Universal Stainless & Alloy Products Annual Report 2020

FY2020 Annual Report · Universal Stainless & Alloy Products

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To our Stockholders,

Significant challenges confronted Universal and our industry in 2020. Foremost among them was the COVID-19
pandemic, with its tragic loss of life and enormous economic cost. The magnitude of the global pandemic and the
uncertainty about its duration caused serious dislocation in the metals supply chain and took a severe toll on end
markets, especially aerospace and oil & gas.

As an essential business, our Company rapidly adapted to changing conditions daily. To do so, we deployed the
strategies that have served us well in past sharp downturns, by quickly reducing costs and increasing liquidity.
Plant activity levels were reduced to align with market conditions, inventory levels were lowered, flexible
spending was cut across the board and capital spending was minimized. By year end 2020, through our continued
focus on working capital reduction, inventory was reduced by $36.0 million and total debt was cut by
$24.2 million, excluding PPP funds.

Behind these accomplishments was the relentless effort by our team who not only enabled us to manage through
the prolonged difficult period, but also helped improve production processes and achieve sustainable cost per
pound reductions while maintaining the highest protocols of health and safety. The successes achieved in 2020
are a tribute to each of them.

The year began with difficult conditions in our aerospace and oil & gas end markets even before the coronavirus
pandemic. In aerospace, our largest market, the grounding of the Boeing 737-MAX in 2019 and uncertainty
about its return to service had already caused a substantial drop in commercial aircraft production. The pandemic
compounded the problem as a 66% drop in worldwide air travel caused airlines to cancel new aircraft orders. As
a result, our 2020 aerospace sales were down 28% from 2019, although our premium alloy sales declined just 6%
due to strength in defense market demand and new products approved in recent years.

The oil & gas market experienced plummeting oil prices at the beginning of the year due to the dispute between
Saudi Arabia and Russia. The prolonged effect of the pandemic led to deterioration in demand, delivering a
further blow, and our sales to the oil & gas market were down 48%. A third market, power generation, saw a
sales decline of 40% as maintenance demand was also impacted by COVID-19.

In contrast, our sales to the heavy equipment market in 2020, mainly tool steel for the automotive market,
matched 2019 despite the temporary shut-down of auto production by the major manufacturers at the onset of the
pandemic. Our sales to the general industrial market were a bright spot in the year with a 42% increase from
2019 driven by strong recovery and demand in the semiconductor market due to chip shortages for consumer
electronics and automotive applications, which continue today.

In total, our 2020 sales amounted to $179.7 million versus $243 million in 2019. The lower sales and resulting
low activity levels, combined with a less favorable product mix, took a toll on our gross margin in 2020. Gross
margin was further reduced by required fixed cost absorption charges starting in the second quarter. As a result,
we reported a loss of $19.0 million, or $2.16 per diluted share, for 2020, compared with net income of
$4.3 million, or $0.48 per diluted share, in 2019.

We are beginning 2021 on a much more positive footing amid signs of a pivot in our hard-hit markets supported
by the roll out of the COVID-19 vaccines across the country. The 737-MAX has been recertified, and Boeing is
beginning to work down its inventory of airplanes on the ground. Airlines are now hoping for a travel pickup
starting this summer. Oil prices are on an upward trajectory and rig counts are slowly coming back. In the metals
supply chain, destocking seems to be winding down, including in aerospace, where there is growing optimism for
recovery beginning in the second half of the year.

At Universal Stainless, we are seeing an increasing order book with continued strong demand for tool steel and
from the semiconductor market coupled with solid increases in demand for premium products including from our
traditional aerospace customers. At this writing it appears that the worst of the downcycle is behind us.

To further support our future growth, we are moving forward with our strategic focus on premium alloys with the
addition of a vacuum arc remelt furnace and an 18-ton crucible for our vacuum induction melting operations in
our North Jackson facility. Once fully operational and commissioned, these investments will expand our
capabilities to produce premium products at much reduced costs. Also, in line with our growth strategy, we are
continuing to develop new products and anticipate receiving approval for several through the course of the year.

In closing, I want to sincerely thank our team for their unceasing dedication and hard work over the past year,
and it continues today. I also want to acknowledge the invaluable guidance of our Board of Directors. Finally, I
am deeply grateful to our customers, stockholders and our other stakeholders for their continued support.

Sincerely,

Dennis M. Oates
Chairman, President and Chief Executive Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
☒☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

OR
☐☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the Fiscal Year Ended December 31, 2020

OF 1934

Commission File Number 001-39467

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization)

25-1724540
(IRS Employer
Identification No.)

600 MAYER STREET, BRIDGEVILLE, PA 15017
(Address of principal executive offices, including zip code)

(412) 257-7600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Common Stock, par value $0.001 per share
Preferred Stock Purchase Rights

Trading Symbol
USAP

Name of Each Exchange
on Which Registered
The Nasdaq Stock Market, LLC
The Nasdaq Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: [None]

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See
the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Non-accelerated filer

Emerging growth company

☐

Accelerated filer

Smaller reporting company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:0)

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

of its internal control over financial

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant on June 30, 2020, based on the closing price of $8.60 per share on that date, was approximately
$72,990,000. For the purposes of this disclosure only, the registrant has assumed that its directors and executive officers are the affiliates of the registrant. The registrant has made no
determination that such persons are “affiliates” within the meaning of Rule 405 under the Securities Act of 1933.
As of February 1, 2021, there were 8,883,788 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE Part III of this Form 10-K incorporates by reference portions of the Company’s definitive Proxy Statement for the 2021
Annual Meeting of Stockholders.

INDEX

PART I

Item 1.

Business

Item 1A.

Risk Factors

Item 1B. Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safety Disclosures

PART II

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities

Item 6.

Selected Financial Data

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A.

Controls and Procedures

Item 9B. Other Information

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

Item 11.

Executive Compensation

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Item 14.

Principal Accountant Fees and Services

PART IV

Item 15.

Exhibits and Financial Statement Schedules

Item 16.

Form 10-K Summary

PART I

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

The statements contained in this Annual Report on Form 10-K (“Form 10-K”) of Universal Stainless & Alloy Products, Inc.
and its wholly-owned subsidiaries (collectively, “we,” “us,” “our,” or the “Company”), including, but not limited to, the
statements contained in Item 1, “Business,” and Item 7, “Management's Discussion and Analysis of the Financial Condition
and Results of Operations,” along with statements contained in other reports that we have filed with the Securities and
Exchange Commission (the “SEC”), external documents and oral presentations, which are not historical facts are considered
to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Act of 1934, as amended. These statements which may be expressed in a variety of ways,
including the use of forward looking terminology such as “believe,” “expect,” “seek,” “intend,” “may,” “will,” “should,”
“could,” “potential,” “continue,” “estimate,” “plan,” or “anticipate,” or the negatives thereof, other variations thereon or
compatible terminology, relate to, among other things, statements regarding future growth, cost savings, expanded production
capacity, broader product lines, greater capacity to meet customer quality reliability, price and delivery needs, enhanced
competitive posture, and the effect of new accounting pronouncements. We do not undertake any obligation to publicly
update any forward-looking statements.

These forward-looking statements, and any forward looking statements contained in other public disclosures of the Company
which make reference to the cautionary factors contained in this Form 10-K, are based on assumptions that involve risks and
uncertainties and are subject to change based on the considerations described below. We discuss many of these risks and
uncertainties in greater detail in Item 1A, “Risk Factors,” of this Form 10-K. These and other risks and uncertainties may
cause our actual results, performance or achievements to differ materially from anticipated future results, performance or
achievements expressed or implied by such forward-looking statements.

ITEM 1.

BUSINESS

Universal Stainless & Alloy Products, Inc., which was incorporated in 1994, and its wholly-owned subsidiaries, manufacture
and market semi-finished and finished specialty steel products, including stainless steel, nickel alloys, tool steel and certain
other premium alloyed steels. Our manufacturing process involves melting, remelting, heat treating, hot and cold rolling,
forging, machining and cold drawing of semi-finished and finished specialty steels. Our products are sold to service centers,
forgers, rerollers and original equipment manufacturers (“OEMs”). Our customers further process our products for use in a
variety of industries, including the aerospace, power generation, oil and gas, heavy equipment and general industrial markets.
We also perform conversion services on materials supplied by customers.

We operate in four locations: Bridgeville and Titusville, Pennsylvania; Dunkirk, New York; and North Jackson, Ohio. Our
corporate headquarters is located at our Bridgeville location. We operate these four manufacturing locations as one business
segment.

We produce a wide variety of specialty steel grades using several manufacturing processes including vacuum induction
melting (“VIM”), vacuum-arc remelting (“VAR”), elecro-slag remelting (“ESR”) and argon oxygen decarburization
(“AOD”). At our Bridgeville and North Jackson facilities, we produce specialty steel products in the form of semi-finished
and finished long products (ingots, blooms, billets and bars). In addition, the Bridgeville facility produces flat rolled products
(slabs and plates). Semi-finished long products are primarily used by our Dunkirk facility and certain customers to produce
finished bar and rod. Finished bar products that we manufacture are primarily used by OEMs and by service center customers
for distribution to a variety of end users. We also produce customized shapes primarily for OEMs that are cold rolled from
purchased coiled strip, flat bar or extruded bar at our precision rolled products department, located at our Titusville facility.

We make strategic investments in our business and capabilities over time to support our growth initiatives. This includes the
mid-size bar cell finishing unit that was installed at our Dunkirk facility at the end of 2019, which delivered modernization
and automation of our intermediate bar processing, bringing lower costs and better quality control. Projects scheduled for
completion in 2021 include a new vacuum arc remelt furnace and an 18-ton crucible for our vacuum induction melting
operation at our North Jackson facility. These investments will expand our premium alloy production capabilities and reduce
our costs.

INDUSTRY OVERVIEW

The specialty steel industry is a relatively small but distinct segment of the overall steel industry.rr Specialty steels include
stainless steels, nickel alloys, tool steels, electrical steels, high-temperature alloys, magnetic alloys and electronic alloys.
Specialty steels are made with a high alloy content, suitable for use in environments that demand exceptional hardness,
toughness, strength and resistance to heat, corrosion or abrasion, or combinations thereof. Specialty steels generally must

conform to more demanding customer specifications for consistency, straightness and surface finish than carbon steels. For
the years ended December 31, 2020, 2019 and 2018, approximately 70% of our net sales were derived from stainless steel
products.

We primarily manufacture our products within the following product lines and, generally, in response to customer orders:

Stainless Steel. Stainless steel, which represents the largest part of the specialty steel market, contains elements such as
nickel, chrome and molybdenum that give it the unique qualities of high strength, good wear characteristics, natural
attractiveness, ease of maintenance and resistance to corrosion and heat. Stainless steel is used, among other applications, in
the aerospace, oil and gas, power generation and automotive industries, as well as in the manufacturing of equipment for food
handling, health and medical, chemical processing and pollution control.

High-Strength Low Alloy Steel. High-strength low alloy steel is a relative term that refers to those steels that maintain
alloying elements that range in versatility. The alloy elements of nickel, chrome and molybdenum in such steels typically
exceeds the alloy element of carbon steels but not that of high-temperature alloy steel. High-strength low alloy steels are
manufactured for use generally in the aerospace industry.

Tool Steel. Tool steels contain elements of chrome, vanadium and molybdenum to produce specific hardness characteristics
that enable tool steels to form, cut, shape and shear other materials in the manufacturing process. Heating and cooling at
precise rates in the heat-treating process bring out these hardness characteristics. Tool steels are utilized in the manufacturing
of metals, plastics, paper and aluminum extrusions, pharmaceuticals, electronics and optics.

High-Temperature Alloy Steel. These steels are designed to meet critical requirements of heat resistance and structural
integrity. They generally have very high nickel content relative to other types of specialty steels. High-temperature alloy
steels are manufactured for use generally in the aerospace industry.

RAW MATERIALS AND SUPPLIES

We depend on the delivery of key raw materials for our day-to-day melting operations. These key raw materials are carbon
and stainless scrap metal and alloys, primarily consisting of nickel, chrome, molybdenum, vanadium and copper. Scrap metal
is primarily generated by industrial sources and is purchased through a number of scrap brokers and processors. We also
recycle scrap metal generated from our own production operations as a source of metal for our melt shops. Alloys are
generally purchased from domestic agents and primarily originate in North America, Australia, China, Russia, South
America and South Africa.

Our Bridgeville and North Jackson facilities currently supply semi-finished specialty steel products as starting materials to
our other operating facilities. Semi-finished specialty steel starting materials, which we cannot produce at a competitive cost,
are purchased from other suppliers. We generally purchase these starting materials from steel strip coil suppliers, extruders,
flat rolled producers and service centers. We believe that adequate supplies of starting material will continue to be available.

The cost of raw materials represents approximately 35% to 40% of the cost of products sold in 2020, 2019 and 2018. Raw
material costs can be impacted by significant price changes. Raw material prices vary based on numerous factors, including
quality, and are subject to frequent market fluctuations. The average price of several of our major raw materials, including
iron, molybdenum, vanadium, and chrome, decreased in 2020 compared to the prior year. The average price of nickel in 2020
was relatively flat compared to the prior year. Future raw material prices cannot be predicted with any degree of certainty.
We do not maintain any fixed-price long-term agreements with any of our raw material suppliers.

We apply a raw material surcharge in our pricing to align our pricing with fluctuations in commodity costs. Short lead time
orders embed the surcharge into the price at the time of order entry. Longer lead time orders apply the raw material surcharge
in effect at the time of shipment to better align the selling price with commodity costs. Surcharges are published on our
website, and can fluctuate by month in line with commodity cost changes. Over time, our surcharge will effectively offset
changes in raw material costs; however, during a period of rising or falling prices the timing will cause variation between
reporting periods.

Our operations at our Bridgeville and North Jackson facilities also require consumable operating supplies other than raw
materials. Our Bridgeville facility uses graphite electrodes in the melting process, which are sourced from various suppliers
both domestically and overseas.

CUSTOMERS

Our largest customer in 2020, Reliance Steel & Aluminum Co. (“Reliance”), accounted for approximately 23%, 27% and
18% of our net sales for the years ended December 31, 2020, 2019 and 2018, respectively. The increase in 2019 was
primarily due to Reliance’s acquisition of another one of our customers at the end of 2019. No other customer accounted for
more than 10% of our net sales during 2020.

International sales approximated 7% of our annual net sales in 2020 and 2019, and approximately 8% in 2018.

BACKLOG
Our backlog of orders (excluding surcharges) on hand as of December 31, 2020 was approximately $48.0 million compared
to approximately $119.1 million at December 31, 2019. We expect substantially all of the backlog orders as of December 31,
2020 to be filled during 2021. Our backlog may not be indicative of actual sales because certain surcharges are not
determinable until the order is shipped to the customer and, therefore, should not be used as a direct measure of future
revenue. However, we expect that our actual sales will be higher than the backlog once the actual surcharges are determined.

COMPETITION
Competition in our markets is based upon product quality, delivery capability, customer service, customer approval and price.
Maintaining high standards of product quality, while responding quickly to customer needs and keeping production costs at
competitive levels, is essential to our ability to compete in these markets.

We believe that there are several companies that manufacture one or more similar specialty steel products that are significant
competitors. There are a few smaller producing companies and material converters that are also considered to be competitors.

High import penetration of specialty steel products, especially stainless and tool steels, also impacts the competitive nature
within the United States. Unfair pricing practices by foreign producers have resulted in high import penetration into the U.S.
markets in which we participate.

HUMAN CAPITAL MANAGEMENT

Employee Relations
We consider the maintenance of good relations with our employees to be important to the successfulff
We have profit-sharing plans for certain salaried and hourly employees and for all of our employees represented by United
Steelworkers (the “USW”) and have equity ownership programs for all of our eligible employees, in an effort to forge an
alliance between our employees’ interests and those of our stockholders. At December 31, 2020, 2019 and 2018, we had 566,
795 and 781 employees, respectively, of which 430, 611 and 607, respectively, were USW members.

conduct of our business.

Collective Bargaining Agreements
Our Bridgeville, Titusville, Dunkirk and North Jackson facilities recognize the USW as the exclusive representative for their
hourly employees with respect to the terms and conditions of their employment. The following collective bargaining
agreements are currently in place:

Facility
Bridgeville
North Jackson
Dunkirk
Titusville

Commencement Date
September 2018
July 2018
November 2017
October 2020

Expiration Date
August 2023
June 2024
October 2022
September 2025

We believe a critical component of our collective bargaining agreements is the inclusion of a profit sharing plan.

Employee Benefit Plans

We maintain a 401(k) retirement plan for our hourly and salaried employees. Pursuant to the 401(k) plan, participants may
elect to make pre-tax and after-tax contributions, subject to certain limitations imposed under the Internal Revenue Code of
1986, as amended. In addition, we make periodic contributions to the 401(k) plan for the hourly employees employed at the
North Jackson, Dunkirk and Titusville facilities, based on service. In addition, we make periodic contributions for the
salaried employees at all locations based upon their service and their individual contribution to the 401(k) retirement plan.

We participate in the Steelworkers Pension Trust (the “Trust”), a multi-employer defined-benefit pension plan that is open to
all hourly and salaried employees associated with the Bridgeville facility. We make periodic contributions to the Trust based
on hours worked at a fixed rate for each hourly employee and a fixed monthly contribution on behalf of each salaried
employee.

We also provide group life and health insurance plans for our hourly and salary employees.

