10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2023

OR

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

For the Transition Period from to

Commission File Number 001-39467

 

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	25-1724540
(State or other jurisdiction of incorporation or organization)	(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 Exchange Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share Preferred Stock Purchase Rights	USAP	The Nasdaq Stock Market, LLC The Nasdaq Stock Market, LLC

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 (§232.405 of this chapter) 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	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☑
Emerging growth 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. ☐

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

As of April 21, 2023, there were 9,060,668 shares of the Registrant’s common stock outstanding.

intest ra

i

Universal Stainless & Alloy Products, Inc.

Table of Contents

	DESCRIPTION	PAGE NO.
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Consolidated Statements of Operations	1
	Consolidated Statements of Comprehensive Loss	2
	Consolidated Balance Sheets	3
	Consolidated Statements of Cash Flow	4
	Consolidated Statements of Shareholders' Equity	5
	Notes to the Unaudited Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	16
PART II.	OTHER INFORMATION	17
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Mine Safety Disclosures	17
Item 5.	Other Information	17
Item 6.	Exhibits	18
SIGNATURES		19

Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Information)

(Unaudited)

	Three months ended
	March 31,
	2023			2022
Net sales	$	65,865		$	47,562
Cost of products sold		58,141			43,509
Gross margin		7,724			4,053
Selling, general and administrative expenses		6,275			5,049
Operating income (loss)		1,449			(996	)
Interest expense and other financing costs		2,032			709
Other (income) expense, net		(42	)		13
Loss before income taxes		(541	)		(1,718	)
Income tax benefit		(29	)		(103	)
Net loss	$	(512	)	$	(1,615	)
Net loss per common share - Basic	$	(0.06	)	$	(0.18	)
Net loss per common share - Diluted	$	(0.06	)	$	(0.18	)
Weighted average shares of common stock outstanding
Basic		9,055,815			8,946,174
Diluted		9,055,815			8,946,174

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

1

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Dollars in Thousands)

(Unaudited)

	Three months ended
	March 31,
	2023			2022
Net loss	$	(512	)	$	(1,615	)
Other comprehensive (loss) income, net of tax
Unrealized (loss) gain on derivatives		(146	)		135
Comprehensive loss	$	(658	)	$	(1,480	)

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

2

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Per Share Information)

	March 31,			December 31,
	2023			2022
	(Unaudited)
ASSETS
Current assets:
Cash	$	1,510		$	2,019
Accounts receivable (less expected credit losses of $201 in each period)		34,192			30,960
Inventory, net		149,442			154,193
Other current assets		10,380			10,392
Total current assets		195,524			197,564
Property, plant and equipment, net		161,599			163,490
Deferred income tax assets		215			143
Other long-term assets		1,928			2,137
Total assets	$	359,266		$	363,334
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	32,888		$	38,179
Accrued employment costs		3,439			2,790
Current portion of long-term debt		3,370			3,419
Other current liabilities		991			1,112
Total current liabilities		40,688			45,500
Long-term debt, net		96,069			95,015
Other long-term liabilities, net		3,053			3,066
Total liabilities		139,810			143,581
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; 9,060,668 and 9,049,748 shares issued, respectively		9			9
Additional paid-in capital		97,363			97,002
Accumulated other comprehensive (loss) income		(13	)		133
Retained earnings		122,097			122,609
Total stockholders’ equity		219,456			219,753
Total liabilities and stockholders’ equity	$	359,266		$	363,334

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

3

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(Dollars in Thousands)

(Unaudited)

	Three months ended
	March 31,
	2023			2022
Operating Activities:
Net loss	$	(512	)	$	(1,615	)
Adjustments for non-cash items:
Depreciation and amortization		5,032			4,871
Deferred income tax		(68	)		(122	)
Share-based compensation expense		361			409
Changes in assets and liabilities:
Accounts receivable, net		(3,232	)		(7,155	)
Inventory, net		4,320			(7,365	)
Accounts payable		(3,102	)		7,872
Accrued employment costs		649			(1,695	)
Income taxes		36			23
Other		21			798
Net cash provided by (used in) operating activities		3,505			(3,979	)
Investing Activity:
Capital expenditures		(4,499	)		(2,520	)
Net cash used in investing activity		(4,499	)		(2,520	)
Financing Activities:
Borrowings under revolving credit facility		64,797			28,799
Payments on revolving credit facility		(63,377	)		(21,535	)
Payments on term loan facility and finance leases		(935	)		(604	)
Net cash provided by financing activities		485			6,660
Net (decrease) increase in cash		(509	)		161
Cash at beginning of period		2,019			118
Cash at end of period	$	1,510		$	279

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

4

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in Thousands)

(Unaudited)

										Accumulated
	Common				Additional					other
	shares		Common		paid-in		Retained			comprehensive
	outstanding		stock		capital		earnings			(loss) income
For the three months ended March 31, 2023
Balance at December 31, 2022		9,049,748	$	9	$	97,002	$	122,609		$	133
Share-based compensation		10,920		-		361		-			-
Net loss on derivative instruments		-		-		-		-			(146	)
Net loss		-		-		-		(512	)		-
Balance at March 31, 2023		9,060,668	$	9	$	97,363	$	122,097		$	(13	)
For the three months ended March 31, 2022
Balance at December 31, 2021		8,938,091	$	9	$	95,590	$	130,682		$	40
Share-based compensation		19,362		-		409		-			-
Net gain on derivative instruments		-		-		-		-			135
Net loss		-		-		-		(1,615	)		-
Balance at March 31, 2022		8,957,453	$	9	$	95,999	$	129,067		$	175

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

5

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Nature of Business and Basis of Presentation

Universal Stainless & Alloy Products, Inc., and its wholly-owned subsidiaries (collectively, “Universal,” “we,” “us,” “our,” or the “Company”), 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, original equipment manufacturers and wire redrawers. 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 manufacturing industries. We also perform conversion services on materials supplied by customers.

The accompanying unaudited consolidated statements include the accounts of Universal Stainless & Alloy Products, Inc. and its subsidiaries and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reports and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in consolidated financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to such regulations. Although the December 31, 2022 consolidated balance sheet data was derived from the audited consolidated financial statements, it does not include all disclosures required by U.S. GAAP. However, we believe that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our most recently audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission. In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary to present a fair presentation of the consolidated financial statements for the periods shown. Interim results are not necessarily indicative of the operating results for the full fiscal year or any future period. The preparation of these consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Actual results may differ from our estimates. The consolidated financial statements include our accounts and the accounts of our wholly–owned subsidiaries. We also consolidate, regardless of our ownership percentage, variable interest entities (each a “VIE”) for which we are deemed to have a controlling financial interest. All intercompany transactions and balances have been eliminated.

When we obtain an economic interest in an entity, we evaluate the entity to determine if the entity is a VIE, and if we are deemed to be a primary beneficiary. As a part of our evaluation, we are required to qualitatively assess if we are the primary beneficiary of the VIE based on whether we hold the power to direct those matters that most significantly impacted the activities of the VIE and the obligation to absorb losses or the right to receive the benefits of the VIE that could potentially be significant. Refer to Note 7, New Markets Tax Credit Financing Transaction, for a description of the VIEs included in our consolidated financial statements.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board added a new impairment model that is based on expected losses rather than incurred losses, known as the current expected credit loss (CECL) model. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses applicable to trade receivables, other receivables, contract assets and most debt instruments. The model does not have a minimum threshold for recognition of impairment losses. The Company adopted this guidance as of January 1, 2023. The adoption did not have a material impact on the consolidated financial statements.

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) Recently issued ASUs not listed were assessed and were determined not applicable, or are expected to have minimal impact on our consolidated financial statements.

6

Note 2: Net loss per Common Share

The following table sets forth the computation of basic and diluted net loss per common share:

	Three months ended
	March 31,
(dollars in thousands, except per share amounts)	2023			2022
Numerator:
Net loss	$	(512	)	$	(1,615	)
Denominator:
Weighted average number of shares of common stock outstanding		9,055,815			8,946,174
Weighted average effect of dilutive share-based compensation		-			-
Diluted weighted average number of shares of common stock outstanding		9,055,815			8,946,174
Net loss per common share:
Net loss per common share - Basic	$	(0.06	)	$	(0.18	)
Net loss per common share - Diluted	$	(0.06	)	$	(0.18	)

We had options to purchase 694,875 and 748,775 shares of common stock outstanding at a weighted average price of $18.08 and $19.01 for the three months ended March 31, 2023 and 2022, respectively, which were excluded in the computation of diluted net loss per common share. These options were not included in the computation of diluted net loss per common share because their exercise prices were greater than the average market price of our common stock.

