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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, 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

 

img33768341_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 November 1, 2022, the registrant had outstanding 47,236,557 shares of common stock.

 


 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements (unaudited)

 

 

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

 

1

Consolidated Statements of Income – Three and nine months ended September 30, 2022 and 2021

 

2

Consolidated Statements of Comprehensive Income – Three and nine months ended September 30, 2022 and 2021

 

3

Consolidated Statements of Shareholders’ Equity – Three and nine months ended September 30, 2022 and 2021

 

4

Consolidated Statements of Cash Flows – Nine months ended September 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

 

27

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

35

Item 4. Controls and Procedures

 

35

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

 

36

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, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

187,750

 

 

$

311,993

 

Short-term investments

 

 

501,051

 

 

 

351,194

 

Accounts receivable

 

 

78,193

 

 

 

107,639

 

Inventory

 

 

180,194

 

 

 

134,160

 

Other current assets

 

 

30,005

 

 

 

20,948

 

Total current assets

 

 

977,193

 

 

 

925,934

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $110,334 and $92,461

 

 

137,713

 

 

 

128,832

 

ACQUIRED TECHNOLOGY, net of accumulated amortization of $187,132 and $173,635

 

 

40,921

 

 

 

49,668

 

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $8,631 and $7,565

 

 

8,657

 

 

 

9,711

 

GOODWILL

 

 

15,535

 

 

 

15,535

 

INVESTMENTS

 

 

173,871

 

 

 

168,076

 

DEFERRED INCOME TAXES

 

 

43,005

 

 

 

33,453

 

OTHER ASSETS

 

 

133,428

 

 

 

135,710

 

TOTAL ASSETS

 

$

1,530,323

 

 

$

1,466,919

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

13,357

 

 

$

14,955

 

Accrued expenses

 

 

49,975

 

 

 

45,474

 

Deferred revenue

 

 

67,254

 

 

 

120,864

 

Other current liabilities

 

 

7,613

 

 

 

6,645

 

Total current liabilities

 

 

138,199

 

 

 

187,938

 

DEFERRED REVENUE

 

 

26,761

 

 

 

36,217

 

RETIREMENT PLAN BENEFIT LIABILITY

 

 

67,305

 

 

 

66,773

 

OTHER LIABILITIES

 

 

86,233

 

 

 

76,077

 

Total liabilities

 

 

318,498

 

 

 

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, 49,128,525
   and
49,065,924 shares issued, and 47,762,877 and 47,700,276 shares outstanding, at
   September 30, 2022 and December 31, 2021, respectively

 

 

491

 

 

 

491

 

Additional paid-in capital

 

 

674,773

 

 

 

658,728

 

Retained earnings

 

 

602,399

 

 

 

500,212

 

Accumulated other comprehensive loss

 

 

(24,556

)

 

 

(18,235

)

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

 

 

(41,284

)

 

 

(41,284

)

Total shareholders’ equity

 

 

1,211,825

 

 

 

1,099,914

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,530,323

 

 

$

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

Material sales

 

$

84,182

 

 

$

75,609

 

 

$

242,742

 

 

$

232,855

 

Royalty and license fees

 

 

71,450

 

 

 

63,939

 

 

 

191,530

 

 

 

163,037

 

Contract research services

 

 

4,924

 

 

 

4,070

 

 

 

13,315

 

 

 

11,386

 

Total revenue

 

 

160,556

 

 

 

143,618

 

 

 

447,587

 

 

 

407,278

 

COST OF SALES

 

 

37,396

 

 

 

31,481

 

 

 

97,798

 

 

 

82,748

 

Gross margin

 

 

123,160

 

 

 

112,137

 

 

 

349,789

 

 

 

324,530

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

30,414

 

 

 

25,327

 

 

 

85,156

 

 

 

72,733

 

Selling, general and administrative

 

 

18,442

 

 

 

20,960

 

 

 

59,373

 

 

 

57,603

 

Amortization of acquired technology and other intangible assets

 

 

3,562

 

 

 

5,505

 

 

 

14,562

 

 

 

16,490

 

Patent costs

 

 

2,018

 

 

 

2,359

 

 

 

6,075

 

 

 

6,003

 

