Priceline 2015 Annual Report Download

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PRICELINE GROUP INC.
FORM 10-K
(Annual Report)
Filed 02/17/16 for the Period Ending 12/31/15
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 2016, 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
    ... 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 http://www.edgar-online.com © Copyright 2016, EDGAR Online, Inc. All Rights Reserved. Distribution and use of...

  • Page 2
    ... value of common stock held by non-affiliates of The Priceline Group Inc. as of June 30, 2015 was approximately $58.6 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...

  • Page 3
    ... on June 2, 2016 , to be filed with the Securities and Exchange Commission within 120 days after the end of The Priceline Group Inc.'s fiscal year ended December 31, 2015 . The Priceline Group Inc. Annual Report on Form 10-K for the Year Ended December 31, 2015 Index Page No. Special Note Regarding...

  • Page 4
    ... (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 and cruises. We offer rental...

  • Page 5
    ... 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; Beginning on May 21, 2013, advertising revenues primarily earned by KAYAK from...

  • Page 6
    ... (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 and cruises. We offer rental...

  • Page 7
    ... consumers to easily search and compare travel 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...

  • Page 8
    ..., rental car companies and airlines, many of which have their own branded websites to which they drive business, including joint efforts by travel service providers such as Room Key, an online hotel reservation service owned by several major hotel companies; online travel search and price comparison...

  • Page 9
    ... hotel and other accommodations through their online and mobile platforms. Further, meta-search services may lower the cost for new companies to enter the market by providing a distribution channel without the cost of promoting the new entrant's brand to drive consumers directly to its website...

  • Page 10
    ... far in advance. Further, given the device sizes and technical limitations of tablets and smart phones, mobile consumers may not be willing to download multiple apps from multiple companies providing a similar service and instead prefer to use one or a limited number of apps for their mobile travel...

  • Page 11
    .... These internal platforms were designed to include open application protocol interfaces that can provide connectivity to vendors in the industries in which we operate. These include large global systems, such as accommodation, airline ticket and rental car reservation systems and financial service...

  • Page 12
    ... as the third quarter of 2015, our operating margins typically benefit from relatively less variable 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. Employees As of...

  • Page 13
    ... 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the Company's Code of Conduct is available through the www.pricelinegroup.com website and any amendments to or waivers of the Code of Conduct will be disclosed on that...

  • Page 14
    ... upon the sale of travel services. 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 spending levels. As a result, sales of travel services tend...

  • Page 15
    ..., rental car companies and airlines, many of which have their own branded websites to which they drive business, including joint efforts by travel service providers such as Room Key, an online hotel reservation service owned by several major hotel companies; online travel search and price comparison...

  • Page 16
    ... hotel and other accommodations through their online and mobile platforms. Further, meta-search services may lower the cost for new companies to enter the market by providing a distribution channel without the cost of promoting the new entrant's brand to drive consumers directly to its website...

  • Page 17
    ... business, compete with us in online channels to drive consumers to their own websites in lieu of third-party distributors such as us. Travel service providers may charge lower prices and, in some instances, offer advantages such as loyalty points or special discounts to members of closed user...

  • Page 18
    ... 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 19
    ...decline in ad clicks by consumers could increase our costs-per-click and reduce our online advertising efficiency. We use third-party websites, including online search engines (primarily Google), meta-search and travel research services, and affiliate marketing as primary means of generating traffic...

  • Page 20
    ...willing to download multiple apps from multiple companies providing a similar service and instead prefer to use one or a limited number of apps for their mobile travel and restaurant research and reservation activity. As a result, the consumer experience with mobile apps as well as brand recognition...

  • Page 21
    ... our business, brand, market share and results of operations. We currently require consumers who use certain of our services to guarantee their offers with their credit card, either online or, in some instances, through our toll-free telephone service. We require user names and passwords in order to...

  • Page 22
    ... number of places where we operate and as the tools and techniques used in such attacks become more advanced. Successful attacks could result in negative publicity, damage our reputation and prevent consumers from booking travel services, researching travel services or making restaurant reservations...

  • Page 23
    ... on the value of our brands, our market share, business and 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...

  • Page 24
    ... business practices and that changes are needed to international tax laws to address situations where multinational businesses may pay little or no tax in certain jurisdictions by shifting profits away from jurisdictions where the activities creating those profits may take place. The final reports...