In addition, the calculation of diluted net loss per share for the three months ended March 31, 2023 and 2022, respectively, excluded 20,508 and 28,398 shares for the assumed exercise of stock options as a result of being in a net loss position.

Note 3: 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 and not yet billed of $1.8 million and $1.6 million are included in Accounts Receivable in the Consolidated Balance Sheets at March 31, 2023 and December 31, 2022, respectively.

The Company has elected the following practical expedients allowed under Accounting Standard Codification (“ASC”) 606:

•Shipping costs are not considered to be separate performance obligations.

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

7

The following summarizes our revenue by melt type:

	Three months ended March 31,
	2023		2022
Net sales:
Specialty alloys	$	47,549		38,220
Premium alloys (A)		17,656		8,933
Conversion services and other sales		660		409
Total net sales	$	65,865		47,562

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

Note 4: Inventory

Our raw material and starting stock inventory is primarily comprised of ferrous and non-ferrous scrap metal and alloys such as nickel, chrome, molybdenum, cobalt, vanadium and copper. Our semi-finished and finished steel products are work-in-process in various stages of production or are finished products waiting to be shipped to our customers.

Operating materials are primarily comprised of forge dies and production molds and rolls that are consumed over their useful lives. During the three months ended March 31, 2023 and 2022, we amortized these operating materials in the amount of $0.4 million for both periods. 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.

Inventory is stated at the lower of cost or net realizable value with cost principally determined on a weighted average cost method. Such costs include the acquisition cost for raw materials and supplies, direct labor and applied manufacturing overhead. We assess market based upon actual and estimated transactions at or around the balance sheet date. Typically, 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.

Inventories consisted of the following:

	March 31,			December 31,
(in thousands)	2023			2022
Raw materials and starting stock	$	15,769		$	14,890
Semi-finished and finished steel products		122,426			129,534
Operating materials		14,588			13,220
Gross inventory		152,783			157,644
Inventory reserves		(3,341	)		(3,451	)
Total inventory, net	$	149,442		$	154,193

Note 5: Leases

The Company periodically enters into leases in its normal course of business. At March 31, 2023 and December 31, 2022, the leases in effect were primarily related to mobile equipment and other production equipment. The term of our leases is generally 72 months or less, and the leases do not have significant restrictions, covenants, or other nonstandard terms.

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 six 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.

The Company entered into one new finance lease agreement in the first quarter of 2023. As of March 31, 2023, future minimum lease payments applicable to operating and finance leases were as follows:

8

	Operating Leases		Finance Leases
2023	$	178	$	1,333
2024		170		1,757
2025		36		1,645
2026		21		1,518
2027		2		1,471
2028		-		1,091
Total minimum lease payments		407		8,813
Less amounts representing interest		(14)		(2,033)
Present value of minimum lease payments		393		6,780
Less current obligations		(229)		(961)
Total long-term lease obligations, net	$	164	$	5,819
Weighted-average remaining lease term		2.0 years		5.0 years

Right-of-use assets recorded to the consolidated balance sheet at March 31, 2023, net of accumulated amortization, were $0.4 million for operating leases and $6.8 million for finance leases. For the three months ended March 31, 2023, the amortization of finance lease assets was $0.3 million and was included in cost of products sold in the consolidated statements of operations. Right-of-use assets recorded to the consolidated balance sheet at December 31, 2022, net of accumulated amortization, were $0.5 million for operating leases and $6.7 million for finance leases.

The unamortized portion of the $5.2 million lease component of our new VAR expansion financing arrangement is included in the right-of-use asset total, while the $1.8 million sale and leaseback component of that agreement is excluded. The sale and leaseback component is accounted for as a loan secured by the related equipment, as it did not meet the criteria for sale accounting under Accounting Standards Codification section 842. The total $7.0 million original principal amount of the financing arrangement has a term of 72 months and an implicit interest rate of approximately 11.2%. The weighted average interest rate on all our financing leases is approximately 10.0%.

The Company applies 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 revolving credit facility discussed in Note 6, Long-Term Debt, 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 6: Long-Term Debt

Long-term debt consisted of the following:

	March 31,			December 31,
(in thousands)	2023			2022
Revolving credit facility	$	80,965		$	79,545
Term loan		11,249			11,786
Sale and leaseback financing liability		1,734			1,804
Finance leases		6,780			6,663
Total debt		100,728			99,798
Less: current portion of long-term debt		(3,370	)		(3,419	)
Less: deferred financing costs		(1,289	)		(1,364	)
Long-term debt, net	$	96,069		$	95,015

Credit Facility

On March 17, 2021, we entered into the Second Amended and Restated Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”), with PNC Bank, National Association, as administrative agent and co-collateral agent (the “Agent”), Bank of America, N.A., as co-collateral agent (“Bank of America”), the Lenders (as defined in the Credit Agreement) party thereto from time to time and PNC Capital Markets LLC, as sole lead arranger and sole bookrunner. The Credit Agreement provides for a senior secured revolving credit facility in an aggregate principal amount not to exceed $105.0 million (“Revolving Credit Facility”) and a senior secured term loan facility (“Term Loan”) in the amount of $15.0 million (together with the Revolving Credit Facility, the “Facilities”).

At March 31, 2023, we had total Credit Agreement related net deferred financing costs of approximately $0.7 million. For the three months ended March 31, 2023 and 2022, we amortized $0.1 million of those deferred financing costs.

The Company was in compliance with all the applicable financial covenants throughout the term of the Credit Agreement and at March 31, 2023.

9

The Facilities, which expire on March 17, 2026 (the ‘Expiration Date”), are collateralized by a first lien on 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. The Company must maintain undrawn availability under the Credit Agreement of at least $11.0 million. That requirement can be overcome if the Company maintains a fixed charge coverage ratio of not less than 1.10 to 1.0 measured on a rolling two-quarter basis and calculated in accordance with the terms of the Credit Agreement.

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 pays quarterly installments of the principal of approximately $0.5 million, plus accrued and unpaid interest, on the first day of each fiscal quarter beginning after June 30, 2021. 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, bear interest at either a base rate or the current LIBOR (prior to September 30, 2022) or SOFR (after September 30, 2022) rate plus a spread, 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 SOFR based rate for the majority of the debt outstanding under the Facilities for the three months ended March 31, 2023, which approximated 7.0% to 7.5% for commitments under our Revolving Credit Facility and was 7.85% for the Term Loan.

Note 7: New Markets Tax Credit Financing Transaction

On March 9, 2018, the Company entered into a qualified New Markets Tax Credit (“NMTC”) 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 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 NMTC financing program, 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 March 31, 2023 and December 31, 2022, 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.

10

Note 8: Fair Value Measurement

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 March 31, 2023 and December 31, 2022 due to their short-term maturities (Level 1). The fair value of the Term Loan and Revolving Credit Facility at March 31, 2023 and December 31, 2022 approximated the carrying amount as the interest rate is based upon floating short-term interest rates (Level 2).

Note 9: 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 on 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.

Note 10: Income Taxes

Management estimates the annual effective income tax rate quarterly based on forecasted full year results. Items unrelated to current year ordinary income are recognized entirely in the period identified as a discrete item of tax. The quarterly income tax provision includes tax on ordinary income provided at the most recent estimated annual effective tax rate (“ETR”), increased or decreased for the tax effect of discrete items.

For the three months ended March 31, 2023 and 2022, our estimated annual effective tax rates applied to ordinary income were 12.9% and 10.6%, respectively. In both periods, the projected annual ETR is less than the federal statutory rate of 21.0% due to the impact of research and development credits. Discrete items during the three months ended March 31, 2023 and 2022 were approximately $0.1 million of expense related to share-based compensation items, and the ETR for each period was 5.3% and 6.0%, respectively.

Note 11: 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 U.S. Dollar, the Company entered into foreign exchange forward contracts to mitigate the foreign currency risk related to a portion of these sales, and has designated these contracts as cash flow hedges.

The notional value of contracts was $4.6 million and $4.3 million at March 31, 2023 and December 31, 2022, respectively.

The Company recorded an unrealized loss in accumulated other comprehensive income of less than $0.1 million at March 31, 2023 related to the contracts, compared to an unrealized gain of less than $0.1 million at December 31, 2022.

