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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 March 31, 2015
For the quarterly period ended June 30, 2015
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 1-34554

DIRECTV GROUP HOLDINGS, LLC (successor in interest to DIRECTV) (Exact name of registrant as specified in its charter)


DELAWARE (State or other jurisdiction of incorporation or organization)		26-4772533 (I.R.S. Employer Identification No.)
2260 East Imperial Highway El Segundo, California (Address of principal executive offices)		90245 (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 ý		Accelerated filer o		Non-accelerated filer o (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

As of ~~May~~July 124, 2015, the registrant had outstanding 504,~~062~~514,~~549~~734 shares of common stock.

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DIRECTV

TABLE OF CONTENTS

	Page No.
Part I—Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014		2
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014	2
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014		3
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2015 and 2014	3
Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014		4
Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014		5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014	5
Notes to the Consolidated Financial Statements	6	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	40	34
Item 3. Quantitative and Qualitative Disclosures About Market Risk	69	56
Item 4. Controls and Procedures	69	56
Part II—Other Information
Item 1. Legal Proceedings	70	57
Item 1A. Risk Factors	71	58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	71	58
Item 6. Exhibits	72	59
Signatures	73	60

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DIRECTV

PART I—FINANCIAL INFORMATION (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS

This Form 10-Q has not been reviewed by an independent accountant using professional review standards and procedures, although such a review is required by Rule 10-01(d) of Regulation S-X. The independent accountant previously engaged by DIRECTV is no longer independent as a result of the acquisition of DIRECTV by AT&T Inc. on July 24, 2015. An amendment to this Form 10-Q is expected to be filed once a review has been completed.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(Dollars in Millions, Except Per Share Amounts)
Revenues	$	8,~~143~~441		$	78,~~855~~109		$	16,584		$	15,964
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other		3,~~576~~780			3,~~383~~498			7,356			6,881
Subscriber service expenses		~~581~~596			~~551~~574			1,177			1,125
Broadcast operations expenses		~~117~~118			97107			235			204
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs		~~888~~893			~~827~~898			1,781			1,725
Upgrade and retention costs		~~350~~344			~~321~~362			694			683
General and administrative expenses		~~514~~600			~~454~~517			1,114			971
Venezuelan currency devaluation charge		—			~~281~~—			—			281
Depreciation and amortization expense		~~730~~721			~~714~~729			1,451			1,443

Total operating costs and expenses		67,~~756~~052			6,~~628~~685			13,808			13,313

Operating profit		1,~~387~~389			1,~~227~~424			2,776			2,651
Interest income		2224			1312			46			25
Interest expense		(~~245~~234	)		(~~232~~230	)		(479	)		(462	)
Other, net		725			5735			32			92

Income before income taxes		1,~~171~~204			1,~~065~~241			2,375			2,306
Income tax expense		(~~441~~454	)		(~~496~~431	)		(895	)		(927	)

Net income		~~730~~750			~~569~~810			1,480			1,379
Less: Net income attributable to noncontrolling interest		—(3	)		(84	)		(3	)		(12	)

Net income attributable to DIRECTV	$	~~730~~747		$	~~561~~806		$	1,477		$	1,367



Basic earnings attributable to DIRECTV per common share	$	1.4548		$	1.1060		$	2.93		$	2.70
Diluted earnings attributable to DIRECTV per common share	$	1.4447		$	1.0959		$	2.91		$	2.67
Weighted average number of common shares outstanding (in millions):
Basic		~~503~~504			~~511~~504			504			507
Diluted		~~507~~508			~~515~~508			508			512

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

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DIRECTV

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(Dollars in Millions)
Net income	$	~~730~~750		$	~~569~~810		$	1,480		$	1,379
Other comprehensive income (loss), net of taxes:
Cash flows hedges:
Unrealized losses arising during the period		(121	)		(7	)
Unrealized gains (losses) arising during the period		83			6			(38	)		(1	)
Reclassification adjustments included in net income		94(74	)		(828	)		20			(36	)
Foreign currency translation adjustments		~~(132~~16	)		3932			(116	)		71

Other comprehensive income (loss)		~~(159~~25	)		2410			(134	)		34

Comprehensive income		~~571~~775			~~593~~820			1,346			1,413
Comprehensive (income) loss attributable to noncontrolling interest		18(8	)		(118	)		10			(19	)

Comprehensive income attributable to DIRECTV	$	~~589~~767		$	~~582~~812		$	1,356		$	1,394

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

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DIRECTV

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2015			December 31, 2014
	June 30, 2015			December 31, 2014
	(Dollars in Millions, Except Share Data)
ASSETS
Current assets
Cash and cash equivalents	$	45,~~284~~061		$	4,635
Accounts receivable, net of allowances of $92 and $109		2,635			2,800
Accounts receivable, net of allowances of $115 and $109		2,754			2,800
Inventories		~~334~~425			299
Deferred income taxes		7165			68
Prepaid expenses and other		~~722~~777			1,017

Total current assets		89,~~046~~082			8,819
Satellites, net		3,~~045~~010			3,040
Property and equipment, net		6,~~455~~477			6,721
Goodwill		3,~~877~~885			3,929
Intangible assets, net		~~954~~946			994
Investments and other assets		1,~~924~~921			1,956

Total assets	$	2425,~~301~~321		$	25,459



LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liabilities	$	4,~~639~~795		$	5,048
Unearned subscriber revenues and deferred credits		~~570~~572			584
Current debt		2,355			1,327

Total current liabilities		7,~~564~~722			6,959
Long-term debt		17,~~058~~157			19,485
Deferred income taxes		1,~~606~~624			1,726
Other liabilities and deferred credits		2,~~353~~281			2,117
Commitments and contingencies
Stockholders' deficit
Common stock and additional paid-in capital—$0.01 par value, 3,950,000,000 shares authorized, 503,981,177 and 502,733,342 shares issued and outstanding of common stock at March 31, 2015 and December 31, 2014, respectively		3,608			3,613
Common stock and additional paid-in capital—$0.01 par value, 3,950,000,000 shares authorized, 504,511,567 and 502,733,342 shares issued and outstanding of common stock at June 30, 2015 and December 31, 2014, respectively		3,645			3,613
Accumulated deficit		(76,~~678~~931	)		(8,408	)
Accumulated other comprehensive loss		(~~577~~552	)		(418	)

Total DIRECTV stockholders' deficit		(43,~~647~~838	)		(5,213	)
Noncontrolling interest		~~367~~375			385

Total stockholders' deficit		(43,~~280~~463	)		(4,828	)

Total liabilities and stockholders' deficit	$	2425,~~301~~321		$	25,459

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

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DIRECTV

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	Six Months Ended June 30,
	2015			2014
	(Dollars in Millions)
Cash Flows From Operating Activities
Net income	$	~~730~~1,480		$	~~569~~1,379
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		~~730~~1,451			~~714~~1,443
Venezuelan currency devaluation charge		—			281
Amortization of deferred revenues and deferred credits		(1123	)		(1224	)
Share-based compensation expense		2753			2045
Equity in earnings from unconsolidated affiliates		(3357	)		(4478	)
Net foreign currency transaction loss (gain)		3164			(611	)
Dividends received		7			—
Net gains from sale of investments		—			(2	)
Net losses (gains) from sale of investments		5			(17	)
Deferred income taxes		4494			84115
Excess tax benefit from share-based compensation		(31	)		(22	)
Other		614			1545
Change in other operating assets and liabilities:
Accounts receivable		~~151~~65			98133
Inventories		(37110	)		(3629	)
Prepaid expenses and other		~~293~~304			~~303~~122
Accounts payable and accrued liabilities		(~~358~~211	)		(~~397~~342	)
Unearned subscriber revenue and deferred credits		32			4348
Other, net		84131			(1824	)

Net cash provided by operating activities		13,~~636~~238			13,~~590~~064

Cash Flows From Investing Activities
Cash paid for property and equipment		(~~613~~1,251	)		(~~650~~1,417	)
Cash paid for satellites		(96131	)		(54109	)
Investment in companies, net of cash acquired		(10	)		(4	)
Cash paid for short-term investments		(53	)		—
Proceeds from sale of investments		—			4
Investment in companies, net of cash acquired		(23	)		(8	)
Other, net		3			(3	)
Proceeds from sale of investments		2			29
Other, net		(4	)		(4	)

Net cash used in investing activities		(~~716~~1,460	)		(~~707~~1,509	)

Cash Flows From Financing Activities
Issuance of commercial paper (maturity 90 days or less), net		—			~~105~~25
Proceeds from short-term borrowings		—			90270
Repayment of short-term borrowings		—			(~~200~~235	)
Proceeds from long-term debt		1720			1,~~260~~329
Debt issuance costs		—			(67	)
Repayment of long-term debt		(1,~~226~~255	)		(111,026	)
Repayment of other long-term obligations		(2951	)		(1534	)
Common shares repurchased and retired		—			(~~895~~1,386	)
Taxes paid in lieu of shares issued for share-based compensation		(64	)		(57	)
Stock options exercised		9			10
Taxes paid in lieu of shares issued for share-based compensation		(65	)		(57	)
Excess tax benefit from share-based compensation		31			22
Other, net		—			(2640	)

Net cash provided by (used in) in financing activities		(1,271	)		267
Net cash used in financing activities		(1,311	)		(1,129	)

Effect of exchange rate changes on Venezuelan cash and cash equivalents		—(41	)		(316	)

Net increase (decrease) in cash and cash equivalents		(351	)		834
Net increase in cash and cash equivalents		426			110
Cash and cash equivalents at beginning of the period		4,635			2,180

Cash and cash equivalents at end of the period	$	45,~~284~~061		$	32,~~014~~290



Supplemental Cash Flow Information
Cash paid for interest	$	~~318~~412		$	~~328~~413
Cash paid for income taxes		49384			84767

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

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Description of Business and Basis of Presentation

DIRECTV, which we also refer to as the Company, we, or us, is a leading provider of digital television entertainment in the United States and Latin America. We operate two direct-to-home, or DTH, business units;: DIRECTV U.S. and DIRECTV Latin America, which are differentiated by their geographic locations and are engaged in acquiring, promoting, selling and distributing digital entertainment programming primarily via satellite to residential and commercial subscribers. In addition, we own and operate two regional sports networks, and also own non-controlling interests in two others, ROOT SPORTS™ Northwest and ROOT SPORTS Southwest (our joint venture with AT&T Inc.). We own a 42% interest in Game Show Network LLC, or GSN, a television network dedicated to game-related programming and Internet interactive game playing. We account for our investment in ROOT SPORTS Northwest, ROOT SPORTS Southwest and GSN using the equity method of accounting.

•: DIRECTV U.S. DIRECTV Holdings LLC and its subsidiaries, which we refer to as DIRECTV U.S., is the largest provider of DTH digital television services and the second largest provider in the multi-channel video programming distribution industry in the United States.
•: DIRECTV Latin America. DIRECTV Latin America Holdings, Inc. and its subsidiaries, or DIRECTV Latin America, is a leading provider of DTH digital television services throughout Latin America. DIRECTV Latin America is comprised of: PanAmericana, which provides services in Argentina, Chile, Colombia, Ecuador, Peru, Puerto Rico, Venezuela and certain other countries in the region, and Sky Brasil Servicos Ltda., or Sky Brasil, which is a 93% owned subsidiary. DIRECTV Latin America also includes our 41% equity method investment in Innova, S. de R.L. de C.V., or Sky Mexico, which we include in the PanAmericana and Other segment.
•: DIRECTV Sports Networks. DIRECTV Sports Networks LLC and its subsidiaries, or DSN, is comprised primarily of two wholly owned regional sports networks based in Denver, Colorado and Pittsburgh, Pennsylvania, and two regional sports networks based in Seattle, Washington and Houston, Texas in which DSN retains a noncontrolling interest, each of which operates under the brand name ROOT SPORTS. In the fourth quarter of 2014, we acquired a noncontrolling interest in Houston Sports Holdings, LLC, or HSH, the regional sports network based in Houston, Texas. The operating results of DSN are reported as part of the "Sports Networks, Eliminations and Other" reporting segment.

WeOn ~~have~~July 24, ~~prepared~~2015, ~~the~~DIRECTV ~~accompanying~~completed ~~unaudited~~a ~~consolidated~~merger ~~financial~~transaction ~~statements~~under inwhich ~~accordance~~DIRECTV ~~with~~merged ~~accounting~~into ~~principles~~Steam ~~generally~~Merger ~~accepted~~Sub, LLC, ina ~~the~~wholly-owned ~~United~~direct ~~States~~subsidiary of ~~America~~AT&T Inc., or ~~GAAP, for~~ ~~interim financial reporting~~AT&T. InFollowing the ~~opinion of management~~merger, ~~all~~Steam ~~adjustments~~Merger ~~(consisting~~Sub, ~~only~~LLC ~~of normal recurring items) that are necessary for~~ (a ~~fair~~successor ~~presentation~~in ~~have~~interest ~~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~~DIRECTV) ~~consolidated~~was ~~financial statements~~renamed ~~and~~DIRECTV ~~footnotes~~Group ~~thereto included in our Annual Report on Form 10-K for the year ended December 31~~Holdings, ~~2014 filed with the SEC on February~~ ~~24, 2015, 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~~LLC.

We ~~prepare~~have ~~our~~prepared the accompanying unaudited consolidated financial statements in ~~conformity~~accordance with accounting principles generally accepted in the United States of America, or GAAP, ~~which~~for interim ~~requires~~financial usreporting. toIn ~~make~~the ~~estimates~~opinion ~~and~~of ~~assumptions~~management, all adjustments (consisting only of normal recurring items) that ~~affect~~are ~~amounts~~necessary ~~reported~~for ~~herein~~a fair presentation have been included. WeThe ~~base~~results ~~our~~for interim ~~estimates~~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 ~~assumptions~~footnotes thereto included in our Annual Report on ~~historical~~Form 10-K/A ~~experience~~for ~~and~~the year ended December 31, 2014 filed with the SEC on ~~various~~June 4, ~~other~~2015, ~~factors~~our ~~that~~Quarterly weReport ~~believe~~on Form 10-Q tofor bethe ~~reasonable~~quarter ended March 31, 2015 filed

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

~~under~~with the ~~circumstances.~~SEC ~~Due~~on toMay 8, ~~the~~2015, ~~inherent~~and ~~uncertainty~~all ~~involved~~of inour ~~making~~other ~~estimates~~filings, ~~our~~including ~~actual~~Current ~~results~~Reports ~~reported~~on inForm 8-K, ~~future~~filed ~~periods~~with ~~may~~the beSEC ~~affected~~after bysuch ~~changes~~date inand ~~those~~through ~~estimates~~the date of this report.

We prepare our consolidated financial statements in conformity with 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 ~~Proposed~~results ~~AT&T~~reported ~~Merger~~in ~~Transaction~~ future periods may be affected by changes in those estimates.

On May 18, 2014, DIRECTV and AT&T Inc., or AT&T, announced that they entered into a definitive agreement under which DIRECTV will combine with AT&T in a stock and cash transaction. The Agreement and Plan of Merger, which was included as Exhibit 2.1 to the Form 8-K filed with the SEC on May 19, 2014, or the Merger Agreement, was approved unanimously by the Board of Directors of each company and was approved by our stockholders at a special meeting held on September 25, 2014.

Subject to the conditions in the Merger Agreement, at the effective time of the merger, our shareholders will receive $95.00 per share, subject to adjustments as described below under the terms of the merger, comprised of $28.50 per share in cash and $66.50 per share in AT&T stock. The stock portion will be subject to a collar such that our shareholders will receive 1.905 AT&T shares if the AT&T stock price is below $34.90 at closing and 1.724 AT&T shares if the AT&T stock price is above $38.58 at closing. If the AT&T stock price at closing is between $34.90 and $38.58, our shareholders will receive a number of shares between 1.724 and 1.905, equal to $66.50 in value. In all cases the AT&T stock price at closing is based on a volume-weighted average as provided in the Merger Agreement. The value of the shares may differ on the date of exchange. The transaction is subject to review by the U.S. Department of Justice and the Federal Communications Commission. The transaction has been reviewed and approved by Brazil telecommunications and Mexican antitrust authorities. The transaction is expected to close in the second quarter of 2015.

In connection with the proposed combination, we have made certain representations, warranties and covenants in the Merger Agreement, including, among other things, covenants by DIRECTV to conduct its business in the ordinary course during the interim period between the execution of the Merger Agreement and consummation of the merger and not to take certain actions prior to the closing of the merger without the prior approval of AT&T.

Note 2: New Accounting Standards

~~Debt~~Revenue ~~Issuance Costs~~Recognition. In ~~April~~May ~~2015~~2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ~~(ASU) 2015~~No. 2014-0309, ~~Simplifying the~~"Revenue ~~Presentation~~from ofContracts ~~Debt~~with ~~Issuance~~Customers ~~Costs~~(Topic 606)" (ASU 2014-09), which ~~requires~~replaces ~~debt~~existing ~~issuance~~revenue ~~costs~~recognition ~~related~~rules towith a ~~recognized~~comprehensive ~~debt~~revenue ~~liability~~measurement toand berecognition ~~presented~~standard inand ~~the~~expanded ~~balance~~disclosure requirements. ~~sheet~~ASU as2014-09 abecomes ~~direct deduction~~effective ~~from~~for ~~the~~annual ~~carrying~~reporting ~~amount~~periods ofbeginning ~~that~~after ~~debt~~December 15, ~~liability~~2017, ~~consistent~~following ~~with~~the ~~debt~~July ~~discounts.~~2015 ~~This~~approval ~~ASU~~of ~~requires~~a ~~retrospective~~one-year ~~adoption~~deferral ~~and~~of isthe effective ~~for~~date ~~fiscal~~by ~~periods beginning after~~the ~~December 15, 2015~~FASB. ~~Early~~We ~~adoption~~continue isto ~~permitted.~~evaluate ~~The~~the ~~adoption~~impact of ~~this~~the ~~ASU~~new ~~will~~standard ~~not~~and ~~have~~available aadoption ~~material impact on our financial statements~~methods.

