The DIRECTV Group Announces Second Quarter 2005 Results

-- DIRECTV U.S. Revenues Increase 34% to $3.0 Billion

-- DIRECTV U.S. Operating Profit before Depreciation and Amortization Nearly Triples to $505 Million, More than Doubling Margin to 17%

The DIRECTV Group, Inc. (NYSE:DTV) today reported second quarternet income of $162 million, compared with a net loss of $13 millionlast year, and operating profit of $312 million, compared with anoperating loss of $28 million in the same period of 2004. In addition,revenues increased 21% to $3.19 billion, and operating profit beforedepreciation and amortization(1) of $523 million more than tripledcompared to last year's second quarter.

"Our second quarter results are indicative of the substantialprofit and cash-generating potential of DIRECTV U.S.," said ChaseCarey, president and CEO. "The 34% increase in revenues to $3.0billion and the nearly tripling of operating profit beforedepreciation and amortization to over $500 million at DIRECTV U.S. area reflection of our profitable growth strategy to drive strongsubscriber and ARPU growth while also increasing margins throughimproved cost management, particularly in key areas such as subscriberacquisition and upgrade/retention marketing."

Carey continued: "With 964,000 gross subscriber additions in thequarter, demand for DIRECTV continues to be strong. Importantly, withthe stricter credit screening policy that we implemented at thebeginning of the second quarter, we are now attaining subscribers withimproved credit profiles. However, DIRECTV's net subscriber additionsof 225,000 were lower due to a disappointing average monthly churnrate in the quarter of 1.69% primarily resulting from an increase ininvoluntary churn of high-risk customers attained over the lastseveral quarters. With our new credit policy and other recent actionstaken to improve the credit worthiness of new subscribers, we believewe will drive churn lower beginning in the fourth quarter of thisyear."

Carey concluded: "Looking ahead over the next few months, we areexcited about several important initiatives that we believe willextend DIRECTV's leadership in the video marketplace, including a moreexciting NFL SUNDAY TICKET(TM) package, the introduction of our moreadvanced digital video recorder and the roll-out of several marketswith high-definition local television."

Second Quarter Review

THE DIRECTV GROUP'S OPERATIONAL REVIEW

In the second quarter of 2005, The DIRECTV Group's revenues of$3.19 billion increased 21%, compared to the second quarter of 2004,driven principally by strong DIRECTV U.S. subscriber growth, theconsolidation of the full economics of the former National RuralTelecommunications Cooperative (NRTC) and Pegasus Satellite Television(Pegasus) subscribers acquired in the third quarter of 2004, andstrong average monthly revenue per subscriber (ARPU) growth at DIRECTVU.S. These changes were partially offset by lower revenues at HughesNetwork Systems (HNS) due to the sale of certain HNS business units.
Three Months Six Months
The DIRECTV Group Ended June 30, Ended June 30,
----------------- -----------------
2005 2004 2005 2004
------------------------------ ------- ------- ------- -------
Revenues ($M) $3,188 $2,643 $6,336 $5,136
------------------------------ ------- ------- ------- -------
Operating Profit Before
Depreciation and Amortization
($M) 523 143 681 233
------------------------------ ------- ------- ------- -------
Operating Profit (Loss) ($M) 312 (28) 257 (125)
------------------------------ ------- ------- ------- -------
Net Income (Loss) ($M) 162 (13) 120 (652)
------------------------------ ------- ------- ------- -------
Net Income (Loss) Per Common
Share ($) 0.12 (0.01) 0.09 (0.47)
------------------------------ ------- ------- ------- -------

The significant increase in operating profit before depreciationand amortization to $523 million was primarily due to theaforementioned increased revenues combined with higher DIRECTV U.S.operating margin, resulting primarily from the stabilizing of costs inkey areas such as subscriber acquisition and upgrade and retentionmarketing, as well as a $28 million gain recorded for the sale of theDIRECTV Latin America subscribers in Mexico. Also impacting thecomparison were charges in the 2004 period for $60 million related tostock-based compensation expense, severance and employee retentionplans. Operating profit of $312 million improved due to the higheroperating profit before depreciation and amortization, partiallyoffset by higher amortization expense at DIRECTV U.S., resulting fromintangible assets recorded as part of the NRTC and Pegasustransactions.

Net income of $162 million in the second quarter of 2005 improveddue to the increased operating profit discussed above and a $31million tax credit (recorded in "Income (loss) from discontinuedoperations, net of taxes" in the Consolidated Statements ofOperations) related to the favorable settlement of a U.S. federalincome tax dispute associated with a previously divested business.These improvements were partially offset by a second quarter 2005charge of $65 million related to the premium paid for the redemptionof senior notes and the write-off of a portion of deferred debtissuance costs resulting from the recent debt refinancing (recorded in"Other, net" in the Consolidated Statements of Operations), as well ashigher income tax expense associated with the higher pre-tax income inthe most recent period.

Year-To-Date Review

In the first half of 2005, The DIRECTV Group's revenues of $6.34billion increased 23%, compared to the same period of 2004, drivenprincipally by strong DIRECTV U.S. subscriber growth, theconsolidation of the full economics of the former NRTC and Pegasussubscribers, and strong ARPU growth at DIRECTV U.S. These changes werepartially offset by lower revenues at HNS due to the sale of certainHNS business units.

