<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1999
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from__________ to __________
Commission File Number 33-95042
--------
PEGASUS MEDIA & COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 23-2778525
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
c/o Pegasus Communications Management Company;
225 City Line Avenue, Suite 200, Bala Cynwyd, PA 19004
------------------------------------------------ -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (888) 438-7488
--------------
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes_X_ No___
Number of shares of each class of the Registrant's common stock
outstanding as of November 5, 1999:
Class A, Common Stock, $0.01 par value 161,500
Class B, Common Stock, $0.01 par value 8,500
The Registrant meets the conditions set forth in General Instruction H
(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.
<PAGE>
PEGASUS MEDIA & COMMUNICATIONS, INC.
Form 10-Q
Table of Contents
For the Quarterly Period Ended September 30, 1999
Page
----
Part I. Financial Information
Item 1 Combined Financial Statements
Combined Balance Sheets
December 31, 1998 and September 30, 1999 3
Combined Statements of Operations
Three months ended September 30, 1998 and 1999 4
Combined Statements of Operations
Nine months ended September 30, 1998 and 1999 5
Combined Statements of Cash Flows
Nine months ended September 30, 1998 and 1999 6
Notes to Combined Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Part II. Other Information
Item 5 Other Information 26
Item 6 Exhibits and Reports on Form 8-K 26
Signature 28
2
<PAGE>
Pegasus Media & Communications, Inc.
Combined Balance Sheets
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $22,706,767 $17,838,837
Restricted cash 1,000,000 -
Accounts receivable, less allowance for doubtful
accounts of $384,000 and $537,000, respectively 16,736,558 19,569,605
Inventory 4,693,450 6,297,273
Program rights 3,156,715 3,962,351
Deferred taxes 2,602,453 2,102,277
Net advances to affiliates - 4,342,245
Prepaid expenses and other 722,420 4,495,468
------------- -------------
Total current assets 51,618,363 58,608,056
Property and equipment, net 28,785,294 36,713,382
Intangible assets, net 369,745,145 443,161,616
Program rights 3,428,382 6,234,095
Deferred taxes 7,167,379 6,368,396
Investment in affiliate - 4,828,900
Deposits and other 872,386 1,071,413
------------ ------------
Total assets $461,616,949 $556,985,858
============ ============
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 10,332,061 $ 10,016,397
Accounts payable 3,246,132 4,430,682
Accrued interest 6,188,829 3,430,883
Accrued satellite programming, fees and commissions 13,058,116 23,477,526
Accrued expenses 10,711,030 11,505,284
Current portion of program rights payable 2,431,515 4,048,455
----------- ------------
Total current liabilities 45,967,683 56,909,227
Long-term debt 124,812,182 178,935,697
Net advances from affiliates 8,880,953 -
Program rights payable 2,472,367 4,771,662
Deferred taxes 14,315,249 13,172,061
----------- ------------
Total liabilities 196,448,434 253,788,647
----------- ------------
Commitments and contingent liabilities - -
Minority interest 3,000,000 3,000,000
Common stockholder's equity:
Class A common stock; $0.01 par value; 230,000 shares
authorized; 161,500 issued and outstanding 1,615 1,615
Class B common stock; $0.01 par value; 20,000 shares
authorized; 8,500 issued and outstanding 85 85
Additional paid-in capital 314,010,492 414,546,440
Deficit (51,843,677) (114,350,929)
------------ -------------
Total stockholder's equity 262,168,515 300,197,211
------------ -------------
Total liabilities and stockholder's equity $461,616,949 $556,985,858
============ ============
</TABLE>
See accompanying notes to combined financial statements
3
<PAGE>
Pegasus Media & Communications, Inc.
Combined Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------
1998 1999
------------- ------------
(unaudited)
<S> <C> <C>
Net revenues:
DBS $25,270,812 $46,392,028
Broadcast 7,879,806 8,919,845
Cable 2,847,826 6,221,682
----------- ------------
Total net revenues 35,998,444 61,533,555
Operating expenses:
DBS
Programming, technical, general and administrative 17,720,539 32,549,175
Marketing and selling 7,187,863 25,505,102
Incentive compensation 250,000 200,000
Depreciation and amortization 8,239,836 10,632,083
Broadcast
Programming, technical, general and administrative 4,184,604 5,764,515
Marketing and selling 1,255,995 1,369,005
Incentive compensation 112,404 -
Depreciation and amortization 748,637 1,299,108
Cable
Programming, technical, general and administrative 1,507,379 3,181,813
Marketing and selling 81,629 218,878
Incentive compensation 4,895 134,543
Depreciation and amortization 1,075,587 2,002,655
Corporate expenses 916,861 1,171,099
Corporate depreciation and amortization 154,490 175,550
----------- ------------
Loss from operations (7,442,275) (22,669,971)
Interest expense (4,530,075) (4,367,574)
Interest income 277,709 50,487
Other income (expense), net 51,475 (208,532)
Gain on sale of cable systems 24,726,432 -
----------- ------------
Income (loss) before income taxes 13,083,266 (27,195,590)
Provision for income taxes 50,000 221,443
----------- ------------
Net income (loss) $13,033,266 ($27,417,033)
=========== ============
</TABLE>
See accompanying notes to combined financial statements
4
<PAGE>
Pegasus Media & Communications, Inc.
Combined Statements of Operations
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
1998 1999
----------- ------------
(unaudited)
<S> <C> <C>
Net revenues:
DBS $63,960,864 $118,862,595
Broadcast 23,417,652 26,400,898
Cable 11,819,324 14,870,093
----------- ------------
Total net revenues 99,197,840 160,133,586
Operating expenses:
DBS
Programming, technical, general and administrative 44,147,001 82,448,058
Marketing and selling 15,439,864 54,645,557
Incentive compensation 985,000 795,000
Depreciation and amortization 22,297,202 30,617,922
Broadcast
Programming, technical, general and administrative 12,265,031 15,910,236
Marketing and selling 4,217,521 4,447,811
Incentive compensation 144,457 202,409
Depreciation and amortization 3,257,382 3,770,940
Cable
Programming, technical, general and administrative 6,047,476 7,595,791
Marketing and selling 268,350 504,216
Incentive compensation 168,500 195,331
Depreciation and amortization 4,003,678 5,025,585
Corporate expenses 2,354,963 3,200,746
Corporate depreciation and amortization 453,470 525,488
----------- ------------
Loss from operations (16,852,055) (49,751,504)
Interest expense (11,352,066) (12,196,850)
Interest income 397,964 211,692
Other expense, net (152,491) (364,147)
Gain on sale of cable systems 24,726,432 -
----------- ------------
Loss before income taxes (3,232,216) (62,100,809)
Provision for income taxes 175,000 406,443
----------- ------------
Net loss ($3,407,216) ($62,507,252)
=========== ============
</TABLE>
See accompanying notes to combined financial statements
5
<PAGE>
Pegasus Media & Communications, Inc.
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------
1998 1999
----------- ------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($3,407,216) ($62,507,252)
Adjustments to reconcile net loss
to net cash used for operating activities:
Depreciation and amortization 30,011,732 39,939,935
Program rights amortization 1,914,072 2,460,368
Accretion on discount of bonds 296,915 298,349
Stock incentive compensation 1,297,957 1,192,740
Gain on sale of cable systems (24,726,432) -
Bad debt expense 1,148,605 2,985,920
Change in assets and liabilities:
Accounts receivable (3,408,898) (5,329,725)
Inventory (2,579,269) (1,432,823)
Prepaid expenses and other (109,947) (3,698,640)
Accounts payable and accrued expenses (1,261,570) 11,744,403
Accrued interest (2,241,969) (2,757,946)
Deposits and other 59,564 (194,587)
----------- ------------
Net cash used for operating activities (3,006,456) (17,299,258)
----------- ------------
Cash flows from investing activities:
Acquisitions (89,815,402) (104,064,329)
Cash acquired from acquisitions 171,900 5,486
Capital expenditures (5,318,664) (8,950,220)
Purchase of intangible assets (3,612,262) (2,109,611)
Payments for programming rights (1,597,782) (2,155,482)
Proceeds from sale of cable systems 30,132,826 -
Investment in affiliate - (4,828,900)
----------- ------------
Net cash used for investing activities (70,039,384) (122,103,056)
----------- ------------
Cash flows from financing activities:
Repayments of long-term debt (5,514,004) (9,589,237)
Borrowings on bank credit facilities 81,500,000 108,400,000
Repayments of bank credit facilities - (50,000,000)
Net contributions by Parent 20,522,254 98,038,080
Net advances to/from affiliates (9,845,583) (13,223,198)
Restricted cash (600,000) 1,000,000
Capital lease repayments (182,085) (91,261)
----------- ------------
Net cash provided by financing activities 85,880,582 134,534,384
----------- ------------
Net increase (decrease) in cash and cash equivalents 12,834,742 (4,867,930)
Cash and cash equivalents, beginning of year 17,010,315 22,706,767
----------- ------------
Cash and cash equivalents, end of period $29,845,057 $17,838,837
=========== ============
</TABLE>
See accompanying notes to combined financial statements
6
<PAGE>
PEGASUS MEDIA & COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. The Company:
Pegasus Media & Communications, Inc. ("Pegasus" or together with its
subsidiaries, the "Company") operates in growing segments of the media industry
and is a direct subsidiary of Pegasus Communications Corporation ("PCC" or the
"Parent"). Pegasus' significant operating subsidiaries are Pegasus Broadcast
Television, Inc. ("PBT"), Pegasus Cable Television, Inc. ("PCT") and Pegasus
Satellite Television, Inc. ("PST").
