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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 September 30, 2021

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

 

img32844820_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.)

 

 

 

375 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 November 2, 2021, the registrant had outstanding 47,125,672 shares of common stock.

 


 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements (unaudited)

 

 

Consolidated Balance Sheets – September 30, 2021 and December 31, 2020

 

1

Consolidated Statements of Income – Three and nine months ended September 30, 2021 and 2020

 

2

Consolidated Statements of Comprehensive Income – Three and nine months ended September 30, 2021 and 2020

 

3

Consolidated Statements of Shareholders’ Equity – Three and nine months ended September 30, 2021 and 2020

 

4

Consolidated Statements of Cash Flows – Nine months ended September 30, 2021 and 2020

 

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)

 

 

 

September 30, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

535,157

 

 

$

630,012

 

Short-term investments

 

 

253,786

 

 

 

99,996

 

Accounts receivable

 

 

96,235

 

 

 

82,261

 

Inventory

 

 

121,485

 

 

 

91,591

 

Other current assets

 

 

48,476

 

 

 

20,746

 

Total current assets

 

 

1,055,139

 

 

 

924,606

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $86,962 and $72,493

 

 

118,988

 

 

 

102,113

 

ACQUIRED TECHNOLOGY, net of accumulated amortization of $168,489 and $153,050

 

 

54,814

 

 

 

70,253

 

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $7,206 and $6,155

 

 

10,028

 

 

 

10,685

 

GOODWILL

 

 

15,535

 

 

 

15,535

 

INVESTMENTS

 

 

8,500

 

 

 

5,000

 

DEFERRED INCOME TAXES

 

 

32,476

 

 

 

37,695

 

OTHER ASSETS

 

 

133,111

 

 

 

103,341

 

TOTAL ASSETS

 

$

1,428,591

 

 

$

1,269,228

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

10,939

 

 

$

13,801

 

Accrued expenses

 

 

42,736

 

 

 

41,404

 

Deferred revenue

 

 

123,475

 

 

 

105,215

 

Other current liabilities

 

 

3,111

 

 

 

4,540

 

Total current liabilities

 

 

180,261

 

 

 

164,960

 

DEFERRED REVENUE

 

 

43,458

 

 

 

57,086

 

RETIREMENT PLAN BENEFIT LIABILITY

 

 

80,676

 

 

 

78,527

 

OTHER LIABILITIES

 

 

87,874

 

 

 

55,941

 

Total liabilities

 

 

392,269

 

 

 

356,514

 

COMMITMENTS AND CONTINGENCIES (Note 15)

 

 

 

 

 

 

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, 49,060,909
   and
49,013,476 shares issued, and 47,695,261 and 47,647,828 shares outstanding, at
   September 30, 2021 and December 31, 2020, respectively

 

 

491

 

 

 

490

 

Additional paid-in capital

 

 

646,049

 

 

 

635,595

 

Retained earnings

 

 

463,820

 

 

 

353,930

 

Accumulated other comprehensive loss

 

 

(32,756

)

 

 

(36,019

)

Treasury stock, at cost (1,365,648 shares at September 30, 2021 and December 31, 2020)

 

 

(41,284

)

 

 

(41,284

)

Total shareholders’ equity

 

 

1,036,322

 

 

 

912,714

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,428,591

 

 

$

1,269,228

 

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
 September 30,

 

 

Nine Months Ended
 September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

Material sales

 

$

75,609

 

 

$

68,709

 

 

$

232,855

 

 

$

167,211

 

Royalty and license fees

 

 

63,939

 

 

 

44,550

 

 

 

163,037

 

 

 

110,008

 

Contract research services

 

 

4,070

 

 

 

3,820

 

 

 

11,386

 

 

 

10,105

 

Total revenue

 

 

143,618

 

 

 

117,079

 

 

 

407,278

 

 

 

287,324

 

COST OF SALES

 

 

31,481

 

 

 

23,378

 

 

 

82,748

 

 

 

58,480

 

Gross margin

 

 

112,137

 

 

 

93,701

 

 

 

324,530

 

 

 

228,844

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

25,327

 

 

 

20,814

 

 

 

72,733

 

 

 

61,708

 

Selling, general and administrative

 

 

20,960

 

 

 

13,579

 

 

 

57,603

 

 

 

45,129

 

Amortization of acquired technology and other intangible assets

 

 

5,505

 

 

 

5,494

 

 

 

16,490

 

 

 

16,474

 

Patent costs

 

 

2,359

 

 

 

2,095

 

 

 

6,003

 

 

 

5,591

 

Royalty and license expense

 