Employee Stock Purchase Plan

Under the 1996 Employee Stock Purchase Plan, as amended (the “Plan”), the Company is authorized to issue up to 300,000
shares of common stock to its full-time employees, nearly all of whom are eligible to participate. Under the terms of the Plan,
employees can choose as of January 1 and July 1 of each year to have up to 10% of their total earnings withheld to purchase
up to 100 shares of our common stock each six-month period. The purchase price of the stock is 85% of the lower of its
beginning-of-the-period or end-of-the-period market prices. At December 31, 2020, we have issued 273,307 shares of
common stock since the Plan’s inception.

Employee Safety

COVID-19 emerged at or around the beginning of 2020 bringing significant uncertainty in our end markets. Recognizing the
potential for disruption in our operations, we began to deploy safety protocols and processes beginning in the March
timeframe to help keep our employees safe while continuing to serve our customer base. The safety protocols in place are in
line with state and CDC recommendations and Occupational Safety and Health Administration (“OSHA”) requirements such
as face coverings, physical distancing, temperature checks, work from home where applicable, enhanced cleaning,
encouraging self-health checks as well as contact tracing and quarantining as required

The safety of our employees is a paramount concern in managing our operations. We strive to minimize workplace injuries as
much as possible and to provide a safe, open and accountable work environment for our employees. Our safety performance,
as measured by our OSHA recordable rate, marked a record low in 2020. We encourage employees to provide feedback, ask
questions and report concerns related to ethics or safety violations. We take employee concerns seriously and evaluate
appropriate actions in response.

Employee Inclusion

We are an Equal Opportunity Employer. All qualified applicants for positions with the Company receive consideration for
employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability, or
veteran status. We strive to provide an equitable and inclusive environment for all our employees. We are committed to
achieving representation across all levels of our workforce that reflects the diversity of the communities in which we live and
work.

GOVERNMENT REGULATIONS

We are subject to federal, state and local environmental laws and regulations (collectively, “Environmental Laws”), including
those governing discharges of pollutants into the air and water, and the generation, handling and disposal of hazardous and
non-hazardous substances. We monitor our compliance with applicable Environmental Laws and, accordingly, believe that
we are currently in compliance with all laws and regulations in all material respects. We are subject periodically to
environmental compliance reviews by various regulatory offices. We may be liable for the remediation of contamination
associated with generation, handling and disposal activities. Environmental costs could be incurred, which may be
significant, related to environmental compliance, at any time or from time to time in the future. In the ordinary course of
business, we are also subject to government regulations including those enforced by OSHA.

EXECUTIVE OFFICERS

The following table sets forth, as of February 17, 2021, certain information with respect to the executive officers of the
Company:

Name

g(Age)

Dennis M. Oates (68)
Christopher M. Zimmer (47)
Graham McIntosh, Ph.D. (58)
Christopher T. Scanlon (45)
JJohn J. Arminas (49)

Executive
Officer Since
2008
2010
2015
2018
2020

Position

Chairman, President and Chief Executive Officer
Executive Vice President and Chief Commercial Officer
Executive Vice President and Chief Technology Officer
VVice President of Finance, Chief Financial Officer and Treasurer
VVice President, General Counsel and Corporate

Secretary
y

Dennis M. Oates has been President and Chief Executive Officer of the Company since 2008. Mr. Oates was named to the
Company’s Board of Directors in 2007. Mr. Oates previously served as Senior Vice President of the Specialty Alloys
Operations of Carpenter Technology Corporation from 2003 to 2007. Mr. Oates also servedrr
Officer of TW Metals, Inc. from 1998 to 2003. In May 2010, the Board of Directors elected Mr. Oates to the additional
position of Chairman.

as President and Chief Executive

Christopher M. Zimmer has been Executive Vice President and Chief Commercial Officer since 2014. Mr. Zimmer served as
Vice President of Sales and Marketing from 2008 to 2014. Mr. Zimmer previously served as Vice President of Sales and
Marketing for Schmoltz+Bickenbach USA from 1995 to 2008. He previously held positions of increasing responsibility
including inside sales, Commercial Manager—stainless bar, General Manager—nickel alloy products, and National Sales
Manager.

Graham McIntosh, Ph.D. has been Executive Vice President and Chief Technology Officer since May 2018. Dr. McIntosh
also served as the Company’s Vice President and Chief Technology Officer from 2013 until May 2018. Dr. McIntosh
previously served as Director of Global Technology Initiatives for Carpenter Technology Corporation where he joined in
2008. Dr. McIntosh also served as Vice President of Technology and Director of Quality for Firth Rixson Viking from 2001
to 2008, and also held several management and technical positions at Wyman-Gordon Livingston from 1987 to 2001, where
he began his career.

Christopher T. Scanlon has been Vice President of Finance, Chief Financial Officer and Treasurer since April 2018. Mr.
Scanlon previously served as Controller and Chief Accounting Officer for L.B. Foster Company, a leading manufacturer and
distributor of products and services for transportation and energy infrastructure, where he joined in 2012. Mr. Scanlon also
served as Division Controller for Education Management Corporation from 2009 to 2012, and held positions of increasing
responsibilities with Bayer Corporation, the U.S. operations of the German-based Bayer AG, and Respironics, Inc.

John J. Arminas was appointed Vice President, General Counsel and Corporate Secretary for the Company effective April 1,
2020. Mr. Arminas also served as the Company’s Corporate Counsel fromff
Company, Mr. Arminas served as an attorney for the Law Firm of Goldberg, Kamin & Garvin from July 2004 to 2013.

2013 until April 2020. Prior to his tenure at the

PATENTS AND TRADEMARKS

We do not consider our business to be materially dependent on patent or trademark protection, and believe we own or
maintain effective licenses covering all the intellectual property used in our business. We benefit from our proprietary rights
relating to designs, engineering and manufacturing processes and procedures. We seek to protect our proprietary information
by use of confidentiality and non-competition agreements with certain employees.

AVAILABLE INFORMATION

Our common stock is listed on the Nasdaq Global Select Market under the “USAP” ticker symbol. Copies of our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports,
as well as proxy and information statements that we file with the SEC, are available free of charge on our website at
www.univstainless.com as soon as reasonably practicable after such reports are filed with the SEC. The contents of our
website are not part of this Form 10-K. Copies of these documents will be available to any shareholder upon request.
Requests should be directed in writing to Investor Relations at 600 Mayer Street, Bridgeville, PA 15017. The SEC maintains
an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding
issuers, like us, that file electronically with the SEC.

ITEM 1A.

RISK FACTORS

We wish to caution each reader of this Form 10-K to consider the following factors and other factors discussed herein and in
other past reports, including but not limited to prior year Form 10-K and Form 10-Q reports filed with the SEC. Our business
and results of operations could be materially affected by any of the following risks. The factors discussed herein are not
exhaustive. Therefore, the factors contained herein should be read together with other reports that we file with the SEC from
time to time, which may supplement, modify, supersede, or update the factors listed in this document.

Macroeconomic Risks

Our business and operations, and the operations of our customers and suppliers, have been and are expected to continue to
be adversely impacted by the COVID-19 pandemic.

The outbreak of COVID-19 was declared by the World Health Organization to be a “pandemic” and has spread across the
world, including the United States and many countries where the Company sells its products or sources raw materials.

Our operations and financial performance have been negatively impacted by the COVID-19 pandemic that has caused, and is
expected to continue to cause, a global slowdown of economic activity, disruptions in global supply chains and significant
volatility and disruption of financial markets. Because the severity, magnitude and duration of the COVID-19 pandemic and
its economic consequences are uncertain, rapidly changing and difficult to predict, the COVID-19 pandemic’s impact on our
operations and financial performance cannot be determined at this time. Further, the ultimate impact of the COVID-19

pandemic on our operations and financial performance depends on many factors that are not within our control, including, but
not limited to, governmental, business and individuals’ actions that have been and continue to be taken in response to the
pandemic (including restrictions on travel and transport and workforce pressures); the impact of the pandemic and actions
taken in response on global and regional economies, travel and economic activity; general economic uncertainty in key global
markets and financial market volatility; global economic conditions and levels of economic growth; commodity prices;
vaccination activities; and the pace of recovery when the COVID-19 pandemic subsides.

Notwithstanding our continued operations, we have experienced, and expect to continue experiencing, lower demand and
volume for our products, including delivery and shipping delays and deferrals directly and indirectly to the COVID-19
pandemic that have adversely impacted, and are expected to continue to adversely impact, our businesses. For example, a
significant portion of our sales result from products sold to customers in the commercial aerospace industry. In recent
months, several commercial aerospace companies have announced cost-cutting and other measures in response to declining
demand stemming from the COVID-19 pandemic, including measures to reduce inventory and/or downward adjustments to
their production rates. Likewise, the COVID-19 pandemic has exacerbated declines in consumer activity and supply issues in
the oil & gas end market. We expect that the longer the period of economic and global supply chain and disruption continues,
the more material the adverse impact will be on our business operations, financial performance and results of operations.

As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our
liquidity position in relation to our anticipated future liquidity needs. Under the terms of our Credit Agreement, our
borrowing availability is based on eligible accounts receivable and inventory, which have been reduced to lower levels as a
result of the challenging economic environment we have faced
during the COVID-19 pandemic, and which may continue to
be reduced as the COVID-19 pandemic persists. Also, a continued worldwide disruption could materially affect our future
access to our sources of liquidity, financial condition, capitalization and capital investments. In the event of a sustained
market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take
appropriate actions. Additionally, a prolonged period of generating lower cash from operations could adversely affect
our
financial condition and the achievement of our strategic objectives. Conditions in the financial and credit markets also may
limit the availability of funding or increase the cost of funding, which could adversely affect our business, financial position
and results of operations.

We are subject to risks associated with global economic and market factors.

Our results of operations are affected directly by the level of business activity of our customers and our suppliers, which in
turn is affected by global economic and market factors, including health epidemics, impacting the industries and markets that
we participate in. We are susceptible to macroeconomic downturns in the United States and abroad that may affect the
general economic climate, our performance and the demand of our customers. We may face significant challenges if
conditions in the financial markets deteriorate. There can be no assurance that global economic and market conditions will
not adversely impact our results of operations, cash flow or financial position in the future.

Existing free trade laws and regulations, such as the United States-Mexico-Canada Agreement, provide certain beneficial
duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other
requirements. Changes in laws or policies governing the terms of foreign trade, and in particularly increased trade
restrictions, tariffs or taxes on imports fromff
adverse effect on our business and financial results. Given the uncertainty regarding the scope and duration of current,
proposed, or future imposed tariffs, we can provide no assurance that any strategies we implement to mitigate the impact of
such tariffs on the Company will be successful.

countries where we sell products or purchase materials could have a material

Commercial Risks

A substantial amount of our sales is derived from a limited number of customers.

Our five largest customers in the aggregate accounted for approximately 47% of our net sales for the year ended December
31, 2020, 54% of our net sales for the year ended 2019 and 43% for the year ended 2018. An adverse change in, or
termination of, the relationship with one or more of our customers or market segments could have a material adverse effect
on our results of operations.

Our business is very competitive, and increased competition could reduce our sales.

We compete with domestic and foreign producers of specialty steel products. In addition, many of the finished products sold
by our customers are in direct competition with finished products manufactured by foreign sources, which may affect the
demand for those customers’ products. Any competitive factors that adversely affect the market for finished products

manufactured by us or our customers could indirectly adversely affect the demand for our semi-finished products.
Additionally, our products compete with products fashioned from alternative materials such as aluminum, composites and
plastics, the production of which includes domestic and foreign enterprises. Competition in our field is intense and is
expected to continue to be so in the foreseeable future. A majority
contracts. There can be no assurance that we will be able to compete successfully in the future.

of our business is not covered under long term supply

The demand for our products may be cyclical.

Demand for our products from our customers can be cyclical in nature and sensitive to various factors, including demand,
production schedules and other conditions in each of our end markets, fluctuations in inventory levels throughout the supply
chain, and general macroeconomic conditions. A significant adverse change in demand for any reason could have a material
adverse effect on our results of operations.

A substantial amount of our sales is derived from the aerospace industry.

Approximately 70% of our sales and 50% of our tons shipped represented products sold to customers in the aerospace market
in 2020. The aerospace market is historically cyclical due to both external and internal market factors. These factors include
general economic conditions, supply chain fluctuations, diminished credit availability, airline profitability, demand for air
travel, age of fleets, varying fuel and labor costs, price competition, new technology development and international and
domestic political conditions such as military conflict and the threat of terrorism. The length and degree of cyclical
fluctuation can be influenced by any one or a combination of these factors and therefore are difficult to predict with certainty.

A prolonged downturn in the aerospace industry would adversely affect the demand for our products and/or the prices at
which we are able to sell our products, and our results of operations, business and financial condition could be materially
adversely affected. The continued market uncertainty regarding impacts of COVID-19 on the aerospace business, has and
could continue to adversely impact our results.

Our business may be harmed by failure to develop, commercialize, market and sell new applications and new products.

We believe that our alloys and metallurgical manufacturing expertise provide us with a competitive advantage over other
high-performance alloy producers. Our ability to maintain this competitive advantage depends on our ability to continue to
offer products that have equal or better performance characteristics than competing products at competitive prices. Our future
growth will depend, in part, on our ability to address the increasingly demanding needs of our customers by enhancing the
properties of our existing alloys, by timely developing new applications for our existing products, and by timely developing,
commercializing, marketing and selling new products. If we are not successful in these effff orts,
product enhancements do not adequately meet the requirements of the marketplace and achieve market acceptance, our
business could be adversely affected.

or if our new products and

Our business requires continuing efforts to obtain new customer approvals on existing products and applications, which is a
stringent, difficult process subject to each customer’s varying approval methodology and preferences. If we are not successful
in these efforts, our business could be adversely affected.

We believe that our international sales and purchases are associated with various risks.

We conduct business with suppliers and customers in foreign countries which exposes us to risks associated with
international business activities, including effects of the United Kingdom’s withdrawal from membership in the European
Union (referred to as “Brexit”). We could be significantly impacted by these risks, which include the potential for volatile
economic and labor conditions, political instability, collecting accounts receivable and exchange rate fluctuations (which may
affect sales revenue to international customers and the margins on international sales when converted into U.S. dollars).

International sales approximated 7% of annual net sales in 2020 and 2019 and 8% in 2018, an immaterial portion of which is
denominated in foreign currencies.

Financial Risks

Our business may be harmed if we are unable to meet our debt service requirements or the covenants in our credit
agreement, or if interest

rates increase.

We have debt upon which we are required to make scheduled interest and principal payments, and we may incur additional
debt in the future. A significant portion of our debt bears interest at variable rates that may increase in the future. A
significant increase in interest rates or disruption in the global financial markets may affect our ability to obtain financing or
to refinance existing debt on acceptable terms, if at all, and could increase the cost of our borrowings.

Our credit agreement uses the London Interbank Offering Rate (“LIBOR”) as a benchmark for establishing the interest rate
on a substantial portion of our debt. LIBOR is the subject of recent national, international and other regulatory guidance and
proposals for reform. Reforms may cause LIBOR to perform differently than in the past or cause its discontinuance. Further
developments and the resulting consequences cannot be entirely predicted, but could include an increase in our interest
expense.

Our ability to satisfy our debt obligations will depend upon our future operating performance, which will be affected by
prevailing economic conditions in the markets that we serve and financial, business and other factors, many of which are
beyond our control. If we are unable to generate sufficient
operations and financial condition could be adversely affff ected.
senior secured revolving credit facility and a $10.0 million senior secured term loan facility, also requires us to comply with
certain covenants. Failure to comply with the covenants contained in the credit agreement could result in a default, which, if
not waived by our lenders, could substantially increase our borrowing costs and result in acceleration of our debt. As of
December 31, 2020, we were in compliance with the applicable covenants in our credit agreement.

cash to service our debt or if interest rates increase, our results of

Our credit agreement, which provides for a $110.0 million

Changes in tax rules and regulations, or interpretations thereof, may adversely affect our effective tax rates.

We are a U.S. based company with customers and suppliers in foreign countries. We import various raw materials used in our
production processes and we export goods to our foreign customers. The United States, the European Commission, countries
in the European Union and other countries where we do business have implemented and may consider further changes in
relevant tax, border tax, accounting and other laws, regulations and interpretations, that may unfavorably impact our effective
tax rate or result in other costs to us.

Our ability to recognize tax benefits on our existing net operating loss positions may be limited.

We have generated meaningful net operating loss carryforwards, tax credit carryforwards and other tax attributes
(collectively, the “Tax Benefits”), which potentially can be utilized in certain circumstances to reduce our future income tax
obligations. As of December 31, 2020, we had estimated U.S. federal net operating losses of approximately $22.1 million,
state net operating losses of approximately $9.9 million, U.S. federal tax credit carryforwards of approximately $5.6 million
and state tax credit carryforwards of approximately $0.3 million. We expect that our Tax Benefits may increase during 2021.
Our ability to use our Tax Benefits would be substantially limited if we were to experience an “ownership change,” as
defined under Section 382 of the Internal Revenue Code (the “Tax Code”). In general, a corporation would experience an
ownership change if the percentage of the corporation’s stock owned by one or more “5% shareholders,” as defined under
Section 382 of the Tax Code, increases by more than 50 percentage points over their lowest ownership percentage within a
rolling three-year period. On August 24, 2020, our Board of Directors adopted a Tax Benefits Preservation Plan (the “Plan”)
designed to protect the availability of our Tax Benefits. The Plan contains an ownership trigger threshold of 4.95% and
reduces the likelihood that changes in our investor base would limit our future use of its Tax Benefits, which would
significantly impair the value of such Tax Benefits. However, there is no guarantee that the Plan will be effective in
protecting our NOLs and other tax assets or that Stockholders will vote to extend. Further, if we continue to be unable to
generate sufficient taxable income, these Tax Benefits may expire unutilized, and we may not be able to recognize the
benefits that could arise from such Tax Benefits.

