Table of Contents

  **UNITED STATES SECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549** **Form 10-Q**    **þ** **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    SECURITIES EXCHANGE ACT OF 1934**  **For the quarterly period ended June 30, 2005****OR** **o** **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    SECURITIES EXCHANGE ACT OF 1934**  **For the transition period    from           to****Commission File Number: 333-102395****Dex Media East LLC***(Exact name of registrant as specified in its charter)*   **Delaware** **42-1554575***(State or other jurisdiction of* *(IRS Employer**incorporation or organization)* *Identification No.)***198 Inverness Drive West****Englewood, Colorado****80112***(Address of principal executive offices)***(303) 784-2900***(Registrant’s telephone number, including area code)*    Indicate by check mark whether the registrant: (1) hasfiled all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past90 days.     Yes þ          No o     Indicate by check mark whether the registrant is an acceleratedfiler (as defined in Rule 12b-2 of the ExchangeAct).     Yes o          No þ     **THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERALINSTRUCTIONS H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFOREFILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.**  

**TABLE OF CONTENTS**           **Page**    **No.**          PART I: FINANCIAL INFORMATION  2      Item 1.      Financial Statements  2        Condensed Consolidated Balance Sheets    (unaudited) — June 30, 2005 and December 31,    2004  2        Condensed Consolidated Statements of    Operations (unaudited) — Three months and six months    ended June 30, 2005 and 2004  3        Condensed Consolidated Statements of Cash    Flows (unaudited) — Six months ended June 30,    2005 and 2004  4           Notes to Condensed Consolidated Financial Statements    (unaudited)  5      Item 2.      Management’s Narrative Analysis of    Results of Operations*  15      Item 3.      Quantitative and Qualitative Disclosures    About Market Risk  22      Item 4.      Controls and Procedures  22      PART II: OTHER INFORMATION  23      Item 1.      Legal Proceedings  23      Item 2.      Unregistered Sales of Equity Securities and    Use of Proceeds  23      Item 3.      Defaults Upon Senior Securities  23      Item 4.      Submission of Matters to a Vote of Security    Holders  23      Item 5.      Other Information  24      Item 6.      Exhibits  24      Signature  25  Fifth Amendment to the Credit Agreement Certification of CEO Pursuant to Section 302 Certification of CFO Pursuant to Section 302 *     Pursuant to General Instructions H(2)(a) of Form 10-Q:    (i) the information called for by Item 2 of    Part I, Management’s Discussion and Analysis of    Financial Condition and Results of Operations, has been omitted    and (ii) the registrant is providing a management’s    analysis of results of operations.
1

Table of Contents
**PART I.****FINANCIAL INFORMATION****Item 1.*****Financial Statements*****DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****CONDENSED CONSOLIDATED BALANCE SHEETS****(Dollars in thousands)****(Unaudited)**             **As of** **As of**  **June 30,** **December 31,**  **2005** **2004**     **ASSETS**    Current assets:             Cash and cash equivalents $—  $—      Accounts receivable, net  54,480   56,123      Deferred directory costs  140,563   135,417      Current deferred income taxes  23,099   8,189      Other current assets  5,775   5,181              Total current assets  223,917   204,910     Property, plant and equipment, net  52,828   50,750     Goodwill  890,731   890,731     Intangible assets, net  1,286,833   1,363,673     Deferred income taxes  5,500   38,297     Deferred financing costs  43,547   50,924     Other assets  1,052   1,180              Total Assets $2,504,408  $2,600,465         **LIABILITIES AND OWNER’S EQUITY**    Current liabilities:             Accounts payable $32,985  $38,997      Amounts due to affiliate  8,591   6,311      Deferred revenue and customer deposits  99,842   96,587      Accrued interest payable  13,744   14,463      Current portion of long-term debt  155,525   105,232      Other accrued liabilities  4,847   10,134              Total current liabilities  315,534   271,724     Long-term debt  1,504,592   1,655,302     Amounts due to affiliate related to post-retirement obligations  41,013   38,843     Other liabilities  1,465   1,028              Total Liabilities  1,862,604   1,966,897            Commitments and contingencies (Note 10)            Owner’s interest  686,242   705,906     Accumulated deficit  (44,385)  (71,550)    Accumulated other comprehensive loss  (53)  (788)             Total Owner’s Equity  641,804   633,568              Total Liabilities and Owner’s Equity $2,504,408  $2,600,465        See accompanying notes to condensed consolidated financialstatements.
2

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS****(Dollars in thousands)****(Unaudited)**                     **Three Months Ended** **Six Months Ended**  **June 30,** **June 30,**       **2005** **2004** **2005** **2004**             Revenue $178,202  $179,809  $359,397  $360,598     Operating expenses:                     Cost of revenue  54,091   55,281   107,773   110,651      General and administrative expense  20,416   18,375   39,018   36,464      Bad debt expense  6,607   5,021   11,936   11,332      Depreciation and amortization expense  2,916   3,138   5,677   5,629      Amortization of intangibles  38,420   45,281   76,840   90,563                    Total operating expenses  122,450   127,096   241,244   254,639                    Operating income  55,752   52,713   118,153   105,959     Other (income) expense:                     Interest income  (338)  (208)  (473)  (318)     Interest expense  36,870   44,264   74,342   94,548      Other (income) expense, net  (394)  10   (304)  43                    Income before income taxes  19,614   8,647   44,588   11,686     Income tax provision  7,665   3,480   17,423   4,697                    Net income $11,949  $5,167  $27,165  $6,989              See accompanying notes to condensed consolidated financialstatements.
3

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS****(Dollars in thousands)****(Unaudited)**              **Six Months Ended June 30,**     **2005** **2004**         Operating activities:             Net income $27,165  $6,989      Adjustments to net income:              Bad debt expense  11,936   11,332       Depreciation and amortization expense  5,677   5,629       Amortization of intangibles  76,840   90,563       Amortization of deferred financing costs  9,031   15,669       Stock-based compensation expense  399   137       Loss on disposition of assets  85   —       Deferred tax provision  17,423   4,697      Changes in operating assets and liabilities:              Accounts receivable  (10,293)  4,413       Deferred directory costs  (5,146)  (5,329)      Other current assets  (594)  407       Other long-term assets  401   424       Accounts payable and other liabilities  (10,750)  (22,355)      Accrued interest  (719)  (4,002)      Deferred revenue and customer deposits  3,255   (476)      Amounts due to affiliates  2,280   27,317       Other long-term liabilities  814   (3,317)      Amounts due to affiliate related to post-retirement benefits  2,170   2,578               Cash provided by operating activities  129,974   134,676            Investing activities:             Expenditures for property, plant and equipment  (2,376)  (5,977)     Capitalized software development costs  (5,464)  (12,451)              Cash used for investing activities  (7,840)  (18,428)           Financing activities:             Proceeds from borrowings on revolving credit facility  79,000   8,000      Repayments of borrowings on revolving credit facility  (26,000)  (5,000)     Repayments on long-term debt  (153,417)  (114,000)     Payment of financing costs  (1,654)  (941)     Distribution to owner  (20,063)  (7,065)              Cash used for financing activities  (122,134)  (119,006)           Cash and cash equivalents:             Decrease  —   (2,758)     Beginning balance  —   2,758               Ending balance $—  $—            Supplemental cash flow disclosures:            Interest paid $66,034  $82,815 See accompanying notes to condensed consolidated financialstatements.
4

