Priceline.com Reports Financial Results For 3rd Quarter 2007

Priceline.com Incorporated (Nasdaq: PCLN) today reported its financial results for the 3rd quarter 2007. Gross travel bookings for the 3rd quarter, which refers to the total Dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers, rose 54.0% year-over-year to $1.39 billion. Priceline.com had GAAP revenues in the 3rd quarter of $417.3 million, a 33.1% increase over a year ago. Priceline.com’s GAAP gross profit for the 3rd quarter was $202.3 million, a 63.8% increase from the prior year. Priceline.com had GAAP net income for the 3rd quarter 2007 of $104.4 million or $2.27 per diluted share, which compares to $47.8 million or $1.05 per diluted share in the same period a year ago. GAAP net income for the 3rd quarter 2007 was positively affected by a $47.9 million non-cash tax benefit from reversing a portion of priceline.com’s deferred tax asset valuation allowance in the period. GAAP net income for the 3rd quarter 2006 was positively affected by a similar $28.1 million non-cash tax benefit. Priceline.com reported pro forma revenues in the 3rd quarter of $416.9 million, a 33.7% increase over a year ago. Pro forma gross profit for the 3rd quarter 2007 was $201.9 million, an increase of 65.1% over the same period in the prior year. Pro forma net income for the quarter was $71.5 million or $1.58 per diluted share, which compares to $30.2 million, or $0.72 per diluted share in the same period a year ago. First Call analyst consensus for the 3rd quarter 2007 was $1.28 per diluted share. The section below entitled "Non-GAAP Financial Measures” provides a definition and information about the use of pro forma financial measures in this press release and the attached financial and statistical supplement reconciles pro forma financial information with priceline.com’s financial results under GAAP. The non-cash income tax benefit in the 3rd quarter of 2007 was recorded pursuant to the provisions of Statement of Financial Accounting Standards No. 109, which requires a company to release a portion of its deferred tax asset valuation allowance when it becomes more likely than not that it will realize all or some portion of its deferred tax asset. The company released a portion of its valuation allowance in the 3rd quarter 2007 after taking into consideration current operating results and future prospects. While priceline.com does not expect to pay cash U.S. federal income taxes on its income for the foreseeable future, priceline.com records a mostly non-cash provision for U.S. income tax expense in its consolidated financial statements. Priceline.com makes cash tax payments for U.S. alternative minimum taxes and for certain international taxes. "Priceline.com’s over-performance in the 3rd quarter was driven by a combination of what we believe to be continued market-leading growth in our Booking.com international business and strong quarterly results from our domestic product lines,” said priceline.com President and Chief Executive Officer Jeffery H. Boyd. "Despite increasingly challenging quarterly comparables, Booking.com recorded a 97.9% increase in gross travel bookings compared to a year ago. Booking.com’s team has been very effective in growing its business throughout Europe and in the U.S. and other international markets.” Mr. Boyd continued, "During the 3rd quarter, priceline.com’s domestic gross travel bookings increased by 19% on increasing merchant hotel and rental car sales and a 23% increase in airline ticket sales principally tied to our no-booking-fee promotion. Despite the loss of margin on retail ticket sales, year-over-year domestic operating margins were up substantially.” Looking forward, Mr. Boyd said, "Priceline is directing its key assets and resources to building the leading worldwide online hotel business. Our results this year reflect the strength of our products and operations. They also reflect the benefits of our businesses supporting each other by sharing regional demand and hotel supply, technology and business