It seems like the worst is over for Texas firms.
That’s a fair assessment based on the 2010 financial performance of the 25 highest-grossing Texas-based firms. Taken as a whole, the firms’ gross revenue was flat in 2010, compared to 2009, when the total gross revenue of the 25 highest-grossing firms declined by 3.7 percent. Total net income for the 25 firms also was flat in 2010, compared to 2009.
The improvement in financial performance is clearly related to the improved economy in Texas and elsewhere in the country. Managing partners of many of the 25 highest-grossing firms generally report that 2010 was better than expected, and transactional work in particular picked up during the second half of the year. Energy is king in Texas, and much of the uptick in work in 2010 compared to 2009 is related to a recovering energy industry.
In 2010, the 25 highest-grossing firms had a total gross income of $5.2 billion, which is the same as the total in 2009. That total is nevertheless down a bit from 2008, when the 25 highest-grossing firms brought in $5.4 billion. Sixteen of the firms improved their gross revenue in 2010, compared to 2009, while the other seven posted lower gross revenue for the year. [See "BigTex Combined Gross Revenue Drops in '09," Texas Lawyer, April 26, 2010, page 22.]
2009, a year when the nation’s economy suffered, was not typical for BigTex firms, because the combined gross revenue of the firms on the list had consistently increased on a year-to-year basis.
The list of 25 highest-grossing firms in 2010 includes one new firm — Kane Russell Coleman & Logan of Dallas, which posted $33.8 million in gross revenue in 2010. That was enough for Kane Russell to capture the bottom spot on the chart. Kane Russell replaces Clark, Thomas & Winters of Austin, which was a going firm in 2010 but lost most of its attorneys during the early months of 2011 to a number of other firms and now is in wind-down mode. “There are no lawyers practicing at Clark, Thomas anymore,” Meade Bauer, former president of Clark, Thomas told Texas Lawyer on April 6. Bauer referred questions to Larry McNeill, a former president of the firm, but McNeill did not return several messages left at the firm, which was founded in 1938. [See "End of a Firm," Texas Lawyer, April 11, 2011, page 3.]
Only firms based in Texas are included in Texas Lawyer ‘s Annual Report on Firm Finance.
Like gross revenue, combined net income was flat in 2010. The combined net for the 25 highest-grossing firms was $2.2 billion, the same as it was in 2009 and in 2008.
Average profits per partner at the 25 firms were $889,000 in 2010, up 9.3 percent compared to 2009′s average of $813,000.
Average revenue per lawyer at the 25 firms was $668,000 in 2010, up 4.1 percent from an average of $642,000 in 2009.
Those four measures in the Annual Report on Firm Finance — gross revenue, net income, PPP and RPL — help describe each firm’s financial performance and provide a means to compare them. The gross revenue chart is the master list for the report.
See related charts: Gross Revenue, Profits Per Partner, Net Income and Revenue Per Lawyer and the The Texas 100
This year marks the 25th Annual Report on Firm Finance published by Texas Lawyer. The first was published in 1987, when it included the 10 highest-grossing firms in Texas in 1986.
Akin Gump Strauss Hauer & Feld of Dallas leads the list of the highest-grossing Texas-based firms in 2010, a spot the firm has held for 13 years in a row. Akin Gump’s gross revenue came in at $736.5 million for 2010, up 2.5 percent from $718.8 million the previous year. The next four BigTex firms on the list are three Houston firms: Fulbright & Jaworski with $625.4 million; Vinson & Elkins with $602.7 million; and Baker Botts with $555 million. Next is Dallas-based Locke Lord Bissell & Liddell with $396.4 million. The firms maintained the same order on the chart as in 2009 with the exception of V&E, which moved past Baker Botts to take third on the list.
