##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

Form 10-Q

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the quarterly period ended March 31,
    2004                                           
|  
|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
    incorporation or organization) |  | (IRS Employer
    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) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act).     Yes o          No þ



---






---










INDEX

|                                      |  |                                                                                           |    |                                                                                                                  |    |  |   | 
|------------------------------------- |  | ----------------------------------------------------------------------------------------- | -- | ---------------------------------------------------------------------------------------------------------------- | -- |  | - | 
|Item No.                              |  |                                                                                           |    | Page                                                                                                            
|                                      |  |                                                                                           |    |                                                                                                                 
|PART I
    FINANCIAL INFORMATION     
|Item 1.                               |  | Financial Statements                                                                      |    |                                                                                                                  |    | 
|                                      |  |                                                                                           |    | Condensed Consolidated
    Balance Sheets (unaudited)  March 31, 2004 and
    December 31, 2003                 |    |  | 2 | 
|                                      |  |                                                                                           |    | Condensed Consolidated
    Statements of Operations (unaudited)  Three Months
    Ended March 31, 2004 and 2003 |    |  | 3 | 
|                                      |  |                                                                                           |    | Condensed Consolidated
    Statements of Cash Flows (unaudited)  Three Months
    Ended March 31, 2004 and 2003 |    |  | 4 | 
|                                      |  |                                                                                           |    | Notes to Condensed
    Consolidated Financial Statements (unaudited)                                             |    |  | 5 | 
|Item 2.                               |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |    |                                                                                                                  | 13 | 
|Item 3.                               |  | Quantitative and Qualitative
    Disclosures About Market Risk                            |    |                                                                                                                  | 24 | 
|Item 4.                               |  | Controls and Procedures                                                                   |    |                                                                                                                  | 24 | 
|PART II
    OTHER INFORMATION        
|Item 1.                               |  | Legal Proceedings                                                                         |    |                                                                                                                  | 26 | 
|Item 2.                               |  | Changes in Securities and
    Use of Proceeds                                             |    |                                                                                                                  | 26 | 
|Item 3.                               |  | Defaults upon Senior
    Securities                                                       |    |                                                                                                                  | 26 | 
|Item 4.                               |  | Submission of Matters to a
    Vote of Security Holders                                   |    |                                                                                                                  | 26 | 
|Item 5.                               |  | Other Information                                                                         |    |                                                                                                                  | 26 | 
|Item 6.                               |  | Exhibits and Reports on Form
    8-K                                                      |    |                                                                                                                  | 26 | 
|Signatures                            |  |                                                                                           | 28 |                                                                                                                 
|Certifications                        |  |                                                                                           |    |                                                                                                                 
|Certification Pursuant to Section 302
|Certification Pursuant to Section 302
|Certification Pursuant to Section 906
|Certification Pursuant to Section 906



1



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##### 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


|                                                                                                        |                                        |                           |                                      |              |           |           |           |         |           |           | 
|------------------------------------------------------------------------------------------------------- | -------------------------------------- | ------------------------- | ------------------------------------ | ------------ | --------- | --------- | --------- | ------- | --------- | --------- | 
|                                                                                                        |                                        | As of                     |                                      | As of       
|                                                                                                        |                                        | March 31,                 |                                      | December 31,
|                                                                                                        |                                        | 2004                      |                                      | 2003        
|                                                                                                        |                                        |                           |                                      |             
|                                                                                                        |                                        |                          
|                                                                                                        |                                        | (Dollars in thousands)   
|                                                                                                        |                                        |                          
|                                                                                                        |                                        | (Unaudited)              
|ASSETS                                                                                                 
|Current assets:                                                                                         |                                        |                           |                                      |              |           |           |           |        
|                                                                                                        | Cash and cash equivalents              |                           | $                                    |             |           |           | $         | 2,758   |          
|                                                                                                        | Accounts receivable, net               |                           |                                      | 54,244       |           |           |           | 62,176  |          
|                                                                                                        | Deferred directory costs               |                           |                                      | 133,542      |           |           |           | 128,333 |          
|                                                                                                        | Current deferred taxes                 |                           |                                      | 6,206        |           |           |           | 5,979   |          
|                                                                                                        | Amounts due from affiliates            |                           |                                      |             |           |           |           | 28,554  |          
|                                                                                                        | Other current assets                   |                           |                                      | 4,709        |           |           |           | 5,906   |          
|                                                                                                        |                                        |                           |                                      |              |           |           |           |        
|                                                                                                        |                                        | Total current assets      |                                      |              | 198,701   |           |           |         | 233,706   |          
|Property, plant and equipment, net                                                                      |                                        |                           | 48,785                               |              |           |           | 39,667    |        
|Goodwill                                                                                                |                                        |                           | 890,731                              |              |           |           | 890,731   |        
|Intangible assets, net                                                                                  |                                        |                           | 1,499,518                            |              |           |           | 1,544,800 |        
|Deferred income taxes                                                                                   |                                        |                           | 41,539                               |              |           |           | 42,151    |        
|Deferred financing costs                                                                                |                                        |                           | 68,192                               |              |           |           | 78,925    |        
|Amounts due from affiliate related to
    post-retirement and other post-employment benefit obligations |                                        |                           |                                     |              |           |           | 35,519    |        
|Other assets                                                                                            |                                        |                           | 1,338                                |              |           |           | 1,719     |        
|                                                                                                        |                                        |                           |                                      |              |           |           |           |        
|                                                                                                        |                                        | Total Assets              |                                      | $            | 2,748,804 |           |           | $       | 2,867,218 |          
|                                                                                                        |                                        |                           |                                      |              |           |           |           |        
|LIABILITIES AND OWNERS EQUITY                                                                         
|Current liabilities:                                                                                    |                                        |                           |                                      |              |           |           |           |        
|                                                                                                        | Accounts payable                       |                           | $                                    | 22,932       |           |           | $         | 49,062  |          
|                                                                                                        | Amounts due to affiliate               |                           |                                      | 17,833       |           |           |           |        |          
|                                                                                                        | Employee compensation                  |                           |                                      |             |           |           |           | 32,783  |          
|                                                                                                        | Deferred revenue and customer deposits |                           |                                      | 103,720      |           |           |           | 99,522  |          
|                                                                                                        | Accrued interest payable               |                           |                                      | 43,896       |           |           |           | 18,684  |          
|                                                                                                        | Current portion of long-term debt      |                           |                                      | 75,950       |           |           |           | 50,845  |          
|                                                                                                        | Other accrued liabilities              |                           |                                      | 13,476       |           |           |           | 9,120   |          
|                                                                                                        |                                        |                           |                                      |              |           |           |           |        
|                                                                                                        |                                        | Total current liabilities |                                      |              | 277,807   |           |           |         | 260,016   |          
|Long-term debt                                                                                          |                                        |                           | 1,990,067                            |              |           |           | 2,090,268 |        
|Post-retirement and other post-employment benefit
    obligations                                       |                                        |                           |                                     |              |           |           | 69,381    |        
|Amounts due to affiliate related to
    post-retirement and other post-employment obligations           |                                        |                           | 35,212                               |              |           |           |          |        
|Other liabilities                                                                                       |                                        |                           | 4,809                                |              |           |           | 7,195     |        
|                                                                                                        |                                        |                           |                                      |              |           |           |           |        
|                                                                                                        |                                        | Total Liabilities         |                                      |              | 2,307,895 |           |           |         | 2,426,860 |          
|                                                                                                        |                                        |                           |                                      |              |           |           |           |        
|Commitments and contingencies
    (Note 9)                                                              |                                        |                           |                                      |              |           |           |           |        
|Accumulated deficit                                                                                     |                                        |                           | (68,080                              | )            |           |           | (69,902   | )      
|Accumulated other comprehensive loss                                                                    |                                        |                           | (5,297                               | )            |           |           | (4,026    | )      
|Owners interest                                                                                        |                                        |                           | 514,286                              |              |           |           | 514,286   |        
|                                                                                                        |                                        |                           |                                      |              |           |           |           |        
|                                                                                                        |                                        | Total Owners Equity      |                                      |              | 440,909   |           |           |         | 440,358   |          
|                                                                                                        |                                        |                           |                                      |              |           |           |           |        
|                                                                                                        |                                        |                           | Total Liabilities and Owners Equity |              | $         | 2,748,804 |           |         | $         | 2,867,218 | 
|                                                                                                        |                                        |                           |                                      |              |           |           |           |        

See accompanying notes to condensed consolidated
financial statements.

2



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##### Table of Contents



DEX MEDIA EAST LLC

An Indirect Wholly-Owned Subsidiary of Dex
Media, Inc.




CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


|                               |                                       |                                   |         |                 |         |   |         |         |         |  
|------------------------------ | ------------------------------------- | --------------------------------- | ------- | --------------- | ------- | - | ------- | ------- | ------- | -
|                               |                                       | Three Months                      |         | Three Months   
|                               |                                       | Ended March 31,                   |         | Ended March 31,
|                               |                                       | 2004                              |         | 2003           
|                               |                                       |                                   |         |                
|                               |                                       |                                  
|                               |                                       | (Dollars in thousands)           
|                               |                                       |                                  
|                               |                                       | (Unaudited)                      
|Revenue                        |                                       | $                                 | 180,789 |                 |         | $ | 152,873 |        
|Operating Expenses:            |                                       |                                   |         |                 |         |   |         |        
|                               | Cost of revenue                       |                                   |         | 55,370          |         |   |         | 47,228  |        
|                               | General and administrative expense    |                                   |         | 17,497          |         |   |         | 16,514  |        
|                               | Bad debt expense                      |                                   |         | 6,903           |         |   |         | 7,128   |        
|                               | Depreciation and amortization expense |                                   |         | 2,491           |         |   |         | 2,773   |        
|                               | Amortization of intangibles           |                                   |         | 45,282          |         |   |         | 53,590  |        
|                               |                                       |                                   |         |                 |         |   |         |        
|                               |                                       | Total operating expenses          |         |                 | 127,543 |   |         |         | 127,233 |  
|                               |                                       |                                   |         |                 |         |   |         |        
|                               |                                       | Operating income                  |         |                 | 53,246  |   |         |         | 25,640  |  
|Other expense (income):        |                                       |                                   |         |                 |         |   |         |        
|                               | Interest income                       |                                   |         | (110            | )       |   |         | (98     | )      
|                               | Interest expense                      |                                   |         | 50,284          |         |   |         | 48,164  |        
|                               | Other expense, net                    |                                   |         | 33              |         |   |         | 4,077   |        
|                               |                                       |                                   |         |                 |         |   |         |        
|                               |                                       | Income (loss) before income taxes |         |                 | 3,039   |   |         |         | (26,503 | )
|Income tax provision (benefit) |                                       |                                   | 1,217   |                 |         |   | (10,615 | )      
|                               |                                       |                                   |         |                 |         |   |         |        
|                               | Net income (loss)                     |                                   | $       | 1,822           |         |   | $       | (15,888 | )      
|                               |                                       |                                   |         |                 |         |   |         |        

See accompanying notes to condensed consolidated
financial statements.

3



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##### Table of Contents



DEX MEDIA EAST LLC

An Indirect Wholly-Owned Subsidiary of Dex
Media, Inc.




CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                  |                                                               |                                                  |                                       |                    |         |        |   |         |         |        | 
|--------------------------------- | ------------------------------------------------------------- | ------------------------------------------------ | ------------------------------------- | ------------------ | ------- | ------ | - | ------- | ------- | ------ | 
|                                  |                                                               | Three Months Ended                               |                                       | Three Months Ended
|                                  |                                                               | March 31,                                        |                                       | March 31,         
|                                  |                                                               | 2004                                             |                                       | 2003              
|                                  |                                                               |                                                  |                                       |                   
|                                  |                                                               |                                                 
|                                  |                                                               | (Dollars in thousands)                          
|                                  |                                                               |                                                 
|                                  |                                                               | (Unaudited)                                     
|Operating activities:             |                                                               |                                                  |                                       |                    |         |        |   |        
|                                  | Net income (loss)                                             |                                                  | $                                     | 1,822              |         |        | $ | (15,888 | )      
|Adjustments to net income (loss): |                                                               |                                                  |                                       |                    |         |        |   |        
|                                  | Bad debt expense                                              |                                                  |                                       | 6,903              |         |        |   | 7,128   |        
|                                  | Depreciation and amortization expense                         |                                                  |                                       | 2,491              |         |        |   | 2,773   |        
|                                  | Amortization of intangibles                                   |                                                  |                                       | 45,282             |         |        |   | 53,590  |        
|                                  | Amortization of deferred financing costs                      |                                                  |                                       | 10,693             |         |        |   | 4,277   |        
|                                  | Deferred tax provision (benefit)                              |                                                  |                                       | 1,217              |         |        |   | (10,615 | )      
|                                  | Unrealized gain on foreign currency derivative
    instrument |                                                  |                                       |                   |         |        |   | (1,733  | )      
|                                  | Unrealized loss on translation of foreign
    currency debt   |                                                  |                                       |                   |         |        |   | 967     |        
|                                  | Changes in operating assets and liabilities:                  |                                                  |                                       |                    |         |        |   |         |        
|                                  |                                                               | Accounts receivable                              |                                       |                    | 1,029   |        |   |         | 4,938   |       
|                                  |                                                               | Deferred directory costs                         |                                       |                    | (5,209  | )      |   |         | (6,036  | )     
|                                  |                                                               | Other current assets                             |                                       |                    | 1,197   |        |   |         | (612    | )     
|                                  |                                                               | Other long-term assets                           |                                       |                    | 421     |        |   |         | (5,598  | )     
|                                  |                                                               | Accounts payable and other liabilities           |                                       |                    | (5,266  | )      |   |         | 11,190  |       
|                                  |                                                               | Deferred revenue and customer deposits           |                                       |                    | 4,198   |        |   |         | 20,216  |       
|                                  |                                                               | Amounts due to affiliates                        |                                       |                    | 19,183  |        |   |         |        |       
|                                  |                                                               | Employee benefit plan obligations and other, net |                                       |                    |        |        |   |         | 1,113   |       
|                                  |                                                               |                                                  |                                       |                    |         |        |   |        
|                                  |                                                               |                                                  | Cash provided by operating activities |                    |         | 83,961 |   |         |         | 65,710 | 
|                                  |                                                               |                                                  |                                       |                    |         |        |   |        
|Investing activities:             |                                                               |                                                  |                                       |                    |         |        |   |        
|                                  | Expenditures for property, plant and equipment                |                                                  |                                       | (4,748             | )       |        |   |        |        
|                                  | Capitalized software development costs                        |                                                  |                                       | (6,860             | )       |        |   | (3,273  | )      
|                                  |                                                               |                                                  |                                       |                    |         |        |   |        
|                                  |                                                               | Cash used for investing activities               |                                       |                    | (11,608 | )      |   |         | (3,273  | )     
|                                  |                                                               |                                                  |                                       |                    |         |        |   |        
|Financing activities:             |                                                               |                                                  |                                       |                    |         |        |   |        
|                                  | Proceeds from issuance of short-term debt                     |                                                  |                                       | 2,000              |         |        |   |        |        
|                                  | Repayments of short-term borrowings                           |                                                  |                                       | (2,000             | )       |        |   |        |        
|                                  | Repayments on long-term debt                                  |                                                  |                                       | (75,000            | )       |        |   | (25,000 | )      
|                                  | Payment of financing costs                                    |                                                  |                                       |                   |         |        |   | (337    | )      
|                                  | Dividends to parent                                           |                                                  |                                       | (111               | )       |        |   |        |        
|                                  |                                                               |                                                  |                                       |                    |         |        |   |        
|                                  |                                                               | Cash used for financing activities               |                                       |                    | (75,111 | )      |   |         | (25,337 | )     
|                                  |                                                               |                                                  |                                       |                    |         |        |   |        
|Cash and cash equivalents:        |                                                               |                                                  |                                       |                    |         |        |   |        
|                                  | (Decrease) increase                                           |                                                  |                                       | (2,758             | )       |        |   | 37,100  |        
|                                  | Beginning balance                                             |                                                  |                                       | 2,758              |         |        |   | 37,626  |        
|                                  |                                                               |                                                  |                                       |                    |         |        |   |        
|                                  |                                                               | Ending balance                                   |                                       | $                  |        |        |   | $       | 74,726  |       
|                                  |                                                               |                                                  |                                       |                    |         |        |   |        

See accompanying notes to condensed consolidated
financial statements.

4



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##### Table of Contents



DEX MEDIA EAST LLC

An Indirect Wholly-Owned Subsidiary of Dex
Media, Inc.




NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


(Unaudited)




|    |                        
|--- | -----------------------
|(1) | Description of Business



|    |            
|--- | -----------
|(a) | Acquisition

On August 19, 2002, Dex Holdings LLC
(Dex Holdings), the parent of Dex Media, Inc.
(Dex Media), new entities formed by the private
equity firms of The Carlyle Group and Welsh, Carson,
Anderson & Stowe (WCAS) (together, the
Sponsors), entered into concurrent purchase
agreements (the Dex East Purchase Agreement and the
Dex West Purchase Agreement) to purchase the
business of Qwest Dex Holdings, Inc. and its wholly-owned
subsidiary Qwest Dex, Inc. (together Qwest Dex) from
Qwest Communications International Inc. (Qwest) in
two separate phases.

In the first phase, consummated on
November 8, 2002 (the Acquisition), Dex
Holdings assigned its right to purchase the directory business
in the Dex East States (as defined below) to Dex Media East LLC
(Dex Media East or the Company), an
indirect wholly-owned subsidiary of Dex Media. Dex Media East
now operates the directory business in Colorado, Iowa,
Minnesota, Nebraska, New Mexico, North Dakota and South Dakota
(the Dex East States). The total amount of
consideration paid for Qwest Dexs directory business in
the Dex East States was $2.8 billion (excluding fees and
acquisition costs).