Forgiveness of our PPP Loan is not yet certain, and the Small Business Association’s review of our forgiveness application is
not complete.

On April 16, 2020, we entered into a promissory note, dated April 15, 2020, with PNC Bank, National Association,
evidencing an unsecured loan with a principal amount of $10.0 million made to us pursuant to the Paycheck Protection
Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). In accordance with the
requirements of the CARES Act, our PPP loan may be fully forgiven if (i) proceeds are used to pay eligible payroll costs,
rent, mortgage interest and utilities and (ii) full-time employee headcount and salaries are either maintained during the 24-
week period following disbursement of the PPP loan or restored by December 31, 2020. We used 100% of the proceeds of

the PPP loan to pay eligible payroll costs, and we applied for forgiveness of our PPP loan during the third quarter of 2020.
While we believe we have met all of the requirements of the CARES Act, no assurance can be given that our PPP loan will
be forgiven in full or in any part. In addition, based on guidance from the Department of the Treasury, since our PPP loan
proceeds exceeded $2.0 million, our forgiveness application will be subject to audit by the Small Business Administration,
including with respect to our certification that the economic uncertainty at the time of our application made our request for a
PPP loan necessary to support our ongoing operations. Such certification does not contain any objective criteria and is subject
to interpretation. If we are found to have been ineligible to receive our PPP loan, or in violation of any of the laws or
regulations that may apply to us in connection with the PPP loan, we may be subject to fines and penalties, and could be
required to repay the PPP loan. In addition, our receipt of our PPP loan and our submission of a forgiveness application may
result in adverse publicity and damage to our reputation, governmental investigations, inquiries, reviews and audits, which
could consume significant financial and management resources. Any of these events could harm our business, results of
operations and financial condition. Even if our PPP loan ultimately is forgiven, we cannot give any assurance as to the
amount that will be forgiven or the timing for any forgiveness determination.

Human Capital Risks

Our business depends largely on our ability to attract and retain key personnel.

We depend on the continued service, availability and ability to attract skilled personnel, including members of our executive
management team, other management positions, and metallurgists, along with maintenance and production positions. Our
inability to attract and retain such people may adversely impact our ability to fill existing roles and support growth. Attraction
and retention of qualified personnel remains challenging as the labor market remains tight.

Further, the loss of key personnel could adversely affect our ability to perform until suitable replacements can be found.

Our business may be harmed by strikes or work stoppages.

At December 31, 2020, we had 430 employees, out of a total of 566, who were covered under collective bargaining
agreements with the USW expiring at various dates in 2022 to 2025. There can be no assurance that we will be successful in
timely concluding collective bargaining agreements with the USW to succeed the agreements that expire, in which case, we
may experience strikes or work stoppages that may have a material adverse impact on our results of operations.

Costs related to our participation in a multi-employer pension plan could increase significantly.

We participate in the Steelworkers Pension Trust (the “Trust”), a multi-employer defined-benefit pension plan. We make
contributions to the Trust with respect to all hourly and salaried employees associated with our Bridgeville facility. The
trustees of the Trust have provided us with the latest data available for the Trust year ended December 31, 2019. As of that
date, the Trust is not fully funded. Our contribution rates could increase if the Trust is required to adopt a funding
improvement plan or a rehabilitation plan as a result of funding deficiencies in excess of specified levels, which may be due
to poor performance of Trust investments or other factors, or as a result of future wage and benefit agreements. In addition, if
we choose to stop participating in the Trust, our contributions to the Trust decline or the Trust is terminated, we may be
required to pay the Trust an amount based on the underfunded status of the Trust, referred to as a withdrawal liability.
Changes to any of these factors could negatively impact our future results of operations and cash flows to a material extent.

Operational Risks

Our business is subject to stringent environmental, health and safety regulations which may result in significant liabilities
and/or costs to maintain compliance.

Our operations and properties are subject to extensive and varied federal, state, local and international laws and regulations
relating to public health, the environment, pollution, and occupational safety and health. We have used, and currently use and
manufacture, substances that are considered hazardous or toxic under worker safety and health laws and regulations. We take
measures to control or eliminate the continuing risk associated with the environmental, health and safety issues, however we
could incur substantial fines and civil or criminal sanctions, cleanup costs, compliance investments and third-party property
or injury claims as a result of violations, or non-compliance related to these regulations affecting our facilities and operations.

We are dependent on the availability and price of raw materials and operating supplies.

We purchase carbon and stainless scrap metal and alloy additives, principally nickel, chrome, vanadium, molybdenum,
manganese and copper, for our melting operation. A substantial portion of the alloy additives is available only from foreign
sources, some of which are located in countries that may be subject to unstable political and economic conditions. Those
conditions might disrupt supplies or affect the prices of the raw materials. We maintain sales price surcharges on certain of
our products to help offset the impact of raw material price fluctuations.

We do not maintain long-term fixed-price supply agreements with any of our raw material suppliers. If our supply of raw
materials were interrupted, we might not be able to obtain sufficient quantities of raw materials, or obtain sufficient quantities
of such materials at satisfactory prices, which, in either case, could adversely affect our results of operations. In addition,
significant volatility in the price of our principal raw materials could adversely affect our financial results and there can be no
assurance that the raw material surcharge mechanism employed by us will completely offset immediate changes in our raw
material costs.

Our production processes require consumable operating supplies, such as electrodes, which have increased in price
significantly compared to prior years. Significant volatility in the price of our consumable operating supplies could adversely
affect our financial results.

Our business requires substantial amounts of energy.

The manufacturing of specialty steel is an energy-intensive process and requires the ready availability of substantial amounts
of electricity and natural gas, for which we negotiate competitive supply agreements. While we believe that our energy
agreements allow us to compete effectively within the specialty steel industry, the potential for increased costs exists during
periods of high demand or supply disruptions. We have a sales price surcharge to help offset the cost fluctuations.

Our business may be harmed by failures on critical manufacturing equipment.

Our manufacturing processes are dependent upon certain critical pieces of specialty steel making equipment, including our
50-ton electric-arc furnace and AOD vessel, our ESR, VIM and VAR furnaces, our radial hydraulic forge and our universal
rolling mill. In the event a critical piece of equipment should become inoperative as a result of unexpected equipment failure,
such as the fire at our North Jackson, OH forge during 2019, there can be no assurance that our operations would not be
substantially curtailed, which may have a negative effect on our financial results.

Our business subjects us to risk of litigation claims, as a routine matter, and this risk increases the potential for a loss that
might not be covered by insurance.

Litigation claims may relate to the conduct of our business, including claims relating to product liability, commercial
disputes, employment actions, employee benefits, compliance with domestic and federal laws and personal injury. Due to the
uncertainties of litigation, we might not prevail on claims made against us in the lawsuits that we currently face, and
additional claims may be made against us in the future. The outcome of litigation cannot be predicted with certainty, and
some of these lawsuits, claims or proceedings may be determined adversely to us. The resolution in any reporting period of
one or more of these matters could have a material adverse effect on our business.

If we are unable to protect our information
based attacks or network security breaches, our operations could be disrupted.

ff
technology infrastructure

against service interruptions, data corruption, cyber-

We rely on information technology networks and systems to manage and support a variety of business activities, including
procurement and supply chain, engineering support, and manufacturing. Our information technology systems, some of which
are managed by third-parties, may be susceptible to the inability to continue to receive software updates and contractual
vendor support, damage, disruptions or shutdown due to failures during the process of upgrading or replacing software,
databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers,
telecommunications failures, user errors or catastrophic events. In addition, security breaches could result in unauthorized
disclosures of confidential information. If our information technology systems suffer severe damage, disruption or shutdown
and our business continuity plans do not effectively resolve the issues in a timely manner, our manufacturing process could
be disrupted resulting in late deliveries or even no deliveries if there is a total shutdown.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

We own our Bridgeville, Pennsylvania facility, which consists of approximately 760,000 square feet of floor space and our
executive offices on approximately 74 acres. The Bridgeville facility contains melting, remelting, conditioning, rolling,
annealing, testing and various other processing equipment. Substantially all products shipped from the Bridgeville facility
are processed through its melt shop and universal rolling mill operations.

We own our North Jackson, Ohio facility, which consists of approximately 257,000 square feet of floor space on
approximately 110 acres. The North Jackson facility contains melting, remelting, forging, annealing and various other
processing operations. Our obligations under our credit agreement, which is more fully described under Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital
Resources,” are collateralized by a first lien on our real property in North Jackson, Ohio. Also, our obligations under our
notes, also more fully described under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources,” are collateralized by a second lien on our North Jackson, Ohio real property.

We own our Dunkirk, New York facility, which consists of approximately 680,000 square feet of floor space on
approximately 81 acres. The Dunkirk facility processes semi-finished billet and bar stock through one or more of its five
rolling mills, a high temperature annealing facility and/or its round and shape bar finishing and testing equipment.

We own our Titusville, Pennsylvania facility, which consists of seven buildings on approximately 10 acres, including two
principal buildings of approximately 265,000 square feet in total area. The Titusville facility contains five VAR furnaces and
various rolling and finishing equipment.

Specialty steel production is a capital-intensive industry. We believe that our facilities and equipment are suitable for our
present manufacturing needs. We believe, however, that we will continue to require capital from time to time to add new
equipment and to repair or replace our existing equipment to remain competitive and to enable us to manufacture quality
products and provide delivery and other support service assurances to our customers.

ITEM 3.

LEGAL PROCEEDINGS

Information regarding the Company’s legal proceedings and other commitments and contingencies is set forth
Item 8, Financial Statements and Supplementary Data, Note 14, which is incorporated by reference into this Item 3.

in Part II,

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

At December 31, 2020, a total of 8,883,788 shares of common stock, par value $0.001 per share, were issued and held by 93
holders of record. There were no shares of the issued common stock held in treasury at December 31, 2020 after the
Company retired all shares previously held in treasuryrr during 2020. Our common stock trades under the symbol “USAP” on
the Nasdaq Global Select Market.

DIVIDENDS

We have never paid a cash dividend on our common stock. Our credit agreement does not permit the payment of cash
dividends on our common stock. Accordingly, we do not expect to pay a cash dividend on our common stock in the near
future.

ITEM 6.

SELECTED FINANCIAL DATA

Not applicable

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following Management Discussion and Analysis (“MD&A”) is intended to help the reader understand the consolidated
results of operations and financial condition of Universal Stainless & Alloy Products, Inc. and its wholly-owned subsidiaries
(collectively, “we,” “us,” “our,” or the “Company”). This MD&A should be read in conjunction with our consolidated
financial statements and accompanying notes included in this Form 10-K. When reviewing the discussion, you should keep in
mind the substantial risks and uncertainties that characterize our business. In particular, we encourage you to review the risk
and uncertainties described under Item 1A “Risk Factors,” of this Form 10-K. These risks and uncertainties could cause
actual results to differ materially from those forecasted in forward-looking statements or implied by past results and trends.
Forward-looking statements are statements that attempt to project or anticipate future developments in our business; we
encourage you to review the discussion of forward-looking statements under “Cautionary Statement for Purposes of the
“Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995,” at the beginning of this report. These
statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we
undertake no obligation to update or revise the statements in light of future developments. Unless otherwise specified, any
reference to a “year” is to the year ended December 31.

Overview

We manufacture and market semi-finished and finished specialty steel products, including stainless steel, nickel alloys, tool
steel and certain other alloyed steels. Our manufacturing process involves melting, remelting, heat treating, hot and cold
rolling, forging, machining and cold drawing of semi-finished and finished specialty steels. Our products are sold to service
centers, forgers, rerollers and original equipment manufacturers. Our customers further process our products for use in a
variety of industries, including the aerospace, power generation, oil and gas, heavy equipment and general industrial
markets. We also perform conversion services on materials supplied by customers.

Our aerospace end market continued to represent approximately 70% of our total net sales and will continue to be a major
driver of our future results, although the COVID-19 pandemic negatively impacted sales in 2020. Sales decreased in all of
our end markets in 2020 compared with 2019 except general industrial, which includes sales to the semiconductor, medical
and general manufacturing markets. Total Company backlog at the end of 2020 was $48.0 million, down from $119.1 million
at the end of 2019.

Our 2020 gross margin was negative 1.5% of net sales, down from 11.4% of net sales in 2019. The decrease was primarily
due to the impacts of the COVID-19 pandemic, including direct charges recorded to the income statement as a result of low
activity levels. Due to the lower activity levels at our production facilities, management revised its accounting estimates for
the absorption of costs into inventory. As a result, $8.3 million of fixed overhead costs were not absorbed into inventory and
$4.9 million of negative operating efficiency variances were incurred. The total impact of $13.2 million was charged directly
to expense during 2020. We expect to see margin improvement in 2021 as production activity at our facilities increases and
we anticipate the benefit of increased productivity.

Selling, general and administrative (“SG&A”) expenses decreased by $0.6 million in 2020 despite approximately $0.6
million of severance costs recorded in the second quarter. The decrease in SG&A was due to cost reduction initiatives
enacted in the second half of 2020 in response to our decrease in volume.

During 2020, we generated $23.8 million of cash from our operations, primarily from reducing our working capital and our
spending in response to lower volumes. We used $9.2 million of cash on capital expenditures, which is a decrease of $8.2
million compared to 2019, and we used $14.7 million of cash in financing activities. Our financing activities consisted
primarily of $24.8 million in net debt and finance lease payments, partially offset by proceeds from a Paycheck Protection
Program Note in the amount of $10.0 million.

Our operating facilities are integrated, and therefore our chief operating decision maker (“CODM”) views the Company as
one business unit. Our CODM sets performance goals, assesses performance and makes decisions about resource allocations
on a consolidated basis. As a result of these factors, as well as the nature of the financial information available which is
reviewed by our CODM, we maintain one reportable segment.

COVID-19 Pandemic

While the Company’s four plants continued to operate throughout 2020, COVID-19 related challenges continued to
negatively impact the efficiency of our operations. These challenges are expected to continue into 2021. The pandemic has
impacted and will continue to impact the Company’s backlog, end markets, overall operations, cash flows and financial
results. The scope and nature of these impacts, most of which are beyond the Company’s control, continue to evolve. The
ultimate extent of the effects of the COVID-19 pandemic on the Company, and the end markets we serve, is highly uncertain
and will depend on future developments. As such, the effects could exist for an extended period, even after the pandemic may
end.

Results of Operations

2020 Results Compared to 2019

For the years ended December 31,
(dollars in thousands, except per

shipped ton information)

Total net sales
Cost of products sold
Gross margin
Selling, general and administrative
expenses
Operating (loss) income
Interest expense
Deferred financing amortization
Other (income), net
(Loss) income before income taxes
(Benefit) provision for income taxes
Net (loss) income
Tons shipped
Sales dollars per shipped ton

Market Segment Information:

For the years ended December 31,
(dollars in thousands)s

Net sales:

Service centers
Original equipment manufacturers
Rerollers
Forgers
Conversion services and other sales

Total net sales

Melt Type Information:

For the years ended December 31,
(dollars in thousands)

Net sales:

Specialty alloys
Premium alloys
Conversion services and other sales

Total net sales

2020

2019

Amount

Percentage
of net sales Amount

Percentage
of net sales

Dollar / ton
variance

Percentage
variance

$ 179,731
182,387
(2,656)

100.0
101.5
(1.5)

$ 243,007
215,369
27,638

100.0
88.6
11.4

19,752
(22,408)
2,784
225
(1,123)
(24,294)
(5,247)
$ (19,047)
30,821
5,831

11.0
(12.5)
1.5
0.1
(0.6)
(13.5)
(2.9)
(10.6) % $

20,347
7,291
3,765
227
(474)
3,773
(502)
4,275
41,462
5,861

8.4
3.0
1.5
0.1
(0.2)
1.6
(0.2)
1.8 % $

(63,276)
(32,982)
(30,294)

(595)
(29,699)
(981)
(2)
(649)
(28,067)
(4,745)
(23,322)
(10,641)
(30)

(26.0)
(15.3)
(109.6)

(2.9)
(407.3)
(26.1)
(0.9)
136.9
(743.9)
945.2
(545.5) %
(25.7) %
(0.5) %

2020

2019

Amount

Percentage
of net sales Amount

Percentage
of net sales

Dollar
variance

Percentage
variance

$ 126,122
20,783
15,928
14,244
2,654
$ 179,731

70.2 % $ 166,327
24,731
11.5
27,236
8.9
20,444
7.9
4,269
1.5
100.0 % $ 243,007

68.4 % $ (40,205)
(3,948)
10.2
(11,308)
11.2
(6,200)
8.4
(1,615)
1.8
100.0 % $ (63,276)

(24.2) %
(16.0)
(41.5)
(30.3)
(37.8)
(26.0) %

2020

2019

Amount

Percentage
of net sales Amount

Percentage
of net sales

Dollar
variance

Percentage
variance

$ 141,838
35,239
2,654
$ 179,731

78.9 % $ 201,120
37,618
19.6
4,269
1.5
100.0 % $ 243,007

82.7 % $ (59,282)
(2,379)
15.5
(1,615)
1.8
100.0 % $ (63,276)

(29.5) %
(6.3)
(37.8)
(26.0) %

of our products are sold to service centers rather than the ultimate end market customers. The end market

a
The majority
information in this Annual Report is our estimate based upon our knowledge of our customers and the grade of material sold
to them, which they will in-turn sell to the ultimate end market customer.

