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) February 14, 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 February 14, 2008, priceline.com announced its financial results for the 4^th quarter and the year-ended December 31, 2007.  A copy of priceline.com’s consolidated balance sheet at December 31, 2007 and consolidated statement of operations for the three and twelve months ended December 31, 2007 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 December 31, 2007 and consolidated statement of operations for the three and twelve months ended December 31, 2007 shall be treated as “filed” for purposes of the Securities Exchange Act of 1934, as amended.

Item 7.01.              Regulation FD Disclosure

                On February 14, 2008, priceline.com announced its financial results for the fiscal quarter and year-ended December 31, 2007.  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.

                Priceline.com stated that in the 4^th quarter 2007 it had generated approximately $66 million in net cash from operating activities and had capital expenditures of approximately $5 million.  The company noted the favorable impact of currency exchange rates on its 4th quarter 2007 financial results.

                With respect to 1^st quarter 2008 guidance, the company noted that it expected domestic gross travel bookings to grow approximately 35% over the same period in the prior year.  Priceline.com announced that it expected consolidated advertising expenses of approximately $68 to $71 million in the 1^st quarter 2008 and expected approximately 85% of that amount to be spent “on-line.”  Priceline.com estimated that sales and marketing expenses in the 1^st quarter 2008 would be between $15 and $16 million.  Priceline.com stated that it estimated that personnel costs, excluding stock-based compensation expense, would be approximately $27 to $29 million in the 1^st quarter 2008.  With respect to 1^st quarter 2008, priceline.com stated it estimated that general and administrative expenses would be approximately $11 to $12 million, information technology expenses would be approximately $5.5 to $6.0 million, and depreciation and amortization expenses, excluding acquisition related amortization, would be approximately $4.3 million.  Priceline.com said it expected an aggregate benefit of approximately $800,000 in the 1^st quarter 2008 associated with “net” interest income, foreign exchange expense, equity in income of Priceline Mortgage and minority interest expense.  Priceline.com estimated that it would have cash income tax expense of approximately $5 million in the 1^st quarter 2008 comprised of alternative minimum tax in the United States and additional income taxes in Europe.

                With respect to its full-year 2008 financial guidance, the company noted that the annualized forecasted growth rates for the 1^st quarter 2008 were expected to be the “high water” marks during the year for both the company’s international and domestic business.  The company said that it expected the 1st quarter 2008 to represent a higher percentage of full-year forecasted pro forma EBITDA in 2008 compared to 2007 and that it expected the 2nd quarter 2008 to represent a lower percentage of full-year forecasted pro forma EBITDA in 2008 compared to 2007 due to an earlier Easter holiday in 2008 compared to 2007.  The company also noted that it expected that its annualized forecasted pro forma net income per share growth rate in the 4^th quarter 2008 would be in excess of 30%.  With respect to its 2008 guidance, the company noted that its guidance was based on current observed trends in the business and not on an assumption that these trends will deteriorate in future months due to the economic downturn.  The company cautioned, however, that it was possible that the on-line travel category and the company could suffer beyond effects observed to date if economic conditions worsened.

                The company noted that its “pro forma” financial guidance was based upon a “pro forma” diluted share count of approximately 49 million shares (which includes a calculation of the

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assumed economic dilutive impact of all 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 February 13, 2008 closing stock price of $104.96.  The company emphasized, as it had on its prior earnings conference call, that the calculation of diluted shares outstanding — and, as a result, the calculation of “pro forma” net income per diluted share — could be materially affected by the trading levels of its stock and that the “pro forma” share count represented a substantial increase on year-over-year basis as a result of the increase in the company’s stock price.