~~Revenue~~Long-Term ~~Recognition~~Debt and Debt Issuance Costs. In ~~May~~April ~~2014~~2015, the FASB issued ASU ~~2014~~No. 2015-0903, ~~Revenue~~"Interest—Imputation ~~from~~of ~~Contracts~~Interest: Simplifying ~~with~~the ~~Customers,~~Presentation asof aDebt ~~new~~Issuance ~~Topic,~~Costs" ~~Accounting Standards Codification~~ (~~ASC~~ASU 2015-03), ~~Topic~~which ~~606.~~will ~~This~~result isin athe ~~comprehensive~~reclassification ~~new~~of ~~revenue~~debt ~~recognition~~issuance ~~standard~~costs ~~which~~from ~~will~~"Other ~~supersede~~Assets" ~~existing~~to ~~revenue~~inclusion ~~recognition~~as ~~guidance. The standard creates~~ a ~~five-step~~reduction ~~model~~of ~~for~~our ~~revenue~~reportable ~~recognition~~"Long-Term ~~that~~Debt" ~~requires~~balance ~~companies~~on toour ~~exercise~~consolidated ~~judgment~~balance ~~when considering contract terms and relevant facts and circumstances~~sheets. ~~The~~ASU ~~five~~2015-~~step~~03 ~~model~~becomes ~~includes~~effective ~~(1)~~January ~~identifying~~1, ~~the contract~~2016, ~~(2) identifying~~ ~~the~~subject ~~separate~~to ~~performance~~early ~~obligations in the contract~~adoption, ~~(3) determining~~and ~~the~~will ~~transaction~~require ~~price,~~full ~~(4) allocating~~retrospective ~~the~~application. ~~transaction~~We ~~price~~do tonot expect ~~the~~this ~~separate~~new ~~performance obligations~~standard ~~and~~to ~~(5) recognizing~~have ~~revenue~~a ~~when~~material ~~each~~impact ~~performance~~on ~~obligation~~our ~~has~~consolidated ~~been~~balance sheets.

Note 3: Goodwill

The following table sets forth changes in the carrying amounts of "Goodwill" in the Consolidated Balance Sheets by reportable segment for the six months ended June 30, 2015:

			DIRECTV Latin America

			DIRECTV Latin America					Sports Networks, Eliminations and Other
	DIRECTV U.S.		Sky Brasil			PanAmericana and Other		Sports Networks, Eliminations and Other		Total
	(Dollars in Millions)
Balance as of January 1, 2015	$	3,191	$	305		$	211	$	222	$	3,929
Sky Brasil foreign currency translation adjustment		—		(44	)		—		—		(44	)

Balance as of June 30, 2015	$	3,191	$	261		$	211	$	222	$	3,885

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

satisfied. The standard also requires expanded disclosures surrounding revenue recognition. The standard will likely be effective for fiscal periods beginning after December 15, 2017 and allows for either a full retrospective or modified retrospective adoption. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

Note 3: Goodwill

The following table sets forth changes in the carrying amounts of "Goodwill" in the Consolidated Balance Sheets by reportable segment for the three months ended March 31, 2015:

			DIRECTV Latin America
								Sports Networks, Eliminations and Other
	DIRECTV U.S.		Sky Brasil			PanAmericana and Other				Total
	(Dollars in Millions)
Balance as of January 1, 2015	$	3,191	$	305		$	211	$	222	$	3,929
Sky Brasil foreign currency translation adjustment		—		(52	)		—		—		(52	)

Balance as of March 31, 2015	$	3,191	$	253		$	211	$	222	$	3,877

Note 4: Debt

The following table sets forth our outstanding debt as of:

	March 31, 2015		December 31, 2014
	June 30, 2015		December 31, 2014
	(Dollars in Millions)
Current debt
Current portion of long-term debt	$	2,~~249~~250	$	1,200
Current portion of borrowings under BNDES financing facility		~~106~~105		127
Long-term debt
Senior notes		1617,~~936~~053		19,327
Borrowings under BNDES financing facility		9173		140
Borrowings under Desenvolve SP financing facility		31		18

Total debt	$	19,~~413~~512	$	20,812

The amount of interest accrued related to our outstanding debt was $~~185~~322 million at ~~March~~June 3130, 2015 and $278 million at December 31, 2014.

Senior Notes

~~Three~~Six Months Ended ~~March~~June 3130, 2015 Financing ~~Transaction~~Transactions

In March 2015, DIRECTV U.S. repaid the 3.550% senior notes due in 2015, or the 2015 Notes, for the unpaid principal balance of $1,200 million, together with accrued and unpaid interest as of that date, as required by the indenture for the 2015 Notes.

Six Months Ended June 30, 2014 Financing Transactions

On March 17, 2014, DIRECTV U.S. issued, pursuant to a registration statement, $1,250 million in aggregate principal of 4.450% senior notes due in 2024 with proceeds, net of an original issue discount, of $1,245 million. We incurred $7 million of debt issuance costs in connection with this transaction.

On March 20, 2014, we exercised our early redemption right under the indenture of the 4.750% senior notes due in 2014 ("the 2014 Notes") effective April 24, 2014. The redemption price was based on the remaining scheduled payments of principal and interest using a discount rate equal to the Treasury Rate (as defined in the indenture governing the 2014 Notes) plus 40 basis points, together with accrued and unpaid interest as of April 24, 2014. The aggregate principal amount of the 2014 Notes outstanding on March 20, 2014 was $1,000 million and we made a cash payment of $1,022 million in the second quarter of 2014 to redeem such Notes.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

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Three Months Ended March 31, 2014 Financing Transactions

In March 2014, DIRECTV U.S. issued, pursuant to a registration statement, $1,250 million in aggregate principal of 4.45% senior notes due in 2024 with proceeds, net of an original issue discount, of $1,245 million. We incurred $7 million of debt issuance costs in connection with this transaction.

Also in March 2014, DIRECTV U.S. exercised its early redemption right under the indenture for the 4.750% senior notes due in 2014 ("the 2014 Notes") effective April 24, 2014. The redemption price was based on the remaining scheduled payments of principal and interest using a discount rate equal to the Treasury Rate (as defined in the indenture governing the 2014 Notes) plus 40 basis points, together with accrued and unpaid interest as of April 24, 2014. The aggregate principal amount of the 2014 Notes outstanding was $1,000 million and we made a cash payment of $1,022 million to redeem such Notes.

The following table sets forth our outstanding senior notes:

	Principal amount		Carrying value, net of unamortized original issue discounts
	March 31, 2015		March 31, 2015		December 31, 2014
	June 30, 2015		June 30, 2015		December 31, 2014
	(Dollars in Millions)
3.550% senior notes due in 2015	$	—	$	—	$	1,200
3.125% senior notes due in 2016		750		750		750
3.500% senior notes due in 2016		1,500		1,~~499~~500		1,499
2.400% senior notes due in 2017		1,250		1,249		1,249
1.750% senior notes due in 2018		750		746		746
5.875% senior notes due in 2019		1,000		~~996~~997		996
5.200% senior notes due in 2020		1,300		1,299		1,299
4.600% senior notes due in 2021		1,000		1,000		999
5.000% senior notes due in 2021(1)		1,500		1,~~508~~507		1,506
3.800% senior notes due in 2022(1)		1,500		1,~~522~~521		1,520
2.750% senior notes due in 2023(2)		~~537~~557		~~534~~555		602
4.450% senior notes due in 2024(1)		1,250		1,~~289~~288		1,285
3.950% senior notes due in 2025		1,200		1,192		1,192
4.375% senior notes due in 2029(2)		1,~~111~~179		1,~~101~~167		1,157
5.200% senior notes due in 2033(2)		~~518~~550		~~516~~548		543
6.350% senior notes due in 2040		500		500		500
6.000% senior notes due in 2040		1,250		1,236		1,236
6.375% senior notes due in 2041		1,000		1,000		1,000
5.150% senior notes due in 2042		1,250		1,248		1,248

Total senior notes	$	19,~~166~~286	$	19,~~185~~303	$	20,527

(1)The carrying values as of ~~March~~June 3130, 2015 and December 31, 2014 include the following fair value adjustments, respectively: increases of $1211 million and $10 million for the 5.000% senior notes due in 2021, increases of $2221 million and $20 million for the 3.800% senior notes due in 2022 and increases of $4342 million and $39 million for the 4.450% senior notes due in 2024. (2)These amounts reflect the remeasurement of the aggregate principal and carrying value of our foreign currency denominated senior notes to U.S. dollars based on the exchange rates in effect at each of the dates presented.

The fair value of our senior notes was approximately $20,154 million at June 30, 2015 and $22,044 million at December 31, 2014. 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 DIRECTV Holdings LLC and DIRECTV Financing Co., Inc., or the Co-Issuers, and have been registered under the Securities Act of 1933, as amended.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

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The principal ~~(2)These amounts~~amount ~~reflect~~of ~~the~~our ~~remeasurement~~senior ofnotes ~~the~~which ~~aggregate~~have ~~principal~~not ~~and~~been ~~carrying~~redeemed ~~value~~mature ofas ~~our~~follows: ~~foreign~~$2,250 million ~~currency~~in ~~denominated~~2016, ~~senior~~$1,250 million ~~notes~~in to2017, ~~U.S.~~$750 million ~~dollars~~in ~~based~~2018, on$1,000 million ~~the~~in ~~exchange~~2019, ~~rates~~$1,300 million in ~~effect~~2020 atand ~~each~~$12,736 million ~~of the dates presented~~thereafter.

~~The~~ ~~fair value of our senior notes was approximately $21,077 million at March 31, 2015 and $22,044 million at December 31, 2014. We calculated the fair values~~ ~~based~~ Revolving onCredit ~~quoted~~Facilities ~~market prices of our senior notes, which is a Level 1 input under accounting guidance for fair value measurements of assets~~ and ~~liabilities.~~Commercial Paper

~~All of~~Concurrent ~~our~~with ~~senior~~the ~~notes~~AT&T ~~were~~merger ~~issued~~transaction byclose ~~DIRECTV~~on ~~Holdings~~July ~~LLC~~24, ~~and~~2015, ~~DIRECTV~~we ~~Financing Co.,~~terminated ~~Inc.,~~our orrevolving ~~the~~credit ~~Co-Issuers,~~facilities and ~~have~~commercial paper ~~been~~program ~~registered~~which ~~under~~included the ~~Securities~~ability ~~Act~~for ofus ~~1933, as~~to ~~amended~~borrow up to $2.5 billion.

The principal amount of our senior notes mature as follows: $2,250 million in 2016, $1,250 million in 2017, $750 million in 2018, $1,000 million in 2019, $1,300 million in 2020 and $12,616 million thereafter.

Commercial Paper

DIRECTV U.S. has a commercial paper program backed by its revolving credit facilities, which provides for the issuance of short-term commercial paper in the United States up to a maximum aggregate principal of $2.5 billion. As of March 31, 2015 and December 31, 2014 we had no short-term commercial paper outstanding. Aggregate amounts outstanding under the revolving credit facilities described below and the commercial paper program are limited to $2.5 billion.

Revolving Credit Facilities

DIRECTV U.S. has a $1.0 billion revolving credit facility, which expires in February 2016, and a $1.5 billion revolving credit facility, which expires in September 2017. We pay a commitment fee of 0.15% per year for the unused commitment under the revolving credit facilities. Borrowings currently bear interest at a rate equal to the London Interbank Offer Rate (LIBOR) plus 1.25%. Both the commitment fee and the annual interest rate may increase or decrease under certain conditions due to changes in DIRECTV U.S.' long-term, unsecured debt ratings. Under certain conditions, DIRECTV U.S. may increase the borrowing capacity of the revolving credit facilities by an aggregate amount of up to $500 million. Aggregate amounts outstanding under the revolving credit facilities and the commercial paper program are limited to $2.5 billion. As of March 31, 2015 and December 31, 2014 there were no borrowings outstanding under the revolving credit facilities.

Borrowings under the revolving credit facilities are unsecured senior obligations of DIRECTV U.S. and rank equally in right of payment with all of DIRECTV U.S.' existing and future senior debt and rank senior in right of payment to all of DIRECTV U.S.' future subordinated debt, if any.

Covenants and Restrictions

The ~~revolving~~senior ~~credit~~notes facilities require DIRECTV U.S. to maintain at the end of each fiscal quarter a specified ratio of indebtedness to earnings before interest, taxes and depreciation and amortization. The revolving credit facilities also include covenants that limit DIRECTV U.S.'s and its subsidiaries' ability to, among other things, (i) incur ~~additional~~certain ~~subsidiary indebtedness~~liens, (ii) ~~incur~~engage ~~liens,~~in ~~(iii) enter into~~ certain ~~transactions~~sale ~~with~~leaseback ~~affiliates~~transactions, and (iviii) merge, consolidate or ~~consolidate~~sell ~~with~~substantially ~~another~~all ~~entity,~~of ~~(v) sell, assign,~~its ~~lease~~assets. orIf ~~otherwise~~DIRECTV ~~dispose~~U.S. ofand ~~all~~its orsubsidiaries ~~substantially~~fail ~~all~~to comply ofwith ~~its~~these ~~assets~~covenants, ~~and~~all ~~(vi) change~~or ~~its~~a ~~lines~~portion of ~~business.~~its ~~Additionally,~~borrowings under the senior notes ~~contain~~could ~~covenants~~become immediately payable. The senior notes provide that ~~are~~the ~~similar.~~borrowings ~~If DIRECTV~~may ~~U.S.~~be ~~fails~~required to ~~comply~~be ~~with~~prepaid ~~these~~if certain ~~covenants~~change-in-control events, ~~all~~coupled orwith a ratings decline, occur.

DIRECTV Group Holdings, LLC Guarantors. Following the close of the AT&T merger transaction discussed in Note 1 of the Notes to the Consolidated Financial Statements, DIRECTV Group Holdings, LLC assumed as the successor of DIRECTV the guarantee of the senior notes on the terms set forth in the respective Supplemental Indentures and the Guarantee, dated as of July 24, 2015, with respect to each Supplemental Indenture (collectively, the "Guarantees"). For further information, refer to the Form 8-K filed with the SEC on July 24, 2015 by AT&T Inc.

DIRECTV Group Holdings, LLC guarantees all of the senior notes outstanding, jointly and severally with DIRECTV Holdings, LLC's material domestic subsidiaries. DIRECTV Group Holdings LLC unconditionally guarantees that the principal and interest on the respective senior notes will be paid in full when due and that the obligations of the Co-Issuers to the holders of the outstanding senior notes will be performed.

As a result of the Guarantees, holders of the senior notes may have the benefit of DIRECTV Group Holdings, LLC 's interests in the assets and related earnings of our operations that are not held through DIRECTV Holdings LLC and its subsidiaries. Those operations are primarily our DTH digital television services throughout Latin America which are held by DIRECTV Latin America and our regional sports networks which are held by DSN. However, the subsidiaries that own and operate the DIRECTV Latin America business and the regional sports networks have not guaranteed the senior notes.

The Guarantees are unsecured senior obligations of DIRECTV Group Holdings, LLC and rank equally in right of payment with all of DIRECTV Group Holdings, LLC's existing and future senior debt and rank senior in right of payment to all of DIRECTV Group Holdings, LLC 's future subordinated debt, if any. The Guarantees are effectively subordinated to all existing and future secured obligations, if any, of DIRECTV Group Holdings, LLC to the extent of the value of the assets securing the obligations. DIRECTV Group Holdings, LLC is not subject to the covenants contained in the indentures governing the senior notes and the Guarantees will terminate and be released on the terms set forth in each of the indentures.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

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portion of its borrowings under the senior notes could become immediately payable and its revolving credit facilities could be terminated. The senior notes and revolving credit facilities also provide that the borrowings may be required to be prepaid if certain change-in-control events, coupled with a ratings decline, occur.

DIRECTV Guarantors. DIRECTV guarantees all of the senior notes outstanding, jointly and severally with DIRECTV Holdings LLC's material domestic subsidiaries. DIRECTV unconditionally guarantees that the principal and interest on the respective senior notes will be paid in full when due and that the obligations of the Co-Issuers to the holders of the outstanding senior notes will be performed. The revolving credit facilities and the commercial paper program are also similarly fully guaranteed by DIRECTV.

As a result of the guarantees, holders of the senior notes, the revolving credit debt and the commercial paper may have the benefit of DIRECTV's interests in the assets and related earnings of our operations that are not held through DIRECTV Holdings LLC and its subsidiaries. Those operations are primarily our DTH digital television services throughout Latin America which are held by DIRECTV Latin America and our regional sports networks which are held by DSN. However, the subsidiaries that own and operate the DIRECTV Latin America business and the regional sports networks have not guaranteed the senior notes, the revolving credit facilities and the commercial paper program.

The guarantees are unsecured senior obligations of DIRECTV and rank equally in right of payment with all of DIRECTV's existing and future senior debt and rank senior in right of payment to all of DIRECTV's future subordinated debt, if any. The guarantees are effectively subordinated to all existing and future secured obligations, if any, of DIRECTV to the extent of the value of the assets securing the obligations. DIRECTV is not subject to the covenants contained in each indenture of the senior notes and our guarantees will terminate and be released on the terms set forth in each of the indentures.

Desenvolve SP Financing Facility

In the second quarter of 2014, Sky Brasil entered into a Brazilian real denominated financing facility with Desenvolve SP, an agency created by the Sao Paulo State Government for economic development, under which Sky Brasil may borrow funds for the construction of a satellite and broadcast facility. Each borrowing under the facility, including accrued interest, will be repaid in a single installment five years from the date of such borrowing. The financing facility is secured by a third party bank guarantee. As of ~~March~~June 3130, 2015, Sky Brasil had borrowings of R$98 million ($31 million) under the facility bearing interest of 2.5% per year. As of December 31, 2014, Sky Brasil had borrowings of R$48 million ($18 million) under the facility bearing interest of 2.5% per year. The U.S. dollar amounts reflect the conversion of the Brazilian real denominated amounts into U.S. dollars based on the exchange rates of R$3.2110 / $1.00 and R$2.66 / $1.00 as of ~~March~~June 3130, 2015 and December 31, 2014, respectively.

Borrowings under the Desenvolve SP facility mature as follows: R$48 million ($15 million) in 2019 and R$50 million ($16 million) in 2020.

BNDES Financing Facility

In March 2013, Sky Brasil entered into a Brazilian real denominated financing facility with Banco Nacional de Desenvolvimento Econômico e Social, or BNDES, a government owned bank in Brazil, under which Sky Brasil may borrow funds for the purchase of set-top receivers. As of June 30, 2015, Sky Brasil had borrowings of R$552 million ($178 million) outstanding under the BNDES facility bearing interest at a weighted-average rate of 5.40% per year. As of December 31, 2014, Sky Brasil had borrowings of R$710 million ($267 million) outstanding under the BNDES facility bearing interest at a weighted-average rate of 5.11% per year. Borrowings under the facility are required to be repaid in 30 monthly installments. The U.S. dollar amounts reflect the conversion of the Brazilian real denominated amounts into U.S. dollars based on the exchange rates of R$3.10 / $1.00 and R$2.66 / $1.00 as of June 30, 2015 and December 31, 2014, respectively.

Borrowings under the BNDES facility mature as follows: R$174 million ($56 million) in 2015, R$273 million ($88 million) in 2016, R$102 million ($33 million) in 2017 and R$3 million ($1 million) in 2018. The financing facility is collateralized by the financed set-top receivers with an original purchase price of approximately R$1,037 million ($335 million) based on the exchange rate of R$3.10 / $1.00 as of June 30, 2015.