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS****(Unaudited)****1.****Description of Business*****     (a)******The Company***     Dex Media East LLC (“Dex Media East” or the“Company”) is a subsidiary of Dex Media East, Inc. andan indirect wholly-owned subsidiary of Dex Media, Inc.(“Dex Media”). Dex Media East is the exclusiveofficial directory publisher for Qwest Corporation, the localexchange carrier of Qwest Communications International, Inc.(“Qwest”) in Colorado, Iowa, Minnesota, Nebraska, NewMexico, North Dakota and South Dakota (collectively, the“Dex East States”).     Dex Media’s directory business was acquired from Qwest Dex,Inc. (“Qwest Dex”) in a two phase purchase between DexHoldings LLC (“Dex Holdings”), the former parent ofDex Media, and Qwest Dex. Dex Holdings and Dex Media were formedby two private equity firms: The Carlyle Group and Welsh,Carson, Anderson & Stowe (“WCAS”)(collectively, the “Sponsors”).     In the first phase of the purchase, which was consummated onNovember 8, 2002, Dex Holdings assigned its right topurchase the directory business of Qwest Dex in the Dex EastStates to the Company (the “Acquisition”). In thesecond phase of the purchase, which was consummated onSeptember 9, 2003, Dex Holdings assigned to Dex Media WestLLC (“Dex Media West”), another indirect wholly-ownedsubsidiary of Dex Media, its right to purchase the directorybusiness of Qwest Dex in Arizona, Idaho, Montana, Oregon, Utah,Washington and Wyoming. Dex Holdings was dissolved effectiveJanuary 1, 2005.***     (b)******Operations***     The Company is the largest telephone directory publisher ofwhite and yellow pages directories to businesses and residentsin the Dex East States. The Company provides directory, Internetand direct marketing solutions to local and nationaladvertisers. Virtually all of the Company’s revenue isderived from the sale of advertising in its various directories.Published directories are distributed to residents andbusinesses in the Dex East States through third-party vendors.The Company operates as a single segment.***     (c)******Dex Media Initial Public Offering***     Effective July 21, 2004, Dex Media consummated its initialpublic offering of common stock (the “Dex Media IPO”).Immediately prior to the Dex Media IPO, Dex Media effected a10-for-1 split of all authorized shares of common stock. Part ofthe proceeds related to the Dex Media IPO were used to redeem$183.8 million of the Company’s senior subordinatednotes on August 26, 2004 at a redemption price of 112.125%along with the accrued and unpaid interest. In connection withthe Dex Media IPO, the Company paid $5.0 million to each ofthe Sponsors to eliminate the $2.0 million annual advisoryfee payable under its management consulting agreements.**2.****Basis of Presentation*****     (a)******General***     The accompanying condensed consolidated interim financialstatements are unaudited. In compliance with the instructions ofthe Securities and Exchange Commission (“SEC”) forinterim financial statements, certain information and footnotedisclosures normally included in financial statements preparedin accordance with accounting principles generally accepted inthe United States of America have been omitted. Inmanagement’s opinion, the condensed consolidated financialstatements reflect all adjustments (which consist of normalrecurring adjustments) necessary to fairly present the condensedconsolidated statements of financial position as ofJune 30, 2005 and December 31, 2004, the condensedconsolidated statements of
5

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**operations for the three months and six months endedJune 30, 2005 and 2004 and condensed consolidatedstatements of cash flows for the six months ended June 30,2005 and 2004.     These condensed consolidated financial statements should be readin conjunction with the audited consolidated financialstatements of the Company as of December 31, 2004 and 2003and for the years ended December 31, 2004 and 2003 and forthe periods from November 9 to December 31, 2002 and fromJanuary 1 to November 8, 2002 included in theCompany’s Annual Report on Form 10-K for the yearended December 31, 2004, as filed with the SEC. Thecondensed consolidated statements of operations for the sixmonths ended June 30, 2005 are not necessarily indicativeof the results expected for the full year.***     (b)******Reclassifications***     Certain prior period amounts have been reclassified to conformto the 2005 presentation.**3.****Summary of Significant Accounting Policies*****     (a)******Principles of consolidation***     The condensed consolidated financial statements of the companyinclude the results of operations, financial position and cashflows of Dex Media East and its two wholly-owned subsidiaries,Dex Media East Finance Co. and Dex Media International Inc. Allintercompany balances and transactions have been eliminated inthe consolidation.***     (b)******Use of estimates***     The preparation of financial statements in conformity withaccounting principles generally accepted in the United States ofAmerica requires management to make estimates and assumptionsthat affect the amounts and disclosures reported in thesecondensed consolidated financial statements and accompanyingnotes. Actual results could differ significantly from thoseestimates.***     (c)******Revenue recognition***     The sale of advertising in printed directories published by theCompany is its primary source of revenue. The Company recognizesrevenue ratably over the life of each directory using thedeferral and amortization method of accounting, with revenuerecognition commencing in the month of delivery.     The Company publishes white and yellow pages directories withprimarily 12-month lives. From time to time, the Company maychoose to change the publication dates of certain directories inorder to more efficiently manage work and customer flow. Thelives of the affected directories are expected to be12 months thereafter. Such publication date changes do nothave a significant impact on the Company’s recognizedrevenue as the Company’s sales contracts generally allowfor the billing of additional monthly charges in the case ofdirectories with extended lives. During the three months and sixmonths ended June 30, 2005, the Company published 63 and94 directories, respectively. During the three months andsix months ended June 30, 2004, the Company published 59and 92 directories, respectively.     The Company enters into transactions such as exclusivityarrangements, sponsorships, and other media access transactionswhere the Company’s products and services are promoted by athird party and, in exchange, the Company carries thatparty’s advertisement. The Company accounts for thesetransactions in accordance with Emerging Issues Task Force(“EITF”) Issue No. 99-17 *“Accounting forAdvertising Barter Transactions.”*Revenue and expenserelated to such transactions are classified in the condensedconsolidated statements of operations consistently with similaritems sold or purchased for cash. Such transactions were notsignificant to the Company’s operations for the threemonths and six months ended June 30, 2005 and 2004.
6

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     In certain cases, the Company enters into agreements withcustomers that involve the delivery of more than one product orservice. Revenue for such arrangements is allocated inaccordance with EITF Issue No. 00-21 *“RevenueArrangements with Multiple Deliverables.”****     (d)******Cost of revenue***     The Company accounts for cost of revenue under the deferral andamortization method of accounting. Accordingly, theCompany’s cost of revenue recognized in a reporting periodconsists of: (i) costs incurred in that period andrecognized in that period, principally sales salaries and wages;(ii) costs incurred in a prior period, a portion of whichare amortized and recognized in the current period; and(iii) costs incurred in the current period, a portion ofwhich are amortized and recognized in that period and thebalance of which are deferred until future periods.Consequently, there will be a difference between the cost ofrevenue recognized in any given period and the costs incurred inthe given period. Such difference may be significant.     Costs incurred in the current period and subject to deferralinclude direct costs associated with the publication ofdirectories, including sales commissions, paper, printing,transportation, distribution and pre-press production andemployee and systems support costs relating to each of theforegoing. Sales commissions include commissions paid toemployees for sales to local advertisers and to third-partycertified marketing representatives, which act as theCompany’s channel to national advertisers. All deferredcosts related to the sale and production of directories arerecognized ratably over the life of each directory under thedeferral and amortization method of accounting, with costrecognition commencing in the month of delivery. From time oftime the Company has changed the publication dates of certaindirectories. In such cases, the estimated life of the relatedunamortized deferred cost of revenue is revised to amortize suchcosts over the new remaining estimated life. Changes indirectory publication dates typically do not result in anyadditional direct incurred costs.***     (e)******Stock-based compensation***     The Company accounts for the Stock Option Plan of Dex Media,Inc., and the Dex Media, Inc. 2004 Incentive Award Plan, as morefully discussed in Note 8, under the recognition andmeasurement principles of Accounting Principles Board OpinionNo. 25, *“Accounting for Stock Issued toEmployees,”*and related Interpretations. Had theCompany accounted for employee stock option grants under theminimum value method for options issued prior to Dex Mediabecoming a publicly traded company and the fair value methodafter Dex Media became a publicly traded company, both of whichare prescribed by Statement of Financial Accounting Standard(“SFAS”) No. 123, *“Accounting forStock-Based Compensation,”*the pro forma results
7

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**of the Company for the three months and six months endedJune 30, 2005 and 2004 would have been as follows (inthousands):                    **For the** **For the**  **Three Months Ended** **Six Months Ended**  **June 30,** **June 30,**       **2005** **2004** **2005** **2004**             Net Income                     As reported $11,949  $5,167  $27,165  $6,989      Add: Stock-based employee compensation expense included in    reported net income, net of related tax effects  124   75   244   84      Deduct: Stock-based employee compensation expense determined    under minimum value or fair value based method, as applicable,    for all awards, net of related tax effects  (192)  (129)  (385)  (186)                  Pro forma $11,881  $5,113  $27,024  $6,887              ***     (f)******Income tax provision***     The Company is included in the consolidated Federal income taxreturn and combined or consolidated state income tax returns,where permitted, for Dex Media, the Company’s indirectparent. Although the Company is a single member limitedliability company and is disregarded as a taxable entity forincome tax purposes, the Company calculates and records incometaxes as if it filed a tax return on a stand-alone basis.     Income taxes are accounted for under the asset and liabilitymethod. Deferred tax assets and liabilities are recorded toreflect the future tax consequences of temporary differencesbetween the financial reporting bases of assets and liabilitiesand their tax bases at each year end. Deferred tax assets andliabilities are measured using the enacted income tax rates ineffect for the year in which those temporary differences areexpected to be recovered or settled. Deferred tax assets andliabilities are adjusted for future income tax rate changes inthe year the changes are enacted. Deferred tax assets arerecognized for operating loss and tax credit carryforwards ifmanagement believes, based upon existing evidence, that it ismore likely than not that the carryforwards will be utilized.All deferred tax assets are reviewed for realizability andvaluation allowances are recorded if it is more likely than notthat the deferred tax assets will not be realized. No valuationallowance has been established against deferred tax assets as ofJune 30, 2005 or December 31, 2004.***     (g)******New accounting standards***     On March 29, 2005, the SEC released Staff AccountingBulletin (“SAB”) No. 107,*“Share-based Payment”.* SAB No. 107provides an interpretation of SFAS No. 123R,*“Share-based payment”* and its interaction withcertain SEC rules and regulations and provides the SEC’sviews regarding the valuation of share-based paymentarrangements for public companies. SAB No. 107 provides guidancewith regard to share-based payment transactions withnon-employees, the transition from nonpublic to public entitystatus, valuation methods (including assumptions such asexpected volatility and expected term), the accounting forcertain redeemable financial instruments issued undershare-based payment arrangements, the classification ofcompensation expense, non-GAAP financial measures, first-timeadoption of SFAS No. 123R, the modification ofemployee share options prior to adoption ofSFAS No. 123R and disclosures in Management’sDiscussion and Analysis subsequent to the adoption ofSFAS No. 123R. Based upon the options outstanding
8

