UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

COMMISSION FILE NO. 0-22531

PANAMSAT CORPORATION(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

|DELAWARE(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) |  | 95-4607698(I.R.S. EMPLOYER IDENTIFICATION NO.)
|---------------------------------------------------------------------- |  | ----------------------------------------------

20 WESTPORT ROAD, WILTON, CT 06897(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S
TELEPHONE NUMBER, INCLUDING AREA CODE:203-210-8000

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    ý        No    o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes    o        No    ý

As of November 11, 2004, an aggregate of 109,677,413 shares of our common stock were outstanding.



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Unless the context otherwise requires, in this Quarterly Report on Form 10-Q, the terms "we," "our," the "company" and "PanAmSat" refer to PanAmSat Corporation and its
subsidiaries.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q contains certain forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for certain forward-looking statements so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors
that could cause actual results to differ materially from those projected in the information. When used in this Quarterly Report on Form 10-Q, the words "estimate," "project,"
"plan," "anticipate," "expect," "intend," "outlook," "believe" and other similar expressions are intended to identify forward-looking statements and information. Actual results may differ materially
from any results which might be projected, forecasted, estimated or budgeted due to certain risks and uncertainties, including without limitation: (i) risks associated with operating our
in-orbit satellites, (ii) risks of satellite launch failures, satellite launch and construction delays and in-orbit failures or reduced performance, (iii) risk
that we may not be able to obtain new or renewal satellite insurance policies on commercially reasonable terms or at all, (iv) risks related to possible future losses on satellites that are not
adequately covered by insurance, (v) risks related to domestic and international government regulation, (vi) risks related to our contracted backlog or expected contracted backlog for
future services, (vii) risks related to pricing pressure and overcapacity in markets in which we operate, (viii) risks of inadequate access to capital markets, (ix) risks related
to competition, (x) risks related to customer defaults on their obligations owed to us, (xi) risks of doing business internationally, (xii) risks associated with our high level of
indebtedness, (xiii) risks related to control by our controlling stockholders and (xiv) litigation. PanAmSat cautions that the foregoing list of important factors is not exclusive, and
PanAmSat undertakes no obligation to publicly update any forward-looking statement. Such risks are more fully described under the caption "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003. Reference is also made to such other risks and
uncertainties detailed from time to time in our filings with the United States Securities and Exchange Commission.

WEBSITE ACCESS TO COMPANY'S REPORTS

PanAmSat's Internet website address is www.panamsat.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through
our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission.

i

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

PANAMSAT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(IN THOUSANDS, EXCEPT SHARE DATA)

|                                                     |                                                                     | September 30,
2004                 |             | September 30,
2003
|---------------------------------------------------- | ------------------------------------------------------------------- | ---------------------------------- | ----------- | ------------------
|REVENUES:                                            |                                                                     |                                    |             |                   
|                                                     | Operating leases, satellite services and other                      |                                    | $           | 203,268           
|                                                     | Outright sales and sales-type leases                                |                                    |             | 3,827             
|                                                     |                                                                     |                                    |             |                   
|                                                     |                                                                     | Total revenues                     |             |                   
|                                                     |                                                                     |                                    |             |                   
|OPERATING COSTS AND EXPENSES:                        |                                                                     |                                    |             |                   
|                                                     | Cost of outright sales and sales-type leases                        |                                    |             | 2,224             
|                                                     | Depreciation and amortization                                       |                                    |             | 74,322            
|                                                     | Direct operating costs (exclusive of depreciation and amortization) |                                    |             | 38,649            
|                                                     | Selling, general and administrative expenses                        |                                    |             | 21,509            
|                                                     | Facilities restructuring and severance costs                        |                                    |             | 2,080             
|                                                     | Transaction-related costs                                           |                                    |             | 154,535           
|                                                     |                                                                     |                                    |             |                   
|                                                     |                                                                     | Total operating costs and expenses |             |                   
|                                                     |                                                                     |                                    |             |                   
|INCOME (LOSS) FROM OPERATIONS                        |                                                                     |                                    | (86,224     | )                 
|INTEREST EXPENSENET                                 |                                                                     |                                    | 57,794      |                   
|                                                     |                                                                     |                                    |             |                   
|INCOME (LOSS) BEFORE INCOME TAXES                    |                                                                     |                                    | (144,018    | )                 
|INCOME TAX EXPENSE (BENEFIT)                         |                                                                     |                                    | (67,363     | )                 
|                                                     |                                                                     |                                    |             |                   
|NET INCOME (LOSS)                                    |                                                                     | $                                  | (76,655     | )                 
|                                                     |                                                                     |                                    |             |                   
|NET INCOME (LOSS) PER COMMON SHAREbasic and diluted |                                                                     | $                                  | (0.16       | )                 
|                                                     |                                                                     |                                    |             |                   
|Weighted average common shares outstanding           |                                                                     |                                    | 470,248,000 |                   
|                                                     |                                                                     |                                    |             |                   

The
accompanying notes are an integral part of these condensed consolidated financial statements.

1

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PANAMSAT CORPORATION  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003  (IN THOUSANDS, EXCEPT SHARE DATA)

|                                                     |                                                                     | September 30,
2004                 |             | September 30,
2003
|---------------------------------------------------- | ------------------------------------------------------------------- | ---------------------------------- | ----------- | ------------------
|REVENUES:                                            |                                                                     |                                    |             |                   
|                                                     | Operating leases, satellite services and other                      |                                    | $           | 607,165           
|                                                     | Outright sales and sales-type leases                                |                                    |             | 12,185            
|                                                     |                                                                     |                                    |             |                   
|                                                     |                                                                     | Total revenues                     |             |                   
|                                                     |                                                                     |                                    |             |                   
|OPERATING COSTS AND EXPENSES:                        |                                                                     |                                    |             |                   
|                                                     | Cost of outright sales and sales-type leases                        |                                    |             | 2,224             
|                                                     | Depreciation and amortization                                       |                                    |             | 220,969           
|                                                     | Direct operating costs (exclusive of depreciation and amortization) |                                    |             | 118,484           
|                                                     | Selling, general and administrative expenses                        |                                    |             | 88,814            
|                                                     | Satellite impairment loss                                           |                                    |             | 99,946            
|                                                     | Facilities restructuring and severance costs                        |                                    |             | 4,508             
|                                                     | Transaction-related costs                                           |                                    |             | 155,035           
|                                                     |                                                                     |                                    |             |                   
|                                                     |                                                                     | Total operating costs and expenses |             |                   
|                                                     |                                                                     |                                    |             |                   
|INCOME (LOSS) FROM OPERATIONS                        |                                                                     |                                    | (70,630     | )                 
|INTEREST EXPENSENET                                 |                                                                     |                                    | 122,503     |                   
|                                                     |                                                                     |                                    |             |                   
|INCOME (LOSS) BEFORE INCOME TAXES                    |                                                                     |                                    | (193,133    | )                 
|INCOME TAX EXPENSE (BENEFIT)                         |                                                                     |                                    | (95,215     | )                 
|                                                     |                                                                     |                                    |             |                   
|NET INCOME (LOSS)                                    |                                                                     | $                                  | (97,918     | )                 
|                                                     |                                                                     |                                    |             |                   
|NET INCOME (LOSS) PER COMMON SHAREbasic and diluted |                                                                     | $                                  | (0.16       | )                 
|                                                     |                                                                     |                                    |             |                   
|Weighted average common shares outstanding           |                                                                     |                                    | 593,809,000 |                   
|                                                     |                                                                     |                                    |             |                   

The
accompanying notes are an integral part of these condensed consolidated financial statements.

2

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PANAMSAT CORPORATION  CONDENSED CONSOLIDATED BALANCE SHEETS  (IN THOUSANDS, EXCEPT SHARE DATA)

|                                                                                                                 |                                                                                                                                                                                                                         | September 30,
2004        |           | December 31,
2003 |        
|---------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | --------- | ----------------- | -------
|
|ASSETS                                                                                                           |                                                                                                                                                                                                                         |                           |           |                   |        
|CURRENT ASSETS:                                                                                                  |                                                                                                                                                                                                                         |                           |           |                   |        
|                                                                                                                 | Cash and cash equivalents                                                                                                                                                                                               |                           | $         | 48,204            |        
|                                                                                                                 | Short-term investments                                                                                                                                                                                                  |                           |           |                  |        
|                                                                                                                 | Accounts receivablenet                                                                                                                                                                                                 |                           |           | 62,549            |        
|                                                                                                                 | Net investment in sales-type leases                                                                                                                                                                                     |                           |           | 25,634            |        
|                                                                                                                 | Prepaid expenses and other current assets                                                                                                                                                                               |                           |           | 29,191            |        
|                                                                                                                 | Insurance claim receivable                                                                                                                                                                                              |                           |           |                  |        
|                                                                                                                 | Deferred income taxes                                                                                                                                                                                                   |                           |           | 7,048             |        
|                                                                                                                 | Assets held for sale                                                                                                                                                                                                    |                           |           | 3,257             |        
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        
|                                                                                                                 |                                                                                                                                                                                                                         | Total current assets      |           |                   | 175,883
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        
|SATELLITES AND OTHER PROPERTY AND EQUIPMENTNet                                                                  |                                                                                                                                                                                                                         |                           | 2,036,651 |                   |        
|NET INVESTMENT IN SALES-TYPE LEASES                                                                              |                                                                                                                                                                                                                         |                           | 90,165    |                   |        
|GOODWILL                                                                                                         |                                                                                                                                                                                                                         |                           | 2,246,122 |                   |        
|DEFERRED CHARGES AND OTHER ASSETSNet                                                                            |                                                                                                                                                                                                                         |                           | 333,761   |                   |        
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        
|TOTAL ASSETS                                                                                                     |                                                                                                                                                                                                                         | $                         | 4,882,582 |                   | $      
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                             |                                                                                                                                                                                                                         |                           |           |                   |        
|CURRENT LIABILITIES:                                                                                             |                                                                                                                                                                                                                         |                           |           |                   |        
|                                                                                                                 | Accounts payable and accrued liabilities                                                                                                                                                                                |                           | $         | 75,037            |        
|                                                                                                                 | Current portion of long-term debt                                                                                                                                                                                       |                           |           | 95,416            |        
|                                                                                                                 | Current portion of satellite incentive obligations                                                                                                                                                                      |                           |           | 13,218            |        
|                                                                                                                 | Accrued interest payable                                                                                                                                                                                                |                           |           | 17,694            |        
|                                                                                                                 | Deferred gains and revenues                                                                                                                                                                                             |                           |           | 23,645            |        
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        
|                                                                                                                 |                                                                                                                                                                                                                         | Total current liabilities |           |                   | 225,010
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        
|LONG-TERM DEBT                                                                                                   |                                                                                                                                                                                                                         |                           | 3,673,740 |                   |        
|DEFERRED INCOME TAXES                                                                                            |                                                                                                                                                                                                                         |                           | 31,459    |                   |        
|DEFERRED CREDITS AND OTHER (principally customer deposits, satellite incentive obligations and deferred revenue) |                                                                                                                                                                                                                         |                           | 278,954   |                   |        
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        
|TOTAL LIABILITIES                                                                                                |                                                                                                                                                                                                                         |                           | 4,209,163 |                   |        
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        
|COMMITMENTS AND CONTINGENCIES                                                                                    |                                                                                                                                                                                                                         |                           |           |                   |        
|STOCKHOLDERS' EQUITY:                                                                                            |                                                                                                                                                                                                                         |                           |           |                   |        
|                                                                                                                 | Common stock $0.01 par value; 1,329,271,891 shares authorized; 238,380,931 and 655,864,175 shares issued; and 109,677,413 and 655,864,175 shares outstanding at September 30, 2004 and December 31, 2003, respectively) |                           |           | 2,384             |        
|                                                                                                                 | Additional paid-in-capital                                                                                                                                                                                              |                           |           | 818,260           |        
|                                                                                                                 | Treasury stock, at cost (128,703,518 and 0 shares outstanding at September 30, 2004 and December 31, 2003, respectively)                                                                                                |                           |           | (692,286          | )      
|                                                                                                                 | Accumulated other comprehensive income (loss)                                                                                                                                                                           |                           |           | 772               |        
|                                                                                                                 | Retained earnings                                                                                                                                                                                                       |                           |           | 547,707           |        
|                                                                                                                 | Other stockholders' equity                                                                                                                                                                                              |                           |           | (3,418            | )      
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        
|TOTAL STOCKHOLDERS' EQUITY                                                                                       |                                                                                                                                                                                                                         |                           | 673,419   |                   |        
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                       |                                                                                                                                                                                                                         | $                         | 4,882,582 |                   | $      
|                                                                                                                 |                                                                                                                                                                                                                         |                           |           |                   |        

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

---



PANAMSAT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(IN THOUSANDS, EXCEPT SHARE DATA)

|                                                             |  | Common Stock |   |   |        | Treasury Stock, at Cost |   | Accumulated
Other
Comprehensive
Income (Loss) |   |              |   |   |            |   |   |        |  
|------------------------------------------------------------ |  | ------------ | - | - | ------ | ----------------------- | - | --------------------------------------------- | - | ------------ | - | - | ---------- | - | - | ------ | -
|
|
|BALANCE, JANUARY 1, 2004                                     |  | 655,864,175  |   | $ | 6,559  |                         | $ | 2,536,275                                     |   |             |   | $ |           |   | $ | (1,567 | )
|Additional Issuances of common stock                         |  | 807,882      |   |   | 8      |                         |   | 3,766                                         |   |             |   |   |           |   |   |       |  
|Purchase of Treasury shares                                  |  |             |   |   |       |                         |   | (57                                           | ) | (546,994,644 | ) |   | (2,783,742 | ) |   |       |  
|Retirement of Treasury shares                                |  | (418,291,126 | ) |   | (4,183 | )                       |   | (2,087,273                                    | ) | 418,291,126  |   |   | 2,091,456  |   |   |       |  
|Realized and unrealized net gain on cash flow hedge          |  |             |   |   |       |                         |   |                                              |   |             |   |   |           |   |   | 2,002  |  
|Unrealized gain on short- term investments                   |  |             |   |   |       |                         |   |                                              |   |             |   |   |           |   |   | 1      |  
|Foreign currency translation adjustment                      |  |             |   |   |       |                         |   |                                              |   |             |   |   |           |   |   | 336    |  
|Deferred compensation                                        |  |             |   |   |       |                         |   |                                              |   |             |   |   |           |   |   |       |  
|Amortization of deferred compensation                        |  |             |   |   |       |                         |   | 201                                           |   |             |   |   |           |   |   |       |  
|Net customer guarantee received pursuant to the Transactions |  |             |   |   |       |                         |   | 2,723                                         |   |             |   |   |           |   |   |       |  
|Transaction costs capitalized to equity                      |  |             |   |   |       |                         |   | (9,157                                        | ) |             |   |   |           |   |   |       |  
|Modification of options                                      |  |             |   |   |       |                         |   | 1,237                                         |   |             |   |   |           |   |   |       |  
|Tax basis step-up and tax indemnification                    |  |             |   |   |       |                         |   | 377,068                                       |   |             |   |   |           |   |   |       |  
|Cashing out of restricted stock units                        |  |             |   |   |       |                         |   | (6,523                                        | ) |             |   |   |           |   |   |       |  
|Net loss                                                     |  |             |   |   |       |                         |   |                                              |   |             |   |   |           |   |   |       |  
|                                                             |  |              |   |   |        |                         |   |                                               |   |              |   |   |            |   |   |        |  
|BALANCE, SEPTEMBER 30, 2004                                  |  | 238,380,931  |   | $ | 2,384  |                         | $ | 818,260                                       |   | (128,703,518 | ) | $ | (692,286   | ) | $ | 772    |  
|                                                             |  |              |   |   |        |                         |   |                                               |   |              |   |   |            |   |   |        |  

Other Stockholders' Equity:

September 30,
2004

January 1,
2004Excess of purchase price over historical cost basis of net assets acquired

$
(3,418
)
$
(3,418
)Deferred compensation, net





(4,716
)TOTAL OTHER STOCKHOLDERS' EQUITY

$
(3,418
)
$
(8,134
)


The accompanying notes are an integral part of these condensed consolidated financial statements.

4

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PANAMSAT CORPORATION  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003  (IN THOUSANDS)

|                                                                                         |                                                                | September 30, 2004                                  |          | September 30, 2003 |         
|---------------------------------------------------------------------------------------- | -------------------------------------------------------------- | --------------------------------------------------- | -------- | ------------------ | --------
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |                                                                |                                                     |          |                    |         
|Net income (loss)                                                                        |                                                                | $                                                   | (97,918  | )                  | $       
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                                |                                                     |          |                    |         
|                                                                                         | Depreciation and amortization                                  |                                                     |          | 220,969            |         
|                                                                                         | Deferred income taxes                                          |                                                     |          | (98,457            | )       
|                                                                                         | Amortization of debt issuance costs and other deferred charges |                                                     |          | 7,698              |         
|                                                                                         | Provision for uncollectible receivables                        |                                                     |          | 31,982             |         
|                                                                                         | Loss on early extinguishment of debt                           |                                                     |          | 20,589             |         
|                                                                                         | Satellite impairment loss                                      |                                                     |          | 99,946             |         
|                                                                                         | Loss on Galaxy 10R XIPS anomaly                                |                                                     |          | 9,090              |         
|                                                                                         | Facilities restructuring and severance costs                   |                                                     |          | 4,309              |         
|                                                                                         | Reversal of sales-type lease liabilities                       |                                                     |          | (3,727             | )       
|                                                                                         | Gain on disposal of fixed assets                               |                                                     |          | (1,332             | )       
|                                                                                         | Other non-cash items                                           |                                                     |          | (3,950             | )       
|                                                                                         | Changes in assets and liabilities:                             |                                                     |          |                    |         
|                                                                                         |                                                                | Collections on investments in sales-type leases     |          |                    | 19,035  
|                                                                                         |                                                                | Operating leases and other receivables              |          |                    | 6,166   
|                                                                                         |                                                                | Prepaid expenses and other assets                   |          |                    | (4,222  
|                                                                                         |                                                                | Accounts payable and accrued liabilities            |          |                    | (44,336 
|                                                                                         |                                                                | Deferred gains and revenues                         |          |                    | 1,209   
|                                                                                         |                                                                |                                                     |          |                    |         
|                                                                                         |                                                                | NET CASH PROVIDED BY OPERATING ACTIVITIES           |          |                    | 167,051 
|                                                                                         |                                                                |                                                     |          |                    |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |                                                                |                                                     |          |                    |         
|                                                                                         | Capital expenditures (including capitalized interest)          |                                                     |          | (108,308           | )       
|                                                                                         | Insurance proceeds from satellite recoveries                   |                                                     |          | 286,915            |         
|                                                                                         | Net sales of short-term investments                            |                                                     |          | 38,936             |         
|                                                                                         | Acquisitions, net of cash acquired                             |                                                     |          | (522               | )       
|                                                                                         |                                                                |                                                     |          |                    |         
|                                                                                         |                                                                | NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |          |                    | 217,021 
|                                                                                         |                                                                |                                                     |          |                    |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |                                                                |                                                     |          |                    |         
|                                                                                         | Repayments of long-term debt                                   |                                                     |          | (1,443,459         | )       
|                                                                                         | Issuance of new long-term debt                                 |                                                     |          | 3,512,615          |         
|                                                                                         | Capitalized transaction costs                                  |                                                     |          | (152,064           | )       
|                                                                                         | New incentive obligations                                      |                                                     |          | 16,250             |         
|                                                                                         | Repayments of incentive obligations                            |                                                     |          | (9,571             | )       
|                                                                                         | Repurchase of Common Stock                                     |                                                     |          | (2,784,556         | )       
|                                                                                         | Re-issuance of Treasury Stock                                  |                                                     |          | 757                |         
|                                                                                         | Capital contributed by affiliate                               |                                                     |          | 9,200              |         
|                                                                                         | Other equity related transactions                              |                                                     |          | 3,384              |         
|                                                                                         |                                                                |                                                     |          |                    |         
|                                                                                         |                                                                | NET CASH USED IN FINANCING ACTIVITIES               |          |                    | (847,444
|                                                                                         |                                                                |                                                     |          |                    |         
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                  |                                                                |                                                     | 328      |                    |         
|                                                                                         |                                                                |                                                     |          |                    |         
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                |                                                                |                                                     | (463,044 | )                  |         
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                           |                                                                |                                                     | 511,248  |                    |         
|                                                                                         |                                                                |                                                     |          |                    |         
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                 |                                                                | $                                                   | 48,204   |                    | $       
|                                                                                         |                                                                |                                                     |          |                    |         
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                        |                                                                |                                                     |          |                    |         
|                                                                                         | Cash received for interest                                     |                                                     | $        | 6,955              |         
|                                                                                         |                                                                |                                                     |          |                    |         
|                                                                                         | Cash paid for interest                                         |                                                     | $        | 134,453            |         
|                                                                                         |                                                                |                                                     |          |                    |         
|                                                                                         | Cash received for taxes                                        |                                                     | $        | 122                |         
|                                                                                         |                                                                |                                                     |          |                    |         
|                                                                                         | Cash paid for taxes                                            |                                                     | $        | 3,422              |         
|                                                                                         |                                                                |                                                     |          |                    |         

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

---





PANAMSAT CORPORATION        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)    Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial
information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete financial statements. The condensed consolidated financial statements include all normal and recurring adjustments that
management considers necessary to present fairly the financial position as of September 30, 2004, results of operations for the three and nine month periods ended September 30, 2004 and
2003 and cash flows for the nine months ended September 30, 2004 and 2003. Certain prior period amounts have been reclassified to conform to the current period's presentation. Operating results
for the three and nine months ended September 30, 2004 and 2003 are not necessarily indicative of the operating results for the full year. For further information, refer to the consolidated
financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission
("SEC") on March 15, 2004, all amendments thereto, and all of our other filings filed with the SEC from March 15, 2004 through the date of this report.

