UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________

FORM 10-Q



(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2014~~March 31, 2015 or



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-15071

_____________________

Steel Excel Inc.

(Exact name of Registrant as specified in its charter)



DELAWARE (State or other jurisdiction of incorporation or organization)	94-2748530 (I.R.S. Employer Identification No.)

1133 WESTCHESTER AVENUE, SUITE N222 WHITE PLAINS, NEW YORK (Address of principal executive offices)	10604 (Zip Code)

Registrant's telephone number, including area code (914) 461-1300

_____________________

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one).



Large accelerated filer o	Accelerated filer ý	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

As of ~~October 31, 2014~~April 30, 2015, there were ~~11,410,657~~11,565,103 shares of Steel Excel’s common stock outstanding.

TABLE OF CONTENTS



Part I.		Financial Statements
	Item 1.		Unaudited Consolidated Financial Statements
			Consolidated Statements of Operations for the ~~three- and nine-month~~three-month periods ended ~~September 30,~~March 31, 2015 and 2014 ~~and 2013~~	3
			Consolidated Statements of Comprehensive Income (Loss) for the ~~three- and nine-month~~three-month periods ended ~~September 30,~~March 31, 2015 and 2014 ~~and 2013~~	4
			Consolidated Balance Sheets as of ~~September 30, 2014,~~March 31, 2015, and December 31, ~~2013~~2014	5
			Consolidated Statement of Stockholders' Equity for the ~~nine-month~~three-month period ended ~~September 30, 2014~~March 31, 2015	6
			Consolidated Statements of Cash Flows for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2015 and 2014 ~~and 2013~~	7
			Notes to Consolidated Financial Statements	8
	Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	2425
	Item 4.		Controls and Procedures	2928

Part II.		Other Information
	Item 6.		Exhibits	3129
	Signatures			3230

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Steel Excel Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


													Three Months Ended March 31,
	Three Months Ended September 30,						Nine Months Ended September 30,						2015			2014
	2014			2013			2014			2013						(Revised)
	(in thousands, except per-share data)												(in thousands, except per-share data)
Net revenues	$	58,583		$	31,420		$	155,666		$	86,532		$	38,885		$	45,159

Cost of revenues	40,599			23,340			111,095			62,061			32,188			35,101

Gross profit	17,984			8,080			44,571			24,471			6,697			10,058

Operating expenses:
Selling, general and administrative expenses	9,531			5,146			27,075			16,204			8,039			7,471
Amortization of intangibles	2,273			1,985			7,347			6,616			2,162			2,641
Total operating expenses	11,804			7,131			34,422			22,820			10,201			10,112

Operating income	6,180			949			10,149			1,651
Operating loss													(3,504		)	(54		)

Interest income, net	554			472			1,763			2,341
Interest expense													(642		)	(868		)
Other income (expense), net	(1,299		)	1,467			2,283			1,408			(1,729		)	4,517

Income from continuing operations before income taxes and equity method loss	5,435			2,888			14,195			5,400
Income (loss) before income taxes and equity method loss													(5,875		)	3,595

Benefit from (provision for) income taxes	(1,537		)	297			1,059			2,314			372			(195		)
Loss from equity method investees, net of taxes	(4,843		)	(138		)	(3,402		)	(218		)	(2,110		)	(1,433		)

Net income (loss) from continuing operations	(945		)	3,047			11,852			7,496

Loss from discontinued operations, net of taxes	—			(888		)	—			(1,477		)

Net income (loss)	(945		)	2,159			11,852			6,019			(7,613		)	1,967

Net loss (income) attributable to non-controlling interests in consolidated entities
Continuing operations	(238		)	(178		)	99			(122		)
Discontinued operations	—			489			—			954
Net loss attributable to non-controlling interests in consolidated entities													363			326

Net income (loss) attributable to Steel Excel Inc.	$	(1,183	)	$	2,470		$	11,951		$	6,851		$	(7,250	)	$	2,293

Basic income (loss) per share attributable to Steel Excel Inc.:
Net income (loss) from continuing operations	$	(0.10	)	$	0.23		$	1.02		$	0.58
Loss from discontinued operations, net of taxes	$	—		$	(0.03	)	$	—		$	(0.04	)
Net income (loss)	$	(0.10	)	$	0.20		$	1.02		$	0.54		$	(0.63	)	$	0.19

Diluted income (loss) per share attributable to Steel Excel Inc.:
Net income (loss) from continuing operations	$	(0.10	)	$	0.23		$	1.01		$	0.58
Loss from discontinued operations, net of taxes	$	—		$	(0.03	)	$	—		$	(0.04	)
Net income (loss)	$	(0.10	)	$	0.20		$	1.01		$	0.54		$	(0.63	)	$	0.19

Shares used in computing income (loss) per share:
Basic	11,437			12,529			11,769			12,736			11,475			11,981
Diluted	11,437			12,546			11,790			12,754			11,475			11,999

See accompanying Notes to Consolidated Financial Statements.

Steel Excel Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


													Three Months Ended March 31,
	Three Months Ended September 30,						Nine Months Ended September 30,						2015			2014
	2014			2013			2014			2013						(Revised)
	(in thousands)												(in thousands)
Net income (loss)	$	(945	)	$	2,159		$	11,852		$	6,019		$	(7,613	)	$	1,967
Other comprehensive income (loss):
Foreign currency translation adjustment	16			(3		)	30			(39		)	2			—
Reclassification to realized gains	—			(346		)	—			(346		)	—			—
Net foreign currency translation adjustment ^(A)	16			(349		)	30			(385		)	2			—

Marketable securities:
Gross unrealized gains (losses) on marketable securities, net of tax ^(B)	(761		)	2,421			6,622			5,917
Gross unrealized gains on marketable securities, net of tax ^(B)													1,114			8,023
Reclassification to realized gains, net of tax ^(C)	(911		)	(1,176		)	(2,488		)	(1,158		)	(185		)	(1,934		)
Net unrealized gain (loss) on marketable securities, net of taxes	(1,672		)	1,245			4,134			4,759
Net unrealized gain on marketable securities, net of taxes													929			6,089

Comprehensive income (loss)	(2,601		)	3,055			16,016			10,393			(6,682		)	8,056
Comprehensive loss (income) attributable to non-controlling interest	(238		)	311			99			832
Comprehensive loss attributable to non-controlling interest													363			326

Comprehensive income (loss) attributable to Steel Excel Inc.	$	(2,839	)	$	3,366		$	16,115		$	11,225		$	(6,319	)	$	8,382

(A) No tax effect on cumulative translation adjustments
(B) Tax benefit (provision) on gross unrealized gains (losses)	$	586		$	(1,351	)	$	(3,449	)	$	(3,455	)
(B) Tax provision on gross unrealized gains													$	(548	)	$	—
(C) Tax benefit on reclassifications to realized gains (losses)	$	434		$	687		$	1,296		$	676		$	91		$	—

See accompanying Notes to Consolidated Financial Statements.

Steel Excel Inc.

CONSOLIDATED BALANCE SHEETS

(unaudited)


							March 31, 2015			December 31, 2014
										(Revised)
	September 30, 2014			December 31, 2013			(in thousands)
Assets	(in thousands)
Current assets:
Cash and cash equivalents	$	46,677		$	73,602		$	64,076		$	51,910
Restricted cash	20,264			—			21,308			21,311
Marketable securities	169,635			178,485			124,385			138,457
Accounts receivable, net of allowance for doubtful accounts of $0	29,930			25,355
Accounts receivable (net of allowance for doubtful accounts of $61 in 2015)							17,788			28,016
Deferred income taxes	15			—			1,696			1,696
Prepaid expenses and other current assets	5,133			5,870			7,403			4,228
Current assets of discontinued operations	31			31
Total current assets	271,685			283,343			236,656			245,618
Property and equipment, net	108,337			105,890			104,305			107,187
Goodwill	67,530			67,530			30,864			30,864
Intangible assets, net	38,017			44,438			33,620			35,782
Other investments	28,540			25,844			28,483			28,525
Investments in equity method investees ($26,871 at fair value in 2014)	32,728			8,339
Investments in equity method investees (fair value - $33,240 in 2015 and $26,871 2014)							38,808			30,060
Deferred income taxes	3,732			1,556			221			80
Other long-term assets	1,440			1,754			1,141			1,238
Total assets	$	552,009		$	538,694		$	474,098		$	479,354

Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable	$	4,460		$	4,754		$	3,160		$	3,936
Accrued expenses and other liabilities	10,942			7,763			17,719			8,916
Financial instrument obligations	20,264			—			21,308			21,311
Current portion of long-term debt	13,214			13,214			13,214			13,214
Current portion of capital lease obligations	412			412			412			412
3/4% convertible senior subordinated notes	—			346
Deferred income taxes	3,838			3,612			85			85
Current liabilities of discontinued operations	987			987			450			450
Total current liabilities	54,117			31,088			56,348			48,324
Capital lease obligations, net of current portion	283			572			70			177
Long-term debt, net of current portion	69,375			79,286			62,768			66,071
Deferred income taxes	2,373			—			3,549			3,549
Other long-term liabilities	3,715			3,813			6			3,715
Total liabilities	129,863			114,759			122,741			121,836

Commitments and contingencies

Stockholders' equity:
Common stock ($0.001 par value, 40,000 shares authorized; 14,224 and 14,508 shares issued in 2014 and 2013, respectively; 11,410 and 12,005 shares outstanding in 2014 and 2013, respectively)	14			14
Common stock ($0.001 par value, 40,000 shares authorized; 14,380 and 14,220 shares issued in 2015 and 2014, respectively; 11,566 and 11,406 shares outstanding in 2015 and 2014, respectively)							14			14
Additional paid-in capital	267,047			274,826			267,965			267,444
Accumulated other comprehensive income	10,680			6,516			(14,275		)	(15,206		)
Retained earnings	225,918			213,967			179,386			186,636
Treasury stock, at cost (2014 - 2,814 shares; 2013 - 2,503 shares)	(81,355		)	(71,001		)
Treasury stock, at cost (2,814 shares in 2015 and 2014)							(81,355		)	(81,355		)
Total Steel Excel Inc. stockholders' equity	422,304			424,322			351,735			357,533
Non-controlling interest	(158		)	(387		)	(378		)	(15		)
Total stockholders' equity	422,146			423,935			351,357			357,518
Total liabilities and stockholders' equity	$	552,009		$	538,694		$	474,098		$	479,354

See accompanying Notes to Consolidated Financial Statements.

Steel Excel Inc.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(unaudited)

Steel Excel Inc. Stockholders' Equity
Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Retained Earnings Non-Controlling Interest
Shares Amount Shares Amount Total
(in thousands)
Balance, January 1, 2014 14,508
$ 14
(2,503 ) $ (71,001 ) $ 274,826
$ 6,516
$ 213,967
$ (387 ) $ 423,935
Net income attributable to Steel Excel Inc. —
—
—
—
—
—
11,951
—
11,951
Net loss attributable to non-controlling interests —
—
—
—
—
—
—
(99 ) (99 )
Other comprehensive income —
—
—
—
—
4,164
—
—
4,164
Net issuance of restricted shares 13
1
—
—
(14 ) —
—
—
(13 )
Stock-based compensation —
—
—
—
2,305
—
—
—
2,305
Reverse/forward stock split (297 ) (1 ) —
—
(10,070 ) —
—
—
(10,071 )
Repurchases of common stock —
—
(311 ) (10,354 ) —
—
—
—
(10,354 )
Contribution from non-controlling interest —
—
—
—
—
—
—
328
328
Balance, September 30, 2014 14,224
$ 14
(2,814 ) $ (81,355 ) $ 267,047
$ 10,680
$ 225,918
$ (158 ) $ 422,146



	Steel Excel Inc. Stockholders' Equity
	Common Stock			Treasury Stock					Additional Paid-in Capital			Accumulated Other Comprehensive Income			Retained Earnings			Non-Controlling Interest
	Shares	Amount		Shares		Amount			Additional Paid-in Capital			Accumulated Other Comprehensive Income			Retained Earnings			Non-Controlling Interest			Total
	(in thousands)
Balance, January 1, 2015	14,220	$	14	(2,814	)	$	(81,355	)	$	267,444		$	(15,206	)	$	186,636		$	(15	)	$	357,518
Net loss attributable to Steel Excel Inc.	—	—		—		—			—			—			(7,250		)	—			(7,250		)
Net loss attributable to non-controlling interests	—	—		—		—			—			—			—			(363		)	(363		)
Other comprehensive income	—	—		—		—			—			931			—			—			931
Net issuance of restricted shares	160	—		—		—			(18		)	—			—			—			(18		)
Stock-based compensation	—	—		—		—			539			—			—			—			539
Balance, March 31, 2015	14,380	$	14	(2,814	)	$	(81,355	)	$	267,965		$	(14,275	)	$	179,386		$	(378	)	$	351,357

See accompanying Notes to Consolidated Financial Statements.