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**as of March 31, 2005, the Company has determined that theadoption of SAB No. 107 will not have a materialimpact on the Company’s results of operations.     On April 14, 2005, the SEC announced the adoption of a newrule that amends the compliance dates forSFAS No. 123R. Under SFAS No. 123R,registrants would have been required to implement the standardas of the beginning of the first interim or annual period thatbegins after June 15, 2005. The SEC’s new rulerequires companies to implement SFAS No. 123R at thebeginning of their first fiscal year beginning on or afterJune 15, 2005, instead of the first reporting period thatbegins after June 15, 2005. As a result, the financialstatements of the Company must comply withSFAS No. 123R beginning with the interim financialstatements for the first quarter of 2006. The SEC’s newrule does not change the accounting required bySFAS No. 123R; it changes only the dates forcompliance with the standard.     During May 2005, the Financial Accounting Standards Board(“FASB”) issued SFAS No. 154,*“Accounting Changes and Error Corrections — areplacement of APB Opinion No. 20 and FASB StatementNo. 3.”*This statement applies to all voluntarychanges in accounting principle and requires retrospectiveapplication of the new accounting principle to prior accountingperiods as if that principle had always been used. In addition,this statement requires that a change in depreciation method beaccounted for as a change in estimate. The requirements areeffective for changes made in fiscal years beginning afterDecember 15, 2005. The Company does not expect the adoptionof SFAS No. 154 to have a material impact on theCompany’s financial statements.**4.****Goodwill and Intangible Assets**     During the six months ended June 30, 2005 goodwill was notimpaired or otherwise adjusted.     The gross carrying amount and accumulated amortization ofidentifiable intangible assets and their estimated useful livesare as follows (dollars in thousands):                    **As of June 30, 2005**     **Gross**    **Carrying** **Accumulated** **Net Book**  **Intangible Assets** **Value** **Amortization** **Value** **Life**             Customer relationships — local $897,000  $(369,703) $527,297   20 years(1)    Customer relationships — national  241,000   (77,839)  163,161   25 years(1)    Non-compete/publishing agreements  251,000   (16,610)  234,390   40 years     Dex Trademark  311,000   —   311,000   Indefinite     Qwest Dex Trademark agreement  68,000   (35,970)  32,030   5 years     Advertising agreement  23,000   (4,045)  18,955   15 years                   Totals $1,791,000  $(504,167) $1,286,833                  
9

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**                    **As of December 31, 2004**     **Gross**    **Carrying** **Accumulated** **Net Book**  **Intangible Assets** **Value** **Amortization** **Value** **Life**             Customer relationships — local $897,000  $(315,787) $581,213   20 years(1)    Customer relationships — national  241,000   (65,620)  175,380   25 years(1)    Non-compete/publishing agreements  251,000   (13,470)  237,530   40 years     Dex Trademark  311,000   —   311,000   Indefinite     Qwest Dex Trademark agreement  68,000   (29,170)  38,830   5 years     Advertising agreement  23,000   (3,280)  19,720   15 years                   Totals $1,791,000  $(427,327) $1,363,673                   (1)     Amortization expense is calculated using a declining method in    relation to estimated retention lives of acquired customers.**5.****Long-Term Debt**     Long-term debt is comprised of the following (in thousands):           **As of** **As of**  **June 30,** **December 31,**  **2005** **2004**     **Notes Payable to Banks: (equal right of payment)**            Notes payable to banks, Tranche A term loan, bearing    interest at adjusted London Interbank Offer Rates    (“LIBOR”) plus the current applicable interest spread    of 1.25% (weighted average interest rate of 4.58% at    June 30, 2005) $364,369  $474,654     Notes payable to banks, Tranche B term loan, bearing    interest at adjusted LIBOR plus the current applicable interest    spread of 1.75% (weighted average interest rate of 4.98% at    June 30, 2005)  451,498   494,630     Revolving loan bearing interest at Alternative Base Rate    (“ABR”) plus the current applicable spread of 0.25%    and at adjusted LIBOR plus the current applicable interest    spread of 1.25% (weighted average interest rate of 4.64% at    June 30, 2005)  53,000   — **Unsecured Notes Payable: (in descending order of right    of payment)**            Unsecured senior notes, due November 2009, bearing interest at    9.875%  450,000   450,000     Unsecured senior subordinated notes, due November 2012, bearing    interest at 12.125%  341,250   341,250           1,660,117   1,760,534     Less: current portion of long-term debt  (155,525)  (105,232)         $1,504,592  $1,655,302             As of June 30, 2005, there were $53.0 million ofborrowings under the revolving loan (with an additionalapproximate $1 million committed under a standby letter ofcredit). The Company paid interest and fees for the revolvingloan, interest rate swaps, senior notes and senior subordinatednotes of $65.4 million and $81.8 million during thesix months ended June 30, 2005 and 2004, respectively.
10

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS — (Continued)****6.****Derivative Instruments and Hedging Activities**     As of June 30, 2005, the Company has two interest rate swapagreements to hedge against the effects of increases in theinterest rates associated with floating rate debt on its termloans. The interest rate swap agreements have an aggregatenotional amount of $125.0 million, applicable fixed ratesranging from 3.638% to 4.085% and expire in November 2007 andMay 2008.     Changes in the fair value of interest rate swaps designated ashedging instruments that effectively offset the variability ofcash flows associated with variable-rate, term loan obligationsare reported in accumulated other comprehensive income, net oftax (“AOCI”). These amounts are subsequentlyreclassified into interest expense as a yield adjustment of thehedged interest payments in the same period in which the relatedinterest payments affect earnings. During the three months endedJune 30, 2005 and 2004, the Company reclassified hedginglosses of $0.3 million and $1.8 million, respectively,into earnings. During the six months ended June 30, 2005and 2004, the Company reclassified $0.9 million and$3.6 million of hedging losses into earnings, respectively.For the three months and six months ended June 30, 2005,the Company had $0.8 million of unrealized losses, net oftax, and $0.7 million of unrealized gains, net of tax,included in other comprehensive income, respectively. For thethree months and six months ended June 30, 2004, theCompany had $4.3 million and $3.0 million ofunrealized gains, net of tax, included in other comprehensiveincome, respectively. As of June 30, 2005 andDecember 31, 2004, the Company had $0.1 million and$0.8 million of unrealized losses, net of tax,respectively, included in AOCI.     As of June 30, 2005, less than $0.1 million ofdeferred losses, net of tax, on derivative instruments recordedin AOCI are expected to be reclassified to earnings during thenext 12 months. Transactions and events are expected tooccur over the next 12 months that will necessitatereclassifying these derivative losses to earnings.     During November 2002, the Company entered into an interest ratecap agreement. The Company has not designated the interest ratecap as a hedging instrument and therefore reports all gains andlosses in the change in fair value of the interest rate capdirectly in earnings. No losses were reported in earnings forthe three months ended June 30, 2005 and losses of lessthan $0.1 million were reported for the three months endedJune 30, 2004. No losses were reported in earnings for thesix months ended June 30, 2005 and losses of less than$0.1 million were reported in earning for the six monthsended June 30, 2004. The interest rate cap had a notionalamount of $200.0 million and expired in May 2005.     The Company does not speculate using derivative instruments.**7.****Comprehensive Income**     Components of comprehensive income are changes in equity otherthan those resulting from contributions by owners anddistributions to owners. For the Company, the component ofcomprehensive income other than net income is the change in fairvalue on derivatives designated as hedging instruments, net oftax. The aggregate amounts of such changes to equity that havenot yet been recognized in net income are reported in the equityportion of the condensed consolidated balance sheets asaccumulated other comprehensive income.
11