(2)    PanAmSat Merger, Subsequent Sale and Related Transactions

On April 20, 2004, we entered into a definitive transaction agreement with The DIRECTV Group, Inc. ("The DIRECTV Group"), PAS Merger
Sub, Inc. ("Merger Sub"), a wholly-owned subsidiary of The DIRECTV Group, and Constellation, LLC ("Constellation"), an affiliate of Kohlberg Kravis Roberts & Co. L.P. ("KKR"), for the
merger of our company with Merger Sub (the "Merger") and subsequent sale to Constellation. On May 17, 2004, Constellation assigned the right to purchase a portion of the shares of our common
stock to limited liability companies affiliated with The Carlyle Group ("Carlyle") and Providence Equity Partners, Inc. ("Providence," and Providence, together with KKR and Carlyle,
the "Sponsors"). On August 12, 2004, The DIRECTV Group entered into a letter agreement with the Sponsors which amended certain terms of the transactions, including the purchase price paid to
The DIRECTV Group. The Merger, the purchase transactions, the related financing transactions and the related contractual arrangements entered into with The DIRECTV Group described below are referred
to collectively as the "Transactions."

Pursuant
to the terms of the transaction agreement, on August 18, 2004, Merger Sub merged with and into us, with PanAmSat as the surviving entity. As of the effective time of the
Merger, holders of shares of our common stock (other than The DIRECTV Group and members of management who agreed not to have certain of their equity interests cashed out in the Merger) had no further
ownership interest in us. Instead, such holders of our common stock received $23.50 in cash per share of our common stock.

On
August 20, 2004, as part of the Transactions, a portion of the shares of our common stock beneficially owned by The DIRECTV Group was repurchased by us at a purchase price of
$21.84 in cash per share. Following the repurchase, The DIRECTV Group sold all of its remaining shares of our common stock to the Sponsors at a purchase price of $21.84 in cash per share. Following
that sale, The DIRECTV Group and The News Corporation Limited ("News Corporation") were no longer related parties of ours.

6

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As
a result of and immediately following the Transactions, entities affiliated with KKR owned approximately 44% of our common stock, entities affiliated with Carlyle and Providence each
owned approximately 27% of our common stock and certain executive officers and directors had beneficial ownership of the remainder of our common stock.

Immediately
following the Transactions, each stock option issued and outstanding under our 1997 Long-Term Incentive Plan, whether or not then vested, was canceled and
converted into the right to receive a payment from us (subject to any applicable withholding taxes) equal to the product of (a) the total number of shares of our common stock subject to such
stock option and (b) the excess of $23.50 over the option exercise price for such stock option, payable in cash. Immediately before the effective time of the Merger, all restrictions on
restricted shares and restricted stock units granted under our 1997 Long-Term Incentive Plan lapsed, and the unvested restricted shares and restricted stock units vested and were canceled
and the holders of those securities received $23.50 per share, less applicable withholding taxes. Certain members of our management agreed not to have certain of their equity interests cashed out in
the Merger; existing options, restricted shares and restricted stock units granted to such individuals remained outstanding as options and shares.

In
connection with the Transactions, on August 20, 2004, our Board of Directors approved an approximately 4.37 for 1 stock split of our common stock. All share and per share
amounts, as well as
the par value amounts and additional paid in capital amounts related to these shares within these condensed consolidated financial statements have been restated for all periods to give retroactive
effect to the stock split. The $23.50 per share paid to certain holders of our common stock was $5.38 per share after giving effect to the stock split. The $21.84 per share paid to certain other
holders of our common stock was $5.00 per share after giving effect to the stock split.

The
Transactions have been accounted for as a leveraged recapitalization, whereby the historical basis of our assets and liabilities have been maintained.

Also
in connection with the Transactions, we (i) entered into a new Senior Secured Credit Facility consisting of an $800.0 million Term Loan A Facility, a
$1,660.0 million Term Loan B Facility and a $250.0 million revolving credit facility, of which $42.6 million was drawn; (ii) issued $1,010 million of our 9% Senior
Notes due 2014 pursuant to Rule 144A under the Securities Act of 1933, as amended; (iii) terminated and repaid our old senior secured credit facility (the "Old Credit Facility");
(iv) completed a tender offer for substantially all of our $275 million 6.125% Notes due 2005 and our $800 million 81/2% Senior Notes due 2012; and
(v) completed the redemption of our remaining 6.125% Notes due 2005 in October 2004 (See Note 6 "Long-term Debt").

We
incurred approximately $307.1 million of costs related to the Transactions, of which approximately $155.0 million have been expensed within our condensed consolidated
statement of operations during the nine months ended September 30, 2004 with the remainder being capitalized to debt issuance costs and stockholders' equity within our consolidated balance
sheet.

Concurrently
with the execution of the transaction agreement, we entered into a tax separation agreement with The DIRECTV Group that superseded four earlier tax-related
agreements among ourselves, The DIRECTV Group, and certain of its affiliates. We and The DIRECTV Group agreed to handle tax matters with respect to the tax periods covered by the tax separation
agreement, including tax return preparation, audits, appeals and litigation, in a manner consistent with the past practice of

7

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The
DIRECTV Group and ourselves before the acquisition. In addition, we and The DIRECTV Group agreed to cooperate in any tax audits, litigation or appeals that involve, directly or indirectly, periods
ending on or prior to the day of the closing of the Transactions.

Pursuant
to the tax separation agreement, The DIRECTV Group has agreed to indemnify us for all federal and consolidated state and local income taxes a taxing authority may attempt to
collect from us regarding any liability for the federal or consolidated state or local income taxes of General Motors Corporation ("GM") and The DIRECTV Group, except those income taxes we are
required to pay under the tax separation agreement. In addition, The DIRECTV Group agreed to indemnify us for any taxes (other than those taxes described in the preceding sentence) related to any
periods or portions of
such periods ending on or prior to the day of the closing of the Transactions in amounts equal to 80% of the first $75 million of such other taxes and 100% of any other taxes in excess of the
first $75 million. As a result, our net tax liability related to these periods is capped at $15 million. As of September 30, 2004, we recorded approximately $75 million of
receivables from The DIRECTV Group related to these tax indemnifications within our consolidated balance sheet.

We
were deconsolidated from The DIRECTV Group consolidated tax group upon consummation of the Merger. As a result of the deconsolidation, during the third quarter of 2004, our net
operating losses were eliminated (through August 20, 2004) and the tax basis in our satellites was increased, resulting in a net increase to our net deferred tax liabilities of
$5.7 million. In addition, the tax basis in our satellites was increased through a taxable transfer of certain of our satellites to newly formed operating companies, resulting in a decrease in
our consolidated net deferred tax liabilities of $307.7 million.

The
tax separation agreement is effective from the day of the closing of the Transactions until the expiration of the statute of limitations with respect to all taxes to which the tax
separation agreement relates.

Also
in connection with the Transactions, we entered into new contractual arrangements with affiliates of The DIRECTV Group at rates which, we believe, approximate market rates. These
contractual arrangements include the extension of transponder lease agreements with Hughes Network Systems, Inc. ("HNS"), the extension of The DIRECTV Group guarantees of our transponder lease
agreements with DIRECTV Latin America LLC ("DTVLA"), the purchase of additional transponder capacity for direct-to-home ("DTH") services in Latin America, and the extension of
existing and the entering into of new telemetry, tracking and control ("TT&C") service agreements with DIRECTV Operations LLC. In addition, in connection with the Transactions, The DIRECTV Group paid
us for certain past due receivables from, and guaranteed certain future obligations of, our customer Sky Multi-Country Partners, an affiliate of News Corporation. Certain of the new contractual
arrangements we entered into in connection with the Transactions increased our contracted backlog as of September 30, 2004 by approximately $687 million. Management believes that these
guarantees and other contractual arrangements will substantially reduce credit risks associated with the two Latin American DTH platforms in our contracted backlog and protect us against the possible
impact of future consolidation of those platforms.

Certain
of our executives have change-in-control severance agreements, which provide for, among other things, the payment of severance and other benefits upon the
termination of the executive without cause or for good reason within three years after a change in control of PanAmSat, as defined

8

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in
their respective agreements. In addition, our Severance Pay Plan allows for the payment of enhanced severance to employees laid off or who resign for good reason (as defined in such plan) due to,
and within two years following, a change-in-control (See Note 11 "Commitments and Contingencies").

On
August 20, 2004, in conjunction with the Transactions, our Board of Directors approved the retirement of the 95,742,728 shares of our common stock repurchased from affiliates
of The DIRECTV Group (418,291,126 shares repurchased after giving effect to the August 20, 2004 stock split).

(3)    Customer Termination

In July of 2004, we terminated our transponder lease agreements with one of our customers due to non-payment of the customer's obligations to us
through June 30, 2004. As a result, in the second quarter of 2004, we recorded a pre-tax charge of approximately $29.6 million within selling, general and administrative
expense in our condensed consolidated statement of operations related to the write-off of current and long-term receivable balances due from this customer. Prior to the
termination, contracted future backlog and remaining 2004 revenues related to this customer were $80.4 million and $5.0 million, respectively.

(4)    PAS-6 and Galaxy 10R Impairment Losses

On March 17, 2004, our PAS-6 satellite, an FS 1300 model satellite built by Space Systems/Loral, suffered an anomaly resulting in a loss of
power. Following that event, we moved the satellite to a storage orbit while we and the manufacturer evaluated the problem. On April 1, 2004, this satellite experienced another anomaly and more
significant loss of power. Neither of these losses was anticipated. We maintained communications with, and control of, this satellite and, as a result of the second anomaly, took the necessary steps
to de-orbit it.

PAS-6
had previously been taken out of primary service and was used as a backup for another satellite, PAS-6B. Accordingly, these events did not affect service to
any of our customers and we anticipate that they will not affect our revenues in 2004. We do not plan to replace
this satellite. As a result of the March 17 event, we recorded a non-cash impairment charge within income from operations of approximately $99.9 million in the first quarter
of 2004. This resulted in a non-cash charge to net income after taxes of approximately $63.3 million. PAS-6 was uninsured and we will not collect insurance proceeds as a
result of these events.

On
August 3, 2004, the secondary Xenon Ion Propulsion Systems ("XIPS") on PanAmSat's Galaxy 10R satellite experienced an unexpected shutdown, subsequently determined to be a
permanent failure. XIPS is an electronic propulsion system that maintains a satellite's in-orbit position. This event has not affected service to any of our customers. The primary XIPS on
this satellite had previously failed. The satellite is operating normally on its backup bi-propellant propulsion system, which has proven to be a highly reliable propulsion system with
extensive flight experience. In the absence of the primary and secondary XIPS, this satellite is expected to operate normally on its available bi-propellant fuel for over three years.
Prior to this event, Galaxy 10R was scheduled to have an estimated end of useful life in 2015.

We
do not expect this event to affect service to our customers or to affect revenues from the customers on this satellite over the remaining life of the satellite. As a result, there
should be no

9

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material
impact on services, revenues or satellite operations. In addition, we do not believe that this event will affect our contracted backlog because the remaining fuel for the backup
bi-propellant propulsion system should provide ample time to seamlessly transition customers to a new or replacement satellite and substantially all of our customer contracts would
continue in effect on their terms on such new or replacement satellite.

This
event will result in acceleration to the 20042007 timeframe of planned capital expenditures to replace this satellite. We have contractual arrangements in place that
would allow us to procure the construction and launch of a replacement satellite. Galaxy 10R is insured and in August 2004 we made a claim under its insurance policies. In November 2004,
our insurers confirmed to us their agreement to settle the Galaxy 10R insurance claim by payment to the company of approximately $75.3 million. These insurance proceeds, which are expected to
be received by the end of the fourth quarter of 2004, will be used to partially offset the replacement cost of Galaxy 10R.

As
a result of this event, we have recorded approximately $9.1 million of losses in the third quarter of 2004 related primarily to a customer warranty obligation payable at the
satellite's end of life and a non-cash write off of a portion of a sales-type lease receivable. These losses and warranty obligations are substantially covered by the Galaxy
10R insurance policies. In connection with the Galaxy 10R insurance settlement, a gain of approximately $9.1 million will be recorded during the fourth quarter of 2004, offsetting the third
quarter losses. Upon settlement of the Galaxy 10R insurance claim in November 2004, the expected additional depreciation expense resulting from Galaxy 10R's revised estimated useful life will
be approximately $5 million per year.

We
operate three other Boeing 601 HP satellites that continue to operate normally with XIPS as their primary propulsion system. Two of these satellites (PAS-9 and
PAS-10) have over 6 years of bi-propellant fuel and the third (Galaxy 13/Horizons 1), which also has a more robust XIPS than its predecessors, has over 11 years
of bi-propellant fuel.

(5)    Satellite Deployment Plans and Operational Developments

In January 2004, we and Horizons LLC ("Horizons") commenced service on the Galaxy 13/Horizons 1 satellite. The satellite is a Boeing 601HP with 24
C-band and 24 Ku-band transponders and is operated at 127 degrees west longitude. Horizons, a 50-50 joint venture between us and JSAT International Inc.
("JSAT"), the U.S. subsidiary of a Japanese satellite services provider, owns the Ku-band payload on the satellite, which is separately designated Horizons 1. Using this capacity, Horizons
offers a variety of digital video, Internet and data services. Effective upon the in-service date of Galaxy 13/Horizons 1, JSAT and we contributed our investments in the
Ku-band transponders to Horizons. Our investment in Horizons of $42.6 million as of September 30, 2004 is classified within "Deferred Charges and Other
Assets-Net" on our Consolidated Balance Sheet as of such date and is being accounted for under the equity method.

The
C-band capacity on this satellite is designated as Galaxy 13. It is owned, developed and marketed solely by us and is utilized to provide High-Definition
Television ("HDTV"), as well as other services within the United States. This satellite is a part of our "Power of Five" antenna program, which provides qualified cable operators with simultaneous
access to five Galaxy neighborhood satellites. The spacecraft replaced Galaxy 9, which is now utilized as a domestic C-band in-orbit spare.

10

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We
expect to launch three satellites by the end of 2006. We are scheduled to launch Galaxy 14 in the first quarter of 2005 to serve as an in-orbit spare. We plan to replace
Galaxy 5 at 125 degrees west longitude with Galaxy 12 in January 2005. We plan to launch Galaxy 15 in the second quarter of 2005 to replace Galaxy 1R at 133 degrees west longitude. We plan to
launch Galaxy 16 in the second quarter of 2006 to replace Galaxy 4R at 99 degrees west longitude.

In
June 2004, we committed to purchase Galaxy 17, an on-ground spare for Galaxy 11, which will also serve as a spare to protect against launch failure of Galaxy 16 and
could serve as a replacement for Galaxy 10R. In addition, we plan to construct and launch replacement satellites for Galaxy 10R and PAS-6B prior to the end of their useful lives, although
no commitments
have been made for the procurement of these satellites (See Note 11 "Commitments and Contingencies" below).

(6)    Long-term Debt

In connection with the Transactions, we (i) entered into a new Senior Secured Credit Facility consisting of an $800.0 million Term Loan A
Facility, a $1,660.0 million Term Loan B Facility and a $250.0 million revolving credit facility, of which $42.6 million was drawn; (ii) issued $1,010 million
of our 9% Senior Notes due 2014 pursuant to Rule 144A under the Securities Act of 1933, as amended; (iii) terminated and repaid our Old Credit Facility; (iv) completed a tender
offer for substantially all of our $275 million 6.125% Notes due 2005 and our $800 million 81/2% Senior Notes due 2012; and (v) completed the redemption of our
remaining 6.125% Notes due 2005 in October 2004. In September 2004, we repaid the outstanding balance under our revolving credit facility.

As
of September 30, 2004 and December 31, 2003, long-term debt consisted of the following (in thousands):

September 30,
2004

December 31,
200361/8% Notes due 2005

$
24,156

$
275,00063/8% Notes due 2008


150,000


150,000Old Term Loan B-1 due 2010





350,00081/2% Notes due 2012


1,190


800,00067/8% Notes due 2028


125,000


125,000Transaction Related Financing:Revolving Credit Facility





Term Loan A due 2009


798,810


Term Loan B due 2011


1,660,000


9% Senior Notes due 2014


1,010,000


3,769,156


1,700,000Less: current maturities


95,416


3,500Total Long-Term Debt

$
3,673,740

$
1,696,500


At
September 30, 2004 we had total debt outstanding of approximately $3.769 billion, including current maturities of $95.4 million relating to our
61/8% Senior Notes due 2005, and the quarterly

11

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principal
payments on the Term A Facility and the Term B Facility under the Senior Secured Credit Facility described below.

Our
Senior Secured Credit Facility is comprised of a $250.0 million revolving credit facility, which will terminate in August 2009 (the "Revolving Facility"), an
$800.0 million Term Loan A Facility, which matures in August 2009 (the "Term A Facility"), and a $1,660 million Term Loan B Facility, which matures in August 2011 (the
"Term B Facility"). At September 30, 2004, the interest rates on the Term A Facility and Term B Facility were LIBOR plus 2.50% and LIBOR plus 2.75%, respectively, and the
Revolving Facility was undrawn. These rates are subject to change based upon our total leverage ratio. In addition, we are required to pay a commitment fee for the unused commitments under the
Revolving Facility and the Term A Facility, if any, which, as of September 30, 2004 on an annual basis was 0.50%. As of September 30, 2004 we had outstanding letters of credit
totaling $36.1 million. Outstanding letters of credit reduce our ability to borrow against the Revolving Facility by an equivalent amount. Any amounts borrowed under the Revolving Facility
would bear interest at LIBOR plus 2.50% as of September 30, 2004, although this interest rate is subject to adjustment based on our total leverage ratio. Fees charged by the lenders were
capitalized as debt issuance costs and are amortized over the terms of the Revolving Facility, the Term A Facility, and the Term B Facility.

Obligations
under the Senior Secured Credit Facility are, or will be, as the case may be, unconditionally and irrevocably guaranteed jointly and severally by our current and future
domestic subsidiaries and are secured by substantially all of our assets and substantially all of the assets of each of our current and future domestic subsidiaries.

The
$1,010 million Senior Notes bear interest at an annual rate of 9.0%. Fees charged by the lenders were capitalized as debt issuance costs and are amortized over the term of the
9% Senior Notes. The 9% Senior Notes require interest payments to be made semi-annually, mature on August 15, 2014, are unsecured, and are, or will be, as the case may be,
unconditionally guaranteed by each of our existing and certain subsequently acquired or organized domestic restricted subsidiaries.