  • Page 25
    .... We are also subject to non-income based taxes, such as value-added, payroll, sales, use, net worth, property and goods and services taxes, in the United States and various international jurisdictions, as well as the potential for travel transaction taxes in the United States as discussed below and...

  • Page 26
    ... to use our services 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...

  • Page 27
    ... on-line travel companies that offer lower rates of commission or other benefits, offer lower rates to consumers that book through off-line channels and continue to discount through, among other things, accommodation loyalty programs, as long as those rates are not published or marketed online. The...

  • Page 28
    ... to prohibit "narrow" price parity agreements, could have a material adverse effect on our business and our results of operations, in particular if consumers use our services to shop for accommodation reservations but make their reservations directly with an accommodation provider. In addition, as...

  • Page 29
    ... on our websites might be impaired, either of which could negatively affect a consumer's experience using our services. As a result, these regulations could have a material adverse effect on our business, market share and results of operations. Our stock price is highly volatile. The market price of...

  • Page 30
    ...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 of our intellectual property rights; lack of success in the expansion of our business models geographically; announcements by third parties...

  • Page 31
    ... growth, market share, business and results of operations. Further, to the extent mobile devices enable users to block advertising content on their devices, our advertising revenue and our ability to market our brands and acquire new customers may be negatively affected. We believe that ease-of-use...

  • Page 32
    ...The success of our acquisition of OpenTable is subject to numerous risks and uncertainties. On July 24, 2014, we acquired OpenTable, a leading brand for booking online restaurant reservations. We believe that the online restaurant reservation business is complementary to our online travel businesses...

  • Page 33
    ...or losses reported as a component of accumulated other comprehensive income, net of tax. Our portfolio includes fixed income securities and equity securities of publicly traded companies, the values of which are subject to market price volatility. If such investments suffer market price declines, we...

  • Page 34
    ... operations may be unable or 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...

  • Page 35
    ... they require accommodation providers to provide Booking.com with room rates that are at least as low as those offered to other online travel companies ("OTCs") or through the accommodation provider's website. On April 21, 2015, the French, Italian and Swedish NCAs, working in close cooperation with...

  • Page 36
    ...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 37
    ...operations or cash flows. An estimate for a reasonably possible loss or range of loss in excess of the amount accrued cannot be reasonably made. 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 claims...

  • Page 38
    ...the periods indicated, the high and low sales prices per share of our common stock as reported on the NASDAQ Global Select Market: 2015 First Quarter Second Quarter Third Quarter Fourth Quarter 2014 First Quarter Second Quarter Third Quarter Fourth Quarter Holders As of February 10, 2016, there were...

  • Page 39
    Measurement Point December 31 The Priceline Group Inc. NASDAQ Composite Index S&P 500 Index RDG Internet Composite 2010 2011 2012 2013 2014 2015 100.00 117.06 155.27 290.93 285.37 319.10 36 100.00 100.53 116.92 166.19 188.78 199.95 ...

  • Page 40
    ... 2015 : ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (1) (2) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value...

  • Page 41
    ... accounting standards in the fourth quarter of 2015. Year Ended December 31, 2015 2014 (3)(4) 2013 (3)(4) 2012 (3)(4) 2011 (3)(4) (In thousands, except per share amounts) Total revenues Cost of revenues Gross profit Total operating expenses Operating income Total other expense Income tax expense Net...

  • Page 42
    ... on this new accounting update. (4) Includes reclassifications related to unamortized debt issuance costs as a result of the early adoption of the accounting update issued by FASB in April 2015, which requires debt issuance costs to be presented in the balance sheets as a direct deduction from...

  • Page 43
    ... 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; Beginning on May 21, 2013, advertising revenues primarily earned by KAYAK from...

  • Page 44
    ... 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 45
    ...increase our non-hotel accommodation business, these different market characteristics could negatively impact our profit margins; and, to the extent these properties represent an increasing percentage of the properties added to our websites, we expect that our gross bookings growth rate and property...

  • Page 46
    ..., and current and new competitors can launch new services at a relatively low cost. We currently, or may potentially in the future, compete with a variety of companies, including online travel reservation services such as those owned by Expedia (including Travelocity and Orbitz), Ctrip (in which we...

  • Page 47
    ... of discounted closed user group retail prices for hotel rooms have negatively affected our opaque hotel reservation gross profit. We have established widely used and recognized e-commerce brands through aggressive marketing and promotional campaigns. Both our online and offline advertising expense...

