OpenTable Closing 8-K/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 24, 2014

The Priceline Group Inc.

(Exact name of registrant as specified in its charter)



Delaware	0-25581	06-1528493
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)



800 Connecticut Avenue, Norwalk, Connecticut		06854
(Address of principal office)		(zip code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4c under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01. Completion of Acquisition or Disposition of Assets.

On July 24, 2014, The Priceline Group Inc., a Delaware corporation (“The Priceline Group”), OpenTable, Inc., a Delaware corporation (“OpenTable”), and Rhombus, Inc., a Delaware corporation and wholly owned subsidiary of The Priceline Group (“Rhombus”), consummated the merger contemplated by the Agreement and Plan of Merger by and among The Priceline Group, OpenTable, and Rhombus, dated as of June 12, 2014 (the “Merger”). The completion of the Merger was previously reported in The Priceline Group's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on July 24, 2014 (the “Initial Report”).

This Current Report on Form 8-K/A amends Item 9.01 of the Initial Report to provide certain financial statements of OpenTable and certain unaudited pro forma financial information required under Item 9.01, which were excluded from the Initial Report in reliance on Items 9.01(a)(4) and 9.01(b)(2) of Form 8-K.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

The following financial statements are filed as Exhibit 99.2 to this Form 8-K/A and are incorporated herein by reference:


i.	Audited consolidated financial statements of OpenTable, Inc. as of and for the year ended December 31, 2013; and


ii.	Unaudited interim consolidated financial statements of OpenTable, Inc. as of and for the six months ended June 30, 2014.

(b) Pro Forma Financial Information.

The unaudited pro forma condensed consolidated financial statements as of and for the six months ended June 30, 2014 and for the year ended December 31, 2013 are filed as Exhibit 99.3 to this Form 8-K/A and are incorporated herein by reference.

(d) Exhibits.

Exhibit No. Description


2.1	Agreement and Plan of Merger, dated as of June 12, 2014, by and among OpenTable, Inc., The Priceline Group Inc. and Rhombus, Inc. (filed as exhibit 2.1 to the Current Report on Form 8-K filed on June 13, 2014 and incorporated herein by reference).


23.1	Consent of Deloitte & Touche LLP relating to OpenTable, Inc.'s financial statements.


99.1	Joint Press Release, dated July 24, 2014, of The Priceline Group Inc. and OpenTable, Inc. announcing the closing of the merger (filed as exhibit 99.1 to the Current Report on Form 8-K filed on July 24, 2014 and incorporated herein by reference).


99.2	Audited consolidated financial statements of OpenTable, Inc. as of and for the year ended December 31, 2013 and unaudited interim consolidated financial statements of OpenTable, Inc. as of and for the six months ended June 30, 2014.


99.3	Unaudited pro forma combined financial statements as of and for the six months ended June 30, 2014 and for the year ended December 31, 2013.

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.



THE PRICELINE GROUP INC.


By:	/s/ Daniel J. Finnegan
	Name:	Daniel J. Finnegan
	Title:	Chief Financial Officer

Date: October 7, 2014

iii

EXHIBIT INDEX

Exhibit No. Description


2.1	Agreement and Plan of Merger, dated as of June 12, 2014, by and among OpenTable, Inc., The Priceline Group Inc. and Rhombus, Inc. (filed as exhibit 2.1 to the Current Report on Form 8-K filed on June 13, 2014 and incorporated herein by reference).


23.1	Consent of Deloitte &Touche LLP relating to OpenTable, Inc.'s financial statements.


99.1	Joint Press Release, dated July 24, 2014, of The Priceline Group Inc. and OpenTable, Inc. announcing the closing of the merger (filed as exhibit 99.1 to the Current Report on Form 8-K filed on July 24, 2014 and incorporated herein by reference).


99.2	Audited consolidated financial statements of OpenTable, Inc. as of and for the year ended December 31, 2013 and unaudited interim consolidated financial statements of OpenTable, Inc. as of and for the six months ended June 30, 2014.


99.3	Unaudited pro forma combined financial statements for the year ended December 31, 2013 and as of and for the six months ended June 30, 2014.

Exhibit 23.1 OT

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-151413, 333-122414, 333-65034, 333-55578, 333-83233, 333-188733, 333-189145, 333-196756, and 333-197639) and in the Registration Statement on Form S-3 (No. 333-198515) of The Priceline Group Inc. of our report dated February 21, 2014 relating to the consolidated financial statements of OpenTable, Inc. and subsidiaries, appearing in the Amendment No. 1 to the Current Report on Form 8-K of The Priceline Group Inc. dated October 7, 2014.

/s/ DELOITTE & TOUCHE LLP

San Francisco, California

October 7, 2014

Exhibit 99.2 OT

Exhibit 99.2

The following pages provide the Consolidated Audited Balance Sheets as of December 31, 2013 and 2012, the Consolidated Audited Income Statements, Statements of Comprehensive Income, Statements of Stockholders' Equity and Statements of Cash Flows for the years ended December 2013, 2012, and 2011, and the related notes, as filed by OpenTable, Inc. with the Securities and Exchange Commission on their 2013 Annual Report on Form 10-K on February 21, 2014.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

OpenTable, Inc.

San Francisco, California

We have audited the accompanying consolidated balance sheets of OpenTable, Inc. and subsidiaries (collectively the "Company") as of December 31, 2013 and 2012, and the related consolidated income statements, statements of stockholders' equity, statements of comprehensive income, and of cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

San Francisco, California

February 21, 2014

OPENTABLE, INC.

CONSOLIDATED BALANCE SHEETS



	December 31,
	2013			2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	100,283,000		$	102,772,000
Short-term investments	14,263,000			733,000
Accounts receivable, net of allowance for doubtful accounts of $1,532,000, and $1,551,000 at December 31, 2013 and 2012	25,359,000			22,015,000
Prepaid expenses and other current assets	4,659,000			2,924,000
Deferred tax asset	17,861,000			14,353,000
Total current assets	162,425,000			142,797,000
Property, equipment and software, net	30,972,000			21,271,000
Goodwill	79,271,000			46,304,000
Intangible assets	23,376,000			15,226,000
Deferred tax asset	14,092,000			10,628,000
Other assets	835,000			1,021,000
TOTAL ASSETS	$	310,971,000		$	237,247,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	5,156,000		$	2,985,000
Accrued expenses	8,676,000			10,862,000
Accrued compensation	4,692,000			5,167,000
Deferred revenue	1,556,000			1,563,000
Deferred tax liabilities	—			107,000
Dining rewards payable	37,509,000			27,611,000
Total current liabilities	57,589,000			48,295,000
Deferred revenue—non-current	1,894,000			2,054,000
Deferred tax liabilities	2,508,000			3,268,000
Income tax liabilities	15,597,000			15,639,000
Other long-term liabilities	3,121,000			76,000
Total liabilities	80,709,000			69,332,000
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY:
Common stock, $0.0001 par value—100,000,000 shares authorized; 25,300,522 and 24,419,627 shares issued, 23,376,047 and 22,898,107 shares outstanding at December 31, 2013 and 2012	3,000			2,000
Additional paid-in capital	263,697,000			211,408,000
Treasury stock, at cost (1,924,475 and 1,521,520 shares at December 31, 2013 and 2012)	(74,247,000		)	(50,685,000		)
Accumulated other comprehensive income	1,095,000			861,000
Retained earnings	39,714,000			6,329,000
Total stockholders' equity	230,262,000			167,915,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	310,971,000		$	237,247,000

See notes to consolidated financial statements.

OPENTABLE, INC.

CONSOLIDATED INCOME STATEMENTS



	Year Ended December 31,
	2013			2012		2011
REVENUES	$	190,050,000		$	161,632,000	$	139,518,000
COSTS AND EXPENSES:
Operations and support	48,185,000			41,908,000		39,350,000
Sales and marketing	41,926,000			34,531,000		28,697,000
Technology	20,089,000			14,564,000		14,691,000
General and administrative	33,421,000			34,080,000		24,157,000
Total costs and expenses	143,621,000			125,083,000		106,895,000
Income from operations	46,429,000			36,549,000		32,623,000
Other income, net	(10,000		)	99,000		98,000
Income before taxes	46,419,000			36,648,000		32,721,000
Income tax expense	13,034,000			12,676,000		11,167,000
NET INCOME	$	33,385,000		$	23,972,000	$	21,554,000
Net income per share (Note 2):
Basic	$	1.45		$	1.06	$	0.92
Diluted	$	1.39		$	1.03	$	0.88
Weighted average shares outstanding:
Basic	23,042,000			22,639,000		23,525,000
Diluted	23,974,000			23,249,000		24,436,000

See notes to consolidated financial statements.

OPENTABLE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Year Ended December 31,
	2013		2012			2011
Net Income	$	33,385,000	$	23,972,000		$	21,554,000
Foreign currency translation gain (loss)	234,000		2,498,000			(331,000		)
Unrealized gain (loss) on investments	—		(3,000		)	2,000
Other comprehensive gain (loss)	234,000		2,495,000			(329,000		)
COMPREHENSIVE INCOME	$	33,619,000	$	26,467,000		$	21,225,000

See notes to consolidated financial statements.

OPENTABLE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



	Common Stock						Treasury Stock				Accumulated Other Comprehensive Income/(Loss)			Retained Earnings
					Additional Paid-in Capital
	Shares		Amount				Shares	Amount									Total
Balance at January 1, 2011	23,297,518		$	2,000	$	143,292,000	210,247	$	(647,000	)	$	(1,305,000	)	$	(39,197,000	)	$	102,145,000
Issuance of common stock upon exercise of employee stock options	501,639				5,981,000												5,981,000
Tax benefit from disqualifying dispositions					11,098,000												11,098,000
Share repurchase program	(1,089,300	)					1,089,300	(41,316,000		)							(41,316,000		)
Stock-based compensation expense					11,094,000												11,094,000
Other comprehensive gain (loss)											(329,000		)				(329,000		)
Net income														21,554,000			21,554,000
Balance at December 31, 2011	22,709,857		2,000		171,465,000		1,299,547	(41,963,000		)	(1,634,000		)	(17,643,000		)	110,227,000
Issuance of common stock upon exercise of employee stock options	410,223				7,014,000												7,014,000
Tax benefit from disqualifying dispositions					11,448,000												11,448,000
Share repurchase program	(221,973	)					221,973	(8,722,000		)							(8,722,000		)
Stock-based compensation expense					21,481,000												21,481,000
Other comprehensive gain (loss)											2,495,000						2,495,000
Net income														23,972,000			23,972,000
Balance at December 31, 2012	22,898,107		2,000		211,408,000		1,521,520	(50,685,000		)	861,000			6,329,000			167,915,000
Issuance of common stock upon exercise of employee stock options	758,986		1,000		19,076,000												19,077,000
Issuance of common stock in connection with acquisition	121,909				8,224,000												8,224,000
Tax benefit from disqualifying dispositions					6,764,000												6,764,000
Share repurchase program	(402,955	)					402,955	(23,562,000		)							(23,562,000		)
Stock-based compensation expense					18,225,000												18,225,000
Other comprehensive gain (loss)											234,000						234,000
Net income														33,385,000			33,385,000
Balance at December 31, 2013	23,376,047		$	3,000	$	263,697,000	1,924,475	$	(74,247,000	)	$	1,095,000		$	39,714,000		$	230,262,000

See notes to consolidated financial statements.

OPENTABLE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



	Year Ended December 31,
	2013			2012			2011
OPERATING ACTIVITIES:
Net income	$	33,385,000		$	23,972,000		$	21,554,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	12,361,000			9,110,000			8,047,000
Amortization of intangibles	4,847,000			3,638,000			3,958,000
Provision for doubtful accounts	2,627,000			2,666,000			2,113,000
Stock-based compensation	16,787,000			20,646,000			10,729,000
Write-off of property, equipment and software	631,000			378,000			972,000
Deferred taxes	(7,055,000		)	(8,106,000		)	(3,284,000		)
Excess tax benefit related to stock-based compensation	(6,764,000		)	(11,448,000		)	(11,098,000		)
Change in contingent liability	—			(21,000		)	(1,392,000		)
Changes in operating assets and liabilities (net of effect of acquisitions):
Accounts receivable	(8,024,000		)	(5,774,000		)	(7,657,000		)
Prepaid expenses and other current assets	(2,425,000		)	(386,000		)	(51,000		)
Accounts payable and accrued expenses	8,348,000			18,023,000			10,304,000
Accrued compensation	(481,000		)	655,000			312,000
Deferred revenue	(134,000		)	(393,000		)	(639,000		)
Long-term liabilities	2,042,000			1,535,000			2,779,000
Dining rewards payable	9,864,000			6,774,000			5,424,000
Net cash provided by operating activities	66,009,000			61,269,000			42,071,000
INVESTING ACTIVITIES:
Purchases of property, equipment and software	(20,753,000		)	(13,438,000		)	(9,584,000		)
Purchases of investments	(17,879,000		)	(10,315,000		)	(31,959,000		)
Sales of investments	—			17,317,000			10,011,000
Maturities of investments	4,126,000			5,595,000			17,425,000
Acquisition of businesses, net of cash acquired	(35,594,000		)	(4,000,000		)	—
Change in restricted cash	—			—			176,000
Net cash used in investing activities	(70,100,000		)	(4,841,000		)	(13,931,000		)
FINANCING ACTIVITIES:
Excess tax benefit related to stock-based compensation	6,764,000			11,448,000			11,098,000
Proceeds from issuance of common stock upon exercise of employee stock options	19,076,000			7,014,000			5,437,000
Repurchases of common stock	(23,562,000		)	(8,722,000		)	(41,316,000		)
Net cash provided by (used in) financing activities	2,278,000			9,740,000			(24,781,000		)
EFFECT OF EXCHANGE RATES ON CASH	(676,000		)	85,000			(284,000		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(2,489,000		)	66,253,000			3,075,000
CASH AND CASH EQUIVALENTS—Beginning of year	102,772,000			36,519,000			33,444,000
CASH AND CASH EQUIVALENTS—End of year	$	100,283,000		$	102,772,000		$	36,519,000
SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW INFORMATION:
Cash paid for income taxes	$	23,200,000		$	1,333,000		$	611,000
Cash paid for interest expense	$	103,000		$	—		$	—
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING ACTIVITIES:
Contingent liability recorded in other long-term liabilities	$	—		$	—		$	21,000
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Purchase of property and equipment recorded in accounts payable	$	1,667,000		$	1,146,000		$	958,000
Issuance of common stock in connection with acquisition of a business	$	8,224,000		$	—		$	—
Vesting of early exercised stock options	$	—		$	1,000		$	544,000

See notes to consolidated financial statements.

OPENTABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

1. Organization and Description of Business

OpenTable, Inc. (together with its subsidiaries, "OpenTable" or the "Company"), was incorporated on October 13, 1998, and is a Delaware corporation. The Company provides solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. For restaurant customers, the Company provides a proprietary Electronic Reservation Book ("ERB"), and Connect. The ERB combines proprietary software and computer hardware to deliver a solution that computerizes restaurant host-stand operations and replaces traditional pen-and-paper reservation books. The ERB streamlines and enhances a number of business-critical functions and processes for restaurants, including reservation management, table management, guest recognition and email marketing. For restaurants that do not require the operational benefits of the ERB, OpenTable offers Connect, a web-based solution that enables participating restaurants to receive reservations from OpenTable's websites and mobile applications ("apps") as well as the websites and mobile apps of OpenTable's partners and restaurant customers. For diners, the Company operates popular restaurant reservation websites and mobile apps. OpenTable's websites and mobile apps enable diners to find, choose and book tables at restaurants on the OpenTable network, overcoming the inefficiencies associated with the traditional process of reserving by phone.

Certain Significant Risks and Uncertainties

The Company operates in a dynamic industry, and accordingly, can be affected by a variety of factors. For example, management of the Company believes that changes in any of the following areas could have a significant negative effect on the Company in terms of its future financial position, results of operations or cash flows: the ability to maintain an adequate rate of growth; the impact of the current economic climate on its business; the ability to effectively manage its growth; the ability to attract new restaurant customers; the ability to increase the number of visitors to its websites and convert those visitors into diners; and the ability to retain existing restaurant customers and diners and encourage repeat reservations.

2. Summary of Significant Accounting Policies

Principles of Consolidation

These consolidated financial statements include the accounts of OpenTable, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.

Foreign Currency Translation

The Company's operations are conducted in various countries around the world and the financial statements of its foreign subsidiaries are reported in the applicable foreign currencies (functional currencies). Financial information is translated from the applicable functional currency to the U.S. dollar (the reporting currency) for inclusion in the Company's consolidated financial statements. Income, expenses and cash flows are translated at average exchange rates prevailing during the fiscal period, and assets and liabilities are translated at fiscal period-end exchange rates. Resulting translation adjustments are included as a component of accumulated other comprehensive income (loss) in stockholders' equity. Foreign exchange transaction gains and losses are included in Other Income, net in the accompanying consolidated income statements.

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments with original maturities of three months or less at the time of purchase to be cash equivalents. At December 31, 2013 and 2012, cash and cash equivalents consist of cash, money market accounts, certificates of deposit and U.S. government agency securities.

2. Summary of Significant Accounting Policies (Continued)

Short-term Investments

Short-term investments consist mainly of U.S. government agency securities and certificates of deposit. The Company classifies its investments as available-for-sale securities. The Company has classified all available for sale securities with readily available markets as short term, even though the stated maturity may be one year or more beyond the current balance sheet date, because of the intent and ability to sell those securities as necessary, prior to maturity to meet liquidity needs. Available-for-sale securities are carried at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in stockholders' equity. For the twelve month periods ended December 31, 2013, 2012, and 2011, realized and unrealized gains and losses on investments were not material and no impairment charges were recognized. An impairment charge is recorded in the consolidated income statements for declines in fair value below the cost of an individual investment that are deemed to be other than temporary. Management judges whether a decline in value is temporary based on available information, including the length of time that the fair market value has been below cost combined with the severity of the decline.

If a debt security in an unrealized loss position is deemed to be other-than-temporary, the difference between the security's then-current amortized cost basis and fair value is separated into (i) the amount of the impairment related to the credit loss (i.e., the credit loss component) and (ii) the amount of the impairment related to all other factors (i.e., the non-credit loss component). The credit loss component is recognized in earnings. The non-credit loss component would be recognized in accumulated other comprehensive loss.

Fair Value

The Company records its financial assets and liabilities at fair value. The accounting standard for fair value provides a framework for measuring fair value, and defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting standard establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:


•	Level 1—Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis.


•	Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


•	Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term investments and accounts receivable. The Company places its cash and cash equivalents, short-term investments and restricted cash with major financial institutions throughout the world, which management assesses to be of high credit quality, in order to limit the exposure of each investment.

Credit risk with respect to accounts receivable is dispersed due to the large number of customers. In addition, the Company's credit risk is mitigated by the relatively short collection period. Collateral is not required for accounts receivable. The Company maintains an allowance for doubtful accounts receivable balances. The allowance is based upon historical loss patterns, the number of days that billings are past due and an evaluation of the potential risk of loss associated with problem accounts. Accounts receivable written-off against the allowance for doubtful accounts were $2,644,000, $2,430,000 and $2,058,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Property, Equipment and Software, net

Property, equipment and software, net is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is four years for restaurant hardware and three years for all other asset categories except leasehold improvement, which are amortized over the shorter of the lease term or expected useful life of the improvements.

2. Summary of Significant Accounting Policies (Continued)

Goodwill and Intangible Assets

The Company accounts for goodwill and intangible assets in accordance with Accounting Standards Codification ("ASC") Topic 350 Intangibles—Goodwill and Other ("Topic 350"). Goodwill and intangible assets with indefinite lives are not amortized but are tested for impairment on an annual or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Intangible assets with finite useful lives are amortized using the straight-line method over their useful lives and are reviewed for impairment in accordance with Topic 350.

Website and Internal-Use Software Development Costs

Costs related to website and internal-use software development are accounted for in accordance with ASC Topic 350-50—Intangibles—Website Development Costs. Such software is primarily related to the Company's websites and mobile apps, including support systems. The Company begins to capitalize its costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed and the software will be used as intended. Costs incurred prior to meeting these criteria are expensed as incurred and recorded within Technology expenses within the accompanying consolidated income statements. Capitalized costs are amortized on a straight-line basis over the estimated useful life of the related asset, generally estimated between two to three years. Costs incurred for enhancements that are expected to result in additional features or functionality are capitalized and amortized over the estimated useful life of the enhancements, generally between two and three years.

The Company capitalized $11,355,000, $7,253,000 and $3,426,000 (including $1,437,000, $835,000 and $366,000 of capitalized stock-based compensation expense) in website and internal-use software development costs during the years ended December 31, 2013, 2012 and 2011, respectively. Amortization expense totaled $5,535,000, $3,236,000 and $2,555,000 during the fiscal years ended December 31, 2013, 2012 and 2011, respectively. Such costs are recorded in operations and support within the accompanying consolidated income statements.

The Company follows the guidance in ASC Topic 985—Software in accounting for costs incurred in connection with development of the software contained in the ERB used by all restaurant customers. All costs incurred to establish the technological feasibility of a computer product to be sold, leased or otherwise marketed are expensed as incurred. Costs incurred subsequent to establishing technological feasibility and through general product release are capitalized and amortized over the estimated product life. The period between technological feasibility and general product release is generally short and the costs incurred during this stage are not material for the years ended December 31, 2013, 2012 and 2011 and are expensed as incurred in Technology expense.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairments of long-lived assets during the twelve months ended December 31, 2013, 2012 and 2011, respectively. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Revenue Recognition

Subscription revenues are recognized on a straight-line basis during the contractual period over which the service is delivered. Reservation revenues (or per-seated diner fees) are recognized on a transaction-by-transaction basis, as diners are seated by restaurant customers. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenues, depending on whether the revenue recognition criteria have been met. Revenues are shown net of $19,973,000, $15,419,000 and $12,444,000 for the years ended December 31, 2013, 2012 and 2011, respectively, related to redeemable Dining Points issued to diners during the respective periods.

Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

2. Summary of Significant Accounting Policies (Continued)

Dining Point Loyalty Program

The Company provides a points-based loyalty program, "OpenTable Dining Rewards," to registered diners who book and honor reservations through the Company's websites and mobile apps. OpenTable Dining Rewards involves the issuance of "Dining Points" which can be accumulated and redeemed for "Dining Checks." When a diner accumulates a defined minimum number of points, he or she may redeem them for a Dining Check. Diners may present Dining Checks at any OpenTable restaurant and their bill is reduced by the check amount. If a diner does not make a seated reservation within any 12-month period, then his or her account is considered inactive and the accumulated Dining Points for the diner are reset to zero.

The Company recognizes the liability associated with Dining Points as contra-revenue in accordance with ASC Topic 605-50—Revenue Recognition—Customer Payments and Incentives.

The recorded contra-revenue is an estimate of the eventual cash outlay related to the issued Dining Points and is recorded at the time the points are earned by the diner (when the diner is "seated" by the restaurant). The Company estimates the contra-revenue for the issued Dining Points by analyzing the historical patterns of redemption and check-cashing activity.

Technology

In the consolidated income statements, technology expense includes employee compensation associated with the development of new technologies.

Operations and Support

In the consolidated income statements, operations and support expense includes employee compensation associated with the installation, support and maintenance of customers, as well as costs associated with restaurant equipment and connectivity, outsourced call center costs, referral payments and shipping costs associated with restaurant equipment. Operations and Support expenses also include amortization of intangibles, resulting from various acquisitions, and capitalized website and internal-use software development costs.

Advertising Expense

Advertising costs are expensed when incurred and are included in sales and marketing expense in the accompanying consolidated income statements. Advertising costs include online and offline marketing costs such as print media, e-mail marketing, pay per click, market research, printing, public relations and tradeshow expenses. The Company incurred $9,836,000, $2,910,000 and $3,578,000 of advertising costs during the fiscal years ended December 31, 2013, 2012 and 2011, respectively.

Stock-Based Compensation

The Company measures stock based awards at fair value and recognizes compensation expense for all share-based payment awards made to its employees and directors, including employee stock options and restricted stock units in accordance with ASC Topic 718 ("Topic 718")-Stock Compensation.

The Company estimates the fair value of stock options granted using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of its common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized using a graded vesting attribution method over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in the consolidated income statements.

The cost of restricted stock units is determined using the fair value of the Company's common stock on the date of grant. Stock-based compensation expense is recognized using a graded vesting attribution method over the vesting period.

2. Summary of Significant Accounting Policies (Continued)

Net Income Per Share

The Company calculates net income per share in accordance with ASC Topic 260—Earnings per Share.

Non-vested performance-based awards are included in the diluted shares outstanding each period if established performance criteria have been met at the end of the respective periods. 97,600 shares were excluded from the dilutive shares outstanding for each of the years ended December 31, 2013, 2012 and 2011, respectively, as the performance criteria had not been met as of the respective dates. In June 2013, all remaining non-vested performance-based awards were cancelled. As such, no shares were included in the dilutive shares outstanding for the twelve months ended December 31, 2013.

Anti-dilutive shares in the amounts of 176,000, 1,482,000 and 150,000 were excluded from the dilutive shares outstanding for the years ended December 31, 2013, 2012 and 2011, respectively.

The following table sets forth the computation of basic and diluted net income per share for the periods indicated:



	Year Ended December 31,
	2013		2012		2011
Basic net income per common share calculation:
Net income	$	33,385,000	$	23,972,000	$	21,554,000
Basic weighted average common shares outstanding	23,042,000		22,639,000		23,525,000
Basic net income per share	$	1.45	$	1.06	$	0.92

Diluted net income per common share calculation:
Net income	$	33,385,000	$	23,972,000	$	21,554,000
Weighted average shares used to compute basic net
income per share	23,042,000		22,639,000		23,525,000
Effect of potentially dilutive securities:
Unvested common shares subject to repurchase	—		—		14,000
Employee stock options	790,000		543,000		885,000
Employee stock awards	142,000		67,000		12,000
Weighted average shares used to compute diluted net
income per share	23,974,000		23,249,000		24,436,000
Diluted net income per share	$	1.39	$	1.03	$	0.88

Comprehensive Income

In accordance with ASC Topic 220—Comprehensive Income, the Company reports by major components and as a single total, the change in its net assets during the period from non-owner sources. Comprehensive income consists of net income and accumulated other comprehensive income (loss), which includes certain changes in equity that are excluded from net income. Specifically, it includes cumulative foreign currency translation and the unrealized gain (loss) from investments.

Accumulated other comprehensive income of $1,095,000 and $861,000, as of December 31, 2013 and 2012, respectively, was comprised entirely of foreign currency translation gain.

2. Summary of Significant Accounting Policies (Continued)

Income Taxes

The Company records income taxes using the asset and liability method of accounting for income taxes in accordance with ASC Topic 740—Income Taxes ("Topic 740"). Under this method, income tax expense or benefit is recognized for the amount of taxes payable or refundable for the current year and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns. The Company accounts for any income tax contingencies in accordance with Topic 740. The measurement of current and deferred tax assets and liabilities is based on provisions of currently enacted tax laws. The effects of any future changes in tax laws or rates have not been considered.