End Market Information:

For the years ended December 31,
(dollars in thousands)

Net sales:

Aerospace
Power generation
Oil and gas
Heavy equipment
General industrial, conversion services
and other sales

Total net sales

Net sales:

2020

2019

Amount

Percentage
of net sales Amount

Percentage
of net sales

Dollar
variance

Percentage
variance

$ 121,900
6,879
13,065
22,400

67.8 % $ 170,445
11,530
3.8
25,023
7.3
22,725
12.5

70.1 % $ (48,545)
(4,651)
4.7
(11,958)
10.3
(325)
9.4

15,487
$ 179,731

8.6

13,284
100.0 % $ 243,007

5.5

2,203
100.0 % $ (63,276)

(28.5) %
(40.3)
(47.8)
(1.4)

16.6
(26.0) %

Net sales for the year ended December 31, 2020 decreased $63.3 million, or 26.0%, compared to 2019. The decrease in our
sales is primarily due to a decrease in consolidated tons shipped driven by lower business activity as a result of significant
challenges facing all our end markets caused primarily by the COVID-19 pandemic. The most significant impact on our
business has been the slowdown in the global commercial airline industry, which is the largest driver of the decline in sales
for our aerospace end market.

Gross margin:

Selling, general and administrative expenses:

Our SG&A expenses consist primarily of employee costs including salaries, incentive compensation, payroll taxes and
benefit related costs, legal and accounting services, share compensation and insurance costs. Our SG&A expenses decreased
by $0.6 million in 2020 due to cost reduction initiatives enacted in the second half of 2020 in response to our decrease in
volume.

Interest expense and deferred financing amortization:

Our interest expense was $2.8 million in 2020 compared to $3.8 million in 2019 due in part to lower total debt balances year
over year and due in part to lower interest rates on our variable rate debt. The interest rates on our variable rate debt under our
Credit Agreement, which is described further below under “Liquidity and Capital Resources – Credit Facility,” are primarily
determined by a LIBOR-based rate plus an applicable margin, and the LIBOR rate was lower in 2020 compared to 2019.

Other income:

Other income was $1.1 million in 2020 compared to $0.5 million in 2019. The increase is related to increased insurance
recoveries during 2020.

(Benefit) from income taxes:

The 2020 income tax benefitff
primarily due to our 2020 pretax loss.

is $5.2 million compared to a 2019 income tax benefit of $0.5 million. The difference is

Net (loss) income:

We had a net loss of $19.0 million in 2020 compared to net income of $4.3 million in 2019 due to the significant decrease in
sales volume and the direct charges due to lower plant activity in 2020.

2019 Results Compared to 2018

For the yyears ended December 31,
(dollars in thousands, except per

shipped ton information)

Total net sales
Cost of products sold
Gross margin
Selling, general and administrative
expenses
Operating income
Interest expense
Deferred financing amortization
Other (income), net
Income before income taxes
Provision (benefit) for income taxes
Net income
Tons shipped
Sales dollars per shipped ton

Market Segment Information:

For the yyears ended December 31,
(dollars in thousands)

Net sales:

Service centers
gForgers
Rerollers
Original equipment manufacturers
Conversion services and other sales

Total net sales

Melt Type Information:

For the yyears ended December 31,
(dollars in thousands)

2019

2018

Amount

243,007
215,369
27,638

Percentage
of net sales

100.0
88.6
11.4

Amount

255,927
218,111
37,816

Percentage
of net sales

Dollar / ton
variance

Percentage
variance

100.0
85.2
14.8

(12,920)
(2,742)
(10,178)

(5.0)
(1.3)
(26.9)

20,347
7,291
3,765
227
(474)
3,773
(502)
4,275
41,462
5,861

8.4
3.0
1.5
0.1
(0.2)
1.6
(0.2)
1.8 % $

21,746
16,070
4,047
255
(829)
12,597
1,935
10,662
44,554
5,744

8.5
6.3
1.6
0.1
(0.3)
5.0
0.8
4.2 % $

(1,399)
(8,779)
(282)
(28)
355
(8,824)
2,437
(6,387)
(3,092)
117

(6.4)
(54.6)
(7.0)
(11.0)
42.8
(70.0)
(125.9)
(59.9) %
(6.9) %
2.0 %

2019

2018

Amount

$ 166,327
20,444
27,236
24,731
4,269
$ 243,007

Percentage
of net sales

Amount

Percentage
of net sales

Dollar
variance

Percentage
variance

68.4 % $ 180,165
20,263
8.4
29,337
11.2
20,582
10.2
5,580
1.8
100.0 % $ 255,927

70.4 % $ (13,838)
181
7.9
(2,101)
11.5
4,149
8.0
(1,311)
2.2
100.0 % $ (12,920)

(7.7) %
0.9
(7.2)
20.2
(23.5)

(5.0) %

2019

2018

Net sales:

Specialty alloys
Premium alloys
Conversion services and other sales

Total net sales

Amount

$ 201,120
37,618
4,269
$ 243,007

Percentage
of net sales

Amount

Percentage
of net sales

Dollar
variance

Percentage
variance

82.7 % $ 209,203
41,144
15.5
5,580
1.8
100.0 % $ 255,927

81.7 % $
16.1
2.2

(8,083)
(3,526)
(1,311)
100.0 % $ (12,920)

(3.9) %
(8.6)
(23.5)

(5.0) %

of our products are sold to service centers rather than the ultimate end market customers. The end market

The majority
a
information in this Annual Report is our estimate based upon our knowledge of our customers and the grade of material sold
to them, which they will in-turn sell to the ultimate end market customer.

End Market Information:

For the yyears ended December 31,
(dollars in thousands)

Net sales:

Aerospace
Power generation
Oil and gas
Heavy equipment
General industrial, conversion services
and other sales

Total net sales

Net sales:

2019

2018

Amount

Percentage
of net sales

Amount

Percentage
of net sales

Dollar
variance

Percentage
variance

$ 170,445
11,530
25,023
22,725

70.1 % $ 148,850
9,278
4.7
31,493
10.3
41,623
9.4

58.2 % $ 21,595
2,252
3.6
(6,470)
12.3
(18,898)
16.3

14.5 %
24.3
(20.5)
(45.4)

13,284
$ 243,007

5.5

24,683
100.0 % $ 255,927

9.6

(11,399)
100.0 % $ (12,920)

(46.2)

(5.0) %

Net sales for the year ended December 31, 2019 decreased $12.9 million, or 5.0%, compared to 2018. The decrease in our
sales reflects approximately a 7% decrease in consolidated tons shipped, partially offset by a 2% increase in sales dollars per
shipped ton. The decrease in our shipped tons was due to lower tool steel shipments. The increase in sales dollars per shipped
ton was driven by higher aerospace end market sales, partially offset by lower surcharges.

Gross margin:

Our gross margin, as a percentage of net sales, was 11.4% in 2019, compared to 14.8% in 2018. The decrease in gross
margin is a result of misalignment of melt costs and surcharges for the majoa rity of the year, and increased cost of operations
on material sold. The increased operations cost was in part due to a fire at our North Jackson facility at the end of the second
quarter, and in part due to product mix.

Selling, general and administrative expenses:

Our SG&A expenses consist primarily of employee costs including salaries, incentive compensation, payroll taxes and
benefit related costs, legal and accounting services, share compensation and insurance costs. Our SG&A expenses decreased
by $1.4 million for the year ended December 31, 2019 compared to 2018. The decrease is driven by lower employee related
costs, primarily lower incentive compensation accruals. As a percentage of sales, our SG&A expenses were 8.4% in 2019
compared to 8.5% in 2018.

Interest expense and deferred financing amortization:

Our interest costs on our debt was $3.8 million in 2019 compared with $4.0 million in 2018. Although our total debt at
December 31, 2019 increased compared to December 31, 2018, average debt forff
2019 was below 2018 by approximately
$2.0 million. In addition, variable interest rates charged on our Credit Agreement debt decreased during 2019. These two
factors result in the $0.3 million decrease in interest expense. The interest rate on our variable rate debt is determined by a
LIBOR-based rate plus an applicable margin based upon achieving certain ratios.

Other income:

Other income was $0.5 million in 2019 compared to $0.8 million in 2018. The 2019 other income includes insurance
proceeds of $0.4 million received in the third quarter related to a fire that occurred at our Dunkirk facility in 2017. The prior
year other income includes a favorable legal settlement of $0.7 million received in the second quarter of 2018.

(Benefit) provision from income taxes:

The 2019 income tax benefit is $0.5 million, compared to a provision for income taxes in 2018 of $1.9 million. The
difference is due primarily to lower pretax income and higher research and development tax credits in 2019 compared to the
prior year. The significant components of the current year tax provision include the Federal statutory rate of 21%, offset by
the benefit of research and development tax credits.

Net income:

We had net income of $4.3 million for the year ended December 31, 2019, compared to $10.7 million for 2018. The decrease
is due to the decrease in our net sales and our gross margin from 2018 to 2019.

Liquidity and Capital Resources

Historically, we have financed our operations through cash provided by operating activities and borrowings on our credit
facilities. At December 31, 2020, we maintained approximately $43.8 million of remaining availability under our revolving
credit facility.

Net cash provided by operating activities

During 2020, we generated $23.8 million of cash from our operating activities. Net loss adjusted for non-cash expenses used
$3.4 million of cash while our managed working capital, defined as net accounts receivable plus net inventory, minus
accounts payable and other current liabilities, generated $27.1 million of cash. The decrease in managed working capital is
the direct result of our reduced spending and inventory management, and focused cash collections activities.

During 2019, we used cash from operating activities of $4.4 million. Net income adjusted for non-cash expenses generated
$24.3 million of cash. Our managed working capital used $21.5 million of cash. Inventories increased by $15.0 million to
support strong demand for our aerospace end market products. Accounts receivable increased by $3.0 million due to the
timing of sales and collections activity. Accounts payable decreased by $1.4 million and other accrued liabilities decreased by
$2.1 million. All other operating activities used $7.2 million of cash in 2019, primarily driven by a decrease in accrued
employment costs and an increase in prepaid expense.

Net cash used in investing activities

Our capital spending was $9.2 million during 2020 and $17.4 million during 2019, consistent with our overall spend
reduction initiatives in 2020.

Net cash used in financing activities

During 2020, we used $24.8 million of cash to make net payments on our debt, partially offset by $10.0 of proceeds from a
Paycheck Protection Program Note.

We believe that our cash flows fromff
adequate to satisfy our working capital, capital expenditure requirements, and other contractual obligations for the
foreseeable future, including at least the next 12 months.

continuing operations, as well as available borrowings under our credit facility, are

Raw materials and supplies

The cost of raw materials represents approximately 35% of the cost of products sold in 2020. The major raw materials used in
our operations include nickel, molybdenum, vanadium, chrome, iron and carbon scrap. Additionally, our Bridgeville facility
uses graphite electrodes as a consumable supply in the melting process. The average price of several of our major raw
materials, including iron, molybdenum, vanadium, and chrome, decreased in 2020 compared to the prior year. The average
price of nickel in 2020 was relatively flat compared to the prior year.

We maintain sales price surcharge to mitigate the risk of substantial raw material cost fluctuations. The market values for
these raw materials and others continue to fluctuate based on supply and demand, market disruptions and other factors. Over
time, our surcharge will effectively offset changes in raw material costs; however, during a period of rising or falling prices
the timing will cause variation between reporting periods.

Credit Facility

On August 3, 2018, we entered into the Credit Agreement with PNC Bank, National Association, as administrative agent and
co-collateral agent, Bank of America, N.A., as co-collateral agent, and PNC Capital Markets LLC, as sole lead arranger and
sole bookrunner. The Credit Agreement provides for a senior secured revolving credit facility not to exceed $110.0 million
(“Revolving Credit Facility”) and a senior secured term loan facility (“Term Loan”) in the amount of $10.0 million (together
with the Revolving Credit Facility, the “Facilities”). The Company was in compliance with all applicable covenants at
December 31, 2020.

The Facilities, which expire on August 3, 2023 (the ‘Expiration Date”), are collateralized by a first lien in substantially all of
the assets of the Company and its subsidiaries, except that no real property is collateral under the Facilities other than
Company’s real property in North Jackson, Ohio.

Availability under the Credit Agreement is based on eligible accounts receivable and inventory. Further, the Company must
maintain undrawn availability under the Credit Agreement at certain times of at least an amount equal to payments due on the
notes issued in connection with the acquisition of the North Jackson facility, as defined in the Credit Agreement, plus 12.5%
of the maximum borrowing amount of $110.0 million “(Minimum Liquidity”). This requirement exists until the Notes are
paid in full, refinanced or extended. At December 31, 2020, the Company was in compliance with the Minimum Liquidity
calculation.

The Company is required to pay a commitment fee of 0.25% based on the daily unused portion of the Revolving Credit
Facility.

With respect to the Term Loan, the Company must pay quarterly installments of the principal of approximately $0.4 million,
plus accrued and unpaid interest, on the first day of each fiscal quarter beginning on September 30, 2018. To the extent not
previously paid, the Term Loan will become due and payable in full on the Expiration Date.

Amounts outstanding under the Facilities, at the Company’s option, will bear interest at either a base rate or a LIBOR based
rate, in either case calculated in accordance with the terms of the Credit Agreement. Interest under the Credit Agreement is
payable monthly. We elected to use the LIBOR based rate for the majority of the debt outstanding under the Facilities during
2020. At December 31, 2020, the LIBOR based rate was 2.16% on our Revolving Credit Facility and 2.66% for the Term
Loan.

The Credit Agreement contains customary affirmative and negative covenants. If a triggering event occurs as defined in the
Credit Agreement, the Company must maintain a fixed charge coverage ratio of not less than 1.10 to 1.0 measured on a
rolling four quarter basis and calculated in accordance with the terms of the Credit Agreement.

At December 31, 2020 and 2019, we had net Credit Agreement related deferred financing costs of approximately $0.5
million and $0.7 million, respectively. We amortized $0.2 million of those deferred financing costs during each of the years
ended December 31, 2020 and 2019. We did not record any additional deferred financing costs to the Consolidated Balance
Sheet during 2020 or 2019.

Paycheck Protection Program Note

On April 16, 2020, the Company entered into a promissory note, dated April 15, 2020, with PNC Bank, National Association,
evidencing an unsecured loan with a principal amount of $10.0 million made to the Company pursuant to the Paycheck
Protection Program (the “PPP Term Note”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES
Act”). The PPP Term Note is guaranteed by the United States Small Business Administration.

The PPP Term Note bears interest at a fixed annual rate of 1.00%, with the firff st six months of interest deferred. According to
the terms of the PPP Term Note, the Company would begin to make 18 equal monthly payments of principal and interest in
November 2020 with the final payment due in April 2022. The PPP Term Note may be accelerated upon the occurrence of an
event of default. The Company applied for forgiveness of the PPP Term Note during the third quarter of 2020. As of
December 31, 2020, the Company has not made any principal or interest payments related to the PPP Term Note.

The Company anticipates forgiveness of the entire amount of the PPP Term Note; however, we are unable to estimate the
timing of the completion of the forgiveness process. We have elected to classify the entire principal balance of the PPP Term
Note within Long-term debt, net on the consolidated balance sheet as of December 31, 2020. Under the existing terms of the
PPP Term Note, if no forgiveness were granted approximately $7.7 million of the principal amount would be due within
twelve months.

The proceeds may be used to maintain payroll or make certain covered interest payments, lease payments and utility
payments. Under the terms of the CARES Act, the Company may be granted forgiveness for all or a portion of loan granted
under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds for
payment of payroll costs and any payments of certain covered lease and utility payments.

Notes

In connection with the acquisition of the North Jackson facility in 2011, we issued $20.0 million in Notes to the sellers of the
facility as partial consideration in the transaction.

lien on the same assets of the Company that collateralize the obligations of the Company under the Facilities. The Holder had
the right to elect at any time on or prior to August 17, 2017 to convert all or any portion of the outstanding principal amount
of the Notes. The Holder’s conversion rights expired and are no longer subject to exercise.

The Notes were originally scheduled to mature on March 17, 2019. On March 30, 2018, the Company provided notification
of its intent to extend the maturity date to March 17, 2020 in accordance with the terms of the Notes. Upon the Company’s
extension of the maturity date of the Notes to March 17, 2020, principal payments in the aggregate amount of $2.0 million
were made in March 2019. On March 18, 2019, the Company provided notification of its intent to extend the maturity date to
March 17, 2021 in accordance with the terms of the Notes. Upon the Company’s extension of the maturity date of the Notes
to March 17, 2021, principal payments in the aggregate amount of $2.0 million were made in March 2020.

There are no further extension options remaining, and the remaining aggregate principal balance of the Notes outstanding of
$15.0 million has been classified within Current portion of long-term debt as of December 31, 2020. The classification is
consistent with our intent to pay the notes off in the first quarter of 2021.

In accordance with the terms of the Notes, the Notes have borne interest at a rate of 6.0% per year since August 17, 2017. All
accrued and unpaid interest is payable quarterly in arrears on each September 18, December 18, March 18 and June 18.

Leases

The Company periodically enters into leases in its normal course of business. At December 31, 2020, the leases in effect
were primarily related to mobile and other production equipment. The term of our leases is generally 60 months or less, and
the leases do not have significant restrictions, covenants, or other nonstandard terms.

We adopted the guidance effective in Leases (Topic 842) on January 1, 2019. Adoption of this guidance did not change the
balance sheet recognition of our finance leases or the income statement recognition of our finance or operating leases. As a
result of adopting the guidance, the Company recorded lease liabilities and right-of-use assets related to its operating leases.
The impact at adoption was immaterial to the Company’s consolidated financial statements.

