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

FORM 10-Q

(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
For the quarterly period ended September 30, 2011
or
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		25-1902628 59-3772785
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
2230 East Imperial Highway, El Segundo, California		90245
(Address of principal executive offices)		(Zip Code)
(310) 964-5000 (Registrant's telephone number, including area code)
N/A (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer o		Accelerated filer o		Non-accelerated filer ý (Do not check if a smaller reporting company)		Smaller reporting company o

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.

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DIRECTV HOLDINGS LLC

TABLE OF CONTENTS

			Page No
Part I—Financial Information (Unaudited)
	Item 1. Financial Statements		1
		Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010	1
		Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010	1
		Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010	2
		Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010	2
		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010	3
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010	3
		Notes to the Consolidated Financial Statements	4
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		1920
	Item 4. Controls and Procedures		3133
Part II—Other Information
	Item 1. Legal Proceedings		3234
	Item 1A. Risk Factors		3234
	Item 6. Exhibits		3335
Signatures			3436

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DIRECTV HOLDINGS LLC ~~PART I—FINANCIAL INFORMATION~~

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS ~~(Unaudited)~~

			Three Months Ended June 30,						Six Months Ended June 30,
			2011			2010			2011			2010
			(Dollars in Millions)
Revenues			$	5,277		$	4,934		$	10,422		$	9,706
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		2,207			2,019			4,407			4,033
		Subscriber service expenses		355			325			706			648
		Broadcast operations expenses		75			66			149			135
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		626			610			1,308			1,205
		Upgrade and retention costs		298			259			557			509
		General and administrative expenses		270			261			486			476
	Depreciation and amortization expense			430			495			872			993
Total operating costs and expenses				4,261			4,035			8,485			7,999
Operating profit				1,016			899			1,937			1,707
Interest income				1			1			1			4
Interest expense				(186	)		(116	)		(342	)		(213	)
Other, net				29			5			23			—
Income before income taxes				860			789			1,619			1,498
Income tax expense				(323	)		(307	)		(611	)		(583	)
Net income			$	537		$	482		$	1,008		$	915

(Unaudited)

			Three Months Ended September 30,						Nine Months Ended September 30,

			2011			2010			2011			2010
			(Dollars in Millions)
Revenues			$	5,421		$	5,031		$	15,843		$	14,737
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		2,411			2,125			6,818			6,158
		Subscriber service expenses		375			351			1,081			999
		Broadcast operations expenses		75			68			224			203
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		793			724			2,101			1,929
		Upgrade and retention costs		332			306			889			815
		General and administrative expenses		282			265			768			741
	Depreciation and amortization expense			353			472			1,225			1,465

Total operating costs and expenses				4,621			4,311			13,106			12,310

Operating profit				800			720			2,737			2,427
Interest income				—			—			1			4
Interest expense				(177	)		(131	)		(519	)		(344	)
Other, net				6			(9	)		29			(9	)

Income before income taxes				629			580			2,248			2,078
Income tax expense				(237	)		(228	)		(848	)		(811	)

Net income			$	392		$	352		$	1,400		$	1,267

The accompanying notes are an integral part of these Consolidated Financial Statements.

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DIRECTV HOLDINGS LLC

CONSOLIDATED BALANCE SHEETS

(Unaudited)

			June 30, 2011			December 31, 2010
			September 30, 2011			December 31, 2010
			(Dollars in Millions)
ASSETS
Current assets
	Cash and cash equivalents		$	~~1,296~~807		$	687
	Accounts receivable, net of allowances of $66 and $46			1,673			1,735
	Accounts receivable, net of allowances of $67 and $46			1,792			1,735
	Inventories			~~298~~286			227
	Prepaid expenses and other			~~188~~366			187
		Total current assets		3,~~455~~251			2,836
Satellites, net				1,~~737~~742			1,794
Property and equipment, net				2,~~801~~984			2,832
Goodwill				3,177			3,176
Intangible assets, net				~~466~~463			495
Other assets				~~252~~258			267
		Total assets	$	11,~~888~~875		$	11,400
LIABILITIES AND OWNER'S DEFICIT
Current liabilities
	Accounts payable and accrued liabilities		$	2,~~571~~705		$	2,977
	Unearned subscriber revenues and deferred credits			~~372~~424			378
		Total current liabilities		23,~~943~~129			3,355
Long-term debt				13,~~462~~463			10,472
Deferred income taxes				1,~~035~~180			906
Other liabilities and deferred credits				~~249~~242			288
Commitments and contingencies
Owner's deficit
	Capital stock and additional paid-in capital			5113			7
	Accumulated deficit			(56,~~852~~152	)		(3,628	)
		Total owner's deficit		(56,~~801~~139	)		(3,621	)
		Total liabilities and owner's deficit	$	11,~~888~~875		$	11,400

The accompanying notes are an integral part of these Consolidated Financial Statements.

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DIRECTV HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

				Six Months Ended June 30,
				Nine Months Ended September 30,
				2011			2010
				(Dollars in Millions)
Cash Flows from Operating Activities
Net income				$	1,~~008~~400		$	~~915~~1,267
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization				~~872~~1,225			~~993~~1,465
	Amortization of deferred revenues and deferred credits				(1827	)		(1727	)
	Share-based compensation expense				4362			3150
	Deferred income taxes				~~119~~260			58193
	Other				(3134	)		1325
	Change in other operating assets and liabilities:
		Accounts receivable			81(42	)		9(103	)
		Inventories			(7159	)		3433
		Prepaid expenses and other			2(177	)		3(185	)
		Accounts payable and accrued liabilities			(~~337~~220	)		~~(55~~5	)
		Unearned subscriber revenue and deferred credits			(646	)		(6115	)
		Other, net			(1210	)		(3719	)
			Net cash provided by operating activities		12,~~650~~424			12,~~941~~819
Cash Flows from Investing Activities
	Cash paid for property and equipment				(~~245~~404	)		(~~222~~349	)
	Cash paid for subscriber leased equipment—subscriber acquisitions				(~~324~~546	)		(~~246~~437	)
	Cash paid for subscriber leased equipment—upgrade and retention				(~~145~~236	)		(~~152~~232	)
	Cash paid for satellites				(4883	)		(6999	)
	Investment in companies, net of cash acquired				(11	)		(1	)
	Other				55			—
	Proceeds from sale of investments				55			—
			Net cash used in investing activities		(718	)		(690	)
	Other, net				1			3
			Net cash used in investing activities		(1,224	)		(1,115	)
Cash Flows from Financing Activities
	Cash proceeds from debt issuance				3,990			25,~~996~~978
	Debt issuance costs				(30	)		(1644	)
	Repayment of long-term debt				(1,000	)		(12,~~103~~323	)
	Repayment of other long-term obligations				(5461	)		(4873	)
	Cash dividends to Parent				(34,~~250~~000	)		(45,~~000~~500	)
	Excess tax benefit from share-based compensation				21			8
			Net cash used in financing activities		(~~323~~1,080	)		(21,~~163~~954	)
Net increase (decrease) in cash and cash equivalents					~~609~~120			(~~912~~250	)
Cash and cash equivalents at beginning of the period					687			1,716
Cash and cash equivalents at end of the period				$	~~1,296~~807		$	~~804~~1,466
Supplemental cash flow information
Cash paid for interest				$	~~277~~512		$	~~171~~248
Cash paid for income taxes					~~449~~691			~~438~~717

The accompanying notes are an integral part of these Consolidated Financial Statements.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

DIRECTV Holdings LLC is an indirect, wholly-owned subsidiary of DIRECTV and consists of DIRECTV Enterprises, LLC and its wholly-owned subsidiaries and DIRECTV Financing Co., Inc., or DIRECTV Financing. We sometimes refer to DIRECTV Holdings LLC as DIRECTV Holdings, DIRECTV U.S., we or us and sometimes refer to DIRECTV as our Parent. 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.

We have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial reporting. In the opinion of management, all adjustments (consisting only of normal recurring items) that are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on February 28, 2011, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 filed with the SEC on May 6, 2011, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 filed with the SEC on August 5, 2011 and all of our other filings, including Current Reports on Form 8-K, filed with the SEC after such date and through the date of this report.

We prepare our consolidated financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~GAAP, which requires us to make estimates and assumptions that affect amounts reported herein. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, our actual results reported in future periods may be affected by changes in those estimates.

Note 2: Divestiture

In April 2011, we sold an equity method investment for $55 million in cash. As a result of this sale, we recognized a $37 million gain, or $23 million after tax, on the sale in "Other, net" in the Consolidated Statements of Operations, which represents the difference between the selling price and the carrying amount of the equity method investment sold.

Note 3: Accounting Change and Change in Accounting Estimate

Accounting Change

Revenue Recognition

On January 1, 2011 we adopted the revisions issued by the Financial Accounting Standards Board to the standard for revenue arrangements with multiple deliverables. The revised standard allows entities to use the "best estimate of selling price" in addition to third-party evidence or actual selling prices for determining the fair value of a deliverable, and includes additional disclosure requirements. The adoption of this change did not have an effect on our consolidated results of operations and financial position.

We enter into multiple-deliverable revenue arrangements with our subscribers under which we provide DIRECTV receiving equipment and installation at the inception of the arrangement, and programming during their contract period of up to two years. We allocate consideration to each deliverable in the arrangement based on its relative selling price. We determine the selling price of the

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

DIRECTV receiving equipment using our best estimate. We determine the selling price for installation services based on prices charged by third parties. We determine the selling price of the programming using our standard programming rates. The DIRECTV receiving equipment, installation services and programming are each considered separate units of accounting.

We recognize subscription and pay-per-view revenues when programming is broadcast to subscribers. We recognize subscriber fees for multiple set-top receivers, warranty services and equipment rental as revenue, as earned. We recognize advertising revenues when the related services are performed. We defer programming payments received from subscribers in advance of the broadcast as "Unearned subscriber revenues and deferred credits" in the Consolidated Balance Sheets until earned. We recognize revenues to be received under contractual commitments on a straight line basis over the minimum contractual period. We report revenues net of customer credits and discounted promotions.