  • Page 48
    ... near term due to the benefit of revenue related to reservations booked in previous quarters. Other Factors We believe that our future success depends in large part on our ability to continue to profitably grow our brands worldwide, and, over time, to offer other travel and travel-related services...

  • Page 49
    ... fair values at the acquisition date. The excess of the purchase price consideration over the net of the amounts allocated to the assets acquired and liabilities assumed is recognized as goodwill. Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business...

  • Page 50
    ...impairment review include changes in business strategies, market conditions, or the manner of use of an asset; under performance relative to historical or expected future operating results; and negative industry or economic trends. In evaluating an asset for possible impairment, management estimates...

  • Page 51
    ... criteria, the customer would need to identify what portion of the cost relates to purchasing the software and what portion relates to paying for the service of hosting the software. The purchased software would be accounted for using the internal-use software guidance and the service costs would be...

  • Page 52
    ... a customer. The new standard will also require enhanced disclosures. The accounting standard was initially effective for public entities for annual and interim periods beginning after December 15, 2016. In July 2015, the FASB agreed to defer the effective date of the new revenue standard to annual...

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

  • Page 54
    ... Rental Car Days Airline Tickets 432.3 59.9 7.7 2014 346.0 51.8 7.8 Change 24.9 % 15.6 % (1.6)% Accommodation room night reservations increased by 24.9% for the year ended December 31, 2015 , compared to the year ended December 31, 2014 , due to an increase in Booking.com, agoda.com and priceline...

  • Page 55
    ... at priceline.com; (2) transaction revenues representing the price of Name Your Own Price ® hotel, rental car and airline ticket reservations and vacation packages charged to a customer (with a corresponding travel service provider cost recorded in cost of revenues); (3) customer processing fees...

  • Page 56
    ...'s Name Your Own Price ® and vacation package reservation services, net of applicable taxes and charges; and (2) fees paid to third parties by KAYAK and priceline.com to return travel itinerary information for consumer search queries. Cost of revenues for the year ended December 31, 2015 decreased...

  • Page 57
    ... taxes of $16.4 million (including estimated interest and penalties) recorded in the first quarter of 2015 related to a favorable ruling in the State of Hawaii. Gross profit for the year ended December 31, 2015 was also positively impacted by a net reduction in cost of revenue in the third quarter...

  • Page 58
    ... Gross Profit $ 113,617 1.3% $ 2014 97,498 1.3% Change 16.5% Information technology expenses consist primarily of: (1) software license and system maintenance fees; (2) data communications and other expenses associated with operating our services; (3) outsourced data center costs; and (4) payments...

  • Page 59
    ... % of Total Gross Profit $ 272,494 3.2% $ 2014 207,820 2.7% Change 31.1% Depreciation and amortization expenses consist of: (1) amortization of intangible assets with determinable lives; (2) depreciation on computer equipment; (3) depreciation of internally developed and purchased software; and...

  • Page 60
    ...to pay foreign taxes on our international 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...

  • Page 61
    ... United States has had an adverse impact on our access to availability for our opaque reservation services. Gross bookings resulting from reservations of accommodation room nights, rental car days and airline tickets made through our agency and merchant models for the years ended December 31, 2014...

  • Page 62
    ...third quarter of 2013), partially offset by a decline in priceline.com's Name Your Own Price ® airline ticket reservation service. Revenues Year Ended December 31, (in thousands) 2014 Agency Revenues Merchant Revenues Advertising and Other Revenues Total Revenues Agency Revenues Agency revenues for...

  • Page 63
    ..., 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 64
    ... 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 65
    ... December 31, 2014 and 2013 includes charges amounting to $20.6 million and $24.1 million, respectively, representing the impact of adjusting the estimated probable outcome at the end of the performance period for outstanding unvested performance share units. Stock-based compensation expense for the...

  • Page 66
    ... Gross Profit $ 97,498 1.3% $ 2013 71,890 1.3% 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; (3) outsourced data center costs; and (4) payments...

  • Page 67
    ... significant beneficial impact on the Company's effective tax rate for those periods. Redeemable Noncontrolling Interests Year Ended December 31, (in thousands) 2014 Net Income Attributable to Noncontrolling Interests $ - $ 2013 135 Change NA We purchased the remaining outstanding shares underlying...