The nearly three-fold increase in operating profit beforedepreciation and amortization to $681 million in the first six monthsof 2005 was primarily due to the increased DIRECTV U.S. revenuesdiscussed above combined with higher operating margins, resultingprimarily from the stabilizing of costs in key areas such assubscriber acquisition and upgrade and retention marketing. Alsoimpacting the comparison were charges in the 2004 period of $120million related to severance, stock-based compensation expense andemployee retention plans. The improved operating profit of $257million was due to the higher operating profit before depreciation andamortization, partially offset by higher amortization expense atDIRECTV U.S. resulting from intangible assets recorded as part of theNRTC and Pegasus transactions.

First half 2005 net income of $120 million was improved due to thehigher operating profit discussed above, lower 2005 income tax expenseprimarily due to a decrease in pre-tax income, and two non-cashafter-tax charges included in the 2004 results: $499 million primarilyrelated to the sale of PanAmSat (reflected in "Income (loss) fromdiscontinued operations, net of taxes") and $311 million resultingfrom a change in The DIRECTV Group's method of accounting forsubscriber acquisition, upgrade and retention costs (reflected in"Cumulative effect of accounting change, net of taxes" in theConsolidated Statements of Operations). These changes were partiallyoffset by a first quarter 2004 pre-tax gain of $387 million related tothe sale of approximately 19 million shares of XM Satellite Radio(recorded in "Other, net" in the Consolidated Statements ofOperations), higher net interest expense in 2005 primarily related tohigher average debt balances and a reduction in the amount ofcapitalized interest, a second quarter 2005 charge of $65 millionrelated to the premium paid for the redemption of senior notes, andthe write-off of a portion of deferred debt issuance costs from therecent debt refinancing, as well as a $43 million pre-tax gain thatprimarily resulted from the restructuring of certain contracts inconnection with the February 2004 completion of DIRECTV Latin AmericaLLC bankruptcy proceedings.

SEGMENT FINANCIAL REVIEW

DIRECTV U.S. Segment

Beginning in the fourth quarter of 2004, DIRECTV U.S. reports itscurrent and prior period subscribers and churn on a total platformbasis and no longer separately reports subscribers and churn for theformer NRTC and Pegasus territories. These changes resulted fromDIRECTV U.S.' purchase of 1.4 million Pegasus and NRTC membersubscribers and certain related assets completed in the third quarterof 2004.
Three Months Six Months
DIRECTV U.S. Ended June 30, Ended June 30,
----------------- -----------------
2005 2004 2005 2004
------------------------------ ------- ------- ------- -------
Revenue ($M) $2,961 $2,217 $5,761 $4,298
------------------------------ ------- ------- ------- -------
Average Monthly Revenue per
Subscriber (ARPU) ($) 67.79 65.01 66.91 64.31
------------------------------ ------- ------- ------- -------
Operating Profit Before
Depreciation and Amortization
($M) 505 175 720 320
------------------------------ ------- ------- ------- -------
Operating Profit ($M) 333 63 372 85
------------------------------ ------- ------- ------- -------
Free Cash Flow(1) ($M) 127 93(2) 151 (74)(2)
------------------------------ ------- ------- ------- -------
Subscriber Data(3):
------------------------------ ------- ------- ------- -------
Gross Platform Subscriber
Additions (000's) 964 984 2,101 1,934
------------------------------ ------- ------- ------- -------
Average Monthly Platform
Subscriber Churn 1.69% 1.49% 1.59% 1.46%
------------------------------ ------- ------- ------- -------
Net Platform Subscriber
Additions (000's) 225 409 730 828
------------------------------ ------- ------- ------- -------
Cumulative Subscribers
(000's) 14,670 13,040 14,670 13,040
------------------------------ ------- ------- ------- -------

(1) See footnote 2 in the FOOTNOTES section of this release for the
definition of free cash flow.
(2) Includes $200 million of cash received for a set-top receiver
supply and development agreement with Thomson.
(3) The amounts presented for 2004 and 2005 include the results
from the former NRTC and Pegasus territories.

DIRECTV U.S. gross subscriber additions of 964,000 were slightlylower than the same period a year ago primarily due to more stringentcredit policies implemented at the beginning of the quarter. Averagemonthly churn in the quarter increased to 1.69% primarily due tohigher involuntary churn from customers with lower credit scores duein part to the significant increase in gross subscriber additions overthe past several quarters, and a more competitive marketplace. Afteraccounting for this churn, DIRECTV U.S. added 225,000 net subscribersin the quarter. Over the past twelve months, the cumulative number ofDIRECTV subscribers increased 13% to 14.67 million.

DIRECTV U.S. generated quarterly revenues of $2.96 billion, anincrease of 34% compared to last year's second quarter revenues. Theincrease was primarily due to continued strong subscriber growth, theconsolidation of the full economics of the former NRTC and Pegasussubscribers, and higher ARPU. ARPU increased over 4% to $67.79 fromthe same period last year principally due to programming package priceincreases, higher mirroring fees from an increase in the averagenumber of set-top receivers per customer and an increase in thepercentage of subscribers purchasing local channels. These ARPUimprovements were partially offset by the impact from theconsolidation of the former NRTC and Pegasus subscribers, primarilydue to the lower ARPU received from these subscribers.

Operating profit before depreciation and amortization nearlytripled to $505 million and operating profit increased by a factor offive to $333 million compared to last year's second quarter due to theincrease in DIRECTV U.S. revenues combined with higher operatingmargins primarily resulting from the stabilizing of costs in key areassuch as subscriber acquisition and upgrade and retention marketing.Operating profit was negatively impacted by higher amortizationexpense resulting from intangible assets recorded as part of the NRTCand Pegasus transactions.