Steel Excel Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


							Three Months Ended March 31,
	Nine Months Ended September 30,						2015			2014
	2014			2013						(Revised)
	(in thousands)						(in thousands)
Cash Flows From Operating Activities:
Net income	$	11,852		$	6,019
Net income (loss)							$	(7,613	)	$	1,967
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations	—			1,476
Loss from equity method investees	3,402			218			2,110			1,433
Stock-based compensation expense	2,305			1,979			539			617
Depreciation and amortization	18,127			14,361			5,994			6,163
Deferred income tax benefit	(1,745		)	(2,364		)
Deferred income tax provision (benefit)							(598		)	78
Gain on sales of marketable securities	(4,065		)	(1,834		)	(135		)	(2,991		)
Loss on extinguishment of debt	—			463
Loss on financial instrument obligations	752			—			186			—
Loss on change to equity method at fair value	568			—			2,807			—
Other	561			155			434			27
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(4,402		)	2,419			10,167			(160		)
Prepaid expenses and other assets	709			(1,981		)	(3,152		)	(1,802		)
Accounts payable and other liabilities	2,725			(1,690		)	4,583			4,526
Net cash used in operating activities of discontinued operations	—			(1,894		)
Net cash provided by operating activities	30,789			17,327			15,322			9,858

Cash Flows From Investing Activities:
Purchases of businesses, net of cash acquired	(517		)	(1,125		)	—			(530		)
Purchases of property and equipment	(13,610		)	(6,052		)	(1,304		)	(3,279		)
Proceeds from sale of property and equipment	413			527			27			26
Investments in equity method investees	(144		)	(9,202		)
Purchases of marketable securities	(99,296		)	(161,288		)	(5,058		)	(51,843		)
Sales of marketable securities	105,112			65,474			6,773			40,579
Maturities of marketable securities	4,302			134,669
Proceeds from issuance of financial instrument obligations	171			—			89			—
Repayments of financial instrument obligations							(278		)	—
Other investments	(3,000		)	(25,000		)	—			(3,000		)
Reclassification of restricted cash	(20,264		)	—			3			—
Net cash used in investing activities of discontinued operations	—			(196		)
Net cash used in investing activities	(26,833		)	(2,193		)
Net cash provided by (used in) investing activities							252			(18,047		)

Cash Flows From Financing Activities:
Repurchases of common stock - treasury shares	(10,354		)	(17,816		)	—			(1,377		)
Repurchases of common stock - reverse/forward stock split	(10,071		)	—
Proceeds from issuance of long-term debt	—			70,000
Repayment of subordinated notes	(346		)	—			—			(346		)
Repayments of capital lease obligations	(289		)	(314		)	(107		)	(101		)
Payments for debt issuance costs	—			(1,130		)
Repayments of long-term debt	(9,911		)	(15,500		)	(3,303		)	(3,304		)
Other financing activities	60			—
Net cash provided by (used in) financing activities	(30,911		)	35,240
Net cash used in financing activities							(3,410		)	(5,128		)

Net increase (decrease) in cash and cash equivalents	(26,955		)	50,374			12,164			(13,317		)
Effect of foreign currency translation on cash and cash equivalents	30			(35		)	2			—
Cash and cash equivalents at beginning of period	73,602			71,556			51,910			73,602

Cash and cash equivalents at end of period	$	46,677		$	121,895		$	64,076		$	60,285

See accompanying Notes to Consolidated Financial Statements.

Steel Excel Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


1.	Description and Basis of Presentation

Steel Excel Inc. (“Steel Excel” or the “Company”) currently operates in two reporting segments - Energy and Sports. Through its wholly-owned subsidiary Steel Energy Services Ltd. ("Steel Energy"), the Company’s Energy business provides drilling and production services to the oil and gas industry. Through its wholly-owned subsidiary Steel Sports Inc., the Company’s Sports business provides event-based sports services and other health-related services. The Company also makes significant non-controlling investments in entities in industries related to its reporting segments as well as entities in other unrelated industries. The Company continues to identify business acquisition opportunities in both the Energy and ~~investment opportunities~~Sports industries as well as in other unrelated industries.

The accompanying unaudited consolidated financial statements of Steel Excel and its subsidiaries, which have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles, should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s annual report on Form 10-K for the year ended December 31, ~~2013.~~2014. The Company believes that all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation have been included in the financial statements. The operating results of any period are not necessarily indicative of the results for the entire year or any future period.

~~In December 2013, Black Hawk Energy Services Ltd. ("Black Hawk Ltd."), an indirect wholly-owned subsidiary of~~During 2015, the Company ~~acquired~~identified an error in the ~~business~~manner in which the provision for income taxes had been recorded for all quarterly and ~~substantially all of~~annual periods in the ~~assets of Black Hawk Energy Services, Inc. ("Black Hawk Inc."), a provider of drilling and production services to the oil and gas industry. The fair values recognized at~~years ended December 31, ~~2013, were provisional pending further analysis~~2014 and ~~valuations. In 2014, the Company recorded measurement period adjustments to reflect revised fair values of the assets and liabilities acquired from Black Hawk Inc.~~2013. The Company's balance sheet at December 31, ~~2013, has~~2014, and its statement of operations, statement of comprehensive income, and statement of cash flows for the three months ended March 31, 2014, have been revised to reflect ~~such measurement period adjustments as if they were recorded at~~ the ~~acquisition date~~correction of these errors (see Note 3).

The Company shut down the operations of Ruckus Sports LLC (“Ruckus”), a provider of obstacle course and mass-participation events, in November 2013. The consolidated financial statements reflect Ruckus as a discontinued operation in all periods presented (see Note 4).

The Company's effected a 1-for-500 reverse stock split (the "Reverse Split") in June 2014, immediately followed by a 500-for-1 forward stock split (the "Forward Split", and together with the Reverse Split, the "Reverse/Forward Split"), of its common stock. The consolidated financial statements reflect the effects of the Reverse/Forward Split (see Note 19).

Certain other prior period amounts have been reclassified to conform to the ~~2014~~2015 financial statement presentation.


2.	Recent Accounting Pronouncements

In April ~~2014,~~2015, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update (“ASU”) No. ~~2014-08,~~2015-03, ~~Presentation~~Interest—Imputation of ~~Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360)~~Interest (Subtopic 835-30), which ~~changes the requirements for reporting discontinued operations. Pursuant~~requires that debt issuance costs related to ~~this pronouncement, the disposal of~~ a ~~component of an entity is required to~~recognized debt liability be reported in discontinued operations if the disposal represents a strategic shift that will have a major effect on an entity’s operations and financial results. This pronouncement also requires additional disclosures for discontinued operations and requires disclosures about disposals of individually significant components of an entity that do not qualify for discontinued operations presentationpresented in the ~~financial statements.~~balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by ASU No. ~~2014-08~~2015-03. ASU No. 2015-03 is effective for ~~annual reporting periods~~financial statements issued for fiscal years beginning after December 15, ~~2014,~~2015, and ~~for~~ interim ~~reporting period~~periods within those ~~years.~~fiscal years, with early adoption permitted for financial statements that have not been previously issued. Upon adoption, ASU No. 2015-03 should be applied retrospectively, with the balance sheet of each individual period presented adjusted to reflect the period-specific effects of applying the standard. The Company does not expect the adoption of ASU No. ~~2014-08 to have a material effect on its consolidated financial statements.~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, which establishes a core principle, achieved through a five-step process, that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 is effective for public companies for annual reporting periods beginning after December 15, 2016, and for interim reporting periods within those years. Upon adoption, ASU No. 2014-09 can be applied either retrospectively to each reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. Early application is not permitted. The Company

~~needs to evaluate the impact on its consolidated financial statements of adopting ASU No. 2014-09 and will determine the implementation method to be used.~~

~~In June 2014, the FASB issued ASU No. 2014-12,~~ ~~Compensation — Stock Compensation (Topic 718)~~, to address diversity in accounting for share-based payment awards that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards. ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU No. 2014-12 is effective for annual reporting periods beginning after December 15, 2015, and for interim reporting period within those years, with earlier adoption permitted. The Company does not expect the adoption of ASU No. 2014-122015-03 to have a material effect on its consolidated financial statements.


3.	~~Acquisitions~~Revised Financial Statements

~~On December 16, 2013,~~During 2015, the Company ~~acquired~~identified an error related to the ~~business~~manner in which the change in valuation allowance for deferred tax assets was reflected in its financial statements for all annual and ~~substantially all~~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 ~~assets~~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 ~~Black Hawk Inc. for approximately $60.8 million~~this error was an overstatement of income from continuing operations and an understatement of other comprehensive income; in ~~cash, subject to a post-closing working capital adjustment.~~ 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 ~~fair values recognized~~correction of this error has resulted in 2013 in connection with this transaction were provisional pending the Company's continued evaluation, including assessing any identifiable intangible assets acquired, and completing a valuation of the tangible and intangible assets. During 2014, the Company recorded adjustments to the initial fair value estimates based on the Company's continued assessment of the fair values of the assets and liabilities acquired, including a valuation. The following table summarizes the provisional fair values previously reported, the measurement period adjustments recognized in 2014, and the revised fair values of the assets and liabilities acquired.

Previously Reported Measurement Period Adjustments Revised
(in thousands)
Accounts receivable $ 9,663
$ 451
$ 10,114
Prepaid expenses and other current assets 208
111
319
Property and equipment 30,581
(493 ) 30,088
Intangible assets —
12,210
12,210
Accounts payable (1,333 ) (251 ) (1,584 )
Accrued expenses (1,756 ) (404 ) (2,160 )
Total identifiable net assets acquired 37,363
11,624
48,987
Goodwill 23,400
(12,824 ) 10,576
Net assets acquired $ 60,763
$ (1,200 ) $ 59,563

The measurement period adjustments include an adjustment to the purchase price of $1.2 million, which represents a payment received by the Company in 2014 for the post-closing working capital adjustment. The intangible assets acquired represented customer relationships, a trade name, and a non-compete arrangement with estimated fair values of $11.3 million, $0.8 million, and $0.1 million, respectively. The intangible assets are being amortized over five-year periods. The revised amounts are subject to further revision pending the Company's continued assessment of the fair values of the assets and liabilities acquired. The Company's balance sheet at December 31, ~~2013, has~~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 ~~measurement period~~impact of these adjustments.

As a result of these adjustments, ~~as if they had been recognized~~there was no impact on any of the assets or liabilities reported at ~~the acquisition date, including the amount due~~December 31, 2014, nor was there any impact on any component of income before income taxes and equity method loss for the ~~post-closing working capital adjustment.~~three months ended March 31, 2014. The ~~measurement period~~impact of these adjustments ~~did not have a material effect~~ on the individual line items of the Company's ~~statement~~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~~Operations for the ~~year~~three months ended ~~December~~March 31, ~~2013.~~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.


4.	Acquisitions

In February 2014, UK Elite Soccer, Inc. ("UK Elite"), the Sports' segment soccer operation, acquired the business and assets of ~~three~~an independent ~~providers~~provider of soccer clinics and camps for a total purchase price of ~~$1.0 million, or approximately~~ $0.5 ~~million net of cash acquired.~~million. In connection with ~~these acquisitions,~~this acquisition, the Company recognized approximately ~~$0.2 million in current assets, primarily trade receivables, approximately $0.6 million in current liabilities, primarily deferred revenue, and approximately $0.9~~$0.5 million in intangible assets representing customer relationships.