Right-of-use assets and lease liabilities are recorded at the present value of minimum lease payments. For our operating
leases, the assets are included in Other long-term assets on the consolidated balance sheets and are amortized within
operating income over the respective lease terms. The long-term component of the lease liability is included in Other long-
term liabilities, net, and the current component is included in Other current liabilities. For our finance leases, the assets are
included in Property, plant and equipment, net on the consolidated balance sheets and are depreciated over the respective
lease terms which range from three to five years. The long-term component of the lease liability is included in Long-term
debt and the current component is included in Current portion of long-term debt.

During the twelve months ended December 31, 2020, the Company entered into two new lease agreements accounted for as
finance leases and two new lease agreements accounted for as operating leases.

Share-Based Activity

We granted stock options and issued shares of our common stock to officers, employees, and non-employee directors during
2020, 2019 and 2018 through our incentive compensation plans. Refer to Note 12 to our consolidated financial statements
included in Item 8, “Financial Statements and Supplementary Data” for further information.

Contingent Items

Product Claims. We are subject to various claims and legal actions that arise in the normal course of conducting business.
There were no material product claims outstanding at December 31, 2020.

Environmental Matters. We, as well as other steel companies, are subject to demanding environmental standards imposed by
federal, state and local environmental laws and regulations. We are not aware of any environmental condition that currently
exists at any of our facilities that are probable or reasonably possible of having a material impact on our results of operations
or liquidity.

We are aware of energy usage concerns relating to climate change; however, we are not aware of any pending regulations
that are expected to have a material impact on our results of operations or liquidity.

Legal Matters. From time to time, various lawsuits and claims have been or may be asserted against us relating to the
conduct of our business, including routine litigation relating to commercial and employment matters. The ultimate cost and
outcome of any litigation or claim cannot be predicted with certainty. Management believes, based on information presently
available, that the likelihood that the ultimate outcome of any such pending matter will have a material adverse effect on its
financial
ff
more of these matters may have a material adverse effect
occurs.

condition, or liquidity or a material impact to its results of operations is remote, although the resolution of one or
on its results of operations for the period in which the resolution

Critical Accounting Estimates

The Company’s revenues are primarily composed of sales of products. Revenue from the sale of products is recognized
when the Company satisfies its performance obligation under a contract by transferring control of the promised product to its
customer, which in most cases coincides with shipment of the related product. Certain sales qualify for over-time revenue
recognition. Sales of certain specified product grades and shapes, and sales from conversion services, are recognized over-
time. The Company’s identification of and accounting for these sales is discussed further in Note 2 to our consolidated
financial statements included in Item 8, “Financial Statements and Supplementary Data.”

Management regularly monitors the ability to collect its unpaid sales invoices and the valuation of its receivables. The
allowance for doubtful accounts includes specific reserves for the value of outstanding invoices issued to customers that are
deemed potentially not collectible.

Inventories are stated at the lower of cost or net realizable value. The cost of inventory is principally determined by the
weighted average cost method for material and operation costs. An inventory reserve is provided for material on hand for
which management believes cost exceeds net realizable value. We reserve for slow-moving inventory and inventory that is
being evaluated under our quality control process. The reserves are based upon management’s expected method of
disposition.

Property, Plant and Equipment (“PP&E”) is stated at historical cost or faff ir value at acquisition less accumulated depreciation.
Depreciation is computed by the straight-line method over the estimated useful lives of the assets for book purposes.
Depreciation for income tax purposes is computed using accelerated methods. Upon disposal, assets and related accumulated
depreciation are removed from the financial statements and differences between the net book value and proceeds from
disposal are generally included in cost of goods sold in the consolidated statement of operations. PP&E is evaluated for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable in relation to the operating performance and future undiscounted cash flows of the underlying assets.
Adjustments are made if the sum of expected future cash flows is less than book value. No impairment reserve was
necessary as of December 31, 2020, 2019 or 2018.

Deferred income taxes are provided for temporary differences between amounts of assets and liabilities for financial
reporting purposes and the basis of such assets and liabilities as measured by tax laws and regulations. Our deferred tax
assets include net operating loss carry forwards that can be used to offset taxable income in future periods and reduce income
taxes payable in those future periods. These deferred tax assets will expire, if unused, at various times beginning in 2027.
Deferred
ff
valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.

tax liabilities primarily relate to book / tax depreciation differences. Management assesses the need to record a

The calculation for our share-based compensation expense involves several assumptions. Management believes each
assumption used in the valuation is reasonable because it considers the experience of the plan and reasonable expectations.
Management estimates volatility based on historical data, future expectations and the expected term of the share-based
compensation awards. The assumptions, however, involve inherent uncertainties. As a result, if other assumptions had been
used, share-based compensation expense could have varied.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Prices for our raw materials and natural gas requirements are subject to frequent market fluctuations, and profit margins may
decline in the event market prices increase. Selling price increases and surcharges are utilized to offset raw material and
natural gas market price increases.

Raw material prices vary based on numerous factors, including quality, and are subject to frequent market fluctuations.
Future raw material prices cannot be predicted with any degree of certainty. We do not maintain any fixed-price long-term
agreements with any of our raw material suppliers.

We maintain a sales price surcharge on certain of our products to help offset the impact of raw material price fluctuations.
For certain products, the surcharge is calculated at the time of order entry, based on current raw material prices or prices at
the time of shipment. For certain finished products, the surcharge is calculated based on the monthly average raw material
prices two months prior to the promised ship date. While the material surcharge is designed to offset modest fluctuations in
raw material prices, it cannot immediately absorb significant spikes in raw material prices. A material change in raw material
prices within a short period of time could have a material effect on our financial results and there can be no assurance that the
raw material surcharge will completely offset immediate changes in our raw material costs.

At December 31, 2020, we had $25.3 million of floating rate debt outstanding with an interest rates between 2.16% and
2.66%. Since the interest rate on floating rate debt changes with the short-term market rate of interest, we are exposed to the
risk that these interest rates may increase, raising our interest expense. Exclusive of any interest rate hedges, a hypothetical
1.0% increase or decrease in our floating rate debt interest rates would unfavorably or favorably impact our annual pre-tax
results by approximately $0.3 million.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAAA

Index to Financial Statements

Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Financial Statements

Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets at December 31, 2019 and 2018
Consolidated Statements of Cash Flows for the yyears ended December 31, 2019, 2018 and 2017
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2019, 2018 and 2017

Notes to Consolidated Financial Statements
Consolidated Financial Statement Schedules
Schedule II – Valuation and Quali y g

fying Accounts

Page
24
25

27
28
29
30
31
32
49
49

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) under the Securities Exchange Act of 1934). Our internal control over financial reporting is designed to
provide reasonable assurance to management and the board of directors regarding the preparation and fair presentation of
published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation. We conducted an assessment of the effectiveness of our
internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued
by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission (2013 Framework). Based on our
assessment, we believe that, as of December 31, 2020, our internal control over financial reporting is effective.

The effectiveness of internal control over financial reporting as of December 31, 2020 has been audited by Schneider
Downs & Co. Inc., an independent registered public accounting firm which also audited our consolidated financial
statements. Schneider Downs’ attestation report on the consolidated financial statements and management’s maintenance of
ff
effective
Accounting Firm.”

internal control over financial reporting is included under the heading “Report of Independent Registered Public

/s/ Dennis M. Oates
Dennis M. Oates
Chairman, President and Chief Executive Officer

/s/ Christopher T. Scanlon
Christopher T. Scanlon
Vice President of Finance, Chief Financial Officer and Treasurer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Universal Stainless & Alloy Products, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Universal Stainless & Alloy Products, Inc. (the
“Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive (loss)
income, cash flows, and shareholders’ equity for each of the three years in the period ended December 31, 2020, and the
related notes and schedules (collectively referred to as the “consolidated financial statements”). We also have audited the
Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 2020, in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated
Framework (2013) issued by COSO.

Basis for Opinions
The Company’s management is responsible for the consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management’s Report on Internal Control Over Financial Reporting appearing under Item 8.
Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud,
and whether effective internal control over financial reporting was maintained in
all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
ff
disposition of the company’s assets that could have a material effect

on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Inventory

Critical Audit Matter Description
As discussed in Notes 1 and 3 to the consolidated financial statements, the Company’s net inventory totaled $111 million as
of December 31, 2020 and is stated at the lower of cost or net realizable value with cost principally determined by the
weighted average cost method. Such costs include the acquisition cost over the production period for raw materials,
including scrap, and supplies, direct labor and applied manufacturing overhead within the guidelines of normal operating
capacity. The Company establishes reserves based upon assessments of slow-moving inventory, the results of quality control
reviews, the determination of normal capacity levels in the manufact
uring process, and whether the product is valued at the
lower of cost or net realizable value.

We identified auditing the valuation of inventory as a critical audit matter. The production cycle for a unit of inventory
generally lasts several months and involves the accumulation of different types of costs at various cost centers. The ultimate
cost of a unit in inventory may be subject to reductions related to abnormal production levels, scrap valuation and recovery,
achieving customer specifications, or changes in the market, customer needs, and commodity pricing. Additionally, for
certain new products, there is limited historical data for which to evaluate recoverability of the cost of the unit. The
complexity surrounding the production process and the high degree of estimation involved in assessing net realizable value
results in significant auditor judgment around auditing the valuation of inventory.

How the Critical Audit Matter Was Addressed in the Audit
We evaluated and tested: the design and operating effectiveness of the Company’s internal controls over the accumulation of
inventory costs, the calculation to support estimated scrap values within the inventory costing model, management’s
assessment of normal capacity levels and calculation to establish an estimate of excess costs, the calculation of lower of cost
or net realizable value reserves and the calculation of slow-moving inventory. Our audit procedures involved testing the
assumptions significant to management’s inventory valuation assessment including plant capacity levels, expected selling
prices, demand forecasts, scrap values, and recovery percentages as well as the relevant underlying data.

/s/ Schneider Downs & Co., Inc.
Schneider Downs & Co., Inc.

We have served as the Company’s auditor since 2003.

Pittsburgh, Pennsylvania
February 17, 2021

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATEDA

STATEMENTS OF OPERATIONS

For the yyears ended December 31,
(dollars in thousands, except per share information)
Net sales
Cost of products sold
Gross margin
Selling, general and administrative expenses
Operating (loss) income
Interest expense and other
Other (income), net
(Loss) income before income taxes
(Benefit) provision for income taxes
Net (loss) income
Basic earnings per share
Diluted earnings per share
Weighted average shares of common stock outstanding:

financing costs

Basic
Diluted

$
$
$

2020

2019

2018

179,731
182,387
(2,656)
19,752
(22,408)
3,009
(1,123)
(24,294)
(5,247)
(19,047)
(2.16)
(2.16)

$
$
$

243,007
215,369
27,638
20,347
7,291
3,992
(474)
3,773
(502)
4,275
0.49
0.48

$
$
$

255,927
218,111
37,816
21,746
16,070
4,302
(829)
12,597
1,935
10,662
1.31
1.28

8,818,974
8,818,974

8,778,753
8,873,719

8,132,632
8,347,692

The accompanying notes are an integral part of these consolidated financial statements.

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

For the years ended December 31,
(dollars in thousands)
Net (loss) income
Other comprehensive (loss) income, net of tax:

2020

2019

2018

(19,047)

4,275

10,662

(Loss) reclassified into retained earnings from adoption of ASU 2018-02
Unrealized (loss) gain on derivatives, net of tax

-
(14)

(21)
(11)

-
94

Comprehensive (loss) income

(19,061)

4,243

10,756

The accompanying notes are an integral part of these consolidated financial statements.

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATEDA

BALANCE SHEETS

December 31,
(dollars in thousands)s
ASSETS
Current assets:

Cash
Accounts receivable (less allowance for doubtful accounts of $203 and $295,
respectively)
Inventory, net
Other current assets

Total current assets

Property, plant and equipment, net
Other long-term assets
Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable
Accrued employment costs
Current portion of long-term debt
Other current liabilities

Total current liabilities

Long-term debt
Deferred income taxes
Other long-term liabilities
Total liabilities

Commitments and contingencies (Note 14)
Stockholders’ equity:

Senior preferred stock, par value $0.001 per share; 1,980,000 shares authorized; zero
shares issued and outstanding
Common stock, par value $0.001 per share; 20,000,000 shares authorized; 8,883,788
and 9,093,715 shares issued, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Treasury stock, at cost; zero and 294,279 common shares held, respectively

Total stockholders’ equity

Total liabilities and stockholders’ equity

2020

2019

164

170

18,101
111,380
7,471
137,116
164,983
947
303,046

12,632
1,826
16,713
2,722
33,893
33,471
5,725
4,277
77,366

35,595
147,402
8,300
191,467
176,061
871
368,399

40,912
4,449
3,934
830
50,125
60,411
10,962
3,765
125,263

9
94,276
(45)
131,440
-
225,680
303,046

9
94,982
(31)
150,487
(2,311)
243,136
368,399

The accompanying notes are an integral part of these consolidated financial statements.

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATEDA

STATEMENTS OF CASH FLOWS

For the years ended December 31,
(dollars in thousands)s
Operating Activities:
Net (loss) income
Adjustments for non-cash items:

Depreciation and amortization
Deferred income tax
Share-based compensation expense

Changes in assets and liabilities:
Accounts receivable, net
Inventory, net
Accounts payable
Accrued employment costs
Income taxes
Other, net

Net cash provided by (used in) operating activities
Investing Activities:
Capital expenditures
Proceeds from sale of property, plant and equipment

Net cash used in investing activities
Financing Activities:

Borrowings under revolving credit facility
Payments on revolving credit facility
Proceeds under New Markets Tax Credit financing, net
Proceeds from Paycheck Protection Program Note
Payments on term loan facility, finance leases, and notes
Payments of financing costs
Proceeds from public offering, net of cash expenses
Issuance of common stock under share-based plans

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and restricted cash
Cash and restricted cash at beginning of period

Cash and restricted cash at end of period

Supplemental Disclosure of Cash Flow Information:

Interest paid
Income taxes (refunded) paid, net

2020

2019

2018

(19,047)

4,275

10,662

19,449
(5,231)
1,455

17,494
34,326
(25,282)
(1,983)
243
2,387
23,811

(9,157)
-
(9,157)

115,876
(136,877)
-
10,000
(3,809)
-
-
150

(14,660)

(6)
170

164

2,885
(213)

$
$

19,133
(517)
1,390

(2,977)
(14,965)
(1,412)
(3,490)
84
(5,930)
(4,409)

(17,354)
-
(17,354)

174,907
(153,632)
-
-
(3,904)
-
-
471

17,842

(3,921)
4,091

170

3,670
69

2019

170
-
170

$
$

18,918
1,850
1,442

(7,628)
(20,373)
5,293
3,865
(246)
2,824
16,607

(15,388)
10
(15,378)

368,910
(388,728)
2,835
-
(12,364)
(1,109)
32,246
865

2,655

3,884
207

4,091

4,183
102

2018

3,696
395
4,091

$
$

The following table reconciles cash and restricted cash above to the Consolidated Balance Sheets

For the years ended December 31,

Cash
Restricted cash included in other long-term assets

Total cash and restricted cash

2020

164
-
164

The accompanying notes are an integral part of these consolidated financial statements.

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATEDA

STATEMENTS OF SHAREHOLDERS’ EQUITY

Common
shares

Common

Additional
paid-in

AAccumulated
other

Retained

comprehensive Treasury

Treasury

(dollars in thousands)

outstanding
g

stock

capital

earnings
g

income
(loss)

stock

Balance at December 31, 2017
Common stock issuance under

Employee Stock Purchase Plan
Exercise of stock options
Public offering

Share-based compensation
Capital investment
Net gain on derivative instruments
Net income
Balance at December 31, 2018

Common stock issuance under

Employee Stock Purchase Plan
Exercise of stock options
Share-based compensation
Net loss on derivative instruments
AAdoption of ASU 2018-02
Net income
Balance at December 31, 2019

Common stock issuance under

Employee Stock Purchase Plan

Share-based compensation
Net loss on derivative instruments
Treasury Stock retirement
Net loss
Balance at December 31, 2020

7,257,787

7,922
50,770
1,408,163
27,848
-
-
-
8,752,490

31,376
5,325
10,245
-
-
-
8,799,436

21,940
62,412
-
-
-
8,883,788

-
-
1
-
-
-
-
9

-
-
-
-
-
-
9

-
-
-
-
-
9

$ 58,514 $ 135,529

(93)

292,855

$ (2,290)

149
716
32,246
1,442
33
-
-
93,100

418
53
1,411
-
-
-
94,982

-
-

-
10,662
146,191

-
-
-
-
21
4,275
150,487

150
1,455
-
(2,311)
-

-
-
-
-
(19,047)
$ 94,276 $ 131,440

-
-

94
-
1

-
-
-
(11)
(21)
-
(31)

-
-
(14)
-
-
(45)

-
-

-
-
292,855

-
-
1,424
-
-
-
294,279

-
-

-
-
(2,290)

-
-
(21)
-
-
-
(2,311)

-
-
-
(294,279)
-
-

-
-
-
2,311
-
-

The accompanying notes are an integral part of these consolidated financial statements.

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Significant Accounting Policies

Basis of Consolidation. The consolidated financial statements include the accounts of Universal Stainless & Alloy Products,
Inc. and its wholly-owned subsidiaries and variable interest entities (collectively, “we,” “us,” “our,” or the “Company”). All
intercompany accounts and transactions have been eliminated in consolidation. We have no interests in any unconsolidated
entity.