  • Page 68
    ...additional tax payments in the United States. Cash equivalents, short-term investments and long-term investments are comprised of U.S. and foreign corporate bonds, U.S. and foreign government securities, high-grade commercial paper, U.S. government agency securities, Ctrip American Depositary Shares...

  • Page 69
    ...See Part I Item IA Risk Factors - " We may have exposure to additional tax liabilities. " A number of U.S. 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...

  • Page 70
    ... the conversion premium amount in cash or shares of common stock at our option. See Note 10 to the Consolidated Financial Statements. (2) Represents fees on uncommitted funds and outstanding letters of credit as of December 31, 2015 . (3) We reported "Other long-term liabilities" of $135 million on...

  • Page 71
    ... net assets, gross bookings, gross profit, operating expenses and net income have been negatively impacted as expressed in U.S. Dollars. Since our expenses are generally denominated in foreign currencies on a basis similar to our revenues, our operating margins are not significantly impacted...

  • Page 72
    ... of Operations. 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...

  • Page 73
    ... or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management...

  • Page 74
    ... no gross revenues or net profits associated with these activities for the fiscal year ended December 31, 2015. Booking.com, through non-U.S. person representatives, intends to continue these business activities and may enter into transactions with hotels in Iran as authorized under U.S. law. PART...

  • Page 75
    ... Documents Filed as a Part of this Annual Report on Form 10-K: 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: Consolidated Balance Sheets as of December 31, 2015...

  • Page 76
    ... KAYAK Software Corporation 2012 Equity Incentive Plan. OpenTable, Inc. Amended and Restated 2009 Equity Incentive Award Plan. Buuteeq, Inc. Amended and Restated 2010 Stock Plan. Amended and Restated Rocket Travel, Inc. 2012 Stock Incentive Plan. The Priceline Group Inc. Amended and Restated Annual...

  • Page 77
    ...to the Current Report on Form 8-K filed on March 6, 2015 (File No. 1-36691). Previously filed as an exhibit to the Annual Report on Form 10-K filed for the year ended December 31, 2014 (File No. 1-36691). Previously filed as an exhibit to the Quarterly Report on Form 10-Q filed for the quarter ended...

  • Page 78
    ... by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 75 Darren R. Huston President and Chief Executive Officer February 17, 2016

  • Page 79
    ... Date /s/ Jeffery H. Boyd Jeffery H. Boyd /s/ Darren R. Huston Darren R. Huston /s/ Daniel J. Finnegan Daniel J. Finnegan Director, Chairman of the Board February 17, 2016 President, Chief Executive Officer and Director (Principal Executive Officer) Chief Financial Officer and Chief Accounting...

  • Page 80
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Page No. Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets for the years ended December 31, 2015 and 2014 Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013 Consolidated Statements of...

  • Page 81
    ... audited, in 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, 2015 , based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee...

  • Page 82
    The Priceline Group Inc. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, 2015 ASSETS Current assets: Cash and cash equivalents Restricted cash Short-term investments Accounts receivable, net of allowance for doubtful accounts of $15,014 and $14,212, ...

  • Page 83
    ..., except per share data) Year Ended December 31, 2015 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...

  • Page 84
    The Priceline Group Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Year Ended December 31, 2015 Net income Other comprehensive income (loss), net of tax Foreign currency translation adjustments (1) Unrealized gain (loss) on marketable securities (2) Comprehensive income Less: ...

  • Page 85
    ... Priceline Group Inc. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013 (In thousands) Common Stock Shares Balance, December 31, 2012 Net income applicable to common stockholders Unrealized gain (loss) on marketable securities, net of tax...

  • Page 86
    ... contracts Change in restricted 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 - revolving credit facility Payments...

  • Page 87
    Non-cash fair value increase for redeemable noncontrolling interests Non-cash investing activity for contingent consideration Non-cash financing activity for acquisitions $ $ $ - 9,170 - $ $ $ - 10,700 13,751 $ $ $ 42,522 - 1,546,748 See Notes to Consolidated Financial Statements. 83

  • Page 88
    ...online accommodation reservation market based on room nights booked. The Company offers consumers a broad array of accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through its Booking.com, priceline.com and agoda.com brands...