DIRECTV Latin America Segment

On October 11, 2004, The DIRECTV Group announced a series oftransactions with News Corporation, Grupo Televisa, Globo and LibertyMedia that are designed to strengthen the operating and financialperformance of DIRECTV Latin America by consolidating theDirect-To-Home (DTH) platforms of DIRECTV Latin America and Sky into asingle platform in each of the major territories served in the region.In aggregate, The DIRECTV Group is paying approximately $580 millionin cash for the News Corporation and Liberty Media equity stakes inthe Sky platforms, of which approximately $398 million was paid inOctober 2004, with the remaining amount expected to be paid in 2006.

In Mexico, DIRECTV Latin America's local operating company is inthe process of closing its operations and migrating its subscribers toSky Mexico. Since the transactions were announced, 141,000 subscribershave been migrated to Sky Mexico, including 38,000 in the secondquarter. As of June 30, 2005, DIRECTV Latin America's affiliate inMexico had essentially completed the subscriber migration process. Inthe second quarter, DIRECTV Latin America booked a non-cash gain of$28 million related to the successful migration and retention of aportion of the Mexico subscribers and expects to book gains of up to$40 million in the second half of 2005 as additional migratedsubscribers meet the retention requirements of the agreement. At theclose of the transaction -- which is expected to occur in early 2006-- an additional non-cash gain of up to $63 million is expected to berecognized.

In Brazil, DIRECTV Brasil and Sky Brasil have agreed to merge,with DIRECTV Brasil customers migrating to the Sky Brasil platform.The transactions in Brazil are subject to local regulatory approval,which has not yet been granted. In the rest of the region, The DIRECTVGroup effectively acquired Sky's DTH satellite platforms in Colombiaand Chile, resulting in the addition of approximately 89,000subscribers in 2004. DIRECTV Latin America is in the process ofmigrating Sky Chile subscribers to the DIRECTV Latin America platform.In Colombia, the transaction is subject to regulatory approval, whichis in the process of being finalized.
Three Months Six Months
DIRECTV Latin America Ended June 30, Ended June 30,
--------------- ---------------
Dollars in Millions 2005 2004 2005 2004
---------------------------------- ------ ------ ------ ------
Revenue $184 $167 $367 $330
---------------------------------- ------ ------ ------ ------
Operating Profit Before
Depreciation and Amortization(1) 45 30 68 46
---------------------------------- ------ ------ ------ ------
Operating Profit (Loss)(1) 4 (16) (10) (47)
---------------------------------- ------ ------ ------ ------
Net Subscriber Additions(2)
(000's) 45 24 74 41
---------------------------------- ------ ------ ------ ------
Cumulative Subscribers(3) (000's) 1,519 1,538 1,519 1,538
---------------------------------- ------ ------ ------ ------

(1) 2005 results include a $28 million gain related to the successful
migration of a portion of DIRECTV Latin America subscribers in
Mexico to Sky Mexico.
(2) Excludes Mexico.
(3) Includes Mexico; however, as of June 30, 2005, there were no
remaining DIRECTV Latin America subscribers in Mexico.

In the second quarter of 2005, excluding Mexico, DIRECTV LatinAmerica added 45,000 net subscribers. Revenues for DIRECTV LatinAmerica increased 10% to $184 million in the quarter mostly due to alarger subscriber base in Argentina, Venezuela, Brazil and PuertoRico, as well as the consolidation of Sky Chile and Sky Colombia,partially offset by lower revenues due to the ongoing shut-down ofDIRECTV Latin America's operations in Mexico. The increase in secondquarter 2005 operating profit before depreciation and amortization to$45 million and operating profit to $4 million was primarilyattributable to the aforementioned $28 million non-cash gain recordedfor the sale of DIRECTV Latin America's subscribers in Mexico, as wellas the operating profits associated with the increased revenuesdiscussed above. These improvements were partially offset by theeffects of the shutdown process in Mexico. The operating profit alsoreflects reduced depreciation principally due to a fourth quarter 2004write-down of assets in Mexico.
Network Systems Segment

Three Months Six Months
HNS Ended Ended
June 30, June 30,
------------- -------------
Dollars in Millions 2005 2004 2005 2004
-------------------------------------- ----- ----- ----- -----
Revenue $45 $364 $211 $681
-------------------------------------- ----- ----- ----- -----
Operating Loss Before Depreciation and
Amortization (8) (21) (61) (18)
-------------------------------------- ----- ----- ----- -----
Operating Loss (8) (37) (61) (52)
-------------------------------------- ----- ----- ----- -----

On April 22, 2005, The DIRECTV Group completed the sale of a 50%interest in HNS LLC, an entity that owns substantially all of theremaining assets of HNS, to SkyTerra Communications, Inc., anaffiliate of Apollo Management, L.P., which is a New York-basedprivate equity firm. At the close of the transaction, The DIRECTVGroup received $246 million in cash and 300,000 shares of SkyTerracommon stock valued at about $11 million. As of the date of the sale,The DIRECTV Group no longer consolidates the results of HNS andaccounts for 50% of HNS' net income or loss as part of "Other, net" inthe Consolidated Statements of Operations. However, as previouslydisclosed, The DIRECTV Group expects to take pension-related chargesof up to $14 million in the second half of 2005.