On
August 22, 2004, we completed a tender offer and consent solicitation to purchase any and all of the outstanding $800.0 million aggregate principal amount of our
81/2% Senior Notes due 2012 for cash. Not all of these notes were tendered and, as a result, approximately $1.2 million aggregate principal amount will remain outstanding through
the original maturity date. As required by our Senior Secured Credit Facility, we repaid our Term A Facility by the amount of the 81/2% Senior Notes that remained outstanding after the
tender offer. The remaining 81/2% Senior Notes due 2012 are unsecured, and are unconditionally guaranteed by each of our existing domestic restricted subsidiaries (See Note 17
"Condensed Consolidating Financial Statements" below provided as required by the SEC's Regulation S-X, Rule 3-10(f)).

On
August 22, 2004, we completed a tender offer to purchase any and all of the outstanding $275.0 million aggregate principal amount of our 6.125% Notes due 2005 for cash.
On October 22, 2004, we completed a redemption of our remaining $24.2 million 6.125% Notes due 2005 that were not purchased in the tender offer from cash on hand.

12

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In conjunction with the Transactions, in the third quarter of 2004, we wrote-off debt issuance costs and recorded a charge within interest expense of
$15.1 million related to the prepayment of our pre-existing debt. Also in conjunction with the Recapitalization, we capitalized approximately $142.9 million to debt issuance
costs and approximately $9.2 million to equity. The debt issuance costs are classified on our balance sheet within Deferred Charges and Other Assets and will be amortized to interest expense
over the terms of the related debt obligations.

We
also had outstanding 10 and 30-year fixed rate notes totaling $275 million issued in January 1998. The outstanding principal balances, interest rates and
maturity dates for these notes as of September 30, 2004, are $150 million at 6.375% due 2008 and $125 million at 6.875% due 2028, respectively. Principal on these notes is payable
at maturity, while interest is payable semi-annually.

In
June 2004, we repaid from available cash on hand the $349.1 million outstanding balance under the Term Loan B-1 Facility of our Old Credit Facility. In
conjunction with this repayment, we recorded a charge of $5.5 million within interest expense as a result of the write-off of unamortized debt issuance costs related to that loan
facility and a charge of $0.5 million within interest expense representing the amount accumulated within other comprehensive income related to our $100.0 million interest rate hedge on
that loan facility entered into during the third quarter of 2002. The hedge liability was not impacted by the repayment of that facility. The fair value of the outstanding interest-rate
hedge agreement as of September 30, 2004, based upon quoted market prices from the counterparty, reflected a hedge liability of approximately $0.7 million. Upon expiration of the current
agreement on August 30, 2005, we will not be required to enter into an interest rate hedge agreement.

On
July 14, 2003, we made an optional pre-payment of $350 million against our Old Credit Facility from available cash on hand. During the third quarter of 2003,
we recorded a non-cash charge of approximately $5.7 million to write-off debt issuance costs associated with the portion of the credit facility that was prepaid.

We
are required to maintain certain financial covenants and are also subject to restrictive covenants under our borrowings. As of September 30, 2004, we were in compliance with
all such covenants.

(7)    Acquisitions

On March 7, 2003, we acquired substantially all of the assets of Hughes Global Services, Inc. ("HGS") from our affiliate, The DIRECTV Group, for
approximately $8.4 million in cash and the assumption of certain liabilities. On August 27, 2003, we acquired Esatel Communications, Inc. ("Esatel") and its related entity, Silver
Springs Teleport, LC. In November 2003, we purchased substantially all of the assets of Sonic Telecommunications International Ltd. ("Sonic"). The aggregate purchase price for the Esatel
and Sonic acquisitions was approximately $12.3 million, of which $0.5 million was paid in the first quarter of 2004.

The
results of these acquisitions are included within our consolidated income statements from the date of each respective acquisition.

13

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(8)    Stock-Based Compensation

Effective January 1, 2003, we adopted the fair value recognition provision of FASB Statement No. 123, "Accounting for Stock Based Compensation,"
prospectively, to all employee awards granted on or after January 1, 2003, pursuant to FASB Statement No. 148, "Accounting for Stock-Based CompensationTransition and
Disclosure." During 2004 and 2003, we issued the following awards (after giving effect to the August 20, 2004 stock split):

Grant date:

Employee Stock
Options Granted

Restricted Stock
Units GrantedMarch 31, 2003

51,990

June 30, 2003

50,461

1,741,010September 30, 2003

93,276

December 31, 2003

19,223

8,738March 31, 2004

211,237

8,738June 30, 2004



September 30, 2004

5,434,920




Prior
to the consummation of the Transactions, employee stock options granted before June 30, 2004 were scheduled to vest ratably over three years. The stock options granted in
the third quarter of 2004 vest over five to eight years. Portions of these awards vest over a five-year period based upon the passage of time and portions vest over an eight year period,
which may be reduced if certain pre-established company operating performance targets are achieved. Compensation expense for these nonqualified stock options is based on the fair value of
the options at the respective grant dates utilizing the Black-Scholes model for estimating fair value. We recorded compensation expense related to these options of approximately $114 thousand
and $196 thousand for the three and nine months ended September 30, 2004, respectively, and $10 thousand and $15 thousand during the three and nine month periods ended
September 30, 2003, respectively. Under the intrinsic value method used for reporting prior to January 1, 2003, no compensation expense had been recognized on options granted through
December 31, 2002, as the exercise price of the options granted equaled the market price of our common stock on the date of grant for all prior grants.

Prior
to the consummation of the Transactions, restricted stock units granted in 2004 and 2003 were scheduled to vest 50% on the second anniversary of the grant date and the remaining
50% on the third anniversary. Stock compensation expense was being recognized over the vesting period based on our stock price on the grant date. We recorded compensation expense related to the
restricted stock units of approximately $0.4 million and $1.7 million for the three and nine months ended September 30, 2004, respectively, and $0.7 million and
$1.2 million during the three and nine month periods ended September 30, 2003, respectively.

Upon
consummation of the Transactions, all outstanding employee stock options vested and became exercisable, and all outstanding restricted shares and restricted stock units vested
immediately prior to the Merger. We recorded a charge of approximately $8.3 million within Transaction-related costs in our condensed consolidated statement of operations in the third quarter
of 2004 in relation to the acceleration of vesting of these options, restricted shares and restricted stock units. Also in conjunction with the Transactions, the exercise prices of certain employee
options were modified. As a result of these modifications, we recorded additional expense of approximately $1.2 million within Transaction Costs in our condensed consolidated statement of
operations in the third quarter of 2004. Holders of options and restricted stock units were entitled to receive (i) with respect to in-the-money

14

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options,
cash equal to the difference between the exercise price and the $23.50 per share price paid in the Transactions, and (ii) with respect to restricted shares and restricted stock units
cash in the amount of $23.50 per share. All out-of-the-money stock options were cancelled without payment. Certain members of our management agreed not to have
certain of their equity interests cashed out in the Transactions; existing options, restricted shares and restricted stock units granted to such individuals remain outstanding as options and shares.

The
following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period
(in thousands except per share amounts):

|                                                                                                                                             |                               | Three Months Ended: |         | Nine Months Ended: |  
|-------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | ------------------- | ------- | ------------------ | -
|
|Net income (loss), as reported                                                                                                               |                               | $                   | (76,655 | )                  | $
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effects                                   |                               |                     | 6,389   |                    |  
|Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects |                               |                     | (6,384  | )                  |  
|                                                                                                                                             |                               |                     |         |                    |  
|Pro forma net income (loss)                                                                                                                  |                               | $                   | (76,650 | )                  | $
|                                                                                                                                             |                               |                     |         |                    |  
|Earnings (loss) per share:                                                                                                                   |                               |                     |         |                    |  
|                                                                                                                                             | Basic and Dilutedas reported |                     | $       | (0.16              | )
|                                                                                                                                             |                               |                     |         |                    |  
|                                                                                                                                             | Basic and Dilutedpro forma   |                     | $       | (0.16              | )
|                                                                                                                                             |                               |                     |         |                    |  

The
pro forma amounts for compensation cost may not necessarily be indicative of the effects on operating results for future periods.

(9)    Facilities Restructuring and Severance Costs

Facilities restructuring and severance costs were $2.1 million and $0.7 million for the three months ended September 30, 2004 and 2003,
respectively, and $4.5 million and $1.4 million for the nine month periods ended September 30, 2004 and 2003, respectively.

In
January 2003, our management approved a plan to consolidate certain of our teleports in order to improve customer service and reduce operating costs. Under this plan, our
Homestead, Florida teleport was closed in 2003 and in June 2004 we closed our Spring Creek, New York teleport. On October 28, 2004, we sold our Spring Creek teleport (See Note 16
"Subsequent Events"). This teleport consolidation plan includes the disposal of land, buildings and equipment located at these teleports and severance related costs for approximately 40 employees that
will be required to perform services through the date of closure. During the year ended December 31, 2003 and for the nine months ended September 30, 2004, we recorded charges of
$4.2 million and $0.8 million, respectively, related to this teleport consolidation plan, primarily representing severance costs.

15

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On
March 29, 2002, our management approved a plan to restructure several of our United States locations and close certain facilities, some of which are currently being leased
through 2011. In an effort to further streamline our operations, in the nine months ended September 30, 2004 we consolidated our Manhattan Beach, El Segundo and Long Beach, California
facilities. As a result, in the first quarter of 2004, we recorded a non-cash charge of approximately $1.4 million reflecting future lease costs related to approximately 18,000
square feet of unused facilities in Manhattan Beach. Additionally, in the third quarter of 2004 we recorded a non-cash charge of approximately $2.3 million due to a reduction in
future anticipated sublease income related to one of our idle facilities.

During
the nine months ended September 30, 2004 we made cash payments of $0.4 million related to the 2003 reduction in workforce.

The
following table summarizes the recorded accruals and activity related to our teleport consolidation, facilities restructuring and severance charges (in millions):

|                                     |  | Facilities
Restructuring |      | Teleport
Consolidation |   | Severance
Costs |   | Total |     
|------------------------------------ |  | ------------------------ | ---- | ---------------------- | - | --------------- | - | ----- | ----
|Balance as of January 1, 2003        |  | $                        | 7.6  |                        | $ |                |   | $     |    
|2003 restructuring charges (credits) |  |                          | (1.4 | )                      |   | 4.2             |   |       | 1.4 
|Less: net cash payments in 2003      |  |                          | (1.6 | )                      |   | (2.4            | ) |       | (0.7
|                                     |  |                          |      |                        |   |                 |   |       |     
|Balance as of December 31, 2003      |  | $                        | 4.6  |                        | $ | 1.8             |   | $     | 0.7 
|2004 restructuring charges           |  |                          | 3.7  |                        |   | 0.8             |   |       |    
|Less: net cash payments in 2004      |  |                          | (1.6 | )                      |   | (1.5            | ) |       | (0.4
|                                     |  |                          |      |                        |   |                 |   |       |     
|Balance as of September 30, 2004     |  | $                        | 6.7  |                        | $ | 1.1             |   | $     | 0.3 
|                                     |  |                          |      |                        |   |                 |   |       |     

(10)    Interest ExpenseNet

Interest expense for the three months ended September 30, 2004 and 2003 is recorded net of capitalized interest of $2.0 million and
$2.8 million, respectively, and interest income of $1.7 million and $2.4 million, respectively. Interest expense for the nine months ended September 30, 2004 and 2003 is
recorded net of capitalized interest of $4.3 million and $11.3 million, respectively, and interest income of $6.8 million and $11.4 million, respectively. Included in
interest expense for the three and nine months ended September 30, 2004 is approximately $15.1 million and $20.6 million, respectively, for the write-off of
unamortized debt issuance costs related to the June 2004 and August 2004 prepayments of debt. Included in interest expense for the three and nine months ended September 30, 2003
is approximately $5.7 million for the write-off of debt issuance costs associated with the portion of the Old Credit Facility that was prepaid in July 2003 (See Note 6
"Long-Term Debt").

(11)    Commitments and Contingencies

Satellite Incentive Obligations

Satellite contracts typically require that we make progress payments during the period of the satellite's construction and orbital incentive payments (plus
interest) over the orbital life of the satellite. The incentive obligations may be subject to reduction or refund if the satellite fails to meet specific

16

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technical
operating standards. As of September 30, 2004, we had $123.9 million of liabilities recorded in relation to these satellite incentive obligations.

Satellite Commitments

As of September 30, 2004, we had approximately $159.7 million of expenditures remaining under existing satellite construction contracts and
$21.6 million remaining under existing satellite launch contracts. Satellite launch and in-orbit insurance contracts related to future satellites to be launched are cancelable up to
thirty days prior to the satellite's launch. As of September 30, 2004, we did not have any non-cancelable commitments related to existing launch insurance or in-orbit
insurance contracts for satellites to be launched.

Through
September 30, 2004, we had made approximately $171.2 million of capital expenditures in relation to Galaxy 14 and Galaxy 15. We also spent $65.8 million for
launch costs originally intended for Galaxy 8-iR and $6.0 million for another future launch. As a result of the termination of the Galaxy 8-iR construction contract, we
expect to use this launch for Galaxy 16, which will replace our Galaxy 4R satellite in early 2006.

In
April 2004, we entered into a commitment for the construction of Galaxy 16. In June 2004, we paid The DIRECTV Group $28.5 million to fully reimburse amounts
previously paid on our behalf to the manufacturer of this satellite. Also in June 2004, we executed a definitive agreement for the procurement of Galaxy 17 an on-ground spare for
Galaxy 11, which will also serve as a
spare to protect against launch failure of Galaxy 16. The aggregate commitment related to these construction agreements is approximately $200 million, which will be paid over the next two
years.

We
plan to construct and launch replacement satellites for Galaxy 10R and PAS-6B prior to the end of their useful lives, although no commitments have been made for the
procurement of these satellites.

Satellite Insurance

On August 31, 2004, we filed a proof of loss under the insurance policy for our Galaxy 10R spacecraft after the secondary XIPS on this satellite
permanently failed. In November 2004, our insurers confirmed to us their agreement to settle this claim for approximately $75.3 million. These insurance proceeds, which are expected to
be received by the end of the fourth quarter of 2004, will be used to partially offset the replacement cost of Galaxy 10R.

On
February 19, 2003, we filed proofs of loss under the insurance policies for two of our BSS 702 spacecraft, Galaxy 11 and PAS-1R, for constructive total losses based
on degradation of the solar panels. On December 29, 2003, we reached a settlement of these insurance claims for payment of $260 million with no future revenue share. We offset the
proceeds from this settlement against the carrying value of the satellites. In the first quarter of 2004, we received the $260 million settlement amount.

On
July 31, 2003, we filed a proof of loss under the insurance policy for our Galaxy 4R spacecraft after the secondary XIPS on this satellite ceased working. In 2003, we settled
with and received $102.6 million from insurers representing approximately 83 percent of the insurance coverage on the satellite. In March 2004, we reached an agreement with and
received $26.9 million from the insurer

17

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representing
the remaining 17 percent of the insurance coverage on this satellite. The settlement with the insurer representing 17 percent coverage included a future sharing of revenues
actually received from the satellite. We proportionately offset the proceeds from these settlements against the insured carrying value of the satellite and the net investment in sales-type
lease. We plan to replace this satellite with Galaxy 16 prior to the end of its useful life using the insurance proceeds and a launch service contract that we had purchased previously.

During
the first quarter of 2004 we received $286.9 million of insurance proceeds under the insurance policies for Galaxy 11, PAS-1R and Galaxy 4R satellites. These
proceeds were held in a
collateral account and were classified as restricted cash pursuant to the terms of our Old Credit Facility until those restrictions were lifted in June 2004.

As
of September 30, 2004, we had in effect launch and in-orbit insurance policies covering seven satellites in the aggregate amount of approximately
$828.9 million. As of such date, these insured satellites had an aggregate net book value and other insurable costs of $899.7 million. We have 17 uninsured satellites in orbit. The
uninsured satellites are: PAS-4, which is used as a backup satellite; PAS-5 and PAS-7, for which we received insurance proceeds for constructive total losses;
Galaxy 1R, Galaxy 3R, Galaxy 5 and SBS-6, which are approaching the ends of their useful lives; Galaxy 11 and PAS-1R, for which we received insurance proceeds for partial
losses; PAS-2, PAS-3R, PAS-6B, PAS-8 and Galaxy 9, for which we determined that insurance was not available on commercially reasonable terms; and
HGS-3, HGS-5 and Leasat, which have an aggregate book value of less than $1.0 million. Our Galaxy 12 and Galaxy 9 satellites currently serve as in-orbit
backups for the C-band portions of Galaxy 1R, Galaxy 3C, Galaxy 4R, Galaxy 5, Galaxy 10R, Galaxy 11 and Galaxy 13/Horizons 1 (See Note 5 "Satellite Deployment Plans" above). The
C-band portion of the satellites that are currently covered by C-band in-orbit backups had an aggregate net book value of approximately $310.8 million as of
September 30, 2004.

Of
the insured satellites, as of September 30, 2004, three were covered by policies with substantial exclusions or exceptions to coverage for failures of specific components
identified by the underwriters as at risk for possible failure ("Significant Exclusion Policies"). The exclusions reduce the probability of an insurance recovery in the event of a loss on these
satellites. One of the satellites, PAS-9, has operational redundancies available for the systems on which exclusions have been imposed. We believe that this redundancy allows for
uninterrupted operation of the satellite in the event of a failure of the component subject to the insurance exclusion. The second such satellite, Galaxy 4R, for which we have received insurance
proceeds, has a remaining policy covering $19.7 million of investments in sales-type leases that also has a policy exclusion for XIPS related anomalies. Galaxy 4R is currently
operating on its backup bi-propellant propulsion system. The third satellite, Galaxy 13/Horizons 1, which was placed in service in January 2004 and is insured by a policy with an
exclusion for XIPS related anomalies, continues to have fully redundant XIPS as its primary propulsion system. Certain enhancements have been made to the XIPS on this satellite to make the systems
more robust. In addition, this satellite has available backup bi-propellant of over 11 years.

At
September 30, 2004, the uninsured satellites and the satellites insured by Significant Exclusion Policies had a total net book value and other insurable costs of approximately
$1.0 billion. Of this amount, $753.7 million related to uninsured satellites and $273.0 million related to satellites insured by Significant Exclusion Policies.

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Operating Leases

We have commitments for operating leases primarily relating to equipment, our executive office facilities in Wilton, Connecticut and other locations. These leases
contain escalation provisions for increases as a result of increases in real estate taxes and operating expenses. As of September 30, 2004, minimum annual rentals of all leases, exclusive of
potential increases in real estate taxes, operating assessments and future sub-lease income aggregated $33.2 million.

Customer and Vendor Obligations

We have certain contracts with our customers which require that we provide equipment, services and other support to these customers during the course of the
related contracts. As of September 30, 2004, we had commitments under these customer contracts which aggregated approximately $45.1 million related to the provision of equipment,
services and other support.

We
have certain long-term contractual obligations with service providers primarily for the operation of certain of our satellites. As of September 30, 2004, we had
commitments under these vendor contracts, which aggregated approximately $53.8 million, related to the provision of equipment, services and other support.

Change-in-Control Obligations

Certain of our senior executives are party to change-in-control severance agreements which provide for payment of severance and other
benefits in the event of an involuntary termination of the executive's employment (as defined in such agreements) within three years after a change in control. As a change in control of The DIRECTV
Group and PanAmSat have occurred, these agreements will apply if an involuntary termination of the executive occurs during the period specified by the agreement. Based upon current compensation
levels, if all of these executives receive the termination related benefits as specified by their respective agreements, the aggregate cost to us would be in the range of $4 million to
$5 million.

Certain
of our other executives have change-in-control severance agreements which provide for, among other things, the payment of severance and other benefits
upon the termination of the executive without cause or for good reason within three years after a change in control of PanAmSat, as defined in their respective agreements. The Transactions resulted in
a change-in-control of PanAmSat under these agreements. Based upon current compensation levels, if all of these executives receive the termination related benefits as specified by their respective
agreements, the
aggregate cost to us would be approximately $5 million in addition to the costs described above with respect to our senior executives.

In
addition, our Severance Pay Plan allows for the payment of enhanced severance to employees laid off or who resign for good reason (as defined in such plan) due to, and within two
years following, a change-in-control.