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 interest rate swap was designated as a cash flow hedge. The notional amount of the contract at its inception was $16 million and reduces throughout the term. The notional amount of the contract was $5 million at March 31, 2023 and $10 million at December 31, 2022. The Company recorded an unrealized gain in accumulated other comprehensive income of $0.1 million at March 31, 2023 and December 31, 2022 related to the contract.

11

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains or incorporates forward-looking statements within the meaning of the Private Securities Reform Act of 1995, which involves risks and uncertainties. The following information should be read in conjunction with the unaudited consolidated financial information and the notes thereto included in this Quarterly Report on Form 10-Q. You should not place undue reliance on these forward-looking statements. Actual events or results may differ materially due to competitive factors and other factors referred to in Part 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022, our other filings with the Securities and Exchange Commission and elsewhere in this Quarterly Report. These factors may cause our actual results to differ materially from any forward-looking statement. These forward-looking statements are based on current expectations, estimates, forecasts, and projections about the industry and markets in which we operate, and management’s beliefs and assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “project,” or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict.

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 material supplied by our customers.

Sales in the first quarter of 2023 were $65.9 million, which is the highest level since the second quarter of 2019 and represents a 17.2% increase from the fourth quarter of 2022. During this period, sales to our largest end market, aerospace, increased $8.9 million, or 22.2%. Sales also increased in the power generation and heavy equipment end markets, while sales decreased sequentially in the oil and gas and general industrial end markets.

Total company backlog at the end of the first quarter, before surcharges applied at the time of shipment, was $366 million, an increase of $78.1 million, or 27.1% compared to the end of 2022. Despite our increase in sales, our backlog increased to another new record in the current quarter due to strong order entry resulting from sustained high demand for our products.

Sales of premium alloy products, which we define as all vacuum induction melt products, rose to $17.7 million in the first quarter and comprised 26.8% of total sales. Our premium alloy products are primarily sold to the aerospace end market.

Our gross margin for the first quarter was $7.7 million, or 11.7% of net sales, and increase from 4.3% of sales in the fourth quarter of 2022. This reflects higher base prices and higher surcharges during the quarter, while inflationary impacts in our costs have started to decelerate. Additionally, lingering negative impacts of the previously reported liquid metal spill that occurred in April 2022 have eased as we have now had several quarters of strong operating activity after returning to full operation in our Bridgeville melt facility.

The higher gross margin resulted in operating income of $1.4 million for the quarter, but higher market interest rates resulted in interest expense of $2.0 million and a net loss of $0.5 million for the period.

COVID-19 Pandemic

COVID-19 related challenges negatively impacted the efficiency of our operations from 2020 through the first quarter of 2023. These challenges have impacted the Company’s backlog, end markets, overall operations, cash flows and financial results, and may continue into the future. The ultimate extent of the effects of COVID-19 on the Company, and the end markets we serve, remains uncertain and will continue to depend on future developments.

12

Results of Operations

Three months ended March 31, 2023 as compared to the three months ended March 31, 2022:

	Three months ended March 31,
(in thousands, except shipped ton information)	2023							2022
	Amount			Percentage of net sales				Amount			Percentage of net sales				Dollar variance			Percentage variance
Net sales	$	65,865			100.0		%	$	47,562			100.0		%	$	18,303			38.5		%
Cost of products sold		58,141			88.3				43,509			91.5				14,632			33.6
Gross margin		7,724			11.7				4,053			8.5				3,671			90.6
Selling, general and administrative expenses		6,275			9.5				5,049			10.6				1,226			24.3
Operating income (loss)		1,449			2.2				(996	)		(2.1	)			2,445			(245.5	)
Interest expense		1,968			3.0				653			1.4				1,315			201.4
Deferred financing amortization		64			0.1				56			0.1				8			14.3
Other (income) expense, net		(42	)		(0.1	)			13			-				(55	)	NM
Loss before income taxes		(541	)		(0.8	)			(1,718	)		(3.6	)			1,177			(68.5	)
Income tax benefit		(29	)		-				(103	)		(0.2	)			74			(71.8	)
Net loss	$	(512	)		(0.8	)	%	$	(1,615	)		(3.4	)	%	$	1,103			(68.3	)

Market Segment Information
	Three months ended March 31,
(in thousands)	2023					2022
	Amount		Percentage of net sales			Amount		Percentage of net sales			Dollar variance			Percentage variance
Net sales:
Service centers	$	49,323		74.9	%	$	33,253		69.9	%	$	16,070			48.3		%
Original equipment manufacturers		4,208		6.4			4,704		9.9			(496	)		(10.5	)
Rerollers		6,645		10.1			4,508		9.5			2,137			47.4
Forgers		5,029		7.6			4,688		9.9			341			7.3
Conversion services and other		660		1.0			409		0.8			251			61.4
Total net sales	$	65,865		100.0	%	$	47,562		100.0	%	$	18,303			38.5		%

13

Melt Type Information
	Three months ended March 31,
(in thousands)	2023					2022
	Amount		Percentage of net sales				Amount		Percentage of net sales			Dollar variance		Percentage variance
Net sales:
Specialty alloys	$	47,549		72.2	%	$		38,220		80.4	%	$	9,329		24.4	%
Premium alloys (A)		17,656		26.8				8,933		18.8			8,723		97.6
Conversion services and other		660		1.0				409		0.8			251		61.4
Total net sales	$	65,865		100.0	%	$		47,562		100.0	%	$	18,303		38.5	%

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

The majority of our products are sold to service centers rather than the ultimate end market customers. The end market information in this Quarterly 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
	Three months ended March 31,
(in thousands)	2023					2022
	Amount		Percentage of net sales			Amount		Percentage of net sales			Dollar variance			Percentage variance
Net sales:
Aerospace	$	48,958		74.3	%	$	30,102		63.3	%	$	18,856			62.6		%
Power generation		1,086		1.7			1,297		2.7			(211	)		(16.3	)
Oil & gas		4,752		7.2			4,352		9.2			400			9.2
Heavy equipment		6,931		10.5			8,074		17.0			(1,143	)		(14.2	)
General industrial, conversion services and other		4,138		6.3			3,737		7.8			401			10.7
Total net sales	$	65,865		100.0	%	$	47,562		100.0	%	$	18,303			38.5		%

Net sales:

Net sales for the three months ended March 31, 2023 increased $18.3 million, or 38.5%, compared to the same period in the prior year. This reflects both higher shipment volume and a strong pricing environment. The increase in demand and selling price is driven by our aerospace end market.

Gross margin:

As a percent of sales, our gross margin for the three months ended March 31, 2023 was 11.7% compared to 8.5% for the three months ended March 31, 2022. The increase includes higher average selling prices and the benefit of higher shipment volumes, partly offset by inflationary pressures on substantially all of our production inputs throughout 2022 and the first quarter of 2023.

Selling, general and administrative expenses:

Our selling, general and administrative (“SG&A”) expenses consist primarily of employee costs, which include salaries, payroll taxes and benefit related costs, insurance costs and professional services. SG&A expenses increased by $1.2 million for the three months ended March 31, 2023 compared to the same period in the prior year.

Interest expense and other financing costs:

Interest expense totaled approximately $2.0 million in the first quarter of 2023 compared to $0.7 million in the first quarter of 2022. The increase reflects higher average debt levels and the impact of higher variable interest rates paid on our revolving credit facility debt.

Income tax benefit:

Management estimates the annual effective income tax rate quarterly based on forecasted full year results. Items unrelated to current year ordinary income are recognized entirely in the period identified as a discrete item of tax. The quarterly income tax provision includes tax on ordinary income provided at the most recent estimated annual effective tax rate (“ETR”), increased or decreased for the tax effect of discrete items.

For the three months ended March 31, 2023 and 2022, our estimated annual effective tax rates applied to ordinary income were 12.9% and 10.6%, respectively. In both periods, the projected annual ETR is less than the federal statutory rate of 21.0% due to the impact of research and development credits. Discrete items during the three months ended March 31, 2023 and 2022 were approximately $0.1 million of expense related to share-based compensation items, and the ETR for each period was 5.3% and 6.0%, respectively.

14

Net loss:

For the three months ended March 31, 2023, the Company recorded a net loss of $0.5 million, or $0.06 per diluted share, compared to net loss of $1.6 million, or $0.18 per diluted share, for the three months ended March 31, 2022.

