SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 16, 1999
priceline.com Incorporated
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(Exact name of registrant as specified in its charter)
Delaware 0-25581 06-1528493
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(State or other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
Five High Ridge Park, Stamford, Connecticut 06905
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(Address of principal office) (zip code)
(203) 705-3000
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Registrant's telephone number, including area code
N/A
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS.
On November 17, 1999, priceline.com Incorporated, a Delaware
corporation ("priceline.com"), announced that United Airlines, American
Airlines and USAirways had agreed to become participating carriers in the
priceline.com name-your-price airline ticket service. In connection with
the entrance of United, American and USAirways to the priceline.com
program, priceline.com issued to its domestic carriers warrants to purchase
a total of 20 million shares of priceline.com common stock. In addition,
Delta Airlines agreed to restructure its existing priceline.com equity
position, including a sale by Delta of 2,085,767 shares of priceline.com
common stock to Priceline's Founder and Vice Chairman Jay S. Walker and
Chairman and CEO Richard Braddock for an aggregate purchase price of $125
million. Delta also agreed to exchange 6 million shares of priceline.com
common stock for 6 million shares of newly issued priceline.com convertible
preferred stock. Priceline.com also issued a new warrant to Delta to
acquire 5.5 million shares of priceline.com common stock. The information
set forth in this paragraph is qualified in its entirety by reference to a
press release issued by priceline.com on November 17, 1999, a copy of which
is attached hereto as Exhibit 99.1 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
99.1 Press Release issued by priceline.com on November 17,
1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
PRICELINE.COM INCORPORATED
By: /s/ Paul E. Francis
---------------------------
Name: Paul E. Francis
Title: Chief Financial Officer
Date: November 18, 1999
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release issued by priceline.com on
November 17, 1999.
EXHIBIT 99.1
STAMFORD, Conn.--(BUSINESS WIRE)--Nov. 17, 1999--
-- Priceline.com's airline partners now include all of the major
full-service carriers
-- New carriers increase priceline.com's inventory access by 94%
-- Participating airlines fly an average of over 500,000 empty
seats a day
-- Priceline.com airline service set to add 142 new cities,
37,000 new city pairs
-- Priceline.com founder Jay Walker and Chairman and CEO Richard
Braddock to purchase more than 2,000,000 priceline.com shares from
Delta Air Lines at an aggregate price of $125 million
-- New warrant structure created for existing and new major
domestic airline partners
Priceline.com (Nasdaq:PCLN) announced today that United Airlines,
American Airlines and US Airways have agreed to become the newest partners
in priceline.com's name-your-own-price service for leisure airline tickets.
United is the nation's largest airline, American is second-largest and US
Airways is fifth-largest. Priceline.com now includes all of the nation's
major full-service airlines as partners in its airline tickets program:
United, American, Delta Air Lines, US Airways, Continental, Northwest, TWA
and America West.
With the addition of these new carriers, priceline.com's inventory access
will increase by 94%. In total, priceline.com's partner airlines represent
almost 90% of the total U.S. market share and fly an average of more than
500,000 empty seats every day.
Priceline.com also has 20 major international airlines participating in its
airline ticket service.
United officially begins writing tickets today through priceline.com
American and US Airways will begin writing tickets through priceline.com
within a few weeks, although it typically takes 6 to 8 weeks for new
participating carriers to fully utilize the priceline.com airline system.
"Delta Air Lines has been priceline's lead airline partner during a
period of enormous growth for priceline. Delta will continue to be a
crucial partner of priceline in the future and we are pleased to be
extending our relationship with them in the transactions we are announcing
today. The addition of United, American and US Air to our airline service
is a further endorsement of priceline.com's unique ability to solve a
fundamental problem for a range of industries, including the airlines,"
said Richard S. Braddock, priceline.com's chairman and CEO. "Priceline.com
does something that no single company, no matter how large, can do - we
collect demand and then let multiple sellers see and selectively fill that
demand in ways that complement, but never harm their retail prices. Our
success in the airline industry reveals the strength of the priceline.com
business model to incrementally grow sales and revenues for all of our
partners simultaneously, including companies that are direct competitors.
Now, other companies such as the Ford Motor Company are leveraging
priceline.com in their industries as our system demonstrates its horizontal
scalability. We expect that the airline business is only the first in a
long line of industries to benefit from broad utilization of the
priceline.com system." Braddock continued, "The key business metrics for
priceline.com and its airline service are very strong. On average, our
airline service sells over 50,000 airline tickets a week, or one ticket
every three seconds during peak times. This strong market response to our
airline service has helped priceline.com build a base of over 3,000,000
unique customers. Now, priceline.com's airline service will have almost
double the capacity to fill our customer's ticket requests. Our new airline
partners will allow us to expand service to 142 new cities and add over
37,000 new city-pairs. This added capacity should give our customers an
even better chance of getting their price on most routes when they name
their price through priceline.com." Concluded Braddock, "We view this
addition of three major domestic airlines as an extremely strong
endorsement of the value of priceline.com's system to our airline partners,
both as an incremental revenue producer and a long-term strategic equity
asset. The Internet will continue to be the travel industry's most
competitive sector, but priceline.com has clearly carved out a unique
franchise for itself and is now in a position to serve the entire airline
industry."
