Bulldog Investors Target: Hill International Proxy Letter
July 17, 2015
Dear Fellow Stockholder:
On August 7, 2015, Hill International, Inc. ("Hill") will be holding its Annual Stockholders Meeting in Philadelphia. This will be my first Annual Meeting as Hill's CEO, a position I have held for a little more than six months. As a fellow shareholder, I am happy to report that during this brief period, our share price has increased nearly 36%, driven by double-digit revenue growth, a return to profitability and one of the highest backlogs in our history. Despite such strong performance, we are under attack by an activist investor who is primarily interested in a fire-sale of the Company instead of allowing long-term investors to benefit from our strong financial performance. In advance of this meeting, it is imperative that you understand the facts about the activist proxy campaign initiated by Bulldog Investors ("Bulldog").
Hill's Board of Directors strongly opposes Bulldog's nominations and its proposals which relate solely to forcing a sale of our company. We believe that Bulldog's nominees have little to no understanding of our business and industry and, as such, would deliver no added value to our company or its stockholders.
The Board also has serious concerns about the qualifications of the people nominated by Bulldog. Bulldog's nominees have in the past violated certain securities laws. Moreover, another company on whose board they currently serve has been investigated by federal agencies including the IRS Criminal Division, and has been the subject of litigation focused on the suppression of shareholder rights. These are clearly not individuals that should serve on Hill's Board.
Please support Hill's Board nominees by voting and returning the WHITE proxy card. Your vote is extremely important, and we ask that you consider the following:
Hill's Board and management team have the right plan in place to deliver long-term and sustainable value to our stockholders, as evidenced by the following:
Hill is Focused on Revenue Growth: We Have Achieved Substantial Long-Term Growth in Revenues and Are Forecasting Record Revenues in 2015
- Hill has reported record consulting fee revenues (CFR) every year since becoming a public company in 2006.
- Over the past 10 years (2004 through 2014), Hill's CFR grew at a CAGR of 25%, rising from $63 million to $576 million during that period.
- During 2014, our strong business development efforts generated record annual net bookings of $628 million. This drove total backlog at the end of last year to a record $1.08 billion.
- For 2015, we are forecasting that Hill's CFR will increase to between $650 million and $675 million, growth of 13% to 17% from last year.
A chart of Hill's consulting fee revenue is available athttp://media.globenewswire.com/cache/7727/file/35698.pdf
Hill is Focused on EBITDA Growth: EBITDA is Growing Significantly Faster than Revenues
- On May 4, 2015, we announced a cost optimization plan that we expect will eliminate more than $25.0 million in annualized overhead expenses. Implementation is well underway, and we expect to see the benefits of this plan during the Third Quarter of 2015.
- Based upon higher anticipated CFR and the cost optimization program, we have forecasted that earnings before interest, taxes, depreciation and amortization ("EBITDA") as a percentage of CFR in 2015 will be in the range of 8.0% to 10.0%, or approximately $52 million to $68 million for the year, up significantly from 6.6%, or $37.8 million, in 2014. (Please see "EBITDA Reconciliation" at the end of this letter for detailed information on the reconciliation between Hill's net (loss) earnings and EBITDA for the past four years.)
A chart of Hill's EBITDA is available at http://media.globenewswire.com/cache/7727/file/35699.pdf
Hill is Focused on Debt Reduction and Strengthening its Balance Sheet
- Hill's improving performance over the past few years allowed us to take a very important step towards further strengthening overall profitability with the successful closing during the Third Quarter of 2014 of both a $40.6 million equity follow-on offering and a $165.0 million senior debt refinancing. This new equity and debt capital allowed us to refinance older, more expensive credit obligations.
- During the First Quarter of 2015, we lowered Hill's interest expense by 30% versus the prior year and we expect further savings as this year progresses.
- Our improved profitability and cash flow allows us to further reduce senior debt and deleverage our balance sheet going forward.
Why Hill's Nominees are the RIGHT Choice
- Camille S. Andrews
- Six years of experience as a member of Hill's Board of Directors
- Chair of the Board's Governance and Nominating Committee
- Associate Dean and a member of the faculty of Rutgers University School of Law at Camden with expertise in corporate, securities, antitrust and other complex litigation
- Counsel to Context Capital Partners, a private equity firm
- Former Partner at Dilworth Paxson LLP, a major law firm
- B.A. magna cum laude, University of Pittsburgh; J.D. with honors, Rutgers University (member of Law Review)
- Published and lectured in securities law, Sarbanes-Oxley, legal ethics and other complex litigation areas
- Member of the New Jersey and Pennsylvania Bars and admitted to practice before the U.S. Supreme Court
- Served on numerous non-profit boards, including AYCO Foundation (a Goldman Sachs Charitable Foundation), Walnut Street Theater, the Philadelphia Zoo, New Jersey Cares for Abused Children, and the Camden Leap Academy Charter School
- Recipient of numerous awards, including the Distinguished Service Award for Excellence in Continuing Legal Education, the Dr. Martin Luther King, Jr. Award for Champions of Justice, and the Campeone de la Justicia Hispanic Law Student Award for Social Justice.
