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 Universal Display Corporation Announces Fourth Quarter and Full Year 2016 Financial Results
   Thursday, February 23, 2017 4:15:03 PM ET

Universal Display Corporation (OLED ), enabling energy-efficient displays and lighting with its UniversalPHOLED(R) technology and materials, today reported financial results for the fourth quarter and year ended December 31, 2016.

For the full year 2016, the Company reported revenue of $198.9 million, up from $191.0 million for 2015, primarily driven by higher royalty and license fees and contract research services revenue from our recently completed acquisition, partially offset by lower revenue from commercial material sales. The Company posted operating income of $68.4 million for the year and net income of $48.1 million. These results compare to operating income of $32.3 million and net income of $14.7 million for 2015. The 2015 net income figure includes a $33.0 million write-down of inventory in the second quarter, primarily of an existing host material and associated work-in-process, resulting from a customer’s faster-than-expected reduction in demand for this material. Excluding this item and its associated $2.8 million reduction in income tax expense, non-GAAP net income for 2015 was $44.8 million or $0.94 per diluted share (see "reconciliation of non-GAAP measures" for further discussion of the non-GAAP measures).

"We are pleased to report that 2016 finished on a strong note," said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. "In the fourth quarter, total emitter sales increased 25% sequentially, the adoption of next-generation emitters commenced, and with the robust activity for new UniversalPHOLED materials in the pipeline, we embarked on our next expansion phase with PPG Industries to double our phosphorescent emitter production capacity."

Rosenblatt continued, "Looking forward, we see extremely positive momentum in our business and believe that we are well positioned to capture the tremendous opportunities in front of us. With our bustling customer pipeline, we have broadened and further increased the depth of our R&D team to respond to the exciting challenges and opportunities in the marketplace for today and tomorrow. We have the innovation, commitment to operational excellence, agility and flexibility to drive the invention and development of the best OLED technologies and phosphorescent materials for our customers and partners worldwide."

Financial Highlights for the Fourth Quarter of 2016

Total revenue was $74.6 million, up 20% from the fourth quarter of 2015, driven by material sales of $29.2 million, up 5% and royalty and license fees of $43.6 million, up 27%, on a year-to-year basis. Contract research services revenue generated from the wholly-owned subsidiary Adesis, Inc. was $1.8 million. The Company recognized $37.5 million in SDC licensing revenue, up from $30 million in the same quarter of 2015.

The Company reported operating income of $34.8 million for the fourth quarter of 2016, up 31% compared to $26.6 million for the fourth quarter of 2015. Cost of sales was $9.1 million, up from $8.1 million, and operating expenses were $30.7 million, up from $27.6 million.

Net income for the fourth quarter of 2016 was $25.8 million, or $0.55 per diluted share, compared to $18.1 million, or $0.39 per diluted share, for the fourth quarter of 2015.

Financial Highlights for the Full Year 2016

Revenue for the full year 2016 was $198.9 million, up 4% from $191.0 million for the prior year. Material sales were $99.3 million, down 12% from $113.1 million for the prior year, primarily due to a decline in host sales of $11.1 million. Royalty and license fees were $96.1 million, up $18.3 million from $77.8 million for the prior year, reflecting the $15.0 million increase SDC license revenue. Contract research services revenue was $3.5 million, compared to $0.2 million for the prior year due to customer sales from the recently acquired Adesis subsidiary.

The Company reported operating income of $68.4 million for the full year 2016, compared to $32.3 million for the prior year. Operating income in the prior year reflected a $33.0 million write-down of inventory, primarily of an existing host material and associated work-in-process. Excluding this item, adjusted operating income for the full year 2015 was $65.3 million (see "reconciliation of non-GAAP Measures" below for further discussion of the non-GAAP measures included in this release).

For the full year 2016, the Company reported net income of $48.1 million, or $1.02 per diluted share. Net income in the full year 2016 included an increase in amortization expense of $5.5 million associated with the purchase of the BASF OLED IP assets and the acquisition of Adesis, or a reduction of $0.08 per diluted share. These results compare to net income of $14.7 million, or $0.31 per diluted share, for the prior year. Excluding the inventory write-down, and the associated $2.8 million reduction of income tax expense, adjusted net income for the prior year was $44.8 million, or $0.94 per diluted share.

Operating cash flow for the full year 2016 was $80.3 million, compared to $113.6 million for the prior year. Operating cash flow for the full year 2015 included an upfront $42.0 million license and royalty payment.

