8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 6, 2008

priceline.com Incorporated

(Exact name of registrant as specified in its charter)

Delaware	0-25581	06-1528493
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

800 Connecticut Avenue, Norwalk, Connecticut	06854
(Address of principal office)	(zip code)

N/A

(Former name or former address, if changed since last report)

Item 2.02.              Results of Operations and Financial Conditions

On November 6, 2008, priceline.com announced its financial results for the 3^rd quarter ended September 30, 2008.  A copy of priceline.com’s consolidated balance sheet at September 30, 2008, consolidated statement of operations for the three and nine months ended September 30, 2008 and consolidated statement of cash flows for the nine months ended September 30, 2008 are included in the financial and statistical supplement attached to the press release attached as Exhibit 99.1 to this Current Report on Form 8-K.  The consolidated balance sheet at September 30, 2008, consolidated statement of operations for the three and nine months ended September 30, 2008 and consolidated statement of cash flows for the nine months ended September 30, 2008 shall be treated as “filed” for purposes of the Securities Exchange Act of 1934, as amended.

Item 7.01.              Regulation FD Disclosure

On November 6, 2008, priceline.com announced its financial results for the 3^rd quarter ended September 30, 2008.  A copy of priceline.com’s press release announcing these financial results and certain other information is attached as Exhibit 99.1 to this Current Report on Form 8-K.

With respect to its 3^rd quarter 2008 financial results, the company said that its net income benefited from approximately $5.0 million of foreign exchange hedging gains that were recognized during the quarter.  The company noted, among other things, that in September the global financial crisis struck Europe and that consumer demand for the company’s international travel services perceptibly weakened during that period and that weakness carried into the 4^th quarter.  The company said that, as a result, it has seen deterioration in the key drivers of its international business, namely the Euro/Dollar/Pound exchange rate, transaction growth rates, average daily rates of hotel room nights and cancellation rates.  Specifically, the company explained that it had observed 3^rd quarter average daily rates for hotel room nights decrease year-over-year approximately 1% domestically and approximately 3.5% internationally, with significantly worse trends in September that have carried into the 4^th quarter.

The company discussed its outstanding convertible senior notes and explained that most of the company’s notes were held by convertible bond hedge funds, many of which were facing redemptions as the result of the recent financial market turmoil.  As a result, the company noted that it had received notices of conversion over the past several weeks from approximately $50 million principal amount of its outstanding notes.  The company said that as long as the convertible bond market remained in turmoil, it expected to see more conversions and that its debt balance at the end of the 4^th quarter 2008 would be at least $75 million lower as a result of conversions that the company had received during the 4^th quarter to date.  The company noted that as a result of the early conversion activity, there was a timing mismatch between the time when the company delivered shares of priceline.com stock to the convertible bond holder (at the time of conversion) and when it would potentially receive shares of priceline.com stock from the counterparties to the company’s conversion spread hedges (at the stated maturity dates of the convertible senior notes), which were designed to reduce potential dilution upon conversion of the notes.

With respect to 4^th quarter 2008 guidance, the company noted that given the outlook for the general economy and the deterioration in the key drivers of its international business, it was forecasting a significant reduction in U.S. dollar denominated international gross booking rates.  The company noted that it expected domestic gross travel bookings to grow approximately 22% during the 4^th quarter 2008 over the same period in the prior year.  Priceline.com announced that it expected consolidated advertising expenses of approximately $58 to $62 million in the 4^th

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quarter 2008 and expected approximately 90% of that amount to be spent “on-line.”  Priceline.com estimated that sales and marketing expenses in the 4^th quarter 2008 would be between $16.5 and $17.5 million.  Priceline.com stated that it estimated that personnel costs, excluding stock-based compensation expense, would be approximately $28 to $29 million in the 4^th quarter 2008.  With respect to 4^th quarter 2008, priceline.com stated it estimated that general and administrative expenses would be approximately $13 to $13.5 million, information technology expenses would be approximately $5 to $5.5 million, and depreciation and amortization expenses, excluding acquisition related amortization, would be approximately $4.3 million.  Priceline.com said it expected a positive gain of approximately $2.5 million in the 4^th quarter 2008 primarily associated with foreign exchange hedging income.  Priceline.com estimated that it would have cash income tax expense of approximately $11.5 million to $12 million in the 4^th quarter 2008 comprised of additional income taxes in Europe and alternative minimum tax in the United States.

