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," "intend," 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 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 approximately 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 generally accepted accounting principles, which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the judgment increases, such judgments become even more subjective. While management believes its assumptions are reasonable and appropriate, actual results may be materially different 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 September 30, 2009 Compared to

                     Three Months Ended September 30, 2008

Results of Operations

Consulting Fee Revenue ("CFR")



                                                 Three months ended
(in thousands)         September 30, 2009         September 30, 2008              Change
Project Management    $     65,255     75.3 %    $     64,776     74.2 %    $    479       0.7 %
Construction Claims         21,442     24.7 %          22,498     25.8 %      (1,056 )    (4.7 )

Total                 $     86,697    100.0 %    $     87,274    100.0 %    $   (577 )    (0.7 )%

Hill's CFR decreased 0.7% to $86,697,000 in the third quarter of 2009 from $87,274,000 in the third quarter of 2008. This was comprised of an organic 1.5% decrease primarily from Europe offset by an increase of 0.8% from acquisitions.

During the third quarter of 2009, Hill's project management CFR growth of 0.7% was all organic. The dollar increase in project management CFR consisted of a $2,063,000 increase in foreign projects and a decrease of $1,585,000 in domestic projects. The increase in foreign project management CFR was primarily due to increases of $5,461,000 generated in North Africa and $2,033,000 in the Middle East. Growth in North Africa was primarily due to large new contracts in Libya. Decreases in Europe (primarily due to the downturn in the economies of Spain and Poland) partially offset these increases. The decrease in domestic projects consisted primarily of New Jersey and Texas partially offset by increases in Pennsylvania and the Southwest Region.

During the third quarter of 2009, Hill's construction claims CFR decrease of 4.7% was comprised of an organic 8.0% decrease partially offset by 3.3% growth from the acquisitions of PCI Group, LLC ("PCI") and Chitester Management Systems, Inc. ("Chitester"). The dollar change in construction claims CFR is primarily attributable to a $1,562,000 decrease due to the change in the average exchange rate of the British pound to the U.S. dollar from an average of $1.89 during the third quarter of 2008 to $1.64 for the third quarter of 2009.

Reimbursable Expenses



                                                  Three months ended
 (in thousands)         September 30, 2009         September 30, 2008              Change
 Project Management    $     15,837     96.0 %    $      9,654     89.2 %    $ 6,183       64.0 %
 Construction Claims            661      4.0 %           1,172     10.8 %       (511 )    (43.6 )

 Total                 $     16,498    100.0 %    $     10,826    100.0 %    $ 5,672       52.4 %

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 $3,085,000 in New York and $2,427,000 in Philadelphia.

Cost of Services



                                                                     Three months ended
                                          September 30, 2009                  September 30, 2008               Change
(in thousands)                                            % of CFR                            % of CFR
Project Management                  $ 40,356    79.2 %        61.8 %    $ 39,028    79.7 %        60.3 %    $ 1,328   3.4 %
Construction Claims                   10,568    20.8 %        49.3 %       9,954    20.3 %        44.2 %        614   6.2 %

Total                               $ 50,924   100.0 %        58.7 %    $ 48,982   100.0 %        56.1 %    $ 1,942   4.0 %

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 $271,000 and an increase of $1,057,000 in other direct costs resulting from increased work primarily in North Africa and the Middle East partially offset by decreased work in Europe, primarily Spain and Poland.

The increase in the cost of services for construction claims was due primarily to an increase of $825,000 in direct expenses for Europe and the Middle East partially offset by a decrease of $280,000 for BBCG, a Canadian operation sold in March 2009.

Gross Profit



                                                                       Three months ended
                                         September 30, 2009                  September 30, 2008                  Change
(in thousands)                                           % of CFR                            % of CFR
Project Management                 $ 24,899    69.6 %        38.2 %    $ 25,748    67.2 %        39.7 %    $   (849 )     (3.3 )%
Construction Claims                  10,874    30.4 %        50.7 %      12,544    32.8 %        55.8 %      (1,670 )    (13.3 )

Total                              $ 35,773   100.0 %        41.3 %    $ 38,292   100.0 %        43.9 %    $ (2,519 )     (6.6 )%

The decrease in project management gross profit included decreases of $1,451,000 from domestic operations and $1,191,000 from Poland, primarily due to decreased CFR, offset by an increase of $2,459,000 in North Africa.

