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PRICELINE GROUP INC.
FORM 10-K
(Annual Report)
Filed 02/19/15 for the Period Ending 12/31/14
Address 800 CONNECTICUT AVE
NORWALK, CT 06854
Telephone 203-299-8000
CIK 0001075531
Symbol PCLN
SIC Code 7389 - Business Services, Not Elsewhere Classified
Industry Business Services
Sector Services
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2015, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ... INC. FORM 10-K (Annual Report) Filed 02/19/15 for the Period Ending 12/31/14 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 800 CONNECTICUT AVE NORWALK, CT 06854 203-299-8000 0001075531 PCLN 7389 - Business Services, Not Elsewhere Classified Business Services Services 12/31...

  • Page 2
    ....8 billion based upon the closing price reported for such date on the NASDAQ Global Select Market. For purposes of this disclosure, shares of common stock held by executive officers and directors of The Priceline Group Inc. on June 30, 2014 have been excluded because such persons may be deemed to be...

  • Page 3

  • Page 4
    ...and Exchange Commission within 120 days after the end of The Priceline Group Inc.'s fiscal year ended December 31, 2014 . The Priceline Group Inc. Annual Report on Form 10-K for the Year Ended December 31, 2014 Index Page No. Special Note Regarding Forward Looking Statements PART I Item 1. Business...

  • Page 5
    ... accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through our Booking.com, priceline.com and agoda.com brands. Our priceline.com brand also offers consumers reservations for rental cars, airline tickets, vacation packages...

  • Page 6
    ...and customer processing fees from our accommodation, rental car, airline ticket and vacation package reservation services; Advertising revenues primarily earned by KAYAK from sending referrals to OTAs and travel service providers, as well as from advertising placements on KAYAK's websites and mobile...

  • Page 7
    ... accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through our Booking.com, priceline.com and agoda.com brands. Our priceline.com brand also offers consumers reservations for rental cars, airline tickets, vacation packages...

  • Page 8
    ... itineraries and prices, including airline ticket, accommodation reservation and rental car reservation information, from hundreds of travel websites at once. KAYAK derives revenues from advertising placements on its websites and mobile apps and from sending referrals to travel service providers and...

  • Page 9
    .... For example, Google has entered various aspects of the online travel market through its acquisition in 2011 of ITA Software, Inc., a major flight information software company, its hotel meta-search service known as "Hotel Finder" and its license of hotel-booking software from Room 77. We currently...

  • Page 10
    ... the travel reservations business in some capacity. Apple has substantial market share in the smart phone category and controls integration of offerings, including travel services, into its mobile operating system. Apple also has more experience producing and developing mobile apps and has access to...

  • Page 11
    ..., supported this initiative with steeper discounts through lower margins. We believe these offerings, in particular "Expedia Unpublished Rates," have adversely impacted the market share and year-over-year growth rate of priceline.com's Name Your Own Price ® opaque hotel reservation service, which...

  • Page 12
    ... advertising expense. In addition, gross profit growth is typically less impacted in the near term due to the benefit of revenue related to reservations booked in previous quarters. We experience the highest levels of booking and travel consumption for our Asia-Pacific and South American businesses...

  • Page 13
    ... addresses www.pricelinegroup.com, www.booking.com, www.priceline.com, www.kayak.com, www.agoda.com, www.rentalcars.com and www.opentable.com, among others. We are not including the information contained on our websites as a part of, or incorporating it by reference into, this Annual Report on Form...

  • Page 14
    ... are significantly dependent upon the sale of travel services, particularly leisure travel. Travel, including accommodation (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties), rental car and airline ticket reservations, is dependent on discretionary...

  • Page 15
    ... accommodation reservation service Booking.com, the Asia-based accommodation reservation service agoda.com, the U.K.-based rental car reservation service rentalcars.com and, to a lesser extent, KAYAK's international meta-search services and OpenTable's international restaurant reservation business...

  • Page 16
    ..., Google has entered various aspects of the online travel market through its acquisition in 2011 of ITA Software, Inc., a major flight information software company, its hotel meta-search service known as "Hotel Finder" (discussed below) and its license of hotel-booking software from Room 77. We...

  • Page 17
    ..., supported this initiative with steeper discounts through lower margins. We believe these offerings, in particular "Expedia Unpublished Rates," have adversely impacted the market share and year-over-year growth rate for priceline.com's Name Your Own Price ® opaque hotel reservation service, which...

  • Page 18
    ...the closed user group between a retail hotel reservation and an opaque hotel reservation, which may lead to fewer consumers using our opaque hotel reservation services. In addition, after entering into an exclusive, long-term strategic marketing agreement in August 2013, Expedia acquired Travelocity...

  • Page 19
    ... increases in revenues from our KAYAK meta-search business to offset any related decrease in gross profit or increase in advertising and other customer acquisition costs experienced by our OTA brands. Our business could be negatively affected by changes in Internet search engine algorithms and...

  • Page 20
    ... the travel reservations business in some capacity. Apple has substantial market share in the smart phone category and controls integration of offerings, including travel services, into its mobile operating system. Apple also has more experience producing and developing mobile apps and has access to...