The information set forth above and in the attached press release contains forward-looking statements relating to priceline.com’s performance during 2008.  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 be included in priceline.com’s Annual Report on Form 10-K for the twelve months ended December 31, 2007 to be filed with the Securities and Exchange Commission on or about February 29, 2008.  The information set forth above is qualified in its entirety by reference to the press release (which includes a financial and statistical supplement and information about forward-looking statements), a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information in this Item 7.01 (including Exhibit 99.1 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 Press release (which includes a financial and statistical supplement and related information) issued by priceline.com Incorporated on February 14, 2008 relating to, among other things, its 4^th quarter and year-ended 2007 earnings. The consolidated balance sheet at December 31, 2007 and consolidated statement of operations for the three and twelve months ended December 31, 2007 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/ Jeffery H. Boyd
		Name:	Jeffery H. Boyd
		Title:	President and Chief Executive Officer
Date: February 15, 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 February 14, 2008 relating to, among other things, its 4th quarter and year-ended 2007 earnings. The consolidated balance sheet at December 31, 2007 and consolidated statement of operations for the three and twelve months ended December 31, 2007 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 4^th Quarter And Full-Year 2007

Gross travel bookings increase 62% year over year;
International gross travel bookings grow 113%

NORWALK, Conn., February 14, 2008 . . . Priceline.com Incorporated (Nasdaq: PCLN) today reported its financial results for the 4^th quarter and full-year 2007.  Gross travel bookings for the 4^th quarter, which refers to the total dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers, rose 62% year-over-year to $1.2 billion.

Priceline.com had GAAP revenues in the 4th quarter of $334.9 million, a 28.8% increase over a year ago.  Priceline.com’s GAAP gross profit for the 4^th quarter was $160.2 million, a 60.9% increase from the prior year.  Priceline.com had GAAP net income for the 4^th quarter of $32.9 million or $0.68 per diluted share, which compares to $13.2 million or $0.33 per diluted share in the same period a year ago.

Priceline.com reported pro forma revenues in the 4^th quarter of $334.9 million, a 28.8% increase over a year ago.  Pro forma gross profit for the 4th quarter was $160.6 million, an increase of 60.7% over the same period in the prior year.  Pro forma net income in the fourth quarter was $0.96 per diluted share, an increase of 65.5% over a year ago.  First Call analyst consensus for the 4^th quarter 2007 was $0.84 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.

For full-year 2007, priceline.com’s gross travel bookings were $4.8 billion, a 45.5% increase over 2006.  Full-year 2007 GAAP revenues were $1.41 billion, a 25.5% increase over a year ago.  Priceline.com’s GAAP gross profit for 2007 was $639.4 million, a 59.4% increase from the prior year.  Priceline.com had GAAP net income for 2007 of $155.5 million or $3.42 per diluted share, which compares to $72.5 million or $1.68 per diluted share a year ago.  Priceline.com reported pro forma revenues for the full-year 2007 of $1.39 billion, a 24.0% increase over a year ago.  Pro forma gross profit for 2007 was $621.2 million, an increase of 54.9% over the prior year.  Pro forma net income for 2007 was $4.04 per diluted share, a 99.0% increase over a year ago.

“Priceline’s gross bookings growth momentum continued in the fourth quarter with international growth accelerating to 113.0% year-over-year and the domestic growth rate increasing sequentially to 24.2% led by increasing retail airline ticket bookings,” said Jeffery H. Boyd, priceline’s President and Chief Executive Officer.  “Internationally, we believe that our wide geographic reach, new market initiatives and extensive inventory are providing sustained impetus for growth.  We believe that in the United States, our value positioning and brand promotion through offline and online channels is driving above-category growth rates in an uncertain economic environment.”

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During 2007, priceline.com achieved several strategic milestones that included:

·The elimination of booking fees on published-price domestic and international airfares.  This means that, in most cases, priceline.com customers pay less for their tickets than they do at other major full-service online travel reservation services, including Expedia, Travelocity and Orbitz.