know-how. With good momentum in Europe and the U.S., we believe the Agoda transaction, also announced today, represents a positive step in developing the same supportive dynamics in Asia, which we believe will help us build a meaningful presence in that important market.” Forward Guidance Priceline.com said it was targeting the following for 4th quarter 2007: Year-over-year increases in overall gross travel bookings of approximately 50%. Year-over-year increases in gross travel bookings from Booking.com of approximately 90% to 95%. Year-over-year increase in pro forma revenue of approximately 22% to 26%. Year-over-year increase in pro forma gross profit of approximately 50%. Pro forma net income of between $0.77 and $0.85 per diluted share. Pro forma guidance for the 4th quarter 2007: excludes non-cash amortization expense of acquisition-related intangibles, excludes non-cash stock-based compensation expense, excludes option payroll tax expense, excludes non-cash income tax expense and reflects the impact on income taxes of the pro forma adjustments, includes the additional impact on minority interest expense of the pro forma adjustments described above, includes the anti-dilutive impact of the "Conversion Spread Hedges" (see below) on outstanding diluted common shares outstanding, and includes the dilutive impact of additional shares of unvested restricted stock and restricted stock units (including performance share units) because pro forma net income has been adjusted to exclude preferred stock dividend and stock-based compensation. When aggregated, the foregoing adjustments are expected to increase pro forma net income over GAAP net income by approximately $12 million for the 4th quarter 2007. On a per share basis, the Company estimates GAAP net income of approximately $0.51 to $0.59 per diluted share for the 4th quarter 2007. The Financial Accounting Standards Board ("FASB”) is expected to adopt a FASB Staff Position ("FSP”) that would significantly impact the accounting for convertible debt. The FSP would require cash settled convertible debt to be separated into debt and equity components at issuance and a value to be assigned to each. The value assigned to the debt component would be the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value would be recorded as a debt discount and amortized to interest expense over the life of the bond. Although the FSP would have no impact on priceline.com’s actual past or future cash flows, it would require priceline.com to record a significant amount of non-cash interest expense as the debt discount is amortized. As a result, there would be a material adverse impact on priceline’s reported GAAP results of operations and earnings per share. The FSP, if adopted, will become effective January 1, 2008 for priceline and require retrospective application. About Priceline.com® Incorporated Priceline.com Incorporated (Nasdaq: PCLN) operates priceline.com, a leading U.S. online travel service for value-conscious leisure travelers, and Booking.com, a leading international online hotel reservation service. In the U.S., priceline.com gives customers more ways to save on their airline tickets, hotel rooms, rental cars, vacation packages and cruises than any other Internet travel service. In addition to getting great published prices, leisure travelers can narrow their searches using priceline.com’s TripFilter™ advanced search technology, create packages to save even more money, and take advantage of priceline.com’s famous Name Your Own Price® service, which can deliver the lowest prices available. Priceline.com believes that Booking.com is Europe’s largest and fastest growing hotel reservation service, with a network of affiliated Web sites. Booking.com operates in 60 countries in 16 languages and offers its customers access to approximately 38,000 participating hotels worldwide. Priceline.com also operates the following travel websites: Travelweb.com, Lowestfare.com, RentalCars.com and BreezeNet.com. Priceline.com also has a personal finance service that offers