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Like appraising closely held businesses, gauging the financial worth of law firms isn’t an exact science, and each year we ask readers to read this report with a few caveats in mind. Law firms traditionally keep their finances to themselves, and if they cooperate with a press survey such as this, they do it informally. All of the firms listed among the Top 20 provided at least raw data — such as billing rates, hours billed and non-hourly fee structures — from which we could make informed estimates of gross revenue. Information about salaries and other overhead helped us calculate net income. Some partners went further to give us actual gross and net income (though “off the record”). Still others were willing to guide us with our informed estimates, making sure they were within acceptable margins of error. We also checked with secondary sources, such as a firm’s former partners and associates. To avoid signaling where we got numbers firsthand and where we didn’t, we rounded gross revenue and net income to the nearest $1,000 and revenue per lawyer and profits per partner to the nearest $100. Gross revenue is all fees collected by the firm during the fiscal year, including billings for legal professionals on staff. Net income is the profit left for equity partners after paying all expenses. It does not include compensation for nonequity partners, who have guaranteed incomes, plus some form of bonus arrangement, all of which are part of overhead. The ratio of revenue per lawyer to profits per partner is the Am Law Profitability Index (API), devised by The American Lawyer magazine, an affiliate of the Law Journal. The higher the API, the more successful the firm is at turning revenue into profits. The financial figures for each firm are for the most recently completed fiscal year, which ended in 2001 for most firms. However, the survey lists the numbers of lawyers and partners as of Aug. 31, 2001, excluding the new class of associates who start in the fall but don’t start generating revenue immediately. For Fox, Rothschild, O’Brien & Frankel and Drinker Biddle & Shanley — both being branches of Philadelphia-based firms — we counted only those lawyers who, according to the firms, were principally based in New Jersey as of the date we counted. In obtaining revenue figures, we asked for actual receipts, even though some firms’ accounting systems operate on an accrual basis.

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