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     For the three months and six months ended June 30, 2005 and2004 comprehensive income included the following components (inthousands):                   **Three Months** **Six Months**  **Ended** **Ended**       **June 30,** **June 30,** **June 30,** **June 30,**  **2005** **2004** **2005** **2004**             Net income $11,949  $5,167  $27,165  $6,989     Changes in fair value of derivatives, net of tax  (845)  4,279   735   3,008                  Comprehensive income $11,104  $9,446  $27,900  $9,997              **8.****Stock-Based Awards**     On November 8, 2002, Dex Media adopted the Stock OptionPlan of Dex Media, Inc. (the “2002 Plan”), whichpermits the grant of nonqualified and incentive stock options toits employees, consultants and independent directors or those ofits wholly owned subsidiaries. In May 2004, Dex Media adoptedthe Dex Media, Inc. 2004 Incentive Award Plan (the “2004Plan”). The 2004 Plan provides for a variety of stock-basedawards, including non-qualified stock options, incentive stockoptions, stock appreciation rights, restricted stock awards,restricted stock unit awards, deferred stock awards, dividendequivalents, performance-base awards and other stock-basedawards. Effective with the adoption of the 2004 Plan, Dex Mediadiscontinued grants under the 2002 Plan while the optionsoutstanding under the 2002 Plan remain outstanding pursuant tothe terms of that plan. As of June 30, 2005,6,100,386 shares of Dex Media common stock were availablefor grant under the 2004 Plan and 2002 Plan, with67,500 shares of restricted stock issued pursuant torestricted stock agreements. As of December 31, 2004, themaximum number of shares of Dex Media common stock available forgrant under the 2004 Plan and 2002 Plan was 6,251,650, with25,000 shares of restricted stock issued pursuant torestricted stock agreements.     Dex Media’s Compensation Committee determines the exerciseprice for each option awarded. Outstanding options issuedpursuant to the 2002 Plan vest in two segments. Subject to theoptionee’s continued employment with the Company:(i) 25% of the options granted will vest in equal annualinstallments of 5% each on each December 31 beginning inthe year of grant or the following year, depending upon whenduring the calendar year the options are granted, and endingfive years after and (ii) 75% of the options granted willvest in full on the eighth anniversary of the grant date;however, an installment equal to 15% of the options grantedshall become vested following each of the fiscal years beginningin the year of grant or the following year, depending upon whenduring the calendar year the options are granted, and endingfive years after if certain earnings before interest, taxes,depreciation and amortization (“EBITDA”) targets aremet with respect to each year. Options outstanding issuedpursuant to the 2004 Plan vest in equal annual installments overfour years.**9.****Pension and Other-Post Retirement Benefits*****     (a)******General description***     Effective November 8, 2002, Dex Media adopted a pensionplan and effective December 1, 2002, Dex Media adopted another post-retirement benefit plan providing retiree healthcare.Dex Media has filed for a determination letter with the IRS forits pension plan. The pension plan is a noncontributory definedbenefit plan covering substantially all management andoccupational employees of the Company. The other post-retirementbenefit plan provides healthcare and life insurance for certainretirees.     Pension costs and other post-retirement benefit costs arerecognized over the periods in which the employee rendersservices and becomes eligible to receive benefits as determinedby using the projected unit
12

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**credit method. Dex Media’s funding policy is to makecontributions with the objective of accumulating sufficientassets to pay all benefits when due. No pension funding wasrequired for Dex Media for the three months ended June 30,2005 and 2004. The other post-retirement benefit plan ispay-as-you go and is funded out of Dex Media’s operatingcash as the costs are incurred.***     (b)******Components of net periodic benefit cost***     The components of net periodic benefit cost for the Company areas follows (in thousands):                   **Three Months Ended** **Three Months Ended**  **June 30, 2005** **June 30, 2004**       **Pension** **Post-Retirement** **Pension** **Post-Retirement**  **Benefit** **Benefits** **Benefit** **Benefits**             Service cost $865  $232  $1,254  $282     Interest cost  1,405   409   1,387   386     Expected return on plan assets  (1,930)  —   (1,916)  —     Amortization of prior service costs  (49)  (84)  —   (43)    Amortization of net (gain) loss  —   3   —   —                  Net periodic benefit cost $291  $560  $725  $625                                 **Six Months Ended** **Six Months Ended**  **June 30, 2005** **June, 2004**       **Pension** **Post-Retirement** **Pension** **Post-Retirement**  **Benefit** **Benefits** **Benefit** **Benefits**             Service cost $2,209  $511  $2,508  $564     Interest cost  2,792   838   2,774   772     Expected return on plan assets  (3,903)  —   (3,832)  —     Amortization of prior service costs  (49)  (127)  —   (86)    Amortization of net (gain) loss  —   3   —   —                  Net periodic benefit cost $1,049  $1,225  $1,450  $1,250                   Dex Media does not expect to make any contributions to itspension plan in 2005.     As a result of employee terminations, Dex Media expects thatlump sum settlement payments of pension liabilities will exceedpension service and interest costs during the three months endedSeptember 30, 2005. Dex Media expects to record asettlement as defined in SFAS No. 88,*“Employers’ Accounting for Settlements andCurtailments of Defined Benefit Pension Plans and forTermination Benefits.”*The result of this settlementaccounting will be to record a portion of the company’sunrecognized actuarial gain or loss to income. The Company cannot estimate that gain or loss at this time.     In December 2003, the Medicare Prescription Drug, Improvementand Modernization Act of 2003 (“Medicare Act”) wassigned into law. The Medicare Act provides for a federal subsidyto be paid to employers beginning in 2006 if an employerprovides alternative prescription drug coverage for Medicareeligible retirees where that alternative coverage is at leastactuarially equivalent to the standard coverage provided underthe Medicare Act. Final regulations regarding the calculation ofactuarial equivalence were issued on January 21, 2005 andit was subsequently determined that the plan’s prescriptiondrug benefit for certain occupational (union) employees isprojected to satisfy the requirements to receive the federalsubsidy for approximately eight years beginning in 2006. Theexpected savings was not included in the 2004 financial results,but is expected to be reflected in the net periodic benefit costfor 2005 and later years.
13

Table of Contents
**DEX MEDIA EAST LLC****AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF DEX MEDIA, INC.****NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     In accordance with FASB Staff Position No. 106-2,*“Accounting for Disclosure Requirements Related to theMedicare Prescription Drug, Improvement and Modernization Act of2003,”*the reduction in plan liability was recognizedas an actuarial gain as of January 1, 2005. This reducedthe plan’s liability by approximately $0.1 million asof January 1, 2005. The impact of the subsidy on the total2005 net periodic benefit cost was immaterial. In addition,the amount of federal subsidies projected to be received by usfor the periods 2006 through 2013 are also expected to beimmaterial.**10.****Commitments and Contingencies**     The Company is involved, from time to time, in litigationarising in the normal course of business. The outcome of thislitigation is not expected to have a material adverse impact onthe Company.**11.****Related Party Transactions**     Upon consummation of the acquisition of Dex West, all Dex Westemployees became employees of Dex Media East. EffectiveJanuary 1, 2004, all employees of Dex Media East weretransferred to Dex Media Service LLC (“Service Co.”).As such, all employee-related liabilities, including pension andother post-retirement obligations, are included in ServiceCo.’s liabilities, with an offsetting asset recorded as anaffiliate receivable. Dex Media East is charged and carries anaffiliate payable for the portion of the liability associatedwith employees providing services to Dex Media East. Under theShared Services and Employees Agreement dated September 9,2003, costs related to Service Co. employees providing servicesentirely for Dex Media East are allocated 100% to Dex MediaEast. Shared employee costs are allocated and charged to DexMedia East based upon Dex Media East’s proportional shareof consolidated Dex Media revenue. All cash related affiliatebalances are settled at least monthly.     In connection with the Acquisition, the Company entered into amanagement consulting agreement with each of the Sponsors. Eachagreement allows the Company access to the Sponsors’expertise in areas such as corporate management, financialtransactions, product strategy, investment, acquisitions andother matters that relate to the Company’s business,administration and policies. Each of the Sponsors received aone-time transaction fee for structuring the transactionsrelated to the Acquisition of $15.0 million. In addition,each of the Sponsors received an annual advisory fee of$1.0 million for advisory, consulting and other services.The annual advisory fee payable to the Sponsors was terminatedafter the Company and Dex Media West each paid a one timetermination fee of $5.0 million to each of the twoSponsors, for an aggregate of $10.0 million, in conjunctionwith the Dex Media IPO. The Sponsors maintain the right to actas Dex Media’s financial advisor or investment banker inconjunction with any merger, acquisition, disposition, financingor similar transaction in return for additional reasonablecompensation and expenses as may be agreed upon by the parties.Pursuant to these management consulting agreements, the Companyincurred $0.5 million and $1.0 million in annualadvisory fees for the three months and six months endedJune 30, 2004, respectively.     During February 2003, Dex Media entered into a five yearagreement with Amdocs, Inc. (“Amdocs”) for thecomplete modernization of the Company’s core productionplatform. This project was designed to upgrade theCompany’s existing software system to enhance itsfunctionality. WCAS, one of the Sponsors, was a shareholder ofAmdocs at the time the Company entered into the agreement andceased to be a shareholder of Amdocs during 2004. For the sixmonths ended June 30, 2005 and 2004, Dex Media paid Amdocs$17.8 million and $30.5 million, respectively, underthis agreement and for other related on-going support.
14