Liquidity and Capital Resources

Historically, we have financed our operations through cash provided by operating activities and borrowings on our credit facilities. At March 31, 2023, we maintained approximately $24 million of remaining availability under our revolving credit facility.

We believe that our cash flows from continuing operations, as well as available borrowings under our credit facility are adequate to satisfy our working capital, capital expenditure requirements, and other contractual obligations for the foreseeable future, including at least the next 12 months.

Net cash provided by (used in) operating activities:

During the three months ended March 31, 2023, our operating activities generated $3.5 million of cash. Our net loss, after adjustments for non-cash expenses, generated $4.8 million. We used $2.1 million of cash on our managed working capital, which we define as net accounts receivable, plus inventory, minus accounts payable, minus other current liabilities. Accounts receivable increased $3.2 million and inventory decreased $4.3 million on higher sales. Accounts payable decreased $3.1 million due to the timing of vendor payments. We also generated $0.7 million of cash from our other assets and liabilities.

During the three months ended March 31, 2022, net cash of $4.0 million was used in operating activities. Our net loss, after adjustments for non-cash expenses, generated $3.5 million. We used $5.9 million of cash from managed working capital, which we define as net accounts receivable, plus inventory, minus accounts payable, minus other current liabilities. Accounts receivable increased $7.2 million due to higher sales. Inventory also grew in support of our record backlog and used $7.4 million in cash. An increase in accounts payable provided $7.9 million in cash, partially offsetting the increased inventory and accounts receivable. We also used $0.9 million of cash from other assets and liabilities.

In February 2022, the Company entered into an agreement with the Department of Transportation (“DOT”) under the Aviation Manufacturing Jobs Protection (“AMJP”) Program for a grant of up to $3.6 million, and received the first installment of $1.8 million. The Company expects to receive additional funds from the DOT after upon final confirmation from the DOT of the Company's compliance with the terms of the agreement. The additional amount we will receive was conditioned upon the Company committing to not furlough or lay off a defined group of employees during the six-month period of performance between February 2022 and August 2022. The total estimated grant benefit was recognized over the six-month performance period as a reduction to cost of sales. The $1.8 million portion of the grant that is earned but not yet received is recorded within Other current assets on the Consolidated Balance Sheet as of March 31, 2023.

Net cash used in investing activities:

During the three months ended March 31, 2023, we used $4.5 million of cash for capital expenditures, compared to $2.5 million for the same period in the prior year. Full year 2023 capital spending is expected to approximate $16 million to $18 million.

Net cash provided by financing activities:

Net cash provided by financing activities was $0.5 million for the three months ended March 31, 2023, compared to $6.7 million for the same period in the prior year. The decrease in financing cash inflows was primarily due to stronger operating cash flow, driven by our higher gross margin and lower investments in working capital.

Raw materials

The cost of raw materials represents approximately 40% to 50% of the cost of products sold in the first three months of 2023 and 2022. The major raw materials used in our operations include nickel, molybdenum, vanadium, chrome, iron and carbon scrap. The average price of substantially all our major raw materials, including iron, nickel, molybdenum, vanadium, and chrome, increased in 2022 compared with 2021 and remain at elevated levels compared to historical prices through the first three months of 2023.

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 March 17, 2021, we entered into the Second Amended and Restated Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”), with PNC Bank, National Association, as administrative agent and co-collateral agent (the “Agent”), Bank of America, N.A., as co-collateral agent (“Bank of America”), the Lenders (as defined in the Credit Agreement) party thereto from time to time and PNC Capital Markets LLC, as sole lead arranger and sole bookrunner. The Credit Agreement provides for a senior secured revolving credit facility in an aggregate principal amount not to exceed $105.0 million (“Revolving Credit Facility”) and a senior secured term loan facility (“Term Loan”) in the amount of $15.0 million (together with the Revolving Credit Facility, the “Facilities”).

At March 31, 2023, we had total Credit Agreement related net deferred financing costs of approximately $1.3 million. For the three months ended March 31, 2023, we amortized $0.1 million of those deferred financing costs.

The Company was in compliance with all the applicable financial covenants throughout the term of the Credit Agreement and at March 31, 2023.

The Facilities, which expire on March 17, 2026 (the ‘Expiration Date”), are collateralized by a first lien on 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.

15

Availability under the Credit Agreement is based on eligible accounts receivable and inventory. The Company must maintain undrawn availability under the Credit Agreement of at least $11.0 million. That requirement can be overcome if the Company maintains a fixed charge coverage ratio of not less than 1.10 to 1.0 measured on a rolling two-quarter basis and calculated in accordance with the terms of the Credit Agreement.

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 pays quarterly installments of the principal of approximately $0.5 million, plus accrued and unpaid interest, on the first day of each fiscal quarter beginning after June 30, 2021. 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, bear interest at either a base rate or the current LIBOR (prior to September 30, 2022) or SOFR (after September 30, 2022) rate plus a spread, 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 SOFR based rate for the majority of the debt outstanding under the Facilities for the three months ended March 31, 2023, which approximated 7.0% to 7.5% for commitments under our Revolving Credit Facility and was 7.85% for the Term Loan.

Leases

The Company periodically enters into leases in its normal course of business. At March 31, 2023, the leases in effect were primarily related to mobile equipment and other production equipment. The term of our leases is generally 72 months or less, and the leases do not have significant restrictions, covenants, or other nonstandard terms.

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 six 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.

The Company entered one new financing lease during the first quarter of 2023.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has reviewed its market risk and believes there are no significant changes from that disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, except as provided in this Form 10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Part II. Item 1A. “Risk Factors.”

Item 4. CONTROLS AND PROCEDURES

The Company’s management, including the Company’s Chairman, President and Chief Executive Officer and its Vice President and Chief Financial Officer, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chairman, President and Chief Executive Officer and its Vice President and Chief Financial Officer concluded that, as of the end of the fiscal period covered by this quarterly report, the Company’s disclosure controls and procedures are effective. During the fiscal quarter ended March 31, 2023, there were no changes in the Company’s internal control over financial reporting which have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

16

Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

There are no material changes from the legal proceedings disclosed in Item 3. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Item 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 could materially affect our business, financial conditions or future results. Those risk factors are not the only risks facing us. Additional risks and uncertainties not currently known or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. We believe that there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Not Applicable.

Item 5. OTHER INFORMATION

Not Applicable.

17

Item 6. EXHIBITS

Exhibit Number	Exhibit
1.01	Offer Letter between Universal Satinless & Alloy Products, Inc. and Christopher M. Zimmer (filted herewith).
31.1	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).
31.2	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).
32.1	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).
101	The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Loss; (iv) the Consolidated Statements of Cash Flows; the Consolidated Statements of Shareholders’ Equity; and (v) the Notes to the Consolidated Financial Statements (filed herewith).
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Exhibit 101 attachments).

18

SIGNATURES

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

Date: April 26, 2023

/s/ Dennis M. Oates

Dennis M. Oates

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Date: April 26, 2023

/s/ Steven V. DiTommaso

Steven V. DiTommaso

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

19

EX-1

Exhibit 1.01

March 24, 2023

Mr. Christopher Zimmer

502 Kingston Circle

Venetia, PA 15367

SUBJECT: EMPLOYMENT PROMOTION OFFER

Dear Mr. Zimmer:

It is with great pleasure that I am able to notify you that Universal Stainless & Alloy Products, Inc. (“the Company”) is hereby offering you a promotion in the capacity of Chief Operating Officer effective April 3, 2023.

This offer is made in conjunction with your Employment Agreement. Except as noted below, if there are any contradictory terms or ambiguity the terms of your Employment Agreement shall prevail.

This offer is made with the following provisions:

1)Annual Salary: $375,000.00 (paid in two-week increments).

2)Equity Grant: A one-time grant of 11,000 Restricted Stock Units (“RSU”) subject to the terms of the Company’s standard service RSU Agreement that will vest 100% on the fourth anniversary of the grant date. Any additional stock awards are at the discretion of the Board of Directors.

3)Employment status: Full-time, Exempt.

4)Participation in the Variable Incentive Compensation Program. Your threshold bonus is increased from 40% to 45%; your target bonus is increased from 80% to 90%; and your potential maximum bonus is increased from 120% of your base annual salary to 130%. Note the bonus is prorated based on the effective date of this promotion.