  • Page 21
    ... card industry security standards, even if no customer information is compromised, we could incur significant fines or experience a significant increase in payment card transaction costs. System capacity constraints, system failures or "denial-of-service" or other attacks could harm our business...

  • Page 22
    ...effect on the value of our brands, our market share and our results of operations. We rely on certain third party computer systems and third party service providers, including GDSs and computerized central reservation systems of the accommodation, rental car and airline industries in connection with...

  • Page 23
    ... and profit shifting" by multinational companies. The action plan expressed the OECD's view that international tax standards have not kept pace with changes in global business practices and concluded that changes are needed to international tax laws to address situations where multinationals may pay...

  • Page 24
    ... on our business and results of operations. A number of jurisdictions in the United States have initiated lawsuits against online travel companies, including us, related to, among other things, the payment of travel transaction taxes (e.g., hotel occupancy taxes, excise taxes, sales taxes, etc.). In...

  • Page 25
    ... online travel companies. Similarly, in January 2013, the Tax Appeal Court for the State of Hawaii held that online travel companies, including us, are liable for the State's general excise tax on the full amount the online travel company collects from the customer for a hotel room reservation...

  • Page 26
    ... and/or our revenues could be adversely affected, especially if reservations during highly desirable times on high volume days are not made available through us. Further, KAYAK, a meta-search service, depends on access to information related to travel service pricing, schedules, availability and...

  • Page 27
    ... by the CMA will affect industry practice, including discounting to closed user groups, the status of rate parity clauses found in many online travel companies' contracts with hotels and other travel service providers, and our business and results of operations. The competition authorities of many...

  • Page 28
    ... countries. • • • Our business has grown substantially over the last several years and continues to expand into new geographic locations. In addition, we have made efforts and expect to make further efforts to integrate access to travel services across our various brands. These changes add...

  • Page 29
    ... or our competitors of price reductions, promotions, significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; loss of a major travel service provider participant, such as a hotel chain, rental car company or airline, from our services; changes in the status...

  • Page 30
    ...services through mobile applications and mobile optimized websites on smart phones and tablets. Any failure by us to successfully develop and achieve customer adoption of our mobile applications and mobile optimized websites would likely have a material and adverse effect on our growth, market share...

  • Page 31
    ... source licensing terms. Some open source licenses require users who distribute software containing open source to make available all or part of such software, which in some circumstances could include valuable proprietary code of the user. While we monitor our use of open source software and try to...

  • Page 32
    ... unwilling to honor tickets sold for their flights. Our policy in such event is to direct customers seeking a refund or exchange to the airline, and not to provide a remedy ourselves. Because we are the merchant-of-record on sales of Name Your Own Price ® and Express Deals ® airline tickets to our...

  • Page 33
    ... in various locations around the world, including hosting and data center facilities in the United States, the United Kingdom, Switzerland, the Netherlands and Hong Kong and sales and support facilities in numerous locations. We do not own any real estate as of December 31, 2014 . We believe...

  • Page 34
    ... ability to discount hotel room reservations, which the OFT alleged was a form of resale price maintenance. We dispute the allegations in the SO. On January 31, 2014, the OFT announced that it had accepted commitments offered by Booking.com, as well as Expedia and Intercontinental Hotel Group, (the...

  • Page 35
    ... publicity regarding any such investigations could adversely affect our brands and therefore our market share and results of operations. Lawsuits Alleging Antitrust Violations On August 20, 2012, one complaint was filed on behalf of a putative class of persons who purchased hotel room reservations...

  • Page 36
    ... OTC collects from the customer for a hotel room reservation, without any offset for amounts passed through to the hotel. We recorded an accrual for travel transaction taxes (including estimated interest and penalties), with a corresponding charge to cost of revenues, of approximately $16.5 million...

  • Page 37
    ... for the Northern District of Illinois; filed in July 2013); Department of Revenue, Finance and Administration Cabinet, Commonwealth of Kentucky v. Expedia Inc., et al. (Franklin Circuit Court, Kentucky; filed in July 2013); State of New Hampshire v. priceline.com Inc., et al. (Merrimack Superior...

  • Page 38
    ... On February 9, 2015, International Business Machines Corporation ("IBM") filed a complaint in the U.S. District Court for the District of Delaware against us and our subsidiaries KAYAK Software Corporation, OpenTable, Inc. and priceline.com LLC (the "Subject Companies"). In the complaint...

  • Page 39
    ...recorded have not been material to our consolidated results of operations or cash flows. We are unable to estimate a reasonably possible range of loss. From time to time, we have been, and expect to continue to be, subject to legal proceedings and claims in the ordinary course of business, including...

  • Page 40
    ... Third Quarter Fourth Quarter Holders $ High 728.70 847.33 1,019.95 1,198.75 $ Low 627.67 677.72 831.11 972.40 As of February 11, 2015 , there were approximately 239 stockholders of record of The Priceline Group Inc.'s common stock. Dividend Policy We have not declared or paid any cash dividends...