Table of Contents
**Item 2.*****Management’s Narrative Analysis of Results of    Operations***     Pursuant to General Instructions H(2)(a) of Form 10-Q:(i) the information called for by Item 2 ofPart I, Management’s Discussion and Analysis ofFinancial Condition and Results of Operations, has been omittedand (ii) the registrant is providing a management’sanalysis of results of operations.**Executive Overview*****Our Company***     In the following discussion and analysis, “we,”“our” or “us” refers to Dex Media East.     We are the exclusive publisher of the “official”yellow pages and white pages directories for Qwest in thefollowing states where Qwest is the primary incumbent localexchange carrier: Colorado, Iowa, Minnesota, Nebraska, NewMexico, North Dakota and South Dakota. We have been publishingdirectories for over 100 years. Our contractual agreementswith Qwest grant us the right to be the exclusive incumbentpublisher of the “official” yellow pages and whitepages directories for Qwest in the Dex East States untilNovember 2052 and prevent Qwest from competing with us in thedirectory products business in the Dex East States untilNovember 2042.     We are the largest directory publisher in the Dex East Statesand, collectively with Dex Media West, are the fourth largestdirectory publisher in the U.S. During the six months endedJune 30, 2005 and 2004, we published 94 and92 directories, respectively, and printed approximately10.8 million and 9.6 million copies, respectively, ofthese directories for distribution to virtually all business andresidential consumers throughout the Dex East States. Inaddition, our Internet-based directory,DexOnline.comtm,which is bundled with our print product to provide web-basedaccess to our directories, further extends the distribution ofour advertisers’ content. DexOnline.com includesapproximately 21 million business listings and129 million residential listings from across the UnitedStates. Our other products and services include the sale ofdirect marketing lists and the sale of Dex directories and otherpublishers’ directories outside the normal deliveryschedule.     We seek to bring buyers together with our advertising customersthrough a cost-effective, bundled advertising solution thatincludes print, Internet-based and CD-ROM directories. Themajority of our advertising customers are small and medium-sizedlocal businesses and national businesses with a local presence.We believe that our advertising customers value: (i) ourability to provide consumers with an authoritative and diversereference source to search for products and services acrossmultiple platforms; (ii) our broad distribution topotential buyers of our advertisers’ products and services;(iii) our lower cost per usage compared with most otherdirectories and a higher return on investment than other formsof local advertising; and (iv) the quality of our clientservice and support.     For the six months ended June 30, 2005, we generatedapproximately 97% of our total revenue from the sale of bundledprint and Internet directory advertising. Our other products andservices account for the remaining 3% of our total revenue. Forthe six months ended June 30, 2005 and 2004, we generated$359.4 million and $360.6 million in total revenue,respectively. See “Results of Operations” in thisItem 2.***Background***     The following discussion and analysis of our financial conditionand results of operations covers the six months endedJune 30, 2005 and 2004.     The non-historical statements in this Item 2, includingstatements regarding industry outlook and our expectationsregarding the future performance of our business, areforward-looking statements. Such forward-looking statements aresubject to numerous risks and uncertainties, and our results maydiffer materially from those contained in any suchforward-looking statements. See “Disclosure RegardingForward-Looking Statements” in this Item 2.
15

Table of Contents
**Results of Operations*****Overview***     Our consolidated financial statements included in this quarterlyreport have been prepared on the basis of the deferral andamortization method of accounting, under which revenue and costof revenue related to the publication of directories areinitially deferred and then recognized ratably over the life ofeach directory, commencing in the month of delivery. From timeto time, we have determined that the publication dates ofcertain directories will be extended. These publication datechanges are made to more efficiently manage work and customerflow. The lives of the affected directories are expected to be12 months following the new publication date. Generally, weare able to bill and collect for additional periods related todirectory extensions and under the deferral and amortizationmethod of accounting, our related cost of revenue is amortizedover the extended estimated useful life of the directory.Certain prior period amounts have been reclassified to conformto the 2005 presentation.***Revenue***     We derive virtually all our revenue from the sale of advertisingin our printed directories, which we refer to as directoryservices revenue. The sale of advertising in our printeddirectories also includes the replication of listings anddisplay advertisements in DexOnline.com, our Internet-baseddirectory. We also provide related services, including otherInternet-related products, direct marketing lists and the saleof Dex directories and other publishers’ directoriesoutside of the normal delivery schedule, which we refer tocollectively as other revenue. Directory services revenue isaffected by several factors, including changes in the quantityand size of advertisements sold, defectors and new advertisers,as well as the proportion of premium advertisements sold,changes in the pricing of advertising, changes in the quantityand mix of advertising purchased per account and theintroduction of additional products which generate incrementalrevenue. Directory services revenue may also increase throughthe publication of new printed directories. Revenue recognizedon sales under our Advertising Commitment Agreement with Qwestconsists primarily of directory services revenue.     We enter into transactions such as exclusivity arrangements,sponsorships and other media access transactions whereby ourproducts and services are promoted by a third party and, inexchange, we carry that party’s advertisement. We accountfor these transactions in accordance with EITF IssueNo. 99-17. Revenue and expense related to such transactionsare included in the condensed consolidated statements ofoperations consistent with reasonably similar items sold orpurchased for cash. These related revenue items are currentlyincluded in local directory services revenue. The revenue fromsuch transactions for the six months ended June 30, 2005and 2004 represented approximately 1% of total revenue in eachperiod and is expected to continue at this level for theforeseeable future. The revenue and related expense have noimpact on net income or cash flow over the life of the barteredadvertisement.     In certain cases, we enter into agreements with accounts thatinvolve the delivery of more than one product or service. Weallocate revenue for such arrangements in accordance with EITFIssue No. 00-21.***Cost of Revenue***     We account for cost of revenue under the deferral andamortization method of accounting. Accordingly, our cost ofrevenue recognized in a reporting period consists of:(i) costs incurred in that period and recognized in thatperiod, principally sales salaries and wages; (ii) costsincurred in a prior period, a portion of which are amortized andrecognized in the current period; and (iii) costs incurredin the current period, a portion of which are amortized andrecognized in that period and the balance of which are deferreduntil future periods. Consequently, there will be a differencebetween the cost of revenue recognized in any given period andthe costs incurred in that period. Such differences may besignificant.     Costs incurred in the current period and subject to deferralinclude direct costs associated with the publication ofdirectories, including sales commissions, paper, printing,transportation, distribution and pre- press production, as wellas employee and systems support costs relating to each of theforegoing. Sales commissions include commissions paid toemployees for sales to local advertisers and to certifiedmarketing
16

