OLED 10-Q

Universal Display Corp \Pa\ (OLED)

10-Q 2021-05-06 For: 2021-03-31

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Added on April 10, 2026

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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)


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


Large accelerated filer	☒	Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☐	Smaller reporting company	☐

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets – March 31, 2021 and December 31, 2020		1
Consolidated Statements of Income – Three months ended March 31, 2021 and 2020		2
Consolidated Statements of Comprehensive Income – Three months ended March 31, 2021 and 2020		3
Consolidated Statements of Shareholders’ Equity – Three months ended March 31, 2021 and 2020		4
Consolidated Statements of Cash Flows – Three months ended March 31, 2021 and 2020		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		31
Item 4. Controls and Procedures		31

PART II – OTHER INFORMATION

Item 1. Legal Proceedings		31
Item 1A. Risk Factors		32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		32
Item 3. Defaults Upon Senior Securities		32
Item 4. Mine Safety Disclosures		32
Item 5. Other Information		32
Item 6. Exhibits		33

	March 31, 2021			December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	726,279		$	630,012
Short-term investments		720			99,996
Accounts receivable		91,327			82,261
Inventory		101,422			91,591
Other current assets		39,587			20,746
Total current assets		959,335			924,606
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $76,756 and $72,493		107,815			102,113
ACQUIRED TECHNOLOGY, net of accumulated amortization of $158,197 and $153,050		65,106			70,253
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $6,496 and $6,155		10,641			10,685
GOODWILL		15,535			15,535
INVESTMENTS		8,500			5,000
DEFERRED INCOME TAXES		36,864			37,695
OTHER ASSETS		106,704			103,341
TOTAL ASSETS	$	1,310,500		$	1,269,228
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	14,741		$	13,801
Accrued expenses		19,171			41,404
Deferred revenue		128,546			105,215
Other current liabilities		3,874			4,540
Total current liabilities		166,332			164,960
DEFERRED REVENUE		49,578			57,086
RETIREMENT PLAN BENEFIT LIABILITY		79,246			78,527
OTHER LIABILITIES		62,876			55,941
Total liabilities		358,032			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, 49,050,776 and 49,013,476 shares issued, and 47,685,128 and 47,647,828 shares outstanding, at March 31, 2021 and December 31, 2020, respectively		491			490
Additional paid-in capital		632,138			635,595
Retained earnings		396,130			353,930
Accumulated other comprehensive loss		(35,009	)		(36,019	)
Treasury stock, at cost (1,365,648 shares at March 31, 2021 and December 31, 2020)		(41,284	)		(41,284	)
Total shareholders’ equity		952,468			912,714
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,310,500		$	1,269,228

	Three Months Ended March 31,
	2021			2020
REVENUE:
Material sales	$	79,808		$	66,575
Royalty and license fees		50,886			43,078
Contract research services		3,306			2,624
Total revenue		134,000			112,277
COST OF SALES		23,298			22,459
Gross margin		110,702			89,818
OPERATING EXPENSES:
Research and development		23,305			19,497
Selling, general and administrative		16,404			15,403
Amortization of acquired technology and other intangible assets		5,488			5,490
Patent costs		1,835			1,638
Royalty and license expense		112			3,284
Total operating expenses		47,144			45,312
OPERATING INCOME		63,558			44,506
Interest income, net		133			2,147
Other income, net		59			202
Interest and other income, net		192			2,349
INCOME BEFORE INCOME TAXES		63,750			46,855
INCOME TAX EXPENSE		(12,063	)		(8,700	)
NET INCOME	$	51,687		$	38,155
NET INCOME PER COMMON SHARE:
BASIC	$	1.09		$	0.80
DILUTED	$	1.08		$	0.80
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:
BASIC		47,267,921			47,093,033
DILUTED		47,329,704			47,122,829
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.20		$	0.15

	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

	Three Months Ended March 31, 2020
	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, 2019		200,000	$	2		48,852,193		$	489	$	620,236		$	249,003		$	(16,997	)		1,365,648	$	(41,284	)	$	811,449
Net income		—		—		—			—		—			38,155			—			—		—			38,155
Other comprehensive income		—		—		—			—		—			—			2,460			—		—			2,460
Cash dividend		—		—		—			—		—			(7,098	)		—			—		—			(7,098	)
Issuance of common stock to employees		—		—		80,483			—		5,665			—			—			—		—			5,665
Shares withheld for employee taxes		—		—		(30,437	)		—		(4,816	)		—			—			—		—			(4,816	)
Issuance of common stock to Board of Directors and Scientific Advisory Board		—		—		5,678			—		554			—			—			—		—			554
Issuance of common stock to employees under an ESPP		—		—		2,315			—		328			—			—			—		—			328
BALANCE, MARCH 31, 2020		200,000	$	2		48,910,232		$	489	$	621,967		$	280,060		$	(14,537	)		1,365,648	$	(41,284	)	$	846,697

