UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

or

Commission file number 333-106529

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

|DIRECTV Holdings LLCDelaware
DIRECTV Financing Co., Inc.Delaware
(State or other jurisdiction of
incorporation or organization) |  | 25-1902628
59-3772785
(I.R.S. Employer
Identification Number)
|--------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------
|2230 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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

|Large accelerated filer    o |  | Accelerated filer    o |  | Non-accelerated filer    ý
|---------------------------- |  | ---------------------- |  | --------------------------

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

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



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TABLE OF CONTENTS

|                                         |  |                                                                                                       |  | Page No.
|---------------------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | --------
|Part IFinancial Information (Unaudited) |  |                                                                                                      
|Item 1.                                  |  | Financial Statements                                                                                  |  |         
|                                         |  | Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2006 and 2005 |  | 1       
|                                         |  | Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005                            |  | 2       
|                                         |  | Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005           |  | 3       
|                                         |  | Notes to the Consolidated Financial Statements                                                        |  | 4       
|Item 2.                                  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                 |  | 17      
|Item 4.                                  |  | Controls and Procedures                                                                               |  | 25      
|Part IIOther Information                |  |                                                                                                      
|Item 1.                                  |  | Legal Proceedings                                                                                     |  | 25      
|Item 1A.                                 |  | Risk Factors                                                                                          |  | 25      
|Item 6.                                  |  | Exhibits                                                                                              |  | 26      
|Signature                                |  | 27                                                                                                   

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DIRECTV HOLDINGS LLC

PART IFINANCIAL INFORMATION (UNAUDITED)

ITEM 1.    FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS        (Unaudited)

|                                   |                                                                                                  | Three Months Ended
September 30,    |         | Nine Months Ended
September 30, |        
|---------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ------- | ------------------------------- | -------
|
|
|Revenues                           |                                                                                                  | $                                   | 3,403.1 |                                 | $      
|Operating Costs and Expenses       |                                                                                                  |                                     |         |                                 |        
|                                   | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |         |                                 |        
|                                   |                                                                                                  | Broadcast programming and other     |         |                                 | 1,416.8
|                                   |                                                                                                  | Subscriber service expenses         |         |                                 | 285.4  
|                                   |                                                                                                  | Broadcast operations expenses       |         |                                 | 44.8   
|                                   | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |         |                                 |        
|                                   |                                                                                                  | Subscriber acquisition costs        |         |                                 | 432.0  
|                                   |                                                                                                  | Upgrade and retention costs         |         |                                 | 208.2  
|                                   |                                                                                                  | General and administrative expenses |         |                                 | 192.5  
|                                   | Depreciation and amortization expense                                                            |                                     |         | 226.0                           |        
|                                   |                                                                                                  |                                     |         |                                 |        
|Total Operating Costs and Expenses |                                                                                                  |                                     | 2,805.7 |                                 |        
|                                   |                                                                                                  |                                     |         |                                 |        
|Operating Profit                   |                                                                                                  |                                     | 597.4   |                                 |        
|Interest income                    |                                                                                                  |                                     | 17.8    |                                 |        
|Interest expense                   |                                                                                                  |                                     | (53.6   | )                               |        
|Other expense                      |                                                                                                  |                                     | (0.6    | )                               |        
|                                   |                                                                                                  |                                     |         |                                 |        
|Income Before Income Taxes         |                                                                                                  |                                     | 561.0   |                                 |        
|Income tax expense                 |                                                                                                  |                                     | (214.1  | )                               |        
|                                   |                                                                                                  |                                     |         |                                 |        
|Net Income                         |                                                                                                  | $                                   | 346.9   |                                 | $      
|                                   |                                                                                                  |                                     |         |                                 |        

---

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

1

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DIRECTV HOLDINGS LLC        CONSOLIDATED BALANCE SHEETS        (Unaudited)

|                                       |                                                           | September 30,
2006                   |         | December 31,
2005 |         
|-------------------------------------- | --------------------------------------------------------- | ------------------------------------ | ------- | ----------------- | --------
|
|ASSETS                                 |                                                           |                                      |         |                   |         
|Current Assets                         |                                                           |                                      |         |                   |         
|                                       | Cash and cash equivalents                                 |                                      | $       | 1,202.9           |         
|                                       | Accounts receivable, net of allowances of $65.1 and $75.0 |                                      |         | 1,079.7           |         
|                                       | Inventories                                               |                                      |         | 163.2             |         
|                                       | Deferred income taxes                                     |                                      |         | 108.5             |         
|                                       | Prepaid expenses and other                                |                                      |         | 210.7             |         
|                                       |                                                           |                                      |         |                   |         
|                                       |                                                           | Total Current Assets                 |         |                   | 2,765.0 
|Satellites, net                        |                                                           |                                      | 1,960.5 |                   |         
|Property and Equipment, net            |                                                           |                                      | 1,584.7 |                   |         
|Goodwill                               |                                                           |                                      | 3,031.7 |                   |         
|Intangible Assets, net                 |                                                           |                                      | 1,632.4 |                   |         
|Other Assets                           |                                                           |                                      | 152.2   |                   |         
|                                       |                                                           |                                      |         |                   |         
|                                       |                                                           | Total Assets                         |         | $                 | 11,126.5
|                                       |                                                           |                                      |         |                   |         
|LIABILITIES AND OWNER'S EQUITY         |                                                           |                                      |         |                   |         
|Current Liabilities                    |                                                           |                                      |         |                   |         
|                                       | Accounts payable and accrued liabilities                  |                                      | $       | 1,979.0           |         
|                                       | Unearned subscriber revenue and deferred credits          |                                      |         | 392.6             |         
|                                       | Current portion of long-term debt                         |                                      |         | 10.4              |         
|                                       |                                                           |                                      |         |                   |         
|                                       |                                                           | Total Current Liabilities            |         |                   | 2,382.0 
|Long-Term Debt                         |                                                           |                                      | 3,397.5 |                   |         
|Other Liabilities and Deferred Credits |                                                           |                                      | 990.9   |                   |         
|Deferred Income Taxes                  |                                                           |                                      | 330.1   |                   |         
|Commitments and Contingencies          |                                                           |                                      |         |                   |         
|Owner's Equity                         |                                                           |                                      |         |                   |         
|                                       | Capital stock and additional paid-in capital              |                                      |         | 3,780.4           |         
|                                       | Retained earnings (deficit)                               |                                      |         | 245.6             |         
|                                       |                                                           |                                      |         |                   |         
|                                       |                                                           | Total Owner's Equity                 |         |                   | 4,026.0 
|                                       |                                                           |                                      |         |                   |         
|                                       |                                                           | Total Liabilities and Owner's Equity |         | $                 | 11,126.5
|                                       |                                                           |                                      |         |                   |         

---

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

2

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DIRECTV HOLDINGS LLC        CONSOLIDATED STATEMENTS OF CASH FLOWS        (Unaudited)

|                                                                                  |                                                                    | Nine Months Ended
September 30,                     |                                          
|--------------------------------------------------------------------------------- | ------------------------------------------------------------------ | --------------------------------------------------- | -----------------------------------------
|
|
|Cash Flows from Operating Activities                                              |                                                                    |                                                     |                                          
|Net Income                                                                        |                                                                    | $                                                   | 1,000.1                                  
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                    |                                                     |                                          
|                                                                                  | Depreciation and amortization expense                              |                                                     |                                          
|                                                                                  | Share-based compensation expense                                   |                                                     |                                          
|                                                                                  | Equity losses from unconsolidated affiliates                       |                                                     |                                          
|                                                                                  | Amortization of debt issuance costs                                |                                                     |                                          
|                                                                                  | Write-off of debt issuance costs                                   |                                                     |                                          
|                                                                                  | Deferred income taxes                                              |                                                     |                                          
|                                                                                  | Change in other operating assets and liabilities                   |                                                     |                                          
|                                                                                  |                                                                    | Accounts receivable, net                            |                                          
|                                                                                  |                                                                    | Inventories                                         |                                          
|                                                                                  |                                                                    | Prepaid expenses and other                          |                                          
|                                                                                  |                                                                    | Other assets                                        |                                          
|                                                                                  |                                                                    | Accounts payable and accrued liabilities            |                                          
|                                                                                  |                                                                    | Unearned subscriber revenue and deferred credits    |                                          
|                                                                                  |                                                                    | Other liabilities and deferred credits              |                                          
|                                                                                  |                                                                    |                                                     |                                          
|                                                                                  |                                                                    |                                                     | Net Cash Provided by Operating Activities
|                                                                                  |                                                                    |                                                     |                                          
|Cash Flows from Investing Activities                                              |                                                                    |                                                     |                                          
|                                                                                  | Cash paid for property and equipment                               |                                                     |                                          
|                                                                                  | Cash paid for subscriber leased equipment- subscriber acquisitions |                                                     |                                          
|                                                                                  | Cash paid for subscriber leased equipment- upgrade and retention   |                                                     |                                          
|                                                                                  | Cash paid for satellites                                           |                                                     |                                          
|                                                                                  | Other                                                              |                                                     |                                          
|                                                                                  |                                                                    |                                                     |                                          
|                                                                                  |                                                                    | Net Cash Used in Investing Activities               |                                          
|                                                                                  |                                                                    |                                                     |                                          
|Cash Flows from Financing Activities                                              |                                                                    |                                                     |                                          
|                                                                                  | Cash proceeds from refinancing transactions                        |                                                     |                                          
|                                                                                  | Repayment of long-term debt                                        |                                                     |                                          
|                                                                                  | Repayment of borrowing from Parent                                 |                                                     |                                          
|                                                                                  | Repayment of other long-term obligations                           |                                                     |                                          
|                                                                                  | Cash dividend to Parent                                            |                                                     |                                          
|                                                                                  | Cash contribution from Parent                                      |                                                     |                                          
|                                                                                  | Excess tax benefit from share-based compensation                   |                                                     |                                          
|                                                                                  | Debt issuance costs                                                |                                                     |                                          
|                                                                                  |                                                                    |                                                     |                                          
|                                                                                  |                                                                    | Net Cash Provided by (Used in) Financing Activities |                                          
|                                                                                  |                                                                    |                                                     |                                          
|Net increase in cash and cash equivalents                                         |                                                                    |                                                     | 38.1                                     
|Cash and cash equivalents at beginning of the period                              |                                                                    |                                                     | 1,164.8                                  
|                                                                                  |                                                                    |                                                     |                                          
|Cash and cash equivalents at the end of the period                                |                                                                    | $                                                   | 1,202.9                                  
|                                                                                  |                                                                    |                                                     |                                          
|Supplemental Cash Flow Information                                                |                                                                    |                                                     |                                          
|Cash paid for interest                                                            |                                                                    | $                                                   | 164.9                                    
|Cash paid (refunded) for income taxes                                             |                                                                    |                                                     | 568.0                                    

---

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

3

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DIRECTV HOLDINGS LLC        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

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

We
have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America for interim
financial reporting. In the opinion of management, all adjustments (consisting only of normal recurring items) that are necessary for a fair presentation have been included. The results for interim
periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial statements and
footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission, or SEC, on
March 10, 2006, our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2006 filed with the SEC on May 8, 2006, and for the quarter ended
June 30, 2006 filed with the SEC on August 8, 2006, 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.