·The acquisition of Agoda.com, an Asian online hotel reservation service. Agoda offers hotel properties in Australia, China, Japan, India, Thailand, South Korea, Singapore, Indonesia, the Philippines, New Zealand and several other countries.  In addition, Agoda offers hotels in Europe, the Americas, the Middle East and Africa.  Agoda’s services are offered in 12 languages.  Agoda contributed $13.4 million to the fourth quarter international gross bookings metric for the two-month period following the acquisition.

·The signing of participation agreements and extensions with several major airlines.  In October, American Airlines — the world’s largest airline — signed an exclusive agreement to provide priceline.com with Name Your Own Price^® fares.  JetBlue also signed an agreement to provide priceline.com with full access to its published fares, schedules and inventories.

·The addition of exclusive Zagat Survey reviews and information for hotels, restaurants and attractions in the United States and select international locations.  The Zagat information, combined with traveler reviews provided by priceline.com customers, covers over 600 cities and thousands of hotels and restaurants.

·Priceline.com added a group hotel booking service where customers can book 10 to 1,000 rooms at specially discounted prices.  Priceline.com’s Name Your Own Price^® hotel service, which previously allowed customers to book up to four hotel rooms, was also expanded to accommodate up to nine rooms at a time.

Looking forward, Mr. Boyd said, “We believe that Priceline is well-positioned as we enter 2008 to continue building out our global hotel business with new inventory and geographies and mining the synergies available when we build links among our regional businesses in the United States, Europe and Asia.  While we are concerned with how continued economic distress could negatively affect our markets in both the U.S. and internationally, we believe our services are relatively more attractive to suppliers and consumers in times of economic difficulty and our recent results in 2008 support that thesis and the guidance we are providing for the year.”

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Forward Guidance

For full-year 2008, priceline said that it expects to generate approximately $7.0 to $7.3 billion in gross travel bookings.  Priceline.com said that it expects pro forma EBITDA of $300 to $325 million and to earn approximately $4.80 to $5.10 of pro forma net income per diluted share for full-year 2008.

Priceline.com said it was targeting the following for 1^st quarter 2008:

·Year over year increases in gross travel bookings of approximately 60 - 65%.

·Year over year increases in international gross travel bookings of approximately 85 - 90%.

·Year over year increase in revenue of approximately 30%.

·Year over year increase in pro forma gross profit of approximately 55 - 60%.

·Pro forma net income of between $0.50 and $0.60 per diluted share.

Pro forma guidance for the 1^st quarter and full-year 2008:

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

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

·excludes option payroll tax expense,

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

·includes the additional impact on minority interest expense of the pro forma adjustments described above,

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

·includes the dilutive impact of additional shares of unvested restricted stock, restricted stock units and performance share units because pro forma net income has been adjuste d to exclude stock-based compensation.

When aggregated, the foregoing adjustments as well as depreciation expense are expected to increase pro forma EBITDA over GAAP operating income by approximately $80 million for the full year 2008.

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In addition, the foregoing adjustments are expected to increase pro forma net income over GAAP net income by approximately $17 million for the 1^st quarter 2008 and $78 million for full-year 2008.  On a per share basis, the Company estimates GAAP net income of approximately $0.16 to $0.26 per diluted share for the 1^st quarter 2008 and approximately $3.25 to $3.55 for full-year 2008.

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;

—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;

—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;

—fluctuations in foreign exchange rates;

—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, inc luding 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;

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—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; 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 and the pro forma adjustments described below.

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 associated with the settlement of the 2000 securities litigation and cash benefit associated with the favorable resolution of litigation related to credit card processing costs are excluded because of the non-recurring nature of the settlements.

·Cash benefit 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 from pro forma gross profit, pro forma EBITDA 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 EBITDA and pro forma net income because they do not impact cash earnings and are reflected in earnings per share through increased share counts.

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·Option payroll tax expense is excluded because the expense is driven primarily by stock option exercise activity and the market price of priceline.com’s common stock and often shows volatility unrelated to operating results.

·The restructuring charge, net is excluded because it can impact comparability of earnings with historical results from prior periods.