Table of Contents
representatives, which act as our channel to nationaladvertisers. All deferred costs related to the sale andproduction of directories are recognized ratably over the lifeof each directory under the deferral and amortization method ofaccounting, with cost recognition commencing in the month ofdelivery.***General and Administrative Expense***     Our general and administrative expense consists primarily of thecosts of advertising, promotion and marketing, administrativestaff, pension and other post-retirement benefits, informationtechnology, training, account billing, corporate management,office and facilities expense and bad debt expense. All ourgeneral and administrative expense is recognized in the periodin which it is incurred.***Income Tax Provision***     We account for income taxes under the asset and liability methodof accounting. Deferred tax assets and liabilities are recordedto reflect the future tax consequences of temporary differencesbetween the financial reporting bases of assets and liabilitiesand their tax bases at each year end. Deferred tax assets andliabilities are measured using the enacted income tax rates ineffect for the year in which those temporary differences areexpected to be recovered or settled. Deferred tax assets andliabilities are adjusted for future income tax rate changes inthe year the changes are enacted. Deferred tax assets arerecognized for operating loss and tax credit carry forwards ifmanagement believes, based upon existing evidence, that it ismore likely than not that the carry forward will be utilized.All deferred tax assets are reviewed for realizability, andvaluation allowances are recorded if it is more likely than notthat the deferred tax assets will not be realized.***Items Affecting Comparability Between Periods***     Prior to the Dex Media IPO, we paid an annual management fee of$2.0 million to the Sponsors. In connection with the DexMedia IPO, we made a lump sum payment of $10.0 million inaggregate to the Sponsors to terminate our obligation to paysuch annual advisory fees. For the six months endedJune 30, 2004, the Company incurred $1.0 million ofadvisory fees.***The Six Months Ended June 30, 2005 Compared to the    Six Months Ended June 30, 2004.***             **Six Months Ended**     **June 30,** **June 31,**  **2005** **2004**       **(Dollars in thousands)**    Revenue:             Local directory services $294,085  $292,748      National directory services  51,683   51,392      Qwest advertising  4,578   8,450      Other revenue  9,051   8,008              Total revenue  359,397   360,598     Cost of revenue  107,773   110,651             Gross profit, excluding depreciation and amortization expense $251,624  $249,947      Gross margin  70.0%  69.3%    General and administrative expense, including bad debt expense $50,954  $47,796 ***Revenue***     Total revenue decreased $1.2 million, or 0.3%, to$359.4 million for the six months ended June 30, 2005from $360.6 million for the six months ended June 30,2004. The decrease in total revenue was primarily due to adecrease in Qwest advertising revenue, and was partially offsetby an increase in local directory services revenue and otherrevenue relating to our Internet product line.
17

Table of Contents
     Local and national directory services revenue is affected by avariety of volume and pricing factors. Volume related factorsinclude quantity of advertisements sold, the change in mix ofadvertisements among our product families, the proportion ofadvertisements sold with premium features, the volume ofpromotional services obtained from our advertisers in exchangefor our publication of their advertisements in our directories,the number of local advertisers’ disconnects and the numberof new advertisers obtained during a period. Pricing factorsinclude price increases related to our standard rates that maybe made from time to time in varying markets for varyingcategories, and are offset by discount programs that may beinitiated in local markets for certain advertiser headings. Suchfactors generally affect the dollar volume of orders initiatedin a period which are recognized as revenue over the life of agiven directory, beginning in the month of delivery.Fluctuations in product mix and pricing are among the multiplefactors that contributed to the change in local and nationaldirectory services revenue.     Local directory services revenue increased $1.3 million, or0.5%, to $294.1 million for the six months endedJune 30, 2005 compared to $292.7 million for the sixmonths ended June, 2004. Local directory services revenueaccounted for 81.8% and 81.2% of revenue for the six monthsended June 30, 2005 and the six months ended June 30,2004, respectively.     Revenue from national advertisers increased $0.3 million,or 0.6%, to $51.7 million for the six months endedJune 30, 2005 compared to $51.4 million for the sixmonths ended June 30, 2004. Revenue from nationaladvertisers accounted for 14.4% of revenue for the six monthsended June 30, 2005 and 14.3% for the six months endedJune 30, 2004.     Revenue from Qwest advertising decreased $3.9 million, or45.8% to $4.6 million for the six months endedJune 30, 2005 from $8.5 million for the six monthsended June 30, 2004. This decrease in Qwest advertisingrevenue was a result of the timing of Qwest’s purchasesunder its Advertising Commitment Agreement with us. Under theAdvertising Commitment Agreement, Qwest is obligated to purchase$20.0 million collectively in advertising from us and DexMedia West. However, if in any given year Qwest exceeds$20.0 million of advertising purchases, up to$5.0 million of the excess will be credited to thefollowing year’s purchase commitments. As a result ofpurchases in excess of the $20.0 million for the year endedDecember 31, 2003, Qwest purchased less than$20.0 million of Dex advertising in 2004, of which aportion is deferred and recognized over the life of the relateddirectory in 2005.     Other revenue increased $1.0 million, or 13.0%, to$9.1 million for the six months ended June 30, 2005from $8.0 million for the six months ended June 30,2004. This increase in other revenue was primarily due to anincrease in Internet revenue, and was partially offset by adecrease in direct marketing revenue.***Cost of revenue***     Cost of revenue recognized was $107.8 million for the sixmonths ended June 30, 2005 compared to $110.7 millionfor the six months ended June 30, 2004. Cost of revenuerecognized represented 30.0% and 30.7% of revenue for the sixmonths ended June 30, 2005 and 2004, respectively. The costof revenue recognized does not include any depreciation andamortization expense.     For the six months ended June 30, 2005 and 2004, weincurred costs subject to deferral and amortization of$109.8 million and $111.5 million, respectively. Asdescribed below, the decrease in incurred costs primarilyresulted from decreased employee costs and direct costs ofpublishing.     Employee costs incurred decreased $2.5 million, or 5.1%, to$46.5 million for the six months ended June 30, 2005compared to $49.0 million for the six months endedJune 30, 2004. This decrease primarily resulted from areduction in the number of employees, which related primarily toplanned workforce reductions.     Direct publishing costs incurred, which primarily include paper,printing and distribution, decreased $3.2 million, or 8.1%,to $36.2 million for the six months ended June 30,2005 from $39.4 million for the six months endedJune 30, 2004. The decrease was primarily a result ofdeclining printing costs in 2005 due to the implementation of anew printing agreement with one of the two outside providers ofprinting service.
18

Table of Contents
     Contracting and professional fees incurred increased$3.8 million, or 77.6%, to $8.7 million for the sixmonths ended June 30, 2005 from $4.9 million for thesix months ended June 30, 2004. This increase was primarilydue to costs related to supporting our new production system,which we began to incur in the second quarter of 2004.     National commissions incurred increased $1.3 million, or11.5%, to $12.6 million for the six months endedJune 30, 2005 from $11.3 million for the six monthsended June 30, 2004. The increase was primarily a result ofmoving the publication of six directories from the first quarterof 2005 to the second quarter of 2005, and was partially offsetby a decrease as a result of moving the publication date of twodirectories from the second quarter of 2005 to the first quarterof 2005.     Other cost of revenue incurred, which primarily includes systemsexpense and office and facilities expense, was $5.8 millionfor the six months ended June 30, 2005 compared to$6.9 million for the six months ended June 30, 2004.***Gross profit***     Our gross profit was $251.6 million for the six monthsended June 30, 2005 compared to $249.9 million for thesix months ended June 30, 2004. Gross margin was 70.0% forthe six months ended June 30, 2005 compared to 69.3% forthe six months ended June 30, 2004.***General and administrative expense***     General and administrative expense, including bad debt expense,increased $3.2 million, or 6.7%, to $51.0 million forthe six months ended June 30, 2005 from $47.8 millionfor the six months ended June 30, 2004. The increase wasprimarily due to increases in employee costs contracting andprofessional fees, advertising and bad debt expense offset bydecreases in other general and administrative expenses.     Employee costs increased $1.1 million, or 8.5%, to$14.1 million for the six months ended June 30, 2005from $13.0 million for the six months ended June 30,2004. Employee costs include salaries and wages, benefits andother employee costs. Salaries and wages were $7.8 millionfor the six months ended June 30, 2005 compared to$8.0 million for the six months ended June 30, 2004.Benefits were $3.8 million for the six months endedJune 30, 2005 compared to $4.1 million for the sixmonths ended June 30, 2004. Other employee costs increased$1.6 million for the six months ended June 30, 2005 to$2.5 million from $0.9 million for the six monthsended June 30, 2004. This increase was primarily related torecognition of net accrued severance costs of $1.8 millionin connection with planned workforce reductions during the threemonths ended June 30, 2005.     Advertising expense increased $1.0 million, or 12.8%, to$8.8 million for the six months ended June 30, 2005from $7.8 million for the six months ended June 30,2004. Advertising expense as a percentage of revenue increasedto 2.4% for the six months ended June 30, 2005 from 2.2%for the six months ended June 30, 2004.     Contracting and professional fees increased $0.7 million,or 8.4%, to $9.0 million for the six months endedJune 30, 2005 from $8.3 million for the six monthsended June 30, 2004. For the six months ended June 30,2004, contracting and professional fees included$1.0 million of annual advisory fees paid to our Sponsors.This fee was terminated in conjunction with the Dex Media IPOand therefore was not incurred in the six months endedJune 30, 2005. The decrease in such advisory fees wasoffset by an increase in on-going support costs related to ournew production system, which we began incurring in the secondquarter of 2004.     Bad debt expense increased $0.6 million, or 5.3%, to$11.9 million for the six months ended June 30, 2005from $11.3 million for the six months ended June 30,2004. Bad debt expense as a percentage of total revenue was 3.3%for the six months ended June 30, 2005 compared to 3.1% forthe six months ended June 30, 2004.     All other general and administrative expense was$7.2 million for the six months ended June 30, 2005compared to $7.4 million for the six months endedJune 30, 2004.
19