Note 2: Accounting Change and New Accounting Standards

Accounting Change

On January 1, 2006, we adopted Statement of Financial Accounting Standards, or SFAS, No. 123 (revised 2004), "Share-Based Payment," or SFAS
No. 123R, which replaces SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." The adoption of this standard did not have a significant impact on our consolidated results of operations or financial position, as the fair value based calculation of compensation expense
under SFAS No. 123R is substantially similar to the calculation we applied under SFAS No. 123. However, as a result of the adoption of SFAS No. 123R, beginning in the first
quarter of 2006, we report the excess income tax benefit associated with the exercise of stock options or pay-out of restricted stock units as a cash flow from financing activities in our
Consolidated Statements of Cash Flows.

New Accounting Standards

In September 2006, the Financial Accounting Standards Board, or FASB, issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and
Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R)," or SFAS No. 158. SFAS No. 158 requires an employer to recognize in its
statement of financial position an asset for a plan's overfunded status or a liability for a plan's underfunded status, measure a plan's assets and its obligations that determine its funded status as
of the end of the employer's fiscal year, and recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. These changes are to be reported
as a component of other comprehensive income, net of tax. The adoption of this standard will have no effect on our consolidated results of operations and financial position, as DIRECTV Holdings does
not sponsor postretirement plans, but rather our employees participate in plans that are sponsored and carried as an obligation by our Parent.

4

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In
September 2006, the FASB issued SFAS No.157, "Fair Value Measurements," or SFAS No. 157. SFAS No. 157 defines fair value, sets out a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about fair value measurements of assets and liabilities. SFAS No. 157 applies under other accounting pronouncements
previously issued by the Board that
require or permit fair value measurements. The adoption of SFAS No. 157 on January 1, 2008, as required, could result in a transition adjustment that would be recognized as a
cumulative-effect adjustment to the opening balance of retained earnings. We are currently assessing the effect SFAS No. 157 may have, if any, to our consolidated results of operations
and financial position.

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

In
July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109," or FIN 48.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements according to SFAS No. 109, "Accounting for Income Taxes." FIN 48 provides for the recognition
of only those uncertain tax positions that are more-likely-than-not to be sustained upon examination, measured at the largest amount that has a greater than 50%
likelihood of being realized upon settlement. Additionally, FIN 48 gives guidance on derecognition, classification, interest, penalties, accounting in interim periods and disclosure related to
uncertain tax positions. The adoption of FIN 48 on January 1, 2007, as required, could result in an adjustment to the amount of recorded tax assets and liabilities related to uncertain tax
positions by recording a corresponding adjustment to retained earnings in the Consolidated Balance Sheets. We are currently assessing the effect FIN 48 may have, if any, to our consolidated results of
operations and financial position.

Note 3: Share-Based Payments



The Compensation Committee of The DIRECTV Group Board of Directors has granted restricted stock units under The DIRECTV Group, Inc. 2004 Stock Plan, or the
2004 Plan, and the former Hughes Electronics Corporation Incentive Plan, or the HEC Plan, to certain of our employees and executives. Annual awards are mostly performance-based, with final payments in
shares of our Parent's common stock. Final payment can be reduced from the target award amounts based on the company's performance over a three or four year performance period in comparison with
pre-established targets. We record compensation expense for restricted stock units on a straight-line basis over the service period of up to four years based upon the value of
the award on the date approved, reduced for estimated forfeitures and adjusted for anticipated payout percentages related to the achievement of performance targets.

During
the nine months ended September 30, 2006, our employees were granted approximately 3.0 million restricted stock units with a weighted average grant-date
fair value of approximately $13.57 per share. During the nine months ended September 30, 2005, our employees were granted approximately 2.9 million restricted stock units with a weighted
average grant-date fair value of approximately $16.66 per share.

5

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As
of September 30, 2006, there was $48.0 million of unrecognized compensation costs related to unvested restricted stock units, which we expect to recognize as follows:
$9.4 million in the remainder of 2006, $27.6 million in 2007 and $11.0 million in 2008.



The DIRECTV Group Compensation Committee has also granted stock options to acquire our Parent's common stock under the 2004 Plan and the HEC Plan to certain of
our employees and executives. The exercise price of options granted is equal to at least 100% of the fair market value of the common stock on the date the options were granted. These nonqualified
options generally vested over one to five years, expire ten years from date of grant and are subject to earlier termination under certain conditions. We record compensation expense for stock options
on a straight-line basis over the vesting period reduced for estimated forfeitures. All options granted to our employees were fully vested and fully expensed prior to December 31,
2005. No stock options were granted to our employees during 2006 or 2005.

We
recorded share-based compensation expense, which includes compensation costs associated with restricted stock units and stock options, as applicable, in the amount of
$9.7 million for the three months ended September 30, 2006, $7.6 million for the three months ended September 30, 2005, $28.4 for the nine months ended September 30,
2006 and $20.8 million for the nine months ended September 30, 2005. We recognized a tax benefit associated with share-based compensation expense of $3.7 million for the three
months ended September 30, 2006, $2.9 million for the three months ended September 30, 2005, $10.8 million for the nine months ended September 30, 2006 and
$7.9 million for the nine months ended September 30, 2005.

We
realized actual tax benefits for the deduction of share-based compensation arrangements in the amount of $1.6 million for the three months ended September 30, 2006,
$0.1 million for the three months ended September 30, 2005, $8.2 million for the nine months ended September 30, 2006, and $5.6 for the nine months ended
September 30, 2005.

Note 4: Lease Program

On March 1, 2006, we introduced a new set-top receiver lease program. Under this program, set-top receivers leased to new and
existing subscribers are capitalized and depreciated over their estimated useful lives of three years. Subscribers who lease their set-top receivers pay a monthly lease fee for each
set-top receiver leased in lieu of a monthly mirroring fee. Prior to March 1, 2006, most of the set-top receivers provided to new and existing subscribers were
immediately expensed upon activation as a subscriber acquisition or upgrade and retention cost in the Consolidated Statements of Operations. Now, with the introduction of the lease program, most
set-top receivers provided to new and a substantial number of set-top receivers provided to existing subscribers are leased. We have updated our subscriber acquisition costs
and upgrade and retention costs policies below to reflect the introduction of the lease program.



We include commissions we pay to national retailers, independent satellite television retailers, dealers, regional bell operating companies and the cost of
DIRECTV set-top receivers and other equipment, installation, advertising, marketing and customer call center expenses associated with the acquisition of new DIRECTV subscribers in
subscriber acquisition costs in the consolidated statements of operations. We expense these costs as incurred, or when subscribers activate the DIRECTV® service, as appropriate, except for
the cost of set-top receivers leased to new subscribers, which we

6

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capitalize
in "Property and Equipment, net" in the Consolidated Balance Sheets. Although paid in advance, the retailer or dealer earns substantially all commissions paid for customer acquisitions over
12 months from the date of subscriber activation. Should the subscriber cancel the DIRECTV service during the 12 month service period, we are reimbursed for the unearned portion of the
commission by the retailer or dealer and record a decrease to subscriber acquisition costs. We present the amount of DIRECTV set-top receivers capitalized each period for subscriber
acquisition activities in the Consolidated Statements of Cash Flows under the caption "Cash paid for subscriber leased equipmentsubscriber acquisitions."



Upgrade and retention costs in the Consolidated Statements of Operations consist primarily of costs we incur for loyalty programs offered to existing subscribers.
The costs for loyalty programs include the costs of installing or providing hardware under our movers program (for subscribers relocating to a new residence), multiple set-top receiver
offers, DVR (digital video recorder), HD (high-definition), local channel upgrade programs and other similar initiatives, and third party commissions we incur for the sale of additional
set-top receivers to existing subscribers. We expense these costs as incurred, except for the cost of set-top receivers leased to existing subscribers, which we capitalize in
"Property and Equipment, net" in the Consolidated Balance Sheets. We present the amount of DIRECTV set-top receivers capitalized each period for upgrade and retention activities in the
Consolidated Statements of Cash Flows under the caption "Cash paid for subscriber leased equipmentupgrade and retention."

During
the three months ended September 30, 2006, we capitalized $203.5 million for set-top receivers leased to new subscribers and $121.1 million for
set-top receivers leased to existing subscribers. Depreciation expense on these capitalized receivers was $44.5 million for the three months ended September 30, 2006. During
the nine months ended September 30, 2006, we capitalized $402.9 million for set-top receivers leased to new subscribers and $261.0 million for set-top
receivers leased to existing subscribers. Depreciation expense on these capitalized receivers was $67.8 million for the nine months ended September 30, 2006.

