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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

ý

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

For the quarterly period ended March 31, 2007

o

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

For the transition period from to

Commission file number 333-106529

DIRECTV HOLDINGS LLC
DIRECTV FINANCING CO., INC.
(Exact name of registrant as specified in its charter)

DIRECTV Holdings LLC—Delaware DIRECTV Financing Co., Inc.—Delaware (State or other jurisdiction of incorporation or organization) 25-1902628 59-3772785 (I.R.S. Employer Identification Number)

DIRECTV Holdings LLC—Delaware DIRECTV Financing Co., Inc.—Delaware (State or other jurisdiction of incorporation or organization)		25-1902628 59-3772785 (I.R.S. Employer Identification Number)
2230 East Imperial Highway, El Segundo, California (Address of principal executive offices)		90245 (Zip Code)

2230 East Imperial Highway, El Segundo, California 90245 (Address of principal executive offices, including zip code)

(310) 964-5000
(Registrant's telephone number, including area code)

~~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~~N/A ~~of 1934 during the preceding 12 months~~ (orFormer ~~for~~name, ~~such~~former ~~shorter~~address ~~period~~and ~~that~~former ~~the~~fiscal ~~registrant was required to file such reports)~~year, ~~and~~if ~~(2) has~~changed ~~been~~since ~~subject~~last ~~to such filing requirements for the past 90 days. Yes ý No o~~ report)

Indicate by check mark whether the registrant: is(1) has anfiled ~~accelerated~~all ~~filer~~reports required to be filed by Section 13 or 15(asd) ~~defined~~of inthe Securities Exchange Act of 1934 during the ~~Rule~~preceding 12 ~~12b-~~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. days. Yes oý No ýo

~~The~~Indicate ~~registrant~~by ~~has~~check ~~met~~mark whether the ~~conditions~~registrant ~~set~~is ~~forth~~a inlarge ~~General~~accelerated ~~Instructions~~filer, ~~H(1)(a)~~an ~~and~~accelerated ~~(b) of~~filer, ~~Form 10-Q~~or ~~and~~a isnon-accelerated ~~therefore~~filer. ~~filing~~See ~~this~~definition of ~~Quarterly~~"accelerated ~~Report~~filer onand ~~Form~~large accelerated filer" in Rule 1012b-Q2 ~~with~~of the ~~reduced~~Exchange ~~disclosure format~~Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

The registrant has met the conditions set forth in General Instructions H(1) (a) and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with the reduced disclosure format.

TABLE OF CONTENTS

				Page No.	~~Page No.~~
Part I—Financial Information (Unaudited)
Item 1.	~~Item 1.~~	Financial Statements	~~Financial Statements~~
			Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004		1
		Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and 2006		1
			Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004		2
		Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006		2
			Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004		3
		Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006		3
		Notes to the Consolidated Financial Statements	~~Notes to the Consolidated Financial Statements~~	4	4
Item 2.	~~Item 2.~~	Management's Discussion and Analysis of Financial Condition and Results of Operations	~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~	14	17
Item 4.	~~Item 4.~~	Controls and Procedures	~~Controls and Procedures~~	21	28
Part II—Other Information
Item 1.	~~Item 1.~~	Legal Proceedings	~~Legal Proceedings~~	21	29
	Item 6.		Exhibits		30
Item 1A.		Risk Factors		22
Signature					31
Item 6.		Exhibits		23
Signature				24

DIRECTV HOLDINGS LLC ~~PART I—FINANCIAL INFORMATION (UNAUDITED)~~

PART I—FINANCIAL INFORMATION (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

					Three Months Ended June 30,						Six Months Ended June 30,
				Three Months Ended March 31,
					2005			2004			2005			2004
				2007			2006
					(dollars in millions)
				(Dollars in Millions)
Revenues				$	$3,538.7	~~2,960.5~~	$	$3,193.5	~~2,216.9~~		$	~~5,761.3~~		$	~~4,297.7~~
Operating Costs and Expenses, exclusive of depreciation and amortization expense shown separately below
Operating Costs and Expenses
	Programming and other costs					1,137.7			856.5			2,287.3			1,704.6
	Costs of revenues, exclusive of depreciation and amortization expense
	Subscriber service expenses					219.2			166.0			439.7			312.0
		Broadcast programming and other			1,483.4			1,331.5
	Subscriber acquisition costs:
		Subscriber service expenses			279.9			236.7
			Third party customer acquisitions			467.9			445.4			1,055.8			881.9
		Broadcast operations expenses			51.6			42.0
			Direct customer acquisitions			154.3			162.1			312.0			313.4
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
	Upgrade and retention costs					223.2			226.8			475.4			401.0
		Subscriber acquisition costs			431.6			567.6
	Broadcast operations expenses					35.3			35.2			70.7			65.2
		Upgrade and retention costs			226.2			293.1
	~~General and administrative expenses~~	General and administrative expenses			197.3	~~218.3~~		178.0	~~149.9~~			~~400.2~~			~~299.4~~
~~Depreciation and amortization expense~~	Depreciation and amortization expense				303.1	~~171.4~~		182.2	~~111.7~~			~~348.6~~			~~235.5~~
Total Operating Costs and Expenses			~~Total Operating Costs and Expenses~~		2,973.1	~~2,627.3~~		2,831.1	~~2,153.6~~			~~5,389.7~~			~~4,213.0~~
Operating Profit					565.6	~~333.2~~		362.4	~~63.3~~			~~371.6~~			~~84.7~~
Interest expense, net						(54.2	)		(46.0	)		(110.2	)		(93.4	)
Interest income					21.0			14.4
Other expense						(65.2	)		—			(65.6	)		—
Interest expense					(52.5	)		(55.9	)
Income (Loss) Before Income Taxes and Cumulative Effect of Accounting Change						213.8			17.3			195.8			(8.7	)
Other expense					(0.7	)		(0.6	)
Income tax (expense) benefit						(82.0	)		(6.6	)		(75.1	)		3.4
Income Before Income Taxes					533.4			320.3
Income (Loss) Before Cumulative Effect of Accounting Change						131.8			10.7			120.7			(5.3	)
Income tax expense					(208.2	)		(122.4	)
Cumulative effect of accounting change, net of taxes						—			—			—			(311.5	)
Net Income				$	325.2		$	197.9
Net Income (Loss)					$	131.8		$	10.7		$	120.7		$	(316.8	)

~~Reference~~The ~~should~~accompanying beNotes ~~made~~are toan ~~the~~integral ~~Notes~~part toof ~~the~~these Consolidated Financial Statements.

DIRECTV HOLDINGS LLC

CONSOLIDATED BALANCE SHEETS

(Unaudited)

					June 30, 2005			December 31, 2004
			March 31, 2007		December 31, 2006
					(dollars in millions)
			(Dollars in Millions)
ASSETS
Current Assets
	Cash and cash equivalents		$	1,600.9	$	~~814~~1,355.07		$	~~34.5~~
	Accounts receivable, net of allowances of $96.6 and $86.4					815.1			885.0
	Accounts receivable, net of allowances of $71.7 and $58.7			1,069.5		1,267.2
	Inventories, net					294.2			122.0
	Inventories			173.0		140.3
	Prepaid expenses and other			166.7		~~241~~145.8			~~289.8~~
		Total Current Assets		~~Total Current Assets~~3,010.1		2,~~165~~909.10			~~1,331.3~~
Satellites, net of accumulated depreciation of $507.8 and $455.6						1,764.8			1,597.4
Satellites, net				2,008.7		2,000.5
Property, net of accumulated depreciation of $1,291.1 and $1,182.4						723.5			686.1
Property and Equipment, net				2,421.2		2,026.5
Goodwill				3,031.7		3,031.7			~~3,031.7~~
Intangible Assets, net				1,458.2		21,~~048~~545.39			~~2,224.9~~
Other Assets				188.3		~~125~~173.47			~~122.8~~
		Total Assets	$	~~Total Assets~~12,118.2	$	911,~~858~~687.83		$	~~8,994.2~~
LIABILITIES AND OWNER'S EQUITY
Current Liabilities
	Accounts payable and accrued liabilities		$	2,411.2	$	12,~~851~~401.39		$	~~1,771.7~~
	Unearned subscriber revenue and deferred credits			295.5		~~225~~259.50			~~255.9~~
	Current portion of long-term debt			10.4		210.84			~~10.2~~
		Total Current Liabilities		~~Total Current Liabilities~~2,717.1		2,~~079~~671.63			~~2,037.8~~
Long-Term Debt				3,392.2		3,~~410~~394.59			~~3,276.6~~
Other Liabilities and Deferred Credits				1,027.2		~~1,065~~993.78			~~1,128.6~~
Deferred Income Taxes				258.3		~~227~~239.98			~~172.3~~
Commitments and Contingencies
Owner's Equity
	Capital stock and additional paid-in capital			3,800.2		43,~~034~~786.21			~~3,458.7~~
	Accumulated deficit					(959.1	)		(1,079.8	)
	Retained earnings			923.2		601.4
		Total Owner's Equity		~~Total Owner's Equity~~4,723.4		34,~~075~~387.15			~~2,378.9~~
		Total Liabilities and Owner's Equity	$	~~Total Liabilities and Owner's Equity~~12,118.2	$	911,~~858~~687.83		$	~~8,994.2~~

~~Reference~~The ~~should~~accompanying beNotes ~~made~~are toan ~~the~~integral ~~Notes~~part toof ~~the~~these Consolidated Financial Statements.

DIRECTV HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

						Six Months Ended June 30,
				Three Months Ended March 31,
						2005			2004
				2007			2006
						(dollars in millions)
				(Dollars in Millions)
Cash Flows from Operating Activities
Income (Loss) Before Cumulative Effect of Accounting Change						$	120.7		$	(5.3	)
Net Income				$	325.2		$	197.9
Adjustments to reconcile income (loss) before cumulative effect of accounting change to net cash provided by operating activities
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization expense				303.1		~~348.6~~	182.2		~~235.5~~
	Equity losses from unconsolidated affiliates						0.7			—
	Share-based compensation expense				9.8			9.7
	Loss on sale or disposal of property						—			8.6
	Equity in losses from unconsolidated affiliates				0.7			—
	Stock-based compensation expense						13.2			15.9
	Amortization of debt issuance costs				1.2			1.2
	Amortization of debt issuance costs						3.9			4.5
	Deferred income taxes and other				41.3			39.4
	Write-off of debt issuance costs						19.0			—
	Change in other operating assets and liabilities
	Deferred income taxes and other						55.3			(3.8	)
		Accounts receivable, net			197.7			165.8
	Change in other operating assets and liabilities
		Inventories			(32.7	)		(26.0	)
			Accounts receivable, net				49.9			(39.5	)
		Prepaid expenses and other			(23.0	)		(24.2	)
			Inventories				(172.2	)		(97.8	)
		Other assets			(14.8	)		(4.5	)
			Prepaid expenses and other				48.3			(3.8	)
		Accounts payable and accrued liabilities			20.6			(249.8	)
			Other assets				(1.9	)		(30.4	)
		Unearned subscriber revenue and deferred credits			36.5			2.1
			Accounts payable and accrued liabilities				91.6			(31.6	)
		Other liabilities and deferred credits			25.7			(4.5	)
			Unearned subscriber revenue and deferred credits				(30.4	)		41.7
			Net Cash Provided by Operating Activities		891.3			289.3
			Other liabilities and deferred credits				(52.2	)		111.6
Cash Flows from Investing Activities
				Net Cash Provided by Operating Activities			494.5			205.6
	Cash paid for property and equipment				(169.0	)		(97.8	)
Cash Flows from Investing Activities
	Cash paid for subscriber leased equipment- subscriber acquisitions				(187.8	)		(46.4	)
	Expenditures for property and equipment						(148.3	)		(106.5	)
	Cash paid for subscriber leased equipment- upgrade and retention				(218.6	)		(40.4	)
	Expenditures for satellites						(195.6	)		(172.7	)
	Cash paid for satellites				(54.0	)		(56.6	)
	Proceeds from sale of property						—			3.3
	Other				(0.8	)		(1.8	)
		Net Cash Used in Investing Activities		~~Net Cash Used in Investing Activities~~	(630.2	)	~~(343.9~~	)(243.0	)	~~(275.9~~	)
Cash Flows from Financing Activities
	Cash proceeds from refinancing transactions						3,003.3			—
	Repayment of long-term debt				(2.5	)		—
	Cash contribution from Parent						538.3			—
	Repayment of other long-term obligations				(17.7	)		(16.3	)
	Repayment of debt						(2,001.8	)		(213.2	)
	Excess tax benefit from share-based compensation				4.3			1.7
	Repayment of borrowing from Parent						(875.0	)		—
		Net Cash Used in Financing Activities			(15.9	)		(14.6	)
	Repayment of long-term obligations						(31.2	)		—
Net increase in cash and cash equivalents					245.2			31.7
	Debt issuance costs						(4.7	)		(1.9	)
Cash and cash equivalents at beginning of the period					1,355.7			1,164.8
				Net Cash Provided by (Used in) Financing Activities			628.9			(215.1	)
Cash and cash equivalents at end of the period				$	1,600.9		$	1,196.5
Net increase (decrease) in cash and cash equivalents							779.5			(285.4	)
Supplemental Cash Flow Information
Cash and cash equivalents at beginning of the period							34.5			415.7
Interest paid				$	49.2		$	58.0
Cash and cash equivalents at end of the period						$	814.0		$	130.3
Income taxes paid					52.9			119.4
Supplemental Cash Flow Information
Interest paid						$	114.9		$	93.8
Income taxes (refunded) paid							(44.1	)		0.5

~~Reference~~The ~~should~~accompanying beNotes ~~made~~are toan ~~the~~integral ~~Notes~~part toof ~~the~~these Consolidated Financial Statements.

DIRECTV HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ~~(Unaudited)~~

(Unaudited)

Note 1: Basis of Presentation

DIRECTV Holdings LLC is a wholly-owned subsidiary of The DIRECTV Group, Inc. and consists of DIRECTV Enterprises, LLC and its wholly-owned subsidiaries and DIRECTV Financing Co., Inc. We sometimes refer to DIRECTV Holdings LLC as DIRECTV Holdings, DIRECTV, we or ~~DIRECTV~~us and sometimes refer to The DIRECTV Group, Inc. as The DIRECTV Group or Parent.

WeOn ~~have~~December 23, ~~prepared~~2006, ~~the~~News ~~accompanying~~Corporation ~~unaudited~~and ~~consolidated~~Liberty ~~financial~~Media ~~statements~~Corporation inentered ~~accordance~~into ~~with~~an ~~accounting~~agreement ~~principles~~to ~~generally~~exchange ~~accepted~~Liberty's in16.3% ~~the~~ownership ~~United~~interest ~~States~~in ofNews ~~America~~Corporation for ~~interim~~News ~~financial~~Corporation's ~~reporting~~approximately 38.4% Inownership ~~the~~in ~~opinion~~our ~~of management~~Parent, ~~all~~three ~~adjustments~~regional ~~(consisting~~sports ~~only~~networks ofand ~~normal~~$550 million ~~recurring~~in ~~items) which are necessary for a fair presentation have been included~~cash. The ~~results~~transaction ~~for~~has ~~interim periods~~been ~~are~~approved ~~not~~by ~~necessarily~~the ~~indicative~~stockholders of ~~results~~News ~~that~~Corporation ~~may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial statements~~ and ~~footnotes~~is ~~thereto~~subject ~~included~~to inregulatory ~~our~~approval ~~Annual~~from ~~Report on Form 10-K for~~ the ~~year~~Federal ~~ended~~Communications ~~December 31~~Commission, ~~2004 filed with~~ the ~~Securities~~receipt ~~and~~of ~~Exchange~~a ~~Commission,~~private orletter ~~SEC,~~ruling ~~on March 1,~~from ~~2005, our Quarterly Report on Form 10-Q for~~ the ~~quarter~~Internal ~~ended~~Revenue ~~March 31,~~Service ~~2005 filed with the SEC on May 5, 2005,~~ and ~~all~~antitrust ofclearance. ~~our~~It ~~other~~is ~~filings,~~expected ~~including Current~~that ~~Reports on Form 8-K, filed with~~ the transaction ~~SEC~~will ~~after~~close ~~such~~in ~~date and through~~ the ~~date~~second half of ~~this report~~2007.