For the preparation of the Company's consolidated financial statements included herein, the Company estimates its income taxes and tax contingencies in each of the tax jurisdictions in which they operate prior to the completion and filing of its tax returns. This process involves estimating actual current tax expense together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in net deferred tax assets and liabilities. The Company must then assess the likelihood that the deferred tax assets will be realizable, and to the extent they believe that realizability is not likely, the Company must establish a valuation allowance. In assessing the need for any additional valuation allowance, the Company considers all the evidence available to us, both positive and negative, including historical levels of income, legislative developments, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies.

As of December 31, 2013, it was considered "more likely than not" that the Company's deferred tax assets would be realized, with the exception of certain foreign tax credit carryforwards and certain foreign net operating losses which did not meet the "more likely than not" realizability threshold. A valuation allowance of approximately $0.9 million as of December 31, 2013 will result in an income tax benefit if and when the Company concludes that it is more likely than not that the related deferred tax assets will be realized.

Recently Issued Accounting Standards

As of December 31, 2013, the Company believes that there are no recently issued accounting pronouncements not yet effective that will have an impact on the Company's consolidated financial statements.

3. Acquisitions

Acquisition of Treat Technologies

In August 2012, the Company acquired Treat Technologies, Inc. ("Treat"), a provider of the Treatful-branded online gift card solutions for restaurants, for a purchase price of approximately $4,000,000 in cash. The Company recorded $2,253,000 of goodwill and $1,800,000 of identifiable intangible assets in connection with the acquisition which was accounted for as a business combination. The Company has included the effects of the transaction within the results of operations prospectively from August 3, 2012, the date of acquisition. Pro forma financial information for this business combination has not been presented, as the effects were not material to the Company's historical consolidated financial statements.

Acquisition of Foodspotting

In February 2013, the Company acquired all of the outstanding shares of capital stock of Foodspotting, Inc., a provider of a mobile app for finding and sharing photos of food, for a purchase price of $10,100,000 in cash. The Company recorded $6,227,000 of goodwill and $4,300,000 of developed technology which is being amortized over two years. The Company has included the effects of the transaction within the results of operations prospectively from February 6, 2013, the date of acquisition. Pro forma financial information for this business combination has not been presented, as the effects were not material to the Company’s historical consolidated financial statements.

Acquisition of JustChalo

In June 2013, the Company acquired JustChalo Inc., a mobile technology company, for a purchase price of $11,000,000, of which $2,300,000 was paid in cash and the remainder through the issuance of 121,909 shares of common stock and an option to purchase 6,478 shares of common stock. The Company recorded $9,644,000 of goodwill and $1,200,000 of developed technology which is being amortized over two years. The Company has included the effects of the transaction within the results of operations prospectively from June 10, 2013, the date of acquisition. Pro forma financial information for this business combination has not been presented, as the effects were not material to the Company’s historical consolidated financial statements. In January 2014, as part of an escrow claim, 166 shares of common stock were cancelled.

3. Acquisitions (Continued)

Acquisition of Rezbook

In July 2013, the Company acquired certain assets and liabilities of the Rezbook business from Urbanspoon, an operating business of IAC/InterActiveCorp, for $12,000,000 in cash. Rezbook is a reservation management system for restaurants. The Company recorded $7,683,000 of goodwill in connection with this acquisition. Additionally, the Company recorded $3,000,000 in customer relationships and $1,400,000 of developed technology which are being amortized over five and two years, respectively. The Company has included the effects of the transaction within the results of operations prospectively from July 31, 2013, the date of acquisition. Pro forma financial information for this business combination has not been presented, as the effects were not material to the Company’s historical consolidated financial statements.

Acquisition of Quickcue

In December 2013, the Company acquired Quickcue, LLC, a provider of guest management systems for restaurants, for a purchase price of $11,500,000 in cash. The Company recorded $8,623,000 of goodwill and $2,900,000 of developed technology which is being amortized over two years. The Company has included the effects of the transaction within the results of operations prospectively from December 13, 2013, the date of acquisition. Pro forma financial information for this business combination has not been presented, as the effects were not material to the Company’s historical consolidated financial statements.

On a combined basis, the acquisitions in 2013 were considered immaterial, and no additional pro forma financial information is required.

4. Short-Term Investments and Fair Value Measurements

Short-term investments are summarized as follows:



	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Market Value
At December 31, 2013
U.S. government and agency securities	$	11,145,000	$	—	$	—	$	11,145,000
Certificates of deposit	3,118,000		—		—		3,118,000
Total	$	14,263,000	$	—	$	—	$	14,263,000



	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Market Value
At December 31, 2012
Certificates of deposit	$	733,000	—		—		733,000
Total	$	733,000	$	—	$	—	$	733,000

As of December 31, 2013, there were no investments that had maturity dates of greater than one year. As of December 31, 2012, certain investments with a total estimated fair value of $487,000 had original maturity dates of greater than one year but less than five years.

The Company classifies all investments as Level 2 assets.

The Company chose not to elect the fair value option as prescribed by ASC Topic 825—Financial Instruments for its financial assets and liabilities that had not been previously carried at fair value. Therefore, financial assets and liabilities not carried at fair value, such as accounts payable, are still reported at their carrying values.

5. Property, Equipment and Software

Property, equipment and software consists of the following:



	December 31,
	2013			2012
Restaurant hardware	$	22,668,000		$	21,237,000
Computer equipment	6,243,000			5,359,000
Software	4,287,000			3,289,000
Website and internal-use software development costs	21,413,000			11,693,000
Furniture and fixtures	1,028,000			474,000
Leasehold improvements	5,576,000			1,277,000
Total	61,215,000			43,329,000
Accumulated depreciation and amortization	(30,243,000		)	(22,058,000		)
Property, equipment and software, net	$	30,972,000		$	21,271,000

6. Goodwill and Intangible Assets

The following table summarizes the Company's goodwill activity by geographical reporting unit:



	North America		United Kingdom		Consolidated
Balance as of December 31, 2011	$	4,561,000	$	37,751,000	$	42,312,000
Goodwill additions related to acquisitions	2,253,000		—		2,253,000
Foreign exchange rate adjustment	—		1,739,000		1,739,000
Balance as of December 31, 2012	6,814,000		39,490,000		46,304,000
Goodwill additions related to acquisitions	32,177,000		—		32,177,000
Foreign exchange rate adjustment	—		790,000		790,000
Total Goodwill as of December 31, 2013	$	38,991,000	$	40,280,000	$	79,271,000

A summary of intangible assets as of December 31, 2013 and 2012 is as follows:



	December 31, 2013							December 31, 2012
	Gross Carrying Value		Accumulated Amortization			Total		Gross Carrying Value		Accumulated Amortization			Total
Trademarks—finite life	$	132,000	$	(106,000	)	$	26,000	$	132,000	$	(77,000	)	$	55,000
Trademarks—indefinite life	12,540,000		—			12,540,000		12,294,000		—			12,294,000
Customer relationships	12,076,000		(9,140,000		)	2,936,000		8,924,000		(7,164,000		)	1,760,000
Developed technology	12,690,000		(4,816,000		)	7,874,000		2,867,000		(1,750,000		)	1,117,000
Total intangible assets	$	37,438,000	$	(14,062,000	)	$	23,376,000	$	24,217,000	$	(8,991,000	)	$	15,226,000

Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives which range from one to four years. Amortization of intangible assets was $4,847,000, $3,638,000 and $3,958,000 for the years ended December 31, 2013, 2012 and 2011, respectively. Based on the current amount of intangibles subject to amortization, estimated future annual amortization expense is as follows: 2014: $6,146,000; 2015: $3,140,000; 2016: $600,000; 2017: $600,000; 2018:

6. Goodwill and Intangible Assets (Continued)

$350,000. Intangible assets with indefinite lives are not amortized. Instead, they are reviewed for impairment annually, or whenever events or changes in circumstances indicate the carrying amount exceeds its fair value. The Company has defined its annual intangible impairment evaluation date as August 31, 2013 and determined that the carrying amount of the indefinite life intangible assets did not exceed the fair value. Additionally, there was no impairment of indefinite life intangible assets as of December 31, 2013 or 2012.

For the annual impairment analysis, goodwill is evaluated at the reporting unit level. The Company elected to skip the optional step of performing a qualitative review in both 2013 and 2012. Therefore, the evaluation for impairment was performed by comparing the reporting unit's carrying amount of goodwill to the fair value of the reporting unit. If the carrying amount exceeds the reporting unit fair value, then the second step of the impairment test is performed to determine the amount of the impairment loss. The Company has defined its annual goodwill impairment evaluation date as August 31. The Company performed its annual goodwill impairment evaluation as of August 31, 2013 and determined that the carrying amount of goodwill did not exceed the fair value of either reporting units. Additionally, there was no impairment of goodwill as of December 31, 2012 or 2013.

7. Line of Credit

In January 2013, the Company entered into a credit agreement, which provides for a senior secured revolving credit facility of $50,000,000 to fund working capital and other general corporate needs and is available through January 2016. The credit agreement includes an unused line fee, the costs of which are recorded as interest expense. This credit agreement requires the Company to comply with various financial and non-financial covenants and precludes the payment of dividends to stockholders without the permission of the lender, subject to limited exceptions. No amounts were outstanding on this line of credit during the year ended or at December 31, 2013.

8. Commitments and Contingencies

Office Facility Leases

The Company leases its office facilities under operating lease agreements that expire at various dates through 2020. The terms of the lease agreements provide for rental payments on a graduated basis. The Company recognizes rent expense on a straight-line basis over the lease period.

Rental expense, principally for leased office space under operating lease commitments, was $3,056,000, $1,952,000 and $1,877,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Aggregate Future Lease Commitments

The Company's minimum payments under non-cancelable operating leases for office space having initial terms in excess of one year are as follows at December 31, 2013:



	Operating Leases
Year ending December 31:
2014	$	2,326,000
2015	2,052,000
2016	1,995,000
2017	1,987,000
2018	2,004,000
Thereafter	2,741,000
Total minimum lease payments	$	13,105,000

8. Commitments and Contingencies (Continued)

Litigation

The Company is subject to various legal proceedings and claims arising in the ordinary course of business. Although occasional adverse decisions or settlements may occur, management believes that the final disposition of such matters will not have a material adverse effect on the Company's business, financial position, results of operations or cash flows.

9. Stockholders' Equity

Common Stock

At December 2013, there were 100,000,000 shares of common stock authorized, 25,300,522 shares issued and 23,376,047 shares outstanding. Holders of common stock are entitled to dividends if and when declared by the board of directors.

Treasury Stock

In November 2011, the Board of Directors authorized the Company to purchase up to $50,000,000 of its outstanding common stock. For the twelve months ended December 31, 2011, the Company repurchased 1,089,300 shares of common stock for $41.3 million. The Company completed the repurchase program on January 6, 2012, with the purchase of an additional 221,673 shares of common stock for $8.7 million.

In August 2012, the Board of Directors authorized the Company to purchase up to an additional $50,000,000 of its outstanding common stock. Under this repurchase program, 221,973 shares of common stock for $8.7 million were repurchased in the twelve months ended December 31, 2012. For the twelve months ended December 31, 2013, the Company repurchased 402,955 shares of common stock for $23.6 million under this repurchase program.

Common Stock Reserved For Future Issuance

At December 31, 2013, the Company has reserved the following shares of common stock for future issuances in connection with:



Stock options and restricted stock units outstanding	2,424,151
Shares available for future grants	1,362,743
Total	3,786,894

Stock Based Compensation

The Company applies the provisions of ASC Topic 718—Stock Compensation (Topic 718), which requires compensation costs related to share-based transactions, including employee stock options, to be recognized in the financial statements based on fair value.

Under Topic 718, the fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model.

The Company determined weighted average valuation assumptions as follows:

•

Volatility—The computation of expected volatility includes the historical and implied stock volatility of comparable companies from a representative peer group selected based on industry and market capitalization data, which has been weighted. The Company has increased and will continue to increase the weight of its own stock price volatility within the weighted average over time as sufficient trading history of its stock is established, with the intent of relying completely upon its own stock volatility in 2015.


•	Expected term—The expected term was estimated using the simplified method allowed under Topic 718.


•	Risk free rate—The risk free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.

9. Stockholders' Equity (Continued)


•	Forfeiture rate—The Company estimated the forfeiture rate based on its historical experience with forfeitures. The Company reviews the estimated forfeiture rates each period end and makes changes as factors affecting the forfeiture rate calculations and assumptions change.


•	Dividend yield—The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future. Consequently, the Company used an expected dividend yield of zero.

The following summarizes the assumptions relating to the Company's stock options for the years ended December 31, 2013, 2012 and 2011, as required under Topic 718:



	Year Ended December 31,
	2013	2012	2011
Dividend yield	—%	—%	—%
Volatility	47% - 54%	52% - 55%	53% - 55%
Risk free interest rate	1.03% - 1.71%	0.80% - 1.27%	0.79% - 2.67%
Expected term, in years	5.50 - 6.08	5.27 - 6.55	5.00 - 6.08

Under Topic 718, the Company recorded net stock-based compensation expense related to stock options of $12,285,000, $15,981,000 and $8,303,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Excess Tax Benefits

Topic 718 requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow. For the years ended December 31, 2013, 2012 and 2011, the Company recorded $6,764,000, $11,448,000 and $11,098,000, respectively, of excess tax benefits from stock-based compensation.

