Revised Financial Statements

During 2015, the Company identified an error related to the manner in which the change in the 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 the 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 the 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, its statements of operations and statements of comprehensive income for the three and nine months ended September 30, 2014, and its statement of cash flows for the nine months ended September 30, 2014. The correction of this error did not result in any adjustments to the statement of operations or the statement of comprehensive income for the year ended December 31, 2014. In addition, the Company's disclosures for the three and nine months ended September 30, 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 income for the three and nine months ended September 30, 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 loss	(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 September 30, 2014:



	Previously Reported			Adjustments		Revised
	(in thousands, except per-share data)
Income before income taxes and equity method income	$	5,435		$	—	$	5,435
Provision for income taxes	(1,537		)	1,020		(517		)
Loss from equity method investees, net of taxes	(4,843		)	—		(4,843		)

Net income (loss)	(945		)	1,020		75
Net income attributable to non-controlling interests in consolidated entities	(238		)	—		(238		)

Net loss attributable to Steel Excel Inc.	$	(1,183	)	$	1,020	$	(163	)

Basic and diluted income (loss) per share attributable to Steel Excel Inc.:
Net loss	$	(0.10	)	$	0.09	$	(0.01	)

Statement of Operations for the nine months ended September 30, 2014:



	Previously Reported			Adjustments			Revised
	(in thousands, except per-share data)
Income before income taxes and equity method income	$	14,195		$	—		$	14,195
Benefit from (provision for) income taxes	1,059			(2,153		)	(1,094		)
Loss from equity method investees, net of taxes	(3,402		)	—			(3,402		)

Net income	11,852			(2,153		)	9,699
Net loss attributable to non-controlling interests in consolidated entities	99			—			99

Net income attributable to Steel Excel Inc.	$	11,951		$	(2,153	)	$	9,798

Basic income (loss) per share attributable to Steel Excel Inc.:
Net income	$	1.02		$	(0.18	)	$	0.83

Diluted income (loss) per share attributable to Steel Excel Inc.:
Net income	$	1.01		$	(0.18	)	$	0.83

Statement of Comprehensive Income for the three months ended September 30, 2014:



	Previously Reported			Adjustments			Revised
	(in thousands)
Net income (loss)	$	(945	)	$	1,020		$	75
Other comprehensive income (loss):
Foreign currency translation adjustment	16			—			16
Reclassification to realized gains	—			—			—
Net foreign currency translation adjustment ^(A)	16			—			16

Marketable securities:
Gross unrealized gains on marketable securities, net of tax ^(B)	(761		)	(586		)	(1,347		)
Reclassification to realized gains, net of tax ^(C)	(911		)	(434		)	(1,345		)
Net unrealized gain on marketable securities, net of tax	(1,672		)	(1,020		)	(2,692		)

Comprehensive loss	(2,601		)	—			(2,601		)
Comprehensive income attributable to non-controlling interest	(238		)	—			(238		)

Comprehensive loss attributable to Steel Excel Inc.	$	(2,839	)	$	—		$	(2,839	)

(A) No tax effect on cumulative translation adjustments
(B) Tax benefit on gross unrealized gains	$	586		$	(586	)	$	—
(C) Tax benefit on reclassifications to realized gains (losses)	$	434		$	(434	)	$	—

Statement of Comprehensive Income for the nine months ended September 30, 2014:



	Previously Reported			Adjustments			Revised
	(in thousands)
Net income	$	11,852		$	(2,153	)	$	9,699
Other comprehensive income (loss):
Foreign currency translation adjustment	30			—			30
Reclassification to realized gains	—			—			—
Net foreign currency translation adjustment ^(A)	30			—			30

Marketable securities:
Gross unrealized gains on marketable securities, net of tax ^(B)	6,622			3,449			10,071
Reclassification to realized gains, net of tax ^(C)	(2,488		)	(1,296		)	(3,784		)
Net unrealized gain on marketable securities, net of tax	4,134			2,153			6,287

Comprehensive income	16,016			—			16,016
Comprehensive loss attributable to non-controlling interest	99			—			99

Comprehensive income attributable to Steel Excel Inc.	$	16,115		$	—		$	16,115

(A) No tax effect on cumulative translation adjustments
(B) Tax provision on gross unrealized gains	$	(3,449	)	$	3,449		$	—
(C) Tax benefit on reclassifications to realized gains (losses)	$	1,296		$	(1,296	)	$	—

Statement of Cash Flows for the nine months ended September 30, 2014:



	Previously Reported			Adjustments			Revised
	(in thousands)
Net income	$	11,852		$	(2,153	)	$	9,699
Deferred income tax provision (benefit)	$	(1,745	)	$	2,153		$	408
Cash provided by operating activities	$	30,789		$	—		$	30,789

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.