We ~~introduced~~have prepared the ~~DIRECTV®~~accompanying ~~service~~unaudited inconsolidated ~~the~~financial ~~United~~statements ~~States~~ in ~~1994.~~accordance Wewith ~~currently~~accounting ~~broadcast~~principles ~~our~~generally ~~service~~accepted ~~from~~in ~~our~~the ~~fleet~~United States of ~~satellites~~America, ~~located~~or ~~at our 101 degrees west longitude~~GAAP, orfor ~~WL,~~interim ~~110~~financial ~~WL and 119 WL orbital locations~~reporting. WeIn ~~also~~the ~~broadcast~~opinion ~~from~~of ~~72.5 WL under our arrangement with Telesat Canada~~management, orall ~~Telesat,~~adjustments ~~Industry~~(consisting ~~Canada~~only ~~and~~of ~~the~~normal ~~Federal~~recurring ~~Communications~~items) ~~Commission,~~that orare ~~FCC. Additionally,~~necessary wefor ~~broadcast~~a ~~from~~fair 95presentation WLhave ~~using~~been ~~transponders on a satellite we lease~~included. WeThe ~~transmit~~results ~~entertainment and information programs from our digital broadcast centers located in Castle Rock, Colorado~~for ~~and~~interim ~~Los~~periods ~~Angeles,~~are ~~California~~not tonecessarily ~~our~~indicative ~~in-orbit~~of ~~satellites.~~results ~~Customers~~that ~~receive~~may ~~our~~be ~~programming~~expected ~~using~~for aany ~~small~~other ~~receiving~~interim ~~satellite~~period ~~dish~~or ~~antenna,~~for athe ~~digital~~full ~~set-top~~year. ~~receiver~~For ~~and~~further ~~a remote control~~information, ~~which we~~ refer to asthe aconsolidated ~~DIRECTV~~financial statements ~~System.~~and ~~DIRECTV~~footnotes ~~System~~thereto ~~equipment~~included isin ~~manufactured~~our byAnnual ~~Thomson Inc.~~Report ~~(RCA),~~on ~~Philips~~Form 10-K ~~Electronics~~for ~~North~~the ~~America~~year ~~Corporation,~~ended ~~Samsung Electronics America,~~December ~~Inc.~~31, ~~and~~2006 ~~other~~filed ~~name~~with ~~brand~~the ~~consumer~~Securities ~~electronics companies. We distribute DIRECTV System equipment to consumers through national retail~~ and ~~consumer~~Exchange ~~electronics~~Commission, ~~stores~~or SEC, ~~satellite~~on ~~television dealers~~March 1, ~~regional~~2007 ~~Bell~~and ~~operating~~all ~~companies~~of ~~and~~our other ~~telephone service providers~~filings, including ~~our~~Current ~~direct~~Reports ~~customer~~on ~~acquisition~~Form 8-K, ~~program~~filed ~~and~~with ~~rural~~the ~~dealer~~SEC ~~networks.~~after Wesuch ~~have~~date aand ~~single~~through ~~operating~~the ~~segment with all revenues to~~ date ~~generated~~of ~~from~~this Ureport.S. ~~based subscribers and customers.~~

~~Prior period~~Note 2: ~~financial~~Accounting ~~statements~~Change ~~have~~and ~~been~~New ~~reclassified~~Accounting ~~to conform to the current period presentation.~~ Standards

~~Note 2:~~ Accounting Change

Uncertain ~~Subscriber~~Tax ~~Acquisition~~Positions. On January 1, ~~Upgrade~~2007, we adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109", or FIN 48. We now recognize a benefit in "Income tax expense" in the Consolidated Statements of Operations for uncertain tax positions that are more-likely-than-not to be sustained upon examination, measured at the largest amount that has a greater than 50% likelihood of being realized upon settlement. Unrecognized tax benefits represent tax benefits taken or expected to be taken in income tax returns, for which the benefit has not yet been recognized in "Income Tax Expense" in the Consolidated Statements of Operations due to the uncertainty of whether such benefits will be ultimately realized. The cumulative effect of adopting FIN 48 resulted in a $3.4 million decrease to the January 1, 2007 balance of "Retained Earnings" in the Consolidated Balance Sheets. As of the date of adoption our unrecognized tax benefits totaled $25.9 million, including $3.4 million of tax positions the recognition of which would affect the annual effective income tax rate. We include the liability for unrecognized tax benefits in "Other Liabilities and ~~Retention~~Deferred ~~Costs~~ Credits" in the Consolidated Balance Sheets as of March 31, 2007.

~~Effective January 1, 2004, we changed our method of accounting for subscriber acquisition, upgrade and retention costs. Previously, we deferred a portion~~We ofrecognize ~~these~~interest ~~costs, equal to the amount of profit to be earned from the subscriber, typically over the 12 month subscriber contract,~~ and ~~amortized~~penalties ~~the~~accrued ~~deferred~~related ~~amounts~~ to ~~expense~~unrecognized ~~over~~tax ~~the~~benefits ~~contract period.~~in We"Income ~~now~~tax expense" ~~all~~in ~~subscriber acquisition, upgrade and retention costs as incurred as subscribers activate~~ the ~~DIRECTV~~Consolidated ~~service.~~Statements ~~We determined that expensing such costs was preferable to our prior accounting method after considering the accounting practices~~ of ~~our competitors and companies within similar industries and the added clarity and ease of understanding our reported results for investors~~Operations. As ~~a result~~ of the ~~change,~~date ~~we expensed the total~~ of ~~the deferred costs~~adoption, ~~which~~we ~~amounted~~have accrued to $~~503~~1.90 million ~~($311.5 million,~~in ~~net~~interest ofand ~~taxes),~~penalties as apart ~~cumulative~~of ~~effect~~our ofliability ~~accounting change~~for onunrecognized ~~January 1,~~tax ~~2004~~benefits.

We file ~~New~~numerous ~~Accounting~~consolidated ~~Standard~~ and separate income tax returns in the United States federal jurisdiction and in many state jurisdictions. For U.S. federal tax purposes, the tax years 2001 through 2006 remain open to examination. The California tax years 1994 through 2006 remain open to examination and the income tax returns in the other state and foreign tax jurisdictions in which we have operations are generally subject to examination for a period of 3 to 5 years after filing of the respective return.

~~In May 2005, the Financial Accounting Standards Board issued Statement No. 154, "Accounting Changes and Error Corrections, a replacement of APB~~We ~~Opinion~~do ~~No. 20,~~not ~~Accounting~~anticipate ~~Changes,~~that ~~and Statement No. 3, Reporting Accounting Changes in Interim Financial Statements," or SFAS No. 154. SFAS No. 154~~ changes ~~the requirements for the accounting for, and reporting of, a change in accounting principle. Previously, most voluntary changes in accounting principles were required~~ to ~~be recognized by way of a cumulative effect adjustment within net income during~~ the ~~period~~total ofunrecognized ~~the~~tax ~~change.~~benefits ~~SFAS No. 154 generally requires retrospective application to prior periods' financial statements of voluntary changes~~ in ~~accounting principles. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, SFAS No. 154 does not change~~ the ~~transition~~next ~~provisions~~twelve ofmonths ~~any existing accounting pronouncements. We do not believe adoption of SFAS No. 154~~ will have a ~~material~~significant effect on our ~~consolidated~~ results of operations or financial position.

~~Note 3:~~ ~~Intangible~~New ~~Assets~~Accounting Standards

In February 2007, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS No. 159, "The ~~following~~Fair Value ~~table~~Option ~~sets~~for ~~forth~~Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115." SFAS No. 159 permits, but does not require, companies to report at fair value the ~~amounts~~majority ~~recorded~~of ~~for~~recognized ~~intangible~~financial assets, asfinancial ofliabilities and firm commitments. Under this standard, unrealized gains and losses on items for which the ~~periods~~fair ~~presented:~~value option is elected are reported in earnings at each subsequent reporting date. We are currently assessing the effect SFAS No. 159 may have, if any, to our consolidated results of operations or financial position when adopted on January 1, 2008.

				June 30, 2005						December 31, 2004
			Estimated Useful Lives (years)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
						(dollars in millions)
Intangible Assets:
	Orbital Slots		Indefinite	$	463.0	$	30.6	$	432.4	$	463.0	$	30.6	$	432.4
	72.5 WL Orbital License		4		172.5		36.6		135.9		172.5		15.7		156.8
	Subscriber Related		5-6		1,336.8		221.2		1,115.6		1,336.8		93.9		1,242.9
	Dealer Network		15		130.0		48.5		81.5		130.0		43.8		86.2
	Distribution Rights		7		334.1		51.2		282.9		334.1		27.5		306.6
		Total Intangible Assets		$	2,436.4	$	388.1	$	2,048.3	$	2,436.4	$	211.5	$	2,224.9

In September 2006, the FASB issued SFAS No.157, "Fair Value Measurements." SFAS No. 157 defines fair value, sets out a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements of assets and liabilities. SFAS No. 157 applies under other accounting pronouncements previously issued by the Board that require or permit fair value measurements. We do not expect the adoption of SFAS No. 157 on January 1, 2008 to have any effect on our consolidated results of operations or financial position.

~~The~~In ~~following~~September 2006, ~~table~~the ~~represents~~Emerging Issues Task Force, or EITF, issued EITF No. 06-1, "Accounting for Consideration Given by a Service Provider to a Manufacturer or Reseller of Equipment Necessary for an End-Customer to Receive Service from the ~~amounts~~Service ~~recorded~~Provider" or EITF No. 06-1. EITF No. 06-1 provides guidance to service providers regarding the proper reporting of consideration given to manufacturers or resellers of equipment necessary for an end-customer to receive its services. Depending on the circumstances, such consideration is reported as ~~amortization~~either an expense ~~for~~or ~~intangible~~a ~~assets~~reduction ~~for~~of revenues. We are currently assessing the ~~periods~~effect ~~presented:~~EITF No. 06-1 may have, if any, to our consolidated results of operations when adopted, as required, on January 1, 2008.

		Three Months Ended June 30,				Six Months Ended June 30,
		2005		2004		2005		2004
		(dollars in millions)
72.5 WL Orbital License		$	10.5	$	—	$	20.9	$	—
Subscriber Related			63.7		5.7		127.3		21.9
Dealer Network			2.3		2.3		4.7		4.6
Distribution Rights			11.8		3.8		23.7		3.8
	Total Amortization Expense for Intangible Assets	$	88.3	$	11.8	$	176.6	$	30.3

Note 3: Lease Program

~~Estimated amortization~~On ~~expense~~March 1, ~~for~~2006, ~~intangible~~we ~~assets~~introduced ina ~~each~~new ofset-top ~~the~~receiver ~~next~~lease ~~five~~program. ~~years~~Prior to March 1, 2006, we expensed most set-top receivers provided to new and ~~thereafter~~existing issubscribers immediately upon activation as ~~follows:~~a ~~$176.4 million~~subscriber ~~for~~acquisition or upgrade and retention cost in the ~~remainder~~Consolidated Statements of ~~2005, $353~~Operations.~~0 million~~ Subsequent to the inintroduction ~~2006~~of the lease program, ~~$353.0 million~~we inlease ~~2007~~most set-top receivers provided to new and existing subscribers, ~~$342.6 million~~and therefore capitalize the receivers in ~~2008~~"Property and Equipment, ~~$247.8 million~~net" in ~~2009~~the Consolidated ~~and~~Balance ~~$143~~Sheets.~~1 million~~ ~~thereafter.~~

~~Note 4~~ The following table sets forth the amount of set-top receivers we capitalized, and depreciation expense we recorded, under the lease program for the periods presented: ~~Debt~~

			Interest Rates at June 30, 2005		June 30, 2005		December 31, 2004
		Three Months Ended March 31,
					(dollars in millions)
		2007			2006
8.375% senior notes			8.375	%	$	910.0	$	1,400.0
		(Dollars in Millions)
6.375% senior notes			6.375	%		1,000.0		—
Cash paid for subscriber leased equipment—subscriber acquisitions		$	187.8		$	46.4
Credit facility			4.794	%		1,500.0		1,011.8
Cash paid for subscriber leased equipment—upgrade and retention			218.6			40.4
Other			—			3.3		—
Total subscriber leased equipment capitalized		$	406.4		$	86.8
Borrowing from Parent			—			—		875.0
Depreciation expense		$	113.7		$	1.2
	Total debt					3,413.3		3,286.8
Less: current portion of long-term debt			4.794	%		2.8		10.2
	Long-term debt				$	3,410.5	$	3,276.6

~~During the second quarter of 2005, we refinanced a significant portion of our outstanding debt, as discussed in more detail below. As of June~~Note ~~30, 2005, our outstanding debt included the following notes payable and credit facility~~4: Intangible Assets

~~Notes~~The ~~Payable. Our~~following ~~$910.0 million~~table insets ~~registered~~forth ~~senior~~the ~~notes~~amounts ~~outstanding~~recorded atfor ~~June 30,~~intangible ~~2005~~assets ~~are due in 2013, bear interest at 8.375%, and are referred to~~ as ~~the 8.375% senior notes. Principal on the 8.375% senior notes is payable upon maturity, while interest is payable semi-annually. The amount~~ of ~~interest~~ ~~accrued related to~~ the ~~8.375%~~periods ~~senior~~presented: ~~notes was $22.2 million at June 30, 2005 and $34.2 million at December 31, 2004.~~

Our $1,000.0 million in unregistered senior notes outstanding at June 30, 2005 are due in 2015, bear interest at 6.375%, and are referred to as the 6.375% senior notes. Principal on the 6.375% senior notes is payable upon maturity, while interest is payable semi-annually beginning December 15, 2005. The amount of interest accrued related to the 6.375% senior notes was $2.7 million at June 30, 2005.

			March 31, 2007						December 31, 2006
		Estimated Useful Lives (years)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
(Dollars in Millions)
Orbital slots		Indefinite	$	432.4			$	432.4	$	432.4			$	432.4
72.5 WL orbital license		5		192.9	$	109.7		83.2		192.9	$	99.2		93.7
Subscriber related		5-10		1,344.9		668.1		676.8		1,344.1		604.1		740.0
Dealer network		15		130.0		64.6		65.4		130.0		62.3		67.7
Distribution rights		7		334.1		133.7		200.4		334.1		122.0		212.1

	Total Intangible Assets		$	2,434.3	$	976.1	$	1,458.2	$	2,433.5	$	887.6	$	1,545.9

~~The~~Amortization ~~8.375%~~expense ~~senior~~for ~~notes~~intangible ~~and~~assets ~~the~~was 6$88.~~375%~~5 million ~~senior~~for ~~notes~~the ~~were~~three ~~issued~~month byperiod ~~DIRECTV~~ended ~~Holdings and DIRECTV Financing Co.,~~March ~~Inc.~~31, or2007 ~~DIRECTV~~and ~~Financing (together with DIRECTV Holdings, the Co-Issuers)~~$88.4 million ~~The~~for ~~8.375% senior notes and~~ the ~~6.375%~~three ~~senior~~month ~~notes~~period ~~have been fully and unconditionally guaranteed, jointly and severally, by each of DIRECTV Holdings' material domestic~~ended ~~subsidiaries (other than DIRECTV Financing)~~March 31, ~~which we refer to as the Guarantor Subsidiaries, on a senior unsecured basis~~2006.

~~The~~Estimated ~~Co-Issuers~~amortization ~~and~~expense ~~the~~for ~~Guarantor~~intangible ~~Subsidiaries~~assets ~~entered~~in ~~into~~each ~~a registration rights agreement with the initial purchasers~~ of the ~~6.375%~~next ~~senior~~five ~~notes,~~years ~~which requires the Co-Issuers~~ and ~~the~~thereafter ~~Guarantor~~is ~~Subsidiaries~~as tofollows: ~~file an exchange offer registration statement relating to the 6~~$265.~~375%~~3 million ~~senior~~for ~~notes. Once~~ the ~~exchange~~remainder ~~offer~~of ~~registration~~2007, ~~statement becomes~~$353.7 million ~~effective~~in ~~and~~2008, ~~the~~$259.0 million ~~exchange~~in ~~offer begins~~2009, ~~the existing holders of the 6~~$89.~~375%~~5 million ~~senior notes will be offered the opportunity to participate~~ in ~~the~~2010, ~~exchange~~$33.7 million ~~offer on the terms and conditions specified~~ in ~~the~~ ~~exchange~~2011 ~~offer registration statement~~ and ~~exchange their existing 6~~$24.~~375%~~6 million senior notes for registered notes with identical terms, except that the registered notes will have been registered under the Securities Act of 1933, as amended, and will not bear the legends restricting their transferthereafter.

~~The fair value of our 8.375% senior notes was approximately $1,008.3~~Note ~~million~~5: at June 30, 2005 with a carrying value of $910.0 million and $1,569.8 million at December 31, 2004 with a carrying value of $1,400.0 million. The fair value of our 6.375% senior notes was approximately $993.0 million at Debt

		Interest Rates at March 31, 2007		March 31, 2007		December 31, 2006
				(Dollars in Millions)
8.375% senior notes due in 2013		8.375	%	$	910.0	$	910.0
6.375% senior notes due in 2015		6.375	%		1,000.0		1,000.0
Senior secured credit facility		6.582	%		1,489.9		1,492.5
Other		—			2.7		2.8

	Total debt				3,402.6		3,405.3
Less: current portion of long-term debt					10.4		10.4

	Long-term debt			$	3,392.2	$	3,394.9

~~June 30,~~ The ~~2005~~fair ~~with~~value aof ~~carrying~~our ~~value~~8.375% ofsenior notes was approximately $1959.6 million at March 31,~~000~~ 2007 and approximately $948.01 million at December 31, 2006. The fair value ~~values~~of ~~were~~our 6.375% senior notes was approximately $952.3 million at March 31, 2007 and approximately $961.9 million at December 31, 2006. We calculated the fair values based on quoted market prices on those dates.

~~Credit~~Our notes ~~Facility. At~~payable ~~June 30,~~and ~~2005, our~~ senior secured credit facility ~~consisted~~mature ofas afollows: $~~500~~7.05 million ~~six-year~~ ~~Term~~in ~~Loan~~the A,remainder aof $12007,~~000~~ $47.06 million ~~eight-year~~in ~~Term~~2008, ~~Loan~~$97.6 million Bin ~~and~~2009, $297.5 million ain 2010, $~~500~~97.06 million ~~undrawn~~in ~~six-year~~2011 ~~revolving~~and ~~credit~~$2,852.1 million ~~facility~~thereafter. ~~The~~These ~~senior~~amounts ~~secured credit~~do ~~facility~~not ~~bears~~reflect ~~interest~~potential atprepayments athat ~~rate~~may ~~equal~~be torequired ~~London~~under ~~InterBank~~our ~~Offered~~senior ~~Rate~~secured credit facility, orwhich ~~LIBOR,~~could ~~plus~~result ~~1.50%~~from ~~and~~a ~~requires~~computation usthat towe ~~pay~~may abe ~~commitment~~required ~~fee~~to ofmake ~~0.25%~~at ~~per~~each year ~~for~~end ~~the unused commitment~~ under the ~~revolving~~ credit ~~facility~~agreement. ~~The~~We ~~interest~~were ~~rate~~not ~~and~~required ~~commitment~~to ~~fee~~make ~~may~~a beprepayment ~~increased~~for orthe ~~decreased~~year ~~under~~ended December 31, ~~certain conditions~~2006. The ~~senior~~amount ~~secured~~of ~~credit~~interest ~~facility~~accrued isrelated ~~secured~~to ~~by substantially all of~~ our ~~assets and~~outstanding isdebt ~~fully~~was ~~and~~$28.6 million ~~unconditionally~~at ~~guaranteed~~March 31, ~~jointly~~2007 and ~~severally,~~$26.5 million byat ~~the~~December 31, ~~Guarantor Subsidiaries~~2006. The unamortized ~~amount~~bond ofpremium ~~interest~~included ~~accrued~~in ~~related~~total todebt ~~the~~was ~~senior~~$2.7 million ~~secured~~as ~~credit~~of ~~facility~~March 31, ~~was~~2007 and $72.68 million at ~~June~~as of December 3031, ~~2005~~2006.