home mortgages, refinancing and home equity loans through an independent licensee. Priceline.com licenses its business model to independent licensees, including priceline mortgage and certain international licensees. Information About Forward-Looking Statements This press release may contain forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements. Expressions of future goals and similar expressions including, without limitation, "goal,” "believe(s)," "intend,” "expect(s)," "will," "may," "should," "could," "plan(s)," "anticipate(s)," "estimate(s)," "predict(s)," "potential," "target(s)," or "continue," reflecting something other than historical fact are intended to identify forward-looking statements. The following factors, among others, could cause the Company's actual results to differ materially from those described in the forward-looking statements:   -- adverse changes in general market conditions for leisure and other travel services as a result of, among other things, terrorist attacks, natural disasters or adverse weather, the bankruptcy or insolvency of a major airline, decreased consumer spending, general economic downturn or the outbreak of an epidemic or pandemic disease;   -- adverse changes in the Company's relationships with airlines and other product and service providers and vendors which could include, without limitation, the withdrawal of suppliers from the priceline.com system (either priceline.com's "retail" or "opaque" services, or both) and/or the loss or reduction of global distribution fees;   -- the occurrence of an external or internal security breach of our systems or other Internet based systems involving personal customer information, credit card information or other sensitive data;   -- the effects of increased competition;   -- fluctuations in foreign exchange rates;   -- our ability to expand successfully in international markets;   -- systems-related failures and/or security breaches, including without limitation, any security breach that results in the theft, transfer or unauthorized disclosure of customer information, or the failure to comply with various state laws applicable to the company's obligations in the event of such a breach;   -- difficulties integrating recent or future acquisitions, including ensuring the effectiveness of the design and operation of internal controls and disclosure controls of acquired businesses;   -- a change by a major search engine to its search engine algorithms that negatively affects the search engine ranking of the company or its 3rd party distribution partners;   --legal and regulatory risks; and   -- the ability to attract and retain qualified personnel. For a detailed discussion of these and other factors that could cause the Company's actual results to differ materially from those described in the forward-looking statements, please refer to the Company's most recent Form 10-Q, Form 10-K and Form 8-K filings with the Securities and Exchange Commission. Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Non-GAAP Financial Measures Pro forma revenue, Pro forma gross profit, pro forma net income and pro forma net income per share are "non-GAAP financial measures," as such term is defined by the Securities and Exchange Commission, and may differ from non-GAAP financial measures used by other companies. Priceline.com believes that pro forma revenue, pro forma gross profit, pro forma net income and pro forma net income per share that exclude certain non-cash or non-recurring income or expense items are useful for investors to evaluate priceline.com's future on-going performance because they enable a more meaningful comparison of priceline.com's projected cash earnings and performance with its historical results from prior periods. Pro forma financial information is adjusted for the following items:   -- Cash expenses associated with the settlement of the 2000 securities litigation are excluded because of the non-recurring nature of the settlement.   -- Cash benefit associated with the refund of excise taxes paid on merchant airline tickets that was approved for payment by the Internal Revenue Service is excluded because of its non-recurring nature.   -- Amortization expense of acquisition-related intangibles is excluded from pro forma gross profit and pro forma net income because it does not impact cash earnings.   -- Stock-based compensation expense and the non-cash expense associated with the payment of preferred stock dividends are excluded from pro forma net income because they do not impact cash earnings and are reflected in earnings per share through increased share counts.   -- Option payroll tax expense is excluded because the expense is driven primarily by stock option exercise activity and the market price of priceline.com's common stock and often shows volatility unrelated to operating results.   -- The restructuring charge, net is excluded because it can impact comparability of earnings with historical results from prior periods.   -- Income tax expense is adjusted for the tax impact of certain of the pro forma adjustments described above and to exclude tax expense recorded where no actual tax payments are owed because of available net operating loss carry forwards. In addition, pro forma income tax expense is adjusted to exclude the non-cash tax benefit from reversing a portion of priceline.com's deferred tax asset valuation allowance. This benefit amounted to $47.9 million in 3rd quarter 2007 and $28.1 million in 3rd quarter 2006.   -- Minority interest is adjusted for the impact of certain of the pro forma adjustments described above.   -- Finally, for calculating pro forma net income per share:   -- net income is adjusted for the impact of the pro forma adjustments described above   -- fully diluted share count is adjusted to include the anti-dilutive impact of priceline.com's "Conversion Spread Hedges" related to priceline.com's convertibles securities that increase the effective conversion price of the 0.50% convertible notes due 2011 and 0.75% convertible notes due 2013 from their stated $40.38 conversion price to an effective conversion price of $50.47 per share. Under GAAP, the anti-dilutive impact of the Conversion Spread Hedges is not reflected on the outstanding diluted share count until the end of the hedge when shares are delivered.   -- fully diluted share count in 2006 is adjusted to exclude the impact of EITF 04-08 ("Effect of Contingently Convertible Debt on Diluted Earnings per Share"), because the common stock that underlie priceline.com's 1.0% convertible notes due 2011 and priceline.com's 2.25% convertible notes due 2025 were not issuable because our common stock did not trade above the respective contingent conversion prices.   -- All common stock warrants and unvested shares of restricted common stock, restricted stock units and performance share units are included in the calculation of pro forma net income per share because pro forma net income has been adjusted to exclude our preferred stock dividend and stock-based compensation expense. The presentation of this financial information should not be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles in the United States. The attached financial and statistical supplement reconciles pro forma financial information with priceline.com’s financial results under GAAP. priceline.com IncorporatedCONSOLIDATED BALANCE SHEETS(unaudited)(In thousands, except share and per share data)     September 30, December 31, ASSETS 2007 2006   Current assets: Cash and cash equivalents $ 423,508 $ 423,577 Restricted cash 2,710 2,459 Short-term investments 73,048 7,983 Accounts receivable, net of allowance for doubtful accounts of $1,641 and $1,651, respectively 103,558 48,536 Prepaid expenses and other current assets   26,998     20,534   Total current assets 629,822 503,089   Long-term investments 18,735 - Property and equipment, net 25,056 21,691 Intangible assets, net 182,438 152,925 Goodwill 270,807 226,707 Deferred taxes 222,766 179,392 Other assets   21,085     21,844     Total assets $ 1,370,709   $ 1,105,648     LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Accounts payable $ 59,359 $ 49,032 Accrued expenses and other current liabilities 124,576 46,872 Deferred merchant bookings 7,670 4,768 Convertible debt   569,453     -   Total current liabilities 761,058 100,672   Deferred taxes 47,153 39,714 Other long-term liabilities 12,508 11,885 Minority interest 15,127 22,486 Convertible debt   -     568,865   Total liabilities   835,846     743,622       Series B mandatorily redeemable preferred stock, $0.01 par value, 80,000 authorized shares; $1,000 liquidation value per share; 80,000 shares issued and 0 and 13,470 shares outstanding, respectively - 13,470   Stockholders' equity: Common stock, $0.008 par value, authorized 1,000,000,000 shares, 44,969,857, and 43,215,712 shares issued, respectively 345 331 Treasury stock, 6,641,992 and 6,603,050 shares, respectively (488,691 ) (486,468 ) Additional paid-in capital 2,112,949 2,070,379 Accumulated deficit (1,139,368 ) (1,262,033 ) Accumulated other comprehensive income   49,628     26,347   Total stockholders' equity   534,863     348,556     Total liabilities and stockholders' equity $ 1,370,709   $ 1,105,648   priceline.com IncorporatedCONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)(In thousands, except per share data)           Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006   Merchant revenues, including $395 and $18,592 excise tax refund for the three and nine months ended September 30, 2007, respectively   $ 275,211 $ 238,558 $ 776,131 $ 699,520 Agency revenues 139,623 73,326 292,478 159,599 Other revenues   2,453     1,583     5,947     3,913   Total revenues 417,287 313,467 1,074,556 863,032   Cost of merchant revenues 214,956 189,920 595,297 561,450 Cost of agency revenues - - - - Cost of other revenues   -     -     -     -   Total costs of revenues   214,956     189,920     595,297     561,450     Gross profit   202,331     123,547     479,259     301,582     Operating expenses: Advertising - Offline 8,413 6,665 29,028 24,962 Advertising - Online 53,844 34,560 129,241 86,914 Sales and marketing 13,093 11,204 36,027 31,494 Personnel, including stock-based compensation of $4,127, $3,543, $10,759, $10,277, respectively 27,182 21,658 72,108 56,869 General and administrative, including net cost of litigation settlement of $126 and $55,365 in 2007, and option payroll taxes of $228, $54, $760, $273, respectively   9,241 6,643 82,893 19,638 Information technology 3,343 2,551 9,406 7,190 Depreciation and amortization 9,131 8,664 26,633 24,970 Restructuring charge, net   -     -     -     135     Total operating expenses   124,247     91,945     385,336     252,172     Operating income 78,084 31,602 93,923 49,410   Other income (expense): Interest income, including $77 and $3,346 of interest on excise tax refund for the three and nine months ended September 30, 2007, respectively 6,063 2,626 20,377 6,322 Interest expense (2,607 ) (1,550 ) (7,560 ) (4,603 ) Other   (1,316 )   354     (1,862 )   (157 ) Total other income (expense)   2,140     1,430     10,955     1,562     Earnings before income taxes, equity in income (loss) of investees and minority interests 80,224 33,032 104,878 50,972 Income tax benefit 26,657 18,113 23,287 13,277 Equity in income (loss) of investees and minority interests   (2,516 )   (2,328 )   (3,945 )   (3,015 ) Net income 104,365 48,817 124,220 61,234 Preferred stock dividend   -     (1,063 )   (1,555 )   (1,927 )   Net income applicable to common stockholders $ 104,365   $ 47,754   $ 122,665   $ 59,307     Net income applicable to common stockholders per basic common share $ 2.76   $ 1.21   $ 3.27   $ 1.50     Weighted average number of basic common shares outstanding   37,803     39,596     37,533     39,487     Net income applicable to common stockholders per diluted common share $ 2.27   $ 1.05   $ 2.79   $ 1.34     Weighted average number of diluted common shares outstanding   45,924     46,385     43,924     46,153   priceline.com IncorporatedRECONCILIATION OF GAAP TO PRO FORMA(unaudited)(In thousands, except