In the second phase, consummated on
September 9, 2003, Qwest Dex contributed its remaining
assets and liabilities relating to its directory business in the
Dex West States (as defined below) to GPP LLC, a newly-formed
limited liability company. Immediately following this
contribution, Dex Media West LLC (Dex Media West),
an indirect wholly-owned subsidiary of Dex Media, purchased all
of the interests in GPP LLC for $4.3 billion (excluding
fees and acquisition costs). Immediately following such
purchase, Dex Media West merged with GPP LLC. Dex Media West now
operates the directory business acquired in Arizona, Idaho,
Montana, Oregon, Utah, Washington and Wyoming (the Dex
West States). In conjunction with the sale, Dex West
employees became employees of Dex Media West and were
immediately transferred to Dex Media East. On January 1,
2004, all employees of Dex Media East were transferred to
another indirect wholly-owned subsidiary of Dex Media, Dex Media
Services LLC (or Service Co.).



|    |           
|--- | ----------
|(b) | Operations

The Company is the exclusive official directory
publisher for Qwest Corporation, Qwests local exchange
carrier (Qwest LEC), in the Dex East States, which
is the primary local exchange carrier in most service areas
within the Dex East States. As a result, the Company is the
largest telephone directory publisher of white and yellow pages
directories to businesses and residents in the Dex East States.
The Company provides directory and Internet solutions to local
and national advertisers. Virtually all of the Companys
revenue is derived from the sale of advertising in its various
directories. Published directories are distributed to businesses
and residents in the Dex East States through third-party vendors.



|    |                      
|--- | ---------------------
|(2) | Basis of Presentation

The accompanying condensed consolidated interim
financial statements are unaudited. In compliance with the
Securities and Exchange Commissions (the SEC)
instructions for interim financial statements, certain
information and footnote disclosures normally included in
financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
have been omitted. In managements opinion, the condensed
consolidated financial statements reflect all adjustments (which
consist of normal recurring adjustments) necessary to fairly
present the condensed consolidated results of operations, cash
flows and financial position of the Company as of March 31,
2004 and December 31, 2003 and for the three months ended
March 31, 2004 and 2003. These condensed consolidated
financial statements should be read in conjunction with the
audited consolidated financial statements of the Company as of
December 31,

5



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##### Table of Contents



DEX MEDIA EAST LLC


An Indirect Wholly-Owned Subsidiary of Dex
Media, Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2003 and 2002 and for the year ended
December 31, 2003, for the periods from November 9 to
December 31, 2002 and from January 1 to November 8,
2002, and for the year ended December 31, 2001 included in
the Companys Form 10-K as filed with the SEC. The
condensed consolidated results of operations for the three
months ended March 31, 2004 are not necessarily indicative
of the results expected for the full year.

The accompanying condensed consolidated
statements of operations for the three months ended
March 31, 2003 and the condensed consolidated statements of
cash flows for the three months ended March 31, 2003,
reflect the consolidated financial results of operations and
cash flows of the Company and include all material adjustments
required under purchase accounting.



|    |                                               
|--- | ----------------------------------------------
|(3) | Summary of Significant Accounting
    Policies



|    |                            
|--- | ---------------------------
|(a) | Principles of Consolidation

The condensed consolidated financial statements
include the financial statements of Dex Media East and its
wholly-owned subsidiaries, Dex Media East Finance Co. and Dex
Media International Inc. All intercompany balances and
transactions have been eliminated in consolidation.



|    |                 
|--- | ----------------
|(b) | Use of Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the amounts and disclosures reported
in these condensed consolidated financial statements and
accompanying notes. Actual results could differ significantly
from those estimates.



|    |                    
|--- | -------------------
|(c) | Revenue Recognition

The sale of advertising in printed directories
published by the Company is the primary source of revenue.
Revenue is recognized ratably over the life of each directory
using the deferral and amortization method of accounting, with
revenue recognition commencing in the month of delivery. The
Company publishes white and yellow pages directories primarily
with 12-month lives. From time to time, the Company may choose
to change the lives of certain directories in order to more
efficiently manage work and customer flow. During 2003, the
Company determined it would extend the lives of five directories
published in December 2002 and publish the new editions of these
five directories in January 2004. The lives of the new editions
of these five directories will be 12 months thereafter.
These extensions did not have a significant impact on the
Companys results of operations for the three months ended
March 31, 2004 and are not expected to have a material
effect on revenue or cost of revenue in future periods under the
deferral and amortization method of accounting. For the three
months ended March 31, 2004 and 2003, the Company published
33 and 28 directories, respectively.

The Company enters into transactions where the
Companys products and services are promoted by the
customer and, in exchange, the Company carries the
customers advertisement. The Company accounts for these
transactions in accordance with Emerging Issues Task Force
(EITF) Issue No. 99-17, Accounting for
Advertising Barter Transactions.Such transactions
were not significant to the Companys operations for the
three months ended March 31, 2004 and 2003.

In certain cases, the Company enters into
agreements with customers that involve the delivery of more than
one product or service. Revenue for such arrangements is
allocated in accordance with EITF Issue No. 00-21,
Revenue Arrangements with Multiple
Deliverables.

6



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##### Table of Contents



DEX MEDIA EAST LLC


An Indirect Wholly-Owned Subsidiary of Dex
Media, Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                
|--- | ---------------
|(d) | Cost of Revenue

The Company accounts for cost of revenue under
the deferral and amortization method of accounting. Accordingly,
the cost of revenue recognized in a reporting period consists of
(1) costs incurred in that period and recognized in that
period, principally sales salaries and wages, (2) costs
incurred in a prior period, a portion of which is amortized and
recognized in the current period and (3) costs incurred in
the current period, a portion of which is amortized and
recognized in that period and the balance of which is deferred
until future periods. Consequently, there will be a difference
between the cost of revenue recognized in any given period and
the costs incurred in the given period, which may be significant.

Costs incurred in the current period and subject
to deferral include direct costs associated with the publication
of directories, including sales commissions, paper, printing,
transportation, distribution and pre-press production and
employee and systems support costs relating to each of the
foregoing. Sales commissions include commissions paid to
employees for sales to local advertisers and to third party
certified marketing representatives, which act as the
Companys channel to national advertisers. All deferred
costs related to the sale and production of directories are
recognized ratably over the life of each directory under the
deferral and amortization method of accounting, with cost
recognition commencing in the month of delivery.



|    |                         
|--- | ------------------------
|(e) | Stock-Based Compensation

The Company accounts for the Stock Option Plan of
Dex Media, Inc. under the recognition and measurement principles
of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees,and related Interpretations. Had the
Company accounted for employee stock options grants under the
fair value method prescribed by Statement of Financial
Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation,the
pro forma results of the Company for the three months ended
March 31, 2004 and 2003 would have been as follows (in
thousands):

|                  |             |                |   |                |  |  |   |         |  
|----------------- | ----------- | -------------- | - | -------------- |  |  | - | ------- | -
|                  |             | Three Months   |   | Three Months  
|                  |             | Ended          |   | Ended         
|                  |             | March 31, 2004 |   | March 31, 2003
|                  |             |                |   |               
|Net Income (Loss) |             |                |   |                |  |  |   |        
|                  | As reported |                | $ | 1,822          |  |  | $ | (15,888 | )
|                  | Pro forma   |                |   | 1,767          |  |  |   | (15,931 | )



|    |                     
|--- | --------------------
|(f) | Income Tax Provision

Income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are
recorded to reflect the future tax consequences of temporary
differences between the financial reporting bases of assets and
liabilities and their tax bases at each year end. Deferred tax
assets and liabilities are measured using the enacted income tax
rates in effect for the period in which those temporary
differences are expected to be recovered or settled. Deferred
tax assets and liabilities are adjusted for future income tax
rate changes in the year the changes are enacted. Deferred tax
assets are recognized for operating loss and tax credit carry
forwards if management believes, based upon existing evidence,
that it is more likely than not that the carry forward will be
utilized. All deferred tax assets are reviewed for realizability
and valuation allowances are recorded if it is more likely than
not that the deferred tax assets will not be realized.

7



---



##### Table of Contents



DEX MEDIA EAST LLC


An Indirect Wholly-Owned Subsidiary of Dex
Media, Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                               
|--- | ------------------------------
|(4) | Goodwill and Intangible Assets

For the three months ended March 31, 2004
and 2003 no goodwill was acquired, impaired or otherwise
adjusted.

The gross carrying amount and accumulated
amortization of other intangible assets and their estimated
useful lives are as follows (dollars in thousands):

As of March 31, 2004

|                                  |        |          |         |              |  |          |          |          |   |   |         |           |  |  |              |  | 
|--------------------------------- | ------ | -------- | ------- | ------------ |  | -------- | -------- | -------- | - | - | ------- | --------- |  |  | ------------ |  | 
|                                  |        | Gross    |         |              |  |          |          |         
|                                  |        | Carrying |         | Accumulated  |  | Net Book |          |         
|Intangible Assets                 |        | Value    |         | Amortization |  | Value    |          | Life    
|                                  |        |          |         |              |  |          |          |         
|Customer relationships  local    |        | $        | 897,000 |              |  | $        | (217,157 | )        |   | $ | 679,843 |           |  |  | 20  years(1) | 
|Customer relationships  national |        |          | 241,000 |              |  |          | (44,462  | )        |   |   | 196,538 |           |  |  | 25  years(1) | 
|Non-compete/publishing agreements |        |          | 251,000 |              |  |          | (8,760   | )        |   |   | 242,240 |           |  |  | 40 years     | 
|Dex Trademark                     |        |          | 311,000 |              |  |          |         |          |   |   | 311,000 |           |  |  | Indefinite   | 
|Qwest Dex Trademark agreement     |        |          | 68,000  |              |  |          | (18,970  | )        |   |   | 49,030  |           |  |  | 5 years      | 
|Advertising agreements            |        |          | 23,000  |              |  |          | (2,133   | )        |   |   | 20,867  |           |  |  | 15 years     | 
|                                  |        |          |         |              |  |          |          |          |   |   |         |           |  |  |              | 
|                                  | Totals |          | $       | 1,791,000    |  |          | $        | (291,482 | ) |   | $       | 1,499,518 |  |  |              |  | 
|                                  |        |          |         |              |  |          |          |          |   |   |         |           |  |  |              | 