~~Our~~Covenants and Restrictions. The senior secured credit facility requires us to comply with certain financial covenants. The senior notes ~~payable~~ and the senior secured credit facility ~~mature~~also asinclude ~~follows:~~covenants ~~$7.5~~that restrict our ability to, among other things, (i) ~~million~~incur inadditional ~~2006;~~indebtedness, ~~$10.1~~(ii) ~~million~~incur inliens, (iii) pay ~~2007;~~dividends ~~$47.6~~or make certain other restricted payments, investments or acquisitions, (iv) ~~million~~enter ininto ~~2008;~~certain ~~$97.6~~transactions with affiliates, (v) ~~million~~merge inor ~~2009~~consolidate ~~and~~with $3another entity,~~247.2~~ (vi) ~~million~~sell, ~~thereafter.~~assign, ~~The~~lease ~~unamortized~~or ~~bond~~otherwise ~~premium~~dispose ~~included~~of inall ~~total~~or ~~debt~~substantially asall of ~~June~~our assets, and (vii) 30make voluntary prepayments of certain debt, ~~2005~~in ~~was~~each $3case subject to exceptions as provided in the credit agreement and senior notes indentures.~~3 million.~~ ~~These~~Should ~~amounts~~we dofail ~~not~~to ~~reflect~~comply ~~potential~~with ~~prepayments~~these ~~that~~covenants, ~~may be~~all ~~required~~or ~~under~~a portion of our borrowings under the senior ~~secured~~notes and senior secured credit facility, ~~which~~ could ~~result~~become ~~from~~immediately apayable ~~computation~~and ofour ~~excess~~revolving ~~cash~~credit ~~flows~~facility ~~that~~could webe ~~are~~terminated. ~~required~~At toMarch 31, ~~make~~2007, atwe ~~each~~were ~~year~~in ~~end~~compliance ~~under~~with ~~the~~all ~~credit~~such ~~agreement~~covenants.

Covenants and Restrictions. The senior secured credit facility requires us to comply with certain financial covenants. The senior notes and the senior secured credit facility also include covenants that restrict the Co-Issuers and the Guarantor Subsidiaries' ability to, among other things, (i)Note ~~incur additional~~6: ~~indebtedness,~~Commitments (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions as provided in the credit agreement and senior notes indentures. Should we fail to comply with our covenants, all or a portion of our borrowings under the senior notes and senior secured credit facility could become immediately payable and the revolving credit facility could be terminated. At June 30, 2005, we were in compliance with all such covenants. Contingencies

~~Refinancing~~ Transactions. In April 2005, we replaced our prior credit facility with the senior secured credit facility described above. The senior secured credit facility was initially comprised of a $500.0 million six-year Term Loan A, a $1,500.0 million eight-year Term Loan B, both of which were fully funded, and a $500.0 million undrawn six-year revolving credit facility. We used a portion of the $2,000.0 million proceeds from the transaction to repay our prior credit facility which had a then-outstanding balance of $1,001.6 million, to repay our $875.0 million borrowing from Parent, and to pay related financing costs and accrued interest. Borrowings under the prior credit facility bore interest at a rate equal to LIBOR plus 1.75%. The amount of interest accrued related to the prior credit facility was $2.3 million at December 31, 2004. Commitments

~~On May~~As of March 1931, ~~2005~~2007, we ~~redeemed~~anticipate minimum future payments under noncancelable operating leases having lease terms in excess of one year, primarily for satellite transponder leases and real property, to be $~~490~~164.07 million ofpayable ~~our~~as ~~then~~follows: ~~outstanding~~$22.4 million for the remainder of 2007, $132.4 million in 2008,~~400~~ $22.0 million in 2009, $20.8 million in 2010, $21.~~375%~~3 million ~~senior~~in ~~notes~~2011 atand a$45.8 million ~~redemption~~thereafter. ~~price~~Certain of ~~108.375%~~these ~~plus~~leases ~~accrued~~contain escalation clauses and ~~unpaid interest~~renewal or purchase options, ~~for~~which awe ~~total~~have not ofconsidered in the amounts disclosed. Rental expense under operating leases was $~~538~~13.3 million, ~~which~~for ~~was~~the ~~funded~~three bymonths aended ~~capital~~March 31, ~~contribution~~2007 ~~from~~and ~~our~~$12.8 million ~~Parent~~for the three months ended March 31, 2006.

OnAs ~~June~~of March 1531, ~~2005~~2007, ~~the~~we ~~Co-Issuers~~anticipate ~~issued~~minimum $1future payments under agreements to purchase broadcast programming,~~000.0 million~~ and the purchase of ~~6.375%~~services ~~senior~~that ~~notes~~we inhave aoutsourced ~~private~~to ~~placement~~third parties, ~~transaction.~~such Weas ~~used~~billing aservices, ~~portion~~and ofsatellite ~~the~~telemetry, ~~proceeds~~tracking ~~from~~and ~~the transaction~~control, and satellite construction and launch contracts to ~~repay~~be $~~500~~4,786.2 million payable as follows: $871.0 million ofin the ~~Term~~remainder ~~Loan~~of B2007, ~~portion~~$999.7 million ofin ~~our~~2008, ~~senior~~$1,013.5 million ~~secured~~in ~~credit~~2009, ~~facility~~$989.2 million ~~and~~in to2010, ~~pay~~$583.4 million ~~related~~in ~~financing~~2011 ~~costs~~and $329.4 million thereafter.

As of March 31, 2007, future payments for other long-term obligations total $372.5 million, and are payable as follows: $54.8 million for the remainder of 2007, $76.9 million in 2008, $81.6 million in 2009, $85.5 million in 2010, $50.2 million in 2011 and $23.5 million thereafter. We record these amounts in "Accounts payable and accrued liabilities" and "Other Liabilities and Deferred Credits" in our Consolidated Balance Sheets.

~~The repayment~~ of our prior senior secured credit facility, the partial repayment of our senior secured credit facility and the partial redemption of our 8.375% senior notes resulted in a second quarter of 2005 pre-tax charge of $64.9 million ($40.1 million after tax) of which $41.0 million was associated with the premium paid for the redemption of our 8.375% senior notes and $23.9 million with the write-off of a portion of our deferred debt issuance costs and other transaction costs. The charge was recorded in "Other expense" in the consolidated statement of operations. Contingencies

~~Note~~ Litigation. Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, claims and proceedings are pending against us arising in the ordinary course of business. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or treble damage claims, or demands that, if granted, could require us to pay damages or make other expenditures in amounts that could not be estimated at March 5:31, ~~Related-Party~~2007. ~~Transactions~~ After discussion with counsel representing us in those actions, it is the opinion of management that such litigation is not expected to have a material adverse effect on our consolidated results of operations or financial position.

On April 4, 2005, Finisar Corporation filed a patent infringement action in the United States District Court for the Eastern District of Texas (Beaumont) alleging that The DIRECTV Group, DIRECTV Holdings LLC, DIRECTV Enterprises, LLC, DIRECTV Operations, LLC, DIRECTV, Inc., and ~~affiliates~~DTV Network Systems, Inc. We ~~enter~~infringed ~~into~~U.S. ~~related~~Patent No. 5,404,505. On June 23, 2006, the jury determined that we willfully infringed this patent and awarded approximately $78.9 million in damages. On July 7, 2006, the Court entered its final written judgment which denied Finisar's request for an injunction and instead granted us a compulsory license. Under the license, we would be obligated to pay Finisar $1.60 per new set-~~party~~top ~~transactions~~box manufactured for use with ~~The~~the DIRECTV ~~Group~~system beginning June 17, 2006 and ~~certain~~continuing ofuntil ~~its~~the patent expires in 2012 or is otherwise found to be invalid. The Court also increased the damages ~~affiliates~~award asby ~~part~~$25.0 million, because of ~~normal~~the ~~operations~~jury finding of willful infringement and awarded pre-judgment interest of $13.4 million to Finisar. Post-judgment interest accrues on the total judgment.

We ~~receive~~filed ana ~~allocation~~notice of ~~employee~~appeal ~~benefit~~to ~~expenses~~the ~~from~~Court ~~The~~of ~~DIRECTV~~Appeals ~~Group.~~for Wethe ~~believe~~Federal ~~that~~Circuit ~~our~~on ~~consolidated~~October 5, ~~financial~~2006, ~~statements~~and ~~reflect~~Finisar ~~our~~also ~~cost~~filed a notice of ~~doing~~appeal ~~business~~on inOctober 18, ~~accordance~~2006. ~~with SEC~~A ~~Staff~~bond was ~~Accounting~~submitted ~~Bulletin~~to Nothe District Court in the amount of $126.7 ~~55,~~million ~~"Allocation~~as required security for the damages awarded but not yet paid pending appeal plus interest for the anticipated duration of ~~Expenses~~the appeal. ~~and~~We ~~Related~~were ~~Disclosures~~successful in ~~Financial~~obtaining ~~Statements~~an order that post-judgment royalties pursuant to the compulsory license shall be held in escrow pending outcome of ~~Subsidiaries~~the appeal, ~~Divisions~~and orthe ~~Lesser~~initial ~~Business~~quarterly ~~Components~~payment ofhas ~~Another~~been ~~Entity;~~made. ~~Cheap~~Through March 31, ~~Stock~~2007, the compulsory license fee amounted to $17."8 million, which was paid into escrow.

~~During~~Based ~~the~~on ~~third~~our ~~quarter~~review of ~~2004~~the record in this case, asincluding ~~part~~discussion with and analysis by counsel of the ~~National~~bases ~~Rural~~for ~~Telecommunications~~our ~~Cooperative~~appeal, orwe ~~NRTC,~~have determined that we have a number of strong arguments available on appeal and, ~~Pegasus~~although ~~Satellite~~there ~~Television~~can be no assurance as to the ultimate outcome, ~~Inc.~~ we are confident that the judgment against us will ultimately be reversed, or ~~Pegasus,~~remanded ~~transactions~~for ~~discussed~~a new trial in ~~Note 6~~which, we ~~borrowed~~believe, ~~$875.0 million~~we ~~from~~would ~~The~~prevail. ~~DIRECTV~~As ~~Group~~a result, ~~which~~we ~~resulted~~have inconcluded ~~interest~~that ~~expense~~it ofis ~~$0.9 million~~not ~~for~~probable ~~the~~that ~~three~~Finisar ~~months~~will ~~ended~~ultimately ~~June 30,~~prevail ~~2005~~in ~~and $6.5 million~~this ~~for~~matter; ~~the~~therefore, ~~six~~we ~~months~~have ~~ended~~not ~~June 30,~~recorded ~~2005.~~any ~~See~~liability ~~Note 4~~ for this ~~further~~judgment ~~discussion~~nor ofare ~~the~~we ~~repayment~~recording ofany expense for the ~~$875.0 million~~compulsory ~~borrowing~~license.

~~During~~ Satellites. We may purchase in-orbit and launch insurance to mitigate the ~~first~~potential ~~quarter~~financial impact of ~~2005,~~satellite launch ~~The~~and ~~DIRECTV~~in-orbit ~~Group~~failures ~~contributed~~if the premium costs are considered economic relative to usthe ~~SPACEWAY~~risk of satellite ~~assets~~failure. atThe ~~its~~insurance ~~cost~~generally incovers the ~~amount~~unamortized book value of ~~$24~~covered satellites.~~0 million,~~ ~~which~~We wedo ~~recorded~~not asinsure aagainst ~~capital contribution.~~lost Inrevenues ~~addition,~~in ~~see~~the ~~Note 4~~event ~~for~~of ~~further~~a ~~discussion~~total or partial loss of the ~~$538~~capacity of a satellite.~~3 million~~ ~~capital~~We ~~contribution~~generally ~~received~~rely ~~from~~on ~~The~~in-orbit ~~DIRECTV~~spare ~~Group~~satellites ~~during~~and excess transponder capacity at key orbital slots to mitigate the ~~second~~impact ~~quarter~~that a satellite failure could have on our ability to provide service. At March 31, 2007, the net book value of in-orbit ~~2005~~satellites was $1,301.9 million of which $923.7 million was uninsured.

News Corporation and affiliates. News Corporation owns approximately 34% of the outstanding common stock of The DIRECTV Group. As of June 30, 2005, we had the following types of contractual arrangements with News Corporation entities: purchase of programming, products and advertising; license of certain intellectual property, including patents; purchase of system access products, set-top receiver software and support services; and sale of advertising space.

NDS Limited, or NDS, a subsidiary of News Corporation, is the exclusive provider of our conditional access products and services, including system access cards, a key component of the access security system in our set-top receivers.

Other. We purchase telemetry, tracking and control services, or TT&C, for certain of our satellites and lease additional satellite capacity from PanAmSat Corporation, or PanAmSat, which was a subsidiary of The DIRECTV Group until its sale on August 20, 2004. Prior to the PanAmSat sale, our transactions were considered related-party with the costs included in "Broadcast operations expenses" in the consolidated statements of operations.

Prior to The DIRECTV Group's sale of Hughes Network System, Inc.'s, or HNS', set-top receiver manufacturing operations to Thomson Inc. on June 22, 2004, we purchased DIRECTV System equipment from and provided system access cards to HNS. We recorded the cost of purchases of DIRECTV System equipment from HNS in inventory and recognized the cost of the equipment in "Subscriber acquisition costs" or "Upgrade and retention costs" in accordance with our accounting policies. We recorded DIRECTV System access cards provided to HNS as "Revenues" in the consolidated statements of operations. We recorded the amounts due to HNS in "Accounts payable and accrued liabilities" in the consolidated balance sheets.

~~The~~Other. As of March 31, 2007, included in "Investments and Other Assets" in the Consolidated Balance Sheets is a ~~following~~receivable ~~table~~for ~~summarizes~~$27.3 million ~~related~~of the $57.0 million rebate that we can earn from Thomson by purchasing at least $4.0 billion of set-~~party~~top ~~transactions:~~receivers through June 2010. We have accrued this receivable based on our assessment that achievement of the minimum purchase requirement is both probable and reasonably estimable. On a quarterly basis, we assess the probability of earning the rebate over the contract term. If we subsequently determine that it is no longer probable that we will earn the rebate, we would be required to reverse the amount of the rebate earned to date as a charge to the Consolidated Statements of Operations at the time such determination is made.

		Three Months Ended June 30,				Six Months Ended June 30,
		2005		2004		2005		2004
		(dollars in millions)
Sales:
The DIRECTV Group and affiliates		$	2.2	$	8.5	$	5.2	$	20.4
News Corporation and affiliates			4.7		2.6		10.8		4.2
	Total	$	6.9	$	11.1	$	16.0	$	24.6
Purchases:
The DIRECTV Group and affiliates		$	—	$	92.8	$	—	$	146.7
News Corporation and affiliates			183.7		89.2		323.9		161.2
	Total	$	183.7	$	182.0	$	323.9	$	307.9

Note 7: Related-Party Transactions

~~The following~~In ~~table~~the ~~sets~~ordinary ~~forth~~course ~~the~~of ~~amount~~our ofoperations, ~~accounts~~we ~~receivable~~enter ~~from~~into ~~and~~related-party ~~accounts~~transactions ~~payable~~with toThe ~~related-parties~~DIRECTV asGroup, ~~well~~News asCorporation, ~~the~~their ~~amount~~affiliates, ~~borrowed~~and ~~from~~companies ~~Parent:~~in which we hold equity method investments.

		June 30, 2005		December 31, 2004
		(dollars in millions)
Accounts receivable from related-parties		$	5.9	$	4.8
Accounts payable to related-parties:
The DIRECTV Group and affiliates		$	18.0	$	23.9
News Corporation and affiliates			99.4		92.3
	Total	$	117.4	$	116.2
Borrowing from Parent		$	—	$	875.0

The DIRECTV Group and affiliates.

~~Note~~ We determine our income taxes based upon our tax sharing agreement with The DIRECTV Group, which generally provides that the current income tax liability or receivable be computed as if we were a separate taxpayer. Payments made to our Parent under this tax sharing arrangement were $45.2 6:million ~~Acquisitions~~for the quarter ended March 31, 2007 and $119.0 million ~~Other~~for ~~Transactions~~ the quarter ended March 31, 2006. We also receive an allocation of employee benefit expenses from The DIRECTV Group. We believe that our consolidated financial statements reflect our cost of doing business in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 55, "Allocation of Expenses and Related Disclosures in Financial Statements of Subsidiaries, Divisions of Lesser Business Components of Another Entity."

~~NRTC~~News ~~Contract~~Corporation ~~Rights~~ and ~~Member Subscribers~~affiliates.