·Income tax expense is adjusted for the tax impact of certain of the pro forma adjustments described above and to exclude tax expense recorded where no actual tax payments are owed because of available net operating loss carry forwards.

In addition, pro forma income tax expense is adjusted to exclude the non-cash tax benefit from reversing a portion of priceline.com’s deferred tax asset valuation allowance.  This benefit amounted to $47.9 million in 3rd quarter 2007 and $28.1 million in 3rd quarter 2006.  Further, pro forma net income for 2007 excludes the non- recurring $3.6 million income tax benefit resulting from the recognition of foreign capital allowance carry forwards in 4^th quarter 2007.  Pro forma net income for 3rd quarter 2007 and 4th quarter 2006 excludes non-cash income tax benefits of $1.2 million and $3.0 million, respectively, related to the impact on deferred taxes of enacted reductions in certain international statutory tax rates.

·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:

onet income is adjusted for the impact of the pro forma adjustments described above

ofully diluted share count is adjusted to include the anti-dilutive impact of  priceline.com’s  “Conversion Spread Hedges” related to priceline.com’s convertible securities that increase the effective conversion price of the 0.50% convertible notes due 2011 and 0.75% convertible notes due 2013 from their stated $40.38 conversion price to an effective conversion price of $50.47 per share.  Under GAAP, the anti-dilutive impact of the Conversion Spread Hedges is not reflected on the outstanding diluted share count until the end of the hedge when shares are delivered.

ofully diluted share count in 2006 is adjusted to exclude the impact of EITF 04-08 (“Effect of Contingently Convertible Debt on Diluted Earnings per Share”), because the common stock that underlie priceline.com’s 1.0% convertible notes due 2011 and priceline.com’s 2.25% convertible notes due 2025 were not issuable because our common stock did not trade above the respective contingent conversion prices.

oAll 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.

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The presentation of this financial information should not be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles in the United States.  The attached financial and statistical supplement reconciles pro forma financial information with priceline.com’s financial results under GAAP.

About Priceline.com® Incorporated

Priceline.com Incorporated (Nasdaq: PCLN) provides online travel services in 22 languages in over 60 countries in Europe, North America, Asia, the Middle East and Africa.  Priceline.com operates 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 60 countries in 16 languages and offers its customers access to over 41,000 participating hotels worldwide.

In the U.S., priceline.com gives customers more ways to save on their airline tickets, hotel rooms, rental cars, vacation packages and cruises than any other Internet travel service.  In addition to getting great published prices, leisure travelers can narrow their searches using priceline.com’s TripFilter advanced search technology, 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)

	December 31,			December 31,
ASSETS	2007			2006
Current assets:
Cash and cash equivalents	$	385,359		$	423,577
Restricted cash	1,350			2,459
Short-term investments	122,499			7,983
Accounts receivable, net of allowance for doubtful accounts of $2,266 and $1,651, respectively	70,712			48,536
Prepaid expenses and other current assets	33,080			20,534
Total current assets	613,000			503,089
Long-term investments	2,451			—
Property and equipment, net	27,088			21,691
Intangible assets, net	182,748			152,925
Goodwill	287,159			226,707
Deferred taxes	218,519			179,392
Other assets	19,891			21,844
Total assets	$	1,350,856		$	1,105,648
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	47,708		$	49,032
Accrued expenses and other current liabilities	59,589			46,872
Deferred merchant bookings	17,750			4,768
Convertible debt	569,796			—
Total current liabilities	694,843			100,672
Deferred taxes	46,502			39,714
Other long-term liabilities	13,368			11,885
Minority interest	17,036			22,486
Convertible debt	—			568,865
Total liabilities	771,749			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, 45,117,685, and 43,215,712 shares issued, respectively	346			331
Treasury stock, 6,646,408 and 6,603,050 shares, respectively	(489,106		)	(486,468		)
Additional paid-in capital	2,124,029			2,070,379
Accumulated deficit	(1,106,506		)	(1,262,033		)
Accumulated other comprehensive income	50,344			26,347
Total stockholders' equity	579,107			348,556
Total liabilities and stockholders' equity	$	1,350,856		$	1,105,648