5)Car Allowance: $1,200.00 per month.

6) Vacation:

•Four weeks of vacation annually.

Exhibit 1.01

The above-mentioned items are substantially the items that are material to the internal offer with promotion but are not all-inclusive of the Universal Stainless’ benefits and do not contain all provisions. Universal Stainless’ benefit plans and providers are subject to change. Only the actual Universal Stainless Policies and Benefits Plan Documents govern the eligibility and administration of the benefits.

Please indicate your acceptance and by signing below and returning this offer letter to me.

If an acceptance of the above offer has not been made at the conclusion of five (5) days from the date of this letter, the above offer is hereby rescinded.

If you have any questions, please do not hesitate to call me at 412-257-7609.

Sincerely,

/s/ Dennis M. Oates

___________________________________

Dennis M. Oates

Chairman, President & Chief Executive Officer

I, Christopher Zimmer, hereby accept this offer of employment promotion by Universal Stainless & Alloy Products, Inc.

/s/ Christopher Zimmer

____________________________________

Signature

FILENAME Offer Letter - Zimmer (3-24-2023).docx

600 Mayer Street, Bridgeville, PA 15017 phone 412.257.7600 fax 412.257.7640 web www.univstainless.com

EX-31

Exhibit 31.1

CERTIFICATION

I, Dennis M. Oates, certify that:

1.I have reviewed this report on Form 10-Q of Universal Stainless & Alloy Products, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 26, 2023

/s/ Dennis M. Oates

Dennis M. Oates

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

EX-31

Exhibit 31.2

CERTIFICATION

I, Steven V. DiTommaso, certify that:

1.I have reviewed this report on Form 10-Q of Universal Stainless & Alloy Products, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 26, 2023

/s/ Steven V. DiTommaso

Steven V. DiTommaso

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Stainless & Alloy Products, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 26, 2023	/s/ Dennis M. Oates
	Dennis M. Oates
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)
Date: April 26, 2023	/s/ Steven V. DiTommaso
	Steven V. DiTommaso
	Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2023	Apr. 21, 2023
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Entity Registrant Name	UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
Entity Central Index Key	0000931584
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		9,060,668
Entity Shell Company	false
Entity File Number	001-39467
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	25-1724540
Entity Address, Address Line One	600 Mayer Street
Entity Address, City or Town	Bridgeville
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	15017
City Area Code	412
Local Phone Number	257-7600
Document Quarterly Report	true
Document Transition Report	false
Common Stock
Document Information [Line Items]
Trading Symbol	USAP
Title of 12(b) Security	Common Stock, par value $0.001 per share
Security Exchange Name	NASDAQ
Preferrerd Stock
Document Information [Line Items]
Title of 12(b) Security	Preferred Stock Purchase Rights
Security Exchange Name	NASDAQ
No Trading Symbol Flag	true

XML

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Statement [Abstract]
Net sales	$ 65,865	$ 47,562
Cost of products sold	58,141	43,509
Gross margin	7,724	4,053
Selling, general and administrative expenses	6,275	5,049
Operating income (loss)	1,449	(996)
Interest expense and other financing costs	2,032	709
Other (income) expense, net	(42)	13
Loss before income taxes	(541)	(1,718)
Income tax benefit	(29)	(103)
Net loss	$ (512)	$ (1,615)
Net loss per common share - Basic	$ (0.06)	$ (0.18)
Net loss per common share - Diluted	$ (0.06)	$ (0.18)
Weighted average shares of common stock outstanding
Basic	9,055,815	8,946,174
Diluted	9,055,815	8,946,174

XML

Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (512)	$ (1,615)
Other comprehensive (loss) income, net of tax
Unrealized (loss) gain on derivatives	(146)	135
Comprehensive loss	$ (658)	$ (1,480)

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash	$ 1,510	$ 2,019
Accounts receivable (less expected credit losses of $201 in each period)	34,192	30,960
Inventory, net	149,442	154,193
Other current assets	10,380	10,392
Total current assets	195,524	197,564
Property, plant and equipment, net	161,599	163,490
Deferred income tax assets	215	143
Other long-term assets	1,928	2,137
Total assets	359,266	363,334
Current liabilities:
Accounts payable	32,888	38,179
Accrued employment costs	3,439	2,790
Current portion of long-term debt	3,370	3,419
Other current liabilities	991	1,112
Total current liabilities	40,688	45,500
Long-term debt, net	96,069	95,015
Other long-term liabilities, net	3,053	3,066
Total liabilities	139,810	143,581
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; 9,060,668 and 9,049,748 shares issued, respectively	9	9
Additional paid-in capital	97,363	97,002
Accumulated other comprehensive (loss) income	(13)	133
Retained earnings	122,097	122,609
Total stockholders’ equity	219,456	219,753
Total liabilities and stockholders’ equity	$ 359,266	$ 363,334

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Statement Of Financial Position [Abstract]
Accounts receivable, less expected credit losses	$ 201	$ 201
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,980,000	1,980,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	9,060,668	9,049,748

XML

Consolidated Statements of Cash Flow - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Operating Activities:
Net loss	$ (512)	$ (1,615)
Adjustments for non-cash items:
Depreciation and amortization	5,032	4,871
Deferred income tax	(68)	(122)
Share-based compensation expense	361	409
Changes in assets and liabilities:
Accounts receivable, net	(3,232)	(7,155)
Inventory, net	4,320	(7,365)
Accounts payable	(3,102)	7,872
Accrued employment costs	649	(1,695)
Income taxes	36	23
Other	21	798
Net cash provided by (used in) operating activities	3,505	(3,979)
Investing Activity:
Capital expenditures	(4,499)	(2,520)
Net cash used in investing activity	(4,499)	(2,520)
Financing Activities:
Borrowings under revolving credit facility	64,797	28,799
Payments on revolving credit facility	(63,377)	(21,535)
Payments on term loan facility and finance leases	(935)	(604)
Net cash provided by financing activities	485	6,660
Net (decrease) increase in cash	(509)	161
Cash at beginning of period	2,019	118
Cash at end of period	$ 1,510	$ 279

XML

Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive (Loss) Income [Member]
Beginning Balance at Dec. 31, 2021		$ 9	$ 95,590	$ 130,682	$ 40
Beginning Balance (shares) at Dec. 31, 2021		8,938,091
Share-based compensation			409
Share-based compensation (shares)		19,362
Net gain (loss) on derivative instruments					135
Net loss	$ (1,615)			(1,615)
Ending Balance at Mar. 31, 2022		$ 9	95,999	129,067	175
Ending Balance (shares) at Mar. 31, 2022		8,957,453
Beginning Balance at Dec. 31, 2022	219,753	$ 9	97,002	122,609	133
Beginning Balance (shares) at Dec. 31, 2022		9,049,748
Share-based compensation			361
Share-based compensation (shares)		10,920
Net gain (loss) on derivative instruments					(146)
Net loss	(512)			(512)
Ending Balance at Mar. 31, 2023	$ 219,456	$ 9	$ 97,363	$ 122,097	$ (13)
Ending Balance (shares) at Mar. 31, 2023		9,060,668

XML

Nature of Business and Basis of Presentation

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Nature of Business and Basis of Presentation

Note 1: Nature of Business and Basis of Presentation

Universal Stainless & Alloy Products, Inc., and its wholly-owned subsidiaries (collectively, “Universal,” “we,” “us,” “our,” or the “Company”), 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, original equipment manufacturers and wire redrawers. 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 manufacturing industries. We also perform conversion services on materials supplied by customers.

The accompanying unaudited consolidated statements include the accounts of Universal Stainless & Alloy Products, Inc. and its subsidiaries and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reports and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in consolidated financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to such regulations. Although the December 31, 2022 consolidated balance sheet data was derived from the audited consolidated financial statements, it does not include all disclosures required by U.S. GAAP. However, we believe that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our most recently audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission. In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary to present a fair presentation of the consolidated financial statements for the periods shown. Interim results are not necessarily indicative of the operating results for the full fiscal year or any future period. The preparation of these consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Actual results may differ from our estimates. The consolidated financial statements include our accounts and the accounts of our wholly–owned subsidiaries. We also consolidate, regardless of our ownership percentage, variable interest entities (each a “VIE”) for which we are deemed to have a controlling financial interest. All intercompany transactions and balances have been eliminated.