Second quarter 2005 revenue declined to $45 million principallydue to the sale of HNS discussed above. The change in operating lossbefore depreciation and amortization and operating loss were mostlydue to charges in 2004 totaling $19 million related to severance costsassociated with the June 2004 sale of HNS' set-top box business toThomson and an inventory write-down.
CONSOLIDATED BALANCE SHEET AND CASH FLOW

The DIRECTV Group June 30, December 31,
2005 2004
----------------------------------------------------------------------
Cash, Cash Equivalents & Short-Term
Investments ($B) $4.05 $2.83
----------------------------------------------------------------------
Total Debt ($B) 3.42 2.43
----------------------------------------------------------------------
Net Debt (Cash) ($B) (0.63) (0.40)
----------------------------------------------------------------------
Free Cash Flow(1) ($M) (103) (795)
----------------------------------------------------------------------

(1) See footnote 2 in the FOOTNOTES section of this release for the
definition of free cash flow.

The DIRECTV Group's consolidated cash and short-term investmentbalance increased by $1.22 billion to $4.05 billion and total debtincreased by $988 million to $3.42 billion, compared to the December31, 2004, balances due primarily to the recent debt refinancingsdiscussed below. Also impacting the change in the cash balance was theproceeds from the sale of businesses and investments.

In April 2005, DIRECTV U.S. entered into a new senior securedcredit facility. The new facility consists of a $1.5 billioneight-year Term Loan B (subsequently reduced to $1.0 billion, asdescribed below), and a $500 million six-year Term Loan A (both ofwhich are fully funded), as well as a $500 million undrawn six-yearrevolving credit facility. The interest rate on each of the term loansis currently LIBOR plus 1.50% per annum. The proceeds of the termloans were used to repay an existing $1.0 billion senior secured loanand pay related financing costs, with the remaining proceeds to beused for general corporate purposes.

In addition, DIRECTV U.S. redeemed $490 million, plus interest anda redemption premium, of its 8 3/8% senior notes in May 2005. In June,DIRECTV U.S. raised an additional $1 billion in 6 3/8% senior notes,of which $500 million of the proceeds was used to pay down the newTerm Loan B discussed above and $500 million remains available forgeneral corporate purposes.

CONFERENCE CALL INFORMATION

A live webcast of The DIRECTV Group's second quarter 2005 earningscall will be available on the company's website at www.directv.com.The call will begin at 11:00 a.m. ET, today, August 4, 2005. Thedial-in number for the call is 913-312-1295. The webcast will bearchived on our website and a replay of the call will be available(dial-in number: 719-457-0820, code: 4219125) beginning at 3:30 p.m.ET today through 11:59 p.m. ET Monday, August 8, 2005.
FOOTNOTES

(1) Operating profit (loss) 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, should be used in conjunction with other GAAP
financial measures and is not presented as an alternative measure
of operating results, as determined in accordance with accounting
principles generally accepted in the United States of America.
Please see each of The DIRECTV Group's and DIRECTV Holdings LLC's
Annual Reports on Form 10-K for the year ended December 31, 2004,
for further discussion of operating profit (loss) before
depreciation and amortization. Operating profit before
depreciation and amortization margin is calculated by dividing
operating profit before depreciation and amortization by total
revenues.

(2) Free cash flow, which is a financial measure that is not
determined in accordance with GAAP, is calculated by deducting
amounts under the captions "Expenditures for property and
equipment" and "Expenditures for satellites" from "Net cash
provided by (used in) operating activities" from the Consolidated
Statements of Cash Flows. This financial measure should be used in
conjunction with other GAAP financial measures and is not
presented as an alternative measure of cash flows from operating
activities, as determined in accordance with GAAP. The DIRECTV
Group and DIRECTV U.S. management use free cash flow to evaluate
the cash generated by DIRECTV U.S.' current subscriber base, net
of capital expenditures, for the purpose of allocating resources
to activities such as adding new subscribers, retaining and
upgrading existing subscribers, and for additional capital
expenditures. The DIRECTV Group and DIRECTV U.S. believe this
measure is useful to investors, along with other GAAP measures
(such as cash flows from operating and investing activities), to
compare DIRECTV U.S.' operating performance to other
communications, entertainment, and media companies. We believe
that investors also use current and projected free cash flow to
determine the ability of our current and projected subscriber base
to fund required and discretionary spending and to help determine
the financial value of the company.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

NOTE: This release may include or incorporate by reference certainstatements that we believe are, or may be considered to be,"forward-looking statements" within the meaning of various provisionsof the Securities Act of 1933 and of the Securities Exchange Act of1934. These forward-looking statements generally can be identified byuse of statements that include phrases such as "believe," "expect,""estimate," "anticipate," "intend," "plan," "foresee," "project," orother similar words or phrases. Similarly, statements that describeour objectives, plans or goals also are forward-looking statements.All of these forward-looking statements are subject to certain risksand uncertainties that could cause actual results to differ materiallyfrom historical results or from those expressed or implied by therelevant forward-looking statement. Such risks and uncertaintiesinclude, but are not limited to: economic conditions; product demandand market acceptance; ability to simplify aspects of our businessmodel; improve customer service; create new and desirable programmingcontent and interactive features; achieve anticipated economies ofscale; government action; local political or economic developments inor affecting countries where we have operations, including political,economic and social uncertainties in many Latin American countries inwhich DTVLA operates; foreign currency exchange rates; competition;the outcome of legal proceedings; ability to achieve cost reductions;ability to renew programming contracts under favorable terms;technological risk; limitations on access to distribution channels;the success and timeliness of satellite launches; in-orbit performanceof satellites, including technical anomalies; loss of uninsuredsatellites; theft of satellite programming signals; and our ability toaccess capital to maintain our financial flexibility. We urge you toconsider these factors carefully in evaluating the forward-lookingstatements.
NON-GAAP FINANCIAL RECONCILIATION SCHEDULES
(Numbers may not add due to rounding)