The Company’s balance sheet remained strong, with cash and cash equivalents and investments of $343.0 million as of December 31, 2016. During the year, the Company added $96.0 million in intangible assets in the form of acquired license rights and know-how with the BASF patent acquisition, and the Adesis acquisition added $16.8 million in intangible assets in the form of customer relationships, internally developed IP and trade names as well as $15.5 million of goodwill.

2017 Guidance

Although the OLED industry is still at an early state where many variables can have a material impact on its growth, and the Company thus caveats its financial guidance accordingly, the Company believes that its revenues will be in the range of $230 million to $250 million for fiscal 2017.

Dividend

The Company also announced a cash dividend today of $0.03 per share on the Company’s common stock. The dividend is payable on March 31, 2017, to all shareholders of record as of the close of business on March 15, 2017.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, February 23, 2017 at 5:00 p.m. Eastern Time. The live webcast of the conference call can be accessed under the events page of the Company’s Investor Relations website at ir.oled.com. Those wishing to participate in the live call should dial 1-888-525-6276 (toll-free) or 1-719-325-2425, and reference conference ID 1207105. Please dial in 5-10 minutes prior to the scheduled conference call time. An online archive of the webcast will be available within two hours of the conclusion of the call.

Upcoming Investor Events

On March 15, 2017, Universal Display Corporation will present at the Goldman Sachs Third Annual Innovation Symposium to be held in New York City. The event will not be webcasted.

About Universal Display Corporation

Universal Display Corporation (OLED ) 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 4,200 issued and pending patents worldwide. Universal Display licenses its proprietary technologies, including its breakthrough high-efficiency UniversalPHOLED(R) phosphorescent OLED technology that can enable the development of low power and eco-friendly displays and solid-state 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, with international offices in China, Hong Kong, Ireland, Japan, South Korea, and Taiwan, 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, BOE Technology, DuPont Displays, Inc., Innolux Corporation, Kaneka Corporation, Konica Minolta Technology Center, Inc., LG Display Co., Ltd., Lumiotec, Inc., OLEDWorks LLC, OSRAM, Pioneer Corporation, Samsung Display Co., Ltd., Sumitomo Chemical Company, Ltd., Tianma Micro-electronics and Tohoku Pioneer Corporation. To learn more about Universal Display Corporation, please visit http://www.oled.com .

Universal Display Corporation and the Universal Display Corporation 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, the Company’s expected results and future declaration of dividends, as well as the growth of the OLED market and the Company’s opportunities in that market, are forward-looking financial statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 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, 2016. Universal Display Corporation disclaims any obligation to update any forward-looking statement contained in this document.

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                                                                                          UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
                                                                                                    CONSOLIDATED BALANCE SHEETS
                                                                                          (in thousands, except share and per share data)
 
                                                                                   December 31, 2016                                 December 31, 2015
                                                                                                                  ------------------------------                          ---------------------------------------------------------
                                 ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                                                                                                        $  139,365                                              $         97,513
    Short-term investments                                                                                                              188,644                                                       297,981
    Accounts receivable                                                                                                                  24,994                                                        24,729
    Inventory                                                                                                                            17,314                                                        12,748
    Deferred income taxes                                                                                                                 8,661                                                        12,326
    Other current assets                                                                                               6,392                                      2,387  
                                                                                                                  -------------------- --------                           -------------------- -------------- --------------------
        Total current assets                                                                                                            385,370                                                       447,684
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $32,167                                                                       27,203                                                        22,407
and $27,897
ACQUIRED TECHNOLOGY, net of accumulated amortization of $70,714                                                                         152,127                                                        72,015
and $54,837
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $615 and                                                                     16,225                                                --
none
GOODWILL                                                                                                                                 15,535                                                --
INVESTMENTS                                                                                                                              14,960                                                         2,187
DEFERRED INCOME TAXES                                                                                                                    15,832                                                        14,945
OTHER ASSETS                                                                                                             307                                        174  
                                                                                                                  -------------------- --------                           -------------------- -------------- --------------------
TOTAL ASSETS                                                                                                                         $  627,559                                              $        559,412  
                                                                                                                  ==================== ========                           ==================== ============== ====================
     LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
    Accounts payable                                                                                                                 $    8,112                                              $          6,849
    Accrued expenses                                                                                                                     19,845                                                        17,387
    Deferred revenue                                                                                                                     10,282                                                        10,107
    Other current liabilities                                                                                          1,967                                        167  
                                                                                                                  -------------------- --------                           -------------------- -------------- --------------------
        Total current liabilities                                                                                                        40,206                                                        34,510
DEFERRED REVENUE                                                                                                                         31,322                                                        35,543
RETIREMENT PLAN BENEFIT LIABILITY                                                                                     27,563                                     22,594  
                                                                                                                  -------------------- --------                           -------------------- -------------- --------------------
        Total liabilities                                                                                             99,091                                     92,647  
                                                                                                                  -------------------- --------                           -------------------- -------------- --------------------
SHAREHOLDERS’ EQUITY:
                                                                                                                                              2                                                             2
    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)
    Common Stock, par value $0.01 per share, 100,000,000 shares                                                                             483                                                           482
    authorized, 48,270,990 and 48,132,223 shares issued, and 46,913,127
    and 46,774,360 shares outstanding at December 31, 2016 and December
    31, 2015, respectively
    Additional paid-in capital                                                                                                          604,364                                                       589,885
    Accumulated deficit                                                                                                                 (25,557 )                                                     (73,627 )
    Accumulated other comprehensive loss                                                                                                (10,666 )                                                      (9,819 )
    Treasury stock, at cost (1,357,863 shares at December 31, 2016 and                                               (40,158 )                                  (40,158 )
    December 31, 2015)
                                                                                                                  -------------------- --------                           -------------------- -------------- --------------------
        Total shareholders’ equity                                                        528,468                                    466,765  
                                                                                                                  -------------------- --------                           -------------------- -------------- --------------------
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                $  627,559                                              $        559,412  
                                                                                                                  ==================== ========                           ==================== ============== ====================
                                                                                                                                                                                                               