Foreign Withholding Taxes

We have outstanding tax claims related to withholding taxes assessed on revenues derived from broadcasters inside and outside of India who broadcast from or into
India. The Indian government has

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assessed
approximately $7.3 million (reduced from an initial assessment of $15.2 million) against one of our subsidiaries for the Indian tax year ended March 31, 1997. This
assessment is being appealed to the Income Tax Appeals Tribunal. For Indian tax years ended March 31, 1996, 1998, 1999, 2000 and 2001, the Indian government has assessed approximately
$36 million in the aggregate against us, including interest. This assessment has been appealed to the Commissioner of Income Tax (Appeals). We are contesting the imposition of such taxes. While
this contest proceeds, we have been required to advance cash and provide a bank guarantee for a total of $36 million. To date, we have paid cash of approximately $1 million related to
these assessment years. If unsuccessful in our contest, we could be subject to comparable claims for subsequent years. In connection with the Transactions, The DIRECTV Group agreed to indemnify us for
these and certain other taxes related to any periods or portions of such periods ending on or prior to the day of the closing of the Transactions in amounts equal to 80% of the first
$75 million of such taxes and 100% of such taxes in excess of the first $75 million. As a result, our net tax liability related to these periods is capped at $15 million (See
Note 2 "PanAmSat Merger, Subsequent Sale and Related Transactions" above).

(12)    Certain Relationships and Related Transactions Prior to the Completion of the Transactions

Transactions with The DIRECTV Group and its Affiliates

Until the consummation of the Transactions on August 20, 2004, The DIRECTV Group and its affiliates were related parties of ours.

We
provide satellite capacity, TT&C and other related services and facilities to several subsidiaries of The DIRECTV Group and purchase certain services and equipment from a subsidiary
of The DIRECTV Group. Additionally, for the period prior to the consummation of the Transactions, we reimbursed The DIRECTV Group for the allocated costs of certain jointly incurred expense items,
principally relating to administrative and other expenses. Revenues derived from The DIRECTV Group and its affiliates were $18.5 million from July 1, 2004 though August 19, 2004,
or 8.9% of our revenues for the three months ended September 30, 2004. Revenues derived from The DIRECTV Group and its affiliates were $82.3 million from January 1, 2004 though
August 19, 2004, or 13.3% of our revenues for the nine months ended September 30, 2004.

During
the fourth quarter of 2003, we agreed to amend our transponder lease agreements with DTVLA. This amendment became effective in February 2004 upon DTVLA's emergence from the
Chapter 11 bankruptcy process. In conjunction with these amendments we agreed to accept reduced cash payments in the early years, most of which we expect to recapture in later years, and The DIRECTV
Group has agreed to guarantee all of the transponder lease agreements with DTVLA for a period of five years.

We
entered into new contractual arrangements with affiliates of The DIRECTV Group in connection with the Transactions at rates which, we believe, approximate market rates. These
contractual arrangements include the extension of transponder lease agreements with HNS, the extension of The DIRECTV Group guarantees of our transponder lease agreements with DTVLA, the purchase of
additional transponder capacity for DTH services in Latin America, and the extension of existing and the entering into of new TT&C services agreements with DIRECTV Operations LLC. In addition, in
connection with the Transactions, The DIRECTV Group paid us $9.2 million for certain past due receivables from, and guaranteed certain future obligations of, our customer Sky Multi-

20

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Country
Partners, an affiliate of News Corporation (See Note 2 "PanAmSat Merger, Subsequent Sale and Related Transactions" above).

During
2003, we transferred an authorization for a Ka-band orbital slot to HNS, an affiliate, in exchange for a contingent payment of approximately $2.1 million. The
payment is payable upon the launch of a satellite by HNS to such orbital slot. The Federal Communications Commission has approved the transfer of this authorization.

On
April 20, 2004, we entered into a definitive transaction agreement with The DIRECTV Group, Merger Sub, a wholly-owned subsidiary of The DIRECTV Group, and Constellation, an
affiliate of KKR for the Transactions. (See Note 2 "PanAmSat Merger, Subsequent Sale and Related Transactions" above).

In
June 2004, we paid The DIRECTV Group $28.5 million to reimburse them in full for amounts they previously paid on our behalf to the manufacturer of the Galaxy 16
satellite (See Note 5 "Satellite Deployment Plans" above).

Concurrently
with the execution of the transaction agreement, we entered into a tax separation agreement with The DIRECTV Group that will supersede four earlier tax-related
agreements among ourselves, The DIRECTV Group and certain of its affiliates. We and The DIRECTV Group have agreed to handle tax matters with respect to the tax periods covered by the tax separation
agreement, including tax return preparation, audits, appeals and litigation, in a manner consistent with the past practice of The DIRECTV Group and ourselves before the acquisition. In addition, we
and The DIRECTV Group have agreed to cooperate in any tax audits, litigation or appeals that involve, directly or indirectly, periods ending on or prior to the day of the closing of the Transactions.

Pursuant
to the tax separation agreement, The DIRECTV Group has agreed to indemnify us for all federal and consolidated state and local income taxes a taxing authority may attempt to
collect from us regarding any liability for the federal or consolidated state or local income taxes of GM and The DIRECTV Group, except those income taxes we are required to pay under the tax
separation agreement. In addition, The DIRECTV Group has agreed to indemnify us for any taxes (other than those taxes described in the preceding sentence) related to any periods or portions of such
periods ending on or prior to the day of the closing of the Transactions in amounts equal to 80% of the first $75 million of such other taxes and 100% of any other taxes in excess of the first
$75 million. As a result, our net tax liability related to these periods is capped at $15 million.

The
tax separation agreement became effective upon the consummation of the Transactions on August 20, 2004 and will remain effective until the expiration of the statute of
limitations with respect to all taxes to which the tax separation agreement relates.

Transactions with News Corporation and its Affiliates (Other than The DIRECTV Group)

Until
the consummation of the Transactions on August 20, 2004, News Corporation and its affiliates were related parties of ours.

We
are a party to agreements with News Corporation and certain of its subsidiaries and affiliates pursuant to which we provide satellite capacity, TT&C and other related services.
Revenues derived from the News Corporation and its affiliates were $12.8 million from July 1, 2004 though August 19,

21

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2004,
or 6.2% of our revenues for the three months ended September 30, 2004. Revenues derived from the News Corporation and its affiliates were $55.1 million from January 1, 2004
though August 19, 2004, or 9.1% of our revenues for the nine months ended September 30, 2004.

In
January 2004, Fox Entertainment and we signed a multi-year, multi-satellite agreement, the terms of which provide that Fox Entertainment will consolidate its entire
suite of U.S. cable and broadcast programming onto our global fleet for 15 years and move a significant portion of its international traffic onto the fleet for the next decade. Fox
Entertainment will now be one of our largest media customers and one of our top five global customers.

Effect of the Transactions

As a result of the Transactions, effective August 20, 2004, The DIRECTV Group and News Corporation were no longer related parties of ours and the Sponsors
and their affiliates became related parties of ours.

Transactions with The Sponsors and Their Affiliates

The Sponsors provide management and advisory services to us pursuant to management services agreements executed at the closing of the Transactions. The Sponsors
charge us an aggregate management fee of $2 million annually for the provision of these services. From August 20, 2004 through September 30, 2004, we accrued $231 thousand
of expense for these management fees.

We
provide satellite capacity, TT&C and other related services to affiliates of the Sponsors. Revenues for these services were $990 thousand and $2.97 million for the three
and nine months ended September 30, 2004, respectively. As of September 30, 2004, we had receivables related to these affiliates of approximately $165 thousand.

(13)    Other AssetsNet

Our Other Assetsnet are recorded within deferred charges and other assets-net on our consolidated balance sheet. Other
assetsnet consists of prepayments of installation at the facilities of third parties that provide TT&C services to us under long-term service agreements, as well as other
miscellaneous deferred charges and other assets. The prepaid installation costs are necessary for third parties to provide services to us over the term of the related services agreement. These prepaid
costs are amortized on a straight-line basis over the respective contract periods. Included in other assets-net as of September 30, 2004 and December 31, 2003 are
$2.2 million and $3.2 million, respectively of customer lists. As of September 30, 2004 and December 31, 2003, customer lists are net of accumulated amortization of
$1.7 million and $0.6 million, respectively.

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PANAMSAT CORPORATION        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(14)    Evaluation of Long-Lived Assets

We periodically evaluate potential impairment loss relating to long-lived assets, including satellites, when a change in circumstances occurs, by
assessing whether the unamortized carrying amount can be recovered over the remaining life through undiscounted future expected cash flows generated by the underlying assets (excluding interest
payments). If the undiscounted future cash flows were less than the carrying value of the asset or group of assets, an impairment charge would be recorded. We assess the recoverability of certain of
our deferred charges and other assets by comparing the remaining net book value of the deferred charges and other assets at each period end with the expected future undiscounted cash flows to be
generated pursuant to the customer contract that gave rise to the deferred charges. The recoverability analysis is performed for each individual deferred charge and the undiscounted cash flows are the
cash flows associated with the specific customer contract that gave rise to the deferred charges. The undiscounted cash flows, as determined within the specific contractual arrangement with that
customer, would be utilized to assess the recoverability of the deferred charge. The impairment charge would be measured as the excess of the carrying value of the asset or group of assets over the
present value of estimated expected future cash flows related to the asset or asset group using a discount rate commensurate with the risks involved.

We
also assess the recoverability of our long-lived assets pursuant to paragraph 10 of Financial Accounting Standards Board ("FASB") Statement No. 144 ("SFAS
No. 144"). The costs of specific satellites are grouped together with other associated assets when assessing recoverability. Periodically and when a change in circumstances occurs, this group
of assets is compared with the expected future undiscounted cash flows to be generated by us from the related satellite. Any excess of the net book value for this group of assets over the expected
future undiscounted cash flows of the related satellite would result in an impairment charge that would be recorded within our statement of income in the period the determination is made. The
impairment charge would be measured as the excess of the carrying value of the asset or group of assets over the present value of estimated expected future cash flows related to the asset or asset
group using a discount rate commensurate with the risks involved.

In
the event a portion of a satellite was rendered inoperative and/or incapable of performing its intended function, we would apply the concepts of SFAS No. 144, in the
determination of whether an impairment loss had occurred. If an impairment loss were indicated, such amount would be recognized in the period of occurrence, net of any insurance proceeds to be
received so long as such amounts are determinable and receipt is probable. If no impairment loss was indicated in accordance with SFAS No. 144 and we received insurance proceeds, the proceeds
would offset the carrying value of the satellite. In the event that the insurance proceeds received exceeded the carrying value of the satellite, the excess of the proceeds over the carrying value of
the satellite would be recognized in the income statement.

In
the event a portion of a satellite was rendered inoperative and/or incapable of performing its intended function and the satellite was not insured, we would apply the concepts of
SFAS 144 in the determination of whether an impairment loss had occurred. In the event an impairment loss had occurred, such amount would be recognized in the period of occurrence.

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(15)    Operating Segments

Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS No. 131")
establishes standards for reporting information about operating segments in annual financial statements of public business enterprises and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders. Operating segments are components of an enterprise about which separate financial information is available and regularly
evaluated by the chief operating decision maker(s) of an enterprise. We have organized our company into two operating segments based upon the types of customers served, services provided and the
economic characteristics of each segment. Our operating segments are:



Prior
to the third quarter of 2004, we utilized net income plus net interest expense, income tax expense (benefit) and depreciation and amortization, or EBITDA, to measure the operating
performance of our operating segments and as a measure of segment performance for incentive compensation purposes.

As
a result of the Transactions, we began utilizing Segment EBITDA as a measure of performance for our operating segments during the third quarter of 2004. We evaluate the performance of
our operating segments based on several factors, of which the primary financial measure is segment net income (loss) plus net interest expense, income tax expense (benefit) and depreciation and
amortization, further adjusted to exclude non-recurring items and other non-cash adjustments largely outside of the segment operating managers' control ("Segment EBITDA").
Segment EBITDA is presented herein because our chief operating decision maker evaluates and measures each business unit's performance based on its Segment EBITDA results.

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Selected
information for our operating segments is as follows (in thousands):

|                                       |              | Three Months Ended:                         |   | Nine Months Ended: |        
|-------------------------------------- | ------------ | ------------------------------------------- | - | ------------------ | -------
|
|Revenues:                              |              |                                             |   |                    |        
|                                       | FSS          |                                             | $ | 191,945            |        
|                                       | G2           |                                             |   | 20,497             |        
|                                       | Eliminations |                                             |   | (5,347             | )      
|                                       |              |                                             |   |                    |        
|                                       |              | Total Revenues                              |   | $                  | 207,095
|                                       |              |                                             |   |                    |        
|Depreciation and Amortization Expense: |              |                                             |   |                    |        
|                                       | FSS          |                                             | $ | 74,011             |        
|                                       | G2           |                                             |   | 311                |        
|                                       | Eliminations |                                             |   |                   |        
|                                       |              |                                             |   |                    |        
|                                       |              | Total Depreciation and Amortization Expense |   | $                  | 74,322 
|                                       |              |                                             |   |                    |        
|Income (loss) from Operations:         |              |                                             |   |                    |        
|                                       | FSS          |                                             | $ | (88,909            | )      
|                                       | G2           |                                             |   | 2,685              |        
|                                       | Eliminations |                                             |   |                   |        
|                                       |              |                                             |   |                    |        
|                                       |              | Total Income (loss) from Operations         |   | $                  | (86,224
|                                       |              |                                             |   |                    |        
|Segment EBITDA:                        |              |                                             |   |                    |        
|                                       | FSS          |                                             | $ | 156,236            |        
|                                       |              |                                             |   |                    |        
|                                       | G2           |                                             | $ | 2,996              |        
|                                       |              |                                             |   |                    |        
|Capital Expenditures:                  |              |                                             |   |                    |        
|                                       | FSS          |                                             | $ | 24,400             |        
|                                       | G2           |                                             |   | 22                 |        
|                                       | Eliminations |                                             |   |                   |        
|                                       |              |                                             |   |                    |        
|                                       |              | Total Capital Expenditures                  |   | $                  | 24,422 
|                                       |              |                                             |   |                    |        

|        |              | September 30,
2004 |   | December 31,
2003 |          
|------- | ------------ | ------------------ | - | ----------------- | ---------
|Assets: |              |                    |   |                   |          
|        | FSS          |                    | $ | 4,861,722         |          
|        | G2           |                    |   | 36,270            |          
|        | Eliminations |                    |   | (15,410           | )        
|        |              |                    |   |                   |          
|        |              | Total Assets       |   | $                 | 4,882,582
|        |              |                    |   |                   |          

The
following table sets forth a reconciliation of Income from operations to Segment EBITDA for our FSS operating segment and our G2 operating segment for the periods
indicated. Management encourages readers to use GAAP disclosures within this Form 10-Q to evaluate our results of

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operations.
These non-GAAP tables are included to aid the reader in understanding our GAAP financial statements.

|                                                                   |  | Three Months Ended
September 30, |         | Nine Months Ended
September 30,
|------------------------------------------------------------------ |  | -------------------------------- | ------- | -------------------------------
|
|
|FSS Operating Segment:                                             |  |                                  |         |                                
|Reconciliation of income (loss) from operations to Segment EBITDA: |  |                                  |         |                                
|Income (loss) from operations                                      |  | $                                | (88,909 | )                              
|Depreciation and amortization                                      |  |                                  | 74,011  |                                
|                                                                   |  |                                  |         |                                
|EBITDA                                                             |  |                                  | (14,898 | )                              
|Adjustment of sales-type leases to operating leases(a)             |  |                                  | 6,608   |                                
|Effect of Galaxy 10R anomaly(b)                                    |  |                                  | 9,090   |                                
|Satellite impairment(c)                                            |  |                                  |        |                                
|Restructuring charges(d)                                           |  |                                  | 2,080   |                                
|Reserves for long-term receivables and sales-type leases(e)        |  |                                  | (3,727  | )                              
|Reversal of allowance for customer credits(f)                      |  |                                  | 1,800   |                                
|Transaction-related costs(g)                                       |  |                                  | 154,535 |                                
|Other items(h)                                                     |  |                                  | 748     |                                
|                                                                   |  |                                  |         |                                
|Segment EBITDA                                                     |  | $                                | 156,236 |                                
|                                                                   |  |                                  |         |                                
|G2 Operating Segment:                                              |  |                                  |         |                                
|Reconciliation of income from operations to Segment EBITDA:        |  |                                  |         |                                
|Income from operations                                             |  | $                                | 2,685   |                                
|Depreciation and amortization                                      |  |                                  | 311     |                                
|                                                                   |  |                                  |         |                                
|Segment EBITDA                                                     |  | $                                | 2,996   |                                
|                                                                   |  |                                  |         |                                

---

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(16)    Subsequent Events



On October 8, 2004, all of our outstanding common stock, par value $0.01 per share, held by our then existing stockholders was contributed to PanAmSat
Holding Corporation ("Holdco") in exchange for an equal number of shares of Holdco common stock, par value $0.01 per share. In addition, options and other equity rights for our common stock were
converted to similar rights for Holdco common stock. As a result of and immediately following that contribution, our then existing stockholders owned Holdco in equal proportion to their prior
ownership interest in us, and we became a wholly-owned
subsidiary of Holdco. On October 18, 2004, certain members of our management purchased additional shares of Holdco common stock and were granted options to purchase Holdco common stock.

On
October 20, 2004, Holdco issued $416 million aggregate principal amount at maturity of its 103/8% Senior Discount Notes due 2014 pursuant to
Rule 144A under the Securities Act of 1933, as amended. We are not an obligor under or a guarantor of these notes and they are structurally junior in right of payment to all of our existing and
future indebtedness. All of the proceeds of that offering, less

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discounts,
commissions and expenses, or approximately $245.6 million, were paid on October 20, 2004, as a dividend to the stockholders of Holdco.



On October 28, 2004, we completed the sale of our Spring Creek teleport for approximately $14.4 million, net of associated selling costs. As of
September 30, 2004, the assets of the Spring Creek teleport of $3.3 million were reflected as "Assets Held for Sale" on our consolidated balance sheet. As a result of the completion of
this sale, we recorded a pre-tax gain of approximately $11.1 million in October 2004. The Spring Creek teleport is not significant to our consolidated operating results or
financial position.

(17)    Condensed Consolidating Financial Statements

Obligations under our 81/2% Senior Notes due 2012 are fully and unconditionally guaranteed on a joint and several basis by all of our existing
domestic subsidiaries (the "Guarantor Subsidiaries," each a "Guarantor").

In
the first quarter of 2004, we reorganized portions of our subsidiary structure so that certain of our government sales activities operate through a wholly owned subsidiary, G2. As a
result, we are now required to present consolidating financial information for our company and our subsidiaries within the notes to our condensed consolidated financial statements in accordance with
the criteria established for parent companies in the SEC's Regulation S-X, Rule 3-10(f). During the current period we determined that our
non-guarantor subsidiaries, which include our foreign subsidiaries which do not guarantee the Senior Notes, were no longer minor (as defined in the SEC's Regulation S-X,
Rule 3-10 (h)) and therefore they are included within the following condensed consolidating financial statements.

The
following condensed consolidating financial information presents the results of operations, financial position and cash flows of PanAmSat Corporation, the Guarantor Subsidiaries, the
Non-guarantor Subsidiaries (which are our international subsidiaries and our newly formed satellite operating companies) and the eliminations necessary to arrive at the information for our
company on a consolidated basis as of and for the three and nine month periods ended September 30, 2004. The principal elimination entries eliminate investments in subsidiaries and intercompany
balances and transactions.