Stock Option Plans

Under the 2009 Equity Incentive Award Plan (the "2009 Plan"), which the Company adopted in 2009, as of December 31, 2013, there were 1,362,743 shares of common stock reserved for the issuance of restricted stock, restricted stock awards, restricted stock units, stock appreciation rights, performance awards, deferred stock, and options (incentive stock options ("ISOs") or nonstatutory stock options ("NSOs")) to eligible participants. The 2009 Plan provides that on the first day of each fiscal year the number of shares available for issuance shall increase by an amount equal to the lesser of 744,063 shares or 3% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year or a lesser amount as may be determined by the Board of Directors. Pursuant to this provision, in January 2014, the number of shares of common stock authorized for issuance under the 2009 Plan increased by an additional 701,281. Other than in the case of an option grant pursuant to the terms of the JustChalo acquisition agreement, to date, both ISOs and NSOs have been granted at a price per share not less than the fair market value at the date of grant. Options granted typically vest and become fully exercisable over periods ranging from one to four years. Options granted are generally exercisable for up to 10 years. The Company began granting restricted stock units ("RSUs") to its employees in November 2010. RSUs typically vest and become exercisable annually, based on a one to four year total vesting term.

In June 2011, the President and Chief Executive Officer ("CEO") resigned his position as CEO, and agreed to serve as the Executive Chairman of the Board of Directors ("Chairman"). Under the terms of the Company's amended and restated offer letter agreement with this executive in May 2011, a stock option for 214,000 shares, previously granted to this executive in January 2010, was modified, resulting in the cancellation of 171,200 unvested shares. The Company reversed $1.4 million in stock-based compensation expense that had previously been recorded on these shares. The remaining 42,800 shares were revalued as of the modification date and were scheduled to vest ratably over 24 months from the modification date. In December 2011, this same executive resigned his position as Chairman, and agreed to serve only in the capacity as a member of the Board of Directors. Under the terms of a letter agreement with this executive in December 2011, the above stock option grant was modified again, resulting in the cancellation of 32,100 unvested shares and a reversal of $1.2 million in stock-based compensation expense. The remaining 10,700 shares were revalued as of the second modification date, and $0.2 million of stock-based compensation expense was recognized in the fourth quarter of 2011 in conjunction with these shares being fully vested.

9. Stockholders' Equity (Continued)

Under the 1999 Stock Plan, which expired in May 2009, the Company granted 342,574 performance-based stock options to two executives. The first option was granted in November 2005 for 244,974 shares at an exercise price of $1.50 per share. The second option was granted in July 2006 for 97,600 shares at an exercise price of $1.50 per share. The grant-date fair value for the first option was $380,000. The fair value is to be amortized over the period during which management has estimated the performance metrics will be achieved. In the fourth quarter of 2011, the Company concluded that there was no expectation that the balance of the performance metrics would be earned and all previously booked expense on the unvested shares, in the amount of $88,000, was reversed. Additionally, the executive to whom this option was granted ceased working for the Company during the fourth quarter of 2011. As such, all unvested shares were cancelled and returned to the plan. The grant-date fair value for the second option was $255,000. The fair value is to be amortized over the period during which management has estimated the performance metrics will be achieved by. For the second option, there was no stock-based compensation expense recognized in the years ended December 31, 2013, 2012 and 2011, respectively. The executive to whom this option was granted ceased working for the Company during the second quarter of 2013. As such, all unvested shares were cancelled and returned to the plan. As of December 31, 2013, there are no outstanding shares pertaining to either performance-based option grant.

A summary of the Company's stock option activity follows:



	Options Outstanding
	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Outstanding—January 1, 2011	2,433,361		$	20.09
Granted (weighted average fair value of $39.70)	170,932		53.54
Exercised	(491,995	)	11.06
Canceled or expired	(417,164	)	18.62
Outstanding—December 31, 2011	1,695,134		$	26.44
Granted (weighted average fair value of $19.72)	1,511,546		39.44
Exercised	(377,756	)	18.57
Canceled or expired	(29,248	)	51.80
Balance, December 31, 2012	2,799,676		$	34.26
Granted (weighted average fair value of $30.56)	179,068		61.07
Exercised	(689,966	)	27.65
Canceled or expired	(218,155	)	34.74
Balance, December 31, 2013	2,070,623		$	38.72	7.49	$	84,245,000
Available for grant—December 31, 2013	1,362,743
Options vested and expected to vest as of December 31, 2013	2,042,004		$	38.65	7.48	$	83,227,000
Options Exercisable as of December 31, 2013	1,071,545		$	34.57	6.71	$	48,092,000

The Company has computed the aggregate intrinsic value amounts disclosed in the above table based on the difference between the original exercise price of the options and the fair value of the Company's common stock of $79.37 at December 31, 2013. The aggregate intrinsic value of awards exercised during the year ended December 31, 2013, 2012 and 2011 was $35,684,000, $11,421,000 and $13,813,000, respectively.

9. Stockholders' Equity (Continued)

The options outstanding and exercisable as of December 31, 2013 have been segregated into ranges for additional disclosure as follows:



	Options Outstanding				Options Vested and Exercisable
Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.62 - $24.97	408,337	4.97	$	18.16	398,105	$	18.24
$25.89 - $38.95	217,225	8.10	36.92		44,891	33.31
$39.01 - $39.01	992,394	8.01	39.01		405,230	39.01
$39.95 - $65.51	336,314	8.52	51.57		142,263	43.37
$65.95 - $80.70	112,605	7.85	74.43		77,308	77.55
$82.56 - $82.56	3,748	7.50	82.56		3,748	82.56
Total	2,070,623	7.49	$	38.72	1,071,545	$	34.57

As of December 31, 2013, total unrecognized compensation costs, adjusted for estimated forfeitures, related to non-vested stock options was $8,600,000, which is expected to be recognized over the next 0.95 years.

Restricted Stock Units

The Company began granting Restricted Stock Units ("RSUs") to its employees in November 2010. The cost of RSUs is determined using the fair value of the Company's common stock on the date of grant. RSUs typically vest and become exercisable annually, based on a one to four year total vesting term. Stock-based compensation expense is amortized using a graded vesting attribution method over the requisite service period.

Restricted Stock Unit Activity

A summary of the Company's RSU activity is as follows:



	Outstanding
			Weighted Average Remaining Contractual Term (In Years)
	Outstanding Number of Shares		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Outstanding—January 1, 2011	21,210
Granted	178,065
Vested	(9,944	)
Cancelled	(13,177	)
Outstanding—December 31, 2011	176,154
Granted	144,616
Vested	(32,467	)
Cancelled	(31,881	)
Outstanding—December 31, 2012	256,422
Granted	226,181
Vested	(69,020	)
Cancelled	(60,055	)
Outstanding—December 31, 2013	353,528		1.64	$	28,060,000

The Company recorded net stock-based compensation expense related to RSUs of $4,502,000, $4,665,000 and $2,426,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

9. Stockholders' Equity (Continued)

As of December 31, 2013, total unrecognized compensation costs, adjusted for estimated forfeitures, related to non-vested RSUs was $11,800,000, which is expected to be recognized over the next 1.64 years.

10. Other Income, Net

Other income, net, consists of the following:



	Year Ended December 31,
	2013			2012			2011
Interest income	$	55,000		$	71,000		$	87,000
Interest expense	(103,000		)	—			—
Foreign exchange transaction losses, net	(26,000		)	(23,000		)	(28,000		)
Other non-operating income	64,000			51,000			39,000
Total	$	(10,000	)	$	99,000		$	98,000

11. Income Taxes

The Company accounts for income taxes under the asset and liability method provided by ASC Topic 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and income tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company's geographical breakdown of its income before provision for income taxes is as follows:



	Year Ended December 31,
	2013		2012			2011
Domestic	$	45,554,000	$	39,941,000		$	37,708,000
Foreign	865,000		(3,293,000		)	(4,987,000		)
Income before income taxes	$	46,419,000	$	36,648,000		$	32,721,000

The Company's provisions for income taxes are as follows:



	Year Ended December 31,
	2013			2012			2011
Current Tax Expense:
Federal	$	19,731,000		$	20,362,000		$	15,149,000
State	1,836,000			1,589,000			1,056,000
Foreign	627,000			240,000			(26,000		)
Total Current Tax Expense	22,194,000			22,191,000			16,179,000
Deferred Tax Expense:
Federal	(6,796,000		)	(7,268,000		)	(3,016,000		)
State	(1,540,000		)	(1,206,000		)	(347,000		)
Foreign	(824,000		)	(1,041,000		)	(1,649,000		)
Total Deferred Tax Expense	(9,160,000		)	(9,515,000		)	(5,012,000		)
Total Income Tax Expense	$	13,034,000		$	12,676,000		$	11,167,000

11. Income Taxes (Continued)

The difference between the Company's effective rate and the federal statutory rate was as follows:



	Year Ended December 31,
	2013		2012		2011
Tax at federal statutory rate	35.0	%	35.0	%	35.0	%
State tax, net of federal benefit	2.7	%	2.6	%	2.8	%
Foreign rate differential	(0.1	)%	(1.3	)%	0.3	%
Stock-based compensation	1.0	%	1.0	%	3.5	%
Disqualifying dispositions	(0.4	)%	(0.4	)%	(1.8	)%
Research and development credits	(2.0	)%	(0.5	)%	(1.1	)%
California enterprise zone tax credit	(0.4	)%	(0.4	)%	(0.5	)%
Domestic manufacturing deduction	(4.1	)%	(2.8	)%	(3.5	)%
Change in statutory tax rates	(0.7	)%	(0.5	)%	(1.2	)%
Change in reserves due to lapse of statute	(3.0	)%	—	%	—	%
Other	0.1	%	1.9	%	0.6	%
Effective tax rate	28.1	%	34.6	%	34.1	%

As of December 31, 2013 and 2012 the Company had net deferred tax assets before valuation allowance of approximately $30,366,000 and $22,811,000, respectively. Realization of the deferred tax assets is dependent upon future taxable income, if any, the amount and timing of which are uncertain. Management evaluates the recoverability of deferred tax assets and the amount of the valuation allowance required. The Company's valuation allowance decreased by approximately $284,000 and decreased by approximately $1,566,000 during the years ended December 31, 2013 and 2012, respectively.

The components of the Company's net deferred tax assets for federal and state income taxes at December 31 are as follows:



	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	4,281,000		$	4,395,000
Deferred revenue	1,005,000			871,000
Dining rewards points	12,232,000			9,084,000
Accruals and reserves not currently deductible	16,257,000			13,365,000
Tax credits	1,659,000			760,000
Other	1,275,000			(3,000		)
Total deferred tax assets	36,709,000			28,472,000
Deferred tax liabilities:
Basis difference in fixed assets	(4,459,000		)	(4,283,000		)
State taxes	(1,884,000		)	(1,378,000		)
Total deferred tax liabilities	(6,343,000		)	(5,661,000		)
Net deferred tax assets before valuation allowance	30,366,000			22,811,000
Valuation allowance	(921,000		)	(1,205,000		)
Net deferred tax asset	$	29,445,000		$	21,606,000

At December 31, 2013, the Company had federal, state and foreign net operating loss carryforwards of approximately $4,078,000, $7,695,000 and $4,064,000, respectively. If not utilized, the federal net operating loss carryforwards will expire in 2032, the state net operating loss carryforwards will begin to expire in 2015 and there is no expiration date on the aforementioned foreign net operating losses. As a result of Topic 718, Stock Compensation, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2013 and 2012 that arose directly from tax deductions related to equity compensation in excess of compensation recognized for financial reporting. Utilization of the

11. Income Taxes (Continued)

net operating loss carryforwards are subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended and similar state provisions.

As of December 31, 2013, the Company's California research and development credit carryforwards for income tax purposes were approximately $3,171,000, of which $2,748,000 will be credited directly to additional paid-in capital upon utilization. These carryforwards can be carried over indefinitely. In addition, the Company's California Enterprise Zone credit carryforwards for income tax purposes were approximately $1,639,000, of which $1,228,000 will be credited directly to additional paid-in capital upon realization. These carryforwards will begin to expire in 2025.

As of December 31, 2013, it was considered more likely than not that the Company's deferred tax assets would be realized with the exception of certain United Kingdom net operating losses of approximately $921,000 with indefinite life. The valuation allowance of approximately $921,000 as of December 31, 2013 will result in an income tax benefit if and when the Company concludes it is more likely than not that the related deferred tax assets will be realized.

It is the practice and the intention of the Company to indefinitely reinvest the earnings of its foreign subsidiaries in those operations. As of December 31, 2013, the excess of the amount for financial reporting over the tax basis of investment in these foreign subsidiaries is insignificant and the determination of the unrecognized deferred tax liability is not currently practical and the amount is not expected to be material.

A reconciliation of the beginning and ending amounts of unrecognized income tax benefits during the twelve month periods ending December 31, 2013, 2012 and 2011 is as follows:



	2013			2012			2011
Balance of unrecognized tax benefits at January 1	$	18,362,000		$	17,648,000		$	17,585,000
Additions for tax positions related to current year	1,403,000			913,000			548,000
Additions for tax positions related to prior year	103,000			80,000			—
Reductions for tax positions of prior years	(1,788,000		)	(279,000		)	(485,000		)
Lapses of statute of limitations	(992,000		)	—			—
Balance of unrecognized tax benefits at December 31	$	17,088,000		$	18,362,000		$	17,648,000

In the event that certain unrecognized tax benefits are recognized, the effective tax rate will be affected. Approximately $16,213,000 and $18,362,000 of unrecognized tax benefit would impact the effective tax rate at December 31, 2013 and 2012, respectively, if recognized. The Company's policy is to classify interest accrued or penalties related to unrecognized tax benefits as a component of income tax expense. The Company accrued approximately $197,000 and reversed approximately $277,000 of interest and penalties during 2013 and in total as of December 31, 2013 and 2012, has recognized a liability for interest and penalties of approximately $696,000 and $777,000, respectively.