The following table reconciles Operating Profit Before Depreciation
and Amortization to Operating Profit (Loss).(a)

Three Months Six Months
Dollars in Millions Ended Ended
June 30, June 30,
------------------------------------- ------------- --------------
2005 2004 2005 2004
------------------------------------- ----- ----- ----- ------
The DIRECTV Group
Operating Profit (Loss) $312 $(28) $257 $(125)
Plus: Depreciation & Amortization
(D&A) 211 172 423 357
----- ----- ----- ------
Operating Profit Before D&A $523 $143 $681 $233
------------------------------------- ===== ===== ===== ======

(a) For a reconciliation of this non-GAAP financial measure for each
of our segments, please see the Notes to the Consolidated
Financial Statements which will be included in The DIRECTV Group's
quarterly report on Form 10-Q for the quarter ended June 30, 2005,
which is expected to be filed with the SEC in August 2005.
Additional DIRECTV U.S. non-GAAP financial reconciliation
schedules are included with the DIRECTV Holdings LLC's stand-alone
financial statements included in this earnings release.


The following tables reconcile Free Cash Flow to "Net Cash Provided by
Operating Activities."

Dollars in Millions Six Months Twelve Months
Ended June 30, Ended December 31,
2005 2004
----------------------------------------------------------------------
The DIRECTV Group
Free Cash Flow (103) $(795)
Plus: Expenditures for property 206 476
Plus: Expenditures for satellites 228 547
-----------------------------------
Net Cash Provided by Operating
Activities 330 $229
-----------------------------------===================================


Dollars in Millions Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------- -----------------
2005 2004 2005 2004
---------------------- ----- ----- ----- -----
DIRECTV U.S.
Free Cash Flow $127 $93 $151 $(74)
Plus: Expenditures
for property &
equipment 103 55 148 107
Plus: Expenditures
for satellites 95 101 196 173
----- ----- ----- -----
Net Cash Provided by
Operating Activities $324 $248 $495 $206
---------------------- ===== ===== ===== =====

DIRECTV is the nation's leading and fastest-growing digitalmultichannel television service provider, with approximately 14.7million customers. DIRECTV and the Cyclone Design logo are registeredtrademarks of DIRECTV Inc. DIRECTV is a world-leading provider ofdigital multichannel television entertainment. DIRECTV (NYSE:DTV) isapproximately 34 percent owned by News Corporation. For moreinformation visit www.directv.com
THE DIRECTV GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
------------------- -------------------

Revenues $3,187.9 $2,642.8 $6,335.8 $5,136.0
----------------------------------------------------------------------

Operating Costs and Expenses,
exclusive of depreciation and
amortization expense shown
separately below
Broadcast programming and
other costs of sale 1,238.9 1,131.2 2,583.8 2,245.3
Subscriber service expenses 230.9 179.2 463.0 335.2
Subscriber acquisition costs:
Third-party customer
acquisitions 482.7 459.5 1,081.7 910.5
Direct customer acquisitions 161.4 163.1 323.6 315.8
Upgrade and retention costs 226.5 230.3 481.0 406.9
Broadcast operations expenses 63.2 50.5 125.4 95.8
General and administrative
expenses 285.5 285.8 599.8 593.9
(Gain) loss from asset sales
and impairment charges, net (23.9) - (3.0) -
Depreciation and amortization
expense 211.1 171.5 423.1 357.1
----------------------------------------------------------------------
Total Operating Costs and
Expenses 2,876.3 2,671.1 6,078.4 5,260.5
----------------------------------------------------------------------

Operating Profit (Loss) 311.6 (28.3) 257.4 (124.5)

Interest income 31.0 4.7 53.1 10.4
Interest expense (60.2) (20.6) (115.5) (43.9)
Reorganization (expense)
income - (1.8) - 43.4
Other, net (71.9) 5.3 (73.6) 396.9
----------------------------------------------------------------------

Income (Loss) From Continuing Operations
Before Income Taxes, Minority
Interests and Cumulative
Effect of Accounting
Change 210.5 (40.7) 121.4 282.3

Income tax (expense) benefit (75.6) 20.1 (31.9) (127.0)
Minority interests in net
(earnings) losses of
subsidiaries (4.7) 3.0 (0.7) 2.3
----------------------------------------------------------------------

Income (loss) from continuing
operations before cumulative
effect of accounting change 130.2 (17.6) 88.8 157.6
Income (loss) from
discontinued operations, net
of taxes 31.3 4.3 31.3 (499.2)
----------------------------------------------------------------------

Income (loss) before
cumulative effect of
accounting change 161.5 (13.3) 120.1 (341.6)
Cumulative effect of
accounting change, net of
taxes - - - (310.5)
----------------------------------------------------------------------

Net Income (Loss) $161.5 $(13.3) $120.1 $(652.1)
======================================================================


Basic and Diluted Earnings
(Loss) Per Common Share:
Income (loss) from continuing
operations before cumulative
effect of accounting change $0.10 $(0.01) $0.07 $0.11
Income (loss) from
discontinued operations, net
of taxes 0.02 - 0.02 (0.36)
Cumulative effect of
accounting change, net of
taxes - - - (0.22)
----------------------------------------------------------------------
Net Income (Loss) $0.12 $(0.01) $0.09 $(0.47)
======================================================================

Weighted average number of common shares
outstanding (in millions)
Basic 1,387.6 1,384.6 1,386.8 1,384.3
Diluted 1,393.5 1,384.6 1,392.8 1,391.0
======================================================================