The decrease in construction claims gross profit of $1,670,000 included a decrease of $1,755,000 in the United Kingdom and Asia/Pacific primarily due to decreased CFR and the decrease in the British pound to the U.S. dollar from the third quarter of 2008 to the third quarter of 2009.

Selling, General and Administrative

("SG&A") Expenses



                                               Three months ended
                     September 30, 2009         September 30, 2008              Change
   (in thousands)                % of CFR                   % of CFR

The significant components of the change in SG&A are as follows:

• An increase in indirect labor expense of $858,000 including an increase of $438,000 in North Africa in connection with its growth and $426,000 in corporate primarily for increases in executive compensation.

• An increase of $772,000 for bad debt expense primarily from the Middle East and Europe.

• A decrease in administrative and business development travel expense of $864,000 and a decrease in office supplies and computer related expenses of $342,000 due to cost reduction efforts.

• A decrease of $777,000 in professional services including legal and accounting as a result of cost cutting efforts initiated in 2009.

• A gain of $400,000 from the sale of a domestic operations contract from a subsidiary company.

• A decrease in unapplied labor of $208,000 primarily in Poland, Asia/Pacific and Texas due to staff reductions caused by lower CFR.

Equity in Earnings of Affiliates

Our share of the earnings of affiliates increased $2,368,000 from $1,563,000 in the third quarter of 2008 to $3,931,000 in the third quarter of 2009, primarily due to increased work in Iraq by SBH and the completion of several fixed-price task orders.

Our share of the earnings of SBH increased $2,885,000 from $700,000 in the third quarter of 2008 to $3,585,000 in the third quarter of 2009.

Our share of the earnings of Hill TMG was $339,000 in the third quarter of 2009 compared with $863,000 in the third quarter of 2008, a decrease of $524,000.

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. At September 30, 2009, the existing task orders under the contract extend until late 2010, but those task orders have a lower run rate than was experienced in 2009.

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 increased $922,000, or 12.7%, to $8,168,000 in the third quarter of 2009, from a profit of $7,246,000 in the same period of 2008, principally due to increased equity in earnings of affiliates and lower SG&A expenses, partially offset by a decrease in CFR. In addition, the lower valuation of the British pound and the Euro versus the U.S. dollar decreased our operating profit in the third quarter of 2009 by approximately $221,000 from the same period of 2008.

Interest Expense, net

Net interest expense increased $479,000 to $511,000 in the three-month period ended September 30, 2009 as compared with a net interest expense of $32,000 in the three-month period ended September 30, 2008, primarily due to increased borrowing under the Company's senior credit facility.

Income Taxes

For the three-month periods ended September 30, 2009 and 2008, we recognized net tax expense of $1,636,000 and $1,829,000, respectively. The Company's income tax expense for the three-month period ended September 30, 2009 included $787,000 related to increases in the reserves for uncertain tax positions and a $1,096,000 benefit resulting from adjustments to agree the 2008 book amount to the actual amounts per the tax returns.

The effective income tax rates for the three-month periods ended September 30, 2009 and 2008 were 21.4% and 25.4%, respectively. Excluding the effect of the reserve increase and the provision to return adjustment, the effective income tax expense rate would have been 25.4% and 24.9% for the three-month periods ended September 30, 2009 and 2008, respectively.

Net Earnings

Our net earnings attributable to Hill International, Inc. for the third quarter of 2009 were $5,832,000, or $0.15 per diluted common share based upon 38,839,000 diluted common shares outstanding, as compared to net earnings for the third quarter of 2008 of $5,207,000, or $0.13 per diluted common share based upon 40,997,000 diluted common shares outstanding. Net earnings were favorably affected by significantly higher equity in earnings of affiliates, and lower SG&A expenses, partially offset by lower CFR, the decrease in gross profit percentages, and the impact of exchange rates as the U.S. dollar strengthened (compared to the same period in 2008) against the British pound and the Euro.