Royalty and license expense

 

 

261

 

 

 

258

 

 

 

596

 

 

 

519

 

Total operating expenses

 

 

54,697

 

 

 

54,409

 

 

 

165,762

 

 

 

153,348

 

OPERATING INCOME

 

 

68,463

 

 

 

57,728

 

 

 

184,027

 

 

 

171,182

 

Interest income, net

 

 

2,432

 

 

 

137

 

 

 

4,306

 

 

 

345

 

Other (loss) income, net

 

 

(804

)

 

 

(102

)

 

 

(749

)

 

 

178

 

Interest and other income, net

 

 

1,628

 

 

 

35

 

 

 

3,557

 

 

 

523

 

INCOME BEFORE INCOME TAXES

 

 

70,091

 

 

 

57,763

 

 

 

187,584

 

 

 

171,705

 

INCOME TAX EXPENSE

 

 

(16,636

)

 

 

(11,654

)

 

 

(42,657

)

 

 

(33,368

)

NET INCOME

 

$

53,455

 

 

$

46,109

 

 

$

144,927

 

 

$

138,337

 

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

$

1.12

 

 

$

0.97

 

 

$

3.04

 

 

$

2.91

 

DILUTED

 

$

1.12

 

 

$

0.97

 

 

$

3.04

 

 

$

2.90

 

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

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

47,396,495

 

 

 

47,291,192

 

 

 

47,386,426

 

 

 

47,286,927

 

DILUTED

 

 

47,466,934

 

 

 

47,362,575

 

 

 

47,455,893

 

 

 

47,355,583

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.30

 

 

$

0.20

 

 

$

0.90

 

 

$

0.60

 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

NET INCOME

 

$

53,455

 

 

$

46,109

 

 

$

144,927

 

 

$

138,337

 

OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale securities,
   net of tax of $
572, $1, $2,120 and $10, respectively

 

 

(1,680

)

 

 

(3

)

 

 

(7,231

)

 

 

(35

)

Amortization of prior service cost and actuarial loss for
   retirement plan included in net periodic pension costs,
   net of tax of $
159, $334, $444 and $1,004, respectively

 

 

493

 

 

 

1,174

 

 

 

1,511

 

 

 

3,522

 

Change in cumulative foreign currency translation
   adjustment

 

 

(191

)

 

 

(155

)

 

 

(601

)

 

 

(224

)

TOTAL OTHER COMPREHENSIVE (LOSS) INCOME

 

 

(1,378

)

 

 

1,016

 

 

 

(6,321

)

 

 

3,263

 

COMPREHENSIVE INCOME

 

$

52,077

 

 

$

47,125

 

 

$

138,606

 

 

$

141,600

 

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, 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,
JUNE 30, 2022

 

 

200,000

 

 

$

2

 

 

 

49,115,444

 

 

$

491

 

 

$

666,087

 

 

$

563,191

 

 

$

(23,178

)

 

 

1,365,648

 

 

$

(41,284

)

 

$

1,165,309

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53,455

 

 

 

 

 

 

 

 

 

 

 

 

53,455

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,378

)

 

 

 

 

 

 

 

 

(1,378

)

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,247

)

 

 

 

 

 

 

 

 

 

 

 

(14,247

)

Issuance of common stock
to employees

 

 

 

 

 

 

 

 

8,753

 

 

 

 

 

 

8,209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,209

 

Shares withheld for employee taxes

 

 

 

 

 

 

 

 

(2,852

)

 

 

 

 

 

(306

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(306

)

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

 

 

 

 

 

 

 

 

2,196

 

 

 

 

 

 

347

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

347

 

Issuance of common stock to employees under an ESPP

 

 

 

 

 

 

 

 

4,984

 

 

 

 

 

 

436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

436

 

BALANCE,
SEPTEMBER 30, 2022

 

 

200,000

 

 

$

2

 

 

 

49,128,525

 

 

$

491

 

 

$

674,773

 

 

$

602,399

 

 

$

(24,556

)

 

 

1,365,648

 

 

$

(41,284

)

 

$

1,211,825

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2022

 

 

 

Series A
Nonconvertible

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated
Other

 

 

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Treasury Stock

 

 

Shareholders’</