Energy work, both transactional and litigation, is a main driver behind strong 2012 financials at large Texas firms, although firm leaders also cite lateral hiring, a strong Texas economy, attention to collections and client year-end tax planning as major contributors.
The 25 highest-grossing firms in Texas brought in gross revenue totaling $5.4 billion in 2012, up from $5.3 billion in 2011. Some firms posted exceedingly good numbers for 2012.
For example, net income in 2012 increased by half at Bracewell & Giuliani of Houston and Dallas-based Godwin Lewis. At Looper Reed & McGraw of Houston, net income improved by 133.3 percent in 2012 compared to 2011.
2012 was the best-ever yearat Looper Reed for both hourly and contingent-fee revenue, says president and managing director J. Cary Gray.
“We likely can’t do this year-in and year-out, and you are only as good as the services you provide going forward,” he says, adding that he believes the firm’s size — 117 full-time equivalent lawyers in 2012 — and its rate flexibility makes it attractive for clients of all sizes.
“Our rates are probably 20 percent lower than the largest law firms are. We make a very conscious effort to staff cases more efficiently,” Gray says.
Boosted by two major lateral-hire groups in 2012, Bracewell’s net income improved by 49.1 percent. Net income at Godwin Lewis was up by 47.8 percent in part due to a lot of litigation for energy clients.
Seventeen of the 25 large Texas-based firm firms improved their gross revenue, compared to 2011, when 19 firms brought in more than the previous year. [See "Gross Revenue at BigTex Firms Inches Up in '11," Texas Lawyer, April 30, 2012, page 16.]
• Who’s Hiring Lawyers? Texas Law Firms Growing, Shrinking
• Financial Charts: Gross Revenue, Profits Per Partner, Net Income, Revenue Per Lawyer
• The Texas 100
• Firm Finance: What Was Notable for 2012
2012 was such a good year that some of the Texas firms had its best year ever. Looper Reed is one, with gross revenue up by 27.2 percent, net income up by 133.3 percent, revenue per lawyer up by 20.5 percent and profits per partner up by 45.8 percent, compared to 2011.
Another is Chamberlain, Hrdlicka, White, Williams & Aughtry, where gross revenue improved by 13.1 percent, net income by 23.6 percent, RPL by 9.7 percent and PPP by 18.2 percent. One major factor at Chamberlain Hrdlicka was improving the firm’s shareholder collection rate to 96.2 percent in 2012 from 92.5 percent in 2011, which exceeded managing shareholder Wayne Risoli’s expectations. [See "The Art of Collection: How-To Coaching Helps Boost Firm's Gross Revenue," Texas Lawyer, Feb. 1, 2013, page 1.]
The list of the 25 highest-grossing firms in 2012 is a bit different than last year’s list. Brown McCarroll, which dropped off the list last year, returned, while Beirne, Maynard & Parsons, which had a full-time equivalent of 56 lawyers in 2012, compared to 62 in 2011, slipped off the list for 2012.
Only firms based in Texas are included in Texas Lawyer‘s Annual Report on Firm Finance.
Like total gross revenue, total net income for the 25 firms improved by a bit in 2012, coming in at a total of $2.2 billion, compared to $2.1 billion the previous year.
Revenue per lawyer averaged $691,000 in 2012, up 3.4 percent from 2011′s $668,000 average.
|The Millionaires’ Club
Profits per partner topped $1 million in 2012 at these eight Texas-based firms.
|Akin Gump Strauss Hauer & Feld||$1,540,000|
|Vinson & Elkins||$1,470,000|
|Bracewell & Giuliani||$1,450,000|
|Texas Lawyer, April 2013|
Profits per partner averaged $961,000, up 4.0 percent when compared to an average of $924,000 the previous year.
Those four measures in the Texas Lawyer‘s 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.
This is the 27 year Texas Lawyer has published the Annual Report on Firm Finance. The first was published in 1987, when it included the 10 highest-grossing firms in Texas in 1986.
As it has for the last 15 years, Akin Gump Strauss Hauer & Feld is the highest-grossing firm on the list in 2012, with gross revenue of $775.0 million, up 0.6 percent from $770,000 in 2011.
Six firms posted double-digit percentage increases in gross revenue in 2012, with Godwin Lewis posting the largest percentage increase. While gross revenue declined at eight of the 25 firms, none of the declines reached 10 percent.
