Priceline.com Reports Financial Results for 2nd Quarter 2007

Priceline.com Incorporated (Nasdaq: PCLN) today reported its financial results for the 2nd quarter 2007. Gross travel bookings for the 2nd quarter, which refers to the total Dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers, rose 33% year-over-year to $1.2 billion. Priceline.com had GAAP revenues in the 2nd quarter of $355.9 million, a 15.7% increase over a year ago. Priceline.com’s GAAP gross profit for the 2nd quarter was $157.2 million, up 48.6% from the prior year. Priceline.com had GAAP net income for the 2nd quarter 2007 of $34.6 million or $0.79 per diluted share, which compares to a $12.5 million or $0.28 per diluted share in the same period a year ago. Priceline.com reported pro forma revenues in the 2nd quarter of $353.6 million, a 14.9% increase over a year ago. Pro forma gross profit for the 2nd quarter 2007 was $154.9 million, an increase of 45.9% over the same period in the prior year. Pro forma net income for the quarter was $47.3 million or $1.11 per diluted share, which compares to $23.0 million, or $0.55 per diluted share in the same period a year ago. First Call analyst consensus for the 2nd quarter 2007 was $0.89 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. "Priceline.com’s earnings performance in the second quarter exceeded our previous expectations for both the international and domestic businesses,” said priceline.com President and Chief Executive Officer Jeffery H. Boyd. "Internationally, Booking.com’s results were driven by 93% growth in gross bookings, which continues to outperform market growth rates. Domestic gross bookings fell within the range of our guidance, but earnings growth exceeded our expectations due to strong organic growth in merchant hotel and rental cars and more efficient marketing.” "Based on the strength we have seen in our international and domestic businesses as the summer unfolds, we are increasing our guidance for the balance of the year,” Mr. Boyd said. "In particular, we believe the scale we have achieved in worldwide hotel sales and our low-cost leadership has provided us with opportunities to grow organically and geographically which are reflected in our recent reported results. We intend to continue our vigorous pursuit of those opportunities going forward.” Forward Guidance Priceline.com said it was targeting the following for 3rd quarter 2007: Year-over-year increases in overall gross travel bookings of approximately 43% to 46%. Year-over-year increases in gross travel bookings from Booking.com of approximately 85% to 90%. Year-over-year increase in pro forma revenue of approximately 20% to 25%. Year-over-year increase in pro forma gross profit of approximately 50% to 54%. Pro forma net income of between $1.21 and $1.31 per diluted share. In view of the company’s stronger than expected performance in the 2nd quarter 2007, priceline.com revised its full year guidance as follows: Consolidated gross travel bookings of $4.50 to $4.65 billion International gross travel bookings of $2.45 to $2.55 billion Pro forma net income of between $3.50 and $3.65 per diluted share Pro forma guidance for the 3rd quarter and full year 2007: excludes cash expenses associated with the settlement of the 2000 securities litigation, excludes the cash benefit associated with the refund of excise taxes (and related accrued interest) paid on merchant airline tickets, 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, excludes non-cash preferred stock dividends, 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 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 $13 million for the 3rd quarter 2007 and $70 million for full-year 2007. On a per share basis, the Company estimates GAAP net income of approximately $0.90 to $1.00 per diluted share for the 3rd quarter 2007 and GAAP net income of approximately $1.82 to $1.97 per diluted share for the full-year 2007. The Financial Accounting Standards Board ("FASB”) is expected to propose a FASB Staff Position ("FSP”) that would significantly impact the accounting for convertible debt. The proposal 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 expected proposal, if approved, is likely to 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 the best 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. Booking.com operates one of Europe’s fastest growing hotel reservation services through a network of affiliated Web sites. Booking.com operates in 53 countries in 15 languages and offers its customers access to approximately 35,000 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. For more information about priceline.com: To book flights http://www.priceline.com/flights/ To book hotels http://www.priceline.com/hotels/ To book rental cars http://www.priceline.com/rentalcars/ To book a vacation package http://www.priceline.com/vacationpackages/ To book a cruise http://www.pricelinecruiseoutlet.com To see our PriceBreakers deals: http://www.priceline.com/pricebreakers To check our travel guides: http://travela.priceline.com/travelguides/ To watch our TV ads: http://www.priceline.com/promo/shatner_pcln_negotiator.asp Other priceline.com affiliated sites include: General travel information and trip planning http://www.mytravelguide.com Travel reservations http://www.lowestfare.com http://www.travelweb.com Rental cars http://www.RentalCars.com http://www.BreezeNet.com European hotels http://www.booking.com http://www.priceline.co.uk 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 advese 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 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 (and related accrued interest) on merchant airline tickets 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 carryforwards. 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 the Conversion Spread Hedges that increase the effective conversion price of the 2011 Notes and 2013 Notes 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% Convertible Senior Notes and priceline.com's 2.25% Convertible Senior Notes were not issuable because our common stock did not trade above the respective contingent conversion prices. -- 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. 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 Incorporated CONSOLIDATED BALANCE SHEETS (unaudited) (In thousands, except share and per share data)   June 30, December 31, ASSETS 2007 2006   Current assets: Cash and cash equivalents $ 426,521 $ 423,577 Restricted cash 2,691 2,459 Short-term investments 22,410 7,983 Accounts receivable, net of allowance for doubtful accounts of $1,558 and $1,651, respectively 76,831 48,536 Prepaid expenses and other current assets   23,919     20,534   Total current assets 552,372 503,089   Property and equipment, net 22,137 21,691 Intangible assets, net 152,241 152,925 Goodwill 236,612 226,707 Deferred taxes 184,086 179,392 Other assets   20,216     21,844     Total assets $ 1,167,664   $ 1,105,648     LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Accounts payable $ 58,999 $ 49,032 Accrued expenses and other current liabilities 50,094 46,872 Deferred merchant bookings 10,698 4,768 Convertible debt   569,161     -   Total current liabilities 688,952 100,672   Deferred taxes 40,327 39,714 Other long-term liabilities 11,957 11,885 Minority interest 21,226 22,486 Convertible debt   -     568,865   Total liabilities   762,462     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, 44,627,642 and 43,215,712 shares issued, respectively 343 331 Treasury stock, 6,633,639 and 6,603,050 shares, respectively (488,098 ) (486,468 ) Additional paid-in capital 2,101,654 2,070,379 Accumulated deficit (1,243,732 ) (1,262,033 ) Accumulated other comprehensive