Priceline 2011 Annual Report Download - page 56

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To the extent that any tax authority succeeds in asserting that we have a tax collection responsibility, or we determine
that we have one, with respect to future transactions, we may collect any such additional tax obligations from our customers,
which would have the effect of increasing the cost of hotel room reservations to our customers and, consequently, could make
our hotels services less competitive (i.e., versus the websites of other online travel companies or hotel company websites) and
reduce hotel reservation transactions; alternatively, we could choose to reduce the compensation for our services on "merchant"
hotel transactions. Either step could have a material adverse effect on our business and results of operations.
As a result of this litigation and other attempts by jurisdictions to levy similar taxes, we have established an accrual
which amounted to approximately $33 million and $26 million as of December 31, 2011 and 2010, respectively. The accrual
is based on our estimate of the ultimate cost of resolving these issues. The actual cost may be less or greater, potentially
significantly, than the liabilities recorded. We believe that even if we were to suffer adverse determinations in the near term in
more of the pending proceedings than currently anticipated given results to date, because of our available cash, it would not
have a material impact on our liquidity.
The following table represents our material contractual obligations and commitments as of December 31, 2011 (see
Note 16 to the Consolidated Financial Statements):
Contractual Obligations
Operating lease obligations
Convertible debt(1)
Revolving credit facility(2)
Redeemable noncontrolling interests
Total(3)
Payments due by Period (in thousands)
Total
$ 221,603
584,284
7,767
127,045
$ 940,699
Less than
1 Year
$ 32,539
584,284
1,866
71,145
$ 689,834
1 to 3
Years
$ 60,775
—
3,084
55,900
$ 119,759
3 to 5 Years
$ 46,883
—
2,817
—
$ 49,700
More than 5
Years
$ 81,406
—
—
—
$ 81,406
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(1) Convertible debt represents the aggregate principal amount of the Notes and interest of $9.3 million. See Note 11 to the
Consolidated Financial Statements.
(2) Represents fees on uncommitted funds and outstanding letters of credit as of December 31, 2011.
(3) We reported "Other long-term liabilities" of $39 million on the Consolidated Balance Sheet at December 31, 2011, of
which approximately $33 million related to our accrual for potential resolution of issues related to hotel occupancy and
other hotel-related transaction taxes (refer to Note 16 to the Consolidated Financial Statements) and approximately $3
million related to unrecognized tax benefits (refer to Note 15 to the Consolidated Financial Statements). A variety of
factors could affect the timing of payments for these liabilities. We believe that these matters will likely not be resolved in
the next twelve months and accordingly we have classified the estimated liability as "non-current" on the Consolidated
Balance Sheet. We have excluded "Other long-term liabilities" in the amount of $39 million from the contractual
obligations table because we cannot reasonably estimate the timing of such payments.
Since the contingent conversion threshold for the 1.25% Convertible Senior Notes due 2015 was exceeded as of
December 31, 2011, these notes are convertible at the option of the holders. If the holders elect to convert, we will be required
to pay the aggregate principal amount in cash and we will deliver cash or shares of common stock, at our option, for the
conversion value in excess of the aggregate principal amount. We would likely fund our conversion obligations with cash and
cash equivalents, short-term investments and borrowings under our revolving credit facility.
We believe that our existing cash balances and liquid resources will be sufficient to fund our operating activities,
capital expenditures and other obligations through at least the next twelve months. However, if during that period or thereafter,
we are not successful in generating sufficient cash flow from operations or in raising additional capital when required in
sufficient amounts and on terms acceptable to us, we may be required to reduce our planned capital expenditures and scale back
the scope of our business plan, either of which could have a material adverse effect on our future financial condition or results
of operations. If additional funds were raised through the issuance of equity securities, the percentage ownership of our then
current stockholders would be diluted. There are no assurances that we will generate sufficient cash flow from operations in
the future, that revenue growth or sustained profitability will be realized or that future borrowings or equity sales will be
available in amounts sufficient to make anticipated capital expenditures, finance our strategies or repay our indebtedness.