~~Note 4:~~Change ~~Debt~~in Accounting Estimate

~~Senior~~Depreciable ~~Notes~~Lives of Leased Set-Top Receivers

~~The~~We ~~following~~currently ~~table~~lease ~~sets~~most ~~forth~~set-top receivers provided to new and existing subscribers and therefore capitalize the cost of those set-top receivers. We depreciate capitalized set-top receivers over the estimated useful life of the equipment. In our ~~outstanding~~Form 10-K, ~~senior~~we ~~notes~~disclosed ~~balance~~the possibility of a change in useful life for set-top receivers in the near term because we had begun to see indications that useful lives were increasing. As a result of the completion of an extensive evaluation of the estimated useful life of the set-top receivers, including consideration of historical write-offs, improved efficiencies in our refurbishment program, improved set-top receiver failure rates over time and management's judgment of the risk of technological obsolescence, we determined that the estimated useful life of high-definition, or HD, set-top receivers used in our business has increased to four years, from three years as previously estimated. We will continue to depreciate standard definition set-top receivers over a three year estimated useful life. We are accounting for this change in the useful life of the HD set-top receivers as a change in an accounting estimate beginning July 1, 2011. This change had the effect of reducing depreciation and amortization expense and increasing net income in our consolidated results of operations as follows:

			Principal amount			Carrying value, net of unamortized original issue discounts or including premium
		Three Months Ended September 30, 2011			Nine Months Ended September 30, 2011
			June 30, 2011			June 30, 2011		December 31, 2010
		(Dollars in Millions)
						(Dollars in Millions)
Depreciation and amortization expense		$	(76	)	$	(76	)
4.750% senior notes due 2014			$	1,000		$	998	$	998
Net income			47			47
3.550% senior notes due 2015				1,200			1,199		1,199
6.375% senior notes due 2015				—			—		1,002
3.125% senior notes due 2016				750			750		750
3.500% senior notes due 2016				1,500			1,497		—
7.625% senior notes due 2016				1,500			1,500		1,500
5.875% senior notes due 2019				1,000			994		994
5.200% senior notes due 2020				1,300			1,298		1,298
4.600% senior notes due 2021				1,000			999		999
5.000% senior notes due 2021				1,500			1,494		—
6.350% senior notes due 2040				500			499		499
6.000% senior notes due 2040				1,250			1,234		1,233
6.375% senior notes due 2041				1,000			1,000		—
	Total senior notes		$	13,500		$	13,462	$	10,472

The fair value of our senior notes was approximately $14,188 million at June 30, 2011 and $10,881 million at December 31, 2010. We calculated the fair values based on quoted market prices of our senior notes, which is a Level 1 input under accounting guidance for fair value measurements of assets and liabilities.

All of our senior notes were issued by us and have been registered under the Securities Act of 1933, as amended. All of our senior notes are unsecured and have been fully and unconditionally

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~guaranteed, jointly~~ ~~and~~Note 4: ~~severally, by substantially all of our domestic subsidiaries. Principal on the senior notes is payable upon maturity, while interest is payable semi-annually.~~ Debt

~~As of~~ ~~June 30,~~Senior ~~2011, we had the ability to borrow up to $2 billion under a revolving credit facility discussed below.~~ Notes

The following table sets forth our outstanding senior notes balance as of:

		Principal amount		Carrying value, net of unamortized original issue discounts or including premium

		September 30, 2011		September 30, 2011		December 31, 2010
				(Dollars in Millions)
4.750% senior notes due 2014		$	1,000	$	998	$	998
3.550% senior notes due 2015			1,200		1,199		1,199
6.375% senior notes due 2015			—		—		1,002
3.125% senior notes due 2016			750		750		750
3.500% senior notes due 2016			1,500		1,498		—
7.625% senior notes due 2016			1,500		1,500		1,500
5.875% senior notes due 2019			1,000		994		994
5.200% senior notes due 2020			1,300		1,298		1,298
4.600% senior notes due 2021			1,000		999		999
5.000% senior notes due 2021			1,500		1,494		—
6.350% senior notes due 2040			500		499		499
6.000% senior notes due 2040			1,250		1,234		1,233
6.375% senior notes due 2041			1,000		1,000		—

	Total senior notes	$	13,500	$	13,463	$	10,472

The fair value of our senior notes was approximately $14,418 million at September 30, 2011 and $10,881 million at December 31, 2010. We calculated the fair values based on quoted market prices of our senior notes, which is a Level 1 input under accounting guidance for fair value measurements of assets and liabilities.

All of our senior notes were issued by us and have been registered under the Securities Act of 1933, as amended. All of our senior notes are unsecured and have been fully and unconditionally guaranteed, jointly and severally, by substantially all of our domestic subsidiaries. Principal on the senior notes is payable upon maturity, while interest is payable semi-annually.

As of September 30, 2011, we had the ability to borrow up to $2 billion under a revolving credit facility discussed below.

2011 Financing Transactions

On March 10, 2011 we issued the following senior notes:

	Principal		Proceeds, net of discount

	(Dollars in Millions)
3.500% senior notes due 2016	$	1,500	$	1,497
5.000% senior notes due 2021		1,500		1,493
6.375% senior notes due 2041		1,000		1,000

	$	4,000	$	3,990

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

We incurred $24 million of debt issuance costs in connection with this transaction.

On March 17, 2011, we purchased, pursuant to a tender offer, $341 million of our then outstanding $1,002 million of 6.375% senior notes due in 2015, representing approximately 34% of the total outstanding principal of these notes, at a price of 103.313%, plus accrued and unpaid interest. On June 15, 2011, we redeemed, pursuant to the terms of our indenture, the remaining $659 million of our outstanding 6.375% senior notes due 2015, at a price of 102.125%, plus accrued and unpaid interest. We recorded a pre-tax charge of $~~14 million, $9 million after tax, during the second quarter of 2011 and a pre-tax charge of $~~25 million, $16 million after tax, during the ~~six~~nine months ended ~~June~~ September 30, 2011, as a result of the redemptions, primarily for the premiums paid. The pre-tax charge was recorded in "Other, net" in our Consolidated Statements of Operations.

2010 Financing Transactions

On August 17, 2010, pursuant to a registration statement, we issued the following senior notes:

	Principal		Proceeds, net of discount

	(Dollars in Millions)
3.125% senior notes due in 2016	$	750	$	750
4.600% senior notes due in 2021		1,000		999
6.000% senior notes due in 2040		1,250		1,233

	$	3,000	$	2,982

We incurred $19 million of debt issuance costs in connection with this transaction.

On August 20, 2010, we repaid the $1,220 million of remaining principal on Term Loans A and B of our senior secured credit facility. The repayment of Term Loans A and B resulted in a third quarter 2010 pre-tax charge of $7 million, $4 million after tax, resulting from the write-off of deferred debt issuance and other transaction costs. The charge was recorded in "Other, net" in our Consolidated Statements of Operations.

On March 11, 2010 we issued the following senior notes:

	Principal		Proceeds, net of discount

	(Dollars in Millions)
3.550% senior notes due 2015	$	1,200	$	1,199
5.200% senior notes due 2020		1,300		1,298
6.350% senior notes due 2040		500		499

	$	3,000	$	2,996

We incurred $17 million of debt issuance costs in connection with this transaction.

On March 16, 2010, we repaid the $985 million of remaining principal on Term Loan C of our senior secured credit facility. The repayment of Term Loan C resulted in a first quarter 2010 pre-tax charge of $9 million, $6 million after tax, of which $6 million resulted from the write-off of unamortized discount and $3 million resulted from the write-off of deferred debt issuance and other transaction costs. The charge was recorded in "Other, net" in our Consolidated Statements of Operations.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

transaction costs. The charge was recorded in "Other, net" in our Consolidated Statements of Operations.

Credit Facilities

At December 31, 2010, our senior secured credit facility consisted of a $500 million undrawn six-year revolving credit facility.

In February 2011, our senior secured credit facility was terminated and replaced by a five-year, $2.0 billion revolving credit facility. We pay a commitment fee of .30% per year for the unused commitment under the revolving credit facility, and borrowings will bear interest at an annual rate of (i) the London interbank offer rate (LIBOR) (or for Euro advances the EURIBOR rate) plus 1.50% or at our option (ii) the higher of the prime rate plus 0.50% or the Fed Funds Rate plus 1.00%. The commitment fee and the annual interest rate may be increased or decreased under certain conditions, which include changes in our long-term, unsecured debt ratings. The revolving credit facility has been fully and unconditionally guaranteed, jointly and severally, by substantially all of our subsidiaries on a senior unsecured basis.

Covenants and Restrictions

The revolving credit facility requires us to maintain at the end of each fiscal quarter a specified ratio of indebtedness to adjusted net income. The revolving credit facility also includes covenants that restrict our ability to, among other things, (i) incur additional subsidiary indebtedness, (ii) incur liens, (iii) enter into certain transactions with affiliates, (iv) merge or consolidate with another entity, (v) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vi) change our lines of business. Additionally, the senior notes contain restrictive covenants that are similar. Should we fail to comply with these covenants, all or a portion of our borrowings under the senior notes could become immediately payable and our revolving credit facility could be terminated. At ~~June~~September 30, 2011, we were in compliance with all such covenants. The senior notes and revolving credit facility also provide that the borrowings may be required to be prepaid if certain change-in-control events occur.

Note 5: Commitments and Contingencies

Commitments

Satellite Commitments

We have entered into contracts for the construction and launch of two new satellites: D14, which we expect to launch in the first quarter of 2014 and D15, which we expect to launch in the fourth quarter of 2014. D14 and D15 are expected to provide us additional HD, replacement, and backup capacity.

Total cash payments under these agreements aggregate to $580 million, payable as follows $53 million in the remainder of 2011, $215 million in 2012, $229 million in 2013, $57 million in 2014, and $26 million in 2015.

Contingencies

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 June 30, 2011. 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 effect on our consolidated financial statements.

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 8

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~analyzed~~treble bydamage usclaims, ator ~~this~~demands ~~stage~~that, ofif ~~their proceedings~~granted, wecould ~~believe~~require ~~the~~us ~~claims~~to ~~are~~pay ~~without~~damages ~~merit~~or ~~and~~make ~~intend~~other toexpenditures ~~defend~~in ~~the~~amounts ~~actions~~that ~~vigorously.~~could Wenot ~~have~~be ~~determined~~estimated ~~that~~at ~~the~~September 30, ~~likelihood~~2011. ofAfter adiscussion ~~material liability~~with incounsel ~~such~~representing ~~matters~~us isin ~~remote~~those oractions, ~~have~~it ~~made~~is ~~appropriate accruals and~~ the ~~final~~opinion ~~disposition~~ of ~~these~~management ~~claims~~that such litigation is not expected to have a material effect on our consolidated financial ~~position~~statements. However, if an adverse ruling is made in a lawsuit involving key intellectual property, such ruling could result in a loss that would be material to our consolidated results of operations of any one period. No assurance can be given that any adverse outcome would not be material to our consolidated financial position.

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. We have determined that the likelihood of a material liability in such matters is remote or have made appropriate accruals and the final disposition of these claims is not expected to have a material effect on our consolidated financial position. However, if an adverse ruling is made in a lawsuit involving key intellectual property, such ruling could result in a loss that would be material to our consolidated results of operations of any one period. No assurance can be given that any adverse outcome would not be material to our consolidated financial position.