  • Page 89
    ... where the Company is not the merchant of record and where the prices of the travel services are determined by third parties. Agency revenues include travel commissions, global distribution system ("GDS") reservation booking fees related to certain travel services, travel insurance fees and customer...

  • Page 90
    ...the consumer. Merchant revenues and cost of revenues include the selling price and cost, respectively, of the Name Your Own Price ® travel services and are reported on a gross basis. Express Deals ® allows consumers to select hotel, rental car and airline ticket reservations with price and certain...

  • Page 91
    ... Recovery Charge, Occupancy Taxes and State and 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...

  • Page 92
    ... details on income taxes. Segment Reporting - The Company determined that its brands constitute its operating segments. The Company's Booking.com brand represents a substantial majority of gross profit and net income. Based on similar economic characteristics and other similar operating factors, the...

  • Page 93
    ... this accounting update in the fourth quarter of 2015 and applied it retrospectively to prior periods. The impact on the Company's Consolidated Financial Statements is summarized below. In April 2015, the FASB issued a new accounting update which changes the presentation of debt issuance costs in...

  • Page 94
    ...GAAP, the Company's available-for-sale investments in equity securities with readily identifiable market value are remeasured to fair value each reporting period with changes in fair value recognized in accumulated other comprehensive income (loss). However, under the new accounting literature, fair...

  • Page 95
    ...-line basis, net of estimated forfeitures, over the employee's requisite service period. The fair value of restricted stock units and performance share units is determined based on the number of units granted and the quoted price of the Company's common stock as of the grant date. Stock-based...

  • Page 96
    ..., 2015 , 2014 and 2013 includes charges amounting to $22.6 million , $20.6 million and $24.1 million , respectively, representing the impact of adjusting the estimated probable outcome at the end of the performance period for outstanding unvested performance share units. Included in the stock-based...

  • Page 97
    ... date fair value per share of $1,329.11 . The actual number of shares to be issued will be determined upon completion of the performance period which generally ends December 31, 2016. At December 31, 2015 , there were 63,484 unvested 2014 performance share units outstanding, net of performance share...

  • Page 98
    ...689 , 41,524 and 65,293 shares with an acquisition-date fair value of $24.4 million , $24.2 million and $30.9 million , respectively. For the years ended December 31, 2015 , 2014 and 2013 , the Company recorded stock-based compensation expense related to employee stock options of $24.9 million , $24...

  • Page 99
    ... 31, 2015 , the Company had also invested $630.3 million of its international cash in Ctrip American Depositary Shares ("ADSs"). The convertible debt and equity securities of Ctrip have been marked-to-market in accordance with the accounting guidance for available-for-sale securities. In connection...

  • Page 100
    ...$ 39 $ $ Gross Unrealized Losses (34) (34) (652) - (18) (738) $ $ Cost Short-term investments: Foreign government securities U.S. government securities Corporate debt securities Commercial paper U.S. government agency securities Total short-term investments Long-term investments: Foreign government...

  • Page 101
    ...paper U.S. government agency securities Foreign exchange derivatives Long-term investments: Foreign government securities U.S. government securities Corporate debt securities U.S. municipal securities Ctrip convertible debt securities Ctrip equity securities Total assets at fair value 977,035 1,076...

  • Page 102
    ... inputs that are observable, or can be corroborated by observable data, in an active marketplace. The Company's derivative instruments are valued using pricing models. Pricing models take into account the contract terms as well as multiple inputs where applicable, such as interest rate yield curves...

  • Page 103
    ..., including restricted cash, accounts receivable, accounts payable, accrued expenses and deferred merchant bookings are carried at cost which approximates their fair value because of the short-term nature of these items. As of December 31, 2015 , the Company held investments in equity securities of...

  • Page 104
    ... 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 105
    ... per share until the shares of common stock were received in October 2013. 8. PROPERTY AND EQUIPMENT Property and equipment at December 31, 2015 and 2014 consisted of the following (in thousands): Estimated Useful Lives (years) 2 to 5 years 2 to 11 years 2015 Computer equipment and software Office...

  • Page 106
    ... 2015 . OpenTable's fair value was estimated using a combination of standard valuation techniques, including an income approach (discounted cash flows) and market approaches (EBITDA multiples of comparable publicly-traded companies and for precedent transactions). 10 . DEBT Revolving Credit Facility...