Restricted Cash

Restricted cash of $13 million as of June 30, 2015 and $10 million as of December 31, 2014 was included as part of "Prepaid expenses and other" in our Consolidated Balance Sheets. The majority of these amounts secure certain of our letters of credit obligations and restrictions on the cash will be removed as the letters of credit expire.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

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BNDES Financing Facility

In March 2013, Sky Brasil entered into a Brazilian real denominated financing facility with Banco Nacional de Desenvolvimento Econômico e Social, or BNDES, a government owned bank in Brazil, under which Sky Brasil may borrow funds for the purchase of set-top receivers. As of March 31, 2015, Sky Brasil had borrowings of R$633 million ($197 million) outstanding under the BNDES facility bearing interest at a weighted-average rate of 5.22% per year. As of December 31, 2014, Sky Brasil had borrowings of R$710 million ($267 million) outstanding under the BNDES facility bearing interest at a weighted-average rate of 5.11% per year. Borrowings under the facility are required to be repaid in 30 monthly installments. The U.S. dollar amounts reflect the conversion of the Brazilian real denominated amounts into U.S. dollars based on the exchange rates of R$3.21 / $1.00 and R$2.66 / $1.00 as of March 31, 2015 and December 31, 2014, respectively.

Borrowings under the BNDES facility mature as follows: R$260 million ($81 million) in 2015, R$273 million ($85 million) in 2016 and R$100 million ($31 million) in 2017. The financing facility is collateralized by the financed set-top receivers with an original purchase price of approximately R$1,022 million ($318 million) based on the exchange rate of R$3.21 / $1.00 as of March 31, 2015.

Restricted Cash

Restricted cash of $7 million as of March 31, 2015 and $10 million as of December 31, 2014 was included as part of "Prepaid expenses and other" in our Consolidated Balance Sheets. These amounts secure certain of our letters of credit obligations and restrictions on the cash will be removed as the letters of credit expire.

Note 5: Derivative Financial Instruments

We use derivative financial instruments primarily to manage the risks associated with fluctuations in foreign currency exchange rates and interest rates. We do not use derivatives for trading or speculative purposes. We record derivative financial instruments in the Consolidated Balance Sheets as either assets or liabilities at fair value. We calculate the fair value of derivative contracts using an income-approach model (discounted cash flow analysis), the use of which is considered a Level 2 valuation technique, using observable inputs, such as yield curves, foreign currency exchange rates, and incorporating counterparty credit risk, as applicable. For derivative financial instruments designated as fair value hedges, the change in the fair value of both the derivative instrument and the hedged item are recognized in earnings in the current period. For derivative financial instruments designated as cash flow hedges, the effective portion of the unrealized gains or losses on the derivative financial instruments are initially reported in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets, and subsequently reclassified to earnings in the same periods during which the hedged item affects earnings. The ineffective portion of the unrealized gains and losses on these derivative financial instruments, if any, is recorded immediately in earnings. We evaluate the effectiveness of our derivative financial instruments at inception and on a quarterly basis.

The following table sets forth the fair values of assets and liabilities associated with the derivative financial instruments as of:

	Assets				Liabilities

	June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
	(Dollars in millions)
Cash flow hedges:
Cross-currency swap contracts	$	3	$	8	$	81	$	24
Fair value hedges:
Interest rate swap contracts		—		12		—		6

Total derivative financial instruments	$	3	$	20	$	81	$	30

The fair values of the assets associated with derivative financial instruments are recorded in "Investments and other assets" in the Consolidated Balance Sheets and the fair value of the liabilities associated with derivative financial instruments are recorded in "Other liabilities and deferred credits" in the Consolidated Balance Sheets.

The following table sets forth the notional amounts of outstanding derivative financial instruments as of:

	June 30, 2015		December 31, 2014

	(Dollars in millions)
Cash flow hedges:
Cross-currency swap contracts	$	2,418	$	2,418
Fair value hedges:
Interest rate swap contracts		—		3,000

Total notional amount of derivative financial instruments	$	2,418	$	5,418

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

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~~The~~ Collateral ~~following~~Arrangements. We ~~table~~have ~~sets~~agreements ~~forth~~with our derivative instrument counterparties that include collateral provisions which require a party with an unrealized loss position in excess of certain thresholds to post cash collateral for the ~~fair~~amount ~~values~~in excess of ~~assets~~the threshold. The threshold levels in our collateral agreements are based on each party's credit ratings. We held no cash collateral from counterparties as of June 30, 2015 and ~~liabilities~~December 31, ~~associated~~2014. We did not have any cash collateral posted with counterparties as of June 30, 2015 and December 31, 2014. We do not offset the ~~derivative~~fair ~~financial~~value ~~instruments~~of ascollateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable), against the fair value of: the derivative instruments.

	Assets				Liabilities
	March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014
	(Dollars in millions)
Cash flow hedges:
Cross-currency swap contracts	$	—	$	8	$	210	$	24
Fair value hedges:
Interest rate swap contracts		—		12		—		6

Total derivative financial instruments	$	—	$	20	$	210	$	30

The following table sets forth the notional amounts of outstanding derivative financial instruments as of:

	March 31, 2015		December 31, 2014
	(Dollars in millions)
Cash flow hedges:
Cross-currency swap contracts	$	2,418	$	2,418
Fair value hedges:
Interest rate swaps		—		3,000

Total notional amount of derivative financial instruments	$	2,418	$	5,418

Collateral Arrangements. We have agreements with our derivative instrument counterparties that include collateral provisions which require a party with an unrealized loss position in excess of certain thresholds to post cash collateral for the amount in excess of the threshold. The threshold levels in our collateral agreements are based on each party's credit ratings. We held no cash collateral from counterparties as of March 31, 2015 and December 31, 2014. We did not have any cash collateral posted with counterparties as of March 31, 2015 and December 31, 2014. We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable), against the fair value of the derivative instruments.

Cross-Currency Swap Contracts

In a series of financing transactions, DIRECTV U.S. issued, pursuant to a U.S. registration statement, the following senior notes: £750 million in aggregate principal of 4.375% senior notes due in 2029, €500 million in aggregate principal of 2.750% senior notes due in 2023 and £350 million in aggregate principal of 5.200% senior notes due in 2033. In connection with the issuance of these senior notes, DIRECTV U.S. entered into cross-currency swap contracts to manage the related foreign exchange risk by effectively converting all of the fixed-rate British pound sterling and fixed-rate Euro denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt. These cross-currency swaps are designated and qualify as cash flow hedges. The terms of the cross-currency swap contracts correspond to the related hedged senior notes and have maturities ranging from May 2023 to November 2033.

We calculate the fair value of the cross-currency swap contracts using an income-approach model (discounted cash flow analysis), the use of which is considered a Level 2 valuation technique, using observable inputs, such as foreign currency exchange rates, swap rates, cross-currency basis swap spreads and incorporating counterparty credit risk.

During the six months ended June 30, 2015, DIRECTV U.S. recorded net remeasurement gains of $32 million in "Other, net" in the Consolidated Statements of Operations related to the remeasurement of the hedged senior notes. To offset these remeasurement gains, we reclassified $32 million ($20 million after tax) from "Accumulated other comprehensive loss" in the Consolidated Balance Sheets to "Other, net" in the Consolidated Statements of Operations. During the six months ended June 30, 2014, DIRECTV U.S. recorded net remeasurement losses of $58 million in "Other, net" in the Consolidated Statements of Operations related to the remeasurement of the hedged senior notes. To offset these remeasurement losses, we reclassified $58 million ($36 million after tax) from "Accumulated other comprehensive loss" in the Consolidated Balance Sheets to "Other, net" in the Consolidated Statements of Operations. These reclassifications eliminate the impact of the remeasurement of the hedged senior notes from our results of operations.

Interest Rate Lock Contracts

Periodically we entered into interest rate lock contracts such as forward starting swaps and treasury locks to hedge against changes in interest payments attributable to changes in the benchmark interest rate during the period leading up to a forecasted issuance of fixed rate debt. These interest rate locks are designated and qualify as cash flow hedges. On March 17, 2014, DIRECTV U.S. issued $1,250 million in aggregate principal of 4.450% senior notes due in 2024. In connection with this transaction, DIRECTV U.S. settled all then-outstanding forward-starting interest rate swaps, which were previously entered into to protect against unfavorable interest rate changes related to the

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

~~fixed-rate~~forecasted ~~U.S.~~issuance ~~dollar~~of ~~denominated~~ debt. These ~~cross-currency~~interest rate swaps ~~are~~were designated and ~~qualify~~qualified as cash flow hedges. ~~The~~As ~~terms~~a result of ~~the~~settling ~~cross~~these forward-~~currency~~starting ~~swap~~interest ~~contracts~~rate ~~correspond~~swaps, towe recognized $1 million of ineffectiveness in earnings during 2014. As of June 30, 2015, we had $8 million in "Accumulated other comprehensive loss" in the ~~related~~Consolidated ~~hedged~~Balance Sheets related ~~senior~~to ~~notes~~these ~~and~~forward-starting ~~have~~interest ~~maturities~~rate ~~ranging~~swaps ~~from~~that ~~May~~is ~~2023~~being torecognized ~~November~~as ~~2033~~interest expense over the term of the 4.450% senior notes due in 2024.

During the three months ended March 31, 2015, DIRECTV U.S. recorded net remeasurement gains of $151 million in "Other, net" in the Consolidated Statements of Operations related to the remeasurement of the hedged senior notes. To offset these remeasurement gains, we reclassified $151 million ($94 million after tax) from "Accumulated other comprehensive loss" in the Consolidated Balance Sheets to "Other, net" in the Consolidated Statements of Operations. During the three months ended March 31, 2014, DIRECTV U.S. recorded net remeasurement losses of $13 million in "Other, net" in the Consolidated Statements of Operations related to the remeasurement of the hedged senior notes. To offset these remeasurement losses, we reclassified $13 million ($8 million after tax) from "Accumulated other comprehensive loss" in the Consolidated Balance Sheets to "Other, net" in the Consolidated Statements of Operations. These reclassifications eliminate the impact of the remeasurement of the hedged senior notes from our results of operations.

Interest Rate Lock Contracts

Periodically we enter into interest rate lock contracts such as forward starting swaps and treasury locks to hedge against changes in interest payments attributable to changes in the benchmark interest rate during the period leading up to a forecasted issuance of fixed rate debt. These interest rate locks are designated and qualify as cash flow hedges. On March 17, 2014, DIRECTV U.S. issued $1,250 million in aggregate principal of 4.450% senior notes due in 2024. In connection with this transaction, DIRECTV U.S. settled all then-outstanding forward-starting interest rate swaps, which were previously entered into to protect against unfavorable interest rate changes related to the forecasted issuance of debt. These interest rate swaps were designated and qualified as cash flow hedges. As a result of settling these forward-starting interest rate swaps, we recognized $1 million of ineffectiveness in earnings during 2014. As of March 31, 2015, we had $8 million in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets related to these forward-starting interest rate swaps that is being recognized as interest expense over the term of the 4.450% senior notes due in 2024.

Fixed-to-Floating Interest Rate Swap Contracts

DIRECTV U.S. ~~may~~has ~~enter~~entered into fixed-to-floating interest rate swap contracts from time to time in order to manage its interest rate exposure. We designate such swaps as fair value hedges. Depending on market conditions, the mix of our fixed interest rate and floating interest rate debt and other factors, we may periodically discontinue these fair value hedges and terminate our fixed-to-floating interest rate swap contracts by settling the contracts or by entering into offsetting contracts.

During 2014, DIRECTV U.S. entered into interest rate swap contracts with a total notional amount of $3,000 million, converting a portion of the total aggregate principal amounts of the 5.000% senior notes due in 2021, the 3.800% senior notes due in 2022 and the 4.450% senior notes due in 2024 from a fixed to floating interest rate. In January 2015, DIRECTV U.S. discontinued the fair value hedges and settled these fixed-to-floating interest rate swap contracts. As a result of these settlements, DIRECTV U.S. received cash proceeds of $18 million, which are included in "Net cash provided by operations" in the Consolidated Statements of Cash Flows.

As of June 30, 2015, there was $74 million of favorable adjustments to the carrying value of the senior notes, which will be amortized to "Interest expense" in the Consolidated Statements of Operations over the remaining term of the hedged senior notes. We calculated the fair value of the interest rate swap contracts using an income-approach model (discounted cash flow analysis), the use of which is considered a Level 2 valuation technique, using observable inputs, such as yield curves. In connection with the settlement of the fixed-to-floating interest rate swap contracts, we recognized a $2 million gain in "Other, net" in the Consolidated Statements of Operations for the quarter ended March 31, 2015. The periodic interest settlements for the interest rate swap contracts are recorded in "Interest expense" in the Consolidated Statements of Operations.

Note 6: Contingencies

Venezuela Devaluation and Foreign Currency Exchange Controls

Companies operating in Venezuela are required to obtain Venezuelan government approval to exchange Venezuelan bolivars into U.S. dollars and such approval has not consistently been granted for several years. Consequently, our ability to pay U.S. dollar denominated obligations and repatriate cash generated in Venezuela in excess of local operating requirements is limited, which has resulted in increases in the cash balance at our Venezuelan subsidiary, and limited our ability to import set-top receivers and other equipment, limiting the growth of our business in Venezuela.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

~~hedges~~including ~~and~~telecommunications ~~settled~~equipment ~~these~~and ~~fixed-to-floating~~(iii) an ~~interest~~open ~~rate~~market ~~swap~~currency ~~contracts.~~exchange Assystem aSistema ~~result~~Marginal ofde ~~these~~Divisas, ~~settlements~~or SIMADI, ~~DIRECTV~~which ~~U.S.~~is ~~received~~based ~~cash~~on ~~proceeds~~supply and demand. As of ~~$18~~June ~~million~~30, ~~which~~2015, the ~~are~~SICAD ~~included~~exchange inrate ~~"Net~~was ~~cash provided~~12.8 byVenezuelan ~~operations"~~bolivars inper U.S. dollars and the ~~Consolidated~~SIMADI ~~Statements~~exchange ofrate ~~Cash~~was ~~Flows~~197.7 Venezuelan bolivars per U.S. dollars.

AsEffective of March 31, ~~2015~~2014, ~~there~~we ~~was~~changed ~~$77 million of favorable adjustments to~~ the ~~carrying~~exchange ~~value~~rate offor ~~the~~remeasuring ~~senior~~our ~~notes,~~Venezuelan ~~which~~subsidiary's ~~will~~monetary benet ~~amortized~~assets tofrom ~~"Interest expense" in~~ the ~~Consolidated~~ ~~Statements~~official ofexchange ~~Operations~~rate ~~over the remaining term~~ of ~~the~~6.3 ~~hedged~~Venezuelan ~~senior~~bolivars per ~~notes~~U.S. dollar Weto ~~calculated~~ the ~~fair~~SICAD ~~value of the interest~~ rate, ~~swap~~which ~~contracts~~was ~~using~~10.7 anVenezuelan ~~income-approach~~bolivars ~~model~~per ~~(discounted cash~~U.S. dollar ~~flow~~as ~~analysis), the use~~ of ~~which is considered a Level~~March ~~2 valuation technique~~31, ~~using observable inputs, such as yield curves~~2014. InAs ~~connection~~a ~~with~~result ~~the settlement~~ of the ~~fixed-to-floating interest rate swap contracts~~devaluation, we ~~recognized~~recorded a ~~$2 million~~pre-tax ~~gain~~charge in "~~Other,~~Venezuelan ~~net~~currency devaluation charge" in the Consolidated Statements of Operations ~~for~~of $281 million in the first quarter ~~ended~~of ~~March 31~~2014, ~~2015.~~related ~~The~~to ~~periodic interest~~the ~~settlements~~remeasurement ~~for~~of the ~~interest~~Venezuelan ~~rate~~bolivar ~~swap~~denominated ~~contracts~~net ~~are~~monetary ~~recorded~~assets inof ~~"Interest~~our ~~expense"~~Venezuelan insubsidiary ~~the~~on ~~Consolidated~~March 31, ~~Statements of Operations~~2014.

As of June 30, 2015, we believe that the SICAD rate was the most representative rate to use for remeasurement, as a limited amount of telecommunications equipment was imported at ~~Note~~the SICAD rate during the six months ended June 30, 2015 and the official rate of 6:.3 ~~Commitments~~Venezuelan bolivars per U.S. dollar continued to be reserved only for the settlement of U.S. dollar denominated obligations related to purchases of "essential goods and ~~Contingencies~~ services". In addition, we did not repatriate any amounts at the official rate or through the SICAD mechanism but we were able to repatriate an insignificant amount of Venezuelan bolivars through the SIMADI mechanism during the six months ended June 30, 2015. During the second quarter of 2015, we recorded $39 million in "General and administrative expenses" in the Consolidated Statements of Operations as a result of the change in the SICAD exchange rate to 12.8 Venezuelan bolivars per U.S. dollar as of June 30, 2015 from 12.0 Venezuelan bolivars per U.S. dollar as of March 31, 2015.

Our Venezuelan subsidiary had Venezuelan bolivar denominated net monetary assets of $595 million, including cash of $629 million, as of June 30, 2015, based on the SICAD exchange rate of 12.8 Venezuelan bolivars per U.S. dollar, as compared to Venezuelan bolivar denominated net monetary assets of $481 million, including cash of $481 million, as of December 31, 2014, based on the SICAD exchange rate of 12.0 Venezuelan bolivars per U.S. dollar. In addition, our Venezuelan subsidiary had $575 million of net property, equipment and intangible assets as of June 30, 2015 as compared to $574 million at December 31, 2014. In the second quarter of 2015, our Venezuelan subsidiary generated revenues of approximately $250 million and operating profit before depreciation and amortization of approximately $80 million. During the six months ended June 30, 2015, our Venezuelan ~~Commitments~~ subsidiary generated revenues of approximately $500 million and operating profit before depreciation and amortization of approximately $180 million, excluding the impact of the $39 million exchange rate losses recorded in "General and administrative expenses" as a result of the change in the SICAD exchange rate.