The following unaudited pro forma financial information for the three months ended September 30, 2013, combines the results of operations of the Company with the results of operations of Black Hawk Inc., which business was acquired in December 2013, as if the acquisition had occurred at the beginning of the year prior to the date of acquisition. The unaudited pro forma financial information for the nine months ended September 30, 2013, combines the results of operations of the

Company with the results of operations of Black Hawk Inc. and UK Elite, which business was acquired in June 2013, as if those acquisitions had occurred at the beginning of the year prior to the date of acquisition. The pro forma financial information does not include the results of Ruckus, which was acquired in January 2013 and is reported as a discontinued operation in the Company's consolidated financial statements. No pro forma information is provided for the businesses acquired by UK Elite in 2014 since their results of operations are not material. The pro forma financial information is not necessarily indicative of what would have actually occurred had the acquisitions been consummated at the beginning of the year prior to the date of acquisition or results that may occur in the future.

Three Months Ended September 30, 2013 Nine Months Ended September 30, 2013
(in thousands. except per-share data)
Net revenues $ 48,696
$ 133,634
Net income from continuing operations $ 6,890
$ 14,811
Net income $ 6,002
$ 13,334
Net income attributable to Steel Excel Inc. $ 6,313
$ 14,160
Net income per share attributable to Steel Excel Inc. - Basic $ 0.50
$ 1.11
Net income per share attributable to Steel Excel Inc. - Diluted $ 0.50
$ 1.11


4.	~~Discontinued Operations~~

In November 2013, the Company shut down the operations of Ruckus after it did not meet operational and financial expectations. For the nine months ended September 30, 2013, Ruckus reported revenues of $1.0 million and a loss from discontinued operations of $1.5 million. For the three months ended September 30, 2013, Ruckus reported revenues of $0.4 million and incurred a loss from discontinued operations of $0.9 million.


5.	Investments

Marketable Securities

All of the Company's marketable securities at ~~September 30, 2014,~~March 31, 2015, and December 31, ~~2013,~~2014, were classified as "available-for-sale" securities, with changes in fair value recognized in stockholders' equity as "other comprehensive income (loss)". Marketable securities at ~~September 30,~~March 31, 2015, consisted of the following:



	Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Short-term deposits	$	41,704		$	—	$	—		$	41,704
Mutual funds	17,030			4,713		(272		)	21,471
Corporate securities	88,392			8,963		(25,277		)	72,078
Corporate obligations	32,396			481		(2,041		)	30,836
Total available-for-sale securities	179,522			14,157		(27,590		)	166,089
Amounts classified as cash equivalents	(41,704		)	—		—			(41,704		)
Amounts classified as marketable securities	$	137,818		$	14,157	$	(27,590	)	$	124,385

Marketable securities at December 31, 2014, consisted of the following:

Cost
Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value
(in thousands)
Short-term deposits $ 42,554
$ —
$ —
$ 42,554
Mutual funds 15,722
5,153
(116 ) 20,759
Corporate securities 105,932
13,539
(2,675 ) 116,796
Corporate obligations 31,248
995
(163 ) 32,080
Total available-for-sale securities 195,456
19,687
(2,954 ) 212,189
Amounts classified as cash equivalents (42,554 ) —
—
(42,554 )
Amounts classified as marketable securities $ 152,902
$ 19,687
$ (2,954 ) $ 169,635

~~Marketable securities at December 31, 2013, consisted of the following:~~


	Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value			Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)											(in thousands)
Short-term deposits	$	60,909		$	—	$	—		$	60,909		$	42,681		$	—	$	—		$	42,681
Mutual funds	15,722			5,061		—			20,783			17,030			4,262		(322		)	20,970
United States government securities	50,356			23		—			50,379
Corporate securities	69,806			9,961		(5,208		)	74,559			103,761			7,821		(23,732		)	87,850
Corporate obligations	31,356			885		(276		)	31,965			32,486			592		(3,441		)	29,637
Commercial paper	1,799			—		—			1,799
Total available-for-sale securities	229,948			15,930		(5,484		)	240,394			195,958			12,675		(27,495		)	181,138
Amounts classified as cash equivalents	(61,909		)	—		—			(61,909		)	(42,681		)	—		—			(42,681		)
Amounts classified as marketable securities	$	168,039		$	15,930	$	(5,484	)	$	178,485		$	153,277		$	12,675	$	(27,495	)	$	138,457

Proceeds from sales of marketable securities were ~~$105.1~~$6.8 million and ~~$65.5 million for the nine months ended September 30, 2014 and 2013, respectively, and $9.4 million and $20.4~~$40.6 million for the three months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013,~~ respectively. The Company determines gains and losses from sales of marketable securities based on specific identification of the securities sold. Gross realized gains and losses from sales of marketable securities, all of which are reported as a component of "Other income (expense), net" in the consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013,~~ were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2014			2013			2014			2013			2015			2014
	(in thousands)												(in thousands)
Gross realized gains	$	682		$	1,914		$	7,078		$	5,779		$	510		$	3,200
Gross realized losses	(1,683		)	(51		)	(3,012		)	(3,945		)	(375		)	(209		)
Realized gains (losses), net	$	(1,001	)	$	1,863		$	4,066		$	1,834		$	135		$	2,991

The fair value of the Company’s marketable securities with unrealized losses at ~~September 30,~~March 31, 2015, all of which had unrealized losses for periods of less than twelve months, were as follows:



	Fair Value		Gross Unrealized Losses
	(in thousands)
Corporate securities	$	40,326	$	(25,277	)
Corporate obligations	14,741		(2,041		)
Mutual funds	4,922		(272		)
Total	$	59,989	$	(27,590	)

The fair value of the Company’s marketable securities with unrealized losses at December 31, 2014, all of which had unrealized losses for periods of less than twelve months, were as follows:

Fair
Value

Gross
Unrealized
Losses
(in thousands)
Corporate securities $ 28,611
$ (2,675 )
Corporate obligations 7,592
(163 )
Mutual funds 5,079
(116 )
Total $ 41,282
$ (2,954 )

~~The fair value of the Company’s marketable securities with unrealized losses at December 31, 2013, and the duration of time that such losses had been unrealized, were as follows:~~


	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in thousands)															(in thousands)
Corporate securities	$	15,609	$	(4,757	)	$	803	$	(451	)	$	16,412	$	(5,208	)	$	39,869	$	(23,732	)
Corporate obligations	10,477		(276		)	—		—			10,477		(276		)	13,530		(3,441		)
Mutual funds																4,873		(322		)
Total	$	26,086	$	(5,033	)	$	803	$	(451	)	$	26,889	$	(5,484	)	$	58,272	$	(27,495	)

Gross unrealized losses primarily related to losses on corporate securities. The Company has evaluated such securities, which primarily consist of investments in in equity securities of publicly-traded entities, as of ~~September 30, 2014,~~March 31, 2015, and has determined that there was no indication of other-than-temporary impairments. This determination was based on several factors, including the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the entity, and the Company's intent and ability to hold the corporate securities for a period of time sufficient to allow for any anticipated recovery in market value.

The amortized cost and estimated fair value of available-for-sale debt securities and marketable securities with no contractual maturities at ~~September 30, 2014,~~March 31, 2015, by contractual maturity, were as follows:


	Cost		Estimated Fair Value		Cost		Estimated Fair Value
	(in thousands)				(in thousands)
Debt securities:
Mature after one year through three years	$	223	$	228
Mature in one year or less					$	202	$	207
Mature in more than three years	31,025		31,852		32,194		30,629
Total debt securities	31,248		32,080		32,396		30,836
Securities with no contractual maturities	164,208		180,109		147,126		135,253
Total	$	195,456	$	212,189	$	179,522	$	166,089

Financial Instrument Obligations

In 2014, the Company entered into short sale transactions on certain financial instruments in which the Company received proceeds from the sale of such financial instruments and incurred obligations to deliver or purchase securities at a later date. Upon initially entering into such short sale transactions the Company recognized obligations totaling approximately $19.5 million, with a comparable amount of the Company's cash and cash equivalents reclassified as restricted cash. Subsequent changes in the fair value of such obligations, determined based on the closing market price of the financial instruments, are recognized currently as gains or losses, with a comparable reclassification made between the amounts of the Company's unrestricted and restricted cash. The Company's obligations for such transactions are reported as "Financial instrument obligations" with a comparable amount reported as "Restricted cash" in the Company's consolidated balance sheet. As of September 30, 2014, the Company's financialFinancial instrument obligations consisted of the ~~following.~~

Initial Obligation Estimated Fair
Value
(in thousands)
Corporate securities $ 655
$ 532
Market indices 18,685
19,603
Covered call options 80
123
Naked put options 92
6
Total $ 19,512
$ 20,264

following:

1213



	March 31, 2015				December 31, 2014
	Initial Obligation		Estimated Fair Value		Initial Obligation		Estimated Fair Value
	(in thousands)
Corporate securities	$	675	$	744	$	666	$	621
Market indices	18,685		20,540		18,685		20,451
Covered call options	55		24		7		4
Naked put options	—		—		109		235
Total	$	19,415	$	21,308	$	19,467	$	21,311

For the three ~~and nine~~ months ended ~~September 30, 2014,~~March 31, 2015, the Company incurred losses on the financial instrument obligations totaling ~~$0.1~~$0.2 million, ~~and $0.8 million, respectively,~~ which are included as a component of "Other income (expense), net" in the Company's consolidated statements of operations.

Equity-Method Investments

In January 2013, the Company acquired a 40% membership interest in Again Faster LLC ("Again Faster"), a fitness equipment ~~company, for total cash consideration of~~ ~~$4.0 million~~.company. In August 2013, the Company acquired ~~1,316,866~~ ~~shares~~approximately 44.7% of the common stock of iGo, Inc. (“iGo”), in a ~~cash tender offer for total consideration~~provider of ~~$5.2 million. The shares of common stock of iGo acquired by the Company represented approximately 44.7% of the issued and outstanding shares of iGo at the date of acquisition.~~mobile accessories. Both Again Faster and iGo are accounted for using the traditional method of accounting for equity-method investments, with the Company recognizing its equity in the income and losses of ~~iGo~~each entity on a one-quarter lag basis.

In May 2014, the Company increased its holdings of the common stock of API Technologies Corp. (“API”), a designer and manufacturer of high performance systems, subsystems, modules, and components, to 11,377,192 shares through the acquisition of 1,666,666 shares on the open market. Upon acquiring such shares the Company held approximately 20.6% of the total outstanding common stock of API. Effective as of that date the investment in API has been accounted for as an equity-method investment using the fair value option, with changes in fair value based on the market price of API's common stock recognized currently as income or loss from equity method investees. The Company elected the fair value option to account for its investment in API in order to more appropriately reflect the value of API in its financial statements. Prior to such time the investment in API was accounted for as an available-for-sale security, and upon the change in classification the Company recognized a loss of approximately $0.6 million that had previously been included as a component of "accumulated other comprehensive income".

In January 2015, two members of the Company's board of directors were appointed to the eight-member board of directors of Aviat Networks, Inc. ("Aviat"), a global provider of microwave networking solutions. At the time of the appointment, the Company held 8,041,892 shares of Aviat, or approximately 12.9% of the total outstanding common stock. Effective as of the date of the appointment, the investment in Aviat has been accounted for as an equity-method investment as the Company’s voting interest and board representation provide it with significant influence over Aviat's operations. The Company elected the fair value option to account for its investment in Aviat, with changes in fair value based on the market price of Aviat's common stock recognized currently as income or loss from equity method investees, in order to more appropriately reflect the value of Aviat in its financial statements. Prior to such time the investment in Aviat was accounted for as an available-for-sale security, and upon the change in classification the Company recognized a loss of approximately $2.8 million that had previously been included as a component of "accumulated other comprehensive income".

The following table summarizes the Company's equity-method investments.