  • Page 41
    Measurement Point December 31 The Priceline Group Inc. NASDAQ Composite Index S&P 500 Index RDG Internet Composite 2009 2010 2011 2012 2013 2014 Sales of Unregistered Securities $ 100.00 $ 182.94 214.14 284.05 532.21 522.05 100.00 117.61 118.70 139.00 196.83 223.74 $ 100....

  • Page 42
    ...31, 2014 : ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of...

  • Page 43
    ... date of May 2010, KAYAK from its acquisition date of May 2013 and OpenTable from its acquisition date of July 2014. The information set forth below is not necessarily indicative of future results and should be read in conjunction with Part II Item 7 Management's Discussion and Analysis of...

  • Page 44
    ... from facilitating reservations of accommodations, rental cars, cruises and other travel services; Transaction gross profit and customer processing fees from our accommodation, rental car, airline ticket and vacation package reservation services; Advertising revenues primarily earned by KAYAK from...

  • Page 45
    ... have a negative impact on our overall margins as these markets increase in size over time. Also, we intend to continue to invest in adding accommodations available for reservation on our websites, including hotels, bed and breakfasts, hostels and vacation rentals. Vacation rentals generally consist...

  • Page 46
    ...The market for the travel reservation and search services we offer is intensely competitive, a trend we expect to continue, and current and new competitors can launch new services at a relatively low cost. We currently, or potentially may in the future, compete with a variety of companies, including...

  • Page 47
    ... individual travel agencies around the world; travel service providers such as accommodation providers, rental car companies and airlines; online travel search and price comparison services (generally referred to as "meta-search" services), such as TripAdvisor, trivago (in which Expedia has acquired...

  • Page 48
    ... returns on investment ("ROIs") and (2) brand mix within The Priceline Group as our international brands grew faster than our U.S. brands and spent a higher percentage of gross profit on online advertising. In 2014, these long-term trends were more than offset by the inclusion of KAYAK and OpenTable...

  • Page 49
    ... sustain gross profit growth and profitability. On July 24, 2014, we acquired OpenTable, a leading provider of online restaurant reservations, for $2.5 billion ( $2.4 billion net of cash acquired) and on May 21, 2013, we acquired KAYAK Software Corporation, a leading travel meta-search service, for...

  • Page 50
    ...profit earned from merchant hotel transactions; however, in a handful of jurisdictions, we have been required recently by passage of a new statute or by court order to start collecting and remitting certain taxes (local occupancy and/or sales or excise tax) imposed upon our margin and/or service fee...

  • Page 51
    .... Likewise, if KAYAK is unsuccessful in profitably growing its global online travel brand or it experiences a significant reduction in advertising revenues on its websites or mobile apps or profitability due to factors such as a loss of continued access to travel services information provided by...

  • Page 52
    ... or the disclosure reconciliation of gross unrecognized tax benefits. The update is effective for public companies beginning after December 15, 2013. We adopted this update in the first quarter of 2014 and this accounting update did not have an impact on the Company's consolidated balance sheet. 48

  • Page 53
    ... making a reservation or the location of the travel service provider or restaurant. We follow a similar approach for reporting the international and domestic revenue and gross profit of those businesses. Gross bookings resulting from accommodation room nights, rental car days and airline tickets...

  • Page 54
    ... services and priceline.com Express Deals ® hotel and retail hotel reservation services, partially offset by declines in priceline.com's Name Your Own Price ® services. Units sold for accommodation room nights, rental car days and airline tickets for the years ended December 31, 2014 and 2013...

  • Page 55
    ... and priceline.com retail merchant hotel and Express Deals ® reservation services, which are recorded in revenue "net" of travel service provider costs. As a result, we believe that gross profit is an important measure to evaluate growth in our business. Advertising and Other Revenues Advertising...

  • Page 56
    ..., which are recorded in revenue "net" of travel provider cost have been growing faster than priceline.com's Name Your Own Price ® reservation services. As a result, we believe that gross profit is an important measure to evaluate growth in our business. Our international operations accounted for...

  • Page 57
    ... gross booking volumes, higher public relations costs and the inclusion of OpenTable since its acquisition on July 24, 2014. Sales and marketing expenses as a percentage of gross profit are typically higher for our merchant businesses, which incur credit card processing fees. Our merchant business...

  • Page 58
    ...for outstanding unvested performance share units. Stock-based compensation expense for the year ended December 31, 2014 also includes $26.5 million of compensation expense related to 2014 acquisitions. In December 2013, the Dutch Government enacted certain amendments to Dutch tax law including a one...

  • Page 59
    ... thousands) 2014 2013 97,498 $ 71,890 1.3% 1.3% Information Technology % of Total Gross Profit $ Change 35.6% Information technology expenses consist primarily of: (1) software license and system maintenance fees; (2) data communications and other expenses associated with operating our services...

  • Page 60
    ...to pay foreign taxes on our non-U.S. income except in countries where we have operating loss carryforwards. We expect that our international operations will grow their pretax income faster than the U.S. business over the long term and, therefore, it is our expectation that our cash tax payments will...