Use of Estimates. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles
requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements. The estimates and assumptions used in these consolidated financial statements are based on known information
available as of the balance sheet date. Actual results could differ from those estimates.

Concentration of Credit Risk. We limit our credit risk on accounts receivable by performing ongoing credit evaluations and,
when necessary, require letters of credit, guarantees or cash collateral. During 2020, we had one customer which accounted
for approximately 23% of our total net sales and 8% of our total accounts receivable balance. The percent of accounts
receivable made up by our largest customer is lower than the percent of sales primarily due to timing, as sales to that
customer were lowest in the fourth quarter compared to each of the first three quarters. During 2019, we had one customer
which accounted for approximately 27% of our total net sales and 9% of our total accounts receivable, and a second customer
which accounted for approximately 11% of our total net sales and 17% of our total accounts receivable. During 2018, we had
one customer which accounted for approximately 18% of our total net sales and 6% of our total accounts receivable balance.

Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable are presented net of the allowance for
doubtful accounts on our consolidated balance sheets. We market our products to a diverse customer base, primarily
throughout the United States. International sales approximated 7% of 2020 total net sales, 7% of 2019 total net sales, and 8%
of 2018 total net sales. The allowance for doubtful accounts includes specific reserves for the value of outstanding invoices
issued to customers that are deemed potentially not collectible. Receivables are charged-off to the allowance when they are
deemed to be uncollectible. There was no bad debt expense recorded for the years ended December 31, 2020, 2019 and 2018.

Inventories. Inventories are stated at the lower of cost or net realizable value with cost principally determined by the
weighted average cost method. Such costs include the acquisition cost forff
raw materials and operating supplies, direct labor
and applied manufacturing overhead within the guidelines of normal plant capacity. We reserve for slow-moving inventory
and inventory that is being evaluated under our quality control process. The reserves are based upon management’s expected
method of disposition. The net change in inventory reserves for the year ended December 31, 2020 was an increase of $1.1
million. The net change for the year ended December 31, 2019 was an increase of $0.2 million, and the net change for the
year ended December 31, 2018 was an increase of $0.4 million.

Included in inventory are operating materials consisting of forge dies and production molds and rolls that are consumed over
their useful lives. During the years ended December 31, 2020, 2019 and 2018, we amortized these operating materials in the
amount of $1.7 million, $2.3 million and $2.3 million, respectively. This expense is recorded as a component of cost of
products sold on the consolidated statements of operations and included as a part of our total depreciation and amortization
on the consolidated statements of cash flows.

We experienced significantly lower activity levels at our production facilities during 2020 caused primarily by the impacts of
the COVID-19 pandemic. Due to the lower activity levels, management revised its accounting estimates for the absorption of
costs into inventory and, as a result, $8.3 million of fixed overhead costs were not absorbed into inventory and $4.9 million
of negative operating effff iff ciency variances were incurred. The total impact of $13.2 million was charged directly to expense
during 2020.

Property, Plant and Equipment. Property, plant and equipment is recorded at cost or its fair value at acquisition date. No
depreciation is recognized on assets until they are placed in service. Assets which have been retired or disposed of are
removed from cost and accumulated depreciation accounts, with the gain or loss generally reflected in cost of goods sold on
the consolidated statements of operations.

Major equipment maintenance costs are capitalized as incurred and included in other current assets. These costs are
amortized to cost of products sold within a 12 to 36 month period. Other maintenance costs are expensed as incurred. Costs
of improvements and renewals are capitalized. Our maintenance expense for the years ended December 31, 2020, 2019 and
2018 was $15.9 million, $19.7 million and $18.3 million, respectively, which is included as a component of cost of products
sold.

Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets. The
estimated useful lives of buildings and land improvements are between 10 and 39 years, and the estimated useful lives of
machinery and equipment are between five and 20 years. Our total depreciation expense for the years ended December 31,
2020, 2019 and 2018 was $17.5 million, $16.7 million and $16.4 million, respectively, of which $17.0 million, $16.1 million
and $15.9 million, respectively, was included as a component of cost of products sold while the remainder was included in
selling, general and administrative expense.

Long-Lived Asset Impairment. Long-lived assets, including property, plant and equipment and intangible assets are evaluated
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable in relation to the operating performance and future undiscounted cash flows of the underlying assets.
Adjustments are made if the sum of expected future cash flows is less than the book value. Based on management’s
assessment of the carrying values of long-lived assets, no impairment reserve was necessary as of December 31, 2020, 2019
and 2018.

Deferred Financing Costs. Deferred financing costs are amortized up to the maturity date of the related financial instrument
using the straight-line method, which approximates the effective interest method. Deferred financing cost amortization for
the years ended December 31, 2020, 2019 and 2018 was $0.2 million, $0.2 million and $0.3 million, respectively, and is
included as a component of interest expense and other financing costs on the consolidated statements of operations and
included as part of total depreciation and amortization on the consolidated statements of cash flows. At December 31, 2020
and 2019, we had $1.2 million and $1.4 million, respectively, of unamortized deferred financing costs included on our
consolidated balance sheets as a reduction of debt.

Revenue Recognition. The Company’s revenues are primarily composed of sales of products. Revenue from the sale of
products is recognized when the Company satisfies its performance obligations under a contract by transferring control of the
promised product to its customer (“point-in-time”). Sales of certain specified product grades and shapes, and sales from
conversion services, are recognized over-time. These sales qualify for over-time revenue recognition as the Company does
not produce an asset with alternative use when completing its performance obligations with regard to these items, and
maintains an enforceable right to payment in the event of contract termination.

Invoiced shipping and handling costs are also accounted for as revenue. Customer claims, which are not material, are
accounted for primarily as a reduction to gross sales after the matter has been researched and an acceptable resolution has
been reached.

Income Taxes. Deferred income taxes are provided for net operating losses, unused tax credits earned and the tax effect of
temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial
statements. We use the liability method to account for income taxes, which requires deferred taxes to be recorded at the
statutory rate expected to be in effff ect
ff when the taxes are paid. Valuation allowances are provided for a deferred tax asset
when it is more likely than not that the asset will not be realized. Income tax penalties and interest are included in the
provision for income tax expense.

We evaluate the tax positions taken or expected to be taken in our tax returns. A tax position should only be recognized in the
financial statements if we determine that it is more-likely-than-not that the tax position will be sustained upon examination by
the tax authorities, based upon the technical merits of the position. For those tax positions that should be recognized, the
measurement of a tax position is determined as being the largest amount of benefit that is greater than fifty percent likely of
being realized upon ultimate settlement. We believe there are no material uncertain tax positions at December 31, 2020,
2019 and 2018.

We recognize excess tax benefits as a result of the exercise of employee stock options within the consolidated statements of
operations.

Share-based Compensation Plans. We recognize compensation expense based on the grant-date fair value of the awards.
The fair value of the stock option grants is estimated on the date of grant using the Black-Scholes option-pricing model, and
is recognized ratably over the service/vesting period of the award. The fair value of time-based restricted stock grants and
restricted stock units is calculated using the market value of the stock on the date of issuance, and is recognized ratably over
the service/vesting period of the award.

Net (Loss) Income per Common Share. Net (loss) income per common share is computed by dividing net (loss) income by
the weighted-average number of common shares outstanding during the period. Diluted net (loss) income per common share
is computed by dividing net (loss) income by the weighted-average number of common shares outstanding plus all dilutive
potential common shares outstanding during the period.

Treasury Stock. We account for treasury stock under the cost method and include such shares as a reduction of total
stockholders’ equity. During 2020, we retired all treasury stock previously acquired.

Financial Instruments. Financial instruments held by us include cash, accounts receivable, and accounts payable and current
and long-term debt. The carrying value of cash, accounts receivable and accounts payable is considered to be representative
of fair value because of the short maturity of these instruments. Refer to Note 8 for fair value disclosures of our financial
instruments.

Segment Reporting. Our operating facilities are integrated, and therefore our chief operating decision maker (“CODM”)
views the Company as one business unit. Our CODM sets performance goals, assesses performance and makes decisions
about resource allocations on a consolidated basis. As a result of these factors, as well as the nature of the financial
information available which is reviewed by our CODM, we maintain one reportable segment.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)
2018-13, “Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies
the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including the removal of
certain disclosure requirements. The amendments in the ASU are effective for all entities for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the ASU. An
entity is permitted to early adopt any removed or modified disclosures upon issuance of the ASU and delay adoption of the
additional disclosures until the effective date. We adopted this guidance as of January 1, 2020 and the adoption did not have a
material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes (Topic
740),” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic
740. The amendments in this ASU also improve consistency and simplify other areas of Topic 740 by clarifying and
amending existing guidance. The amendments in this ASU will be applied using different approaches depending on what the
specific amendment relates to and, for public entities, are effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2020. An entity is permitted to early adopt the guidance, and we early adopted ASU
2019-12 as of January 1, 2020. The adoption did not have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all ASUs. Recently issued ASUs not listed were assessed and
determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements.

Note 2: Revenue Recognition

The Company’s revenues are primarily comprised of sales of products. Revenue is recognized when the Company satisfies its
performance obligation under the contract by transferring the promised product to its customer that obtains control of the
product. A performance obligation is a promise in a contract to transfer a distinct product to a customer. Most of the
Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately
identifiable from other promises in the contract and, therefore, not distinct.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products.
As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales and other taxes are
excluded from revenues. Invoiced shipping and handling costs are included in revenue.

The Company’s revenue is primarily from products transferred to customers at a point in time. The Company recognizes
revenue at the point in time in which the customer obtains control of the product, which is generally when product title passes
to the customer upon shipment.

We have determined that there are certain customer agreements involving production of specified product grades and shapes
that require revenue to be recognized over time, in advance of shipment, due to there being no alternative use for these grades
and shapes without significant economic loss. Also, the Company maintains an enforceable right to payment including a
normal profit margin from the customer in the event of contract termination. Contract assets related to services performed,
not yet billed of $2.3 million and $2.2 million are included in Accounts Receivable in the Consolidated Balance Sheets at
December 31, 2020 and December 31, 2019, respectively.

The Company has elected the following practical expedients allowed under ASU 2014-09:

•

Shipping activities are not considered to be separate performance obligations.

Performance obligations are satisfied within one year from a given reporting date, and consequently we omit
disclosure of the transaction price apportioned to remaining performance obligations on open orders.

The following summarizes our revenue by melt type:

Net sales:

Specialty alloys
Premium alloys (A)
Conversion services and other sales

Total net sales

Twelve Months Ended
December 31,

2020

2019

141,838
35,239
2,654

179,731

201,120
37,618
4,269

243,007

(A) Premium alloys represent all vacuum induction melted (VIM) products.

Note 3: Inventory

The majora

classes of inventory are as follows:

2020

2019

9,286
94,928
11,502
115,716
(4,336)
111,380

2020

7,847
52,160
291,134
4,664
355,805
(190,822)
164,983

9,815
127,713
13,090
150,618
(3,216)
147,402

2019

7,847
50,974
281,008
9,441
349,270
(173,209)
176,061

starting stock
g

December 31,
(dollars in thousands)
Raw materials and
Semi-finished and finished steel products
Operating materials
Gross inventory
Inventory reserves
Total

inventory, net

Note 4: Property, Plant and Equipment

Property, plant and equipment consists of the following:

December 31,
(dollars in thousands)
Land and land improvements
Buildings
Machinery and equipment
Construction in progress
Gross property, plant and equipment
AAccumulated depreciation
Property, plant and equipment, net

Note 5: Long-Term Debt

Long-term debt consists of the following:

December 31,
(dollars in thousands)
Term loan
Revolving credit facility
Notes
Paycheck Protection Program Note
Finance leases

Less: current portion of long-term debt
Less: deferred

financing costs

gLong-term debt

Credit Facility

2020

2019

6,786
18,479
15,000
10,000
1,070
51,335
(16,713)
(1,151)

33,471

8,215
39,480
17,000
-
1,026
65,721
(3,934)
(1,376)

60,411

The Company is required to pay a commitment fee of 0.25% based on the daily unused portion of the Revolving Credit
Facility.

The aggregate annual principal payments due under our Credit Agreement at December 31, 2020, are as follows:

(dollars in thousands)
2021
2022
2023
2024

1,429
1,429
1,429
20,978
25,265

Paycheck Protection Program Term Note

The proceeds may be used to maintain payroll or make certain covered interest payments, lease payments and utility
payments. Under the terms of the CARES Act, the Company may be granted forgiveness for all or a portion of the loan
granted under the PPP, with such forgiveness to be determined, subject to limitations, based on the use of the loan proceeds
for payment of payroll costs and any payments of certain covered lease and utility payments.

Notes

In connection with the acquisition of the North Jackson facility in 2011, we issued $20.0 million in Notes to the sellers of the
facility as partial consideration in the transaction.

On January 21, 2016, the Company entered into Amended and Restated Notes in the aggregate principal amount of $20.0
million, each in favor of Gorbert Inc. (“Holder”). The Company’s obligations under the Notes are collateralized by a second
lien on the same assets of the Company that collateralize the obligations of the Company under the Facilities. The Holder had
the right to elect at any time on or prior to August 17, 2017 to convert all or any portion of the outstanding principal amount
of the Notes. The Holder’s conversion rights expired and are no longer subject to exercise.

Note 6: Leases

As of December 31, 2020, future minimum lease payments applicable to operating and finance leases were as follows:

2021
2022
2023
2024
2025
Total minimum lease payments
Less amounts representing interest
Present value of minimum lease payments
Less current obligations
Total long-term lease obligations, net

Weighted-average remaining lease term

Operating Leases

Finance Leases

269
258
165
71
3
766
(33)
733
(265)
468

344
319
240
240
80
1,223
(153)
1,070
(284)
786

3 years

3.5 years

Right-of-use assets recorded to the consolidated balance sheet at December 31, 2020 were $0.7 million for operating leases
and $0.8 million for finance leases. For the twelve months ended December 31, 2020, the amortization of finance lease assets
was $0.4 million and was included in cost of products sold in the Consolidated Statements of Operations.

The Company elected the practical expedient allowed under Leases (Topic 842) to exclude leases with a term of 12 months
or less from the calculation of our lease liabilities and right-of-use assets.

In determining the lease liability and corresponding right-of-use asset for each lease, the Company calculated the present
value of future lease payments using the interest rate implicit in the lease, when available, or the Company’s incremental
borrowing rate. The incremental borrowing rate was determined with reference to the interest rate applicable under our senior
secured revolving credit facility discussed in Note 5, as this facility is collateralized by a first lien on substantially all of the
assets of the Company and its term is similar to the term of our leases.

Note 7: New Markets Tax Credit Financing Transaction

On March 9, 2018, the Company entered into a New Markets Tax Credit financing program with PNC New Markets
Investment Partners, LLC and Boston Community Capital, Inc. related to a new mid-size bar cell capital project at the
Company’s Dunkirk, NY facility. PNC New Markets Investment Partners, LLC made a capital contribution and the
Company made a loan to Dunkirk Investment Fund, LLC (“Investment Fund”) under the qualified NMTC financing program.
Through this financing transaction, the Company secured low interest financing and the potential for other future benefits
related to its mid-size bar cell capital project.

In connection with the financing transaction, the Company loaned $6.7 million aggregate principal amount (“Leverage
Loan”) due in March 2048 to the Investment Fund. Additionally, PNC New Markets Investment Partners, LLC contributed
$3.5 million to the Investment Fund, and as such, PNC New Markets Investment Partners, LLC is entitled to substantially all
tax and other benefits derived from the NMTC. The Investment Fund then contributed the proceeds to a community

development entity (“CDE”). The CDE then loaned the funds, on similar terms, as the Leverage Loan to Dunkirk Specialty
Steel, LLC, a wholly-owned subsidiary of the Company. The CDE loan proceeds are restricted for use on the mid-size bar
cell capital project.

The NMTC is subject to 100 percent recapture for a period of seven years as provided in the Internal Revenue Code. The
Company is required to comply with various regulations and contractual provisions that apply to the NMTC arrangement.
Non-compliance with applicable requirements could result in projected tax benefits not being realized and, therefore, require
the Company to indemnify PNC New Markets Investment Partners, LLC for any loss or recapture of NMTCs related to the
financing until the Company’s obligation to deliver tax benefits is relieved. The Company does not anticipate any credit
recaptures will be required in connection with this arrangement.

As of December 31, 2020 and 2019, the Company recorded $2.8 million within Other long-term liabilities related to this
transaction, which represents the funds contributed to the Investment Fund by PNC New Markets Investment Partners, LLC.

This transaction also includes a put/call provision whereby the Company may be obligated or entitled to repurchase PNC
New Markets Investment Partners, LLC’s interest in the Investment Fund. The Company believes that PNC New Markets
Investment Partners, LLC will exercise the put option in March 2025, at the end of the recapture period, resulting in a gain of
$2.8 million at that time. The value attributed to the put/call is negligible.

Direct costs incurred in structuring this financing transaction totaled $0.7 million. These costs were deferred and are
amortized over the term of the loans.

The Company has determined that the Investment Fund and CDE are each a VIE, and that it is the primary beneficiary of
each VIE. This conclusion was reached based on the following:

•

The ongoing activities of the VIE, collecting and remitting interest and fees, and NMTC compliance were all
considered in the initial design and are not expected to significantly affect economic performance throughout the life
of the VIE;

Contractual arrangements obligate the Company to comply with NMTC rules and regulations and provide various
other guarantees to the Investment Fund and CDE;

PNC New Markets Investment Partners, LLC lacks a material interest in the underlying economics of the project;
and

The Company is obligated to absorb losses of the VIE.