With respect to its 4^th quarter financial guidance, the company noted that its guidance was based on an assumption that the company continued to operate in similar economic conditions.   The company noted that its forecast for the remainder of the 4th quarter 2008 assumed, among other things, that the Euro/U.S. Dollar exchange rate would be 1.29  U.S. dollars per Euro, that there was no material change in the foreign exchange relationship between the British Pound and the Euro, that the average daily rates for the company’s domestic hotel service would be down approximately 3% to 4% year-over-year and that the average daily rates for the company’s international hotel service would decline approximately 5% to 6% year-over-year. The company noted that its “pro forma” financial guidance was based upon a “pro forma” diluted share count of approximately 44.6 million shares (which includes a calculation of the assumed economic dilutive impact of the company’s outstanding convertible notes and stock options, net of the favorable economic impact of the hedges associated with the company’s outstanding convertible notes), which is based on the company’s November 5, 2008 closing stock price of $52.60 per share.

With respect to its 4^th quarter guidance, the company noted that further negative economic developments, such as a fresh wave of instability in financial markets or high profile financial or industrial company bankruptcies or bailouts which depress consumer sentiment, would likely lead to below-forecast results.  The company emphasized that the economic uncertainty affecting the worldwide consumer and marketplace had added a great deal of uncertainty to the company’s 4^th quarter 2008 forecast and that this macro economic volatility meant that there was a significantly greater standard deviation in the company’s forecast with respect to possible upside and possible downside as compared to previous quarters.

This Form 8-K contains 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.  For a detailed discussion of the 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.

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Item 9.01.              Financial Statements and Exhibits

                (d) Exhibits

99.1 Press release (which includes a financial and statistical supplement and related information) issued by priceline.com Incorporated on November 6, 2008 relating to, among other things, its 3^rd quarter ended September 30, 2008 earnings. The consolidated balance sheet at September 30, 2008, consolidated statement of operations for the three and nine months ended September 30, 2008 and consolidated statement of cash flows for the nine months ended September 30, 2008 shall be treated as “filed” for the purposes of the Securities and Exchange Act of 1934, as amended, and the remaining information shall be treated as “furnished.”

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SIGNATURES

                Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PRICELINE.COM INCORPORATED
By:	/s/ Robert J. Mylod, Jr.
	Name:	Robert J. Mylod, Jr.
	Title:	Chief Financial Officer

Date:  November 7, 2008

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EXHIBIT INDEX

Exhibit No.

Description

99.1

Press release (which includes a financial and statistical supplement and related information) issued by priceline.com Incorporated on November 5, 2008 relating to, among other things, its 3rd quarter ended September 30, 2008 earnings. The consolidated balance sheet at September 30, 2008, consolidated statement of operations for the three and nine months ended September 30, 2008 and consolidated statement of cash flows for the nine months ended September 30, 2008 shall be treated as “filed” for the purposes of the Securities and Exchange Act of 1934, as amended, and the remaining information shall be treated as “furnished.”

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EX-99.1

Exhibit 99.1

Priceline.com Reports Financial Results For 3^rd Quarter 2008

     NORWALK, Conn., November 6, 2008 . . .. Priceline.com Incorporated® (Nasdaq: PCLN) today reported its financial results for the 3^rd quarter 2008.  Gross travel bookings for the 3^rd quarter, which refers to the total dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers, rose 47.4% year-over-year to $2 billion.