	Amortized		Unrealized					Aggregate Fair
Cash and Cash Equivalents Classification	Cost		Gains		(Losses)			Market Value
March 31, 2021
Cash accounts in banking institutions	$	160,850	$	—	$	—		$	160,850
Money market accounts		16,438		—		—			16,438
U.S. Government bonds		548,997		—		(6	)		548,991
	$	726,285	$	—	$	(6	)	$	726,279
December 31, 2020
Cash accounts in banking institutions	$	163,779	$	—	$	—		$	163,779
Money market accounts		17,261		—		—			17,261
U.S. Government bonds		448,970		6		(4	)		448,972
	$	630,010	$	6	$	(4	)	$	630,012

			Fair Value Measurements, Using
	Total Carrying Value as of March 31, 2021		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	548,991	$	548,991	$	—	$	—
Short-term investments		720		720		—		—
Convertible notes		500		—		—		500

			Fair Value Measurements, Using
	Total Carrying Value as of December 31, 2020		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	466,233	$	466,233	$	—	$	—
Short-term investments		99,996		99,996		—		—

	March 31, 2021		December 31, 2020
Raw materials	$	60,458	$	46,843
Work-in-process		2,882		9,904
Finished goods		38,082		34,844
Inventory	$	101,422	$	91,591

	March 31, 2021			December 31, 2020
Land	$	2,642		$	2,642
Building and improvements		55,321			53,568
Office and lab equipment		91,857			85,881
Furniture, fixtures and computer related assets		11,948			8,921
Construction-in-progress		22,803			23,594
		184,571			174,606
Less: Accumulated depreciation		(76,756	)		(72,493	)
Property and equipment, net	$	107,815		$	102,113

	March 31, 2021			December 31, 2020
PD-LD, Inc.	$	1,481		$	1,481
Motorola		15,909			15,909
BASF		95,989			95,989
Fujifilm		109,462			109,462
Other		462			462
		223,303			223,303
Less: Accumulated amortization		(158,197	)		(153,050	)
Acquired technology, net	$	65,106		$	70,253

	March 31, 2021
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	10,520	$	(4,284	)	$	6,236
Developed IP, processes and recipes		4,820		(1,507	)		3,313
Trade name/Trademarks		1,500		(705	)		795
Other		297		—			297
Total identifiable other intangible assets	$	17,137	$	(6,496	)	$	10,641

	March 31, 2021		December 31, 2020
Right-of-use assets	$	12,819	$	8,750
Short-term lease liabilities		2,324		1,871
Long-term lease liabilities		10,495		6,879

	Three Months Ended March 31,
	2021			2020
NET INCOME	$	51,687		$	38,155
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized (loss) gain on available-for-sale securities, net of tax of $17 and $525, respectively		(58	)		1,855
Amortization of prior service cost and actuarial loss for retirement plan included in net periodic pension costs, net of tax of $335 and $182, respectively		1,174			638
Change in cumulative foreign currency translation adjustment		(106	)		(33	)
TOTAL OTHER COMPREHENSIVE INCOME		1,010			2,460
COMPREHENSIVE INCOME	$	52,697		$	40,615