per share data)             Three Months Ended September 30,   Nine Months Ended September 30, RECONCILIATION OF GAAP TO PRO FORMA REVENUE 2007 2006 2007 2006   GAAP Revenue $ 417,287 $ 313,467 $ 1,074,556 $ 863,032   (a) Airline excise tax refund (395 ) (1,600 ) (18,592 ) (1,600 )         Pro Forma Revenue $ 416,892   $ 311,867   $ 1,055,964   $ 861,432     Three Months Ended September 30, Nine Months Ended September 30, RECONCILIATION OF GAAP TO PRO FORMA GROSS PROFIT   2007     2006     2007     2006     GAAP Gross Profit $ 202,331 $ 123,547 $ 479,259 $ 301,582   (a) Airline excise tax refund (395 ) (1,600 ) (18,592 ) (1,600 ) (b) Amortization of acquired intangible assets in Cost of revenues - 373 - 1,051         Pro Forma Gross Profit $ 201,936   $ 122,320   $ 460,667   $ 301,033     Three Months Ended September 30,   Nine Months Ended September 30, RECONCILIATION OF GAAP TO PRO FORMA NET INCOME 2007 2006 2007 2006   GAAP Net Income $ 104,365 $ 47,754 $ 122,665 $ 59,307   (a) Airline excise tax refund (395 ) (1,600 ) (18,592 ) (1,600 ) (b) Amortization of acquired intangible assets in Cost of revenues - 373 - 1,051 (b) Amortization of acquired intangible assets in Depreciation and amortization 6,117 5,979 18,324 17,315 (c) Stock-based compensation 4,127 3,543 10,759 10,277 (d) Securities litigation settlement, net of insurance contribution 126 - 55,365 - (d) Stock option payroll taxes 228 54 760 273 (e) Impact from favorable state franchise tax determination - (1,671 ) - (1,671 ) (f) Accrued interest income on excise tax refund (77 ) - (3,346 ) - (g) Restructuring charge, net - - - 135 (h) Adjustments for the tax impact of certain of the pro forma adjustments and to exclude non-cash income taxes (42,746 ) (26,088 ) (50,449 ) (26,276 ) (i) Impact on minority interests of other pro forma adjustments (204 ) 744 (774 ) (20 ) (g) Preferred stock dividend - 1,063 1,555 1,927         Pro Forma Net Income $ 71,541   $ 30,151   $ 136,267   $ 60,718     Three Months Ended September 30,   Nine Months Ended September 30, RECONCILIATION OF GAAP TO PRO FORMA NET INCOME PER DILUTED COMMON SHARE 2007 2006 2007 2006   GAAP Weighted average number of diluted common shares outstanding 45,924 46,385 43,924 46,153   (j) Adjustment for Conversion Spread Hedges (1,140 ) - (1,406 ) - (k) Adjustment for warrants and restricted stock 584 1,348 580 1,202 (l) Adjustment for impact of EITF 04-08 on Convertible debt - (5,760 ) - (5,760 )         Pro Forma Weighted average number of diluted common shares outstanding   45,368     41,973     43,098     41,595     Net income applicable to common stockholders per diluted common share: (m) GAAP $ 2.27   $ 1.05   $ 2.79   $ 1.34     Pro Forma $ 1.58   $ 0.72   $ 3.16   $ 1.46       (a) Airline excise tax refund is recorded in Merchant Revenue (b) Amortization of acquired intangible assets is recorded in Cost of revenues and Depreciation and amortization (c) Stock-based compensation is recorded in Personnel expense (d) Securities litigation settlement and option payroll taxes are recorded in General and administrative expense (e) Non-recurring impact of favorable state franchise tax determination is recorded in General and administrative expense (f) Accrued interest income on excise tax refund is recorded in Interest income (g) Restructuring charge and Preferred stock dividend are recorded in those respective expense line items (h) Adjustments for the tax impact of certain of the pro forma adjustments and to exclude non-cash income taxes (including the benefit amounting to $47.9 million and $28.1 million in 3rd quarter 2007 and 3rd quarter 2006, respectively, from the reversal of a portion of the Company's US deferred tax asset valuation allowance) are recorded in Income tax benefit (i) Impact on minority interests of other pro forma adjustments are recorded in Equity in income (loss) of investees and minority interests (j) Reflects the impact of the Conversion Spread Hedges that increase the effective conversion price of the Convertible Senior Notes due September 30, 2011 