THE DIRECTV GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)

June 30, December 31,
ASSETS 2005 2004
-------------------------------------- ---------------- --------------
Current Assets
Cash and cash equivalents $3,675.2 $2,307.4
Short-term investments 379.0 522.6
Accounts and notes receivable, net of
allowances of $133.7 and $121.7 856.4 918.6
Inventories 296.1 124.4
Prepaid expenses and other 372.6 377.0
Assets of business held for sale - 521.1
-------------------------------------- ---------------- --------------

Total Current Assets 5,579.3 4,771.1
Satellites, net 1,729.8 1,560.4
Property, net 1,115.2 1,135.1
Goodwill, net 3,045.3 3,044.1
Intangible Assets, net 2,051.8 2,227.1
Investments and Other Assets 1,595.6 1,586.6
-------------------------------------- ---------------- --------------

Total Assets $15,117.0 $14,324.4
====================================== ================ ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------- ---------------- --------------
Current Liabilities
Accounts payable $1,312.7 $1,290.9
Unearned subscriber revenue and
deferred credits 242.6 261.5
Short-term borrowings and current
portion of long-term debt 5.7 19.8
Accrued liabilities and other 881.0 881.7
Liabilities of business held for sale - 240.6
-------------------------------------- ---------------- --------------

Total Current Liabilities 2,442.0 2,694.5
Long-Term Debt 3,411.7 2,409.5
Other Liabilities and Deferred Credits 1,551.7 1,665.4
Commitments and Contingencies
Minority Interests 48.0 47.9
Stockholders' Equity 7,663.6 7,507.1
-------------------------------------- ---------------- --------------

Total Liabilities and Stockholders'
Equity $15,117.0 $14,324.4
====================================== ================ ==============


THE DIRECTV GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)

Six Months Ended June 30,
-------------------------------
2005 2004
----------------------------------------------------------------------
Cash Flows from Operating Activities
Income from continuing operations
before cumulative effect of
accounting change $88.8 $157.6
Adjustments to reconcile income from
continuing operations before
cumulative effect of accounting change
to net cash provided by
(used in) operating activities
Depreciation and amortization 423.1 357.1
Gain from asset sales and impairment
charges, net (3.0) -
Equity losses from unconsolidated
affiliates 8.4 -
Net (gain) loss from sale of
investments 0.6 (396.5)
Loss on disposal of assets 4.3 15.0
Stock-based compensation expense 20.4 42.2
Write-off of debt issuance costs 19.0 -
Deferred income taxes and other 46.7 41.2
Change in other operating assets and
liabilities
Accounts and notes receivable 47.3 13.0
Inventories (171.7) (74.8)
Prepaid expenses and other (3.6) 2.2
Accounts payable 14.3 (392.0)
Accrued liabilities (29.2) 7.4
Unearned subscriber revenue and
deferred credits (18.9) 41.3
Other (116.1) 110.7
----------------------------------------------------------------------
Net Cash Provided by (Used in)
Operating Activities 330.4 (75.6)
----------------------------------------------------------------------
Cash Flows from Investing Activities
Purchase of short-term and other
investments (1,783.5) (1,809.2)
Sale of short-term investments 1,931.6 1,775.0
Expenditures for property (205.7) (204.5)
Expenditures for satellites (227.5) (232.9)
Proceeds from sale of investments 113.1 510.5
Proceeds from sale of businesses 246.0 279.4
Other (0.3) 4.2
----------------------------------------------------------------------
Net Cash Provided by Investing
Activities 73.7 322.5
----------------------------------------------------------------------
Cash Flows from Financing Activities
Net (decrease) increase in short-term
borrowings (3.2) 2.7
Long-term debt borrowings 3,003.3 0.6
Repayment of long-term debt (2,002.4) (214.1)
Debt issuance costs (4.7) (1.9)
Repayment of long-term obligations (44.6) -
Stock options exercised 15.3 13.6
----------------------------------------------------------------------
Net Cash Provided by (Used in)
Financing Activities 963.7 (199.1)
----------------------------------------------------------------------
Net increase in cash and cash
equivalents 1,367.8 47.8
Cash and cash equivalents at beginning
of the period 2,307.4 1,434.7
----------------------------------------------------------------------
Cash and cash equivalents at the end of
the period $3,675.2 $1,482.5
----------------------------------------------------------------------

Supplemental Cash Flow Information
Interest paid $116.6 $48.3
Income taxes paid 5.0 27.5


THE DIRECTV GROUP, INC.
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)

Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2005 2004 2005 2004
----------------------------------------------------------------------
DIRECTV U.S.
Revenues $2,960.5 $2,216.9 $5,761.3 $4,297.7
Operating Profit Before
Depreciation and
Amortization(1) 504.6 175.0 720.2 320.2
Operating Profit Before
Depreciation and Amortization
Margin(1) 17.0% 7.9% 12.5% 7.5%
Operating Profit $ 333.2 $ 63.3 $ 371.6 $ 84.7
Operating Profit Margin 11.3% 2.9% 6.4% 2.0%
Depreciation and Amortization $ 171.4 $ 111.7 $ 348.6 $ 235.5
Capital Expenditures 197.7 155.7 343.9 279.2