Priceline.com had GAAP revenues in the 3^rd quarter of $561.6 million, a 34.6% increase over a year ago.  The Company’s international operations contributed revenues in the 3^rd quarter of $223.7 million, a 69.7% increase versus a year ago (approximately 63% growth on a local currency basis). GAAP gross profit for the 3^rd quarter was $316.1 million, a 56.2% increase from the prior year.  The Company’s international operations contributed gross profit in the 3^rd quarter of $222.5 million, a 70.0% increase versus a year ago (approximately 63% growth on a local currency basis). Priceline.com had GAAP net income for the 3^rd quarter of $88.0 million or $1.81 per diluted share, compared to GAAP net income of $104.4 million or $2.27 per diluted share in the 3^rd quarter 2007.  GAAP net income for the 3^rd quarter of 2007 was positively affected by a non-cash tax benefit in the amount of $47.9 million, from reversing a portion of priceline.com’s deferred tax asset valuation allowance in the period.

Priceline.com reported pro forma revenues in the 3^rd quarter of $561.6 million, a 34.7% increase over a year ago.  Pro forma gross profit for the 3^rd quarter was $316.1 million, an increase of 56.5% over the same period in the prior year.  Pro forma EBITDA for the 3^rd quarter 2008 amounted to $152.4 million, an increase of 69.4% over a year ago.  Pro forma net income in the 3^rd quarter was $116.8 million, or $2.39 per diluted share, an increase of 51.3% over a year ago.  First Call analyst consensus for the 3^rd quarter 2008 was $2.10 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 delivered strong growth in the United States and in our international business despite deteriorating global economic conditions towards the end of the quarter,” said Jeffery H. Boyd, priceline.com’s President and Chief Executive Officer.  “Our domestic gross bookings grew at what we believe is a market-leading 32.8% as our value brand and low prices appealed to cost-conscious consumers and suppliers used our opaque distribution to move unsold inventory in the face of slowing demand.  Our international operations generated gross bookings growth of 58.6% (approximately 45% growth on a local currency basis) in the 3^rd quarter, with Booking.com growing its supplier base by 50% year-over-year to approximately 57,000 hotels and Booking.com and Agoda.com continuing to build the business in Asia.”

(more)

Mr. Boyd continued, “While we are proud of the results achieved in the third quarter, evidence of global economic weakness became more pronounced in our international business in late September and October, particularly the substantial decline in the value of the Euro and decreasing transaction growth rates and hotel average daily rates tied to softening hotel demand and occupancy.  The velocity of economic change in this environment makes it difficult to precisely predict the future trajectory of any business.  However, we believe priceline.com’s brands are well-positioned to compete in economic down-cycles and we intend to continue building our business around the world to maximize our participation in the global secular movement of travel planning and purchase to the internet.”

Forward Guidance

Priceline.com said it was targeting the following for 4^th quarter 2008:

·Year-over-year increase in gross travel bookings of approximately 7.5 - 17.5%.

·Year-over-year increase in international gross travel bookings of approximately 0 - 10% (approximately 10 - 20% on a local currency basis).

·Year-over-year increase in revenue of approximately 12 - 14%.

·Year-over-year increase in pro forma gross profit of approximately 12.5 - 17.5%.

·Pro forma EBITDA of approximately $60 million to $66 million.

·Pro forma net income of between $1.00 and $1.10 per diluted share.

Given the current macro-economic conditions, the Company noted that its actual performance during the 4^th quarter 2008 against the guidance above would be subject to greater variability than it had been in the past.

Pro forma guidance for the 4^th quarter 2008:

·excludes non-cash amortization expense of acquisition-related intangibles,

·  &# 160;               excludes non-cash stock-based compensation expense,

·excludes payroll tax expense related to stock-based compensation,

·excludes non-cash income tax expense and reflects the impact on income taxes of the pro forma adjustments,

·includes the anti-dilutive impact of the “Conversion Spread Hedges” (see “Non-GAAP Financial Measures” below) on outstanding diluted common shares, and

·            &# 160;     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.

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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 $24 million in 4th quarter.

In addition, the foregoing adjustments are expected to increase pro forma net income over GAAP net income by approximately $20 million in the 4th quarter 2008.  On a per share basis, the Company estimates GAAP net income of approximately $0.55 to $0.65 per diluted share for the 4th quarter 2008.