Because the Company is the primary beneficiary of each VIE, these entities have been included in the Company’s
Consolidated Financial Statements.

Note 8: Fair Value Measurements

The fair value hierarchy has three levels based on the inputs used to determine fair value, which are as follows:

Level 1 — Unadjusted quoted prices available in active markets for the identical assets or liabilities at the measurement
date.

Level 2 — Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for
identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are
observable for the asset or liability.

Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant
management judgment. These values are generally determined using pricing models for which the assumptions utilize
management’s estimates of market participant assumptions.

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to
measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based
on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a
particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific
to the asset or liability.

The carrying amounts of our cash, accounts receivable and accounts payable approximated fair value at December 31, 2020
and 2019 due to their short-term nature (Level 1). The fair value of the Term Loan and Revolver at December 31, 2020 and
2019 approximated the carrying amount as the interest rate is based upon floating short-term interest rates (Level 2). The fair
value of the Notes was approximately $15.0 million at December 31, 2020 and $16.9 million at December 31, 2019 (Level
2).

Note 9: Derivatives and Hedging

The Company invoices certain customers in foreign currencies. In order to mitigate the risks associated with fluctuations in
exchange rates with the US Dollar, the Company enters into foreign exchange forward
contracts for a portion of these sales
and has designated these contracts as cash flow hedges.

The notional value of these contracts was $1.2 million at December 31, 2020 and $4.9 million at December 31, 2019. The
contracts had a related unrealized loss recorded in accumulated other comprehensive income of less than $0.1 million at
December 31, 2020 and 2019.

Additionally, the Company entered into a forward interest rate swap contract during 2020 to fix the interest rate on a portion
of its variable-rate debt from January 1, 2021 to June 30, 2023. The forward interest rate swap was designated as a cash flow
hedge. The notional amount of the contract at its inception was $16 million, and the notional amount will step down
throughout the term. The contract had a related unrealized loss recorded in accumulated other comprehensive income of less
than $0.1 million at December 31, 2020.

Note 10: Income Taxes

The income tax benefit attributable to continuing operations during the years ended December 31, 2020, 2019 and 2018 is as
follows:

Components of the benefit from income taxes are as follows:

For the years ended December 31,
(dollars in thousands)s
Current (benefit) provision

Federal
State

Deferred (benefit) provision

Federal
State

(Benefit) provision for income taxes

2020

2019

2018

(16)
-

(5,154)
(77)
(5,247)

(7)
22

(279)
(238)
(502)

The income tax (benefit) provision reconciled to taxes computed at the statutory federal rate is as follows:

For the years ended December 31,
Tax (benefit) provision at statutory tax rate
State income taxes, net of federal impact
Research and development tax credit
Valuation allowance, net of federal impact
Adjustments to deferred taxes
Other, net
(Benefit) provision for income taxes

2020

2019

(5,102)
(129)
(372)
-
279
77
(5,247)

792
38
(1,233)
(193)
41
53
(502)

(1)
86

2,100
(250)
1,935

2018

2,645
74
(874)
(167)
277
(20)
1,935

We continue to record a full valuation allowance against our New York deferred tax assets due to the zero percent state
income tax rate for qualified manufacturers. We continue to record a partial valuation allowance against our Pennsylvania net
operating loss deferred tax asset due to annual usage limitations. We have determined that federal and other state deferred tax
assets are expected to be realized and have not recorded any additional valuation allowances.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our net
deferred taxes related to continuing operations are as follows:

December 31,
(dollars in thousands)
Noncurrent deferred income taxes:
Federal and state tax carryforwards

Inventory
Share-based compensation
Receivables
Accrued liabilities
Other
Total deferred tax assets

Deferred tax liabilities:

Property, plant and equipment
Other
Total deferred tax liabilities

Total noncurrent deferred income taxes

2020

2019

$
$

10,950
1,409
1,919
59
271
12
14,620

19,672
673
20,345
5,725

$
$

7,659
970
2,029
166
333
7
11,164

21,312
814
22,126
10,962

We file a U.S. federal income tax return and various state income tax returns. For federal income tax purposes, we had $22.1
million and $8.6 million of net operating loss carryforwards at December 31, 2020 and 2019, respectively. The net operating
loss carryforwards begin to expire in 2033. In addition, we have credit carryforwards associated with our research and
development activities of $5.6 million and $5.2 million as of December 31, 2020 and 2019, respectively. The research and
development credit carryforwards begin to expire in 2030.

We have state net operating loss carryforwards of $9.9 million at December 31, 2020 and $8.8 million at December 31,
2019, and the related valuation allowances were $2.8 million at each date. We have state credit carryforwards of $0.2 million
at December 31, 2020 and 2019. The state net operating loss carryforwards begin to expire in 2031. The state credit
carryforwards begin to expire in 2027.

We are routinely under audit by federal or state authorities. Our federal tax returns are subject to examination by the IRS for
tax years after 2016. We are subject to examination by most state tax jurisdictions for tax years after 2016.

Note 11: Net Income (Loss) Per Common Share

The computation of basic and diluted net income (loss) per common share for the years ended December 31, 2020, 2019 and
2018 is as follows:

For the yyears ended December 31,
(dollars in thousands, except per share amounts)
Numerator:
Net (loss) income

Weighted average number of shares of common stock outstanding
Weighted average effect of dilutive share-based compensation
average number of shares of common stock
Diluted

gweighted

outstanding
g

(loss) income per common share:

Basic earnings per share
Diluted

earnings per share

2020

2019

2018

(19,047) $

4,275 $

10,662

8,818,974
-
8,818,974

8,778,753
94,966
8,873,719

8,132,632
215,060
8,347,692

$
$

(2.16) $
(2.16) $

0.49 $
0.48 $

1.31
1.28

On May 25, 2018, the Company completed an underwritten, public offering involving the issuance and sale by the Company
of 1,224,490 shares of common stock at a public offering price of $24.50 per share. In addition, the Company granted the
underwriters a 30-day option to purchase up to an additional 183,673 shares of common stock. On June 1, 2018, the
underwriters exercised the option in full, and an additional 183,673 shares of common stock were issued and sold on June 5,

2018. The public offering resulted in gross proceeds to the Company of approximately $34.5 million, or $32.2 million net of
the underwriting discount and other offering fees and expenses. We used the net proceeds from the public offff eff ring to repay
amounts outstanding under the Company’s revolving credit facility. The public offering’s impact on the weighted average
number of shares for the year ended December 31, 2018 was 0.8 million shares.

There were 776,025, 593,975 and 323,250 options to purchase shares of common stock, at an average price of $22.02,
$26.91, and $32.36 for the years ended December 31, 2020, 2019 and 2018, respectively, that were not included in the
computation of diluted net income per common share because their respective exercise prices were greater than the average
market price of our common stock.

Note 12: Share-Based Plans

At December 31, 2020, we had the following share-based compensation plans:

Universal Stainless & Alloy Products, Inc. 2017 Equity Incentive Plan

We maintain the Universal Stainless & Alloy Products, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which was
approved by our stockholders in May 2017. The 2017 Plan permits the issuance of stock options, restricted stock, restricted
stock units, other share-based awards and performance awards to officers, employees, non-employee directors, and
consultants and advisors to the Company. At inception, there were 568,357 shares authorized for issuance under the 2017
Plan.

When adopted, the 2017 Plan replaced the Omnibus Incentive Plan (“OIP”). Any awards outstanding under the OIP will
remain subject to and be paid under the OIP. No new awards will be granted under the OIP. Any shares subject to
outstanding awards under the OIP that cease to be subject to such awards after the adoption of the 2017 Plan will increase the
shares authorized under the 2017 Plan. At December 31, 2020, there were 310,142 shares available for grant under the 2017
Plan.

Omnibus Incentive Plan

We maintain the OIP which was approved by our stockholders in May 2012. The OIP permitted the issuance of stock
options, restricted stock, restricted stock units and other share-based awards to non-employee directors, other than those
directors owning more than 5% of our outstanding common stock, consultants, officers and other key employees who were
expected to contribute to our future growth and success. With the adoption of the 2017 Plan, no shares of common
stock were available for grant at December 31, 2020 under the OIP.

Stock Options

The price for options granted under the both the 2017 Plan and OIP is equal to the fair market value of the common stock at
the date of grant. Options granted to non-employee directors vest over a three-year period, and options granted to employees
vest over a four-year period. All options under both the 2017 Plan and OIP will expire no later than ten years after the grant
date. Forfeited options may be reissued and are included in the amount available for grants.

A summary of stock option activity as of and for the year ended December 31, 2020 is presented below:

Outstanding at December 31, 2019

Stock options granted
Stock options vested
Stock options forfeited
Outstanding at December 31, 2020
Exercisable at December 31, 2019

Number
of shares

252,736
122,300
(94,230)
(36,050)
244,756

Non-vested stock
options outstanding

Weighted-
average
grant-date
fair value

Number
of shares

Stock options
outstanding
Weighted-
average
exercise
price

Weighted-
average
contractual
term (years)

8.45
2.99
8.35
7.43
5.87

896,800
122,300
-
(125,525)
893,575
648,819

$
$

22.01
6.91
-
21.57
20.00
22.77

5.7
4.4

There were no proceeds from stock option exercises during 2020. Proceeds from stock option exercises totaled $0.1 million
and $0.7 million for the years ended December 31, 2019 and 2018, respectively. Shares issued in connection with stock
option exercises are issued from available authorized shares.

Based upon the closing stock price of $7.48 at December 31, 2020, the aggregate intrinsic value of outstanding stock options
was $0.1 million, of which a nominal amount was related to options that were exercisable. Intrinsic value of stock options is
calculated as the amount by which the market price of our common stock exceeds the exercise price of the options. There
were no stock options exercised for the year ended December 31, 2020. The aggregate intrinsic value of stock options
exercised for the year ended December 31, 2019 was less than $0.1 million.

The total fair value of stock option awards vested during each of the years ended December 31, 2020, 2019 and 2018 was
approximately $0.8 million.

Share-based compensation to employees and directors is recognized as compensation expense in the consolidated statements
of operations based on the stock options fair value on the measurement date, which is the date of the grant. The value of the
portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods. The
compensation expense recognized, and its related tax effects,

are included in additional paid-in capital.

Share-based compensation expense related to stock options totaled $0.8 million for each of the years ended December 31,
2020, 2019 and 2018, respectively. Share-based compensation expense is recognized ratably over the requisite service period
for all stock option awards. Unrecognized share-based compensation expense related to non-vested stock option awards
totaled $1.2 million at December 31, 2020, and the weighted-average period over which this unrecognized expense was
expected to be recognized was 2.8 years.

The fair value of our stock options granted is estimated on the measurement date, which is the date of grant. We use the
Black-Scholes option-pricing model. Our determination of fair value of stock option awards on the date of grant is affected
by our stock price as well as assumptions regarding our expected stock price volatility over the term of the awards, and actual
and projected stock option exercise behaviors. The weighted-average grant-date fair value of stock options granted during the
years ended December 31, 2020, 2019 and 2018 was $2.99, $6.71 and $10.33, respectively.

The assumptions used to determine the fair value of stock options granted are detailed in the table below:

Risk-free interest rate
Dividend yield
Expected market price volatility
Weighted-average expected market price volatility
Expected term

2020

2019

2018

0.37% to 0.94%

1.41% to 2.56%

2.63% to 3.10%

0.0%

46% to 51%

47% to 52%

45% to 52%

49.2%

49.4%

49.1%

4.6 to 6.5 yyears

4.7 to 6.8 yyears

The risk-free interest rate was developed using the U.S. Treasuryrr yield curve for periods equal to the expected life of the
stock options at the grant date. No dividend yield was assumed because we do not pay cash dividends on common stock and
currently have no plans to pay a dividend. Expected volatility is based on the long-term historical volatility (estimated over a
period equal to the expected term of the stock options) of our common stock. In estimating the fair value of stock options
under the Black-Scholes option-pricing model, separate groups of employees that have similar historical exercise behavior
are considered separately. The expected term of options granted represents the period of time that options granted are
expected to be outstanding.

Restricted Stock and Restricted Stock Units

A summary of restricted stock activity for the years ended December 31, 2020 and 2019 is presented below:

Balance, December 31, 2018

Restricted stock granted in May
Restricted stock vested in May
Restricted stock granted in November

Balance, December 31, 2019

Restricted stock granted in May
Restricted stock vested in May
Restricted stock granted in October
Restricted stock granted in November
Restricted stock vested in December

Balance, December 31, 2020

Number
of shares

Weighted-average
grant-date
fair value

80,352
6,368
(4,528)
18,000
100,192
6,308
(6,652)
11,866
139,500
(44,000)
207,214

17.97
12.88
20.56
14.39
16.89
7.84
18.11
5.80
6.42
14.75
9.25

Share-based compensation expense related to restricted stock totaled $0.5 million, $0.4 million, and $0.5 million for the years
ended December 31, 2020, 2019 and 2018, respectively.

During the years ended December 31, 2020 and 2019, we granted 157,674 and 24,368 time-based restricted stock units,
respectively, to certain employees and directors. The restricted stock units typically vest over four years for employees and
three years for directors. The fair value of the non-vested time-based restricted common stock awards was calculated using
the market value of the stock on the date of issuance.

As of December 31, 2020, total unrecognized compensation cost related to non-vested time-based restricted stock units was
$1.9 million. That cost is expected to be recognized over a weighted-average period of 3.4 years.

Employee Stock Purchase Plan

Under the 1996 Employee Stock Purchase Plan, as amended (the “Plan”), the Company is authorized to issue up to 300,000
shares of common stock to its full-time employees, nearly all of whom are eligible to participate. Under the terms of the
Plan, employees can choose as of January 1 and July 1 of each year to have up to 10% of their total earnings withheld to
purchase up to 100 shares of our common stock each six-month period. The purchase price of the stock is 85% of the lower
of its beginning-of-the-period or end-of-the-period market prices. At December 31, 2020, we have issued 273,307 shares of
common stock since the Plan’s inception.

Tax Benefits Preservation Plan

On August 24, 2020, the Company's Board of Directors (the “Board”) adopted the Tax Benefits Preservation Plan (“Rights
Agreement”), which is a stockholder rights plan designed to reduce the risk that the Company’s ability to use its net operating
loss carryforwards and certain other tax attributes to reduce potential future income tax obligations would become subject to
limitation by reason of the Company experiencing an “ownership change,” as defined in Section 382 of the Internal Revenue
Code of 1986.

Under the Rights Agreement, the Board declared a dividend of one right (a “Right”) for each of the Company’s issued and
outstanding shares of common stock, par value $0.001 per share (“Common Stock”). The dividend will be paid to the
stockholders of record at the close of business on September 3, 2020 (the “Record Date”). Each Right entitles the registered
holder, subject to the terms of the Rights Agreement (as defined below), to purchase from the Company one one-thousandth
of a share of the Company’s Series A Junior Participating Preferred Stock, par value $0.001 per share (the “Series A
Preferred Stock”), at a price of $35.00 (the “Exercise Price”), subject to certain adjustments. The fair value of the Rights was
not significant.

The Rights will not be exercisable until the earlier to occur of (i) the close of business on the tenth business day after a public
announcement or filing that a person or group of affiliated or associated persons has become an “Acquiring Person,” which is
defined as a person or group of affiliated or associated persons that, at any time after the date of the Rights Agreement, has
acquired, or obtained the right to acquire, beneficial ownership of 4.95% or more of the Company’s outstanding shares of
Common Stock, subject to certain exceptions or (ii) the close of business on the tenth business day after the commencement
of, or announcement of an intention to commence, a tender offer or exchange offer the consummation of which would result
in any person becoming an Acquiring Person (the earlier of such dates being called the “Distribution Date”).

The Rights, which are not exercisable until the Distribution Date, will expire at or prior to the earliest of (i) the close of
business on August 24, 2023; (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement; (iii) the time
at which the Rights are exchanged pursuant to the Rights Agreement; (iv) the time at which the Rights are terminated upon
the occurrence of certain mergers or other transactions approved in advance by the Board; and (v) the close of business on the
date set by the Board following a determination by the Board that (x) the Rights Agreement is no longer necessary or
desirable for the preservation of the Tax Benefits or (y) no Tax Benefits are available to be carried forward or are otherwise
available.

There were no issuances of Series A Preferred Stock during the twelve months ended December 31, 2020.

Note 13: Retirement Plans

We have a defined contribution retirement plan (“401(k) plan”) that covers substantially all employees. Pursuant to the
401(k) plan, participants may elect to make pre-tax and after-tax contributions, subject to certain limitations imposed under
the Internal Revenue Code of 1986, as amended. In addition, we make periodic contributions to the 401(k) plan based on
service for the North Jackson, Titusville and Dunkirk hourly employees. Prior to the North Jackson initial collective
bargaining agreement, periodic contributions to the 401(k) plan were based on age for hourly employees at the North Jackson
facility. We make periodic contributions for the salaried employees at all locations based upon their service and their
individual contribution to the 401(k) plan.