As of December 31, 2003

|                                  |        |          |         |              |  |          |          |          |   |   |         |           |  |  |              |  | 
|--------------------------------- | ------ | -------- | ------- | ------------ |  | -------- | -------- | -------- | - | - | ------- | --------- |  |  | ------------ |  | 
|                                  |        | Gross    |         |              |  |          |          |         
|                                  |        | Carrying |         | Accumulated  |  | Net Book |          |         
|Intangible Assets                 |        | Value    |         | Amortization |  | Value    |          | Life    
|                                  |        |          |         |              |  |          |          |         
|Customer relationships  local    |        | $        | 897,000 |              |  | $        | (184,280 | )        |   | $ | 712,720 |           |  |  | 20  years(1) | 
|Customer relationships  national |        |          | 241,000 |              |  |          | (37,410  | )        |   |   | 203,590 |           |  |  | 25  years(1) | 
|Non-compete/publishing agreements |        |          | 251,000 |              |  |          | (7,190   | )        |   |   | 243,810 |           |  |  | 40 years     | 
|Dex Trademark                     |        |          | 311,000 |              |  |          |         |          |   |   | 311,000 |           |  |  | Indefinite   | 
|Qwest Dex Trademark agreement     |        |          | 68,000  |              |  |          | (15,570  | )        |   |   | 52,430  |           |  |  | 5 years      | 
|Advertising agreements            |        |          | 23,000  |              |  |          | (1,750   | )        |   |   | 21,250  |           |  |  | 15 years     | 
|                                  |        |          |         |              |  |          |          |          |   |   |         |           |  |  |              | 
|                                  | Totals |          | $       | 1,791,000    |  |          | $        | (246,200 | ) |   | $       | 1,544,800 |  |  |              |  | 
|                                  |        |          |         |              |  |          |          |          |   |   |         |           |  |  |              | 



---



|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(1) | Amortization is calculated using a declining
    method in relation to estimated retention lives of acquired
    customers.

8



---



##### Table of Contents



DEX MEDIA EAST LLC


An Indirect Wholly-Owned Subsidiary of Dex
Media, Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |               
|--- | --------------
|(5) | Long-Term Debt

Long-term debt is comprised of the following (in
thousands, in descending order of right of payment):

|                                                                                                                                                                                                                                |  |           |           |              |  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | --------- | ------------ |  | - | --------- | -
|                                                                                                                                                                                                                                |  | March 31, |           | December 31,
|                                                                                                                                                                                                                                |  | 2004      |           | 2003        
|                                                                                                                                                                                                                                |  |           |           |             
|Notes payable to banks, Tranche A Term Loan,
    bearing interest at adjusted London Interbank Offer Rates
    (LIBOR) plus the current applicable interest spread
    of 2.25% (weighted average of 3.39% at March 31, 2004) |  | $         | 547,467   |              |  | $ | 585,288   |  
|Notes payable to banks, Tranche B Term Loan,
    bearing interest at adjusted LIBOR plus the current applicable
    interest spread of 2.5% (weighted average of 3.62% at
    March 31, 2004)                                   |  |           | 543,550   |              |  |   | 580,825   |  
|Unsecured senior notes, due November 2009,
    bearing interest at 9 7/8%                                                                                                                                                       |  |           | 450,000   |              |  |   | 450,000   |  
|Unsecured senior subordinated notes, due November
    2012, bearing interest at 12 1/8%                                                                                                                                         |  |           | 525,000   |              |  |   | 525,000   |  
|                                                                                                                                                                                                                                |  |           |           |              |  |   |           |  
|                                                                                                                                                                                                                                |  |           | 2,066,017 |              |  |   | 2,141,113 |  
|Less: current portion of long-term debt                                                                                                                                                                                         |  |           | (75,950   | )            |  |   | (50,845   | )
|                                                                                                                                                                                                                                |  |           |           |              |  |   |           |  
|                                                                                                                                                                                                                                |  | $         | 1,990,067 |              |  | $ | 2,090,268 |  
|                                                                                                                                                                                                                                |  |           |           |              |  |   |           |  

As of March 31, 2004, there were no
borrowings under the revolving credit facility (although
approximately $1 million was committed under a standby
letter of credit). The Company paid interest and fees for the
credit facilities, interest rate swap, senior notes and senior
subordinated notes of $14.0 million and $17.2 million
during the three months ended March 31, 2004 and 2003,
respectively. As of March 31, 2004, the Company was in
compliance with all covenants under its credit facilities.



|    |                                                  
|--- | -------------------------------------------------
|(6) | Derivative Instruments and Hedging
    Activities

During November 2002, the Company entered into
four interest rate swap agreements to hedge against the effects
of increases in the interest rates associated with floating rate
debt on its credit facilities. All interest rate related
derivative instruments had forward starting dates of May 8,
2003. Due to the forward starting dates, the Company did not
reclassify any amounts into earnings for the three months ended
March 31, 2003. The Company reclassified $1.8 million
of hedging losses into interest expense for the three months
ended March 31, 2004. For the three months ended
March 31, 2004 and 2003, the Company had $1.3 million
and $1.7 million of unrealized losses, respectively net of
tax which are included in accumulated other comprehensive loss.
As of March 31, 2004 and December 31, 2003,
$5.3 million and $4.0 million, respectively, of
deferred losses,net of tax on derivative instruments are
recorded in accumulated other comprehensive loss, of which
$2.7 million, net of tax is expected to be reclassified to
earnings during the next 12 months.

During November 2002, the Company entered into a
foreign currency swap agreement to hedge against the effects of
foreign currency fluctuation between the US Dollar and the Euro
on its Tranche B-Euros. For the three months ended
March 31, 2003, the Company recognized approximately
$1.7 million in unrealized gains on the foreign currency
derivative instrument. These gains were offset by losses on
foreign currency transaction adjustments to the underlying debt
instrument of approximately $1.2 million for the three
months ended March 31, 2003. In connection with the
refinancing of the Tranche B and Tranche-B Euros in
November 2003, the Company canceled its foreign currency swap
agreement on November 10, 2003.

During November 2002, the Company entered into an
interest rate cap agreement. Losses of less than
$0.1 million and $0.3 million are included in earnings
for the three months ended March 31, 2004 and 2003,
respectively, relating to this agreement.

9



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##### Table of Contents



DEX MEDIA EAST LLC


An Indirect Wholly-Owned Subsidiary of Dex
Media, Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                     
|--- | --------------------
|(7) | Comprehensive Income

Components of comprehensive income (loss) are
changes in equity other than those resulting from investments by
owners and distributions to owners. Net income (loss) is the
primary component of comprehensive income (loss). For the
Company, the component of comprehensive income (loss) other than
net income (loss) is the change in unrealized gain or loss on
derivatives qualifying for hedge accounting, net of tax. The
aggregate amounts of such changes to equity that have not been
recognized in net income are reported in the equity portion of
the consolidated balance sheets as accumulated other
comprehensive income (loss). Comprehensive income (loss) for the
three months ended March 31, 2004 and 2003 was
$0.6 million and ($17.6) million, respectively.



|    |              
|--- | -------------
|(8) | Stock Options

On November 8, 2002, Dex Media adopted the
Stock Option Plan of Dex Media, Inc. (the Plan) that
permits the grant of nonqualified and incentive stock options to
its employees, consultants and independent directors or those of
its wholly-owned subsidiaries. As of March 31, 2004 and
December 31, 2003, the maximum number of shares of common
stock available for grant was 623,000. The Compensation
Committee of Dex Media determines the terms for each option.
Generally, all outstanding stock options have an exercise price
that are equal to the estimated fair value of the common stock
on the date the stock option was granted. However, in certain
instances stock options have been granted with an exercise price
below the fair value of the common stock on the date of grant.
All outstanding options have a term of ten years. Outstanding
options vest in two segments. Subject to the optionees
continued employment with the Company (1) 25% of the
options granted will vest in equal annual installments of 5%
each on each December 31 beginning in the year of grant or
the following year, depending upon when during the calendar year
the options are granted, and ending five years after; and
(2) 75% of the options granted will vest on the eighth
anniversary of the grant date; however, an installment equal to
15% of the options granted shall become vested following each of
the fiscal years beginning the year of grant or the following
year, depending upon when during the calendar year the options
are granted, and ending five years after if certain EBITDA
targets are met with respect to each year.

On November 3, 2003, Dex Media declared a
distribution to its parent of $750.2 million. As a result
of the distribution and as provided under the Plan, Dex Media
adjusted the exercise price of all outstanding options to $60,
effective November 10, 2003. As the aggregate intrinsic
value of the awards immediately after the change in exercise
price was not greater than the aggregate intrinsic value of the
awards immediately prior to the change in exercise price, and as
the ratio of the exercise price per share to the market price
per share was not reduced, the adjustment to the exercise price
of the options did not result in any accounting recognition in
the Companys consolidated statements of operations in
accordance with APB Opinion No. 25 and FASB Interpretation
No. (FIN) 44, Accounting for
Certain Transactions Involving Stock Compensation.

On January 28, 2004, Dex Media declared
another distribution to its parent of $250.5 million. As a
result of the distribution and as allowed under the Plan, Dex
Media adjusted the exercise price of outstanding options to
$46.43 and increased the number of outstanding options by
9.3587%, effective March 3, 2004. As the aggregate
intrinsic value of the awards immediately after the change in
exercise price was not greater than the aggregate intrinsic
value of the awards immediately prior to the change in exercise
price, and as the ratio of the exercise price per share to the
market price per share was not reduced, the adjustment to the
exercise price of the options did not result in any accounting
recognition in the Companys consolidated statements of
operations in accordance with APB Opinion No. 25 and
FIN 44.