When we obtain an economic interest in an entity, we evaluate the entity to determine if the entity is a VIE, and if we are deemed to be a primary beneficiary. As a part of our evaluation, we are required to qualitatively assess if we are the primary beneficiary of the VIE based on whether we hold the power to direct those matters that most significantly impacted the activities of the VIE and the obligation to absorb losses or the right to receive the benefits of the VIE that could potentially be significant. Refer to Note 7, New Markets Tax Credit Financing Transaction, for a description of the VIEs included in our consolidated financial statements.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board added a new impairment model that is based on expected losses rather than incurred losses, known as the current expected credit loss (CECL) model. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses applicable to trade receivables, other receivables, contract assets and most debt instruments. The model does not have a minimum threshold for recognition of impairment losses. The Company adopted this guidance as of January 1, 2023. The adoption did not have a material impact on the consolidated financial statements.

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) Recently issued ASUs not listed were assessed and were determined not applicable, or are expected to have minimal impact on our consolidated financial statements.

XML

Net Loss per Common Share

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Net loss per Common Share

Note 2: Net loss per Common Share

The following table sets forth the computation of basic and diluted net loss per common share:

	Three months ended
	March 31,
(dollars in thousands, except per share amounts)	2023			2022
Numerator:
Net loss	$	(512	)	$	(1,615	)
Denominator:
Weighted average number of shares of common stock outstanding		9,055,815			8,946,174
Weighted average effect of dilutive share-based compensation		-			-
Diluted weighted average number of shares of common stock outstanding		9,055,815			8,946,174
Net loss per common share:
Net loss per common share - Basic	$	(0.06	)	$	(0.18	)
Net loss per common share - Diluted	$	(0.06	)	$	(0.18	)

We had options to purchase 694,875 and 748,775 shares of common stock outstanding at a weighted average price of $18.08 and $19.01 for the three months ended March 31, 2023 and 2022, respectively, which were excluded in the computation of diluted net loss per common share. These options were not included in the computation of diluted net loss per common share because their exercise prices were greater than the average market price of our common stock.

In addition, the calculation of diluted net loss per share for the three months ended March 31, 2023 and 2022, respectively, excluded 20,508 and 28,398 shares for the assumed exercise of stock options as a result of being in a net loss position.

XML

Revenue Recognition

3 Months Ended

Mar. 31, 2023

Revenue From Contract With Customer [Abstract]

Revenue Recognition

Note 3: 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 and not yet billed of $1.8 million and $1.6 million are included in Accounts Receivable in the Consolidated Balance Sheets at March 31, 2023 and December 31, 2022, respectively.

The Company has elected the following practical expedients allowed under Accounting Standard Codification (“ASC”) 606:

•Shipping costs are not considered to be separate performance obligations.

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

The following summarizes our revenue by melt type:

	Three months ended March 31,
	2023		2022
Net sales:
Specialty alloys	$	47,549		38,220
Premium alloys (A)		17,656		8,933
Conversion services and other sales		660		409
Total net sales	$	65,865		47,562

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

XML

Inventory

3 Months Ended

Mar. 31, 2023

Inventory Disclosure [Abstract]

Inventory

Note 4: Inventory

Our raw material and starting stock inventory is primarily comprised of ferrous and non-ferrous scrap metal and alloys such as nickel, chrome, molybdenum, cobalt, vanadium and copper. Our semi-finished and finished steel products are work-in-process in various stages of production or are finished products waiting to be shipped to our customers.

Operating materials are primarily comprised of forge dies and production molds and rolls that are consumed over their useful lives. During the three months ended March 31, 2023 and 2022, we amortized these operating materials in the amount of $0.4 million for both periods. 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.

Inventory is stated at the lower of cost or net realizable value with cost principally determined on a weighted average cost method. Such costs include the acquisition cost for raw materials and supplies, direct labor and applied manufacturing overhead. We assess market based upon actual and estimated transactions at or around the balance sheet date. Typically, 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.

Inventories consisted of the following:

	March 31,			December 31,
(in thousands)	2023			2022
Raw materials and starting stock	$	15,769		$	14,890
Semi-finished and finished steel products		122,426			129,534
Operating materials		14,588			13,220
Gross inventory		152,783			157,644
Inventory reserves		(3,341	)		(3,451	)
Total inventory, net	$	149,442		$	154,193

XML

Leases

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Leases

Note 5: Leases

The Company periodically enters into leases in its normal course of business. At March 31, 2023 and December 31, 2022, the leases in effect were primarily related to mobile equipment and other production equipment. The term of our leases is generally 72 months or less, and the leases do not have significant restrictions, covenants, or other nonstandard terms.

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 six 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.

The Company entered into one new finance lease agreement in the first quarter of 2023. As of March 31, 2023, future minimum lease payments applicable to operating and finance leases were as follows:

	Operating Leases		Finance Leases
2023	$	178	$	1,333
2024		170		1,757
2025		36		1,645
2026		21		1,518
2027		2		1,471
2028		-		1,091
Total minimum lease payments		407		8,813
Less amounts representing interest		(14)		(2,033)
Present value of minimum lease payments		393		6,780
Less current obligations		(229)		(961)
Total long-term lease obligations, net	$	164	$	5,819
Weighted-average remaining lease term		2.0 years		5.0 years

Right-of-use assets recorded to the consolidated balance sheet at March 31, 2023, net of accumulated amortization, were $0.4 million for operating leases and $6.8 million for finance leases. For the three months ended March 31, 2023, the amortization of finance lease assets was $0.3 million and was included in cost of products sold in the consolidated statements of operations. Right-of-use assets recorded to the consolidated balance sheet at December 31, 2022, net of accumulated amortization, were $0.5 million for operating leases and $6.7 million for finance leases.

The unamortized portion of the $5.2 million lease component of our new VAR expansion financing arrangement is included in the right-of-use asset total, while the $1.8 million sale and leaseback component of that agreement is excluded. The sale and leaseback component is accounted for as a loan secured by the related equipment, as it did not meet the criteria for sale accounting under Accounting Standards Codification section 842. The total $7.0 million original principal amount of the financing arrangement has a term of 72 months and an implicit interest rate of approximately 11.2%. The weighted average interest rate on all our financing leases is approximately 10.0%.

The Company applies 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 revolving credit facility discussed in Note 6, Long-Term Debt, 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.

XML

Long-Term Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Long-Term Debt

Note 6: Long-Term Debt

Long-term debt consisted of the following:

	March 31,			December 31,
(in thousands)	2023			2022
Revolving credit facility	$	80,965		$	79,545
Term loan		11,249			11,786
Sale and leaseback financing liability		1,734			1,804
Finance leases		6,780			6,663
Total debt		100,728			99,798
Less: current portion of long-term debt		(3,370	)		(3,419	)
Less: deferred financing costs		(1,289	)		(1,364	)
Long-term debt, net	$	96,069		$	95,015

Credit Facility

On March 17, 2021, we entered into the Second Amended and Restated Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”), with PNC Bank, National Association, as administrative agent and co-collateral agent (the “Agent”), Bank of America, N.A., as co-collateral agent (“Bank of America”), the Lenders (as defined in the Credit Agreement) party thereto from time to time and PNC Capital Markets LLC, as sole lead arranger and sole bookrunner. The Credit Agreement provides for a senior secured revolving credit facility in an aggregate principal amount not to exceed $105.0 million (“Revolving Credit Facility”) and a senior secured term loan facility (“Term Loan”) in the amount of $15.0 million (together with the Revolving Credit Facility, the “Facilities”).

At March 31, 2023, we had total Credit Agreement related net deferred financing costs of approximately $0.7 million. For the three months ended March 31, 2023 and 2022, we amortized $0.1 million of those deferred financing costs.

The Company was in compliance with all the applicable financial covenants throughout the term of the Credit Agreement and at March 31, 2023.

The Facilities, which expire on March 17, 2026 (the ‘Expiration Date”), are collateralized by a first lien on 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. The Company must maintain undrawn availability under the Credit Agreement of at least $11.0 million. That requirement can be overcome if the Company maintains a fixed charge coverage ratio of not less than 1.10 to 1.0 measured on a rolling two-quarter basis and calculated in accordance with the terms of the Credit Agreement.

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 pays quarterly installments of the principal of approximately $0.5 million, plus accrued and unpaid interest, on the first day of each fiscal quarter beginning after June 30, 2021. 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, bear interest at either a base rate or the current LIBOR (prior to September 30, 2022) or SOFR (after September 30, 2022) rate plus a spread, 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 SOFR based rate for the majority of the debt outstanding under the Facilities for the three months ended March 31, 2023, which approximated 7.0% to 7.5% for commitments under our Revolving Credit Facility and was 7.85% for the Term Loan.