All tax years remain open to examination by major taxing jurisdictions to which the Company is subject. The Company files a federal and many state returns. The Company does not anticipate significant changes to its uncertain tax positions through the next fiscal year.

12. Employee Benefit Plan

In 1999, the Company adopted a defined contribution plan that is intended to qualify under section 401(k) of the Internal Revenue Code. The 401(k) plan provides retirement benefits for eligible employees. The 401(k) plan stipulates that eligible employees may elect to contribute to it upon date of hire. The Company began matching employee contributions under the terms of the 401(k) plan in 2007. Matching contributions totaled $333,000, $192,000 and $164,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

13. Segment Information

The Company operates in one industry - online reservations and guest management solutions. The Company has two reportable segments: North America and International, as defined by Topic 280 - Segment Reporting. Reportable segments have been identified based on how management makes operating decisions, assesses performance and allocates resources. The chief executive officer acts as the chief operating decision maker on behalf of both segments. The Company does not allocate assets discretely by reportable segments, and reviews asset information on a global basis, not by segment.

Summarized financial information concerning the reportable segments is as follows:



	North America Segment(1)			International Segment			Total Consolidated
Year ended December 31, 2013
Revenues—reservations	$	98,088,000		$	16,995,000		$	115,083,000
Revenues—subscription	54,377,000			7,468,000			61,845,000
Revenues—other	11,996,000			1,126,000			13,122,000
Total Revenues	164,461,000			25,589,000			190,050,000
Income (loss) from operations	54,260,000			(7,831,000		)	46,429,000
Interest income	55,000			—			55,000
Interest expense	(103,000		)	—			(103,000		)
Depreciation and amortization expense	13,485,000			3,723,000			17,208,000
Purchases of property, equipment and software	19,024,000			1,729,000			20,753,000
Year ended December 31, 2012
Revenues—reservations	$	78,929,000		$	12,099,000		$	91,028,000
Revenues—subscription	49,371,000			6,890,000			56,261,000
Revenues—other	11,038,000			3,305,000			14,343,000
Total Revenues	139,338,000			22,294,000			161,632,000
Income (loss) from operations	45,674,000			(9,125,000		)	36,549,000
Interest income	71,000			—			71,000
Depreciation and amortization expense	7,532,000			5,216,000			12,748,000
Purchases of property, equipment and software	9,604,000			3,834,000			13,438,000
Year ended December 31, 2011
Revenues—reservations	$	62,751,000		$	11,464,000		$	74,215,000
Revenues—subscription	44,784,000			5,983,000			50,767,000
Revenues—other	11,119,000			3,417,000			14,536,000
Total Revenues	118,654,000			20,864,000			139,518,000
Income (loss) from operations	44,007,000			(11,384,000		)	32,623,000
Interest income	85,000			2,000			87,000
Depreciation and amortization expense	6,852,000			5,153,000			12,005,000
Purchases of property, equipment and software	6,960,000			2,624,000			9,584,000

_______________________________________________________________________________


(1)	A significant majority of the Company's "Technology" costs are incurred in the United States and as such are allocated to the North America segment. There are no internal revenue transactions between the Company's reporting segments.

13. Segment Information (Continued)

Geographical Information

The Company is domiciled in the United States and has international operations in Canada, Germany, Japan, Mexico and the United Kingdom. Information regarding the Company's operations by geographic area is presented below:



	Years Ended December 31,
	2013		2012		2011
Revenues:
United States	$	154,677,000	$	130,839,000	$	111,463,000
United Kingdom	19,561,000		17,290,000		17,078,000
International—all others	15,812,000		13,503,000		10,977,000
Total revenues	$	190,050,000	$	161,632,000	$	139,518,000
Long-lived assets(1):
United States	$	26,891,000	$	16,308,000	$	12,536,000
United Kingdom	3,167,000		4,083,000		2,399,000
International—all others	1,371,000		1,454,000		2,670,000
Total long-lived assets	$	31,429,000	$	21,845,000	$	17,605,000

_______________________________________________________________________________


(1)	Includes all non-current assets except deferred tax assets, goodwill and intangible assets.

The Company has no customers that individually, or in the aggregate, exceed 10% of revenues or accounts receivable as of and for any of the period presented above.

14. Selected Quarterly Data (Unaudited)



	For the Three Months Ended,
	Dec 31, 2013		Sep 30, 2013		Jun 30, 2013		Mar 31, 2013		Dec 31, 2012		Sep 30, 2012		Jun 30, 2012		Mar 31, 2012
	(In thousands, except per share amounts)
Revenues	$	52,291	$	46,693	$	45,565	$	45,501	$	42,967	$	39,738	$	39,558	$	39,369
Income from operations	13,227		10,215		13,070		9,917		11,117		9,165		8,877		7,391
Net income	10,314		7,614		8,316		7,141		7,463		5,948		5,745		4,816
Net income per share:
Basic	$	0.44	$	0.33	$	0.36	$	0.31	$	0.33	$	0.26	$	0.25	$	0.21
Diluted	$	0.43	$	0.32	$	0.35	$	0.30	$	0.32	$	0.26	$	0.25	$	0.21

15. Subsequent Events

In February 2014, the Company acquired Ness Computing, Inc., a provider of mobile personalized restaurant recommendations, for a purchase price of approximately $17.2 million in cash, or $11.3 million net of cash acquired. The effects of this acquisition are not expected to be material to the Company's financial statements.

The following pages provide the Consolidated Unaudited Balance Sheet as of June 30, 2014, the Condensed Consolidated Unaudited Income Statements, Statements of Comprehensive Income, and Statements of Cash Flows for the six months ended June 30, 2014 and 2013, and the related notes, as prepared by OpenTable, Inc.

OPENTABLE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)



	June 30, 2014			December 31, 2013
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	127,159		$	100,283
Short-term investments	11,672			14,263
Accounts receivable, net of allowance for doubtful accounts of $1,889 and $1,532 at June 30, 2014 and December 31, 2013	25,024			25,359
Prepaid expenses and other current assets	3,905			4,659
Deferred tax asset	20,034			17,861
Total current assets	187,794			162,425
Property, equipment and software, net	34,134			30,972
Goodwill	81,837			79,271
Intangible assets	15,267			23,376
Deferred tax asset	17,255			14,092
Other assets	1,002			835
TOTAL ASSETS	$	337,289		$	310,971

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	4,574		$	5,156
Accrued expenses	8,184			8,676
Accrued compensation	5,187			4,692
Deferred revenue	1,805			1,556
Dining rewards payable	43,359			37,509
Total current liabilities	63,109			57,589
Deferred revenue — non-current	1,579			1,894
Deferred tax liabilities	—			2,508
Income tax liabilities	15,445			15,597
Other long-term liabilities	2,941			3,121
Total liabilities	83,074			80,709

COMMITMENTS AND CONTINGENCIES (Note 5)	0			0

STOCKHOLDERS’ EQUITY:
Common stock, $0.0001 par value — 100,000,000 shares authorized; 25,608,890 and 25,300,522 shares issued, 23,684,415 and 23,376,047 shares outstanding at June 30, 2014 and December 31, 2013	3			3
Additional paid-in capital	285,278			263,697
Treasury stock, at cost (1,924,475 shares at June 30, 2014 and December 31, 2013)	(74,247		)	(74,247		)
Accumulated other comprehensive income	3,013			1,095
Retained earnings	40,168			39,714
Total stockholders’ equity	254,215			230,262
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	337,289		$	310,971

See notes to condensed consolidated financial statements (unaudited).

OPENTABLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
REVENUES	$	55,732		$	45,565		$	109,511		$	91,066

COSTS AND EXPENSES:
Operations and support	15,386			11,458			29,721			22,821
Sales and marketing	13,444			8,955			27,301			19,457
Technology	6,776			4,611			13,019			9,111
General and administrative	13,520			7,471			22,827			16,690
Impairment of acquired intangibles	—			—			12,648			—

Total costs and expenses	49,126			32,495			105,516			68,079

Income from operations	6,606			13,070			3,995			22,987
Other income, net	(6		)	(2		)	(6		)	11

Income before taxes	6,600			13,068			3,989			22,998
Income tax expense	2,503			4,752			3,535			7,541

NET INCOME	$	4,097		$	8,316		$	454		$	15,457

Net income per share (See Note 7):
Basic	$	0.17		$	0.36		$	0.02		$	0.68
Diluted	$	0.17		$	0.35		$	0.02		$	0.65

Weighted average shares outstanding:
Basic	23,560			22,826			23,502			22,882
Diluted	24,472			23,747			24,425			23,772

See notes to condensed consolidated financial statements (unaudited).

OPENTABLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)



	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
Net income	$	4,097	$	8,316		$	454	$	15,457

Foreign currency translation gain (loss)	1,680		(230		)	1,918		(3,765		)
Unrealized loss on investments	—		(2		)	—		(2		)
Other comprehensive income (loss)	1,680		(232		)	1,918		(3,767		)

COMPREHENSIVE INCOME	$	5,777	$	8,084		$	2,372	$	11,690

See notes to condensed consolidated financial statements (unaudited).

OPENTABLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)



	Six Months Ended June 30,
	2014			2013
OPERATING ACTIVITIES:
Net income	$	454		$	15,457
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,990			5,544
Amortization of intangibles	4,068			2,116
Impairment of acquired intangibles	12,648			—
Provision for doubtful accounts	1,546			1,532
Stock-based compensation	8,533			7,871
Write-off of property, equipment and software	140			371
Deferred taxes	(7,863		)	(5,033		)
Excess tax benefit related to stock-based compensation	(3,971		)	(1,219		)
Changes in operating assets and liabilities (net of effect of acquisitions):
Accounts receivable	(1,593		)	(1,078		)
Prepaid expenses and other current assets	2,315			(2,926		)
Accounts payable and accrued expenses	4,086			(4,222		)
Accrued compensation	457			416
Deferred revenue	(72		)	702
Long-term liabilities	(112		)	1,948
Dining rewards payable	5,812			5,180
Net cash provided by operating activities	34,438			26,659

INVESTING ACTIVITIES:
Purchases of property, equipment and software	(10,391		)	(10,135		)
Purchases of investments	(10,148		)	(11,811		)
Maturities of investments	12,661			1,392
Acquisition of businesses, net of cash acquired	(11,322		)	(12,243		)
Net cash used in investing activities	(19,200		)	(32,797		)

FINANCING ACTIVITIES:
Excess tax benefit related to stock-based compensation	3,971			1,219
Proceeds from issuance of common stock upon exercise of employee stock options	7,309			7,029
Repurchases of common stock	—			(23,562		)
Net cash provided by (used in) financing activities	11,280			(15,314		)

EFFECT OF EXCHANGE RATES ON CASH	358			(437		)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	26,876			(21,889		)

CASH AND CASH EQUIVALENTS — Beginning of period	100,283			102,772

CASH AND CASH EQUIVALENTS — End of period	$	127,159		$	80,883
	(Continued)

OPENTABLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)

(Unaudited)



	Six Months Ended June 30,
	2014		2013
SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW INFORMATION:
Cash paid for income taxes	$	5,002	$	19,401
Cash paid for interest expense	$	38	$	—

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Purchase of property, equipment and software recorded in accounts payable and accrued expenses	$	698	$	3,845
Issuance of common stock in connection with acquisition of business	$	—	$	8,224
Cancellation of common stock in connection with acquisition of business	$	11	$	—
See notes to condensed consolidated financial statements (unaudited).	(Concluded)

OPENTABLE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization and Description of Business

OpenTable, Inc. (together with its subsidiaries, “OpenTable” or the “Company”), was incorporated on October 13, 1998, and is a Delaware corporation. The Company provides solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. For restaurant customers, the Company provides a proprietary Electronic Reservation Book (“ERB”) and Connect. The ERB combines proprietary software and computer hardware to deliver a solution that computerizes restaurant host-stand operations and replaces traditional pen-and-paper reservation books. The ERB streamlines and enhances a number of business-critical functions and processes for restaurants, including reservation management, table management, guest recognition and email marketing. For restaurants that do not require the operational benefits of the ERB, OpenTable offers Connect, a web-based solution that enables participating restaurants to receive reservations from OpenTable’s websites and mobile applications (“apps”) as well as the websites and mobile apps of OpenTable’s partners and restaurant customers. For diners, the Company operates popular restaurant reservation websites and mobile apps. OpenTable’s websites and mobile apps enable diners to find, choose and book tables at restaurants on the OpenTable network, overcoming the inefficiencies associated with the traditional process of reserving by phone.

Certain Significant Risks and Uncertainties

The Company operates in a dynamic industry, and accordingly, can be affected by a variety of factors. For example, management of the Company believes that changes in any of the following areas could have a significant negative effect on the Company’s future financial position, results of operations or cash flows: the ability to maintain an adequate rate of growth; the impact of the economic conditions on its business; the ability to attract new restaurant customers; the ability to increase the number of visitors to its websites and mobile apps and convert those visitors into diners; and the ability to retain existing restaurant customers and diners or encourage repeat reservations.

Merger

On June 12, 2014, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with The Priceline Group Inc. (NASDAQ: PCLN) ("Priceline") and Rhombus, Inc. ("Rhombus"), a wholly owned subsidiary of Priceline. In accordance with the terms of the Merger Agreement, on July 24, 2014, Rhombus merged with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of Priceline. At the effective time of the merger, each issued and outstanding share of OpenTable common stock, other than shares owned by stockholders that perfected and did not withdraw a demand for appraisal rights pursuant to Section 262 of the General Corporation Law of the State of Delaware, were converted into a right to receive an amount of cash equal to $103.00 per share, except for shares then owned by Priceline or its wholly owned subsidiary effecting the transaction and shares held in treasury of OpenTable or by any of its wholly owned subsidiaries, which shares were canceled and retired and ceased to exist, for a total value of approximately $2.5 billion. In addition, OpenTable incurred approximately $4.5 million in deal costs during the quarter ended June 30, 2014.