Early Cancellation Fees. In 2008, a number of plaintiffs filed putative class action lawsuits in state and federal courts challenging the early cancellation fees we assess our customers when they do not fulfill their programming commitments. Several of these lawsuits are pending—some in California state court purporting to represent statewide classes, and some in federal courts purporting to represent nationwide classes. The lawsuits seek both monetary and injunctive relief. While the theories of liability vary, the lawsuits generally challenge these fees under state consumer protection laws as both unfair and inadequately disclosed to customers. In light of the U.S. Supreme Court's recent decision in AT&T Mobility LLC v. Concepcion, we intend to move to compel these cases to arbitration in accordance with our Customer Agreement. We believe that our early cancellation fees are adequately disclosed, and represent reasonable estimates of the costs we incur when customers cancel service before fulfilling their programming commitments.

From time to time, we receive investigative inquiries or subpoenas from state and federal authorities with respect to alleged violations of state and federal statutes. These inquiries may lead to legal proceedings in some cases. We have received a request for information from the Federal Trade Commission, or FTC, on issues similar to those recently resolved with a multistate group of state attorneys general. We are cooperating with the FTC by providing information about our sales and marketing practices and customer complaints.

Satellites

We may purchase in-orbit and launch insurance to mitigate the potential financial impact of satellite launch and in-orbit failures if the premium costs are considered economic 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 a satellite failure could have on our ability to provide service. At ~~June~~September 30, 2011, the net book value of in-orbit ~~satellites~~ satellites was $1,~~626~~577 million, all of which was uninsured.

During the ~~Note 6:~~third ~~Related~~quarter ~~Party~~of ~~Transactions~~ 2011, the propulsion system used to maintain our D10 satellite's position in orbit temporarily ceased to function. If the propulsion system were to permanently fail, we

~~In the ordinary course of our operations, we enter into transactions with related parties as discussed below.~~ 9

DIRECTV and affiliates

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~also~~would ~~receive~~be required to de-orbit the satellite and record an ~~allocation~~impairment ofcharge ~~employee~~for ~~benefit~~its ~~expenses~~remaining ~~from~~book ~~our~~value, ~~Parent~~which was approximately $274 million at September 30, 2011. We currently ~~believe~~have ~~that~~sufficient ~~our~~backup ~~consolidated~~capacity ~~financial~~to ~~statements~~continue ~~reflect~~broadcasting ~~our~~most ~~cost~~ of ~~doing~~the ~~business~~channels inbroadcast ~~accordance~~from ~~with~~this ~~SEC~~satellite; ~~Staff Accounting~~however, ~~Bulletin~~we ~~Topic 1.B,~~would ~~"Allocation~~lose some of ~~Expenses~~our ~~and~~HD ~~Related~~pay-per-view channels ~~Disclosures~~if inthis ~~Financial~~satellite ~~Statements~~has to be de-orbited before additional capacity becomes available. We do not believe the loss of ~~Subsidiaries,~~such ~~Divisions~~channels orwould ~~Lesser~~materially ~~Business~~affect ~~Components~~our results of ~~Another~~operations or ~~Entity~~financial position."

~~We paid~~ ~~dividends to our Parent of $3,250~~Note ~~million~~6: ~~during~~Related ~~the~~Party ~~six months ended June 30, 2011 and $4,000 million during the six months ended June 30, 2010 from available cash and cash equivalents.~~ Transactions

In the ordinary course of our operations, we enter into transactions with related parties as discussed below.

DIRECTV and affiliates

We determine our income taxes based upon our tax sharing agreement with our Parent, 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 $658 million for the nine months ended September 30, 2011 and $698 million for the nine months ended September 30, 2010. We also receive an allocation of employee benefit expenses from our Parent. We believe that our consolidated financial statements reflect our cost of doing business in accordance with SEC Staff Accounting Bulletin Topic 1.B, "Allocation of Expenses and Related Disclosures in Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity."

We paid dividends to our Parent of $4,000 million during the nine months ended September 30, 2011 and $5,500 million during the nine months ended September 30, 2010 from available cash and cash equivalents. In October 2011, we paid a $400 million dividend to our Parent.

Transactions with regional sports networks owned by our Parent are also included as transactions with DIRECTV and affiliates.

Liberty Media, Liberty Global and Discovery Communications

On June 16, 2010, our Parent completed a transaction with Dr. John Malone and his family, which we refer to as the Malones, which resulted in the reduction of the Malones' voting interest in our Parent from approximately 24% to approximately 3% and Dr. Malone's concurrent resignation from our Parent's Board of Directors. Transactions with Liberty Media, Discovery Communications, Inc. and Liberty Global, Inc. and their subsidiaries or equity method investees were considered to be related party transactions as a result of Dr. Malone's ownership interest and management roles for these entities. Such transactions consisted primarily of purchases of programming created, owned or distributed by these entities.

The majority of payments under contractual arrangements with Liberty Media, Discovery Communications, Inc. and Liberty Global, Inc. entities relate to multi-year programming contracts. Payments under these contracts are typically subject to annual rate increases and are based on the number of subscribers receiving the related programming.

Other

Companies in which we hold equity method investments are also considered related parties.

~~Transactions with the Game Show Network, in which our Parent holds an equity method investment, are also included as transactions with Other.~~ 10

The majority of payments under contractual arrangements with related parties are pursuant to multi-year programming contracts. Payments under these contracts are typically subject to annual rate increases and are based on the number of subscribers receiving the related programming.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Transactions with the Game Show Network, in which our Parent holds an equity method investment, are also included as transactions with Other.

The following table summarizes sales to, and purchases from, related parties:

		Three Months Ended June 30,				Six Months Ended June 30,
		Three Months Ended September 30,				Nine Months Ended September 30,
		2011		2010		2011		2010
		(Dollars in Millions)
Sales:
Liberty Media and affiliates		$	—	$	12—	$	—	$	26
Discovery Communications, Liberty Global and affiliates			—		2—		—		5
DIRECTV and affiliates			2		21		46		45
Other			1—		13		1		14
	Total	$	32	$	174	$	57	$	3640
Purchases:
Liberty Media and affiliates		$	—	$	65—	$	—	$	143
Discovery Communications, Liberty Global and affiliates			—		50—		—		111
DIRECTV and affiliates			1415		1514		2843		2741
Other			2120		23		4667		4568
	Total	$	35	$	~~153~~37	$	74110	$	~~326~~363

The following table sets forth the amount of accounts receivable from and accounts payable to related parties as of:

	June 30, 2011		December 31, 2010
	September 30, 2011		December 31, 2010
	(Dollars in Millions)
Accounts receivable	$	3	$	9
Accounts payable		5051		63

The accounts receivable and accounts payable balances as of ~~June~~September 30, 2011 and December 31, 2010 are primarily related to intercompany transactions with our Parent.

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7: Condensed Consolidating Financial Statements

The following presents the condensed consolidating statements of operations for the three and six months ended June 30, 2011 and June 30, 2010, the condensed consolidating balance sheets as of June 30, 2011 and December 31, 2010, and the condensed consolidating statements of cash flows for the six months ended June 30, 2011 and 2010 of DIRECTV Holdings together with DIRECTV Financing, or the Co-Issuers, and 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.

Condensed Consolidating Statement of Operations For the Three Months Ended June 30, 2011

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Revenues			$	183		$	5,277		$	(183	)	$	5,277
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		—			2,207			—			2,207
		Subscriber service expenses		—			355			—			355
		Broadcast operations expenses		—			75			—			75
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		—			626			—			626
		Upgrade and retention costs		—			298			—			298
		General and administrative expenses		—			453			(183	)		270
	Depreciation and amortization expense			—			430			—			430
		Total operating costs and expenses		—			4,444			(183	)		4,261
Operating profit				183			833			—			1,016
Equity in income of consolidated subsidiaries				547			—			(547	)		—
Interest income				—			1			—			1
Interest expense				(185	)		(1	)		—			(186	)
Other, net				(14	)		43			—			29
Income before income taxes				531			876			(547	)		860
Income tax benefit (expense)				6			(329	)		—			(323	)
Net income			$	537		$	547		$	(547	)	$	537

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7: Condensed Consolidating ~~Statement~~Financial ~~of Operations~~Statements ~~For the Three Months Ended June 30, 2010~~

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Revenues			$	110		$	4,934		$	(110	)	$	4,934
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		—			2,019			—			2,019
		Subscriber service expenses		—			325			—			325
		Broadcast operations expenses		—			66			—			66
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		—			610			—			610
		Upgrade and retention costs		—			259			—			259
		General and administrative expenses		—			371			(110	)		261
	Depreciation and amortization expense			—			495			—			495
		Total operating costs and expenses		—			4,145			(110	)		4,035
Operating profit				110			789			—			899
Equity in income of consolidated subsidiaries				484			—			(484	)		—
Interest income				1			—			—			1
Interest expense				(114	)		(2	)		—			(116	)
Other, net				—			5			—			5
Income before income taxes				481			792			(484	)		789
Income tax benefit (expense)				1			(308	)		—			(307	)
Net income			$	482		$	484		$	(484	)	$	482

The following presents the condensed consolidating statements of operations for the three and nine months ended September 30, 2011 and September 30, 2010, the condensed consolidating balance sheets as of September 30, 2011 and December 31, 2010, and the condensed consolidating statements of cash flows for the nine months ended September 30, 2011 and September 30, 2010 of DIRECTV Holdings together with DIRECTV Financing, or the Co-Issuers, and 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.

Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2011

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated

			(Dollars in Millions)
Revenues			$	178		$	5,421		$	(178	)	$	5,421
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		—			2,411			—			2,411
		Subscriber service expenses		—			375			—			375
		Broadcast operations expenses		—			75			—			75
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		—			793			—			793
		Upgrade and retention costs		—			332			—			332
		General and administrative expenses		—			460			(178	)		282
	Depreciation and amortization expense			—			353			—			353

		Total operating costs and expenses		—			4,799			(178	)		4,621

Operating profit				178			622			—			800
Equity in income of consolidated subsidiaries				391			—			(391	)		—
Interest expense				(176	)		(1	)		—			(177	)
Other, net				—			6			—			6

Income (loss) before income taxes				393			627			(391	)		629
Income expense				(1	)		(236	)		—			(237	)

Net income (loss)			$	392		$	391		$	(391	)	$	392

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations For the ~~Six~~Three Months Ended ~~June~~September 30, ~~2011~~ 2010

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Revenues			$	~~327~~119		$	105,~~422~~031		$	(~~327~~119	)	$	105,~~422~~031
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		—			42,~~407~~125			—			42,~~407~~125
		Subscriber service expenses		—			~~706~~351			—			~~706~~351
		Broadcast operations expenses		—			~~149~~68			—			~~149~~68
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		—			~~1,308~~724			—			~~1,308~~724
		Upgrade and retention costs		—			~~557~~306			—			~~557~~306
		General and administrative expenses		—			~~813~~384			(~~327~~119	)		~~486~~265
	Depreciation and amortization expense			—			~~872~~472			—			~~872~~472
		Total operating costs and expenses		—			84,~~812~~430			(~~327~~119	)		84,~~485~~311
Operating profit				~~327~~119			~~1,610~~601			—			~~1,937~~720
Equity in income of consolidated subsidiaries				~~1,031~~367			—			(~~1,031~~367	)		—
Interest income				—			1			—			1
Interest expense				(129	)		(2	)		—			(131	)
Interest expense				(340	)		(2	)		—			(342	)
Other, net				(15	)		6			—			(9	)
Other, net				(24	)		48			(1	)		23
Income (loss) before income taxes				342			605			(367	)		580
Income before income taxes				994			1,657			(1,032	)		1,619
Income tax benefit (expense)				10			(238	)		—			(228	)
Income tax benefit (expense)				14			(625	)		—			(611	)
Net income (loss)			$	352		$	367		$	(367	)	$	352
Net income			$	1,008		$	1,032		$	(1,032	)	$	1,008

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations For the ~~Six~~Nine Months Ended ~~June~~September 30, ~~2010~~ 2011

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Revenues			$	~~201~~505		$	915,~~706~~843		$	(~~201~~505	)	$	915,~~706~~843
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		—			46,~~033~~818			—			46,~~033~~818
		Subscriber service expenses		—			~~648~~1,081			—			~~648~~1,081
		Broadcast operations expenses		—			~~135~~224			—			~~135~~224
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		—			12,~~205~~101			—			12,~~205~~101
		Upgrade and retention costs		—			~~509~~889			—			~~509~~889
		General and administrative expenses		—			~~677~~1,273			(~~201~~505	)		~~476~~768
	Depreciation and amortization expense			—			~~993~~1,225			—			~~993~~1,225
		Total operating costs and expenses		—			813,~~200~~611			(~~201~~505	)		713,~~999~~106
Operating profit				~~201~~505			12,~~506~~232			—			12,~~707~~737
Equity in income of consolidated subsidiaries				~~925~~1,423			—			(~~925~~1,423	)		—
Interest income				1—			31			—			41
Interest expense				(~~209~~516	)		(43	)		—			(~~213~~519	)
Other, net				(925	)		954			—			—29
Income before income taxes				909			1,514			(925	)		1,498
Income (loss) before income taxes				1,387			2,284			(1,423	)		2,248
Income tax benefit (expense)				613			(~~589~~861	)		—			(~~583~~848	)
Net income			$	915		$	925		$	(925	)	$	915
Net income (loss)			$	1,400		$	1,423		$	(1,423	)	$	1,400

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DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating ~~Balance~~Statement ~~Sheet As~~ of ~~June~~Operations For the Nine Months Ended September 30, ~~2011~~ 2010

			Co-Issuers			Guarantor Subsidiaries			Eliminations			DIRECTV Holdings Consolidated
			(Dollars in Millions)
ASSETS
Revenues			$	320		$	14,737		$	(320	)	$	14,737
Total current assets			$	1,371		$	2,171		$	(87	)	$	3,455
Operating costs and expenses
Satellites, net				—			1,737			—			1,737
	Costs of revenues, exclusive of depreciation and amortization expense
Property and equipment, net				—			2,801			—			2,801
		Broadcast programming and other		—			6,158			—			6,158
Goodwill				1,828			1,349			—			3,177
		Subscriber service expenses		—			999			—			999
Intangible assets, net				—			466			—			466
		Broadcast operations expenses		—			203			—			203
Other assets				14,720			6,906			(21,374	)		252
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Total assets			$	17,919		$	15,430		$	(21,461	)	$	11,888
		Subscriber acquisition costs		—			1,929			—			1,929
LIABILITIES AND OWNER'S EQUITY (DEFICIT)
		Upgrade and retention costs		—			815			—			815
Total current liabilities			$	222		$	2,809		$	(88	)	$	2,943
		General and administrative expenses		—			1,061			(320	)		741
Long-term debt				13,462			—			—			13,462
	Depreciation and amortization expense			—			1,465			—			1,465
Deferred income taxes				—			1,252			(217	)		1,035
		Total operating costs and expenses		—			12,630			(320	)		12,310
Other liabilities and deferred credits				10,036			249			(10,036	)		249
Operating profit				320			2,107			—			2,427
Owner's equity (deficit)
Equity in income of consolidated subsidiaries				1,293			—			(1,293	)		—
	Capital stock and additional paid-in capital			51			4,665			(4,665	)		51
Interest income				1			3			—			4
	Retained earnings (accumulated deficit)			(5,852	)		6,455			(6,455	)		(5,852	)
Interest expense				(338	)		(6	)		—			(344	)
		Total owner's equity (deficit)		(5,801	)		11,120			(11,120	)		(5,801	)
Other, net				(25	)		16			—			(9	)
Total liabilities and owner's equity (deficit)			$	17,919		$	15,430		$	(21,461	)	$	11,888
Income (loss) before income taxes				1,251			2,120			(1,293	)		2,078
Income tax benefit (expense)				16			(827	)		—			(811	)
Net income (loss)			$	1,267		$	1,293		$	(1,293	)	$	1,267

Table of Contents

DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Balance Sheet As of ~~December~~September 3130, ~~2010~~ 2011

			Co-Issuers			Guarantor Subsidiaries		Eliminations			DIRECTV Holdings Consolidated
			(Dollars in Millions)
ASSETS
Total current assets			$	~~743~~871		$	2,~~147~~435	$	(5455	)	$	23,~~836~~251
Satellites, net				—			1,~~794~~742		—			1,~~794~~742
Property and equipment, net				—			2,~~832~~984		—			2,~~832~~984
Goodwill				1,828			1,~~348~~349		—			3,~~176~~177
Intangible assets, net				—			~~495~~463		—			~~495~~463
Other assets				1315,~~032~~384			67,~~069~~220		(1822,~~834~~346	)		~~267~~258
Total assets			$	1518,~~603~~083		$	1416,~~685~~193	$	(1822,~~888~~401	)	$	11,~~400~~875
LIABILITIES AND OWNER'S EQUITY (DEFICIT)
Total current liabilities			$	160		$	3,~~247~~022	$	(5253	)	$	3,~~355~~129
Long-term debt				1013,~~472~~463			—		—			1013,~~472~~463
Deferred income taxes				—			1,~~123~~397		(217	)		~~906~~1,180
Other liabilities and deferred credits				810,~~592~~599			~~289~~244		(810,~~593~~601	)		~~288~~242
Owner's equity (deficit)
	Capital stock and additional paid-in capital			713			4,~~602~~684		(4,~~602~~684	)		713
	Retained earnings (accumulated deficit)			(36,~~628~~152	)		56,~~424~~846		(56,~~424~~846	)		(36,~~628~~152	)
		Total owner's equity (deficit)		(36,~~621~~139	)		1011,~~026~~530		(1011,~~026~~530	)		(36,~~621~~139	)
Total liabilities and owner's equity (deficit)			$	1518,~~603~~083		$	1416,~~685~~193	$	(1822,~~888~~401	)	$	11,~~400~~875

Table of Contents

DIRECTV HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating ~~Statement~~Balance Sheet As of ~~Cash Flows For the Six Months Ended June~~December 3031, ~~2011~~ 2010

			Co-Issuers			Guarantor Subsidiaries			~~DIRECTV Holdings Consolidated~~Eliminations			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Cash flows from operating activities
ASSETS
	Net cash provided by operating activities		$	897		$	753		$	1,650
Total current assets			$	743		$	2,147		$	(54	)	$	2,836
Cash flows from investing activities
Satellites, net				—			1,794			—			1,794
	Cash paid for property and equipment			—			(245	)		(245	)
Property and equipment, net				—			2,832			—			2,832
	Cash paid for subscriber leased equipment—subscriber acquisition			—			(324	)		(324	)
Goodwill				1,828			1,348			—			3,176
	Cash paid for subscriber leased equipment—upgrade and retention			—			(145	)		(145	)
Intangible assets, net				—			495			—			495
	Cash paid for satellites			—			(48	)		(48	)
Other assets				13,032			6,069			(18,834	)		267
	Investment in companies, net of cash acquired			—			(11	)		(11	)
Total assets			$	15,603		$	14,685		$	(18,888	)	$	11,400
	Other			—			55			55
LIABILITIES AND OWNER'S EQUITY (DEFICIT)
		Net cash used in investing activities		—			(718	)		(718	)
Total current liabilities			$	160		$	3,247		$	(52	)	$	3,355
Cash flows from financing activities
Long-term debt				10,472			—			—			10,472
	Cash proceeds from debt issuance			3,990			—			3,990
Deferred income taxes				—			1,123			(217	)		906
	Debt issuance costs			(30	)		—			(30	)
Other liabilities and deferred credits				8,592			289			(8,593	)		288
	Repayment of long-term debt			(1,000	)		—			(1,000	)
Owner's equity (deficit)
	Repayment of other long-term obligations			—			(54	)		(54	)
	Capital stock and additional paid-in capital			7			4,602			(4,602	)		7
	Cash dividend to Parent			(3,250	)		—			(3,250	)
	Retained earnings (accumulated deficit)			(3,628	)		5,424			(5,424	)		(3,628	)
	Excess tax benefit from share-based compensation			—			21			21
		Total owner's equity (deficit)		(3,621	)		10,026			(10,026	)		(3,621	)
		Net cash used in financing activities		(290	)		(33	)		(323	)
Total liabilities and owner's equity (deficit)			$	15,603		$	14,685		$	(18,888	)	$	11,400
Net increase in cash and cash equivalents				607			2			609
Cash and cash equivalents at beginning of the period				683			4			687
Cash and cash equivalents at the end of the period			$	1,290		$	6		$	1,296

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

NOTES ~~Condensed~~TO ~~Consolidating~~THE ~~Statement~~CONSOLIDATED ofFINANCIAL ~~Cash~~STATEMENTS ~~Flows For~~(Continued) ~~the Six Months Ended June 30, 2010~~

