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The biggest changes in Cozen O’Connor’s financial performance for 2006 were in its profits per equity partner and number of equity attorneys. The firm saw a 10.6 percent increase in its profits per equity partner (PPP), moving up from $470,000 in 2005 to $520,000 in 2006. After a static year as far as headcount, with the firm hovering around 483 attorneys, the equity tier dropped by 11.8 percent, from 127 equity members in 2005 to 112 in 2006. The non-equity member tier grew by about 1 percent, from 104 in 2005 to 105 in 2006. Cozen O’Connor saw a 1.8 percent increase in its overall gross revenue, from $220.5 million in 2005 to $224.5 million in 2006. The firm saw a 1.1 percent increase in its revenue per lawyer (RPL), from $460,000 in 2005 to $465,000 in 2006. Of the firm’s $224.5 million in gross revenue, almost $58 million went to equity partners and another $27 million to non-equity partners. The average compensation for all partners grew by 9.8 percent from $355,000 in 2005 to $390,000 in 2006. “The numbers were exactly on budget,” firm Chairman Stephen A. Cozen said. Cozen O’Connor calculates its budget to allow leeway for a substantial number of contingency-fee cases that are part of its large subrogation practice, he said. The gross revenue “could have easily been $20 million more,” Cozen said. The firm has about $50 million in outstanding judgments that, if affirmed by appellate courts, would result in about $15 million to $20 million in attorney fees for the firm, he said. Cozen said he was happy with the growth in PPP and average compensation for all partners. He said he would have liked the RPL to have grown more, but its smaller increase was due to the contingency-fee cases. Sandra Mannix of Abelson Legal Search said while she may be on the conservative side, she thinks any growth is positive. While firms may hope for double-digit increases across the board, she said 2 percent growth in revenue and RPL is better than a dip in either category. Mannix said she has been hearing from some of her more medium-sized clients that 2006 was actually a difficult year, particularly in the insurance defense side. Lisa R. Smith, a consultant with Hildebrandt International in Washington, D.C., said last week that while it was generally a good year for firms overall, “the litigation practices weren’t quite as robust” as in prior years. If a firm had a heavier focus on litigation, where price sensitivity is more likely, Smith said the increases in key financial indicators might not be as great this year. Cozen said the firm is far from the typical insurance defense firm and doesn’t handle commodity work. Cozen O’Connor, he said, has the largest subrogation practice in the world and also handles declaratory judgments and large liability cases. Cozen O’Connor still has more than 50 percent of its practice focused on insurance-related litigation, but has expanded well beyond that focus according to many in the legal industry. Cozen said the firm has not yet reached its goals in terms of expansion. The firm is still looking to grow its general and commercial litigation practices as well as transactional-based practices, he said. That could happen through laterals, groups or combinations, he said. What has been most impressive about Cozen O’Connor over the last few years, Mannix said, is the firm’s careful, incremental growth. The firm’s headcount rose by one – moving from 482 to 483 – by the Aug. 31 timeline used by The American Lawyer in calculating the number of full-time attorneys. Cozen pointed out that the firm has been in existence for less than 40 years, and he is happy that it has grown to around 500 lawyers. “We’re seeing a maturity in the firm,” he said. The firm is exhibiting the same entrepreneurial spirit that it began with, but, Cozen said, it is also becoming more institutionalized. While a larger-scale combination has not become inevitable, Cozen said it is desirable at this point. Up until the last two years, Cozen said the average growth of the firm has been at about 15 percent. Cozen O’Connor was recently in talks with 300-attorney Wolf Block Schorr & Solis-Cohen, but those talks ended early this year due to “business and structural differences.” Cozen O’Connor has made some structural changes in the last year, causing it to restate its 2005 number of non-equity partners. In the 2005 survey, the firm reported a non-equity tier of 95. For the 2006 survey, the firm restated 2005′s non-equity tier to include 104 attorneys. Cozen said the firm changed internally the structure of its membership tiers from its traditional junior/senior member status to a shareholder and member status. A shareholder in the firm is now akin to an equity partner and a member is considered a non-equity partner. “I would say we made a variety of adjustments to make sure people achieved the status they deserve,” he said. While the firm isn’t making it more difficult to become an equity partner, Cozen said it is applying the criteria “more conservatively.” The 10.6 percent increase in PPP was “independent” of the nearly 12 percent decrease in the firm’s equity tier, Cozen said. The firm was busy in several practice areas, he said. In 2006, Cozen O’Connor opened up a Miami office to service clients in that part of the country, as well as in Central and South America. Cozen said it always takes some time for a new office to begin adding to the revenue, but he said the attorneys in Miami were right on budget. While the firm handles work in South and Central America, Cozen said he wasn’t sure whether he would open offices anywhere in those regions. Another big move for the firm in 2006 was the addition of the four-attorney labor and employment group from Klett Rooney Lieber & Schorling. Mark J. Foley, Raymond A. Kresge, Andrew J. Rolfes and George A. Voegele Jr. joined the firm before Klett Rooney merged with Buchanan Ingersoll. Cozen said the group was an addition to an already-strong practice area. Currently, Cozen O’Connor is in the midst of restructuring and reorganizing the firm, particularly its leadership, Cozen said. By June of this year, he said the firm will announce “significant changes in the manner in which we do business in terms of executive structure.”

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