In May 2008, the FASB issued 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 will have no impact on our actual past or future cash flows, it will require us to restate our previously issued financial statements and record a significant amount of non-cash interest expense as the debt discount is amortized and may result in losses on extinguishment that would not have occurred under previous GAAP.  FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008.  The Company expects that it will have a material adverse impact on our GAAPresults of operations and earnings per share.

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, 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;

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— 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 i n foreign exchange rates;

— the effects of increased competition;

— a change by a major search engine to its search engine algorithms that negatively affects the search engine ranking of the company or its 3^rd 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 4^th 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;

< font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;"> 

— 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 applicable pro forma adjustments described below.

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Pro forma revenue, pro forma gross profit, 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 revenue, pro forma gross profit, 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:

·Cash expenses incurred in 2007 associated with the settlement of the 2000 securities litigation is excluded because of the non-recurring nature of the settlement.

·Cash benefit recorded in 2007 associated with the refund by the Internal Revenue Service of excise taxes paid on merchant airline tickets is excluded because of its non-recurring nature.

·Amortization expense of acquisition-related intangibles is excluded 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 because they do not impact cash earnings and are reflected in earnings per share through increased share count.

·Payroll tax expense related to stock-based compensation is excluded 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.

·Income tax benefit (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 $47.9 million of priceline.com’s deferred tax asset valuation allowance in 3^rd quarter 2007.

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·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 “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 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.

About Priceline.com(R) Incorporated

Priceline.com Incorporated (Nasdaq: PCLN) www.priceline.com provides online travel services in 25 languages in over 70 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 19 languages and offers its customers access to approximately 57,000 participating hotels worldwide.

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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 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.

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Press information:   Brian Ek  203-299-8167  (brian.ek@priceline.com)

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priceline.com Incorporated

CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share and per share data)

	September 30,			December 31,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	413,386		$	385,359
Restricted cash	2,835			1,350
Short-term investments	38,850			122,499
Accounts receivable, net of allowance for doubtful accounts of $4,411 and $2,309, respectively	138,875			70,712
Prepaid expenses and other current assets	45,226			33,080
Total current assets	639,172			613,000
Long-term investments	14,304			2,451
Property and equipment, net	28,450			27,088
Intangible assets, net	213,392			182,748
Goodwill	353,407			287,159
Deferred taxes	189,471			218,519
Other assets	17,917			19,891
Total assets	$	1,456,113		$	1,350,856
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	65,802		$	47,708
Accrued expenses and other current liabilities	92,694			59,589
Deferred merchant bookings	30,454			17,750
Convertible debt	467,519			569,796
Total current liabilities	656,469			694,843
Deferred taxes	54,358			46,502
Other long-term liabilities	16,866			13,368
Total liabilities	727,693			754,713
Commitments and Contingencies
Minority interest	—			17,036
Stockholders’ equity:
Common stock, $0.008 par value, authorized 1,000,000,000 shares, 47,007,186, and 45,117,685 shares issued, respectively	362			346
Treasury stock, 6,682,847 and 6,646,408 shares, respectively	(493,442		)	(489,106		)
Additional paid-in capital	2,164,029			2,124,029
Accumulated deficit	(946,288		)	(1,106,506		)
Accumulated other comprehensive income	3,759			50,344
Total stockholders’ equity	728,420			579,107
Total liabilities and stockholders’ equity	$	1,456,113		$	1,350,856

