UNIVERSAL DISPLAY CORP \PA\ [OLED] Filings

10-Q 1 oled-20220331.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2022


☐	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 1-12031

UNIVERSAL DISPLAY CORPORATION

(Exact name of registrant as specified in its charter)


Pennsylvania		23-2372688
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

250 Phillips Boulevard, Ewing, New Jersey		08618
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (609) 671-0980

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	OLED	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	☐	Emerging growth company	☐
Non-accelerated filer	☐	Smaller reporting company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial account 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 May 3, 2022, the registrant had outstanding 47,214,329 shares of common stock.

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets – March 31, 2022 and December 31, 2021		1
Consolidated Statements of Income – Three months ended March 31, 2022 and 2021		2
Consolidated Statements of Comprehensive Income – Three months ended March 31, 2022 and 2021		3
Consolidated Statements of Shareholders’ Equity – Three months ended March 31, 2022 and 2021		4
Consolidated Statements of Cash Flows – Three months ended March 31, 2022 and 2021		5
Notes to Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3. Quantitative and Qualitative Disclosures About Market Risk		32
Item 4. Controls and Procedures		32

PART II – OTHER INFORMATION

Item 1. Legal Proceedings		32
Item 1A. Risk Factors		33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 3. Defaults Upon Senior Securities		33
Item 4. Mine Safety Disclosures		33
Item 5. Other Information		33
Item 6. Exhibits		34

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


	March 31, 2022			December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	357,424		$	311,993
Short-term investments		325,055			351,194
Accounts receivable		104,947			107,639
Inventory		143,240			134,160
Other current assets		29,120			20,948
Total current assets		959,786			925,934
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $97,979 and $92,461		131,879			128,832
ACQUIRED TECHNOLOGY, net of accumulated amortization of $178,782 and $173,635		44,521			49,668
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $7,918 and $7,565		9,370			9,711
GOODWILL		15,535			15,535
INVESTMENTS		164,130			168,076
DEFERRED INCOME TAXES		35,788			33,453
OTHER ASSETS		126,222			135,710
TOTAL ASSETS	$	1,487,231		$	1,466,919
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	27,064		$	14,955
Accrued expenses		26,960			45,474
Deferred revenue		111,778			120,864
Other current liabilities		12,452			6,645
Total current liabilities		178,254			187,938
DEFERRED REVENUE		31,735			36,217
RETIREMENT PLAN BENEFIT LIABILITY		67,481			66,773
OTHER LIABILITIES		78,461			76,077
Total liabilities		355,931			367,005
COMMITMENTS AND CONTINGENCIES (Note 18)
SHAREHOLDERS’ EQUITY:
Preferred Stock, par value $0.01 per share, 5,000,000 shares authorized, 200,000 shares of Series A Nonconvertible Preferred Stock issued and outstanding (liquidation value of $7.50 per share or $1,500)		2			2
Common Stock, par value $0.01 per share, 200,000,000 shares authorized, 49,099,830 and 49,065,924 shares issued, and 47,734,182 and 47,700,276 shares outstanding, at March 31, 2022 and December 31, 2021, respectively		491			491
Additional paid-in capital		658,050			658,728
Retained earnings		535,936			500,212
Accumulated other comprehensive loss		(21,895	)		(18,235	)
Treasury stock, at cost (1,365,648 shares at March 31, 2022 and December 31, 2021)		(41,284	)		(41,284	)
Total shareholders’ equity		1,131,300			1,099,914
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,487,231		$	1,466,919

The accompanying notes are an integral part of these Consolidated Financial Statements.

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except share and per share data)


	Three Months Ended March 31,
	2022			2021
REVENUE:
Material sales	$	86,691		$	79,808
Royalty and license fees		59,802			50,886
Contract research services		3,977			3,306
Total revenue		150,470			134,000
COST OF SALES		33,163			23,298
Gross margin		117,307			110,702
OPERATING EXPENSES:
Research and development		26,545			23,305
Selling, general and administrative		21,062			16,404
Amortization of acquired technology and other intangible assets		5,498			5,488
Patent costs		1,798			1,835
Royalty and license expense		154			112
Total operating expenses		55,057			47,144
OPERATING INCOME		62,250			63,558
Interest income, net		291			133
Other (loss) income, net		(34	)		59
Interest and other income, net		257			192
INCOME BEFORE INCOME TAXES		62,507			63,750
INCOME TAX EXPENSE		(12,537	)		(12,063	)
NET INCOME	$	49,970		$	51,687
NET INCOME PER COMMON SHARE:
BASIC	$	1.05		$	1.09
DILUTED	$	1.05		$	1.08
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:
BASIC		47,369,764			47,267,921
DILUTED		47,440,281			47,329,704
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.30		$	0.20

The accompanying notes are an integral part of these Consolidated Financial Statements.