	Ownership				Carrying Value				Income (Loss) Recognized												Ownership				Carrying Value				Income (Loss) Recognized
									Three Months Ended						Nine Months Ended														Three Months Ended
	September 30, 2014		December 31, 2013		September 30, 2014		December 31, 2013		September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013			March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014		March 31, 2015			March 31, 2014
					(in thousands)																				(in thousands)
Traditional equity method	Traditional equity method																				Traditional equity method
Again Faster	40.0	%	40.0	%	$	3,115	$	3,671	$	(263	)	$	(138	)	$	(556	)	$	(218	)	40.0	%	40.0	%	$	2,683	$	3,105	$	(422	)	$	(129	)
iGo	46.9	%	44.7	%	2,742		4,668		(121		)	—			(1,926		)	—			46.9	%	46.9	%	2,885		2,600		285			(1,304		)

Fair value option	Fair value option																				Fair value option
API	20.6	%			26,871		—		(4,459		)	—			(920		)	—			20.6	%	20.6	%	23,669		24,355		(686		)	—
Aviat																					12.9	%			9,571				(1,287		)	—
Total					$	32,728	$	8,339	$	(4,843	)	$	(138	)	$	(3,402	)	$	(218	)					$	38,808	$	30,060	$	(2,110	)	$	(1,433	)

Based on the closing market price of iGo’s publicly-traded shares, the value of the Company’s investment in iGo was approximately ~~$4.2~~$3.3 million at ~~September 30, 2014.~~March 31, 2015.

The following table presents summarized income statement information for the Company's significant equity-method investees for three months ended March 31, 2015. The summarized income statement information is for the most recent practicable period for equity-method investments accounted for using the fair value option and as of the date through which Company has recognized its equity in the income of the investee for equity-method investments accounted for using the traditional method. The summarized income statement information is included for the periods during which such significant equity-method investments were accounted for as equity-method investments.



	Amount
	(in thousands)
Revenues	$	143,350
Gross profit	$	38,149
Loss from continuing operations	$	(5,379	)
Net loss	$	(5,479	)
Net loss attributable to investees	$	(5,479	)

Other Investments

The Company's other investments at ~~September 30, 2014,~~March 31, 2015, include a $25.0 million cost-method investment in a limited partnership that co-invested with other private investment funds in a public company. The investment in the limited partnership had an approximate fair value of ~~$23.4~~$26.7 million at ~~September 30, 2014,~~March 31, 2015, based on the net asset value indicated in the monthly statement received from the partnership. The Company's other investments at ~~September 30, 2014,~~March 31, 2015, also include ~~investments~~an investment in a venture capital ~~funds~~fund totaling $0.5 million and a promissory note with an amortized cost of $3.0 million, which is a reasonable approximation of fair value at ~~September 30, 2014.~~March 31, 2015.


6.	Fair Value Measurements

Fair values of assets and liabilities are determined based on a three-level measurement input hierarchy.

Level 1 inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date.

Level 2 inputs are other than quoted market prices that are observable, either directly or indirectly, for an asset or liability. Level 2 inputs can include quoted prices in active markets for similar assets or liabilities, quoted prices in a market that is not active for identical assets or liabilities, or other inputs that can be corroborated by observable market data. The Company uses quoted prices of similar instruments with an active market to determine the fair value of its Level 2 investments.

Level 3 inputs are unobservable for the asset or liability when there is little, if any, market activity for the asset or liability. Level 3 inputs are based on the best information available, and may include data developed by the Company. The Company uses the net asset value included in quarterly statements it receives in arrears from a venture capital fund to determine the fair value of such fund. The Company determines the fair value of certain corporate securities and corporate obligations by incorporating and reviewing prices provided by third-party pricing services based on the specific features of the underlying securities.

Assets and liabilities measured at fair value on a recurring basis at ~~September 30, 2014,~~March 31, 2015, summarized by measurement input category, were as follows:


	Total			Level 1			Level 2		Level 3		Total			Level 1			Level 2		Level 3
	(in thousands)										(in thousands)
Assets
Cash, including short-term deposits⁽¹⁾	$	46,677		$	46,677		$	—	$	—	$	64,076		$	64,076		$	—	$	—
Restricted cash	20,264			20,264			—		—		21,308			21,308			—		—
Mutual funds⁽²⁾	20,759			20,759			—		—		21,471			21,471			—		—
Corporate securities⁽²⁾	116,796			100,409			—		16,387		72,078			59,890			—		12,188
Corporate obligations⁽²⁾	32,080			—			12,858		19,222		30,836			—			12,134		18,702
Investments in equity-method investees	26,871			26,871			—		—		33,240			33,240			—		—
Investments in certain funds⁽³⁾	540			—			—		540		483			—			—		483
Total assets	$	263,987		$	214,980		$	12,858	$	36,149	$	243,492		$	199,985		$	12,134	$	31,373

Liabilities
Financial instrument obligations	$	(20,264	)	$	(20,264	)	$	—	$	—	$	(21,308	)	$	(21,308	)	$	—	$	—


(1)	Reported within "Cash and cash equivalents"


(2)	Reported within “Marketable securities”


(3)	Reported within "Other investments"

Assets and liabilities measured at fair value on a recurring basis at December 31, ~~2013,~~2014, summarized by measurement input category, were as follows:


	Total		Level 1		Level 2		Level 3		Total			Level 1			Level 2		Level 3
	(in thousands)								(in thousands)
Assets
Cash, including short-term deposits⁽¹⁾	$	72,602	$	72,602	$	—	$	—	$	51,910		$	51,910		$	—	$	—
Mutual funds⁽²⁾	20,783		20,783		—		—		20,970			20,970			—		—
United States government securities⁽²⁾	50,379		50,379		—		—
Corporate securities⁽²⁾	74,559		68,624		—		5,935		87,850			72,798			—		15,052
Commercial paper⁽³⁾	1,799		—		1,799		—
Corporate obligations⁽²⁾	31,965		—		14,535		17,430		29,637			—			10,793		18,844
Investments in certain funds⁽⁴⁾	844		—		—		844
Investments in certain funds⁽³⁾									525			—			—		525
Total	$	252,931	$	212,388	$	16,334	$	24,209	$	190,892		$	145,678		$	10,793	$	34,421

Liabilities
Financial instrument obligations									$	(21,311	)	$	(21,311	)	$	—	$	—


(1)	Reported within "Cash and cash equivalents."


(2)	Reported within “Marketable securities.”


(3)	~~$1.0 million reported within "Cash and cash equivalents" and $0.8 million reported within "Marketable securities."~~


~~(4)~~	Reported within "Other investments."

There were no transfers of securities among the various measurement input levels during the ~~nine~~three months ended ~~September 30, 2014.~~March 31, 2015.

Changes in the fair value of assets valued using Level 3 measurement inputs during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013,~~ were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2014			2013			2014			2013			2015			2014
	(in thousands)												(in thousands)
Balance, beginning of period	$	32,346		$	20,952		$	24,209		$	2,804		$	34,421		$	24,209
Purchases	2,756			—			13,294			39,332			—			5,299
Sales	(137		)	(32		)	(4,869		)	(22,958		)	(163		)	(1,974		)
Realized gains (losses) on sale	—			—			(129		)	1,556
Unrealized gains (losses)	1,184			(2,210		)	3,644			(2,024		)	(2,885		)	2,857
Balance, end of period	$	36,149		$	18,710		$	36,149		$	18,710		$	31,373		$	30,391

Realized gains and losses on the sale of investments using Level 3 measurement inputs are recognized as a component of "Other income (expense), net". Unrealized gains and losses on investments using Level 3 measurement inputs are recognized as a component of "Other comprehensive income".

The ~~Company’s 3/4% Convertible Senior Notes originally due in 2023 had a~~ carrying value of ~~approximately~~ ~~$0.3 million~~ ~~at December 31, 2013, which was~~the Company's long-term debt (see Note 9) is a reasonable approximation of its fair ~~value. The Company redeemed all outstanding Convertible Senior Notes in January 2014 with~~value since it is a ~~cash payment of $0.3 million.~~variable-rate obligation.


7.	Property and Equipment

Property and equipment at ~~September 30, 2014~~March 31, 2015, and December 31, ~~2013,~~2014, consisted of the following:


	September 30, 2014			December 31, 2013			March 31, 2015			December 31, 2014
	(in thousands)						(in thousands)
Rigs and other equipment	$	111,538		$	100,884		$	116,235		$	115,391
Buildings and improvements	18,921			17,880			19,206			18,977
Land	1,893			1,893			1,893			1,893
Vehicles	2,170			1,869			2,304			2,197
Furniture and fixtures	690			512			776			673
Assets in progress	2,083			1,114			298			644
	137,295			124,152			140,712			139,775
Accumulated depreciation	(28,958		)	(18,262		)	(36,407		)	(32,588		)
Property and equipment, net	$	108,337		$	105,890		$	104,305		$	107,187

The amounts at December 31, 2013, have been revised to reflect measurement period adjustments identified during the nine months ended September 30, 2014, related to the assets acquired from Black Hawk Inc. as if they had been recognized at the acquisition date (see Note 3). Depreciation expense was $~~3.7~~3.8 million and ~~$2.6~~$3.5 million for the three months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013, respectively. Depreciation expense was~~ ~~$10.8 million~~ ~~and~~ ~~$7.7 million~~ ~~for the nine months ended September 30, 2014 and 2013,~~ respectively.


8.	Goodwill and Other Intangible Assets

The Company's intangible assets at ~~September 30, 2014~~March 31, 2015, and December 31, ~~2013,~~2014, all of which are subject to amortization, consisted of the following:


	September 30, 2014							December 31, 2013							March 31, 2015							December 31, 2014
	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
	(in thousands)														(in thousands)
Energy segment:
Customer relationships	$	54,430	$	(19,999	)	$	34,431	$	54,430	$	(13,700	)	$	40,730	$	54,430	$	(23,805	)	$	30,625	$	54,430	$	(21,938	)	$	32,492
Trade names	4,860		(3,006		)	1,854		4,860		(2,315		)	2,545		4,860		(3,317		)	1,543		4,860		(3,161		)	1,699
Non-compete agreement	120		(19		)	101		120		—			120		120		(31		)	89		120		(25		)	95
	59,410		(23,024		)	36,386		59,410		(16,015		)	43,395		59,410		(27,153		)	32,257		59,410		(25,124		)	34,286

Sports segment:
Customer relationships	2,089		(550		)	1,539		1,163		(230		)	933		2,089		(805		)	1,284		2,089		(678		)	1,411
Trade names	122		(30		)	92		122		(12		)	110		122		(43		)	79		122		(37		)	85
	2,211		(580		)	1,631		1,285		(242		)	1,043		2,211		(848		)	1,363		2,211		(715		)	1,496

Total	$	61,621	$	(23,604	)	$	38,017	$	60,695	$	(16,257	)	$	44,438	$	61,621	$	(28,001	)	$	33,620	$	61,621	$	(25,839	)	$	35,782

Amortization expense was ~~$2.3~~$2.2 million and $~~2.0~~2.6 million for the three months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013,~~ respectively. ~~Amortization expense was $7.3 million and $6.6 million for the nine months ended September 30, 2014 and 2013, respectively.~~

Estimated aggregate amortization expense related to the intangible assets for the ~~next five~~remainder of 2015 and subsequent years is as follows:


	Amount		Amount
	(in thousands)		(in thousands)
For the year ended December 31:
Remainder of 2014	$	2,234
2015	8,210
Remainder of 2015			$	6,049
2016	7,202		7,202
2017	5,971		5,972
2018	5,232		5,229
2019			2,814
Thereafter	9,168		6,354
Total	$	38,017	$	33,620

The changes to the Company’s carrying amount of goodwill were as follows:


	Nine Months Ended September 30, 2014						Year Ended December 31, 2013								Three Months Ended March 31, 2015						Year ended December 31, 2014
	Energy		Sports		Total		Energy		Sports			Total			Energy		Sports		Total		Energy			Sports		Total
	(in thousands)														(in thousands)
Balance, beginning of period	$	65,359	$	2,171	$	67,530	$	52,939	$	154		$	53,093		$	28,693	$	2,171	$	30,864	$	65,359		$	2,171	$	67,530
Acquisitions	—		—		—		10,576		5,594			16,170
Adjustments to fair value	—		—		—		1,844		—			1,844
Impairments	—		—		—		—		(3,577		)	(3,577		)	—		—		—		(36,666		)	—		(36,666		)
Balance, end of period	$	65,359	$	2,171	$	67,530	$	65,359	$	2,171		$	67,530		$	28,693	$	2,171	$	30,864	$	28,693		$	2,171	$	30,864

The amounts for the Energy segment at December 31, 2013, have been revised to reflect measurement period adjustments identified during the nine months ended September 30, 2014, related to the assets acquired from Black Hawk Inc. as if they had been recognized at the acquisition date (see Note 3). The adjustment to fair value in 2013 represents an adjustment to reflect additional acquisition-date deferred income tax liabilities and non-current deferred compensation obligations related to the acquisition of Sun Well Service, Inc. (“Sun Well”) in May 2012. During the year ended December 31, 2013, the Company recognized a goodwill impairment of $3.6 million related to the shutdown of Ruckus (see Note 4).