Pegasus' subsidiaries provide direct broadcast satellite television
("DBS") services to customers in certain rural areas of the United States; own
and/or program broadcast television ("Broadcast" or "TV") stations affiliated
with the Fox Broadcasting Company ("Fox"), United Paramount Network ("UPN") and
The WB Television Network ("WB"); and own and operate cable television ("Cable")
systems that provide service to individual and commercial subscribers in Puerto
Rico.
2. Basis of Presentation:
The accompanying unaudited combined financial statements have been
prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The financial statements include the accounts of Pegasus
and all of its subsidiaries and the accounts of Pegasus Development Corporation
("PDC"). All intercompany transactions and balances have been eliminated.
Certain amounts for 1998 have been reclassified for comparative purposes.
The unaudited combined financial statements reflect all adjustments
consisting of normal recurring items which are, in the opinion of management,
necessary for a fair presentation, in all material respects, of the financial
position of the Company and the results of its operations and its cash flows for
the interim period. For further information, refer to the combined financial
statements and footnotes thereto for the year ended December 31, 1998 included
in the Company's Annual Report on Form 10-K for the year then ended.
PDC, a subsidiary of PCC, provided capital for various satellite
initiatives such as subscriber acquisition costs from October 1, 1997 through
March 31, 1998. The accounts of PDC have been included in the accompanying
combined financial statements since subscriber acquisition costs are an integral
part of the DBS operations and their inclusion is necessary for a fair
presentation of the financial position of the Company and the results of its
operations and its cash flows.
3. Common Stock:
In October 1996, the Company became a direct subsidiary of PCC as a
result of PCC's initial public offering of its Class A Common Stock. In December
1996, as a result of a registered exchange offer made to holders of Pegasus'
Class B Common stock, Pegasus became a wholly owned subsidiary of PCC.
The Company's ability to pay dividends on its Common Stock is subject
to certain restrictions.
7
<PAGE>
PEGASUS MEDIA & COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
4. Long-Term Debt:
<TABLE>
<CAPTION>
Long-term debt consists of the following : December 31, September 30,
1998 1999
---- ----
<S> <C> <C>
Series B Notes payable by Pegasus, due 2005, interest at
12.5%, payable semi-annually in arrears on January 1
and July 1, net of unamortized discount of
$2,621,878 and $2,323,529 as of December 31, 1998
and September 30, 1999, respectively...................... $ 82,378,122 $ 82,676,471
Senior six-year $180.0 million revolving credit facility,
payable by Pegasus, interest at the Company's option at
either the bank's base rate plus an applicable margin or
LIBOR plus an applicable margin........................... 27,500,000 85,900,000
Mortgage payable, due 2000, interest at 8.75%................. 454,965 436,783
Sellers' notes, due 1999 to 2005, interest at 3% to 8%........ 24,376,107 19,595,052
Capital leases and other...................................... 435,049 343,788
------------ ------------
135,144,243 188,952,094
Less current maturities....................................... 10,332,061 10,016,397
------------ ------------
Long-term debt................................................ $124,812,182 $178,935,697
============ ============
</TABLE>
The Company maintains a $180.0 million senior revolving credit facility
(the "PM&C Credit Facility") which expires in 2003 and is collateralized by
substantially all of the assets of Pegasus and its subsidiaries. The PM&C Credit
Facility is subject to certain financial covenants as defined in the loan
agreement, including a debt to adjusted cash flow covenant. As of September 30,
1999, $29.7 million of stand-by letters of credit were issued pursuant to the
PM&C Credit Facility, including $14.5 million collateralizing certain of the
Company's outstanding sellers' notes.
The Company's 12.5% Series B Notes due 2005 (the "12.5% Series B
Notes") may be redeemed, at the option of the Company, in whole or in part, at
various points in time after July 1, 2000 at the redemption prices specified in
the indenture governing the 12.5% Series B Notes, plus accrued and unpaid
interest thereon.
The Company's indebtedness contain certain financial and operating
covenants, including restrictions on the Company's ability to incur additional
indebtedness, create liens and pay dividends.
5. Acquisitions:
In the first three quarters of 1999, the Company acquired, from twelve
independent DIRECTV(R) ("DIRECTV") providers, the rights to provide DIRECTV
programming in certain rural areas of Alabama, Colorado, Illinois, Indiana,
Minnesota, Nebraska, North Dakota, Ohio and Texas and the related assets in
exchange for total consideration of approximately $68.1 million, which consisted
of $61.8 million in cash, 12,339 shares of PCC's Class A Common Stock (amounting
to $550,000 at the time of issuance), warrants to purchase a total of 25,000
shares of PCC's Class A Common Stock (amounting to $814,000 at the time of
issuance), $4.7 million in promissory notes and $252,000 in assumed net
liabilities.
Effective March 31, 1999, the Company purchased a cable system serving
Aguadilla, Puerto Rico and neighboring communities for a purchase price of
approximately $42.1 million in cash. At March 31, 1999, the Aguadilla cable
system served approximately 21,000 subscribers and passed approximately 81,000
of the 90,000 homes in the franchise area. The Aguadilla cable system is
contiguous to the Company's other Puerto Rico cable system and the Company has
consolidated the Aguadilla cable system with its existing cable system.
8
<PAGE>
PEGASUS MEDIA & COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
6. Supplemental Cash Flow Information:
Significant noncash investing and financing activities are as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1999
---- ----
<S> <C> <C>
Barter revenue and related expense............................................. $4,861,900 $5,656,907
Acquisition of program rights and assumption of related program
payables....................................................................... 4,828,024 6,071,717
Acquisition of plant under capital leases....................................... 36,500 -
Capital contribution and related acquisition of intangibles..................... 899,959 1,363,592
Notes payable and related acquisition of intangibles............................ 20,465,833 4,690,000
Deferred taxes, net and related acquisition of intangibles...................... - 29,029
</TABLE>
For the nine months ended September 30, 1998 and 1999, the Company paid
cash for interest in the amount of $13.6 million and $15.0 million,
respectively. The Company paid no federal income taxes for the nine months ended
September 30, 1998 and 1999.
7. Commitments and Contingent Liabilities:
Legal Matters:
In connection with the pending license renewal application of one of
the Company's television stations, it has come to the attention of the Company
that, at that station, there were violations of the FCC's rules establishing
limits on the amount of commercial material in programs directed to children.
The Company has been sued in Indiana for allegedly charging DBS
subscribers excessive fees for late payments. The plaintiffs, who purport to
represent a class consisting of residential DIRECTV customers in Indiana, seek
unspecified damages for the purported class and modification of the Company's
late-fee policy. The Company is advised that similar suits have been brought
against DIRECTV and various cable operators in other parts of the United States.
From time to time the Company is involved with claims that arise in the
normal course of business.
In the opinion of management, the ultimate liability with respect to
these claims and matters will not have a material adverse effect on the combined
operations, liquidity, cash flows or financial position of the Company.
8. Industry Segments:
The Company operates in growing segments of the media industry: DBS,
Broadcast and Cable. DBS consists of providing direct broadcast satellite
television services to customers in certain rural areas of 31 states. Broadcast
consists of nine television stations affiliated with Fox, UPN and the WB, all
located in the eastern United States. Cable consists of providing cable
television services to individual and commercial subscribers in Puerto Rico.
9
<PAGE>
PEGASUS MEDIA & COMMUNICATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
8. Industry Segments: - (Continued)
All of the Company's revenues are derived from external customers.
Capital expenditures for the Company's DBS segment were $386,000 and $1.6
million for the nine months ended September 30, 1998 and 1999, respectively.
Capital expenditures for the Company's Broadcast segment were $3.6 million and
$3.0 million for the nine months ended September 30, 1998 and 1999,
respectively. Capital expenditures for the Company's Cable segment were $1.3
million and $4.4 million for the nine months ended September 30, 1998 and 1999,
respectively. Identifiable total assets for the Company's DBS segment were
$330.3 million and $378.1 million as of December 31, 1998 and September 30,
1999, respectively. Identifiable total assets for the Company's Broadcast
segment were $67.0 million and $70.7 million as of December 31, 1998 and
September 30, 1999, respectively. Identifiable total assets for the Company's
Cable segment were $46.9 million and $88.1 million as of December 31, 1998 and
September 30, 1999, respectively.