income   35,035     26,347   Total stockholders' equity   405,202     348,556     Total liabilities and stockholders' equity $ 1,167,664   $ 1,105,648   priceline.com Incorporated CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share data)     Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006   Merchant revenues, including $2,318 and $18,196 excise tax refund for the three and six months ended June 30, 2007, respectively   $ 254,909 $ 250,524 $ 500,921 $ 460,962 Agency revenues 98,344 55,892 152,855 86,273 Other revenues   2,627     1,235     3,493     2,329   Total revenues   355,880     307,651     657,269     549,564     Cost of merchant revenues 198,669 201,847 380,341 371,530 Cost of agency revenues - - - - Cost of other revenues   -     -     -     -   Total costs of revenues   198,669     201,847     380,341     371,530     Gross profit   157,211     105,804     276,928     178,034     Operating expenses: Advertising - Offline 9,281 8,861 20,615 18,298 Advertising - Online 43,470 30,493 75,397 52,354 Sales and marketing 11,525 10,708 22,934 20,290 Personnel, including stock-based compensation of $3,466, $3,717, $6,632, $6,734, respectively 23,435 18,757 44,926 35,211 General and administrative, including net cost of litigation settlement of $381 and $55,239 in 2007, and option payroll taxes of $94, $130, $532, $219, respectively   9,777 7,256 73,652 12,993 Information technology 3,152 2,332 6,063 4,639 Depreciation and amortization 8,997 8,360 17,502 16,306 Restructuring charge, net   -     -     -     135     Total operating expenses   109,637     86,767     261,089     160,226     Operating income   47,574     19,037     15,839     17,808     Other income (expense): Interest income, including $483 and $3,270 of interest on excise tax refund for the three and six months ended June 30, 2007, respectively 6,112 2,121 14,315 3,696 Interest expense (2,484 ) (1,554 ) (4,954 ) (3,053 ) Other   (332 )   (622 )   (545 )   (511 ) Total other income (expense)   3,296     (55 )   8,816     132     Earnings before income taxes, equity in income (loss) of investees and minority interests 50,870 18,982 24,655 17,940 Income tax expense (14,964 ) (5,578 ) (3,371 ) (4,836 ) Equity in income (loss) of investees and minority interests   (1,334 )   (887 )   (1,428 )   (686 ) Net income 34,572 12,517 19,856 12,418 Preferred stock dividend   -     -     (1,555 )   (865 )   Net income applicable to common stockholders $ 34,572   $ 12,517   $ 18,301   $ 11,553     Net income applicable to common stockholders per basic common share $ 0.92   $ 0.32   $ 0.49   $ 0.29     Weighted average number of basic common shares outstanding   37,597     39,481     37,395     39,432     Net income applicable to common stockholders per diluted common share $ 0.79   $ 0.28   $ 0.43   $ 0.28     Weighted average number of diluted common shares outstanding   43,667     46,993     42,572     43,309   priceline.com Incorporated RECONCILIATION OF GAAP TO PRO FORMA (unaudited) (In thousands, except per share data)     Three Months Ended Six Months Ended RECONCILIATION OF GAAP TO PRO FORMA REVENUE June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006   GAAP Revenue $ 355,880 $ 307,651 $ 657,269 $ 549,564   (a) Airline excise tax refund (2,318 ) - (18,196 ) -             Pro Forma Revenue $ 353,562   $ 307,651   $ 639,073   $ 549,564     Three Months Ended Six Months Ended RECONCILIATION OF GAAP TO PRO FORMA GROSS PROFIT June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006   GAAP Gross Profit $ 157,211 $ 105,804 $ 276,928 $ 178,034   (a) Airline excise tax refund (2,318 ) - (18,196 ) - (b) Amortization of acquired intangible assets in Cost of revenues - 340 - 680         Pro Forma Gross Profit $ 154,893   $ 106,144   $ 258,732   $ 178,714     Three Months Ended Six Months Ended RECONCILIATION OF GAAP TO PRO FORMA NET INCOME