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 2, 2004

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)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.              Results of Operations and Financial Condition

On November 2, 2004, priceline.com Incorporated announced its financial results for the third quarter ended September 30, 2004.  A copy of priceline.com’s consolidated balance sheets at September 30, 2004 and consolidated statements of operations for the three and nine months ended September 30, 2004 are attached as Exhibit 99.1 to this Current Report on Form 8-K.  The information in this Item 2.02 (including Exhibit 99.1) shall be treated as "filed" for purposes of the Securities Exchange Act of 1934, as amended.

Item 7.01.              Regulation FD Disclosure

On November 2, 2004, priceline.com Incorporated announced its financial results for the fiscal quarter ended September 30, 2004.  A copy of priceline.com’s press release announcing these financial results and certain other information is attached as Exhibit 99.2 to this Current Report on Form 8-K.

As set forth in more detail in the attached press release, for the 3^rd quarter 2004, priceline.com’s revenues were $235.9 million and gross profit was $51.1 million.  Priceline.com reported GAAP net income for the 3^rd quarter 2004 of $9.3 million, or $0.23 per diluted share.

Priceline.com announced that it expected advertising expenses of approximately $14.0 to $15.0 million in the 4^th quarter 2004 and expected approximately 60% to be spent on-line and approximately 40% off-line.  Priceline.com estimated that sales and marketing expenses in the 4^th quarter 2004 would be between $7.5 and $8.0 million.  Priceline.com stated that it expected personnel costs to be approximately $10.3 to $10.5 million in the 4^th quarter 2004.  With respect to 4^th quarter 2004, priceline.com stated it expected general and administrative expenses of approximately $4.5 to $4.7 million, information technology expenses of approximately $2.7 to $3.0 million, and depreciation and amortization expenses, excluding acquisition related amortization, of approximately $2.4 million.  Priceline.com stated that it expected cash income tax expense of approximately $750,000 in the 4^th quarter 2004.

The information set forth above and in the attached press release contains forward-looking statements relating to priceline.com’s performance during 2004.  Readers are cautioned not to place undue reliance on forward-looking statements.  All forward-looking statements are based upon information available to priceline.com on the date this report was submitted.  Priceline.com undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  A more thorough discussion of certain factors which may affect priceline.com’s operating results is included in priceline.com’s recent filings with the Securities and Exchange Commission and will also be

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included in priceline.com’s Quarterly Report on Form 10-Q for the three months ended September 30, 2004 to be filed with the Securities and Exchange Commission in the fourth quarter of 2004.  The information set forth above is qualified in its entirety by reference to the press release (which includes a financial and statistical supplement), a copy of which is attached hereto as Exhibit 99.2 and incorporated herein by reference.

The information in this Item 7.01 (including Exhibit 99.2 hereto and the accompanying financial and statistical supplement and related information) shall not be treated as “filed” for purposes of the Securities Exchange Act of 1934, as amended.

Item 9.01.              Financial Statements and Exhibits

(c) Exhibits

99.1	Priceline.com consolidated balance sheets at September 30, 2004 and consolidated statements of operations for the three and nine months ended September 30, 2004.
99.2	Press release (which includes a financial and statistical supplement and related information) issued by priceline.com Incorporated on November 2, 2004 relating to, among other things, its 3rd quarter ended September 30, 2004 earnings.

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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/ Jeffery H. Boyd
	Name:	Jeffery H. Boyd
	Title:	President and Chief Executive Officer

Date:  November 3, 2004

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Priceline.com consolidated balance sheets at September 30, 2004 and consolidated statements of operations for the three and nine months ended September 30, 2004.
99.2	Press release (which includes a financial and statistical supplement and related information) issued by priceline.com Incorporated on November 2, 2004 relating to, among other things, its 3rd quarter ended September 30, 2004 earnings.

