

14.	INCOME TAXES:

In July 2012, Samsung Mobile Display Co., Ltd (SMD) merged with Samsung Display Co., Ltd. (SDC). Following the merger, all agreements between the Company and SMD were assigned to SDC, and SDC will honor all pre-existing agreements made between the Company and SMD. SDC has been required to withhold tax upon payment of royalty and license fees to the Company at a rate of 16.5%.

The Company is subject to income taxes in both United States and foreign jurisdictions. For the three months ended March 31, 2014 and 2013, the Company recorded income tax expense of $2.8 million and income tax benefit of $2.2 million, respectively.

The estimated effective income tax rate of 41.1% for 2014 includes 7.3% due to U.S. Subpart F income. In transferring the Company's foreign operations to Ireland, UDC Ireland Limited sold U.S. inventory which resulted in the aforementioned additional U.S. tax.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the Company's ability to generate future taxable income to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. As part of its assessment management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. During the year ended December 31, 2013, based on previous earnings history, an evaluation of expected future taxable income and other evidence, the Company determined it is more likely than not that its federal and the majority of its state deferred tax assets will be realized. At this time there is no additional evidence to release the remaining valuation allowances that relates to UDC Ireland and the remaining portion of foreign tax credits. However, New Jersey research and development credits were released to offset the Company's projected current New Jersey income tax liability for 2014.