2. Summary of Significant Accounting Policies

Principles of Consolidation

These condensed consolidated financial statements include the accounts of OpenTable, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as filed on February 21, 2014 with the SEC. The condensed consolidated balance sheet as of December 31, 2013, included herein was derived from the audited consolidated financial statements as of that date but does not include all disclosures required by GAAP, including notes to the consolidated financial statements.

2. Summary of Significant Accounting Policies (Continued)

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the Company’s statement of financial position at June 30, 2014 and December 31, 2013, and its results of operations for the three and six months ended June 30, 2014 and 2013, and its cash flows for the six months ended June 30, 2014 and 2013. The results for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for any future period. All references to June 30, 2014 or to the three or six months ended June 30, 2014 and 2013 in the notes to the condensed consolidated financial statements are unaudited.

Acquisition of Ness

In February 2014, the Company acquired Ness Computing, Inc., a provider of mobile personalized restaurant recommendations, for a purchase price of approximately $17.2 million in cash, or $11.3 million net of cash acquired. The Company recorded $1.2 million of goodwill and $8.5 million of developed technology which is being amortized over three years. The Company has included the effects of the transaction within the results of operations prospectively from February 4, 2014, the date of acquisition. Pro forma financial information for this business combination has not been presented, as the effects were not material to the Company’s historical consolidated financial statements.

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.

Recently Issued Accounting Standards

In May 2014 the Financial Accounting Standards Board (FASB) issued the Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), that will supersede nearly all existing revenue recognition guidance under US GAAP. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The standard will be effective for public entities for annual and interim periods beginning after December 15, 2016.

Entities can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. Entities electing the full retrospective adoption will apply the standard to each period presented in the financial statements. This means that entities will have to apply the new guidance as if it had been in effect since the inception of all its contracts with customers presented in the financial statements. Entities that elect the modified retrospective approach will apply the guidance retrospectively only to the most current period presented in the financial statements. This means that entities will have to recognize the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings at the date of initial application. The new revenue standard will be applied to contracts that are in progress at the date of initial application.

The Company plans to adopt the new standard from January 1, 2017. The Company has not yet evaluated which adoption method it plans to use or the potential effect the new standard will have on its consolidated financial statements.

3. Short-Term Investments and Fair Value Measurements

Short-term investments are summarized as follows (in thousands):



	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Market Value
At June 30, 2014:
U.S. government and agency securities	$	8,006	$	—	$	—	$	8,006
Certificates of deposit	3,666		—		—		3,666
Total	$	11,672	$	—	$	—	$	11,672



	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Market Value
At December 31, 2013:
U.S. government and agency securities	$	11,145	$	—	$	—	$	11,145
Certificates of deposit	3,118		—		—		3,118
Total	$	14,263	$	—	$	—	$	14,263

As of June 30, 2014 and December 31, 2013, there were no investments that had maturity dates of greater than one year.

The Company classifies all investments as Level 2 assets.

4. Goodwill and Intangible Assets

The following table summarizes the changes in the Company’s goodwill by geographical reporting unit (in thousands):



	North America		International		Consolidated

Balance at December 31, 2013	$	38,991	$	40,280	$	79,271
Goodwill related to acquisitions	1,205		—		1,205
Foreign exchange rate adjustment	—		1,361		1,361
Balance at June 30, 2014	$	40,196	$	41,641	$	81,837

A summary of intangible assets as of June 30, 2014 and December 31, 2013 is as follows (in thousands):



	June 30,										December 31,
	2014										2013
	Gross Carrying Value		Accumulated Amortization			Accumulated Impairment Loss			Total		Gross Carrying Value		Accumulated Amortization			Total
Trademarks	$	12,788	$	(126	)	$	(12,648	)	$	14	$	12,672	$	(106	)	$	12,566
Customer relationships	12,337		(9,847		)	—			2,490		12,076		(9,140		)	2,936
Developed technology	21,231		(8,468		)	—			12,763		12,690		(4,816		)	7,874
Total intangible assets	$	46,356	$	(18,441	)	$	(12,648	)	$	15,267	$	37,438	$	(14,062	)	$	23,376

4. Goodwill and Intangible Assets (Continued)

Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives which range from one to four years. Amortization of intangible assets was $2.3 million and $1.2 million for the three months ended June 30, 2014 and 2013, respectively, and $4.1 million and $2.1 million for the six months ended June 30, 2014 and 2013, respectively. Estimated future annual amortization expense is as follows: 2014 (remainder): $4.4 million; 2015: $6.0 million; 2016: $3.4 million; 2017: $1.1 million and 2018: $0.4 million. Intangible assets with indefinite lives are not amortized. Instead, they are reviewed for impairment annually, or whenever events or changes in circumstances indicate the carrying amount exceeds its fair value. The Company has defined its annual intangible impairment evaluation date as August 31. The Company performed its annual intangible impairment evaluation as of August 31, 2013 and determined that the carrying amount of the indefinite life intangible assets did not exceed the fair value. There was no impairment of indefinite life intangible assets as of December 31, 2013. In the first quarter of 2014, the Company made a decision to discontinue the use of the toptable brand name in the U.K. marketplace and transition to a single OpenTable brand internationally, beginning in April 2014. Accordingly, the Company determined that the indefinite-lived toptable trademark was impaired as of March 31, 2014, resulting in an impairment loss of $12.6 million.

Goodwill is evaluated at the reporting unit level for impairment annually, or more frequently if events and conditions indicate goodwill may be impaired. The evaluation for impairment is performed by comparing the reporting unit’s carrying amount of goodwill to the fair value of the reporting unit. If the carrying amount exceeds the reporting unit fair value, then the second step of the impairment test is performed to determine the amount of the impairment loss. The Company has defined its annual goodwill impairment evaluation date as August 31. The Company performed its annual goodwill impairment evaluation as of August 31, 2013 and determined that the carrying amount of goodwill did not exceed the fair value of either reporting units. Additionally, there was no impairment of goodwill as of June 30, 2014 or December 31, 2013.

5. Commitments and Contingencies

Contractual Obligations

The Company leases its facilities under operating leases. These leases expire at various dates through 2020. The terms of the lease agreements provide for rental payments on a graduated basis. The Company recognizes rent expense on a straight-line basis over the lease period.

Litigation

The Company is subject to various legal proceedings and claims arising in the ordinary course of business. Although occasional adverse decisions or settlements may occur, management believes that the final disposition of such matters will not have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

6. Stockholders’ Equity

Treasury Stock

In August 2012, the Company announced that the Board of Directors authorized the Company to purchase up to $50.0 million of its outstanding common stock. During the six months ended June 30, 2013, the Company purchased 402,955 shares of stock for $23.4 million (including commissions) under this share repurchase program. No amounts were purchased during the six months ended June 30, 2014.

Stock-Based Compensation

6. Stockholders' Equity (Continued)

Stock Options

Under Topic 718, the fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model.

The following table summarizes the assumptions relating to the Company’s stock options for the three and six months ended June 30, 2014 and 2013, respectively:



	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Dividend yield	0%	0%	0%	0%
Volatility	43%	47.0%	41.9% - 45.0%	47.0% - 53.9%
Risk-free interest rate	1.83%	1.15% - 1.34%	1.51% - 2.10%	1.02% - 1.34%
Expected term, in years	5.50	5.50 - 6.08	5.00 - 6.08	5.50 - 6.08

The Company granted 64,800 and 100,453 stock options during the three months ended June 30, 2014 and 2013, respectively, and 134,286 and 131,971 stock options during the six months ended June 30, 2014 and 2013, respectively. The Company recorded stock-based compensation expense related to stock options of $2.2 million and $2.3 million for three months ended June 30, 2014 and 2013, respectively, and $5.0 million and $6.6 million for the six months ended June 30, 2014 and 2013, respectively.

Restricted Stock Units

The cost of RSUs is determined using the fair value of the Company’s common stock on the date of grant. RSUs typically vest and become exercisable annually, based on a one- to four-year total vesting term. Stock-based compensation expense is amortized using a graded vesting attribution method over the requisite service period.

The Company granted 28,688 and 81,412 RSUs during the three months ended June 30, 2014 and 2013, respectively, and 235,796 and 178,666 RSUs during the six months ended June 30, 2014 and 2013, respectively. The Company recorded stock-based compensation expense related to RSUs of $2.0 million and $1.0 million, respectively, for the three months ended June 30, 2014 and 2013, respectively, and $3.5 million and $1.3 million for the six months ended June 30, 2014 and 2013, respectively.

Excess Tax Benefits

ASC Topic 718 requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow. For the three months ended June 30, 2014 and 2013, the Company recorded $2.6 million and $0.5 million, respectively, of excess tax benefits from stock-based compensation and $4.0 million and $1.2 million of excess tax benefits from stock-based compensation, for the six months ended June 30, 2014 and 2013, respectively.

7. Net Income Per Share

The Company calculates net income per share in accordance with ASC Topic 260—Earnings per Share.

Non-vested performance-based awards are included in the diluted shares outstanding each period if established performance criteria have been met at the end of the respective periods. In June 2013, all remaining non-vested performance-based awards were cancelled. As such, no such shares were included in the dilutive shares outstanding for the three or six months ended June 30, 2014 or 2013.

7. Net Income Per Share (Continued)

Anti-dilutive shares in the amounts of 133,000 and 218,000 were excluded from the dilutive shares outstanding for the three months ended June 30, 2014 and 2013, respectively. Anti-dilutive shares in the amounts of 116,000 and 238,000 were excluded from the dilutive shares outstanding for the six months ended June 30, 2014 and 2013, respectively.

The following table sets forth the computation of basic and diluted net income per share for the periods indicated (in thousands, except per share amounts):



	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Basic net income per common share calculation:
Net income	$	4,097	$	8,316	$	454	$	15,457
Basic weighted average common shares outstanding	23,560		22,826		23,502		22,882
Basic net income per share	$	0.17	$	0.36	$	0.02	$	0.68

Diluted net income per common share calculation:
Net income	$	4,097	$	8,316	$	454	$	15,457
Weighted average shares used to compute basic net income per share	23,560		22,826		23,502		22,882
Effect of potentially dilutive securities:
Employee stock options	718		795		736		768
Employee stock awards	194		126		187		122
Weighted average shares used to compute diluted net income per share	24,472		23,747		24,425		23,772
Diluted net income per share	$	0.17	$	0.35	$	0.02	$	0.65

8. Income Taxes

During the three and six months ended June 30, 2014, the Company recorded income tax expense of $2.5 million and $3.5 million which resulted in an effective tax rate of 37.9% for the three months ended June 30, 2014 and 88.6% for the six months ended June 30, 2014. During the three and six months ended June 30, 2013, the Company recorded income tax expense of $4.8 million and $7.5 million, respectively, which resulted in an effective tax rate of 36.4% and 32.8% for each respective period. For the six months ended June 30, 2014, the Company's effective tax rate differed from the federal statutory rate primarily due to the $2.5 million of tax effects arising from the impairment loss of the toptable trademark as disclosed in Note 4. Excluding the tax effects of the impairment loss, the expected tax provision (derived from applying the federal statutory rate

to the Company’s income before income tax provision for the three and six months ended June 30, 2014) did not significantly differ from the Company’s recorded income tax provision.

As disclosed in Note 1, the Company was acquired by Priceline on July 24, 2014. The Company incurred various transaction costs and has recorded income tax effects according to ASC 805-740.

ASC Topic 740—Income Taxes prescribes that a tax position is required to meet a minimum recognition threshold before being recognized in the financial statements. The Company’s gross unrecognized tax benefits were $17.1 million as of June 30, 2014 and December 31, 2013. As of June 30, 2014 and December 31, 2013, the Company recorded $0.9 million and $0.7 million, respectively, of accrued interest. No significant penalties have been recorded to date.

9. Comprehensive Income (Loss)

In accordance with Topic 220—Comprehensive Income, the Company reports by major components and, as a single total, the change in its net assets during the period from non-owner sources. Comprehensive income (loss) consists of net income and accumulated other comprehensive income (loss), which includes certain changes in equity that are excluded from net income. Specifically, it includes cumulative foreign currency translation and unrealized gains (losses) from investments.

Accumulated other comprehensive income of $3.0 million and $1.1 million as of June 30, 2014 and December 31, 2013, respectively, was comprised entirely of foreign currency translation gains.

10. Segment Information

The Company operates in one industry—online restaurant reservations and guest management solutions. The Company has two reportable segments: North America and International, as defined by Topic 280 — Segment Reporting. Reportable segments have been identified based on how management makes operating decisions, assesses performance and allocates resources. The chief executive officer acts as the chief operating decision maker on behalf of both segments. The Company does not allocate assets discretely by reportable segments, and reviews asset information on a global basis, not by segment.