  • Page 61
    ... 31, 2013, compared to the same period in 2012, primarily due to an increase in the sale of agoda.com accommodation room night reservations, priceline.com Express Deals ® hotel room night reservations, rentalcars.com rental car day reservations and Name Your Own Price ® airline ticket reservations...

  • Page 62
    ... are the merchant of record and therefore charge the customer's credit card for the travel services provided. Merchant revenues include (1) transaction revenues representing the selling price of Name Your Own Price ® hotel room night, rental car and airline ticket reservations and vacation packages...

  • Page 63
    ... revenues for the year ended December 31, 2013 increased 5.1% compared to the same period in 2012, primarily due to increases in our agoda.com hotel reservation service, rentalcars.com rental car reservation service and priceline.com Express Deals ® hotel reservation and Name Your Own Price ® air...

  • Page 64
    ...semi-opaque services, which are recorded in revenue "net" of supplier cost have been growing faster than our Name Your Own Price ® services. As a result, we believe that gross profit is an important measure to evaluate growth in our business. Our international operations accounted for approximately...

  • Page 65
    ...of KAYAK since its acquisition on May 21, 2013. Sales and marketing expenses as a percentage of gross profit are typically higher for our merchant business, which incurs credit card processing fees. Our merchant business grew more slowly than our agency business, and as a result, sales and marketing...

  • Page 66
    ... % of Total Gross Profit $ Change 64.6% Information technology expenses consist primarily of: (1) outsourced data center costs; (2) system maintenance and software license fees; (3) data communications and other expenses associated with operating our services; and (4) payments to outside...

  • Page 67
    ...31, 2013, compared to the same period in 2012, due to growth in our international businesses. According to Dutch corporate income tax law, income generated from qualifying "innovative" activities is taxed at a rate of 5% ("Innovation Box Tax") rather than the Dutch statutory rate of 25%. Booking.com...

  • Page 68
    ... attributable to noncontrolling interest is lower for the year ended December 31, 2013, compared to the same period in 2012, mainly due to a reduction in redeemable noncontrolling interests. We purchased the remaining outstanding shares underlying the redeemable noncontrolling interests in April...

  • Page 69
    ...we acquired OpenTable, Inc., a leading provider of online restaurant reservations, in a cash transaction for a purchase price of approximately $2.5 billion (approximately $2.4 billion net of cash acquired) or $103.00 per share of OpenTable common stock. We funded the acquisition from cash on hand in...

  • Page 70
    ... of excess tax benefits from stock-based compensation. Contingencies A number of jurisdictions have initiated lawsuits against online travel companies, including us, related to, among other things, the payment of travel transaction taxes (e.g., hotel occupancy taxes, excise taxes, sales taxes, etc...

  • Page 71
    ... the conversion premium amount in cash or shares of common stock at our option. See Note 11 to the Consolidated Financial Statements. (2) Represents fees on uncommitted funds and outstanding letters of credit as of December 31, 2014 . (3) We reported "Other long-term liabilities" of $104 million on...

  • Page 72
    ... risk by assessing the anticipated near-term and long-term fluctuations in interest rates and foreign exchange rates. This evaluation includes the review of leading market indicators, discussions with financial analysts and investment bankers regarding current and future economic conditions and...

  • Page 73
    Item 8. Financial Statements and Supplementary Data The following Consolidated Financial Statements of the Company and the report of our independent registered public accounting firm are filed as part of this Annual Report on Form 10-K (See Part IV Item 15 Exhibits and Financial Statement Schedules...

  • Page 74
    ... statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect...

  • Page 75
    ...2014 , and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services Information required by Part III Item 14 will be included in our Proxy Statement relating to our 2015 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days...

  • Page 76
    ... registered public accounting firm are filed as part of this Annual Report on Form 10-K. Consolidated Balance Sheets as of December 31, 2014 and 2013 ; and the related Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in...

  • Page 77
    ... under the 1999 Omnibus Plan. 2013 Form of Performance Share Unit Agreement under the 1999 Omnibus Plan. 2014 Form of Performance Share Unit Agreement under the 1999 Omnibus Plan. Amended and Restated KAYAK Software Corporation 2012 Equity Incentive Plan. OpenTable, Inc. Amended and Restated 2009...

  • Page 78
    ... 8, 2012 (File No. 0-25581). Previously filed as an exhibit to the Current Report on Form 8-K filed on March 4, 2013 (File No. 0-25581). Previously filed as an exhibit to the Current Report on Form 8-K filed on March 7, 2014 (File No. 0-25581). Previously filed as an exhibit to the Quarterly Report...

  • Page 79
    ...any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the Securities and Exchange Commission in connection with this Annual Report on Form 10-K and any and all...

  • Page 80
    ... of the Board February 19, 2015 President and Chief Executive Officer (Principal Executive Officer) Chief Financial Officer and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer) Director February 19, 2015 February 19, 2015 /s/ Timothy M. Armstrong Timothy...

  • Page 81
    ... FINANCIAL STATEMENTS Page No. Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets for the years ended December 31, 2014 and 2013 Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012 Consolidated Statements of Comprehensive...

  • Page 82
    ... accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2014 , based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring...