10



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##### Table of Contents



DEX MEDIA EAST LLC


An Indirect Wholly-Owned Subsidiary of Dex
Media, Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                               
|--- | ----------------------------------------------
|(9) | Pension and Other Post-Retirement
    Benefits



|    |                    
|--- | -------------------
|(a) | General Description

Effective November 8, 2002, Dex Media
adopted a pension plan and effective December 1, 2002, Dex
Media adopted a post-retirement benefit plan providing retiree
healthcare (together, the Dex Media Plans) with
features similar to the Qwest plans described below. All
individuals who became employees of Dex Media in connection with
the Acquisition and who previously participated in the Qwest
plans now participate in the Dex Media Plans. Employees of Qwest
Dex who retired prior to the date of the Acquisition became
retirees of Qwest and as such receive benefits under the Qwest
Plans. Dex Media has filed for a determination letter with the
IRS for its pension plan.

Pension costs and other post-retirement costs are
recognized over the periods in which the employee renders
services and becomes eligible to receive benefits as determined
by using the projected unit credit method. Dex Medias
funding policy is to make contributions with the objective of
accumulating sufficient assets to pay all benefits when due. No
pension funding was required for Dex Media for the three months
ended March 31, 2004 and 2003. The other post-retirement
benefit plan is pay-as-you go and is funded out of Dex
Medias operating cash as the costs are incurred. No other
post-retirement benefit funding was required for Dex Media for
the three months ended March 31, 2004 and 2003.

On September 9, 2003, Dex West employees
became employees of Dex Media East. Effective January 1,
2004, all employees of Dex Media East were transferred to
Service Co. As such, all employee-related liabilities, including
pension and other post-retirement obligations, are included in
Service Co.s reported liabilities. The Company records an
affiliate payable for the portion of the liability associated
with the employees who provide services to Dex Media East. Under
the Shared Services and Employees Agreement dated
September 9, 2003, costs related to employees providing
services entirely for Dex Media East are allocated 100% to Dex
Media East. Shared employee costs are allocated and charged to
Dex Media East based upon Dex Media Easts proportional
share of consolidated Dex Media revenue.



|    |                                            
|--- | -------------------------------------------
|(b) | Components of Net Periodic Benefit
    Cost

The components of net periodic benefit cost for
the Company are as follows (in thousands):

|                                    |  |                    |        |                    |  |                 |     |                 |  |   |        |   |  |   |     | 
|----------------------------------- |  | ------------------ | ------ | ------------------ |  | --------------- | --- | --------------- |  | - | ------ | - |  | - | --- | 
|                                    |  |                    |        |                   
|                                    |  | Three Months Ended |        | Three Months Ended
|                                    |  | March 31, 2004     |        | March 31, 2003    
|                                    |  |                    |        |                   
|                                    |  |                    |        | Post-Retirement    |  |                 |     | Post-Retirement
|                                    |  | Pension Benefit    |        | Benefits           |  | Pension Benefit |     | Benefits       
|                                    |  |                    |        |                    |  |                 |     |                
|Service cost                        |  | $                  | 1,254  |                    |  | $               | 282 |                 |  | $ | 973    |   |  | $ | 239 | 
|Interest cost                       |  |                    | 1,387  |                    |  |                 | 386 |                 |  |   | 1,379  |   |  |   | 596 | 
|Expected return on plan assets      |  |                    | (1,916 | )                  |  |                 |    |                 |  |   | (1,460 | ) |  |   |    | 
|Amortization of prior service costs |  |                    |       |                    |  |                 | (43 | )               |  |   |       |   |  |   |    | 
|                                    |  |                    |        |                    |  |                 |     |                 |  |   |        |   |  |   |     | 
|Net periodic benefit cost           |  | $                  | 725    |                    |  | $               | 625 |                 |  | $ | 892    |   |  | $ | 835 | 
|                                    |  |                    |        |                    |  |                 |     |                 |  |   |        |   |  |   |     | 



|     |                              
|---- | -----------------------------
|(10) | Commitments and Contingencies



|    |           
|--- | ----------
|(a) | Litigation

The Company is involved, from time to time, in
litigation arising in the normal course of business. The outcome
of any of these litigations are not expected to have a material
adverse impact on the Company.

11



---



##### Table of Contents



DEX MEDIA EAST LLC


An Indirect Wholly-Owned Subsidiary of Dex
Media, Inc.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                 
|--- | ----------------
|(b) | Amdocs Agreement

During February 2003, Dex Media entered into a
five year agreement with Amdocs, Inc. (Amdocs) for
the complete modernization of the Companys and Dex Media
Wests core production platform. Upon the consummation of
the acquisition of Dex West, Dex Medias obligation under
the agreement totaled approximately $108.0 million. This
project is designed to upgrade Dex Medias existing
software system to enhance its functionality. The Company will
be allocated its proportional share of these charges in
accordance with its Shared Services and Employees Agreement as
the charges are incurred over the five year period. In the event
that the Company is unable to meet its obligation, Dex Media
West is required to assume the obligation for charges incurred,
and in the event Dex Media West is unable to meet its obligation
under the agreement, the Company may be required to assume the
portion of the obligation currently attributable to Dex Media
West. As of March 31, 2004, Dex Media West and the Company
collectively have approximately $76.0 million of
obligations remaining under this agreement.



|     |                             
|---- | ----------------------------
|(11) | Transactions with Affiliates

As also described in Note 1(a), upon
consummation of the acquisition of Dex West, all former Qwest
employees became employees of Dex Media East. Effective
January 1, 2004, all employees of Dex Media East were
transferred to Service Co. As such, all employee-related
liabilities, including pension and other post-retirement
obligations, are included in Service Co.s liabilities,
with an offsetting asset recorded as an affiliate receivable.
Dex Media East is charged and carries an affiliate payable for
the portion of the liability associated with employees providing
services to Dex Media East. Under the Shared Services and
Employees Agreement dated September 9, 2003, costs related
to Dex Media East employees providing services entirely for Dex
Media East are allocated 100% to Dex Media East. Shared employee
costs are allocated and charged to Dex Media East based upon Dex
Media Easts proportional share of consolidated Dex Media
revenue. All cash related affiliate balances are settled at
least monthly.

(12)     Related
Party Transactions, Other Than Affiliates

In connection with the Acquisition, the Company
entered into a management consulting agreement with each of the
Sponsors. Each agreement allows the Company access to the
Sponsors expertise in areas such as corporate management,
financial transactions, product strategy, investment,
acquisitions and other matters that relate to the Companys
business, administration and policies. Each of the two Sponsors
will receive an annual advisory fee of $1.0 million for
advisory, consulting and other services. These annual payments
shall continue until the agreements are terminated. Pursuant to
these management consulting agreements, the Company incurred
$0.5 million in pro-rated annual advisory fees for each of
the three months ended March 31, 2004 and 2003.

Dex Media has entered into a two year network
services agreement with SAVVIS Communications Corporation
(SAVVIS), pursuant to which SAVVIS will provide
network connections and other services to support the
Companys integrated production system and other systems.
SAVVIS is an affiliate of WCAS. The Company and Dex Media West
expect to pay SAVVIS approximately $2.2 million,
collectively, over the two-year term of the contract, although
the Company has the option to purchase additional services for
which the Company would pay SAVVIS additional fees.



|     |                 
|---- | ----------------
|(13) | Subsequent Event

Dex Media filed a Form S-1 with the SEC on
May 14, 2004 in connection with its proposed initial public
offering. The intended use of proceeds from the offering is to
reduce Dex Media Wests and the Companys senior
subordinated notes by $273.0 million and
$183.8 million, respectively.

12



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Executive Overview



| |           
| | ----------
| | Background

The following discussion and analysis of our
financial condition and results of operations covers periods
subsequent to the consummation of the acquisition of the assets
of Dex East (the Acquisition). Dex East
refers to the operations of Qwest Dex Holdings, Inc. and its
subsidiary in Colorado, Iowa, Minnesota, Nebraska, New Mexico,
North Dakota and South Dakota (the Dex East States).
References to we, our or us
refers to Dex Media East, the successor to Dex East. We have
operated as a stand-alone company since the Acquisition. The
Acquisition was accounted for under the purchase method of
accounting. Under this method, the pre-acquisition deferred
revenue and related deferred costs associated with directories
that were published prior to the acquisition date were not
carried over to our balance sheet. The effect of this accounting
treatment is to reduce revenue and related costs that would
otherwise have been recognized during the twelve months
subsequent to the acquisition date.

The statements in the discussion and analysis
regarding industry outlook, our expectations regarding the
future performance of our business and the other non-historical
statements are forward-looking statements. These forward-looking
statements are subject to numerous risks and uncertainties. Our
actual results may differ materially from those contained in any
forward-looking statements. You should read the following
discussion together with our condensed consolidated financial
statements and related notes thereto included elsewhere herein.

As a result of our conversion to the Amdocs
software system, certain of our customer categories will be
reclassified, which may result in a change in how we report our
total number of customer accounts.



| |             
| | ------------
| | Our Business

We are the largest directory publisher in the Dex
East States and the sixth largest directory publisher in the
U.S. For the three months ended March 31, 2004, we
published 33 directories and distributed approximately five
million copies of these directories to business and residential
consumers in the Dex East States. We also provide related
services, including an Internet-based directory. For the three
months ended March 31, 2004, we have generated
$180.8 million in revenue. Approximately 97% of our total
revenue for the three months ended March 31, 2004, was
generated from the publication of directories.