~~Effective~~News ~~June 1,~~Corporation ~~2004,~~and weits ~~and~~affiliates ~~the~~are ~~NRTC~~considered ~~agreed~~related-parties tobecause ~~end~~News ~~the~~Corporation ~~NRTC's~~owns ~~exclusive~~approximately ~~DIRECTV~~38% ~~service~~of ~~distribution~~the ~~agreement~~outstanding ~~and~~common ~~all~~stock ~~related~~of ~~agreements.~~The AsDIRECTV ~~consideration,~~Group. weWe ~~agreed~~have tothe ~~pay~~following ~~the~~types ~~NRTC~~of ~~approximately~~contractual ~~$4.4 million~~arrangements ~~per~~with ~~month~~News ~~through~~Corporation ~~June 2011.~~entities: Aspurchase aof ~~result~~programming, products and advertising; license of ~~this~~certain ~~agreement~~intellectual property, weincluding patents; ~~now~~purchase ~~have~~of ~~the~~system ~~right~~access toproducts; ~~sell~~set-top ~~our~~receiver ~~services~~software inand ~~all territories~~support ~~across~~services; ~~the~~sale ~~United~~of ~~States.~~advertising Inspace ~~conjunction~~and ~~with~~purchase ~~the~~of ~~agreement,~~employee weservices. ~~recorded~~The ~~$334.1 million~~majority asof ~~distribution~~payments ~~rights~~under contractual inarrangements ~~"Intangible~~with ~~Assets,~~News ~~net"~~Corporation inentities ~~the~~relate ~~consolidated~~to ~~balance~~multi-year ~~sheets~~programming contracts. WePayments ~~are amortizing~~under ~~the~~these ~~distribution~~contracts ~~rights~~are ~~intangible~~typically ~~asset~~subject to ~~expense~~annual ~~over~~rate ~~seven~~increases ~~years,~~and ~~which~~are based ~~represents~~on the ~~remaining~~number ~~life~~ of ~~the~~subscribers ~~DIRECTV~~receiving ~~service~~the ~~distribution~~related ~~agreement~~programming.

In connection with the NRTC transaction described above, during the second and third quarters of 2004, all NRTC members, representing approximately 357,000 subscribers, excluding Pegasus, elected to sell their subscribers to us. As a result, we recorded a subscriber related intangible asset in "Intangible Assets, net" in the consolidated balance sheets amounting to $385.5 million, which we are amortizing over the estimated subscriber lives of approximately six years. We are paying certain NRTC members who elected a long-term payment option over seven years.

AsThe afollowing ~~result~~table ofsummarizes ~~the~~sales ~~above~~to ~~transactions, at June 30, 2005, we owe the NRTC~~ and ~~its~~purchases ~~members~~from ~~who elected the long~~related-~~term payment option $456.7 million, excluding interest, which is payable approximately as follows~~parties: $32.2 million for the remainder of 2005, $67.1 million in 2006, $71.2 million in 2007, $75.5 million in 2008, $80.2 million in 2009 and $130.5 million thereafter. These amounts are recorded in "Accounts payable and accrued liabilities" and "Other Liabilities and Deferred Credits" in the consolidated balance sheets.

Pegasus Subscribers

		Three Months Ended March 31,
		2007		2006
		(Dollars in Millions)
Sales:
The DIRECTV Group and affiliates		$	—	$	0.3
News Corporation and affiliates			4.2		6.3

	Total	$	4.2	$	6.6

Purchases:
The DIRECTV Group and affiliates		$	0.2	$	—
News Corporation and affiliates		$	204.2	$	191.2
Other			3.9		2.4

	Total	$	208.3	$	193.6

OnThe following ~~August 27,~~table ~~2004,~~sets weforth ~~acquired~~ the ~~subscribers~~amount ~~and certain assets, consisting primarily~~ of accounts receivable, offrom ~~Pegasus~~and ~~for~~accounts apayable ~~total purchase price of $987.9 million. The total net cash consideration we paid~~ to Pegasus amounted to $773.0 million, which is the total purchase price net of amounts owed by Pegasus for programming and other services and a May 2004 $63 million judgment in our favor. As a result of the transaction, we recorded a subscriber related-parties: ~~intangible asset in "Intangible Assets, net" in the consolidated balance sheets amounting to $951.3 million, which we are amortizing over the estimated subscriber lives of approximately five years.~~

During the third quarter of 2004, we funded the cash proceeds required for the Pegasus and NRTC transactions described above by $875.0 million of borrowings from Parent and a $200.0 million capital contribution from Parent.

		March 31, 2007		December 31, 2006
		(Dollars in Millions)
Accounts receivable		$	4.5	$	10.1

Accounts payable:
The DIRECTV Group and affiliates		$	8.1	$	24.2
News Corporation and affiliates			184.6		155.8
Other			28.3		23.4

	Total	$	221.0	$	203.4

The accounts ~~72.5~~receivable WLbalances ~~Orbital~~as ~~License~~ of March 31, 2007 and December 31, 2006 are primarily related to affiliates of News Corporation.

As part of an arrangement with Telesat, a Canadian telecommunications and broadcast services company, we agreed to provide Telesat the use of the DIRECTV 3 satellite, which was previously used as an in-orbit spare, through the end of its useful life and in return Telesat agreed to allow us to use its 72.5 WL orbital location through 2008. As additional consideration for our use of 72.5 WL, we also agreed to allow Telesat to use DIRECTV 5 or a similar satellite for a five year period, subject to certain conditions, beginning at the end of 2008. Upon receipt of final approval from the FCC in the third quarter of 2004, we transferred DIRECTV 3 to Telesat and relocated DIRECTV 5, which was also an in-orbit spare, to 72.5 WL to provide additional local channels and other programming in the United States. We recorded these transactions as an exchange of similar productive assets based on the net book values of the assets exchanged. As a result during the third quarter of 2004, we recorded a $172.5Note ~~million~~8: ~~72.5~~Condensed WLConsolidating ~~orbital~~Financial license intangible asset, which is equal to the $81.4 million net book value of the DIRECTV 3 satellite transferred from satellites, net, and an accrual for deferred lease revenues of $91.1 million, representing the value of the transferred satellite over the five year lease period. We are amortizing the 72.5 WL orbital license intangible asset over the four year contract period and will recognize the deferred lease revenues as an offset to depreciation expense during the five year lease period beginning at the end of 2008. Statements

The ~~Long~~following presents the condensed consolidating statements of operations for the three months ended March 31, 2007 and 2006, the condensed consolidating balance sheets as of March 31, 2007 and December 31, 2006, and the condensed consolidating statements of cash flows for the three months ended March 31, 2007 and 2006 of DIRECTV Holdings together with DIRECTV Financing Co., Inc., or the Co-~~Term~~Issuers, ~~Purchase~~and ~~Agreement~~ each of DIRECTV Holdings' material subsidiaries (other than DIRECTV Financing), or the Guarantor Subsidiaries, and the eliminations necessary to present DIRECTV Holdings' financial statements on a consolidated basis. These condensed consolidating financial statements should be read in conjunction with the accompanying consolidated financial statements of DIRECTV Holdings.

As part of The DIRECTV Group's sale of HNS' set-top receiver manufacturing operations to Thomson in June 2004, we entered into a long-term purchase agreement, or the Agreement, with Thomson for the supply of set-top receivers. As part of this transaction, we received approximately $200 million in cash from Thomson and can earn an additional $50 million rebate from Thomson if Thomson's aggregate sales of our set-top receivers equal at least $4 billion over the initial five year contract term plus an additional one year optional extension period, or the Contract Term. We can also earn, on a pro rata basis, an additional $50 million rebate, which was reduced from $100 million in June 2005 in connection with an amendment of the Agreement to, among other things, reduce our

~~current prices~~ ~~of set-top receivers, from Thomson if Thomson's aggregate sales of our set-top receivers are in excess of $4 billion and up to $6 billion during~~ ~~the~~ ~~Contract Term. The approximately $200 million in cash received from Thomson was recorded in "Unearned subscriber revenue and deferred credits" and "Other Liabilities and Deferred Credits"~~ inCondensed ~~the~~Consolidating ~~consolidated~~Statement ~~balance sheets and is recorded as an offset to "Subscriber acquisition costs" and/or "Upgrade and retention costs" in the consolidated statements~~ of ~~operations,~~Operations For ~~as appropriate, on a pro rata basis as~~ the ~~set-top~~Three ~~receivers~~Months ~~purchased~~Ended from Thomson are activated. We have determined that, based upon projected set-top receiver requirements, it is probable and reasonably estimable that the minimum purchase requirement will be met for the $50March million rebate during the initial contract period. We record a proportionate amount of the $50 million rebate as a credit to "Subscriber acquisition costs" and/or "Upgrade and retention costs" in the consolidated statements of operations upon set-top receiver activation over the initial contract period with a corresponding entry to "Accounts receivable31, net" in the consolidated balance sheets. As a result, we recognized $10.1 million during the three months ended June 30, 2005 and $22.4 million during the six months ended June 30, 2005 of the $200 million deferral and the $50 million rebate during the initial contract period in the consolidated statements of operations. 2007

Note 7: Commitments and Contingencies

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
						(Dollars in Millions)
Revenues			$	—		$	3,538.7		$	—		$	3,538.7
Operating Costs and Expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		—			1,483.4			—			1,483.4
		Subscriber service expenses		—			279.9			—			279.9
		Broadcast operations expenses		—			51.6			—			51.6
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		—			431.6			—			431.6
		Upgrade and retention costs		—			226.2			—			226.2
		General and administrative expenses		0.1			197.2			—			197.3
	Depreciation and amortization expense			—			303.1			—			303.1

		Total Operating Costs and Expenses		0.1			2,973.0			—			2,973.1

Operating Profit (Loss)				(0.1	)		565.7			—			565.6
Equity in pre-tax income of consolidated subsidiaries				559.0			—			(559.0	)		—
Interest income				21.0			—			—			21.0
Interest expense				(46.5	)		(6.0	)		—			(52.5	)
Other expense				—			(0.7	)		—			(0.7	)

Income Before Income Taxes				533.4			559.0			(559.0	)		533.4
Income tax expense				(208.2	)		(218.2	)		218.2			(208.2	)

Net Income			$	325.2		$	340.8		$	(340.8	)	$	325.2

~~Litigation~~ Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2006

Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, claims and proceedings are pending against us arising in the ordinary course of business. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or treble damage claims, or demands that, if granted, could require us to pay damages or make other expenditures in amounts that could not be estimated at June 30, 2005. After discussion with counsel representing us in those actions, it is the opinion of management that such litigation is not expected to have a material adverse effect on our consolidated results of operations or financial position.

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
						(Dollars in Millions)
Revenues			$	—		$	3,193.5		$	—		$	3,193.5
Operating Costs and Expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		—			1,331.5			—			1,331.5
		Subscriber service expenses		—			236.7			—			236.7
		Broadcast operations expenses		—			42.0			—			42.0
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		—			567.6			—			567.6
		Upgrade and retention costs		—			293.1			—			293.1
		General and administrative expenses		0.3			177.7			—			178.0
	Depreciation and amortization expense			—			182.2			—			182.2

		Total Operating Costs and Expenses		0.3			2,830.8			—			2,831.1

Operating Profit (Loss)				(0.3	)		362.7			—			362.4
Equity in pre-tax loss of consolidated subsidiaries				353.0			—			(353.0	)		—
Interest income				14.4			—			—			14.4
Interest expense				(46.8	)		(9.1	)		—			(55.9	)
Other expense				—			(0.6	)		—			(0.6	)

Income Before Income Taxes				320.3			353.0			(353.0	)		320.3
Income tax expense				(122.4	)		(134.9	)		134.9			(122.4	)

Net Income			$	197.9		$	218.1		$	(218.1	)	$	197.9

Satellites

We use in-orbit and launch insurance to mitigate the potential financial impact of satellite fleet launch and in-orbit failures unless the premium costs are considered uneconomic relative to the risk of satellite failure. The insurance generally covers the unamortized book value of covered satellites. We do not insure against lost revenues in the event of a total or partial loss of the capacity of a satellite. We generally rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to mitigate the impact that a satellite failure could have on our ability to provide service. At June 30, 2005, the net book value of uninsured satellites amounted to $649.0 million.

Commitments

At June 30, 2005, our minimum future commitments under noncancelable operating leases having lease terms in excess of one year were primarily for real property and aggregated $122.1 million, payable as follows: $14.8 million for the remainder of 2005, $25.9 million in 2006, $24.4 million in 2007, $23.0 million in 2008, $10.3 million in 2009 and $23.7 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options, which we have not considered in the amounts disclosed. Our rental expense under operating leases was $23.5 million for the six months ended June 30, 2005 and $19.9 million for the six months ended June 30, 2004.

At June 30, 2005, we anticipate minimum payments under our current contractual commitments, which include agreements for broadcast programming, the purchase of services that we have outsourced

to ~~third~~ ~~parties,~~ Condensed ~~such~~Consolidating asBalance ~~call~~Sheet As ~~center operations, billing services and TT&C, and the cost~~ of ~~planned satellite construction and launch contracts to be approximately $474.3~~March ~~million for the remainder of 2005~~31, ~~$851.7 million in 2006, $927.6 million in~~ 2007~~, $919.7 million in 2008, $874.7 million in 2009 and $1,336.7 million thereafter.~~

Note 8: Condensed Consolidating Financial Statements

			Co-Issuers		Guarantor Subsidiaries		Eliminations			DIRECTV Holdings Consolidated
					(Dollars in Millions)
ASSETS
Total Current Assets			$	1,621.3	$	1,414.6	$	(25.8	)	$	3,010.1
Satellites, net				—		2,008.7		—			2,008.7
Property and Equipment, net				—		2,421.2		—			2,421.2
Goodwill				1,827.6		1,204.1		—			3,031.7
Intangible Assets, net				—		1,458.2		—			1,458.2
Other Assets				4,706.7		165.0		(4,683.4	)		188.3

Total Assets			$	8.155.6	$	8,671.8	$	(4,709.2	)	$	12,118.2

LIABILITIES AND OWNER'S EQUITY
Total Current Liabilities			$	40.0	$	2,727.8	$	(50.7	)	$	2,717.1
Long-Term Debt				3,392.2		—		—			3,392.2
Other Liabilities and Deferred Credits				—		1,027.2		—			1,027.2
Deferred Income Taxes				—		445.1		(186.8	)		258.3
Owner's Equity
	Capital stock and additional paid-in capital			3,800.2		4,386.7		(4,386.7	)		3,800.2
	Retained earnings			923.2		85.0		(85.0	)		923.2

		Total Owner's Equity		4,723.4		4,471.7		(4,471.7	)		4,723.4

Total Liabilities and Owner's Equity			$	8,155.6	$	8,671.8	$	(4,709.2	)	$	12,118.2

~~The~~ ~~following~~ ~~presents the condensed consolidating statements of operations for the three and six months ended June 30, 2005 and 2004, the condensed~~ ~~consolidating~~Condensed ~~statements~~Consolidating ofBalance ~~cash~~Sheet As ~~flows for the six months ended June 30, 2005 and 2004 and the condensed consolidating balance sheets as~~ of ~~June 30, 2005 and~~ December 31, 2004 of the Co-Issuers, Guarantor Subsidiaries, and the eliminations necessary to present DIRECTV Holdings' financial statements on a consolidated basis. These condensed consolidating financial statements should be read in conjunction with the accompanying consolidated financial statements of DIRECTV Holdings. 2006

Condensed Consolidating Statement of Operations For the Three Months Ended June 30, 2005

			Co-Issuers		Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
					(Dollars in Millions)
ASSETS
Total Current Assets			$	1,397.5	$	1,519.2		$	(7.7	)	$	2,909.0
Satellites, net				—		2,000.5			—			2,000.5
Property and Equipment, net				—		2,026.5			—			2,026.5
Goodwill				1,827.6		1,204.1			—			3,031.7
Intangible Assets, net				—		1,545.9			—			1,545.9
Other Assets				4,585.4		149.1			(4,560.8	)		173.7

Total Assets			$	7,810.5	$	8,445.3		$	(4,568.5	)	$	11,687.3

LIABILITIES AND OWNER'S EQUITY
Total Current Liabilities			$	28.1	$	2,650.9		$	(7.7	)	$	2,671.3
Long-Term Debt				3,394.9		—			—			3,394.9
Other Liabilities and Deferred Credits				—		993.8			—			993.8
Deferred Income Taxes				—		416.5			(176.7	)		239.8
Owner's Equity
	Capital stock and additional paid-in capital			3,786.1		4,636.5			(4,636.5	)		3,786.1
	Retained earnings (deficit)			601.4		(252.4	)		252.4			601.4

		Total Owner's Equity		4,387.5		4,384.1			(4,384.1	)		4,387.5

Total Liabilities and Owner's Equity			$	7,810.5	$	8,445.3		$	(4,568.5	)	$	11,687.3

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
			(dollars in millions)
Revenues			$	255.0		$	2,960.5		$	(255.0	)	$	2,960.5
Operating Costs and Expenses, exclusive of depreciation and amortization expense shown separately below
	Programming and other costs			200.6			1,191.9			(254.8	)		1,137.7
	Subscriber service expenses			—			219.2			—			219.2
	Subscriber acquisition costs:
		Third party customer acquisitions		—			467.9			—			467.9
		Direct customer acquisitions		—			154.3			—			154.3
	Upgrade and retention costs			—			223.2			—			223.2
	Broadcast operations expenses			—			35.3			—			35.3
	General and administrative expenses			0.5			218.0			(0.2	)		218.3
Depreciation and amortization expense				—			171.4			—			171.4
		Total Operating Costs and Expenses		201.1			2,681.2			(255.0	)		2,627.3
Operating Profit				53.9			279.3			—			333.2
Equity in pre-tax income of consolidated subsidiaries				271.2			—			(271.2	)		—
Interest expense, net				(46.4	)		(7.8	)		—			(54.2	)
Other expense				(64.9	)		(0.3	)		—			(65.2	)
Income Before Income Taxes				213.8			271.2			(271.2	)		213.8
Income tax expense				(82.0	)		(103.9	)		103.9			(82.0	)
Net Income			$	131.8		$	167.3		$	(167.3	)	$	131.8