  • Page 83
    The Priceline Group Inc. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, 2014 ASSETS Current assets: Cash and cash equivalents $ Restricted cash Short-term investments Accounts receivable, net of allowance for doubtful accounts of $14,212 and $14,116, ...

  • Page 84
    ... 37.17 50,924 36.11 52,413 $ $ Agency revenues Merchant revenues Advertising and other revenues Total revenues Cost of revenues Gross profit Operating expenses: Advertising - Online Advertising - Offline Sales and marketing Personnel, including stock-based compensation of $186,425, $140,526 and $71...

  • Page 85
    ... $ $ (1) Foreign currency translation adjustments includes a tax of $55,597 for the year ended December 31, 2014 and tax benefits of $55,001 and $18,001 for the years ended December 31, 2013 and 2012 , respectively, associated with hedges of foreign denominated net assets (See Note 14). The...

  • Page 86
    ... Priceline Group Inc. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 and 2012 (In thousands) Common Stock Shares Balance, December 31, 2011 Net income applicable to common stockholders Unrealized gain (loss) on marketable securities, net of tax...

  • Page 87
    ...cash Net cash used in investing activities FINANCING ACTIVITIES: Proceeds from revolving credit facility Payments related to revolving credit facility Proceeds from the issuance of long-term debt Payment of debt issuance costs Payments related to conversion of senior notes Repurchase of common stock...

  • Page 88
    Cash paid during the period for interest Non-cash fair value increase for redeemable noncontrolling interests Non-cash investing activity for contingent consideration Non-cash financing activity for acquisitions $ $ $ $ See Notes to Consolidated Financial Statements. 83 16,950 - 10,700 13,751 $ $...

  • Page 89
    ... accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through its Booking.com, priceline.com and agoda.com brands. The Company's priceline.com brand also offers consumers reservations for rental cars, airline tickets, vacation...

  • Page 90
    ... service providers file secure discounted rates, not generally available to the public, to determine whether it can fulfill the consumer's offer. The Company selects the travel service provider and determines the price it will accept from the consumer. Merchant revenues and cost of revenues include...

  • Page 91
    ... Local Taxes The Company provides an online travel service to facilitate online travel purchases by consumers from travel service providers, including accommodation, rental car and airline ticket reservations, and sometimes as part of a vacation package reservation. For merchant model transactions...

  • Page 92
    ...'s Booking.com, KAYAK and priceline.com businesses and primarily consist of television advertising. The Company expenses advertising production costs the first time the advertising is broadcast. Sales and Marketing - Sales and marketing expenses consist primarily of (1) credit card processing fees...

  • Page 93
    ..., cash flow and financial position. These market risks include, but are not limited to, fluctuations in currency exchange rates. The Company's primary foreign currency exposures are in Euros and British Pound Sterling, in which it conducts a significant portion of its business activities. As...

  • Page 94
    ...the disclosure reconciliation of gross unrecognized tax benefits. The update is effective for public companies beginning after December 15, 2013. The Company adopted this update in the first quarter of 2014 and this accounting update did not have an impact on the Company's consolidated balance sheet...

  • Page 95
    ... there were 2,650,485 shares of common stock available for future grant under the 1999 Plan. In addition, in connection with the acquisition of KAYAK in May 2013, Buuteeq, Inc. in June 2014 and OpenTable in July 2014, the Company assumed the KAYAK Software Corporation 2012 Equity Incentive Plan (the...

  • Page 96
    ... Units The following table summarizes the activity of unvested restricted stock units ("RSUs") and performance share units during the years ended December 31, 2012 , 2013 and 2014 : Weighted Average Grant Date Fair Value 231.87 643.12 108.31 532.26 444.18 389.21 730.47 242.63 681.13 579.71 615.10...

  • Page 97
    ... the Company during the years ended December 31, 2014 , 2013 and 2012 . Stock Options Assumed in Acquisitions The following table summarizes for the year ended December 31, 2014 stock option activity for employee stock options assumed in acquisitions: Weighted Average Remaining Contractual Term (in...

  • Page 98
    ... by major security type, the Company's investments as of December 31, 2014 (in thousands): Gross Unrealized Gains Gross Unrealized Losses Cost Available for sale securities: Short-term investments: Foreign government securities U.S. government securities U.S. commercial paper U.S. government agency...

  • Page 99
    ... by major security type, the Company's short-term investments as of December 31, 2013 (in thousands): Gross Unrealized Gains Gross Unrealized Losses Cost Available for sale securities: Short-term investments: Foreign government securities U.S. government securities Total Fair Value $ $ 4,019,530...

  • Page 100
    ... short-term in nature. As of December 31, 2014 and 2013 , the Company's cash consisted of bank deposits and cash held in investment accounts. Other financial assets and liabilities, including restricted cash, accounts receivable, accounts payable, accrued expenses and deferred merchant bookings are...

  • Page 101
    ... net cash outflows of $80.3 million and $78.6 million for the years ended December 31, 2014 and 2013 , compared to a net cash inflows of $82.1 million for the year ended December 31, 2012 , and were reported within "Net cash used in investing activities" on the Consolidated Statements of Cash...