			Co-Issuers			Guarantor Subsidiaries			DIRECTV Holdings Consolidated
			(Dollars in Millions)
Cash flows from operating activities
	Net cash provided by operating activities		$	1,214		$	727		$	1,941
Cash flows from investing activities
	Cash paid for property and equipment			—			(222	)		(222	)
	Cash paid for subscriber leased equipment—subscriber acquisition			—			(246	)		(246	)
	Cash paid for subscriber leased equipment—upgrade and retention			—			(152	)		(152	)
	Cash paid for satellites			—			(69	)		(69	)
	Investment in companies, net of cash acquired			—			(1	)		(1	)
		Net cash used in investing activities		—			(690	)		(690	)
Cash flows from financing activities
	Cash proceeds from debt issuance			2,996			—			2,996
	Debt issuance costs			(16	)		—			(16	)
	Repayment of long-term debt			(1,103	)		—			(1,103	)
	Repayment of other long-term obligations			—			(48	)		(48	)
	Cash dividend to Parent			(4,000	)		—			(4,000	)
	Excess tax benefit from share-based compensation			—			8			8
		Net cash used in financing activities		(2,123	)		(40	)		(2,163	)
Net decrease in cash and cash equivalents				(909	)		(3	)		(912	)
Cash and cash equivalents at beginning of the period				1,709			7			1,716
Cash and cash equivalents at the end of the period			$	800		$	4		$	804

(Unaudited)

Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2011

			Co-Issuers			Guarantor Subsidiaries			DIRECTV Holdings Consolidated

			(Dollars in Millions)
Cash flows from operating activities
	Net cash provided by operating activities		$	1,148		$	1,276		$	2,424

Cash flows from investing activities
	Cash paid for property and equipment			—			(404	)		(404	)
	Cash paid for subscriber leased equipment—subscriber acquisition			—			(546	)		(546	)
	Cash paid for subscriber leased equipment—upgrade and retention			—			(236	)		(236	)
	Cash paid for satellites			—			(83	)		(83	)
	Investment in companies, net of cash acquired			—			(11	)		(11	)
	Proceeds from sale of investments			—			55			55
	Other			—			1			1

		Net cash used in investing activities		—			(1,224	)		(1,224	)

Cash flows from financing activities
	Cash proceeds from debt issuance			3,990			—			3,990
	Debt issuance costs			(30	)		—			(30	)
	Repayment of long-term debt			(1,000	)		—			(1,000	)
	Repayment of other long-term obligations			—			(61	)		(61	)
	Cash dividend to Parent			(4,000	)		—			(4,000	)
	Excess tax benefit from share-based compensation			—			21			21

		Net cash used in financing activities		(1,040	)		(40	)		(1,080	)

Net increase in cash and cash equivalents				108			12			120
Cash and cash equivalents at beginning of the period				683			4			687

Cash and cash equivalents at the end of the period			$	791		$	16		$	807

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Concluded)

(Unaudited)

Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2010

			Co-Issuers			Guarantor Subsidiaries			DIRECTV Holdings Consolidated

			(Dollars in Millions)
Cash flows from operating activities
	Net cash provided by operating activities		$	1,642		$	1,177		$	2,819

Cash flows from investing activities
	Cash paid for property and equipment			—			(349	)		(349	)
	Cash paid for subscriber leased equipment—subscriber acquisition			—			(437	)		(437	)
	Cash paid for subscriber leased equipment—upgrade and retention			—			(232	)		(232	)
	Cash paid for satellites			—			(99	)		(99	)
	Investment in companies, net of cash acquired			—			(1	)		(1	)
	Other						3			3

		Net cash used in investing activities		—			(1,115	)		(1,115	)

Cash flows from financing activities
	Cash proceeds from debt issuance			5,978			—			5,978
	Debt issuance costs			(44	)		—			(44	)
	Repayment of long-term debt			(2,323	)		—			(2,323	)
	Repayment of other long-term obligations			—			(73	)		(73	)
	Cash dividend to Parent			(5,500	)		—			(5,500	)
	Excess tax benefit from share-based compensation			—			8			8

		Net cash used in financing activities		(1,889	)		(65	)		(1,954	)

Net decrease in cash and cash equivalents				(247	)		(3	)		(250	)
Cash and cash equivalents at beginning of the period				1,709			7			1,716

Cash and cash equivalents at the end of the period			$	1,462		$	4		$	1,466

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

The following management's discussion and analysis should be read in conjunction with our management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on February 28, 2011, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 filed with the SEC on May 6, ~~2011and~~2011 our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 filed with the SEC on August 5, 2011 and all of our other filings, including 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 the use of statements that include phrases such as we "believe", "expect", "anticipate", "intend", "plan", "foresee", "project" or other similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make regarding our outlook for ~~2010~~2011 financial results, liquidity and capital resources.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include economic, business, competitive, national or global political, market and regulatory conditions and the following, each of which is described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2010 or in Part II, Item 1A of this Quarterly Report on Form 10-Q:

•: Levels of competition are increasing.
•: We depend on others to produce programming and programming costs are increasing.
•: Increased subscriber churn or subscriber upgrade and retention costs could materially adversely affect our financial performance.
•: Our subscriber acquisition costs could materially increase.
•: Our ability to keep pace with technological developments is uncertain.
•: Our business relies on intellectual property, some of which is owned by third parties, and we may inadvertently infringe patents and proprietary rights of others.
•: Construction or launch delays on satellites could materially adversely affect our revenues and earnings.
•: Our satellites are subject to significant launch and operational risks.
•: The loss of a satellite, none of which is currently insured, could materially adversely affect our earnings.
•: Satellite programming signals have been stolen and may be stolen in the future, which could result in lost revenues and would cause us to incur incremental operating costs that do not result in subscriber acquisition.

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•: The ability to maintain FCC licenses and other regulatory approvals is critical to our business.
•: Our Parent may have a significant indemnity obligation to Liberty Media, which is not limited in amount or subject to any cap, if parts of the Liberty Transaction or Liberty's 2008 Transaction with News Corporation are treated as a taxable transaction.
•: We face risks arising from the outcome of various legal proceedings.
•: We face risks related to our reliance on network information systems and other technology.
•: Those and the other factors that are described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2010.

Any forward looking statement made by us in the Quarterly Report on Form 10-Q speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may occur and it is not possible for us to predict them all. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future development or otherwise, except as required by law.

CONTENTS

The following is a discussion of our results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Quarterly Report. Information in this section is organized as follows:

•: Business Overview
•: Significant Events Affecting the Comparability of the Results of Operations
•: Results of Operations
•: Liquidity and Capital Resources
•: Contractual Obligations
•: Contingencies
•: Certain Relationships and Related Party Transactions
•: Critical Accounting Estimates
•: Accounting Changes
•: Key Terminology

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DIRECTV HOLDINGS LLC

BUSINESS OVERVIEW

We are a wholly-owned subsidiary of DIRECTV 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 primarily 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 ~~June~~September 30, 2011, we had ~~over~~approximately 19.48 million subscribers.

SIGNIFICANT ~~TRANSACTIONS~~EVENTS AFFECTING THE COMPARABILITY OF THE RESULTS OF OPERATIONS

Change in Accounting Estimate

Depreciable Lives of Leased Set-Top Receivers

We currently lease most set-top receivers provided to new and existing subscribers and therefore capitalize the cost of those set-top receivers. We depreciate capitalized set-top receivers over the estimated useful life of the equipment. In our Form 10-K, we disclosed the possibility of a change in useful life for set-top receivers in the near term because we had begun to see indications that useful lives were increasing. As a result of the completion of an extensive evaluation of the estimated useful life of the set-top receivers, including consideration of historical write-offs, improved efficiencies in our refurbishment program, improved set-top receiver failure rates over time and management's judgment of the risk of technological obsolescence, we determined that the estimated useful life of high-definition, or HD, set-top receivers used in our business has increased to four years, from three years as previously estimated. We will continue to depreciate standard definition set-top receivers over a three year estimated useful life. We are accounting for this change in the useful life of the HD set-top receivers as a change in an accounting estimate beginning July 1, 2011. This change had the effect of reducing depreciation and amortization expense and increasing net income in our consolidated results of operations as follows:

	Three Months Ended September 30,			Nine Months Ended September 30,

	(Dollars in Millions, Except Per Share Amounts)
Depreciation and amortization expense	$	(76	)	$	(76	)
Net income		47			47

Financing Transactions

2011 Financing Transactions

In March 2011, we issued $4.0 billion of senior notes resulting in $3,990 million of proceeds, net of discount.

In March 2011, we completed a fixed price tender offer to purchase $341 million of the outstanding 6.375% senior notes due in 2015. On June 15, 2011, we redeemed, ~~pursuant~~ pursuant to the terms of our indenture, the remaining $659 million of our outstanding 6.375% senior notes due 2015, at a price of 102.125%, plus accrued and unpaid interest. We recorded a pre-tax charge of $~~14 million, $9 million after tax, during the second quarter of 2011 and a pre-tax charge of $~~25 million, $16 million after tax during the ~~six~~nine months ended ~~June~~September 30, 2011, as a result of the redemptions, primarily for the premiums paid. The pre-tax charge was recorded in "Other, net" in our Consolidated Statements of Operations.

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2010 Financing Transactions

In ~~March~~ August 2010, we issued $3.0 billion of senior notes resulting in ~~net proceeds of~~ $2,~~996~~982 million of net proceeds and repaid the $~~985~~1,220 million of remaining principal on Term ~~Loan C~~Loans A and B of our senior secured credit facility. The repayment of Term ~~Loan C~~Loans A and B resulted in a ~~first~~third quarter of 2010 pre-tax charge of $97 million, $64 million after tax, resulting from the write-off of ~~the unamortized discount,~~ deferred debt issuance and other transaction costs. ~~The charges were recorded in "Other, net" in our Consolidated Statements of Operations.~~

In March 2010, we issued $3.0 billion of senior notes resulting in net proceeds of $2,996 million and repaid the $985 million of remaining principal on Term Loan C of our senior secured credit facility. The repayment of Term Loan C resulted in a first quarter of 2010 pre-tax charge of $9 million, $6 million after tax, resulting from the write-off of the unamortized discount, deferred debt issuance and other transaction costs.

The charges were recorded in "Other, net" in our Consolidated Statements of Operations.

Divestiture

In April 2011, we sold an equity method investment for $55 million in cash. We recognized a $37 million gain ($23 million after tax) on the sale in "Other, net" in the Consolidated Statements of Operations.

~~EXECUTIVE OUTLOOK~~ 23

We previously reported in our Annual Report on Form 10-K for the year ended December 31, 2010 that we expect that the anticipated growth in revenues in 2011 will be partially offset by higher programming costs, including the costs associated with our contract with the NFL, resulting in operating profit before depreciation and amortization growth in the low to mid single digit percentage range. Consistent with this, we currently anticipate lower operating profit before depreciation and amortization margins in the second half of the year as compared to the first half of the year, primarily due to higher programming costs.