9. Other Events:
In October 1999, the Company acquired, from two independent DIRECTV
providers, the rights to provide DIRECTV programming in certain rural areas of
Minnesota and the related assets in exchange for total consideration of
approximately $4.6 million, which consisted of $2.8 million in cash and a $1.8
million promissory note, payable over four years.
10. Subsidiary Guarantees:
The 12.5% Series B Notes are guaranteed on a full, unconditional,
senior subordinated basis, jointly and severally by each of the wholly owned
direct and indirect subsidiaries of Pegasus with the exception of certain
subsidiaries as described below (the "Guarantor Subsidiaries"). WTLH License
Corp., WTLH, Inc., Pegasus Anasco Holdings, Inc., Pegasus Satellite Development
Corporation ("PSDC") and Pegasus Cable Television of Connecticut, Inc.
("PCT-CT"), all of which are direct or indirect subsidiaries of Pegasus, are not
guarantors of the 12.5% Series B Notes ("Non-guarantor Subsidiaries"). As the
result of these subsidiaries not being guarantors of the 12.5% Series B Notes,
the following condensed combining financial statements have been provided. The
Company believes separate financial statements and other disclosures concerning
the Guarantor Subsidiaries are not deemed material to investors.
10
<PAGE>
PEGASUS MEDIA & COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
10. Subsidiary Guarantees:-(Continued)
Condensed Combined Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
Guarantor Non-guarantor
As of September 30, 1999 Subsidiaries Subsidiaries Pegasus Eliminations
------------ ------------- ------- ------------
Assets:
<S> <C> <C> <C> <C>
Cash and cash equilalents $ 16,877 $ 479 $441
Accounts receivable, net 16,722
Other current assets 21,191 8
-------- -------- -------- ---------
Total current assets 54,790 487 441
Property and equipment, net 36,713
Intangible assets, net 437,116 2,491 3,102
Other assets 6,797 6,452
Investment in subsidiaries and affiliates 387,898 ($387,898)
-------- -------- -------- ---------
Total assets $535,416 $ 2,978 $397,893 ($387,898)
======== ======== ======== =========
Liabilities and equity:
Current portion of long-term debt $ 10,016
Accounts payable 4,438
Other current liabilities 42,492 ($33) $ 2,906 ($2,906)
-------- -------- -------- ---------
Total current liabilities 56,946 (33) 2,906 (2,906)
Long-term debt 476,823 4,429 82,676 (384,992)
Other liabilities 18,811 (12,326) 11,459
-------- -------- -------- ---------
Total liabilities $ 52,580 (7,930) 97,041 (387,898)
Minority interest 3,000
Total equity (deficit) (20,164) 10,908 300,852
-------- -------- -------- ---------
Total liabilities and equity $535,416 $ 2,978 $397,893 ($387,898)
======== ======== ======== =========
As of December 31, 1998
Assets:
Cash and cash equivalents $ 14,143 $ 3,092 $ 5,318
Accounts receivable, net 13,631
Other current assets 12,166 8
-------- -------- -------- ---------
Total current assets 39,940 3,100 5,318
Property and equipment, net 28,783
Intangible assets, net 363,345 2,643 3,591
Other assets 11,202 (158)
Investments in subsidiaries and affiliates 340,753 ($340,753)
-------- -------- -------- ---------
Total assets $443,270 $ 5,743 $349,504 ($340,753)
======== ======== ======== =========
Liabilities and total equity:
Current portion of long-term debt $ 10,332
Accounts payable 3,246
Other current liabilities 32,417 ($29) $ 5,595 ($5,595)
-------- -------- -------- ---------
Total current liabilities 45,995 (29) 5,595 (5,595)
Long-term debt 373,163 4,429 82,378 (335,158)
Other liabilities 35,140 (9,814) 342
-------- -------- -------- ---------
Total liabilities 454,298 (5,414) 88,315 (340,753)
Minority interest 3,000
Total equity (deficit) (14,028) 11,157 261,189
-------- -------- -------- ---------
Total liabilities and equity $443,270 $5,743 $349,504 ($340,753)
======== ======== ======== =========
</TABLE>
<PAGE>
[RESTUBED FOR TABLE ABOVE]
<TABLE>
<CAPTION>
Pegasus
Pegasus Development
As of September 30, 1999 Subtotal Corporation Eliminations Totals
-------- ----------- ------------ ------
Assets:
<S> <C> <C> <C> <C>
Cash and cash equilalents $ 17,797 $ 42 $ 17,839
Accounts receivable, net 16,722 2,848 19,570
Other current assets 21,199 21,199
-------- ------ ------------ --------
Total current assets 55,718 2,890 58,608
Property and equipment, net 36,713 36,713
Intangible assets, net 442,709 453 443,162
Other assets 13,249 425 13,674
Investment in subsidiaries and affiliates 4,829 4,829
-------- ------ ------------ --------
Total assets $548,389 $8,597 $556,986
======== ====== ============ ========
Liabilities and equity:
Current portion of long-term debt $ 10,016 $ 10,016
Accounts payable 4,438 ($7) 4,431
Other current liabilities 42,459 3 42,462
-------- ------ ------------ --------
Total current liabilities 56,913 (4) 56,909
Long-term debt 178,936 178,936
Other liabilities 17,944 17,944
-------- ------ ------------ --------
Total liabilities 253,793 (4) 253,789
Minority interest 3,000 3,000
Total equity (deficit) 291,596 8,601 300,197
-------- ------ ------------ --------
Total liabilities and equity $548,389 $8,597 $556,986
======== ====== ============ ========
As of December 31, 1998
Assets:
Cash and cash equivalents $ 22,553 $ 154 $ 22,707
Accounts receivable, net 13,631 3,106 16,737
Other current assets 12,174 12,174
-------- ------ ------------ --------
Total current assets 48,358 3,260 51,618
Property and equipment, net 28,783 2 28,785
Intangible assets, net 369,579 166 369,745
Other assets 11,044 425 11,469
Investments in subsidiaries and affiliates
-------- ------ ------------ --------
Total assets $457,764 $3,853 $461,617
======== ====== ============ ========
Liabilities and total equity:
Current portion of long-term debt $ 10,332 $ 10,332
Accounts payable 3,246 3,246
Other current liabilities 32,388 $ 2 32,390
-------- ------ ------------ --------
Total current liabilities 45,966 2 45,968
Long-term debt 124,812 124,812
Other liabilities 25,668 25,668
-------- ------ ------------ --------
Total liabilities 196,446 2 196,448
Minority interest 3,000 3,000
Total equity (deficit) 258,318 3,851 262,169
-------- ------ ------------ --------
Total liabilities and equity $457,764 $3,853 $461,617
======== ====== ============ ========
</TABLE>
11
<PAGE>
PEGASUS MEDIA & COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
10. Subsidiary Guarantees:-(Continued)
Condensed Combined Statements of Operations
For the Nine Months ended September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Guarantor Non-guarantor
Subsidiaries Subsidiaries Pegasus Eliminations
------------ ------------- ------- ------------
<S> <C> <C> <C> <C>
Total revenue $160,167 $ 2,021 ($2,054)
Total operating expenses 156,615 54,799 $ 522 (2,054)
-------- --------- --------- --------
Income (loss) from operations 3,552 (52,778) (522)
Interest expense 8,481 (13) 11,466 (7,737)
Other (165) 35 207
-------- --------- --------- --------
Income (loss) before income taxes (4,764) (52,800) (12,195) 7,737
Provision for income taxes 406
-------- --------- --------- --------
Net income (loss) ($5,170) ($52,800) ($12,195) $ 7,737
======== ========= ========= ========
</TABLE>
[RESTUBED FOR TABLE ABOVE]
<TABLE>
<CAPTION>
Pegasus
Pegasus Development
Subtotal Corporation Eliminations Totals
-------- ----------- ------------ ------
<S> <C> <C> <C> <C>
Total revenue $ 160,134 $160,134
Total operating expenses 209,882 $3 209,885
--------- -------- ------------ --------
Income (loss) from operations (49,748) (3) (49,751)
Interest expense 12,197 12,197
Other 77 76 153
--------- -------- ------------ --------
Income (loss) before income taxes (62,022) (79) (62,101)
Provision for income taxes 406 406
--------- -------- ------------ --------
Net income (loss) ($62,428) ($79) ($62,507)
========= ======== ============ ========
</TABLE>
<PAGE>
Condensed Combined Statements of Operations
For the Nine Months ended September 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Guarantor Non-guarantor
Subsidiaries Subsidiaries Pegasus Eliminations
------------ ------------- ------- ------------
<S> <C> <C> <C> <C>
Total revenue $ 97,575 $ 2,947 ($1,324)
Total operating expenses 100,296 12,754 $ 453 (1,324)
-------- -------- -------- -------
Income (loss) from operations (2,721) (9,807) (453)
Interest expense 8,695 47 10,310 (7,700)
Other (12,596) (12,478) 14
-------- -------- -------- -------
Income (loss) before income taxes 1,180 2,624 (10,777) 7,700
Provision for income taxes 175
-------- -------- -------- -------
Net income (loss) $ 1,005 $ 2,624 ($10,777) $ 7,700
======== ======== ======== =======
</TABLE>
[RESTUBED FOR ABOVE]
<TABLE>
<CAPTION>
Pegasus
Pegasus Development
Subtotal Corporation Eliminations Totals
-------- ----------- ------------ ------
<S> <C> <C> <C> <C>
Total revenue $ 99,198 $ 328 ($328) $ 99,198