28

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PANAMSAT CORPORATION  CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004  (IN THOUSANDS, EXCEPT SHARE DATA)

|                                  |                                                                     | PanAmSat
Corporation               |          | Guarantor
Subsidiaries |         | Non-guarantor
Subsidiaries |        | Eliminations |        | Consolidated |       
|--------------------------------- | ------------------------------------------------------------------- | ---------------------------------- | -------- | ---------------------- | ------- | -------------------------- | ------ | ------------ | ------ | ------------ | ------
|REVENUES:                         |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|                                  | Operating leases, satellite services and other                      |                                    | $        | 190,988                |         | $                          | 21,858 |              | $      | 84,855       |       
|                                  | Outright sales and salestype leases                                |                                    |          | 3,827                  |         |                            |       |              |        |             |       
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|                                  |                                                                     | Total revenues                     |          |                        | 194,815 |                            |        | 21,858       |        |              | 84,855
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|OPERATING COSTS AND EXPENSES:     |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|                                  | Cost of outright sales and salestype leases                        |                                    |          | 2,224                  |         |                            |       |              |        |             |       
|                                  | Depreciation and amortization                                       |                                    |          | 54,445                 |         |                            | 841    |              |        | 19,036       |       
|                                  | Direct operating costs (exclusive of depreciation and amortization) |                                    |          | 100,839                |         |                            | 17,404 |              |        | 14,839       |       
|                                  | Selling, general and administrative expenses                        |                                    |          | 18,779                 |         |                            | 1,478  |              |        | 1,252        |       
|                                  | Facilities restructuring and severance cost                         |                                    |          | 2,080                  |         |                            |       |              |        |             |       
|                                  | Transaction-related costs                                           |                                    |          | 154,535                |         |                            |       |              |        |             |       
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|                                  |                                                                     | Total operating costs and expenses |          |                        | 332,902 |                            |        | 19,723       |        |              | 35,127
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|INCOME (LOSS) FROM OPERATIONS     |                                                                     |                                    | (138,087 | )                      |         | 2,135                      |        |              | 49,728 |              |       
|INTEREST EXPENSE (INCOME)NET     |                                                                     |                                    | 48,728   |                        |         | (65                        | )      |              | 9,131  |              |       
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|INCOME (LOSS) BEFORE INCOME TAXES |                                                                     |                                    | (186,815 | )                      |         | 2,200                      |        |              | 40,597 |              |       
|INCOME TAX EXPENSE (BENEFIT)      |                                                                     |                                    | (86,610  | )                      |         | 924                        |        |              | 18,323 |              |       
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|NET INCOME (LOSS)                 |                                                                     | $                                  | (100,205 | )                      | $       | 1,276                      |        | $            | 22,274 |              | $     
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       

29

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PANAMSAT CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(IN THOUSANDS, EXCEPT SHARE DATA)

|                                  |                                                                     | PanAmSat
Corporation               |          | Guarantor
Subsidiaries |         | Non-guarantor
Subsidiaries |        | Eliminations |        | Consolidated |       
|--------------------------------- | ------------------------------------------------------------------- | ---------------------------------- | -------- | ---------------------- | ------- | -------------------------- | ------ | ------------ | ------ | ------------ | ------
|REVENUES:                         |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|                                  | Operating leases, satellite services and other                      |                                    | $        | 559,337                |         | $                          | 68,308 |              | $      | 94,470       |       
|                                  | Outright sales and sales-type leases                                |                                    |          | 12,185                 |         |                            |       |              |        |             |       
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|                                  |                                                                     | Total revenues                     |          |                        | 571,522 |                            |        | 68,308       |        |              | 94,470
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|OPERATING COSTS AND EXPENSES:     |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|                                  | Cost of outright sales and sales-type leases                        |                                    |          | 2,224                  |         |                            |       |              |        |             |       
|                                  | Depreciation and amortization                                       |                                    |          | 199,930                |         |                            | 1,788  |              |        | 19,251       |       
|                                  | Direct operating costs (exclusive of depreciation and amortization) |                                    |          | 162,450                |         |                            | 54,933 |              |        | 16,051       |       
|                                  | Selling, general and administrative expenses                        |                                    |          | 78,086                 |         |                            | 5,287  |              |        | 5,441        |       
|                                  | PAS-6 impairment loss                                               |                                    |          | 99,946                 |         |                            |       |              |        |             |       
|                                  | Facilities restructuring and severance cost                         |                                    |          | 4,508                  |         |                            |       |              |        |             |       
|                                  | Transaction-related costs                                           |                                    |          | 155,035                |         |                            |       |              |        |             |       
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|                                  |                                                                     | Total operating costs and expenses |          |                        | 702,179 |                            |        | 62,008       |        |              | 40,743
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|INCOME (LOSS) FROM OPERATIONS     |                                                                     |                                    | (130,657 | )                      |         | 6,300                      |        |              | 53,727 |              |       
|INTEREST EXPENSE (INCOME)NET     |                                                                     |                                    | 113,572  |                        |         | (195                       | )      |              | 9,126  |              |       
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|INCOME (LOSS) BEFORE INCOME TAXES |                                                                     |                                    | (244,229 | )                      |         | 6,495                      |        |              | 44,601 |              |       
|INCOME TAX EXPENSE (BENEFIT)      |                                                                     |                                    | (116,274 | )                      |         | 2,486                      |        |              | 18,573 |              |       
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       
|NET INCOME (LOSS)                 |                                                                     | $                                  | (127,955 | )                      | $       | 4,009                      |        | $            | 26,028 |              | $     
|                                  |                                                                     |                                    |          |                        |         |                            |        |              |        |              |       

30

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PANAMSAT CORPORATION  CONDENSED CONSOLIDATING BALANCE SHEETS  SEPTEMBER 30, 2004  (IN THOUSANDS, EXCEPT SHARE DATA)

|                                                                                                                 |                                           | PanAmSat
Corporation      |           | Guarantor
Subsidiaries |         | Non-
guarantor
Subsidiaries |        | Eliminations |           | Consolidated |       
|---------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------- | --------- | ---------------------- | ------- | --------------------------- | ------ | ------------ | --------- | ------------ | ------
|ASSETS                                                                                                           |                                           |                           |           |                        |         |                             |        |              |           |              |       
|CURRENT ASSETS:                                                                                                  |                                           |                           |           |                        |         |                             |        |              |           |              |       
|                                                                                                                 | Cash and cash equivalents                 |                           | $         | 40,075                 |         | $                           | 137    |              | $         | 7,992        |       
|                                                                                                                 | Short-term investments                    |                           |           |                       |         |                             |       |              |           |             |       
|                                                                                                                 | Accounts receivablenet                   |                           |           | 41,169                 |         |                             | 18,677 |              |           | 2,703        |       
|                                                                                                                 | Net investment in sales-type leases       |                           |           | 25,634                 |         |                             |       |              |           |             |       
|                                                                                                                 | Prepaid expenses and other current assets |                           |           | 26,906                 |         |                             | 11,141 |              |           | 257          |       
|                                                                                                                 | Deferred income taxes                     |                           |           | 7,048                  |         |                             |       |              |           |             |       
|                                                                                                                 | Assets held for sale                      |                           |           | 3,257                  |         |                             |       |              |           |             |       
|                                                                                                                 |                                           |                           |           |                        |         |                             |        |              |           |              |       
|                                                                                                                 |                                           | Total current assets      |           |                        | 144,089 |                             |        | 29,955       |           |              | 10,952
|SATELLITES AND OTHER PROPERTY AND EQUIPMENTNET                                                                  |                                           |                           | 799,697   |                        |         | 4,518                       |        |              | 1,232,436 |              |       
|NET INVESTMENT IN SALES-TYPE LEASES                                                                              |                                           |                           | 90,165    |                        |         |                            |        |              |          |              |       
|GOODWILL                                                                                                         |                                           |                           | 2,240,453 |                        |         | 5,669                       |        |              |          |              |       
|DEFERRED CHARGES AND OTHER ASSETSNET                                                                            |                                           |                           | 1,166,800 |                        |         | 2,271                       |        |              | 5,729     |              |       
|INVESTMENT IN AFFILIATES                                                                                         |                                           |                           | 410,712   |                        |         |                            |        |              |          |              |       
|DUE FROM AFFILIATES                                                                                              |                                           |                           |          |                        |         |                            |        |              | 64,972    |              |       
|                                                                                                                 |                                           |                           |           |                        |         |                             |        |              |           |              |       
|TOTAL ASSETS                                                                                                     |                                           | $                         | 4,851,916 |                        | $       | 42,413                      |        | $            | 1,314,089 |              | $     
|                                                                                                                 |                                           |                           |           |                        |         |                             |        |              |           |              |       
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                             |                                           |                           |           |                        |         |                             |        |              |           |              |       
|CURRENT LIABILITIES:                                                                                             |                                           |                           |           |                        |         |                             |        |              |           |              |       
|                                                                                                                 | Accounts payable and accrued liabilities  |                           | $         | 64,208                 |         | $                           | 9,368  |              | $         | 1,461        |       
|                                                                                                                 | Current portion of long-term debt         |                           |           | 95,416                 |         |                             |       |              |           |             |       
|                                                                                                                 | Current portion of satellite incentives   |                           |           | 13,218                 |         |                             |       |              |           |             |       
|                                                                                                                 | Accrued interest payable                  |                           |           | 17,694                 |         |                             |       |              |           | 9,113        |       
|                                                                                                                 | Deferred revenues                         |                           |           | 19,570                 |         |                             | 4,075  |              |           |             |       
|                                                                                                                 |                                           |                           |           |                        |         |                             |        |              |           |              |       
|                                                                                                                 |                                           | Total current liabilities |           |                        | 210,106 |                             |        | 13,443       |           |              | 10,574
|LONG-TERM DEBT                                                                                                   |                                           |                           | 3,673,740 |                        |         |                            |        |              | 840,000   |              |       
|DEFERRED INCOME TAXES                                                                                            |                                           |                           | 31,392    |                        |         | 67                          |        |              |          |              |       
|DEFERRED CREDITS AND OTHER
(principally customer deposits, satellite incentive obligations and deferred revenue) |                                           |                           | 264,814   |                        |         | 5,778                       |        |              | 18,457    |              |       
|DUE TO AFFILIATES                                                                                                |                                           |                           | 64,972    |                        |         |                            |        |              |          |              |       
|                                                                                                                 |                                           |                           |           |                        |         |                             |        |              |           |              |       
|TOTAL LIABILITIES                                                                                                |                                           |                           | 4,245,024 |                        |         | 19,288                      |        |              | 869,031   |              |       
|                                                                                                                 |                                           |                           |           |                        |         |                             |        |              |           |              |       
|COMMITMENTS AND CONTINGENCIES                                                                                    |                                           |                           |           |                        |         |                             |        |              |           |              |       
|STOCKHOLDERS' EQUITY:                                                                                            |                                           |                           |           |                        |         |                             |        |              |           |              |       
|                                                                                                                 | Common Stock, $0.01 par value             |                           |           | 2,384                  |         |                             |       |              |           |             |       
|                                                                                                                 | Additional paid-in-capital                |                           |           | 800,148                |         |                             | 10,069 |              |           | 409,699      |       
|                                                                                                                 | Treasury stock                            |                           |           | (692,286               | )       |                             |       |              |           |             |       
|                                                                                                                 | Accumulated other comprehensive loss      |                           |           | 772                    |         |                             |       |              |           |             |       
|                                                                                                                 | Retained earnings                         |                           |           | 495,874                |         |                             | 16,474 |              |           | 35,359       |       
|                                                                                                                 | Other stockholders' equity                |                           |           |                       |         |                             | (3,418 | )            |           |             |       
|                                                                                                                 |                                           |                           |           |                        |         |                             |        |              |           |              |       
|TOTAL STOCKHOLDERS' EQUITY                                                                                       |                                           |                           | 606,892   |                        |         | 23,125                      |        |              | 445,058   |              |       
|                                                                                                                 |                                           |                           |           |                        |         |                             |        |              |           |              |       
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                       |                                           | $                         | 4,851,916 |                        | $       | 42,413                      |        | $            | 1,314,089 |              | $     
|                                                                                                                 |                                           |                           |           |                        |         |                             |        |              |           |              |       

31

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PANAMSAT CORPORATION  CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004  (IN THOUSANDS)

|                                                    |                                                                                   | PanAmSat
Corporation                            |           | Guarantor
Subsidiaries |          | Non-guarantor
Subsidiaries |       | Eliminations |            | Consolidated |        
|--------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------------- | --------- | ---------------------- | -------- | -------------------------- | ----- | ------------ | ---------- | ------------ | -------
|CASH FLOWS FROM OPERATING ACTIVITIES:               |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|                                                    | Net income (loss)                                                                 |                                                 | $         | (127,955               | )        | $                          | 4,009 |              | $          | 26,028       |        
|                                                    | Adjustments to reconcile net income to net cash provided by operating activities: |                                                 |           |                        |          |                            |       |              |            |              |        
|                                                    | Depreciation and amortization                                                     |                                                 |           | 199,930                |          |                            | 1,788 |              |            | 19,251       |        
|                                                    | Deferred income taxes                                                             |                                                 |           | (116,643               | )        |                            |      |              |            | 18,186       |        
|                                                    | Amortization of debt issuance costs and other deferred charges                    |                                                 |           | 7,698                  |          |                            |      |              |            |             |        
|                                                    | Provision for uncollectible receivables                                           |                                                 |           | 31,982                 |          |                            |      |              |            |             |        
|                                                    | Loss on early extinguishment of debt                                              |                                                 |           | 20,589                 |          |                            |      |              |            |             |        
|                                                    | Satellite impairment loss                                                         |                                                 |           | 99,946                 |          |                            |      |              |            |             |        
|                                                    | Loss on Galaxy 10R XIPS anomaly                                                   |                                                 |           | 9,090                  |          |                            |      |              |            |             |        
|                                                    | Facilities restructuring and severance costs                                      |                                                 |           | 4,309                  |          |                            |      |              |            |             |        
|                                                    | Reversal of sales-type lease liabilities                                          |                                                 |           | (3,727                 | )        |                            |      |              |            |             |        
|                                                    | Gain on disposal of fixed assets                                                  |                                                 |           | (1,332                 | )        |                            |       |              |            |              |        
|                                                    | Other non-cash items                                                              |                                                 |           | (3,668                 | )        |                            | (139  | )            |            | (143         | )      
|                                                    | Changes in assets and liabilities:                                                |                                                 |           |                        |          |                            |       |              |            |              |        
|                                                    |                                                                                   | Collections on investments in sales-type leases |           |                        | 19,035   |                            |       |             |            |              |       
|                                                    |                                                                                   | Operating leases and other receivables          |           |                        | (13,286  | )                          |       | 11,331       |            |              | (992   
|                                                    |                                                                                   | Prepaid expenses and other assets               |           |                        | (835,572 | )                          |       | (8,831       | )          |              | 181    
|                                                    |                                                                                   | Due from affiliates                             |           |                        | 4,065    |                            |       |             |            |              | 89     
|                                                    |                                                                                   | Accounts payable and accrued liabilities        |           |                        | (43,734  | )                          |       | (472         | )          |              | 8,983  
|                                                    |                                                                                   | Deferred gains and revenues                     |           |                        | 4,402    |                            |       | (3,193       | )          |              |       
|                                                    |                                                                                   | Due to affiliates                               |           |                        | 64,973   |                            |       | (4,154       | )          |              | (64,973
|                                                    |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|NET CASH PROVIDED BY OPERATING ACTIVITIES           |                                                                                   |                                                 | (679,898  | )                      |          | 339                        |       |              | 6,610      |              |        
|                                                    |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|CASH FLOWS FROM INVESTING ACTIVITIES:               |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|                                                    | Capital expenditures (including capitalized interest)                             |                                                 |           | (108,286               | )        |                            | (22   | )            |            | (1,250,712   | )      
|                                                    | Insurance proceeds from satellite recoveries                                      |                                                 |           | 286,915                |          |                            |      |              |            |             |        
|                                                    | Sale of short-term investments                                                    |                                                 |           | 38,936                 |          |                            |      |              |            |             |        
|                                                    | Investment in affiliates                                                          |                                                 |           | (410,712               | )        |                            |      |              |            |             |        
|                                                    | Net proceeds from sale of fixed assets                                            |                                                 |           | 1,250,712              |          |                            |      |              |            |             |        
|                                                    | Acquisitions, net of cash acquired                                                |                                                 |           |                       |          |                            | (522  | )            |            |             |        
|                                                    |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |                                                                                   |                                                 | 1,057,565 |                        |          | (544                       | )     |              | (1,250,712 | )            |        
|                                                    |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|CASH FLOWS FROM FINANCING ACTIVITIES:               |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|                                                    | Repayments of long-term debt                                                      |                                                 |           | (1,443,459             | )        |                            |      |              |            |             |        
|                                                    | Issuance of new long-term debt                                                    |                                                 |           | 3,512,615              |          |                            |      |              |            | 840,000      |        
|                                                    | Capitalized transaction costs                                                     |                                                 |           | (152,064               | )        |                            |      |              |            |             |        
|                                                    | New incentive obligations                                                         |                                                 |           | 16,250                 |          |                            |      |              |            |             |        
|                                                    | Repayments of incentive obligations                                               |                                                 |           | (9,571                 | )        |                            |      |              |            |             |        
|                                                    | Repurchase of Common Stock                                                        |                                                 |           | (2,784,556             | )        |                            |      |              |            |             |        
|                                                    | Re-issuance of Treasury Stock                                                     |                                                 |           | 757                    |          |                            |      |              |            |             |        
|                                                    | Capital contributed by affiliate                                                  |                                                 |           | 9,200                  |          |                            |      |              |            |             |        
|                                                    | Other equity related transactions                                                 |                                                 |           | 3,384                  |          |                            |      |              |            | 410,712      |        
|                                                    |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|NET CASH USED IN FINANCING ACTIVITIES               |                                                                                   |                                                 | (847,444  | )                      |          |                           |       |              | 1,250,712  |              |        
|                                                    |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|EFFECT OF EXCHANGE RATE CHANGES ON CASH             |                                                                                   |                                                 | 328       |                        |          |                           |       |              |           |              |        
|                                                    |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|NET INCREASE IN CASH AND CASH EQUIVALENTS           |                                                                                   |                                                 | (469,449  | )                      |          | (205                       | )     |              | 6,610      |              |        
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD      |                                                                                   |                                                 | 509,524   |                        |          | 342                        |       |              | 1,382      |              |        
|                                                    |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        
|CASH AND CASH EQUIVALENTS, END OF PERIOD            |                                                                                   | $                                               | 40,075    |                        | $        | 137                        |       | $            | 7,992      |              | $      
|                                                    |                                                                                   |                                                 |           |                        |          |                            |       |              |            |              |        

32

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following management's discussion and analysis should be read in conjunction with our management's discussion and analysis included in our Annual Report on
Form 10-K for the year ended December 31, 2003 filed with the SEC on March 15, 2004, all amendments thereto, and all of our other filings filed with the SEC from
March 15, 2004 through the date of this report.

PanAmSat Merger, Subsequent Sale and Related Transactions

On April 20, 2004, we entered into a definitive transaction agreement with The DIRECTV Group, Merger Sub, a wholly-owned subsidiary of The DIRECTV Group,
and Constellation, an affiliate of KKR, for the merger of our company with Merger Sub ("Merger") and subsequent sale to Constellation. On May 17, 2004, Constellation assigned the right to
purchase a portion of the shares of our common stock to limited liability companies affiliated with Carlyle and Providence. On August 12, 2004, The DIRECTV Group entered into a letter agreement
with the Sponsors which amended certain terms of the transactions, including the purchase price to be paid to The DIRECTV Group.

Pursuant
to the terms of the transaction agreement, on August 18, 2004, Merger Sub merged with and into us, with PanAmSat as the surviving entity. As of the effective time of the
Merger, holders of shares of our common stock (other than The DIRECTV Group and members of management who agreed not to have certain of their equity interests cashed out in the Merger) had no further
ownership interest in us. Instead, such holders of our common stock received $23.50 in cash per share of our common stock.

On
August 20, 2004, as part of the Transactions, a portion of the shares of our common stock beneficially owned by The DIRECTV Group was repurchased by us at a purchase price of
$21.84 in cash per share. Following the repurchase, The DIRECTV Group sold all of its remaining shares of our common stock to the Sponsors at a purchase price of $21.84 in cash per share. As a result,
The DIRECTV Group and News Corporation were no longer related parties to us.

On
August 20, 2004, in conjunction with the Transactions, our Board of Directors approved the retirement of the 95,742,728 shares of our common stock repurchased from affiliates
of The DIRECTV Group and approved an approximately 4.37 for 1 stock split of our common stock. After giving effect to this stock split, the number of shares repurchased and retired was 418,291,126.
All share and per share amounts, as well as the par value amounts and additional paid in capital amounts related to these shares within these condensed consolidated financial statements have been
restated for all periods to give retroactive effect to the stock split. The $23.50 per share paid to certain holders of our common stock was $5.38 per share after giving effect to the stock split. The
$21.84 per share paid to certain other holders of our common stock was $5.00 per share after giving effect to the stock split.

As
a result of and immediately following the Transactions, entities affiliated with KKR owned approximately 44% of our outstanding common stock, entities affiliated with Carlyle and
Providence each owned approximately 27% of our common stock and certain executive officers and directors had beneficial ownership of the remainder of our common stock.

