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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 June 30, 2022

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 1-12031

 

img33765458_0.jpg 

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 August 2, 2022, the registrant had outstanding 47,229,055 shares of common stock.

 


 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements (unaudited)

 

 

Consolidated Balance Sheets – June 30, 2022 and December 31, 2021

 

1

Consolidated Statements of Income – Three and six months ended June 30, 2022 and 2021

 

2

Consolidated Statements of Comprehensive Income – Three and six months ended June 30, 2022 and 2021

 

3

Consolidated Statements of Shareholders’ Equity – Three and six months ended June 30, 2022 and 2021

 

4

Consolidated Statements of Cash Flows – Six months ended June 30, 2022 and 2021

 

6

Notes to Consolidated Financial Statements

 

7

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

 

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

35

Item 4. Controls and Procedures

 

35

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

 

35

Item 1A. Risk Factors

 

36

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

 

36

Item 3. Defaults Upon Senior Securities

 

36

Item 4. Mine Safety Disclosures

 

36

Item 5. Other Information

 

36

Item 6. Exhibits

 

37

 

 

 

 

 


 

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)

 

 

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

213,896

 

 

$

311,993

 

Short-term investments

 

 

439,449

 

 

 

351,194

 

Accounts receivable

 

 

74,933

 

 

 

107,639

 

Inventory

 

 

165,635

 

 

 

134,160

 

Other current assets

 

 

38,244

 

 

 

20,948

 

Total current assets

 

 

932,157

 

 

 

925,934

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $103,881 and $92,461

 

 

138,028

 

 

 

128,832

 

ACQUIRED TECHNOLOGY, net of accumulated amortization of $183,928 and $173,635

 

 

39,375

 

 

 

49,668

 

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $8,273 and $7,565

 

 

9,015

 

 

 

9,711

 

GOODWILL

 

 

15,535

 

 

 

15,535

 

INVESTMENTS

 

 

200,142

 

 

 

168,076

 

DEFERRED INCOME TAXES

 

 

36,998

 

 

 

33,453

 

OTHER ASSETS

 

 

128,188

 

 

 

135,710

 

TOTAL ASSETS

 

$

1,499,438

 

 

$

1,466,919

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

14,048

 

 

$

14,955

 

Accrued expenses

 

 

38,757

 

 

 

45,474

 

Deferred revenue

 

 

99,106

 

 

 

120,864

 

Other current liabilities

 

 

3,302

 

 

 

6,645

 

Total current liabilities

 

 

155,213

 

 

 

187,938

 

DEFERRED REVENUE

 

 

30,021

 

 

 

36,217

 

RETIREMENT PLAN BENEFIT LIABILITY

 

 

68,188

 

 

 

66,773

 

OTHER LIABILITIES

 

 

80,707

 

 

 

76,077

 

Total liabilities

 

 

334,129

 

 

 

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, 49,115,444
   and
49,065,924 shares issued, and 47,749,796 and 47,700,276 shares outstanding, at
   June 30, 2022 and December 31, 2021, respectively

 

 

491

 

 

 

491

 

Additional paid-in capital

 

 

666,087

 

 

 

658,728

 

Retained earnings

 

 

563,191

 

 

 

500,212

 

Accumulated other comprehensive loss

 

 

(23,178

)

 

 

(18,235

)

Treasury stock, at cost (1,365,648 shares at June 30, 2022 and December 31, 2021)

 

 

(41,284

)

 

 

(41,284

)

Total shareholders’ equity

 

 

1,165,309

 

 

 

1,099,914

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,499,438

 

 

$

1,466,919

 

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

1


 

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

Material sales

 

$

71,869

 

 

$

77,438

 

 

$

158,560

 

 

$

157,246

 

Royalty and license fees

 

 

60,278

 

 

 

48,212

 

 

 

120,080

 

 

 

99,098

 

Contract research services

 

 

4,414

 

 

 

4,010

 

 

 

8,391

 

 

 

7,316

 

Total revenue

 

 

136,561

 

 

 

129,660

 

 

 

287,031

 

 

 

263,660

 

COST OF SALES

 

 

27,239

 

 

 

27,969

 

 

 

60,402

 

 

 

51,267

 

Gross margin

 

 

109,322

 

 

 

101,691

 

 

 

226,629

 

 

 

212,393

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

28,197

 

 

 

24,101

 

 

 

54,742

 

 

 

47,406

 

Selling, general and administrative

 

 

19,869

 

 

 

20,239

 

 

 

40,931

 

 

 

36,643

 