Our Strategy

Our strategy is centered on building
relationships with our major customer groups: small and
medium-sized local businesses and national companies doing
business in the Dex East States. We plan to continue to build
our knowledge of their businesses and develop value-added
content that can be distributed in a variety of forms.
Currently, the primary method of distribution is our print
directories. We also use the Internet and CD-ROMs to deliver our
content. We plan to continue evaluating different methods of
distribution as markets and electronic device acceptance change,
particularly in the digital space. Additionally, we will look to
enhance product offerings such as bundled print and Internet.

Maximizing the utility of our content is an
important aspect of our overall strategy. To accomplish this, we
plan to continue: innovating new products such as advertising on
book spines, covers and tabs; expanding on market segmentation
such as bilingual directories in select markets; and enhancing
our distribution platforms. In addition, we plan to continue
evaluating our related businesses based on the utility of these
product offerings to our advertisers and consumers.

Our strategy also includes a focus on improving
our infrastructure in order to achieve a more efficient cost
structure and improve revenue opportunities in the long-term. In
2004, we expect to replace our entire production system with
Amdocs technology in a phased deployment.

13



---



##### Table of Contents



Results of Operations



| |         
| | --------
| | Overview

Our consolidated financial statements included
herein have been prepared on the basis of the deferral and
amortization method of accounting, under which revenue and
expenses are initially deferred and then recognized ratably over
the life of each directory, commencing in the month of delivery.
In 2003, we determined that the 12-month lives of five
directories published in December 2002 would be extended.
The new editions of these five directories were published in
January 2004. These extensions were made to more
efficiently manage work and customer flow. The lives of the new
editions of these directories are expected to be 12 months
thereafter. These extensions did not have a significant impact
on our results of operations for the three months ended
March 31, 2004 and are not expected to have a material
effect on revenue or cost of revenue in future periods under the
deferral and amortization method of accounting.



| |        
| | -------
| | Revenue

We derive virtually all of our revenue from the
sale of advertising in our printed directories, which we refer
to as directory services revenue. We also provide related
services, including an Internet-based directory. Growth in
directory services revenue is affected by several factors,
including changes in the quantity and size of advertisements
sold as well as the proportion of premium advertisements sold,
changes in the pricing of advertising, changes in the quantity
and mix of advertising purchased per customer and the
introduction of additional products which generate incremental
revenue. Directory services revenue may also increase through
the publication of new printed directories.

We enter into transactions where our products and
services are promoted by a customer and, in exchange, we carry
that customers advertisement. We account for these
transactions in accordance with Emerging Issues Task Force
(EITF) Issue No. 99-17, Accounting for
Advertising Barter Transactions.Such transactions
were not significant to the Companys operations for the
three months ended March 31, 2004 and 2003.

In certain cases, we enter into agreements with
customers that involve the delivery of more than one product or
service. We allocate revenue for such arrangements in accordance
with EITF Issue No. 00-21, Revenue Arrangements
with Multiple Deliverables.

As part of the Advertising Commitment Agreement
dated September 9, 2003 between Qwest and Dex Media West
and Dex Media East, Qwest agreed to purchase from Dex Media West
and us, under a take-or-pay arrangement, a minimum of
$20.0 million annually in advertising services over a
15-year period beginning with the date of the acquisition of Dex
East on November 8, 2002. If Qwest purchases more than
$20.0 million of advertising in any one year pursuant to
such agreement, up to $5.0 million of the excess could be
carried over to the subsequent years minimum advertising
purchase commitment. Upon consummation of the acquisition of Dex
West on September 9, 2003, we and Dex Media West agreed to
allocate the cash received under the take-or-pay arrangement at
42% and 58%, respectively.



| |                
| | ---------------
| | Cost of Revenue

We account for cost of revenue under the deferral
and amortization method of accounting. Accordingly, our cost of
revenue recognized in a reporting period consists of
(1) costs incurred in that period and recognized in that
period, principally sales salaries and wages, (2) costs
incurred in a prior period, a portion of which is amortized and
recognized in the current period and (3) costs incurred in
the current period, a portion of which is amortized and
recognized in that period and the balance of which is deferred
until future periods. Consequently, there will be a difference
between the cost of revenue recognized in any given period and
the costs incurred in the given period, which may be significant.

Costs incurred in the current period and subject
to deferral include direct costs associated with the publication
of directories, including sales commissions, paper, printing,
transportation, distribution and pre-press production, and
employee and systems support costs relating to each of the
foregoing. Sales commissions include commissions paid to
employees for sales to local advertisers and to certified
marketing representatives,

14



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##### Table of Contents



which act as our channel to national advertisers.
All deferred costs related to the sale and production of
directories are recognized ratably over the life of each
directory under the deferral and amortization method of
accounting, with cost recognition commencing in the month of
delivery.




| |                                       
| | --------------------------------------
| | General and Administrative
    Expense

Our general and administrative expense consists
primarily of the costs of advertising, promotion and marketing,
administrative staff, information technology, training, customer
billing, corporate management and bad debt expense. All of our
general and administrative expense is recognized in the period
in which it is incurred. Historically, our general and
administrative expense has included the costs of other services
that were shared among Qwest affiliates, including real estate,
information technologies, finance and human resources. However,
since we have terminated the transition services agreements with
Qwest as of December 31, 2003, we now incur these costs
directly.



| |                     
| | --------------------
| | Income Tax Provision

We account for income taxes under the asset and
liability method of accounting. Deferred tax assets and
liabilities are recorded to reflect the future tax consequences
of temporary differences between the financial reporting bases
of assets and liabilities and their tax bases at each year end.
Deferred tax assets and liabilities are measured using the
enacted income tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled.
Deferred tax assets and liabilities are adjusted for future
income tax rate changes in the year the changes are enacted.
Deferred tax assets are recognized for operating losses and tax
credit carry forwards if management believes, based upon
existing evidence, that it is more likely than not that the
carry forward will be utilized. All deferred tax assets are
reviewed for realizability and valuation allowances are recorded
if it is more likely than not that the deferred tax assets will
not be realized.

Items Affecting Comparability Between
Periods

Our revenue and cost of revenue for the twelve
months following the consummation of the Acquisition were
$85.9 million and $22.2 million lower, respectively,
than our revenue and cost of revenue would have been because the
Acquisition was accounted for under the purchase method of
accounting. For the three months ended March 31, 2003, our
revenue and cost of revenue were $24.7 million and
$5.9 million lower, respectively, as a result of the
purchase method of accounting. Under the purchase method of
accounting, deferred revenue and related deferred directory
costs associated with directories that had previously been
published and distributed were not carried over to our balance
sheet. The effect of this accounting treatment is to reduce
revenue and related costs that would otherwise have been
recognized in the twelve months subsequent to the Acquisition.
The purchase method of accounting will not affect our revenue
and directory costs subsequent to 2003. This purchase accounting
adjustment is non-recurring and has no historical or future cash
impact.

15



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##### Table of Contents



Results of Operations



| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | The Three Months Ended March 31, 2004
    Compared to the Three Months Ended March 31,
    2003.

|                                                                   |                             |                          |        |              |         |          |        |          |         |   |       |        |        |  |      |       |      |  
|------------------------------------------------------------------ | --------------------------- | ------------------------ | ------ | ------------ | ------- | -------- | ------ | -------- | ------- | - | ----- | ------ | ------ |  | ---- | ----- | ---- | -
|                                                                   |                             | Three Months             |        | Three Months |         |          |        |         
|                                                                   |                             | Ended                    |        | Ended        |         |          |        |         
|                                                                   |                             | March 31,                |        | March 31,    |         |          |        |         
|                                                                   |                             | 2004                     |        | 2003         |         | $ Change |        | % Change
|                                                                   |                             |                          |        |              |         |          |        |         
|                                                                   |                             |                         
|                                                                   |                             | (Dollars in thousands)  
|Revenue:                                                           |                             |                          |        |              |         |          |        |          |         |   |       |        |        |  |      |      
|                                                                   | Local directory services    |                          | $      | 145,118      |         |          | $      | 136,406  |         |   | $     | 8,712  |        |  |      | 6.4   | %   
|                                                                   | National directory services |                          |        | 30,169       |         |          |        | 12,473   |         |   |       | 17,696 |        |  |      | 141.9 | %   
|                                                                   |                             |                          |        |              |         |          |        |          |         |   |       |        |        |  |      |      
|                                                                   |                             | Total directory services |        |              | 175,287 |          |        |          | 148,879 |   |       |        | 26,408 |  |      |       | 17.7 | %
|Other revenue                                                      |                             |                          | 5,502  |              |         |          | 3,994  |          |         |   | 1,508 |        |        |  | 37.8 | %    
|                                                                   |                             |                          |        |              |         |          |        |          |         |   |       |        |        |  |      |      
|                                                                   |                             | Total revenue            |        |              | 180,789 |          |        |          | 152,873 |   |       |        | 27,916 |  |      |       | 18.3 | %
|Cost of revenue                                                    |                             |                          | 55,370 |              |         |          | 47,228 |          |         |   | 8,142 |        |        |  | 17.2 | %    
|                                                                   |                             |                          |        |              |         |          |        |          |         |   |       |        |        |  |      |      
|                                                                   | Gross profit                |                          |        | 125,419      |         |          |        | 105,645  |         |   |       | 19,774 |        |  |      | 18.7  | %   
|                                                                   | Gross margin                |                          |        | 69.4         | %       |          |        | 69.1     | %       |   |       |        |        |  |      |       |     
|General and administrative expense, including bad
    debt expense |                             | $                        | 24,400 |              |         | $        | 23,642 |          |         | $ | 758   |        |        |  | 3.2  | %    



| |        
| | -------
| | Revenue

Total revenue increased by $27.9 million, or
18.3%, to $180.8 million for the three months ended
March 31, 2004 from $152.9 million for the three
months ended March 31, 2003. Total revenue for the three
months ended March 31, 2003 was $24.7 million lower
than it would have been due to the effects of purchase
accounting. Excluding the effects of purchase accounting in
2003, total revenue increased $3.2 million, or 1.8%, in
2004. Total revenue included $175.3 million in directory
services revenue and $5.5 million in revenue for all other
products for the three months ended March 31, 2004.