XML

New Markets Tax Credit Financing Transaction

3 Months Ended

Mar. 31, 2023

New Markets Tax Credit Financing Transaction Disclosure [Abstract]

New Markets Tax Credit Financing Transaction

Note 7: New Markets Tax Credit Financing Transaction

On March 9, 2018, the Company entered into a qualified New Markets Tax Credit (“NMTC”) 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 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 NMTC financing program, 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 March 31, 2023 and December 31, 2022, 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.

XML

Fair Value Measurement

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurement

Note 8: Fair Value Measurement

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 March 31, 2023 and December 31, 2022 due to their short-term maturities (Level 1). The fair value of the Term Loan and Revolving Credit Facility at March 31, 2023 and December 31, 2022 approximated the carrying amount as the interest rate is based upon floating short-term interest rates (Level 2).

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 9: 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 on 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.

XML

Income Taxes

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 10: Income Taxes

Management estimates the annual effective income tax rate quarterly based on forecasted full year results. Items unrelated to current year ordinary income are recognized entirely in the period identified as a discrete item of tax. The quarterly income tax provision includes tax on ordinary income provided at the most recent estimated annual effective tax rate (“ETR”), increased or decreased for the tax effect of discrete items.

For the three months ended March 31, 2023 and 2022, our estimated annual effective tax rates applied to ordinary income were 12.9% and 10.6%, respectively. In both periods, the projected annual ETR is less than the federal statutory rate of 21.0% due to the impact of research and development credits. Discrete items during the three months ended March 31, 2023 and 2022 were approximately $0.1 million of expense related to share-based compensation items, and the ETR for each period was 5.3% and 6.0%, respectively.

XML

Derivatives and Hedging

3 Months Ended

Mar. 31, 2023

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

Note 11: 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 U.S. Dollar, the Company entered into foreign exchange forward contracts to mitigate the foreign currency risk related to a portion of these sales, and has designated these contracts as cash flow hedges.

The notional value of contracts was $4.6 million and $4.3 million at March 31, 2023 and December 31, 2022, respectively.

The Company recorded an unrealized loss in accumulated other comprehensive income of less than $0.1 million at March 31, 2023 related to the contracts, compared to an unrealized gain of less than $0.1 million at December 31, 2022.

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 interest rate swap was designated as a cash flow hedge. The notional amount of the contract at its inception was $16 million and reduces throughout the term. The notional amount of the contract was $5 million at March 31, 2023 and $10 million at December 31, 2022. The Company recorded an unrealized gain in accumulated other comprehensive income of $0.1 million at March 31, 2023 and December 31, 2022 related to the contract.

XML

Nature of Business and Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited consolidated statements include the accounts of Universal Stainless & Alloy Products, Inc. and its subsidiaries and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reports and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in consolidated financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to such regulations. Although the December 31, 2022 consolidated balance sheet data was derived from the audited consolidated financial statements, it does not include all disclosures required by U.S. GAAP. However, we believe that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our most recently audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission. In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary to present a fair presentation of the consolidated financial statements for the periods shown. Interim results are not necessarily indicative of the operating results for the full fiscal year or any future period. The preparation of these consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Actual results may differ from our estimates. The consolidated financial statements include our accounts and the accounts of our wholly–owned subsidiaries. We also consolidate, regardless of our ownership percentage, variable interest entities (each a “VIE”) for which we are deemed to have a controlling financial interest. All intercompany transactions and balances have been eliminated.

When we obtain an economic interest in an entity, we evaluate the entity to determine if the entity is a VIE, and if we are deemed to be a primary beneficiary. As a part of our evaluation, we are required to qualitatively assess if we are the primary beneficiary of the VIE based on whether we hold the power to direct those matters that most significantly impacted the activities of the VIE and the obligation to absorb losses or the right to receive the benefits of the VIE that could potentially be significant. Refer to Note 7, New Markets Tax Credit Financing Transaction, for a description of the VIEs included in our consolidated financial statements.

New Accounting Pronouncement

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board added a new impairment model that is based on expected losses rather than incurred losses, known as the current expected credit loss (CECL) model. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses applicable to trade receivables, other receivables, contract assets and most debt instruments. The model does not have a minimum threshold for recognition of impairment losses. The Company adopted this guidance as of January 1, 2023. The adoption did not have a material impact on the consolidated financial statements.

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) Recently issued ASUs not listed were assessed and were determined not applicable, or are expected to have minimal impact on our consolidated financial statements.

XML

Revenue Recognition (Policies)

3 Months Ended

Mar. 31, 2023

Revenue From Contract With Customer [Abstract]

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.

XML

Net Loss per Common Share (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Loss per Common Share

The following table sets forth the computation of basic and diluted net loss per common share:

	Three months ended
	March 31,
(dollars in thousands, except per share amounts)	2023			2022
Numerator:
Net loss	$	(512	)	$	(1,615	)
Denominator:
Weighted average number of shares of common stock outstanding		9,055,815			8,946,174
Weighted average effect of dilutive share-based compensation		-			-
Diluted weighted average number of shares of common stock outstanding		9,055,815			8,946,174
Net loss per common share:
Net loss per common share - Basic	$	(0.06	)	$	(0.18	)
Net loss per common share - Diluted	$	(0.06	)	$	(0.18	)

XML

Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2023

Revenue From Contract With Customer [Abstract]

Summary of Revenue

The following summarizes our revenue by melt type:

	Three months ended March 31,
	2023		2022
Net sales:
Specialty alloys	$	47,549		38,220
Premium alloys (A)		17,656		8,933
Conversion services and other sales		660		409
Total net sales	$	65,865		47,562

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

XML

Inventory (Tables)

3 Months Ended

Mar. 31, 2023

Inventory Disclosure [Abstract]

Major Classes of Inventory

Inventories consisted of the following:

	March 31,			December 31,
(in thousands)	2023			2022
Raw materials and starting stock	$	15,769		$	14,890
Semi-finished and finished steel products		122,426			129,534
Operating materials		14,588			13,220
Gross inventory		152,783			157,644
Inventory reserves		(3,341	)		(3,451	)
Total inventory, net	$	149,442		$	154,193

XML

Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Future Minimum Lease Payments Applicable to Operating and Finance Leases

As of March 31, 2023, future minimum lease payments applicable to operating and finance leases were as follows:

	Operating Leases		Finance Leases
2023	$	178	$	1,333
2024		170		1,757
2025		36		1,645
2026		21		1,518
2027		2		1,471
2028		-		1,091
Total minimum lease payments		407		8,813
Less amounts representing interest		(14)		(2,033)
Present value of minimum lease payments		393		6,780
Less current obligations		(229)		(961)
Total long-term lease obligations, net	$	164	$	5,819
Weighted-average remaining lease term		2.0 years		5.0 years

XML

Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Schedule of Long-Term Debt

Long-term debt consisted of the following:

	March 31,			December 31,
(in thousands)	2023			2022
Revolving credit facility	$	80,965		$	79,545
Term loan		11,249			11,786
Sale and leaseback financing liability		1,734			1,804
Finance leases		6,780			6,663
Total debt		100,728			99,798
Less: current portion of long-term debt		(3,370	)		(3,419	)
Less: deferred financing costs		(1,289	)		(1,364	)
Long-term debt, net	$	96,069		$	95,015

XML

Nature of Business and Basis of Presentation (Narrative) (Details)	3 Months Ended
	Mar. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Change in accounting principle, accounting standards update, adopted	true
Change in accounting principle, accounting standards update, adoption date	Jan. 01, 2023
Change in accounting principle, accounting standards update, immaterial effect	true
Accounting Standards Update [Extensible Enumeration]	us-gaap:AccountingStandardsUpdate201613Member

XML

Net Loss per Common Share (Computation of Basic and Diluted Net Loss Per Common Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Numerator:
Net loss	$ (512)	$ (1,615)
Denominator:
Weighted average number of shares of common stock outstanding	9,055,815	8,946,174
Diluted weighted average number of shares of common stock outstanding	9,055,815	8,946,174
Net loss per common share:
Net loss per common share - Basic	$ (0.06)	$ (0.18)
Net loss per common share - Diluted	$ (0.06)	$ (0.18)