AtThe exchange ~~March 31,~~rate ~~2015,~~used ~~our~~to ~~minimum~~report ~~payments~~net ~~under~~monetary ~~agreements~~assets toand ~~purchase~~operating ~~broadcast~~results ~~programming,~~of ~~and~~our Venezuelan subsidiary is currently based on the ~~purchase~~results of ~~services~~periodic ~~that~~SICAD ~~we have~~auctions, ~~outsourced~~which are expected to ~~third~~result ~~parties,~~in ~~such~~fluctuations asin ~~billing~~reported ~~services,~~amounts ~~and~~that ~~satellite~~could ~~telemetry,~~be ~~tracking~~material ~~and~~to ~~control,~~the ~~satellite~~results ~~construction~~of ~~and~~operations ~~launch~~in ~~contracts~~Venezuela in future periods and ~~broadcast~~could ~~center~~materially ~~services~~affect ~~aggregated~~the comparability of results for our ~~$16,305 million,~~Venezuelan ~~payable~~subsidiary asbetween ~~follows:~~periods. ~~$1,744 million~~Significant uncertainties exist regarding the exchange mechanisms in Venezuela including the ~~remainder~~nature of ~~2015,~~transactions ~~$2,140 million~~that inare ~~2016,~~eligible $1for repatriation though the official process,~~880 million~~ inSICAD ~~2017~~or SIMADI, $1or any other new exchange mechanism that may emerge,~~760 million~~ how such mechanisms will operate in ~~2018~~the future, as well as the volume of U.S. dollars available under each ~~$1,936 million~~mechanism. Changes in ~~2019~~exchange mechanisms and ~~$6,845 million~~rates ~~thereafter.~~will impact the comparability of our results of operations and

Venezuela Devaluation and Foreign Currency Exchange Controls

As of March 31, 2015, the mechanisms in Venezuela for exchanging Venezuelan bolivars into U.S. dollars were as follows: (i) the official government mechanism operated by the Venezuelan Central Bank, which has a fixed exchange rate of 6.3 Venezuelan bolivars per U.S. dollar mainly reserved for essential goods and services (ii) the auction based Sistema Complementario de Administración de Divisas, or SICAD, which is intended for dividend and royalty remittances as well as certain imports, including telecommunications equipment and (iii) an open market currency exchange system Sistema Marginal de Divisas, or SIMADI, which is based on supply and demand. As of March 31, 2015, the SICAD exchange rate was 12.0 Venezuelan bolivars per U.S. dollars and the SIMADI exchange rate was 193.0 Venezuelan bolivars per U.S. dollars.

Effective March 31, 2014, we changed the exchange rate for remeasuring our Venezuelan subsidiary's monetary net assets from the official exchange rate of 6.3 Venezuelan bolivars per U.S. dollar to the SICAD rate, which was 10.7 Venezuelan bolivars per U.S. dollar as of March 31, 2014. As a result of the devaluation, we recorded a pre-tax charge in "Venezuelan currency devaluation charge" in the Consolidated Statements of Operations of $281 million in the first quarter of 2014, related to the

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

~~remeasurement~~financial ofposition, ~~the~~and ~~Venezuelan~~would ~~bolivar~~likely ~~denominated~~result ~~net~~in ~~monetary~~significant ~~assets~~future ofdevaluations ~~our~~or ~~Venezuelan~~impairments ~~subsidiary~~of ontangible ~~March 31,~~and ~~2014~~intangible assets.

As of March 31, 2015, the SICAD rate was the most representative rate to use for remeasurement, as a limited amount of telecommunications equipment was imported at the SICAD rate during the quarter and the official rate of 6.3 Venezuelan bolivars per U.S. dollar continued to be reserved only for the settlement of U.S. dollar denominated obligations related to purchases of "essential goods and services". In addition, we did not transact in the SIMADI mechanism during the three months ended March 31, 2015.

Our Venezuelan subsidiary had Venezuelan bolivar denominated net monetary assets of $534 million, including cash of $554 million, as of March 31, 2015, as compared to Venezuelan bolivar denominated net monetary assets of $481 million, including cash of $481 million, as of December 31, 2014, based on the SICAD exchange rate of 12.0 Venezuelan bolivars per U.S. dollar. In the first quarter of 2015, our Venezuelan subsidiary generated revenues of approximately $200 million and operating profit before depreciation and amortization of approximately $75 million.

The exchange rate used to report net monetary assets and operating results of our Venezuelan subsidiary is currently based on the results of periodic SICAD auctions, which are expected to result in fluctuations in reported amounts that could be material to the results of operations in Venezuela in future periods and could materially affect the comparability of results for our Venezuelan subsidiary between periods. Significant uncertainties exist regarding the exchange mechanisms in Venezuela including the nature of transactions that are eligible for repatriation though the official process, SICAD or SIMADI, or any other new exchange mechanism that may emerge, how such mechanisms will operate in the future, as well as the volume of U.S. dollars available under each mechanism. Changes in exchange mechanisms and rates will impact the comparability of our results of operations and financial position, and would likely result in significant future devaluations.

Litigation

Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, claims and proceedings are pending against us arising in the ordinary course of business. We have established loss provisions for matters in which losses are probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or treble damage claims, or demands that, if granted, could require us to pay damages or make other expenditures in amounts that could not be estimated at ~~March~~June 3130, 2015. 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. We expense legal costs as incurred.

~~Intellectual~~NFL ~~Property~~Sunday Ticket Litigation. WeDIRECTV ~~are~~has abeen ~~defendant~~served inwith ~~several~~three ~~unrelated~~putative ~~lawsuits~~class ~~claiming~~actions ~~infringement~~filed ofin ~~various~~the ~~patents relating~~U.S; toDistrict ~~various~~Court for the ~~aspects~~Central District of California ~~our~~against ~~businesses.~~DIRECTV Inand ~~certain~~the ofNFL ~~these~~alleging ~~cases~~among other ~~industry~~things ~~participants~~that ~~are~~the ~~also~~agreement among the defendants, ~~and~~for ~~also~~DIRECTV's inexclusive ~~certain~~distribution of ~~these~~NFL ~~cases~~Sunday weTicket ~~expect~~violates ~~that~~Sections 1 ~~any~~and ~~potential~~2 ~~liability would be the~~of ~~responsibility~~the ofSherman ~~our~~Act ~~equipment~~and ~~vendors~~that ~~pursuant~~plaintiffs tohave ~~applicable~~been ~~contractual~~overcharged ~~indemnification~~for ~~provisions.~~the ~~Further,~~televised inpresentation ~~certain~~of out-of-market ~~these~~NFL ~~cases,~~games. ~~suppliers~~The ofcomplaint ~~equipment~~in toAbrahamian ~~DIRECTV~~v. ~~are~~National ~~also~~Football ~~defendants~~League, Inc., ~~and DIRECTV~~et ~~has~~al., ~~contractual~~was served ~~obligations~~in toJune ~~indemnify~~2015, ~~and~~the ~~hold~~complaint ~~harmless those suppliers~~ in ~~those~~Ninth ~~cases~~Inning Inc. Tov. ~~the~~National ~~extent~~Football ~~that~~League, Inc., ~~the~~et ~~allegations~~al. inwas ~~these~~served ~~lawsuits~~in ~~can~~July be2015 ~~analyzed~~and bythe uscomplaint atin ~~this~~Rookie ~~stage~~Sports ofCafé, ~~their~~L.L.C., ~~proceedings~~et al., wewas ~~believe~~served ~~the~~in ~~claims~~August ~~are~~2015. ~~without~~The ~~merit~~complaints ~~and~~seek ~~intend~~injunctions, tounspecified ~~defend~~treble ~~the~~damages ~~actions~~and ~~vigorously~~attorneys' fees. We ~~have~~are ~~determined~~confident ~~the~~that ~~likelihood~~our ofagreement awith ~~material~~the ~~liability~~NFL indoes ~~such~~not ~~matters~~violate isthe ~~remote~~Sherman ~~or have made~~Act ~~appropriate accruals~~ and ~~the~~intend ~~final~~to ~~disposition~~vigorously ofdefend ~~these~~the ~~claims~~lawsuits. ~~is not expected to~~

Major League Baseball Litigation. A class was certified by Judge Shira Scheindlin in the case Lerner et al. v. Office of the Commissioner of Baseball et al. filed in May 2015 in federal court for the Southern District of New York. Judge Scheindlin ruled that the plaintiffs were entitled to seek an injunction on behalf of a class of subscribers who had purchased MLB Extra Innings from DIRECTV, Comcast and MLB, to prevent MLB from enforcing league rules that grant member teams exclusive home team territories. The Judge also ruled that the plaintiffs were not entitled to seek damages on behalf of the class. A trial is expected in the fall of 2015. The defendants intend to defend the case and pursue appeals to reverse the numerous errors of law that formed the bases of the trial court's orders.

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. Further, in certain of these cases, suppliers of equipment to DIRECTV are also defendants, and DIRECTV has contractual obligations to indemnify and hold harmless those suppliers in those cases. 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 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 possibly 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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

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 possibly 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. As previously reported, 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. We have reached a settlement with the individual plaintiffs in the federal cases. In the California state court action, the United States Supreme Court agreed to review the California Court of Appeal's opinion affirming the denial of our motion to compel arbitration. 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.

State and Federal Inquiries. 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.

FTC Litigation. On March 11, 2015, the Federal Trade Commission, or FTC, filed a lawsuit against DIRECTV and DIRECTV, LLC in United States District Court for the Northern District of California. The FTC alleges that DIRECTV failed to disclose adequately in our advertisements certain terms and conditions of our programming package offers. The complaint also alleges that DIRECTV violated applicable law by failing adequately to disclose, and to obtain consumers' express consent to, the terms of negative option offers for premium channels. The complaint seeks a permanent injunction to prevent further violations, as well as relief to redress injury to consumers. We believe we have valid defenses to the FTC's claims and we intend to vigorously defend the lawsuit.

Waste Disposal Inquiry. In August 2012, DIRECTV U.S. received from the State of California subpoenas and interrogatories related to our generation, handling, record keeping, transportation and disposal of hazardous waste, including universal waste, in the State of California, and the training of employees regarding the same. The investigation is jointly conducted by the Office of the Attorney General and the District Attorney for Alameda County and appears to be part of a broader effort to investigate waste handling and disposal processes of a number of industries. We are continuing to review our policies and procedures applicable to all facilities, cooperating with the investigation and recently began discussions with regulators directed at reaching resolution of this matter.

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.

Income Tax Matters

We have received tax assessments from certain foreign jurisdictions and have agreed to indemnify previously divested businesses for certain tax assessments relating to periods prior to their respective divestitures. These assessments are in various stages of the administrative process or litigation. While the outcome of these assessments and other tax issues cannot be predicted with certainty, we believe that the ultimate outcome will not have a material effect on our consolidated financial position or result of operations.

Satellites

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

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 30, 2015, the net book value of in-orbit satellites was ~~Satellites~~ $2,047 million, all of which was uninsured.

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 a portion of 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 March 31, 2015, the net book value of in-orbit satellites was $2,119 million, all of which was uninsured.

Other

AsWe have an investment with a carrying value of ~~March~~$147 31million as of June 30, 2015, wein ~~were~~an ~~contingently~~entity ~~liable~~that ~~under~~holds ~~standby~~certain ~~letters~~soccer rights ofand ~~credit~~provides ~~and~~production ~~bonds~~services for soccer tournaments in Latin America. In connection with recent FIFA-related developments and investigations, our investment, which we account for following the ~~aggregate~~equity ~~amount~~method of ~~$352 million~~ ~~primarily~~accounting, ~~related~~could tobe ~~judicial~~adversely ~~deposit~~impacted and ~~payment~~we ~~guarantees~~could inbe ~~Latin~~required ~~America~~to ~~and~~record ~~insurance~~an ~~deductibles~~impairment of our investment depending on on-going developments related to this entity.

As of June 30, 2015, we were contingently liable under standby letters of credit and bonds in the aggregate amount of $361 million primarily related to judicial deposit and payment guarantees in Latin America and insurance deductibles.

Note 7: Related Party Transactions

In the ordinary course of our operations, we enter into transactions with related parties as discussed below. Related parties include Globo, which provides programming and advertising to Sky Brasil, and companies in which we hold equity method investments, including Sky Mexico, GSN, HSH and ROOT SPORTS Northwest.

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.

The following table summarizes revenues and expenses with related parties:

	Three Months Ended March 31,
	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
	(Dollars in Millions)
Revenues	$	23	$	2	$	5	$	4
Expenses		~~241~~263		~~241~~300		504		541

The following table sets forth the ~~amount~~amounts ofrecorded ~~accounts~~in ~~receivable~~the ~~from~~Consolidated ~~and~~Balance ~~accounts~~Sheets ~~payable~~for to related ~~parties~~party transactions as of:

	March 31, 2015		December 31, 2014
	June 30, 2015		December 31, 2014
	(Dollars in Millions)
Accounts receivable	$	7	$	26
Accounts payable		112		123
Prepaid expenses and other		4		—
Short-term liability		162		149
Accounts payable		128		123
Short-term liability		169		149
Long-term liability		1		1

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(Unaudited)

Note 8: Stockholders' Deficit and Noncontrolling Interest

Capital Stock and Additional Paid-In Capital

~~Our~~At June 30, 2015, our certificate of incorporation ~~provides~~provided for the following capital stock: 3,950,000,000 shares of common stock, par value $0.01 per share, and 50,000,000 shares of preferred stock, par value $0.01 per share. DIRECTV common stock is entitled to one vote per share and trades on the NASDAQ, under the ticker "DTV". As of ~~March~~June 3130, 2015 and December 31, 2014, there were no outstanding shares of preferred stock.

Share Repurchase Program

Since 2006 our Board of Directors has approved multiple authorizations for the repurchase of our common stock. In February 2014 our Board of Directors approved an authorization for up to $3.5 billion for repurchases of our common stock. In accordance with the Merger Agreement, we suspended the share repurchase program and agreed to not purchase, repurchase, redeem or otherwise acquire any shares of our capital stock during the pendency of the proposed transaction ~~and~~ without AT&T's consent, effective May 18, 2014.

For the three months months ended March 31, 2014, we repurchased 13 million shares at an average price of $71.53 per share for a total cost of $925 million. Of the $925 million in repurchases during the three months ended March 31, 2014, $30 million were paid for in April 2014. Amounts repurchased but settled subsequent to the end of such periods are considered non-cash financing activities and excluded from the Consolidated Statements of Cash Flows.

Noncontrolling Interest

In connection with our acquisition of Sky Brasil in 2006, our partner who holds the remaining 7% interest, Globo Comunicações e Participações S.A., or Globo, was granted the right, until January 2014, to require us to purchase all, but not less than all, of its shares in Sky Brasil. Globo did not exercise its right to require us to purchase its shares in Sky Brasil. That right has now expired and the noncontrolling interest is no longer redeemable. In accordance with Accounting Standards Codification 480, Distinguishing Liabilities from Equity, during the first quarter of 2014, we reclassified $375 million, which was the fair value of Globo's remaining 7% interest, from "Redeemable noncontrolling interest" to "Noncontrolling interest," a component of stockholders' deficit in the Consolidated Balance Sheets. During the first quarter of 2014, we discontinued fair value accounting for this equity instrument.

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(Unaudited)

The following ~~tables~~table ~~set~~sets forth a reconciliation of stockholders' deficit for the ~~three~~six months ended ~~March~~June 3130, 2015:

			Stockholders' Deficit
	DIRECTV Common Shares		Common Stock and Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total DIRECTV Stockholders' Deficit			Noncontrolling Interest			Total Stockholders' Deficit
	(Amounts in Millions, Except Share Data)
Balance as of January 1, 2015		502,733,342	$	3,613		$	(8,408	)	$	(418	)	$	(5,213	)	$	385		$	(4,828	)
Net income							~~730~~1,477						~~730~~1,477			—3			~~730~~1,480
Stock options exercised and restricted stock units vested and distributed		1,~~247~~778,~~835~~225		(6253	)								(6253	)					(6253	)
Share-based compensation expense				2753									2753						2753
Tax benefit from share-based compensation				31									31						31
Other				(1	)								(1	)					(1	)
Other comprehensive loss										(~~159~~134	)		(~~159~~134	)					(~~159~~134	)
CTA adjustment allocated to noncontrolling interest																(1813	)		(1813	)

Balance as of March 31, 2015		503,981,177	$	3,608		$	(7,678	)	$	(577	)	$	(4,647	)	$	367		$	(4,280	)
Balance as of June 30, 2015		504,511,567	$	3,645		$	(6,931	)	$	(552	)	$	(3,838	)	$	375		$	(3,463	)

The following ~~tables~~table ~~set~~sets forth a reconciliation of stockholders' deficit and redeemable noncontrolling interest for the ~~three~~six months ended ~~March~~June 3130, 2014:

				Stockholders' Deficit
	DIRECTV Common Shares			Common Stock and Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total DIRECTV Stockholders' Deficit			Noncontrolling Interest		Total Stockholders' Deficit			Redeemable Noncontrolling Interest
	(Amounts in Millions, Except Share Data)
Balance as of January 1, 2014		519,306,232		$	3,652		$	(9,874	)	$	(322	)	$	(6,544	)	$	—	$	(6,544	)	$	375
Net income								~~561~~1,367						~~561~~1,367			812		~~569~~1,379
Stock repurchased and retired		(1218,~~928~~774,~~118~~194	)		(89130	)		(~~836~~1,256	)					(~~925~~1,386	)				(~~925~~1,386	)
Stock options exercised and restricted stock units vested and distributed		1,~~220~~693,~~957~~808			(5746	)								(5746	)				(5746	)
Share-based compensation expense					2045									2045					2045
Tax benefit from share-based compensation					22									22					22
Other					1			(14	)					1(13	)				1(13	)
Other comprehensive income											2434			2434					2434
CTA adjustment allocated to noncontrolling interest																	37		37
Noncontrolling interest																	375		375			(375	)

Balance as of March 31, 2014		507,599,071		$	3,549		$	(10,149	)	$	(298	)	$	(6,898	)	$	386	$	(6,512	)	$	—
Balance as of June 30, 2014		502,225,846		$	3,544		$	(9,777	)	$	(288	)	$	(6,521	)	$	394	$	(6,127	)	$	—

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Other Comprehensive Income (Loss)

The following represents the components of other comprehensive income (loss) for each of the periods presented:

	Three Months Ended March 31,
	Three Months Ended June 30,
	2015									2014
	Pre-Tax			Tax Benefit (Expense)			Net of Tax			Pre-Tax			Tax Benefit (Expense)			Net of Tax
	(Dollars in Millions)
Cash flows hedges:
Unrealized losses arising during the period	$	(194	)	$	73		$	(121	)	$	(12	)	$	5		$	(7	)
Unrealized gains arising during the period	$	132		$	(49	)	$	83		$	10		$	(4	)	$	6
Reclassification adjustments included in "Other, net"		~~151~~(119	)		~~(57~~45	)		94(74	)		(1345	)		517			(828	)
Foreign currency translation adjustments		~~(218~~37	)		86(21	)		~~(132~~16	)		6358			(2426	)		3932

Other comprehensive income (loss)	$	(261	)	$	102		$	(159	)	$	38		$	(14	)	$	24
Other comprehensive income	$	50		$	(25	)	$	25		$	23		$	(13	)	$	10

	Six Months Ended June 30,

	2015									2014
	Pre-Tax			Tax Benefit (Expense)			Net of Tax			Pre-Tax			Tax Benefit (Expense)			Net of Tax
	(Dollars in Millions)
Cash flows hedges:
Unrealized losses arising during the period	$	(62	)	$	24		$	(38	)	$	(2	)	$	1		$	(1	)
Reclassification adjustments included in "Other, net"		32			(12	)		20			(58	)		22			(36	)
Foreign currency translation adjustments		(181	)		65			(116	)		121			(50	)		71

Other comprehensive income (loss)	$	(211	)	$	77		$	(134	)	$	61		$	(27	)	$	34

Accumulated Other Comprehensive Loss

The following represents the changes in the components of accumulated other comprehensive loss for each of the periods presented:

	Defined Benefit Plan Items			Gains (Losses) on Cash Flow Hedges			Foreign Currency Items			Accumulated Other Comprehensive Loss
	(Dollars in Millions)
Balance as of January 1, 2015	$	(141	)	$	44		$	(321	)	$	(418	)
Other comprehensive loss		—			(2718	)		(~~132~~116	)		(~~159~~134	)

Balance as of March 31, 2015	$	(141	)	$	17		$	(453	)	$	(577	)
Balance as of June 30, 2015	$	(141	)	$	26		$	(437	)	$	(552	)

	Defined Benefit Plan Items			Gains (Losses) on Cash Flow Hedges			Foreign Currency Items			Accumulated Other Comprehensive Loss
	(Dollars in Millions)
Balance as of January 1, 2014	$	(123	)	$	14		$	(213	)	$	(322	)
Other comprehensive income (loss)		—			(15	)		39			24

Balance as of March 31, 2014	$	(123	)	$	(1	)	$	(174	)	$	(298	)

Note 9: Earnings Per Common Share

We compute basic earnings per common share, or EPS, by dividing net income attributable to DIRECTV by the weighted average number of common shares outstanding for the period.

