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Priceline.com reports pro forma earnings per share
of $0.03 for 3rd quarter 2001

  • $302 million in revenues and $50.4 million in gross profits

  • GAAP net income before preferred stock dividend is $5.0 million

  • 16.7% gross margin is priceline.com record

  • Priceline.com consumer franchise grows to nearly 12 million customers with record 63% repeat business

NORWALK, Conn, November 1, 2001 ... Priceline.com (Nasdaq: PCLN) today reported pro forma net income for the 3rd quarter 2001 of $6.3 million, or $0.03 per diluted share. Revenues for the 3rd quarter 2001 were $302 million, which modestly exceeded the upper end of priceline.com's revised 3rd quarter guidance and compared to 3rd quarter 2000 revenues of $341 million. Pro forma EBITDA for the 3rd quarter 2001 was $8.4 million. In the 3rd quarter 2000, priceline.com had a pro forma net loss of $2.2 million, or $0.01 per share. Pro forma EBITDA and pro forma net income exclude option payroll taxes, amortization of stock-based compensation charges and a non-cash preferred stock dividend.

Priceline.com reported GAAP net income for the 3rd quarter 2001 before preferred stock dividend of $5.0 million and reported a GAAP net loss applicable to common stockholders for the 3rd quarter 2001 of $3.6 million, or $0.02 per share, compared to loss in the 3rd quarter 2000 of $199 million, or $1.19 per share. Priceline.com's gross profit for the 3rd quarter 2001 was $50.4 million, compared to a gross profit of $54.4 million in the 3rd quarter 2000. Priceline.com's 3rd quarter gross margin was a record 16.7%, compared to a gross margin of 15.9% in the 3rd quarter 2000.

Priceline.com reported continued growth of its long-term consumer franchise during the quarter. The Company sold a combined 3.0 million units of travel products during the quarter and added 927,000 new customers, bringing its total customer base to 11.8 million. Repeat business for the 3rd quarter 2001 (defined as the number of unique purchase offers coming from repeat customers divided by the number of total unique purchase offers) was a record 63 percent, compared to 51 percent in the 3rd quarter 2000 and 61 percent in the 2nd quarter 2001.

Priceline.com said that, while demand for travel products has substantially recovered following the September 11th terrorist attacks, unit sales and revenue from sales of travel products in the quarter trailed that demand because of refunds processed by priceline.com in the aftermath of the attacks and because of pressure from deep discounting of published retail prices instituted by airlines, hotel companies and rental car companies to spur near-term demand. The recovery of airline ticket sales in the weeks following the attacks also was slowed by disruptions in availability of inventory related to anticipated schedule changes.

"The rapid recovery of consumer demand for priceline.com's travel products is a tribute to the strength of our brand, the loyalty of our customers and the compelling value we offer to consumers," said priceline.com President and Chief Operating Officer Jeffery H. Boyd. "We are also pleased with the continuing strength of our hotel and rental car businesses. These non-air categories constituted 42 percent of our booked offers in the 3rd quarter 2001, compared to 28 percent a year ago. For the past two quarters, hotel and rental car unit sales have exceeded sales of airline tickets."

Priceline.com also said that its "look to book" ratio (a prevailing metric in the travel industry that measures the percentage of people who actually buy a product after visiting or contacting the travel company) compared favorably with other online travel companies for the quarter. Based on published 3rd quarter reports, priceline.com had a 12.8 percent "look to book" ratio, compared to 8.0 percent for Travelocity and 5.5 percent for Expedia.com.

"With our steadily growing customer base, a strong look-to-book ratio and record repeat business, priceline.com has developed a strong consumer franchise that positions us well for the future," said priceline.com Chairman and Chief Executive Officer Richard S. Braddock. "Our Name Your Own Price proposition is now a preferred way of purchasing for millions of loyal customers, who come back to priceline.com again and again for their travel and other purchases."

Mr. Braddock continued, "We are targeting 4th quarter revenues in the range of $215 million to $235 million, which reflects today's travel industry conditions as well as the usual seasonal weakness of our 4th quarter. However, this year we are managing the 4th quarter to a goal of pro forma break-even earnings per share. Results could range a penny or two on either side of that goal. This compares to 4th quarter 2000 revenues of $228 million and a pro forma net loss of $0.15 per diluted share. The improved earnings outlook is due to key operating efficiencies we've instituted over the past year as part of our turnaround plan. Despite current challenges in the travel sector, we believe priceline.com will continue to be one of e-commerce's winning companies for several reasons. We have seen a demand-driven recovery in our U.S. travel business, which has developed a strong, loyal consumer franchise. Further, priceline's scope has broadened to reduce its reliance on our air product, for example, through the continued strength of the hotel and rental car products and the progress achieved in building our mortgage business."

