<PAGE>
Registration No. 333-23595
Prospectus Supplement filed pursuant to Rule 424(b)(3)
PEGASUS COMMUNICATIONS CORPORATION
Supplement No. 2
dated November 14, 1997
to
Prospectus for 366,464 Shares of Class A Common Stock
dated March 26, 1997
-----------------------
Unless otherwise defined, all terms used herein but not otherwise
defined shall have the same meaning as in the March 26, 1997 Prospectus.
The following information supplements the disclosure found in the Prospectus:
Completed DBS Acquisitions. From January 1, 1997 to November 7, 1997,
Pegasus Communications Corporation ("Pegasus" and together with its direct and
indirect subsidiaries, the "Company") acquired from 24 independent DIRECTV(R)
("DIRECTV") providers the rights to provide DIRECTV programming in certain
rural areas of 23 states and related assets (the "Completed DBS
Acquisitions"). Total consideration for the acquisitions was approximately
$160 million, which, depending upon the particular transaction, consisted of
cash, promissory notes, shares of Class A Common Stock, warrants to purchase
Class A Common Stock, preferred stock of a subsidiary and/or assumed
liabilities.
One of the Completed DBS Acquisitions involved the acquisition of
territories and related assets from an entity controlled by Donald W. Weber, a
director of Pegasus. The total consideration for this acquisition was
approximately $13.1 million (subject to certain adjustments) and consisted of
approximately $6.4 million in cash and $6.7 million in shares of Class A
Common Stock.
Senior Notes Offering. On October 21, 1997, the Company consummated a
private offering (the "Senior Notes Offering") of $115.0 million aggregate
principal amount of senior notes, bearing interest at 9 5/8% per annum (the
"Senior Notes"). The Senior Notes Offering was made in reliance on Rule 144A
and other registration exemptions under the Securities Act of 1933, as amended
(the "Act"). The Company used the net proceeds of the Senior Notes Offering to
repay in full and terminate all commitments under the existing credit facility
of Pegasus Satellite Holdings, Inc. ("PSH"). The Company anticipates using the
remaining net proceeds to finance direct broadcast satellite television
("DBS") acquisitions.
Pending DBS Acquisitions. As of October 20, 1997, the Company had
entered into letters of intent or definitive agreements to acquire DIRECTV
distribution rights and related assets from five independent providers of
DIRECTV services (the "Pending DBS Acquisitions"). In the aggregate, the
consideration for the Pending DBS Acquisitions is approximately $18.1 million
and consists of $10.4 million of cash and $7.7 million in promissory notes.
When negotiating the price of the Pending DBS Acquisitions, the Company takes
into account such factors as the number of subscribers, the mix between cabled
and uncabled households in the service territory, competition, current DBS
penetration rates, the structure of the acquisition, and the form of
consideration. The cash portion of certain of the Pending DBS Acquisitions
will be paid from proceeds of the Senior Notes Offering.
Each of the Pending DBS Acquisitions for which there is only a letter
of intent is subject to negotiation of a definitive agreement, and all of the
Pending DBS Acquisitions are subject, if not already obtained, to the prior
approval of Hughes Electronics Corporation or one of its subsidiaries
("Hughes") and the National Rural Telecommunications Cooperative ("NRTC"). In
addition to these conditions, each of the Pending DBS Acquisitions will be
subject to conditions typical in acquisitions of this nature, certain of which
conditions, like the Hughes and NRTC consents, may be beyond the Company's
control. There can be no assurance that definitive agreements will be entered
into with respect to all of the Pending DBS Acquisitions or, if entered into,
that all or any of the Pending DBS Acquisitions will be completed.
<PAGE>
Subsidiaries Combination. Prior to October 21, 1997, the Company had
two principal operating subsidiaries: Pegasus Media & Communications, Inc.
("PM&C") and PSH. Upon consummation of the Senior Notes Offering, PM&C
acquired the assets of PSH (the "Subsidiaries Combination"), which assets
consisted of the stock of its subsidiaries that hold the rights to all of the
Company's DBS territories. As a result of the Subsidiaries Combination, PM&C
is the direct or indirect parent of all of the Company's subsidiaries that
operate the Company's TV, DBS and cable businesses.
New Credit Facility. By the end of 1997, PM&C will enter into a
$180.0 million six-year, secured, reducing revolving credit facility (the "New
Credit Facility"). Borrowings under the New Credit Facility are available for
acquisitions, subject to the approval of the lenders in certain circumstances,
working capital and general corporate purposes. Concurrently with the closing
of the New Credit Facility, PM&C's existing credit facility will be repaid in
full and the commitments thereunder will be terminated.
Acquisition of Digital Television Services, Inc. Pegasus entered into
an agreement in principle (the "Agreement in Principle") dated as of November
5, 1997 to acquire Digital Television Services, Inc. ("DTS"), the second
largest independent provider of DIRECTV programming, for approximately 5.5
million shares of Pegasus' Class A Common Stock (the "DTS Acquisition"). DTS'
pro forma net debt was approximately $140 million as of September 30, 1997.
Upon completion of the DTS Acquisition, DTS will become a wholly owned
subsidiary of Pegasus. After giving effect to certain pending DTS
acquisitions, DTS serves approximately 120,000 DIRECTV subscribers in ten
states in territories consisting of approximately 1.7 million television
households (including approximately 440,000 households not served by cable).
After giving effect to the DTS Acquisition and certain pending acquisitions,
the Company will serve approximately 250,000 DIRECTV subscribers in 33 states
in territories consisting of approximately four million television households
(including approximately one million households not served by cable).
The transaction is expected to be completed in the first quarter of
1998 and is subject, among other things, to the execution of a definitive
agreement, to the approval of Pegasus' and DTS' Boards of Directors and
Pegasus' stockholders, consents from the NRTC, DIRECTV, Inc., and DTS'
lenders, and other conditions customary in transactions of this nature.
The Agreement in Principle contemplates the granting of certain
registration rights to DTS' stockholders and the execution of a Voting
Agreement among Marshall W. Pagon, Pegasus' President and Chief Executive
Officer, certain affiliates of Mr. Pagon, and certain stockholders of DTS. The
Voting Agreement will provide for an increase in the size of Pegasus' Board of
Directors to nine members consisting of three directors appointed by certain
stockholders of DTS, three directors designated by Mr. Pagon, and three
independent directors.
Sale of New England Cable System. On November 6, 1997, Pegasus Cable
Television, Inc., a subsidiary of Pegasus, entered into a letter of intent
with Avalon Partners & Associates, LLC ("Avalon") to sell its New England
cable systems, which consist of five headends serving 13 towns in Connecticut
and Massachusetts. As of September 30, 1997, Pegasus' New England cable
systems served approximately 15,350 subscribers. The consideration for the
sale will be based upon the twelve month trailing location cash flow of the
systems measured as of the month-end prior to closing but not less than $28
million or more than $31 million. As of September 30, 1997, Pegasus' New
England cable systems had trailing location cash flow of approximately $3.0
million. In addition to being subject to the negotiation of a definitive
agreement, consents from regulatory agencies, including local franchise
authorities, and the approval of Pegasus' Board of Directors, it is
anticipated that the sale will also be subject to conditions customary in
transactions of this nature.
2