                Nine Months Ended September 30, 2009 Compared to

                      Nine Months Ended September 30, 2008

Results of Operations

Consulting Fee Revenue ("CFR")



                                                  Nine months ended
 (in thousands)         September 30, 2009         September 30, 2008              Change
 Project Management    $    206,595     76.4 %    $    173,483     72.7 %    $ 33,112      19.1 %
 Construction Claims         63,793     23.6 %          65,219     27.3        (1,426 )    (2.2 )

 Total                 $    270,388    100.0 %    $    238,702    100.0 %    $ 31,686      13.3 %

Hill's CFR grew 13.3% to $270,388,000 for the nine months ended September 30, 2009 from $238,702,000 for the nine months ended September 30, 2008. This was comprised of 9.2% organic growth, primarily from the Middle East and North Africa, and 4.1% from acquisitions.

During the nine months ended September 30, 2009, Hill's project management CFR growth of 19.1% was comprised of 15.1% organic growth and 4.0% growth from acquisitions. The dollar increase in project management CFR consisted of a $36,437,000 increase in foreign projects and a decrease of $3,325,000 in domestic projects. The increase in foreign project management CFR was primarily due to a $20,496,000 increase generated in North Africa and $13,278,000 in the Middle East. Growth in North Africa was primarily due to two large contracts in Libya. 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 and new work in Qatar. The decrease in domestic project management CFR revenue was primarily due to decreased work in the Texas and New Jersey regions, partially offset by increased work in the Southwest region.

During the nine months ended September 30, 2009, Hill's construction claims CFR decrease of 2.2% was comprised of an organic 6.3% decrease partially offset by 4.1% growth from the acquisitions of PCI and Chitester. The dollar decrease in construction claims CFR is primarily attributable to a decrease in foreign construction claims CFR of $2,281,000 driven primarily by decreased work in the UK and an increase in domestic construction claims CFR of $855,000 due primarily to PCI and Chitester which were acquired during the third and fourth quarters of 2008, respectively. The CFR for the UK was negatively impacted by $8,051,000 due to the decrease in the exchange rate of the British pound to the U.S. dollar from 2008 to 2009.

Reimbursable Expenses



                                                  Nine months ended
(in thousands)         September 30, 2009         September 30, 2008              Change
Project Management    $     39,017     95.0 %    $     33,947     91.3 %    $  5,070       14.9 %
Construction Claims          2,068      5.0 %           3,224      8.7 %      (1,156 )    (35.9 )

Total                 $     41,085    100.0 %    $     37,171    100.0 %    $  3,914       10.5 %

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 $2,454,000 in Pennsylvania and $2,586,000 in the Middle East.

Cost of Services



                                                                        Nine months ended
                                     September 30, 2009        % of       September 30, 2008        % of          Change
(in thousands)                                                 CFR                                  CFR
Project Management                  $    125,543     80.5 %    60.8 %    $    103,753     79.0 %    59.8 %    $ 21,790   21.0 %
Construction Claims                       30,325     19.5 %    47.5 %          27,565     21.0 %    42.3 %       2,760   10.0 %

Total                               $    155,868    100.0 %    57.6 %    $    131,318    100.0 %    55.0 %    $ 24,550   18.7 %

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 $13,635,000 required to produce the higher volume of CFR and an increase in other direct costs of $8,155,000 due to increased work primarily in North Africa.

The increase in the cost of services for construction claims was due primarily to an increase in direct labor of $1,262,000 in the Middle East due to increases in the average salary cost in the latter part of 2008.