 
                                                                                                            UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
                                                                                                                   CONSOLIDATED STATEMENTS OF INCOME
                                                                                                            (in thousands, except share and per share data)
                                                                                                                              (Unaudited)
 
                                                                                                                                     Three Months Ended December 31,
                                                                                                              --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      2016                                                       2015
                                                                                                              -----------------------------------------------------                                          ---------------------------------------------------------
REVENUE:
    Material sales                                                                                                               $     29,201                                                                                   $         27,796
    Royalty and license fees                                                                                                           43,563                                                                                             34,441
    Contract research services                                                                                       1,813                                                           75  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
        Total revenue                                                                                               74,577                                                       62,312  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
COST OF SALES                                                                                                        9,094                                                        8,085  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
GROSS MARGIN                                                                                                                           65,483                                                                                             54,227
OPERATING EXPENSES:
    Research and development                                                                                                           11,182                                                                                             12,643
    Selling, general and administrative                                                                                                10,148                                                                                              8,902
    Amortization of acquired technology and other intangible assets                                                                     5,453                                                                                              2,750
    Patent costs                                                                                                                        1,774                                                                                              1,505
    Royalty and license fees                                                                                         2,167                                                        1,807  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
        Total operating expenses                                                                                    30,724                                                       27,607  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
OPERATING INCOME                                                                                                                       34,759                                                                                             26,620
    Interest income, net                                                                                                                  569                                                                                                222
    Other (expense) income, net                                                                                         54                                               --  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
        Interest and other (expense) income, net                                                                       623                                                          222  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
INCOME BEFORE INCOME TAXES                                                                                                             35,382                                                                                             26,842
INCOME TAX EXPENSE                                                                                                  (9,563 )                                                                        (8,754 )
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
NET INCOME                                                                                                                       $     25,819                                                                $         18,088  
                                                                                                              ==================== ========== ====================                                           ==================== ============== ====================
                                                                                                                                                                                                              
Net income per common share:
        Basic                                                                                                                    $       0.55                                                                                   $           0.39
        Diluted                                                                                                                  $       0.55                                                                                   $           0.39
Weighted average shares used in computing net income per common
share:
        Basic                                                                                                                      46,905,341                                                                                         46,675,225
        Diluted                                                                                                                    47,038,323                                                                                         46,864,535
                                                                                                                                                                                                                                                  
 
                                                                                                            UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
                                                                                                                   CONSOLIDATED STATEMENTS OF INCOME
                                                                                                            (in thousands, except share and per share data)
 