Table of Contents
***Amortization of intangibles***     For the six months ended June 30, 2005 and 2004 werecognized $76.8 million and $90.6 million,respectively, in amortization expense related to ouridentifiable intangible assets. The decrease in amortizationexpense from the prior year was the result of a declining methodused to amortize the value of the acquired customer accounts inproportion with their estimated retention lives.***Interest expense***     Interest expense was $74.3 million and $94.5 millionfor the six months ended June 30, 2005 and 2004,respectively. The decrease in interest expense was primarily aresult of debt repayments including the redemption of$183.8 million on the senior subordinated debt paid inconjunction with the Dex Media IPO. Interest expense for the sixmonths ended June 30, 2005 and 2004 included$9.0 million and $15.7 million, respectively, ofamortization of deferred financing costs.***Income taxes***     SFAS No. 109 requires that we recognize deferredincome tax assets on net operating losses to the extentrealization of these assets is more likely than not. As ofJune 30, 2005 we have recorded $28.6 million of netdeferred income tax assets, of which $15.1 million relatesto estimated net operating loss carryforwards of$38.5 million. As of December 31, 2004 we recorded$46.5 million of net deferred income tax assets, of which$28.3 million resulted from estimated net operating losscarryforwards of $66.7 million, pending the filing of the2004 income tax return. The net operating loss carryforwards donot begin to expire until 2022. Based upon current projectionsof income and expenses, we have determined that it is morelikely than not that we will utilize these deferred tax assetsbefore the expiration of the net operating loss carryforwardperiods. Accordingly, no valuation allowance has been recorded.**Material Trends, Known Facts and Uncertainties*****Directory Services Revenue***     For the six months ended June 30, 2005, approximately 97%of our revenue came from directory services, our bundledadvertising solution that includes print, Internet-baseddirectories and CD-ROMs. Our ability to increase directoryservices revenue is dependent on our ability to attract andretain advertisers or increase revenue per advertiser accountthrough a change in advertising volume and/or rates.     While we do not believe there has been any material change inour advertiser account renewal rate, we were unable to reportour renewal rate in 2004 or to date in 2005 due to ourconversion to the Amdocs software system. The Amdocs conversionhas resulted in certain of our customer account categories beingreclassified, which may result in a change in how we report ourtotal number of customer accounts, thereby having an effect onour reported renewal rate. Further, we believe that our revenueper advertiser account has likely increased primarily as aresult of the inherent value in our products resulting in acontinued ability to increase prices.***Segmented Pricing***     We are continuing to implement a more sophisticated segmentedpricing strategy, which prices advertisements by headingcategory. We believe that implementing this strategy willimprove advertiser retention ultimately improving revenue growthas we better align our pricing with our customers’perception of value.***Competition***     The U.S. directory advertising industry continues to bevery competitive. There are a number of independent directorypublishers and publishers affiliated with local exchangecarriers with which we compete in one or more of the Dex EastStates. On average, there are two to three competing directories(including
20

Table of Contents
Dex) in each of our local markets. Competition from other yellowpages publishers affects our ability to attract and retainadvertisers and to increase advertising rates.     Through our Internet-based directory, DexOnline.com, we competewith these publishers and with other Internet sites providingsearch and classified directory information. In addition, wecompete against other forms of media, including newspapers,radio, television, the Internet, billboards and direct mail forbusiness advertising.***Internet***     We believe that our Internet-based directory, DexOnline.com, isan extension of our printed directories. We believe that anydecline in the usage of our printed directories could be offsetby an increase in usage of our Internet-based directory,DexOnline.com, which was the number one rated Internet YellowPage local search site during 2004 and in the first quarter of2005 in the Dex States as reported by comScore. Additionally,the full roll-out of our Search Engine Marketing(“SEM”) product, Dex WebClickstm,will serve to provide our advertisers with a simplified solutionto their participation in the complex area of auction-basedinternet advertising and could provide us with incrementalrevenue growth. However, if we are unsuccessful in monetizingincreased usage from our Internet-based directory or are notable to effectively deliver our SEM product, our business couldbe negatively impacted.***Paper Prices***     Paper is our principal raw material. Substantially all of thepaper that we use (other than for covers) is supplied by twocompanies: Nippon Paper Industries USA, Co., Ltd. and NorskeSkog Canada (USA), Inc. Prices under the two agreements arenegotiated each year based on prevailing market rates, whichhave been declining consistent with general U.S. markettrends for directory paper over the last three years. Afterrecent favorable trends, beginning in the second half of 2004,pulp prices have been increasing at rates higher than thegeneral inflation rate. This has resulted in upward pressure onour paper prices. The effect of such upward price pressure,however, will be moderated due to the fact that prices underboth our paper agreements are subject to certain priceescalation limits.***New Accounting Standards***     On March 29, 2005, the SEC released SAB No. 107,which provides an interpretation of SFAS No. 123R andits interaction with certain SEC rules and regulations andprovides the SEC’s views regarding the valuation ofshare-based payment arrangements for public companies. SABNo. 107 provides guidance with regard to share-basedpayment transactions with non-employees, the transition fromnonpublic to public entity status, valuation methods (includingassumptions such as expected volatility and expected term), theaccounting for certain redeemable financial instruments issuedunder share-based payment arrangements, the classification ofcompensation expense, non-GAAP financial measures, first-timeadoption of SFAS No. 123R, the modification ofemployee share options prior to adoptions ofSFAS No. 123R and disclosures in Management’sDiscussion and Analysis subsequent to the adoption ofSFAS No. 123R. Based upon the number of stock optionsoutstanding as of June 30, 2005, the Company has determinedthat the adoption of SAB No. 107 will not have a materialimpact on its results of operations.     On April 14, 2005, the SEC announced the adoption of a newrule that amends the compliance dates forSFAS No. 123R. Under SFAS No. 123R,registrants would have been required to implement the standardas of the beginning of the first interim or annual period thatbegins after June 15, 2005. The SEC’s new rulerequires companies to implement SFAS No. 123R at thebeginning of their next fiscal year beginning on or afterJune 15, 2005, instead of the first reporting period thatbegins after June 15, 2005. As a result, the financialstatements of the Company must comply withSFAS No. 123R beginning with the interim financialstatements for the first quarter of 2006. The SEC’s newrule does not change the accounting required bySFAS No. 123R; it changes only the dates forcompliance with the standard.     During May 2005, the FASB issued SFAS No. 154. Thisstatement applies to all voluntary changes in accountingprinciple and requires retrospective application of the newaccounting principle to prior accounting
21