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priceline.com Incorporated

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except per share data)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2007			2006			2007			2006
Merchant revenues, including $18,592 excise tax refund in 2007	$	226,693		$	204,649		$	1,002,824		$	904,169
Agency revenues	105,768			54,301			398,246			213,900
Other revenues	2,392			1,121			8,339			5,034
Total revenues	334,853			260,071			1,409,409			1,123,103
Cost of merchant revenues	174,701			160,554			769,997			722,004
Cost of agency revenues	—			—			—			—
Cost of other revenues	—			—			—			—
Total costs of revenues	174,701			160,554			769,997			722,004
Gross profit	160,152			99,517			639,412			401,099
Operating expenses:
Advertising - Offline	6,935			6,869			35,963			31,831
Advertising - Online	43,434			26,908			172,676			113,822
Sales and marketing	11,131			10,624			47,158			42,119
Personnel, including stock-based compensation of $5,494, $4,651, $16,253, $14,928, respectively	30,885			22,552			102,992			79,421
General and administrative, including net cost of litigation settlement of $55,350 in 2007, and option payroll taxes of $148, $95, $909, $368, respectively	8,943			8,950			91,837			28,587
Information technology	4,373			2,559			13,779			9,749
Depreciation and amortization	10,439			8,479			37,072			33,449
Restructuring charge, net	—			—			—			135
Total operating expenses	116,140			86,941			501,477			339,113
Operating income	44,012			12,576			137,935			61,986
Other income (expense):
Interest income, including $3,346 of interest on excise tax refund in 2007	5,398			4,991			25,776			11,312
Interest expense	(2,851		)	(2,457		)	(10,412		)	(7,060		)
Other	(1,414		)	(450		)	(3,276		)	(606		)
Total other income	1,133			2,084			12,088			3,646
Earnings before income taxes, equity in income (loss) of investees and minority interests	45,145			14,660			150,023			65,632
Income tax benefit (expense)	(11,228		)	(889		)	12,059			12,388
Equity in income (loss) of investees and minority interests	(1,055		)	(539		)	(5,000		)	(3,554		)
Net income	32,862			13,232			157,082			74,466
Preferred stock dividend	—			—			(1,555		)	(1,927		)
Net income applicable to common stockholders	$	32,862		$	13,232		$	155,527		$	72,539
Net income applicable to common stockholders per basic common share	$	0.86		$	0.37		$	4.13		$	1.88
Weighted average number of basic common shares outstanding	38,082			36,166			37,671			38,650
Net income applicable to common stockholders per diluted common share	$	0.68		$	0.33		$	3.42		$	1.68
Weighted average number of diluted common shares outstanding	48,350			40,936			45,504			44,722

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priceline.com Incorporated

RECONCILIATION OF GAAP TO PRO FORMA FINANCIAL INFORMATION

(unaudited)

(In thousands, except per share data)

		Three Months Ended December 31,				Year Ended December 31,
RECONCILIATION OF GAAP TO PRO FORMA REVENUE		2007		2006		2007			2006
GAAP Revenue		$	334,853	$	260,071	$	1,409,409		$	1,123,103
(a)	Airline excise tax refund	—		—		(18,592		)	(1,600		)
	Pro Forma Revenue	$	334,853	$	260,071	$	1,390,817		$	1,121,503

		Three Months Ended December 31,				Year Ended December 31,
RECONCILIATION OF GAAP TO PRO FORMA GROSS PROFIT		2007		2006		2007			2006
	GAAP Gross Profit	$	160,152	$	99,517	$	639,412		$	401,099
(a)	Airline excise tax refund	—		—		(18,592		)	(1,600		)
(b)	Amortization of acquired intangible assets in Cost of revenues	428		428		428			1,481
	Pro Forma Gross Profit	$	160,580	$	99,945	$	621,248		$	400,980