The components of goodwill at ~~September 30, 2014~~March 31, 2015, and December 31, ~~2013,~~2014, were as follows:


	September 30, 2014			December 31, 2013			March 31, 2015			December 31, 2014
	(in thousands)						(in thousands)
Goodwill	$	73,095		$	73,095		$	73,095		$	73,095
Accumulated impairment	(5,565		)	(5,565		)	(42,231		)	(42,231		)
Net goodwill	$	67,530		$	67,530		$	30,864		$	30,864


9.	Long-term Debt

~~In 2013,~~ Steel Energy ~~entered into~~has a credit agreement, as amended (the “Amended Credit Agreement”), with Wells Fargo Bank National Association, RBS Citizens, N.A., and Comerica Bank that ~~provided~~provides for a borrowing capacity of $105.0 million consisting of a $95.0 million secured term loan (the “Term Loan”) and up to $10.0 million in revolving loans (the “Revolving Loans”) subject to a borrowing base of 85% of the eligible accounts receivable.

Borrowings under the Amended Credit Agreement are collateralized by substantially all the assets of Steel Energy and its wholly-owned subsidiaries Sun Well Service, Inc. (“Sun Well”), Rogue Pressure Services, LLC (“Rogue”), and Black Hawk Energy Services Ltd. ("Black Hawk Ltd."), and a pledge of all of the issued and outstanding shares of capital stock of Sun Well, Rogue, and Black Hawk Ltd. Borrowings under the Amended Credit Agreement are fully guaranteed by Sun Well, Rogue, and Black Hawk Ltd. The carrying values as of ~~September 30, 2014,~~March 31, 2015, of the assets pledged as collateral by Steel Energy and its subsidiaries under the Amended Credit Agreement were as follows:


	Amount		Amount
	(in thousands)		(in thousands)
Cash and cash equivalents	$	22,625	$	41,734
Accounts receivable	28,195		16,710
Property and equipment, net	100,142		96,210
Intangible assets, net	36,386		32,257
Total	$	187,348	$	186,911

The Amended Credit Agreement has a term that runs through July 2018, with the Term Loan amortizing in quarterly installments of $3.3 million and a balloon payment due on the maturity date. At ~~September 30, 2014, $82.6~~March 31, 2015, $76.0 million was outstanding under the Term Loan and no amount was outstanding under the Revolving Loans. ~~The carrying value of the amount outstanding under the Amended Credit Agreement is a reasonable approximation of fair value since it is variable rate debt.~~ Principal payments under the Amended Credit Agreement for the remainder of ~~2014~~2015 and subsequent years are as follows:


	Amount		Amount
	(in thousands)		(in thousands)
Remainder of 2014	$	3,304
2015	13,214
Remainder of 2015			$	9,911
2016	13,214		13,214
2017	13,214		13,214
2018	39,643		39,643
Total	82,589		75,982
Less current portion	13,214		13,214
Total long-term debt	$	69,375	$	62,768

The interest rate on the borrowings under the Amended Credit Agreement was ~~3.0%~~2.8% at ~~September 30, 2014.~~March 31, 2015. For the three months ended ~~September 30,~~March 31, 2015 and 2014, the Company incurred interest expense of $~~0.8~~0.6 million and $0.8 million, respectively, in connection with the Amended Credit Agreement, consisting of $0.7 million in interest on the Term Loans and $0.1 million of amortization of deferred financing fees. For the nine months ended September 30, 2014, the Company incurred interest expense of $2.4 million, consisting of $2.0 million in interest on the Term Loans and $0.4 million of amortization of deferred financing fees.Agreement. The Company was in compliance with all financial covenants of the Amended Credit Agreement as of ~~September 30, 2014.~~March 31, 2015.

~~Sun Well previously had a credit agreement (the "Sun Well Credit Agreement") with Wells Fargo Bank, National Association, that included a term loan of~~ ~~$20.0 million~~ ~~and a revolving line of credit for up to~~ ~~$5.0 million~~. All amounts due under the Sun Well Credit Agreement were fully repaid in 2013 and the facility was terminated in July 2013, at which time the Company recognized a loss on extinguishment of $0.5 million. For the three and nine months ended September 30, 2013, the Company incurred interest expense of $0.1 million and $0.3 million, respectively, in connection with the Sun Well Credit Agreement.


10.	Other Liabilities

“Accrued expenses and other current liabilities” consisted of the following:


	September 30, 2014		December 31, 2013		March 31, 2015		December 31, 2014
	(in thousands)				(in thousands)
Accrued compensation and related taxes	$	6,061	$	4,207	$	5,285	$	5,471
Deferred compensation					3,515		—
Deferred revenue	941		857		3,494		1,308
Insurance	1,520		310		2,535		—
Professional services	287		608		264		763
Accrued fuel and rig-related charges	1,163		889		2,076		601
Tax-related	341		385		120		238
Other	629		507		430		535
Total	$	10,942	$	7,763	$	17,719	$	8,916

“Other long-term liabilities” ~~of $3.7 million and $3.8 million~~ at ~~September 30, 2014, and~~ December 31, ~~2013, respectively,~~2014, primarily ~~represented long-term~~consisted deferred compensation ~~arrangements.~~arrangements that are expected to be paid out in 2016.


11.	~~Interest and~~ Other Income (Expense), net

~~“Interest income, net” consisted of the following:~~

Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
(in thousands)
Interest income $ 1,332
$ 1,217
$ 4,231
$ 3,341
Interest expense (778 ) (745 ) (2,468 ) (1,000 )
Interest income, net $ 554
$ 472
$ 1,763
$ 2,341

"Other income (expense), net" consisted of the following:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2014			2013			2014			2013			2015			2014
	(in thousands)												(in thousands)
Realized gain (loss) on sale of marketable securities, net	$	(1,001	)	$	1,863		$	4,066		$	1,834
Realized loss on financial instrument obligation	(83		)	—			(752		)	—
Investment income													$	1,564		$	1,589
Realized gain on sales of marketable securities, net													135			2,991
Realized loss on financial instrument obligations													(186		)	—
Realized loss upon change to equity method at fair value	—			—			(568		)	—			(2,807		)	—
Foreign exchange loss	(223		)	—			(394		)	—			(288		)	—
Loss on extinguishment of debt	—			(463		)	—			(463		)
Other	8			67			(69		)	37			(147		)	(63		)
Other income (expense), net	$	(1,299	)	$	1,467		$	2,283		$	1,408		$	(1,729	)	$	4,517


12.	Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, which requires that deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized. Based on its history of operating losses, the Company has offset its net deferred tax assets by a full valuation allowance. Any reversal of the corresponding valuation allowance will generally result in a tax benefit being recorded in the consolidated statement of operations in the respective period.

For the three months ended ~~September 30, 2014 and 2013,~~March 31, 2015, the Company recognized ~~a provision for income taxes of $1.5 million and~~ a benefit from income taxes of ~~$0.3~~$0.4 million, ~~respectively. The provision for income taxes in the 2014 period~~which primarily reflects the allowable benefit recognized from a ~~$1.0 million~~ valuation allowance adjustment ~~as a result of a decrease in deferred tax liabilities related to net unrealized gains on marketable securities. The benefit~~resulting from ~~income taxes in the 2013 period primarily reflects a $0.7 million valuation allowance adjustment as a result of~~ an increase in deferred tax liabilities related to net unrealized gains on marketable securities.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2014, ~~and 2013,~~ the Company recognized a ~~benefit from~~provision for income taxes of ~~$1.1~~$0.2 million, ~~and $2.3 million, respectively. The benefit from income taxes in each period~~which primarily reflects ~~valuation allowance adjustments of $2.2 million~~state and ~~$2.8 million in the 2014 period and 2013 period, respectively, as a result of an increase in deferred tax liabilities related to net unrealized gains on marketable securities.~~alternative minimum taxes.

13. Stock Benefit Plans

The Company grants equity-based awards to employees under its 2004 Equity Incentive Plan, as amended (the “2004 Plan”), and grants equity-based awards to non-employee directors under its 2006 Director Plan, as amended (the "2006 Plan",

and together with the “2004 Plan”, the "Equity Plans"). Stock-based compensation expense by type of award, all of which was recognized as a component of "Selling, general, and administrative expenses" in the consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013,~~ was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2014		2013		2014		2013		2015		2014
	(in thousands)								(in thousands)
Stock options	$	—	$	25	$	36	$	76	$	—	$	22
Restricted stock	622		277		2,269		1,903		539		595
Total stock-based compensation	$	622	$	302	$	2,305	$	1,979	$	539	$	617

Restricted stock activity in the Equity Plans during the ~~nine~~three months ended ~~September 30, 2014,~~March 31, 2015, was as follows:



	Amount
	(in thousands)
Non-vested stock, January 1, ~~2014~~2015	~~142~~57
Awarded	24161
Vested	(21	)
~~Forfeited~~	~~(12~~3	)
Non-vested stock, ~~September 30, 2014~~March 31, 2015	~~133~~215

The Company did not grant any stock options during the ~~nine~~three months ended ~~September 30, 2014.~~March 31, 2015.


14.	Net Income (Loss) Per Share

Basic net income (loss) attributable to Steel Excel per share of common stock is computed by dividing net income (loss) attributable to Steel Excel by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share attributable to Steel Excel gives effect to all potentially dilutive common shares outstanding during the period.

Amounts used in the calculation of basic and diluted net income (loss) per share of common stock for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013,~~ were as follows:

2021


												Three Months Ended March 31,
	Three Months Ended September 30,						Nine Months Ended September 30,					2015			2014
	2014			2013			2014		2013						(Revised)
	(in thousands, except per share data)											(in thousands, except per share data)
Numerators:
Net income (loss) from continuing operations	$	(945	)	$	3,047		$	11,852	$	7,496
Net income (loss)												$	(7,613	)	$	1,967
Non-controlling interest	(238		)	(178		)	99		(122		)	363			326
Net income (loss) from continuing operations attributable to Steel Excel Inc.	$	(1,183	)	$	2,869		$	11,951	$	7,374

Loss from discontinued operations, net of taxes	$	—		$	(888	)	$	—	$	(1,477	)
Non-controlling interest	—			489			—		954
Loss from discontinued operations, net of taxes, attributable to Steel Excel Inc.	$	—		$	(399	)	$	—	$	(523	)

Net income (loss) attributable to Steel Excel Inc.	$	(1,183	)	$	2,470		$	11,951	$	6,851		$	(7,250	)	$	2,293

Denominators:
Basic weighted average common shares outstanding	11,437			12,529			11,769		12,736			11,475			11,981
Effect of dilutive securities:
Stock-based awards	—			17			21		18			—			18
Diluted weighted average common shares outstanding	11,437			12,546			11,790		12,754			11,475			11,999

Basic income (loss) per share attributable to Steel Excel Inc.:
Net income (loss) from continuing operations	$	(0.10	)	$	0.23		$	1.02	$	0.58
Loss from discontinued operations, net of taxes	$	—		$	(0.03	)	$	—	$	(0.04	)
Net income (loss)	$	(0.10	)	$	0.20		$	1.02	$	0.54		$	(0.63	)	$	0.19

Diluted income (loss) per share attributable to Steel Excel Inc.:
Net income (loss) from continuing operations	$	(0.10	)	$	0.23		$	1.01	$	0.58
Loss from discontinued operations, net of taxes	$	—		$	(0.03	)	$	—	$	(0.04	)
Net income (loss)	$	(0.10	)	$	0.20		$	1.01	$	0.54		$	(0.63	)	$	0.19

The number of shares used in the calculation of diluted earnings (loss) per share for the three months ended ~~September 30, 2014~~March 31, 2015, excluded ~~23,000~~15,000 incremental shares related to restricted stock awards. Such incremental shares were excluded from the calculation of diluted earnings (loss) per share due to their anti-dilutive effect on the loss from continuing operations.