We also participate in the Steelworkers Pension Trust (the “Trust”), a multi-employer defined-benefit pension plan that is
open to all hourly and salary employees associated with the Bridgeville facility. We make periodic contributions to the Trust
based on hours worked at a fixed rate for each hourly employee, as determined by the collective bargaining agreement, and a
fixed monthly contribution on behalf of each salary employee. The trustees of the Trust have provided us with the latest data
available for the Trust year ended December 31, 2019. As of that date, the Trust is not fully funded. We could be held liable
to the Trust for our own obligations, as well as those of other employers, due to our participation in the Trust. Contribution
rates could increase if the Trust is required to adopt a funding improvement plan or a rehabilitation plan, if the performance
of the Trust assets do not meet expectations, or as a result of future collectively-bargained wage and benefit agreements. If
we choose to stop participating in the Trust, we may be required to pay the Trust an amount based on the underfunded status
of the Trust, referred to as a withdrawal liability.

The Pension Protection Act (PPA) defines a zone status for each trust. Trusts in the green zone are at least 80% funded,
trusts in the yellow zone are at least 65% funded, and trusts in the red zone are generally less than 65% funded. The Trust
recertified its zone status after using the extended amortization provisions as allowed by law. The Trust has not implemented
a funding improvement or rehabilitation plan, nor are such plans pending. Our contributions to the Trust have not exceeded
more than 5% of the total contributions to the Trust.

Trusts employer
identification
number /
plan number
23-6648508 / 499

Pension
fund
Trust

Funding plan Company contributions to the Trust

PPA zone status
2019
2020
Green
Green

pending /
implemented
No

(dollars in thousands)
2019

2020

2018

711

945

880

Surcharge
imposed
No

The total expense of all retirement plans for the years ended December 31, 2020, 2019 and 2018 was $1.8 million, $2.1
million and $2.1 million, respectively. No other post-retirement benefit plans exist.

Note 14: Commitments and Contingencies

From time to time, various lawsuits and claims have been or may be asserted against us relating to the conduct of our
business, including routine litigation relating to commercial and employment matters. The ultimate cost and outcome of any
litigation or claim cannot be predicted with certainty. Management believes, based on information presently available, that
the likelihood that the ultimate outcome of any such pending matter will have a material adverse effect on our financial
condition, or liquidity or a material impact to our results of operations is remote, although the resolution of one or more of
these matters may have a material adverse effect on our results of operations for the period in which the resolution occurs.

We, as well as other steel companies, are subject to demanding environmental standards imposed by federal, state and local
environmental laws and regulations. We are not aware of any environmental condition that currently exists at any of our
facilities that would cause a material adverse effect on our financial condition, results of operations or liquidity in a particular
future quarter or year.

Our purchase obligations include the value of all open purchase orders with established quantities and purchase prices, as
well as minimum purchase commitments, all made in the normal course of business. At December 31, 2020, our total
purchase obligations were approximately $19.3 million, of which approximately $16.9 million will be due in 2021.

ITEM 9.

None.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

CONTROLS AND PROCEDURES

ITEM 9A.
Our management, including our Chairman, President and Chief Executive Officer and our Vice President of Finance, Chief
Financial Officer and Treasurer, performed an evaluation of the effectiveness of our disclosure controls and procedures.
Based on that evaluation, our Chairman, President and Chief Executive Officer and our Vice President of Finance, Chief
Financial Officer and Treasurer concluded that, as of the end of the fiscal year covered by this Annual Report on Form 10-K,
Management’s Report on our internal control over financial reporting is
our disclosure controls and procedures are effff ective.
included in Item 8 of this Annual Report on Form 10-K under the caption “Management’s Report on Internal Control Over
Financial Reporting” and is incorporated herein by reference. Our independent registered public accounting firm has issued a
report on management’s maintenance of effective internal control over financial reporting and is set forth in Item 8 of this
Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm” and is
incorporated herein by reference.

During the last fiscal quarter of the fiscal year ended December 31, 2020, there were no changes in our internal control over
financial reporting which have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

ITEM 9B. OTHER INFORMATION
None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information concerning the directors of the Company is set forth in the Proxy Statement for the 2020 Annual Meeting of
Stockholders (the “Proxy Statement”) to be sent to stockholders in connection with our 2020 Annual Meeting of
Stockholders, under the heading “Proposal No. 1—Election of Directors,” which information is incorporated by reference.
With the exception of the information specifically incorporated herein by reference, our Proxy Statement is not to be deemed
filed as part of this report for the purposes of this Item.

In addition to the information set forth under the caption “Executive Officers” in Part I of this report, the information
concerning our directors required by this item is incorporated and made part hereof by reference to the material appearing
under the heading “Nominees for Election as Directors” in our Proxy Statement, which will be filed with the SEC, pursuant
to Regulation 14A, not later than 120 days after the end of the 2020 fiscal year. Information concerning the Audit Committee
and its “audit committee financial expert” required by this item is incorporated and made part hereof by reference to the
material appearing under the heading “Committees of the Board of Directors” in the Proxy Statement. Information required
by this item regarding compliance with Section 16(a) of the Exchange Act, to the extent required to be included therein, is
incorporated and made a part hereof by reference to the material appearing under the heading “Delinquent Section 16(a)
Reports” in the Proxy Statement. Information concerning the executive officers of the Company is contained in Part I of this
Annual Report on Form 10-K under the caption “Executive Officers.”

We have adopted a Code of Business Conduct and Ethics that applies to all directors and employees, including its principal
executive officer and principal financial officer. A copy is available through our website at http://www.univstainless.com.
Information on our website is not part of this Annual Report on Form 10-K. We intend to timely disclose any amendment of
or waiver under the Code of Business Conduct and Ethics on our website and will retain such information on our website as
required by applicable SEC rules.

ITEM 11.

EXECUTIVE COMPENSATION

The information concerning executive compensation is set forth in the Proxy Statement under the heading “Executive
Compensation,” which information is incorporated by reference. With the exception of the information specifically
incorporated herein by reference, the Proxy Statement is not to be deemed filed as part of this report for the purposes of this
Item.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information concerning security ownership of certain beneficial owners and management is set forth in the Proxy
Statement under the heading “Security Ownership of Certain Beneficial Owners and Management,” which information is
incorporated by reference. With the exception of the information
specifically incorporated herein by reference, the Proxy
Statement is not to be deemed filed as part of this report for the purposes of this Item.

Equity Compensation Plan Information:

Securities authorized for issuance under equity compensation plans at December 31, 2020 were as follows:

Plan Category
Equity compensation plans

approved by security holders

Total

Number of shares
to be issued upon
exercise of
outstanding options

Weighted-average
exercise price of
outstanding options

Number of shares
remaining available
for future issuance under
equity compensation
plans (A)

893,575
893,575

$
$

20.00
20.00

336,835
336,835

(A) Includes 310,142 shares of common stock not issued under the Universal Stainless & Alloy Products, Inc. 2017
Equity Incentive Plan and 26,693 available under the 1996 Employee Stock Purchase Plan, as amended.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information concerning certain relationships and related transactions, and director independence is set forth in the Proxy
Statement under the heading “The Board of Directors,” which information is incorporated by reference. With the exception
of the information specifically incorporated herein by reference, the Proxy Statement is not to be deemed filed as part of this
report for the purposes of this Item.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information concerning principal accountant fees and services is set forth in the Proxy Statement under the heading
“Principal Accountant Fees and Services,” which information is incorporated by reference. With the exception of the
information specifically incorporated herein by reference, the Proxy Statement is not to be deemed filed as part of this report
for the purposes of this Item.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this Form 10-K:

1) Financial Statements

The list of financial statements required by this item is set forth in Item 8, “Financial Statements and Supplementary Data”
and is incorporated herein by reference.

2) Consolidated Financial Statement Schedules

Schedule II – Valuation and Qualifying Accounts

For the Years Ended December 31, 2020, 2019 and 2018
(dollars in thousands)
AAllowance for doubtful accounts:
Year ended December 31, 2020
Year ended December 31, 2019
Year ended December 31, 2018

VValuation allowance for deferred income taxes:

Year ended December 31, 2020
Year ended December 31, 2019
Year ended December 31, 2018

Balance at Charged to Deductions/
net charge-
costs and
beginning
offs (A)
expenses
of yyear

Balance at
end of yyear

295
295
456

2,105
2,298
2,465

-
-
-

(92) $
-
$
(161)

$
-
(193) $
(167)

203
295
295

2,105
2,105
2,298

(A) Credits to the allowance for doubtful accounts represent the write-off of bad debts net of recoveries. Credits to the

valuation allowance for deferred income taxes represent adjustments to existing valuation allowances.

3) Exhibits

EXHIBIT
NUMBER

3.1

DESCRIPTION

Amended and Restated Certificate of Incorporation, as
amended

3.2

Second Amended and Restated By-laws of the Company

Certificate of Designations of Series A Junior Participating
Preferred Stock of Universal Stainless & Alloy Products, Inc.

Specimen Copy of Stock Certificate for shares of Common
Stock

Form of Amended and Restated Note, dated January 21,
2016

Incorporated herein by reference to Exhibit 3.1 to
the Company’s Annual Report on Form 10-K for
the year ended December 31, 2017.

Incorporated herein by reference to Exhibit 3.1 to
the Company’s Current Report on Form 8-K filed
December 15, 2014.

Incorporated herein by reference to Exhibit 3.1 to
the Company’s Current Report on Form 8-K filed
August 24, 2020.

Incorporated herein by reference to Exhibit 4.1 to
the Company’s Annual Report on Form 10-K for
the year ended December 31, 1998.

Incorporated herein by reference to Exhibit 4.1 to
the Company’s Current Report on Form 8-K filed
on January 25, 2016

Description of Registrant’s Securities Registered Pursuant to
Section 12 of the Securities Exchange Act of 1934

Filed herewith.

Tax Benefits Preservation Plan, date as of August 24, 2020,
by and between Universal Stainless & Alloy Products, Inc.
and Continental Stock Transfer & Trust Company, as Rights
Agent

Incorporated herein by reference to Exhibit 4.1 to
the Company’s Current Report on Form 8-K filed
August 24, 2020.

10.1

Stockholders Agreement dated as of August 1, 1994, by and
among the Company and its existing stockholders

10.2

Omnibus Incentive Plan

Employment Agreement dated December 21, 2007 between
the Company and Dennis M. Oates

Employment Agreement dated April 21, 2008 between the
Company and Christopher M. Zimmer

Employment Agreement dated August 5, 2015 between the
Company and Graham McIntosh

Employment Agreement dated April 2, 2018, between the
Company and Christopher T. Scanlon

Incorporated herein by reference to Exhibit 10.1 to
the Company’s Annual Report on Form 10-K for
the year ended December 31, 2017.

Incorporated herein by reference to Appendix B of
the Company’s Definitive Proxy Statement dated
April 25, 2012.*

Incorporated herein by reference to Exhibit 10.7 to
the Company’s Annual Report on Form 10-K for
the year ended December 31, 2007.*

Incorporated herein by reference to Exhibit 10.7 to
the Company’s Annual Report on Form 10-K for
the year ended December 31, 2010.*

Incorporated herein by reference to Exhibit 10.2 to
the Company’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2015.*

Incorporated herein by reference to Exhibit 10.3 to
the Company’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2018.*

Employment Agreement dated April 1, 2020, between the
Company and John J. Arminas

Filed herewith.

10.8

Form of notice of grant of restricted stock award.

10.9

Form of non-statutory stock option agreement.

Incorporated herein by reference to Exhibit 10.1 to
the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2012.*

Incorporated herein by reference to Exhibit 10.12
to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2014.*

3.3

4.1

4.2

4.3

4.4

10.3

10.4

10.5

10.6

10.7

EXHIBIT
NUMBER
10.10

DESCRIPTION
Form of incentive stock option agreement.

10.11

Form of non-statutory stock option agreement for eligible
directors.

10.12

First Amended and Restated Revolving Credit, Term Loan
and Security Agreement, dated as of August 3, 2018, by and
among Universal Stainless & Alloy Products, Inc., the other
borrowers party thereto, the guarantors party thereto from
time to time, PNC Bank, National Association, as
administrative agent and co-collateral agent, Bank of
America, N.A., as co-collateral agent, the lenders party
thereto from time to time and PNC Capital Markets LLC, as
sole lead arranger and sole bookrunner.

Incorporated herein by reference to Exhibit 10.13
to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2014.*

Incorporated herein by reference to Exhibit 10.14
to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2014.*

Incorporated herein by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K filed
on August 6, 2018.

10.13

Universal Stainless & Alloy Products, Inc. 1996 Employee
Stock Purchase Plan.

Incorporated herein by reference to Exhibit 4.1 to
the Company’s Registration Statement on Form S-
8 (File No. 333-13511).

10.14

10.15

Amendment to the Universal Stainless & Alloy Products,
Inc. Employee Stock Purchase Plan, dated as of February 3,
2012.

Incorporated herein by reference to Exhibit 99.2 to
the Company’s Registration Statement on Form S-
8 (File No. 333-184336).

Amendment to the Universal Stainless & Alloy Products,
Inc. 1996 Employee Stock Purchase Plan, dated as of May
12, 2016.

Incorporated herein by reference to Exhibit 10.1 to
the Current Report on Form 8-K filed on May 13,
2016.

10.16

Universal Stainless & Alloy Products, Inc. 2017 Equity
Incentive Plan.

Incorporated herein by reference to Exhibit 10.1 to
the Company’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2017.*

10.17

10.18

10.19

Form of Non-Employee Director Stock Option Award
Agreement (Universal Stainless & Alloy Products, Inc. 2017
Equity Incentive Plan)

Incorporated herein by reference to Exhibit 10.3 to
the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2017.

Form of Non-Employee Director RSU Award Agreement
(Universal Stainless & Alloy Products, Inc. 2017 Equity
Incentive Plan)

Incorporated herein by reference to Exhibit 10.4 to
the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2017.

Form of Employee Stock Option Award Agreement
(Universal Stainless & Alloy Products, Inc. 2017 Equity
Incentive Plan)

Incorporated herein by reference to Exhibit 10.6 to
the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2017.

10.20

Form of Employee RSU Award Agreement (Universal
Stainless & Alloy Products, Inc. 2017 Equity Incentive Plan)

Incorporated herein by reference to Exhibit 10.7 to
the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2017.

EXHIBIT
NUMBER
10.21

DESCRIPTION
Form of Retention Stock Option Award Agreement
(Universal Stainless & Alloy Products, Inc. 2017 Equity
Incentive Plan)

10.22

Form of Retention RSU Award Agreement (Universal
Stainless & Alloy Products, Inc. 2017 Equity Incentive Plan)

10.23

Amendment to the Employment Agreement dated December
21, 2007 between the Company and Dennis M. Oates

10.24

Amendment to the Employment Agreement dated April 21,
2008 between the Company and Christopher M. Zimmer

10.25

Paycheck Protection Program Term Note, date as of April 15,
2020

Incorporated herein by reference to Exhibit 10.5 to
the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2017.

Incorporated herein by reference to Exhibit 10.8 to
the Company’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2017.

Incorporated herein by reference to Exhibit 10.22
to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2019.*

Incorporated herein by reference to Exhibit 10.24
to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2019.*

Incorporated herein by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K filed
April 22, 2020.

21.1

23.1

24.1

31.1

31.2

32.1

101

Subsidiaries of Registrant

Consent of Schneider Downs & Co., Inc.

Filed herewith.

Powers of Attorney

Included on the signature page herein.

Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002

Filed herewith.

Certification of Chief Financial Officer pursuant to Rule 13a-
14(a) and 15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

Filed herewith.

Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Rule 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith.

The following financial information from this Annual Report
on Form 10-K for the fiscal year ended December 31, 2020,
formatted in XBRL (Extensible Business Reporting
Language) and furnished electronically herewith: (i) the
Consolidated Balance Sheets as of December 31, 2020 and
2019 (ii) the Consolidated Statements of Operations for the
years ended December 31, 2020, 2019 and 2018; (iii) the
Consolidated Statements of Comprehensive Income; (iv) the
Consolidated Statements of Cash Flows for the years ended
December 31, 2020, 2019 and 2018; (v) the Consolidated
Statements of Shareholders’ Equity for the years ended
December 31, 2020, 2019 and 2018; and (vi) the Notes to
Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as inline XBRL). Contained in Exhibit 101.

* -

Reflects management contract or compensatory plan or arrangement to be filed as an exhibit pursuant to Item 15(b) of
this Annual Report on Form 10-K.

ITEM 16.

FORM 10-K SUMMARY

Not Applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on February 17, 2021.

SIGNATURES

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

By:

/s/ Dennis M. Oates
Dennis M. Oates
Chairman, President and Chief Executive Officer

POWER OF ATTORNEY

Each of the officers and directors of Universal Stainless & Alloy Products, Inc., whose signature appears below in so signing
also makes, constitutes and appoints Dennis M. Oates and John Arminas, and each of them acting alone, his true and lawful
attorney-in-fact, with full power of substitution, for him in any and all capacities, to execute and cause to be filed with the
SEC any and all amendment or amendments to this Report on Form 10-K, with exhibits thereto and other documents
connected therewith and to perform any acts necessary to be done in order to file such documents, and hereby ratifiesff
confirms all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

and

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following
persons on behalf of the Registrant in the capacities and on the dates indicated.

SIGNATURE

TITLE

DATE

/s/ Dennis M. Oates

Dennis M. Oates

Chairman, President, Chief Executive Officer and

February 17, 2021

Director (Principal Executive)

/s/ Christopher T. Scanlon

Vice President of Finance, Chief Financial Officer and

February 17, 2021

Christopher T. Scanlon

Treasurer (Principal Financial and Accounting Officer)

/s/ Christopher L. Ayers

Director

Christopher L. Ayers

/s/

Judith L. Bacchus

Director

Judith L. Bacchus

/s/ M. David Kornblatt

Director

M. David Kornblatt

/s/ Udi Toledano

Udi Toledano

Director

February 17, 2021

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