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~~Results~~RESULTS ofOF ~~Operations~~OPERATIONS

The following table sets forth our unaudited consolidated statements of operations and certain other operating data:

Three Months Ended ~~June~~September 30, 2011 Compared to Three Months Ended ~~June~~September 30, 2010

			Three Months Ended June 30,						Change
			Three Months Ended September 30,						Change
			2011			2010			$			%
			(Dollars in Millions)
Revenues			$	5,~~277~~421		$	45,~~934~~031		$	~~343~~390			7.08	%
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		2,~~207~~411			2,~~019~~125			~~188~~286			913.35	%
		Subscriber service expenses		~~355~~375			~~325~~351			3024			96.28	%
		Broadcast operations expenses		75			6668			97			1310.63	%
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		~~626~~793			~~610~~724			1669			29.65	%
		Upgrade and retention costs		~~298~~332			~~259~~306			3926			158.15	%
		General and administrative expenses		~~270~~282			~~261~~265			917			36.4	%
	Depreciation and amortization expense			~~430~~353			~~495~~472			(65119	)		(1325.12	)%
		Total operating costs and expenses		4,~~261~~621			4,~~035~~311			~~226~~310			57.62	%
Operating profit				~~1,016~~800			~~899~~720			~~117~~80			1311.01	%
Interest income				1			1			—			0.0	%
Interest expense				(177	)		(131	)		(46	)		35.1	%
Interest expense				(186	)		(116	)		(70	)		60.3	%
Other, net				6			(9	)		15			(166.7	)%
Other, net				29			5			24			480.0	%
Income before income taxes				629			580			49			8.4	%
Income before income taxes				860			789			71			9.0	%
Income tax expense				(237	)		(228	)		(9	)		3.9	%
Income tax expense				(323	)		(307	)		(16	)		5.2	%
Net income			$	392		$	352		$	40			11.4	%
Net income			$	537		$	482		$	55			11.4	%
Other Data:
Operating profit margin				14.8	%		14.3	%		—			—
Operating profit before depreciation and amortization(1)
Operating profit			$	~~1,016~~800		$	~~899~~720		$	~~117~~80			1311.01	%
Add: Depreciation and amortization expense				~~430~~353			~~495~~472			(65119	)		(1325.12	)%
Operating profit before depreciation and amortization			$	1,~~446~~153		$	1,~~394~~192		$	52(39	)		(3.73	)%
Operating profit before depreciation and amortization—margin(1)				2721.43	%		2823.37	%		NA—			~~(3.2~~—	)%
Cash Flow Information
Net cash provided by operating activities			$	~~706~~774		$	~~661~~878		$	45(104	)		6(11.8	)%
Net cash used in investing activities				(~~342~~506	)		(~~377~~425	)		35(81	)		(919.31	)%
Net cash used in financing activities				(~~748~~757	)		~~(617~~209	)		(~~131~~966	)		21462.2	%

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		Three Months Ended June 30,						Change
		Three Months Ended September 30,						Change
		2011			2010			$			%
		(Dollars in Millions, Except Per Subscriber Amounts)
Free cash flow(2)
Net cash provided by operating activities		$	~~706~~774		$	~~661~~878		$	45(104	)		6(11.8	)%
Less: Cash paid for property and equipment			(~~143~~159	)		(~~113~~127	)		(3032	)		2625.52	%
	Cash paid for subscriber leased equipment—subscriber acquisitions		(~~150~~222	)		(~~131~~191	)		(1931	)		1416.52	%
	Cash paid for subscriber leased equipment—upgrade and retention		(7691	)		(7180	)		(511	)		713.08	%
	Cash paid for satellites		(1735	)		(6130	)		44(5	)		~~(72~~16.17	)%
Free cash flow		$	~~320~~267		$	~~285~~450		$	35(183	)		12(40.37	)%
Subscriber data
Total number of subscribers (000's)			19,~~433~~760			18,~~760~~934			~~673~~826			34.64	%
ARPU		$	9092.5821		$	8788.9098		$	23.6823			3.06	%
Average monthly subscriber churn %			1.5962	%		1.5170	%		—			5(4.37	)%
Gross subscriber additions (000's)			~~954~~1,280			~~946~~1,137			8143			012.86	%
Subscriber disconnections (000's)			~~928~~953			~~846~~963			82(10	)		9(1.70	)%
Net subscriber additions (000's)			26327			~~100~~174			~~(74~~153	)		~~(74~~87.09	)%
Average subscriber acquisition costs—per subscriber (SAC)		$	~~813~~793		$	~~783~~805		$	30(12	)		3(1.85	)%

(1)

Operating profit before depreciation and amortization, which is a financial measure that is not determined in accordance with GAAP can be calculated by adding amounts under the caption "Depreciation and amortization expense" to "Operating profit." 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 DIRECTV use operating profit before depreciation and amortization to evaluate the operating performance of our company and our business segments and to allocate resources and capital to business segments. This metric is also used 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 acquired intangible assets resulting from prior business acquisitions. To compensate for the exclusion of depreciation and amortization expense from operating profit, our management and DIRECTV separately measure and budget for capital expenditures and business acquisitions.

(1)Operating profit before depreciation and amortization, which is a financial measure that is not determined in accordance with GAAP can be calculated by adding amounts under the caption "Depreciation and amortization expense" to "Operating profit." 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 DIRECTV use operating profit before depreciation and amortization to evaluate the operating performance of our company and our business segments and to allocate resources and capital to business segments. This metric is also used 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 acquired intangible assets resulting from prior business acquisitions. To compensate for the exclusion of depreciation and amortization expense from operating profit, our management and DIRECTV 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. Our management believes 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.

23Operating profit before depreciation and amortization margin is calculated by dividing operating profit before depreciation and amortization by revenues.

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(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 and 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 DIRECTV 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.

~~Operating profit~~ Subscribers. In ~~before~~the ~~depreciation~~third ~~and~~quarter ~~amortization~~of ~~margin~~2011, isnet ~~calculated~~subscriber byadditions ~~dividing~~increased ~~operating~~due ~~profit~~to ~~before~~higher ~~depreciation~~gross additions resulting from our improved customer offers and ~~amortization~~a bylower ~~revenues~~churn rate resulting primarily from higher retention offers to existing subscribers.

Subscribers. In the second quarter of 2011, net subscriber additions decreased as higher gross additions were more than offset by higher churn resulting from a more competitive environment and ongoing economic weakness.

Revenues. Our revenues increased as a result of the larger subscriber base and higher ARPU. The increase in ARPU resulted primarily from price increases on programming packages and lease fees, as well as higher advanced service fees, partially offset by higher promotional offers to new and existing subscribers.

Operating profit before depreciation and amortization. ~~The~~Operating ~~improvement of operating~~ profit before depreciation and amortization ~~was primarily~~and ~~due~~the torelated margin decreased in the third ~~increased~~quarter ~~gross~~of ~~profit~~2011 ~~generated~~as ~~from~~compared to the ~~higher~~third ~~revenues,~~quarter ~~partially~~of ~~offset~~2010 byas higher ~~upgrade~~revenues ~~and~~were ~~retention~~more ~~costs~~than ~~resulting~~offset ~~from~~by a higher ~~volume~~programming, ofsubscriber ~~advanced~~acquisition ~~equipment~~and ~~upgrades~~upgrade and retention costs.

Broadcast programming and other costs increased primarily due to annual program supplier rate increases, higher costs resulting from our new NFL Sunday Ticket contract, which went into effect with the 2011 season and the larger number of subscribers. Subscriber service expenses increased in the ~~second~~ third quarter of 2011 compared to the ~~second~~third quarter of 2010 primarily due to ~~service quality improvement initiatives and~~ the higher number of subscribers.

Subscriber acquisition costs ~~and~~increased primarily due to higher gross subscriber additions as well as higher dealer commissions. Subscriber acquisition costs per subscriber, or SAC, which includes the cost of capitalized set-top receivers, ~~increased~~decreased primarily due to ~~increased~~ ~~demand~~lower ~~for~~marketing ~~advanced~~costs ~~products~~per ~~over~~subscriber ~~the~~added, ~~second~~partially ~~quarter~~offset ofby ~~2010~~increased dealer commissions. Under our lease program we capitalized $~~150~~222 million of set-top receivers in the ~~second~~third quarter of 2011 and $~~131~~191 million in the ~~second~~third quarter of 2010 for subscriber acquisitions.

Upgrade and retention costs increased in the ~~second~~third quarter of 2011 due to a ~~more competitive environment and a~~ higher volume of advanced equipment upgrades and a more competitive environment. Under our lease program we capitalized $7691 million of set-top receivers in the ~~second~~third quarter of 2011 and $7180 million in the ~~second~~third quarter of 2010 for subscriber upgrades.

24 Operating profit. Operating profit and operating profit margin increased in the third quarter of 2011 compared to the third quarter of 2010. The increase in operating profit margin was primarily due

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~~Operating~~to lower ~~profit. The~~depreciation ~~increase~~and inamortization ~~operating~~expense ~~profit~~in ~~was~~the ~~primarily~~third ~~due~~quarter toof ~~higher~~2011 ~~operating~~resulting ~~profit~~from ~~before~~the ~~depreciation~~change ~~and~~in ~~amortization, coupled~~HD ~~with lower~~set-top ~~depreciation~~receiver ~~and~~estimated ~~amortization~~depreciable ~~expense~~life ~~due~~from three to ~~the~~four years, the completion of the amortization of a subscriber related intangible asset and ~~decreased~~lower ~~subscriber~~depreciation ~~equipment~~expense ~~capitalization~~associated with a reduction in capitalized set-top receivers over the last several years, partially offset by lower operating profit before depreciation and amortization.

Interest expense. The increase in interest expense was from an increase in the average debt balance compared to 2010.

Income tax expense. The increase in income tax expense was primarily due to the higher income before income taxes.

