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Priceline.com Reports Financial Results for 1st Quarter 2009

Dépèche transmise le 11 mai 2009 par Business Wire

NORWALK, Conn.--(BUSINESS WIRE)--Priceline.com Incorporated (Nasdaq: PCLN) today reported its financial results for the 1st quarter 2009. Gross travel bookings for the 1st quarter, which refers to the total dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers, were $1.9 billion, an increase of 10.5% over a year ago.

Priceline.com had revenues in the 1st quarter of $462.1 million, a 14.6% increase over a year ago. The Company’s international operations contributed revenues in the 1st quarter of $114.6 million, a 10.0% increase versus a year ago (approximately 30% growth on a local currency basis). Priceline.com’s gross profit for the 1st quarter was $208.3 million, a 15.0% increase from the prior year. The Company’s international operations contributed gross profit in the 1st quarter of $113.9 million, a 10.4% increase versus a year ago (approximately 30% growth on a local currency basis). The Company’s operating income in 1st quarter 2009 was $42.8 million, a 34.9% increase from the prior year. Priceline.com had GAAP net income for the 1st quarter of $25.0 million or $0.53 per diluted share, which compares to $13.8 million or $0.28 per diluted share in the same period a year ago.

Pro forma EBITDA for the 1st quarter 2009 was $63.7 million, an increase of 33.5% over a year ago. Pro forma net income in the 1st quarter was $51.3 million or $1.09 per diluted share, compared to $0.76 per share a year ago. First Call analyst consensus for the 1st quarter 2009 was $0.91 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.

“We are pleased with the results achieved by priceline.com in the 1st quarter 2009”, said priceline.com President and Chief Executive Officer Jeffery H. Boyd. “Despite worldwide recessionary conditions, which continued to adversely impact overall travel demand and pricing, priceline.com continued to gain market share, with hotel room nights up 36%, rental car days up 15% and airline ticket sales up 28%. Priceline.com also showed improved gross and operating margins in the quarter.”

Mr. Boyd continued, “Our international operations grew gross travel bookings by 24% on a local currency basis. Booking.com continues to expand its hotel network with over 66,000 properties in over 70 countries around the world. Booking.com offers an extensive and growing collection of attractively priced hotels in leading destinations around the world. We provide hotel supplier/partners with access to worldwide demand that is of tremendous value in this economic climate. For our international customers, we provide them with the most extensive content available in 22 different languages and access to a broad proprietary supply of rates and availability as they shop for the best value.”

“In the U.S., our gross travel bookings increased 18% in the quarter. Suppliers have actively used our opaque Name-Your-Own-Price® services to supplement demand in a weak economy, allowing us to offer consumers the lowest available prices. We also are the market leader in helping consumers to save money on published-price travel services.”

Looking forward, Mr. Boyd said, “Visibility for the worldwide economy and the travel industry in particular, remains cloudy for 2009. Macroeconomic conditions continue to impact travel demand, pricing and foreign currency exchange rates. Pricing competition increased towards the end of 1st quarter as other on-line travel agents launched promotions to eliminate fees on airline tickets and reduce fees on hotel room bookings to compete with our low price positioning. The swine flu outbreak presents another variable that we believe is likely to adversely impact travel demand, but the degree and duration of that impact cannot be predicted at this time. We believe that the best course of action for priceline.com in these times is to continue to carefully manage expenses while building out our brands on a global basis, serving our customers with consistently outstanding deals and value, and providing our supplier/partners with an efficient, effective platform to sell their services.”

Forward Guidance

Priceline.com said it was targeting the following for 2nd quarter 2009:

  • Gross travel bookings of approximately $2.1 billion to $2.15 billion.
  • Year-over-year change in international gross travel bookings of approximately 15% on a local currency basis (flat year-over-year on a U.S. dollar basis).
  • Year-over-year increase in domestic gross travel bookings of approximately 5%.
  • Year-over-year increase in revenue of approximately 8% to 13%.
  • Year-over-year increase in gross profit of approximately 8% to 13%.
  • Pro forma EBITDA of approximately $102 million to $112 million.
  • Pro forma net income of between $1.65 and $1.75 per diluted share.