10. Segment Information (Continued)

Summarized financial information concerning the reportable segments is as follows (in thousands):



	North America Segment(1)			International Segment			Total Consolidated
Three Months Ended June 30, 2014
Revenues—reservations	$	30,060		$	5,488		$	35,548
Revenues—subscription	14,819			2,227			17,046
Revenues—other	2,882			256			3,138
Income (loss) from operations	8,544			(1,938		)	6,606
Interest income	14			—			14
Interest expense	(31		)	—			(31		)
Depreciation and amortization expense	5,851			689			6,540
Purchases of property, equipment and software	4,897			368			5,265
Three Months Ended June 30, 2013
Revenues—reservations	$	23,752		$	3,933		$	27,685
Revenues—subscription	13,298			1,755			15,053
Revenues—other	2,676			151			2,827
Income (loss) from operations	14,835			(1,765		)	13,070
Interest income	12			—			12
Depreciation and amortization expense	3,136			982			4,118
Purchases of property, equipment and software	4,977			497			5,474
Six Months Ended June 30, 2014
Revenues—reservations	58,783			11,030			69,813
Revenues—subscription	29,303			4,323			33,626
Revenues—other	5,646			426			6,072
Income (loss) from operations	20,328			(16,333		)	3,995
Interest income	33			—			33
Interest expense	(57		)	—			(57		)
Depreciation and amortization expense	10,612			1,446			12,058
Impairment of acquired intangibles	—			12,648			12,648
Purchases of property, equipment and software	9,657			734			10,391
Six Months Ended June 30, 2013
Revenues—reservations	47,244			7,498			54,742
Revenues—subscription	26,188			3,547			29,735
Revenues—other	5,739			850			6,589
Income (loss) from operations	27,811			(4,824		)	22,987
Interest income	31			—			31
Depreciation and amortization expense	5,685			1,975			7,660
Purchases of property, equipment and software	9,276			859			10,135

(1) There are no internal revenue transactions between the Company’s reporting segments.

10. Segment Information (Continued)

Geographical Information

The Company is domiciled in the United States and has international operations in Canada, Germany, India, Japan, Mexico and the United Kingdom. Information regarding the Company’s operations by geographic area is presented below (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Revenues:
United States	$	45,120	$	37,313	$	88,477	$	74,357
United Kingdom	6,230		4,410		12,334		9,065
International—all others	4,382		3,842		8,700		7,644
	$	55,732	$	45,565	$	109,511	$	91,066



	As of June 30, 2014		As of December 31, 2013
Long-lived assets(1):
United States	$	30,677	$	26,891
United Kingdom	2,546		3,167
International—all others	1,570		1,371
Total long-lived assets	$	34,793	$	31,429

(1) Includes all non-current assets except deferred tax assets, goodwill and intangible assets.

The Company had no customers that individually, or in the aggregate, exceeded 10% of revenues or accounts receivable as of and for any of the periods presented above.

11. Subsequent Events

On July 21, 2014, the Company acquired Copilot Labs, Inc., a provider of restaurant analytics and insights, for a purchase price of approximately $10.8 million in cash. The effects of this acquisition are not expected to be material to the Company's financial statements.

Exhibit 99.3 OT

Exhibit 99.3

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

On June 12, 2014, OpenTable, Inc. ("OpenTable") entered into an Agreement and Plan of Merger, or merger agreement, with The Priceline Group Inc. ("The Priceline Group") and Rhombus, Inc. ("Rhombus"), as a result of which OpenTable was acquired by The Priceline Group on July 24, 2014. In accordance with the terms of the merger agreement and the General Corporation Law of the State of Delaware, on July 24, 2014, Rhombus merged with and into OpenTable, with OpenTable continuing as the surviving corporation and a wholly owned subsidiary of The Priceline Group, which is referred to herein as the merger. The accompanying unaudited pro forma combined statements of operations, which we refer to as the pro forma statements of operations, for the six months ended June 30, 2014 and the year ended December 31, 2013 combine the historical consolidated statements of operations of The Priceline Group and OpenTable, giving effect to the merger as if it had been completed on January 1, 2013. The accompanying unaudited pro forma combined balance sheet, which we refer to as the pro forma balance sheet, as of June 30, 2014 combines the historical consolidated balance sheets of The Priceline Group and OpenTable, giving effect to the merger as if it had been completed on June 30, 2014. The historical consolidated financial information has been adjusted in the pro forma financial statements to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable and (3) with respect to the statement of operations, expected to have a continuing effect on the combined results of The Priceline Group and OpenTable.

The accompanying unaudited pro forma combined financial statements, which we refer to as the statements, and related notes were prepared using the acquisition method of accounting with The Priceline Group considered the acquirer of OpenTable. In the statements and related notes, the purchase consideration paid in the merger has been preliminarily allocated to the assets acquired and liabilities assumed of OpenTable based upon their estimated fair values as of June 30, 2014. The statements contained herein do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies, or any revenue, tax, or other synergies that may result from the merger.

The statements and related notes are being provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company's future consolidated results of operations or consolidated balance sheet. The statements are based upon currently available information and estimates and assumptions that The Priceline Group's management and OpenTable's management believe are reasonable as of the date of this Current Report on Form 8-K/A. Any of the factors underlying these estimates and assumptions may change or prove to be materially different, and the estimates and assumptions may not be representative of facts existing upon finalization of the merger.

PF-1



UNAUDITED PRO FORMA COMBINED BALANCE SHEET

	June 30, 2014
(In thousands)	Historical The Priceline Group Inc.			Historical OpenTable, Inc.			Pro Forma Adjustments				Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	3,503,899		$	127,159		$	(2,520,880	)	(a)	$	1,110,178
Restricted cash	15,630			—			—				15,630
Short-term investments	3,660,807			11,672			—				3,672,479
Accounts receivable, net	841,133			25,024			—				866,157
Prepaid expenses and other current assets	380,284			3,905			—				384,189
Deferred income taxes	107,006			20,034			—				127,040
Total current assets	8,508,759			187,794			(2,520,880		)		6,175,673
Property and equipment, net	168,681			34,134			—				202,815
Intangible assets, net	976,946			15,267			1,109,733			(b)	2,101,946
Goodwill	1,905,551			81,837			1,582,472			(c)	3,569,860
Deferred income taxes	6,720			17,255			13,490			(d)	37,465
Other assets	33,666			1,002			—				34,668
Total assets	$	11,600,323		$	337,289		$	184,815			$	12,122,427

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	340,903		$	4,574		$	—			$	345,477
Accrued expenses and other current liabilities	555,716			8,184			50,351			(e)	614,251
Accrued compensation	—			5,187			(5,187		)	(e)	—
Deferred revenue	—			1,805			(1,805		)	(e)	—
Dining rewards payable	—			43,359			(43,359		)	(e)	—
Deferred merchant bookings	569,310			—			—				569,310
Convertible debt	41,316			—			—				41,316
Total current liabilities	1,507,245			63,109			—				1,570,354
Deferred revenue - non-current	—			1,579			(1,579		)	(f)	—
Deferred income taxes	396,489			—			427,500			(g)	823,989
Income tax liabilities	—			15,445			(15,445		)	(f)	—
Other long-term liabilities	106,858			2,941			17,024			(f)	126,823
Convertible debt	1,764,364			—			—				1,764,364
Total liabilities	3,774,956			83,074			427,500				4,285,530

Convertible debt	1,335			—			—				1,335

Stockholders’ equity:
Common stock	480			3			(3		)	(h)	480
Treasury stock	(2,084,533		)	(74,247		)	74,247			(i)	(2,084,533		)
Additional paid-in capital	4,703,329			285,278			(273,748		)	(j)	4,714,859
Accumulated earnings	5,126,421			40,168			(40,168		)	(k)	5,126,421
Accumulated other comprehensive income	78,335			3,013			(3,013		)	(l)	78,335
Total stockholders’ equity	7,824,032			254,215			(242,685		)		7,835,562
Total liabilities and stockholders’ equity	$	11,600,323		$	337,289		$	184,815			$	12,122,427

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

PF-2



UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

	For the six months ended June 30, 2014
(In thousands, except per share data)	Historical The Priceline Group Inc.			Historical OpenTable, Inc.			Pro Forma Adjustments				Pro Forma Combined
Agency revenues	$	2,515,540		$	—		$	—			$	2,515,540
Merchant revenues	1,094,251			—			—				1,094,251
Advertising and other revenues	155,586			109,511			—				265,097
Total revenues	3,765,377			109,511			—				3,874,888
Cost of revenues	475,910			—			—				475,910
Gross profit	3,289,467			109,511			—				3,398,978
Operating expenses:
Advertising — Online	1,160,503			—			9,815			(m)	1,170,318
Advertising — Offline	111,500			—			—				111,500
Operations and support	—			29,721			(29,721		)	(n)	—
Sales and marketing	139,364			27,301			(19,562		)	(o)	147,103
Personnel	416,383			—			46,850			(p)	463,233
General and administrative	164,048			22,827			(14,478		)	(q)	172,397
Information technology	47,266			13,019			(9,475		)	(r)	50,810
Depreciation and amortization	78,663			—			38,361			(s)	117,024
Impairment of acquired intangibles	—			12,648			—				12,648
Total operating expenses	2,117,727			105,516			21,790				2,245,033
Operating income	1,171,740			3,995			(21,790		)		1,153,945
Other income (expense):
Interest income	2,675			—			—				2,675
Interest expense	(34,851		)	—			—				(34,851		)
Foreign currency transactions and other	(7,746		)	(6		)	—				(7,752		)
Total other income (expense)	(39,922		)	(6		)	—				(39,928		)
Earnings before income taxes	1,131,818			3,989			(21,790		)		1,114,017
Income tax (expense) benefit	(224,149		)	(3,535		)	7,816			(t)	(219,868		)
Net income	907,669			454			(13,974		)		894,149
Less: net income attributable to noncontrolling interests	—			—			—				—
Net income applicable to common stockholders	$	907,669		$	454		$	(13,974	)		$	894,149
Net income applicable to common stockholders per basic common share	$	17.36		$	0.02		$	(0.28	)		$	17.10
Weighted average number of basic common shares outstanding	52,275			23,502			(23,502		)	(u)	52,275
Net income applicable to common stockholders per diluted common share	$	17.12		$	0.02		$	(0.29	)		$	16.85
Weighted average number of diluted common shares outstanding	53,004			24,425			(24,375		)	(u)	53,054

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

PF-3



UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

	For the year ended December 31, 2013
(In thousands, except per share data)	Historical The Priceline Group Inc.			Historical OpenTable, Inc.			Pro Forma Adjustments				Pro Forma Combined
Agency revenues	$	4,410,689		$	—		$	—			$	4,410,689
Merchant revenues	2,211,474			—			—				2,211,474
Advertising and other revenues	171,143			190,050			—				361,193
Total revenues	6,793,306			190,050			—				6,983,356
Cost of revenues	1,077,420			—			—				1,077,420
Gross profit	5,715,886			190,050			—				5,905,936
Operating expenses:
Advertising — Online	1,798,645			—			10,763			(m)	1,809,408
Advertising — Offline	127,459			—			—				127,459
Operations and support	—			48,185			(48,185		)	(n)	—
Sales and marketing	235,817			41,926			(28,399		)	(o)	249,344
Personnel	698,692			—			97,143			(p)	795,835
General and administrative	252,994			33,421			(10,022		)	(q)	276,393
Information technology	71,890			20,089			(13,992		)	(r)	77,987
Depreciation and amortization	117,975			—			73,216			(s)	191,191
Total operating expenses	3,303,472			143,621			80,524				3,527,617
Operating income	2,412,414			46,429			(80,524		)		2,378,319
Other income (expense):
Interest income	4,167			—			—				4,167
Interest expense	(83,289		)	—			—				(83,289		)
Foreign currency transactions and other	(36,755		)	(10		)	—				(36,765		)
Total other income (expense)	(115,877		)	(10		)	—				(115,887		)
Earnings before income taxes	2,296,537			46,419			(80,524		)		2,262,432
Income tax (expense) benefit	(403,739		)	(13,034		)	30,599			(t)	(386,174		)
Net income	1,892,798			33,385			(49,925		)		1,876,258
Less: net income attributable to noncontrolling interests	135			—			—				135
Net income applicable to common stockholders	$	1,892,663		$	33,385		$	(49,925	)		$	1,876,123
Net income applicable to common stockholders per basic common share	$	37.17		$	1.45		(1.78		)		$	36.84
Weighted average number of basic common shares outstanding	50,924			23,042			(23,042		)	(u)	50,924
Net income applicable to common stockholders per diluted common share	$	36.11		$	1.39		(1.71		)		$	35.79
Weighted average number of diluted common shares outstanding	52,413			23,974			(23,962		)	(u)	52,425

The accompanying notes are an integral part of these unaudited pro forma combined financial statements.

PF-4

1. Basis of Pro Forma Presentation

The statements and related notes present the pro forma consolidated financial position and results of operations of the combined company formed pursuant to the merger based on the historical financial statements of The Priceline Group Inc. ("The Priceline Group") (formerly known as priceline.com Inc.) and OpenTable, Inc. ("OpenTable") (after giving effect to the merger and adjustments described in these notes, subject to the assumptions and limitations described herein), and are intended to reflect the impact of the merger on The Priceline Group.

The historical financial information of The Priceline Group as of and for the six months ended June 30, 2014 was derived from the unaudited interim consolidated financial statements of The Priceline Group from its Quarterly Report on Form 10-Q for the three months ended June 30, 2014. The historical financial information of The Priceline Group as of and for the year ended December 31, 2013 was derived from the audited consolidated financial statements from The Priceline Group's Annual Report on Form 10-K for the year ended December 31, 2013. OpenTable's audited historical consolidated financial statements as of and for the year ended December 31, 2013 and unaudited interim consolidated financial statements as of and for the six months ended June 30, 2014 are included in this Current Report on Form 8-K/A. These statements should be read in conjunction with such historical financial statements.

The merger will be accounted for under the acquisition method of accounting in accordance with the Accounting Standards Codification (ASC Topic 805, Business Combinations), which we refer to as ASC 805. Under ASC 805, most of the assets acquired and liabilities assumed in a business combination are recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combination are expensed as incurred. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.