Priceline.com has been able to rapidly build its customer base, sales and
brand because it offers a product that is clearly different from other
ticket selling services. Today, leisure airline tickets are sold in one of
three ways: published fares (which are offered through travel agents and
airlines Web sites), off-tariff fares (which are lower than published fares
and are offered through consolidators both on and off the Internet), and
the special fares available exclusively through priceline.com on a
name-your-price basis.
Priceline.com customers can get these fares because they agree to be
flexible in their travel plans and let the airlines select flights with
empty seats. Airlines use priceline.com's name-your-price system as an
effective complement to their other distribution channels because
priceline.com allows them to sell empty seats within a shorter booking
window without affecting their retail prices or other distribution
channels.
Now that all of the major full-service airlines are in priceline.com's
airline service, priceline.com also said today that it has restructured its
warrant agreements with the airlines to give all participating domestic
carriers equity positions in closer relationship to their market share.
To create a level playing field for all of its domestic carriers,
priceline.com has issued warrants to its domestic carriers for a total of
20.0 million shares of priceline.com common stock at an average exercise
price of $56 a share, representing approximately 10% of the fully diluted
common stock of priceline.com, but will result in a smaller amount of
dilution when shares outstanding are accounted for on the treasury stock
method. For example, if the market price of priceline.com's common stock
were $120 per share, priceline.com's weighted average shares outstanding
on a fully diluted basis would be increased by approximately 11 million
shares (or 5%) under the treasury stock method.
As required by GAAP accounting regulations, priceline.com said it expects
to record a one-time, non-cash charge of approximately $1.1 billion in the
fourth quarter of 1999 to reflect the accounting cost of the new airline
warrants. (A more detailed description of priceline.com's participating
airline warrants is included below).
Delta Air Lines has agreed to restructure its existing priceline.com equity
position to facilitate the entrance of United, American and US Air to the
priceline program. On November 16, 1999, Delta also sold 2,085,767 shares
of priceline common stock to priceline's founder and Vice Chairman Jay S.
Walker and Chairman and CEO Richard Braddock for an aggregate purchase
price of $125 million. Delta has agreed to exchange 6.0 million shares of
priceline common stock for 6.0 million shares of newly issued convertible
preferred stock that may be converted into priceline.com stock on a
one-for-one basis and will then hold approximately 8.5 million shares of
priceline common stock. In addition, Delta will receive new warrants to
acquire 5.5 million shares of priceline common stock at an exercise price
equal to last Friday's closing price of priceline shares. Said Walker, "The
dramatic growth of priceline.com in just 18 months demonstrates the power
of the Internet to create powerful, new, rapidly scaling businesses
requiring no investment in inventories, warehouses or staffs of thousands.
Today's announcement clearly positions priceline.com to serve the travel
market on a much larger scale. But the airline industry is just the
beginning for priceline.com's horizontal, highly scalable business model.
That is why we have taken this opportunity to make a substantial additional
investment in the future of priceline.com by purchasing in excess of $125
million worth of priceline.com shares." Concluded Braddock, "Priceline.com
will add significantly to its travel services company with double the
capacity and a partner base that includes all of the major full-service
domestic airlines representing almost 90% of the total U.S. market share.
As our competitive position in the travel industry generates more
customers, we will be able to leverage cross-sales synergy by showing these
customers the many different name-your-price opportunities priceline.com
has for them. Today's news is a win for consumers, for priceline.com
shareholders, for our airline partners and for our business."
Priceline.com Warrant Agreements
On November 12, 1999, Delta Air Lines exercised its warrant to acquire 16.8
million shares of priceline.com common stock which it received in August
1998 for becoming priceline.com's lead airline partner. Net of the exercise
price, Delta received 16,525,834 million shares of priceline.com common
stock upon exercise of the warrant.
In connection with American, United and US Airways joining the
priceline.com service, Delta Air Lines has agreed to exchange 6 million
shares of priceline.com common stock for 6 million shares of newly issued
convertible preferred stock of priceline.com that may be converted into
priceline.com common stock on a one-for-one basis.
The 6 million shares of convertible preferred stock being issued to Delta
Air Lines will bear pay-in-kind dividends at a rate of 8% per annum and
will be callable at par value of $59.93 per share at priceline.com's option
after three years. Shares of convertible preferred stock are convertible
into shares of priceline.com common stock on a one-for-one basis at any
time prior to redemption. The convertible preferred stock is subject to
mandatory redemption on the 10th anniversary of the date of issuance.