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands)


	Three Months Ended March 31,
	2022			2021
NET INCOME	$	49,970		$	51,687
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:
Unrealized loss on available-for-sale securities, net of tax of $1,097 and $17, respectively		(3,935	)		(58	)
Amortization of prior service cost and actuarial loss for retirement plan included in net periodic pension costs, net of tax of $143 and $335, respectively		509			1,174
Change in cumulative foreign currency translation adjustment		(234	)		(106	)
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME		(3,660	)		1,010
COMPREHENSIVE INCOME	$	46,310		$	52,697

The accompanying notes are an integral part of these Consolidated Financial Statements.

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except for share data)


	Three Months Ended March 31, 2022
	Series A Nonconvertible									Additional						Accumulated Other								Total
	Preferred Stock				Common Stock					Paid-in			Retained			Comprehensive			Treasury Stock					Shareholders’
	Shares		Amount		Shares			Amount		Capital			Earnings			Loss			Shares		Amount			Equity
BALANCE, DECEMBER 31, 2021		200,000	$	2		49,065,924		$	491	$	658,728		$	500,212		$	(18,235	)		1,365,648	$	(41,284	)	$	1,099,914
Net income		—		—		—			—		—			49,970			—			—		—			49,970
Other comprehensive loss		—		—		—			—		—			—			(3,660	)		—		—			(3,660	)
Cash dividend		—		—		—			—		—			(14,246	)		—			—		—			(14,246	)
Issuance of common stock to employees		—		—		47,748			—		5,979			—			—			—		—			5,979
Shares withheld for employee taxes		—		—		(22,347	)		—		(7,896	)		—			—			—		—			(7,896	)
Issuance of common stock to Board of Directors and Scientific Advisory Board		—		—		5,630			—		730			—			—			—		—			730
Issuance of common stock to employees under an ESPP		—		—		2,875			—		509			—			—			—		—			509
BALANCE, March 31, 2022		200,000	$	2		49,099,830		$	491	$	658,050		$	535,936		$	(21,895	)		1,365,648	$	(41,284	)	$	1,131,300

	Three Months Ended March 31, 2021
	Series A Nonconvertible									Additional						Accumulated Other								Total
	Preferred Stock				Common Stock					Paid-in			Retained			Comprehensive			Treasury Stock					Shareholders’
	Shares		Amount		Shares			Amount		Capital			Earnings			Loss			Shares		Amount			Equity
BALANCE, DECEMBER 31, 2020		200,000	$	2		49,013,476		$	490	$	635,595		$	353,930		$	(36,019	)		1,365,648	$	(41,284	)	$	912,714
Net income		—		—		—			—		—			51,687			—			—		—			51,687
Other comprehensive income		—		—		—			—		—			—			1,010			—		—			1,010
Cash dividend		—		—		—			—		—			(9,487	)		—			—		—			(9,487	)
Issuance of common stock to employees		—		—		53,123			1		5,115			—			—			—		—			5,116
Shares withheld for employee taxes		—		—		(22,048	)		—		(9,634	)		—			—			—		—			(9,634	)
Issuance of common stock to Board of Directors and Scientific Advisory Board		—		—		4,443			—		630			—			—			—		—			630
Issuance of common stock to employees under an ESPP		—		—		1,782			—		432			—			—			—		—			432
BALANCE, MARCH 31, 2021		200,000	$	2		49,050,776		$	491	$	632,138		$	396,130		$	(35,009	)		1,365,648	$	(41,284	)	$	952,468

The accompanying notes are an integral part of these Consolidated Financial Statements.

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Three Months Ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	49,970		$	51,687
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred revenue and recognition of unbilled receivables, net		(64,106	)		(57,648	)
Depreciation		5,627			4,263
Amortization of intangibles		5,498			5,488
Change in excess inventory reserve		84			667
Amortization of premium and discount on investments, net		(271	)		(70	)
Stock-based compensation to employees		6,085			5,200
Stock-based compensation to Board of Directors and Scientific Advisory Board		430			330
Deferred income tax (benefit) expense		(1,380	)		515
Retirement plan expense		1,359			2,228
Decrease (increase) in assets:
Accounts receivable		2,692			(9,066	)
Inventory		(9,164	)		(10,498	)

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