Given the current macro-economic conditions and the added uncertainty due to the swine flu outbreak, the Company stated that it would not provide earnings guidance beyond the 2nd quarter and noted that its actual performance during the 2nd quarter 2009 against the guidance above is subject to greater variability than it had been in the past.

Pro forma guidance for the 2nd quarter 2009:

  • excludes non-cash amortization expense of acquisition-related intangibles,
  • excludes non-cash stock-based compensation expense,
  • excludes non-cash interest expense and gains or losses on debt extinguishment, if any, recorded pursuant to the provisions of FSP APB 14-1,
  • excludes non-cash income tax expense and reflects the impact on income taxes of certain of the pro forma adjustments,
  • includes the anti-dilutive impact of the "Conversion Spread Hedges" (see “Non-GAAP Financial Measures” below) on diluted common shares outstanding related to outstanding convertible notes, and
  • includes the dilutive impact of additional shares of unvested restricted stock, restricted stock units and performance share units because pro forma net income has been adjusted to exclude stock-based compensation.

In addition, pro forma EBITDA excludes depreciation and amortization expense and includes the impact of foreign currency transactions and other expenses.

When aggregated, the foregoing adjustments are expected to increase pro forma EBITDA over GAAP operating income by approximately $21 million in 2nd quarter 2009.

In addition, the foregoing adjustments are expected to increase pro forma net income over GAAP net income by approximately $30 million in the 2nd quarter 2009. On a per share basis, the Company estimates GAAP net income of approximately $1.03 to $1.13 per diluted share for the 2nd quarter 2009.

Effective January 1, 2009, we adopted FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires cash settled convertible debt, such as our convertible senior notes, 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 is 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, representing the value assigned to the equity component, is recorded as a debt discount and amortized to interest expense over the life of the bond. Although FSP APB 14-1 has no impact on our actual past or future cash flows, it requires us to adjust our previously issued financial statements and to record a significant amount of non-cash interest expense as the debt discount is amortized and may result in gains or losses on extinguishment that would not have occurred under previous GAAP. The adoption of FSP APB 14-1 increased non-cash interest expense for the years ended December 31, 2008, 2007 and 2006 by approximately $26.1 million ($15.5 million net of tax), $28.2 million ($16.6 million net of tax), and $5.4 million ($3.2 million net of tax), respectively, and is estimated to increase fiscal year 2009 non-cash interest expense by approximately $20.3 million ($12.2 million net of tax), excluding the impact of future debt conversions, if any. The adoption of FSP APB 14-1 increased non-cash interest expense in the three months ended March 31, 2009 and 2008 by $5.2 million ($3.1 million net of tax) and $7.6 million ($4.6 million net of tax), respectively. In addition, pursuant to the provisions of FSP APB 14-1, a gain of $2.9 million was recorded in “Foreign currency transactions and other” in the three months ended March 31, 2009 related to debt conversions that occurred in the quarter.

Information About Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements reflect the views of the Company’s management regarding current expectations and projections about future events and are based on currently available information and current foreign currency exchange rates. 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, “may,” “will,” “should,” “could,” “expects,” “does not currently expect,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “predicts,” “potential,” “targets,” 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, decreased consumer spending, general economic downturn, terrorist attacks, natural disasters or adverse weather, the bankruptcy or insolvency of a major airline, or the outbreak of an epidemic or pandemic disease, such as the recent swine flu outbreak;

-- 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;

-- fluctuations in foreign exchange rates and other risks associated with doing business in multiple currencies;

-- the effects of increased competition, including the potential impact of increased pricing competition initiated by other on-line travel agents toward the end of 1st quarter 2009 in the form of reduced booking fees and/or the launch by competitors of an “opaque” travel offering;

-- 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;

-- our ability to expand successfully in international markets;

-- the ability to attract and retain qualified personnel;

-- difficulties integrating recent or future acquisitions, such as the 4th quarter 2007 acquisition of Agoda, including ensuring the effectiveness of the design and operation of internal controls and disclosure controls of acquired businesses;

-- 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;

-- systems-related failures and/or security breaches, including without limitation, “denial-of-service” type attacks on our system, 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; and

-- legal and regulatory risks.