  • Page 107
    ... of letters of credit issued under this revolving credit facility. Outstanding Debt Outstanding debt as of December 31, 2015 consisted of the following (in thousands): Outstanding Principal Amount Unamortized Debt Discount and Debt Issuance Cost December 31, 2015 Long-term debt: 1.0% Convertible...

  • Page 108
    ... of specific events, including but not limited to a change in control, or if the closing sales price of the Company's common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 150...

  • Page 109
    ... 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 2018 Notes in aggregate value ranging from $0 to approximately $344 million depending upon the date of the transaction and the then current stock price of...

  • Page 110
    .... TREASURY STOCK In the first quarter of 2016, the Company's Board of Directors authorized a program to purchase of up to $3.0 billion of the Company's common stock. The Company may from time to time make repurchases of our common stock, depending on prevailing market conditions, alternate uses of...

  • Page 111
    ... $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 retained...

  • Page 112
    ...of subsidiary shares at fair value (1) Currency translation adjustments Balance, end of period $ $ 160,287 135 42,522 (192,530) (10,414) - (1) The fair value of the redeemable noncontrolling interests was determined by industry peer comparable analysis and a discounted cash flow valuation model. 13...

  • Page 113
    ...including U.S. net operating loss carryforwards ("NOLs"). The amount of NOLs available for the Company's use is limited by Section 382 of the Internal Revenue Code ("IRC Section 382 "). IRC Section 382 imposes limitations on the availability of a company's NOLs after a more than 50% ownership change...

  • Page 114
    ... are as follows (in thousands): 2015 Deferred tax assets/(liabilities): Net operating loss carryforward - U.S. Net operating loss carryforward - International Accrued expenses Stock-based compensation and other stock based payments Other Subtotal Discount on convertible notes Intangible assets and...

  • Page 115
    ... relate to whether Booking.com's price parity provisions are anticompetitive because they require accommodation providers to provide Booking.com with room rates that are at least as low as those offered to other online travel companies ("OTCs") or through the accommodation provider's website. 111

  • Page 116
    ... on-line travel companies that offer lower rates of commission or other benefits, offer lower rates to consumers that book through off-line channels and continue to discount through, among other things, accommodation loyalty programs, as long as those rates are not published or marketed online. The...

  • Page 117
    ... 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 118
    ...for Business Acquisitions (see Note 19 ) Employment Contracts The Company has employment agreements with certain members of senior management that provide for cash severance payments of up to approximately $24.8 million , accelerated vesting of equity instruments, including without limitation, stock...

  • Page 119
    ... while making a reservation or the location of the travel service provider or restaurant). The Company's geographic information is as follows (in thousands): United States 2015 Revenues Intangible assets, net Goodwill Other long-lived assets 2014 Revenues Intangible assets, net Goodwill Other long...

  • Page 120
    ... an acquisition fair value of approximately $95 million . OpenTable has built a strong brand helping diners secure restaurant reservations online across the United States and select non-U.S. markets. OpenTable also helps restaurants manage their reservations and connect directly with their customers...

  • 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
    ... affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Annual Report on Form 10â€'K and the Company's other public filings, which are available without charge through the SEC's website at http://www.sec.gov. Exhibit Number...

  • Page 123
    ... KAYAK Software Corporation 2012 Equity Incentive Plan. OpenTable, Inc. Amended and Restated 2009 Equity Incentive Award Plan. Buuteeq, Inc. Amended and Restated 2010 Stock Plan. Amended and Restated Rocket Travel, Inc. 2012 Stock Incentive Plan. The Priceline Group Inc. Amended and Restated Annual...

  • Page 124
    ...to the Current Report on Form 8-K filed on March 6, 2015 (File No. 1-36691). Previously filed as an exhibit to the Annual Report on Form 10-K filed for the year ended December 31, 2014 (File No. 1-36691). Previously filed as an exhibit to the Quarterly Report on Form 10-Q filed for the quarter ended...

  • Page 125
    ... 2016) 1. Purpose The purpose of this Rocket Travel, Inc. 2012 Stock Incentive Plan (the " Plan "), which was assumed by The Priceline Group Inc. (the " Company ") in connection with its acquisition (the " Merger ") of Rocket Travel, Inc. (" Rocket Travel ") on February 27, 2015 (the " Closing Date...

  • Page 126
    ... is less than the Fair Market Value of a share of Stock as of the date on which the Option is granted. For purposes of the Plan, " Fair Market Value " means the closing sales price per share of Stock on the national securities exchange on which the Stock is principally traded, for the last preceding...