~~Six~~Nine Months Ended ~~June~~September 30, 2011 Compared with the ~~Six~~Nine Months Ended ~~June~~September 30, 2010

			Six Months Ended June 30,						Change
			Nine Months Ended September 30,						Change
			2011			2010			$			%
			(Dollars in Millions)
Revenues			$	1015,~~422~~843		$	914,~~706~~737		$	~~716~~1,106			7.45	%
Operating costs and expenses
	Costs of revenues, exclusive of depreciation and amortization expense
		Broadcast programming and other		46,~~407~~818			46,~~033~~158			~~374~~660			910.37	%
		Subscriber service expenses		~~706~~1,081			~~648~~999			5882			98.02	%
		Broadcast operations expenses		~~149~~224			~~135~~203			1421			10.43	%
	Selling, general and administrative expenses, exclusive of depreciation and amortization expense
		Subscriber acquisition costs		12,~~308~~101			1,~~205~~929			~~103~~172			8.59	%
		Upgrade and retention costs		~~557~~889			~~509~~815			4874			9.41	%
		General and administrative expenses		~~486~~768			~~476~~741			1027			23.16	%
	Depreciation and amortization expense			~~872~~1,225			~~993~~1,465			(~~121~~240	)		(1216.24	)%
		Total operating costs and expenses		813,~~485~~106			712,~~999~~310			~~486~~796			6.15	%
Operating profit				12,~~937~~737			12,~~707~~427			~~230~~310			1312.58	%
Interest income				1			4			(3	)		(75.0	)%
Interest expense				(~~342~~519	)		(~~213~~344	)		(~~129~~175	)		6050.69	%
Other, net				2329			—(9	)		2338			~~100~~422.02	%
Income before income taxes				12,~~619~~248			12,~~498~~078			~~121~~170			8.12	%
Income tax expense				(~~611~~848	)		(~~583~~811	)		(2837	)		4.86	%
Net income			$	1,~~008~~400		$	~~915~~1,267		$	93133			10.25	%
Other Data:
Operating profit margin				17.3	%		16.5	%		—			—
Operating profit before depreciation and amortization(1)
Operating profit			$	12,~~937~~737		$	12,~~707~~427		$	~~230~~310			1312.58	%
Add: Depreciation and amortization expense				~~872~~1,225			~~993~~1,465			(~~121~~240	)		(1216.24	)%
Operating profit before depreciation and amortization			$	23,~~809~~962		$	23,~~700~~892		$	~~109~~70			41.08	%
Operating profit before depreciation and amortization—margin(1)				2725.0	%		2726.84	%		NA—			~~(2.9~~—	)%
Cash Flow Information
Net cash provided by operating activities			$	12,~~650~~424		$	12,~~941~~819		$	(~~291~~395	)		(1514.0	)%
Net cash used in investing activities				(~~718~~1,224	)		(~~690~~1,115	)		(28109	)		49.18	%
Net cash used in financing activities				(~~323~~1,080	)		(21,~~163~~954	)		~~1,840~~874			(8544.17	)%

2527

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		Six Months Ended June 30,						Change
		Nine Months Ended September 30,						Change
		2011			2010			$			%
		(Dollars in Millions, Except Per Subscriber Amounts)
Free cash flow(2)
Net cash provided by operating activities		$	12,~~650~~424		$	12,~~941~~819		$	(~~291~~395	)		(1514.0	)%
Less: Cash paid for property and equipment			(~~245~~404	)		(~~222~~349	)		(2355	)		1015.18	%
	Cash paid for subscriber leased equipment—subscriber acquisitions		(~~324~~546	)		(~~246~~437	)		(78109	)		3124.79	%
	Cash paid for subscriber leased equipment—upgrade and retention		(~~145~~236	)		(~~152~~232	)		7(4	)		(41.67	)%
	Cash paid for satellites		(4883	)		(6999	)		2116			(3016.42	)%
Free cash flow		$	~~888~~1,155		$	1,~~252~~702		$	~~(364~~547	)		~~(29~~32.1	)%
Subscriber data
Total number of subscribers (000's)			19,~~433~~760			18,~~760~~934			~~673~~826			34.64	%
ARPU		$	8990.7548		$	8687.6943		$	3.0605			3.5	%
Average monthly subscriber churn %			1.5557	%		1.4956	%		—			4.0.6	%
Gross subscriber additions (000's)			23,~~006~~286			13,~~871~~008			~~135~~278			79.2	%
Subscriber disconnections (000's)			12,~~796~~749			12,~~671~~634			~~125~~115			74.54	%
Net subscriber additions (000's)			~~210~~537			~~200~~374			10163			543.06	%
Average subscriber acquisition costs—per subscriber (SAC)		$	~~814~~806		$	~~776~~787		$	3819			42.94	%

Subscribers. In ~~the first half of~~ 2011, net subscriber additions increased ~~slightly~~due asto ~~the~~ higher gross additions ~~were~~mainly ~~coupled~~resulting ~~with~~from ~~a higher~~improved ~~number of~~customer ~~disconnections due to a higher average monthly subscriber churn rate on the larger subscriber base~~offers. Churn ~~The increase in churn~~ was relatively ~~principally~~unchanged ~~due~~from ~~to a more competitive environment~~2010.

Revenues. Our revenues increased as a result of the larger subscriber base and higher ARPU. The increase in ARPU resulted primarily from price increases on programming packages, higher set-top receiver lease fees and higher advanced service fees, partially offset by higher promotional offers to new and existing subscribers.

Operating profit before depreciation and amortization. ~~The~~Operating ~~improvement of operating~~ profit before depreciation and amortization was ~~primarily~~ ~~due~~higher in 2011 as compared to 2010 ~~the~~as ~~gross~~increased ~~profit~~revenues ~~generated~~were ~~from~~partially ~~the~~offset by higher ~~revenues~~programming costs, ~~partially~~increased subscriber acquisition costs and higher upgrade and retention costs. Operating profit before depreciation and amortization margin decreased in 2011 as compared to 2010 as the revenue growth was more than offset by higher relative growth in broadcast programming, subscriber acquisition and upgrade and retention costs.

Broadcast programming and other costs increased primarily due to annual program supplier rate increases, higher costs resulting from our new NFL Sunday Ticket™ contract, which went into effect with the 2011 season and the larger number of subscribers . Subscriber service expenses increased in ~~the first half of~~ 2011 compared to ~~the first half of~~ 2010 primarily due to service quality improvement initiatives and the higher number of subscribers.

Subscriber acquisition costs increased primarily due to higher gross additions and higher SAC per subscriber. SAC per subscriber, which includes the cost of capitalized set-top receivers, increased primarily due to increased subscriber demand for advanced products over ~~the first half of~~ 2010 coupled with increased dealer commissions, partially offset by lower marketing costs per subscriber added. Under our lease program we capitalized $~~324~~546 million of set-top receivers in ~~the first half of~~ 2011 and $~~246~~437 million of set-top receivers in ~~the first half~~ 2010 for subscriber acquisitions.

Upgrade and retention costs increased in the first half of 2011 due to a higher volume of advanced equipment upgrades. Under our lease program we capitalized $145 million of set-top receivers in the first half of 2011 and $152 million the first half of 2010 for subscriber upgrades. 28

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~~Operating~~Upgrade and ~~profit. The~~retention ~~increase~~costs increased in ~~operating~~2011 ~~profit was primarily~~ due to a higher ~~operating~~volume ~~profit~~of ~~before~~advanced ~~depreciation~~equipment ~~and~~upgrades. ~~amortization, coupled~~Under ~~with lower~~our ~~depreciation~~lease ~~and~~program ~~amortization~~we ~~expense~~capitalized ~~due~~$236 million toof ~~the~~set-top ~~completion~~receivers ofin ~~the~~2011 ~~amortization~~and of$232 million ain ~~subscriber~~2010 ~~related~~for ~~intangible asset and decreased~~ subscriber ~~equipment capitalization~~upgrades.

Operating profit. Operating profit and operating profit margin increased in 2011 as compared to 2010 due to lower depreciation and amortization expense in 2011 resulting from the change in HD set-top receiver estimated depreciable life from three to four years, the completion of the amortization of a subscriber related intangible asset and lower depreciation expense associated with a reduction in capital set-top receivers over the last several years, partially offset by lower operating profit before depreciation and amortization margin.

Interest expense. The increase in interest expense was from an increase in the average debt balance compared to 2010.

Income tax expense. The increase in income tax expense was primarily due to the higher income before income taxes.

LIQUIDITY AND CAPITAL RESOURCES

At ~~June~~September 30, 2011, our cash and cash equivalents totaled $~~1,296~~807 million compared with $687 million at December 31, 2010. The $~~609~~120 million increase resulted primarily from $3,990 million of cash proceeds from the issuance of senior notes and $12,~~650~~424 million in cash provided by operating activities, partially offset by $34,~~250~~000 million in dividends paid to our Parent, $1,000 million of cash used to repay long-term debt and $~~762~~1,269 million of cash paid for property, equipment and satellites.

As of ~~June~~September 30, 2011 we had the ability to borrow up to $2 billion under our revolving credit facility, which is available until February 2016. We are subject to restrictive certain covenants under the credit facility.

As a measure of liquidity, the current ratio (ratio of current assets to current liabilities) was 1.1704 at ~~June~~September 30, 2011 and 0.85 at December 31, 2010. The increase in ~~our~~ our current ratio during the ~~six~~nine months ended ~~June~~September 30, 2011 was primarily due to ~~the~~an ~~change~~increase in our cash and cash equivalents and prepaid expenses and other, and lower accounts payable and accrued liabilities.

We have received capital contributions and have borrowed amounts from our Parent in the past to fund certain transactions. We may also provide dividends to our Parent or fund other cash requirements, including additional share repurchase programs or other distributions to its stockholders. We may use available cash and cash equivalents, cash from operations, or incur additional borrowings to fund such dividends. In October 2011, we paid a $400 million dividend to our Parent.

We expect to fund our cash requirements and our existing business plan using our available cash balances and cash provided by operations. WeIn ~~may~~addition, ~~borrow~~our ~~additional~~Parent ~~amounts~~presently inexpects ~~the~~to ~~future~~add toits ~~maintain~~guarantee ~~our~~for ~~outstanding~~existing and future debt offerings consistent with its objective of achieving a long-term debt target of ~~approximately~~ 2.5 times ~~our~~ annual operating profit before depreciation and amortization of DIRECTV on a consolidated basis. Additional borrowings, which may include borrowings under our $2 billion revolving credit facility, may be required to achieve this target and fund strategic investment opportunities should they arise.

Several factors may affect our ability to fund our operations and commitments that we discuss in "Contractual Obligations" and "Contingencies" below. 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. Additionally, our ability to ~~borrow under the revolving credit facility is contingent upon us meeting financial and other covenants associated with its facility as more fully described below.~~

~~Borrowings~~ 29

At June 30, 2011, we had $13,462 million in total outstanding borrowings, bearing a weighted average interest rate of 5.2%. Our outstanding borrowings consist of our senior notes as more fully described in Note 4 of the Notes to the Consolidated Financial Statements in Item 1, Part I of this

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~~Quarterly~~borrow ~~Report~~under ~~and~~the inrevolving ~~Note 7~~credit tofacility ~~the~~is ~~Notes~~contingent toupon ~~the~~us ~~Consolidated~~meeting ~~Financial~~financial ~~Statements~~and inother ~~Item 8,~~covenants ~~Part II~~associated ofwith ~~our~~its ~~2010~~facility ~~Form 10-K~~as more fully described below.