  • Page 102
    ... related to agency reservations. The Company also accrues for costs associated with merchant transactions 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...

  • Page 103
    ... December 31, 2014 , 2013 and 2012 , respectively. 9. INTANGIBLE ASSETS AND GOODWILL The Company's intangible assets at December 31, 2014 and 2013 consisted of the following (in thousands): December 31, 2014 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount...

  • Page 104
    ... of OpenTable in July 2014 and KAYAK in May 2013. See Note 20 for further information on these acquisitions. In September 2014, the Company performed its annual goodwill impairment testing using standard valuation techniques. Since the annual impairment test, there have been no events or changes in...

  • Page 105
    ...general corporate purposes. The Company funded the acquisition of OpenTable in July 2014 from cash on hand in the United States and $995 million borrowed under the Company's revolving credit facility, which the Company repaid during the third quarter of 2014. As of December 31, 2014 and 2013 , there...

  • Page 106
    ... in which the consideration paid to holders of the Company's common stock consists of all or substantially all cash, the Company would be required to make additional payments in the form of additional shares of common stock to the holders of the 2021 Notes in an aggregate value ranging from $0 to...

  • Page 107
    ... in which the consideration paid to holders of the Company's common stock consists of all or substantially all cash, the Company would be required to make additional payments in the form of additional shares of common stock to the holders of the 2020 Notes in an aggregate value ranging from $0 to...

  • Page 108
    ... transactions and in the third and fourth quarters of 2014, the Company repurchased 114,645 shares of its common stock in privately negotiated, off-market transactions and 438,897 shares of its common stock in the open market for aggregate costs of $147.3 million and $500.0 million , respectively...

  • Page 109
    ..."), paid $108.5 million , net of cash acquired, to purchase a controlling interest of the outstanding equity of TravelJigsaw Holdings Limited (now known as rentalcars.com), a Manchester, U.K.-based international rental car reservation service. Certain key members of rentalcars.com's management team...

  • Page 110
    ... translation adjustments, net of tax (1) Net unrealized gain (loss) on investment securities, net of tax (2) Accumulated other comprehensive income (loss) _____ (1) Foreign currency translation adjustments, net of tax, includes net losses from fair value adjustments at December 31, 2014 of $37...

  • Page 111
    ...31, 2014 and 2013 are as follows (in thousands): 2014 Deferred tax assets/(liabilities): Net operating loss carryforward - U.S. Net operating loss carryforward - International Fixed assets Accrued expenses Stock-based compensation and other stock based payments Other Subtotal Discount on convertible...

  • Page 112
    ...December 31 $ $ The unrecognized tax benefits are included in "Other long-term liabilities" on the Consolidated Balance Sheets for the years ended December 31, 2014 and 2013 . The Company does not expect further significant changes in the amount of unrecognized tax benefits during the next twelve...

  • Page 113
    ... to discount hotel room reservations, which the OFT alleged was a form of resale price maintenance. The Company disputes the allegations in the SO. On January 31, 2014, the OFT announced that it had accepted commitments offered by Booking.com, as well as Expedia and Intercontinental Hotel Group...

  • Page 114
    ... businesses) or furnish or provide hotel rooms or similar accommodations or other travel services. In addition, in many of these matters, the taxing jurisdictions have asserted claims for "conversion" - essentially, that the Company has collected a tax and wrongfully "pocketed" those tax dollars...

  • Page 115
    ... OTC collects from the customer for a hotel room reservation, without any offset for amounts passed through to the hotel. The Company recorded an accrual for travel transaction taxes (including estimated interest and penalties), with a corresponding charge to cost of revenues, of approximately $16...

  • Page 116
    ... similar taxes, the Company has established an accrual (including estimated interest and penalties) for the potential resolution of issues related to travel transaction taxes in the amount of approximately $52 million at December 31, 2014 compared to approximately $55 million at December 31, 2013...

  • Page 117
    .... v. City and County of Denver, et al. (District Court for Denver County, Colorado, filed in March 2012); (Colorado Court of Appeal; appeal filed in April 2013); (Colorado Supreme Court; petition for review filed in August 2014); and Expedia, Inc., et al. v. Oregon Department of Revenue (Oregon Tax...

  • Page 118
    ...On February 9, 2015, International Business Machines Corporation ("IBM") filed a complaint in the U.S. District Court for the District of Delaware against The Priceline Group Inc. and its subsidiaries KAYAK Software Corporation, OpenTable, Inc. and priceline.com LLC (the "Subject Companies"). In the...

  • Page 119
    ... of the internationally based websites of KAYAK since May 21, 2013 and OpenTable since July 24, 2014 (in each case regardless of where the consumer resides, where the consumer is physically located while making a reservation or the location of the travel service provider or restaurant). The Company...

  • Page 120
    ...$ 8.65 $ 6.25 $ 10.89 $ 20.03 $ 8.56 First Quarter Second Third Quarter Quarter (In thousands, except per share data) Fourth Quarter 2013 Total revenues (1) Gross profit Net income Net income applicable to common stockholders Net income applicable to common stockholders per basic common...