XML

Net Loss per Common Share (Narrative) (Details) - Stock Compensation Plan [Member] - $ / shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount	694,875	748,775
Weighted average price of anti-dilutive options outstanding	$ 18.08	$ 19.01
Exercise of stock options (shares)	20,508	28,398

XML

Revenue Recognition (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
ASU 2014-09 [Member]
Revenue Recognition [Line Items]
Revenue practical expedient remaining performance obligation [true/false]	true
Accounts Receivable [Member]
Revenue Recognition [Line Items]
Contract assets	$ 1.8	$ 1.6

XML

Revenue Recognition (Summary of Revenue) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation Of Revenue [Line Items]
Net sales	$ 65,865	$ 47,562
Specialty Alloys [Member]
Disaggregation Of Revenue [Line Items]
Net sales	47,549	38,220
Premium Alloys [Member]
Disaggregation Of Revenue [Line Items]
Net sales	17,656	8,933
Conversion Services and Other Sales [Member]
Disaggregation Of Revenue [Line Items]
Net sales	$ 660	$ 409

XML

Inventory (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Inventory Disclosure [Abstract]
Cost of goods sold, amortization of operating materials	$ 0.4	$ 0.4

XML

Inventory (Major Classes of Inventory) (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Raw materials and starting stock	$ 15,769	$ 14,890
Semi-finished and finished steel products	122,426	129,534
Operating materials	14,588	13,220
Gross inventory	152,783	157,644
Inventory reserves	(3,341)	(3,451)
Total inventory, net	$ 149,442	$ 154,193

XML

Leases (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Lessee Lease Description [Line Items]
Operating leases, right-of-use assets	$ 0.4	$ 0.5
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]	Other long-term assets	Other long-term assets
Finance leases, right-of-use assets	$ 6.8	$ 6.7
Finance Lease Right Of Use Asset Statement Of Financial Position Extensible List	Property, plant and equipment, net	Property, plant and equipment, net
Sale and leaseback component	$ 1.8
Principal amount of financing instrument	$ 7.0
Financing instrument term	72 months
Financing instrument interest rate	11.20%
Weighted average interest rate on financing leases	10.00%
Amortization of finance lease assets	$ 0.3
Lease practical expedient (true/false)	true
VAR expansion
Lessee Lease Description [Line Items]
Value of the lease agreement	$ 5.2
Maximum [Member]
Lessee Lease Description [Line Items]
Operating and finance lease, lease terms	72 months
Finance lease term applicable to depreciate right-of-use assets and lease liabilities	6 years
Minimum [Member]
Lessee Lease Description [Line Items]
Finance lease term applicable to depreciate right-of-use assets and lease liabilities	3 years

XML

Leases (Future Minimum Lease Payments Applicable to Operating and Finance Leases) (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Operating Leases
2023	$ 178
2024	170
2025	36
2026	21
2027	2
Total minimum lease payments	407
Less amounts representing interest	(14)
Present value of minimum lease payments	$ 393
Operating Lease, Liability	us-gaap:OtherLiabilities
Less current obligations	$ (229)
Operating Lease, Liability, Current	Other current liabilities
Total long-term lease obligations, net	$ 164
Operating Lease, Liability, Noncurrent	Other long-term liabilities, net
Weighted-average remaining lease term	2 years
Finance Leases
2023	$ 1,333
2024	1,757
2025	1,645
2026	1,518
2027	1,471
2028	1,091
Total minimum lease payments	8,813
Less amounts representing interest	(2,033)
Present value of minimum lease payments	$ 6,780
Finance Lease, Liability	us-gaap:OtherLiabilities
Less current obligations	$ (961)
Finance Lease, Liability, Current	Current portion of long-term debt
Total long-term lease obligations, net	$ 5,819
Finance Lease, Liability, Noncurrent	Long-term debt, net
Weighted-average remaining lease term	5 years

XML

Long-Term Debt (Schedule of Long-Term Debt) (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Total debt	$ 100,728	$ 99,798
Less: current portion of long-term debt	(3,370)	(3,419)
Less: deferred financing costs	(1,289)	(1,364)
Long-term debt, net	96,069	95,015
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Total debt	80,965	79,545
Term Loan [Member]
Debt Instrument [Line Items]
Total debt	11,249	11,786
Sale And Leaseback Financing Liability [Member]
Debt Instrument [Line Items]
Total debt	1,734	1,804
Finance Leases [Member]
Debt Instrument [Line Items]
Total debt	$ 6,780	$ 6,663

XML

Long-Term Debt (Credit Facility) (Narrative) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Mar. 17, 2021
Line of Credit Facility [Line Items]
Minimum secured borrowing capacity	$ 11,000,000.0
Minimum fixed charge coverage ratio	110.00%
Net deferred financing fees	$ 1,289,000		$ 1,364,000
Amortization of deferred financing costs	$ 100,000	$ 100,000
PNC Bank [Member] | Amended And Restated Revolving Credit [Member]
Line of Credit Facility [Line Items]
Debt instrument, expiration date	Mar. 17, 2026
Revolving Credit Facility [Member] | PNC Bank [Member]
Line of Credit Facility [Line Items]
Maximum secured borrowing capacity				$ 105,000,000.0
Commitment fee on the daily unused portion of the Revolver	0.25%
Net deferred financing fees	$ 700,000
Revolving Credit Facility [Member] | PNC Bank [Member] | SOFR [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Debt instrument, effective interest rate	7.00%
Revolving Credit Facility [Member] | PNC Bank [Member] | SOFR [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Debt instrument, effective interest rate	7.50%
Term Loan [Member] | PNC Bank [Member]
Line of Credit Facility [Line Items]
Maximum secured borrowing capacity				$ 15,000,000.0
Debt Instrument, Frequency of Periodic Payment	quarterly
Quarterly term loan payments	$ 500,000
Debt instrument, effective interest rate	7.85%

XML

New Markets Tax Credit Financing Transaction (Narrative) (Details) - USD ($) $ in Thousands		3 Months Ended
	Mar. 09, 2018	Mar. 31, 2023	Dec. 31, 2022
New Markets Tax Credit Financing Transaction [Line Items]
New market tax credits recapture percentage	100.00%
New market tax credits period of recapture	7 years
Other long-term liabilities		$ 3,053	$ 3,066
Gain (Loss) on Sale of Derivatives		2,800
Deferred financing costs		1,289	1,364
New Markets Tax Credit (NMTC) Program [Member]
New Markets Tax Credit Financing Transaction [Line Items]
Aggregate principal amount of leverage loan loaned to investment fund	$ 6,700
Leverage loan, due date	2048-03
Other long-term liabilities		$ 2,800	$ 2,800
Deferred financing costs	$ 700
New Markets Tax Credit (NMTC) Program [Member] | PNC New Markets Investment Partners, LLC [Member]
New Markets Tax Credit Financing Transaction [Line Items]
Capital contributions to investment fund	$ 3,500

XML

Income Taxes (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Taxes [Line Items]
Estimated annual effective tax rate	12.90%	10.60%
Effective income tax rate continuing operations	5.30%	6.00%
Expense related to share-based compensation item	$ 0.1	$ 0.1
Research and Development [Member]
Income Taxes [Line Items]
Effective income tax rate, federal statutory rate	21.00%	21.00%

XML

Derivatives and Hedging (Narrative) (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022	Jan. 01, 2021
Maximum [Member]
Derivative Instruments And Hedging Activities Disclosures [Line Items]
Accumulated unrealized gain (loss) on foreign currency contracts , net of tax	$ (100,000)	$ 100,000
Derivative Instrument, Gain (Loss) Reclassified from AOCI into Income, Effective Portion, Statement of Income or Comprehensive Income [Extensible Enumeration]	Unrealized Gain Loss On Derivatives	Unrealized Gain Loss On Derivatives
Foreign Exchange Forward Contracts [Member] | Designated as Hedging Instrument [Member] | Cash Flow Hedges [Member]
Derivative Instruments And Hedging Activities Disclosures [Line Items]
Notional value of derivative contracts	$ 4,600,000	$ 4,300,000
Interest Rate Swap [Member]
Derivative Instruments And Hedging Activities Disclosures [Line Items]
Notional value of derivative contracts	5,000,000	10,000,000	$ 16,000,000
Accumulated unrealized gain (loss) on foreign currency contracts , net of tax	$ 100,000	$ 100,000