Universal Display Corporation Announces Fourth Quarter and Full Year 2012 Financial Results

Universal Display Corporation Announces Fourth Quarter and Full Year 2012 Financial Results

EWING, N.J.--(BUSINESS WIRE)-- Universal Display Corporation (NAS: PANL) , enabling energy-efficient displays and lighting with its UniversalPHOLED® technology and materials, today announced its results for the fourth quarter and year ended December 31, 2012.

For the full year of 2012, the company reported revenues of $83.2 million, up 36% compared to revenues of $61.3 million for 2011. Operating income rose to $13.7 million for the year, up 141% from $5.7 million in 2011. The company reported net income of $9.7 million, or $0.21 per diluted share, for the full year of 2012, compared to net income of $3.2 million, or $0.07 per diluted share, for 2011.


"Universal Display Corporation reported a second consecutive profitable year on the strength of a solid finish to 2012," said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. "As we continue to grow, we are building a business that we believe can deliver strong gross margins, produce high operating leverage and generate strong cash flow. Our goal is to solidify and extend our market leadership to capitalize on the growth of the OLED market. With our strong financial position, industry-leading technology, and extensive relationships throughout the industry, we are very excited about the competitive advantages we believe we have established and our expectation that we will be able to use these resources to bring OLED technology into the lives of the global community."

Material sales for 2012 were $44.5 million, up 19% compared to $37.4 million for 2011. Royalty and license fees for 2012 were $31.7 million, up 107% compared to $15.3 million for 2011 as a result of the licensing agreement with Samsung Display Corporation (SDC, and formerly Samsung Mobile Display) being in place for the full year. Technology development and support revenue was $7.1 million for 2012, down 17% compared to $8.5 million for 2011.

Cash provided by operating activities was $17.8 million in 2012, compared to $16.4 million in 2011, primarily due to an improvement in net income. The company's balance sheet remained strong at December 31, 2012, with cash, cash equivalents and short-term investments of $243.9 million, which reflects the $109.1 million used this year to purchase Fujifilm's worldwide patent portfolio of more than 1,200 OLED patents and patent applications. During the fourth quarter of 2012, the company used $5.2 million of its $50 million authorization to repurchase approximately 206,000 of our shares.

FOURTH QUARTER RESULTS

For the fourth quarter of 2012, the company reported revenues of $28.1 million and operating income of $8.4 million, increases of 51% and 135%, respectively, over fourth quarter 2011 revenues of $18.7 million and operating income of $3.6 million. Net income for the fourth quarter of 2012 was $5.4 million, or $0.12 per diluted share, compared to net income of $5.7 million, or $0.12 per diluted share, for the fourth quarter of 2011. Fourth quarter 2011 net income and earnings per share reflect a net tax benefit of approximately $2.7 million as a result of the sale of state-related net operating losses and tax credits, whereas there were no similar benefits in the fourth quarter of 2012.

Royalty and license fees in the fourth quarter of 2012 were $15.4 million, up 184% compared to $5.4 million in the fourth quarter of 2011 primarily due to increased revenue under the licensing agreement with SDC. Material sales were $10.1 million for the 2012 quarter, down 7% compared to $10.8 million for the fourth quarter of 2011. Total operating expenses for the fourth quarter increased $4.7 million compared to the fourth quarter of 2011, with $3.6 million of the increase attributable to higher patent costs and amortization of acquired technology as a result of the Fujifilm patent portfolio acquisition.

Mr. Rosenblatt concluded, "For nearly 20 years, Universal Display has championed OLED technology as a better performing, more efficient alternative to existing display and lighting technology. Consequently, we are extremely pleased with the excitement created by the OLED displays currently in the market, and the increase in new OLED product development that has been encouraged by these initial successes. Beyond today's focus on materials and technology for both large and small format displays, we are working on new generations of products that we believe have the potential to significantly increase our total addressable market, such as encapsulation and solution-based technology. Over the past year, through the acquisition of OLED patent portfolios, new partnerships with companies both domestically and in South Korea, and the expansion of our facilities, we have been making the investments that we anticipate will enable us to remain at the forefront of an industry that we believe is only now entering the early stages of a period of significant growth."

GUIDANCE

The company's arrangement with SDC provides a substantial amount of visibility into its potential future financial performance. Although the OLED industry is still at a stage where many variables can have a material effect on growth, in an effort to increase our transparency, Universal Display is providing the following financial guidance. Again with the caveat that the OLED industry is still in an early stage, the company believes that its revenues will be in the range of $110 million to $125 million for fiscal 2013.

In conjunction with this release, Universal Display will host a conference call, followed by a question and answer session, on Wednesday, February 27, 2013 at 5:00 p.m. Eastern Time. Interested parties may participate by calling 888-271-8594 at 5:00 p.m. Eastern Time and referencing conference ID 4380580.

The conference call will be simultaneously broadcast live over the Internet through a webcast on the Universal Display website. To access the call, please visit the events portion of the website at www.universaldisplay.com. An online archive of the webcast will be available within two hours of the conclusion of the call.

About Universal Display Corporation

Universal Display Corporation (NAS: PANL) is a leader in developing and delivering state-of-the-art, organic light emitting diode (OLED) technologies, materials and services to the display and lighting industries. Founded in 1994, the company currently owns or has exclusive, co-exclusive or sole license rights with respect to more than 3,000 issued and pending patents worldwide, including those acquired from Fujifilm. Universal Display licenses its proprietary technologies, including its breakthrough high-efficiency UniversalPHOLED® phosphorescent OLED technology, that can enable the development of low power and eco-friendly displays and white lighting. The company also develops and offers high-quality, state-of-the-art UniversalPHOLED materials that are recognized as key ingredients in the fabrication of OLEDs with peak performance. In addition, Universal Display delivers innovative and customized solutions to its clients and partners through technology transfer, collaborative technology development and on-site training.

Based in Ewing, New Jersey, Universal Display works and partners with a network of world-class organizations, including Princeton University, the University of Southern California, the University of Michigan, and PPG Industries, Inc. The company has also established relationships with companies such as AU Optronics Corporation, DuPont Displays, Inc., Innolux Corporation, Konica Minolta Technology Center, Inc., LG Display Co., Ltd., Lumiotec, Inc., Moser Baer Technologies Inc., Panasonic Idemitsu OLED Lighting Co., Pioneer Corporation, Samsung Display Corporation, Seiko Epson Corporation, Sony Corporation, Showa Denko K.K., and Tohoku Pioneer Corporation. To learn more about Universal Display, please visit www.universaldisplay.com.

Universal Display Corporation and the Universal Display logo are trademarks or registered trademarks of Universal Display Corporation. All other company, brand or product names may be trademarks or registered trademarks.

All statements in this document that are not historical, such as those relating to Universal Display Corporation's technologies and potential applications of those technologies, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements concern possible or assumed future results of operations, including descriptions of our business strategies and customer relationships. These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "seek," "will," "goal," "may" or similar expressions. You are cautioned not to place undue reliance on any forward-looking statements in this document, as they reflect Universal Display Corporation's current views with respect to future events and are based on assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances, and are thus subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. These risks and uncertainties are discussed in greater detail in Universal Display Corporation's periodic reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, including, in particular, the section entitled "Risk Factors" in Universal Display Corporation's annual report on Form 10-K for the year ended December 31, 2012. Universal Display Corporation disclaims any obligation to update any forward-looking statement contained in this document.