Total operating expenses 112,179 4,199 (328) 116,050
-------- ------- ----- --------
Income (loss) from operations (12,981) (3,871) (16,852)
Interest expense 11,352 11,152
Other (25,060) 88 (24,972)
-------- ------- ----- --------
Income (loss) before income taxes 727 (3,959) (3,232)
Provision for income taxes 175 175
-------- ------- ----- --------
Net income (loss) $ 552 ($3,959) ($3,407)
======== ======= ===== ========
</TABLE>
12
<PAGE>
PEGASUS MEDIA & COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
10. Subsidiary Guarantees:-(Continued)
Condensed Combined Statements of Cash Flows
For the Nine Months ended September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Guarantor Non-guarantor
Subsidiaries Subsidiaries Pegasus Eliminations
------------ ------------- ------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($5,170) ($52,800) ($12,195) $7,737
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 39,263 152 522
Program rights amortization 2,460
Change in assets and liabilities:
Accounts receivable (5,588)
Accounts payable and accrued expenses 16,733 (4) (7,737)
Prepaids and other (3,699)
Other (1,554) 4,405
--------- -------- ------- ------
Net cash provided (used) by operating
activities 42,445 (52,652) (7,268)
Cash flows from investing activities:
Acquisitions (104,064)
Capital expenditures (8,952)
Purchase of intangible assets (1,787) (33)
Other $ 51,605 (53,755)
--------- -------- ------- ------
Net cash provided (used) for
investing activities (63,198) (53,788)
Cash flows from financing activities:
Proceeds from debt 108,400
Repayment of debt (59,680)
Other (25,233) 50,039 56,179
--------- -------- ------- ------
Net cash provided (used) by
financing activities 23,487 50,039 56,179
Net increase (decrease) in cash and
cash equivalents 2,734 (2,613) (4,877)
Cash and cash equivalents, beginning
of year 14,143 3,092 5,318
--------- -------- ------- ------
Cash and cash equivalents, end of period $16,877 $ 479 $ 441
========= ======== ======= ======
</TABLE>
<PAGE>
[RESTUBED FOR ABOVE]
<TABLE>
<CAPTION>
Pegasus
Pegasus Development
Subtotal Corporation Eliminations Totals
-------- ----------- ------------ ------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($62,428) ($79) ($62,507)
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 39,937 3 39,940
Program rights amortization 2,460 2,460
Change in assets and liabilities:
Accounts receivable (5,588) 258 (5,330)
Accounts payable and accrued expenses 8,992 (6) 8,986
Prepaids and other (3,699) (3,699)
Other 2,851 2,851
-------- ------ ----------- --------
Net cash provided (used) by operating
activities (17,475) 176 (17,299)
Cash flows from investing activities:
Acquisitions (104,064) (104,064)
Capital expenditures (8,952) 2 (8,950)
Purchase of intangible assets (1,820) (290) (2,110)
Other (2,150) (4,829) (6,979)
-------- ------ ----------- --------
Net cash provided (used) for
investing activities (116,986) (5,117) (122,103)
Cash flows from financing activities:
Proceeds from debt 108,400 108,400
Repayment of debt (59,680) (59,680)
Other 80,985 4,829 85,814
-------- ------ ----------- --------
Net cash provided (used) by
financing activities 129,705 4,829 134,534
Net increase (decrease) in cash and
cash equivalents (4,756) (112) (4,868)
Cash and cash equivalents, beginning
of year 22,553 154 22,707
-------- ------ ----------- --------
Cash and cash equivalents, end of period $ 17,797 $ 42 $ 17,839
======== ====== =========== ========
</TABLE>
13
<PAGE>
PEGASUS MEDIA & COMMUNICATIONS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
10. Subsidiary Guarantees:-(Continued)
Condensed Combined statements of Cash Flows
For the Nine Months ended September 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Guarantor Non-guarantor
Subsidiaries Subsidiaries Pegasus Eliminations
------------ ------------- ------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,005 $ 2,624 ($10,777) $7,700
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 29,008 551 453
Program rights amortization 1,914
Change in assets and liabilities:
Accounts receivable (908) 1
Accounts payable and accrued expenses 7,805 (2,135) (7,700)
Prepaids and other (96) 46
Other (10,980) (12,504) (2,554)
-------- ------- -------- ------
Net cash provided (used) by operating
activities 27,748 (11,417) (12,878)
Cash flows from investing activities:
Acquisitions (89,815)
Capital expenditures (5,051) (266)
Purchase of intangible assets (3,495) (25)
Other (6,000 15,182 7,525
-------- ------- -------- ------
Net cash provided (used) for
investing activities (92,361) 14,891 7,525
Cash flows from financing activities:
Proceeds from debt 81,500
Repayment of debt (2,612) (3,084)
Other (406) 13,682 (10,000)
-------- ------- -------- ------
Net cash provided (used) by
financing activities 78,482 10,598 (10,000)
Net increase (decrease) in cash and
cash equivalents 13,869 14,072 (15,353)
Cash and cash equivalents, beginning
of year 9,170 2,511 5,329
-------- ------- -------- ------
Cash and cash equivalents, end of period $ 23,039 $16,583 ($10,024)
======== ======= ======== ======
</TABLE>
<PAGE>
[RESTUBED FOR ABOVE]
<TABLE>
<CAPTION>
Pegasus
Development
Corporation Eliminations Totals
----------- ------------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($3,959) (3,407)
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 30,012
Program rights amortization 1,914
Change in assets and liabilities:
Accounts receivable (2,502) (3,409)
Accounts payable and accrued expenses (2,030)
Prepaids and other (50)
Other 2 (26,036)
------- ------------ -------
Net cash provided (used) by operating
activities (6,459) (3,006)
Cash flows from investing activities:
Acquisitions (89,815)
Capital expenditures (2) (5,319)
Purchase of intangible assets (92) (3,612)
Other 28,707
------- ------------ -------
Net cash provided (used) for
investing activities (94) (70,039)
Cash flows from financing activities:
Proceeds from debt 81,500
Repayment of debt (5,696)
Other 6,800 10,076
------- ------------ -------
Net cash provided (used) by
financing activities 6,800 85,880
Net increase (decrease) in cash and
cash equivalents 247 12,835
Cash and cash equivalents, beginning
of year 17,010
------- ------------ -------
Cash and cash equivalents, end of period $ 247 $29,845
======= ============ =======
</TABLE>
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Report contains certain forward-looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) and
information relating to us that are based on the beliefs of our management, as
well as assumptions made by and information currently available to our
management. When used in this Report, the words "estimate," "project,"
"believe," "anticipate," "intend," "expect" and similar expressions are intended
to identify forward-looking statements. Such statements reflect our current
views with respect to future events and are subject to unknown risks,
uncertainties and other factors that may cause actual results to differ
materially from those contemplated in such forward-looking statements. Such
factors include, among other things, the following: general economic and
business conditions, both nationally, internationally and in the regions in
which we operate; relationships with and events affecting third parties like
DIRECTV, Inc; demographic changes; existing government regulations and changes
in, or the failure to comply with government regulations; competition; the loss
of any significant numbers of subscribers or viewers; changes in business
strategy or development plans; technological developments and difficulties
(including any associated with the year 2000); the ability to attract and retain
qualified personnel; our significant indebtedness; the availability and terms of
capital to fund the expansion of our businesses; and other factors referenced in
this Report and in reports and registration statements filed by Pegasus and its
parent company, Pegasus Communications Corporation, from time to time with the
Securities and Exchange Commission. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as the date
hereof. We do not undertake any obligation to publicly release any revisions to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
In reliance upon General Instruction (H)(2)(a) of Form 10-Q, Pegasus is
providing the limited disclosure set forth below. Such disclosure requires us
only to provide a narrative analysis of the results of operations which explains
the reasons for material changes in the amount of revenue and expense items
between the most recent fiscal year-to-date period presented and the
corresponding year-to-date period in the preceding fiscal year. The following
discussion of the financial condition and results of operations of Pegasus
should be read in conjunction with the consolidated financial statements and
related notes which are included on pages 3-14 herein.