Amortization of acquired technology and other intangible assets

 

 

5,502

 

 

 

5,497

 

 

 

11,000

 

 

 

10,985

 

Patent costs

 

 

2,259

 

 

 

1,809

 

 

 

4,057

 

 

 

3,644

 

Royalty and license expense

 

 

181

 

 

 

149

 

 

 

335

 

 

 

261

 

Total operating expenses

 

 

56,008

 

 

 

51,795

 

 

 

111,065

 

 

 

98,939

 

OPERATING INCOME

 

 

53,314

 

 

 

49,896

 

 

 

115,564

 

 

 

113,454

 

Interest income, net

 

 

1,583

 

 

 

75

 

 

 

1,874

 

 

 

208

 

Other income, net

 

 

89

 

 

 

221

 

 

 

55

 

 

 

280

 

Interest and other income, net

 

 

1,672

 

 

 

296

 

 

 

1,929

 

 

 

488

 

INCOME BEFORE INCOME TAXES

 

 

54,986

 

 

 

50,192

 

 

 

117,493

 

 

 

113,942

 

INCOME TAX EXPENSE

 

 

(13,484

)

 

 

(9,651

)

 

 

(26,021

)

 

 

(21,714

)

NET INCOME

 

$

41,502

 

 

$

40,541

 

 

$

91,472

 

 

$

92,228

 

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

$

0.87

 

 

$

0.85

 

 

$

1.92

 

 

$

1.94

 

DILUTED

 

$

0.87

 

 

$

0.85

 

 

$

1.92

 

 

$

1.94

 

WEIGHTED AVERAGE SHARES USED IN COMPUTING NET
   INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

47,393,830

 

 

 

47,299,627

 

 

 

47,381,864

 

 

 

47,284,773

 

DILUTED

 

 

47,457,892

 

 

 

47,356,864

 

 

 

47,451,354

 

 

 

47,347,596

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.30

 

 

$

0.20

 

 

$

0.60

 

 

$

0.40

 

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

2


 

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

NET INCOME

 

$

41,502

 

 

$

40,541

 

 

$

91,472

 

 

$

92,228

 

OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale securities,
   net of tax of $
450, $7, $1,547 and $9, respectively

 

 

(1,616

)

 

 

26

 

 

 

(5,551

)

 

 

(32

)

Amortization of prior service cost and actuarial loss for
   retirement plan included in net periodic pension costs,
   net of tax of $
142, $334, $285 and $669, respectively

 

 

509

 

 

 

1,174

 

 

 

1,018

 

 

 

2,348

 

Change in cumulative foreign currency translation
   adjustment

 

 

(176

)

 

 

37

 

 

 

(410

)

 

 

(69

)

TOTAL OTHER COMPREHENSIVE (LOSS) INCOME

 

 

(1,283

)

 

 

1,237

 

 

 

(4,943

)

 

 

2,247

 

COMPREHENSIVE INCOME

 

$

40,219

 

 

$

41,778

 

 

$

86,529

 

 

$

94,475

 

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

3


 

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except for share data)

 

 

 

Three Months Ended June 30, 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,
MARCH 31, 2022

 

 

200,000

 

 

$

2

 

 

 

49,099,830

 

 

$

491

 

 

$

658,050

 

 

$

535,936

 

 

$

(21,895

)

 

 

1,365,648

 

 

$

(41,284

)

 

$

1,131,300

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41,502

 

 

 

 

 

 

 

 

 

 

 

 

41,502

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,283

)

 

 

 

 

 

 

 

 

(1,283

)

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,247

)

 

 

 

 

 

 

 

 

 

 

 

(14,247

)

Issuance of common stock
to employees

 

 

 

 

 

 

 

 

14,386

 

 

 

 

 

 

7,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,959

 

Shares withheld for employee taxes

 

 

 

 

 

 

 

 

(6,135

)

 

 

 

 

 

(948

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(948

)

Issuance of common stock to Board of Directors
and Scientific Advisory Board

 

 

 

 

 

 

 

 

2,196

 

 

 

 

 

 

344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

344

 

Issuance of common stock to employees under an ESPP

 

 

 

 

 

 

 

 

5,167

 

 

 

 

 

 

682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

682

 

BALANCE,
JUNE 30, 2022

 

 

200,000

 

 

$

2

 

 

 

49,115,444

 

 

$

491

 

 

$

666,087

 

 

$

563,191

 

 

$

(23,178

)

 

 

1,365,648

 

 

$

(41,284

)

 

$

1,165,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 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