and the Convertible Senior Notes due September 30, 2013 from their stated $40.38 conversion price to an effective conversion price of $50.47 per share. Under GAAP, the anti-dilutive impact of the Conversion Spread Hedges is not reflected on the outstanding diluted share count until the end of the hedge when shares are delivered   (k) All common stock warrants and shares of restricted common stock are included in the calculation of pro forma net income per share because pro forma net income has been adjusted to exclude our preferred stock dividend and stock-based compensation expense   (l) Excludes the dilutive impact of convertible debt pursuant to EITF 04-08 for convertible debt because the common stock underlying the convertible debt was not issuable since our common stock did not trade above the contingent conversion prices   (m) Net income amounts used to calculate GAAP diluted earnings per share are adjusted to add back interest expense on convertible senior notes and preferred stock dividend in periods where the underlying shares are included in GAAP weighted average number of diluted common shares outstanding priceline.com Incorporated Statistical Data In thousands (Unaudited)                   Gross Bookings 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07   Domestic $ 378,301 $ 474,007 $ 570,757 $ 504,752 $ 423,275 $ 478,812 $ 547,787 $ 602,205 International   158,460     272,814     356,593     398,416     319,136     519,679     687,124     788,478   Total $ 536,761 $ 746,821 $ 927,350 $ 903,168 $ 742,410 $ 998,491 $ 1,234,911 $ 1,390,683   Agency $ 323,900 $ 480,506 $ 609,284 $ 600,406 $ 491,070 $ 710,528 $ 919,260 $ 1,042,619 Merchant   212,861     266,315     318,066     302,762     251,340     287,963     315,651     348,064   Total $ 536,761 $ 746,821 $ 927,350 $ 903,168 $ 742,410 $ 998,491 $ 1,234,911 $ 1,390,683   Year/Year Growth Domestic 3.0 % 8.3 % 16.0 % 13.1 % 11.9 % 1.0 % -4.0 % 19.3 % International 223.5 % 279.4 % 360.0 % 141.7 % 101.4 % 90.5 % 92.7 % 97.9 % excluding F/X impact 250.8 % 313.8 % 361.5 % 131.8 % 86.3 % 74.5 % 79.6 % 83.4 %     Agency 63.9 % 98.6 % 128.7 % 74.9 % 51.6 % 47.9 % 50.9 % 73.7 % Merchant -2.6 % -0.6 % 5.0 % 13.0 % 18.1 % 8.1 % -0.8 % 15.0 %   Total 29.0 % 46.5 % 62.8 % 47.8 % 38.3 % 33.7 % 33.2 % 54.0 %     Units Sold 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07   Airline Tickets 582 728 821 666 588 639 687 819 Year/Year Growth -9.6 % -2.6 % 4.1 % -2.0 % 0.9 % -12.2 % -16.3 % 23.0 %   Hotel Room-Nights 2,968 4,153 4,995 5,238 4,265 5,955 7,242 7,964 Year/Year Growth 47.8 % 62.5 % 82.5 % 49.7 % 43.7 % 43.4 % 45.0 % 52.0 %   Rental Car Days 1,315 1,621 2,000 2,044 1,789 2,003 2,278 2,338 Year/Year Growth 23.4 % 26.8 % 30.3 % 20.8 % 36.1 % 23.6 % 13.9 % 14.4 %     4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07   Revenue $ 203,913 $ 241,914 $ 307,651 $ 313,467 $ 260,071 $ 301,389 $ 355,880 $ 417,287 Year/Year Growth 4.6 % 3.7 % 15.4 % 21.1 % 27.5 % 24.6 % 15.7 % 33.1 %   Gross Profit $ 64,919 $ 72,231 $ 105,804 $ 123,547 $ 99,517 $ 119,717 $ 157,211 $ 202,331 Year/Year Growth 30.1 % 25.2 % 62.2 % 54.4 % 53.3 % 65.7 % 48.6 % 63.8 %     Gross Bookings represent the total dollar value of travel booked, inclusive of taxes and fees. priceline.com Incorporated   Orbitz Related Data       In thousands (Unaudited)   RECONCILIATION OF GAAP TO PRO FORMA DOMESTIC GROSS PROFIT(a)   Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 GAAP Domestic Gross Profit $ 73,856 $ 60,467 $ 216,231 $ 170,847   (b) Airline excise tax refund (395 ) (1,600 ) (18,592 ) (1,600 ) (c) Amortization of acquired intangible assets in Cost of revenues - 373 - 1,051         Pro Forma Domestic Gross Profit $ 73,461   $ 59,240   $ 197,639   $ 170,298       RECONCILIATION OF PRO FORMA DOMESTIC GROSS PROFIT TO PRO FORMA DOMESTIC GROSS PROFIT EXCLUDING ORBITZ   Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Pro Forma Domestic Gross Profit $ 73,461 $ 59,240 $ 197,639 $ 170,298   Orbitz Related Gross Profit - (5,319 ) - (15,823 )         Pro Forma Domestic