Acquisitions

On January 31, 2013, the Company acquired a 20% membership interest in Ruckus Sports LLC ("Ruckus"), an obstacle course and mass-participation events company, with an option to acquire an additional 40% membership interest in the next two years. Pursuant to an operating agreement, the Company appointed two directors on a three-member board of directors and therefore has the ability to control the operations of Ruckus. The Company has determined that Ruckus is a variable interest entity (“VIE”) and that the Company is the primary beneficiary. Accordingly, the Company accounted for its acquisition of its 20% membership interest as a business combination and consolidates Ruckus. The fair value of the non-controlling interest at the acquisition date was based on the amount paid by the Company for a 20% membership interest and a control premium equal to 50% of the total consideration based on a study of business combinations. In May 2013 and July 2013 the Company acquired additional membership interests in Ruckus of 10% and 15%, respectively, increasing the Company's ownership interest to 45% as of September 30, 2013. Such additional investments were recorded as equity transactions since Ruckus was a consolidated VIE at the time of the investments.

In November 2013, Ruckus cancelled a scheduled event and placed the majority of its employees on non-paid leave as a result of not having sufficient cash to fund current operations. Ruckus continues to explore its alternatives and assess its ability to remain a going concern. For the nine and three months ended September 30, 2013, the Company’s results of operations included revenues of $1.0 million and $0.4 million, respectively, operating losses of $1.5 million and $0.9 million, respectively, and net losses after non-controlling interests of $0.5 million and $0.4 million, respectively, from Ruckus. At September 30, 2013, the Company’s balance sheet included $3.9 million of assets, including $3.5 million of goodwill, and $0.9 million of liabilities from Ruckus.

On June 19, 2013, the Company acquired 80% of the outstanding common stock of UK Elite Soccer, Inc. ("UK Elite"), a provider of youth soccer programs and camps. The Company accounted for the acquisition of UK Elite as a business combination. The fair value of the non-controlling interest at the acquisition date was based on the amount paid by the Company for 80% of the common stock.

The Company acquired Ruckus and UK Elite, both of which are included in the Company's Sports segment, in exchange for aggregate cash payments of $3.1 million and the contribution of a loan of $0.1 million made in December 2012. The estimated fair value of the assets and liabilities acquired in connection with the Ruckus and UK Elite transactions, determined as of the respective acquisition dates, was as follows:



	Amount
	(in thousands)
Cash	$	1,991
Accounts receivable	637
Marketable securities	195
Prepaid expenses and other current assets	759
Property and equipment	69
Other assets	55
Accounts payable	(96		)
Accrued liabilities and other current liabilities	(3,481		)
Long-term liabilities	(53		)
Total identifiable net assets acquired	76

Non-controlling interest	(2,896		)
Goodwill	6,071

Net assets acquired	$	3,251

There were no identifiable intangible assets recognized separately from goodwill in connection with the acquisition of Ruckus. The fair values recognized in connection with the UK Elite transaction are provisional pending the Company's continued evaluation, including assessing any identifiable intangible assets, the value of which are included in goodwill as of September 30, 2013. The goodwill recognized in connection with the Ruckus and UK Elite transactions arises from the growth potential the Company sees for the investment, along with expected synergies within the Company’s Sports segment, and is expected to be fully deductible for tax purposes.

The results of operations of Ruckus and UK Elite have been included in the Company's results of operations since their respective acquisition dates. Revenues from Ruckus and UK Elite totaled $4.9 million and $5.9 million for the three months and nine months ended September 30, 2013, respectively. Operating income from the combined results of operations of Ruckus and UK Elite was $0.3 million for the three months ended September 30, 2013; operating losses from the combined results of operations of Ruckus and UK Elite were $0.4 million for the nine months ended September 30, 2013.

The carrying amounts and classifications of combined assets and liabilities of Ruckus and UK Elite included in the Company’s Financial Statements as of September 30, 2013, are as follows:



	Amount
	(in thousands)
Current assets	$	1,717
Long-term assets	$	6,347
Current liabilities	$	1,038
Long-term liabilities	$	53

On February 9, 2012, and May 31, 2012, the Company acquired Eagle Well Services, Inc. ("Eagle Well") and Sun Well Service, Inc. ("Sun Well"), respectively, both of which are included in the Company's Energy segment. The following pro forma financial information combines the results of operations of the Company, Sun Well, and Eagle Well for the nine months ended September 30, 2012, as if the acquisitions had occurred on January 1, 2012. Pro forma financial information for the 2013 periods is not presented and the 2012 periods do not include any amounts for Ruckus or UK Elite since they were not material to the Company's results of operations. The pro forma financial information is not necessarily indicative of what would have actually occurred had the acquisitions been consummated at the beginning of 2012 or results that may occur in the future.



	Amount
	(in thousands)
Net revenues	$	96,961
Income from continuing operations, net of taxes	$	24,591
Income (loss) from discontinued operations, net of taxes	$	(1,986	)
Net income attributable to Steel Excel Inc.	$	23,185

In December 2012, the Company identified a measurement period adjustment related to the acquisition of Sun Well for a deferred tax liability of $15.1 million associated with the identifiable intangible assets acquired. Such amount was recorded as if the measurement period adjustment was recognized at the acquisition date. As a result of the deferred tax liability recognized, the Company reversed a portion of its valuation allowance for deferred tax assets and recognized a non-cash benefit for income taxes of $15.1 million in the nine months ended September 30, 2013.

In connection with its acquisition of Rogue Pressure Services, Inc. ("Rogue") in December 2011, the Company recognized a liability of $1.2 million for contingent consideration payable upon attaining certain operational performance levels in the ensuing three years. In December 2012, the Company reversed $0.7 million of the contingent consideration liability based on the failure to achieve the operational performance levels in 2012 and projections of future years' performance. In September 2013, the Company reversed the remaining $0.5 million of the contingent consideration liability based on the projections for 2013 and 2014. Such amount was recognized as a reduction of "Selling, general, and administrative expenses" in the three and nine months ended September 30, 2013.