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Original Source: FD (FAIR DISCLOSURE) WIRE
. Howard Verlin, Pegasus Communications Corporation, EVP, Business
Affairs & Capital Markets . Marshall Pagon, Pegasus Communications Corporation, Chairman & CEO . Ted Lodge, Pegasus Communications Corporation, President & COO . Joseph Pooler, Pegasus Communications Corporation, SVP, Finance & Controller . Rory Lindgren, Pegasus Communications Corporation, EVP, Operations
3Q03 consolidated revenues came in at $214.7m. 3Q03 consolidated loss from operations came in at $4.9m. 3Q03 DBS revenues came in at $107m, a decrease of 4% from 3Q02. Q&A Focus: EchoStar, NRTC, DirecTV, DBS, ARPU, programming costs, and guidance.
A. Key Data From Call 1. 3Q03 DBS revenues = $107m. 2. 3Q03 avg. revenue per subscriber = $56.83. 3. 3Q03 other subscriber-related expenses = $47.7m. 4. 3Q03 total subscriber acquisition costs = $24.6m.
5. 3Q03 avg. subs = 1,214,000. 6. 3Q03 churn = 75,000. 7. 3Q03 cash = $60.7m. 8. 3Q03 total debt = $1.366b.
S1. Review (M.P.) 1. Financial & Balance Sheet Activity Review:
1. One of PGTV's 2003 objectives was to completely redo the
liability side of the balance sheet of the operating co., Pegasus Media & Communications and, thereby, extend its amortization and increase financial flexibility. 1. PGTV has achieved that goal. 2. In 3Q03, PGTV retired at par, Pegasus Media & Communications
senior subordinated notes due 2005. 3. Tranche Deed:
1. In addition, in Oct., PGTV issued $300m in a new Tranche deed to the existing credit facility, which Tranche is due in July 2006.
2. Proceeds of this Tranche were used to retire the revolving
line of credit, which was to expire in Oct. 2004 and to retire all of the maturities of the Tranche's B&C due in 2004 and in 1Q05.
3. In the process, PGTV has established a healthy relationship
with Bank of America. 4. As a result, Pegasus Media & Communications no longer has any indebtedness other than that outstanding under its bank credit facility and has no meaningful amortization requirements until 2Q05 and 3Q05, when approx. $95m will become due. 5. PGTV is confident that those maturities can be discharged through a combination of the internally generated cash and asset dispositions.
6. PGTV does not believe that it will need to undertake additional financing for Pegasus Media & Communications until the summer of 2006. 4. Other Details: 1. The results of one of 2003 goals is to extend the maturities of the Pegasus Satellite Communications indebtedness and to reduce the weighed avg. cost of capital on that
indebtedness. 1. PGTV has also made meaningful progress to these goals. 2. Over the summer, PGTV exchanged approx. $170m of Pegasus
Satellite Communications senior notes with maturities in 2005, 2006, and 2007 for a slightly lower amount of the Pegasus Satellite Communications, 11.25 notes due in 2010. 3. PGTV also issued $100m in Pegasus Satellite Communication senior secured notes due in 2009. 1. The cumulative effects of these steps has been to extend
the avg. life of the Pegasus Satellite Communications indebtedness by 18 months and to reduce the weighted avg. interest cost by almost 50 BP. 4. PGTV's earliest Pegasus Satellite Communications maturity is now in 3Q05 in the amount of $80m. 5. PGTV expects to address this maturity through a combination of continuing exchanges and refinancing.
S2. 3Q03 Operational Performance (M.P.) 1. Details: 1. PGTV results continued the trends it has experienced over the last 4-6 quarters with continuing improvements in the composition of its subscriber base manifest in increasing ARPU and decreasing bad debt and involuntary churn, and continuing challenges in the area of voluntary churn arising in television markets where EchoStar offers local broadcast stations and DirecTV does not. 2. 3Q03 growth additions in ARPU were somewhat better than the co. expected. 3. Churn was pretty much in line, while the pre-marketing cash flow margin was a little bit lighter than expected. 4. Margin was affected by $5m increase in other subscriber-related expenditures. 1. Approx. 1/3 of this increase was attributable to access card swapouts with the remainder due to increased retention and upgrade expenditures. 5. PGTV believes that the execution in this area was looser than expected and anticipates to do better in 4Q03. 1. As a result, 4Q03 pre-market cash flow margin will return to levels characteristic of prior qtr. 2. DirecTV Disputes:
1. PGTV was clearly surprised that NRTC decided to seek a
separate settlement with DirecTV. 2. Obviously, PGTV was disappointed that they did so without consultation with their members and patrons. 3. PGTV does not believe that their proposed settlement serves the best interest of their members and patrons. 4. However, while the co. is disappointed in NRTC and their proposed settlement with DirecTV, Judge Baird has made it clear that the PGTV's rights to distribute DirecTV are unaffected by that proposed settlement. 1. The claims for judicial resolution of breaches to those rights will be decided in Federal Court next year, if they are not settled by agreement between PGTV and DirecTV.
5. Therefore, while events in this litigation over the summer
were a disappointment relative to the co.'s expectation. 1. PGTV has adjusted and look forward to the resolution of these issues next year. 6. The co.'s clear preference would be to resolve this by agreement but in the absence of a settlement that is fair and equitable to all of the stake holders, PGTV has no reservation about presenting the case to a judge and jury and relying on their good judgment. 7. Hughes Electronics:
1. In the next 30-90 days, Hughes Electronics sale will be complete.
8. News Corporation: 1. All of DirecTV's current mgt. will be changed when News Corporation assumes control. 2. It's likely that News' vision for DirecTV will differ substantially from that of current mgt. 1. It's likely that there will therefore be significant
change in both the focus and operations of DirecTV over the next 12 months. 3. While it's unclear at this time what those changes may be, it's likely that they will become clear within the first few months after control …