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EX-99.1

Exhibit 99.1

priceline.com Incorporated

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	September 30, 2004			December 31, 2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	77,281		$	93,732
Restricted cash	25,968			22,485
Short-term investments	144,381			151,736
Accounts receivable, net of allowance for doubtful accounts of $1,196 and $794, respectively	24,146			10,782
Prepaid expenses and other current assets	7,223			4,778
Total current assets	278,999			283,513
Property and equipment, net	15,899			16,524
Intangible assets, net	96,651			7,053
Goodwill	130,118			8,779
Other assets	16,186			21,915
Total assets	$	537,853		$	337,784
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	50,640		$	25,061
Accrued expenses	25,096			21,031
Deferred merchant bookings	7,398			—
Other current liabilities	3,512			3,522
Total current liabilities	86,646			49,614
Deferred taxes	25,310			—
Other long-term liabilities	632			1,069
Minority interest	4,471			—
Long-term debt	224,572			124,524
Total liabilities	341,631			175,207
SERIES B MANDATORILY REDEEMABLE PREFERRED STOCK	13,470			13,470
Stockholders’ equity
Common stock	316			306
Treasury stock	(350,628		)	(350,628		)
Additional paid-in capital	2,063,451			2,055,607
Deferred compensation	(1,390		)	(1,408		)
Accumulated deficit	(1,530,448		)	(1,555,444		)
Accumulated other comprehensive income	1,451			674
Total stockholders’ equity	182,752			149,107
Total liabilities and stockholders’ equity	$	537,853		$	337,784

priceline.com Incorporated

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data, unaudited)

	Three Months Ended								Nine Months Ended
	September 30, 2004				September 30, 2003				September 30, 2004				September 30, 2003
Merchant revenues	$	226,453			$	240,584			$	693,324			$	676,135
Agency revenues	8,671				1,895				23,866				4,376
Other revenues	758				962				2,212				2,983
Total revenues	235,882				243,441				719,402				683,494
Cost of merchant revenues	184,627				202,793				570,994				569,365
Cost of agency revenues	151				—				151				—
Cost of other revenues	—				—				—				—
Total costs of revenues	184,778				202,793				571,145				569,365
Gross profit	51,104				40,648				148,257				114,129
Operating expenses:
Advertising - Offline	7,471				5,524				27,752				19,011
Advertising - Online	7,178				4,760				18,668				13,145
Sales and marketing	8,711				7,242				24,513				21,895
Personnel	8,036				7,441				24,054				22,500
General and administrative, including option payroll taxes	4,301				3,212				12,264				8,775
Information technology	2,272				1,878				7,241				6,849
Depreciation and amortization	3,359				2,510				8,144				9,209
Stock based compensation	126				106				344				176
Restructuring charge/(reversal)	—				(137			)	(12			)	(137		)
Warrant costs	—				—				—				6,638
Total operating expenses	41,454				32,536				122,968				108,061
Operating income	9,650				8,112				25,289				6,068
Other income:
Interest income	1,655				596				3,794				1,539
Interest expense	(1,299			)	(367			)	(2,431			)	(413		)
Equity in income (loss) of investees, net	9				1,389				(152			)	2,494
Other	56				—				75				—
Total other income	421				1,618				1,286				3,620
Earnings before income taxes	10,071				9,730				26,575				9,688
Income tax expense	67				—				67				—
Net income	10,004				9,730				26,508				9,688
Preferred stock dividend	(740			)	(1,194			)	(1,512			)	(1,491		)
Net income applicable to common stockholders	$		9,264		$		8,536		$		24,996		$	8,197
Net income applicable to common stockholders per basic common share	$		0.24		$		0.22		$		0.66		$	0.22
Weighted average number of basic common shares outstanding	38,684				38,044				38,111				37,726
Net income applicable to common stockholders per diluted common share	$		0.23		$		0.21		$		0.63		$	0.21
Weighted average number of diluted common shares outstanding	40,279				39,812				39,785				38,883

EX-99.2

Exhibit 99.2

Priceline.com Reports 3^rd Quarter 2004 Financial Results

Gross travel bookings are $432 million, up 44% year over year

Airline ticket unit bookings grow 65%

NORWALK, Conn., November 2, 2004 . . Priceline.com^® Incorporated (Nasdaq: PCLN) today reported 3^rd quarter 2004 gross travel bookings of $432 million, a 44% increase over a year ago.  Gross travel bookings refer to the total dollar value inclusive of taxes and fees of all travel products purchased by consumers.  Revenues were $235.9 million versus $243.4 million for the same period a year ago.