                                                                                                                                         Year Ended December 31,
                                                                                                              --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      2016                                                       2015
                                                                                                              -----------------------------------------------------                                          ---------------------------------------------------------
REVENUE:
    Material sales                                                                                                               $     99,285                                                                                   $        113,066
    Royalty and license fees                                                                                                           96,132                                                                                             77,773
    Contract research services                                                                                       3,469                                                          207  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
        Total revenue                                                                                              198,886                                                      191,046  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
COST OF SALES                                                                                                       26,288                                                       62,997  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
GROSS MARGIN                                                                                                                          172,598                                                                                            128,049
OPERATING EXPENSES:
    Research and development                                                                                                           42,744                                                                                             44,641
    Selling, general and administrative                                                                                                32,876                                                                                             29,046
    Amortization of acquired technology and other intangible assets                                                                    16,493                                                                                             10,999
    Patent costs                                                                                                                        6,249                                                                                              5,717
    Royalty and license fees                                                                                         5,823                                                        5,370  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
        Total operating expenses                                                                                   104,185                                                       95,773  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
OPERATING INCOME                                                                                                                       68,413                                                                                             32,276
    Interest income, net                                                                                                                2,113                                                                                                783
    Other (expense) income, net                                                                                     (1,928 )                                                                --  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
        Interest and other (expense) income, net                                                                       185                                                          783  
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
INCOME BEFORE INCOME TAXES                                                                                                             68,598                                                                                             33,059
INCOME TAX EXPENSE                                                                                                 (20,528 )                                                                       (18,381 )
                                                                                                              -------------------- ---------- --------------------                                           -------------------- -------------- --------------------
NET INCOME                                                                                                                       $     48,070                                                                $         14,678  
                                                                                                              ==================== ========== ====================                                           ==================== ============== ====================
                                                                                                                                                                                                              
Net income per common share:
        Basic                                                                                                                    $       1.02                                                                                   $           0.31
        Diluted                                                                                                                  $       1.02                                                                                   $           0.31
Weighted average shares used in computing net income per common
share:
        Basic                                                                                                                      46,408,460                                                                                         46,816,394
        Diluted                                                                                                                    46,535,980                                                                                         47,494,188
                                                                                                                                                                                                                                                  
 
                                                                                                                 UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
                                                                                                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                                                 (in thousands)
 
                                                                                                                                                 Year Ended December 31,
                                                                                                                    ------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              2016                                                         2015
                                                                                                                    ---------------------------------------------------------                                          ---------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                                                                             $         48,070                                                                                   $         14,678
Adjustments to reconcile net income to net cash provided by
operating activities:
    Amortization of deferred revenue                                                                                                             (7,406 )                                                                                           (8,994 )
    Depreciation                                                                                                                                  4,270                                                                                              3,086
    Amortization of intangibles                                                                                                                  16,492                                                                                             10,999
    Inventory write-down                                                                                                                 --                                                                                             33,000
    Amortization of premium and discount on investments, net                                                                                     (1,830 )                                                                                             (697 )
    Stock-based compensation to employees                                                                                                        11,374                                                                                              9,173
    Stock-based compensation to Board of Directors and Scientific                                                                                 1,715                                                                                              1,291
    Advisory Board
    Deferred income tax benefit                                                                                                                   3,094                                                                                              7,137
    Excess tax benefits from share-based payment arrangements                                                                                    (4,232 )                                                                                   --
    Retirement plan benefit expense                                                                                                               3,965                                                                                              3,354
Decrease (increase) in assets, net of effect of acquisition:
    Accounts receivable                                                                                                                           1,205                                                                                             (2,654 )
    Inventory                                                                                                                                    (4,460 )                                                                                           (8,639 )
    Other current assets                                                                                                                         (3,870 )                                                                                            1,969
    Other assets                                                                                                                                   (133 )                                                                                              251
Increase (decrease) in liabilities, net of effect of acquisition:
    Accounts payable and accrued expenses                                                                                                         4,362                                                                                                790
    Other current liabilities                                                                                                                     4,362                                                                                                 56
    Deferred revenue                                                                                                           3,360                                                       48,812  
                                                                                                                    -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
        Net cash provided by operating activities                                                                             80,338                                                      113,612  
                                                                                                                    -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property and equipment                                                                                                          (7,300 )                                                                                           (5,103 )
    Purchase of intangibles                                                                                                                     (95,989 )                                                                                   --
    Purchase of business, net of cash acquired                                                                                                  (33,380 )                                                                                   --
    Purchases of investments                                                                                                                   (450,277 )                                                                                         (691,876 )
    Proceeds from sale of investments                                                                                        548,474                                                      638,411  
                                                                                                                    -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
        Net cash used in investing activities                                                                                (38,472 )                                                                       (58,568 )
                                                                                                                    -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common stock                                                                                                          439                                                                                                354
    Repurchase of common stock                                                                                                           --                                                                                     --
    Proceeds from the exercise of common stock options                                                                                              185                                                                                              2,034
    Payment of withholding taxes on stock-based compensation to employees                                                                        (4,870 )                                                                                           (5,337 )
    Excess tax benefits from share-based payment arrangements                                                                  4,232                                               --  
                                                                                                                    -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
        Net cash used in financing activities                                                                                    (14 )                                                                        (2,949 )
                                                                                                                    -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                                                 41,852                                                                                             52,095
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                                                  97,513                                                       45,418  
                                                                                                                    -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                                                                                                 $        139,365                                                                $         97,513  
                                                                                                                    ==================== ============== ====================                                           ==================== ============== ====================
The following non-cash activities occurred:
Unrealized loss on available-for-sale securities                                                                                       $           (207 )                                                                                 $           (129 )
Common stock issued to the Board of Directors and Scientific                                                                                        300                                                                                                300
Advisory Board earned and accrued in a previous period
Common stock issued to employees earned and accrued in a previous                                                                                 1,105                                                                                                967
period
Net change in accruals for purchases of property and equipment                                                                                     (103 )                                                                                              467
Earnout liability recorded for Adesis acquisition                                                                                                 1,670                                                                                     --
Excess tax benefits accrued in other current liabilities                                                                                         (4,232 )                                                                                   --
Cash paid for income tax, net                                                                                                                    12,870                                                                                             10,364
                                                                                                                                                                                                                                                            