On November 16, 1999, Delta sold 2,085,767 shares of priceline common stock
to priceline's founder and Vice Chairman Jay S. Walker and Chairman and CEO
Richard Braddock for an aggregate purchase price of $125 million.
At priceline.com's request, priceline.com's lead underwriter released Delta
from its lockup agreement signed on August 7, 1999 to facilitate this sale
and also released Delta from its lock-up agreement with respect to the
additional 8,440,067 shares of priceline.com common stock pursuant to Rule
144 should it choose to do so.
Priceline is issuing new warrants to it existing and new domestic airline
participants to give these participants equity positions in closer
relationship to their overall industry market share. American, Delta and
United will each receive warrants to acquire 5.5 million warrants to
purchase priceline.com common stock. US Airways will receive warrants to
acquire 1.5 million shares of priceline.com common stock. Warrants to
acquire an additional 2.0 million shares have been reserved for issuance to
priceline.com's other existing major domestic carriers - Continental,
Northwest, American West and Trans World Airlines.
The average exercise price of the new warrants being issued is $55.95 per
share. The warrants are vested upon grant but are not exercisable for five
years unless the airlines achieve specified levels of sales through
priceline.com or satisfy other conditions. As required by GAAP accounting
regulations, priceline.com said it expects to record a one-time, non-cash
charge of approximately $1.1 billion in the fourth quarter of 1999 to
reflect the accounting cost of the new airline warrants.
The warrants to acquire a total of 20.0 million shares of priceline.com's
common stock represent approximately 10% of the fully diluted common stock
of priceline.com, but will result in a smaller amount of dilution when
shares outstanding are accounted for on the treasury stock method. For
example, if the market price of priceline.com's common stock were $120 per
share, priceline.com's weighted average shares outstanding on a fully
diluted basis would be increased by approximately 11 million shares (or 5%)
under the treasury stock method.
About priceline.com
Priceline.com is the patented Internet pricing system that enables
consumers to achieve significant savings by naming their own price for
goods and services. Priceline.com takes consumer offers and then presents
them to sellers who can fill as much of that guaranteed demand as they wish
at price points determined by buyers. Priceline.com's "virtual"
business model allows for rapid scaling using the Internet. Because the
Company electronically collects consumer demand, it can fill this demand
directly with sellers or by using proprietary databases. Priceline.com does
not maintain or warehouse inventories in any of its product lines.
Priceline.com is currently selling multiple services to its sellers across
three distinct product categories: a travel service that offers leisure
airline tickets and hotel rooms, a personal finance service that offers
home mortgages, refinancing and home equity loans, and an automotive
service that offers new cars in nine states. Recently, priceline.com
announced that it would also offer a name-your-own-price service for rental
cars and long distance calling.
Priceline.com also licensed its business model to a privately owned
company, Priceline WebHouse Club, which offers name-your-own-price retail
goods, beginning with groceries in the New York metro area. In return for
the WebHouse Club license, priceline.com has received warrants allowing it
to purchase a majority equity stake in the WebHouse Club under certain
contingent conditions. Prior to the exercise of this warrant, the results
of WebHouse Club operations will not be included in priceline.com's
financial statements.
Priceline.com is one of the best-known Internet brands in America. Opinion
Research polls rank priceline.com as the no. 2 most-recognized e-commerce
company behind amazon.com, with awareness among more than 100 million U.S.
adults. Priceline.com was also the no.1 most-recognized Internet travel
service ahead of Travelocity (no.12), Cheap Tickets (no.13), Preview Travel
(no.15) and Expedia (no.16). Another Opinion Research poll found that
Internet shoppers rated priceline.com as the best place to save money on
"big ticket" purchases over $100.
In separate surveys, priceline.com customers also pointed to the savings
they achieved through the service. For example, this holiday season,
priceline.com customers said they were able to name their price and save
26% to 60% on airline tickets. Hotel customers said they have been able to
achieve similar savings.
This press release may contain forward-looking statements which are made
pursuant to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. Expressions of future goals and similar expressions
including, without limitation, "may," "will," "believes," "should,"
"could," "hope," "expects," "expected," "does not currently expect, "
"anticipates," "predicts," "potential," and "forecast," reflecting
something other than historical fact are intended to identify
forward-looking statements, but are not the exclusive means of identifying
such statements. These forward-looking statements involve a number of risks
and uncertainties, including the timely development and market acceptance
of products and technologies and other factors described in the Company's
filing with the Securities and Exchange Commission. The actual results may
differ materially from any forward-looking statements due to such risks and
uncertainties. The Company undertakes no obligation to revise or update any
forward-looking statements in order to reflect events or circumstances that
may arise after the date of this release.
CONTACT:Brian Ek at priceline.com
1-203-705-3026 ([email protected])
Mike Darcy at priceline.com
1-203-705-3331 ([email protected])
OR
Karen Rappaport at Connors Communications
1-212-807-7500 ([email protected])