Priceline.com’s GAAP gross profit for the 3^rd quarter 2004 was $51.1 million.  Priceline.com’s GAAP net income for the 3^rd quarter 2004 was $9.3 million, or $0.23 per diluted share.  Pro forma gross profit for the 3^rd quarter 2004 was $51.7 million, up 27% over the same period a year ago.  Pro forma net income for the 3^rd quarter 2004 was $11.3 million or $0.28 per diluted share, which exceeds First Call analyst estimates of $0.27 per diluted share and represents a 15% increase over the prior year.  Pro forma gross profit and pro forma net income exclude the after-tax effects of non-cash amortization expense of acquisition-related intangibles (primarily associated with priceline.com’s acquisition of Active Hotels and a majority of the equity of Travelweb LLC).  Pro forma net income further excludes the effects of stock-based compensation expense, option payroll tax expense, minority interest credit and, when applicable, the payment of non-cash preferred stock dividends.  The attached financial and statistical supplement reconciles pro forma financial information with priceline.com’s financial results under GAAP and the section below entitled “Non-GAAP Financial Measures” provides further information about the use of pro forma financial measures used in this press release.

Airline ticket unit bookings, which include published-price and Name Your Own Price^® tickets, grew 65% compared to the same period a year ago.  Hotel room night unit bookings grew 27% compared to the same period last year and rental car day unit bookings increased 12% year over year. Hotel room night unit bookings include bookings of Travelweb, which was acquired in May 2004, and ten days of results from Active Hotels, which was acquired in September 2004.  Rental car day unit bookings include bookings of RentalCars.com and Breezenet.com, which were acquired in June and December 2003, respectively.

“Priceline.com’s growth in gross bookings and gross profit dollars continued at an industry-leading pace, fueled by new products and product improvements, as well as contributions from Travelweb,” said priceline.com President and Chief Executive Officer Jeffery H. Boyd.  “On the bottom line, solid expense controls allowed us to report better-than-expected earnings, despite the negative impact of the hurricanes on bookings and cancellations in the southeast during the quarter.”

A major development in the 3^rd quarter for priceline.com and its hotels service was the acquisition of UK-based Active Hotels Ltd., one of Europe’s leading Internet hotel reservation sites, on September 21, 2004.  For the twelve months ended September 30, 2004, Active Hotels had gross travel bookings of approximately $160 million, an approximate 100% increase over the same period a year ago.  Priceline.com said it expected the acquisition to be accretive to its earnings (before non-cash amortization expense associated with the acquisition) for the 4^th quarter 2004 and for 2005.  Active Hotels will continue to be managed by Active’s Europe-based management team.

The acquisition of this profitable travel service expands priceline.com’s footprint in the European travel marketplace and broadens the Company’s inventory of hotels. Active Hotels works with a base of 8,000 participating European hotels.  Active Hotels’ distribution system includes 1,500 independent Web sites throughout Europe, plus company-owned Web sites like ActiveReservations.  Active Hotels’ services are available in English, French, Spanish, German and Italian.

Forward Guidance

Looking forward, Mr. Boyd commented, “With priceline.com’s expanded product line, including retail products, we believe that we are better positioned to compete in the busy holiday travel season than in previous years.  Moreover, we believe that our ongoing initiatives to offer retail choices to our hotel and rental car customers, expand packaging and destination commerce and build on Active Hotels’ leadership position in Europe should provide a firm foundation for growth into 2005.”

Priceline.com stated that it remained comfortable that 4^th quarter year-over-year growth rates for gross travel bookings, revenue, pro forma gross profit and airline ticket, hotel room night and rental car days unit sales, without giving effect to the acquisition of Active Hotels, would be in line with the second half averages given in its previous guidance issued in August.  The Company also issued the following guidance for the 4^th quarter 2004, which is inclusive of the results of Active Hotels:

•Gross travel bookings growth of 60% to 65% on a year-over-year basis;

•Airline Ticket unit sales growth of 60% to 65% on a year-over-year basis;

•Hotel Room Night unit sales growth of 55% to 60% on a year-over-year basis;

•Rental Car Day unit sales growth of 18% to 22% on a year-over-year basis;

•Revenue growth of approximately 5% to 10% on a year-over-year basis; and

•Pro forma gross profit growth of 50% to 55% on a year-over-year basis.