priceline.com Incorporated

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Merchant revenues, including $395 and $18,592 excise tax refund in the three and nine months ended September 30, 2007	$	323,957		$	275,211		$	949,345		$	776,131
Agency revenues	232,638			139,623			515,819			292,478
Other revenues	5,014			2,453			13,600			5,947
Total revenues	561,609			417,287			1,478,764			1,074,556
Cost of revenues(1)	245,531			214,956			727,858			595,297
Gross profit	316,078			202,331			750,906			479,259
Operating expenses:
Advertising - Offline	8,293			8,413			30,252			29,028
Advertising - Online	84,291			53,844			214,952			129,241
Sales and marketing	21,452			13,093			57,715			36,027
Personnel, including stock-based compensation of $10,055,
$4,127, $29,070, $10,759, respectively	45,259			27,182			121,787			72,108
General and administrative, including net cost of litigation settlement of $126 and $55,365 for the three and nine months ended September 30, 2007, respectively	13,524			9,241			39,519			82,893
Information technology	4,402			3,343			13,688			9,406
Depreciation and amortization	10,935			9,131			32,352			26,633
Total operating expenses	188,156			124,247			510,265			385,336
Operating income	127,922			78,084			240,641			93,923
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	3,061			6,063			10,138			20,377
Interest expense	(1,763		)	(2,607		)	(6,787		)	(7,560		)
Other	3,500			(1,316		)	(1,552		)	(1,862		)
Total other income (expense)	4,798			2,140			1,799			10,955
Earnings before income taxes, equity in loss of investees and minority interests	132,720			80,224			242,440			104,878
Income tax benefit (expense)	(42,852		)	26,657			(78,581		)	23,287
Equity in loss of investees and minority interests	(1,900		)	(2,516		)	(3,641		)	(3,945		)
Net income	87,968			104,365			160,218			124,220
Preferred stock dividend	—			—			—			(1,555		)
Net income applicable to common stockholders	$	87,968		$	104,365		$	160,218		$	122,665
Net income applicable to common stockholders per basic common share	$	2.22		$	2.76		$	4.12		$	3.27
Weighted average number of basic common shares outstanding	39,715			37,803			38,905			37,533
Net income applicable to common stockholders per diluted common share	$	1.81		$	2.27		$	3.25		$	2.79
Weighted average number of diluted common shares outstanding	48,656			45,924			49,344			43,924

(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

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands)

	Nine Months Ended
	September 30,
	2008			2007
OPERATING ACTIVITIES:
Net income	$	160,218		$	124,220
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	10,799			8,260
Amortization	21,825			18,373
Provision for uncollectible accounts, net	5,351			2,138
Deferred income taxes	22,469			(49,883		)
Stock-based compensation expense	29,070			10,759
Amortization of debt issuance costs	2,323			2,356
Equity in loss of investees, net and minority interests	3,641			3,945
Loss on impairment of investment	843			—
Changes in assets and liabilities:
Accounts receivable	(80,960		)	(53,568		)
Prepaid expenses and other current assets	(2,662		)	(4,950		)
Accounts payable, accrued expenses and other current liabilities	58,518			26,501
Other	3,765			1,183
Net cash provided by operating activities	235,200			89,334
INVESTING ACTIVITIES:
Purchase of investments	(115,005		)	(118,255		)
Maturity of investments	185,226			35,202
Purchase of shares held by minority interests	(153,564		)	(15,013		)
Acquisitions and other equity investments, net of cash acquired	(593		)	—
Additions to property and equipment	(12,885		)	(11,012		)
Change in restricted cash	(1,500		)	(228		)
Net cash used in investing activities	(98,321		)	(109,306		)
FINANCING ACTIVITIES:
Repurchase of common stock	(4,336		)	(2,223		)
Proceeds from exercise of stock options	4,475			16,197
Payments related to conversion of senior notes	(102,409		)	—
Payment of debt issuance costs	—			(1,309		)
Excess tax benefit on stock-based compensation	6,541			1,434
Net cash (used in) provided by financing activities	(95,729		)	14,099
Effect of exchange rate changes on cash and cash equivalents	(13,123		)	5,804
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	28,027			(69		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	385,359			423,577
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	413,386		$	423,508
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$	46,280		$	22,111
Cash paid during the period for interest	$	6,325		$	5,847

priceline.com Incorporated
RECONCILIATION OF GAAP TO PRO FORMA FINANCIAL INFORMATION
(unaudited)
(In thousands, except per share data)

