Revised Financial Statements

During 2015, the Company identified an error related to the manner in which the change in valuation allowance for deferred tax assets was reflected in its financial statements for all annual and quarterly periods in the years ended December 31, 2014 and 2013. The change in valuation allowance, which resulted from a change in deferred tax liabilities related to unrealized gains on available-for-sale securities, was recognized as a component of income from continuing operations, resulting in a benefit from or provision for income taxes allocated to continuing operations in each period, with an offsetting provision for or benefit from income taxes allocated to other comprehensive income relating to unrealized gains or losses on available-for-sale securities. Upon subsequent review, the Company determined that proper intra-period allocation of the provision for income taxes would have resulted in this change in valuation allowance being allocated to other comprehensive income, resulting in no provision or benefit for such item. In periods in which the valuation allowance decreased, the impact of this error was an overstatement of income from continuing operations and an understatement of other comprehensive income; in periods in which the valuation allowance increased, the impact of this error was an understatement of income from continuing operations and an overstatement of other comprehensive income.

The correction of this error has resulted in adjustments to the Company's balance sheet at December 31, 2014, and its statement of operations, statement of comprehensive income, and statement of cash flows for the three months ended March 31, 2014. In addition, the Company's disclosures for the three months ended March 31, 2014, related to income taxes (see Note 12) and net income (loss) per share (see Note 14) have been revised to reflect the impact of these adjustments.

As a result of these adjustments, there was no impact on any of the assets or liabilities reported at December 31, 2014, nor was there any impact on any component of income before income taxes and equity method loss for the three months ended March 31, 2014. The impact of these adjustments on the individual line items of the Company's financial statements was as follows:

Balance Sheet at December 31, 2014:



	Previously Reported			Adjustments			Revised
	(in thousands)
Stockholders' equity:
Common stock	$	14		$	—		$	14
Additional paid-in capital	267,444			—			267,444
Accumulated other comprehensive income	(18,730		)	3,524			(15,206		)
Retained earnings	190,160			(3,524		)	186,636
Treasury stock, at cost	(81,355		)	—			(81,355		)
Total Steel Excel Inc. stockholders' equity	357,533			—			357,533
Non-controlling interest	(15		)	—			(15		)
Total stockholders' equity	$	357,518		$	—		$	357,518

Statement of Operations for the three months ended March 31, 2014:



	Previously Reported			Adjustments			Revised
	(in thousands, except per-share data)
Income before income taxes and equity method loss	$	3,595		$	—		$	3,595
Benefit from (provision for) income taxes	1,903			(2,098		)	(195		)
Loss from equity method investees, net of taxes	(1,433		)	—			(1,433		)

Net income	4,065			(2,098		)	1,967
Net loss attributable to non-controlling interests in consolidated entities	326			—			326

Net income attributable to Steel Excel Inc.	$	4,391		$	(2,098	)	$	2,293

Basic and diluted income (loss) per share attributable to Steel Excel Inc.:
Net income (loss)	$	0.37		$	(0.18	)	$	0.19

Statement of Comprehensive Income for the three months ended March 31, 2014:



	Previously Reported			Adjustments			Revised
	(in thousands)
Net income (loss)	$	4,065		$	(2,098	)	$	1,967
Other comprehensive income (loss):
Foreign currency translation adjustment	—			—			—
Reclassification to realized gains	—			—			—
Net foreign currency translation adjustment ^(A)	—			—			—

Marketable securities:
Gross unrealized gains on marketable securities, net of tax ^(B)	5,259			2,764			8,023
Reclassification to realized gains, net of tax ^(C)	(1,268		)	(666		)	(1,934		)
Net unrealized gain on marketable securities, net of taxes	3,991			2,098			6,089

Comprehensive income (loss)	8,056			—			8,056
Comprehensive loss attributable to non-controlling interest	326			—			326

Comprehensive income (loss) attributable to Steel Excel Inc.	$	8,382		$	—		$	8,382

(A) No tax effect on cumulative translation adjustments
(B) Tax provision on gross unrealized gains	$	(2,764	)	$	2,764		$	—
(C) Tax benefit on reclassifications to realized gains (losses)	$	666		$	(666	)	$	—

Statement of Cash Flows for the three months ended March 31, 2014:



	Previously Reported			Adjustments			Revised
	(in thousands)
Net income	$	4,065		$	(2,098	)	$	1,967
Deferred income tax provision (benefit)	$	(2,020	)	$	2,098		$	78
Cash provided by operating activities	$	9,858		$	—		$	9,858

The selected quarterly financial data for the years ended December 31, 2014 and 2013, revised to reflect the adjustments to correct the error, is as follows:



	Quarter Ended:
	March 31		June 30		September 30			December 31 ^(A)
	(in thousands, except per-share data)
Year Ended December 31, 2014 ^(B)
Net revenues	$	45,159	$	51,924	$	58,583		$	54,482
Gross profits	$	10,058	$	15,003	$	17,183		$	13,799
Net income (loss) from continuing operations	$	1,967	$	7,657	$	75		$	(33,968	)
Net income (loss)	$	1,967	$	7,657	$	75		$	(33,462	)
Net income (loss) attributable to Steel Excel Inc.	$	2,293	$	7,668	$	(163	)	$	(33,605	)
Net income (loss) from continuing operations attributable to Steel Excel Inc.	$	2,293	$	7,668	$	(163	)	$	(33,832	)
Net income (loss) from continuing operations attributable to Steel Excel Inc. per share of common stock
Basic	$	0.19	$	0.64	$	(0.01	)	$	(2.97	)
Diluted	$	0.19	$	0.64	$	(0.01	)	$	(2.97	)

Year Ended December 31, 2013 ^(C)
Net revenues	$	26,351	$	28,761	$	31,420		$	33,496
Gross profits	$	6,983	$	8,041	$	8,010		$	9,120
Net income from continuing operations	$	1,602	$	732	$	2,383		$	8,150
Net income	$	1,207	$	538	$	1,495		$	4,087
Net income attributable to Steel Excel Inc.	$	1,543	$	723	$	1,806		$	6,599
Net income from continuing operations attributable to Steel Excel Inc.	$	1,622	$	768	$	2,205		$	8,428
Net income from continuing operations attributable to Steel Excel Inc. per share of common stock
Basic	$	0.13	$	0.06	$	0.18		$	0.69
Diluted	$	0.13	$	0.06	$	0.18		$	0.69

(A) Includes goodwill impairments of $36.7 million and a foreign tax benefit of $1.7 million.

(B) Reflects adjustments to correct the provision for income taxes of $2.1 million, $1.1 million, $(1.0) million, and $(2.2) million in the four sequential quarters of 2014, respectively.

(C) Reflects adjustments to the provision for income taxes of $1.8 million, $0.3 million, $0.7 million, and $0.7 million in the four sequential quarters of 2013, respectively.