15.	Accumulated Other Comprehensive Income

Changes in the components of "Accumulated other comprehensive income" were as follows:

Unrealized
Gains on
Securities Cumulative
Translation
Adjustment Total
(in thousands)
Balance, January 1, 2014 $ 6,921
$ (405 ) $ 6,516
Current period other comprehensive income 4,134
30
4,164
Balance, September 30, 2014 $ 11,055
$ (375 ) $ 10,680



	Unrealized Gains on Securities			Cumulative Translation Adjustment			Total
	(in thousands)
Balance, January 1, 2015	$	(14,821	)	$	(385	)	$	(15,206	)

Other comprehensive income (loss) before reclassifications	1,114			2			1,116
Reclassifications from accumulated other comprehensive income	(185		)	—			(185		)
Current period other comprehensive income	929			2			931

Balance, March 31, 2015	$	(13,892	)	$	(383	)	$	(14,275	)

Amounts reclassified for realized gains on marketable securities for the three months ended March 31, 2015, are reported as a component of "Other income (expense), net" in the consolidated statement of operations.


16.	Segment Information

The Company currently reports its business in two reportable segments - Energy and Sports. The Company measures profit or loss of its segments based on operating income (loss). before goodwill impairments.

Segment information relating to the Company's results offrom continuing operations was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2014			2013			2014			2013			2015			2014
	(in thousands)												(in thousands)
Revenues
Energy	$	49,701		$	25,162		$	140,767		$	78,272		$	37,132		$	43,913
Sports	8,882			6,258			14,899			8,260			1,753			1,246
Total revenues	$	58,583		$	31,420		$	155,666		$	86,532		$	38,885		$	45,159

Operating income (loss)
Operating income (loss) before goodwill impairments
Energy	$	8,551		$	2,007		$	21,923		$	8,626		$	2,359		$	5,467
Sports	1,146			975			(896		)	(318		)	(2,539		)	(2,032		)
Total segment operating income	9,697			2,982			21,027			8,308
Total segment operating income (loss)													(180		)	3,435
Corporate and other business activities	(3,517		)	(2,033		)	(10,878		)	(6,657		)	(3,324		)	(3,489		)
Interest income, net	554			472			1,763			2,341
Interest expense													(642		)	(868		)
Other income (expense), net	(1,299		)	1,467			2,283			1,408			(1,729		)	4,517
Income from continuing operations before income taxes and equity method income	$	5,435		$	2,888		$	14,195		$	5,400
Income (loss) before income taxes and equity method loss													$	(5,875	)	$	3,595

Depreciation and amortization expense:
Energy	$	5,519		$	4,386		$	16,924		$	13,923		$	5,565		$	5,793
Sports	431			150			1,203			438			429			370
Total depreciation and amortization expense	$	5,950		$	4,536		$	18,127		$	14,361		$	5,994		$	6,163

Segment information related to the Company's assets was as follows:


	September 30, 2014		December 31, 2013		March 31, 2015		December 31, 2014
	(in thousands)				(in thousands)
Sports	$	19,344	$	20,495	$	18,559	$	18,625
Energy	256,416		244,401		220,068		220,262
Corporate and other business activities	276,249		273,798		235,471		240,467
Total assets	$	552,009	$	538,694	$	474,098	$	479,354


17.	Related Party Transactions

Steel Partners Holdings L.P. ("SPLP") beneficially owned approximately ~~57.9%~~57.2% of the Company’s outstanding common stock as of ~~September 30, 2014~~March 31, 2015. The power to vote and dispose of the securities held by SPLP is controlled by Steel Partners Holdings GP Inc. (“SPH GP”). Warren G. Lichtenstein, the Chairman of the Board of Directors and President of the Company's Sports segment, is also the Executive Chairman of SPH GP. Certain other affiliates of SPH GP hold positions with the Company, including Jack L. Howard, as Vice Chairman and principal executive officer, James F. McCabe, Jr., as Chief Financial Officer, and Leonard J. McGill, as Vice President, General Counsel, and Secretary. Each of Warren G. Lichtenstein and Jack L. Howard is compensated with cash compensation and equity awards or equity-based awards in amounts that are consistent with the Company’s Non-employee Director Compensation Policy.

~~Effective January 1, 2014, the services provided by~~The Company has contracted with SP Corporate Services LLC (“SP Corporate”), an affiliate of SPLP, ~~were expanded, with~~to provide executive and financial management services in the ~~Company paying SP Corporate $8.0 million annually for such services. In October 2014,~~areas of finance, regulatory reporting, and other administrative and operational functions, including the ~~annual service fee was increased to $8.2 million to include fees for executive~~ services ~~provided by SP Corporate to the Company's~~

~~Sports business. The services agreement with SP Corporate and subsequent amendments were approved by~~of a ~~committee of the Company’s independent directors.~~chief financial officer. In addition, the Company reimburses SP Corporate and other SPLP affiliates for certain expenses incurred on the Company’s behalf. During the three months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013,~~ the Company incurred expenses of $2.2 million and $1.0 million, respectively, related to services provided by SP Corporate and reimbursements of expenses incurred on its behalf by SP Corporate and its affiliates. During the nine months ended September 30, 2014 and 2013, the Company incurred expenses of $6.6 million and $3.0$2.2 million, respectively, related to services provided by SP Corporate and reimbursements of expenses incurred on its behalf by SP Corporate and its affiliates. The Company owed SP Corporate and its affiliates $~~0.2~~0.1 million at ~~September 30, 2014~~March 31, 2015.

The Company uses several firms to execute trades of its marketable securities and certain of its other investments. The Company uses Mutual Securities, Inc. ("Mutual Securities"), to execute certain trades, including repurchases of the Company's common stock. Jack L. Howard, the Company's principal executive officer, is a registered principal of Mutual Securities and receives commission payments from Mutual Securities after deductions for fees and expenses. During the three months ended March 31, 2015 and 2014, the Company paid commissions to Mutual Securities totaling $11,000 and $123,000, respectively.

In October 2013, iGo contracted with SP Corporate to provide certain executive, other employee, and corporate services for a fixed annual fee of $0.4 million. In addition, iGo will reimburse SP Corporate for reasonable and necessary business expenses incurred on iGo’s behalf. The services agreement was approved by the independent directors of iGo.

At ~~September 30, 2014,~~March 31, 2015, the Company held $~~15.2~~9.3 million of short-term deposits at WebBank, an affiliate of SPLP. For the three months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013,~~ the Company recorded interest income of ~~$23,000~~$16,000 and ~~$21,000,~~$7,000, respectively, on such deposits. ~~For the~~ ~~nine months ended September 30, 2014~~ ~~and 2013, the Company recorded interest income of $65,000 and $69,000, respectively.~~


18.	Supplemental Cash Flow Information

Cash paid for interest and income taxes and non-cash investing and financing activities for the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 and ~~2013,~~2014, was as follows:


	Nine Months Ended September 30,				Three Months Ended March 31,
	2014		2013		2015		2014
	(in thousands)				(in thousands)
Interest paid	$	2,092	$	539	$	556	$	735
Income taxes paid, net of refunds	$	151	$	1,594	$	61	$	44

Non-cash investing and financing activities:
Reclassification of available-for-sale securities to equity method investment	$	27,647	$	—	$	10,858	$	—
Securities received in exchange for financial instrument obligations	$	19,341	$	—	$	76	$	—
Contribution of advances by non-controlling interest	$	268	$	—
Securities delivered in exchange for settlement of financial instrument obligations					$	76	$	—
Restricted stock awards surrendered to satisfy tax withholding obligations upon vesting	$	14	$	—	$	18	$	—


~~19.~~	~~Stock Split~~

In June 2014, following stockholder approval and authorization from its board of directors, the Company effected a 1-for-500 reverse stock split (the "Reverse Split"), immediately followed by a 500-for-1 forward stock split (the "Forward Split", and together with the Reverse Split, the "Reverse/Forward Split"), of its common stock effective as of the close of business on June 18, 2014. As a result of the Reverse Split, stockholders holding fewer than 500 shares received a cash payment for all of their outstanding shares based on a per share price equal to the closing price of the Company’s common stock on June 18, 2014, the effective date of the Reverse/Forward Split. Stockholders holding 500 or more shares as of the effective date of the Reverse/Forward Split did not receive any payments for fractional shares resulting from the Reverse Split, and therefore the total number of shares held by such holders did not change as a result of the Reverse/Forward Split.

~~In connection with the Reverse Split, the Company paid $10.1 million in July 2014 for~~ ~~295,659~~ ~~shares of common stock and the return of~~ ~~1,388~~ ~~non-vested restricted stock awards previously awarded to employees.~~

2324

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained in this quarterly report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements. See Item I Part 1A in the Company’s annual report on Form 10-K for the year ended December 31, ~~2013,~~2014, for a description of certain factors that might cause such a difference.

Steel Excel Inc. (“Steel Excel” or the “Company”) currently operates in two reporting segments - Energy and Sports. The Energy segment focuses on providing drilling and production services to the oil and gas industry. The Sports segment provides event-based sports services and other health-related services. The Company also makes significant non-controlling investments in entities in industries related to its reporting segments as well as entities in other unrelated industries. The Company continues to identify ~~other new~~ business acquisition ~~opportunities.~~opportunities in both the Energy and Sports industries as well as in other unrelated industries.

In ~~June 2013, the Company acquired~~ ~~80%~~ ~~of the outstanding common stock of UK~~February 2014, U.K. Elite Soccer, Inc. ("UK Elite")~~. UK Elite is included in~~, the ~~Company's Sports segment. In 2014, UK Elite~~Sports' segment soccer operation, acquired the business and assets of ~~three~~an independent ~~providers~~provider of soccer clinics and camps for ~~a total purchase price of $1.0 million, or~~ approximately $0.5 million ~~net of cash acquired.~~in cash.

InDuring 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 ~~2013, Black Hawk Energy Services Ltd. ("Black Hawk Ltd."),~~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 ~~indirect wholly-owned subsidiary~~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 ~~Company, acquired~~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 ~~business~~valuation allowance decreased, the impact of this error was an overstatement of income from continuing operations and ~~substantially all~~an understatement of other comprehensive income; in periods in which the ~~assets~~valuation allowance increased, the impact of ~~Black Hawk Energy Services, Inc. (“Black Hawk Inc.”), a provider~~this error was an understatement of ~~drilling~~income from continuing operations and ~~production services to the oil and gas industry. Black Hawk Ltd. is included~~an overstatement of other comprehensive income. The correction of this error has resulted in the Company's Energy segment. The fair values of the assets and liabilities of Black Hawk Inc. recognized at December 31, 2013, were provisional pending further analysis and valuations. In 2014, the Company recorded measurement period adjustments to ~~reflect revised fair values of~~ the ~~assets and liabilities of Black Hawk Inc. The~~ Company's balance sheet at December 31, ~~2013, has been revised to reflect such measurement period adjustments as if they were recorded at~~2014, and its statement of operations, statement of comprehensive income, and statement of cash flows for the ~~acquisition date.~~

In July 2013, Steel Energy Services Ltd. ("Steel Energy"), a wholly-owned subsidiary of the Company, entered into a credit agreement, as amended (the "Amended Credit Agreement") that provided for a borrowing capacity of $105.0 million consisting of a $95.0 million secured term loan and up to $10.0 million in revolving loans.