  • Page 121
    ... quarter of 2014, the Company acquired certain businesses that provide hotel marketing services. The Company's consolidated financial statements include the accounts of these businesses starting at their respective acquisition dates. The Company paid approximately $98 million , net of cash acquired...

  • Page 122
    Acquisition activity in 2013 KAYAK Software Corporation On May 21, 2013, the Company acquired 100% of KAYAK Software Corporation in a stock and cash transaction. The purchase value was $2.1 billion ( $1.9 billion net of cash acquired). The Company paid $0.5 billion in cash, from cash on hand in the ...

  • Page 123
    ...elsewhere in this Annual Report on Form 101K and the Company's other public filings, which are available without charge through the SEC's website at http://www.sec.gov. Exhibit Number Description Agreement and Plan of Merger, dated as of November 8, 2012, by and among KAYAK Software Corporation, the...

  • Page 124
    ..., dated May 29, 2013, between the Registrant and Goldman, Sachs & Co. Purchase Agreement, dated August 14, 2014, between The Priceline Group Inc. and Wells Fargo Securities, LLC and Citigroup Global Markets Inc., as the Initial Purchasers. Underwriting Agreement, dated September 16, 2014, among the...

  • Page 125
    ... 8, 2012 (File No. 0-25581). Previously filed as an exhibit to the Current Report on Form 8-K filed on March 4, 2013 (File No. 0-25581). Previously filed as an exhibit to the Current Report on Form 8-K filed on March 7, 2014 (File No. 0-25581). Previously filed as an exhibit to the Quarterly Report...

  • Page 126
    ... 10.8 KAYAK SOFTWARE CORPORATION 2012 EQUITY INCENTIVE PLAN (as assumed by priceline.com Incorporated on May 21, 2013 and as amended and restated as of February 7, 2014) 1. Purpose This Plan is intended to encourage ownership of Stock by employees, consultants and directors of the Company and its...

  • Page 127
    ... in its sole discretion. 2.8. Change in Control means the occurrence of any of the following with respect to Awards granted on or after May 21, 2013: (a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty-five percent (35%) or...

  • Page 128
    ... the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding, such increased amount shall be deemed not to result in a Change in Control; provided , however , that if such Person subsequently becomes the Beneficial Owner, directly or...

  • Page 129
    ...a change of control event is not required to assure the Award's continued compliance with Section 409A of the Code. Class A Common Stock means the Class A Common Stock, par value $0.001 per share, of KAYAK 2.10. Software Corporation prior to KAYAK Software Corporation's merger with the Company. 2.11...

  • Page 130
    ... underwriters pursuant to KAYAK Software Corporation's initial public offering. 2.16. time. 2.17. Fair Market Value of a share of Stock as of a particular date shall mean the closing sales price per share of Stock on the national securities exchange on which the Stock is principally traded, for the...

  • Page 131
    ..., the Market Value of Stock as of any date is the closing price for the Stock as reported on the NASDAQ Global Select Market (or on any other national securities exchange on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the...

  • Page 132
    ... pursuant to an offering of such securities, (d) a corporation or other entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of Stock, or (e) the Participant or any group of persons including the Participant, or...

  • Page 133
    ... means (a) any merger or consolidation of the Company with or into another entity as a result of which the Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled, (b) any sale or exchange of all of the Stock of the Company...

  • Page 134
    ... owned shares of Stock in payment of the exercise price therefor, the number of shares delivered shall be considered to have been issued pursuant to an Award granted under the Plan; and (c) any shares of Stock either tendered or withheld in satisfaction of tax withholding obligations of the Company...

  • Page 135
    ... or to any nonemployee member of the Board of Directors of KAYAK Software Corporation or any member of any board of directors (or similar governing authority) of any Subsidiary of KAYAK Software Corporation. However, if the Company obtains stockholder approval of the Plan and subject to the previous...

  • Page 136
    ... been duly executed and delivered by the Company and the Optionee. (b) Exercise Price . The price at which shares of Stock may be acquired under each Incentive Option shall be not less than 100% of the Market Value of Stock on the Grant Date, or not less than 110% of the Market Value of Stock on the...

  • Page 137
    ..., specifying the number of shares of Stock with respect to which the Option is then being exercised. The notice shall be accompanied by payment in the form of cash or check payable to the order of the Company in an amount equal to the exercise price of the shares of Stock to be purchased or, subject...

  • Page 138
    ... the occurrence of the Change of Control in any transaction reported in the stock market in which the Stock is normally traded. 7.3. Restricted Stock . (e) Purchase Price . Shares of Restricted Stock shall be issued under the Plan for such consideration, in cash, other property or services, or any...

  • Page 139
    ... following form: The shares evidenced by this certificate are subject to the terms and conditions of the KAYAK Software Corporation 2012 Equity Incentive Plan, as amended and restated and an Agreement entered into by the registered owner and KAYAK Software Corporation or priceline.com Incorporated...

  • Page 140
    ... the recipient to the value of a specified number of shares of Stock, over the initial value for such number of shares, if any, established by the Committee at the time of grant, at the close of a specified Performance Period to the extent specified business objectives, including, but not limited to...