Table of Contents
periods as if that principle had always been used. In addition,this statement requires that a change in depreciation method beaccounted for as a change in estimate. The requirements areeffective for changes made in fiscal years beginning afterDecember 15, 2005. The Company does not expect the adoptionof SFAS No. 154 to have a material impact on theCompany’s financial statements.**Cautionary Note Regarding Forward-Looking Statements**     This quarterly report contains “forward-lookingstatements” within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended (the “ExchangeAct”). These statements relate to future events or ourfuture financial performance, and involve known and unknownrisks, uncertainties and other factors that may cause our actualresults, levels of activity, performance or achievements to bematerially different from any future results, levels ofactivity, performance or achievements expressed or implied bythese forward-looking statements. Such risks and uncertaintiesare described in detail in our Annual Report on Form 10-Kfor the year ended December 31, 2004 and include, but arenot limited to: (i) our substantial indebtedness, whichcould impair our ability to operate our business; (ii) theterms of our subsidiaries’ credit facilities andindentures, which may restrict our access to cash flow and ourability to pursue our business strategies; (iii) increasedcompetitive pressure from other directory publishers or mediacompanies; (iv) the loss of any of our key agreements withQwest; (v) declining usage of printed yellow pagedirectories; (vi) our inability to renew customeradvertising contracts; (vii) risks related to the start-upof new print or Internet directories and media services;(viii) our practice of extending credit to small andmedium-sized businesses; (ix) our dependence on third-partyproviders of printing, distribution and delivery services;(x) the impact of fluctuations in the price or availabilityof paper; (xi) our failure to successfully convert to theAmdocs software system; (xii) the impact of turnover amongsales representatives or the loss of key personnel;(xiii) the occurrence of work stoppages; and(xiv) general economic, market or business conditions. Insome cases, you can identify forward-looking statements byterminology such as “may,” “will,”“should,” “expects,” “intends,”“plans,” “anticipates,”“believes,” “estimates,”“predicts,” “potential,”“continue,” “assumption” or the negative ofthese terms or other comparable terminology. These statementsare only predictions.     In particular, forward-looking statements include, but are notlimited to, statements made under the heading“Management’s Narrative Analysis of Results ofOperations” relating to our strategies, revenue and costtrends, gross margins, cost savings benefits, industry andcompetitive forces, our segmented pricing strategy, usage ofDexOnline.com and Dex Web Clicks and the impact on the Companyof recent accounting pronouncements.     Although we believe that the expectations reflected in theforward-looking statements are reasonable, we cannot guaranteefuture results, levels of activity, performance or achievements.These forward-looking statements are made as of the date of thisquarterly report and, except as required under the federalsecurities laws and the rules and regulations of the SEC, weassume no obligation to update or revise them or to providereasons why actual results may differ.     We do not undertake any responsibility to release publicly anyrevisions to these forward-looking statements to take intoaccount events or circumstances that occur after the date ofthis quarterly report. Additionally, we do not undertake anyresponsibility to update you on the occurrence of anyunanticipated events which may cause actual results to differfrom those expressed or implied by the forward-lookingstatements contained in this quarterly report.**Item 3.*****Quantitative and Qualitative Disclosures About Market    Risk***     Omitted pursuant to General Instructions H(2)(c) ofForm 10-Q.**Item 4.*****Controls and Procedures***     Dex Media East maintains disclosure controls and procedures (asdefined in Rule 13a-15(e) promulgated under the ExchangeAct that are designed to ensure that information that would berequired to be disclosed in Exchange Act reports is recorded,processed, summarized and reported within the time periods
22

Table of Contents
specified in the SEC’s rules and forms, and that suchinformation is accumulated and communicated to Dex MediaEast’s management, including its Chief Executive Officerand Chief Financial Officer, as appropriate, to allow timelydecisions regarding required disclosure.     As of the end of the period covered by this report, Dex MediaEast carried out an evaluation, under the supervision and withthe participation of Dex Media East’s management, includingits Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of Dex MediaEast’s disclosure controls and procedures. Based on theforegoing, Dex Media East’s Chief Executive Officer andChief Financial Officer concluded that Dex Media East’sdisclosure controls and procedures were effective as of the endof the period covered by this report.     During the three months ended June 30, 2005, there was nochange in Dex Media East’s internal controls or in otherfactors that has materially affected, or is reasonably likely tomaterially affect, Dex Media East’s internal controls overfinancial reporting.**PART II.****OTHER INFORMATION****Item 1.*****Legal Proceedings***     From time to time, we are a party to litigation matters arisingin connection with the normal course of our business. In many ofthese matters, plaintiffs allege that they have suffered damagesfrom errors or omissions or improper listings contained indirectories published by us. Although we have not had notice ofany such claims that we believe to be material, any pending orfuture claim could have a material adverse effect on ourbusiness.     In addition, we are exposed to defamation and breach of privacyclaims arising from our publication of directories and ourmethods of collecting, processing and using personal data. Thesubjects of our data and users of data that we collect andpublish could have claims against us if such data were found tobe inaccurate, or if personal data stored by us were improperlyaccessed and disseminated by unauthorized persons. Although todate we have not had notice of any material claims relating todefamation or breach of privacy claims, we may be party tolitigation matters that could have a material adverse effect onour business.**Item 2.*****Unregistered Sales of Equity Securities and Use of    Proceeds***     Omitted pursuant to General Instructions H(2)(b) ofForm 10-Q.**Item 3.*****Defaults Upon Senior Securities***     Omitted pursuant to General Instructions H(2)(b) ofForm 10-Q.**Item 4.*****Submission of Matters to a Vote of Security Holders***     Omitted pursuant to General Instructions H(2)(b) ofForm 10-Q.
23

Table of Contents
**Item 5.*****Other Information***     On June 16, 2005, Dex Media East amended its CreditAgreement, as amended and restated, to, among other things:(i) permit Dex Media East to engage in accounts receivablesecuritization transactions not exceeding $168.0 million inthe aggregate at any time; (ii) increase the restrictedpayment basket for cash dividends by the Company from$29.4 million to $42.0 million annually; and(iii) reduce the applicable margins for Tranche A termloans and revolving loans made under such Credit Agreement.**Item 6.*****Exhibits***     **Exhibits** **Description**    Exhibit 10.1     Dex Media, Inc. Deferred Compensation Plan (incorporated by    reference to Dex Media, Inc.’s Current Report on    Form  8-K dated May 17, 2005).  Exhibit 10.2     Dex Media, Inc. Corporate Aircraft Policy (incorporated by    reference to Dex Media, Inc.’s Current Report on    Form 8-K dated May 17, 2005).  Exhibit 10.3     Dex Media, Inc. Financial Planning Benefit (incorporated by    reference to Dex Media, Inc.’s Current Report on    Form  8-K dated May 17, 2005).  Exhibit 10.4     Dex Media, Inc. 2005 Bonus Plan Targets (incorporated by    reference to Dex Media, Inc.’s Current Report on    Form 8-K dated May 17, 2005). Exhibit 10.5     Fifth Amendment, dated as of June 16, 2005, to the Credit    Agreement, dated as of November 8, 2002, as amended and    restated as of July 27, 2004, by and among Dex Media, Inc.,    Dex Media East, Inc., Dex Media East LLC, JPMorgan Chase Bank,    as administrative agent, J.P. Morgan Securities Inc. and    Banc of America Securities LLC, as joint bookrunners and co-lead    arrangers, and Bank of America, N.A., Wachovia Bank, National    Association, Lehman Commercial Paper Inc. and Deutsche Bank    Trust Company Americas, as co-syndication agents.  Exhibit 31.1     Certification of Chief Executive Officer of Dex Media East LLC    pursuant to Section 302 of the Sarbanes Oxley Act of 2002.  Exhibit 31.2     Certification of Chief Financial Officer of Dex Media East LLC    pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
24

Table of Contents
**SIGNATURE**     Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly causedthis report to be signed by the undersigned, thereunto dulyauthorized.     DEX MEDIA EAST LLC By: /s/ ROBERT M. NEUMEISTER, JR.                   Robert M. Neumeister, Jr. *Executive Vice President and Chief Financial Officer* *(Principal Financial Officer and Duly Authorized Officer)*Date: August 8, 2005
25

Table of Contents
**EXHIBIT INDEX**     **Exhibits** **Description**    Exhibit 10.1     Dex Media, Inc. Deferred Compensation Plan (incorporated by    reference to Dex Media, Inc.’s Current Report on    Form  8-K dated May 17, 2005).  Exhibit 10.2     Dex Media, Inc. Corporate Aircraft Policy (incorporated by    reference to Dex Media, Inc.’s Current Report on    Form 8-K dated May 17, 2005).  Exhibit 10.3     Dex Media, Inc. Financial Planning Benefit (incorporated by    reference to Dex Media, Inc.’s Current Report on    Form  8-K dated May 17, 2005).  Exhibit 10.4     Dex Media, Inc. 2005 Bonus Plan Targets (incorporated by    reference to Dex Media, Inc.’s Current Report on    Form 8-K dated May 17, 2005).  Exhibit 10.5     Fifth Amendment, dated as of June 16, 2005, to the Credit    Agreement, dated as of November 8, 2002, as amended and    restated as of July 27, 2004, by and among Dex Media, Inc.,    Dex Media East, Inc., Dex Media East LLC, JPMorgan Chase Bank,    as administrative agent, J.P. Morgan Securities Inc. and    Banc of America Securities LLC, as joint bookrunners and co-lead    arrangers, and Bank of America, N.A., Wachovia Bank, National    Association, Lehman Commercial Paper Inc. and Deutsche Bank    Trust Company Americas, as co-syndication agents.  Exhibit 31.1     Certification of Chief Executive Officer of Dex Media East LLC    pursuant to Section 302 of the Sarbanes Oxley Act of 2002.  Exhibit 31.2     Certification of Chief Financial Officer of Dex Media East LLC    pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
26