Diluted EPS considers the effect of common equivalent shares, which consist entirely of common stock options and restricted stock units issued to employees. We excluded 0.2 million common stock awards from the computation of diluted EPS, for both the three months ended March 31, 2015 and March 31, 2014, because the inclusion of the potential common shares would have had an antidilutive effect.

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

	Defined Benefit Plan Items			Gains (Losses) on Cash Flow Hedges			Foreign Currency Items			Accumulated Other Comprehensive Loss

	(Dollars in Millions)
Balance as of January 1, 2014	$	(123	)	$	14		$	(213	)	$	(322	)
Other comprehensive income (loss)		—			(37	)		71			34

Balance as of June 30, 2014	$	(123	)	$	(23	)	$	(142	)	$	(288	)

Note 9: Earnings Per Common Share

We compute basic earnings per common share, or EPS, by dividing net income attributable to DIRECTV by the weighted average number of common shares outstanding for the period.

Diluted EPS considers the effect of common equivalent shares, which consist entirely of common stock options and restricted stock units issued to employees. During the three and six months ended June 30, 2015 and June 30, 2014 we excluded 0.2 million common stock awards from the computation of diluted EPS, because the inclusion of the potential common shares would have had an antidilutive effect.

The reconciliation of the amounts used in the basic and diluted EPS computation is as follows:

	Income			Per Share Amounts
	(Dollars and Shares in Millions, Except Per Share Amounts)
Three Months Ended March 31, 2015
Three Months Ended
June 30, 2015
Basic EPS
Net income attributable to DIRECTV	$	~~730~~747	~~503~~504	$	1.4548
Effect of dilutive securities
Dilutive effect of stock options and restricted stock units		—	4		(0.01	)

Diluted EPS
Adjusted net income attributable to DIRECTV	$	~~730~~747	~~507~~508	$	1.4447



March 31, 2014
June 30, 2014
Basic EPS
Net income attributable to DIRECTV	$	~~561~~806	~~511~~504	$	1.1060
Effect of dilutive securities
Dilutive effect of stock options and restricted stock units		—	4		(0.01	)

Diluted EPS
Adjusted net income attributable to DIRECTV	$	~~561~~806	~~515~~508	$	1.0959

Note 10: Segment Reporting

Our reportable segments, which are differentiated by their products and services as well as geographic location, are DIRECTV U.S., Sky Brasil and PanAmericana and Other, which are engaged in acquiring, promoting, selling and distributing digital entertainment programming primarily via satellite to residential and commercial subscribers, and the Sports Networks, Eliminations and Other segment, which includes our regional sports networks that provide programming devoted to local professional sports teams and college sporting events and locally produce their own programming. Sports Networks, Eliminations and Other also includes the corporate office, eliminations and other entities.

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Selected information for our operating segments is reported as follows:

	Income			Per Share Amounts

	(Dollars and Shares in Millions, Except Per Share Amounts)
Six Months Ended
June 30, 2015
Basic EPS
Net income attributable to DIRECTV	$	1,477	504	$	2.93
Effect of dilutive securities
Dilutive effect of stock options and restricted stock units		—	4		(0.02	)

Diluted EPS
Adjusted net income attributable to DIRECTV	$	1,477	508	$	2.91



June 30, 2014
Basic EPS
Net income attributable to DIRECTV	$	1,367	507	$	2.70
Effect of dilutive securities
Dilutive effect of stock options and restricted stock units		—	5		(0.03	)

Diluted EPS
Adjusted net income attributable to DIRECTV	$	1,367	512	$	2.67

	External Revenues		Intersegment Revenues			Total Revenues		Operating Profit (Loss)			Depreciation and Amortization Expense		Operating Profit (Loss) Before Depreciation and Amortization(1)
	(Dollars in Millions)
Three Months Ended March 31, 2015
DIRECTV U.S.	$	6,456	$	2		$	6,458	$	1,249		$	438	$	1,687
Sky Brasil		795		—			795		54			145		199
PanAmericana and Other		840		—			840		102			144		246

DIRECTV Latin America		1,635		—			1,635		156			289		445
Sports Networks, Eliminations and Other		52		(2	)		50		(18	)		3		(15	)

Total	$	8,143	$	—		$	8,143	$	1,387		$	730	$	2,117



March 31, 2014
DIRECTV U.S.	$	6,085	$	2		$	6,087	$	1,243		$	426	$	1,669
Sky Brasil		939		—			939		148			163		311
PanAmericana and Other		782		—			782		(174	)		122		(52	)

DIRECTV Latin America		1,721		—			1,721		(26	)		285		259
Sports Networks, Eliminations and Other		49		(2	)		47		10			3		13

Total	$	7,855	$	—		$	7,855	$	1,227		$	714	$	1,941

Note 10: Segment Reporting

~~We believe~~ Our ~~this~~reportable ~~measure~~segments, iswhich ~~useful~~are todifferentiated ~~investors,~~by ~~along~~their ~~with~~products ~~GAAP~~and ~~measures~~services ~~(such~~as well as ~~revenues~~geographic location, ~~operating~~are ~~profit~~DIRECTV U.S., Sky Brasil and ~~net~~PanAmericana ~~income)~~and Other, towhich ~~compare~~are ~~our~~engaged ~~operating~~in ~~performance~~acquiring, promoting, selling and distributing digital entertainment programming primarily via satellite to ~~other~~residential ~~communications,~~and commercial ~~entertainment~~subscribers, and ~~media~~the ~~service~~Sports ~~providers.~~Networks, WeEliminations ~~believe~~and Other segment, which includes our regional sports networks that ~~investors~~provide ~~use~~programming ~~current~~devoted ~~and~~to ~~projected~~local ~~operating~~professional ~~profit~~sports ~~before~~teams ~~depreciation~~and college sporting events and ~~amortization~~locally produce their own programming. Sports Networks, Eliminations and ~~similar~~Other ~~measures~~also toincludes ~~estimate~~the ~~our~~corporate ~~current~~office, eliminations and other entities.

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

or Selected ~~prospective~~information ~~enterprise~~for ~~value~~our ~~and make investment decisions. This metric provides investors with a means to compare~~ operating ~~results~~segments ~~exclusive of depreciation and amortization. Our management believes this~~ is ~~useful~~reported ~~given~~as ~~the~~follows: 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.

The following represents a reconciliation of operating profit before depreciation and amortization to reported net income on the Consolidated Statements of Operations:

	External Revenues		Intersegment Revenues			Total Revenues		Operating Profit (Loss)			Depreciation and Amortization Expense		Operating Profit (Loss) Before Depreciation and Amortization(1)

	(Dollars in Millions)
Three Months Ended
June 30, 2015
DIRECTV U.S.	$	6,708	$	2		$	6,710	$	1,373		$	433	$	1,806
Sky Brasil		781		—			781		63			143		206
PanAmericana and Other		895		—			895		(5	)		143		138

DIRECTV Latin America		1,676		—			1,676		58			286		344
Sports Networks, Eliminations and Other		57		(2	)		55		(42	)		2		(40	)

Total	$	8,441	$	—		$	8,441	$	1,389		$	721	$	2,110



June 30, 2014
DIRECTV U.S.	$	6,270	$	2		$	6,272	$	1,319		$	429	$	1,748
Sky Brasil		1,011		—			1,011		114			175		289
PanAmericana and Other		778		—			778		28			121		149

DIRECTV Latin America		1,789		—			1,789		142			296		438
Sports Networks, Eliminations and Other		50		(2	)		48		(37	)		4		(33	)

Total	$	8,109	$	—		$	8,109	$	1,424		$	729	$	2,153

	Three Months Ended March 31,
	2015			2014
	(Dollars in Millions)
Operating profit before depreciation and amortization	$	2,117		$	1,941
Depreciation and amortization		(730	)		(714	)

Operating profit		1,387			1,227
Interest income		22			13
Interest expense		(245	)		(232	)
Other, net		7			57

Income before income taxes		1,171			1,065
Income tax expense		(441	)		(496	)

Net income		730			569
Less: Net income attributable to noncontrolling interest		—			(8	)

Net income attributable to DIRECTV	$	730		$	561

Note 11: Condensed Consolidating Financial Statements

As discussed above in Note 4, DIRECTV has provided a guarantee of all the outstanding senior notes of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc., or the Co-issuers.

The following condensed consolidating financial statements of DIRECTV and subsidiaries have been prepared pursuant to rules regarding the preparation of consolidating financial statements of Regulation S-X.

These condensed consolidating financial statements present the condensed consolidating statements of operations and condensed consolidating statements of comprehensive income for the three months ended March 31, 2015 and 2014, the condensed consolidating statements of cash flows for the three months ended March 31, 2015 and 2014, and the condensed consolidating balance sheets as of March 31, 2015 and December 31, 2014.

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

statements on a consolidated basis. The Non-Guarantor Subsidiaries consist primarily of DIRECTV's DTH digital television services throughout Latin America which are held by DIRECTV Latin America Holdings, Inc. and its subsidiaries, and our regional sports networks which are held by DIRECTV Sports Networks LLC and its subsidiaries. In addition, the Non-Guarantor Subsidiaries include the entity that is the parent of DIRECTV Holdings.

	External Revenues		Intersegment Revenues			Total Revenues		Operating Profit (Loss)			Depreciation and Amortization Expense		Operating Profit (Loss) Before Depreciation and Amortization(1)

	(Dollars in Millions)
Six Months Ended
June 30, 2015
DIRECTV U.S.	$	13,164	$	4		$	13,168	$	2,622		$	871	$	3,493
Sky Brasil		1,576		—			1,576		117			288		405
PanAmericana		1,735		—			1,735		97			287		384

DIRECTV Latin America		3,311		—			3,311		214			575		789
Sports Networks, Eliminations and Other		109		(4	)		105		(60	)		5		(55	)

Total	$	16,584	$	—		$	16,584	$	2,776		$	1,451	$	4,227



June 30, 2014
DIRECTV U.S.	$	12,355	$	4		$	12,359	$	2,562		$	855	$	3,417
Sky Brasil		1,950		—			1,950		262			338		600
PanAmericana		1,560		—			1,560		(146	)		243		97

DIRECTV Latin America		3,510		—			3,510		116			581		697
Sports Networks, Eliminations and Other		99		(4	)		95		(27	)		7		(20	)

Total	$	15,964	$	—		$	15,964	$	2,651		$	1,443	$	4,094

~~The~~ ~~accompanying~~ ~~condensed~~ (1)Operating profit ~~consolidating~~(loss) before depreciation and amortization, which is a financial ~~statements~~measure ~~are~~that is not determined in accordance with GAAP can be calculated by adding amounts under the caption "Depreciation and amortization expense" to "Operating profit (loss)." This measure should be used in conjunction with GAAP financial measures and is not presented as ~~based~~an onalternative measure of operating results, as determined in accordance with GAAP. Our management and Board of Directors use operating profit before depreciation and amortization to evaluate the operating ~~equity~~performance ~~method~~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 ~~accounting~~performance for ~~all~~incentive compensation ~~periods~~purposes ~~presented.~~and ~~Under~~to ~~this~~measure ~~method~~income generated from operations that could be used to fund capital expenditures, ~~investments~~service indebt or pay taxes. Depreciation and amortization expense primarily ~~subsidiaries~~represents ~~are~~an ~~recorded~~allocation atto current expense of the cost of historical capital expenditures and ~~adjusted~~for intangible assets resulting from prior business acquisitions. To compensate for the ~~subsidiaries'~~exclusion ~~cumulative~~of depreciation ~~results~~and ofamortization ~~operations~~expense from operating profit, our management and Board of Directors separately measure and budget for capital ~~contributions~~expenditures and ~~distributions~~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 ~~changes~~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. Our management believes this is useful given the significant variation in ~~equity~~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.

Elimination entries include consolidating and eliminating entries for investments in subsidiaries, intercompany activity and balances, and income taxes.

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

The ~~Condensed~~following ~~Consolidating~~represents ~~Statement~~a reconciliation of ~~Operations For~~operating profit before depreciation and amortization to reported net income on the ~~Three~~Consolidated ~~Months~~Statements ~~Ended~~of ~~March 31,~~Operations: ~~2015~~

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated
	Three Months Ended June 30,						Six Months Ended June 30,
	(Dollars in Millions)
	2015			2014			2015			2014
Revenues	$	—		$	—		$	6,458		$	1,725		$	(40	)	$	8,143
	(Dollars in Millions)
Operating costs and expenses
Operating profit before depreciation and amortization	$	2,110		$	2,153		$	4,227		$	4,094
Costs of revenues, exclusive of depreciation and amortization expense
Depreciation and amortization		(721	)		(729	)		(1,451	)		(1,443	)
Broadcast programming and other		—			—			2,998			616			(38	)		3,576

Subscriber service expenses		—			—			385			196			—			581
Operating profit		1,389			1,424			2,776			2,651
Broadcast operations expenses		—			—			81			38			(2	)		117
Interest income		24			12			46			25
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Interest expense		(234	)		(230	)		(479	)		(462	)
Subscriber acquisition costs		—			—			703			185			—			888
Other, net		25			35			32			92
Upgrade and retention costs		—			—			308			42			—			350

General and administrative expenses		32			—			296			186			—			514
Income before income taxes		1,204			1,241			2,375			2,306
Depreciation and amortization expense		—			—			438			292			—			730
Income tax expense		(454	)		(431	)		(895	)		(927	)

Total operating costs and expenses		32			—			5,209			1,555			(40	)		6,756
Net income		750			810			1,480			1,379

Less: Net income attributable to noncontrolling interest		(3	)		(4	)		(3	)		(12	)
Operating profit (loss)		(32	)		—			1,249			170			—			1,387

Equity in income of consolidated subsidiaries		750			751			—			615			(2,116	)		—
Net income attributable to DIRECTV	$	747		$	806		$	1,477		$	1,367
Interest income		—			3			—			19			—			22

Interest expense		—			(231	)		—			(14	)		—			(245	)

Other, net		—			2			6			(1	)		—			7


Income before income taxes		718			525			1,255			789			(2,116	)		1,171
Income tax benefit (expense)		12			90			(504	)		(39	)		—			(441	)

Net income		730			615			751			750			(2,116	)		730
Less: Net income attributable to noncontrolling interest		—			—			—			—			—			—

Net income attributable to DIRECTV	$	730		$	615		$	751		$	750		$	(2,116	)	$	730

Note 11: Condensed Consolidating Financial Statements

As discussed in Note 4, DIRECTV has provided a guarantee of all the outstanding senior notes of DIRECTV Holdings LLC and DIRECTV Financing Co., Inc., or the Co-issuers.

These condensed consolidating financial statements present the condensed consolidating statements of operations and condensed consolidating statements of comprehensive income for the three and six months ended June 30, 2015 and 2014, the condensed consolidating statements of cash flows for the six months ended June 30, 2015 and 2014, and the condensed consolidating balance sheets as of June 30, 2015 and December 31, 2014.

The condensed consolidating financial statements are comprised of DIRECTV, or the Parent Guarantor, its indirect 100% owned subsidiaries, DIRECTV Holdings, DIRECTV Financing and each of DIRECTV Holdings' material subsidiaries (other than DIRECTV Financing), or the Guarantor Subsidiaries, as well as other subsidiaries who are not guarantors of the senior notes, or the Non-Guarantor Subsidiaries, and the eliminations necessary to present DIRECTV's financial statements on a consolidated basis. The Non-Guarantor Subsidiaries consist primarily of DIRECTV's DTH digital television services throughout Latin America which are held by DIRECTV Latin America Holdings, Inc. and its subsidiaries, and our regional sports networks which are held by DIRECTV Sports Networks LLC and its subsidiaries. In addition, the Non-Guarantor Subsidiaries include the entity that is the parent of DIRECTV Holdings.

The accompanying condensed consolidating financial statements are presented based on the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the subsidiaries' cumulative results of operations, capital contributions and distributions, and other changes in equity.

Elimination entries include consolidating and eliminating entries for investments in subsidiaries, intercompany activity and balances, and income taxes.