RECONCILIATION OF GAAP TO PRO FORMA		Three Months Ended September 30					Nine Months Ended September 30
REVENUES		2008		2007			2008		2007
	GAAP Revenues	$	561,609	$	417,287		$	1,478,764	$	1,074,556
(a)	Airline excise tax refund	—		(395		)	—		(18,592		)
	Pro Forma Revenues	$	561,609	$	416,892		$	1,478,764	$	1,055,964

RECONCILIATION OF GAAP TO PRO FORMA GROSS PROFIT		Three Months Ended September 30					Nine Months Ended September 30
		2008		2007			2008		2007
	GAAP Gross profit	$	316,078	$	202,331		$	750,906	$	479,259
(a)	Airline excise tax refund	—		(395		)	—		(18,592		)
(b)	Amortization of acquired intangible assets in Cost of revenues	—		—			272		—
	Pro Forma Gross profit	$	316,078	$	201,936		$	751,178	$	460,667

RECONCILIATION OF GAAP OPERATING INCOME		Three Months Ended September 30					Nine Months Ended September 30
TO PRO FORMA EBITDA		2008		2007			2008			2007
	GAAP Operating income	$	127,922	$	78,084		$	240,641		$	93,923
(a)	Airline excise tax refund	—		(395		)	—			(18,592		)
(c)	Stock-based compensation	10,055		4,127			29,070			10,759
(d)	Securities litigation settlement, net of insurance contribution	—		126			—			55,365
(d)	Stock-based compensation payroll taxes	36		228			709			760
(k)	Amortization of acquired intangible assets in Cost of revenues	—		—			272			—
(k)	Depreciation and amortization	10,935		9,131			32,352			26,633
(l)	Foreign currency transactions and other	3,500		(1,316		)	(1,552		)	(1,862		)
	Pro Forma EBITDA	$	152,448	$	89,985		$	301,492		$	166,986

RECONCILIATION OF GAAP TO PRO FORMA NET		Three Months Ended September 30						Nine Months Ended September 30
INCOME		2008			2007			2008			2007
	GAAP Net income	$	87,968		$	104,365		$	160,218		$	122,665
(a)	Airline excise tax refund	—			(395		)	—			(18,592		)
(b)	Amortization of acquired intangible assets in Cost of revenues	—			—			272			—
(b)	Amortization of acquired intangible assets in Depreciation and amortization	7,352			6,117			21,553			18,324
(c)	Stock-based compensation	10,055			4,127			29,070			10,759
(d)	Securities litigation settlement, net of insurance contribution	—			126			—			55,365
(d)	Stock-based compensation payroll taxes	36			228			709			760
(e)	Accrued interest income on excise tax refund	—			(77		)	—			(3,346		)
(f)	Adjustments for the tax impact of certain of the pro forma adjustments and  to exclude non-cash income taxes	11,620			(42,746		)	21,469			(50,449		)
(g)	Impact on minority interests of other pro forma adjustments	(243		)	(204		)	(818		)	(774		)
(h)	Preferred stock dividend	—			—			—			1,555
	Pro Forma Net income	$	116,788		$	71,541		$	232,473		$	136,267

RECONCILIATION OF GAAP TO PRO FORMA NET		Three Months Ended September 30						Nine Months Ended September 30
INCOME PER DILUTED COMMON SHARE		2008			2007			2008			2007
	GAAP Weighted average number of diluted common shares outstanding	48,656			45,924			49,344			43,924
(i)	Adjustment for Conversion Spread Hedges	(884		)	(1,140		)	(767		)	(1,406		)
(j)	Adjustment for warrants and restricted stock	1,091			584			1,002			580
	Pro Forma Weighted average number of diluted common shares outstanding	48,863			45,368			49,579			43,098
	Net income applicable to common stockholders per diluted common share
	GAAP	$	1.81		$	2.27		$	3.25		$	2.79
	Pro Forma	$	2.39		$	1.58		$	4.69		$	3.16

