Priceline 2010 Annual Report Download - page 24

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Compensation Discussion and Analysis
Summary Information
Over the last three years, through a worldwide financial crisis and recession, priceline.com has earned
$1.8 billion of non-GAAP EBITDA (a metric described in more detail below) and generated $1.6 billion of cash
from operating activities, an increase of more than 384% over the prior three year period. As measured by room
night reservations, a common metric in the hotel industry, over that same three year period, priceline.com
became the largest online hotel reservation company in the world. Measured in terms of stockholder return,
priceline.com was the single best performing stock on the S&P 500 during the five year period ending December
31, 2010. During that period, priceline.com expanded its global hotel business beyond the U.S. and European
markets, into the fast growing Asia-Pacific hotel market and into South America.
2010 was an excellent year for priceline.com. Priceline.com grew its consolidated gross travel
bookings by more than 46% year-over-year and increased its consolidated non-GAAP EBITDA (a metric
described in more detail below) by more than 64% year-over-year, growing its earnings faster than other leading
online travel companies.
This performance is a result of many factors, most importantly actions taken by the Company’s
leadership, including Jeffery H. Boyd, President and Chief Executive Officer, and the leadership teams at
priceline.com in the U.S., Booking.com and Agoda, to continue the Company’s geographic expansion and
expansion of hotel supply around the world, and to coordinate collaboration among the Company’s different
brands, all while maintaining the Company’s market-leading growth and operating leverage.
In light of this exceptional performance and the achievement by the Company of 2010 consolidated
non-GAAP EBITDA targets set forth in the Company’s 2010 bonus plan, Mr. Boyd received a bonus of $4.0
million for 2010. In addition, in March 2010, Mr. Boyd also received a grant of performance share units having
a grant date fair value of approximately $2.9 million. The performance share units vest over a three year period,
are forfeitable if priceline.com does not meet a cumulative three-year earnings target requiring substantial growth
in consolidated non-GAAP EBITDA and, if there is outstanding performance by priceline.com over the three-
year period, could result in the issuance of up to three times the number of shares underlying the initial grant.
Total compensation for our other named executive officers also reflected the company’s outstanding performance
(see Summary Compensation Table on page 36 for more details).
Executive Compensation Program Philosophy and Objectives
Priceline.com’s goal is to be the leading worldwide on-line hotel reservation service. To achieve this
goal, it is critical that priceline.com be able to attract, motivate and retain highly talented individuals at all levels
of the global organization. All of priceline.com’s global compensation and benefits programs described below
are designed to accomplish these objectives and, in turn, enhance long-term stockholder value.
Priceline.com’s compensation program is substantially performance based and is intended to focus
executives on both short-term and long-term earnings growth. As a general rule, this means that if the Company
achieves superior earnings growth compared to expected growth rates for its competition, total compensation for
senior executives may fall at the higher end of competitive benchmarks. On the other hand, if the Company’s
earnings growth is inferior to that expected of the Company’s competition, total compensation for senior
executives is likely to be significantly below competitive benchmarks. Further, executive officers’ annual
bonuses are funded from earnings growth and, therefore, as a general matter, it is unlikely there would be
significant bonus funding for executive officers unless the Company meets its budgeted earnings targets.
Different elements of the priceline.com compensation program are designed to engender different
behaviors:
x Base salary and benefits are designed to attract and retain employees over time.
x Award opportunities under priceline.com’s annual performance based bonus plan are designed to focus
employees on priceline.com’s annual earnings growth and individual objectives in connection with
each executive’s individual performance goals.