Pegasus Communications Corporation Reports Results for First Quarter Ended March 31,

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BALA CYNWYD, PA -- (MARKET WIRE) -- 05/11/2004 -- Pegasus Communications Corporation (NASDAQ: PGTV) today reported financial results for the quarter ended March 31, 2004. -- (Amounts and changes specified are for the three months ended March 31, 2004 compared to the three months ended March 31, 2003, unless otherwise indicated.)



Results of Operations

Three Months Ended March 31, 2004

Consolidated net revenues decreased $7.7 million, or 4%, to $205.4 million. Consolidated loss from operations increased $15.2 million or 267% to $20.9 million. Net loss applicable to common shares increased $24.3 million, or 56% to $67.7 million. Net cash used for operating activities decreased from $8.0 million to $2.6 million, an improvement of $5.4 million, or 68%. The unfavorable increases to consolidated loss from operations and net loss applicable to common shares are primarily the result of expenses related to the unfavorable verdict returned by the jury on April 14, 2004 in our Seamless Marketing litigation with DIRECTV.

Direct broadcast satellite ("DBS") net revenues decreased $7.6 million, or 4%, to $197.9 million. DBS operating profit before depreciation and amortization, as adjusted for the litigation verdict, increased $5.0 million, or 10% to $57.6 million. DBS operating profit before depreciation and amortization, as adjusted for the litigation verdict, as a percentage of DBS net revenues increased from 26% to 29%. DBS free cash flow increased $10.7 million, or 26%, to $51.6 million.

About Pegasus

Pegasus Communications Corporation (http://www.pgtv.com) provides digital satellite television to rural households throughout the United States. Pegasus owns and/or operates television stations affiliated with CBS, FOX, UPN and The WB networks.

Safe Harbor

Any statements which are not historical facts are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, and will be considered forward-looking statements. Such forward-looking statements may be identified with words such as "we expect," "we predict," "we believe," "we project," "we anticipate," and similar expressions.

Pegasus' actual results may differ materially from those expressed or indicated by forward-looking statements. There can be no assurance that these future events, including pending transactions, will occur as anticipated or that the Company's results will be as estimated.

Factors which can affect our performance and future events are described in our filings with the Securities and Exchange Commission, and include the following: general economic and business conditions, nationally, internationally, and in the regions in which we operate; catastrophic events, including acts of terrorism; relationships with and events affecting third parties like DirecTV, Inc. and the National Rural Telecommunications Cooperative; litigation with DirecTV, Inc., including the judgment when entered with respect to the Seamless Marketing litigation; the recent change of control of DirecTV, Inc.; demographic changes; existing government regulations and changes in, or the failure to comply with, government regulations; competition, including the provision of local channels by a competing direct satellite provider in markets where DirecTV does not offer local channels; the loss of any significant numbers of subscribers or viewers; changes in business strategy or development plans; the cost of pursuing new business initiatives; an expansion of land-based communications systems; technological developments and difficulties; our ability to obtain intellectual property licenses and to avoid committing intellectual property infringement; our ability to attract and retain qualified personnel; our significant indebtedness; and the availability and terms of capital to fund the expansion of our businesses.

Persons are cautioned not to place undue reliance on these forward-looking statements, which speak only as of 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.

Non-GAAP Measure

It is important to note that DBS free cash flow is a supplemental non-GAAP measure.

DBS free cash flow is defined as DBS operating profit before depreciation and amortization less DBS deferred subscriber acquisition costs and DBS capital expenditures.

We use DBS free cash flow: 1. as a measurement of liquidity generated by the DBS business and cash available to: a. fund our debt service; b. potentially fund equity dividends; and c. potentially fund other development projects. 2. in assessing our enterprise value and its growth thereof over time, especially as benchmarked against comparable companies in the industry; and 3. in measuring our leverage at various points throughout our capital structure, and improvements made to it over time, especially as benchmarked against comparable companies in the industry.We believe that investors, analysts, lenders, and other interested parties who follow our industry use DBS free cash flow for the same reasons that we do. Investors, analysts, lenders, and other interested parties who follow our industry rely on DBS free cash flow measures to make informed decisions, especially by benchmarking against comparable companies in the industry. Our ability to reinvest in the DBS business via investments in deferred subscriber acquisition costs and capital expenditures, fund debt service of the enterprise, potentially fund equity dividends, and potentially fund other development projects is largely dependent upon our ability to generate DBS free cash flow.



We believe that the limitation associated with the use of DBS free cash flow, as compared to net increase (decrease) in cash and cash equivalents, is the number of adjustments included in DBS free cash flow. However, we believe this limitation is not significant and is mitigated by the fact that we reconcile DBS free cash flow to the net increase (decrease) in cash and cash equivalents in our earnings press release and on our website.

DBS free cash flow is not, and should not be considered, an alternative to the net increase (decrease) in cash and cash equivalents, or any other measure for determining our liquidity, as determined under generally accepted accounting principles. Although free cash flow is a common measure used by other companies, our calculation of DBS free cash flow may not be comparable with that of others.

A reconciliation of DBS free cash flow to its comparable GAAP measures is included in the attached financial tables. Supplemental detail supporting this reconciliation can be found in the investor relations section of our website (www.pgtv.com).

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