The pro forma statements of operations reflect the merger as if it had been completed on January 1, 2013, and the pro forma balance sheet reflects the merger as if it had been completed on June 30, 2014. The statements and these notes include pro forma adjustments based on preliminary valuations of assets and liabilities of OpenTable. These adjustments are preliminary and may be revised as additional valuation work is performed. The final purchase price allocations will be based on estimated fair value of the assets acquired and the liabilities assumed as of the closing of the merger. For the purpose of measuring the estimated fair value of the assets acquired and liabilities assumed in determining the final purchase price allocations, The Priceline Group will apply the accounting guidance under generally accepted accounting principles ("GAAP") for fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market at the measurement date. The fair value measurements will utilize estimates based on key assumptions in connection with the merger, including historical and current market data.

The pro forma information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company.

2. Estimated Acquisition Consideration for OpenTable

At the effective time of the merger on July 24, 2014, each issued and outstanding share of OpenTable common stock, other than shares owned by stockholders that perfected and did not withdraw a demand for appraisal rights pursuant to Section 262 of the Delaware General Corporation Law, were converted into a right to receive an amount of cash equal to $103.00 per share, except for shares then owned by The Priceline Group or Rhombus and shares held in treasury of OpenTable or by any of its wholly owned subsidiaries, which shares were canceled and retired and ceased to exist.

The aggregate weighted average per share price ("VWAP") of The Priceline Group common stock from July 17, 2014 through July 23, 2014 (the five trading day period ending one day prior to the effective date of the merger) was $1,217.82, resulting in an conversion ratio of 0.084577 ($103.00 divided by $1,217.82). The conversation ratio was used to calculate the amount of share awards assumed and the exercise price of options assumed in the merger, pursuant to section 4.05 of the agreement and plan of merger filed June 13, 2014.

Based on OpenTable's shares of common stock and equity awards outstanding as of July 24, 2014, the acquisition consideration is approximately as follows (in thousands):

PF-5

Preliminary Estimated Acquisition Consideration



Number of shares of OpenTable common stock outstanding at July 24, 2014	23,702
Cash consideration per share per merger agreement	$	103.00
Total cash for outstanding OpenTable common stock			$	2,441,347

Cash paid for vested stock options (1)			77,178
Pre-combination service attributed to unvested stock awards (1)			11,530
Cash paid for payroll taxes related to vested stock options			1,916
Cash paid for fractional shares of unvested stock awards			439
Total preliminary estimated acquisition consideration			$	2,532,410

(1) Under ASC 805, vested and unvested stock awards attributed to pre-combination services are accounted for as purchase price consideration.

3. Preliminary Estimated Purchase Price Allocation

The preliminary purchase price allocation for OpenTable is based on estimates, assumptions, valuations and other studies which have not yet been finalized in order to make a definitive allocation. Accordingly, the pro forma adjustments to allocate the acquisition consideration will remain preliminary until The Priceline Group's management determines the fair values of assets acquired, net of liabilities assumed. The final amounts allocated to assets acquired and liabilities assumed could differ materially from the amounts presented in the unaudited pro forma combined financial statements.

The total preliminary estimated acquisition consideration as shown in the table above is allocated to the tangible and intangible assets and liabilities of OpenTable based on their estimated fair values. As of June 30, 2014, the estimated purchase price allocation was as follows (in thousands):

Estimated Purchase Price Allocation



		OpenTable
Cash and cash equivalents		$	127,159
Short-term investments		11,672
Accounts receivable and other current assets		28,929
Accounts payable		(4,574		)
Accrued expenses		(58,535		)
Property and equipment		34,134
Deferred income taxes – asset		50,779
Other assets		1,002
Deferred income taxes – liability		(427,500		)
Other long-term liabilities		(19,965		)
Identifiable Intangible assets:
Trade names and domain names	910,000
Customer relationships	200,000
Technology	15,000
Total intangible assets		1,125,000
Goodwill		1,664,309
Preliminary estimated acquisition consideration		$	2,532,410

PF-6

Identifiable intangible assets. Preliminary fair values for the intangible assets were determined based on the relief from royalty method, income approach method, and cost method. The intangible assets identified were trade names and domain names, customer relationships and technology and will be amortized on a straight-line basis over the following useful lives:



Trade names and domain names		20 years
Customer relationships		15 years
Technology		5 years

Goodwill. Goodwill represents the excess of the estimated acquisition consideration over the preliminary fair value of the underlying net tangible and intangible assets. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets was the acquired workforce of experienced personnel, synergies in products, technologies, skill sets, operations, customer base, and organizational cultures that can be leveraged to enable us to build a successful combined enterprise. In accordance with ASC Topic 350, Intangibles-Goodwill and Other, goodwill will not be amortized, but instead will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment. In the event management determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of the impairment during the period in which the determination is made.

PF-7

4. Pro Forma Adjustments

The final purchase price allocation may result in different allocations for tangible and intangible assets than presented in the Statements and these notes, and those differences may be material.

Balance Sheet



(a) Cash and cash equivalents	June 30, 2014 (000's)
To reflect cash consideration paid to OpenTable common shareholders	$	(2,441,347	)
To reflect cash consideration paid to holders of employee and non-employee OpenTable stock options	(77,178		)
To reflect cash consideration paid for payroll taxes related to vested stock options	(1,916		)
To reflect cash consideration paid to holders of fractional Priceline Group unvested stock awards received in the exchange of OpenTable stock awards	(439		)
Total adjustments to cash and cash equivalents	$	(2,520,880	)



(b) Intangible assets, net	June 30, 2014 (000's)
To record fair value of acquired intangibles such as trade names and domain names, customer relationships and technology	$	1,125,000
To reverse net book value of existing OpenTable intangible assets	(15,267		)
Total adjustments to intangible assets, net	$	1,109,733



(c) Goodwill	June 30, 2014 (000's)
To adjust for purchase consideration in excess of fair value of net assets acquired	$	1,664,309
To reverse existing OpenTable goodwill	(81,837		)
Total adjustments to goodwill	$	1,582,472



(d) Deferred income taxes (asset)	June 30, 2014 (000's)
To reverse deferred tax liability related to OpenTable's existing intangibles	$	9,120
To record an estimated deferred tax asset on pre-combination service related to unvested OpenTable restricted stock units and non-qualified stock options ($11.5 million at estimated statutory tax rate of 38%)	4,370
Total adjustments to Deferred income taxes (asset)	$	13,490



(e) Accrued expenses and other current liabilities	June 30, 2014 (000's)
Reclassification to Accrued expenses from Dining rewards payable to conform with The Priceline Group presentation	$	43,359
Reclassification to Accrued expenses from Accrued compensation to conform with The Priceline Group presentation	5,187
Reclassification to Accrued expenses from Deferred revenue to conform with The Priceline Group presentation	1,805
Total adjustments to Accrued expenses and other current liabilities	$	50,351

PF-8



(f) Other long-term liabilities	June 30, 2014 (000's)
Reclassification to Other long-term liabilities from Income tax liabilities to conform with The Priceline Group presentation	$	15,445
Reclassification to Other long-term liabilities from Deferred revenue - non-current to conform with The Priceline Group presentation	1,579
Total adjustments to Other long-term liabilities	$	17,024



(g) Deferred income taxes (liability)	June 30, 2014 (000's)
To record an estimated deferred tax liability on the fair value of purchased intangibles (fair value of acquired intangibles of $1.125 billion at an estimated statutory tax rate of 38%)	$	427,500



(h) Common stock	June 30, 2014 (000's)
To reverse $0.0001 par value common shares of OpenTable	$	(3	)



(i) Treasury stock	June 30, 2014 (000's)
To reverse treasury shares of OpenTable	$	74,247



(j) Additional paid-in capital	June 30, 2014 (000's)
To reverse additional paid in capital of OpenTable	$	(285,278	)
To record value of pre-combination service on unvested stock awards	11,530
Total adjustments to Additional paid-in capital	$	(273,748	)



(k) Accumulated earnings	June 30, 2014 (000's)
To reverse accumulated earnings of OpenTable	$	(40,168	)



(l) Accumulated other comprehensive income	June 30, 2014 (000's)
To reverse accumulated other comprehensive income of OpenTable	$	(3,013	)

Statements of Operations



(m) Advertising - Online	Six Months Ended June 30, 2014 (000's)		Year Ended December 31, 2013 (000's)
Reclassification to Advertising-Online from Sales and marketing to conform with The Priceline Group presentation	$	7,961	$	8,123
Reclassification to Advertising-Online from Operations and support to conform with The Priceline Group presentation	1,854		2,640
Total adjustments to Advertising-Online expense	$	9,815	$	10,763

PF-9



(n) Operations and support	Six Months Ended June 30, 2014 (000's)			Year Ended December 31, 2013 (000's)
Reclassification from Operations and support to Depreciation and amortization to conform with The Priceline Group presentation	$	(11,513	)	$	(16,230	)
Reclassification from Operations and support to Personnel to conform with The Priceline Group presentation	(8,475		)	(16,262		)
Reclassification from Operations and support to Sales and marketing to conform with The Priceline Group presentation	(3,443		)	(5,840		)
Reclassification from Operations and support to General and administrative to conform with The Priceline Group presentation	(2,285		)	(4,526		)
Reclassification from Operations and support to Information technology to conform with The Priceline Group presentation	(2,151		)	(2,687		)
Reclassification from Operations and support to Advertising - Online to conform with The Priceline Group presentation	(1,854		)	(2,640		)
Total adjustments to Operations and support expense	$	(29,721	)	$	(48,185	)



(o) Sales and marketing	Six Months Ended June 30, 2014 (000's)			Year Ended December 31, 2013 (000's)
Reclassification to Sales and marketing from Operations and support to conform with The Priceline Group presentation	$	3,433		$	5,840
Reclassification from Sales and marketing to Advertising-Online to conform with The Priceline Group presentation	(7,961		)	(8,123		)
Reclassification from Sales and marketing to Personnel to conform with The Priceline Group presentation	(15,034		)	(26,116		)
Total adjustments to Sales and marketing expense	$	(19,562	)	$	(28,399	)



(p) Personnel	Six Months Ended June 30, 2014 (000's)			Year Ended December 31, 2013 (000's)
Reclassification to Personnel from Sales and marketing to conform with The Priceline Group presentation	$	15,034		$	26,116
To record stock based compensation expense for unvested employee stock option and restricted stock awards as of the merger date ⁽¹⁾	12,829			40,325
Reclassification to Personnel from Information technology to conform with The Priceline Group presentation	9,937			13,748
Reclassification to Personnel from General and administrative to conform with The Priceline Group presentation	9,108			17,479
Reclassification to Personnel from Operations and support to conform with The Priceline Group presentation	8,475			16,262
To reverse stock based compensation expense recorded by OpenTable	(8,533		)	(16,787		)
Total adjustments to Personnel expense	$	46,850		$	97,143

(1) The fair value of the unvested stock option and restricted stock awards related to post-combination service at merger close that will be amortized to stock compensation expense after the merger was approximately $77 million, net of estimated forfeitures.

PF-10



(q) General and administrative	Six Months Ended June 30, 2014 (000's)			Year Ended December 31, 2013 (000's)
Reclassification to General and administrative from Operations and support to conform with The Priceline Group presentation	$	2,285		$	4,526
Reclassification to General and administrative from Information technology to conform with The Priceline Group presentation	1,689			2,931
To reverse acquisition costs associated with acquisition of OpenTable by The Priceline Group	(9,344		)	—
Reclassification from General and administrative to Personnel to conform with The Priceline Group presentation	(9,108		)	(17,479		)
Total adjustments to General and administrative expense	$	(14,478	)	$	(10,022	)



(r) Information technology	Six Months Ended June 30, 2014 (000's)			Year Ended December 31, 2013 (000's)
Reclassification to Information technology from Operations and support to conform with The Priceline Group presentation	$	2,151		$	2,687
Reclassification from Information technology to General and administrative to conform with The Priceline Group presentation	(1,689		)	(2,931		)
Reclassification from Information technology to Personnel to conform with The Priceline Group presentation	(9,937		)	(13,748		)
Total adjustments to Information technology expense	$	(9,475	)	$	(13,992	)



(s) Depreciation and amortization	Six Months Ended June 30, 2014 (000's)			Year Ended December 31, 2013 (000's)
To record amortization expense for newly identified intangible assets	$	30,917		$	61,833
Reclassification to Depreciation and amortization from Operations and support to conform with The Priceline Group presentation	11,513			16,230
To reverse amortization expense for existing OpenTable intangibles	(4,069		)	(4,847		)
Total adjustments to Depreciation and amortization expense	$	38,361		$	73,216



(t) Income tax (expense) benefit	Six Months Ended June 30, 2014 (000's)			Year Ended December 31, 2013 (000's)
To record the tax impact of net increase in amortization expense (total adjustments for amortization expense on intangibles of $30,917 and $61,833 for the six months ended June 30, 2014 and the year ended December 31, 2013 at an estimated statutory tax rate of 38.0%)	$	11,748		$	23,497
To record the net tax impact of stock based compensation related to unvested stock option awards as of the merger date for the six months ended June 30, 2014 and the year ended December 31, 2013 at an estimated statutory tax rate of 38.0%)	1,632			8,944
To reverse the tax benefit related to amortization expense on acquired intangibles	(1,546		)	(1,842		)
To reverse the tax benefit related to the reversal of acquisition costs	(4,018		)	—
Total adjustments to Income tax (expense) benefit	$	7,816		$	30,599

PF-11



(u) Shares outstanding	Six Months Ended June 30, 2014 (000's)	Year Ended December 31, 2013 (000's)
Basic
The Priceline Group weighted average number of shares outstanding	52,275	50,924
Pro forma weighted average number of basic common shares outstanding	52,275	50,924

Diluted
The Priceline Group weighted average number of shares outstanding	53,004	52,413
Dilutive effect of the outstanding OpenTable equity replacement awards	50	12
Pro forma weighted average number of diluted common shares outstanding	53,054	52,425

PF-12