	Three Months Ended March 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	51,687		$	38,155
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred revenue and recognition of unbilled receivables		(57,648	)		(40,511	)
Depreciation		4,263			3,615
Amortization of intangibles		5,488			5,490
Change in excess inventory reserve		667			611
Amortization of premium and discount on investments, net		(70	)		(2,005	)
Stock-based compensation to employees		5,200			5,735
Stock-based compensation to Board of Directors and Scientific Advisory Board		330			254
Deferred income tax expense		515			940
Retirement plan expense		2,228			1,414
Decrease (increase) in assets:
Accounts receivable		(9,066	)		(22,140	)
Inventory		(10,498	)		(10,726	)
Other current assets		5,400			7,706
Other assets		(7,133	)		(3,245	)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses		(21,136	)		(29,340	)
Other current liabilities		(666	)		3,114
Deferred revenue		53,000			43,685
Other liabilities		6,935			2,994
Net cash provided by operating activities		29,496			5,746
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(9,938	)		(4,782	)
Purchases of intangibles		(298	)		—
Purchases of investments		(4,220	)		(148,592	)
Proceeds from sale and maturity of investments		100,000			250,400
Net cash provided by investing activities		85,544			97,026
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		348			259
Payment of withholding taxes related to stock-based compensation to employees		(9,634	)		(4,816	)
Cash dividends paid		(9,487	)		(7,098	)
Net cash used in financing activities		(18,773	)		(11,655	)
INCREASE IN CASH AND CASH EQUIVALENTS		96,267			91,117
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		630,012			131,627
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	726,279		$	222,744
The following non-cash activities occurred:

	March 31, 2021
Weighted average remaining lease term (in years)		7.3
Weighted average discount rate		3.4	%

	Maturities of Operating Lease Liabilities
2021 ⁽¹⁾	$	1,987
2022		2,541
2023		1,652
2024		1,474
2025		1,263
Thereafter		5,520
Total lease payments		14,437
Less: Imputed interest		(1,618	)
Present value of lease payments	$	12,819

	Unrealized Gain (Loss) on Available-for-Sale Securities			Net Unrealized Gain (Loss) on Retirement Plan ⁽²⁾			Change in Cumulative Foreign Currency Translation Adjustment			Total			Affected Line Items in the Consolidated Statements of Income
Balance December 31, 2020, net of tax	$	91		$	(36,075	)	$	(35	)	$	(36,019	)
Other comprehensive loss before reclassification		(58	)		—			(106	)		(164	)
Reclassification to net income ⁽¹⁾		—			1,174			—			1,174		Selling, general and administrative, research and development and cost of sales
Change during period		(58	)		1,174			(106	)		1,010
Balance March 31, 2021, net of tax	$	33		$	(34,901	)	$	(141	)	$	(35,009	)

	% of Total Revenue for the Three Months Ended March 31,		Accounts Receivable as of
Customer	2021	2020	March 31, 2021
A	36%	41%	$	6,204
B	23%	25%	$	20,769
C	20%	23%	$	22,802
D	12%	7%	$	17,740

	Three Months Ended March 31,
Country	2021		2020
South Korea	$	67,975	$	69,425
China		60,504		37,834
Japan		1,315		1,787
Other non-U.S. locations		825		497
Total non-U.S. locations		130,619		109,543
United States		3,381		2,734
Total revenue	$	134,000	$	112,277

	As of March 31, 2021
Accounts receivable	$	91,327
Short-term unbilled receivables		24,900
Long-term unbilled receivables		—
Short-term deferred revenue		128,546
Long-term deferred revenue		49,578

	Three Months Ended March 31, 2021
	Unbilled Receivables			Deferred Revenue
Balance at December 31, 2020	$	10,429		$	(162,301	)
Revenue recognized that was previously included in deferred revenue		—			33,439
Increases due to cash received		—			(53,000	)
Cumulative catch-up adjustment arising from changes in estimates of transaction price		—			3,738
Unbilled receivables recognized		20,471			—
Transferred to receivables from unbilled receivables		(6,000	)		—
Net change		14,471			(15,823	)
Balance at March 31, 2021	$	24,900		$	(178,124	)

Exhibit Number		Description

10.1*+		Amendment, dated February 23, 2021, to Amended and Restated OLED Materials Supply and Service Agreement, dated as of October 1, 2011, between the Registrant and PPG Industries, Inc.

31.1*		Certifications of Steven V. Abramson, Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)

31.2*		Certifications of Sidney D. Rosenblatt, Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)

32.1**		Certifications of Steven V. Abramson, Chief Executive Officer, as required by Rule 13a-14(b) or Rule 15d-14(b), and by 18 U.S.C. Section 1350. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

32.2**		Certifications of Sidney D. Rosenblatt, Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b), and by 18 U.S.C. Section 1350. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		The cover page of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 formatted in Inline XBRL (included in Item 101.INS)

*		Filed herewith.
**		Furnished herewith.
+		Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

		UNIVERSAL DISPLAY CORPORATION

Date: May 6, 2021		By: /s/ Sidney D. Rosenblatt
		Sidney D. Rosenblatt
		Executive Vice President, Chief Financial Officer,
		Treasurer and Secretary