		Three Months Ended December 31,						Year Ended December 31,
RECONCILIATION OF GAAP TO PRO FORMA NET INCOME		2007			2006			2007			2006
	GAAP Net Income	$	32,862		$	13,232		$	155,527		$	72,539
(a)	Airline excise tax refund	—			—			(18,592		)	(1,600		)
(b)	Amortization of acquired intangible assets in Cost of revenues	428			428			428			1,481
(b)	Amortization of acquired intangible assets in Depreciation and amortization	6,853			5,893			25,177			23,206
(c)	Favorable litigation settlement related to credit card processing fees	(1,190		)	—			(1,190		)	—
(d)	Stock-based compensation	5,494			4,651			16,253			14,928
(e)	Securities litigation settlement, net of insurance contribution	(15		)	—			55,350			—
(e)	Stock-based compensation payroll taxes	148			95			909			368
(f)	Impact from favorable state franchise tax determination	—			—			—			(1,671		)
(g)	Accrued interest income on excise tax refund	—			—			(3,346		)	—
(h)	Restructuring charge, net	—			—			—			135
(i)	Adjustments for the tax impact of certain of the pro forma adjustments and to exclude non-cash income taxes	1,719			(1,774		)	(48,730		)	(28,051		)
(j)	Impact on minority interests of other pro forma adjustments	(107		)	(97		)	(881		)	(1,211		)
(k)	Impairment charge related to equity investment in pricelinemortgage.com	—			—			—			1,094
(h)	Preferred stock dividend	—			—			1,555			1,927
	Pro Forma Net Income	$	46,192		$	22,428		$	182,460		$	83,145

		Three Months Ended December 31,						Year Ended December 31,
RECONCILIATION OF GAAP TO PRO FORMA NET INCOME PER DILUTED COMMON SHARE		2007			2006			2007			2006
	GAAP Weighted average number of diluted common shares outstanding	48,350			40,936			45,504			44,722
(l)	Adjustment for Conversion Spread Hedges	(844		)	(17		)	(1,202		)	—
(m)	Adjustment for warrants and restricted stock	842			539			855			1,188
(n)	Adjustment for impact of EITF 04-08 on Convertible debt	—			(2,601		)	—			(4,971		)
	Pro Forma Weighted average number of diluted common shares outstanding	48,348			38,857			45,157			40,939
	Net income applicable to common stockholders per diluted common share
(o)	GAAP	$	0.68		$	0.33		$	3.42		$	1.68
	Pro Forma	$	0.96		$	0.58		$	4.04		$	2.03

(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)	Favorable litigation settlement related to credit card processing fees is recorded in Sales and marketing.
(d)	Stock-based compensation is recorded in Personnel expense.
(e)	Securities litigation settlement and stock-based compensation payroll taxes are recorded in General and administrative expense.
(f)	Non-recurring impact of favorable state franchise tax determination is recorded in General and administrative expense.
(g)	Accrued interest income on airline excise tax refund is recorded in Interest income.
(h)	Restructuring charge and Preferred stock dividend are recorded in those respective expense line items.
(i)	Adjustments for the tax impact of certain of the pro forma adjustments and to exclude non-cash income taxes are recorded in Income tax benefit (expense).
(j)	Impact on minority interests of other pro forma adjustments are recorded in Equity in income (loss) of investees and minority interests.
(k)	Impairment charge related to equity investment in pricelinemortgage.com is recorded in Equity in income (loss) of investees and minority interests.
(l)	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.
(m)	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.
(n)	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.
(o)	Net income amounts used to calculate GAAP diluted earnings per share in 2006 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.