Total directory services revenue, which consists
of local and national directory services revenue, increased
$26.4 million, or 17.7%, to $175.3 million for the
three months ended March 31, 2004 from $148.9 million
for the three months ended March 31, 2003. Total directory
services revenue for the three months ended March 31, 2003
was $24.7 million lower than it would have been due to the
effects of purchase accounting. Excluding the effects of
purchase accounting in 2003, total directory services revenue
increased $1.7 million, or 1.0%, in 2004.

Directory services revenue is affected by a
variety of volume and pricing factors. Volume related factors
include customer acquisition and retention, the size of
advertisements and premium products purchased. Pricing factors
include certain price increases that are applied by product and
market and that are offset by discount programs that may be
offered in selected local markets for targeted products or
headings. Such factors generally affect the dollar volume of
orders initiated in a period which are recognized as revenue
over the life of a given directory, beginning in the month of
delivery. Multiple factors contribute to changes in revenue, and
although no single factor can be distinguished as the primary
cause, improvements in product mix and pricing, combined with
stable customer retention, contributed to our increased
directory services revenue.

Local directory services revenue increased
$8.7 million, or 6.4%, to $145.1 million for the three
months ended March 31, 2004 compared to $136.4 million
for the three months ended March 31, 2003. Local directory
services revenue for the three months ended March 31, 2003
was $9.1 million lower than it would have been due to the
effects of purchase accounting. Excluding the effects of
purchase accounting in 2003, local directory services revenue
decreased $0.4 million, or 0.3%, in 2004.

Revenue from national advertisers, including
Qwest, increased $17.7 million to $30.2 million for
the three months ended March 31, 2004 as compared to
$12.5 million for the three months ended March 31,
2003.

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Revenue from national advertisers, including
Qwest, for the three months ended March 31, 2003 was
$15.6 million lower than it would have been due to the
effects of purchase accounting. Excluding the effects of
purchase accounting in 2003, revenue from national advertisers,
including Qwest, increased $2.1 million, or 7.5%, in 2004.


Other revenue increased by $1.5 million, or
37.8%, to $5.5 million for the three months ended
March 31, 2004 from $4.0 million for the three months
ended March 31, 2003.



| |                
| | ---------------
| | Cost of Revenue

Cost of revenue recognized was $55.4 million
for the three months ended March 31, 2004 compared to
$47.2 million for the three months ended March 31,
2003. Recognized cost of revenue for the three months ended
March 31, 2003 was $5.9 million lower than it would
have been due to the effects of purchase accounting. Excluding
the effects of purchase accounting in 2003, cost of revenue
recognized increased $2.3 million, or 4.3%, in 2004. Cost
of revenue recognized represented 30.6% of revenue for the three
months ended March 31, 2004, compared to 29.9% of revenue,
excluding the effects of purchase accounting, for the three
months ended March 31, 2003.

For the three months ended March 31, 2004
and 2003, we incurred costs subject to deferral and amortization
of $58.2 million and $53.2 million, respectively. The
increase in incurred costs is primarily a result of the shifts
in publication schedules which impacted direct costs of
publishing and national commissions by $5.2 million. Costs
subject to deferral and amortization include certain employee
costs, direct costs of publishing, and other costs.

Employee costs incurred during the period
increased by $1.0 million, or 4.3%, to $24.3 million
for the three months ended March 31, 2004 from
$23.3 million for the three months ended March 31,
2003. This increase was primarily a result of increases in the
number of employees, higher cost of medical insurance and higher
sales commissions and sales incentives paid to employees.

Direct costs of publishing incurred during the
period, which primarily included paper, printing and
distribution, were $22.3 million and $18.1 million for
the three months ended March 31, 2004 and 2003,
respectively. The difference in directory publication schedules
between the periods contributed to $3.7 million of the
increase.

Other costs of revenue incurred during the
period, which primarily includes systems expense, national
commissions, office and facilities expense, and professional
fees were $11.6 million and $11.8 million for the
three months ended March 31, 2004 and 2003, respectively.



| |             
| | ------------
| | Gross Profit

Our gross profit was $125.4 million for the
three months ended March 31, 2004 compared to
$105.6 million for the three months ended March 31,
2003. Gross profit for the three months ended March 31,
2003 was $18.8 million lower due to the effects of purchase
accounting. Excluding the effects of purchase accounting in
2003, total gross profit increased $1.0 million, or 0.8%,
in 2004.



| |                                       
| | --------------------------------------
| | General and Administrative
    Expense

General and administrative expense, excluding
depreciation and amortization, increased $0.8 million, or
3.2%, to $24.4 million from $23.6 million for the
three months ended March 31, 2003. The increase was
primarily due to increases in employee costs and advertising.

Employee costs, which include salaries and wages,
benefits and other employee costs, increased $0.6 million,
or 9.2%, to $7.1 million for the three months ended
March 31, 2004 from $6.5 million for the three months
ended March 31, 2003. Salaries and wages increased
$0.3 million, or 7.9%, to $4.1 million from
$3.8 million for the three months ended March 31, 2004
and 2003, respectively, due to increases in the number of
employees in finance, human resources, real estate and
information technology. Prior to 2004, these functions were
provided primarily by Qwest and were included in other general
and administrative expenses as

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##### Table of Contents



shared services. Benefits were $2.3 million
for each of the three months ended March 31, 2004 and 2003.
Other employee costs were $0.7 million and
$0.4 million for the three months ended March 31, 2004
and 2003, respectively.


Bad debt expense decreased $0.2 million, or
3.2%, to $6.9 million from $7.1 million for the three
months ended March 31, 2004 and 2003, respectively. Bad
debt expense as a percentage of revenue was 3.8% for the three
months ended March 31, 2004 compared to 4.0% of revenue,
excluding the effects of purchase accounting, for the three
months ended March 31, 2003.

Advertising increased $1.6 million to
$3.5 million for the three months ended March 31, 2004
from $1.9 million for the three months ended March 31,
2003 due to efforts to increase customer awareness, including
promoting the new Dex trademark and product offerings.
Advertising as a percent of revenue, excluding the effects of
purchase accounting in 2003, increased to 1.9% from 1.1% for the
three months ended March 31, 2004 compared to the three
months ended March 31, 2003, respectively.

Office and facilities expense remained constant
at $2.7 million for each of the three months ended
March 31, 2004 and 2003.

All other general and administrative expense,
decreased $1.2 million, or 22.2%, to $4.2 million for
the three months ended March 31, 2004 from
$5.4 million for the comparable period in 2003. For the
three months ended March 31, 2003, other general and
administrative expense includes shared services with Qwest,
including services for finance, human resources, real estate and
information technology with the costs of such services incurred
directly in salaries and wages for the three months ended
March 31, 2004.



| |             
| | ------------
| | Income Taxes

SFAS No. 109 requires that we recognize
deferred income tax assets on net operating losses to the extent
realization of these assets is more likely than not. As of
March 31, 2004, we have recorded $47.7 million of
deferred income tax assets resulting primarily from net
operating loss carryforwards. Based upon current projections of
income and expenses, we have determined that it is more likely
than not that we will utilize these deferred tax assets before
the expiration of the net operating loss carryforward periods.
Accordingly, no valuation allowance has been recorded.



| |                            
| | ---------------------------
| | Amortization of Intangibles

In connection with the Acquisition, we recorded
significant intangible assets at the date of Acquisition.
Substantial portions of these assets have definite lives and are
subject to amortization. For the three months ended
March 31, 2004 and 2003 we recognized $45.3 million
and $53.6 million, respectively, in amortization expense
related to our identifiable intangible assets. The decrease in
amortization from the prior year was the result of a declining
method used to amortize the value of acquired customers in
proportion with their estimated retention lives.



| |                 
| | ----------------
| | Interest Expense

We incurred significant indebtedness in
connection with the Acquisition. We recognized interest expense
of $50.3 million and $48.2 million for the three
months ended March 31, 2004 and 2003, respectively.

Liquidity and Capital Resources



| |         
| | --------
| | Overview

Following the transactions related to the
Acquisition, our primary source of liquidity continues to be
cash flow generated from operations. We also have availability
under our revolving credit facility, subject to certain
conditions.

In connection with the Acquisition, we incurred
$1,280.0 million of borrowings under our credit facilities
and $975.0 million of indebtedness with the issuance of the
outstanding notes. In connection with the acquisition in
September 2003, of Dex West by Dex Media, our indirect parent,
we borrowed an additional

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$160.0 million under our credit facilities.
As of March 31, 2004, we had outstanding
$2,066.0 million in aggregate indebtedness. As a result, we
are significantly leveraged and our liquidity requirements will
be significantly increased, primarily due to increased debt
service obligations.


Our credit facilities consist of a revolving
credit facility and term loan facilities. The revolving credit
facility expiring in November 2008 is comprised of total
principal of up to $100.0 million available for general
corporate purposes, subject to certain conditions. The term loan
facilities consist of a Tranche A term loan facility and a
Tranche B term loan facility, which mature in November 2008
and May 2009, respectively.