Significant 3rd quarter 2001 developments for priceline.com included:

  • Customer care following the September 11th crisis. Immediately following the September 11th terrorist attacks, priceline.com assembled a crisis team to provide service and support to customers, implemented emergency change/cancellation policies and procedures, brought the Company's customer service operations up to emergency response levels, and trained customer service personnel to implement the new emergency policies.

  • A deepening of priceline.com's strategic relationship with Cheung Kong (Holdings) Limited and Hutchison Whampoa Limited. In September 2001, Cheung Kong and Hutchison Whampoa purchased more than 7 million additional shares of priceline.com on the open market and raised their equity stake in the business to approximately 30 percent. Priceline.com's Board of Directors also approved a request from the two companies to give them the ability to increase their future ownership stake in priceline.com to 37.5 percent. In addition to being strategic investors in priceline.com's US business, Cheung Kong and Hutchison Whampoa are working with priceline.com on the introduction of a similar service for Asian markets.

  • Expansion of priceline.com's travel products. During the 3rd quarter 2001, priceline.com's hotel service expanded internationally to add hotel properties in Mexico and the Bahamas/Caribbean. The hotel service also began a beta test offering hotel rooms in 50 European cities and towns. As a result of these expansions, priceline.com's hotel service now includes over 7,000 hotel properties and sold 880,000 room nights in the 3rd quarter. Also during the quarter, priceline.com launched an online test for a cruise product. The cruise product is being managed for priceline.com by National Leisure Group. Priceline.com also began software development for its vacation package product, which is expected to launch in the first quarter of 2002.

  • Acquisition of 49 percent equity stake in PricelineMortgage. Late in the 3rd quarter, priceline.com exercised its option to take an equity stake in PricelineMortgage. PricelineMortgage has been profitable since February 2001 and is expected to be accretive to priceline.com's financial results, beginning in the 4th quarter, but not financially material at this time. PricelineMortgage offers consumers unique advantages in obtaining a first mortgage or refinancing through its fast approvals (as little as 30 minutes), guaranteed closing costs, and float-down rate protection.

  • Broadening of key supplier relationships. During the 3rd quarter, priceline.com expanded its strategic marketing relationship with Visa USA. To date, priceline.com has processed millions of Visa card payments for its customers. Under a new agreement, priceline.com will implement advertising on its Web site and will integrate the new Verified by Visa security system into the priceline.com Web site. Priceline.com has also executed multi-year preferred supplier agreements with several of its hotel and rental car partners.

About Priceline.com

Priceline.com is the Name Your Own Pricesm Internet service that offers products for sale in four categories: a travel service that offers leisure airline tickets, hotel rooms and rental cars; a personal finance service that offers home mortgages, refinancing and home equity loans through an independent licensee; an automotive service that offers new cars; and a telecommunications service that offers long distance calling services.

Priceline.com licenses its business model to independent licensees, including pricelinemortgage and certain international licensees. In these arrangements, priceline.com generally receives royalties for licensing its intellectual property. Priceline.com also holds securities carrying the right to purchase a significant equity stake in the licensees under certain conditions. Unless those rights are exercised, the results of licensee operations will not be included in priceline.com's financial statements.

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For press information, contact:
Brian Ek 203-299-8167     (brian.ek@priceline.com)

Information About Forward-Looking Statements
This press release may contain forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements. Expressions of future goals and similar expressions including, without limitation, "may," "will," "should," "could," "expects," "does not currently expect," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "targets," or "continue," reflecting something other than historical fact are intended to identify forward-looking statements. The following factors, among others, could cause the Company's actual results to differ materially from those described in the forward-looking statements: adverse changes in general market conditions for leisure and other travel products as the result of recent terrorist attacks, hostilities or other similar or related events; adverse changes in the Company's relationships with airlines and other product and service providers; systems-related failures and/or security breaches; the effects of increased competition; the Company's ability to protect its intellectual property rights; losses by the Company and its licensees; any adverse impact from negative publicity as a result of recent events and negative customer reaction to such publicity; legal and regulatory risks and the ability to attract and retain qualified personnel. For a detailed discussion of these and other factors that could cause the Company's actual results to differ materially from those described in the forward-looking statements, please refer to the Company's most recent Form 10-Q, Form 10-K and Form 8-K filings with the Securities and Exchange Commission. Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.