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating Statement of Operations For the Three Months Ended ~~March~~June 3130, ~~2014~~2015

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated
	(Dollars in Millions)
Revenues	$	—		$	—		$	6,~~087~~710		$	1,~~798~~772		$	(3041	)	$	78,~~855~~441
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other		—			—			23,~~768~~121			~~641~~689			(2630	)		3,~~383~~780
Subscriber service expenses		—			—			~~359~~404			~~192~~194			—(2	)		~~551~~596
Broadcast operations expenses		—			—			7276			2744			(2	)		97118
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs		—			—			~~648~~682			~~180~~214			(13	)		~~827~~893
Upgrade and retention costs		—			—			~~281~~301			4146			(13	)		~~321~~344
General and administrative expenses		930			—			~~290~~320			~~155~~251			—(1	)		~~454~~600
Venezuelan currency devaluation charge		—			—			—			281			—			281
Depreciation and amortization expense		—			—			433			288			—			721
Depreciation and amortization expense		—			—			426			288			—			714

Total operating costs and expenses		930			—			45,~~844~~337			1,~~805~~726			(3041	)		67,~~628~~052

Operating profit (loss)		(930	)		—			1,~~243~~373			(746	)		—			1,~~227~~389
Equity in income of consolidated subsidiaries		~~568~~764			~~787~~867			—			~~648~~729			(2,~~003~~360	)		—
Interest income		—1			—			1			1222			—			1324
Interest expense		—			(~~220~~222	)		(31	)		(911	)		—			(~~232~~234	)
Other, net		(2—	)		—1			511			5413			—			5725

Income before income taxes		~~557~~735			~~567~~646			1,~~246~~384			~~698~~799			(2,~~003~~360	)		1,~~065~~204
Income tax benefit (expense)		412			8183			(~~459~~517	)		(~~122~~32	)		—			(~~496~~454	)

Net income		~~561~~747			~~648~~729			~~787~~867			~~576~~767			(2,~~003~~360	)		~~569~~750
Less: Net income attributable to noncontrolling interest		—			—			—			(83	)		—			(83	)

Net income attributable to DIRECTV	$	~~561~~747		$	~~648~~729		$	~~787~~867		$	~~568~~764		$	(2,~~003~~360	)	$	~~561~~747

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating Statement of ~~Comprehensive Income~~Operations For the Three Months Ended ~~March~~June 3130, ~~2015~~2014

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated
	(Dollars in Millions)
Net income	$	730		$	615		$	751		$	750		$	(2,116	)	$	730
Revenues	$	—		$	—		$	6,272		$	1,879		$	(42	)	$	8,109
Other comprehensive income (loss), net of taxes:
Operating costs and expenses
Cash flows hedges:
Costs of revenues, exclusive of depreciation and amortization expense
Unrealized losses arising during the period		(121	)		(121	)		—			(121	)		242			(121	)
Broadcast programming and other		—			—			2,800			736			(38	)		3,498
Reclassification adjustments included in net income		94			94			—			94			(188	)		94
Subscriber service expenses		—			—			374			201			(1	)		574
Foreign currency translation adjustments		(114	)		—			—			(132	)		114			(132	)
Broadcast operations expenses		—			—			75			34			(2	)		107
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs		—			—			661			237			—			898
Upgrade and retention costs		—			—			314			48			—			362
General and administrative expenses		30			—			300			188			(1	)		517
Depreciation and amortization expense		—			—			429			300			—			729

Other comprehensive loss		(141	)		(27	)		—			(159	)		168			(159	)
Total operating costs and expenses		30			—			4,953			1,744			(42	)		6,685

Comprehensive income		589			588			751			591			(1,948	)		571
Operating profit (loss)		(30	)		—			1,319			135			—			1,424
Comprehensive loss attributable to noncontrolling interest		—			—			—			18			—			18
Equity in income of consolidated subsidiaries		826			813			—			667			(2,306	)		—
Interest income		—			—			—			12			—			12
Interest expense		(1	)		(222	)		(1	)		(6	)		—			(230	)
Other, net		(1	)		(18	)		13			41			—			35

Comprehensive income attributable to DIRECTV	$	589		$	588		$	751		$	609		$	(1,948	)	$	589
Income before income taxes		794			573			1,331			849			(2,306	)		1,241
Income tax benefit (expense)		12			94			(518	)		(19	)		—			(431	)

Net income		806			667			813			830			(2,306	)		810
Less: Net income attributable to noncontrolling interest		—			—			—			(4	)		—			(4	)

Net income attributable to DIRECTV	$	806		$	667		$	813		$	826		$	(2,306	)	$	806

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DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating Statement of ~~Comprehensive Income~~Operations For the ~~Three~~Six Months Ended ~~March~~June 3130, ~~2014~~2015

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated
	(Dollars in Millions)
Net income	$	561		$	648		$	787		$	576		$	(2,003	)	$	569
Revenues	$	—		$	—		$	13,168		$	3,497		$	(81	)	$	16,584
Other comprehensive income (loss), net of taxes:
Operating costs and expenses
Cash flows hedges:
Costs of revenues, exclusive of depreciation and amortization expense
Unrealized losses arising during the period		—			(7	)		—			—			—			(7	)
Broadcast programming and other		—			—			6,119			1,305			(68	)		7,356
Reclassification adjustments included in net income		—			(8	)		—			—			—			(8	)
Subscriber service expenses		—			—			789			390			(2	)		1,177
Foreign currency translation adjustments		—			—			—			39			—			39
Broadcast operations expenses		—			—			157			82			(4	)		235
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs		—			—			1,385			399			(3	)		1,781
Upgrade and retention costs		—			—			609			88			(3	)		694
General and administrative expenses		62			—			616			437			(1	)		1,114
Depreciation and amortization expense		—			—			871			580			—			1,451

Other comprehensive income (loss)		—			(15	)		—			39			—			24
Total operating costs and expenses		62			—			10,546			3,281			(81	)		13,808

Comprehensive income		561			633			787			615			(2,003	)		593
Operating profit (loss)		(62	)		—			2,622			216			—			2,776
Comprehensive income attributable to noncontrolling interest		—			—			—			(11	)		—			(11	)
Equity in income of consolidated subsidiaries		1,514			1,618			—			1,344			(4,476	)		—
Interest income		1			3			1			41			—			46
Interest expense		—			(453	)		(1	)		(25	)		—			(479	)
Other, net		—			3			17			12			—			32

Comprehensive income attributable to DIRECTV	$	561		$	633		$	787		$	604		$	(2,003	)	$	582
Income before income taxes		1,453			1,171			2,639			1,588			(4,476	)		2,375
Income tax benefit (expense)		24			173			(1,021	)		(71	)		—			(895	)

Net income		1,477			1,344			1,618			1,517			(4,476	)		1,480
Less: Net income attributable to noncontrolling interest		—			—			—			(3	)		—			(3	)

Net income attributable to DIRECTV	$	1,477		$	1,344		$	1,618		$	1,514		$	(4,476	)	$	1,477

Table of Contents

DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating ~~Balance~~Statement ~~Sheet~~of Operations AsFor ofthe ~~March~~Six Months Ended June 3130, ~~2015~~2014

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated
	(Dollars in Millions)
ASSETS
Revenues	$	—		$	—		$	12,359		$	3,677		$	(72	)	$	15,964
Total current assets	$	725		$	2,975		$	2,928		$	1,705		$	(287	)	$	8,046
Operating costs and expenses
Satellites, net		—			—			1,713			1,332			—			3,045
Costs of revenues, exclusive of depreciation and amortization expense
Property and equipment, net		—			—			3,841			2,614			—			6,455
Broadcast programming and other		—			—			5,568			1,377			(64	)		6,881
Goodwill		—			1,828			1,363			686			—			3,877
Subscriber service expenses		—			—			733			393			(1	)		1,125
Intangible assets, net		—			—			509			453			(8	)		954
Broadcast operations expenses		—			—			147			61			(4	)		204
Intercompany receivables		4,532			12,561			29,652			603			(47,348	)		—
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Investment in subsidiaries		(8,730	)		22,133			—			(10,092	)		(3,311	)		—
Subscriber acquisition costs		—			—			1,309			417			(1	)		1,725
Investments and other assets		136			75			645			1,199			(131	)		1,924
Upgrade and retention costs		—			—			595			89			(1	)		683
General and administrative expenses		39			—			590			343			(1	)		971
Venezuelan currency devaluation		—			—			—			281			—			281
Depreciation and amortization expense		—			—			855			588			—			1,443

Total assets	$	(3,337	)	$	39,572		$	40,651		$	(1,500	)	$	(51,085	)	$	24,301
Total operating costs and expenses		39			—			9,797			3,549			(72	)		13,313

Operating profit (loss)		(39	)		—			2,562			128			—			2,651
Equity in income of consolidated subsidiaries		1,394			1,600			—			1,315			(4,309	)		—
Interest income		—			—			1			24			—			25
Interest expense		(1	)		(442	)		(4	)		(15	)		—			(462	)
Other, net		(3	)		(18	)		18			95			—			92

Income before income taxes		1,351			1,140			2,577			1,547			(4,309	)		2,306
Income tax benefit (expense)		16			175			(977	)		(141	)		—			(927	)

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Net income		1,367			1,315			1,600			1,406			(4,309	)		1,379
Total current liabilities	$	244		$	2,421		$	3,888		$	1,298		$	(287	)	$	7,564
Less: Net income attributable to noncontrolling interest		—			—			—			(12	)		—			(12	)
Long-term debt		—			16,936			—			122			—			17,058
Deferred income taxes		—			17			1,731			(11	)		(131	)		1,606
Intercompany liabilities		612			29,623			12,646			4,467			(47,348	)		—
Other liabilities and deferred credits		454			667			253			987			(8	)		2,353
Stockholders' equity (deficit)
Common stock and additional paid-in capital		3,608			476			5,447			3,510			(9,433	)		3,608
Retained earnings (accumulated deficit)		(7,678	)		(10,586	)		16,686			(11,804	)		5,704			(7,678	)
Accumulated other comprehensive income (loss)		(577	)		18			—			(436	)		418			(577	)

Total DIRECTV stockholders' equity (deficit)		(4,647	)		(10,092	)		22,133			(8,730	)		(3,311	)		(4,647	)
Net income attributable to DIRECTV	$	1,367		$	1,315		$	1,600		$	1,394		$	(4,309	)	$	1,367
Noncontrolling interest		—			—			—			367			—			367

Total stockholders' equity (deficit)		(4,647	)		(10,092	)		22,133			(8,363	)		(3,311	)		(4,280	)

Total liabilities and stockholders' equity (deficit)	$	(3,337	)	$	39,572		$	40,651		$	(1,500	)	$	(51,085	)	$	24,301

Table of Contents

DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating ~~Balance~~Statement ~~Sheet~~of Comprehensive Income AsFor ofthe ~~December~~Three Months Ended June 3130, ~~2014~~2015

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated
	(Dollars in Millions)
ASSETS
Net income	$	747		$	729		$	867	$	767		$	(2,360	)	$	750
Total current assets	$	1,201		$	3,690		$	2,964	$	1,592		$	(628	)	$	8,819
Other comprehensive income (loss), net of taxes:
Satellites, net		—			—			1,717		1,323			—			3,040
Cash flows hedges:
Property and equipment, net		—			—			3,891		2,830			—			6,721
Unrealized gains arising during the period		83			83			—		83			(166	)		83
Goodwill		—			1,828			1,363		738			—			3,929
Reclassification adjustments included in net income		(74	)		(74	)		—		(74	)		148			(74	)
Intangible assets, net		—			—			512		490			(8	)		994
Foreign currency translation adjustments		11			—			—		16			(11	)		16
Intercompany receivables		4,975			11,698			28,132		1,143			(45,948	)		—
Investment in subsidiaries		(9,341	)		21,337			—		(10,725	)		(1,271	)		—
Investments and other assets		134			99			670		1,185			(132	)		1,956

Total assets	$	(3,031	)	$	38,652		$	39,249	$	(1,424	)	$	(47,987	)	$	25,459
Other comprehensive income		20			9			—		25			(29	)		25

Comprehensive income		767			738			867		792			(2,389	)		775
Comprehensive income attributable to noncontrolling interest		—			—			—		(8	)		—			(8	)

Comprehensive income attributable to DIRECTV	$	767		$	738		$	867	$	784		$	(2,389	)	$	767

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Total current liabilities	$	527		$	1,454		$	4,244	$	1,362		$	(628	)	$	6,959
Long-term debt		—			19,327			—		158			—			19,485
Deferred income taxes		—			33			1,736		89			(132	)		1,726
Intercompany liabilities		1,212			28,110			11,698		4,928			(45,948	)		—
Other liabilities and deferred credits		443			453			234		995			(8	)		2,117
Stockholders' equity (deficit)
Common stock and additional paid-in capital		3,613			432			5,403		3,489			(9,324	)		3,613
Retained earnings (accumulated deficit)		(8,408	)		(11,202	)		15,934		(12,554	)		7,822			(8,408	)
Accumulated other comprehensive income (loss)		(418	)		45			—		(276	)		231			(418	)

Total DIRECTV stockholders' equity (deficit)		(5,213	)		(10,725	)		21,337		(9,341	)		(1,271	)		(5,213	)
Noncontrolling interest		—			—			—		385			—			385

Total stockholders' equity (deficit)		(5,213	)		(10,725	)		21,337		(8,956	)		(1,271	)		(4,828	)

Total liabilities and stockholders' equity (deficit)	$	(3,031	)	$	38,652		$	39,249	$	(1,424	)	$	(47,987	)	$	25,459

Table of Contents

DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating Statement of ~~Cash~~Comprehensive ~~Flows~~Income For the Three Months Ended ~~March~~June 3130, ~~2015~~2014

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated
	(Dollars in Millions)
Cash flows from operating activities
Net income	$	806		$	667		$	813		$	830		$	(2,306	)	$	810
Net cash provided by (used in) operating activities	$	32		$	(274	)	$	1,465		$	446		$	(33	)	$	1,636
Other comprehensive income (loss), net of taxes:
Cash flows hedges:
Unrealized gains arising during the period		6			6			—			6			(12	)		6
Reclassification adjustments included in net income		(28	)		(28	)		—			(28	)		56			(28	)
Foreign currency translation adjustments		28			—			—			32			(28	)		32

Cash flows from investing activities
Other comprehensive income (loss)		6			(22	)		—			10			16			10
Cash paid for property and equipment		—			—			(337	)		(276	)		—			(613	)
Cash paid for satellites		—			—			(45	)		(51	)		—			(96	)
Investment in companies, net of cash acquired		—			—			(8	)		(2	)		—			(10	)
Intercompany funding		(139	)		(435	)		(1,596	)		(14	)		2,184			—
Other, net		—			—			—			3			—			3

Net cash used in investing activities		(139	)		(435	)		(1,986	)		(340	)		2,184			(716	)
Comprehensive income		812			645			813			840			(2,290	)		820
Comprehensive income attributable to noncontrolling interest		—			—			—			(8	)		—			(8	)

Cash flows from financing activities
Comprehensive income attributable to DIRECTV	$	812		$	645		$	813		$	832		$	(2,290	)	$	812
Proceeds from long-term debt		—			—			—			17			—			17
Repayment of long-term debt		—			(1,200	)		—			(26	)		—			(1,226	)
Repayment of other long-term obligations		—			—			(7	)		(22	)		—			(29	)
Taxes paid in lieu of shares issued for share-based compensation		(64	)		—			(50	)		(14	)		64			(64	)
Excess tax benefit from share-based compensation		31			—			23			8			(31	)		31
Intercompany payments		23			1,532			546			83			(2,184	)		—

Net cash provided by (used in) financing activities		(10	)		332			512			46			(2,151	)		(1,271	)

Net increase (decrease) in cash and cash equivalents		(117	)		(377	)		(9	)		152			—			(351	)
Cash and cash equivalents at beginning of the period		680			3,191			20			744			—			4,635

Cash and cash equivalents at end of the period	$	563		$	2,814		$	11		$	896		$	—		$	4,284

Table of Contents

DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating Statement of ~~Cash~~Comprehensive ~~Flows~~Income For the ~~Three~~Six Months Ended ~~March~~June 3130, ~~2014~~2015

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated
	(Dollars in Millions)
Cash flows from operating activities
Net income	$	1,477		$	1,344		$	1,618		$	1,517		$	(4,476	)	$	1,480
Net cash provided by (used in) operating activities	$	594		$	(305	)	$	1,482		$	489		$	(670	)	$	1,590
Other comprehensive income (loss), net of taxes:
Cash flows hedges:
Unrealized losses arising during the period		(38	)		(38	)		—			(38	)		76			(38	)
Reclassification adjustments included in net income		20			20			—			20			(40	)		20
Foreign currency translation adjustments		(103	)		—			—			(116	)		103			(116	)

Cash flows from investing activities
Other comprehensive loss		(121	)		(18	)		—			(134	)		139			(134	)
Cash paid for property and equipment		—			—			(371	)		(279	)		—			(650	)
Cash paid for satellites		—			—			(11	)		(43	)		—			(54	)
Investment in companies, net of cash acquired		—			—			(1	)		(3	)		—			(4	)
Proceeds from sale of investments		—			—			4			—			—			4
Return of capital from subsidiary		400			—			—			—			(400	)		—
Intercompany funding		(117	)		(408	)		(1,464	)		(77	)		2,066			—
Other, net		—			—			—			(3	)		—			(3	)

Net cash provided by (used in) investing activities		283			(408	)		(1,843	)		(405	)		1,666			(707	)
Comprehensive income		1,356			1,326			1,618			1,383			(4,337	)		1,346
Comprehensive loss attributable to noncontrolling interest		—			—			—			10			—			10

Cash flows from financing activities
Comprehensive income attributable to DIRECTV	$	1,356		$	1,326		$	1,618		$	1,393		$	(4,337	)	$	1,356
Issuance of commercial paper (maturity 90 days or less), net		—			105			—			—			—			105
Proceeds from short-term borrowings		—			90			—			—			—			90
Repayment of short-term borrowings		—			(200	)		—			—			—			(200	)
Proceeds from long-term debt		—			1,245			—			15			—			1,260
Debt issuance costs		—			(6	)		—			—			—			(6	)
Repayment of long-term debt		—			—			—			(11	)		—			(11	)
Repayment of other long-term obligations		—			—			(6	)		(9	)		—			(15	)
Common shares repurchased and retired		(895	)		—			—			—			—			(895	)
Taxes paid in lieu of shares issued for share-based compensation		(57	)		—			(47	)		(10	)		57			(57	)
Excess tax benefit from share-based compensation		22			—			18			4			(22	)		22
Intercompany payments		9			1,465			407			150			(2,031	)		—
Cash dividend to Parent		—			(1,000	)		—			—			1,000			—
Other, net		—			(26	)		—			—			—			(26	)

Net cash provided by (used in) financing activities		(921	)		1,673			372			139			(996	)		267

Effect of exchange rate changes on Venezuelan cash and cash equivalents		—			—			—			(316	)		—			(316	)

Net increase (decrease) in cash and cash equivalents		(44	)		960			11			(93	)		—			834
Cash and cash equivalents at beginning of the period		498			791			6			885			—			2,180

Cash and cash equivalents at end of the period	$	454		$	1,751		$	17		$	792		$	—		$	3,014

Table of Contents

DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income
For the Six Months Ended June 30, 2014

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated

	(Dollars in Millions)
Net income	$	1,367		$	1,315		$	1,600	$	1,406		$	(4,309	)	$	1,379
Other comprehensive income (loss), net of taxes:
Cash flows hedges:
Unrealized losses arising during the period		(1	)		(1	)		—		(1	)		2			(1	)
Reclassification adjustments included in net income		(36	)		(36	)		—		(36	)		72			(36	)
Foreign currency translation adjustments		64			—			—		71			(64	)		71