In November 2013 the Company shut down the operations of Ruckus Sports LLC (“Ruckus”), an obstacle course and mass-participation events company that was controlled by the Company through its representation on the Ruckus board, after it did not meet operational and financial expectations. Ruckus, which was acquired in January 2013, is reported as a discontinued operation in the Company’s consolidated financial statements.

The following discussion and analysis should be read in conjunction with the Company’s unaudited consolidated financial statements and notes thereto.

Results of Operations

Recent developments in the oil services industry had an adverse effect on the results of operations of the Company's Energy segment in the first quarter of 2015. The ~~net revenues~~decline in energy prices, particularly the significant decline in oil prices, has resulted in the Energy segment's customers, the oil and gas exploration and production companies (the "E&P Companies"), cutting back on their capital expenditures, which resulted in reduced drilling activity. In addition, the E&P Companies have sought price concessions from their service providers to offset their drop in revenue. Such actions on the part of the E&P Companies had an adverse effect on the operations of the Energy segment in the first quarter of 2015 and will continue to adversely impact its operations throughout 2015. The Energy segment has experienced a decline in rig utilization in all of its operations and prices for its services have declined. The Company has taken certain actions and instituted cost-reduction measures in an effort to mitigate these adverse effects. The Energy segment's results of operations going forward will be dependent on the price of oil in the future, the resulting drilling rig count in the basins in which it operates, and the Company's ability to return to the pricing and service levels of the past as oil prices increase. Although the impact on the Energy segment's results of operations in 2015 remains uncertain, the drilling rig count in North America has declined significantly and continues to decline, which has directly impacted the segment's rig utilization, and the pricing for the segment's services has declined. As a result, the Company expects the Energy segment to continue to experience a decline in operating income ~~by reportable segment for~~in 2015 as compared to the ~~three and nine months ended September 30,~~ 2014 ~~and 2013, were as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
(in thousands)
Energy net revenues $ 49,701
$ 25,162
$ 140,767
$ 78,272
Sports net revenues 8,882
6,258
14,899
8,260
Consolidated net revenues $ 58,583
$ 31,420
$ 155,666
$ 86,532

Energy operating income $ 8,551
$ 2,007
$ 21,923
$ 8,626
Sports operating income (loss) 1,146
975
(896 ) (318 )
Corporate and other business activities $ (3,517 ) $ (2,033 ) $ (10,878 ) $ (6,657 )
Consolidated operating income $ 6,180
$ 949
$ 10,149
$ 1,651
results.

Three months ended ~~September 30, 2014~~March 31, 2015, compared to three months ended ~~September 30, 2013~~March 31, 2014

Net revenues for the three months ended ~~September 30, 2014, increased~~March 31, 2015, decreased by $~~27.2~~6.3 million as compared to the ~~2013~~2014 period. Net revenues from the Company's Energy segment ~~increased~~decreased by $~~24.5~~6.8 million, or 15.4%, primarily ~~as a result of $19.9 million in revenues~~ from ~~Black Hawk Ltd., which business was acquired in December 2013, and an increase in revenues of $4.6 million in~~ the ~~Energy segment's other operations~~ ~~due primarily to an increase~~decline in rig utilization ~~for snubbing~~and the decline in prices that resulted from the adverse effects the decline in energy prices had on the oil services ~~and an increase in revenues from flow back services related to new equipment purchased in 2014.~~ industry. Net revenues in the Company's Sports segmentincreased by $~~2.6~~0.5 million from an increase of ~~$2.3 million~~ in revenues from UK Elite primarily as a result of ~~an increase in services provided and~~ operating the ~~businesses~~business acquired during the 2014 period for the full period in ~~2014 and an increase in revenues of $0.3 million in the segment's baseball operations.~~2015.

Gross profit for the three months ended ~~September 30, 2014, increased~~March 31, 2015, decreased by $~~9.9~~3.4 million as compared to the ~~2013~~2014 period, and as a percentage of revenue ~~increased~~declined to ~~30.7%~~17.2% in the ~~third~~first quarter of ~~2014~~2015 from ~~25.7%~~22.3% in the comparable ~~2013~~2014 period. Gross profit in the Energy segment ~~increased~~decreased by $~~8.8~~3.4 million, and as a percentage of revenue ~~increased~~declined to ~~27.9%~~17.3% in the ~~third~~first quarter of ~~2014~~2015 from ~~20.2%~~22.5% in the comparable ~~2013~~2014 period. Gross profit in the Energy segment ~~increased~~decreased as a result of ~~$6.0 million~~ ~~in gross profit from Black Hawk Ltd. and~~ ~~an increase in gross profit of $2.7 million in~~ the ~~Energy segment's other operations due primarily to the increase~~decline in revenues. Gross profit in the Sports segment in the ~~2014~~2015 period increased by $1.1 million primarily as a result of an increase of $0.9 million in gross profit from UK Elite resulting from the increase in revenues and an increase in gross profit of $0.2 million in the segment's baseball operations.$0.1 million.

SG&A expenses in the ~~third~~first quarter ~~2014~~2015 increased by $~~4.4~~0.6 million as compared to the comparable ~~2013~~2014 period. SG&A expenses in the Energy segment increased by $2.1 million partially as a result of $0.9 million of costs incurred at Black Hawk Ltd. in the 2014 period. SG&A expenses in the Energy segment's other operations increased $1.2 million as a result of the increase in revenues, business development costs incurred, and the reversal of a contingent consideration liability associated with a prior period acquisition and certain credits received related to insurance in the 2013 period with no comparable benefits recognized in the current period.$0.2 million. SG&A expenses in the Sports segment increased by ~~$0.8~~$0.6 million primarily as a result of additional costs incurred at UK Elite associated with the ~~increase~~business acquired in ~~revenues in~~ the 2014 period. SG&A expenses in corporate and other business activities ~~increased~~decreased by ~~$1.5 million primarily as a result of increased costs incurred for services provided by affiliates of the Company and an increase in stock-based compensation expense in the 2014 period.~~$0.2 million.

~~Operating income~~The Company incurred an operating loss of $3.5 million in the ~~third~~first quarter ~~2014 was $6.2 million~~of 2015 as compared to ~~$0.9~~an operating loss of $0.1 million in the ~~2013~~2014 period. Operating income in the Energy segment ~~increased~~decreased by ~~$6.5~~$3.1 million as a result of ~~$4.5 million~~the decline in ~~operating income~~revenues and margins that resulted from ~~Black Hawk Ltd. and an increase~~the adverse effects the decline in ~~operating income of $2.0 million in~~energy prices had on the ~~Energy segment's other operations. Operating income~~oil services industry. The expected seasonal operating loss in the Sports segment increased by ~~$0.2~~$0.5 million primarily due to the operating results of UK Elite. The operating loss from Corporate and other business activities ~~increased~~decreased by ~~$1.5 million from increased costs incurred for services provided by affiliates of the Company and an increase in stock-based compensation expense in the 2014 period.~~$0.2 million.

Amortization of intangibles in the ~~third~~first quarter ~~2014 increased~~2015 decreased by $~~0.3~~0.5 million as compared to the comparable ~~2013~~2014 period as a result of ~~amortization expense on the intangible assets recognized in connection with the businesses acquired by Black Hawk Ltd. and UK Elite, partially offset by~~ a declining rate of amortization for the intangible assets recognized in connection with prior period acquisitions.

~~Net interest income~~Interest expense of $0.6 million in the ~~third~~first quarter ~~2014 increased~~2015 decreased by ~~$0.1~~$0.2 million as compared to the ~~2013~~2014 period primarily as a result of ~~an increase in interest income on investments.~~

~~Other expense~~the repayment of ~~$1.3 million~~ ~~in the third quarter 2014 primarily~~ ~~represented realized losses on the sale of marketable securities of $1.0 million~~ ~~and a foreign exchange loss of $0.2 million.~~long-term debt.

~~The Company recognized a provision for income taxes~~Other expense of~~$1.5 million~~ ~~and a benefit from income taxes of~~ ~~$0.3 million~~ for the three months ended September 30, 2014 and 2013, respectively. The provision for income taxes in the 2014 period primarily reflects a valuation allowance adjustment as a result of a decrease in deferred tax liabilities related to net unrealized gains on marketable securities. The benefit for income taxes in the 2013 period primarily reflects a valuation allowance adjustment as a result of an increase in deferred tax liabilities related to net unrealized gains on marketable securities.

~~Nine months ended September 30, 2014, compared to nine months ended September 30, 2013~~

~~Net revenues for the nine months ended September 30, 2014, increased by $69.1 million as compared to the 2013 period. Net revenues from the Company's Energy segment increased by $62.5 million~~ ~~primarily as a result of $55.9 million in revenues from Black Hawk Ltd. and an increase in revenues of $6.6 million in the Energy segment's other operations~~ ~~due primarily to an increase in rig utilization for snubbing services and an increase in revenues from flow back services related to new equipment purchased in 2014. Net revenues in the Company's Sports segment increased by $6.6 million primarily as a result of $5.5 million in revenues from~~ ~~UK Elite, which was acquired in June 2013, and an increase in revenues of $1.0 million in the segment's baseball operations.~~

Gross profit for the nine months ended September 30, 2014, increased by $20.1 million as compared to the 2013 period, and as a percentage of revenue increased slightly to 28.6% from 28.3%. Gross profit in the Energy segment increased by $17.3 million, and as a percentage of revenue increased to 26.7% in the first nine months of 2014 from 26.0% in the comparable 2013 period. Gross profit in the Energy segment increased as a result of $16.1 million ~~in gross profit from Black Hawk Ltd. and~~ an increase in gross profit of $1.1 million in the Energy segment's other operations. Gross profit in the Sports segment in the 2014 period increased by $2.8 million primarily as a result of $2.2 million in gross profit from UK Elite and an increase in gross profit of $0.6 million in the segment's baseball operations.

SG&A expenses in the first nine months of 2014 increased by $10.9 million as compared to the comparable 2013 period. SG&A expenses in the Energy segment increased by $3.5 million partially as a result of $2.2 million of costs incurred at Black Hawk Ltd. in the 2014 period. SG&A expenses in the Energy segment's other operations increased $1.3 million as a result of the increase in revenues, business development costs incurred, and from the reversal of a contingent consideration liability associated with a prior period acquisition and certain credits received related to insurance in the 2013 period with no comparable benefits recognized in the current period. SG&A expenses in the Sports segment increased by $3.1 million primarily as a result of costs incurred at UK Elite, including those associated with operating the businesses acquired in the current period. SG&A expenses in corporate and other business activities increased by $4.2 million primarily as a result of increased costs incurred for services provided by affiliates of the Company and an increase in stock-based compensation expense in the 2014 period.

~~Operating income in the first nine months of 2014 was $10.1 million as compared to~~ $1.7 million in the ~~2013 period. Operating income in the Energy segment increased by $13.3 million as~~first quarter 2015 primarily represented a ~~result of $12.0 million in operating income from Black Hawk Ltd. and an increase in operating income of $1.3 million~~ ~~in the Energy segment's other operations.~~ The operating loss in the Sports segment increased by $0.6 million primarily due to the expected seasonal losses incurred in the first half of the current year at UK Elite with no corresponding losses in the prior year. The operating loss from Corporate and other business activities increased by $4.2 million from increased costs incurred for services provided by affiliates of the Company and an increase in stock-based compensation expense in the 2014 period.

Amortization of intangibles in the first nine months of 2014 increased by $0.7 million as compared to the comparable 2013 period as a result of amortization expense on the intangible assets recognized in connection with the businesses acquired by Black Hawk Ltd. and UK Elite, partially offset by a declining rate of amortization for the intangible assets recognized in connection with prior period acquisitions.

Net interest income of $1.8 million in the first nine months of 2014 decreased by $0.6 million as compared to the 2013 period primarily as a result of an increase in interest expense of $1.5 million resulting from the borrowings under the Amended Credit Agreement, partially offset by an increase in interest income on investments of $0.9 million.