Priceline.com expects pro forma net income of between $0.14 and $0.18 per diluted share and GAAP net income of between $0.05 and $0.09 per share.  A reconciliation of pro forma financial results to GAAP results is included in the attached financial and statistical supplement.  Pro forma net income per diluted share for the 4^th quarter 2004 excludes the after-tax effects of non-cash amortization expense of acquisition-related intangibles (primarily associated with the acquisitions of Travelweb LLC and Active Hotels), stock-based compensation, option payroll taxes and minority interest credit, which, when aggregated, are expected to total approximately $3.5 million.

About Priceline.com

Priceline.com is a travel service that offers leisure airline tickets, hotel rooms, rental cars, vacation packages and cruises.  Priceline.com also has a personal finance service that offers home mortgages, refinancing and home equity loans through an independent licensee. Priceline.com operates the retail travel Web sites Travelweb.com, ActiveReservations.com, Lowestfare.com, Rentalcars.com and Breezenet.com.  Priceline.com licenses its business model to independent licensees, including pricelinemortgage and certain international licensees.

###

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

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, “may,” “will,” “should,” “could,” “expect(s),” “does not currently expect,” “plan(s),” “anticipate(s),” “believe(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 products as the result of, among other things, terrorist attacks;

•adverse changes in the Company’s relationships with airlines and other product and service providers which could include, without limitation, the withdrawal of suppliers from the priceline.com system (either priceline.com’s retail or “opaque” products, or both);

•the loss or reduction of global distribution fees;

•the bankruptcy or insolvency of another major domestic airline;

•the effects of increased competition, including, without limitation, adverse effects from the continued consolidation of on-line travel intermediaries;

•systems-related failures and/or security breaches;

•difficulties integrating recent acquisitions, including, without limitation, the acquisitions of Active Hotels and Travelweb;

•final adjustments made in closing the quarter;

•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 gross profit excludes the after-tax effects of non-cash amortization expense of acquisition-related intangibles primarily associated with the acquisition of Active Hotels Ltd. and a majority of the equity of Travelweb LLC.  Pro forma net income excludes the after-tax effects of non-cash amortization expense of acquisition-related intangibles (primarily associated with the acquisition of Active Hotels Ltd. and a majority of the equity of Travelweb LLC), stock based compensation, option payroll taxes, minority interest credit and, when applicable, the payment of non-cash preferred stock dividends.  Pro forma net income and pro forma gross profit 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 net income and pro forma gross profit that exclude the after-tax effects of non-cash amortization expense of acquisition-related intangibles 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.  Stock based compensation and 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 often shows volatility unrelated to operating results since the expense is driven primarily by option exercise activity and the market price of priceline.com’s common stock. The minority interest credit associated with priceline.com’s equity ownership of Travelweb LLC is excluded from pro forma net income because priceline.com is funding all of Travelweb’s operations.  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

(In thousands, except per share data)

	September 30, 2004			December 31, 2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	77,281		$	93,732
Restricted cash	25,968			22,485
Short-term investments	144,381			151,736
Accounts receivable, net of allowance for doubtful accounts of $1,196 and $794, respectively	24,146			10,782
Prepaid expenses and other current assets	7,223			4,778
Total current assets	278,999			283,513
Property and equipment, net	15,899			16,524
Intangible assets, net	96,651			7,053
Goodwill	130,118			8,779
Other assets	16,186			21,915
Total assets	$	537,853		$	337,784
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	50,640		$	25,061
Accrued expenses	25,096			21,031
Deferred merchant bookings	7,398			—
Other current liabilities	3,512			3,522
Total current liabilities	86,646			49,614
Deferred taxes	25,310			—
Other long-term liabilities	632			1,069
Minority interest	4,471			—
Long-term debt	224,572			124,524
Total liabilities	341,631			175,207
SERIES B MANDATORILY REDEEMABLE PREFERRED STOCK	13,470			13,470
Stockholders’ equity
Common stock	316			306
Treasury stock	(350,628		)	(350,628		)
Additional paid-in capital	2,063,451			2,055,607
Deferred compensation	(1,390		)	(1,408		)
Accumulated deficit	(1,530,448		)	(1,555,444		)
Accumulated other comprehensive income	1,451			674
Total stockholders’ equity	182,752			149,107
Total liabilities and stockholders’ equity	$	537,853		$	337,784

priceline.com Incorporated

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data, unaudited)