Note 5: Intangible Assets

The following table sets forth the amounts recorded for intangible assets as of the periods presented:

|                        |  |            |  | September 30, 2006 |         | December 31, 2005
|----------------------- |  | ---------- |  | ------------------ | ------- | -----------------
|
|
|Orbital slots           |  | Indefinite |  | $                  | 432.4   |                  
|72.5 WL Orbital license |  | 5          |  |                    | 192.9   |                  
|Subscriber related      |  | 5-10       |  |                    | 1,342.2 |                  
|Dealer network          |  | 15         |  |                    | 130.0   |                  
|Distribution rights     |  | 7          |  |                    | 334.1   |                  
|                        |  |            |  |                    |         |                  
|Total Intangible Assets |  |            |  | $                  | 2,431.6 |                  
|                        |  |            |  |                    |         |                  

Amortization
expense for intangible assets was $88.4 million for the three month period ended September 30, 2006 and $88.3 million for the three month period ended
September 30, 2005.

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Amortization
expense for intangible assets was $265.1 million for the nine month period ended September 30, 2006 and $264.9 million for the nine month period ended
September 30, 2005.

Estimated
amortization expense for intangible assets in each of the next five years and thereafter is as follows: $88.3 million for the remainder of 2006, $353.4 million in
2007, $353.4 million in 2008, $258.8 million in 2009, $89.2 million in 2010 and $56.9 million thereafter.

Note 6: Debt

The following table sets forth our outstanding debt:

|                                        |                | Interest Rates at
September 30, 2006 |   | September 30,
2006 |         | December 31,
2005
|--------------------------------------- | -------------- | ------------------------------------ | - | ------------------ | ------- | -----------------
|
|8.375% senior notes due in 2013         |                | 8.375                                | % | $                  | 910.0   |                  
|6.375% senior notes due in 2015         |                | 6.375                                | % |                    | 1,000.0 |                  
|Senior secured credit facility          |                | 6.575                                | % |                    | 1,495.0 |                  
|Other                                   |                |                                     |   |                    | 2.9     |                  
|                                        |                |                                      |   |                    |         |                  
|                                        | Total debt     |                                      |   |                    |         | 3,407.9          
|Less: current portion of long-term debt |                |                                      |   |                    | 10.4    |                  
|                                        |                |                                      |   |                    |         |                  
|                                        | Long-term debt |                                      |   |                    | $       | 3,397.5          
|                                        |                |                                      |   |                    |         |                  

The
fair value of our 8.375% senior notes was approximately $947.4 million at September 30, 2006 and approximately $982.3 million at December 31, 2005. The
fair value of our 6.375% senior notes was approximately $949.0 million at September 30, 2006 and approximately $983.8 million at December 31, 2005. We calculated the fair
values based on quoted market prices on those dates.

Our
notes payable and senior secured credit facility mature as follows: $2.5 million in the remainder of 2006; $10.1 million in 2007; $47.6 million in 2008;
$97.6 million in 2009; $297.5 million in 2010 and $2,949.7 million thereafter. These amounts do not reflect potential prepayments that may be required under our senior secured
credit facility, which could result from a computation that we may be
required to make at each year end under the credit agreement. We were not required to make a prepayment for the year ended December 31, 2005 and we do not currently expect to be required to
make a prepayment for the year ending December 31, 2006. The amount of interest accrued related to our outstanding debt was $23.2 million at September 30, 2006 and
$28.4 million at December 31, 2005. The unamortized bond premium included in total debt as of September 30, 2006 was $2.9 million.

Covenants and Restrictions.The senior secured credit facility requires us to comply with certain financial covenants. The
senior notes and the senior secured credit facility also include covenants that restrict our ability to, among other things, (i) incur additional indebtedness, (ii) incur liens,
(iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with
another entity, (vi) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vii) make voluntary prepayments of certain debt, in each case subject to
exceptions as provided in the credit agreement and senior notes indentures. Should we fail to comply with these covenants, all or a portion of our borrowings under the senior notes and senior secured
credit facility could become immediately payable and our revolving credit facility could be terminated. At September 30, 2006, we were in compliance with all such covenants.

8

---



2005 Refinancing Transactions.In April 2005, we replaced our prior credit facility with our existing senior secured
credit facility. We used a portion of the $2,000.0 million proceeds from the transaction to repay our prior credit facility, which had a then outstanding balance of $1,001.6 million, to
repay an $875.0 million borrowing from our Parent, and to pay related financing costs and accrued interest.

On
May 19, 2005, we redeemed $490.0 million of our then outstanding $1,400.0 million of 8.375% senior notes at a redemption price of 108.375% plus accrued and unpaid
interest, for a total of $538.3 million, which was funded by a capital contribution from our Parent.

On
June 15, 2005, we issued $1,000.0 million of 6.375% senior notes. We used a portion of the proceeds from the transaction to repay $500.0 million of our senior
secured credit facility and to pay related financing costs.

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

Note 7: Commitments and Contingencies



At September 30, 2006, our minimum future commitments under noncancelable operating leases having lease terms in excess of one year were primarily for real
property and aggregated $126.7 million, payable as follows: $7.3 million for the remainder of 2006, $28.5 million in 2007, $29.9 million in 2008, $16.5 million in
2009, $15.3 million in 2010 and $29.2 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options, which we have not considered in the amounts
disclosed. Rental expense under operating leases was $12.2 million for the three months ended September 30, 2006 and $12.0 million for the three months ended September 30,
2005. Rental expense under operating leases was $37.2 million for the nine months ended September 30, 2006 and $35.5 million for the nine months ended September 30, 2005.

We
have minimum commitments under agreements for broadcast programming, the purchase of services that we have outsourced to third parties, such as billing services and satellite
telemetry, tracking and control, and satellite construction and launch contracts. As of September 30, 2006, minimum payments over the terms of the applicable agreements aggregated
$5,041.8 million, payable as follows: $307.3 million for the remainder of 2006, $1,042.5 million in 2007, $933.6 million in 2008, $965.8 million in 2009,
$961.5 million in 2010 and $831.1 million thereafter.

At
September 30, 2006, other long term obligations totaling $374.2 million are payable approximately as follows: $17.1 million for the remainder of 2006,
$71.0 million in 2007, $75.3 million in 2008, $79.9 million in 2009, $83.3 million in 2010 and $47.6 million thereafter. These amounts are recorded in "Accounts
payable and accrued liabilities" and "Other Liabilities and Deferred Credits" in our Consolidated Balance Sheets.

As
of September 30, 2006, included in "Investments and Other Assets" in the Consolidated Balance Sheets is a receivable for $22.0 million of the $57.0 million rebate
that we can earn from Thomson by purchasing at least $4.0 billion of set-top receivers through June 2010. We have accrued this receivable based on our assessment that
achievement of the minimum purchase requirement is

9

---



both
probable and reasonably estimable. On a quarterly basis, we assess the probability of earning the rebate over the contract term. If we subsequently determine that it is no longer probable that we
will earn the rebate, we would be required to reverse the amount of the rebate earned to date as a charge to the Consolidated Statements of Operations at the time such determination is made.



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
September 30, 2006. After discussion with counsel representing us in those actions, it is the opinion of management that such litigation is not expected to have a material adverse effect on our
consolidated results of operations or financial position.

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

We
filed a notice of appeal to the Court of Appeals for the Federal Circuit on October 5, 2006 and Finisar also filed a notice of appeal on October 18, 2006. A bond was
submitted to the District Court in the amount of $126.7 million as required security for the damages awarded but not yet paid pending appeal plus interest for the anticipated duration of the
appeal. We were successful in obtaining an order that post-judgment royalties pursuant to the compulsory license shall be held in
escrow pending outcome of the appeal, and the initial quarterly payment has been made. Through September 30, 2006, the compulsory license fee amounted to $6.3 million, which was paid
into escrow in October 2006.

Based
on our review of the record in this case, including discussion with and analysis by counsel of the bases for our appeal, we have determined that we have a number of strong
arguments available on appeal and, although there can be no assurance as to the ultimate outcome, we are confident that the judgment against us will ultimately be reversed, or remanded for a new trial
in which we believe we would prevail. As a result, we have concluded that it is not probable that Finisar will ultimately prevail in this matter; therefore, we have not recorded any liability for this
judgment nor are we recording any expense for the compulsory license.



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

10

---



of
satellite failure. The insurance generally covers the unamortized book value of covered satellites. We do not insure against lost revenues in the event of a total or partial loss of the capacity of
a satellite. We generally rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to mitigate the impact that a satellite failure could have on our ability
to provide service. At September 30, 2006, the net book value of in-orbit satellites was $1,110.3 million, of which $712.3 million was uninsured.

Note 8: Related Party Transactions



In the ordinary course of our operations, we enter into related party transactions with The DIRECTV Group and certain of its affiliates.

We
receive an allocation of employee benefit expenses from The DIRECTV Group. We believe that our consolidated financial statements reflect our cost of doing business in accordance with
SEC Staff Accounting Bulletin No. 55, "Allocation of Expenses and Related Disclosures in Financial Statements of Subsidiaries, Divisions of Lesser Business Components of Another Entity; Cheap
Stock."

On
July 14, 2006 we paid a $300.0 million dividend to The DIRECTV Group from available cash and cash equivalents.

In
connection with the refinancing transactions described in Note 6, during the second quarter of 2005, we repaid an $875.0 million borrowing from The DIRECTV Group and
received a $538.3 million capital contribution from The DIRECTV Group. We recorded interest expense related to the borrowing from The DIRECTV Group of $6.5 million for the nine months
ended September 30, 2005.

During
the nine months ended September 30, 2005, The DIRECTV Group contributed to us certain satellite assets at its cost in the amount of $25.8 million, which we recorded
as a capital contribution.



News Corporation and its affiliates are considered related parties because News Corporation owns approximately 39% of the outstanding common stock of The DIRECTV
Group. We have the following types of contractual arrangements with News Corporation entities: purchase of programming, products and advertising; license of certain intellectual property, including
patents; purchase of system access products; set-top receiver software and support services; sale of advertising space; purchase of employee services; and use of facilities.

