Priceline 2010 Annual Report Download - page 170
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96
6. ACCOUNTS RECEIVABLE RESERVES
The Company records a provision for uncollectible agency commissions, principally receivables from
hotels related to agency reservations. The Company also accrues for costs associated with purchases made on its
websites by individuals using fraudulent credit cards and for other amounts “charged back” as a result of payment
disputes. Changes in accounts receivable reserves consisted of the following (in thousands):
For the Year Ended December 31,
2010 2009 2008
Balance, beginning of year $5,023 $8,429
$ 2,309
Provision charged to expense 7,102 3,227
13,113
Charge-offs and adjustments (5,554) (6,873)
(6,695)
Currency translation adjustments (218) 240
(298)
Balance, end of year $6,353 $5,023
$ 8,429
The increase in the bad debt provision in 2010 as compared to 2009 was primarily due to higher accounts
receivable as a result of increased sales. The decrease in the bad debt provision in 2009 as compared to 2008 was
due to improved collection rates for agency commissions from hotels and a lower level of chargeback activity for
Agoda. In 2008, the Company incurred $1.5 million of credit card chargebacks associated with the bankruptcy of
two airline suppliers.
7. NET INCOME PER SHARE
The Company computes basic net income per share by dividing net income by the weighted average
number of common shares outstanding during the period. Diluted net income per share is based upon the weighted
average number of common and common equivalent shares outstanding during the period.
Common equivalent shares related to stock options, restricted stock, restricted stock units, and
performance share units are calculated using the treasury stock method. Performance share units are included in the
weighted average common equivalent shares based on the number of shares that would be issued if the end of the
reporting period were the end of the performance period, if the result would be dilutive.
The Company’s convertible debt issues have net share settlement features requiring the Company upon
conversion to settle the principal amount of the debt for cash and the conversion premium for cash or shares of the
Company’s common stock. The convertible notes are included in the calculation of diluted net income per share if
their inclusion is dilutive under the treasury stock method.