----------------------------------------------------------------------
DIRECTV LATIN AMERICA
Revenues $ 183.5 $ 167.4 $ 367.4 $ 329.8
Operating Profit Before
Depreciation and
Amortization(1) 45.3 30.0 67.9 45.6
Operating Profit Before
Depreciation and Amortization
Margin(1) 24.7% 17.9% 18.5% 13.8%
Operating Profit (Loss) $ 4.0 $ (15.7) $ (9.5) $ (47.0)
Operating Profit Margin 2.2% N/A N/A N/A
Depreciation and Amortization 41.3 45.7 77.4 92.6
Capital Expenditures 24.6 18.3 41.6 37.2

----------------------------------------------------------------------
NETWORK SYSTEMS
Revenues $ 45.2 $ 364.3 $ 211.4 $ 681.0
Operating Loss Before
Depreciation and
Amortization(1) (8.0) (21.4) (60.8) (17.9)
Operating Loss $ (8.0) $ (37.3) $ (60.8) $ (51.5)
Depreciation and Amortization - 15.9 - 33.6
Capital Expenditures 3.9 24.3 18.1 62.9

----------------------------------------------------------------------
ELIMINATIONS and OTHER
Revenues $ (1.3) $ (105.8) $ (4.3) $ (172.5)
Operating Loss Before
Depreciation and
Amortization(1) (19.2) (40.4) (46.8) (115.3)
Operating Loss (17.6) (38.6) (43.9) (110.7)
Depreciation and Amortization (1.6) (1.8) (2.9) (4.6)
Capital Expenditures 1.4 29.3 29.6 58.1

----------------------------------------------------------------------
TOTAL
Revenues $3,187.9 $2,642.8 $6,335.8 $5,136.0
Operating Profit Before
Depreciation and
Amortization(1) 522.7 143.2 680.5 232.6
Operating Profit Before
Depreciation and Amortization
Margin(1) 16.4% 5.4% 10.7% 4.5%
Operating Profit (Loss) $ 311.6 $ (28.3) $ 257.4 $ (124.5)
Operating Profit Margin 9.8% N/A 4.1% N/A
Depreciation and Amortization 211.1 171.5 423.1 357.1
Capital Expenditures 227.6 227.6 433.2 437.4

======================================================================

(1) See footnote 1 in the FOOTNOTES section above.


The Following Data Reflect DIRECTV U.S.' Financial Statements and
Other Data as a Stand Alone Entity


DIRECTV HOLDINGS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------
2005 2004 2005 2004
--------- --------- -------------------

Revenues $2,960.5 $2,216.9 $5,761.3 $4,297.7
------------------------------ --------- --------- -------------------

Operating Costs and Expenses,
exclusive of depreciation and
amortization expense shown
separately below
Programming and other costs 1,137.7 856.5 2,287.3 1,704.6
Subscriber service expenses 219.2 166.0 439.7 312.0
Subscriber acquisition costs:
Third-party customer
acquisitions 467.9 445.4 1,055.8 881.9
Direct customer
acquisitions 154.3 162.1 312.0 313.4
Upgrade and retention costs 223.2 226.8 475.4 401.0
Broadcast operations
expenses 35.3 35.2 70.7 65.2
General and administrative
expenses 218.3 149.9 400.2 299.4
Depreciation and amortization
expense 171.4 111.7 348.6 235.5
------------------------------ --------- --------- -------------------
Total Operating Costs and
Expenses 2,627.3 2,153.6 5,389.7 4,213.0
------------------------------ --------- --------- -------------------

Operating Profit 333.2 63.3 371.6 84.7

Interest expense, net (54.2) (46.0) (110.2) (93.4)
Other expense (65.2) -- (65.6) --
------------------------------ --------- --------- -------------------

Income (Loss) Before Income
Taxes and Cumulative Effect
of Accounting Change 213.8 17.3 195.8 (8.7)

Income tax (expense) benefit (82.0) (6.6) (75.1) 3.4
------------------------------ --------- --------- -------------------

Income (loss) before
cumulative effect of
accounting change 131.8 10.7 120.7 (5.3)
Cumulative effect of
accounting change, net of
taxes -- -- -- (311.5)
------------------------------ --------- --------- -------------------

Net Income (Loss) $131.8 $10.7 $120.7 $(316.8)
============================== ========= ========= ===================


DIRECTV HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)

June 30, December 31,
ASSETS 2005 2004
----------------------------------------------------------------------
Current Assets
Cash and cash equivalents $814.0 $34.5
Accounts receivable, net of allowances
of $96.6 and $86.4 815.1 885.0
Inventories, net 294.2 122.0
Prepaid expenses and other 241.8 289.8
----------------------------------------------------------------------

Total Current Assets 2,165.1 1,331.3
Satellites, net 1,764.8 1,597.4
Property, net 723.5 686.1
Goodwill 3,031.7 3,031.7
Intangible Assets, net 2,048.3 2,224.9
Other Assets 125.4 122.8
----------------------------------------------------------------------

Total Assets $9,858.8 $8,994.2
======================================================================

LIABILITIES AND OWNER'S EQUITY
----------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued
liabilities $1,851.3 $1,771.7
Unearned subscriber revenue and
deferred credits 225.5 255.9
Current portion of long-term debt 2.8 10.2
----------------------------------------------------------------------

Total Current Liabilities 2,079.6 2,037.8
Long-Term Debt 3,410.5 3,276.6
Other Liabilities and Deferred Credits 1,065.7 1,128.6
Deferred Income Taxes 227.9 172.3
Commitments and Contingencies

Owner's Equity
Capital stock and additional paid-in
capital 4,034.2 3,458.7
Accumulated deficit (959.1) (1,079.8)
----------------------------------------------------------------------
Total Owner's Equity 3,075.1 2,378.9
----------------------------------------------------------------------