Gross Profit



                                                                         Nine months ended
                                    September 30, 2009        % of       September 30, 2008        % of            Change
(in thousands)                                                CFR                                  CFR
Project Management                 $     81,052     70.8 %    39.2 %    $     69,730     64.9 %    40.2 %    $ 11,322       16.2 %
Construction Claims                $     33,468     29.2 %    52.5 %          37,654     35.1 %    57.7 %      (4,186 )    (11.1 )

Total                              $    114,520    100.0 %    42.4 %    $    107,384    100.0 %    45.0 %    $  7,136        6.6 %

The increase in project management gross profit included $13,724,000 from foreign project management of which $9,330,000 is attributable to increases in the Middle East, Europe and North Africa due to the increased CFR discussed above which was partially offset by a devaluation of the Euro.

The decrease in construction claims gross profit of $4,186,000 included a decrease of $3,374,000 in the United Kingdom primarily due to the impact of a decrease of approximately 21% in the average British pound to U.S. dollar exchange rate from the first nine months of 2008 to the first nine months 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 in the United Kingdom. In the Middle East, average salary costs for new hires in the latter part of 2008 were higher than the existing staff causing lower margins. In the United Kingdom, the use of outside experts on a large project was billed at margins significantly lower than internal staff.

Selling, General and Administrative

("SG&A") Expenses



                                               Nine months ended
                      September 30, 2009          September 30, 2008            Change
                                      % of                       % of
    (in thousands)                    CFR                        CFR

The increase in SG&A expenses is partially attributable to an increase of $2,527,000 from the 2008 Gerens, Euromost, PCI and Chitester acquisitions. The significant components of the change are as follows:

• An increase in unapplied labor of $3,758,000 including $1,056,000 for 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 in the Middle East and North Africa and an increase in the U.S. project management operations due to a decrease in labor utilization especially in offices in the western U.S. and New Jersey.

• An increase in indirect labor expense of $4,713,000 supporting the increase in revenue as well as the build-up of corporate staffing in connection with Hill's recent growth. The increase also includes $1,834,000 for Gerens, Euromost, PCI and Chitester.

• An increase of $2,282,000 for bad debt expense including increases in the Middle East and North Africa of $1,659,000.

Equity in Earnings of Affiliates

Our share of the earnings of affiliates increased $4,396,000 from $2,994,000 in the nine-month period ended September 30, 2008 to $7,390,000 in the nine-month period ended September 30, 2009, primarily due to the increased work in Iraq by SBH and the completion of several fixed-price task orders.

Our share of the earnings of SBH increased $4,313,000, from $2,131,000 in the nine-month period ended September 30, 2008 to $6,445,000 in the nine-month period ended September 30, 2009.

Our share of the earnings of Hill TMG was $945,000 in the nine-month period ended September 30, 2009 compared to $863,000 for the same period in 2008.

Operating Profit

Operating profit increased $578,000, or 3.1%, to $19,003,000 during the nine months ended September 30, 2009, from a profit of $18,425,000 in the same period of 2008, principally due to increased CFR and equity in earnings of affiliates partially offset by 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 $2,000,000.

Interest Expense (Income), net

Net interest expense increased $1,360,000 to $1,043,000 in the nine-month period ended September 30, 2009 as compared with a net interest income of $317,000 in the nine-month period ended September 30, 2008, primarily due to increased borrowing under the Company's senior credit facility.

Income Taxes

For the nine-month periods ended September 30, 2009 and 2008, the Company recognized net tax expense of $2,370,000 and $2,098,000, respectively. Income tax expense for the nine-month periods ended September 30, 2009 and 2008 were net of tax benefits of $1,807,000 and $2,506,000, respectively, principally 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. For the nine-month period ended September 30, 2009, income tax expense also included $721,000 related to increases in the reserves for uncertain tax positions and a $1,096,000 benefit resulting from adjustments to agree the 2008 book amount to the actual amounts per the tax returns. The Company's income tax expense for the nine-month period ended September 30, 2008 was adversely affected by a modification to the cash-to-accrual adjustment which was required when the Company became a publicly held entity in 2006. The net adjustment was $1,300,000.

The effective income tax rates for the nine-month periods ended September 30, 2009 and 2008 were 13.2% and 11.2%, respectively. Excluding the effect of the . . .