Reconciliation of non-GAAP measures
 
The following table details our reconciliation of non-GAAP measures
to the most directly comparable GAAP measures:
 
                                                                    
(in thousands, except per share data)                                                                                              Three Months Ended December 31, 2016
                                                                                                             ------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       2016                                                         2015
                                                                                                             ---------------------------------------------------------                                          ---------------------------------------------------------
Cost of commercial material sales reconciliation
Cost of commercial material sales                                                                                               $          6,333                                                                                   $          8,085
Cost of commercial material sales adjustments:
    Inventory write-down                                                                                       --                                               --  
                                                                                                             -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
Adjusted cost of commercial material sales                                                                                      $          6,333                                                                $          8,085  
                                                                                                             ==================== ============== ====================                                           ==================== ============== ====================
Cost of commercial material sales as a % of commercial material                                                                               28 %                                                                                               34 %
sales
Adjusted cost of commercial material sales as a % of commercial                                                                               28 %                                                                                               34 %
material sales
                                                                                                                                                                                                                 
Operating income reconciliation
Operating income                                                                                                                $         34,759                                                                                   $         26,620
Operating income adjustments:
    Inventory write-down                                                                                       --                                               --  
                                                                                                             -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
Adjusted operating income                                                                                                       $         34,759                                                                $         26,620  
                                                                                                             ==================== ============== ====================                                           ==================== ============== ====================
Operating income as a % of total revenue                                                                                                      47 %                                                                                               43 %
Adjusted operating income as a % of total revenue                                                                                             47 %                                                                                               43 %
                                                                                                                                                                                                                 
Net income reconciliation
Net income                                                                                                                      $         25,819                                                                                   $         18,088
Net income per share:
    Basic                                                                                                                       $           0.55                                                                                   $           0.39
    Diluted                                                                                                                     $           0.55                                                                                   $           0.39
Net income adjustments:
    Inventory write-down                                                                                                          --                                                                                     --
    Income tax effect of inventory write-down                                                                                     --                                                                                     --
    Deferred income tax expense                                                                                                   --                                                                                     --
    Release of income tax valuation write-down                                                                 --                                               --  
                                                                                                             -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
Adjusted net income*                                                                                                            $         25,819                                                                $         18,088  
                                                                                                             ==================== ============== ====================                                           ==================== ============== ====================
Net income as a % of total revenue                                                                                                            35 %                                                                                               29 %
Adjusted net income as a % of total revenue                                                                                                   35 %                                                                                               29 %
Adjusted net income per share:
    Basic **                                                                                                                    $           0.55                                                                                   $           0.39
    Diluted ***                                                                                                                 $           0.55                                                                                   $           0.39
Weighted average shares used in computing net income per share and
adjusted net income per share:
    Basic                                                                                                                             46,905,341                                                                                         46,675,225
    Diluted                                                                                                                           47,038,323                                                                                         46,864,535
                                                                                                                                                                                                                                                     
_______________
*       Adjusted net income per share, basic and diluted is derived from
                           dividing adjusted net income by the number of weighted average
                           shares used in computing basic and diluted net income per share.
 
