Pegasus Seeks Financial Stability

Pegasus Communications Corp. chairman Mark Pagon told analysts during an earnings conference call last week that the company's primary goal is to become financially self-sufficient from internal operations by the fourth quarter of this year.

Pegasus, which resells DirecTV Inc. programming in rural areas, has sufficient cash and access to capital to fund its business in that time frame, he said.

Last Thursday, Standard & Poor's said that it placed its ratings on Pegasus and its related entities —including a single-B corporate credit rating— on CreditWatch with negative implications. The move was based on Pegasus's rising financial risk and operating challenges.

In a news release, an S&P analyst noted Pegasus's heavy subscriber-acquisition costs, high leverage and a net loss of subscribers in the first quarter.

At about 10:30 a.m. on Friday, Pegasus's stock price dipped to $1.69, down 18 cents.

The company's other objectives are to focus on the overall health of its balance sheet, so Pegasus can be comfortable about its long-term future, and to look at its non-core assets, Pagon said during the call. He admitted that the company could sell off some of its broadcast operations to concentrate its efforts on DBS.

In the first quarter ended March 31, Pegasus reported net revenue of $224.2 million and a net loss of $39.7 million.

Pagon said Pegasus posted DBS free cash flow of $32.2 million for the quarter, up from break-even for the first quarter of 2001.

After changing its method of counting current subscribers, Pegasus reported a one-time reduction of 138,217 DBS customers for the quarter, for a net loss of about 4,000 subscribers during that span.

Pagon said the company would beef up its efforts to require credit card checks on all new customers in order to bring in customers less likely to churn for lack of payment, and would continue to require one-year programming commitments from new subscribers.

He added that the company was considering two-year commitments from new customers who take two-room systems.