General
Pegasus Media & Communications, Inc. is:
o A wholly owned subsidiary of Pegasus Communications Corporation.
o An independent provider of DIRECTV with 407,000 subscribers at
October 31, 1999. We have the exclusive right to distribute DIRECTV
digital broadcast satellite services to approximately 3.1 million
rural households in 31 states. We distribute DIRECTV through the
Pegasus Communications retail network, a network in excess of 2,000
independent retailers.
o The owner or programmer of nine TV stations affiliated with either
Fox, UPN or the WB and the owner of a large cable system in Puerto
Rico serving approximately 54,000 subscribers.
DBS revenues are principally derived from monthly customer
subscriptions and pay-per-view services. Broadcast revenues are derived from the
sale of broadcast airtime to local and national advertisers. Cable revenues are
derived from monthly customer subscriptions, pay-per-view services, subscriber
equipment rentals and installation charges.
In this section we use the terms pre-marketing cash flow and location
cash flow. Pre-marketing cash flow is calculated by taking our earnings and
adding back the following expenses:
o interest;
15
<PAGE>
o income taxes;
o depreciation and amortization;
o non-cash charges, such as incentive compensation under Pegasus
Communication's restricted stock plan and 401(k) plans;
o corporate overhead; and
o DBS subscriber acquisition costs, which are sales and marketing
expenses incurred to acquire new DBS subscribers.
Location cash flow is pre-marketing cash flow less DBS subscriber
acquisition costs.
Pre-marketing cash flow and location cash flow are not, and should not
be considered, alternatives to income from operations, net income, net cash
provided by operating activities or any other measure for determining our
operating performance or liquidity, as determined under generally accepted
accounting principles. Pre-marketing cash flow and location cash flow also do
not necessarily indicate whether our cash flow will be sufficient to fund
working capital, capital expenditures, or to react to changes in Pegasus'
industry or the economy generally. We believe that pre-marketing cash flow and
location cash flow are important, however, for the following reasons:
o those who follow our industry frequently use them as measures of
financial performance and ability to pay debt service; and
o they are measures that our lenders, investors and we use to monitor
our financial performance and debt leverage.
Pegasus generally does not require new DBS customers to sign
programming contracts and, as a result, subscriber acquisition costs are
currently being charged to operations in the period incurred.
Results of Operations
Three months ended September 30, 1999 compared to three months ended September
30, 1998
Total net revenues for the three months ended September 30, 1999 were
$61.5 million, an increase of $25.5 million, or 71%, compared to total net
revenues of $36.0 million for the same period in 1998. The increase is primarily
due to an increase in DBS revenues of $21.1 million attributable to acquisitions
and internal growth in Pegasus' DBS subscriber base. Total operating expenses
for the three months ended September 30, 1999 were $84.2 million, an increase of
$40.8 million, or 94%, compared to total operating expenses of $43.4 million for
the same period in 1998. The increase is primarily due to an increase of $35.5
million in operating expenses attributable to the growth in Pegasus' DBS
business.
Total corporate expenses, including corporate depreciation and
amortization, were $1.3 million for the three months ended September 30, 1999,
an increase of $275,000, or 26%, compared to $1.1 million for the same period in
1998. The increase in corporate expenses is attributable to the growth in
Pegasus' business.
Interest expense was $4.4 million for the three months ended September
30, 1999, a decrease of $163,000, or 4%, compared to interest expense of $4.5
million for the same period in 1998. The decrease in interest expense is
primarily due to a decrease in sellers' notes associated with Pegasus' DBS
acquisitions. Interest income was $51,000 for the three months ended September
30, 1999, a decrease of $227,000, or 82%, compared to interest income of
$278,000 for the same period in 1998. The decrease in interest income is due to
lower average cash balances for the three months ended September 30, 1999
compared to the same period in 1998.
16
<PAGE>
Other expenses were $209,000 for the three months ended September 30,
1999, an increase of $260,000 compared to other income of $51,000 for the same
period in 1998. The increase is due to an increase in professional fees and
other non-operating expenses.
Pegasus sold its New England cable systems effective July 1, 1998 for
$30.1 million resulting in a nonrecurring gain of $24.7 million in the third
quarter of 1998.
The provision for income taxes was $221,000 for the three months ended
September 30, 1999, an increase of $171,000, or 343%, compared to $50,000 for
the same period in 1998.
DBS
Pegasus' DBS business has experienced significant growth. During the
last twelve months, Pegasus acquired, through acquisitions, approximately 43,000
subscribers and the exclusive DIRECTV distribution rights to approximately
378,000 households in rural areas of the United States. At September 30, 1999,
Pegasus had exclusive DIRECTV distribution rights to 3.1 million households and
392,000 subscribers as compared to 2.7 million households and 224,000
subscribers at September 30, 1998. Pegasus had 3.3 million households and
416,000 subscribers at September 30, 1999, including pending acquisitions. At
September 30, 1998, subscribers would have been 281,000, including pending and
completed acquisitions. Subscriber penetration increased from 8.6% at September
30, 1998 to 12.7% at September 30, 1999, including pending and completed
acquisitions.
Total DBS net revenues were $46.4 million for the three months ended
September 30, 1999, an increase of $21.1 million, or 84%, compared to DBS net
revenues of $25.3 million for the same period in 1998. The increase is primarily
due to an increase in the average number of subscribers in the third quarter of
1999 compared to the third quarter of 1998. The average monthly revenue per
subscriber was $44.94 for the three months ended September 30, 1999 compared to
$41.83 for the same period in 1998. Pro forma DBS net revenues, including
pending acquisitions at September 30, 1999, were $49.8 million, an increase of
$15.4 million, or 45%, compared to pro forma DBS net revenues of $34.4 million
for the same period in 1998.
Programming, technical, and general and administrative expenses were
$32.5 million for the three months ended September 30, 1999, an increase of
$14.8 million, or 84%, compared to $17.7 million for the same period in 1998.
The increase is attributable to significant growth in subscribers and territory
during the last twelve months. As a percentage of revenue, programming,
technical, and general and administrative expenses were 70.2% for the three
months ended September 30, 1999 compared to 70.1% for the same period in 1998.
Subscriber acquisition costs were $25.5 million for the three months
ended September 30, 1999, an increase of $18.3 million compared to $7.2 million
for the same period in 1998. Gross subscriber additions were 79,800 for the
three months ended September 30, 1999 compared to 20,800 for the same period in
1998. The total subscriber acquisition costs per gross subscriber addition were
$320 for the three months ended September 30, 1999 compared to $346 for the same
period in 1998. The decrease in subscriber acquisition costs per gross
subscriber addition is due to a decrease in promotional programming.
Incentive compensation, which is calculated based on increases in pro
forma location cash flow, was $200,000 for the three months ended September 30,
1999, a decrease of $50,000, or 20%, compared to $250,000 for the same period in
1998. The decrease resulted from a lower gain in pro forma location cash flow
during the third quarter of 1999 as compared to the third quarter of 1998.
Depreciation and amortization was $10.6 million for the three months
ended September 30, 1999, an increase of $2.4 million, or 29%, compared to $8.2
million for the same period in 1998. The increase in depreciation and
amortization is primarily due to an increase in the fixed and intangible asset
base as the result of DBS acquisitions that occurred during the last two years.
17
<PAGE>
Broadcast
During the three months ended September 30, 1999, Pegasus owned or
programmed nine broadcast television stations in six markets. Two new stations
were launched during the second half of 1998. Total net broadcast revenues for
the three months ended September 30, 1999 were $8.9 million, an increase of $1.0
million, or 13%, compared to net broadcast revenues of $7.9 million for the same
period in 1998. The increase is primarily attributable to an increase of
$429,000 in net broadcast revenues from the four stations launched in 1997 and
1998, a $394,000 increase in barter revenue and an increase in local and
national advertising sales.
Programming, technical, and general and administrative expenses were
$5.8 million for the three months ended September 30, 1999, an increase of $1.6
million, or 38%, compared to $4.2 million for the same period in 1998. The
increase is primarily due to an increase in expenses from the two new stations
launched in 1998 and an increase in news related expenses associated with the
launch of self-produced news in our Portland, Maine and Chattanooga, Tennessee
markets.
Marketing and selling expenses were $1.4 million for the three months
ended September 30, 1999, an increase of $113,000, or 9%, compared to $1.3
million for the same period in 1998. The increase in marketing and selling
expenses is due to an increase in promotional costs associated with the launch
of the new stations and news programs.
There was no incentive compensation, which is calculated based on
increases in pro forma location cash flow, for the three months ended September
30, 1999 compared to incentive compensation of $112,000 for the same period in
1998. No incentive compensation resulted from a decline in pro forma location
cash flow during the third quarter of 1999 compared to the third quarter of
1998.