We
incurred approximately $307.1 million of costs related to the Transactions during the nine months ended September 30, 2004, of which approximately $155.0 million
was expensed during that period within Transaction-related costs in our condensed consolidated statement of operations. The remaining costs of $152.1 million were capitalized to debt issuance
costs and stockholders' equity within our condensed consolidated balance sheet.

In
connection with the Transactions, we (i) entered into a new Senior Secured Credit Facility consisting of an $800.0 million Term Loan A Facility, a
$1,660.0 million Term Loan B Facility and a $250.0 million revolving credit facility, of which $42.6 million was drawn; (ii) issued $1,010 million of

33

---



our
9% Senior Notes due 2014 pursuant to Rule 144A under the Securities Act of 1933, as amended; (iii) terminated and repaid our Old Credit Facility; (iv) completed a tender offer
for substantially all of our $275 million 6.125% Notes due 2005 and our $800 million 81/2% Senior Notes due 2012; and (v) completed the redemption of our remaining
6.125% Notes due 2005 in October 2004.

Also
in connection with the Transactions, we have entered into new contractual arrangements with affiliates of The DIRECTV Group at rates which, we believe, approximate market rates.
These contractual arrangements include the extension of transponder lease agreements with HNS, the extension of The DIRECTV Group guarantees of our transponder lease agreements with DTVLA, the
purchase of additional transponder capacity for DTH services in Latin America, and the extension of existing and the entering into of new TT&C service agreements with DIRECTV Operations LLC. In
addition, in connection with the Transactions, The DIRECTV Group paid us for certain past due receivables from, and guaranteed certain future obligation of, our customer Sky Multi-Country Partners, an
affiliate of News Corporation. Certain of the new contractual arrangements we entered into in connection with the Transactions increased our contracted backlog by approximately $687 million.
Management believes that these guarantees and other contractual arrangements will substantially
reduce credit risks associated with the two Latin American DTH platforms in our contracted backlog and protect us against the possible impact of future consolidation of those platforms.

Concurrently
with the execution of the transaction agreement, we entered into a tax separation agreement with The DIRECTV Group that superseded four earlier tax-related
agreements among ourselves, The DIRECTV Group, and certain of its affiliates. We and The DIRECTV Group agreed to handle tax matters with respect to the tax periods covered by the tax separation
agreement, including tax return preparation, audits, appeals and litigation, in a manner consistent with the past practice of The DIRECTV Group and ourselves before the acquisition. In addition, we
and The DIRECTV Group agreed to cooperate in any tax audits, litigation or appeals that involve, directly or indirectly, periods ending on or prior to the day of the closing of the Transactions.

Pursuant
to the tax separation agreement, The DIRECTV Group has agreed to indemnify us for all federal and consolidated state and local income taxes a taxing authority may attempt to
collect from us regarding any liability for the federal or consolidated state or local income taxes of GM and The DIRECTV Group, except those income taxes we are required to pay under the tax
separation agreement. In addition, The DIRECTV Group agreed to indemnify us for any taxes (other than those taxes described in the preceding sentence) related to any periods or portions of such
periods ending on or prior to the day of the closing of the Transactions in amounts equal to 80% of the first $75 million of such other taxes and 100% of any other taxes in excess of the first
$75 million. As a result, our net tax liability related to these periods is capped at $15 million. As of September 30, 2004, we recorded approximately $75 million of
receivables from The DIRECTV Group related to these tax indemnifications within our consolidated balance sheet.

We
were deconsolidated from The DIRECTV Group consolidated tax group upon consummation of the Merger. As a result of the deconsolidation, during the third quarter of 2004, our net
operating losses were eliminated (through August 20, 2004) and the tax basis in our satellites was increased resulting in a net increase to our net deferred tax liabilities of
$5.7 million. In addition, the tax basis in our satellites was increased through a taxable transfer of certain of our satellites to newly formed operating companies, resulting in a decrease in
our consolidated net deferred tax liabilities of $307.7 million.

Management Overview

In evaluating our financial condition and operating performance, we consider many factors. The following updates and supplements certain subjects more completely
discussed in "Management's Discussion and Analysis of Financial Condition and Results of OperationsManagement Overview" of

34

---



our
Form 10-K for the year ended December 31, 2003, filed with the SEC on March 15, 2004, and all updates and supplements in our other filings filed with the SEC from
March 15, 2004 through the date of this report.

As
a result of the Transactions described above, we have new owners and a new Board of Directors. We believe that our new ownership gives us the opportunity to enhance our competitive
position and expand our capabilities by supporting our efforts to develop new products and services, forge strategic alliances and develop new markets.

On
October 8, 2004, all of our outstanding common stock, par value $0.01 per share, held by our then existing stockholders was contributed to Holdco in exchange for an equal
number of shares of Holdco common stock, par value $0.01 per share. As a result of, and immediately following, that contribution, our then existing stockholders owned Holdco in equal proportion to
their prior ownership interest in us, and we became a wholly-owned subsidiary of Holdco.

On
October 20, 2004, Holdco issued $416 million aggregate principal amount at maturity of its 103/8% Senior Discount Notes due 2014 pursuant to
Rule 144A under the Securities Act of 1933, as amended. We are not an obligor under or a guarantor of these notes and they are structurally junior in right of payment to all of our existing and
future indebtedness. All of the proceeds of that offering, less discounts, commissions and expenses, or approximately $245.6 million, were paid on October 20, 2004, as a dividend to the
stockholders of Holdco.

Other
than its ownership of our company and its debt obligations, Holdco does not have any independent operations and derives all of its revenues and cash flow from its subsidiaries. We
are its only subsidiary. Its ability to make payment on its notes is dependent on the earnings and the distribution of funds from us. The agreements governing our indebtedness significantly restrict
our ability to pay dividends or otherwise transfer assets to Holdco.

In
connection with the Transactions, as of September 30, 2004, we have total debt of approximately $3.769 billion and an annual cash interest expense related to our debt of
approximately $250 million.

On
August 3, 2004, the secondary XIPS on our Galaxy 10R satellite experienced an unexpected shutdown, and we have not been able to restart the system. XIPS is an electronic
propulsion system that maintains a satellite's in-orbit position. This satellite is expected to operate using its backup bi-propellant fuel system for over three years. This
event will result in acceleration to the 20042007 timeframe of planned capital expenditures to replace this satellite.

Following
is a more detailed discussion of these items and a comprehensive analysis of our results of operations, operating segments, contracted backlog, satellite technology, satellite
deployment plans, liquidity and capital resources, commitments and contingencies, new accounting pronouncements and market risks.

35

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Results of Operations for the Three Months ended September 30, 2004

|                                                                    |                                    | Three Months Ended
September 30, |          |         |   |         |        
|------------------------------------------------------------------- | ---------------------------------- | -------------------------------- | -------- | ------- | - | ------- | -------
|
|
|
|Revenues                                                            |                                    |                                  |          |         |   |         |        
|Operating leases, satellite services and other                      |                                    | $                                | 203,268  |         | $ | 206,033 |        
|Outright sales and sales-type leases                                |                                    |                                  | 3,827    |         |   | 4,047   |        
|                                                                    |                                    |                                  |          |         |   |         |        
|                                                                    | Total revenues                     |                                  |          | 207,095 |   |         | 210,080
|                                                                    |                                    |                                  |          |         |   |         |        
|Costs and expenses                                                  |                                    |                                  |          |         |   |         |        
|Cost of outright sales and sales-type leases                        |                                    |                                  | 2,224    |         |   |        |        
|Depreciation and amortization expense                               |                                    |                                  | 74,322   |         |   | 85,018  |        
|Direct operating costs (exclusive of depreciation and amortization) |                                    |                                  | 38,649   |         |   | 38,563  |        
|Selling, general and administrative expenses                        |                                    |                                  | 21,509   |         |   | 19,323  |        
|Facilities restructuring and severance costs                        |                                    |                                  | 2,080    |         |   | 727     |        
|Transaction-related costs                                           |                                    |                                  | 154,535  |         |   |        |        
|                                                                    |                                    |                                  |          |         |   |         |        
|                                                                    | Total operating costs and expenses |                                  |          | 293,319 |   |         | 143,631
|                                                                    |                                    |                                  |          |         |   |         |        
|Income (loss) from operations                                       |                                    |                                  | (86,224  | )       |   | 66,449  |        
|Interest expense, net                                               |                                    |                                  | 57,794   |         |   | 38,904  |        
|                                                                    |                                    |                                  |          |         |   |         |        
|Income (loss) before income taxes                                   |                                    |                                  | (144,018 | )       |   | 27,545  |        
|Income tax expense (benefit)                                        |                                    |                                  | (67,363  | )       |   | 6,549   |        
|                                                                    |                                    |                                  |          |         |   |         |        
|Net (loss) income                                                   |                                    | $                                | (76,655  | )       | $ | 20,996  |        
|                                                                    |                                    |                                  |          |         |   |         |        
|Earnings per sharebasic and diluted                                |                                    | $                                | (0.16    | )       | $ | 0.03    |        
|                                                                    |                                    |                                  |          |         |   |         |        

RevenuesThe
decrease in total revenues was primarily attributable to lower program distribution and DTH revenues of approximately $5.7 million due to customer credit
related issues and lower government services revenue of $1.3 million. These decreases were partially offset by increases in occasional services revenue of $2.2 million resulting from the
2004 summer Olympics and higher other revenues of $2.8 million due to additional consulting services revenues (See "Operating Segments" below).

Cost
of Outright Sales and Sales-type LeasesThe cost of sales-type leases recorded in the third quarter of 2004 primarily relates to the adjustment
of certain costs for outright sales and sales-type leases due to the August 2004 XIPS anomaly on Galaxy 10R. This increase to cost of sales-type leases of approximately
$5.9 million was partially offset by the reversal of approximately $3.7 million of in-orbit insurance liabilities related to sales-type leases that are no longer
insured.

Depreciation
and Amortization ExpenseThe decrease in depreciation and amortization for the three months ended September 30, 2004, was due primarily to lower
depreciation on Galaxy 11, PAS-1R and Galaxy 4R of $11.6 million, as a result of the allocation of insurance proceeds against the carrying values of these satellites over the past
year, as well as lower depreciation of $2.9 million on PAS-6 due to the impairment loss in the first quarter of 2004 (See "Satellite Technology" below). These decreases
were partially offset by accelerated depreciation of $4.5 million due to reduced end of life estimates for Galaxy 10R and PAS-6B for XIPS failures and depreciation of
$1.2 million on Galaxy 13, which was placed in service in January 2004.

Direct
Operating Costs (exclusive of depreciation and amortization)Total direct operating costs remain relatively flat as compared to the third quarter of 2003. Additional
direct operating costs were

36

---



recorded
during the third quarter of 2004 related to increased expenses of $2.2 million attributable to the growth of our consulting business and additional costs of approximately
$1.0 million for our expanded fiber service offerings, resulting from our November 2003 acquisition of Sonic Telecommunications International Ltd. ("Sonic"). These increases were
offset by reduced satellite insurance expense of $2.0 million and lower direct operating costs of $2.1 million primarily related to lower revenues at our G2 operating segment.

Selling,
General & Administrative ExpensesThe increase in selling, general and administrative expenses was primarily attributable to additional bad debt expense of
approximately $2.5 million recorded during the third quarter of 2004, as compared to the same period in 2003.

Facilities
Restructuring and Severance CostsIn the third quarter of 2004, we recorded a charge of approximately $2.3 million related to our Facilities Restructuring
Plan. This charge resulted from a reduction in future anticipated sublease income at one of our idle facilities. The $0.7 million of charges recorded during the three months ended
September 30, 2003 represents severance costs related to our teleport consolidation. (See "Liquidity and Capital ResourcesFacilities Restructuring and Severance Costs"
below).

Transaction-related
CostsThe increase in 2004 is due to costs incurred in relation to the Transactions. These costs consist of $138.2 million of costs related to our
debt tender offers, $9.5 million resulting from the cashing out of restricted stock units and stock options, $5.0 million of transaction related bonuses paid to certain of our executives
and $1.8 million of costs related to the proxy solicitation and other costs.

Income
from OperationsThe decrease in income from operations of $152.7 million was primarily due to the Transaction related costs of $155.0 million described
above.

Interest
Expense, NetInterest Expense, net consisted of the following (in thousands):

Three Months Ended
September 30,Dollar
Change2004

2003Gross interest expense

$
61,545

$
44,168

$
17,377Less: Interest income


1,702


2,438


(736
)Less: Capitalized interest


2,049


2,826


(777
)Total interest expense, net

$
57,794

$
38,904

$
18,890


Gross
interest expense increased primarily as a result of:



These
increases were partially offset by (i) lower interest expense before the Transactions as a result of the repayments of debt made over the last year and (ii) a
pre-tax charge of $5.7 million
recorded during the third quarter of 2003, as a result of the write-off of debt issuance costs associated with the portion of the credit facility that was prepaid in July 2003.

Income
Tax Expense (Benefit)The increase in income tax benefit was due primarily to lower income from operations of $152.7 million, which primarily resulted from
costs recorded during the third quarter of 2004 related to the Transaction.

37

---





Results of Operations for the Nine Months ended September 30, 2004

|                                                                    |                                    | Nine Months Ended September 30, |          |         |   |         |        
|------------------------------------------------------------------- | ---------------------------------- | ------------------------------- | -------- | ------- | - | ------- | -------
|
|
|
|Revenues                                                            |                                    |                                 |          |         |   |         |        
|Operating leases, satellite services and other                      |                                    | $                               | 607,165  |         | $ | 600,853 |        
|Outright sales and sales-type leases                                |                                    |                                 | 12,185   |         |   | 12,576  |        
|                                                                    |                                    |                                 |          |         |   |         |        
|                                                                    | Total revenues                     |                                 |          | 619,350 |   |         | 613,429
|                                                                    |                                    |                                 |          |         |   |         |        
|Costs and expenses                                                  |                                    |                                 |          |         |   |         |        
|Cost of outright sales and sales-type leases                        |                                    |                                 | 2,224    |         |   |        |        
|Depreciation and amortization expense                               |                                    |                                 | 220,969  |         |   | 232,194 |        
|Direct operating costs (exclusive of depreciation and amortization) |                                    |                                 | 118,484  |         |   | 103,983 |        
|Selling, general and administrative expenses                        |                                    |                                 | 88,814   |         |   | 58,687  |        
|Satellite impairment loss                                           |                                    |                                 | 99,946   |         |   |        |        
|Facilities restructuring and severance costs                        |                                    |                                 | 4,508    |         |   | 1,390   |        
|Transaction-related costs                                           |                                    |                                 | 155,035  |         |   |        |        
|                                                                    |                                    |                                 |          |         |   |         |        
|                                                                    | Total operating costs and expenses |                                 |          | 689,980 |   |         | 396,254
|                                                                    |                                    |                                 |          |         |   |         |        
|Income (loss) from operations                                       |                                    |                                 | (70,630  | )       |   | 217,175 |        
|Interest expense, net                                               |                                    |                                 | 122,503  |         |   | 106,311 |        
|                                                                    |                                    |                                 |          |         |   |         |        
|Income (loss) before income taxes                                   |                                    |                                 | (193,133 | )       |   | 110,864 |        
|Income tax expense (benefit)                                        |                                    |                                 | (95,215  | )       |   | 28,712  |        
|                                                                    |                                    |                                 |          |         |   |         |        
|Net income (loss)                                                   |                                    | $                               | (97,918  | )       | $ | 82,152  |        
|                                                                    |                                    |                                 |          |         |   |         |        
|Earnings (loss) per sharebasic and diluted                         |                                    | $                               | (0.16    | )       | $ | 0.13    |        
|                                                                    |                                    |                                 |          |         |   |         |        

RevenuesThe
increase in total revenues was primarily attributable to additional government services revenues of $18.1 million related to our G2 operating segment and
an increase in network services revenues of $6.8 million related to network resellers, data services within the Middle East and additional revenues related to VSAT applications in North
America. Additionally, occasional services revenue increased by $2.2 million, due partially to the broadcast of the 2004 Summer Olympics and other revenues increased by $4.8 million due
to additional consulting services revenues. These increases were partially offset by lower program distribution and DTH video revenues of $26.0 million primarily as a result of customer credit
related issues in international regions (See "Operating Segments" below).

Cost
of Outright Sales and Sales-type LeasesThe cost of sales-type leases recorded during the nine months ended September 30, 2004 primarily
relates to the adjustment of certain costs for outright sales and sales-type leases due to the August 2004 XIPS anomaly on Galaxy 10R. This increase to cost of
sales-type leases of approximately $5.9 million was partially offset by the reversal of approximately $3.7 million of in-orbit insurance liabilities related to
sales-type leases that are no longer insured.

Depreciation
and Amortization ExpenseThe decrease in depreciation and amortization for the nine months ended September 30, 2004, was due primarily to lower
depreciation on Galaxy 11, PAS-1R and Galaxy 4R of $21.0 million, as a result of the allocation of insurance proceeds against the carrying values of these satellites over the past
year. In addition, we recorded lower non-satellite depreciation of $4.5 million and lower depreciation on PAS-6 of $6.3 million due to the impairment loss in the
first quarter of 2004 (See "Satellite Technology" below). These decreases were partially offset by accelerated depreciation of $12.4 million due to reduced end of life estimates
for Galaxy 10R and

38

---



PAS-6B
for XIPS failures and depreciation of $6.3 million on Galaxy 12 and Galaxy 13, which were placed in service in May 2003 and January 2004, respectively.

Direct
Operating Costs (exclusive of depreciation and amortization)The increase in direct operating costs was primarily due to:



These
increases were partially offset by reduced satellite insurance expense of $7.3 million and a $3.1 million write-off of deferred charges as a result of the
termination of certain vendor contracts during the first quarter of 2003.

Selling,
General & Administrative ExpensesThe increase in selling, general and administrative expenses was due primarily to the $29.6 million
pre-tax charge recorded in relation to the write-off of a customer's long and short-term receivable balances during the second quarter of 2004.

PAS-6
Impairment LossIn the first quarter of 2004, we recorded a non-cash charge of $99.9 million related to the impairment of our
PAS-6 satellite (See "Satellite Technology" below).

Facilities
Restructuring and Severance CostsIn the first nine months of 2004, we recorded a non-cash charge of $3.7 million related to our facilities
restructuring plan and $0.8 million related to our teleport consolidation plan. The non-cash charge associated with our facilities restructuring plan includes a charge of
approximately $2.3 million for a reduction in
future anticipated sublease income related to one of our idle facilities. For the nine months ended September 30, 2003, these amounts represent severance costs related to our teleport
consolidation of $2.8 million offset partially by $1.5 million of restructuring credits related to the signing of sublease agreements for amounts higher than originally estimated. (See
"Liquidity and Capital ResourcesFacilities Restructuring and Severance Costs" below).

Transaction-related
CostsThe increase in 2004 is due to costs incurred in relation to the Transactions. These costs consist of $138.2 million of costs related to our
debt tender offers, $9.5 million resulting from the cashing out of restricted stock units and stock options, $5.0 million of transaction related bonuses paid to certain of our executives
and $2.3 million of costs related to the proxy solicitation and other costs.

Income
(Loss) from OperationsThe decrease in income from operations was primarily due to the Transaction related costs of $155.0 million, the $99.9 million
impairment loss for our PAS-6 satellite and the $29.6 million pre-tax charge described above.

39

---



Interest
Expense, NetInterest Expense, net consisted of the following (in thousands):

Nine Months Ended September 30,Dollar
Change2004

2003Gross interest expense

$
133,542

$
129,033

$
4,509Less: Interest income


6,789


11,416


(4,627
)Less: Capitalized interest


4,250


11,306


(7,056
)Total interest expense, net

$
122,503

$
106,311

$
16,192


Interest
expense, net for the nine months ended September 30, 2004 increased primarily as a result of the following:



These
increases to interest expense, net were partially offset by the following:



Income
Tax Expense (Benefit)The decrease in income tax expense was due primarily to the income tax effect of costs recorded during the third quarter of 2004 related to the
Transaction, the PAS-6 impairment loss recorded during the first quarter of 2004, and the write-off of the customer receivable balance in the second quarter of 2004. We
estimate that our effective income tax rate will be a tax benefit of approximately 54.8% for 2004, as compared to a tax expense of approximately 26% for 2003.