11

---



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

Three Months Ended
September 30,

Nine Months Ended
September 30,2006

2005

2006

2005(dollars in millions)Sales:The DIRECTV Group and affiliates

$
0.4

$
0.8

$
1.1

$
6.0News Corporation and affiliates


6.5


3.5


17.6


14.3Total

$
6.9

$
4.3

$
18.7

$
20.3Purchases:The DIRECTV Group and affiliates

$
0.1

$
7.2

$
0.2

$
7.2News Corporation and affiliates


190.5


163.9


565.9


487.8Other


1.3


2.3


7.2


6.8Total

$
191.9

$
173.4

$
573.3

$
501.8


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

September 30,
2006

December 31,
2005(dollars in millions)Accounts receivable from related parties:The DIRECTV Group and affiliates

$
1.0

$
1.3News Corporation and affiliates


5.0


8.2Total

$
6.0

$
9.5Accounts payable to related parties:The DIRECTV Group and affiliates

$
9.1

$
40.4News Corporation and affiliates


142.7


150.0Other


20.4


11.4Total

$
172.2

$
201.8


Note 9: Condensed Consolidating Financial Statements

The
following presents the condensed consolidating statements of operations for the three and nine months ended September 30, 2006 and 2005, the condensed consolidating balance
sheets as of September 30, 2006 and December 31, 2005, and the condensed consolidating statements of cash flows for the nine months ended September 30, 2006 and 2005 of DIRECTV
Holdings together with DIRECTV Financing Co., Inc., or the Co-Issuers, and each of DIRECTV Holdings' material subsidiaries (other than DIRECTV Financing), or the Guarantor
Subsidiaries, and the eliminations necessary to present DIRECTV Holdings' financial statements on a consolidated basis. These condensed consolidating financial statements should be read in conjunction
with the accompanying consolidated financial statements of DIRECTV Holdings.

12

---





Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2006

|                                                    |                                                                                                  | Co-Issuers                          |        | Guarantor
Subsidiaries |     | Eliminations |   | DIRECTV
Holdings
Consolidated |       
|--------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ------ | ---------------------- | --- | ------------ | - | ----------------------------- | ------
|
|Revenues                                            |                                                                                                  | $                                   |       |                        | $   | 3,403.3      |   | $                             | (0.2  
|Operating Costs and Expenses                        |                                                                                                  |                                     |        |                        |     |              |   |                               |       
|                                                    | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |        |                        |     |              |   |                               |       
|                                                    |                                                                                                  | Broadcast programming and other     |        |                        |    |              |   | 1,416.8                       |       
|                                                    |                                                                                                  | Subscriber service expenses         |        |                        |    |              |   | 285.4                         |       
|                                                    |                                                                                                  | Broadcast operations expenses       |        |                        |    |              |   | 44.8                          |       
|                                                    | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |        |                        |     |              |   |                               |       
|                                                    |                                                                                                  | Subscriber acquisition costs        |        |                        |    |              |   | 432.0                         |       
|                                                    |                                                                                                  | Upgrade and retention costs         |        |                        |    |              |   | 208.2                         |       
|                                                    |                                                                                                  | General and administrative expenses |        |                        | 0.1 |              |   | 192.6                         |       
|Depreciation and amortization expense               |                                                                                                  |                                     |       |                        |     | 226.0        |   |                               |      
|                                                    |                                                                                                  |                                     |        |                        |     |              |   |                               |       
|                                                    |                                                                                                  | Total Operating Costs and Expenses  |        |                        | 0.1 |              |   | 2,805.8                       |       
|                                                    |                                                                                                  |                                     |        |                        |     |              |   |                               |       
|Operating Profit (Loss)                             |                                                                                                  |                                     | (0.1   | )                      |     | 597.5        |   |                               |      
|Equity in pre-tax loss of consolidated subsidiaries |                                                                                                  |                                     | 589.8  |                        |     |             |   |                               | (589.8
|Interest income                                     |                                                                                                  |                                     | 17.8   |                        |     |             |   |                               |      
|Interest expense                                    |                                                                                                  |                                     | (46.5  | )                      |     | (7.1         | ) |                               |      
|Other expense                                       |                                                                                                  |                                     |       |                        |     | (0.6         | ) |                               |      
|                                                    |                                                                                                  |                                     |        |                        |     |              |   |                               |       
|Income (Loss) Before Income Taxes                   |                                                                                                  |                                     | 561.0  |                        |     | 589.8        |   |                               | (589.8
|Income tax (expense) benefit                        |                                                                                                  |                                     | (214.1 | )                      |     | (225.1       | ) |                               | 225.1 
|                                                    |                                                                                                  |                                     |        |                        |     |              |   |                               |       
|Net Income (Loss)                                   |                                                                                                  | $                                   | 346.9  |                        | $   | 364.7        |   | $                             | (364.7
|                                                    |                                                                                                  |                                     |        |                        |     |              |   |                               |       

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

|                                                    |                                                                                                  | Co-Issuers                          |       | Guarantor
Subsidiaries |       | Eliminations |       | DIRECTV
Holdings
Consolidated |       
|--------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ----- | ---------------------- | ----- | ------------ | ----- | ----------------------------- | ------
|
|Revenues                                            |                                                                                                  | $                                   | 177.4 |                        | $     | 3,048.4      |       | $                             | (177.4
|Operating Costs and Expenses                        |                                                                                                  |                                     |       |                        |       |              |       |                               |       
|                                                    | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |       |                        |       |              |       |                               |       
|                                                    |                                                                                                  | Broadcast programming and other     |       |                        | 144.8 |              |       | 1,273.1                       |       
|                                                    |                                                                                                  | Subscriber service expenses         |       |                        |      |              |       | 240.4                         |       
|                                                    |                                                                                                  | Broadcast operations expenses       |       |                        |      |              |       | 39.4                          |       
|                                                    | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |       |                        |       |              |       |                               |       
|                                                    |                                                                                                  | Subscriber acquisition costs        |       |                        |      |              |       | 691.4                         |       
|                                                    |                                                                                                  | Upgrade and retention costs         |       |                        |      |              |       | 291.3                         |       
|                                                    |                                                                                                  | General and administrative expenses |       |                        |      |              |       | 207.6                         |       
|                                                    | Depreciation and amortization expense                                                            |                                     |       |                       |       |              | 167.2 |                               |       
|                                                    |                                                                                                  |                                     |       |                        |       |              |       |                               |       
|                                                    |                                                                                                  | Total Operating Costs and Expenses  |       |                        | 144.8 |              |       | 2,910.4                       |       
|                                                    |                                                                                                  |                                     |       |                        |       |              |       |                               |       
|Operating Profit                                    |                                                                                                  |                                     | 32.6  |                        |       | 138.0        |       |                               |      
|Equity in pre-tax loss of consolidated subsidiaries |                                                                                                  |                                     | 126.7 |                        |       |             |       |                               | (126.7
|Interest income                                     |                                                                                                  |                                     | 8.2   |                        |       |             |       |                               |      
|Interest expense                                    |                                                                                                  |                                     | (49.8 | )                      |       | (10.8        | )     |                               |      
|Other expense                                       |                                                                                                  |                                     | (0.3  | )                      |       | (0.5         | )     |                               |      
|                                                    |                                                                                                  |                                     |       |                        |       |              |       |                               |       
|Income (Loss) Before Income Taxes                   |                                                                                                  |                                     | 117.4 |                        |       | 126.7        |       |                               | (126.7
|Income tax (expense) benefit                        |                                                                                                  |                                     | (45.1 | )                      |       | (48.9        | )     |                               | 48.9  
|                                                    |                                                                                                  |                                     |       |                        |       |              |       |                               |       
|Net Income (Loss)                                   |                                                                                                  | $                                   | 72.3  |                        | $     | 77.8         |       | $                             | (77.8 
|                                                    |                                                                                                  |                                     |       |                        |       |              |       |                               |       

13

---



Condensed Consolidating Statement of Operations
For the Nine Months Ended September 30, 2006

|                                                    |                                                                                                  | Co-Issuers                          |         | Guarantor
Subsidiaries |     | Eliminations |       | DIRECTV
Holdings
Consolidated |         
|--------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ------- | ---------------------- | --- | ------------ | ----- | ----------------------------- | --------
|
|Revenues                                            |                                                                                                  | $                                   |        |                        | $   | 9,915.4      |       | $                             | (0.5    
|Operating Costs and Expenses                        |                                                                                                  |                                     |         |                        |     |              |       |                               |         
|                                                    | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |         |                        |     |              |       |                               |         
|                                                    |                                                                                                  | Broadcast programming and other     |         |                        |    |              |       | 4,062.7                       |         
|                                                    |                                                                                                  | Subscriber service expenses         |         |                        |    |              |       | 777.6                         |         
|                                                    |                                                                                                  | Broadcast operations expenses       |         |                        |    |              |       | 132.4                         |         
|                                                    | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |         |                        |     |              |       |                               |         
|                                                    |                                                                                                  | Subscriber acquisition costs        |         |                        |    |              |       | 1,401.0                       |         
|                                                    |                                                                                                  | Upgrade and retention costs         |         |                        |    |              |       | 645.1                         |         
|                                                    |                                                                                                  | General and administrative expenses |         |                        | 0.5 |              |       | 551.4                         |         
|                                                    | Depreciation and amortization expense                                                            |                                     |         |                       |     |              | 610.6 |                               |         
|                                                    |                                                                                                  |                                     |         |                        |     |              |       |                               |         
|                                                    |                                                                                                  | Total Operating Costs and Expenses  |         |                        | 0.5 |              |       | 8,180.8                       |         
|                                                    |                                                                                                  |                                     |         |                        |     |              |       |                               |         
|Operating Profit (Loss)                             |                                                                                                  |                                     | (0.5    | )                      |     | 1,734.6      |       |                               |        
|Equity in pre-tax loss of consolidated subsidiaries |                                                                                                  |                                     | 1,708.4 |                        |     |             |       |                               | (1,708.4
|Interest income                                     |                                                                                                  |                                     | 49.5    |                        |     |             |       |                               |        
|Interest expense                                    |                                                                                                  |                                     | (139.1  | )                      |     | (24.3        | )     |                               |        
|Other expense                                       |                                                                                                  |                                     |        |                        |     | (1.9         | )     |                               |        
|                                                    |                                                                                                  |                                     |         |                        |     |              |       |                               |         
|Income (Loss) Before Income Taxes                   |                                                                                                  |                                     | 1,618.3 |                        |     | 1,708.4      |       |                               | (1,708.4
|Income tax (expense) benefit                        |                                                                                                  |                                     | (618.2  | )                      |     | (652.6       | )     |                               | 652.6   
|                                                    |                                                                                                  |                                     |         |                        |     |              |       |                               |         
|Net Income (Loss)                                   |                                                                                                  | $                                   | 1,000.1 |                        | $   | 1,055.8      |       | $                             | (1,055.8
|                                                    |                                                                                                  |                                     |         |                        |     |              |       |                               |         

