Priceline 2015 Annual Report Download - page 70

inquiries relating to the payment of travel transaction taxes. For additional information, see Note 15 to the Consolidated Financial Statements and Part I Item 1A
Risk Factors - " Adverse application of state and local tax laws could have an adverse effect on our business and results of operations " in this Annual Report.
As a result of this litigation and other attempts by U.S. jurisdictions to levy similar taxes, we have established an accrual (including estimated interest and
penalties) for the potential resolution of issues related to travel transaction taxes in the amount of approximately $27 million at December 31, 2015 compared to
approximately $52 million at December 31, 2014 . A March 2015 ruling by the Hawaii Supreme Court significantly reduced our (and other OTCs') liability and as
a result we reduced our accrual for travel transaction taxes (including estimated interest and penalties) by $16.4 million with a corresponding reduction to cost of
revenues in the first quarter of 2015. The accrual is based on our estimate of the probable cost of resolving these issues. Our legal expenses for these matters are
expensed as incurred and are not reflected in the amount accrued. The actual cost may be less or greater, potentially significantly, than the liabilities recorded. An
estimate for a reasonably possible loss or range of loss in excess of the amount accrued cannot be reasonably made. If we were to suffer adverse determinations in
the near term in more of the pending proceedings than currently anticipated given results to date, because of our available cash we believe that it would not have a
material impact on our liquidity.
The following table represents our material contractual obligations and commitments as of December 31, 2015 (see Note 15 to the Consolidated Financial
Statements):
Payments due by Period (in thousands)
Contractual Obligations
Total
Less than
1 Year
1 to 3
Years
3 to 5 Years
More than 5 Years
Operating lease obligations
$ 465,528
$ 92,552
$ 151,874
$ 114,243
$ 106,859
Senior Notes (1)
7,347,065
103,658
1,202,315
1,185,565
4,855,527
Revolving credit facility (2)
11,926
3,146
5,049
3,731
—
Earnout - acquisition
9,170
—
—
9,170
—
Total (3)
$ 7,833,689
$ 199,356
$ 1,359,238
$ 1,312,709
$ 4,962,386
(1) Represents the aggregate principal amount of our Senior Notes outstanding as of December 31, 2015 and cumulative interest to maturity of $858 million.
Convertible debt does not reflect the market value in excess of the outstanding principal amount because we can settle 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 the Consolidated Balance Sheet at December 31, 2015 , of which approximately $43 million
related to deferred rents, approximately $42 million related to unrecognized tax benefits (see Note 14 to the Consolidated Financial Statements) and
approximately $27 million related to our accrual for the potential resolution of issues related to travel transaction taxes (see Note 15 to the Consolidated
Financial Statements). A variety of factors could affect the timing of payments for the liabilities related to travel transaction taxes and unrecognized tax
benefits. We believe that these matters will likely not be resolved in the next twelve months and accordingly we have classified the estimated liability as non-
current in the Consolidated Balance Sheet. Therefore, we have excluded long-term liabilities of $126 million from the contractual obligations table above
because we cannot reasonably estimate the timing of such payments or the liability related to deferred rents, which represents the difference in rent expense
recognized in the income statements and rent payments related to operating leases.
We believe that our existing cash balances and liquid resources will be sufficient to fund our operating activities, capital expenditures and other
obligations through at least the next twelve months. However, if during that period or thereafter, we are not successful in generating sufficient cash flow from
operations or in raising additional capital when required in sufficient amounts and on terms acceptable to us, we may be required to reduce our planned capital
expenditures and scale back the scope of our business plan, either of which could have a material adverse effect on our future financial condition or results of
operations. If additional funds were raised through the issuance of equity securities, the percentage ownership of our then current stockholders would be diluted.
We may not generate sufficient cash flow from operations in the future, revenue growth or sustained profitability may not be realized, and future borrowings or
equity sales may not be available in amounts sufficient to make anticipated capital expenditures, finance our strategies or repay our indebtedness.
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