Tables Follow:

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except for share and per share data)

December 31,

2012

2011

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

85,923

$

111,795

Short-term investments

158,018

234,294

Accounts receivable

8,657

10,727

Inventory

11,018

3,843

Other current assets

3,929

1,645

Total current assets

267,545

362,304

PROPERTY AND EQUIPMENT, net

11,808

10,884

ACQUIRED TECHNOLOGY, net

104,624

391

INVESTMENTS

1,270

OTHER ASSETS

277

299

TOTAL ASSETS

$

385,524

$

373,878

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

7,596

$

4,776

Accrued expenses

10,394

9,020

Deferred revenue

4,273

5,534

Other current liabilities

36

187

Total current liabilities

22,299

19,517

DEFERRED REVENUE

3,153

3,874

RETIREMENT PLAN BENEFIT LIABILITY

9,837

8,260

Total liabilities

35,289

31,651

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, 100,000,000 shares authorized, 46,561,437 and 46,113,296 shares issued at December 31, 2012 and 2011, respectively

465

461

Additional paid-in capital

564,883

561,492

Accumulated deficit

(204,211

)

(213,871)

Accumulated other comprehensive loss

(5,702

)

(5,857)

Treasury stock, at cost (205,902 shares at December 31, 2012)

(5,202

)

Total shareholders' equity

350,235

342,227

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

385,524

$

373,878

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands except for share and per share data)

Three Months Ended December 31,

2012

2011

REVENUE:

Material sales

$

10,111

$

10,840

Royalty and license fees

15,445

5,447

Technology development and support revenue

2,577

2,372

Total revenue

28,133

18,659

OPERATING EXPENSES:

Cost of material sales

735

1,080

Research and development

7,958

5,943

Selling, general and administrative

4,789

5,615

Patent costs and amortization of acquired technology

5,526

1,976

Royalty and license expense

754

478

Total operating expenses

19,762

15,092

Operating income

8,371

3,567

INTEREST INCOME

254

350

INTEREST EXPENSE

(5

)

(19

)

INCOME BEFORE INCOME TAXES

8,620

3,898

INCOME TAX (EXPENSE) BENEFIT

(3,235

)

1,836

NET INCOME

$

5,385

$

5,734

NET INCOME PER COMMON SHARE:

BASIC

$

0.12

$

0.13

DILUTED

$

0.12

$

0.12

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

BASIC

46,051,637

45,625,323

DILUTED

46,794,260

46,896,277

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands except for share and per share data)

Year Ended December 31,

2012

2011

REVENUE:

Material sales

$

44,472

$

37,444

Royalty and license fees

31,698

15,345

Technology development and support revenue

7,074

8,500

Total revenue

83,244

61,289

OPERATING EXPENSES:

Cost of material sales

4,528

3,731

Research and development

30,032

24,129

Selling, general and administrative

19,550

18,940

Patent costs and amortization of acquired technology

13,385

7,442

Royalty and license expense

2,073

1,360

Total operating expenses

69,568

55,602

Operating income

13,676

5,687

INTEREST INCOME

1,240

994

INTEREST EXPENSE

(48

)

(50

)

LOSS ON STOCK WARRANT LIABILITY

(4,190

)

INCOME BEFORE INCOME TAXES

14,868

2,441

INCOME TAX (EXPENSE) BENEFIT

(5,208

)

714

NET INCOME

$

9,660

$

3,155

NET INCOME PER COMMON SHARE:

BASIC

$

0.21

$

0.07

DILUTED

$

0.21

$

0.07

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

BASIC

45,951,276

43,737,968

DILUTED

46,883,602

45,140,394

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Year Ended December 31,

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

9,660

$

3,155

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of deferred revenue

(5,284

)

(3,275

)

Depreciation

1,978

1,451

Amortization of intangibles

4,869

49

Amortization of premium and discount on investments, net

(778

)

(775

)

Stock-based employee compensation

4,263

4,373

Stock-based non-employee compensation

6

Non-cash expense under materials and license agreements

9

Stock-based compensation to Board of Directors and Scientific Advisory Board

781

1,377

Loss on stock warrant liability

4,190

Retirement plan benefit expense

1,600

1,527

Decrease (increase) in assets:

Accounts receivable

2,070

(3,479

)

Inventory

(7,175

)

(3,841

)

Other current assets

(2,284

)

341

Other assets

22

(82

)

Increase in liabilities:

Accounts payable and accrued expenses

4,718

6,775

Other current liabilities

11

23

Deferred revenue

3,303

4,585

Net cash provided by operating activities

17,754

16,409

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(2,737

)