Condensed Consolidating Statement of Operations
For the Nine Months Ended September 30, 2005

|                                                    |                                                                                                  | Co-Issuers                          |        | Guarantor
Subsidiaries |       | Eliminations |       | DIRECTV
Holdings
Consolidated |       
|--------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----------------------------------- | ------ | ---------------------- | ----- | ------------ | ----- | ----------------------------- | ------
|
|Revenues                                            |                                                                                                  | $                                   | 512.6  |                        | $     | 8,809.7      |       | $                             | (512.6
|Operating Costs and Expenses                        |                                                                                                  |                                     |        |                        |       |              |       |                               |       
|                                                    | Costs of revenues, exclusive of depreciation and amortization expense                            |                                     |        |                        |       |              |       |                               |       
|                                                    |                                                                                                  | Broadcast programming and other     |        |                        | 433.5 |              |       | 3,606.6                       |       
|                                                    |                                                                                                  | Subscriber service expenses         |        |                        |      |              |       | 680.1                         |       
|                                                    |                                                                                                  | Broadcast operations expenses       |        |                        |      |              |       | 110.1                         |       
|                                                    | Selling, general and administrative expenses, exclusive of depreciation and amortization expense |                                     |        |                        |       |              |       |                               |       
|                                                    |                                                                                                  | Subscriber acquisition costs        |        |                        |      |              |       | 2,059.2                       |       
|                                                    |                                                                                                  | Upgrade and retention costs         |        |                        |      |              |       | 766.7                         |       
|                                                    |                                                                                                  | General and administrative expenses |        |                        | 0.7   |              |       | 607.4                         |       
|                                                    | Depreciation and amortization expense                                                            |                                     |        |                       |       |              | 515.8 |                               |       
|                                                    |                                                                                                  |                                     |        |                        |       |              |       |                               |       
|                                                    |                                                                                                  | Total Operating Costs and Expenses  |        |                        | 434.2 |              |       | 8,345.9                       |       
|                                                    |                                                                                                  |                                     |        |                        |       |              |       |                               |       
|Operating Profit                                    |                                                                                                  |                                     | 78.4   |                        |       | 463.8        |       |                               |      
|Equity in pre-tax loss of consolidated subsidiaries |                                                                                                  |                                     | 421.3  |                        |       |             |       |                               | (421.3
|Interest income                                     |                                                                                                  |                                     | 12.7   |                        |       |             |       |                               |      
|Interest expense                                    |                                                                                                  |                                     | (134.0 | )                      |       | (41.3        | )     |                               |      
|Other expense                                       |                                                                                                  |                                     | (65.2  | )                      |       | (1.2         | )     |                               |      
|                                                    |                                                                                                  |                                     |        |                        |       |              |       |                               |       
|Income (Loss) Before Income Taxes                   |                                                                                                  |                                     | 313.2  |                        |       | 421.3        |       |                               | (421.3
|Income tax (expense) benefit                        |                                                                                                  |                                     | (120.2 | )                      |       | (161.7       | )     |                               | 161.7 
|                                                    |                                                                                                  |                                     |        |                        |       |              |       |                               |       
|Net Income (Loss)                                   |                                                                                                  | $                                   | 193.0  |                        | $     | 259.6        |       | $                             | (259.6
|                                                    |                                                                                                  |                                     |        |                        |       |              |       |                               |       

14

---



Condensed Consolidating Balance Sheet
As of September 30, 2006

|                                       |                                              | Co-Issuers           |         | Guarantor
Subsidiaries |         | Eliminations |         | DIRECTV
Holdings
Consolidated
|-------------------------------------- | -------------------------------------------- | -------------------- | ------- | ---------------------- | ------- | ------------ | ------- | -----------------------------
|
|ASSETS                                 |                                              |                      |         |                        |         |              |         |                              
|Total Current Assets                   |                                              | $                    | 1,253.1 |                        | $       | 1,519.6      |         | $                            
|Satellites, net                        |                                              |                      |        |                        |         | 1,960.5      |         |                              
|Property and Equipment, net            |                                              |                      |        |                        |         | 1,584.7      |         |                              
|Goodwill, net                          |                                              |                      | 1,827.6 |                        |         | 1,204.1      |         |                              
|Intangible Assets, net                 |                                              |                      |        |                        |         | 1,632.4      |         |                              
|Other Assets                           |                                              |                      | 4,368.9 |                        |         | 126.4        |         |                              
|                                       |                                              |                      |         |                        |         |              |         |                              
|Total Assets                           |                                              | $                    | 7,449.6 |                        | $       | 8,027.7      |         | $                            
|                                       |                                              |                      |         |                        |         |              |         |                              
|LIABILITIES AND OWNER'S EQUITY         |                                              |                      |         |                        |         |              |         |                              
|Total Current Liabilities              |                                              | $                    | 26.1    |                        | $       | 2,363.6      |         | $                            
|Long-Term Debt                         |                                              |                      | 3,397.5 |                        |         |             |         |                              
|Other Liabilities and Deferred Credits |                                              |                      |        |                        |         | 990.9        |         |                              
|Deferred Income Taxes                  |                                              |                      |        |                        |         | 495.7        |         |                              
|Owner's Equity                         |                                              |                      |         |                        |         |              |         |                              
|                                       | Capital stock and additional paid-in capital |                      |         | 3,780.4                |         |              | 4,803.8 |                              
|                                       | Retained earnings (deficit)                  |                      |         | 245.6                  |         |              | (626.3  | )                            
|                                       |                                              |                      |         |                        |         |              |         |                              
|                                       |                                              | Total Owner's Equity |         |                        | 4,026.0 |              |         | 4,177.5                      
|                                       |                                              |                      |         |                        |         |              |         |                              
|Total Liabilities and Owner's Equity   |                                              | $                    | 7,449.6 |                        | $       | 8,027.7      |         | $                            
|                                       |                                              |                      |         |                        |         |              |         |                              

Condensed Consolidating Balance Sheet
As of December 31, 2005

|                                       |                                              | Co-Issuers           |         | Guarantor
Subsidiaries |         | Eliminations |          | DIRECTV
Holdings
Consolidated |         
|-------------------------------------- | -------------------------------------------- | -------------------- | ------- | ---------------------- | ------- | ------------ | -------- | ----------------------------- | --------
|
|ASSETS                                 |                                              |                      |         |                        |         |              |          |                               |         
|Total Current Assets                   |                                              | $                    | 1,206.8 |                        | $       | 1,528.0      |          | $                             | (7.7    
|Satellites, net                        |                                              |                      |        |                        |         | 1,907.9      |          |                               |        
|Property and Equipment, net            |                                              |                      |        |                        |         | 848.3        |          |                               |        
|Goodwill, net                          |                                              |                      | 1,827.6 |                        |         | 1,204.1      |          |                               |        
|Intangible Assets, net                 |                                              |                      |        |                        |         | 1,875.0      |          |                               |        
|Other Assets                           |                                              |                      | 3,748.9 |                        |         | 100.2        |          |                               | (3,714.1
|                                       |                                              |                      |         |                        |         |              |          |                               |         
|                                       |                                              | Total Assets         |         | $                      | 6,783.3 |              | $        | 7,463.5                       |         
|                                       |                                              |                      |         |                        |         |              |          |                               |         
|LIABILITIES AND OWNER'S EQUITY         |                                              |                      |         |                        |         |              |          |                               |         
|Total Current Liabilities              |                                              | $                    | 81.6    |                        | $       | 2,555.8      |          | $                             | (7.7    
|Long-Term Debt                         |                                              |                      | 3,405.3 |                        |         |             |          |                               |        
|Other Liabilities and Deferred Credits |                                              |                      |        |                        |         | 989.2        |          |                               |        
|Deferred Income Taxes                  |                                              |                      |        |                        |         | 335.4        |          |                               | (131.0  
|Owner's Equity                         |                                              |                      |         |                        |         |              |          |                               |         
|                                       | Capital stock and additional paid-in capital |                      |         | 4,050.9                |         |              | 4,875.0  |                               |         
|                                       | Accumulated deficit                          |                      |         | (754.5                 | )       |              | (1,291.9 | )                             |         
|                                       |                                              |                      |         |                        |         |              |          |                               |         
|                                       |                                              | Total Owner's Equity |         |                        | 3,296.4 |              |          | 3,583.1                       |         
|                                       |                                              |                      |         |                        |         |              |          |                               |         
|Total Liabilities and Owner's Equity   |                                              | $                    | 6,783.3 |                        | $       | 7,463.5      |          | $                             | (3,721.8
|                                       |                                              |                      |         |                        |         |              |          |                               |         