	Three Months Ended								Nine Months Ended
	September 30, 2004				September 30, 2003				September 30, 2004				September 30, 2003
Merchant revenues	$	226,453			$	240,584			$	693,324			$	676,135
Agency revenues	8,671				1,895				23,866				4,376
Other revenues	758				962				2,212				2,983
Total revenues	235,882				243,441				719,402				683,494
Cost of merchant revenues	184,627				202,793				570,994				569,365
Cost of agency revenues	151				—				151				—
Cost of other revenues	—				—				—				—
Total costs of revenues	184,778				202,793				571,145				569,365
Gross profit	51,104				40,648				148,257				114,129
Operating expenses:
Advertising - Offline	7,471				5,524				27,752				19,011
Advertising - Online	7,178				4,760				18,668				13,145
Sales and marketing	8,711				7,242				24,513				21,895
Personnel	8,036				7,441				24,054				22,500
General and administrative, including option payroll taxes	4,301				3,212				12,264				8,775
Information technology	2,272				1,878				7,241				6,849
Depreciation and amortization	3,359				2,510				8,144				9,209
Stock based compensation	126				106				344				176
Restructuring charge/(reversal)	—				(137			)	(12			)	(137		)
Warrant costs	—				—				—				6,638
Total operating expenses	41,454				32,536				122,968				108,061
Operating income	9,650				8,112				25,289				6,068
Other income:
Interest income	1,655				596				3,794				1,539
Interest expense	(1,299			)	(367			)	(2,431			)	(413		)
Equity in income (loss) of investees, net	9				1,389				(152			)	2,494
Other	56				—				75				—
Total other income	421				1,618				1,286				3,620
Earnings before income taxes	10,071				9,730				26,575				9,688
Income tax expense	67				—				67				—
Net income	10,004				9,730				26,508				9,688
Preferred stock dividend	(740			)	(1,194			)	(1,512			)	(1,491		)
Net income applicable to common stockholders	$		9,264		$		8,536		$		24,996		$	8,197
Net income applicable to common stockholders per basic common share	$		0.24		$		0.22		$		0.66		$	0.22
Weighted average number of basic common shares outstanding	38,684				38,044				38,111				37,726
Net income applicable to common stockholders per diluted common share	$		0.23		$		0.21		$		0.63		$	0.21
Weighted average number of diluted common shares outstanding	40,279				39,812				39,785				38,883

priceline.com Incorporated

RECONCILIATION OF GAAP GROSS PROFIT AND NET INCOME TO PRO FORMA GROSS PROFIT AND NET INCOME

(In thousands, except per share data, unaudited)

	GAAP			Adjustments			Pro Forma
Merchant revenues	$	226,453		$	—		$	226,453
Agency revenues	8,671			—			8,671
Other revenues	758			—			758
Total revenues	235,882			—			235,882
Cost of merchant revenues	184,627			(403		)(a)	184,224
Cost of agency revenues	151			(151		)(b)	—
Cost of other revenues	—			—			—
Total costs of revenues	184,778			(554		)	184,224
Gross profit	51,104			554			51,658
Operating expenses:
Advertising - Offline	7,471			—			7,471
Advertising - Online	7,178			—			7,178
Sales and marketing	8,711			—			8,711
Personnel	8,036			—			8,036
General and administrative, including option payroll taxes	4,301			(6		)(c)	4,295
Information technology	2,272			—			2,272
Depreciation and amortization	3,359			(823		)(d)	2,536
Stock based compensation	126			(126		)(e)	—
Restructuring charge/(reversal)	—			—			—
Warrant costs	—			—			—
Total operating expenses	41,454			(955		)	40,499
Operating income	9,650			1,509			11,159
Other income:
Interest income	1,655			—			1,655
Interest expense	(1,299		)	—			(1,299		)
Equity in income (loss) of investees, net	9			—			9
Other	56			(66		)(f)	(10		)
Total other income	421			(66		)	355
Earnings before income taxes	10,071			1,443			11,514
Income tax expense	67			124		(g)	191
Net income	10,004			1,319			11,323
Preferred stock dividend	(740		)	740		(h)	—
Net income applicable to common stockholders	$	9,264		$	2,059		$	11,323
Net income applicable to common stockholders per basic common share	$	0.24					$	0.29
Weighted average number of basic common shares outstanding	38,684						38,684
Net income applicable to common stockholders per diluted common share	$	0.23					$	0.28
Weighted average number of diluted common shares outstanding	40,279						40,279