Gross Profit Excluding Orbitz $ 73,461   $ 53,921   $ 197,639   $ 154,475       RECONCILIATION OF DOMESTIC GROSS TRAVEL BOOKINGS TO DOMESTIC GROSS TRAVEL BOOKINGS EXCLUDING ORBITZ   Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Domestic Gross Bookings $ 602,205 $ 504,752 $ 1,628,803 $ 1,549,515   Orbitz Related Gross Bookings - (38,713 ) - (114,888 )         Domestic Gross Bookings Excluding Orbitz $ 602,205   $ 466,039   $ 1,628,803   $ 1,434,627       RECONCILIATION OF DOMESTIC GROSS TRAVEL BOOKINGS EXCLUDING ORBITZ TO DOMESTIC NON-AIR GROSS TRAVEL BOOKINGS EXCLUDING ORBITZ   Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Domestic Gross Bookings Excluding Orbitz $ 602,205 $ 466,039 $ 1,628,803 $ 1,434,627   Air Gross Bookings Excluding Orbitz (243,915 ) (190,376 ) (644,576 ) (643,633 )         Domestic Non-Air Gross Bookings Excluding Orbitz $ 358,290   $ 275,663   $ 984,227   $ 790,994     (a) Includes domestic gross profit that is generated through gross bookings associated with intercompany arrangements between priceline.com and Booking.com. (b) Airline excise tax refund is recorded in Merchant Revenue. (c) Amortization of acquired intangible assets is recorded in Cost of revenues. priceline.com Incorporated Estimated Impact of Share Price Movements on Weighted Average GAAP and Pro Forma Diluted Shares Outstanding In millions (Unaudited)     The following table is intended to demonstrate the estimated potential impact of share price movements on the number of equivalent shares included in the fully diluted share count used to calculate diluted earnings per share. Actual results are likely to differ due to the impact of option exercises, equity repurchases, issuances and forfeitures and any conversions of our convertible bonds. The table below is for illustrative purposes only; the company is unable to predict its future stock price and the company's stock could trade below or above the per share prices in the table below.         Estimated Weighted Average Number of Diluted Shares Outstanding GAAP   Adjustments(1)   Pro Forma 4Q07   2007   2008 4Q07   2007   2008 4Q07   2007   2008 Closing Share Price Assumption(2) $50.00 45.3 44.3 42.7 (0.7) (0.8) (0.9) 44.7 43.5 41.8 $55.00 45.7 44.4 43.8 (0.6) (0.8) (0.9) 45.0 43.6 42.9 $60.00 46.0 44.5 44.7 (0.6) (0.8) (0.8) 45.4 43.7 43.9 $65.00 46.3 44.6 45.5 (0.5) (0.8) (0.7) 45.7 43.8 44.8 $70.00 46.5 44.7 46.2 (0.5) (0.8) (0.7) 46.0 43.9 45.5 $75.00 46.8 44.8 46.8 (0.5) (0.8) (0.6) 46.3 44.0 46.2 $80.00 47.0 44.9 47.3 (0.4) (0.7) (0.6) 46.6 44.1 46.7 $85.00 47.2 45.0 47.8 (0.4) (0.7) (0.6) 46.8 44.2 47.2 $90.00 47.4 45.0 48.2 (0.4) (0.7) (0.5) 47.1 44.3 47.7 $95.00 47.6 45.1 48.5 (0.3) (0.7) (0.5) 47.3 44.4 48.1 $100.00 47.8 45.2 48.8 (0.3) (0.7) (0.4) 47.5 44.5 48.4 $105.00 48.0 45.3 49.1 (0.3) (0.7) (0.4) 47.7 44.6 48.7 $110.00 48.1 45.4 49.4 (0.3) (0.7) (0.4) 47.9 44.7 49.0 $115.00 48.3 45.5 49.6 (0.2) (0.6) (0.3) 48.0 44.8 49.3 $120.00 48.4 45.5 49.8 (0.2) (0.6) (0.3) 48.2 44.9 49.5 $125.00 48.6 45.6 50.0 (0.2) (0.6) (0.3) 48.4 45.0 49.8 $130.00 48.7 45.7 50.2 (0.2) (0.6) (0.3) 48.5 45.1 50.0 $135.00 48.8 45.8 50.4 (0.2) (0.6) (0.2) 48.7 45.2 50.2 $140.00 48.9 45.8 50.6 (0.1) (0.6) (0.2) 48.8 45.2 50.3         (1) Reflects the anti-dilutive impact of the "Conversion Spread Hedges" and the dilutive impact of additional warrants and shares of unvested restricted stock and restricted stock units because pro forma net income has been adjusted to exclude preferred stock dividend and stock-based compensation.   (2) Estimated weighted average number of diluted shares outstanding is estimated as follows: 4Q07: Uses actual daily share prices from October 1, 2007 through November 7, 2007, and the closing share price assumption from November 8, 2007 through December 31, 2007. 2007: Uses actual daily share prices from Jan 1, 2007 through November 7, 2007, and the closing share price assumption from November 8, 2007 through December 31, 2007. 2008: Assumes the closing share price assumption from January 1, 2008 through December 31, 2008.