15

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Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2006

|                                                     |                                                                  | Co-Issuers                            |         | Guarantor
Subsidiaries |        | DIRECTV
Holdings
Consolidated |        
|---------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------- | ------- | ---------------------- | ------ | ----------------------------- | -------
|
|Cash Flows from Operating Activities                 |                                                                  |                                       |         |                        |        |                               |        
|                                                     | Net Cash Provided by Operating Activities                        |                                       | $       | 343.1                  |        | $                             | 1,216.9
|                                                     |                                                                  |                                       |         |                        |        |                               |        
|Cash Flows from Investing Activities                 |                                                                  |                                       |         |                        |        |                               |        
|                                                     | Cash paid for property and equipment                             |                                       |         |                       |        |                               | (329.9 
|                                                     | Cash paid for subscriber leased equipmentsubscriber acquisition |                                       |         |                       |        |                               | (402.9 
|                                                     | Cash paid for subscriber leased equipmentupgrade and retention  |                                       |         |                       |        |                               | (261.0 
|                                                     | Cash paid for satellites                                         |                                       |         |                       |        |                               | (172.8 
|                                                     | Other                                                            |                                       |         |                       |        |                               | (2.1   
|                                                     |                                                                  |                                       |         |                        |        |                               |        
|                                                     |                                                                  | Net Cash Used in Investing Activities |         |                        |       |                               |        
|                                                     |                                                                  |                                       |         |                        |        |                               |        
|Cash Flows from Financing Activities                 |                                                                  |                                       |         |                        |        |                               |        
|                                                     | Cash dividend to Parent                                          |                                       |         | (300.0                 | )      |                               |       
|                                                     | Repayment of long-term debt                                      |                                       |         | (5.0                   | )      |                               |       
|                                                     | Repayment of other long-term obligations                         |                                       |         |                       |        |                               | (50.1  
|                                                     | Excess tax benefit from share-based compensation                 |                                       |         |                       |        |                               | 1.9    
|                                                     |                                                                  |                                       |         |                        |        |                               |        
|                                                     |                                                                  | Net Cash Used in Financing Activities |         |                        | (305.0 | )                             |        
|                                                     |                                                                  |                                       |         |                        |        |                               |        
|Net increase in cash and cash equivalents            |                                                                  |                                       | 38.1    |                        |        |                              |        
|Cash and cash equivalents at beginning of the period |                                                                  |                                       | 1,164.8 |                        |        |                              |        
|                                                     |                                                                  |                                       |         |                        |        |                               |        
|Cash and cash equivalents at the end of the period   |                                                                  | $                                     | 1,202.9 |                        | $      |                              |        
|                                                     |                                                                  |                                       |         |                        |        |                               |        

Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2005

|                                                     |                                                     | Co-Issuers                                          |         | Guarantor
Subsidiaries |         | DIRECTV
Holdings
Consolidated |        
|---------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------- | ---------------------- | ------- | ----------------------------- | -------
|
|Cash Flows from Operating Activities                 |                                                     |                                                     |         |                        |         |                               |        
|                                                     | Net Cash Provided by (Used in) Operating Activities |                                                     | $       | (522.7                 | )       | $                             | 1,400.1
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|Cash Flows from Investing Activities                 |                                                     |                                                     |         |                        |         |                               |        
|                                                     | Cash paid for property and equipment                |                                                     |         |                       |         |                               | (250.2 
|                                                     | Cash paid for satellites                            |                                                     |         |                       |         |                               | (246.7 
|                                                     | Other                                               |                                                     |         |                       |         |                               | (1.7   
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|                                                     |                                                     | Net Cash Used in Investing Activities               |         |                        |        |                               |        
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|Cash Flows from Financing Activities                 |                                                     |                                                     |         |                        |         |                               |        
|                                                     | Cash proceeds from refinancing transactions         |                                                     |         | 3,003.3                |         |                               |       
|                                                     | Cash contribution from Parent                       |                                                     |         | 538.3                  |         |                               |       
|                                                     | Repayment of long-term debt                         |                                                     |         | (2,001.8               | )       |                               |       
|                                                     | Repayment of borrowings from Parent                 |                                                     |         | (875.0                 | )       |                               |       
|                                                     | Loans (to) from related parties                     |                                                     |         | 875.0                  |         |                               | (875.0 
|                                                     | Repayment of other long-term obligations            |                                                     |         |                       |         |                               | (47.0  
|                                                     | Debt issuance costs                                 |                                                     |         | (4.7                   | )       |                               |       
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|                                                     |                                                     | Net Cash Provided by (Used in) Financing Activities |         |                        | 1,535.1 |                               |        
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|Net increase (decrease) in cash and cash equivalents |                                                     |                                                     | 1,012.4 |                        |         | (20.5                         | )      
|Cash and cash equivalents at beginning of the period |                                                     |                                                     | 14.0    |                        |         | 20.5                          |        
|                                                     |                                                     |                                                     |         |                        |         |                               |        
|Cash and cash equivalents at the end of the period   |                                                     | $                                                   | 1,026.4 |                        | $       |                              |        
|                                                     |                                                     |                                                     |         |                        |         |                               |        

16

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DIRECTV HOLDINGS LLC

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

The following management's discussion and analysis should be read in conjunction with our management's discussion and analysis included in our Annual Report on
Form 10-K for the year ended December 31, 2005 filed with the SEC on March 10, 2006, or 2005 Form 10-K, our Quarterly Reports on
Form 10-Q for the quarter ended March 31, 2006 filed with the SEC on May 8, 2006, and for the quarter ended June 30, 2006 filed with the SEC on August 8,
2006, 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 use of statements that include phrases such
as we "believe," "estimate," "expect," "anticipate," "intend," "plan," "foresee," "project" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also
are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from historical results
or from those expressed or implied by the relevant forward-looking statement. We discussed in detail these risks and uncertainties in Part I, Item 1A of our 2005
Form 10-K.

BUSINESS OVERVIEW

We are a wholly-owned subsidiary of The DIRECTV Group and our subsidiaries include DIRECTV Enterprises, LLC and its wholly-owned subsidiaries and DIRECTV
Financing Co., Inc. We are the largest provider of direct-to-home, or DTH, digital television services and the second largest provider in the multi-channel video
programming distribution, or MVPD, industry in
the United States. As of September 30, 2006, we had approximately 15.7 million subscribers with average monthly revenue per subscriber, or ARPU, for the nine months ended
September 30, 2006 of $71.41.

We
currently broadcast our service from nine geosynchronous satellites. An additional satellite, DIRECTV 9S, was launched on October 13, 2006 and will provide backup capacity at
the 101 WL and 119 WL orbital locations once in-orbit testing is completed. We have three additional satellites under construction, and plan to launch two of these, DIRECTV 10 and DIRECTV
11, in 2007. These two satellites will provide us with increased capability for local and national high definition, or HD, channels, as well as capacity for new interactive and enhanced services and
standard-definition programming. Once launched, these satellites will operate from our 99 WL and 103 WL orbital locations. The third satellite under construction, DIRECTV 12, will serve as a ground
spare.

Significant Event Affecting the Comparability of the Results of Operations

Lease Program.On March 1, 2006, we introduced a new set-top receiver lease
program. Under this program, set-top receivers leased to new and existing subscribers are capitalized and depreciated over their estimated useful lives. Subscribers who lease their
set-top receivers pay a monthly lease fee for each set-top receiver leased in lieu of a monthly mirroring fee. Prior to March 1, 2006, most set-top receivers
provided to subscribers were immediately expensed upon activation as a subscriber acquisition or upgrade and retention cost in the Consolidated Statements of Operations. Now, with the introduction of
our lease program, most of the set-top receivers provided to new and a substantial number of set-top receivers provided to existing subscribers are leased. We report the amount
of

17

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set-top
receivers we capitalize during the period in our Consolidated Statements of Cash Flows under the captions "Cash paid for subscriber leased equipmentsubscriber
acquisitions" and "Cash paid for subscriber leased equipmentupgrade and retention." We capitalized $203.5 million of set-top receivers leased to new subscribers and
$121.1 million of set-top receivers leased to existing subscribers during the three months ended September 30, 2006 under the lease program. We capitalized
$402.9 million of set-top receivers leased to new subscribers and $261.0 million of set-top receivers leased to existing subscribers during the nine months ended
September 30, 2006 under the lease program. Depreciation expense on these capitalized receivers was $44.5 million for the three months ended September 30, 2006 and
$67.8 million for the nine months ended September 30, 2006.

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

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

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

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

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

Subscriber Acquisition Costs.These costs include commissions we pay to national retailers, independent satellite television
retailers, dealers, regional bell operating companies and the cost of DIRECTV set-top receivers and other system equipment, installation, advertising, marketing and customer call center
expenses associated with the acquisition of new DIRECTV subscribers. Set-top receivers leased to new subscribers are capitalized in "Property and Equipment, net" in the Consolidated
Balance Sheets and depreciated over their useful lives. The amount of set-top receivers capitalized each period for subscriber acquisition activities is presented in the Consolidated
Statements of Cash Flows under the caption "Cash paid for subscriber leased equipment-subscriber acquisitions."

Upgrade and Retention Costs.The majority of upgrade and retention costs are associated with upgrade efforts for existing
subscribers that we believe will result in higher ARPU and lower churn. Our upgrade efforts include subscriber equipment upgrade programs for DVR, HD receivers and local channels, our multiple
set-top receiver offer and similar initiatives. Retention costs also include the costs of installing and/or 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

18

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

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

Average Monthly Revenue Per Subscriber.We calculate ARPU by dividing average monthly revenues for the period (total revenues
during the period divided by the number of months in the period) by average DIRECTV subscribers for the period. We calculate average DIRECTV subscribers for the period by adding the number of DIRECTV
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 DIRECTV subscribers whose service
is disconnected, expressed as a percentage of the average total number of DIRECTV subscribers. We calculate average monthly subscriber churn by dividing the average monthly number of disconnected
DIRECTV subscribers for the period (total subscribers disconnected during the period divided by the number of months in the period) by average DIRECTV subscribers for the period.

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

SAC.We calculate SAC, which represents total subscriber acquisition costs stated on a per subscriber basis, by dividing
total subscriber acquisition costs for 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 "Cash paid for subscriber leased equipmentsubscriber acquisitions" during the period.