Operating Segments

Our operations are comprised of the following two segments:



40

---





Selected
Segment Data:

Three Months
Ended September 30,

Nine Months
Ended September 30,2004

2003

2004

2003(In thousands)Revenues:FSS

$
191,945

$
192,692

$
570,154

$
581,946G2


20,497


21,780


64,918


46,813Eliminations


(5,347
)

(4,392
)

(15,722
)

(15,330
)Total revenues

$
207,095

$
210,080

$
619,350

$
613,429Income (loss) from operations:FSS

$
(88,909
)
$
63,109

$
(78,640
)
$
209,728G2


2,685


3,340


8,010


7,447Eliminations











Total income (loss) from operations

$
(86,224
)
$
66,449

$
(70,630
)
$
217,175Segment EBITDA:FSS

$
156,236

$
157,906

$
459,254

$
468,550G2

$
2,996

$
3,494

$
9,101

$
7,653


(See
Reconciliation of income (loss) from operations to Segment EBITDA for our FSS operating segment and our G2 operating segment within Note 15 "Operating Segments" to our
condensed consolidated financial statements.) Management encourages readers to use GAAP disclosures within this Form 10-Q to evaluate our results of operations. This
non-GAAP information is included to aid the reader in understanding our GAAP financial statements.



FSS Revenue by Service-Type

Three Months Ended
September 30,

Nine Months Ended
September 30,2004

2003

2004

2003(In thousands)FSS Revenues:Video

$
118,941

$
122,466

$
350,178

$
374,000Network


53,573


54,535


164,509


157,686Government


5,347


4,392


15,722


15,330Other


14,084


11,299


39,745


34,930Total FSS revenues

$
191,945

$
192,692

$
570,154

$
581,946


Three Months Ended:

The decrease in FSS revenues for the three months ended September 30, 2004 of $0.7 million was primarily attributable to a decrease in video
services revenues, partially offset by an increase in other services revenues as follows:



41

---





Nine Months Ended:

The decrease in FSS revenues for the nine months ended September 30, 2004 of $11.8 million was primarily attributable to lower video services
revenues of $23.8 million, partially offset by increases in network services revenues of $6.8 million and other services revenues of $4.8 million as follows:



Income
from OperationsThe decrease in FSS income from operations for the three months ended September 30, 2004, was primarily due to the $154.5 million of
costs recorded in relation to the Transactions (See "Management Overview" above). The decrease in FSS income from operations for the nine months ended September 30, 2004 was
primarily due to the $155.0 million of costs recorded in relation to the Transactions, the loss on the impairment of PAS-6 of $99.9 million and the $29.6 million
pre-tax charge described above.

Segment
EBITDASegment EBITDA for the three months ended September 30, 2004 decreased $1.7 million as compared to the same period in 2003. This decrease is due
primarily to lower FSS revenues for the three months ended September 30, 2004 of $0.7 million, as well as higher operating expenses of approximately $1.0 million as compared to
2003. Segment EBITDA for the nine months ended September 30, 2004 decreased approximately $9.3 million. This decrease was due primarily to lower revenues of $11.8 million
discussed above, partially offset by lower operating expenses of approximately $2.5 million.



RevenueThe decrease in G2 segment revenues of $1.3 million for the three months ended September 30, 2004, as compared to the same
period in 2003, was due to a decrease of $3.5 million in non-satellite bandwidth revenue, partially offset by an increase of $2.3 million in equipment sales, as compared to
the same period in 2003. The increase in G2 segment revenues of $18.1 million for the nine months ended September 30, 2004, as compared to the nine months ended September 30,
2003, reflects a full nine months of operations in 2004 for the HGS and Esatel acquisitions made during 2003, as well as an increase in equipment-based sales of $4.4 million, satellite
bandwidth sales of $4.2 million and non-satellite bandwidth sales of $3.2 million, as compared to the same period in 2003. The increase was also due to an increase of
$6.5 million in revenues earned from our long-term construction arrangement with a customer to construct an L-Band navigational payload on our Galaxy 15 satellite. This
construction of the L-Band navigational payload began in October 2003.

42

---



Income
from operations and Segment EBITDAIncome from operations and Segment EBITDA decreased $0.7 million, and $0.5 million, respectively, for the three months
ended September 30, 2004, as compared to the same periods in 2003. These decreases were primarily a result of the lower
revenues earned during the three months ended September 30, 2004, as discussed above, partially offset by the related cost of sales. Income from operations and Segment EBITDA increased
$0.6 million and $1.4 million, respectively, for the nine months ended September 30, 2004, as compared to the same period in 2003. These increases were primarily a result of the
higher revenues earned during the nine months ended September 30, 2004, as discussed above, partially offset by the related cost of sales.

Contracted Backlog

Contracted backlog represents the actual dollar amount (without discounting for present value) of the expected future cash payments to be received from customers
under all contractual agreements, including operating leases, sales-type leases and related service agreements, which may extend to the end of the life of the satellite or beyond to a
replacement satellite. Contracted backlog is attributable to both satellites currently in orbit and those planned for future launch. As of September 30, 2004, we had contracted backlog for
future services of $5.13 billion, which was up from $4.52 billion as of June 30, 2004. This increase was due primarily to contractual arrangements that were executed in connection
with the Transactions of approximately $687 million, and a $77 million net reduction to contracted backlog as a result of other customer activity during the three months ended
September 30, 2004 (primarily resulting from $197 million of customer billings during the quarter, partially offset by net new contracted backlog recorded as a result of the execution of
customer contracts of approximately $120 million).

Satellite Technology

On March 17, 2004, our PAS-6 satellite, an FS 1300 model satellite built by Space Systems/Loral, suffered an anomaly resulting in a loss of
power. Following that event, we moved the satellite to a storage orbit while we evaluated the problem with the manufacturer. On April 1, 2004, this satellite experienced another anomaly and
more significant loss of power. Neither of these losses was anticipated. We maintained communications with, and control of, this satellite and, as a result of the second anomaly, took the necessary
steps to de-orbit it.

PAS-6
had previously been taken out of primary service and was used as a backup for another satellite, PAS-6B. Accordingly, these events did not affect service to
any of our customers and we anticipate that they will not affect our revenues in 2004. We do not plan to replace this satellite. As a result of the March 17 event, we recorded a
non-cash impairment charge within income from operations of approximately $99.9 million in the first quarter of 2004. This resulted in a non-cash charge to net income
after taxes of approximately $63.3 million. PAS-6 was uninsured and we will not collect insurance proceeds as a result of these events. Further, as a result of this impairment, we
will no longer depreciate this asset and will not record $6.2 million of depreciation expense during the remainder of 2004.

Satellite Deployment Plans and Operational Developments

We expect to launch three satellites by the end of 2006. We are scheduled to launch Galaxy 14 in the first quarter of 2005 to serve as an in-orbit
spare. We plan to replace Galaxy 5 at 125 degrees west longitude with Galaxy 12 in January 2005. We plan to launch Galaxy 15 in the second quarter of 2005 to replace Galaxy 1R at 133 degrees
west longitude. We plan to launch Galaxy 16 in the second quarter of 2006 to replace Galaxy 4R at 99 degrees west longitude.

In
June 2004, we committed to purchase Galaxy 17, an on-ground spare for Galaxy 11, which will also serve as a spare to protect against launch failure of Galaxy 16 and
could serve as a replacement

43

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for
Galaxy 10R. In addition, we plan to construct and launch replacement satellites for Galaxy 10R and PAS-6B prior to the end of their useful lives, although no commitments have been made
for the procurement of these satellites.

On
August 3, 2004, the secondary XIPS on PanAmSat's Galaxy 10R satellite experienced an unexpected shutdown, subsequently determined to be a permanent failure. XIPS is an
electronic propulsion system that maintains a satellite's in-orbit position. This event has not affected service to any of our customers. The primary XIPS on this satellite had previously
failed. The satellite is operating normally on its backup bi-propellant propulsion system, which has proven to be a highly reliable propulsion system with extensive flight experience. In
the absence of the primary and secondary XIPS, this satellite is expected to operate normally on its available bi-propellant fuel for over three years. Prior to this event, Galaxy 10R was
scheduled to have an estimated end of useful life in 2015.

We
do not expect this event to affect service to our customers or to affect revenues from the customers on this satellite over the remaining life of the satellite. As a result, there
should be no material impact on services, revenues or satellite operations. In addition, we do not believe that this event will affect our contracted backlog because the remaining fuel for the backup
bi-propellant propulsion system should provide ample time to seamlessly transition customers to a new or replacement satellite and substantially all of our customer contracts would
continue in effect on their terms on such new or replacement satellite.

This
event will result in acceleration to the 2004-2007 timeframe of planned capital expenditures to replace this satellite. We have contractual arrangements in place that
would allow us to procure the construction and launch of a replacement satellite. Galaxy 10R is insured and in August 2004 we made a claim under its insurance policies. In November 2004,
our insurers confirmed to us their agreement to settle the Galaxy 10R insurance claim by payment to the company of
approximately $75.3 million. These insurance proceeds, which are expected to be received by the end of the fourth quarter of 2004, will be used to partially offset the replacement cost of
Galaxy 10R.

As
a result of this event, we have recorded approximately $9.1 million of losses in the third quarter of 2004 related primarily to a customer warranty obligation payable at the
satellite's end of life and a non-cash write off of a portion of a sales-type lease receivable. These losses and warranty obligations are substantially covered by the Galaxy
10R insurance policies. In connection with the Galaxy 10R insurance settlement, a gain of approximately $9.1 million will be recorded during the fourth quarter of 2004, offsetting the third
quarter losses. Upon settlement of the Galaxy 10R insurance claim in November 2004, the expected additional depreciation expense resulting from Galaxy 10R's revised estimated useful life will
be approximately $5 million per year.

We
operate three other Boeing 601 HP satellites that continue to operate normally with XIPS as their primary propulsion system. Two of these satellites (PAS-9 and
PAS-10) have over 6 years of bi-propellant fuel and the third (Galaxy 13/Horizons 1), which also has a more robust XIPS than its predecessors, has over 11 years
of bi-propellant fuel.

Assuming
satellites under development are successfully launched and services on the satellites commence on schedule, we believe that amounts available under the Revolving Facility,
vendor financing, future cash flows from operations and cash on hand will be sufficient to fund our operations and our remaining costs for the construction and launch of satellites currently under
development. There can be no assurance, however, that our assumptions with respect to costs for future construction and launch of our satellites will be correct, or that amounts available under the
Revolving Facility, vendor financing, future cash flows from operations and cash on hand will be sufficient to cover any shortfalls in funding for (i) launches caused by uninsured launch or
in-orbit failures, (ii) cost overruns, (iii) delays, (iv) capacity shortages, or (v) other unanticipated expenses.

44

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Liquidity and Capital Resources



At September 30, 2004, we had cash and cash equivalents of $48.2 million, compared to $511.2 million at December 31, 2003. During the
nine months ended September 30, 2004 we recorded the following significant transactions impacting cash and cash equivalents:



|                                                    |  | Nine Months
Ended
September 30, 2004 |          | Nine Months
Ended
September 30, 2003 |   | Dollar Change |  
|--------------------------------------------------- |  | ------------------------------------ | -------- | ------------------------------------ | - | ------------- | -
|
|Net cash provided by operating activities           |  | $                                    | 167,051  |                                      | $ | 322,103       |  
|Net cash provided by (used in) investing activities |  |                                      | 217,021  |                                      |   | (58,463       | )
|Net cash provided by (used in) financing activities |  |                                      | (847,444 | )                                    |   | (551,232      | )

The
decrease in the net cash provided by operating activities was primarily due to $155.0 million of transaction-related costs that were expensed within our condensed consolidated
statement of operations during the nine months ended September 30, 2004. Additionally, there was a $26.1 million decrease in cash provided by prepaid expenses and other assets resulting
from increased progress payments recorded during the nine months ended September 30, 2004 in relation to the construction of the L-band navigational payload on Galaxy 15, as well as
an increase in cash used for prepaid insurance, including satellite insurance. These decreases in cash flows from operations were partially offset by a decrease in cash used within accounts payable
and accrued liabilities of $12.4 million and a decrease in cash used within operating leases and other receivables of $21.7 million. The decrease in cash used within accounts payable and
accrued liabilities was primarily a result of a decrease in cash used for accounts payable due to outstanding vendor invoices for satellites under construction as of September 30, 2004, as well
as changes in accrued interest and scheduled interest payment as a result of the new debt incurred in relation to the Transactions. The decrease in cash used within operating leases
and other receivables was primarily attributable to improved collections of customer receivables during the nine months ended September 30, 2004, as compared to the same period in 2003.

The
increase in net cash provided by investing activities was primarily due to the receipt of $286.9 million of insurance proceeds during 2004 and a change of $5.5 million
related to short-term

45

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investments.
During the nine months ended September 30, 2004, we had net sales of short-term investments of $38.9 million as compared to net sales of short-term
investments of $44.4 million during the nine months ended September 30, 2003. These increases were partially offset by:



The
increase in cash used within financing activities was primarily due to cash activity related to the Transactions during the nine months ended September 30, 2004 including the
repayment of long-term debt, issuance of new debt, payment of costs related to the Transactions and the repurchase of treasury shares described above. Additionally, we repaid
$350 million of debt under the Term Loan B-1 Facility of our Old Credit Facility during the six months ended June 30, 2004 and recorded approximately $16.3 million of
new satellite incentive obligations related to the Galaxy 13/Horizons 1 satellite in January 2004.



In connection with the Transactions, we (i) entered into a new Senior Secured Credit Facility consisting of an $800.0 million Term Loan A
Facility, a $1,660.0 million Term Loan B Facility and a $250.0 million revolving credit facility, of which $42.6 million was drawn; (ii) issued $1,010 million
of our 9% Senior Notes due 2014 pursuant to Rule 144A under the Securities Act of 1933, as amended; (iii) terminated and repaid our Old Credit Facility; (iv) completed a tender
offer for substantially all of our $275 million 6.125% Notes due 2005 and our $800 million 81/2% Senior Notes due 2012; and (v) completed the
redemption of our remaining 6.125% Notes due 2005 in October 2004. In September 2004, we repaid the outstanding balance under our revolving credit facility.

As
of September 30, 2004, long-term debt consisted of the following (in thousands):

61/8% Notes due 2005

$
24,15663/8% Notes due 2008


150,00081/2% Notes due 2012


1,19067/8% Notes due 2028


125,000Transaction Related Financing:Revolving Credit Facility


Term Loan A due 2009


798,810Term Loan B due 2011


1,660,0009% Senior Notes due 2014


1,010,0003,769,156Less: current maturities


95,416Total Long-Term Debt

$
3,673,740


At
September 30, 2004 we had total debt outstanding of approximately $3.769 billion, including aggregate current maturities of $95.4 million relating
to our 61/8% Senior Notes due 2005 and the quarterly principal payments on the Term A Facility and the Term B Facility under the Secured Credit Facility described below.

Our
Senior Secured Credit Facility is comprised of a $250.0 million Revolving Facility, which will terminate in August 2009, an $800.0 million Term A Facility, which
matures in August 2009, and a $1,660 million Term B Facility, which matures in August 2011. At September 30, 2004, the interest rates on the Term A Facility and Term B
Facility were LIBOR plus 2.50% and LIBOR plus 2.75%, respectively, and the Revolving Facility was undrawn. These rates are subject to change based on our total leverage ratio. In addition, we are
required to pay a commitment fee for the unused commitments under the Revolving Facility and the Term A Facility, if any, which, as of September 30, 2004 on an annual basis was 0.50%. As of
September 30, 2004 we had outstanding letters of credit totaling

46

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$36.1 million.
Outstanding letters of credit reduce our ability to borrow against the Revolving Facility by an equivalent amount. Any amounts borrowed under the Revolving Facility would bear
interest at LIBOR plus 2.50% as of September 30, 2004, although this interest rate is subject to adjustment based on our total leverage ratio.

The
$1,010 million Senior Notes bear interest at an annual rate of 9.0%. The 9% Senior Notes require interest payments to be made semi-annually and mature on
August 15, 2014.

On
August 22, 2004, we completed a tender offer and consent solicitation to purchase any and all of the outstanding $800.0 million aggregate principal amount of our
81/2% Senior Notes due 2012 for cash. Not all of these notes were tendered and, as a result, approximately $1.2 million aggregate principal amount will remain outstanding through
the original maturity date. As required by our Senior Secured Credit Facility, we repaid our Term A Facility by the amount of the 81/2% Senior Notes that remained outstanding
after the tender offer.

On
August 22, 2004, we completed a tender offer to purchase any and all of the outstanding $275.0 million aggregate principal amount of our 6.125% Notes due 2005 for cash.
On October 22, 2004, we completed a redemption of our remaining $24.2 million 6.125% Notes due 2005 that were not purchased in the tender offer from cash on hand.

We
also had outstanding ten and thirty-year fixed rate notes totaling $275 million issued in January 1998. The outstanding principal balances, interest rates
and maturity dates for these notes as of September 30, 2004, are $150 million at 6.375% due 2008 and $125 million at 6.875% due 2028, respectively. Principal on these notes is
payable at maturity, while interest is payable semi-annually.

In
June 2004, we repaid the $349.1 million outstanding balance under the Term Loan B-1 Facility of our Old Credit Facility from available cash on hand.

On
July 14, 2003, we made an optional pre-payment of $350 million against our Old Credit Facility from available cash on hand.

We
are required to maintain certain financial covenants and are also subject to restrictive covenants under our borrowings. As of September 30, 2004, we were in compliance with
all such covenants. The indenture governing our 9% Senior Notes due 2014 and our Senior Secured Credit Facility contain financial ratios that are calculated by reference to Adjusted EBITDA. Adjusted
EBITDA is defined as net income (loss) plus net interest expense, income tax expense (benefit) and depreciation and amortization, further adjusted to give effect to adjustments required in calculating
covenant ratios and compliance under the indentures governing our 9% Senior Notes due 2014 and our Senior Secured Credit Facility. Adjusted EBITDA is a material component of these covenants. For
instance, non-compliance with the financial ratio maintenance covenants contained in our Senior Secured Credit Facility could result in the requirement to immediately repay all amounts
outstanding under such facilities, and non compliance with the debt incurrence ratios contained in our 9% Senior Notes due 2014 would prohibit us from being able to incur additional indebtedness other
than pursuant to specified exceptions. While the determination of required adjustments to net income (loss) is subject to interpretation and requires judgment, we believe the adjustments listed below
are in accordance with the covenants discussed above.

Adjusted
EBITDA is not a presentation made in accordance with GAAP, and does not purport to be an alternative to net income (loss) determined in accordance with GAAP or as a measure of
operating performance or to cash flows from operating activities determined in accordance with GAAP as a measure of liquidity. Additionally, Adjusted EBITDA is not intended to be a measure of free
cash flow for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Because not all companies use
identical calculations, this presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The following table sets forth a reconciliation of net income
(loss) to Adjusted EBITDA for the periods indicated.

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|                                                            |  | Three Months Ended
September 30, |         | Nine Months Ended
September 30,
|----------------------------------------------------------- |  | -------------------------------- | ------- | -------------------------------
|
|
|Reconciliation of Net Income (loss) to Adjusted EBITDA:     |  |                                  |         |                                
|Net income (loss)                                           |  | $                                | (76,655 | )                              
|Interest expense, net                                       |  |                                  | 57,794  |                                
|Income tax expense (benefit)                                |  |                                  | (67,363 | )                              
|Depreciation and amortization                               |  |                                  | 74,322  |                                
|                                                            |  |                                  |         |                                
|EBITDA                                                      |  | $                                | (11,902 | )                              
|Adjustment of sales-type leases to operating leases(a)      |  |                                  | 6,608   |                                
|Effect of Galaxy 10R anomaly(b)                             |  |                                  | 9,090   |                                
|Satellite impairment(c)                                     |  |                                  |        |                                
|Restructuring charges(d)                                    |  |                                  | 2,080   |                                
|Reserves for long-term receivables and sales-type leases(e) |  |                                  | (3,727  | )                              
|Reversal of allowance for customer credits(f)               |  |                                  | 1,800   |                                
|Transaction-related costs(g)                                |  |                                  | 154,535 |                                
|Other items(h)                                              |  |                                  | 748     |                                
|                                                            |  |                                  |         |                                
|Adjusted EBITDA                                             |  | $                                | 159,232 |                                
|                                                            |  |                                  |         |                                

---

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We expect our significant cash outlays will continue to be primarily capital expenditures related to the construction and launch of satellites and debt service
costs. We have satellites in various stages of development, for which we have budgeted capital expenditures. We currently expect to spend approximately $165 million on capital expenditures
during 2004, which will primarily be comprised of costs to construct, insure and launch satellites.