Total Liabilities and Owner's Equity $9,858.8 $8,994.2
======================================================================


DIRECTV HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)

Six Months Ended June 30,
2005 2004
----------------------------------------------------------------------
Cash Flows from Operating Activities
Income (Loss) Before Cumulative Effect
of Accounting Change $120.7 $(5.3)
Adjustments to reconcile income
(loss) before cumulative effect of
accounting change to net cash
provided by operating activities
Depreciation and amortization
expense 348.6 235.5
Equity losses from unconsolidated
affiliates 0.7 --
Loss on sale or disposal of
property -- 8.6
Stock-based compensation expense 13.2 15.9
Amortization of debt issuance
costs 3.9 4.5
Write-off of debt issuance costs 19.0 --
Deferred income taxes and other 55.3 (3.8)
Change in other operating assets
and liabilities
Accounts receivable, net 49.9 (39.5)
Inventories (172.2) (97.8)
Prepaid expenses and other 48.3 (3.8)
Other assets (1.9) (30.4)
Accounts payable and accrued
liabilities 91.6 (31.6)
Unearned subscriber revenue and
deferred credits (30.4) 41.7
Other liabilities and deferred
credits (52.2) 111.6
----------------------------------------------------------------------
Net Cash Provided by Operating
Activities 494.5 205.6
----------------------------------------------------------------------
Cash Flows from Investing Activities
Expenditures for property and
equipment (148.3) (106.5)
Expenditures for satellites (195.6) (172.7)
Proceeds from sale of property -- 3.3
----------------------------------------------------------------------
Net Cash Used in Investing Activities (343.9) (275.9)
----------------------------------------------------------------------
Cash Flows from Financing Activities
Cash proceeds from refinancing
transactions 3,003.3 --
Cash contribution from Parent 538.3 --
Repayment of debt (2,001.8) (213.2)
Repayment of borrowing from Parent (875.0) --
Payments for long-term obligations (31.2) --
Debt issuance costs (4.7) (1.9)
----------------------------------------------------------------------
Net Cash Provided by (Used in)
Financing Activities 628.9 (215.1)
----------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 779.5 (285.4)
Cash and cash equivalents at beginning
of the period 34.5 415.7
----------------------------------------------------------------------
Cash and cash equivalents at end of
the period $814.0 $130.3
======================================================================

Supplemental Cash Flow Information
Interest paid $114.9 $93.8
Income taxes (refunded) paid (44.1) 0.5


DIRECTV HOLDINGS LLC
Non-GAAP Financial Reconciliation and Other Data
(Unaudited)

----------------------------------------------------------------------
Three Months Six Months
Ended Ended
June 30, June 30,
----------------- -------------------
2005 2004 2005 2004
----------------- -------------------
(Dollars in Millions)

Operating Profit $333.2 $63.3 $371.6 $84.7
Add back: Subscriber acquisition
costs:
Third-party customer
acquisitions 467.9 445.4 1,055.8 881.9
Direct customer acquisitions 154.3 162.1 312.0 313.4
Depreciation and amortization
expense 171.4 111.7 348.6 235.5
--------- ------- --------- ---------
Subtotal 793.6 719.2 1,716.4 1,430.8
--------- ------- --------- ---------

Pre-SAC margin(1) $1,126.8 $782.5 $2,088.0 $1,515.5
========= ======= ========= =========
Pre-SAC margin as a percentage
of revenue(1) 38.1% 35.3% 36.2% 35.3%
----------------------------------------------------------------------

Other Data
----------------------------------------------------------------------
Three Months Six Months
Ended Ended
June 30, June 30,
--------------- ---------------
2005 2004 2005 2004
--------------- ---------------
Average monthly revenue per
subscriber (ARPU) $67.79 $65.01 $66.91 $64.31
Average monthly churn %(2) 1.69% 1.49% 1.59% 1.46%
Average subscriber acquisition
costs-per subscriber (SAC) $646 $643 $651 $644
Total number of subscribers-platform
(000's)(2) 14,670 13,040 14,670 13,040
Capital expenditures (millions) $197.7 $155.7 $343.9 $279.2
----------------------------------------------------------------------

(1) Pre-SAC Margin, which is a financial measure that is not
determined in accordance with accounting principles generally
accepted in the United States of America, or GAAP, is calculated
by adding amounts under the captions "Subscriber acquisition
costs" and "Depreciation and amortization expense" to "Operating
Profit." This financial measure should be used in conjunction with
other GAAP financial measures and is not presented as an
alternative measure of operating results, as determined in
accordance with GAAP. The DIRECTV Group and DIRECTV U.S.
management use Pre-SAC Margin to evaluate the profitability of
DIRECTV U.S.' current subscriber base for the purpose of
allocating resources to discretionary activities such as adding
new subscribers, upgrading and retaining existing subscribers, and
for capital expenditures. To compensate for the exclusion of
"Subscriber acquisition costs," management also uses operating
profit and operating profit before depreciation and amortization
expense to measure profitability.

The DIRECTV Group and DIRECTV U.S. believe this measure is useful
to investors, along with other GAAP measures (such as revenues,
operating profit, and net income), to compare DIRECTV U.S.'
operating performance to other communications, entertainment, and
media companies. The DIRECTV Group and DIRECTV U.S. believe that
investors also use current and projected Pre-SAC Margin to
determine the ability of DIRECTV U.S.' current and projected
subscriber base to fund discretionary spending and to determine
the financial returns for subscriber additions.

(2) The amounts presented for 2004 and 2005 include the results from
the former NRTC and Pegasus subscribers for all periods presented.