~~Condensed~~ ~~Consolidating~~ DIRECTV ~~Statement~~HOLDINGS ofLLC NOTES ~~Operations For~~TO ~~the~~THE ~~Three~~CONSOLIDATED ~~Months~~FINANCIAL ~~Ended June 30, 2004~~STATEMENTS—(concluded)

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
			(dollars in millions)
Revenues			$	236.1		$	2,217.0		$	(236.2	)	$	2,216.9
Operating Costs and Expenses, exclusive of depreciation and amortization expense shown separately below
	Programming and other costs			158.1			934.5			(236.1	)		856.5
	Subscriber service expenses			—			166.0			—			166.0
	Subscriber acquisition costs:
		Third party customer acquisitions		—			445.4			—			445.4
		Direct customer acquisitions		—			162.1			—			162.1
	Upgrade and retention costs			—			226.8			—			226.8
	Broadcast operations expenses			—			35.2			—			35.2
	General and administrative expenses			0.2			149.8			(0.1	)		149.9
Depreciation and amortization expense				—			111.7			—			111.7
		Total Operating Costs and Expenses		158.3			2,231.5			(236.2	)		2,153.6
Operating Profit (Loss)				77.8			(14.5	)		—			63.3
Equity in pre-tax loss of consolidated subsidiaries				(15.6	)		—			15.6			—
Interest expense, net				(44.9	)		(1.1	)		—			(46.0	)
Income (Loss) Before Income Taxes				17.3			(15.6	)		15.6			17.3
Income tax (expense) benefit				(6.6	)		6.0			(6.0	)		(6.6	)
Net Income (Loss)			$	10.7		$	(9.6	)	$	9.6		$	10.7

Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2007

Condensed Consolidating Statement of Operations For the Six Months Ended June 30, 2005

			Co-Issuers			Guarantor Subsidiaries			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Cash Flows from Operating Activities
	Net Cash Provided by Operating Activities		$	243.7		$	647.6		$	891.3

Cash Flows from Investing Activities
	Cash paid for property and equipment			—			(169.0	)		(169.0	)
	Cash paid for subscriber leased equipment—subscriber acquisition			—			(187.8	)		(187.8	)
	Cash paid for subscriber leased equipment—upgrade and retention			—			(218.6	)		(218.6	)
	Cash paid for satellites			—			(54.0	)		(54.0	)
	Other			—			(0.8	)		(0.8	)

		Net Cash Used in Investing Activities		—			(630.2	)		(630.2	)

Cash Flows from Financing Activities
	Repayments of long-term debt			(2.5	)		—			(2.5	)
	Repayment of other long-term obligations			—			(17.7	)		(17.7	)
	Excess tax benefit from share-based compensation			—			4.3			4.3

		Net Cash Used in Financing Activities		(2.5	)		(13.4	)		(15.9	)

Net increase in cash and cash equivalents				241.2			4.0			245.2
Cash and cash equivalents at beginning of the period				1,353.8			1.9			1,355.7

Cash and cash equivalents at the end of the period			$	1,595.0		$	5.9		$	1,600.9

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
			(dollars in millions)
Revenues			$	492.2		$	5,761.3		$	(492.2	)	$	5,761.3
Operating Costs and Expenses, exclusive of depreciation and amortization expense shown separately below
	Programming and other costs			397.4			2,381.8			(491.9	)		2,287.3
	Subscriber service expenses			—			439.7			—			439.7
	Subscriber acquisition costs:
		Third party customer acquisitions		—			1,055.8			—			1,055.8
		Direct customer acquisitions		—			312.0			—			312.0
	Upgrade and retention costs			—			475.4			—			475.4
	Broadcast operations expenses			—			70.7			—			70.7
	General and administrative expenses			0.7			399.8			(0.3	)		400.2
Depreciation and amortization expense				—			348.6			—			348.6
		Total Operating Costs and Expenses		398.1			5,483.8			(492.2	)		5,389.7
Operating Profit				94.1			277.5			—			371.6
Equity in pre-tax income of consolidated subsidiaries				256.3			—			(256.3	)		—
Interest expense, net				(89.7	)		(20.5	)		—			(110.2	)
Other expense				(64.9	)		(0.7	)		—			(65.6	)
Income Before Income Taxes				195.8			256.3			(256.3	)		195.8
Income tax expense				(75.1	)		(98.1	)		98.1			(75.1	)
Net Income			$	120.7		$	158.2		$	(158.2	)	$	120.7

Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2006

			Co-Issuers		Guarantor Subsidiaries			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Cash Flows from Operating Activities
	Net Cash Provided by Operating Activities		$	31.7	$	257.6		$	289.3

Cash Flows from Investing Activities
	Cash paid for property and equipment			—		(97.8	)		(97.8	)
	Cash paid for subscriber leased equipment-subscriber acquisition			—		(46.4	)		(46.4	)
	Cash paid for subscriber leased equipment-upgrade and retention			—		(40.4	)		(40.4	)
	Cash paid for satellites			—		(56.6	)		(56.6	)
	Other			—		(1.8	)		(1.8	)

		Net Cash Used in Investing Activities		—		(243.0	)		(243.0	)
Cash Flows from Financing Activities
	Repayment of other long-term obligations			—		(16.3	)		(16.3	)
	Excess tax benefit from share-based compensation			—		1.7			1.7

		Net Cash Used in Financing Activities		—		(14.6	)		(14.6	)

Net increase in cash and cash equivalents				31.7		—			31.7
Cash and cash equivalents at beginning of the period				1,164.8		—			1,164.8

Cash and cash equivalents at the end of the period			$	1,196.5	$	—		$	1,196.5

~~Condensed~~DIRECTV ~~Consolidating~~HOLDINGS ~~Statement of Operations For the Six Months Ended June 30, 2004~~LLC

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
			(dollars in millions)
Revenues			$	449.0		$	4,298.0		$	(449.3	)	$	4,297.7
Operating Costs and Expenses, exclusive of depreciation and amortization expense shown separately below
	Programming and other costs			307.8			1,845.8			(449.0	)		1,704.6
	Subscriber service expenses			—			312.0			—			312.0
	Subscriber acquisition costs:
		Third party customer acquisitions		—			881.9			—			881.9
		Direct customer acquisitions		—			313.4			—			313.4
	Upgrade and retention costs			—			401.0			—			401.0
	Broadcast operations expenses			—			65.2			—			65.2
	General and administrative expenses			0.5			299.2			(0.3	)		299.4
Depreciation and amortization expense				—			235.5			—			235.5
		Total Operating Costs and Expenses		308.3			4,354.0			(449.3	)		4,213.0
Operating Profit (Loss)				140.7			(56.0	)		—			84.7
Equity in pre-tax loss of consolidated subsidiaries				(561.0	)		—			561.0			—
Interest expense, net				(92.3	)		(1.1	)		—			(93.4	)
Loss Before Income Taxes and Cumulative Effect of Accounting Change				(512.6	)		(57.1	)		561.0			(8.7	)
Income tax benefit				195.8			22.0			(214.4	)		3.4
Loss Before Cumulative Effect of Accounting Change				(316.8	)		(35.1	)		346.6			(5.3	)
Cumulative effect of accounting change, net of taxes				—			(311.5	)		—			(311.5	)
Net Loss			$	(316.8	)	$	(346.6	)	$	346.6		$	(316.8	)

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 of financial condition and results ~~Condensed~~of ~~Consolidating~~operations ~~Balance~~included ~~Sheet As~~in our Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 1, 2007, and all of ~~June~~our other filings, including Current Reports on Form 308-K, ~~2005~~ filed with the SEC after such date and through the date of this report.

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
			(dollars in millions)
ASSETS
Total Current Assets			$	831.1		$	1,341.7		$	(7.7	)	$	2,165.1
Satellites, net				—			1,764.8			—			1,764.8
Property, net				—			723.5			—			723.5
Goodwill				1,827.6			1,204.1			—			3,031.7
Intangible Assets, net				—			2,048.3			—			2,048.3
Other Assets				4,060.9			88.2			(4,023.7	)		125.4
Total Assets			$	6,719.6		$	7,170.6		$	(4,031.4	)	$	9,858.8
LIABILITIES AND OWNER'S EQUITY
Total Current Liabilities			$	189.4		$	1,897.9		$	(7.7	)	$	2,079.6
Long-Term Debt				3,410.5			—			—			3,410.5
Other Liabilities and Deferred Credits				44.6			1,361.9			(112.9	)		1,293.6
Owner's Equity
	Capital stock and additional paid-in capital			4,034.2			5,434.7			(5,434.7	)		4,034.2
	Accumulated deficit			(959.1	)		(1,523.9	)		1,523.9			(959.1	)
		Total Owner's Equity		3,075.1			3,910.8			(3,910.8	)		3,075.1
Total Liabilities and Owner's Equity			$	6,719.6		$	7,170.6		$	(4,031.4	)	$	9,858.8

This Quarterly Report on Form 10-Q may contain certain statements that we believe are, or may be considered to be, "forward-looking statements" within the meaning of various provisions of the Securities Act of 1933 and of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as we "believe," "estimate," "expect," "anticipate," "intend," "plan," "foresee," "project" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from historical results or from those expressed or implied by the relevant forward-looking statement. We discuss these risks and uncertainties in detail in Part I, Item 1A of our 2006 Form 10-K.

BUSINESS OVERVIEW

We are a wholly-owned subsidiary of The DIRECTV Group and our subsidiaries include DIRECTV Enterprises, LLC and its wholly-owned subsidiaries and DIRECTV Financing Co., Inc. We acquire, promote, sell and distribute digital entertainment programming via satellite to residential and commercial subscribers. We are the largest provider of direct-to-home, or DTH, digital television services and the second largest provider in the multi-channel video programming distribution, or MVPD, industry in the United States. As of March 31, 2007, we had approximately 16.2 million subscribers.

We currently have a fleet of nine geosynchronous satellites, including eight owned satellites and one leased satellite. We have three satellites under construction and plan to launch DIRECTV 10 in mid 2007, and DIRECTV 11 in early 2008. These two satellites will provide us with increased capability for local and national high definition, or HD, channels, as well as capacity for new interactive and enhanced services and standard-definition programming. Once launched, these satellites will operate from the Ka-Band orbital locations. The third satellite, DIRECTV 12, will serve as a ground spare.

SIGNIFICANT EVENTS AFFECTING THE COMPARABILITY OF THE RESULTS OF OPERATIONS

Lease Program. On March 1, 2006, we introduced a new set-top receiver lease program. Prior to March 1, 2006, most set-top receivers provided to new and existing subscribers were immediately expensed upon activation as a subscriber acquisition or upgrade and retention cost in the Consolidated Statements of Operations. Subsequent to the introduction of the lease program, most set-top receivers provided to new and existing subscribers are leased and therefore capitalized in "Property and Equipment, net" in the Consolidated Balance Sheets.

The following ~~Condensed~~table ~~Consolidating~~sets ~~Balance~~forth ~~Sheet As~~the amount of ~~December 31~~set-top receivers capitalized, ~~2004~~ and depreciation expense recorded under the lease program for the periods presented:

				Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
		Three Months Ended March 31,
				(dollars in millions)
		2007		2006
ASSETS
		(Dollars in Millions)
Total Current Assets				$	46.6		$	1,292.4		$	(7.7	)	$	1,331.3
Cash paid for subscriber leased equipment—subscriber acquisitions		$	187.8	$	46.4
Satellites, net					—			1,597.4			—			1,597.4
Cash subscriber leased equipment—upgrade and retention			218.6		40.4
Property, net					—			686.1			—			686.1
Total subscriber leased equipment capitalized		$	406.4	$	86.8
Goodwill					1,827.6			1,204.1			—			3,031.7
Depreciation expense		$	113.7	$	1.2
Intangible Assets, net					—			2,224.9			—			2,224.9
Other Assets					4,062.9			67.4			(4,007.5	)		122.8
Total Assets				$	5,937.1		$	7,072.3		$	(4,015.2	)	$	8,994.2
LIABILITIES AND OWNER'S EQUITY
Total Current Liabilities				$	195.5		$	1,850.0		$	(7.7	)	$	2,037.8
Long-Term Debt					3,276.6			—			—			3,276.6
Other Liabilities and Deferred Credits					86.1			2,179.7			(964.9	)		1,300.9
Owner's Equity
	Capital stock and additional paid-in capital				3,458.7			4,724.8			(4,724.8	)		3,458.7
	Accumulated deficit				(1,079.8	)		(1,682.2	)		1,682.2			(1,079.8	)
			Total Owner's Equity		2,378.9			3,042.6			(3,042.6	)		2,378.9
Total Liabilities and Owner's Equity				$	5,937.1		$	7,072.3		$	(4,015.2	)	$	8,994.2

EXECUTIVE OUTLOOK ~~Condensed Consolidating Statement of Cash Flows~~UPDATE ~~For the Six Months Ended June 30, 2005~~

			Co-Issuers			Guarantor Subsidiaries			DIRECTV Holdings Consolidated
			(dollars in millions)
Cash Flows from Operating Activities
	Net Cash Provided by (Used in) Operating Activities		$	(750.6	)	$	1,245.1		$	494.5
Cash Flows from Investing Activities
	Expenditures for property and equipment			—			(148.3	)		(148.3	)
	Expenditures for satellites			—			(195.6	)		(195.6	)
		Net Cash Used in Investing Activities		—			(343.9	)		(343.9	)
Cash Flows from Financing Activities
	Cash proceeds from refinancing transactions			3,003.3			—			3,003.3
	Cash contribution from Parent			538.3			—			538.3
	Repayment of debt			(2,001.8	)		—			(2,001.8	)
	Repayment of borrowing from Parent			(875.0	)		—			(875.0	)
	Loans (to) from related parties			875.0			(875.0	)		—
	Repayment of long-term obligations			—			(31.2	)		(31.2	)
	Debt issuance costs			(4.7	)		—			(4.7	)
		Net Cash Provided by (Used in) Financing Activities		1,535.1			(906.2	)		628.9
Net increase (decrease) in cash and cash equivalents				784.5			(5.0	)		779.5
Cash and cash equivalents at beginning of the period				14.0			20.5			34.5
Cash and cash equivalents at the end of the period			$	798.5		$	15.5		$	814.0

In our 2006 Form 10-K, we reported that we expected upgrade and retention costs incurred during 2007, including the cost of set-top receivers capitalized under the lease program but excluding the cost of replacing MPEG-2 HD subscriber equipment with our new MPEG-4 HD subscriber equipment, to be relatively unchanged as compared to the approximately $1,250 million spent in 2006. Upgrade and retention costs incurred for the quarter ending March 31, 2007 exceeded upgrade and retention costs incurred for the quarter ending March 31, 2006 due to higher demand for advanced products. We now expect the upgrade and retention costs incurred for the year ending December 31, 2007 to be greater than in 2006.

KEY TERMINOLOGY USED IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Revenues. We earn revenues mostly from monthly fees we charge subscribers for subscriptions to basic and premium channel programming, HD programming, pay-per-view programming and seasonal and live sporting events. We also earn revenues from monthly fees that we charge subscribers with multiple non-leased set-top receivers (which we refer to as mirroring fees), monthly fees we charge subscribers for leased set-top receivers, monthly fees we charge subscribers for digital video recorder, or DVR, service, hardware revenues from subscribers who purchase set-top receivers from us, our published programming guide, warranty service fees and advertising services.

Broadcast Programming and Other. These costs primarily include license fees for subscription service programming, pay-per-view programming, live sports and other events. Other costs include expenses associated with the publication and distribution of our programming guide, continuing service fees paid to third parties for active subscribers, warranty service costs and production costs for on-air advertisements we sell to third parties.

Subscriber Service Expenses. Subscriber service expenses include the costs of customer call centers, billing, remittance processing and certain home services expenses, such as in-home repair costs.

Broadcast Operations Expenses. These expenses include broadcast center operating costs, signal transmission expenses (including costs of collecting signals for our local channel offerings), and costs of monitoring, maintaining and insuring our satellites. Also included are engineering expenses associated with deterring theft of our signal.

Subscriber Acquisition Costs. These costs include the cost of set-top receivers and other equipment, commissions we pay to national retailers, independent satellite television retailers, dealers,

regional Bell operating companies and the cost of installation, advertising, marketing and customer call center expenses associated with the acquisition of new subscribers. Set-top receivers leased to new subscribers are capitalized in "Property and Equipment, net" in the Consolidated Balance Sheets and depreciated over their useful lives. The amount of set-top ~~Condensed~~receivers ~~Consolidating~~capitalized ~~Statement~~each period for subscriber acquisition activities is presented in the Consolidated Statements of Cash Flows ~~For~~ under the ~~Six~~caption ~~Months~~"Cash ~~Ended~~paid ~~June 30,~~for ~~2004~~ subscriber leased equipment-subscriber acquisitions."