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

We
believe this measure is useful to investors, along with GAAP measures (such as revenues, operating profit and net income), to compare our operating performance to other
communications, entertainment and media service providers. We believe that investors use current and projected

19

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Operating
Profit Before Depreciation and Amortization and similar measures to estimate our current or prospective enterprise value and make investment decisions. This metric provides investors with a
means to compare operating results exclusive of depreciation and amortization expense. We believe this is useful given the significant variation in depreciation and amortization expense that can
result from the timing of capital expenditures, the capitalization of intangible assets, potential variations in expected useful lives when compared to other companies and periodic changes to
estimated useful lives.

RESULTS OF OPERATIONS

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

|                                                          |                                                                                                 | Three Months Ended
September 30,    |                                    |       |         |         |       | Nine Months Ended
September 30, |         |      |        |       |      
|--------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------- | ----- | ------- | ------- | ----- | ------------------------------- | ------- | ---- | ------ | ----- | -----
|
|
|Revenues                                                  |                                                                                                 | $                                   | 3,403.1                            |       | $       | 3,048.4 |       | $                               | 354.7   |      | 11.6   | %     | $    
|Operating Costs and Expenses                              |                                                                                                 |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|                                                          | Costs of revenues, exclusive of depreciation and amortization expense                           |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|                                                          |                                                                                                 | Broadcast programming and other     |                                    |       | 1,416.8 |         |       | 1,240.7                         |         |      | 176.1  |       | 14.2 
|                                                          |                                                                                                 | Subscriber service expenses         |                                    |       | 285.4   |         |       | 240.4                           |         |      | 45.0   |       | 18.7 
|                                                          |                                                                                                 | Broadcast operations expenses       |                                    |       | 44.8    |         |       | 39.4                            |         |      | 5.4    |       | 13.7 
|                                                          | Selling, general and administrative expenses exclusive of depreciation and amortization expense |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|                                                          |                                                                                                 | Subscriber acquisition costs        |                                    |       | 432.0   |         |       | 691.4                           |         |      | (259.4 | )     | (37.5
|                                                          |                                                                                                 | Upgrade and retention costs         |                                    |       | 208.2   |         |       | 291.3                           |         |      | (83.1  | )     | (28.5
|                                                          |                                                                                                 | General and administrative expenses |                                    |       | 192.5   |         |       | 207.4                           |         |      | (14.9  | )     | (7.2 
|                                                          | Depreciation and amortization expense                                                           |                                     |                                    | 226.0 |         |         | 167.2 |                                 |         | 58.8 |        | 35.2  | %    
|                                                          |                                                                                                 |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|                                                          |                                                                                                 |                                     | Total Operating Costs and Expenses |       |         | 2,805.7 |       |                                 | 2,877.8 |      |        | (72.1 | )    
|                                                          |                                                                                                 |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|Operating Profit                                          |                                                                                                 |                                     | 597.4                              |       |         | 170.6   |       |                                 | 426.8   |      | 250.2  | %     |      
|Interest income                                           |                                                                                                 |                                     | 17.8                               |       |         | 8.2     |       |                                 | 9.6     |      | 117.1  | %     |      
|Interest expense                                          |                                                                                                 |                                     | (53.6                              | )     |         | (60.6   | )     |                                 | 7.0     |      | (11.6  | )%    |      
|Other expense                                             |                                                                                                 |                                     | (0.6                               | )     |         | (0.8    | )     |                                 | 0.2     |      | (25.0  | )%    |      
|                                                          |                                                                                                 |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|Income Before Income Taxes                                |                                                                                                 |                                     | 561.0                              |       |         | 117.4   |       |                                 | 443.6   |      | 377.9  | %     |      
|Income tax expense                                        |                                                                                                 |                                     | (214.1                             | )     |         | (45.1   | )     |                                 | (169.0  | )    | 374.7  | %     |      
|                                                          |                                                                                                 |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|Net Income                                                |                                                                                                 | $                                   | 346.9                              |       | $       | 72.3    |       | $                               | 274.6   |      | 379.8  | %     | $    
|                                                          |                                                                                                 |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|Other Data:                                               |                                                                                                 |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|Operating Profit                                          |                                                                                                 | $                                   | 597.4                              |       | $       | 170.6   |       | $                               | 426.8   |      | 250.2  | %     | $    
|Depreciation and amortization expense                     |                                                                                                 |                                     | 226.0                              |       |         | 167.2   |       |                                 | 58.8    |      | 35.2   | %     |      
|                                                          |                                                                                                 |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|Operating Profit Before Depreciation and Amortization     |                                                                                                 | $                                   | 823.4                              |       | $       | 337.8   |       | $                               | 485.6   |      | 143.8  | %     | $    
|                                                          |                                                                                                 |                                     |                                    |       |         |         |       |                                 |         |      |        |       |      
|Average monthly revenue per subscriber (ARPU)             |                                                                                                 | $                                   | 72.74                              |       | $       | 68.65   |       | $                               | 4.09    |      | 6.0    | %     | $    
|Average monthly subscriber churn %                        |                                                                                                 |                                     | 1.80                               | %     |         | 1.89    | %     |                                 |        |      | (4.8   | )%    |      
|Average subscriber acquisition costsper subscriber (SAC) |                                                                                                 | $                                   | 632                                |       | $       | 626     |       | $                               | 6       |      | 1.0    | %     | $    
|Gross subscriber additions (000's)                        |                                                                                                 |                                     | 1,006                              |       |         | 1,104   |       |                                 | (98     | )    | (8.9   | )%    |      
|Net subscriber additions (000's)                          |                                                                                                 |                                     | 165                                |       |         | 263     |       |                                 | (98     | )    | (37.3  | )%    |      
|Total number of subscribers (000's)                       |                                                                                                 |                                     | 15,678                             |       |         | 14,933  |       |                                 | 745     |      | 5.0    | %     |      

20

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Three Months Ended September 30, 2006 Compared with the Three Months Ended September 30, 2005

Subscribers.The decrease in average monthly subscriber churn to 1.80% and the 98,000 decrease in
gross subscriber additions in the third quarter of 2006 are primarily due to more stringent credit policies we implemented beginning in the second quarter of 2005, and changes made to our distribution
network to better align dealers with our objective to improve the overall credit quality of DIRECTV subscribers. Our gross subscriber additions and churn were also negatively affected by increased
competition. The 98,000 reduction in the number of net new subscribers was primarily due to the lower number of gross subscriber additions.

Revenues.The $354.7 million increase in revenues to $3,403.1 million resulted from
higher ARPU and the larger subscriber base. The 6.0% increase in ARPU to $72.74 resulted primarily from programming package price increases, and an increase in the number of subscribers paying
mirroring, lease, DVR and HD programming fees.

Operating Costs and Expenses.Our total operating costs and expenses decreased $72.1 million
to $2,805.7 million in the third quarter of 2006 due mostly to the capitalization of $324.6 million of set-top receivers in 2006 under our new lease program, lower subscriber
acquisition costs resulting from a decrease in gross subscriber additions and lower general and administrative costs. These decreases were partially offset by higher broadcast programming and other
costs, depreciation and amortization expense and subscriber service expenses.

Our
broadcast programming and other costs increased $176.1 million primarily from the increased number of subscribers and annual program supplier rate increases. Subscriber
service expenses increased mostly from the larger subscriber base and an increase in service calls and costs incurred at our call centers to support the increase in the number of subscribers with
advanced products. Broadcast operations expenses increased to support new HD local channel markets and advanced products.

The
$259.4 million decrease in subscriber acquisition costs was due mostly to the capitalization of $203.5 million of set-top receivers under our new lease
program and lower gross subscriber additions in 2006. Including the cost of set-top receivers capitalized under our retention and upgrade programs, upgrade and retention costs incurred
increased by $38.0 million in 2006 due to increased volume under our HD and HD DVR upgrade programs. This increase in upgrade and retention costs incurred was offset by the capitalization of
$121.1 million of leased set-top receivers in 2006, resulting in a net decrease of $83.1 million compared to the same period in the prior year. The $14.9 million
decrease in general and administrative expenses resulted mainly from lower bad debt expense and legal costs in 2006.

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

The
$485.6 million improvement in operating profit before depreciation and amortization was primarily due to the $324.6 million of set-top receivers capitalized
under the lease program, gross profit generated from the higher revenues and reduced subscriber acquisition costs resulting from lower subscriber additions. The increase in operating profit of
$426.8 million was primarily due to higher operating profit before depreciation and amortization, partially offset by higher depreciation and amortization expense in 2006.

Interest Income and Expense.The $9.6 million increase in interest income was due to higher
average cash balances and increased interest rates. The $7.0 million decrease in interest expense was

21

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primarily
due to an increase in capitalized interest related mostly to an increase in capitalized costs for satellites under construction, partially offset by higher average interest rates. We
recorded capitalized interest of $15.3 million for the third quarter of 2006 and $5.5 million for the third quarter of 2005.

Income Tax Expense.The $169.0 million increase in income tax expense was due to our higher
pre-tax income generated in the third quarter of 2006.

Nine Months Ended September 30, 2006 Compared with the Nine Months Ended September 30, 2005

Subscribers.The decrease in average monthly subscriber churn to 1.62% and the 417,000 decrease in
gross subscriber additions during the nine months ended September 30, 2006 are primarily due to more stringent credit policies we implemented beginning in the second quarter of 2005, and
changes made to our distribution network to better align dealers with our objective to improve the overall credit quality of DIRECTV subscribers. Our gross subscriber additions and churn were also
negatively affected by increased competition. The 448,000 reduction in the number of net new subscribers was primarily due to the lower number of gross subscriber additions.

Revenues.The $1,105.2 million increase in revenues to $9,914.9 million resulted from
the larger subscriber base and higher ARPU. The 5.8% increase in ARPU to $71.41 resulted primarily from programming
package price increases, and an increase in the number of subscribers paying mirroring, lease, DVR and HD programming fees.

Operating Costs and Expenses.Our total operating costs and expenses decreased $86.7 million
to $8,180.8 million during the nine months ended September 30, 2006 due mostly to the capitalization of $663.9 million of set-top receivers in 2006 under our new lease
program, lower subscriber acquisition costs resulting from a decrease in gross subscriber additions, and lower general and administrative costs. These decreases were partially offset by higher
broadcast programming and other costs, and higher subscriber service, depreciation and amortization, and broadcast operations expenses.