(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 stock-based compensation payroll taxes are recorded in General and administrative expense.
(e)	Accrued interest income on airline excise tax refund is recorded in Interest income.
(f)	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.
(g)	Impact on minority interests of other pro forma adjustments are recorded in Equity in loss of investees and minority interests.
(h)	Preferred stock dividend is recorded in the respective expense line item.
(i)	Reflects the impact of the Conversion Spread Hedges that increase the effective conversion price of the currently outstanding 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, 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.
(k)	Depreciation and amortization are excluded from Operating income to calculate EBITDA.
(l)	Foreign currency transactions and other are added to Operating income to calculate EBITDA.

priceline.com Incorporated

Statistical Data

In thousands

(Unaudited)

Gross Bookings	2Q06			3Q06			4Q06			1Q07			2Q07			3Q07			4Q07			1Q08			2Q08			3Q08
Domestic	$	570,757		$	504,752		$	423,275		$	478,812		$	547,787		$	602,205		$	525,571		$	720,968		$	872,284		$	799,578
International**	356,593			398,416			319,136			519,679			687,124			788,478			679,760			1,037,644			1,237,681			1,250,850
Total	$	927,350		$	903,168		$	742,410		$	998,491		$	1,234,911		$	1,390,683		$	1,205,331		$	1,758,612		$	2,109,965		$	2,050,427
Agency	$	609,284		$	600,406		$	491,070		$	710,528		$	919,260		$	1,042,619		$	912,698		$	1,370,119		$	1,656,775		$	1,603,693
Merchant**	318,066			302,762			251,340			287,963			315,651			348,064			292,633			388,493			453,190			446,734
Total	$	927,350		$	903,168		$	742,410		$	998,491		$	1,234,911		$	1,390,683		$	1,205,331		$	1,758,612		$	2,109,965		$	2,050,427
Year/Year Growth
Domestic	16.0		%	13.1		%	11.9		%	1.0		%	-4.0		%	19.3		%	24.2		%	50.6		%	59.2		%	32.8		%
International	360.0		%	141.7		%	101.4		%	90.5		%	92.7		%	97.9		%	113.0		%	99.7		%	80.1		%	58.6		%
excluding F/X impact	361.5		%	131.8		%	86.3		%	74.5		%	79.6		%	83.4		%	89.9		%	75.0		%	55.8		%	44.7		%
Agency	128.7		%	74.9		%	51.6		%	47.9		%	50.9		%	73.7		%	85.9		%	92.8		%	80.2		%	53.8		%
Merchant	5.0		%	13.0		%	18.1		%	8.1		%	-0.8		%	15.0		%	16.4		%	34.9		%	43.6		%	28.3		%
Total	62.8		%	47.8		%	38.3		%	33.7		%	33.2		%	54.0		%	62.4		%	76.1		%	70.9		%	47.4		%
Units Sold	2Q06			3Q06			4Q06			1Q07			2Q07			3Q07			4Q07			1Q08			2Q08			3Q08
Airline Tickets	821			666			588			639			687			819			790			1,169			1,362			1,186
Year/Year Growth	4.1		%	-2.0		%	0.9		%	-12.2		%	-16.3		%	23.0		%	34.4		%	83.0		%	98.2		%	44.8		%
Hotel Room-Nights	4,995			5,238			4,265			5,955			7,242			7,964			6,616			9,375			10,879			11,434
Year/Year Growth	82.5		%	49.7		%	43.7		%	43.4		%	45.0		%	52.0		%	55.1		%	57.4		%	50.2		%	43.6		%
Rental Car Days	2,000			2,044			1,789			2,003			2,278			2,338			2,002			2,612			2,815			2,333
Year/Year Growth	30.3		%	20.8		%	36.1		%	23.6		%	13.9		%	14.4		%	11.9		%	30.4		%	23.6		%	-0.2		%
	2Q06			3Q06			4Q06			1Q07			2Q07			3Q07			4Q07			1Q08			2Q08			3Q08
Revenue	$	307,651		$	313,467		$	260,071		$	301,389		$	355,880		$	417,287		$	334,853		$	403,180		$	513,976		$	561,609
Year/Year Growth	15.4		%	21.1		%	27.5		%	24.6		%	15.7		%	33.1		%	28.8		%	33.8		%	44.4		%	34.6		%
Gross Profit	$	105,804		$	123,547		$	99,517		$	119,717		$	157,211		$	202,331		$	160,152		$	181,103		$	253,725		$	316,078
Year/Year Growth	62.2		%	54.4		%	53.3		%	65.7		%	48.6		%	63.8		%	60.9		%	51.3		%	61.4		%	56.2		%

