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NEWS ADVISORY
FOR IMMEDIATE RELEASE
February 20, 2014
Contact: Michael J. Rick
+1.412.355.6455
michael.rick@klgates.com
Pittsburgh – K&L Gates LLP today reported results for the year ended December 31, 2013 as
reflected in the following table comparing 2013 and 2012 performance data. The results are
stated on the modified cash basis of accounting used for U.S. federal income tax purposes. Other
than the pro forma financial information and headcount and practice data, the information herein
for 2012 is derived from the firm’s annual audited financial statements and for 2013 is subject to
audit in the ordinary course.
Years ended December 31
(US$ in thousands except per lawyer and per partner amounts)
Operating Results
Revenues
Net Income Available for:
Fully Participating Equity Partners
All Equity Partners
Net Income as a % of Revenues:
Fully Participating Equity Partners
All Equity Partners
Statistics
Revenue per Lawyer
Net Income per Partner:
Fully Participating Equity Partners
All Equity Partners
Compensation Compression Ratio*
2013
2012
1,158,924
1,060,294
219,581
319,596
227,330
320,498
18.9%
27.6%
21.4%
30.2%
586,767
616,486
832,376
594,045
6.0:1
899,960
636,920
7.9:1
*Ratio of the compensation of the highest paid equity partner to the average of newly
promoted equity partners’ compensation. Within the firm’s long-standing market- and
merit-based compensation system, equity partners can be compensated below the average
compensation for newly promoted equity partners.
At December 31
(US$ in thousands)
Cash and Cash Equivalents
Age of Unbilled Fees (days)
Age of Accounts Receivable (days)
Investments in Leasehold Improvements, Information
Technology, Furnishings and Office Equipment (net of
accumulated depreciation)
Bank Debt – Year End
Low for Year
High for Year
Partner Capital:
Required
Discretionary Balances Subject to Withdrawal
Annual Retirement Obligation Expense
as a % of Revenues**
2013
210,661
36.9
33.2
2012
220,722
37.9
33.0
109,248
-0-0-0-
109,629
-0-0-0-
171,272
188,917
173,784
187,883
0.3%
0.3%
**Reflects payments under frozen legacy retirement programs
Performance for 2013 continued to reflect a challenged legal marketplace and, as compared to
2012, was predominantly driven by the financial impact of the combination on January 1, 2013
with the Australian national firm, Middletons. Revenues increased by 9.3% in 2013 as a result of
the Middletons combination and new offices in Houston, Texas; Seoul, South Korea and
Wilmington, Delaware, offset to a degree by a net decrease in revenues elsewhere in the firm
resulting from reductions in productivity and collection performance. Revenue for 2013 was also
negatively impacted by unfavorable U.S. Dollar exchange rates related to the Australian Dollar.
On a pro forma combined basis with Middletons as if the combination had occurred on
January 1, 2012, firmwide revenue would have declined 1.9% in 2013, of which 0.8% was due to
the unfavorable Australian Dollar exchange rate. Revenue per lawyer decreased 4.8% in 2013 as
compared to 2012 (1.6% on a pro forma combined basis) due primarily to the dilutive impact on
this metric of the headcount additions in the combination with Middletons and reduced revenue
in Asia, partially offset by an improvement in Europe and the Middle East.
On a pro forma combined basis, the Energy, Infrastructure and Resources; Litigation and
Disputes Resolution; and Real Estate practice areas turned in measurably stronger performances
in a year over year comparison, with the remaining practice areas within slight bands, up or
down, as against the prior year’s performance. Soft demand had a continuing negative impact on
the Corporate and Transactional practice area.
The percentage of the firm’s work attributable to matters generated in one office and performed
in one or more other firm offices increased marginally from 27.5% in 2012 to 27.7% in 2013,
continuing a more than decade long trend of increasing levels of interoffice work. At the same
time, the dollar amount of such work increased materially, reflecting significant progress in the
ramp up of synergies with the firm’s Australian and other new offices. In 2013, 466 of the firm’s
500 largest clients used lawyers from two or more firm offices, and 15 of the firm’s 20 largest
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clients used lawyers from 10 or more firm offices. The average number of offices engaged on
projects by the firm’s 20 largest clients in 2013 was 16.2. For the firm’s 100 largest clients in
2013, which generated 31.7% of 2013 revenues, the average number of offices engaged was
10.9.