			Co-Issuers			Guarantor Subsidiaries			DIRECTV Holdings Consolidated
			(dollars in millions)
Cash Flows from Operating Activities
	Net Cash Provided by (Used in) Operating Activities		$	(70.3	)	$	275.9		$	205.6
Cash Flows from Investing Activities
	Expenditures for property and equipment			—			(106.5	)		(106.5	)
	Expenditures for satellites			—			(172.7	)		(172.7	)
	Proceeds from sale of property			—			3.3			3.3
		Net Cash Used in Investing Activities		—			(275.9	)		(275.9	)
Cash Flows from Financing Activities
	Repayment of debt			(213.2	)		—			(213.2	)
	Debt issuance costs			(1.9	)		—			(1.9	)
		Net Cash Used in Financing Activities		(215.1	)		—			(215.1	)
Net decrease in cash and cash equivalents				(285.4	)		—			(285.4	)
Cash and cash equivalents at beginning of the period				415.7			—			415.7
Cash and cash equivalents at the end of the period			$	130.3		$	—		$	130.3

Upgrade and Retention Costs. The majority of upgrade and retention costs are associated with upgrade efforts for existing subscribers that we believe will result in higher average monthly revenue per subscriber, or ARPU, and lower churn. Our upgrade efforts include subscriber equipment upgrade programs for DVR, HD receivers and local channels, our multiple set-top receiver offer and similar initiatives. Retention costs also include the costs of installing and providing hardware under our movers program for subscribers relocating to a new residence. Set-top receivers leased to existing subscribers under upgrade and retention programs are capitalized in "Property and Equipment, net" in the Consolidated Balance Sheets and depreciated over their useful lives. The amount of set-top receivers capitalized each period for upgrade and retention programs is presented in the Consolidated Statements of Cash Flows under the caption "Cash paid for subscriber leased equipment-upgrade and retention."

General and Administrative Expenses. General and administrative expenses include departmental costs for legal, administrative services, finance, marketing and information technology. These costs also include expenses for bad debt and other operating expenses, such as legal settlements, and gains or losses from the sale or disposal of fixed assets.

Average Monthly Revenue Per Subscriber. We calculate ARPU by dividing average monthly revenues for the period (total revenues during the period divided by the number of months in the period) by the average number of subscribers for the period. We calculate average subscribers for the period by adding the number of subscribers as of the beginning of the period and for each quarter end in the current year or period and dividing by the sum of the number of quarters in the period plus one.

Average Monthly Subscriber Churn. Average monthly subscriber churn represents the number of subscribers whose service is disconnected, expressed as a percentage of the average total number of subscribers. We calculate average monthly subscriber churn by dividing the average monthly number of disconnected subscribers for the period (total subscribers disconnected, net of reconnects, during the period divided by the number of months in the period) by average subscribers for the period.

Subscriber Count. The total number of subscribers represents the total number of subscribers actively subscribing to our service, including seasonal subscribers and subscribers who are in the process of relocating.

SAC. We calculate SAC, which represents total subscriber acquisition costs stated on a per subscriber basis, by dividing total subscriber acquisition costs for a period by the number of gross new subscribers acquired during the period. We calculate total subscriber acquisition costs for the period by adding together "Subscriber acquisition costs" expensed during the period and "Cash paid for subscriber leased equipment-subscriber acquisitions" during the period.

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

The following istable asets ~~discussion~~forth of our ~~financial~~unaudited ~~condition~~consolidated ~~and~~statements ~~results~~ of operations ~~for the periods described below. This discussion should be read in conjunction with our management's discussion~~ and ~~analysis~~certain included in our Annual Report on Form 10-K for the year ended December 31, 2004 filed with the SEC on March 1, 2005, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 filed with the SEC on May 5, 2005, and all of our other ~~filings,~~operating ~~including~~data: ~~Current Reports on Form 8-K, filed with the SEC after such date and through the date of this report.~~

This Quarterly Report on Form 10-Q may contain certain statements that we believe are, or may be considered to be, "forward-looking statements" within the meaning of various provisions of the Securities Act of 1933 and of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as we "believe," "estimate," "expect," "anticipate," "intend," "plan," "foresee," "project" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from historical results or from those expressed or implied by the relevant forward-looking statement. Risk factors which could cause actual performance and future actions to differ materially from forward-looking statements made herein include, among others, the following:

				Three Months Ended March 31,						Change
				2007			2006			$			%
				(Dollars in Millions, except per subscriber data)
Revenues				$	3,538.7		$	3,193.5		$	345.2		10.8	%
Operating Costs and Expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other			1,483.4			1,331.5			151.9		11.4	%
		Subscriber service expenses			279.9			236.7			43.2		18.3	%
		Broadcast operations expenses			51.6			42.0			9.6		22.9	%
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs			431.6			567.6			(136.0	)	(24.0	)%
		Upgrade and retention costs			226.2			293.1			(66.9	)	(22.8	)%
		General and administrative expenses			197.3			178.0			19.3		10.8	%
	Depreciation and amortization expense				303.1			182.2			120.9		66.4	%

			Total Operating Costs and Expenses		2,973.1			2,831.1			142.0		5.0	%

Operating Profit					565.6			362.4			203.2		56.1	%
Interest income					21.0			14.4			6.6		45.8	%
Interest expense					(52.5	)		(55.9	)		3.4		(6.1	)%
Other expense					(0.7	)		(0.6	)		(0.1	)	16.7	%

Income Before Income Taxes					533.4			320.3			213.1		66.5	%
Income tax expense					(208.2	)		(122.4	)		(85.8	)	70.1	%

Net Income				$	325.2		$	197.9		$	127.3		64.3	%

Other Data:
Operating Profit				$	565.6		$	362.4		$	203.2		56.1	%
Add: Depreciation and amortization expense					303.1			182.2			120.9		66.4	%

Operating Profit Before Depreciation and Amortization(1)				$	868.7		$	544.6		$	324.1		59.5	%

Operating Profit Before Depreciation and Amortization—Margin(1)					24.5	%		17.1	%		N/A		43.3	%
Net Cash Provided by Operating Activities				$	891.3		$	289.3		$	602.0		208.1	%
Net Cash Used in Investing Activities					(630.2	)		(243.0	)		(387.2	)	159.3	%
Net Cash Used in Financing Activities					(15.9	)		(14.6	)		(1.3	)	8.9	%
Net Cash Provided by Operating Activities				$	891.3		$	289.3		$	602.0		208.1	%
Less: Cash paid for property and equipment					(169.0	)		(97.8	)		(71.2	)	72.8	%
Cash paid for subscriber leased equipment—subscriber acquisitions					(187.8	)		(46.4	)		(141.4	)	304.7	%
Cash paid for subscriber leased equipment—upgrade and retention					(218.6	)		(40.4	)		(178.2	)	441.1	%
Cash paid for satellites					(54.0	)		(56.6	)		2.6		(4.6	)%

Free Cash Flow(2)				$	261.9		$	48.1		$	213.8		444.5	%

Average monthly revenue per subscriber (ARPU)				$	73.40		$	69.75		$	3.65		5.2	%
Average monthly subscriber churn %					1.44	%		1.45	%		—		(0.7	)%
Average subscriber acquisition costs—per subscriber (SAC)				$	667		$	668		$	(1	)	(0.1	)%
Gross subscriber additions					929			919			10		1.1	%
Net subscriber additions (000's)					235			255			(20	)	(7.8	)%
Total number of subscribers (000's)					16,188			15,388			800		5.2	%
Capital expenditures(3)				$	617.4		$	219.9		$	397.5		180.8	%

(1): Operating Profit Before Depreciation and Amortization, which is a financial measure that is not determined in accordance with GAAP by adding amounts under the caption "Depreciation and amortization expense" to "Operating Profit," as presented in the Consolidated Statements of Operations. This measure should be used in conjunction with GAAP financial

Wemeasures ~~urge~~and ~~you~~is tonot ~~consider~~presented ~~these~~as ~~factors~~an ~~carefully~~alternative measure of operating results, as determined in ~~evaluating~~accordance ~~forward-looking~~with ~~statements~~GAAP. Our management and The ~~forward~~DIRECTV ~~looking~~Group ~~statements~~use ~~included~~Operating inProfit ~~this~~Before ~~Quarterly~~Depreciation ~~Report~~and Amortization ~~are~~to ~~made~~evaluate ~~only~~our asoperating performance and to allocate resources and capital. This metric is also used to measure income generated from operations that could be used to fund capital expenditures, service debt or pay taxes. Depreciation and amortization expense primarily represents an allocation to current expense of the ~~date~~cost of historical capital expenditures and for intangible ~~this~~assets. ~~Quarterly~~To ~~Report~~compensate for the exclusion of depreciation and weamortization ~~undertake~~expense nofrom ~~obligation~~operating toprofit, ~~publicly~~our ~~update~~management ~~these~~and ~~forward-looking~~The ~~statements~~DIRECTV toGroup ~~reflect~~separately ~~subsequent~~measure ~~events~~and orbudget ~~circumstances~~for capital expenditures and business acquisitions.

Key Terminology Used in Management's Discussion and Analysis of Financial Condition and Results of Operations

Revenues. We earn revenues mostly from subscriber subscriptions to basic and premium channel programming, pay-per-view programming and seasonal and live sporting events. We also earn revenues from fees that we charge subscribers with multiple set-top receivers (which we refer to as mirroring fees), hardware revenues from subscribers who purchase receivers under our direct sales and upgrade and retention programs, our published programming guide, warranty service fees and advertising services. Prior to the completion of the transactions with the NRTC and Pegasus in the third quarter of 2004, revenues also included fees earned from the NRTC and Pegasus, which were equal to a percentage of the subscriber revenues earned from the subscribers located in certain areas (mainly rural). See "Discussion of Significant Events" below for further discussion.

Programming and Other Costs. These costs primarily include license fees for subscription service programming, pay-per-view programming, live sports and other events. Other costs include expenses associated with the publication and distribution of our programming guide, continuing service fees paid to third parties for active DIRECTV subscribers, warranty service premiums we pay to a third party and production costs for on-air advertisements we sell to third parties.

Subscriber Service Expenses. Subscriber service expenses include the costs of customer call centers, billing, remittance processing and certain home services expenses, such as in-home repair costs.

Subscriber Acquisition Costs—Third Party Customer Acquisitions. The majority of these costs represent commissions we pay to third parties to acquire new DIRECTV subscribers, which include our national retailers as well as independent satellite television retailers, dealers, regional Bell operating companies and others. We also include the costs we incur for subsidies of DIRECTV System equipment, installation and advertising.

Subscriber Acquisition Costs—Direct Customer Acquisitions. These costs consist primarily of hardware, installation, advertising and customer call center expenses associated with new DIRECTV subscribers added through our direct customer acquisition program.

SAC. We calculate SAC, which represents total subscriber acquisition costs stated on a per subscriber basis, by dividing total subscriber acquisition costs for a period (the sum of subscriber acquisition costs reported for third party customer acquisitions and direct customer acquisitions) by the number of gross new subscribers that we acquired through third parties and our direct customer acquisition program during the period, excluding the subscribers we acquired as part of the NRTC and Pegasus transactions.

Upgrade and Retention Costs. The majority of upgrade and retention costs are associated with upgrade efforts for existing subscribers that we believe will result in higher average monthly revenue per subscriber, or ARPU, and lower churn. Our upgrade efforts include subscriber equipment upgrade programs for digital video recorders, or DVRs, high-definition, or HD, receivers and local channels, our multiple set-top receiver offer and similar initiatives. Retention costs also include the costs of installing and/or providing hardware under our movers program for subscribers relocating to a new residence.

Broadcast Operations Expenses. These expenses include broadcast center operating costs, signal transmission expenses (including costs of collecting signals for our local channel offerings), and costs of monitoring, maintaining and insuring our satellites. Also included are engineering expenses associated with deterring theft of the DIRECTV signal.

General and Administrative Expenses. General and administrative expenses include departmental costs for legal, administrative services, finance, marketing and information technology. These costs also include expenses for bad debt and other operating expenses, such as legal settlements, and gains or losses from the sale or disposal of fixed assets.

Operating Profit Before Depreciation and Amortization. We calculate Operating Profit Before Depreciation and Amortization, which is a financial measure that is not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, by adding amounts under the caption "Depreciation and amortization expense" to "Operating Profit," as presented in the consolidated statements of operations. This measure should be used in conjunction with GAAP financial measures and is not presented as an alternative measure of operating results, as determined in accordance with GAAP. Our management and The DIRECTV Group use Operating Profit Before Depreciation and Amortization to evaluate our operating performance and to allocate resources and capital. We also use this metric as a measure of performance for incentive compensation purposes and to measure income generated from operations that could be used to fund capital expenditures, service debt or pay taxes. Depreciation and amortization expense primarily represents an allocation to current expense of the cost of historical capital expenditures and for intangible assets. To compensate for the exclusion of depreciation and amortization expense from operating profit, our management and The DIRECTV Group separately measure and budget for capital expenditures and business acquisitions.

We believe this measure is useful to investors, along with GAAP measures (such as revenues, operating profit and net income), to compare our operating performance to other communications, entertainment and media service providers. We believe that investors use current and projected Operating Profit Before Depreciation and Amortization and similar measures to estimate our current or prospective enterprise value and make investment decisions. This metric provides investors with a means to compare operating results exclusive of depreciation and amortization expense. We believe this is useful given the significant variation in depreciation and amortization expense that can result from the timing of capital expenditures, the capitalization of intangible assets, potential variations in expected useful lives when compared to other companies and periodic changes to estimated useful lives.

~~Average~~Operating Profit ~~Monthly~~Before ~~Revenue~~Depreciation ~~Per~~and ~~Subscriber. We~~Amortization—Margin ~~calculate~~is ~~ARPU~~calculated by dividing ~~average~~Operating ~~monthly~~Profit ~~revenues~~Before ~~for the~~Depreciation ~~period~~and ~~(total~~Amortization ~~revenues during the period divided~~ by ~~the~~Revenues. ~~number of months in the period) by average DIRECTV subscribers for the period, excluding the subscribers of the former NRTC members~~

(2): Free cash flow, which is a financial measure that is not determined in accordance with GAAP, can be calculated by deducting amounts under the captions "Cash paid for property and equipment", "Cash paid for subscriber leased equipment—subscriber acquisitions", "Cash paid for subscriber leased equipment—upgrade & retention" and "Cash paid for satellites" from "Net Cash Provided by Operating Activities" from the Consolidated Statements of Cash Flows. This financial measure should be used in conjunction with other GAAP financial measures and is not presented as an alternative measure of cash flows from operating activities, as determined in accordance with GAAP. Our management and The DIRECTV Group use free cash flow to evaluate the cash generated by our current subscriber base, net of capital expenditures, for the purpose of allocating resources to activities such as adding new subscribers, retaining and upgrading existing subscribers, for additional capital expenditures and other capital investments or transactions and as a measure of performance for incentive compensation purposes. We believe this measure is useful to investors, along with other GAAP measures (such as cash flows from operating and investing activities), to compare our operating performance to other communications, entertainment and media companies. We believe that investors also use current and projected free cash flow to determine the ability of revenues from our current and projected subscriber base to fund required and discretionary spending and to help determine our financial value.
(3): Capital expenditures include cash paid and amounts accrued during the period for property, equipment and satellites.

Three months ended March 31, 2007 compared with the three months ended March 31, 2006

Subscribers. The 20,000 reduction in the number of net new subscribers was primarily due to a larger number of subscriber disconnections, partially offset by the 10,000 increase in gross subscriber additions in the first quarter of 2007. However, the increase in the number of subscriber disconnections did not lead to an increase in churn due to the increase in average subscribers.

Revenues. Our revenue increased $345.2 million to $3,538.7 million resulting from higher ARPU and the larger subscriber base. The 5.2% increase in ARPU to $73.40 resulted primarily from price increases on programming packages, an increase in equipment upgrade fees and an increase in the number of subscribers paying mirroring, lease and DVR fees, and HD programming fees.

Total Operating Costs and Expenses. Our total operating costs and expenses increased $142.0 million to $2,973.1 million in the first quarter of 2007 resulting primarily from higher costs for broadcast programming, subscriber service expenses and increased depreciation and amortization expense, partially offset by decreased upgrade and retention costs and subscriber acquisition costs due to the capitalization of set-top receivers leased to new and existing subscribers. We capitalized $187.8 million of set-top receivers leased to new subscribers and $218.6 million of set-top receivers leased to existing subscribers during the first quarter of 2007 under the lease program compared to the capitalization of $46.4 million of set-top receivers leased to new subscribers and $40.4 million of set-top receivers leased to existing subscribers during the first quarter of 2006. The first quarter of 2007 included three months of lease activity, while the first quarter of 2006 only included one month of lease activity from the introduction of the program on March 1, 2006.

Our broadcast programming and other costs increased $151.9 million primarily from the increased number of subscribers and annual program supplier rate increases. Subscriber service expenses increased mostly from the larger subscriber base and an increase in service calls and costs incurred at our call centers to support the increased number of subscribers with advanced products. Broadcast operation expenses increased primarily as a result of the costs to support new HD local channel markets.

The $136.0 million decrease in subscriber acquisition costs in the first quarter of 2007 was due mostly to the increase of $141.4 million in the capitalization of leased set-top receivers over the first quarter of 2006. Including the cost of set-top receivers capitalized under our upgrade and retention programs in both periods, upgrade and retention costs incurred increased by $111.3 million compared to the first quarter of 2006 primarily due to an increased number of our existing subscribers utilizing our HD upgrade programs. The increase in upgrade and retention costs incurred was offset by an increase of $178.2 million in the capitalization of leased set-top receivers compared to the first quarter of 2006. The $19.3 million increase in general and administrative expenses resulted mainly from an increase in labor and employee benefit costs, higher legal costs and property taxes associated with leased set-top receivers.

The increase in depreciation and amortization expense resulted mainly from the depreciation of leased set-top receivers capitalized under the new lease program and higher depreciation resulting from an increase in equipment purchased to support our broadcast operations.

The improvement of operating profit before depreciation and amortization of $324.1 million was primarily due to the increase in the amount of set-top receivers capitalized under the lease program, as well as the gross profit generated from the higher revenues, partially offset by higher upgrade and retention costs incurred and increased subscriber service expenses. The increase in operating profit of $203.2 million was primarily due to higher operating profit before depreciation and amortization, partially offset by higher depreciation and amortization expense in 2007.