Reconciliation of non-GAAP measures
 
The following table details our reconciliation of non-GAAP measures
to the most directly comparable GAAP measures:
 
                                                                      
(in thousands, except per share data)                                                                                                                                        Year Ended December 31, 2016
                                                                                                             ------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       2016                                                         2015
                                                                                                             ---------------------------------------------------------                                          ---------------------------------------------------------
Cost of commercial material sales reconciliation
Cost of commercial material sales                                                                                               $         18,609                                                                                   $         62,997
Cost of commercial material sales adjustments:
    Inventory write-down                                                                                       --                                                       33,000  
                                                                                                             -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
Adjusted cost of commercial material sales                                                                                      $         18,609                                                                $         29,997  
                                                                                                             ==================== ============== ====================                                           ==================== ============== ====================
Cost of commercial material sales as a % of commercial material                                                                               22 %                                                                                               62 %
sales
Adjusted cost of commercial material sales as a % of commercial                                                                               22 %                                                                                               30 %
material sales
                                                                                                                                                                                                                 
Operating income reconciliation
Operating income                                                                                                                $         68,413                                                                                   $         32,276
Operating income adjustments:
    Inventory write-down                                                                                       --                                                       33,000  
                                                                                                             -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
Adjusted operating income                                                                                                       $         68,413                                                                $         65,276  
                                                                                                             ==================== ============== ====================                                           ==================== ============== ====================
Operating income as a % of total revenue                                                                                                      34 %                                                                                               17 %
Adjusted operating income as a % of total revenue                                                                                             34 %                                                                                               34 %
                                                                                                                                                                                                                 
Net income reconciliation
Net income                                                                                                                      $         48,070                                                                                   $         14,678
Net income per share:
    Basic                                                                                                                       $           1.02                                                                                   $           0.31
    Diluted                                                                                                                     $           1.02                                                                                   $           0.31
Net income adjustments:
    Inventory write-down                                                                                                          --                                                                                             33,000
    Income tax effect of inventory write-down                                                                                     --                                                                                             (2,836 )
    Deferred income tax expense                                                                                                   --                                                                                     --
    Release of income tax valuation write-down                                                                 --                                               --  
                                                                                                             -------------------- -------------- --------------------                                           -------------------- -------------- --------------------
Adjusted net income*                                                                                                            $         48,070                                                                $         44,842  
                                                                                                             ==================== ============== ====================                                           ==================== ============== ====================
Net income as a % of total revenue                                                                                                            24 %                                                                                                8 %
Adjusted net income as a % of total revenue                                                                                                   24 %                                                                                               23 %
Adjusted net income per share:
    Basic **                                                                                                                    $           1.02                                                                                   $           0.96
    Diluted                                                                                                                     $           1.02                                                                                   $           0.94
Weighted average shares used in computing net income per share and
adjusted net income per share:
    Basic                                                                                                                             46,408,460                                                                                         46,816,394
    Diluted                                                                                                                           46,535,980                                                                                         47,494,188
                                                                                                                                                                                                                                                     
_______________
*       Adjusted net income assumes an effective tax rate of 32% for the
                           year ended December 31, 2015, based on excluding the impact of the
                           inventory write down.
**                         Adjusted net income per common share, basic, is derived from
                           dividing adjusted net income by the number of weighted average
                           shares used in computing basic net income per common share.
                            

Non-GAAP Measures

To supplement Universal Display Corporation’s selected financial data presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP measures. These non-GAAP measures include adjusted operating income, adjusted cost of material sales, adjusted net income, adjusted net income per common share, basic and adjusted net income per common share, diluted.

Each of these non-GAAP measures excludes the effect of the write-down of primarily existing host materials that were not included in its customer’s new products as well as excluding the effect of the release of income tax valuation allowances. Universal Display has provided these non-GAAP measures, which the Company believes more accurately reflect the operating performance of its ongoing business, to enhance investors’ overall understanding of its current financial performance and period-to-period comparisons. The presentation of non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170223006566r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170223006566/en/

SOURCE: Universal Display Corporation"> <Property FormalName="PrimaryTwitterHandle" Value="@udcoled

Universal Display Contact: 
Darice Liu, 609-671-0980 x570 
investor@oled.com 
media@oled.com


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