Susman Godfrey and Andrews Kurth, both of Houston, posted the highest percentage change in gross revenue in 2010, with Susman Godfrey’s up 32.3 percent compared to 2009, and Andrews Kurth’s up 10.3 percent. Austin-based Brown McCarroll had the largest decline in gross revenue, a 16.9 percent drop, and Gardere Wynne Sewell of Dallas saw its gross revenue decrease by 15.9 percent.
Fulbright topped the net income chart, like it did last year, posting a net of $276.9 million, up 2.6 percent from 2009. The next four on the list are Akin Gump with $273.1 million; V&E with $269.4 million; Baker Botts with $245.8 million; and Locke Lord with $138.9 million. In this year’s report, Akin Gump leapfrogged over V&E and Baker Botts to take the No. 2 position on the net income chart.
Net income improved at 17 of the firms in 2010 and declined at eight others. The heftiest increase was at trial firm Susman Godfrey, where 2010 net income was $135 million, an improvement of 42.1 percent over 2009, and at Andrews Kurth, where the $103 million net for 2010 was 28.6 percent greater than the previous year. Gardere, with a net income of $63.2 million, posted the biggest decline of 29.5 percent compared to 2009, which was a year when the firm’s gross revenue and net income were inflated by contingent fees.
Susman Godfrey had the highest PPP in 2010, coming in at $2,455,000. Five other firms topped the $1 million mark — Akin Gump, Baker Botts, V&E, Andrews Kurth and Houston-based Bracewell & Giuliani. The PPP from each firm are not compared to 2009 PPP, because the numbers are calculated differently. In 2010, all Firm Finance numbers are based on full-year average FTE (full-time equivalent) lawyer counts, while in 2009, the per-lawyer averages were calculated with the Aug. 31, 2009, snapshot date.
Susman Godfrey tops the 2010 RPL chart with $1,890,000 for 2010. The firms on the RPL chart after Susman Godfrey, in order, are Akin Gump, V&E, Baker Botts, and Carrington, Coleman, Sloman & Blumenthal of Dallas. As with PPP, firm RPL is not compared to 2009 numbers, because of the difference in how the lawyer counts are calculated.
The Annual Report on Firm Finance also includes a Profitability Index that shows whether equity partners in a firm are taking home more or less than average RPL. [See the Profitability Index.]
Texas Lawyer’s report includes a firm-by-firm analysis that attempts to explain 2010 financial results from each of the 25 firms. The fact that lawyers from the firms are quoted in this article is no indication of a firm’s cooperation with the preparation of the Annual Report on Firm Finance. Lawyers simply respond to questions about work and developments at their firms in 2010. Texas Lawyer does not identify the firms that cooperate with our reporting by providing financial information or those that do not.
Also, for the ninth year, the report includes graphs that illustrate the trend line for each firm’s revenue over the past several years. The gross revenue numbers were collected from previous Texas Lawyer Firm Finance reports. For a few firms, numbers go back to the first Firm Finance report in 1987, while other firms are newer to the charts. The report does not include a graph for Kane Russell because the firm is new to the list this year. The graphs are not on the same scale, so they should not be compared side-by-side. All the revenue figures in the charts are for calendar year 2010, except for Gardere, whose 2010 fiscal year ended March 31, 2011.
Reports on individual firms:
• Akin Gump Strauss Hauer & Feld
• Andrews Kurth
• Baker Botts
• Beirne, Maynard & Parsons
• Bracewell & Giuliani
• Brown McCarroll
• Carrington, Coleman, Sloman & Blumenthal
• Chamberlain, Hrdlicka, White, Williams & Martin
• Cox Smith Matthews
• Fulbright & Jaworski
• Gardere Wynne Sewell
• Haynes and Boone
• Jackson Walker
• Kane Russell Coleman & Logan
• Kelly Hart & Hallman
• Locke Lord Bissell & Liddell
• Looper Reed & McGraw
• Munsch Hardt Kopf & Harr
• Porter & Hedges
• Strasburger & Price
• Susman Godfrey
• Thompson & Knight
• Thompson, Coe, Cousins & Irons
• Vinson & Elkins