Interest Income and Expense. The $6.6 million increase in interest income was primarily due to higher average cash balances and increased interest rates. The $3.4 million decrease in interest expense was primarily due to an increase in capitalized interest related mostly to an increase in capitalized costs for satellites under construction, partially offset by higher average interest rates. We recorded capitalized interest of $14.4 million for the first quarter of 2007 and $11.7 million for the first quarter of 2006.

Income Tax Expense. The $85.8 million increase in income tax expense was primarily due to our higher pre-tax income generated in 2007.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2007, we had cash and cash equivalents of $1,600.9 million compared to $1,355.7 million at December 31, 2006. The $245.2 million increase in cash and cash equivalents during the first quarter of 2007 resulted primarily from $891.3 million of cash provided by operations, partially offset by $629.4 million of cash paid for satellites, property and equipment and customer leased equipment. In addition to our existing cash balances, we also have up to $500.0 million of borrowing capacity under our revolving credit facility.

As a measure of liquidity, our current ratio (ratio of current assets to current liabilities) was 1.11 at March 31, 2007 compared to 1.09 at December 31, 2006. Working capital increased $55.3 million to $293.0 million at March 31, 2007 from $237.7 million at December 31, 2006. The change was primarily due to the increase in cash and cash equivalents partially offset by lower accounts receivable.

~~and affiliates prior to the NRTC and Pegasus transactions in the second and third quarters of 2004, which we discuss in more detail below in "Discussion of Significant Events."~~ We ~~calculate average~~ ~~DIRECTV~~generally ~~owned~~fund ~~and~~our ~~operated~~cash ~~subscribers~~requirements ~~for~~from ~~the~~cash ~~year~~on-hand and ~~the~~cash ~~period~~generated by ~~adding~~our ~~the~~operations. ~~number~~However, ofwe ~~DIRECTV~~have ~~owned~~received ~~and~~capital ~~operated~~contributions ~~subscribers as of the beginning of the year or the period~~ and ~~for~~have ~~each~~borrowed ~~quarter~~amounts ~~end~~from inour ~~the~~Parent ~~current~~in ~~year or period and dividing by~~ the ~~sum~~past ofto ~~the~~fund ~~number~~certain ~~of quarters in the period plus one~~transactions.

~~Average~~We believe ~~Monthly~~that ~~Subscriber~~our ~~Churn. Average~~cash ~~monthly~~on-hand, ~~subscriber~~future ~~churn~~cash ~~represents~~flows and amounts available to us under the ~~number~~revolving portion of ~~DIRECTV~~our senior secured credit facility will be sufficient to fund ~~subscribers~~our ~~whose~~operations ~~service~~and iscommitments ~~disconnected~~for the foreseeable future. However, ~~expressed~~several asfactors amay ~~percentage~~affect ofour ~~the~~ability ~~average~~to ~~total~~fund ~~number~~our ofoperations ~~DIRECTV~~and ~~subscribers~~commitments. WeOur ~~calculate~~future ~~average~~cash ~~monthly~~flows may be reduced if we experience, among other things, significantly higher subscriber additions than planned, increased subscriber churn byor ~~dividing~~upgrade ~~the~~and ~~average~~retention ~~monthly number~~costs, ofhigher ~~disconnected~~than ~~DIRECTV~~planned ~~subscribers~~capital expenditures for satellites ~~the~~and ~~period~~broadcast ~~(the~~equipment, ~~subscribers~~satellite ~~disconnected~~anomalies ~~during~~or ~~the~~signal ~~period~~theft ~~divided~~or byif ~~the~~we ~~number~~are ofrequired ~~months~~to inmake ~~the~~a ~~period)~~prepayment byunder ~~average~~our ~~DIRECTV~~senior ~~subscribers~~secured ~~for~~credit ~~the period~~facility. ~~Average~~ ~~monthly~~Additionally, ~~churn~~our ~~includes~~ability to borrow under the ~~results~~senior ~~from~~secured ~~the~~credit ~~former~~facility ~~NRTC~~is contingent upon our meeting financial and ~~Pegasus~~other ~~subscribers~~covenants associated with our debt.

~~Subscriber~~We may ~~Count. The~~provide ~~total~~dividends ~~number~~to ofour ~~DIRECTV~~Parent ~~subscribers~~to ~~represents~~fund ~~the~~its ~~total~~cash ~~number~~requirements, ofincluding ~~subscribers actively~~share ~~subscribing~~repurchase programs or other distributions to ~~the~~its ~~DIRECTV~~stockholders, ~~service~~or to fund strategic transactions, which ~~including~~may ~~the~~include ~~subscribers~~broadband ofinvestment ~~the~~opportunities. ~~NRTC's~~We ~~members~~may use available cash and ~~affiliates~~cash equivalents, ~~seasonal~~cash ~~subscribers~~from ~~and~~operations, ~~subscribers~~or ~~who~~incur ~~are~~additional inborrowings ~~the~~to ~~process~~fund ofsuch ~~relocating~~dividends.

~~Business Overview~~Debt

~~DIRECTV~~At ~~Holdings~~March 31, is2007, we had $3,402.6 million in total outstanding borrowings, bearing a ~~wholly-owned~~weighted ~~subsidiary~~average interest rate of ~~The~~7.0%. ~~DIRECTV~~Our ~~Group~~outstanding borrowings primarily consist of notes payable and ~~consists~~amounts borrowed under a senior secured credit facility as more fully described in Note 5 of ~~DIRECTV~~the ~~Enterprises~~Notes to the Consolidated Financial Statements in Item 1, ~~LLC~~Part I ~~and~~of ~~its~~this ~~wholly-owned~~Quarterly ~~subsidiaries~~Report and ~~DIRECTV Financing~~in ~~Co.~~Note 8 to the Notes to the Consolidated Financial Statements in Item 8, Part ~~Inc~~II of our Form 10-K.

WeOur ~~earn~~notes ~~the~~payable ~~majority~~and ofsenior ~~our~~secured ~~revenues~~credit ~~and~~facility ~~generate~~mature ~~most~~as follows: $7.5 million in the remainder of ~~our~~2007, ~~cash~~$47.6 million ~~flows~~in ~~from~~2008, ~~subscribers~~$97.6 million ~~who~~in ~~subscribe~~2009, $297.5 million toin ~~basic~~2010, ~~premium~~$97.6 million in 2011, and ~~seasonal~~$2,852.1 million ~~sporting~~thereafter. ~~event~~These ~~programming,~~amounts ~~subscriber~~do ~~purchases~~not ~~of pay-per-view~~reflect ~~and~~potential ~~live~~prepayments ~~sporting~~that ~~event~~may ~~programming,~~be ~~and~~required ~~other~~under ~~subscriber~~our ~~revenues~~senior secured credit facility, which could result from a computation that we are ~~derived~~required ~~mostly~~to make ~~from~~at ~~mirroring~~each ~~fees~~year end under the credit agreement. We were not required to make a prepayment for the year ended December 31, 2006.

~~The majority~~COMMITMENTS ofAND our expenses and cash outflows relate to the cost of programming from third parties, the cost of acquiring and retaining subscribers, and general and administrative expenses. We also use a significant amount of cash for capital expenditures for satellites, broadcast equipment and software to support customer billing, collections and subscriber relationship management. CONTINGENCIES

~~Satellite~~For ~~Developments. On~~a ~~May 22,~~discussion ~~2005,~~of ~~DIRECTV~~"Commitments 8and ~~was~~Contingencies," ~~successfully~~see ~~launched.~~Part I, ~~DIRECTV~~Item 81, isNote 6 ~~a Ku/Ka-band hybrid satellite that will supplement our existing fleet~~ of ~~satellites~~the ~~and~~Notes ~~will~~to ~~take~~ the ~~place~~Consolidated ofFinancial ~~an older DIRECTV satellite~~Statements, which ~~will~~we incorporate beherein ~~used~~by ~~as a backup, at the 101 WL orbital slot~~reference.

OnCommitments ~~April 26,~~and ~~2005,~~contingencies ~~SPACEWAY~~as 1discussed ~~was~~in ~~successfully~~the ~~launched.~~Notes ~~SPACEWAY~~to 1the isConsolidated ~~the~~Financial ~~first~~Statements ofdo ~~four~~not ~~Ka-band~~include ~~satellites~~payments that ~~will~~could ~~enable~~be usmade related to ~~broadcast~~our ~~local~~unrecognized HDtax ~~channels into~~benefits ~~several~~liability, which amounted to $25.9 million as of January 1, 2007, the ~~nation's~~date ~~largest~~we ~~markets~~adopted FIN 48. WeThe ~~expect~~timing toand ~~launch~~amount ~~SPACEWAY~~of 2,any ~~also~~future apayments ~~Ka-band~~is ~~satellite~~not reasonably estimable, ~~during~~as such payments are dependent on the ~~second~~completion ~~half~~and resolution of ~~2005~~examinations with tax authorities. We do not expect a significant payment related to these obligations within the next twelve months.

~~Update~~CERTAIN toRELATIONSHIPS ~~Executive~~AND ~~Overview~~RELATED-PARTY ~~and Outlook~~TRANSACTIONS

InFor ~~our~~a ~~Annual~~discussion ~~Report~~of on"Certain ~~Form 10-K~~Relationships ~~for~~and ~~the~~Related-Party ~~year~~Transactions," ~~ended~~see ~~December~~Part 31I, ~~2004,~~Item ~~we disclosed our expectation that average monthly subscriber churn for 2005 would improve slightly over the~~ 1~~.59%~~, ~~reported~~Note 7 ~~for 2004. As a result~~ of ~~higher~~the ~~involuntary~~Notes ~~churn from subscribers with lower credit scores, due in part~~ to the ~~significant~~Consolidated ~~increase in gross subscriber~~Financial ~~additions over the past several quarters~~Statements, aswhich ~~well as a more competitive marketplace,~~ we ~~now~~incorporate ~~expect~~herein ~~average~~by ~~monthly subscriber churn to increase slightly in 2005 compared to 2004~~reference.

~~Results~~ACCOUNTING ~~of Operations~~CHANGES

The following table sets forth, for the periods indicated, our unaudited consolidated statements of operations and certain other operating data:

				Three Months Ended June 30,											Six Months Ended June 30,
				2005			2004			Change					2005			2004			Change
				(dollars in millions, except per subscriber data)
Revenues				$	2,960.5		$	2,216.9		$	743.6		33.5	%	$	5,761.3		$	4,297.7		$	1,463.6		34.1	%
Operating Costs and Expenses, exclusive of depreciation and amortization expense shown separately below
	Programming and other costs				1,137.7			856.5			281.2		32.8	%		2,287.3			1,704.6			582.7		34.2	%
	Subscriber service expenses				219.2			166.0			53.2		32.0	%		439.7			312.0			127.7		40.9	%
	Subscriber acquisition costs:
		Third party customer acquisitions			467.9			445.4			22.5		5.1	%		1,055.8			881.9			173.9		19.7	%
		Direct customer acquisitions			154.3			162.1			(7.8	)	(4.8	)%		312.0			313.4			(1.4	)	(0.4	)%
	Upgrade and retention costs				223.2			226.8			(3.6	)	(1.6	)%		475.4			401.0			74.4		18.6	%
	Broadcast operations expenses				35.3			35.2			0.1		0.3	%		70.7			65.2			5.5		8.4	%
	General and administrative expenses				218.3			149.9			68.4		45.6	%		400.2			299.4			100.8		33.7	%
Depreciation and amortization expense					171.4			111.7			59.7		53.4	%		348.6			235.5			113.1		48.0	%
			Total Operating Costs and Expenses		2,627.3			2,153.6			473.7		22.0	%		5,389.7			4,213.0			1,176.7		27.9	%
Operating Profit					333.2			63.3			269.9		426.4	%		371.6			84.7			286.9		338.7	%
Interest expense, net					(54.2	)		(46.0	)		(8.2	)	17.8	%		(110.2	)		(93.4	)		(16.8	)	18.0	%
Other expense					(65.2	)		—			(65.2	)	100.0	%		(65.6	)		—			(65.6	)	100.0	%
Income (Loss) Before Income Taxes and Cumulative Effect of Accounting Change					213.8			17.3			196.5		1,135.8	%		195.8			(8.7	)		204.5		—
Income tax (expense) benefit					(82.0	)		(6.6	)		(75.4	)	1,142.4	%		(75.1	)		3.4			(78.5	)	—
Income (Loss) Before Cumulative Effect of Accounting Change					131.8			10.7			121.1		1,131.8	%		120.7			(5.3	)		126.0		—
Cumulative effect of accounting change, net of taxes					—			—			—		—			—			(311.5	)		311.5		100.0	%
Net Income (Loss)				$	131.8		$	10.7		$	121.1		1,131.8	%	$	120.7		$	(316.8	)	$	437.5		—
Other Data:
Operating profit				$	333.2		$	63.3		$	269.9		426.4	%	$	371.6		$	84.7		$	286.9		338.7	%
Depreciation and amortization expense					171.4			111.7			59.7		53.4	%		348.6			235.5			113.1		48.0	%
Operating Profit Before Depreciation and Amortization				$	504.6		$	175.0		$	329.6		188.3	%	$	720.2		$	320.2		$	400.0		124.9	%
Average monthly revenue per subscriber (ARPU)				$	67.79		$	65.01		$	2.78		4.3	%	$	66.91		$	64.31		$	2.60		4.0	%
Average monthly subscriber churn %					1.69	%		1.49	%		—		13.4	%		1.59	%		1.46	%		—		8.9	%
Average subscriber acquisition costs—per subscriber (SAC)				$	646		$	643		$	3		0.5	%	$	651		$	644		$	7		1.1	%
Total number of subscribers (000's)					14,670			13,040			1,630		12.5	%		14,670			13,040			1,630		12.5	%

Discussion of Significant Events

Refinancing Transactions. During the second quarter of 2005, we completed a series of refinancing transactions that resulted in a pre-tax charge to "Other expense" in the consolidated statements of operations of $64.9 million ($40.1 million after tax), of which $41.0 million was associated with the

premium paid for the redemption of our 8.375% senior notes and $23.9 million with the write-off of a portion of our deferred debt issuance costs and other transaction costs. As a result of our second quarter 2005 refinancing transactions, our debt increased $136.7 million and cash increased $629.3 million, net of the premium paid and transaction costs. See Part I, Item 1, Note 4 to the consolidated financial statements for further discussion of our refinancing transactions.

Pegasus and NRTC Member Subscribers. During the third quarter of 2004, we completed the Pegasus and NRTC transactions, as described in Part I, Item 1, Note 6 to the consolidated financial statements. The Pegasus transaction resulted in us recording a subscriber related intangible asset of $951.3 million that we are amortizing over the estimated average subscriber lives of five years and the NRTC transaction resulted in us recording a subscriber related intangible asset of $385.5 million that we are amortizing over the estimated average subscriber lives of six years. Had the estimated average subscriber lives for these intangible assets been decreased by one year, our future annual amortization expense would increase by approximately $60 million.

NRTC Contract Rights. Effective June 1, 2004, we and the NRTC agreed to end the NRTC's exclusive DIRECTV service distribution agreement and all related agreements. As consideration, we agreed to pay the NRTC approximately $4.4 million per month through June 2011. As a result of this agreement, we now have the right to sell our services in all territories across the United States. We are amortizing the distribution rights intangible asset of $334.1 million that was recorded as part of the transaction, which includes the present value of the cash payments and fees associated with the transaction, to expense over the remaining life of the original DIRECTV service distribution agreement of seven years.

Subscriber Acquisition, Upgrade and Retention Costs. Effective January 1, 2004, we changed our method of accounting for subscriber acquisition, upgrade and retention costs. Previously, we deferred a portion of these costs, equal to the amount of profit to be earned from the subscriber, typically over the 12 month subscriber contract, and amortized the deferred amounts to expense over the contract period. We now expense all subscriber acquisition, upgrade and retention costs as incurred as subscribers activate the DIRECTV service. We determined that expensing such costs was preferable to our prior accounting method after considering the accounting practices of our competitors and companies within similar industries and the added clarity and ease of understanding our reported results for investors. As a result of this change, we expensed the total of the deferred costs, which amounted to $503.9 million ($311.5 million, net of taxes), as a cumulative effect of accounting change on January 1, 2004.

Three Months Ended June 30, 2005 Compared with the Three Months Ended June 30, 2004

Subscribers. We had approximately 14.7 million subscribers at June 30, 2005. At June 30, 2004, we had approximately 13.0 million subscribers or approximately 11.6 million subscribers excluding the NRTC and Pegasus subscribers, which were acquired in the third quarter of 2004. We added approximately 964,000 gross new subscribers during the three months ended June 30, 2005 and approximately 984,000 gross new subscribers during the same period of 2004. The decrease in gross subscriber additions was primarily due to more stringent credit policies implemented at the beginning of the second quarter of 2005. After accounting for churn, we added approximately 225,000 net new subscribers during the three months ended June 30, 2005 compared to 409,000 net new subscribers during the same period of 2004. The decrease in net new subscriber additions resulted from our increase in average monthly subscriber churn to 1.69% for the three months ended June 30, 2005 compared to 1.49% for same period of 2004 primarily due to higher involuntary churn from subscribers with lower credit scores, due in part to the significant increase in gross subscriber additions over the past several quarters, and a more competitive marketplace.

Revenues. The $743.6 million increase in revenues to $2,960.5 million resulted from our new subscribers added since June 30, 2004, including those subscribers added as part of the NRTC and Pegasus transactions, and higher ARPU on the larger subscriber base. The 4.3% increase in ARPU to $67.79 resulted primarily from price increases on certain programming packages, higher mirroring fees from an increase in the average number of set-top receivers per subscriber and a higher percentage of subscribers purchasing local channels. These increases were partially offset by lower ARPU related to the acquired Pegasus and NRTC subscribers primarily due to the lower ARPU received from these subscribers.

