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How State Taxes Put a Bigger Pinch on the Poor
In this day of record-high fuel costs and erratic airline fares, it's important to have a reliable travel agent. For some, it's the online wonder of Priceline.com (NASDAQ: PCLN), which offers traditional online-travel aids as well as a name-your-own-price service. Which, by the way, never works for me. I guess no one wants to accept $150 for a weekend trip from St. Louis to Seattle.
Anyway, Priceline has benefited from the nation's needy travelers, as evidenced by its third-quarter profit figures, released after the close on Thursday. The firm said third-quarter net income reached $104.4 million, or $2.27 per share, up dramatically from year-ago results of $47.8 million, or $1.05 per share. Excluding items, PCLN banked $1.58 per share, 30 cents above the $1.28 expected on Wall Street.
Revenue rose 33% during the 3-month reporting period to $417.3 million. This was 7.7% higher than analysts' consensus target of $387.5 million.
PCLN officials credited the building profit to success at the Booking.com site (the firm's European brand), as well as domestic growth. In after-hours action, PCLN is showing a gain of 12.85 points, or more than 15%. A move of this magnitude in regular trading on Friday would lift the stock to a new 52-week high and put it a chip-shot away from the psychologically important 100 level.
Beth Gaston Moon is an analyst at Schaeffer's Investment Research.
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Reader Comments (Page 1 of 1)
11-09-2007 @ 4:21PM
rexki said...
Just went over the last quarterly and the previous annual SEC filings:
Very alarming legal stuff in there!! Not a lawyer, but have accounting and auditing background.
Appears they do not pay for the hotel occupancy tax (12-21%) for the amount the customer pays for the room, only on their cost of goods sold side do they calculate occupancy tax and remit to proper taxing authorities.
They have not provided an amount on the balance sheet yet that I can find. They have not put any estimates of the contingency anywhere that I can find: A Competitor web site has!! - TravelWeb
My 2 hour overview research appears as follows:
Average quarterly revenue 250 million less COGS of 150 leaves approx 100 million of "marginal revenue that would be exposed to unpaid occupancy tax.
This has been reported in law suits starting in early 2006. Not sure how far they (tax authorities) could go back in time to collect their money!! City of L.A is going back to 1999 in their law suit. (14% occupancy on top of a sales tax rate of 10-14%).
1999 is the legal start date of the new PriceLine after they stopped the gasoline deal that was pretty cool.
Atlanta and Philly are at 7% occupancy rate.
If it were 5 years the company is looking at 100,000 (million) * 17% (guessed average) times 4 quarters times 5 years or $340,000 million dollar contingency. Playing conservative on the audit side here!
This represents 80% of Cash in the bank per 6/30/2007 balance sheet and 37% of total assets and liabilities.
On the Income statement this represent 9 quarters of net income.
Not sure where the auditors and the analyst are on this one? - either both on the same golf course or ringing the register at the expense of their very valuable public reputation that Arthur Anderson mis calculated.
Thought I might have a bull market protection in this one but will pass!!! Good Luck that the bomb does not explode on this one!
City of Atlanta has a good description for layman of why they sued. It comes down to the local jurisdiction's seeing revenues drying up and thus having to tax the local property owners to cover the shortfalls that the hotels are not paying historically as much.
These "discovery phases" may be the true barometer of these cases. They (PCLN) would not be doing discovery unless there were compelling reasons being reinforced by case law and judges asking for it.
Saddens me that they have no contingency number on their financial at ALL!! - Worst there are no updates disclosed to the SEC that exist in 2007, which are being reported by other public companies SEC filings that are listed in the exact same lawsuit (example Orbitz). What are we hiding since the Chicago v Hotels.com No. 2005 L051003 May 10, 2007 status update hearing?
If collusion is found among ITSA (Interactive Travel Services Association) members, the defendants in the case, then a class action case may be certified and ensue and the tables will be turned and investors like us will get nailed. Doing your homework will not protect you on this one from ignorance.
The local towns around Chicago rely heavily on Hotel taxes to abate and balance private property taxes from me.