  • Page 127
    ... or distributions declared and paid on an equal number of shares of Stock (" Dividend Equivalents "). Dividend Equivalents may be paid currently or credited to an account for the benefit of a Participant, may be settled in cash and/or shares of Stock and may be subject to the same restrictions...

  • Page 128
    ...differ from the Fair Market Value of the shares of Stock subject to such Awards immediately preceding the Acquisition; or (B) upon written notice, provide that one or more Awards then outstanding must be exercised, in whole or in part, within a specified number of days of the date of such notice, at...

  • Page 129
    ..., or similar officials in the case of an entity other than a corporation) of the Surviving Entity (the " Parent Entity "), is represented by Company Voting Securities that were outstanding immediately prior to such Reorganization or Sale (or, if applicable, is represented by shares into which...

  • Page 130
    ... 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 131
    ... that would require the application of the laws of a jurisdiction other than such state. Adopted by the Board of Directors of Rocket Travel on October 17, 2012 Approved by the stockholders of Rocket Travel on October 17, 2012 Assumed by The Priceline Group Inc. on February 27, 2015 NAI-1500791206v3

  • Page 132
    Exhibit 10.11 The Priceline Group Inc. Annual Bonus Plan (As Amended and Restated Effective February 5, 2015)

  • Page 133
    ... Date Bonus Bonus Classification Bonus Formula Board CEO Committee Corporation Eligible Employee Entitled Employee Executive Officer Performance Measure Performance Period Plan Participation Requirements Eligibility Determination of Bonuses Limitation of Bonuses and General Discretion Bonus Payments...

  • Page 134
    ... Date Subject to Section 6.02 (Amendment or Termination), this Plan shall be effective on and after January 30, 2007. SECTION 2 - Definitions The following terms, when capitalized, shall be defined as follows: 2.01 Bonus "Bonus" means, as to an Eligible Employee, a cash payment determined...

  • Page 135
    ... assets or net assets, return on investment, economic value added, market shares, overhead or other expense reduction, credit rating, strategic plan development and implementation, succession plan development and implementation, improvement in workforce, diversity, customer indicators, improvements...

  • Page 136
    ... the Corporation who is...Bonuses Within 60 days after the ...time prior to the payment of Bonuses for any Performance Period in accordance with Section 4.04 (Bonus Payments...case of non-Executive Officers, the CEO. An Entitled Employee who was, during a year, promoted or newly hired to a position included...

  • Page 137
    ... case of nonExecutive Officers, the CEO may designate an Eligible Employee for inclusion in one of such Bonus Classifications when, but for such designation, the Eligible Employee would not otherwise be included in such Bonus Classification. 4.04 Bonus Payments The Committee shall, within 60 days...

  • Page 138
    ...or in part from time to time or terminated by the Corporation. Any amendment or termination shall be binding on the Corporation, Entitled ...shall include the plural, and vice versa, unless qualified by the context. 6.05 Withholding of Taxes The Corporation shall withhold all applicable taxes from...

  • Page 139
    ....1 The Priceline Group Inc. Ratio of Earnings to Fixed Charges (In thousands) Year Ended December 31, 2015 Earnings Computation: Earnings before income taxes Less: Net income attributable to noncontrolling interests, before tax Add: Fixed charges Total earnings as adjusted Fixed Charges Computation...

  • Page 140
    ... 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 141
    ... on Form S-8 of our reports dated February 16, 2016, relating to the consolidated financial statements of The Priceline Group Inc. and subsidiaries (the "Company") and the effectiveness of the Company's internal control over financial reporting, appearing in this Annual Report on Form 10-K of the...

  • Page 142
    ...; and any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. /s/ Darren R. Huston Name: Title: Darren R. Huston President and Chief Executive Officer Dated: February 17, 2016

  • Page 143
    ...fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. /s/ Daniel J. Finnegan Name: Title: Daniel J. Finnegan Chief Financial Officer and Chief Accounting Officer Dated: February 17, 2016

  • Page 144
    ... 63 of title 18, United States Code), the undersigned officer of 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, 2015 (the "Report") of the Company fully complies with the...

  • Page 145
    ... 63 of title 18, United States Code), the undersigned officer of 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, 2015 (the "Report") of the Company fully complies with the...