10

priceline.com Incorporated

Statistical Data

In thousands

(Unaudited)

Gross Bookings*	1Q06			2Q06			3Q06			4Q06			1Q07			2Q07			3Q07			4Q07
Domestic	$	474,007		$	570,757		$	504,752		$	423,275		$	478,812		$	547,787		$	602,205		$	525,571
International**	272,814			356,593			398,416			319,136			519,679			687,124			788,478			679,760
Total	$	746,821		$	927,350		$	903,168		$	742,410		$	998,491		$	1,234,911		$	1,390,683		$	1,205,331
Agency	$	480,506		$	609,284		$	600,406		$	491,070		$	710,528		$	919,260		$	1,042,619		$	912,698
Merchant**	266,315			318,066			302,762			251,340			287,963			315,651			348,064			292,633
Total	$	746,821		$	927,350		$	903,168		$	742,410		$	998,491		$	1,234,911		$	1,390,683		$	1,205,331
Year/Year Growth
Domestic	8.3		%	16.0		%	13.1		%	11.9		%	1.0		%	-4.0		%	19.3		%	24.2		%
International	279.4		%	360.0		%	141.7		%	101.4		%	90.5		%	92.7		%	97.9		%	113.0		%
excluding F/X impact	313.8		%	361.5		%	131.8		%	86.3		%	74.5		%	79.6		%	83.4		%	89.9		%
Agency	98.6		%	128.7		%	74.9		%	51.6		%	47.9		%	50.9		%	73.7		%	85.9		%
Merchant	-0.6		%	5.0		%	13.0		%	18.1		%	8.1		%	-0.8		%	15.0		%	16.4		%
Total	46.5		%	62.8		%	47.8		%	38.3		%	33.7		%	33.2		%	54.0		%	62.4		%
Units Sold	1Q06			2Q06			3Q06			4Q06			1Q07			2Q07			3Q07			4Q07
Airline Tickets	728			821			666			588			639			687			819			790
Year/Year Growth	-2.6		%	4.1		%	-2.0		%	0.9		%	-12.2		%	-16.3		%	23.0		%	34.4		%
Hotel Room-Nights	4,153			4,995			5,238			4,265			5,955			7,242			7,964			6,616
Year/Year Growth	62.5		%	82.5		%	49.7		%	43.7		%	43.4		%	45.0		%	52.0		%	55.1		%
Rental Car Days	1,621			2,000			2,044			1,789			2,003			2,278			2,338			2,002
Year/Year Growth	26.8		%	30.3		%	20.8		%	36.1		%	23.6		%	13.9		%	14.4		%	11.9		%
	1Q06			2Q06			3Q06			4Q06			1Q07			2Q07			3Q07			4Q07
Revenue	$	241,914		$	307,651		$	313,467		$	260,071		$	301,389		$	355,880		$	417,287		$	334,853
Year/Year Growth	3.7		%	15.4		%	21.1		%	27.5		%	24.6		%	15.7		%	33.1		%	28.8		%
Gross Profit	$	72,231		$	105,804		$	123,547		$	99,517		$	119,717		$	157,211		$	202,331		$	160,152
Year/Year Growth	25.2		%	62.2		%	54.4		%	53.3		%	65.7		%	48.6		%	63.8		%	60.9		%

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

**Includes $13.4 million of gross bookings from Agoda since acquisition on November 6, 2007.

11

priceline.com Incorporated
Orbitz Related Data
In thousands
(Unaudited)
RECONCILIATION OF GAAP TO PRO FORMA DOMESTIC GROSS PROFIT(a)
		Three Months Ended						Twelve Months Ended
		December 31,						December 31,
		2007			2006			2007			2006
	GAAP Domestic Gross Profit	$	60,262		$	52,801		$	276,493		$	223,542
(b)	Airline excise tax refund	—			—			(18,592		)	(1,600		)
(c)	Amortization of acquired intangible assets in Cost of revenues	428			428			428			1,481
	Pro Forma Domestic Gross Profit	$	60,689		$	53,229		$	258,329		$	223,423
RECONCILIATION OF PRO FORMA DOMESTIC GROSS PROFIT TO PRO FORMA DOMESTIC GROSS PROFIT EXCLUDING ORBITZ
		Three Months Ended						Twelve Months Ended
		December 31,						December 31,
		2007			2006			2007			2006
	Pro Forma Domestic Gross Profit	$	60,689		$	53,229		$	258,329		$	223,423
	Orbitz Related Gross Profit	—			(3,695		)	—			(19,518		)
	Pro Forma Domestic Gross Profit Excluding Orbitz	$	60,689		$	49,533		$	258,329		$	203,905
RECONCILIATION OF DOMESTIC GROSS TRAVEL BOOKINGS TO DOMESTIC GROSS TRAVEL BOOKINGS EXCLUDING ORBITZ
		Three Months Ended						Twelve Months Ended
		December 31,						December 31,
		2007			2006			2007			2006
	Domestic Gross Bookings	$	525,571		$	423,274		$	2,154,375		$	1,972,791
	Orbitz Related Gross Bookings	—			(25,583		)	—			(140,471		)
	Domestic Gross Bookings Excluding Orbitz	$	525,571		$	397,691		$	2,154,375		$	1,832,320
RECONCILIATION OF DOMESTIC GROSS TRAVEL BOOKINGS EXCLUDING ORBITZ TO DOMESTIC NON-AIR GROSS TRAVEL BOOKINGS EXCLUDING ORBITZ
		Three Months Ended						Twelve Months Ended
		December 31,						December 31,
		2007			2006			2007			2006
	Domestic Gross Bookings Excluding Orbitz	$	525,571		$	397,691		$	2,154,375		$	1,832,320
	Air Gross Bookings Excluding Orbitz	(246,776		)	(165,078		)	(891,351		)	(808,710		)
	Domestic Non-Air Gross Bookings Excluding Orbitz	$	278,796		$	232,613		$	1,263,024		$	1,023,609

(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.

12

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
			1Q08	2008	1Q08	2008		1Q08	2008
Closing Share Price Assumption(2)	$	50.00	46.2	43.7	0.3	(0.1	)	46.6	43.6
	$	55.00	46.5	44.5	0.4	—		46.9	44.5
	$	60.00	46.7	45.1	0.4	0.1		47.1	45.2
	$	65.00	46.9	45.7	0.4	0.2		47.4	45.9
	$	70.00	47.2	46.2	0.5	0.3		47.6	46.5
	$	75.00	47.3	46.6	0.5	0.3		47.8	47.0
	$	80.00	47.5	47.0	0.5	0.4		48.1	47.4
	$	85.00	47.7	47.4	0.5	0.5		48.3	47.8
	$	90.00	47.9	47.7	0.6	0.5		48.4	48.2
	$	95.00	48.0	48.0	0.6	0.6		48.6	48.5
	$	100.00	48.2	48.2	0.6	0.6		48.8	48.8
	$	105.00	48.3	48.5	0.6	0.6		48.9	49.1
	$	110.00	48.4	48.7	0.7	0.7		49.1	49.4
	$	115.00	48.6	48.9	0.7	0.7		49.2	49.6
	$	120.00	48.7	49.1	0.7	0.7		49.4	49.8
	$	125.00	48.8	49.3	0.7	0.7		49.5	50.0
	$	130.00	48.9	49.4	0.7	0.8		49.6	50.2
	$	135.00	49.0	49.6	0.7	0.8		49.8	50.4
	$	140.00	49.1	49.7	0.8	0.8		49.9	50.5

(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)	Estimated weighted average number of diluted shares outstanding is estimated as follows:
	1Q08: Uses actual daily share prices from Jan. 1, 2008 through Feb. 13, 2008, and the closing share price assumption from Feb. 14, 2008 through Mar.  31, 2008.
	2008: Uses actual daily share prices from Jan. 1, 2008 through Feb. 13, 2008, and the closing share price assumption from Feb. 14, 2008 through Dec. 31, 2008.

13