Gross Bookings represent the total dollar value of travel booked, inclusive of taxes and fees.

** Includes $32.4 million, $24.2 million, $24.6 million and $13.4 million of Agoda gross bookings in 3Q08, 2Q08, 1Q08 and 4Q07, respectively since acquisition on November 6, 2007.

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 of restricted stock, restricted stock units and performance share units, any conversions of our convertible notes and the elimination of the anti-dilutive impact of our conversion spread hedges associated with the convertible notes converted prior to maturity. 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
			4Q08	2008	2009	4Q08		2008	2009		4Q08	2008	2009
Closing Share Price Assumption(2)	$	30.00	42.4	48.2	42.1	0.9		0.2	1.1		43.4	48.5	43.2
	$	35.00	43.1	48.3	42.2	0.4		0.3	1.1		43.6	48.5	43.3
	$	40.00	43.8	48.3	42.4	(0.1	)	0.3	1.1		43.7	48.6	43.5
	$	45.00	44.3	48.3	43.5	(0.5	)	0.3	0.3		43.8	48.6	43.8
	$	50.00	44.8	48.4	44.4	(0.4	)	0.3	(0.3	)	44.3	48.7	44.1
	$	55.00	45.2	48.4	45.2	(0.4	)	0.3	(0.2	)	44.8	48.7	44.9
	$	60.00	45.6	48.4	45.8	(0.3	)	0.3	(0.1	)	45.3	48.7	45.7
	$	65.00	45.9	48.5	46.4	(0.2	)	0.3	—		45.7	48.8	46.3
	$	70.00	46.3	48.5	46.8	(0.2	)	0.3	—		46.1	48.8	46.9
	$	75.00	46.6	48.5	47.2	(0.1	)	0.3	0.1		46.4	48.9	47.4
	$	80.00	46.8	48.6	47.6	(0.1	)	0.3	0.2		46.8	48.9	47.8
	$	85.00	47.1	48.6	47.9	—		0.3	0.2		47.1	48.9	48.1
	$	90.00	47.3	48.6	48.2	—		0.3	0.3		47.3	49.0	48.5
	$	95.00	47.5	48.7	48.5	0.1		0.3	0.3		47.6	49.0	48.8
	$	100.00	47.7	48.7	48.7	0.1		0.3	0.4		47.8	49.0	49.0
	$	105.00	47.9	48.7	48.9	0.1		0.3	0.4		48.0	49.1	49.3
	$	110.00	48.0	48.8	49.1	0.2		0.3	0.4		48.2	49.1	49.5
	$	115.00	48.2	48.8	49.3	0.2		0.4	0.5		48.4	49.1	49.7
	$	120.00	48.4	48.8	49.4	0.2		0.4	0.5		48.6	49.2	49.9
	$	125.00	48.5	48.8	49.6	0.3		0.4	0.5		48.7	49.2	50.1
	$	130.00	48.6	48.9	49.7	0.3		0.4	0.5		48.9	49.2	50.2

(1)Reflects the anti-dilutive impact of the “Conversion Spread Hedges” associated with convertible notes that remain outstanding to maturity 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:4Q08: Uses actual daily share prices from October 1, 2008 through November 5, 2008, and the closing share price assumption from November 6, 2008 through December 31, 2008.
2008:  Uses actual daily share prices from January 1, 2008 through November 5, 2008, and the closing share price assumption from November 6, 2008 through December 31, 2008.
2009:  Uses the closing share price assumption from January 1, 2009 through December 31, 2009.