(a)	Cost of merchant revenue adjustment for Travelweb acquired intangibles.
(b)	Cost of agency revenue adjustment for Active Hotels acquired intangibles.
(c)	Adjustment for option payroll taxes.
(d)	Amortization adjustment for acquistion-related intangibles, primarily related to Active Hotels and Travelweb.
(e)	Adjustment for stock-based compensation.
(f)	Adjustment for minority interest credit.
(g)	Adjustment for acquisition-related income tax benefit.
(h)	Adjustment for preferred stock dividend.

priceline.com Incorporated - 2004 THIRD QUARTER FINANCIAL DATA SUPPLEMENT

priceline.com Financials
	Consolidated Statements of Operations
	Consolidated Balance Sheets
Statistical Data

This supplement is unaudited and intended as a supplement to, and should be read in conjunction with, the Company’s audited financial statements and the notes thereto filed with the SEC on Form 10-K and unaudited quarterly financial statements filed with the SEC on Form 10-Q.  Certain data have been reclassified in order to conform historical information in a manner consistent with current presentation and has not been audited in this form.  Certain presentations within this supplement are not consistent with Generally Accepted Accounting Principles.

priceline.com Incorporated

Consolidated Statements of Operations

In thousands, except per share data

(Unaudited)

Income Statement Analysis	1Q03			2Q03			3Q03			4Q03			1Q04			2Q04			3Q04			3Q04 vs. 3Q03		9 months 2004			9 months 2003			9 mos. 2004 vs. 9 mos. 2003
Merchant revenues	$	198,608		$	236,943		$	240,584		$	176,319		$	217,011		$	249,860		$	226,453		-6	%	$	693,324		$	676,135		3	%
Agency revenues	1,005			1,476			1,895			3,178			6,448			8,747			8,671			358	%	23,866			4,376			445	%
Other revenues	874			1,147			962			670			672			782			758			-21	%	2,212			2,983			-26	%
Total revenues	200,487			239,566			243,441			180,167			224,131			259,389			235,882			-3	%	719,402			683,494			5	%
Cost of merchant revenues	167,500			199,072			202,793			148,351			180,757			205,610			184,627			-9	%	570,994			569,365			0	%
Cost of agency revenues	—			—			—			—			—			—			151			NM		151			—			NM
Cost of other revenues	—			—			—			—			—			—			—			NM		—			—			0	%
Total costs of revenues	167,500			199,072			202,793			148,351			180,757			205,610			184,778			-9	%	571,145			569,365			0	%
Gross profit	$	32,987		$	40,494		$	40,648		$	31,816		$	43,374		$	53,779		$	51,104		26	%	$	148,257		$	114,129		30	%
Operating expenses:
Advertising - offline	6,986			6,501			5,524			6,028			10,664			9,617			7,471			35	%	27,752			19,011			46	%
Advertising - online	4,112			4,273			4,760			4,064			4,741			6,749			7,178			51	%	18,668			13,145			42	%
Sales and marketing	6,864			7,789			7,242			4,908			6,706			9,096			8,711			20	%	24,513			21,895			12	%
Personnel	7,512			7,547			7,441			7,180			8,235			7,783			8,036			8	%	24,054			22,500			7	%