Akin Gump also topped the net income chart with $267.5 million, down 3.8 percent when compared to $278.0 million in 2011
Looper Reed posted the largest increase in net income in 2012. Others with double-digit increases include Bracewell, Winstead, Chamberlain Hrdlicka, Godwin Lewis, Strasburger & Price, and Brown McCarroll.
The firm with the largest drop in net income was Cox Smith Matthews, where net dropped by 17.1 percent with $17.0 million in 2012 compared to $20.5 million the previous year.
Thirteen of the firms improved net income in 2012, while net income declined at 10 firms and stayed the same at two.
Godwin Lewis, like last year, topped the PPP chart with an average of $2,835,000, up 48 percent from $1,915,000 in 2011. Profits per partner improved by more than 10 percent at these other firms: Bracewell, Andrews Kurth, Chamberlain Hrdlicka, Looper Reed and Brown McCarroll. The largest decline in PPP was at Cox Smith, a 10.6 percent drop to $380,000 from $425,000 the year before.
Average PPP improved at 16 of the firms, declined at seven and was the same at two.
Susman Godfrey leads the RPL chart, with $1,265,000 in 2012, down 7.0 percent from $1,360,000 in 2011. Three firms posted double-digit increases in RPL: Godwin Lewis, Bracewell & Giuliani, and Looper Reed.
RPL improved at 15 of the firm, declined at eight and stayed the same at two.
The Annual Report on Firm Finance also includes a Profitability Index, which shows whether equity partners in a firm are taking home more or less than average RPL. [See: "Profitability Index," below.]
The report also includes a firm-by-firm analysis that gives some insight to help explain financial results from each of the 25 firms. The fact that lawyers from the firms are quoted in these articles is no indication of a firm’s cooperation with the preparation of the Annual Report on Firm Finance. Lawyers simply responded to questions about work and developments at their firms in 2012. Texas Lawyer does not identify the firms that cooperate with our reporting by providing financial information or those that do not.
The individual firm reports also include 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 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 2012, except for Gardere Wynne Sewell, whose most recent fiscal year ended March 31, 2013. All lawyer counts are full-time equivalent for the firm’s fiscal year.
|2||Bracewell & Giuliani||1.93|
|3||Kane Russell Coleman & Logan||1.78|
|4||Vinson & Elkins||1.68|
|6||Akin Gump Strauss Hauer & Feld||1.6|
|7||Looper Reed & McGraw||1.56|
|8||Kelly Hart & Hallman||1.47|
|12||Thompson & Knight||1.34|
|13||Gardere Wynne Sewell||1.33|
|16 (tie)||Haynes and Boone||1.21|
|16 (tie)||Munsch Hardt Kopf & Harr||1.21|
|18||Chamberlain, Hrdlicka, White, Williams & Aughtry||1.19|
|20||Thompson, Coe, Cousins & Irons||1.07|
|21||Fulbright & Jaworski||1.05|
|23||Strasburger & Price||0.94|
|24||Carrington, Coleman, Sloman & Blumenthal||0.83|
|25||Cox Smith Matthews||0.8|
To calculate a firm’s profitability Texas Lawyer used the profitability index, a mathematical formula. The formula, developed by our affiliate The American Lawyer, is:
Profitability = Profits Per Partner /Revenue Per Lawyer
The formula takes some of the variables — although not all — out of gross revenue, net profits, leverage or even profit-margin comparisons. It shows whether the equity partners in a particular firm are taking home more or less than the average revenue their respective lawyers are bringing into the firm.Essentially, if the profits per partner are more than the revenue per lawyer, the firm is producing profits for its partners. If not, the firm may need to take a hard look at its expenses or its leverage.
Using the profitability index as a measure, 21 of the 25 firms were profitable in 2012, compared to 22 in 2011. Four firms were unprofitable, compared to three in 2011. Godwin Lewis of Dallas was the most profitable firm in 2012 with a profitability index of 3.03, while Cox Smith Matthews of San Antonio, with a profitability index of .80 in 2012, was the least profitable among the 25 highest-grossing Texas-based firms.
— BRENDA SAPINO JEFFREYS
|Texas Lawyer, April 2013|