Depreciation and amortization was $1.3 million for the three months
ended September 30, 1999, an increase of $551,000, or 74%, compared to $749,000
for the same period in 1998. The increase is due to capital expenditures
associated with the launch of the new stations and our news initiative.
Cable
Total net cable revenues were $6.2 million for the three months ended
September 30, 1999, an increase of $3.4 million, or 118%, compared to net cable
revenues of $2.8 million for the same period in 1998. The increase is primarily
attributable to the acquisition of the Aguadilla, Puerto Rico cable system
effective March 31, 1999. Net revenues derived from Pegasus' existing Puerto
Rico cable system were $3.6 million for the three months ended September 30,
1999, an increase of $760,000, or 27%, compared to net cable revenues of $2.8
million for the same period in 1998. The Aguadilla, Puerto Rico cable system
generated net revenues of $2.6 million for the three months ended September 30,
1999. The average monthly revenue per subscriber was $38.89 for the three months
ended September 30, 1999 compared to $32.71 for the same period in 1998. On a
pro forma basis, including the completed acquisition of the Aguadilla, Puerto
Rico cable system and the disposition of the New England cable systems, there
were 53,900 subscribers as of September 30, 1999 compared to 51,100 subscribers
as of September 30, 1998.
Programming, technical, and general and administrative expenses were
$3.2 million for the three months ended September 30, 1999, an increase of $1.7
million, or 111%, compared to $1.5 million for the same period in 1998. The
increase is primarily attributable to the acquisition of the Aguadilla, Puerto
Rico cable system effective March 31, 1999.
Marketing and selling expenses were $219,000 for the three months ended
September 30, 1999, an increase of $137,000, or 168%, compared to $82,000 for
the same period in 1998. The increase is a result of the acquisition of the
Aguadilla, Puerto Rico cable system.
18
<PAGE>
Incentive compensation, which is calculated based on increases in pro
forma location cash flow, was $135,000 for the three months ended September 30,
1999, an increase of $130,000 compared to $5,000 for the same period in 1998.
The increase resulted from a larger gain in pro forma location cash flow during
the third quarter of 1999 as compared to the third quarter of 1998.
Depreciation and amortization was $2.0 million for the three months
ended September 30, 1999, an increase of $927,000, or 86%, compared to $1.1
million for the same period in 1998. The increase in depreciation and
amortization is primarily due to the acquisition of the Aguadilla, Puerto Rico
cable system.
Nine months ended September 30, 1999 compared to nine months ended September 30,
1998
Total net revenues for the nine months ended September 30, 1999 were
$160.1 million, an increase of $60.9 million, or 61%, compared to total net
revenues of $99.2 million for the same period in 1998. The increase in total net
revenues for the nine months ended September 30, 1999 is primarily due to an
increase in DBS revenues of $54.9 million attributable to acquisitions and
internal growth in Pegasus' DBS subscriber base. Total operating expenses for
the nine months ended September 30, 1999 were $209.9 million, an increase of
$93.8 million, or 81%, compared to total operating expenses of $116.0 million
for the same period in 1998. The increase is primarily due to an increase of
$85.6 million in operating expenses attributable to the growth in Pegasus' DBS
business.
Total corporate expenses, including corporate depreciation and
amortization, were $3.7 million for the nine months ended September 30, 1999, an
increase of $918,000, or 33%, compared to $2.8 million for the same period in
1998. The increase in corporate expenses is attributable to the growth in
Pegasus' business.
Interest expense was $12.2 million for the nine months ended September
30, 1999, an increase of $845,000, or 7%, compared to interest expense of $11.4
million for the same period in 1998. The increase in interest expense is
primarily due to an increase in bank borrowings and sellers' notes associated
with Pegasus' DBS acquisitions. Interest income was $212,000 for the nine months
ended September 30, 1999, a decrease of $186,000, or 47%, compared to interest
income of $398,000 for the same period in 1998. The decrease in interest income
is due to lower average cash balances for the nine months ended September 30,
1999 compared to the same period in 1998.
Other expenses were $364,000 for the nine months ended September 30,
1999, an increase of $212,000, or 139%, compared to other expenses of $153,000
for the same period in 1998. The increase is due to an increase in professional
fees and other non-operating expenses.
Pegasus sold its New England cable systems effective July 1, 1998 for
$30.1 million resulting in a nonrecurring gain of $24.7 million for the nine
months ended September 30, 1998.
The provision for income taxes was $406,000 for the nine months ended
September 30, 1999, an increase of $231,000, or 132%, compared to $175,000 for
the same period in 1998.
DBS
Total DBS net revenues were $118.9 million for the nine months ended
September 30, 1999, an increase of $54.9 million, or 86%, compared to DBS net
revenues of $64.0 million for the same period in 1998. The increase is primarily
due to an increase in the average number of subscribers in the first three
quarters of 1999 compared to the same period in 1998. The average monthly
revenue per subscriber was $43.41 for the nine months ended September 30, 1999
compared to $42.01 for the same period in 1998. Pro forma DBS net revenues,
including pending acquisitions at September 30, 1999, were $133.9 million, an
increase of $35.1 million, or 35%, compared to pro forma DBS net revenues of
$98.8 million for the same period in 1998.
19
<PAGE>
Programming, technical, and general and administrative expenses were
$82.4 million for the nine months ended September 30, 1999, an increase of $38.3
million, or 87%, compared to $44.1 million for the same period in 1998. The
increase is attributable to significant growth in subscribers and territory
during the last twelve months. As a percentage of revenue, programming,
technical, and general and administrative expenses were 69.4% for the nine
months ended September 30, 1999 compared to 69.0% for the same period in 1998.
Subscriber acquisition costs were $54.6 million for the nine months
ended September 30, 1999, an increase of $39.2 million compared to $15.4 million
for the same period in 1998. Gross subscriber additions were 154,200 for the
nine months ended September 30, 1999 compared to 50,300 for the same period in
1998. The total subscriber acquisition costs per gross subscriber addition were
$354 for the nine months ended September 30, 1999 compared to $307 for the same
period in 1998. The increase in subscriber acquisition costs per gross
subscriber addition is due to an increase in commissions and an increase in
promotional programming during the first half of 1999.
Incentive compensation, which is calculated based on increases in pro
forma location cash flow, was $795,000 for the nine months ended September 30,
1999, a decrease of $190,000, or 19%, compared to $985,000 for the same period
in 1998. The decrease resulted from a lower gain in pro forma location cash flow
during the first three quarters of 1999 as compared to the first three quarters
of 1998.
Depreciation and amortization was $30.6 million for the nine months
ended September 30, 1999, an increase of $8.3 million, or 37%, compared to $22.3
million for the same period in 1998. The increase in depreciation and
amortization is primarily due to an increase in the fixed and intangible asset
base as the result of DBS acquisitions that occurred during the last two years.
Broadcast
During the nine months ended September 30, 1999, Pegasus owned or
programmed nine broadcast television stations in six markets. Two new stations
were launched during the second half of 1998. Total net broadcast revenues for
the nine months ended September 30, 1999 were $26.4 million, an increase of $3.0
million, or 13%, compared to net broadcast revenues of $23.4 million for the
same period in 1998. The increase is primarily attributable to an increase of
$1.2 million in net broadcast revenues from the four stations launched in 1997
and 1998, a $795,000 increase in barter revenue and an increase in local and
national advertising sales.
Programming, technical, and general and administrative expenses were
$15.9 million for the nine months ended September 30, 1999, an increase of $3.6
million, or 30%, compared to $12.3 million for the same period in 1998. The
increase is primarily due to an increase in expenses from the two new stations
launched in 1998 and an increase in news related expenses associated with the
launch of self-produced news in our Portland, Maine and Chattanooga, Tennessee
markets.
Marketing and selling expenses were $4.4 million for the nine months
ended September 30, 1999, an increase of $230,000, or 5%, compared to $4.2
million for the same period in 1998. The increase in marketing and selling
expenses is due to an increase in promotional costs associated with the launch
of the new stations and news programs.
Incentive compensation, which is calculated based on increases in pro
forma location cash flow, was $202,000 for the nine months ended September 30,
1999, an increase of $58,000, or 40% compared to $144,000 for the same period in
1998. The increase resulted from a larger gain in pro forma location cash flow
during the first three quarters of 1999 as compared to the first three quarters
of 1998.
Depreciation and amortization was $3.8 million for the nine months
ended September 30, 1999, an increase of $514,000, or 16%, compared to $3.3
million for the same period in 1998. The increase is due to capital expenditures
associated with the launch of the new stations and our news initiative.