~~Other income of $2.3 million in the first nine months of 2014 primarily~~ ~~represented~~ realized ~~gains on the sale of marketable securities of $4.1 million, partially offset by a~~ loss of ~~$0.8 million recognized on financial instrument obligations, a~~

~~loss of $0.6~~$2.8 million recognized upon initially accounting for an investment under the equity method of accounting at fair value and a foreign exchange loss of ~~$0.4~~$0.3 million, partially offset by investment income of $1.6 million. Other income of $4.5 million in the first quarter 2014 primarily represented realized gains on the sale marketable securities of $3.0 million and investment income of $1.6 million.

The Company recognized a benefit ~~for~~from income taxes of ~~$1.1~~$0.4 million ~~and $2.3 million~~ for the ~~nine~~three months ended ~~September 30, 2014 and 2013, respectively. The benefit from income taxes in each period~~March 31, 2015, which primarily reflects the allowable benefit recognized from a valuation allowance ~~adjustments as a result of~~adjustment resulting from an increase in deferred tax liabilities related to net unrealized gains on marketable securities. The Company recognized a provision for income taxes of $0.2 million for the three months ended March 31, 2014, which primarily reflects state and alternative minimum taxes.

Financial Condition

~~The Amended~~Steel Energy Services Ltd. ("Steel Energy") has a credit agreement, as amended (the “Amended Credit ~~Agreement provided~~Agreement”), that provides for a borrowing capacity of $105.0 million consisting of a $95.0 million secured term loan (the “Term Loan”) and up to $10.0 million in revolving loans (the “Revolving Loans”) subject to a borrowing base of 85% of the eligible accounts receivable. Borrowings under the Amended Credit Agreement, which totaled ~~$82.6~~$76.0 million at ~~September 30, 2014,~~March 31, 2015, are collateralized by substantially all the assets of Steel Energy and its wholly-owned subsidiaries Sun Well Service, Inc. (“Sun Well”), Rogue Pressure Services, LLC (“Rogue”), and Black Hawk Ltd., and a pledge of all of the issued and outstanding shares of capital stock of Sun Well, Rogue, and Black Hawk Energy Services, Ltd. ("Black Hawk Ltd."). Borrowings under the Amended Credit Agreement are fully guaranteed by Sun Well, Rogue, and Black Hawk Ltd. The Company was in compliance with all financial covenants of the Amended Credit Agreement as of ~~September 30, 2014.~~March 31, 2015.

The Company finances its operations and capital expenditure requirements from its existing cash and marketable securities balances, which at ~~September 30, 2014,~~March 31, 2015, totaled $~~46.7~~64.1 million and $~~169.6~~124.4 million, respectively. Working capital in the first ~~nine~~three months of ~~2014~~2015 decreased by $~~34.7~~17.0 million due primarily to a decrease of ~~$27.8~~$10.9 million from a reclassification of current available-for-sale securities to non-current equity method investments and ~~additional equity method investments made during the period, the repayment of $9.9 million in long-term debt, and~~ an increase of ~~$4.6 million in accounts receivable from the timing of collections, partially offset by an increase of $2.9~~$8.0 million in accounts payable and accrued expenses from the reclassification of deferred compensation to a current obligation and the timing of payments.

Cash flows from operating activities ~~of continuing operations~~ increased by $~~11.6~~5.5 million in the first ~~nine~~three months of ~~2014~~2015 as compared to the ~~2013~~2014 period due primarily to an increase in net collections of accounts receivable of $10.3 million, partially offset by a decrease in cash generated from net ~~income.~~income of $3.6 million.

During the first ~~nine~~three months of ~~2014,~~2015, the Company ~~used $26.8~~generated $0.3 million of cash ~~for~~from investing activities. The Company ~~made purchases~~received proceeds from sales of marketable securities, net of ~~proceeds from sales~~purchases and restricted cash, of $~~10.1~~1.7 million, ~~invested $13.6~~which was partially offset by $1.3 million in purchases of property and equipment and ~~made other investments~~net repayments of ~~$3.0 million~~.financial instrument obligations of $0.2 million.

During the first ~~nine~~three months of ~~2014,~~2015, the Company used ~~$30.9~~$3.4 million of cash for financing ~~activities. The Company paid an aggregate of $20.4 million to acquire treasury shares and repurchase common stock in connection with the Reverse Split, made~~activities primarily for debt repayments on the Amended Credit Facility of $~~9.9~~3.3 million~~, and paid~~ ~~$0.5 million~~ ~~for acquisitions net of cash acquired.~~.

At ~~September 30, 2014,~~March 31, 2015, the Company had $~~216.3~~188.5 million in cash and marketable securities, exclusive of ~~$20.3~~$21.3 million of restricted cash related to short sale transactions on certain financial instruments for which the Company has an obligation to deliver or purchase securities at a later date.

Available-for-sale securities at ~~September 30, 2014,~~March 31, 2015, included short-term deposits, corporate debt and equity instruments, and mutual funds, and were recorded on the consolidated balance sheet at fair market value, with any related unrealized gain or loss reported as a component of “Accumulated other comprehensive income” in stockholders’ equity. We expect to realize the full value of all our marketable securities upon maturity or sale, as we have the intent and ability to hold the securities until the full value is realized. However, we cannot provide any assurance that our invested cash and marketable securities will not be impacted by adverse conditions in the financial markets, which may require us to record an impairment charge that could adversely impact our financial results. In addition, we maintain our cash and marketable securities with certain financial institutions, in which our balances exceed the limits that are insured by the Federal Deposit Insurance Corporation. If the underlying financial institutions fail or other adverse events occur in the financial markets, our cash balances may be impacted.

We believe that our cash balances will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. We anticipate making additional acquisitions and investments, and we may be required to use a significant portion of our available cash balances for such acquisitions and investments or for working capital needs thereafter. The consummation of additional acquisitions, prevailing economic conditions, and financial, business and other factors beyond our control could adversely affect our estimates of our future cash requirements. As such, we could be required to fund our cash requirements by alternative financing. In these instances, we may seek to raise such additional funds

through public or private equity or debt financings or from other sources. As a result, we may not be able to obtain adequate or favorable equity financing, if needed, due in part to our shares of common stock currently trading on the OTCQB Market. Any equity financing we obtain may dilute existing ownership interests, and any debt financing could contain covenants that impose limitations on the conduct of our business. There can be no assurance that additional financing, if needed, would be available on terms acceptable to us or at all.

Commitments and Contingencies

Contractual Obligations

In 2014, the Company entered into short sale transactions on certain financial instruments in which the Company received proceeds from the sale of such financial instruments and incurred obligations to deliver or purchase securities at a later date. As of September 30, 2014, the Company's obligations for such transactions totaled approximately $20.3 million, consisting of market indices for $19.6 million, corporate securities for $0.5 million, and option contracts, primarily covered calls, for $0.1 million. There is no stated repayment date for the obligations related to market indices and corporate securities; the obligations related to option contracts come due within a period of no longer than four months. Such obligations are reported as "Financial instrument obligations" as a component of current liabilities in the Company's consolidated balance sheet.

There were no other material changes in the Company’s contractual obligations at ~~September 30, 2014,~~March 31, 2015, as compared to those reported in the Company’s annual report on Form 10-K for the year ended December 31, ~~2013.~~2014.

Legal Proceedings

From time to time we are subject to litigation or claims that arise in the normal course of business. While the results of such litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse impact on our financial position or results of operations. However, because of the nature and inherent uncertainties of litigation, should the outcome of these actions be unfavorable, our business, financial condition, and results of operations could be materially and adversely affected.

Recent Accounting Pronouncements

with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by ASU No. ~~2014-08~~2015-03. ASU No. 2015-03 is effective for ~~annual reporting periods~~financial statements issued for fiscal years beginning after December 15, ~~2014,~~2015, and ~~for~~ interim ~~reporting period~~periods within those ~~years.~~fiscal years, with early adoption permitted for financial statements that have not been previously issued. Upon adoption, ASU No. 2015-03 should be applied retrospectively, with the balance sheet of each individual period presented adjusted to reflect the period-specific effects of applying the standard. The Company does not expect the adoption of ASU No. ~~2014-08 to have a material effect on the consolidated financial statements.~~

Critical Accounting Policies

The Company's critical accounting policies have not changed from those presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies in our annual report on Form 10-K for the year ended December 31, ~~2013.~~2014.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Vice Chairman and our Chief Financial Officer ("CFO"), we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this quarterly report on Form10-Q. Based upon that evaluation, our Vice Chairman and our CFO have concluded that the design and operation of our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to our management, including our Vice Chairman and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three-month period ended ~~September 30, 2014,~~March 31, 2015, which was the period covered by this quarterly report on Form 10-Q, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

A control system, no matter how well conceived and operated, can only provide reasonable assurance that the objectives of the control system are met. Because of these inherent limitations, no evaluation of our disclosure controls and procedures or our internal control over financial reporting will provide absolute assurance that misstatements due to error or fraud will not occur.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On December 16, 2013, and June 24, 2014, the Company's Board of Directors authorized stock repurchase programs to acquire up to 200,000 shares and 500,000 shares, respectively, of the Company's common stock. Any such repurchases will be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market in compliance with applicable laws and regulations. The repurchase programs are expected to continue indefinitely, unless shortened by the Board of Directors.

~~The following table summarizes, by month,~~No repurchases were made under the ~~repurchases made~~repurchase programs during the three months ended ~~September 30, 2014~~,March 31, 2015. The maximum number of shares that may yet be repurchased under the ~~repurchase programs.~~programs was 382,845 at March 31, 2015.

(a) (b) (c) (d)
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs

Month of July 2014 114,791
$ 35.01
114,791
402,999
Month of August 2014 14,504
$ 32.96
14,504
388,495
Month of September 2014 5,650
$ 31.04
5,650
382,845
Total 134,945
$ 34.63
134,945

3028

Item 6. Exhibits



10.1*	~~Amendment No. 3 to the Amended and Restated Management Services Agreement between Steel Excel Inc. and SP Corporate Services LLC, dated as of January 1, 2014~~
31.1*	Certification of the Principal Executive Officer, Jack L. Howard, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer, James F. McCabe, Jr., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certifications of the Principal Executive Officer, Jack L. Howard, and the Principal Financial Officer, James F. McCabe, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

** Furnished with this Form 10-Q. In accordance with Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for the purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

3129

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



Steel Excel Inc.

By:	/s/Jack L. Howard
By:	Jack L. Howard Vice Chairman (Principal executive officer)	Date:	~~November 6, 2014~~May 11, 2015

By:	/s/James F. McCabe, Jr.
	James F. McCabe, Jr. Chief Financial Officer (Principal financial officer)	Date:	~~November 6, 2014~~May 11, 2015

3230



	Previously Reported			Measurement Period Adjustments			Revised
	(in thousands)
Accounts receivable	$	9,663		$	451		$	10,114
Prepaid expenses and other current assets	208			111			319
Property and equipment	30,581			(493		)	30,088
Intangible assets	—			12,210			12,210
Accounts payable	(1,333		)	(251		)	(1,584		)
Accrued expenses	(1,756		)	(404		)	(2,160		)
Total identifiable net assets acquired	37,363			11,624			48,987
Goodwill	23,400			(12,824		)	10,576
Net assets acquired	$	60,763		$	(1,200	)	$	59,563



	Three Months Ended September 30, 2013		Nine Months Ended September 30, 2013
	(in thousands. except per-share data)
Net revenues	$	48,696	$	133,634
Net income from continuing operations	$	6,890	$	14,811
Net income	$	6,002	$	13,334
Net income attributable to Steel Excel Inc.	$	6,313	$	14,160
Net income per share attributable to Steel Excel Inc. - Basic	$	0.50	$	1.11
Net income per share attributable to Steel Excel Inc. - Diluted	$	0.50	$	1.11



	(a)	(b)		(c)	(d)
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs

Month of July 2014	114,791	$	35.01	114,791	402,999
Month of August 2014	14,504	$	32.96	14,504	388,495
Month of September 2014	5,650	$	31.04	5,650	382,845
Total	134,945	$	34.63	134,945