In January 2003, our management approved a plan to consolidate certain of our teleports in order to improve customer service and reduce operating costs.
Under this plan, our Homestead, Florida teleport was closed in 2003 and in June 2004 we closed our Spring Creek, New York teleport. On October 28, 2004, we sold our Spring Creek teleport
as described below. This teleport consolidation plan includes the disposal of land, buildings and equipment located at these teleports and severance related costs for approximately 40 employees that
will be required to perform services through the date of closure. During the year ended December 31, 2003 and for the nine months ended September 30, 2004, we
recorded charges of $4.2 million and $0.8 million, respectively, related to this teleport consolidation plan, primarily representing severance costs.

In
addition to the fourth quarter gain on the sale of our Spring Creek teleport described below, we estimate that this teleport consolidation plan will result in approximately
$6 million of costs from January 2003 through the end of 2004. These costs primarily consist of severance-related costs for which the employees will be required to perform future
services. Severance-related costs associated with this consolidation plan include compensation and benefits, outplacement services and legal and consulting expenses related to the reduction in
workforce of approximately 40 employees.

On
October 28, 2004, we completed the sale of our Spring Creek teleport for approximately $14.4 million, net of associated selling costs. As of September 30, 2004,
the assets of the Spring Creek teleport of $3.3 million were reflected as "Assets Held for Sale" on our consolidated balance sheet. As a result of the completion of this sale, we recorded a
pre-tax gain on the disposal of land buildings and equipment of approximately $11.1 million in October 2004. The Spring Creek teleport is not significant to our consolidated
operating results or financial position.

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On
March 29, 2002, our management approved a plan to restructure several of our United States locations and close certain facilities, some of which are currently being leased
through 2011. In an effort to further streamline our operations, in the nine months ended September 30, 2004 we consolidated our Manhattan Beach, El Segundo and Long Beach, California
facilities. As a result, in the first quarter of 2004 we recorded a non-cash charge of approximately $1.4 million reflecting future lease costs related to approximately 18,000
square feet of unused facilities in Manhattan Beach. Additionally, in the third quarter of 2004 we recorded a non-cash charge of approximately $2.3 million due to a reduction in
future anticipated sublease income related to one of our idle facilities.

During
the nine months ended September 30, 2004 we made cash payments of $0.4 million related to the 2003 reduction in workforce.

Commitments and Contingencies

The following schedule summarizes our contractual obligations and commercial commitments as of September 30, 2004:

|                                            |                                | Payments Due by Period  
|------------------------------------------- | ------------------------------ | ------------------------
|
|
|Total Debt:                                 |                                |                         
|                                            | Senior Secured Credit Facility |                         
|                                            |                                | 9% Senior Notes Due 2014
|                                            |                                | Other Notes(1)          
|                                            |                                |                         
|                                            |                                |                         
|Interest payments(2)                        |                                |                         
|Satellite Incentive Obligations             |                                |                         
|Operating Leases                            |                                |                         
|Satellite Construction and Launch Contracts |                                |                         
|Customer Contracts                          |                                |                         
|Vendor Contracts                            |                                |                         
|                                            |                                |                         
|                                            |                                |                         
|                                            |                                |                         

---

Satellite
launch and in-orbit insurance contracts related to future satellites to be launched are cancelable up to 30 days prior to the satellite's launch. As of
June 30, 2004, we did not have any non-cancelable commitments related to existing launch insurance or in-orbit insurance contracts for satellites to be launched.

Satellite Incentive Obligations

Satellite contracts typically require that we make progress payments during the period of the satellite's construction and orbital incentive payments (plus
interest) over the orbital life of the satellite.

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The
incentive obligations may be subject to reduction or refund if the satellite fails to meet specific technical operating standards. As of September 30, 2004, we had $123.9 million of
liabilities recorded in relation to these satellite incentive obligations.

Satellite Commitments

As of September 30, 2004, we had approximately $159.7 million of expenditures remaining under existing satellite construction contracts and
$21.6 million remaining under existing satellite launch contracts. Satellite launch and in-orbit insurance contracts related to future satellites to be launched are cancelable up to
thirty days prior to the satellite's launch. As of September 30, 2004, we did not have any non-cancelable commitments related to existing launch insurance or in-orbit
insurance contracts for satellites to be launched.

Through
September 30, 2004, we had made approximately $171.2 million of capital expenditures in relation to Galaxy 14 and Galaxy 15. We also spent $65.8 million for
launch costs originally intended for Galaxy 8-iR and $6.0 million for another future launch. As a result of the termination of the Galaxy 8-iR construction contract, we
expect to use this launch for Galaxy 16, which will replace our Galaxy 4R satellite in early 2006.

In
April 2004, we entered into a commitment for the construction of Galaxy 16. In June 2004, we paid The DIRECTV Group $28.5 million to fully reimburse amounts
previously paid on our behalf to the manufacturer of this satellite. Also in June 2004, we executed a definitive agreement for the procurement of Galaxy 17 an on-ground spare for
Galaxy 11, which will also serve as a spare to protect against launch failure of Galaxy 16. The aggregate commitment related to these construction agreements is approximately $200 million,
which will be paid over the next two years.

We
plan to construct and launch replacement satellites for Galaxy 10R and PAS-6B prior to the end of their useful lives, although no commitments have been made for the
procurement of these satellites.

Satellite Insurance

On August 31, 2004, we filed a proof of loss under the insurance policy for our Galaxy 10R spacecraft after the secondary XIPS on this satellite
permanently failed. In November 2004, our insurers confirmed to us their agreement to settle this claim for approximately $75.3 million. These insurance proceeds, which are expected to
be received by the end of the fourth quarter of 2004, will be used to partially offset the replacement cost of Galaxy 10R.

On
February 19, 2003, we filed proofs of loss under the insurance policies for two of our BSS 702 spacecraft, Galaxy 11 and PAS-1R, for constructive total losses based
on degradation of the solar panels. On December 29, 2003, we reached a settlement of these insurance claims for payment of $260 million with no future revenue share. We offset the
proceeds from this settlement against the carrying value of the satellites. In the first quarter of 2004, we received the $260 million settlement amount.

On
July 31, 2003, we filed a proof of loss under the insurance policy for our Galaxy 4R spacecraft after the secondary XIPS on this satellite ceased working. In 2003, we settled
with and received $102.6 million from insurers representing approximately 83 percent of the insurance coverage on the satellite. In March 2004, we reached an agreement with and
received $26.9 million from the insurer representing the remaining 17 percent of the insurance coverage on this satellite. The settlement with the insurer representing 17 percent
coverage included a future sharing of revenues actually received from the satellite. We proportionately offset the proceeds from these settlements against the insured carrying value of the satellite
and the net investment in sales-type lease. We plan to replace this

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satellite
with Galaxy 16 prior to the end of its useful life using the insurance proceeds and a launch service contract that we had purchased previously.

During
the first quarter of 2004 we received $286.9 million of insurance proceeds under the insurance policies for Galaxy 11, PAS-1R and Galaxy 4R satellites. These
proceeds were held in a collateral account and were classified as restricted cash pursuant to the terms of our Old Credit Facility until those restrictions were lifted in June 2004.

As
of September 30, 2004, we had in effect launch and in-orbit insurance policies covering seven satellites in the aggregate amount of approximately
$828.9 million. As of such date, these insured satellites had an aggregate net book value and other insurable costs of $899.7 million. We have 17 uninsured satellites in orbit. The
uninsured satellites are: PAS-4, which is used as a backup satellite; PAS-5 and PAS-7, for which we received insurance proceeds for constructive total losses;
Galaxy 1R, Galaxy 3R, Galaxy 5 and SBS-6, which are approaching the ends of their useful lives; Galaxy 11 and PAS-1R, for which we received insurance proceeds for partial
losses; PAS-2, PAS-3R, PAS-6B, PAS-8 and Galaxy 9, for which we determined that insurance was not available on commercially reasonable terms; and
HGS-3, HGS-5 and Leasat, which have an aggregate book value of less than $1.0 million. Our Galaxy 12 and Galaxy 9 satellites currently serve as in-orbit
backups for the C-band portions of Galaxy 1R, Galaxy 3C, Galaxy 4R, Galaxy 5, Galaxy 10R, Galaxy 11 and Galaxy 13/Horizons 1 (See "Satellite Deployment Plans and Operational Developments"
above). The C-band portion of the satellites that are currently covered by C-band in-orbit backups had an aggregate net book value of approximately
$310.8 million as of September 30, 2004.

Of
the insured satellites, as of September 30, 2004, three were covered by policies with substantial exclusions or exceptions to coverage for failures of specific components
identified by the underwriters as at risk for possible failure ("Significant Exclusion Policies"). The exclusions reduce the probability of an insurance recovery in the event of a loss on these
satellites. One of the satellites, PAS-9, has operational redundancies available for the systems on which exclusions have been imposed. We believe that this redundancy allows for
uninterrupted operation of the satellite in the event of a failure of the component subject to the insurance exclusion. The second such satellite, Galaxy 4R, for which we have received insurance
proceeds, has a remaining policy covering $19.7 million of investments in sales-type leases that also has a policy exclusion for XIPS related anomalies. Galaxy 4R is currently
operating on its backup bi-propellant propulsion system. The third satellite, Galaxy 13/Horizons 1, which was placed in service in January 2004 and is insured by a policy with an
exclusion for XIPS related anomalies, continues to have fully redundant XIPS as its primary propulsion system. Certain enhancements have been made to the XIPS on this satellite to make the systems
more robust. In addition, this satellite has available backup bi-propellant of over 11 years.

At
September 30, 2004, the uninsured satellites and the satellites insured by Significant Exclusion Policies had a total net book value and other insurable costs of approximately
$1.0 billion. Of this amount, $753.7 million related to uninsured satellites and $273.0 million related to satellites insured by Significant Exclusion Policies.

Operating Leases

We have commitments for operating leases primarily relating to equipment, our executive office facilities in Wilton, Connecticut and other locations. These leases
contain escalation provisions for increases as a result of increases in real estate taxes and operating expenses. As of September 30, 2004, minimum annual rentals of all leases, exclusive of
potential increases in real estate taxes, operating assessments and future sub-lease income aggregated $33.2 million.

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Customer and Vendor Obligations

We have certain contracts with our customers which require that we provide equipment, services and other support to these customers during the course of the
related contracts. As of September 30, 2004, we had commitments under these customer contracts which aggregated approximately $45.1 million related to the provision of equipment,
services and other support.

We
have certain long-term contractual obligations with service providers primarily for the operation of certain of our satellites. As of September 30, 2004, we had
commitments under these vendor contracts, which aggregated approximately $53.8 million, related to the provision of equipment, services and other support.

Change-in-Control Obligations

Certain of our senior executives are party to change-in-control severance agreements which provide for payment of severance and other
benefits in the event of an involuntary termination of the executive's employment (as defined in such agreements) within three years after a change in control. As a change in control of The DIRECTV
Group and PanAmSat have occurred, these agreements will apply if an involuntary termination of the executive occurs during the period specified by the agreement. Based upon current compensation
levels, if all of these executives receive the termination related benefits as specified by their respective agreements, the aggregate cost to us would be in the range of $4 million to
$5 million.

Certain
of our other executives have change-in-control severance agreements which provide for, among other things, the payment of severance and other benefits
upon the termination of the executive without cause or for good reason within three years after a change in control of PanAmSat, as defined in their respective agreements. The Transactions resulted in
a change-in-control of PanAmSat under these agreements. Based upon current compensation levels, if all of these executives receive the termination related benefits as specified by their respective
agreements, the aggregate cost to us would be approximately $5 million in addition to the costs described above with respect to our senior executives.

In
addition, our Severance Pay Plan allows for the payment of enhanced severance to employees laid off or who resign for good reason (as defined in such plan) due to, and within two
years following, a change-in-control.

Foreign Withholding Taxes

We have outstanding tax claims related to withholding taxes assessed on revenues derived from broadcasters inside and outside of India who broadcast from or into
India. The Indian government has assessed approximately $7.3 million (reduced from an initial assessment of $15.2 million) against one of our subsidiaries for the Indian tax year ended
March 31, 1997. This assessment is being appealed to the Income Tax Appeals Tribunal. For Indian tax years ended March 31, 1996, 1998, 1999, 2000 and 2001, the Indian government has
assessed approximately $36 million in the aggregate against us, including interest. This assessment has been appealed to the Commissioner of Income Tax (Appeals). We are contesting the
imposition of such taxes. While this contest proceeds, we have been required to advance cash and provide a bank guarantee for a total of $36 million. To date, we have paid cash of approximately
$1 million related to these assessment years. If unsuccessful in our contest, we could be subject to comparable claims for subsequent years. In connection with the Transactions, The DIRECTV
Group agreed to indemnify us for these and certain other taxes related to any periods or portions of such periods ending on or prior to the day of the closing of the Transactions in amounts equal to
80% of the first $75 million of such taxes and 100% of such taxes in excess of the first $75 million. As a result, our net tax liability related to these periods is capped at
$15 million (See "PanAmSat Merger, Subsequent Sale and Related Transactions" above).

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New Accounting Pronouncements

There are no issued statements awaiting implementation that are expected to have a material impact on our financial statements.

Market Risks

We manage our exposure to market risks through internally established policies and procedures and, when we deem appropriate, through the use of derivative
financial instruments. We use derivative financial instruments, including interest rate hedges, to manage market risks. Additional information regarding our interest rate hedge is contained within
"Liquidity and Capital ResourcesLong-term Debt" above. The objective of our policies is to mitigate potential income statement, cash flow and fair value exposures
resulting from possible future adverse fluctuations in interest rates. We evaluate our exposure to market risks by assessing the anticipated near-term and long-term
fluctuations in interest rates on a daily basis. This evaluation includes the review of leading market indicators, discussions with financial analysts and investment bankers regarding current and
future economic conditions and the review of market projections as to expected future interest rates. We utilize this information to determine our own investment strategies as well as to determine if
the use of derivative financial instruments is appropriate to mitigate any potential future interest rate exposure that we may face. Our policy does not allow speculation in derivative instruments for
profit or execution of derivative instrument contracts for which there are no underlying exposures. We do not use financial instruments for trading purposes and are not a party to any leveraged
derivatives.

We
determine the impact of changes in interest rates on the fair value of our financial instruments based on a hypothetical 10% adverse change in interest rates from the rates in effect
as of the end of the period for these financial instruments. We use separate methodologies to determine the impact of these hypothetical changes on our sales-type leases, fixed rate public
debt and variable rate debt as follows:



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The
only potential limitations of the respective models are in the assumptions utilized in the models such as the hypothetical adverse fluctuation rate and the discount rate. We believe
that these models and the assumptions utilized are reasonable and sufficient to yield proper market risk disclosure.

We
did not experience any material changes in interest rate exposures during the nine months ended September 30, 2004. Based upon economic conditions and leading market indicators
at September 30, 2004, we do not foresee a significant adverse change in interest rates in the near future. As a result, our strategies and procedures to manage exposure to interest rates have
not changed in comparison to the prior year.

As
of September 30, 2004, long-term debt consisted of fixed-rate borrowings of approximately $1.31 billion, $2.46 billion of floating rate
debt, and a fixed interest rate hedge obligation in a notional amount of $100 million (See "Liquidity and Capital ResourcesLong-term Debt" above). We are
subject to fluctuating interest rates on our floating rate debt and any changes in interest rates would impact results of operations and
cash flows. The potential effect of a hypothetical 10% adverse fluctuation in interest rates for one year on our floating rate debt outstanding at September 30, 2004 would be a reduction in
cash flows of approximately $11.0 million and a reduction in net income of approximately $7.0 million.

Fluctuations
in interest rates may affect the fair values of fixed-rate borrowings and fixed-rate net investments in sales-type lease receivables. Any
changes in interest rates would impact results of operations and cash flows. At September 30, 2004, outstanding fixed-rate borrowings bore interest at rates ranging from
61/8% to 9%, and sales type lease receivables bore interest between 8% and 12%. The potential fair value change resulting from a hypothetical 10% adverse fluctuation in interest rates
related to our outstanding fixed-rate debt and fixed-rate net investment in sales-type lease receivable balances would be approximately $68.5 million and
$2.6 million as of September 30, 2004.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsMarket Risks."

ITEM 4.    CONTROLS AND PROCEDURES.

Based upon the required evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), our Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of September 30, 2004.

There
has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during our fiscal quarter ended September 30, 2004, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PANAMSAT CORPORATION    PART IIOTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS.

We have outstanding tax claims related to withholding taxes assessed on revenues derived from broadcasters inside and outside of India who broadcast from or into
India. The Indian government has assessed approximately $7.3 million (reduced from an initial assessment of $15.2 million) against one of our subsidiaries for the Indian tax year ended
March 31, 1997. This assessment is being appealed to the Income Tax Appeals Tribunal. For Indian tax years ended March 31, 1996, 1998, 1999, 2000 and 2001, the Indian government has
assessed approximately $36 million in the aggregate against us, including interest. This assessment has been appealed to the Commissioner of Income Tax (Appeals). We are contesting the
imposition of such taxes. While this contest proceeds, we have been required to advance cash and provide a bank guarantee for a total of $36 million. To date, we have paid cash of approximately
$1 million related to these assessment years. If unsuccessful in our contest, we could be subject to comparable claims for subsequent years. The DIRECTV Group has agreed to indemnify us for
certain of our tax obligations, including foreign withholding tax obligations.

We
periodically become involved in various claims and lawsuits that are incidental to our business. Other than the matter described above, we believe that no matters currently pending
would, in the event of an adverse outcome, be material.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

On August 13, 2004, at the annual meeting of stockholders of the company, the following matters were voted upon:



Nominee

For

WithheldChase Carey

138,299,852

4,287,294Bruce B. Churchill

139,266,153

3,320,993Patrick J. Costello

138,750,393

3,836,753Patrick T. Doyle

139,265,453

3,321,693Eddy W. Hartenstein

139,383,258

3,203,888Dennis F. Hightower

142,400,150

186,996James M. Hoak

142,470,950

116,196Larry D. Hunter

139,336,153

3,250,993Stephen R. Kahn

142,521,139

66,007Joseph R. Wright, Jr.

139,333,170

3,253,976




ITEM 5.    OTHER INFORMATION.

None.

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ITEM 6.    EXHIBITS.

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| |  | 10.11 |  | Management Services Letter from Kohlberg Kravis Roberts & Co. L.P. to PanAmSat Corporation, dated August 20, 2004.*                        
| |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | 10.12 |  | Management Services Letter from TC Group, L.L.C. to PanAmSat Corporation, dated August 20, 2004.*                                          
| |  | 10.13 |  | Management Services Letter from Providence Equity Partners IV Inc. to PanAmSat Corporation, dated August 20, 2004.*                        
| |  | 10.14 |  | Amendment to the PanAmSat Corporation 1999 Non-Employee Directors Compensation Deferral Plan.*                                             
| |  | 10.15 |  | Amendment No. 1 to the PanAmSat Corporation Supplemental Savings Plan.*                                                                    
| |  | 10.16 |  | Amendment No. 1 to the PanAmSat Corporation Deferred Compensation Plan.*                                                                   
| |  | 10.17 |  | Amended and Restated PanAmSat Corporation Annual Incentive Plan.*                                                                          
| |  | 10.18 |  | Letter Agreement between PanAmSat Corporation and James Cuminale, dated August 20, 2004.*                                                  
| |  | 31.1  |  | Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.*
| |  | 31.2  |  | Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.*
| |  | 32.1  |  | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.*                                                              
| |  | 32.2  |  | Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*                                                              

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|PANAMSAT CORPORATION |  |  |                                                                                                                                          
|-------------------- |  |  | -----------------------------------------------------------------------------------------------------------------------------------------
|November 15, 2004    |  |  |                                                                                                                                          
|                     |  |  | /s/MICHAEL J. INGLESEMichael J. Inglese Executive Vice President and
Chief Financial Officer
and a Duly Authorized
Officer of the Company

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