- Brian W. Clymer
- Nine years of experience as a member of Hill's Board of Directors
- Chair of the Board's Audit Committee
- Former Senior Vice President of External Affairs, Prudential Financial, Inc.
- Former Treasurer of the State of New Jersey
- Former President and CEO of Railway System Design, Inc., a transportation design firm
- Former Vice President of Gannett Fleming, Inc., an engineering and construction management firm
- Former Administrator of the U.S. Federal Transit Administration
- B.S., Lehigh University
- Certified Public Accountant in Pennsylvania
Both Camille and Brian are strong, independent directors, who have served with distinction on Hill's Board for many years, and they have earned the trust and respect of Hill's other directors as well as its management team. The company believes that, given the wealth of talented women in the business community, diversity is an important consideration for board membership. As the only woman on Hill's Board, Camille brings not only her 30 years of legal and business experience but a diversity that beneficially serves the long-term strategic goals and direction of our company. We strongly recommend that you vote for the reelection of Camille and Brian to our Board.
Why Bulldog's Nominees are the WRONG Choice
Securities Law Violations
- On November 26, 2006, the SEC staff stated that both of Bulldog's nominees, Phil Goldstein and Andy Dakos, as participants in another proxy contest, violated the SEC's proxy rules.
- On October 17, 2007, the Commonwealth of Massachusetts Securities Division found that Bulldog, Goldstein and Dakos had violated Massachusetts state securities laws by making an unlawful offer of securities.
- Even more troubling than these violations, the SEC's rules require disclosure of facts that are material to an evaluation of the ability or integrity of a director, including certain findings relating to violations of securities laws by persons who are nominated as directors. However, Goldstein and Dakos have never made disclosure of these violations to you or your fellow stockholders during this proxy contest!
Poor Track Record of Adding Value
- Since August 2012, Goldstein has served as Chairman of the Board and Dakos has served as a director of Imperial Holdings, Inc. ("IFT"). Since they joined its board, IFT has been the subject of investigations by federal agencies including the IRS Criminal Division. IFT has also suffered deteriorating cash flow since Goldstein and Dakos joined its board, with combined operating and investing cash flow of +$10.5 million in 2012, -$53.5 million in 2013 and -$78.9 million in 2014! Not surprisingly, IFT's stock price has traded lower over the past two years as its cash flow has collapsed.
- Goldstein has been a director of MVC Capital, Inc. ("MVC") since September 2012. MVC has failed to file its financial statements for nearly the past year and it recently received a delisting notice from the New York Stock Exchange. Not surprisingly, MVC's stock is currently trading well below the price it did when Goldstein joined its board.
Aside from the above reasons that the Bulldog nominees should not serve on Hill's Board of Directors, they simply have not presented any new ideas to add shareholder value, other than attempting to force the sale of our company at the worst possible time. What, if anything, will Goldstein and Dakos do differently than the current Board to grow the business and create long-term shareholder value? We don't know because they have offered no such ideas. They, as recent investors, seem to be only interested in forcing a sale of our company to maximize their short-term return. Considering the anticipated growth in our business and our expectation of record revenues and record EBITDA this year, we don't believe that is what is in the best interests of our company or its stockholders.
Make the RIGHT Choice – Vote the WHITE Proxy Card
Unlike Bulldog, your Board's interests lie solely with enhancing near- and long-term shareholder value. To that end, the Board voluntarily terminated the stockholder rights plan it had adopted in response to an unsolicited and inadequate takeover offer. We listened closely to our stockholders—many of whom were against the plan—and came to the conclusion that the benefits of the rights plan were outweighed by the concerns of our investors.
The Board and management of Hill are committed to enhancing the long-term value of your investment. Any involvement by Bulldog would serve as a costly and unnecessary distraction by two individuals with no relevant operational or industry experience, and an agenda that we view as being driven by short-term gains at the expense of long-term value creation.
Your vote is very important to us. No matter how many shares of Common Stock you own, please vote FOR the election of both of our nominees—Camille Andrews and Brian Clymer—and in accordance with our recommendations on all other proposals on the agenda for the 2015 Annual Meeting.
On behalf of Hill's Board of Directors and management team, we appreciate the continued support of you and our other fellow stockholders as we build value together.
David L. Richter President and Chief Executive Officer