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 EBITDA represents GAAP operating income excluding depreciation and amortization expense, plus foreign currency transactions and other expense and the pro forma adjustments relating to stock-based compensation expense and payroll taxes related to stock-based compensation described below.

Pro forma EBITDA, 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 EBITDA, 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 analysts and 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. These pro forma metrics, in particular pro forma EBITDA and pro forma net income, are not intended to represent funds available for priceline.com’s discretionary use and are not intended to represent or to be used as a substitute for operating income, net income or cash flows from operations data as measured under GAAP. The items excluded from these pro forma metrics, but included in the calculation of their closest GAAP equivalent, are significant components of consolidated statements of income and must be considered in performing a comprehensive assessment of overall financial performance. Pro forma financial information is adjusted for the following items:

  • Amortization expense of acquisition-related intangibles is excluded because it does not impact cash earnings.
  • Stock-based compensation expense is excluded because it does not impact cash earnings and is reflected in earnings per share through increased share count.
  • Payroll tax expense related to stock-based compensation is excluded for the three months ended March 31, 2008 because the expense is driven primarily by stock option exercise and share award vesting activity and the market price of priceline.com’s common stock and often shows volatility unrelated to operating results. As of January 1, 2009, we no longer exclude payroll tax expense related to stock-based compensation due to its relative insignificance to our consolidated financial statements.
  • Interest expense related to the amortization of debt discount and gains or losses on debt extinguishment recorded in 2009, and in 2008 on a retrospective basis, pursuant to the provisions of FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement)” are excluded because they are non-cash in nature. Pursuant to the provisions of FSP APB 14-1, certain debt issuance costs were reclassified to equity and are therefore no longer amortized in GAAP or pro forma earnings (as of January 1, 2009).
  • Net income attributable to noncontrolling interests is adjusted for the impact of certain of the pro forma adjustments described above.
  • 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 “Conversion Spread Hedges” related to priceline.com’s convertible securities that increase the effective conversion price of the currently outstanding 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 in 2011 and 2013 if and when shares are delivered.
    • All 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 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.

About Priceline.com® Incorporated

Priceline.com Incorporated (Nasdaq: PCLN) www.priceline.com provides online travel services in 28 languages in over 78 countries in Europe, North America, Asia, the Middle East and Africa. Included in the priceline.com family of companies is Booking.com, a leading international online hotel reservation service, priceline.com, a leading U.S. online travel service for value-conscious leisure travelers, and Agoda.com, an Asian online hotel reservation service.

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 over 70 countries in 22 languages and offers its customers access to over 66,000 participating hotels worldwide.

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, customize their search activity through priceline.com’s Inside Track features, 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 also operates the following travel websites: Travelweb.com, Lowestfare.com, RentalCars.com and BreezeNet.com. Priceline.com licenses its business model to independent licensees, including priceline mortgage and certain international licensees.

priceline.com Incorporated
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
   
December 31,
March 31, 2008
ASSETS 2009 As Adjusted
 
Current assets:
Cash and cash equivalents $ 291,260 $ 364,550
Restricted cash 1,552 2,528
Short-term investments 205,794 98,888
Accounts receivable, net of allowance for doubtful accounts of
$7,957 and $8,429, respectively 104,747 92,328
Prepaid expenses and other current assets 27,253 23,463
Deferred income taxes   15,779     12,142  
Total current assets 646,385 593,899
 
Property and equipment, net 28,560 29,404
Intangible assets, net 174,886 193,231
Goodwill 321,122 326,863
Deferred income taxes 142,507 153,955
Other assets   14,568     15,069  
 