Other comprehensive income (loss)		27			(37	)		—		34			10			34

Comprehensive income		1,394			1,278			1,600		1,440			(4,299	)		1,413
Comprehensive income attributable to noncontrolling interest		—			—			—		(19	)		—			(19	)

Comprehensive income attributable to DIRECTV	$	1,394		$	1,278		$	1,600	$	1,421		$	(4,299	)	$	1,394

Table of Contents

DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating Balance Sheet
As of June 30, 2015

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated

	(Dollars in Millions)
ASSETS
Total current assets	$	3,266		$	1,194		$	3,105	$	1,864		$	(347	)	$	9,082
Satellites, net		—			—			1,669		1,341			—			3,010
Property and equipment, net		—			—			3,761		2,716			—			6,477
Goodwill		—			1,828			1,363		694			—			3,885
Intangible assets, net		—			—			506		448			(8	)		946
Intercompany receivables		4,638			13,379			31,060		618			(49,695	)		—
Investment in subsidiaries		(10,438	)		23,020			—		(11,834	)		(748	)		—
Investments and other assets		136			77			626		1,202			(120	)		1,921

Total assets	$	(2,398	)	$	39,498		$	42,090	$	(2,951	)	$	(50,918	)	$	25,321



LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Total current liabilities	$	331		$	2,605		$	3,717	$	1,416		$	(347	)	$	7,722
Long-term debt		—			17,053			—		104			—			17,157
Deferred income taxes		—			21			1,703		20			(120	)		1,624
Intercompany liabilities		642			31,076			13,379		4,598			(49,695	)		—
Other liabilities and deferred credits		467			577			271		974			(8	)		2,281
Stockholders' equity (deficit)
Common stock and additional paid-in capital		3,645			8			5,468		3,022			(8,498	)		3,645
Retained earnings (accumulated deficit)		(6,931	)		(11,869	)		17,552		(13,049	)		7,366			(6,931	)
Accumulated other comprehensive income (loss)		(552	)		27			—		(411	)		384			(552	)

Total DIRECTV stockholders' equity (deficit)		(3,838	)		(11,834	)		23,020		(10,438	)		(748	)		(3,838	)
Noncontrolling interest		—			—			—		375			—			375

Total stockholders' equity (deficit)		(3,838	)		(11,834	)		23,020		(10,063	)		(748	)		(3,463	)

Total liabilities and stockholders' equity (deficit)	$	(2,398	)	$	39,498		$	42,090	$	(2,951	)	$	(50,918	)	$	25,321

Table of Contents

DIRECTV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating Balance Sheet
As of December 31, 2014

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated

	(Dollars in Millions)
ASSETS
Total current assets	$	1,201		$	3,690		$	2,964	$	1,592		$	(628	)	$	8,819
Satellites, net		—			—			1,717		1,323			—			3,040
Property and equipment, net		—			—			3,891		2,830			—			6,721
Goodwill		—			1,828			1,363		738			—			3,929
Intangible assets, net		—			—			512		490			(8	)		994
Intercompany receivables		4,975			11,698			28,132		1,143			(45,948	)		—
Investment in subsidiaries		(9,341	)		21,337			—		(10,725	)		(1,271	)		—
Investments and other assets		134			99			670		1,185			(132	)		1,956

Total assets	$	(3,031	)	$	38,652		$	39,249	$	(1,424	)	$	(47,987	)	$	25,459



LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Total current liabilities	$	527		$	1,454		$	4,244	$	1,362		$	(628	)	$	6,959
Long-term debt		—			19,327			—		158			—			19,485
Deferred income taxes		—			33			1,736		89			(132	)		1,726
Intercompany liabilities		1,212			28,110			11,698		4,928			(45,948	)		—
Other liabilities and deferred credits		443			453			234		995			(8	)		2,117
Stockholders' equity (deficit)
Common stock and additional paid-in capital		3,613			432			5,403		3,489			(9,324	)		3,613
Retained earnings (accumulated deficit)		(8,408	)		(11,202	)		15,934		(12,554	)		7,822			(8,408	)
Accumulated other comprehensive loss		(418	)		45			—		(276	)		231			(418	)

Total DIRECTV stockholders' equity (deficit)		(5,213	)		(10,725	)		21,337		(9,341	)		(1,271	)		(5,213	)
Noncontrolling interest		—			—			—		385			—			385

Total Stockholders' equity (deficit)		(5,213	)		(10,725	)		21,337		(8,956	)		(1,271	)		(4,828	)

Total liabilities and stockholders' equity (deficit)	$	(3,031	)	$	38,652		$	39,249	$	(1,424	)	$	(47,987	)	$	25,459

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2015

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated

	(Dollars in Millions)
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	2,596		$	(700	)	$	2,990		$	886		$	(2,534	)	$	3,238

Cash flows from investing activities
Cash paid for property and equipment		—			—			(642	)		(609	)		—			(1,251	)
Cash paid for satellites		—			—			(47	)		(84	)		—			(131	)
Cash paid for short-term investments		—			—			—			(53	)		—			(53	)
Investment in companies, net of cash acquired		—			—			(18	)		(5	)		—			(23	)
Proceeds from sale of investments		—			—			2			—			—			2
Intercompany payments (funding)		(148	)		(701	)		(2,996	)		40			3,805			—
Other, net		—			—			—			(4	)		—			(4	)

Net cash used in investing activities		(148	)		(701	)		(3,701	)		(715	)		3,805			(1,460	)

Cash flows from financing activities
Proceeds from long-term debt		—			—			—			20			—			20
Repayment of long-term debt		—			(1,200	)		—			(55	)		—			(1,255	)
Repayment of other long-term obligations		—			—			(13	)		(38	)		—			(51	)
Stock options exercised		9			—			—			—			—			9
Taxes paid in lieu of shares issued for share-based compensation		(65	)		—			(51	)		(14	)		65			(65	)
Excess tax benefit from share-based compensation		31			—			23			8			(31	)		31
Intercompany payments (funding)		(39	)		2,981			751			112			(3,805	)		—
Cash dividend to Parent		—			(2,500	)		—			—			2,500			—

Net cash provided by (used in) financing activities		(64	)		(719	)		710			33			(1,271	)		(1,311	)

Effect of exchange rate changes on Venezuelan cash and cash equivalents		—			—			—			(41	)		—			(41	)

Net increase (decrease) in cash and cash equivalents		2,384			(2,120	)		(1	)		163			—			426
Cash and cash equivalents at beginning of the period		680			3,191			20			744			—			4,635

Cash and cash equivalents at end of the period	$	3,064		$	1,071		$	19		$	907		$	—		$	5,061

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2014

	Parent Guarantor			Co-Issuers			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			DIRECTV Consolidated

	(Dollars in Millions)
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	1,042		$	(1,033	)	$	3,139		$	1,026		$	(1,110	)	$	3,064

Cash flows from investing activities
Cash paid for property and equipment		—			—			(773	)		(644	)		—			(1,417	)
Cash paid for satellites		—			—			(33	)		(76	)		—			(109	)
Investment in companies, net of cash acquired		—			—			(1	)		(7	)		—			(8	)
Proceeds from sale of investments		—			—			16			13			—			29
Return of capital from subsidiary		425			—			—			—			(425	)		—
Intercompany payments (funding)		103			(653	)		(2,990	)		72			3,468			—
Other, net		—			—			—			(4	)		—			(4	)

Net cash provided by (used in) investing activities		528			(653	)		(3,781	)		(646	)		3,043			(1,509	)

Cash flows from financing activities
Issuance of commercial paper (maturity 90 days or less), net		—			25			—			—			—			25
Proceeds from short-term borrowings		—			270			—			—			—			270
Repayment of short-term borrowings		—			(235	)		—			—			—			(235	)
Proceeds from long-term debt		—			1,245			—			84			—			1,329
Debt issuance costs		—			(7	)		—			—			—			(7	)
Repayment of long-term debt		—			(1,000	)		—			(26	)		—			(1,026	)
Repayment of other long-term obligations		—			—			(15	)		(19	)		—			(34	)
Common shares repurchased and retired		(1,386	)		—			—			—			—			(1,386	)
Stock options exercised		10			—			—			—			—			10
Taxes paid in lieu of shares issued for share-based compensation		(57	)		—			(47	)		(10	)		57			(57	)
Excess tax benefit from share-based compensation		22			—			18			4			(22	)		22
Intercompany payments (funding)		(75	)		2,966			702			(125	)		(3,468	)		—
Cash dividend to Parent		—			(1,500	)		—			—			1,500			—
Other, net		—			(26	)		—			(14	)		—			(40	)

Net cash provided by (used in) financing activities		(1,486	)		1,738			658			(106	)		(1,933	)		(1,129	)

Effect of exchange rate changes on Venezuelan cash and cash equivalents		—			—			—			(316	)		—			(316	)

Net increase (decrease) in cash and cash equivalents		84			52			16			(42	)		—			110
Cash and cash equivalents at beginning of the period		498			791			6			885			—			2,180

Cash and cash equivalents at end of the period	$	582		$	843		$	22		$	843		$	—		$	2,290

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)

(Unaudited)

Note 12: Subsequent Events

On July 24, 2015, we were acquired by AT&T. Under the merger agreement, each share of DIRECTV stock was exchanged for $28.50 cash plus 1.892 shares of AT&T common stock. DIRECTV shareholders hold an approximate 16% stake in the combined company, based on AT&T's common shares outstanding. Based on AT&T's $34.29 per share closing stock price on July 24, 2015, total consideration paid to DIRECTV shareholders was $47,110 million.

Our assets and liabilities are being appraised, based on third-party valuations and will be recorded in AT&T's financial statements at their respective fair values as of the date of the acquisition, July 24, 2015.

•: Long-lived assets such as property, plant and equipment valuations will reflect changes in technology, usage, and relative obsolescence and depreciation of the assets.
•: Debt instruments and investments are valued in relation to current market conditions.
•: Foreign holdings and operations will be valued using exchange rates as determined by current practice in the countries in which we operate, such as Argentina, Brazil, Venezuela and other countries in Latin America. These valuations could result in significant changes to our historical account balances. For example, our Venezuela subsidiary had bolivar denominated net monetary assets of $595 million, including cash of $629 million, as of June 30, 2015, based on the SICAD exchange rate of 12.8 Venezuelan bolivars per U.S. dollar. When valuing these operations, AT&T may elect an alternative government approved mechanism to exchange Venezuelan bolivars into U.S. dollars, including the SIMADI exchange rate, or other new exchange mechanisms that may emerge. See Note 6 of the Notes to the Consolidated Financial Statements.
•: Assets and liabilities will also be recorded for other identifiable intangible assets, including customer lists, trade name, and orbital slots. The value of these intangibles will be determined using AT&T's estimates of future cash flows from the existing business.
•: Other assets and liabilities will be valued based on AT&T's estimates.

After all values have been assigned to assets and liabilities, the remainder of the purchase price is recorded as goodwill.

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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/A for the year ended December 31, 2014 filed with the SEC on ~~February~~June 244, 2015, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 filed with the SEC on May 8, 2015, 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 2015 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/A for the year ended December 31, 2014:

•: 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.
•: DIRECTV Latin America is subject to various additional risks associated with doing business internationally, which include political and economic instability and foreign currency exchange rate volatility and controls, especially in Venezuela.
•: 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.

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•: Our satellites are subject to significant launch and operational risks.
•: The loss of one or more satellites, none of which is currently insured, could materially adversely affect our business and 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.
•: The ability to maintain FCC licenses and other regulatory approvals is critical to our business.
•: We rely on network and information systems and other technology and a disruption or failure of such networks, systems or technology as a result of misappropriation of data or other malfeasance, as well as outages, natural disasters, accidental releases of information or similar events, may disrupt our business.
•: We face risks arising from the outcome of various legal proceedings.
•: Our strategic initiatives may not be successfully implemented, may not elicit the expected customer response in the market and may result in competitive reactions.

InThose ~~addition,~~and ~~below~~the other factors that are ~~risk~~described ~~factors~~in ~~relating~~more todetail in our Annual Report on Form 10-K/A for the ~~proposed~~year ~~AT&T~~ended ~~merger~~December 31, ~~transaction:~~2014.

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, 2014.

Any forward-looking statement made by us in this 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:

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

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SUMMARY DATA

(Unaudited)

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(Dollars in Millions, Except Per Share Amounts)
Consolidated Statements of Operations Data:
Revenues	$	8,~~143~~441		$	78,~~855~~109		$	16,584		$	15,964
Total operating costs and expenses		67,~~756~~052			6,~~628~~685			13,808			13,313

Operating profit		1,~~387~~389			1,~~227~~424			2,776			2,651
Interest income		2224			1312			46			25
Interest expense		(~~245~~234	)		(~~232~~230	)		(479	)		(462	)
Other, net		725			5735			32			92

Income before income taxes		1,~~171~~204			1,~~065~~241			2,375			2,306
Income tax expense		(~~441~~454	)		(~~496~~431	)		(895	)		(927	)

Net income		~~730~~750			~~569~~810			1,480			1,379
Less: Net income attributable to noncontrolling interest		—(3	)		(84	)		(3	)		(12	)

Net income attributable to DIRECTV	$	~~730~~747		$	~~561~~806		$	1,477		$	1,367



Basic earnings attributable to DIRECTV per common share	$	1.4548		$	1.1060		$	2.93		$	2.70
Diluted earnings attributable to DIRECTV per common share	$	1.4447		$	1.0959		$	2.91		$	2.67
Weighted average number of total common shares outstanding (in millions):
Basic		~~503~~504			~~511~~504			504			507
Diluted		~~507~~508			~~515~~508			508			512

	March 31, 2015			December 31, 2014
	(Dollars in Millions)
Consolidated Balance Sheets Data:
Cash and cash equivalents	$	4,284		$	4,635
Total current assets		8,046			8,819
Total assets		24,301			25,459
Total current liabilities		7,564			6,959
Long-term debt		17,058			19,485
Total stockholders' deficit		(4,280	)		(4,828	)

Referenceshould be made to the Notes to the Consolidated Financial Statements.

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SUMMARY DATA—(continued)

(Unaudited)

	Three Months Ended March 31,
	June 30, 2015			December 31, 2014
	2015			2014
	(Dollars in Millions)
Other Data:
Consolidated Balance Sheets Data:
Operating profit before depreciation and amortization(1)
Cash and cash equivalents	$	5,061		$	4,635
Operating profit	$	1,387		$	1,227
Total current assets		9,082			8,819
Add: Depreciation and amortization expense		730			714
Total assets		25,321			25,459

Total current liabilities		7,722			6,959
Operating profit before depreciation and amortization	$	2,117		$	1,941
Long-term debt		17,157			19,485

Redeemable noncontrolling interest		—			—

Total stockholders' deficit		(3,463	)		(4,828	)

Operating profit before depreciation and amortization margin		26.0	%		24.7	%
Cash flow information
Net cash provided by operating activities	$	1,636		$	1,590
Net cash used in investing activities		(716	)		(707	)
Net cash provided by (used in) financing activities		(1,271	)		267
Free cash flow(2)
Net cash provided by operating activities		1,636			1,590
Less: Cash paid for property and equipment		(613	)		(650	)
Less: Cash paid for satellites		(96	)		(54	)

Free cash flow	$	927		$	886

37Reference should be made to the Notes to the Consolidated Financial Statements.

	Three Months Ended June 30,						Six Months Ended June 30,

	2015			2014			2015			2014
	(Dollars in Millions)
Other Data:
Operating profit before depreciation and amortization(1)
Operating profit	$	1,389		$	1,424		$	2,776		$	2,651
Add: Depreciation and amortization expense		721			729			1,451			1,443

Operating profit before depreciation and amortization	$	2,110		$	2,153		$	4,227		$	4,094



Operating profit before depreciation and amortization margin		25.0	%		26.6	%		25.5	%		25.6	%
Cash flow information
Net cash provided by operating activities	$	1,602		$	1,474		$	3,238		$	3,064
Net cash used in investing activities		(744	)		(802	)		(1,460	)		(1,509	)
Net cash provided by (used in) financing activities		(40	)		(1,396	)		(1,311	)		(1,129	)
Free cash flow(2)
Net cash provided by operating activities		1,602			1,474			3,238			3,064
Less: Cash paid for property and equipment		(638	)		(767	)		(1,251	)		(1,417	)
Less: Cash paid for satellites		(35	)		(55	)		(131	)		(109	)

Free cash flow	$	929		$	652		$	1,856		$	1,538

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SUMMARY DATA—(continued)

(Unaudited)

Selected Segment Data

	Revenues				Operating Profit (Loss)			Depreciation and Amortization Expense		Operating Profit (Loss) Before Depreciation and Amortization(1)
	(Dollars in Millions)
Three Months Ended March 31, 2015
Three Months Ended
DIRECTV U.S.	$	6,458	79.3	%	$	1,249		$	438	$	1,687
June 30, 2015
Sky Brasil		795	9.8	%		54			145		199
DIRECTV U.S.	$	6,710	79.5	%	$	1,373		$	433	$	1,806
PanAmericana and Other		840	10.3	%		102			144		246
Sky Brasil		781	9.3	%		63			143		206
PanAmericana and Other		895	10.6	%		(5	)		143		138

DIRECTV Latin America		1,~~635~~676	2019.19	%		~~156~~58			~~289~~286		~~445~~344
Sports Networks, Eliminations and Other		5055	0.67	%		(1842	)		32		(1540	)

Total	$	8,~~143~~441	100.0	%	$	1,~~387~~389		$	~~730~~721	$	2,~~117~~110



March 31, 2014
June 30, 2014
DIRECTV U.S.	$	6,~~087~~272	77.53	%	$	1,~~243~~319		$	~~426~~429	$	1,~~669~~748
Sky Brasil		~~939~~1,011	12.05	%		~~148~~114			~~163~~175		~~311~~289
PanAmericana and Other		~~782~~778	109.06	%		~~(174~~28	)		~~122~~121		~~(52~~149	)

DIRECTV Latin America		1,~~721~~789	22.01	%		~~(26~~142	)		~~285~~296		~~259~~438
Sports Networks, Eliminations and Other		4748	0.56	%		10(37	)		34		13(33	)

Total	$	78,~~855~~109	100.0	%	$	1,~~227~~424		$	~~714~~729	$	12,~~941~~153

(1)Operating profit before depreciation and amortization, which is a financial measure that is not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, 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 our Board of Directors 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 our Board of Directors 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 44

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SUMMARY DATA—(continued)

(Unaudited)

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. Operating profit before depreciation and amortization margin is calculated by dividing Operating profit before depreciation and amortization by Revenues. (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" 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 our Board of Directors 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.