General and administrative	2,819			2,642			3,058			3,256			3,469			4,156			4,295			40	%	11,920			8,519			40	%
Information technology	2,367			2,604			1,878			2,049			2,514			2,455			2,272			21	%	7,241			6,849			6	%
Depreciation and amortization	3,912			2,787			2,510			2,324			2,220			2,565			3,359			34	%	8,144			9,209			-12	%
Option payroll taxes	—			102			154			—			40			298			6			-96	%	344			256			34	%
Stock based compensation	—			70			106			106			106			112			126			19	%	344			176			95	%
Restructuring charge/(reversal)	—			—			(137		)	(49		)	—			(12		)	—			100	%	(12		)	(137		)	NM
Warrant costs	6,638			—			—			—			—			—			—			NM		—			6,638			-100	%
Total operating expenses	$	41,210		$	34,315		$	32,536		$	29,866		$	38,695		$	42,819		$	41,454		27	%	$	122,968		$	108,061		14	%
Operating income (loss)	$	(8,223	)	$	6,179		$	8,112		$	1,950		$	4,679		$	10,960		$	9,650		19	%	$	25,289		$	6,068		317	%
Other income (expenses):
Interest income, net	492			405			229			441			544			463			356			55	%	1,363			1,126			21	%
Equity in income/(loss) of investees, net	—			1,105			1,389			(163		)	(126		)	(35		)	9			-99	%	(152		)	2,494			-106	%
Other	—			—			—			—			6			13			56			NM		75			—			NM
Total other income	$	492		$	1,510		$	1,618		$	278		$	424		$	441		$	421		-74	%	1,286			3,620			-64	%
Earnings before income taxes	$	(7,731	)	$	7,689		$	9,730		$	2,228		$	5,103		$	11,401		$	10,071		4	%	$	26,575		$	9,688		174	%
Income tax expense	—			—			—			—			—			—			$	67		NM		$	67		$	0		NM
Net income (loss)	$	(7,731	)	$	7,689		$	9,730		$	2,228		$	5,103		$	11,401		$	10,004		3	%	$	26,508		$	9,688		174	%
Preferred stock dividend	(297		)	—			(1,194		)	—			(772		)	—			(740		)	38	%	(1,512		)	(1,491		)	-1	%
Net income (loss) applicable to common stockholders	$	(8,028	)	$	7,689		$	8,536		$	2,228		$	4,331		$	11,401		$	9,264		9	%	$	24,996		$	8,197		205	%
Net income (loss) applicable to common stockholders per basic common share	$	(0.21	)	$	0.20		$	0.22		$	0.06		$	0.12		$	0.30		$	0.24		7	%	$	0.66		$	0.22		202	%
Net income (loss) applicable to common stockholders per diluted common share	$	(0.21	)	$	0.20		$	0.21		$	0.06		$	0.11		$	0.29		$	0.23		7	%	$	0.63		$	0.21		198	%
(1) Weighted average common shares:
Basic	37,477			37,635			38,044			38,019			37,588			38,076			38,684			2	%	38,111			37,726			1	%
Diluted	37,477			39,284			39,812			40,107			38,905			39,932			40,279			1	%	39,785			38,883			2	%
Common shares outstanding, end of period	37,495			37,925			38,291			37,607			37,696			38,748			38,801			1	%	38,801			37,925			2	%
Gross margin	16.5		%	16.9		%	16.7		%	17.7		%	19.4		%	20.7		%	21.7		%			20.6		%	16.7		%

(1)  Reflects one-for-six reverse stock split.

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priceline.com Incorporated

Consolidated Balance Sheets

In thousands

(Unaudited)