Borrowings

At September 30, 2011, we had $13,463 million in total outstanding borrowings, bearing a weighted average interest rate of 5.2%. Our outstanding borrowings consist of our senior notes as more fully described in Note 4 of the Notes to the Consolidated Financial Statements in Item 1, Part I of this Quarterly Report and in Note 7 to the Notes to the Consolidated Financial Statements in Item 8, Part II of our 2010 Form 10-K.

Our senior notes mature as follows: $1,000 million in 2014, $1,200 million in 2015 and $11,300 million thereafter.

Revolving Credit Facility

In February 2011, our senior secured credit facility was terminated and replaced by a new five-year, $2.0 billion revolving credit facility. We pay a commitment fee of .30% per year for the unused commitment under the revolving credit facility, and borrowings will bear interest at an annual rate of (i) the London interbank offer rate (LIBOR) (or for Euro advances the EURIBOR rate) plus 1.50% or at our option (ii) the higher of the prime rate plus 0.50% or the Fed Funds Rate plus 1.00%. The commitment fee and the annual interest rate may be increased or decreased under certain conditions, which include changes in our long-term, unsecured debt ratings. The revolving credit facility has been fully and unconditionally guaranteed, jointly and severally, by substantially all of our subsidiaries on a senior unsecured basis.

Covenants and Restrictions. The revolving credit facility requires us to maintain at the end of each fiscal quarter a specified ratio of indebtedness to adjusted net income. The revolving credit facility also includes covenants that restrict our ability to, among other things, (i) incur additional subsidiary indebtedness, (ii) incur liens, (iii) enter into certain transactions with affiliates, (iv) merge or consolidate with another entity, (v) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vi) change our lines of business. Additionally, the senior notes contain restrictive covenants that are similar. Should we fail to comply with these covenants, all or a portion of our borrowings under the senior notes could become immediately payable and our revolving credit facility could be terminated. At ~~June~~September 30, 2011, we were in compliance with all ~~such~~ such covenants. The senior notes and revolving credit facility also provide that the borrowings may be required to be prepaid if certain change-in-control events occur.

~~CONTRACTUAL OBLIGATIONS~~ 30

The following table sets forth our contractual obligations as of June 30, 2011, 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 I, Item 1 referenced in the table below and the Notes to the Consolidated Financial Statements in Part II, Item 8 in our Form 10-K for the year ended December 31, 2010.

	Payments due by period
Contractual Obligations	Total		2011		2012-2013		2014-2015		2016 and thereafter
	(Dollars in Millions)
Long-term debt obligations (Note 4)(a)	$	22,131	$	350	$	1,408	$	3,539	$	16,834
Purchase obligations(b)		6,367		1,006		3,477		1,844		40
Operating lease obligations(c)		313		34		93		46		140
Other long-term liabilities reflected on the Consolidated Balance Sheets under GAAP(d)		71		9		34		17		11
Total	$	28,882	$	1,399	$	5,012	$	5,446	$	17,025

(a)Long-term debt obligations include interest calculated based on the rates in effect at June 30, 2011, however, the obligations do not reflect potential prepayments required under its indentures.

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CONTRACTUAL OBLIGATIONS

The following table sets forth our contractual obligations as of September 30, 2011, 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 I, Item 1 referenced in the table below and the Notes to the Consolidated Financial Statements in Part II, Item 8 in our Form 10-K for the year ended December 31, 2010.

			Payments due by period						2016 and thereafter

Contractual Obligations	Total		2011		2012-2013		2014-2015		2016 and thereafter
	(Dollars in Millions)
Long-term debt obligations (Note 4)(a)	$	21,894	$	113	$	1,408	$	3,540	$	16,833
Purchase obligations(b)		6,285		510		3,808		1,927		40
Operating lease obligations(c)		319		16		97		52		154
Other long-term liabilities reflected on the Consolidated Balance Sheets under GAAP(d)		80		5		40		23		12

Total	$	28,578	$	644	$	5,353	$	5,542	$	17,039

(a): Long-term debt obligations include interest calculated based on the rates in effect at September 30, 2011, however, the obligations do not reflect potential prepayments required under its indentures.
(b): Purchase obligations consist primarily of broadcast programming commitments, service contract commitments and satellite contracts. Broadcast programming commitments include guaranteed minimum contractual commitments that are typically based on a flat fee or a minimum number of required subscribers subscribing to the related programming. Actual payments may exceed the minimum payment requirements if the actual number of subscribers subscribing to the related programming exceeds the minimum amounts. Service contract commitments include minimum commitments for the purchase of services that have been outsourced to third parties, such as billing services, telemetry, tracking and control services and broadcast center services. In most cases, actual payments, which are typically based on volume, usually exceed these minimum amounts.
(c): Certain of our operating leases contain escalation clauses and renewal or purchase options, which we do not consider in the amounts disclosed.
(d): Payments due by period for other long-term liabilities reflected on the Consolidated Balance Sheet under GAAP do not include payments that could be made related to our net unrecognized tax benefits liability, which amounted to $57 million as of September 30, 2011. The timing and amount of any future payments is not reasonably estimable, as such payments are dependent on the completion and resolution of examinations with tax authorities. We do not expect a significant payment related to these obligations within the next twelve months.

CONTINGENCIES

For a discussion of "Contingencies," see Part I, Item 1, Note 5 of the Notes 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 6 of the Notes to the Consolidated Financial Statements of this Quarterly Report, which we incorporate herein by reference.

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CRITICAL ACCOUNTING ESTIMATES

~~There~~For ~~have~~a ~~been~~discussion noof ~~material~~ changes into our ~~critical~~"Critical ~~accounting~~Accounting ~~estimates~~Estimates," ~~during~~see Part I, Item 1, Note 3 of the ~~six~~Notes ~~months~~to ~~ended~~the Consolidated ~~June 30~~Financial Statements of this Quarterly Report, ~~2011~~which we incorporate herein by reference. For additional information, see Item 7. Critical Accounting Estimates in Part II of our Annual Report on Form 10-K for the year ended December 31, 2010.

ACCOUNTING CHANGES

For a discussion of "Accounting Changes" see Part I, Item 1, Note 3 of the Notes to the Consolidated Financial Statements of this Quarterly Report, which we incorporate herein by reference.

KEY TERMINOLOGY

The following key terminology is 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 and access fees, 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 DVR service, hardware revenues from subscribers who lease or purchase set-top receivers from us, warranty service fees and advertising services. Revenues are reported net of customer credits and discounted promotions.

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DVR service, hardware revenues from subscribers who lease or purchase set-top receivers from us, warranty service fees and advertising services. Revenues are reported net of customer credits and discounted promotions.

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 continuing service fees paid to third parties for active subscribers and warranty service costs.

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 and telcos, 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 receivers capitalized each period for subscriber acquisitions is included in "Cash paid for subscriber leased equipment-subscriber acquisitions" in the Consolidated Statements of Cash Flows.

Upgrade and Retention Costs. Upgrade and retention costs are associated with upgrade efforts for existing subscribers that we believe will result in higher ARPU and lower churn. Our upgrade efforts include subscriber equipment upgrade programs for DVR, HD and HD DVR 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 included in "Cash paid for subscriber leased equipment-upgrade and retention" in the Consolidated Statements of Cash Flows.

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over their useful lives. The amount of set-top receivers capitalized each period for upgrade and retention programs is included in "Cash paid for subscriber leased equipment-upgrade and retention" in the Consolidated Statements of Cash Flows.

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 average 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.

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Subscriber Count. The total number of subscribers represents the total number of subscribers actively subscribing to our service, including subscribers who have suspended their account for a particular season of the year because they are temporarily away from their primary residence and subscribers who are in the process of relocating and commercial equivalent viewing units.

SAC. We calculate SAC, which represents total subscriber acquisition costs stated on a per subscriber basis, by dividing total subscriber acquisition costs for the 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 the amount of cash paid for equipment leased to new subscribers during the period.

* * *

ITEM 4. CONTROLS AND PROCEDURES

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 our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on the evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of ~~June~~ September 30, 2011.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended ~~June~~September 30, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

* * *

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

(a): Material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we became or were a party during the quarter ended September 30, 2011 or subsequent thereto, but before the filing of the report, are summarized below:

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. We have determined that the likelihood of a material liability in such matters is remote or have made appropriate accruals and the final disposition of these claims is not expected to have a material effect on our consolidated financial position. However, if an adverse ruling is made in a lawsuit involving key intellectual property, such ruling could result in a loss that would be material to our consolidated results of operations of any one period. No assurance can be given that any adverse outcome would not be material to our consolidated financial position.

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.

(b): No previously reported legal proceedings were terminated during the third quarter ended September 30, 2011.

ITEM 1A. RISK FACTORS

Except as discussed below, the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2010, ~~and~~ our Quarterly Report for the quarter ended March 31, 2011 and our Quarterly Report for the quarter ended June 30, 2011 have not materially changed. See Part I Item 2 of this Quarterly Report related to "forward-looking statements" which we incorporate by reference.

The National Football League labor dispute has been resolved.

We have a contract with the National Football League for the exclusive rights to distribute the NFL Sunday Ticket Package to our subscribers. The NFL's collective bargaining agreement with its players expired in March 2011 and the NFL and its players have been engaged in a labor dispute. The NFL and its ~~players~~ ~~recently~~ players agreed to a new collective bargaining agreement. Therefore, our risks related to the labor dispute have been resolved and the NFL Sunday Ticket Package ~~will~~is bebeing distributed to our subscribers for the 2011-2012 season pursuant to our contract with the NFL.

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ITEM 6. EXHIBITS

Exhibit Number			Exhibit Name

	**31.1		Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302.
	**31.2		Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 302.
	**31.3		Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.
	**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.
	***101.INS		XBRL Instance Document
	***101.SCH		XBRL Taxonomy Extension Schema Document
	***101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
	***101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
	***101.LAB		XBRL Taxonomy Extension Label Linkbase Document
	***101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

**: Furnished, not filed.
***: Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

**Furnished, not filed. ***Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability. 35

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SIGNATURES

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 4, 2011	By:	/s/ PATRICK T. DOYLE Patrick T. Doyle (Duly Authorized Officer and Executive Vice President and Chief Financial Officer)
Date: November 3, 2011	By:	/s/ PATRICK T. DOYLE Patrick T. Doyle (Duly Authorized Officer and Executive Vice President and Chief Financial Officer)
	DIRECTV FINANCING CO., INC. (Registrant)
Date: August 4, 2011	By:	/s/ PATRICK T. DOYLE Patrick T. Doyle (Duly Authorized Officer and Executive Vice President and Chief Financial Officer)
Date: November 3, 2011	By:	/s/ PATRICK T. DOYLE Patrick T. Doyle (Duly Authorized Officer and Executive Vice President and Chief Financial Officer)

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