Net income available for all equity partners as a percentage of revenues was 27.6% in 2013 as
compared to 30.2% (29.7% on a pro forma combined basis) in 2012. The year on year decline
was principally due to the decreased revenue experienced by the combined firm on a pro forma
basis. The profit percentage continued to be influenced by the firm’s commitment to meet market
demand with large numbers of income partners, whose compensation is accounted for as
expense. If income partners’ compensation were paid out of net income rather than expensed, the
profit percentage for 2013 would have been 38.6% as compared with 41.8% in 2012.
Revenues by region for 2013 and 2012 were as follows:
Years Ended December 31
2013
2012
901,648
147,772
109,504
1,158,924
924,935
41,486
93,873
1,060,294
(US$ in thousands)
Americas
Asia Pacific
Europe/Middle East
Total
Firmwide revenues in 2013 increased 9.3% as compared to 2012. In the Americas, revenues
decreased by 2.5% on decreased average headcount of 3.5%. Revenues increased materially in
the Asia Pacific region due to the Middletons combination, offset by a net decrease of 22.7% in
the rest of the region on a net productivity decrease, unfavorable U.S. Dollar exchange rates
related to the Japanese Yen and a modest headcount decline. Revenues increased by 16.7% in the
Europe/Middle East region due to productivity increases and increased average headcount of
6.2%.
The changes in revenues, net income and metrics expressed as averages include the effect of
movements in average foreign currency exchange rates relative to the U.S. Dollar. During 2013
the U.S. Dollar appreciated by 6.8% relative to the Australian Dollar, by 1.3% relative to the
GBP Sterling and by 18.2% relative to the Japanese Yen, which had the effect of reducing
revenues and other metrics when stated in U.S. Dollars. Also during 2013 the U.S. Dollar
declined relative to the Euro by 3.3%, offsetting somewhat the reduction in revenues and other
metrics stated in U.S. Dollars for the other currencies mentioned. Other currency movements
either are insignificant relative to the U.S. Dollar or are pegged to the U.S. Dollar.
Indicia of financial stability remained strong in 2013, with significant cash balances and partner
capital, no bank debt, the availability of $75 million under bank lines of credit, and negligible
retirement expense as a percentage of revenues. No client accounted for more than 5% of firm
revenues in 2013 or 2012. Components of the firm’s balance sheet as of December 31, 2013
remained generally flat compared with the prior year end.
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K&L Gates continued to execute on its long-term growth strategy in 2013 by opening U.S.
offices in Wilmington, Delaware and Houston, Texas; by commencing operations in its Seoul
office announced in 2012; and by consummating its combination with Middletons. The firm also
plans by September 2014 to consolidate its four-lawyer San Diego office with the firm’s growing
Orange County office. The San Diego office was established in early 2008 by the Chicago-based
firm Bell, Boyd & Lloyd LLP, which combined with K&L Gates in March 2009. All financial
and other data presented herein other than when stated as being on a pro forma combined basis
are exclusive of Middletons for 2012 and inclusive of Middletons for 2013.
Headcount for 2013 and 2012 was as follows:
Years Ended December 31
Fully Participating Equity Partners:
At Year End
Average
All Equity Partners
At Year End
Average
Lawyers:
At Year End
Average
Other Legal Professionals:
At Year End
Average
Total Average Legal Professionals
2013
2012
272.0
263.8
258.0
252.6
540.0
538.0
502.0
503.2
2,093.0
1,975.1
1,748.0
1,719.9
383.0
306.6
2,281.7
333.0
293.2
2,013.1
Headcount increased in 2013 as compared to 2012 as the result of the Middletons combination,
the establishment of the Houston, Wilmington and Seoul offices, and additions of legal personnel
to other offices of the firm, offset to a modest degree by attrition.
K&L Gates practices out of 48 fully integrated offices located in the United States, Asia,
Australia, Europe, the Middle East and South America and represents leading global
corporations, growth and middle-market companies, capital markets participants and
entrepreneurs in every major industry group as well as public sector entities, educational
institutions, philanthropic organizations and individuals. For more information about K&L
Gates or its locations, practices and registrations, visit www.klgates.com.
K&L Gates has offices in: Anchorage, Austin, Beijing, Berlin, Boston, Brisbane, Brussels, Charleston, Charlotte, Chicago, Dallas, Doha, Dubai,
Fort Worth, Frankfurt, Harrisburg, Hong Kong, Houston, London, Los Angeles, Melbourne, Miami, Milan, Moscow, Newark, New York, Orange
County, Palo Alto, Paris, Perth, Pittsburgh, Portland, Raleigh, Research Triangle Park, San Diego, San Francisco, São Paulo, Seattle, Seoul,
Shanghai, Singapore, Spokane, Sydney, Taipei, Tokyo, Warsaw, Washington, D.C., and Wilmington.
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