Our
broadcast programming and other costs increased $534.7 million primarily from the increased number of subscribers and annual program supplier rate increases. Subscriber
service expenses increased mostly from the larger subscriber base and an increase in service calls and costs incurred at our call centers to support the increase in the number of subscribers with
advanced products. Broadcast operations expenses increased to support new HD local channel markets and advanced products.

The
$658.2 million decrease in subscriber acquisition costs was primarily due to the capitalization of $402.9 million of leased set-top receivers and the
decrease in gross subscriber additions. Including the cost of set-top receivers capitalized under our upgrade and retention programs, upgrade and retention costs increased by
$139.4 million in 2006 due mostly to increased volume under our HD and HD DVR upgrade programs. This increase in upgrade and retention costs incurred was offset by the capitalization of
$261.0 million of leased set-top receivers in 2006, resulting in a net decrease of $121.6 million compared to the prior year period. The $56.2 million decrease in
general and administrative expenses resulted mainly from $102.9 million of lower bad debt expense, legal and severance costs, partially offset by an increase in inventory management costs.

The
increase in depreciation and amortization expense resulted mainly from the depreciation of leased set-top receivers capitalized under the new lease program and satellites
launched in 2005, and higher depreciation resulting from an increase in equipment purchased to support our broadcast operations.

The
improvement of operating profit before depreciation and amortization of $1,286.7 million was primarily due to the gross profit generated from the higher revenues, the
capitalization of

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$663.9 million
of set-top receivers under the lease program, fewer gross subscriber additions, and lower general and administrative expenses, partially offset by an increase in
upgrade and retention costs. The increase in operating profit of $1,191.9 million was primarily due to higher operating profit before depreciation and amortization, partially offset by the
increase in depreciation and amortization expense.

Interest Income and Expense.The $36.8 million increase in interest income was due to higher
average cash balances and increased interest rates. The $11.9 million decrease in interest expense was primarily due to an increase in capitalized interest related mostly to an increase in
capitalized costs for satellites under construction, partially offset by higher average interest rates. We recorded capitalized interest of $41.5 million for the nine months ended
September 30, 2006 and $15.0 million for the nine months ended September 30, 2005.

Other Expense.The $64.5 decrease in Other Expense is primarily from a $64.9 million charge
related to our refinancing transaction in the second quarter of 2005 discussed in more detail in Note 6 of the Notes to the Consolidated Financial Statements in Part I, Item 1 of this
Quarterly Report.

Income Tax Expense.The $498.0 million increase in income tax expense was due to our higher
pre-tax income generated in 2006.

LIQUIDITY AND CAPITAL RESOURCES

We generally fund our cash requirements from cash on-hand and cash generated by our operations. However, we have received capital contributions and
have borrowed amounts from our Parent in the past to fund certain transactions. We also have up to $500.0 million of borrowing capacity under our revolving credit facility.

At
September 30, 2006, we had cash and cash equivalents of $1,202.9 million compared to $1,164.8 million at December 31, 2005. The $38.1 million
increase in cash and cash equivalents during 2006 resulted primarily from $1,560.0 million in cash provided by operating activities, partially offset by $1,166.6 million of cash paid for
subscriber leased equipment, satellites, property and equipment, $300 million of cash used to pay a dividend to our Parent, and $55.1 million of cash used to repay debt and other
long-term obligations.

As
a measure of liquidity, our current ratio (ratio of current assets to current liabilities) was 1.16 at September 30, 2006 compared to 1.04 at December 31, 2005. Working
capital increased $285.6 million to $383.0 million at September 30, 2006 from $97.4 million at December 31, 2005. The change was primarily due to an increase in cash
and cash equivalents, accounts receivable and prepaid expenses and a decrease in accounts payable and accrued liabilities, partially offset by a decrease in inventories, deferred income taxes and an
increase in deferred revenues.

We
believe that our cash on-hand, future cash flows and amounts available to us under the revolving portion of our senior secured credit facility will be sufficient to fund
our operations and commitments for the foreseeable future. However, several factors may affect our ability to fund our operations and commitments. Our future cash flows may be reduced if we
experience, among other things, significantly higher subscriber additions than planned, increased subscriber churn or upgrade and retention costs, higher than planned capital expenditures for
satellites and broadcast equipment, satellite anomalies or signal theft or if we are required to make a prepayment under our senior secured credit facility. Additionally, our ability to borrow under
the senior secured credit facility is contingent upon our meeting financial and other covenants associated with our debt.

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We
may incur additional borrowing in the future to provide additional dividends to our Parent to fund potential significant strategic wireless broadband investment opportunities should
they arise or to fund its share repurchase program if the amount of authorized purchases significantly increases.

Update to Executive Outlook

In our 2005 Form 10-K, we reported that we expected cash flow, defined as net cash provided by operating activities less net cash used in
investing activities, to be significantly lower in 2006 compared to 2005. Cash flows for the nine months ended September 30, 2006 exceeded cash flows for the nine months ended
September 30, 2005. We now expect cash flows for the year ending December 31, 2006 to be higher than in 2005.

Notes Payable and Credit Facilities

At September 30, 2006, we had $3,407.9 million in total outstanding borrowings, bearing a weighted average interest rate of 7.0%. Our outstanding
borrowings consist of notes payable and amounts borrowed under a senior secured credit facility as more fully described in Note 6 of the Notes to the Consolidated Financial Statements in Item
1, Part I of this Quarterly Report and in the Notes to the Consolidated Financial Statements in Item 8, Part II of our Form 10-K.

Our
notes payable and senior secured credit facility mature as follows: $2.5 million in the remainder of 2006; $10.1 million in 2007; $47.6 million in 2008;
$97.6 million in 2009; $297.5 million in 2010; and $2,949.7 million thereafter. These amounts do not reflect potential prepayments that may be required under our senior secured
credit facility, which could result from a computation that we may be required to make at each year end under the credit agreement. We were not required to make a
prepayment for the year ended December 31, 2005 and we do not currently expect to be required to make a prepayment for the year ending December 31, 2006.

COMMITMENTS AND CONTINGENCIES

For a discussion of "Commitments and Contingencies," see Part I, Item 1, Note 7 of the Notes to the Consolidated Financial Statements, which we
incorporate herein by reference.

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

For a discussion of "Certain Relationships and Related-Party Transactions," see Part I, Item 1, Note 8 of the Notes to the Consolidated Financial
Statements, which we incorporate herein by reference.

ACCOUNTING CHANGES

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

SECURITY RATINGS

On April 4, 2005, Moody's Investors Service, or Moody's, assigned a Ba1 rating to our senior secured credit facility. In addition, Moody's affirmed our Ba2
Corporate Family Rating and Ba2 senior unsecured ratings. On September 22, 2006, Moody's changed our senior secured rating from Ba1 to Baa3 and our unsecured rating from Ba2 to Ba3 in
connection with the implementation of its new rating methodology. The Corporate Family Rating was unchanged and all ratings remain on stable outlook.

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On
April 5, 2005, Standard and Poor's Ratings Services assigned a BB rating to our new senior secured credit facility and affirmed our BB corporate and BB- senior
unsecured ratings. All ratings remain on stable outlook.

ITEM 4.    CONTROLS AND PROCEDURES

We carried out an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q under the supervision and with the
participation of management, including our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on the evaluation, our principal executive officer and
our principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2006.

There
has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during our fiscal quarter ended September 30, 2006, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART IIOTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

Material pending legal proceedings, other than ordinary routine litigation incidental to the business, or changes thereto, to which we became or were a party
during the quarter ended September 30, 2006 or subsequent thereto, but before the filing of this report, are summarized in Part I, Item 1, Note 7 of the Notes to the Consolidated
Financial Statements of the Quarterly Report under "Litigation" which we incorporate by reference.

Intellectual Property Litigation.We are a defendant in several unrelated lawsuits claiming
infringement of various patents relating to various aspects of our businesses. In certain of these cases other industry participants are also defendants, and also in certain of these cases we expect
that any potential liability
would be the responsibility of our equipment vendors pursuant to applicable contractual indemnification provisions. To the extent that the allegations in these lawsuits can be analyzed by us at this
stage of their proceedings, we believe the claims are without merit and intend to defend the actions vigorously. The final disposition of these claims is not expected to have a material adverse effect
on our consolidated financial position, but could possibly be material to our consolidated results of operations of any one period. Further, no assurance can be given that any adverse outcome would
not be material to our consolidated financial position.

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.

ITEM 1A.    RISK FACTORS

The risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005 have not materially changed.

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DIRECTV HOLDINGS LLC

ITEM 6.    EXHIBITS

|Exhibit
Number |  | Exhibit Name                                                                                                                                                                                  
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1**         |  | Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ("Section 302").                                               
|31.2**         |  | Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 302.                                                                                                 
|31.3**         |  | Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.                                                                                          
|31.4**         |  | Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 302.                                                                                          
|32.1**         |  | Certification of the Chief Executive Officer of DIRECTV Holdings LLC pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906").
|32.2**         |  | Certification of the Chief Financial Officer of DIRECTV Holdings LLC pursuant to Section 906.                                                                                                 
|32.3**         |  | Certification of the Chief Executive Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.                                                                                          
|32.4**         |  | Certification of the Chief Financial Officer of DIRECTV Financing Co., Inc. pursuant to Section 906.                                                                                          

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A
copy of any of the exhibits included in this Quarterly Report on Form 10-Q, upon payment of a fee to cover the reasonable expenses of furnishing such exhibits, may
be obtained by sending a written request to us at the address set forth on the front cover of this Form 10-Q, attention General Counsel.

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DIRECTV HOLDINGS LLC

SIGNATURE

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

|                       |  | DIRECTV HOLDINGS LLC
(Registrant)       
|---------------------- |  | ----------------------------------------
|Date: November 8, 2006 |  | By:                                     
|                       |  | DIRECTV FINANCING CO., INC.
(Registrant)
|Date: November 8, 2006 |  | By:                                     

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