20
<PAGE>
Cable
Total net cable revenues were $14.9 million for the nine months ended
September 30, 1999, an increase of $3.1 million, or 26%, compared to net cable
revenues of $11.8 million for the same period in 1998. The increase is primarily
due to the acquisition of the Aguadilla, Puerto Rico cable system effective
March 31, 1999, partially offset by the sale of Pegasus' New England cable
systems effective July 1, 1998. Net cable revenues from the New England Cable
systems were $3.3 million for the nine months ended September 30, 1998. The net
revenues derived from Pegasus' existing Puerto Rico cable system were $10.0
million for the nine months ended September 30, 1999, an increase of $1.4
million, or 17%, compared to net cable revenues of $8.5 million for the same
period in 1998. The Aguadilla, Puerto Rico cable system generated net revenues
of $4.9 million for the nine months ended September 30, 1999. The average
monthly revenue per subscriber was $37.02 for the nine months ended September
30, 1999 compared to $34.14 for the same period in 1998. On a pro forma basis,
including the completed acquisition of the Aguadilla, Puerto Rico cable system
and the disposition of the New England cable systems, there were 53,900
subscribers as of September 30, 1999 compared to 51,100 subscribers as of
September 30, 1998.
Programming, technical, and general and administrative expenses were
$7.6 million for the nine months ended September 30, 1999, an increase of $1.5
million, or 26%, compared to $6.0 million for the same period in 1998. The
increase is primarily attributable to the acquisition of the Aguadilla, Puerto
Rico cable system partially offset by the sale of Pegasus' New England cable
systems.
Marketing and selling expenses were $504,000 for the nine months ended
September 30, 1999, an increase of $236,000, or 88%, compared to $268,000 for
the same period in 1998. The increase is a result of the acquisition of the
Aguadilla, Puerto Rico cable system.
Incentive compensation, which is calculated based on increases in pro
forma location cash flow, was $195,000 for the nine months ended September 30,
1999, an increase of $27,000, or 16%, compared to $169,000 for the same period
in 1998. The increase resulted from a larger gain in pro forma location cash
flow during the first three quarters of 1999 as compared to the first three
quarters of 1998.
Depreciation and amortization was $5.0 million for the nine months
ended September 30, 1999, an increase of $1.0 million, or 26%, compared to $4.0
million for the same period in 1998. The increase in depreciation and
amortization is primarily due to the acquisition of the Aguadilla, Puerto Rico
cable system.
Liquidity and Capital Resources
Pegasus' primary sources of liquidity have been the net cash provided
by its DBS, broadcast and cable operations, credit available under its credit
facilities and proceeds from public and private offerings. Pegasus' principal
uses of its cash has been to fund acquisitions, meet debt service obligations,
fund DBS subscriber acquisition costs and fund investments in its broadcast and
cable technical facilities.
Pre-marketing cash flow increased by approximately $7.2 million, or
64%, for the three months ended September 30, 1999 as compared to the same
period in 1998. The increase in pre-marketing cash flow for the three months
ended September 30, 1999 is primarily due to an increase in DBS pre-marketing
cash flow of $6.3 million, or 83%, attributable to acquisitions and internal
growth in Pegasus' DBS subscriber base.
Pre-marketing cash flow increased by approximately $17.0 million, or
53%, for the nine months ended September 30, 1999 as compared to the same period
in 1998. The increase in pre-marketing cash flow for the nine months ended
September 30, 1999 is primarily due to an increase in DBS pre-marketing cash
flow of $16.6 million, or 84%, attributable to acquisitions and internal growth
in Pegasus' DBS subscriber base.
21
<PAGE>
During the nine months ended September 30, 1999, $22.7 million of cash
on hand at the beginning of the year, together with $134.5 million of net cash
provided by Pegasus' financing activities, was used to fund operating activities
of approximately $17.3 million and investing activities of $122.1 million.
Investing activities consisted of:
o the purchase of a cable system serving Aguadilla, Puerto Rico and
neighboring communities for approximately $42.1 million;
o the acquisition of DBS assets from twelve independent DIRECTV
providers during the first three quarters of 1999 for approximately
$61.8 million;
o the purchase of a building for broadcast operations in our
Northeastern PA market for approximately $1.8 million;
o broadcast expenditures associated with the launch of self-produced
news in our Portland, Maine and Chattanooga, Tennessee markets
totaling $825,000;
o DBS facility upgrades of $1.6 million;
o the expansion and enhancements of the Puerto Rico cable system
amounting to $3.6 million, including $213,000 related to hurricane
damage;
o payments of programming rights amounting to $2.2 million;
o investment in an affiliate of $4.8 million;
o new business development costs of approximately $286,000; and
o other capital expenditures and intangibles totaling approximately
$3.1 million.
Financing activities consisted of:
o contributions by Pegasus Communications Corporation of approximately
$98.0 million;
o net borrowings on bank credit facilities totaling $58.4 million;
o the repayment of approximately $22.9 million of long-term debt,
primarily sellers' notes, capital leases and affiliate advances; and
o restricted cash draws of approximately $1.0 million in connection
with the acquisition of the Aguadilla, Puerto Rico cable system.
As of September 30, 1999, cash on hand amounted to $17.8 million.
Pegasus maintains a $180.0 million senior, reducing revolving credit
facility. Borrowings under the credit facility are available for acquisitions,
subject to the approval of the lenders in certain circumstances, working
capital, capital expenditures and for general corporate purposes. As of
September 30, 1999, $85.9 million was outstanding and stand-by letters of credit
amounting to $29.7 million were issued under our $180.0 million credit facility.
The credit facility expires in December 2003.
22
<PAGE>
As defined in the Indenture governing Pegasus' Series B Notes, Pegasus
is required to provide Adjusted Operating Cash Flow data for Pegasus and its
Restricted Subsidiaries, on a combined basis, where Adjusted Operating Cash Flow
is defined as "for the four most recent fiscal quarters for which internal
financial statements are available, Operating Cash Flow of such Person and its
Restricted Subsidiaries, less DBS Cash Flow for the most recent four-quarter
period, plus DBS Cash Flow for the most recent quarterly period multiplied by
four." Operating Cash Flow is income from operations before income taxes,
depreciation and amortization, interest expense, extraordinary items and
non-cash charges. Although Adjusted Operating Cash Flow is not a measure of
performance under generally accepted accounting principles, we believe that
Location Cash Flow, Operating Cash Flow and Adjusted Operating Cash Flow are
accepted within our business segments as generally recognized measures of
performance and are used by analysts who report publicly on the performance of
companies operating in such segments. Restricted Subsidiaries carries the same
meaning as in the Indenture. Pro forma for the acquisition of the Aguadilla,
Puerto Rico cable system, the two completed DBS acquisitions occurring in the
third quarter of 1999 and the sale of our New England cable systems, as if such
acquisitions/disposition occurred on October 1, 1998, Adjusted Operating Cash
Flow would have been approximately $67.3 million as follows:
<TABLE>
<CAPTION>
Four Quarters Ended
September 30,1999
-----------------------
(in thousands)
<S> <C>
Revenues................................................................. $218,976
Direct operating expenses, excluding depreciation, amortization and other
non-cash charges....................................................... 147,306
Income from operations before incentive compensation, corporate
expenses, depreciation and amortization and other non-cash charges..... 71,670
Corporate expenses....................................................... 4,371
-------
Adjusted operating cash flow ............................................ $67,299
=======
</TABLE>
Pegasus believes that it has adequate resources to meet its working
capital, maintenance capital expenditure and debt service obligations for at
least the next twelve months. However, our ability in the future to repay our
existing indebtedness will depend upon the success of our business strategy,
prevailing economic conditions, regulatory matters, levels of interest rates and
financial, business and other factors that are beyond our control. We cannot
assure you that we will be able to generate the substantial increases in cash
flow from operations that we will need to meet the obligations under our
indebtedness. Furthermore, our agreements with respect to our indebtedness
contain numerous covenants that, among other things, restrict our ability to:
o pay dividends and make certain other payments and investments;
o borrow additional funds;
o create liens; and
o sell our assets.
Failure to make debt payments or comply with our covenants could result in an
event of default which if not cured or waived could have a material adverse
effect on us.
Pegasus closely monitors conditions in the capital markets to identify
opportunities for the effective use of financial leverage. In financing its
future expansion and acquisition requirements, Pegasus would expect to avail
itself of such opportunities and thereby increase its indebtedness. This could
result in increased debt service requirements. We cannot assure you that such
debt financing can be completed on terms satisfactory to Pegasus or at all.
Pegasus may also issue additional equity to fund its future expansion and
acquisition requirements.
23
<PAGE>
Year 2000
The year 2000 issue is a general term used to describe the various
problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other equipment as the year 2000
approaches and is reached. These problems generally arise from the fact that
most computer hardware and software have historically used only two digits to
identify the year in a date, often resulting in the computer failing to
distinguish dates in the 2000s from dates in the 1900s. These problems may also
arise from additional sources, such as the use of special codes and conventions
in software utilizing the date field.