 

258

 

 

 

3,293

 

 

 

519

 

 

 

8,195

 

Total operating expenses

 

 

54,409

 

 

 

45,275

 

 

 

153,348

 

 

 

137,097

 

OPERATING INCOME

 

 

57,728

 

 

 

48,426

 

 

 

171,182

 

 

 

91,747

 

Interest income, net

 

 

137

 

 

 

1,029

 

 

 

345

 

 

 

4,444

 

Other (loss) income, net

 

 

(102

)

 

 

262

 

 

 

178

 

 

 

634

 

Interest and other income, net

 

 

35

 

 

 

1,291

 

 

 

523

 

 

 

5,078

 

INCOME BEFORE INCOME TAXES

 

 

57,763

 

 

 

49,717

 

 

 

171,705

 

 

 

96,825

 

INCOME TAX EXPENSE

 

 

(11,654

)

 

 

(9,217

)

 

 

(33,368

)

 

 

(17,355

)

NET INCOME

 

$

46,109

 

 

$

40,500

 

 

$

138,337

 

 

$

79,470

 

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

$

0.97

 

 

$

0.85

 

 

$

2.91

 

 

$

1.67

 

DILUTED

 

$

0.97

 

 

$

0.85

 

 

$

2.90

 

 

$

1.67

 

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

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

47,291,192

 

 

 

47,227,061

 

 

 

47,286,927

 

 

 

47,182,625

 

DILUTED

 

 

47,362,575

 

 

 

47,260,331

 

 

 

47,355,583

 

 

 

47,212,660

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.20

 

 

$

0.15

 

 

$

0.60

 

 

$

0.45

 

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

NET INCOME

 

$

46,109

 

 

$

40,500

 

 

$

138,337

 

 

$

79,470

 

OTHER COMPREHENSIVE INCOME, NET OF TAX:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale securities,
   net of tax of $
1, $177, $10 and $97, respectively

 

 

(3

)

 

 

(626

)

 

 

(35

)

 

 

342

 

Amortization of prior service cost and actuarial loss for
   retirement plan included in net periodic pension costs,
   net of tax of $
334, $181, $1,004 and $543, respectively

 

 

1,174

 

 

 

639

 

 

 

3,522

 

 

 

1,917

 

Change in cumulative foreign currency translation
   adjustment

 

 

(155

)

 

 

1

 

 

 

(224

)

 

 

(29

)

TOTAL OTHER COMPREHENSIVE INCOME

 

 

1,016

 

 

 

14

 

 

 

3,263

 

 

 

2,230

 

COMPREHENSIVE INCOME

 

$

47,125

 

 

$

40,514

 

 

$

141,600

 

 

$

81,700

 

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 September 30, 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,
JUNE 30, 2021

 

 

200,000

 

 

$

2

 

 

 

49,054,059

 

 

$

491

 

 

$

638,991

 

 

$

427,188

 

 

$

(33,772

)

 

 

1,365,648

 

 

$

(41,284

)

 

$

991,616

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,109

 

 

 

 

 

 

 

 

 

 

 

 

46,109

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,016

 

 

 

 

 

 

 

 

 

1,016

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,477

)

 

 

 

 

 

 

 

 

 

 

 

(9,477

)

Issuance of common stock
to employees

 

 

 

 

 

 

 

 

5,111

 

 

 

 

 

 

8,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,131

 

Shares withheld for employee taxes

 

 

 

 

 

 

 

 

(2,025

)

 

 

 

 

 

(1,862

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,862

)

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

 

 

 

 

 

 

 

 

1,361

 

 

 

 

 

 

348

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

348

 

Issuance of common stock to employees under an ESPP

 

 

 

 

 

 

 

 

2,403

 

 

 

 

 

 

441

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

441

 

BALANCE,
SEPTEMBER 30, 2021

 

 

200,000

 

 

$

2

 

 

 

49,060,909

 

 

$

491

 

 

$

646,049

 

 

$

463,820

 

 

$

(32,756

)

 

 

1,365,648

 

 

$

(41,284

)

 

$

1,036,322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

138,337

 

 

 

 

 

 

 

 

 

 

 

 

138,337

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,263

 

 

 

 

 

 

 

 

 

3,263

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,447

)

 

 

 

 

 

 

 

 

 

 

 

(28,447

)

Issuance of common stock
to employees

 

 

 

 

 

 

 

 

62,501

 

 

 

1

 

 

 

22,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,543

 

Shares withheld for employee taxes

 

 

 

 

 

 

 

 

(28,733

)

 

 

 

 

 

(14,880

)