June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006   GAAP Net Income $ 34,572 $ 12,517 $ 18,301 $ 11,553   (a) Airline excise tax refund (2,318 ) - (18,196 ) - (b) Amortization of acquired intangible assets in Cost of revenues - 340 - 680 (b) Amortization of acquired intangible assets in Depreciation and amortization 6,294 5,774 12,207 11,334 (c) Stock-based compensation 3,466 3,717 6,632 6,734 (d) Securities litigation settlement, net of insurance contribution 381 - 55,239 - (d) Stock option payroll taxes 94 130 532 219 (e) Accrued interest income on excise tax refund (483 ) - (3,270 ) - (f) Restructuring charge, net - - - 135 (g) Adjustments for the tax impact of certain of the pro forma adjustments and to exclude non-cash income taxes 5,600 903 (7,702 ) (188 ) (h) Impact on minority interests of other pro forma adjustments (264 ) (381 ) (572 ) (765 ) (f) Preferred stock dividend - - 1,555 865         Pro Forma Net Income $ 47,342   $ 23,000   $ 64,726   $ 30,567     Three Months Ended Six Months Ended RECONCILIATION OF GAAP TO PRO FORMA NET INCOME PER DILUTED COMMON SHARE June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006   GAAP Weighted average number of diluted common shares outstanding 43,667 46,993 42,572 43,309   (i) Adjustment for Conversion Spread Hedges (1,454 ) - (1,595 ) - (j) Adjustment for warrants and restricted stock 473 530 471 1,171 (k) Adjustment for impact of EITF 04-08 on Convertible debt - (5,760 ) - (3,125 )         Pro Forma Weighted average number of diluted common shares outstanding   42,686     41,763     41,448     41,355     Net income applicable to common stockholders per diluted common share: (l) GAAP $ 0.79   $ 0.28   $ 0.43   $ 0.28     Pro Forma $ 1.11   $ 0.55   $ 1.56   $ 0.74       (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) Accrued interest income on excise tax refund is recorded in Interest income (f) Restructuring charge and Preferred stock dividend are recorded in those respective expense line items (g) Adjustments for the tax impact of certain of the pro forma adjustments and to exclude non-cash income taxes are recorded in Income tax expense (h) Impact on minority interests of other pro forma adjustments are recorded in Equity in income (loss) of investees and minority interests (i) 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   (j) 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   (k) 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   (l) 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         Orbitz Related Data In thousands (Unaudited)   RECONCILIATION OF GAAP TO PRO FORMA DOMESTIC GROSS PROFIT(a)   Three Months Ended Six Months Ended June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006 GAAP Domestic Gross Profit $ 69,157 $ 59,709 $ 142,680 $ 110,364   (b) Airline excise tax refund (2,318 ) - (18,196 ) - (c) Amortization of acquired intangible assets in Cost of revenues - 340 - 680         Pro Forma Domestic Gross Profit $ 66,839   $ 60,049   $ 124,484   $ 111,044       RECONCILIATION OF PRO FORMA DOMESTIC GROSS PROFIT TO PRO FORMA DOMESTIC GROSS PROFIT EXCLUDING ORBITZ   Three Months Ended Six Months Ended June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006 Pro Forma Domestic Gross Profit $ 66,839 $ 60,049 $ 124,484 $ 111,044   Orbitz Related Gross Profit - (5,978 ) - (10,503 )         Pro Forma Domestic Gross Profit Excluding Orbitz $ 66,839   $ 54,071   $ 124,484   $ 100,541       RECONCILIATION OF DOMESTIC GROSS TRAVEL BOOKINGS TO DOMESTIC GROSS TRAVEL BOOKINGS EXCLUDING ORBITZ   Three Months Ended Six Months Ended June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006 Domestic Gross Bookings $ 547,787 $ 570,758 $ 1,026,599 $ 1,044,765   Orbitz Related Gross Bookings - (44,150 ) - (76,175 )         Domestic Gross Bookings Excluding Orbitz $ 547,787   $ 526,608   $ 1,026,599   $ 968,590       