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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 March 31, 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

 

img33762576_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 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.

1


 

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.

2


 

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.

3


 

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.

 

4


 

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

)