	Revenues				Operating Profit (Loss)			Depreciation and Amortization Expense		Operating Profit (Loss) Before Depreciation and Amortization(1)

	(Dollars in Millions)
Six Months Ended
June 30, 2015
DIRECTV U.S.	$	13,168	79.4	%	$	2,622		$	871	$	3,493
Sky Brasil		1,576	9.5	%		117			288		405
PanAmericana and Other		1,735	10.5	%		97			287		384

DIRECTV Latin America		3,311	20.0	%		214			575		789
Sports Networks, Eliminations and Other		105	0.6	%		(60	)		5		(55	)

Total	$	16,584	100.0	%	$	2,776		$	1,451	$	4,227



June 30, 2014
DIRECTV U.S.	$	12,359	77.4	%	$	2,562		$	855	$	3,417
Sky Brasil		1,950	12.2	%		262			338		600
PanAmericana and Other		1,560	9.8	%		(146	)		243		97

DIRECTV Latin America		3,510	22.0	%		116			581		697
Sports Networks, Eliminations and Other		95	0.6	%		(27	)		7		(20	)

Total	$	15,964	100.0	%	$	2,651		$	1,443	$	4,094

39 (1)Operating profit before depreciation and amortization, which is a financial measure that is not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, 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 our Board of Directors 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 our Board of Directors 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

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SUMMARY DATA—(continued)

(Unaudited)

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.

Operating profit before depreciation and amortization margin is calculated by dividing Operating profit before depreciation and amortization by Revenues.

(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" 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 our Board of Directors 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.

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BUSINESS OVERVIEW

•: DIRECTV U.S. DIRECTV Holdings LLC and its subsidiaries, which we refer to as DIRECTV U.S., is the largest provider of 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 30, 2015, DIRECTV U.S. had approximately 20.3 million subscribers.
•: DIRECTV Latin America. DIRECTV Latin America Holdings, Inc. and its subsidiaries, or DIRECTV Latin America, is a leading provider of DTH digital television services throughout Latin America. DIRECTV Latin America is comprised of: PanAmericana, which provides services in Argentina, Chile, Colombia, Ecuador, Peru, Puerto Rico, Venezuela and certain other countries in the region, and Sky Brasil Servicos Ltda., or Sky Brasil, which is a 93% owned subsidiary. DIRECTV Latin America also includes our 41% equity method investment in Innova, S. de R.L. de C.V., or Sky Mexico, which we include in the PanAmericana segment. As of June 30, 2015, PanAmericana had approximately 7.2 million subscribers, Sky Brasil had approximately 5.7 million subscribers and Sky Mexico had approximately 6.9 million subscribers.
•: DIRECTV Sports Networks. DIRECTV Sports Networks LLC and its subsidiaries, or DSN, is comprised primarily of two wholly owned regional sports networks based in Denver, Colorado and Pittsburgh, Pennsylvania, and two regional sports networks based in Seattle, Washington and Houston, Texas in which DSN retains a noncontrolling interest, each of which operates under the brand name ROOT SPORTS. In the fourth quarter of 2014, we acquired a noncontrolling interest in Houston Sports Holdings, LLC, or HSH, the regional sports network based in Houston, Texas. The operating results of DSN are reported as part of the "Sports Networks, Eliminations and Other" reporting segment.

On July 24, 2015, DIRECTV completed a merger transaction under which DIRECTV merged into Steam Merger Sub, LLC, a wholly-owned direct subsidiary of AT&T Inc., or ~~SIGNIFICANT~~AT&T. ~~EVENT~~Following ~~AFFECTING~~the ~~THE~~merger, ~~COMPARABILITY~~Steam OFMerger ~~THE~~Sub, ~~RESULTS~~LCC OF(a ~~OPERATIONS~~ successor in interest to DIRECTV) was renamed DIRECTV Group Holdings, LLC.

SIGNIFICANT EVENTS AFFECTING THE COMPARABILITY OF THE RESULTS OF OPERATIONS

Venezuela Devaluation and Foreign Currency Exchange Controls

Companies operating in Venezuela are required to obtain Venezuelan government approval to exchange Venezuelan bolivars into U.S. dollars and such approval has not consistently been granted for several years. Consequently, our ability to pay U.S. dollar denominated obligations and repatriate cash generated in Venezuela in excess of local operating requirements is limited, which has resulted in ~~increases in the cash balance at our Venezuelan subsidiary, and limited our ability to import set-top receivers and other equipment, limiting the growth of our business in Venezuela.~~

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~~essential~~increases ~~goods~~in ~~and services (ii)~~ the ~~auction~~cash ~~based~~balance ~~Sistema~~at ~~Complementario~~our deVenezuelan ~~Administración de Divisas~~subsidiary, ~~or SICAD, which is intended for dividend~~ and ~~royalty~~limited ~~remittances~~our asability ~~well as~~to ~~certain~~import ~~imports, including~~set-top ~~telecommunications~~receivers ~~equipment~~ and ~~(iii) an~~other ~~open market currency exchange system Sistema Marginal de Divisas~~equipment, orlimiting ~~SIMADI,~~the ~~which~~growth ~~is based on supply and demand. As~~ of ~~March 31, 2015,~~our ~~the~~business ~~SICAD~~in ~~exchange rate was 12~~Venezuela.0 ~~Venezuelan bolivars per U.S. dollars and the SIMADI exchange rate was 193.0 Venezuelan bolivars per U.S. dollars.~~

As of June 30, 2015, the mechanisms in Venezuela for exchanging Venezuelan bolivars into U.S. dollars were as follows: (i) the official government mechanism operated by the Venezuelan Central Bank, which has a fixed exchange rate of 6.3 Venezuelan bolivars per U.S. dollar mainly reserved for essential goods and services (ii) the auction based Sistema Complementario de Administración de Divisas, or SICAD, which is intended for dividend and royalty remittances as well as certain imports, including telecommunications equipment and (iii) an open market currency exchange system Sistema Marginal de Divisas, or SIMADI, which is based on supply and demand. As of June 30, 2015, the SICAD exchange rate was 12.8 Venezuelan bolivars per U.S. dollars and the SIMADI exchange rate was 197.7 Venezuelan bolivars per U.S. dollars.

As of ~~March~~June 3130, 2015, we believe that the SICAD rate was the most representative rate to use for remeasurement, as a limited amount of telecommunications equipment was imported at the SICAD rate during the ~~quarter~~six months ended June 30, 2015 and the official rate of 6.3 Venezuelan bolivars per U.S. dollar continued to be reserved only for the settlement of U.S. dollar denominated obligations related to purchases of "essential goods and services". In addition, we did not ~~transact~~repatriate inany amounts at the official rate or through the SICAD mechanism but we were able to repatriate an insignificant amount of Venezuelan bolivars through the SIMADI mechanism during the ~~three~~six months ended June 30, 2015. During the second quarter of 2015, we recorded $39 million in "General and administrative expenses" in the Consolidated Statements of Operations as a result of the change in the SICAD exchange rate to 12.8 Venezuelan bolivars per U.S. dollar as of June 30, 2015 from 12.0 Venezuelan bolivars per U.S. dollar as of March 31, 2015.

Our Venezuelan subsidiary had Venezuelan bolivar denominated net monetary assets of $~~534~~595 million, including cash of $~~554~~629 million, as of ~~March~~June 3130, 2015, based on the SICAD exchange rate of 12.8 Venezuelan bolivars per U.S. dollar, as compared to Venezuelan bolivar denominated net monetary assets of $481 million, including cash of $481 million, as of December 31, 2014, based on the SICAD exchange rate of 12.0 Venezuelan bolivars per U.S. dollar. In addition, our Venezuelan subsidiary had $575 million of net property, equipment and intangible assets as of June 30, 2015 as compared to $574 million at December 31, 2014. In the ~~first~~second quarter of 2015, our Venezuelan subsidiary generated revenues of approximately $~~200~~250 million and operating profit before depreciation and amortization of approximately $80 million. During the six months ended June 30, 2015, our Venezuelan subsidiary generated revenues of approximately $75500 million and operating profit before depreciation and amortization of approximately $180 million, excluding the impact of the $39 million exchange rate losses recorded in "General and administrative expenses" as a result of the change in the SICAD exchange rate.

~~AT&T Merger-Related Costs~~ 48

In connection with the proposed merger, we recognized costs of $26 million for the quarter ended March 31, 2015 in "General and administrative expenses" in the Consolidated Statements of

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~~Operations~~between periods. Significant uncertainties exist regarding the exchange mechanisms in Venezuela including the nature of transactions that are eligible for repatriation though the official process, ~~primarily~~SICAD ~~related~~or toSIMADI, ~~professional~~or ~~services~~any ~~fees~~other new exchange mechanism that may emerge, how such mechanisms will operate in the future, as well as the volume of U.S. ~~These~~dollars ~~costs~~available ~~are~~under ~~reported~~each mechanism. Changes in exchange mechanisms and rates will impact the ~~"Sports~~comparability ~~Networks~~of our results of operations and financial position, ~~Eliminations~~and would likely result in significant future devaluations or impairments of tangible and ~~Other"~~intangible ~~segment~~assets.

AT&T Merger-Related Costs

In connection with the merger, we recognized costs of $21 million for the second quarter of 2015 and $47 million for the six months ended June 30, 2015 in "General and administrative expenses" in the Consolidated Statements of Operations, primarily related to professional services fees. These costs are reported in the "Sports Networks, Eliminations and Other" segment.

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, advanced receiver fees (which include HD, DVR and multi-room viewing), seasonal live sporting events and pay-per-view programming. We also earn revenues from monthly fees we charge subscribers for multiple set-top receivers, 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, seasonal live sporting 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 service calls.

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. In certain countries in Latin America, where our customer agreements provide for the lease of the entire DIRECTV or SKY System, we also capitalize the costs of the other customer premises equipment and related installation costs. The amount of set-top receivers capitalized each period for subscriber acquisitions is included in "Cash paid for property and equipment" 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 average monthly revenue per subscriber, or ARPU, and lower churn. Our upgrade efforts include subscriber equipment upgrade programs for advanced receivers 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 estimated useful lives. The amount of set-top receivers capitalized each period for upgrade and retention programs is included in "Cash paid for property and equipment" in the Consolidated Statements of Cash Flows. 49

General and Administrative Expenses. General and administrative expenses include departmental costs for legal, administrative services, finance, marketing and information technology. These costs also

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~~include~~premises ~~expenses~~equipment ~~for~~and ~~bad~~related ~~debt~~installation ~~and~~costs. ~~other~~The ~~operating~~amount ~~expenses,~~of ~~such~~set-top asreceivers ~~legal~~capitalized ~~settlements,~~each ~~and~~period ~~gains~~for orsubscriber ~~losses~~acquisitions ~~from~~is ~~the~~included ~~sale~~in or"Cash ~~disposal~~paid for property and equipment" in the Consolidated Statements of ~~fixed~~Cash ~~assets~~Flows.

Upgrade and Retention Costs. Upgrade and retention costs are associated with upgrade efforts for existing subscribers that we believe will result in higher average monthly revenue per subscriber, or ARPU, and lower churn. Our upgrade efforts include subscriber equipment upgrade programs for advanced receivers 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 estimated useful lives. The amount of set-top receivers capitalized each period for upgrade and retention programs is included in "Cash paid for property and equipment" 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, net of customer credits and discounted promotions, 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.

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.

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RESULTS OF OPERATIONS

Three Months Ended ~~March~~June 3130, 2015 Compared to Three Months Ended ~~March~~June 3130, 2014

DIRECTV U.S. Results of Operations

The following table provides operating results and a summary of key subscriber data for the DIRECTV U.S. segment:

	Three Months Ended and As of March 31,						Change
	Three Months Ended and As of June 30,						Change
	2015			2014			$			%
	(Dollars in Millions, Except Per Subscriber Amounts)
Revenues	$	6,~~458~~710		$	6,~~087~~272		$	~~371~~438			67.10	%
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other		23,~~998~~121			2,~~768~~800			~~230~~321			811.35	%
Subscriber service expenses		~~385~~404			~~359~~374			2630			78.20	%
Broadcast operations expenses		8176			7275			91			121.53	%
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs		~~703~~682			~~648~~661			5521			83.52	%
Upgrade and retention costs		~~308~~301			~~281~~314			27(13	)		9(4.61	)%
General and administrative expenses		~~296~~320			~~290~~300			620			26.17	%
Depreciation and amortization expense		~~438~~433			~~426~~429			124			20.89	%

Total operating costs and expenses		5,~~209~~337			4,~~844~~953			~~365~~384			7.58	%

Operating profit	$	1,~~249~~373		$	1,~~243~~319		$	654			04.51	%



Operating profit margin		1920.35	%		2021.40	%		—			—
Other data:
Operating profit before depreciation and amortization	$	1,~~687~~806		$	1,~~669~~748		$	1858			13.13	%
Operating profit before depreciation and amortization margin		26.19	%		27.49	%		—			—
Total number of subscribers (in thousands)		20,~~412~~279			20,~~265~~231			~~147~~48			0.72	%
ARPU	$	~~105~~109.6293		$	~~100~~103.1626		$	56.4667			56.5	%
Average monthly subscriber churn %		1.3756	%		1.4555	%		—			(50.56	)%
Gross subscriber additions (in thousands)		~~895~~818			~~891~~908			4(90	)		0(9.49	)%
Subscriber disconnections (in thousands)		~~835~~951			~~879~~942			~~(44~~9	)		(51.0	)%
Net subscriber additions (in thousands)		60			12			48			NM	*
Net subscriber disconnections (in thousands)		(133	)		(34	)		(99	)		*NM
Average subscriber acquisition costs—per subscriber (SAC)	$	~~914~~950		$	~~859~~855		$	5595			611.41	%
Capital expenditures:
Property and equipment	$	~~136~~147		$	~~144~~183		$	(836	)		(519.67	)%
Subscriber leased equipment—subscriber acquisitions		~~115~~95			~~117~~115			(220	)		(117.74	)%
Subscriber leased equipment—upgrade and retention		8663			~~110~~104			(2441	)		NM(39.4	*)%
Satellites		452			1122			34(20	)		~~309~~(90.19	)%

Total capital expenditures	$	~~382~~307		$	~~382~~424		$	—(117	)		—(27.6	)%

*Percentage not meaningful.

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Subscribers. In the ~~first~~second quarter of 2015, net subscriber ~~additions~~disconnections increased ~~as compared to the first quarter of 2014~~ primarily due to lower ~~average monthly~~gross ~~churn.~~subscriber ~~The~~additions as ~~improvement~~compared ~~in average monthly churn was primarily due~~ to the asecond ~~continued~~quarter ~~focus~~of on2014. ~~attracting~~Gross ~~higher~~subscriber ~~quality new subscribers and improved macroeconomic conditions, which resulted in~~additions ~~higher~~declined ~~customer~~primarily ~~pay rates,~~ as ~~well~~a asresult ~~successful~~of ~~winback~~stricter ~~initiatives~~credit policies. ~~Gross~~Average monthly subscriber ~~additions~~churn ~~remained~~was relatively ~~flat~~unchanged in the ~~first~~second quarter of 2015 as compared to the ~~first~~second quarter of 2014.

Revenues. DIRECTV U.S. revenues increased in the ~~first~~second quarter of 2015 primarily as a result of higher ARPU ~~and a larger subscriber base~~. The increase in ARPU resulted primarily from price increases on programming packages and regional sports networks, higher set-top box lease fees, ~~increased advanced receiver service fees,~~ a reduction in new customer credits, asand ~~well~~higher asrevenues ~~increased~~from ~~commercial~~pay-per-view ~~business revenues~~events, ~~warranty~~as ~~program~~well ~~fees~~as increased ~~and~~ ad sales. These ~~increases~~improvements were partially offset by increased promotional offers ~~for~~to existing customers.

Operating profit before depreciation and amortization. Operating profit before depreciation and amortization increased in the ~~first~~second quarter of 2015 as compared to the ~~first~~second quarter of 2014 primarily due to higher revenues coupled with lower upgrade and retention costs, partially offset by higher broadcast programming and other costs, ~~higher~~and higher subscriber ~~acquisition~~service ~~and~~expenses. ~~upgrade~~Upgrade and retention costs, asdecreased ~~well~~primarily asdue ~~higher~~to ~~subscriber~~a ~~service~~lower ~~expenses~~upgrade volume. Broadcast programming and other costs increased primarily due to annual program supplier rate increases, ~~partially~~and ~~offset by the favorable resolution of~~ a ~~prior~~larger ~~year~~subscriber ~~dispute~~base, ~~with~~as awell ~~programmer.~~as ~~Subscriber acquisition costs increased primarily due to an increase in~~ higher ~~quality~~pay-per-view ~~subscribers~~events ~~from the consumer electronics distribution channel, and higher ancillary equipment costs~~expense. ~~Upgrade~~Subscriber ~~and~~service ~~retention~~expenses ~~costs~~ increased ~~primarily~~mainly ~~due~~as toa ~~improved~~result ~~results~~of ~~from our~~ customer ~~winback~~service ~~campaigns~~initiatives.

Operating profit before depreciation and amortization margin ~~decreased~~declined inprimarily ~~the~~due ~~first~~to ~~quarter~~the ofhigher ~~2015~~broadcast asprogramming ~~compared~~and toother ~~the~~costs. ~~first~~The ~~quarter~~decline ofwas ~~2014~~partially ~~primarily~~offset ~~due~~by tolower ~~higher broadcast programming~~upgrade and ~~other~~retention ~~costs,~~expenses as well as ~~higher~~relatively lower growth to subscriber acquisition costs associated with the decrease in gross additions.

Operating profit. Operating profit increased in the ~~first~~second quarter of 2015 as compared to the ~~first~~second quarter of 2014 due to anthe ~~increase~~higher in operating profit before depreciation and amortization ~~partially offset by an increase of depreciation and amortization due to higher total capitalized subscriber leased equipment~~. ~~Operating profit margin decreased in the first quarter of 2015 as compared to the first quarter of 2014 primarily due to the decrease in operating profit before depreciation and amortization margin.~~

45 Operating profit margin decreased in the second quarter of 2015 as compared to the second quarter of 2014 due to the decrease in operating profit before depreciation and amortization margin, partially offset by the impact of slower relative growth in depreciation and amortization expense.

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DIRECTV Latin America Results of Operations

The following table provides operating results and a summary of key subscriber data for the consolidated DIRECTV Latin America operations, which does not include Sky Mexico:

	Three Months Ended and As of March 31,						Change
	Three Months Ended and As of June 30,						Change
	2015			2014			$			%
	(Dollars in Millions, Except Per Subscriber Amounts)
Revenues	$	1,~~635~~676		$	1,~~721~~789		$	(86113	)		(56.03	)%
Operating profit before depreciation and amortization(1)		445			259			186			71.8	%
Operating profit before depreciation and amortization		344			438			(94	)		(21.5	)%
Operating profit before depreciation and amortization margin(1)		27.2	%		15.0	%		—			—
Operating profit before depreciation and amortization margin		20.5	%		24.5	%		—			—
Operating profit(1)	$	156		$	(26	)	$	182			(700.0	)%

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