Total Operating Costs and Expenses. The $473.7 million increase in total operating costs and expenses to $2,627.3 million resulted primarily from higher costs for programming, subscriber service expenses, general and administrative expenses and depreciation and amortization expense.

The increase in programming and other costs of $281.2 million resulted mostly from higher license fees for subscription service programming due to the increased number of subscribers and annual program supplier rate increases. Our higher subscriber service expenses resulted primarily from increased costs due to our larger subscriber base, which includes costs related to two new customer call centers opened in the second half of 2004.

The $68.4 million increase in general and administrative expenses resulted primarily from higher bad debt expense resulting from the increase in the subscriber base and involuntary churn discussed above.

The increase in depreciation and amortization expense resulted primarily from amortization expense related to intangible assets recorded as part of the NRTC and Pegasus transactions.

Operating Profit. The improvement in operating profit of $269.9 million was primarily due to higher margins from the increase in revenues, and reduced subscriber acquisition costs and upgrade and retention costs as a percentage of revenues, partially offset by the increase in bad debt expense and the higher depreciation and amortization expense resulting from the amortization of intangible assets recorded as part of the NRTC and Pegasus transactions.

Other Expense. The $65.2 million increase in other expense was primarily due to our second quarter of 2005 pre-tax charge of $64.9 million associated with our 2005 refinancing transactions.

Income Tax Expense. The $75.4 million increase in the income tax expense was due to our higher pre-tax income generated in 2005.

Six Months Ended June 30, 2005 Compared with the Six Months Ended June 30, 2004

Subscribers. We had approximately 14.7 million subscribers at June 30, 2005. At June 30, 2004, we had approximately 13.0 million subscribers or approximately 11.6 million subscribers excluding the NRTC and Pegasus subscribers, which were acquired in the third quarter of 2004. We added approximately 2.1 million gross new subscribers during the six months ended June 30, 2005 compared to approximately 1.9 million gross new subscribers during the same period of 2004. The increase was due to a higher number of subscribers acquired in local channel markets, improved international programming and an improved and more diverse distribution network. After accounting for churn, we added approximately 730,000 net new subscribers during the six months ended June 30, 2005 compared to approximately 828,000 net new subscribers during the same period of 2004. The decrease in net new subscriber additions resulted from our increase in average monthly subscriber churn to 1.59% for the six months ended June 30, 2005 compared to 1.46% for the same period of 2004 primarily due to higher involuntary churn from subscribers with lower credit scores due in part to the significant increase in gross subscriber additions over the past several quarters, and a more competitive marketplace.

Revenues. The $1,463.6 million increase in revenues to $5,761.3 million resulted from our new subscribers added since June 30, 2004, including those subscribers added as part of the NRTC and Pegasus transactions, and higher ARPU on the larger subscriber base. The 4.0% increase in ARPU to $66.91 resulted primarily from price increases on certain programming packages, higher mirroring fees from an increase in the average number of set-top receivers per subscriber and a higher percentage of subscribers purchasing local channels. These increases were partially offset by lower ARPU related to the acquired Pegasus and NRTC subscribers primarily due to the lower ARPU received from these subscribers.

Total Operating Costs and Expenses. The $1,176.7 million increase in total operating costs and expenses to $5,389.7 million resulted primarily from higher costs for programming, subscriber services, subscriber acquisitions, upgrade and retention costs, general and administrative expenses and depreciation and amortization expense.

The increase in programming and other costs of $582.7 million resulted mostly from higher license fees for subscription service programming due to the increased number of subscribers and annual program supplier rate increases. Our higher subscriber service expenses resulted primarily from increased costs due to our larger subscriber base, which includes costs related to two new customer call centers opened in the second half of 2004.

Higher gross subscriber additions during the six months ended June 30, 2005 primarily drove the increase in subscriber acquisition costs. Increased volume under our DVR, movers and HD upgrade programs drove most of the increase in upgrade and retention costs. Under these programs, we provide DVRs or additional equipment, plus installation, to subscribers at significantly reduced prices.

The $100.8 million increase in general and administrative expenses resulted primarily from higher bad debt expense resulting from the increase in the subscriber base and involuntary churn discussed above and higher severance charges during the six months ended June 30, 2005.

The increase in depreciation and amortization expense resulted primarily from amortization expense related to intangible assets recorded as part of the NRTC and Pegasus transactions.

Operating Profit. The improvement in operating profit of $286.9 million was primarily due to higher margins from the increase in revenues, and reduced subscriber acquisition costs and upgrade and retention costs as a percentage of revenues, partially offset by the increase in bad debt expense and the higher depreciation and amortization expense resulting from the amortization of intangible assets recorded as part of the NRTC and Pegasus transactions.

Other Expense. The $65.6 million increase in other expense was primarily due to our second quarter of 2005 pre-tax charge of $64.9 million associated with our 2005 refinancing transactions.

Cumulative Effect of Accounting Change, net of taxes. The $311.5 million cumulative effect of accounting change, net of taxes, was due to the January 1, 2004 change in our accounting for subscriber acquisition, upgrade and retention costs discussed above.

Income Tax (Expense) Benefit. We recognized an income tax expense of $75.1 million for the six months ended June 30, 2005 compared to an income tax benefit of $3.4 million for the six month ended June 30, 2004. The change in income tax (expense) benefit is primarily attributable to the change in income (loss) before income taxes and cumulative effect of accounting change.

Liquidity and Capital Resources

We generally fund our cash requirements from cash on-hand and cash generated by our operations. However, we have received capital contributions and have borrowed amounts from our Parent in the past to fund certain transactions. In the second quarter of 2005, we received a

$538.3 million capital contribution to redeem a portion of our senior notes as part of our refinancing transactions discussed above in "Discussion of Significant Events." We also have up to $500.0 million of borrowing capacity under our revolving credit facility.

At June 30, 2005, we had cash and cash equivalents of $814.0 million compared to $34.5 million at December 31, 2004. The $779.5 million increase in cash and cash equivalents during 2005 resulted primarily from net cash provided by the refinancing transactions discussed above and $494.5 million in cash provided by operations, partially offset by $343.9 million of expenditures for satellites, property and equipment and $31.2 million of payments made associated with our obligations to the NRTC and its members.

As a measure of liquidity, our current ratio (ratio of current assets to current liabilities) was 1.04 at June 30, 2005 compared to 0.65 at December 31, 2004. Working capital increased by $792.0 million to $85.5 million at June 30, 2005 from a working capital deficit of $706.5 million at December 31, 2004. The change was primarily due to our increase in cash described above.

We believe that our cash on-hand, future cash flows and amounts available to us under the revolving portion of our senior secured credit facility will be sufficient to fund our operations and commitments for the foreseeable future. However, several factors may affect our ability to fund our operations and commitments, which we discuss in Note 7 to the consolidated financial statements. Additionally, our ability to borrow under the senior secured credit facility is contingent upon our meeting financial and other covenants associated with our debt.

In addition, our future cash flows may be reduced if we experience, among other things, significantly higher subscriber additions than planned, increased subscriber churn or upgrade and retention costs, higher than planned capital expenditures for satellites and broadcast equipment, satellite anomalies or signal theft or if we are required to make a prepayment on our Term Loans.

Debt. At June 30, 2005, our debt primarily consisted of $910.0 million 8.375% senior notes, $1,000.0 million 6.375% senior notes and $1,500.0 million of borrowings under our senior secured credit facility. Debt is more fully described in Part I, Item 1, Note 4 to the consolidated financial statements of this Quarterly Report, which we incorporate herein by reference.

Contractual Obligations

The following table sets forth our contractual obligations as of June 30, 2005, including the future periods in which payments are expected. Additional details regarding these obligations are provided in the notes to the consolidated financial statements in Part 1, Item 1 referenced in the table.

	Payments due by period
Contractual Obligations	Total		Remainder of 2005		2006-2007		2008-2009		2010 and thereafter
	(dollars in millions)
Long-Term Debt Obligations (Note 4)(a)	$	5,113.0	$	106.6	$	443.0	$	563.6	$	3,999.8
Operating Leases Obligations (Note 7)(b)		122.1		14.8		50.3		33.3		23.7
Purchase Obligations (Note 7)(c)		5,384.7		474.3		1,779.3		1,794.4		1,336.7
Other Long-Term Liabilities Reflected on the Consolidated Balance Sheets under GAAP (Note 6)(d)		456.7		32.2		138.3		155.7		130.5
Total	$	11,076.5	$	627.9	$	2,410.9	$	2,547.0	$	5,490.7

Contingencies

For a discussion of "Contingencies," see Part I, Item 1, Note 7 to the consolidated financial statements of this Quarterly Report, which we incorporate herein by reference.

Certain Relationships and Related-Party Transactions

For a discussion of "Certain Relationships and Related-Party Transactions," see Part I, Item 1, Note 5 to the consolidated financial statements of this Quarterly Report, which we incorporate herein by reference.

Accounting Changes

Subscriber Acquisition, Upgrade and Retention Costs

Effective January 1, 2004, we changed our method of accounting for subscriber acquisition, upgrade and retention costs. See "Discussion of Significant Events" above for further discussion.

For additional information regarding "Accounting Changes," see Part I, Item 1, Note 2 to the consolidated financial statements of this Quarterly Report, which we incorporate herein by reference.

~~Security~~SECURITY ~~Ratings~~RATINGS

On ~~April~~September 422, ~~2005~~2006, inMoody's ~~connection~~Investors ~~with~~Service ~~the~~changed ~~April 2005~~our ~~refinancing~~senior ~~transactions,~~secured ~~described~~rating infrom ~~Part I,~~Ba1 ~~Item~~to 1,Baa3 ~~Note 4~~and toour ~~the~~senior ~~consolidated financial~~unsecured ~~statements,~~rating ~~Moody's~~from ~~Investors~~Ba2 ~~Service,~~to orBa3 ~~Moody's,~~in connection ~~assigned~~with athe ~~Ba1~~implementation ~~rating~~of toits ~~our~~new ~~senior~~rating ~~secured~~methodology. ~~credit~~Our ~~facility.~~Ba2 InCorporate ~~addition,~~Family ~~Moody's~~Rating ~~affirmed~~remained ~~our~~unchanged ~~Ba2~~and ~~senior~~all ~~implied~~ratings ~~and~~remained ~~Ba2~~on ~~senior~~stable ~~unsecured ratings~~outlook. On ~~June~~December 822, ~~2005~~2006, Moody's affirmed ~~assigned~~our aratings ~~Ba2~~but ~~rating~~changed our outlook from stable to ~~our~~negative, ~~6.375%~~following ~~senior~~the ~~notes.~~announcement ~~The~~of ~~ratings~~the ~~remain~~pending ontransaction ~~stable~~between ~~outlook~~News Corporation and Liberty.

On April 53, ~~2005~~2007, ~~in connection with the April 2005 refinancing transactions,~~ Standard and Poor's Ratings Services, orchanged ~~S&P, assigned a BB rating to~~ our senior secured ~~credit~~ ~~facility~~rating ~~and~~from ~~affirmed our~~ BB ~~corporate~~to ~~and~~ BB~~- senior unsecured ratings~~+. OnOur ~~June 8,~~BB ~~2005,~~corporate ~~S&P~~and ~~assigned a~~ BB- ~~rating to our 6.375%~~ senior ~~notes and affirmed our corporate, senior secured and~~ unsecured ratings remained unchanged. All ratings remain on stable outlook.

ITEM 4. CONTROLS AND PROCEDURES

~~DIRECTV~~We carried out an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q under the supervision and with the participation of management, including ~~DIRECTV's~~our principal executive officer and ~~DIRECTV's~~our principal financial officer, of the effectiveness of ~~DIRECTV's~~our disclosure controls and procedures (as defined in in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on the evaluation, ~~DIRECTV's~~our principal executive officer and our ~~DIRECTV's~~ principal financial officer concluded that ~~DIRECTV's~~our disclosure controls and procedures were effective as of ~~June~~March 3031, ~~2005~~2007.

There has been no change in ~~the~~our ~~DIRECTV's~~ internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) ~~that~~ that occurred during ~~DIRECTV's~~our fiscal quarter ended ~~June~~March 3031, ~~2005~~2007, that has materially affected, or is reasonably likely to materially affect, ~~DIRECTV's~~our internal control over financial reporting.

28 PART II—OTHER INFORMATION

PART II—OTHER INFORMATION (UNAUDITED)

ITEM 1. LEGAL PROCEEDINGS

~~(a)~~ Material pending legal proceedings, other than ordinary routine litigation incidental to the business, ~~or changes thereto,~~ to which we became or were a party during the quarter ended ~~June~~ March 3031, ~~2005~~2007 or subsequent thereto, but before the filing of this report, are summarized ~~below:~~in Part 1, Item 1, Note 6 of the Notes to the Consolidated Financial Statements of the Quarterly Report under "Contingencies-Litigation," which we incorporate by reference.

~~None~~Intellectual Property Litigation. We are a defendant in several unrelated lawsuits claiming infringement of various patents relating to various aspects of our businesses. In certain of these cases other industry participants are also defendants, and also in certain of these cases we expect that any potential liability would be the responsibility of our equipment vendors pursuant to applicable contractual indemnification provisions. To the extent that the allegations in these lawsuits can be analyzed by us at this stage of their proceedings, we believe the claims are without merit and intend to defend the actions vigorously. The final disposition of these claims is not expected to have a material adverse effect on our consolidated financial position, but could possibly be material to our consolidated results of operations of any one period. Further, no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

~~(b) Previously reported legal proceedings which have been terminated during the quarter ended June 30, 2005 are summarized below:~~ 21

~~None~~Other. We are subject to other legal proceedings and claims that arise in the ordinary course of our business. The amount of ultimate liability with respect to such actions is not expected to materially affect our financial position, results of operations or liquidity.

29 ITEM 1A. RISK FACTORS

The risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2006 have not materially changed.

DIRECTV HOLDINGS LLC

ITEM 6. EXHIBITS

Exhibit Number		Exhibit Name
10.1*		Indenture, dated as of June 15, 2005, by and among DIRECTV Holdings LLC, DIRECTV Financing Co, Inc., the Guarantors signatory thereto and The Bank of New York, as trustee (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc., filed on June 20, 2005 (the "Holdings June 20, 2005 8-K")).
31.1*		Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ("Section 302").
10.2*		Registration Rights Agreement, dated as of June 15, 2005, by and among DIRECTV Holdings LLC, DIRECTV Financing Co., Inc., the Guarantors signatory thereto and the Initial Purchasers named therein (incorporated herein by reference to Exhibit 10.2 to the Holdings June 20, 2005 8-K).
31.2*		Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 302.
10.3*		Credit Agreement dated as of April 13, 2005 by and among Borrower, Bank of America, N.A., as Administrative Agent and Collateral Agent, the lenders party to the Credit Agreement, certain subsidiaries of the Borrower, as guarantors, JP Morgan Chase Bank, N.A., as Syndication Agent, Credit Suisse First Boston, Goldman Sachs Credit Partners, L.P. and Citicorp North America, Inc. as Co-Documentation Agents, and Banc of America Securities LLC and J.P. Morgan Securities Inc., as Co-Lead Arrangers and Co-Book Managers (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc. filed on April 19, 2005 (the "Holdings April 19, 2005 8-K")).
31.3*		Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.
10.4*		Security Agreement dated as of April 13, 2005 by and among Borrower, its subsidiaries named therein as grantors and Bank of America, N.A., as Collateral Agent (incorporated herein by reference to Exhibit 10.2 to the Holdings April 19, 2005 8-K).
31.4*		Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.
10.5*		Pledge Agreement dated as of April 13, 2005 by and among Borrower, its subsidiaries named therein as pledgors and Bank of America, N.A., as Collateral Agent (incorporated herein by reference to Exhibit 10.3 to the Holdings April 19, 2005 8-K).
32.1*		Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906").
31.1**		Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ("Section 302").
32.2*		Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 906.
31.2**		Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 302.
32.3*		Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.
31.3**		Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.
32.4*		Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.
31.4**		Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.
32.1**		Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906").
32.2**		Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 906.
32.3**		Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.
32.4**		Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.

*: Filed herewith.

3023

DIRECTV HOLDINGS LLC

SIGNATURE

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

	DIRECTV HOLDINGS LLC (Registrant)
Date: August 5, 2005	By:	/s/ MICHAEL W. PALKOVIC Michael W. Palkovic Executive Vice President and Chief Financial Officer
Date: May 9, 2007	By:	/s/ MICHAEL W. PALKOVIC Michael W. Palkovic* Executive Vice President and Chief Financial Officer
	DIRECTV FINANCING CO., INC. (Registrant)
Date: August 5, 2005	By:	/s/ MICHAEL W. PALKOVIC Michael W. Palkovic Executive Vice President and Chief Financial Officer
Date: May 9, 2007	By:	/s/ MICHAEL W. PALKOVIC Michael W. Palkovic* Executive Vice President and Chief Financial Officer

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TABLE OF CONTENTS

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
DIRECTV HOLDINGS LLC CONSOLIDATED BALANCE SHEETS (Unaudited)
DIRECTV HOLDINGS LLC CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
DIRECTV HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2007
Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2006
Condensed Consolidating Balance Sheet As of March 31, 2007
Condensed Consolidating Balance Sheet As of December 31, 2006
DIRECTV HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(concluded)
Condensed Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2007
Condensed Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2006
DIRECTV HOLDINGS LLC

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

ITEM 4. CONTROLS AND PROCEDURES

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

DIRECTV HOLDINGS LLC

ITEM 6. EXHIBITS

DIRECTV HOLDINGS LLC
SIGNATURE

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