Total assets $ 1,328,028   $ 1,312,421  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 77,832 $ 46,290
Accrued expenses and other current liabilities 74,458 77,713
Deferred merchant bookings 35,608 29,664
Convertible debt   306,412     317,910  
Total current liabilities 494,310 471,577
 
Deferred taxes 44,266 48,933
Other long-term liabilities   18,717     18,010  
Total liabilities   557,293     538,520  
 
Convertible debt   66,068     75,075  
 
Stockholders' equity:
Common stock, $0.008 par value, authorized 1,000,000,000 shares,
48,476,914, and 47,664,766 shares issued, respectively 373 367
Treasury stock, 6,840,576 and 6,685,048 shares, respectively (506,662 ) (493,555 )
Additional paid-in capital 2,194,613 2,176,556
Accumulated deficit (919,122 ) (944,145 )
Accumulated other comprehensive income   (64,535 )   (40,397 )

Total stockholders' equity

  704,667     698,826  
 
Total liabilities and stockholders' equity $ 1,328,028   $ 1,312,421  
priceline.com Incorporated
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 
  Three Months Ended
March 31,
  2008
2009 As Adjusted
 
Merchant revenues $ 337,034 $ 289,159
Agency revenues 120,225 109,932
Other revenues   4,799     4,089  
Total revenues 462,058 403,180
 
Cost of revenues (1)   253,728     222,077  
 
Gross profit   208,330     181,103  
 
 
Operating expenses:
Advertising - Offline 10,766 12,031
Advertising - Online 68,117 57,800
Sales and marketing 18,419 16,333
Personnel, including stock-based compensation

of $10,593 and $9,939, respectively

39,510 36,883
General and administrative 14,788 11,789
Information technology 4,527 4,149
Depreciation and amortization   9,361     10,353  
 
Total operating expenses   165,488     149,338  
 
Operating income   42,842     31,765  
 
Other income (expense):
Interest income 741 4,172
Interest expense (6,805 ) (10,061 )
Foreign currency transactions and other   3,817     (5,084 )
Total other income (expense)   (2,247 )   (10,973 )
 
 
Earnings before income taxes and equity in loss of investees 40,595 20,792
Income tax expense (15,541 ) (6,506 )
Equity in loss of investees   (31 )   (89 )
Net income 25,023 14,197
Less: net income attributable to noncontrolling interests   -     421  
 
Net income applicable to common stockholders of priceline.com Incorporated $ 25,023   $ 13,776  
 
Net income applicable to common stockholders per basic common share $ 0.61   $ 0.36  
 
Weighted average number of basic common shares outstanding   41,004     38,224  
 
Net income applicable to common stockholders per diluted common share $ 0.53   $ 0.28  
 
Weighted average number of diluted common shares outstanding   47,013     49,134  
 
 
 

(1) Cost of revenues entirely reflect Name Your Own Price® transactions whose revenues are recorded "gross" with a
corresponding cost of revenue while retail transactions are recorded "net" with no corresponding cost of revenues.

priceline.com Incorporated
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
   
 
 
Three Months Ended
March 31,
2008
OPERATING ACTIVITIES: 2009 As Adjusted
Net income $ 25,023 $ 14,197
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 3,453 3,608
Amortization 5,908 7,017
Provision for uncollectible accounts, net 1,062 1,942
Deferred income taxes 9,035 (485 )
Stock-based compensation expense 10,593 9,939
Amortization of debt issuance costs

516

608
Amortization of debt discount 5,197 7,553
Gain on extinguishment of debt (2,870 ) -
Equity in loss of investees 31 89
Accounts receivable (15,930 ) (25,700 )
Prepaid expenses and other current assets (167 ) 1,757
Accounts payable, accrued expenses and other current liabilities 32,011 21,902
Other  

302

    955  
Net cash provided by operating activities   74,164     43,382  
INVESTING ACTIVITIES:
Purchase of investments (139,453 ) (16,678 )
Maturity of investments

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