RECONCILIATION OF DOMESTIC GROSS TRAVEL BOOKINGS EXCLUDING ORBITZ TO DOMESTIC NON-AIR GROSS TRAVEL BOOKINGS EXCLUDING ORBITZ   Three Months Ended Six Months Ended June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006 Domestic Gross Bookings Excluding Orbitz $ 547,787 $ 526,608 $ 1,026,599 $ 968,590   Air Gross Bookings Excluding Orbitz (216,965 ) (251,543 ) (400,661 ) (453,256 )         Domestic Non-Air Gross Bookings Excluding Orbitz $ 330,822   $ 275,065   $ 625,938   $ 515,334       (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 Statistical Data Dollar and unit data in thousands   Gross Bookings 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07   Domestic $446,232 $378,301 $474,007 $570,757 $504,752 $423,275 $478,812 $547,787 International 164,822 158,460 272,814 356,593 398,416 319,136 519,679 687,124 Total $611,054 $536,761 $746,821 $927,350 $903,168 $742,410 $998,491 $1,234,911   Agency $343,214 $323,900 $480,506 $609,284 $600,406 $491,070 $710,528 $919,260 Merchant 267,840 212,861 266,315 318,066 302,762 251,340 287,963 315,651 Total $611,054 $536,761 $746,821 $927,350 $903,168 $742,410 $998,491 $1,234,911   Year/Year Growth Domestic 5.0% 3.0% 8.3% 16.0% 13.1% 11.9% 1.0% -4.0% International 1474.3% 223.5% 279.4% 360.0% 141.7% 101.4% 90.5% 92.7% excluding F/X impact 1475.6% 250.8% 313.8% 361.5% 131.8% 86.3% 74.5% 79.6%     Agency 118.7% 63.9% 98.6% 128.7% 74.9% 51.6% 47.9% 50.9% Merchant -3.8% -2.6% -0.6% 5.0% 13.0% 18.1% 8.1% -0.8%   Total 40.4% 29.0% 46.5% 62.8% 47.8% 38.3% 33.7% 33.2%     Units Sold 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07   Airline Tickets 680 582 728 821 666 588 639 687 Year/Year Growth -6.2% -9.6% -2.6% 4.1% -2.0% 0.9% -12.2% -16.3%   Hotel Room-Nights 3,499 2,968 4,153 4,995 5,238 4,265 5,955 7,242 Year/Year Growth 67.7% 47.8% 62.5% 82.5% 49.7% 43.7% 43.4% 45.0%   Rental Car Days 1,692 1,315 1,621 2,000 2,044 1,789 2,003 2,278 Year/Year Growth 24.0% 23.4% 26.8% 30.3% 20.8% 36.1% 23.6% 13.9%     3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07   Revenue $258,797 $203,913 $241,914 $307,651 $313,467 $260,071 $301,389 $355,880 Year/Year Growth 9.7% 4.6% 3.7% 15.4% 21.1% 27.5% 24.6% 15.7%   Gross Profit $80,002 $64,919 $72,231 $105,804 $123,547 $99,517 $119,717 $157,211 Year/Year Growth 56.5% 30.1% 25.2% 62.2% 54.4% 53.3% 65.7% 48.6%     Gross Bookings represent the total dollar value of travel booked, inclusive of taxes and fees. 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 3Q07 2007 2008 3Q07 2007 2008 3Q07 2007 2008 Closing Share Price Assumption(2) $50.00 43.4 42.7 42.3 (1.1) (1.2) (1.3) 42.3 41.6 41.1 $55.00 44.0 43.1 43.4 (1.1) (1.1) (1.2) 42.9 42.0 42.2 $60.00 44.4 43.5 44.2 (1.0) (1.0) (1.0) 43.4 42.4 43.2 $65.00 44.9 43.8 44.9 (0.9) (1.0) (0.9) 43.9 42.8 44.0 $70.00 45.2 44.1 45.6 (0.9) (0.9) (0.8) 44.4 43.2 44.7 $75.00 45.6 44.4 46.1 (0.8) (0.9) (0.8) 44.8 43.5 45.4 $80.00 45.9 44.7 46.6 (0.8) (0.9) (0.7) 45.2 43.8 45.9 $85.00 46.2 45.0 47.0 (0.7) (0.8) (0.6) 45.5 44.1 46.4 $90.00 46.5 45.2 47.4 (0.7) (0.8) (0.6) 45.8 44.4 46.8 $95.00 46.8 45.4 47.7 (0.6) (0.7) (0.5) 46.1 44.7 47.2 $100.00 47.0 45.7 48.0 (0.6) (0.7) (0.5) 46.4 44.9 47.5       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) Weighted average number of diluted shares outstanding is estimated using actual daily share prices through August 6th and the closing share price assumption indicated for all other trading days in the period.   3Q07: Uses actual daily share prices from July 1, 2007 through August 6, 2007, and the closing share price assumption from August 7, 2007 through September 30, 2007. 2007: Uses actual daily share prices from Jan 1, 2007 through August 6, 2007, and the closing share price assumption from August 7, 2007 through December 31, 2007. 2008: Assumes the closing share price assumption from January 1, 2008 through December 31, 2008.