  • Page 141
    ... exercise price of any Option or Stock Appreciation Right intended to qualify as a Qualified Performance-Based Award shall in no event be less that the Market Value or the Fair Market Value, as applicable, of the Stock on the date of grant, and may become exercisable based on continued service, on...

  • Page 142
    ...pre-tax profit, (xvii) operating profit, net operating profit or economic profit, (xviii) gross margin, operating margin or profit margin, (xix) return on operating revenue or return on operating assets, (xx) cash from operations, (xxi) operating ratio, (xxii) operating revenue, (xxiii) market share...

  • Page 143
    ...provided in Section 4, (b) the numbers and kinds of shares or other securities subject to the then outstanding Awards, (c) the exercise price for each share or other unit of any other securities subject to then outstanding Stock Rights (without change in the aggregate exercise price as to which such...

  • Page 144
    ... not specifically covered by the preceding Section, including, but not limited to, an extraordinary cash distribution on Stock, a corporate separation or other reorganization or liquidation, the Committee may make such adjustment of outstanding Awards and their terms, if any, as it, in its sole...

  • Page 145
    ... price of any such Stock Right, the Committee may cancel that Stock Right without the payment of any consideration therefore prior to or upon the Transaction. For this purpose, "acquisition price" means the amount of cash, and market value of any other consideration, received in payment for a share...

  • Page 146
    ...a Participant, or all Awards of the same type, identically. Any determinations required to carry out the foregoing provisions of this Section 8.4, including, but not limited to, the market value of other consideration received by holders of Stock in a Transaction and whether substantially equivalent...

  • Page 147
    ... had not then elapsed. All such Awards of Performance Share Units and Restricted Stock Units shall be paid to the extent earned to Participants in accordance with their terms within thirty (30) days following the effective date of the Change of Control; and (ii) the following provisions of this...

  • Page 148
    ... on or after May 21, 2013, the Board may cancel all outstanding Options in exchange for consideration in cash or in kind which consideration in both cases shall be equal in value to the higher of (i) the Fair Market Value of those shares of Stock or other securities the holder of such Option would...

  • Page 149
    ... potential for insider trading and to avoid or recover compensation payable or paid on the basis of inaccurate financial results or statements, employee conduct, and other similar events. 11. Reservation of Stock The Company shall at all times during the term of the Plan and any outstanding Awards...

  • Page 150
    ... any particular tax consequences as a result of the grant of, exercise of rights under, or payment in respect of an Award, including, but not limited to, that an Option granted as an Incentive Option has or will qualify as an "incentive stock option" within the meaning of Section 422 of the Code or...

  • Page 151
    ... in return for the grant of new Awards for the same or a different number of shares of Stock and on the same or different terms and conditions (including but not limited to the exercise price of any Option); and (c) (i) offer to buy out for a payment in cash or cash equivalents, or in exchange for...

  • Page 152
    ... to any clawback policy of the Company that may be in effect from time to time or is required under any applicable law or rules and regulations of the national securities exchange or national securities association on which shares of Stock may be traded. 18. Notices and Other Communications Any...

  • Page 153
    ... the existence of the successor is the result of a direct or indirect purchase, merger, consolidation, or other event, or a sale or disposition of all or substantially all of the business and/or assets of the Company, and references to the "Company" in the Plan and in any Agreement will be deemed...

  • Page 154
    Exhibit 12.1 The Priceline Group Inc. Ratio of Earnings to Fixed Charges (In thousands) Year Ended December 31, 2012 2011 $ 1,761,869 $ 1,367,794 $ 2014 Earnings Computation: Earnings before income taxes Less: Net income attributable to noncontrolling interests, before tax Add: Fixed charges Total ...

  • Page 155
    ... Name Agoda Company Pte. Ltd. Booking.com B.V. Booking.com Holding B.V. KAYAK Software Corporation OpenTable, Inc. Priceline.com Bookings Acquisition Company Limited Priceline.com Europe Holdco, Inc. Priceline.com Holdco U.K. Limited priceline.com International Ltd. priceline.com LLC priceline...

  • Page 156
    ... 18, 2015 , relating to the consolidated financial statements of The Priceline Group Inc. (formerly known as priceline.com Incorporated) and subsidiaries (the "Company") and the effectiveness of the Company's internal control over financial reporting, appearing in this Annual Report on Form 10...

  • Page 157
    ...have reviewed the Annual Report on Form 10-K of The Priceline Group Inc. (the "Registrant") for the year ended December 31, 2014 ; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements...

  • Page 158
    ...have reviewed the Annual Report on Form 10-K of The Priceline Group Inc. (the "Registrant") for the year ended December 31, 2014 ; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements...

  • Page 159
    ... The Priceline Group Inc., a Delaware corporation (the "Company"), hereby certifies that, to his knowledge: The Annual Report on Form 10-K for the 12 months ended December 31, 2014 (the "Report") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange...

  • Page 160
    ... The Priceline Group Inc., a Delaware corporation (the "Company"), hereby certifies that, to his knowledge: The Annual Report on Form 10-K for the 12 months ended December 31, 2014 (the "Report") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange...