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) August 5, 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)

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 (see General Instruction A.2. below):

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

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

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

o  Pre-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 Conditions

On August 5, 2008, priceline.com announced its financial results for the 2^nd quarter ended June 30, 2008.  A copy of priceline.com’s consolidated balance sheet at June 30, 2008 and consolidated statement of operations for the three and six months ended June 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 June 30, 2008 and consolidated statement of operations for the three and six months ended June 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 August 5, 2008, priceline.com announced its financial results for the 2^nd quarter ended June 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.

The company discussed, among other things, the impact of currency exchange rates and the average daily rates of hotel room nights on its financial results and forecasts and noted that the approximate 1.5% decrease in year-over-year international average daily rates of hotel room nights during the 2^nd quarter 2008 more than offset the positive impact of currency exchange rates on international gross travel bookings during the 2^nd quarter 2008.  The company also noted that it observed a year-over-year increase in international hotel room cancelation rates during the 2^nd quarter 2008, which negatively impacted hotel room night unit sales.  The company noted it was carefully watching the average daily rates of hotel room nights and cancelation rates because it believed both numbers could potentially be impacted by what appeared to be softening economic conditions in the company’s core markets.  The company also noted that in the 2^nd quarter 2008 it saw headwinds in its rental car service due to supply limitations and that there was significant uncertainty as to how and to what degree the significant upcoming reductions in domestic airline capacity would impact future travel demand generally.

With respect to 3^rd quarter 2008 guidance, the company noted that it expected domestic gross travel bookings to grow approximately 30% over the same period in the prior year, and international gross bookings to grow approximately 58% to 68% over the same period in the prior year, which represents a slight flattening in the international gross bookings rate of decline.  The company attributed this flattening to a number of factors and noted that international gross bookings growth rate in July 2008 showed an increase compared to the growth rate in June 2008.  Priceline.com announced that it expected consolidated advertising expenses of approximately $93   to $98 million in the 3^rd quarter 2008 and expected approximately 92% of that amount to be spent “on-line.”  Priceline.com estimated that sales and marketing expenses in the 3^rd quarter 2008 would be between $21.5 and $22.5 million.  Priceline.com stated that it estimated that personnel costs, excluding stock-based compensation expense, would be approximately $34 to $36 million in the 3^rd quarter 2008.  With respect to 3^rd quarter 2008, priceline.com stated it estimated that general and administrative expenses would be approximately $13 to $14 million, information technology expenses would be approximately $6.0 to $6.5 million, and depreciation and amortization expenses, excluding acquisition related amortization, would be approximately $4.0 million.  Priceline.com said it expected an aggregate expense of approximately $600,000 in the 3^rd quarter 2008 associated with “net” interest income, foreign exchange hedging income or expense, equity in income of Priceline Mortgage and minority interest expense.  Priceline.com estimated that it would have cash income tax expense of approximately $30 million in the 3^rd quarter 2008 comprised of additional income taxes in Europe and alternative minimum tax in the United States.

With respect to its guidance for the remainder of 2008, 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 3^rd quarter 2008 and

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full-year 2008 assumed, among other things, that the Euro/U.S. Dollar exchange rate would be 1.55 U.S. dollars per Euro, that the average daily rates for the company’s domestic hotel service would be flat year-over-year and that the average daily rates for the company’s international hotel service would decline approximately 1% to 2% year-over-year and that there would be quarterly sequential stability in the company’s on-line advertising efficiencies.  The company noted that, while it believed its assumptions underlying its forecast were reasonable, there were broad industry trends within its various supplier networks that potentially could point and lead to further deterioration in average daily rates.  The company cautioned that if economic pressures impacted, among other things, hotel unit sales, hotel average daily rates or the value of the Euro relative to the U.S. Dollar, the company’s forecasts could be at significant risk.

The company noted that its “pro forma” financial guidance was based upon a “pro forma” diluted share count of approximately 49.8 million shares (which includes a calculation of the 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 August 4, 2008 closing stock price of $111.72 per share.

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.

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 August 5, 2008 relating to, among other things, its 2^nd quarter ended June 30, 2008 earnings. The consolidated balance sheet at June 30, 2008 and consolidated statement of operations for the three and six months ended June 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:  August 6, 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 August 5, 2008 relating to, among other things, its 2nd quarter ended June 30, 2008 earnings. The consolidated balance sheet at June 30, 2008 and consolidated statement of operations for the three and six months ended June 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 2^nd Quarter 2008

Gross travel bookings increase 71% year over year;

 International gross travel bookings grow 80%,

Domestic gross travel bookings grow 59%

     NORWALK, Conn., August 5, 2008 . . . Priceline.com Incorporated® (Nasdaq: PCLN) today reported its financial results for the 2^nd quarter 2008.  Gross travel bookings for the 2^nd quarter, which refers to the total dollar value, inclusive of all taxes and fees, of all travel services purchased by consumers, rose 70.9% year-over-year to $2.1 billion.

Priceline.com had GAAP revenues in the 2^nd quarter of $514.0 million, a 44.4% increase over a year ago.  The Company’s international operations contributed revenues in the 2^nd quarter of $164.5 million, an 82.0% increase versus a year ago. GAAP gross profit for the 2^nd quarter was $253.7 million, a 61.4% increase from the prior year.  Priceline.com had GAAP net income for the 2^nd quarter of $54.1 million or $1.08 per diluted share, compared to GAAP net income of $34.6 million or $0.79 per diluted share in the 2^nd quarter 2007.

Priceline.com reported pro forma revenues in the 2^nd quarter of $514.0 million, a 45.4% increase over a year ago.  Pro forma gross profit for the 2^nd quarter was $253.7million, an increase of 63.8% over the same period in the prior year.  Pro forma EBITDA for the 2^nd quarter 2008 amounted to $101.3 million, an increase of 75.1% over a year ago.  Pro forma net income in the 2^nd quarter was $78.5 million, or $1.55 per diluted share, an increase of 39.6% over a year ago.  First Call analyst consensus for the 2^nd quarter 2008 was $1.41 per diluted share. The section below entitled “Non-GAAP Financial Measures” provides a definition and information about the use of pro forma financial measures in this press release and the attached financial and statistical supplement reconciles pro forma financial information with priceline.com’s financial results under GAAP.

“Priceline.com turned in an excellent quarter with consolidated gross travel bookings growth of 71% despite macroeconomic uncertainties and softening travel market trends,” said Jeffery H. Boyd, priceline.com’s President and Chief Executive Officer.  “Our international business, which includes Booking.com and Agoda.com, had $1.2 billion in 2^nd quarter gross bookings, up 80.1% from last year.  The business continues to benefit from growth in participating hotels, which at over 52,000 are up approximately 50% year-over-year, geographic expansion, effective marketing and favorable foreign exchange rates, which have driven growth in bookings and earnings.”

Mr. Boyd continued, “Priceline’s domestic business also posted a strong quarter, with gross travel bookings up 59.2% over last year.  Our discounted domestic merchant services grew 36% as consumers sought out travel deals and airlines and hotel companies used our Name Your Own Price® and packages services to round out demand while protecting needed yields.  We also continued to promote our value brand by chopping fees on published hotel sales, following up on last year’s elimination of booking fees on retail air tickets, and providing the first Sunshine Guarantee, which protected customers if their vacation was rained out.”

(more)

Looking forward, Mr. Boyd said, “Economic uncertainty and high fuel prices are affecting the broad travel market and significant airline capacity reductions in the fall will also have a negative impact.  Through the first half of the year, we believe that the positive trends impacting our domestic and international businesses have overshadowed these negative influences.  We believe these trends position us for attractive top line and earnings growth for the balance of the year and beyond.”

Forward Guidance

For full year 2008, priceline said that it now expects to generate approximately $7.55 billion to $7.90 billion in gross travel bookings.  Priceline expects pro forma EBITDA of $360 million to $380 million and to earn approximately $5.50 to $5.85 of pro forma net income per diluted share for full year 2008.

Priceline.com said it was targeting the following for 3^rd quarter 2008:

·Year-over-year increase in gross travel bookings of approximately 44 - 54%.

·Year-over-year increase in international gross travel bookings of approximately 58 - 68%.

·Year-over-year increase in revenue of approximately 30 - 35%.

·Year-over-year increase in pro forma gross profit of approximately 52 - 57%.

·Pro forma EBITDA of approximately $133 million to $143 million.

·Pro forma net income of between $2.00 and $2.15 per diluted share.

Pro forma guidance for the 3^rd 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 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 form a net income has been adjusted to exclude stock-based compensation.

(more)

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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 $20 million and $80 million for 3^rd  quarter 2008 and full year 2008, respectively.

In addition, the foregoing adjustments are expected to increase pro forma net income over GAAP net income by approximately $24 million for the 3^rd quarter 2008 and by approximately $90 million for full year 2008.  On a per share basis, the Company estimates GAAP net income of approximately $1.50 to $1.65 per diluted share for the 3^rd  quarter 2008 and approximately $3.75 to $4.10 per diluted share 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;

(more)

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— 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;

— 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.

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 toevaluate priceline.com’s future on-going performance because they enable a more meaningfulcomparison 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 1^st quarter and 2^nd quarter 2007 associated with the settlement of the 2000 securities litigation is excluded because of the non-recurring nature of the settlement.

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·Cash benefit recorded in 1^st and 2^nd quarter 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 expense is adjusted for the tax impact of certain of the pro forma adjustments described above and to exclude tax expense or benefit recorded where no actual tax payments are owed because of available net operating loss carry forwards.

·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 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.

·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.

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About Priceline.com® Incorporated

Priceline.com Incorporated (Nasdaq: PCLN) www.priceline.com provides online travel services in 21 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 65 countries in 18 languages and offers its customers access to over 52,000 participating hotels worldwide.

In the U.S., priceline.com gives customers more ways to save on their airline tickets, hotel rooms, rental cars, vacation packages and cruises than any other Internet travel service.  In addition to getting great published prices, leisure travelers can narrow their searches using priceline.com’s TripFilter advanced search technology, customize their search activity through priceline.com’s Inside Track features, create packages to save even more money, and take advantage of priceline.com’s famous Name Your Own Price® service, which can deliver the lowest prices available. Priceline.com also operates the following travel websites:  Travelweb.com, Lowestfare.com, RentalCars.com and BreezeNet.com.  Priceline.com 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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For 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)

	June 30,			December 31,
ASSETS	2008			2007
Current assets:
Cash and cash equivalents	$	471,068		$	385,359
Restricted cash	3,005			1,350
Short-term investments	80,153			122,499
Accounts receivable, net of allowance for doubtful accounts of $3,547 and $2,309, respectively	132,523			70,712
Prepaid expenses and other current assets	36,436			33,080
Total current assets	723,185			613,000
Long-term investments	14,894			2,451
Property and equipment, net	27,534			27,088
Intangible assets, net	192,555			182,748
Goodwill	311,200			287,159
Deferred taxes	203,397			218,519
Other assets	18,781			19,891
Total assets	$	1,491,546		$	1,350,856
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	78,356		$	47,708
Accrued expenses and other current liabilities	82,504			59,589
Deferred merchant bookings	31,505			17,750
Convertible debt	520,076			569,796
Total current liabilities	712,441			694,843
Deferred taxes	49,623			46,502
Other long-term liabilities	16,061			13,368
Total liabilities	778,125			754,713
Commitments and Contingencies
Minority interest (estimated fair value redemption amount is $128,000 as of June 30, 2008)	17,005			17,036
Stockholders’ equity:
Common stock, $0.008 par value, authorized 1,000,000,000 shares, 46,159,875, and 45,117,685 shares issued, respectively	355			346
Treasury stock, 6,673,965 and 6,646,408 shares, respectively	(492,511		)	(489,106		)
Additional paid-in capital	2,147,728			2,124,029
Accumulated deficit	(1,034,256		)	(1,106,506		)
Accumulated other comprehensive income	75,100			50,344
Total stockholders’ equity	696,416			579,107
Total liabilities and stockholders’ equity	$	1,491,546		$	1,350,856

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priceline.com Incorporated

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Merchant revenues, including $2,318 and $18,196 excise tax refund for the three and six months ended June 30, 2007, respectively	$	336,230		$	254,909		$	625,388		$	500,921
Agency revenues	173,249			98,344			283,181			152,855
Other revenues	4,497			2,627			8,586			3,493
Total revenues	513,976			355,880			917,155			657,269
Cost of revenues (1)	260,251			198,669			482,327			380,341
Gross profit	253,725			157,211			434,828			276,928
Operating expenses:
Advertising - Offline	9,928			9,281			21,959			20,615
Advertising - Online	72,860			43,470			130,661			75,397
Sales and marketing	19,930			11,525			36,263			22,934
Personnel, including stock-based compensation of $9,077, $3,466, $19,016, $6,632,respectively	39,644			23,435			76,528			44,926
General and administrative, including net cost of litigation settlement of $381 and $55,239 for the three and six months ended June 30, 2007, respectively, and stock-based compensation payroll taxes of $186, $94, $673, $532, respectively	14,209			9,777			25,995			73,652
Information technology	5,136			3,152			9,286			6,063
Depreciation and amortization	11,064			8,997			21,417			17,502
Total operating expenses	172,771			109,637			322,109			261,089
Operating income	80,954			47,574			112,719			15,839
Other income (expense):
Interest income, including $483 and $3,270 of interest on excise tax refund for the three and six months ended June 30, 2007, respectively	2,905			6,112			7,077			14,315
Interest expense	(2,351		)	(2,484		)	(5,023		)	(4,954		)
Foreign currency transactions and other	30			(332		)	(5,053		)	(545		)
Total other income (expense)	584			3,296			(2,999		)	8,816
Earnings before income taxes, equity in income (loss) of investees and minority interests	81,538			50,870			109,720			24,655
Income tax expense	(26,211		)	(14,964		)	(35,729		)	(3,371		)
Equity in income (loss) of investees and minority interests	(1,231		)	(1,334		)	(1,741		)	(1,428		)
Net income	54,096			34,572			72,250			19,856
Preferred stock dividend	—			—			—			(1,555		)
Net income applicable to common stockholders	$	54,096		$	34,572		$	72,250		$	18,301
Net income applicable to common stockholders per basic common share	$	1.40		$	0.92		$	1.88		$	0.49
Weighted average number of basic common shares outstanding	38,768			37,597			38,496			37,395
Net income applicable to common stockholders per diluted common share	$	1.08		$	0.79		$	1.46		$	0.43
Weighted average number of diluted common shares outstanding	49,948			43,667			49,585			42,572

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

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priceline.com Incorporated

RECONCILIATION OF GAAP TO PRO FORMA FINANCIAL INFORMATION

(unaudited)

(In thousands, except per share data)

RECONCILIATION OF GAAP TO PRO FORMA REVENUES		Three Months Ended June 30					Six Months Ended June 30
		2008		2007			2008		2007
	GAAP Revenues	$	513,976	$	355,880		$	917,155	$	657,269
(a)	Airline excise tax refund	—		(2,318		)	—		(18,196		)
	Pro Forma Revenues	$	513,976	$	353,562		$	917,155	$	639,073

RECONCILIATION OF GAAP TO PRO FORMA GROSS PROFIT		Three Months Ended June 30					Six Months Ended June 30
		2008		2007			2008		2007
	GAAP Gross profit	$	253,725	$	157,211		$	434,828	$	276,928
(a)	Airline excise tax refund	—		(2,318		)	—		(18,196		)
(b)	Amortization of acquired intangible assets in Cost of revenues	—		—			272		—
	Pro Forma Gross profit	$	253,725	$	154,893		$	435,100	$	258,732

RECONCILIATION OF GAAP OPERATING INCOME TO PRO FORMA EBITDA		Three Months Ended June 30					Six Months Ended June 30
		2008		2007			2008			2007
GAAP Operating income		$	80,954	$	47,574		$	112,719		$	15,839
(a)	Airline excise tax refund	—		(2,318		)	—			(18,196		)
(c)	Stock-based compensation	9,077		3,466			19,016			6,632
(d)	Securities litigation settlement, net of insurance contribution	—		381			—			55,239
(d)	Stock-based compensation payroll taxes	186		94			673			532
(k)	Amortization of acquired intangible assets in Cost of revenues	—		—			272			—
(k)	Depreciation and amortization	11,064		8,997			21,417			17,502
(l)	Foreign currency transactions and other	30		(332		)	(5,053		)	(545		)
	Pro Forma EBITDA	$	101,311	$	57,862		$	149,044		$	77,003

RECONCILIATION OF GAAP TO PRO FORMA NET INCOME		Three Months Ended June 30						Six Months Ended June 30
		2008			2007			2008			2007
GAAP Net income		$	54,096		$	34,572		$	72,250		$	18,301
(a)	Airline excise tax refund	—			(2,318		)	—			(18,196		)
(b)	Amortization of acquired intangible assets in Cost of revenues	—			—			272			—
(b)	Amortization of acquired intangible assets in Depreciation and amortization	7,456			6,294			14,201			12,207
(c)	Stock-based compensation	9,077			3,466			19,016			6,632
(d)	Securities litigation settlement, net of insurance contribution	—			381			—			55,239
(d)	Stock-based compensation payroll taxes	186			94			673			532
(e)	Accrued interest income on excise tax refund	—			(483		)	—			(3,270		)
(f)	Adjustments for the tax impact of certain of the pro forma adjustments and to exclude non-cash income taxes	7,908			5,600			9,983			(7,702		)
(g)	Impact on minority interests of other pro forma adjustments	(252		)	(264		)	(575		)	(572		)
(h)	Preferred stock dividend	—			—			—			1,555
	Pro Forma Net income	$	78,471		$	47,342		$	115,820		$	64,726

		Three Months Ended June 30						Six Months Ended June 30
RECONCILIATION OF GAAP TO PRO FORMA NET INCOME PER DILUTED COMMON SHARE		2008			2007			2008			2007
	GAAP Weighted average number of diluted common shares outstanding	49,948			43,667			49,585			42,572
(i)	Adjustment for Conversion Spread Hedges	(672		)	(1,454		)	(719		)	(1,595		)
(j)	Adjustment for warrants and restricted stock	1,229			473			1,135			471
	Pro Forma Weighted average number of diluted common shares outstanding	50,505			42,686			50,001			41,448
	Net income applicable to common stockholders per diluted common share
	GAAP	$	1.08		$	0.79		$	1.46		$	0.43
	Pro Forma	$	1.55		$	1.11		$	2.32		$	1.56

(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 income (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 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 pro forma EBITDA.
(l)	Foreign currency transactions and other are added to Operating income to calculate pro forma EBITDA.

9

priceline.com Incorporated

Statistical Data

In thousands

(Unaudited)

Gross Bookings	1Q06		2Q06		3Q06		4Q06		1Q07		2Q07		3Q07		4Q07		1Q08		2Q08
Domestic	$	474,007	$	570,757	$	504,752	$	423,275	$	478,812	$	547,787	$	602,205	$	525,571	$	720,968	$	872,284
International**	272,814		356,593		398,416		319,136		519,679		687,124		788,478		679,760		1,037,644		1,237,681
Total	$	746,821	$	927,350	$	903,168	$	742,410	$	998,491	$	1,234,911	$	1,390,683	$	1,205,331	$	1,758,612	$	2,109,965
Agency	$	480,506	$	609,284	$	600,406	$	491,070	$	710,528	$	919,260	$	1,042,619	$	912,698	$	1,370,119	$	1,656,775
Merchant**	266,315		318,066		302,762		251,340		287,963		315,651		348,064		292,633		388,493		453,190
Total	$	746,821	$	927,350	$	903,168	$	742,410	$	998,491	$	1,234,911	$	1,390,683	$	1,205,331	$	1,758,612	$	2,109,965

Year/Year Growth
Domestic	8.3	%	16.0	%	13.1	%	11.9	%	1.0	%	-4.0	%	19.3	%	24.2	%	50.6	%	59.2	%
International	279.4	%	360.0	%	141.7	%	101.4	%	90.5	%	92.7	%	97.9	%	113.0	%	99.7	%	80.1	%
excluding F/X impact	313.8	%	361.5	%	131.8	%	86.3	%	74.5	%	79.6	%	83.4	%	89.9	%	75.0	%	55.8	%
Agency	98.6	%	128.7	%	74.9	%	51.6	%	47.9	%	50.9	%	73.7	%	85.9	%	92.8	%	80.2	%
Merchant	-0.6	%	5.0	%	13.0	%	18.1	%	8.1	%	-0.8	%	15.0	%	16.4	%	34.9	%	43.6	%
Total	46.5	%	62.8	%	47.8	%	38.3	%	33.7	%	33.2	%	54.0	%	62.4	%	76.1	%	70.9	%

Units Sold	1Q06		2Q06		3Q06		4Q06		1Q07		2Q07		3Q07		4Q07		1Q08		2Q08
Airline Tickets	728		821		666		588		639		687		819		790		1,169		1,362
Year/Year Growth	-2.6	%	4.1	%	-2.0	%	0.9	%	-12.2	%	-16.3	%	23.0	%	34.4	%	83.0	%	98.2	%
Hotel Room-Nights	4,153		4,995		5,238		4,265		5,955		7,242		7,964		6,616		9,375		10,879
Year/Year Growth	62.5	%	82.5	%	49.7	%	43.7	%	43.4	%	45.0	%	52.0	%	55.1	%	57.4	%	50.2	%
Rental Car Days	1,621		2,000		2,044		1,789		2,003		2,278		2,338		2,002		2,612		2,815
Year/Year Growth	26.8	%	30.3	%	20.8	%	36.1	%	23.6	%	13.9	%	14.4	%	11.9	%	30.4	%	23.6	%

	1Q06			2Q06			3Q06			4Q06			1Q07			2Q07			3Q07			4Q07			1Q08			2Q08
Revenue	$	241,914		$	307,651		$	313,467		$	260,071		$	301,389		$	355,880		$	417,287		$	334,853		$	403,180		$	513,976
Year/Year Growth	3.7		%	15.4		%	21.1		%	27.5		%	24.6		%	15.7		%	33.1		%	28.8		%	33.8		%	44.4		%
Gross Profit	$	72,231		$	105,804		$	123,547		$	99,517		$	119,717		$	157,211		$	202,331		$	160,152		$	181,103		$	253,725
Year/Year Growth	25.2		%	62.2		%	54.4		%	53.3		%	65.7		%	48.6		%	63.8		%	60.9		%	51.3		%	61.4		%

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

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

10

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 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
		3Q08	2008	3Q08	2008	3Q08	2008
Closing Share Price Assumption(2)	$75.00	48.2	48.7	0.2	0.3	48.4	49.0
	$80.00	48.4	48.8	0.2	0.3	48.6	49.1
	$85.00	48.6	48.9	0.3	0.3	48.8	49.2
	$90.00	48.7	49.0	0.3	0.3	49.0	49.4
	$95.00	48.9	49.1	0.3	0.4	49.2	49.5
	$100.00	49.1	49.2	0.3	0.4	49.4	49.6
	$105.00	49.2	49.3	0.4	0.4	49.6	49.7
	$110.00	49.4	49.4	0.4	0.4	49.7	49.8
	$115.00	49.5	49.5	0.4	0.4	49.9	49.9
	$120.00	49.6	49.5	0.4	0.4	50.0	50.0
	$125.00	49.7	49.6	0.5	0.4	50.2	50.1
	$130.00	49.8	49.7	0.5	0.5	50.3	50.1
	$135.00	49.9	49.7	0.5	0.5	50.4	50.2
	$140.00	50.1	49.8	0.5	0.5	50.6	50.3
	$145.00	50.1	49.9	0.5	0.5	50.7	50.4
	$150.00	50.2	49.9	0.5	0.5	50.8	50.4
	$155.00	50.3	50.0	0.6	0.5	50.9	50.5
	$160.00	50.4	50.1	0.6	0.5	51.0	50.6
	$165.00	50.5	50.1	0.6	0.5	51.1	50.6
	$170.00	50.6	50.2	0.6	0.5	51.2	50.7
	$175.00	50.6	50.2	0.6	0.5	51.3	50.8

(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:
	3Q08: Uses actual daily share prices from July 1, 2008 through August 4, 2008, and the closing share price assumption from August 5, 2008 through September 30, 2008.
	2008: Uses actual daily share prices from January 1, 2008 through August 4, 2008, and the closing share price assumption from August 5, 2008 through December 31, 2008.

11