Pegasus has reviewed its critical systems as to the year 2000 issue.
Pegasus' primary focus has been on its own internal systems. Pegasus has in the
past three years replaced or upgraded its TV traffic systems, cable billing
systems and corporate accounting systems. However, if any additional necessary
changes are not made or completed in a timely fashion or unanticipated problems
arise, the year 2000 issue may take longer for Pegasus to address and may have a
material adverse impact on Pegasus' financial condition and its results of
operations.
Pegasus relies on outside vendors for the operation of its DBS
satellite control and billing systems, including DIRECTV, the National Rural
Telecommunications Cooperative and their respective vendors. Pegasus has
established a policy to ensure that these vendors are currently in compliance
with the year 2000 issue or have a plan in place to be in compliance with the
year 2000 issue. In addition, Pegasus has had initial communications with
certain of its other significant suppliers, distributors, financial institutions
and parties with which it conducts business to evaluate their year 2000
compliance plans and state of readiness and to determine the extent to which
Pegasus' systems may be affected by the failure of others to remediate their own
year 2000 issues. To date, however, Pegasus has received only preliminary
feedback from such parties and has not independently confirmed any information
received from other parties with respect to the year 2000 issue. As such, we
cannot assure you that these other parties will complete their year 2000
conversion in a timely fashion or will not suffer a year 2000 business
disruption that may adversely affect Pegasus' financial condition and its
results of operations.
Because Pegasus' year 2000 conversion is expected to be completed prior
to any potential disruption to Pegasus' business, Pegasus has not yet completed
the development of a year 2000-specific contingency plan. If Pegasus determines
that its business or a segment thereof is at material risk of disruption due to
the year 2000 issue or anticipates that its year 2000 conversion will not be
completed in a timely fashion, it will work to enhance its contingency plan.
Costs to be incurred beyond September 30, 1999 relating to the year 2000 issue
are not expected to be significant.
Seasonality
Pegasus' revenues vary throughout the year. As is typical in the
broadcast television industry, Pegasus' first quarter generally produces the
lowest revenues for the year and the fourth quarter generally produces the
highest revenues for the year. Pegasus' operating results in any period may be
affected by the incurrence of advertising and promotion expenses that do not
necessarily produce commensurate revenues in the short-term until the impact of
such advertising and promotion is realized in future periods.
Inflation
Pegasus believes that inflation has not been a material factor
affecting its business. In general, Pegasus' revenues and expenses are impacted
to the same extent by inflation. A majority of Pegasus' indebtedness bears
interest at a fixed rate.
24
<PAGE>
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). As a result of the
subsequent issuance of SFAS No. 137, SFAS No. 133 is now effective for fiscal
years beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. The
Company does not expect that the adoption of SFAS No. 133 will have a material
effect on our business, financial position or results of operations.
25
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On June 3, 1999, the National Rural Telecommunications Cooperative
filed a lawsuit in federal court against DIRECTV, Inc. seeking a court order to
enforce the National Rural Telecommunications Cooperative's contractual rights
to obtain from DIRECTV certain premium programming formerly distributed by
United States Satellite Broadcasting Company, Inc. for exclusive distribution by
the National Rural Telecommunications Cooperative's members and affiliates in
their rural markets. The National Rural Telecommunications Cooperative also
sought a temporary restraining order preventing DIRECTV from marketing the
premium programming in such markets and requiring DIRECTV to provide the
National Rural Telecommunications Cooperative with the premium programming for
exclusive distribution in those areas. The court, in an order dated June 17,
1999, denied the National Rural Telecommunications Cooperative a preliminary
injunction on such matters, without deciding the underlying claims. On July 22,
1999, DIRECTV responded to the National Rural Telecommunications Cooperative's
continuing lawsuit by rejecting the National Rural Telecommunications
Cooperative's claims to exclusive distribution rights and by filing a
counterclaim seeking judicial clarification of certain provisions of DIRECTV's
contract with the National Rural Telecommunications Cooperative. In particular,
DIRECTV contends in its counterclaim that the term of DIRECTV's contract with
the National Rural Telecommunications Cooperative is measured solely by the
orbital life of DBS-1, the first DIRECTV satellite launched into orbit at the
101(degree) W orbital location, without regard to the orbital lives of the other
DIRECTV satellites at the 101(degree) W orbital location. DIRECTV also alleges
in its counterclaim that the National Rural Telecommunications Cooperative's
right of first refusal, which is effective at the end of the term of DIRECTV's
contract with the National Rural Telecommunications Cooperative, does not
provide for certain programming and other rights comparable to those now
provided under the contract. On September 8, 1999, the court denied a motion by
DIRECTV to dismiss certain of the National Rural Telecommunications
Cooperative's claims, leaving all of the causes of action asserted by the
National Rural Telecommunications Cooperative at issue.
On September 9, 1999, the National Rural Telecommunications Cooperative
filed a response to DIRECTV's counterclaim contesting DIRECTV's interpretations
of the end of term and right of first refusal provisions. On August 26, 1999,
the National Rural Telecommunications Cooperative filed a separate lawsuit in
federal court against DIRECTV claiming that DIRECTV had failed to provide to the
National Rural Telecommunications Cooperative its share of launch fees and other
benefits that DIRECTV and its affiliates have received relating to programming
and other services. While we are not a party to the pending litigation between
the National Rural Telecommunications Cooperative and DIRECTV, the outcome of
the litigation could have a material adverse effect on our direct broadcast
satellite business because we are an associate of the National Rural
Telecommunications Cooperative with contract rights that are affected by the
contractual relationship between the National Rural Telecommunications
Cooperative and DIRECTV.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.1 Agreement, effective as of September 13, 1999, by and
among ADS Alliance Data Systems, Inc., Pegasus Satellite
Television, Inc. and Digital Television Services, Inc.
(which is incorporated by reference to Exhibit 10.1 to
Pegasus Communications Corporations' Form 10-Q for the
quarterly period ended September 30, 1999). (Portions of
this document were redacted and filed separately with the
Securities and Exchange Commission pursuant to a request
for confidential treatment pursuant to Rule 24b-2 under
the Securities Exchange Act of 1934, as amended).
Exhibit 27.1 Financial Data Schedule.
26
<PAGE>
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed during the quarter
ended September 30, 1999.
27
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Pegasus Media & Communications, Inc. has duly
caused this Report to be signed on its behalf by the undersigned
thereunto duly authorized.
Pegasus Media & Communications, Inc.
November 12, 1999 By: /s/ M. Kasin Smith
- ------------------------- -----------------------
Date M. Kasin Smith
Vice President and Acting Chief Financial Officer
(Principal Financial and Accounting Officer)
28
<PAGE>
EXHIBIT INDEX
Exhibit 10.1 Agreement, effective as of September 13, 1999, by and
among ADS Alliance Data Systems, Inc., Pegasus
Satellite Television, Inc. and Digital Television
Services, Inc. (which is incorporated by reference to
Exhibit 10.1 to Pegasus Communications Corporations'
Form 10-Q for the quarterly period ended September
30, 1999). (Portions of this document were redacted
and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended).
Exhibit 27.1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the combined
balance sheet of Pegasus Media & Communications Inc., as of September 30, 1999
(unaudited) and the related combined statements of operations and cash flows for
the three and nine months ended September 30, 1999 (unaudited). This information
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<EXCHANGE-RATE> 1 1
<CASH> 17,838,837 17,838,837
<SECURITIES> 0 0
<RECEIVABLES> 20,106,605 20,106,605
<ALLOWANCES> 537,000 537,000
<INVENTORY> 6,297,273 6,297,273
<CURRENT-ASSETS> 58,608,056 58,608,056
<PP&E> 63,621,928 63,621,928
<DEPRECIATION> 26,908,546 26,908,546
<TOTAL-ASSETS> 556,985,858 556,985,858
<CURRENT-LIABILITIES> 56,909,227 56,909,227
<BONDS> 82,676,471 82,676,471
0 0
3,000,000 3,000,000
<COMMON> 1,700 1,700
<OTHER-SE> 300,195,511 300,195,511
<TOTAL-LIABILITY-AND-EQUITY> 556,985,858 556,985,858
<SALES> 61,533,555 160,133,586
<TOTAL-REVENUES> 61,533,555 160,133,586
<CGS> 0 0
<TOTAL-COSTS> 84,203,526 209,885,090
<OTHER-EXPENSES> 158,045 152,455
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,367,574 12,196,850
<INCOME-PRETAX> (27,195,590) (62,100,809)
<INCOME-TAX> 221,443 406,443
<INCOME-CONTINUING> (27,417,033) (62,507,252)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (27,417,033) (62,507,252)
<EPS-BASIC> (161.28) (367.69)
<EPS-DILUTED> (161.28) (367.69)
</TABLE>