	3/31/2003			6/30/2003					9/30/2003			12/31/2003					3/31/2004						6/30/2004				9/30/2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	52,560		$	69,292				$	115,302		$			93,732		$				176,092		$		156,306		$	77,281
Restricted cash	17,025			16,869					20,750			22,485					22,384						23,502				25,968
Short-term investments	70,194			62,992					148,027			151,736					79,576						206,360				144,381
Accounts receivable, net of allowance for doubtful accounts	16,106			23,565					18,809			10,782					19,052						23,733				24,146
Prepaid expenses and other current assets	6,243			8,158					6,737			4,778					3,435						6,156				7,223
Total current assets	162,128			180,876					309,625			283,513					300,539						416,057				278,999
PROPERTY AND EQUIPMENT, net	17,690			16,106					16,603			16,524					15,692						15,474				15,899
INTANGIBLE ASSETS, net	1,086			3,808					3,687			7,053					6,814						13,570				96,651
GOODWILL	10,517			10,517					9,534			8,779					8,779						32,837				130,118
OTHER ASSETS	16,837			17,699					22,829			21,915					21,385						16,674				16,186
TOTAL ASSETS	$	208,258		$	229,006				$	362,278		$			337,784		$	353,209					$		494,612		$	537,853
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	36,020		$		46,863			$	38,467		$	25,061				$		38,023				$	49,380			$	50,640
Accrued expenses	24,983			23,296					22,972			21,031					18,118						22,414				25,096
Deferred merchant bookings	—			—					—			—					—						8,867				7,398
Other current liabilities	2,833			2,134					3,100			3,522					3,127						3,340				3,512
Total current liabilities	63,836			72,293					64,539			49,614					59,268						84,001				86,646
Deferred taxes	—			—					—			—					—						—				25,310
Other long-term liabilities	422			276					545			1,069					435						2,029				632
Minority interest	—			—					—			—					—						691				4,471
Long-term debt	—			—					125,000			124,524					124,996						223,348				224,572
Total liabilities	64,258			72,569					190,084			175,207					184,699						310,069				341,631
SERIES B MANDATORILY REDEEMABLE PREFERRED STOCK	13,470			13,470					13,470			13,470					13,470						13,470				13,470
STOCKHOLDERS’ EQUITY:
Common stock	1,886			303					306			306					307						315				316
Treasury stock	(338,410		)	(338,410				)	(338,410		)	(350,628				)	(350,628					)	(350,628			)	(350,628		)
Additional paid-in capital	2,040,850			2,048,785					2,055,540			2,055,607					2,056,942						2,062,613				2,063,451
Deferred compensation	—			(1,619				)	(1,514		)	(1,408				)	(1,302					)	(1,516			)	(1,390		)
Accumulated deficit	(1,573,897		)	(1,566,208				)	(1,557,672		)	(1,555,444				)	(1,551,113					)	(1,539,712			)	(1,530,448		)
Accumulated other comprehensive income	101			116					474			674					834						1				1,451
Total stockholders’ equity	130,530			142,967					158,724			149,107					155,040						171,073				182,752
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	208,258		$			229,006		$	362,278		$		337,784			$			353,209			$	494,612			$	537,853

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priceline.com Incorporated

Statistical Data

In thousands

Gross Bookings	1Q03			2Q03			3Q03			4Q03			1Q04			2Q04			3Q04
Merchant	$	226,739		$	267,039		$	266,640		$	197,543		$	244,816		$	295,718		$	276,726
Agency	20,778			30,023			33,875			58,647			115,363			174,657			155,292
Total	$	247,517		$	297,061		$	300,515		$	256,191		$	360,179		$	470,375		$	432,018
Year/Year Growth	-19.3		%	-16.3		%	9.2		%	12.2		%	45.5		%	58.3		%	43.8		%

Units Sold	1Q03		2Q03		3Q03		4Q03		1Q04		2Q04		3Q04
Airline Tickets	483		513		438		399		620		819		722
Year/Year Growth	-44.2	%	-44.4	%	-32.0	%	-18.1	%	28.2	%	59.8	%	64.9	%
Hotel Room-Nights	1,234		1,505		1,642		1,319		1,669		1,983		2,081
Year/Year Growth	35.6	%	38.0	%	43.2	%	36.9	%	35.2	%	31.8	%	26.7	%
Rental Car Days	663		867		1,215		922		1,213		1,409		1,364
Year/Year Growth	-12.6	%	6.1	%	59.1	%	61.8	%	83.1	%	62.5	%	12.3	%

	1Q03			2Q03			3Q03			4Q03			1Q04			2Q04			3Q04
Revenue	$	200,487		$	239,566		$	243,441		$	180,167		$	224,131		$	259,389		$	235,882
Year/Year Growth	-23.4		%	-21.3		%	1.4		%	-8.7		%	11.8		%	8.3		%	-3.1		%
Gross Profit	$	32,987		$	40,494		$	40,648		$	31,816		$	43,374		$	53,779		$	51,104
Year/Year Growth	-21.4		%	-15.9		%	7.7		%	4.4		%	31.5		%	32.8		%	25.7		%

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

The gross bookings and units sold information included above is for U.S. operations only.

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