Our credit facilities bear interest, at our
option, at either:



| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a base rate used by JPMorgan Chase Bank, plus an
    applicable margin; or                                                                                                                                                              
|
| |  | a eurocurrency rate on deposits for one, two,
    three or six-month periods (or nine or twelve-month periods if,
    at the time of the borrowing, all lenders agree to make such a
    duration available), plus an applicable margin.

The applicable margins on loans under our
revolving credit facility, the Tranche A term loan facility
and the Tranche B term loan facility are subject to change
depending on our leverage ratio.

In addition to paying interest on outstanding
principal amounts under our credit facilities, we are required
to pay an annual commitment fee of 0.5% to the lenders for the
unused commitments under our revolving credit facility. The
commitment fee is payable quarterly in arrears and is subject to
change depending on our leverage ratio.

Our credit facilities contain negative and
affirmative covenants and requirements affecting us and domestic
subsidiaries that we create or acquire, with certain exceptions
set forth in our credit agreement. Our credit facilities contain
the following negative covenants and restrictions, among others:
restrictions on liens, sale-leaseback transactions, incurrence
of debt, payment of dividends and other restricted junior
payments, redemptions and stock repurchases, consolidations and
mergers, acquisitions, asset dispositions, investments, loans,
advances, changes in line of business, changes in fiscal year,
restrictive agreements with subsidiaries, transactions with
affiliates, capital expenditures, amendments to charter, by-laws
and other material documents, hedging agreements and
inter-company indebtedness. Our credit facilities also require
us to meet certain financial covenants, including leverage
ratios, an interest coverage ratio and a fixed charges coverage
ratio.

We entered into a billing and collection services
agreement with Qwest LEC upon the consummation of the
Acquisition. Under this agreement, Qwest LEC will continue until
November 7, 2004 subject to renewal, to bill and collect,
on our behalf, amounts owed by customers, that are also Qwest
local telephone customers, for our directory services. In 2003,
Qwest LEC billed approximately 43% of our revenue, excluding the
effects of purchase accounting, on our behalf, and we billed the
remaining 57% directly. Qwest LEC bills the customer on the same
billing statement on which it bills the customer for local
telephone service. In conjunction with the Acquisition, we
developed and continue to maintain the ability to transition
from the Qwest LEC billing and collection system to our own
billing and collection system, for those customers billed by
Qwest, within approximately two weeks should we choose to do so.



| |                     
| | --------------------
| | Sources of Liquidity

Net cash provided by operations was
$84.0 million and $65.7 million for the three months
ended March 31, 2004 and 2003, respectively. Cash provided
by operations was generated primarily from cash receipts from
the sale of directory advertisements, reduced by cash
disbursements for cost of revenue incurred, general and
administrative expenses and interest expense.

Net cash used for investing activities was
$11.6 million and $3.3 million for the three months
ended March 31, 2004 and 2003, respectively. The principal
use of cash for investing activities for the three months ended
March 31, 2004 and 2003 was expenditures for property,
plant, and equipment and software.

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Net cash used for financing activities was
$75.1 million and $25.3 million for the three months
ended March 31, 2004 and 2003, respectively. Significant
uses of cash for financing activities for the three months ended
March 31, 2004 and 2003 include $75.0 million and
$25.0 million, respectively, of repayments on long-term
borrowings.

Our ability to make payments on and to refinance
our indebtedness and to fund planned capital expenditures will
depend to a large extent on our ability to generate cash in the
future. This, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. Based on our current
level of operations, we believe our cash flow from operations,
available cash and available borrowings under our credit
facilities will be adequate to meet our future liquidity needs
for at least the next 12 months.

We cannot ensure, however, that our business will
generate cash flow from operations in an amount sufficient to
enable us to pay our indebtedness or to fund our other liquidity
needs. The restrictive covenants under the note indentures and
credit agreement prohibit us from commingling the funds of Dex
Media West with ours. They also prohibit us from borrowing any
funds from Dex Media West. Despite the restrictive covenants
under the note indentures and credit agreement limiting our
ability to incur additional indebtedness and dispose of our
assets, the covenants allow for multiple sources of limited
liquidity that we may access to meet our ongoing business needs,
including:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | i. Cash from operating cash flow.                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | ii. Up to $99.1 million of the
    revolving credit facility available to us as of March 31,
    2004.                                                                                                                                                                                                                                                                                                                                                           
|
| | iii. Other unsecured indebtedness which we
    may incur up to an aggregate principal amount of
    $50.0 million.                                                                                                                                                                                                                                                                                                                                               
|
| | iv. We may sell, or dispose of, assets up to
    $10.0 million annually, subject to an aggregate amount of
    $20.0 million.                                                                                                                                                                                                                                                                                                                                    
|
| | v. The proceeds from any debt issuance which
    we may use as long as our leverage ratio is at or below
    4.0 to 1.0.                                                                                                                                                                                                                                                                                                                                         
|
| | vi. We may use the proceeds from any equity
    offering as follows: a) 50%, if our leverage ratio is above
    4.0 to 1.0 or b) 100%, if our leverage ratio is at or
    below 4.0 to 1.0. As a condition to the closing of our
    indirect parents initial public offering, we will amend
    our credit facilities to, among other things, allow us access to
    a portion of the proceeds from any equity offering irrespective
    of our leverage ratio.

The credit agreement and indentures governing the
notes permit us to pursue the option of financing our capital
expenditures with capital leases as long as the aggregate
outstanding balance of capital leases is not in excess of
$30.0 million at any time. As of March 31, 2004, the
outstanding balance of capital leases was $0.5 million.

Our access to liquidity will improve
significantly when our leverage ratio drops below 4.0 to
1.0. The leverage ratio can be improved by reducing debt levels
or increasing the amount of earnings before interest, taxes,
depreciation and amortization (EBITDA). When our
leverage ratio is under 4.0 to 1.0, we may retain any
proceeds from debt or equity issuances for any business purpose,
except for optional repayment of non-credit facility related
debt with equity proceeds. If we use equity proceeds to
optionally repay a cumulative amount of non-credit facility
related debt in excess of $20.0 million, we are required to
repay equal amounts of debt under our term facilities with the
proceeds from the same equity issuances.



| |                  
| | -----------------
| | Uses of Liquidity

We expect that our primary liquidity requirements
will be for debt service on our credit facilities and notes,
capital expenditures and working capital. During the three
months ended March 31, 2004, we used the funds generated
from operations in excess of liquidity requirements to make
optional repayments under our credit facilities.

20



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##### Table of Contents



We made optional repayments in an aggregate
principal amount of $75.0 million under our credit
facilities in the three months ended March 31, 2004 using
the excess cash flow generated from operations. Our debt
portfolio, consisting of the amounts borrowed under the credit
facilities, senior notes and senior subordinated notes, is
comprised of 65.1% fixed rate debt and 34.9% floating rate debt
as of three months ended March 31, 2004. Mandatory
repayments or optional repayments under the credit facilities in
the future will cause the percentage of fixed rate debt in our
debt portfolio to increase. As our fixed rate debt as a
percentage of our total debt increases, the effective interest
rate of our debt portfolio will rise. Due to the current low
interest rate environment, the floating rate debt under the
credit facilities has significantly lower interest rates than
the fixed interest rates of our senior notes and senior
subordinated notes. If short-term interest rates rise, the
effective interest rate of our portfolio will also increase.

Tranche A and Tranche B of our term
loan credit facilities have scheduled quarterly principal
repayments that began September 30, 2003 and continue until
the maturity dates of the facilities. As a result of the
optional repayments made through March 31, 2004, the
required quarterly payments from each tranche in the period from
September 30, 2003 to June 30, 2004 have been reduced
to zero. The first mandatory repayment is now due on
September 30, 2004.

On November 10, 2003, our indirect parent,
Dex Media, issued $500.0 million of 8% Notes due 2013
and $389.0 million aggregate principal amount at maturity
of 9% Discount Notes due 2013 for gross proceeds of
$750.2 million. The gross proceeds of $750.2 million
were paid by Dex Media as a distribution to its parent and
ultimately to the Sponsors. These notes are expected to be
serviced and repaid from distributions to Dex Media from us and
our affiliate, Dex Media West, subject in each case to
restrictions contained in our respective debt agreements.
Accordingly, our cash requirements will increase in May 2009
when cash interest becomes payable on Dex Medias 9%
Discount Notes.

On February 11, 2004, our indirect parent,
Dex Media, issued another $361.0 million aggregate
principal amount at maturity of 9% Discount Notes due 2013 for
gross proceeds of $250.5 million. The gross proceeds of
$250.5 million were paid by Dex Media as a distribution to
its parent and ultimately to the Sponsors. These discount notes
defer interest until May 2009 at which time we, along with our
affiliate, Dex Media West, will be expected to service and repay
this debt in the form of distributions to Dex Media, subject in
each case to restrictions contained in our respective debt
agreements.

Dex Media has no operations of its own and
derives all of its cash flow and liquidity from its
subsidiaries. It depends on the earnings and the distribution of
funds from us and Dex Media West to meet its cash needs.
Although we are not obligated to make funds available to Dex
Media for any purpose, we are expected to make cash
distributions of $8.4 million to Dex Media semi-annually to
service its cash interest obligations on the 8% Notes due 2013,
subject to certain covenant requirements under the note
indentures and credit agreement. The indentures relating to our
senior notes and senior subordinated notes prohibit us from
distributing funds to Dex Media if the amount of such
distribution, together with all other restricted payments made
by us since November 8, 2002, would exceed the sum of an
amount calculated pursuant to a formula taking into account,
among other things, the amount of adjusted consolidated net
income accrued by us since January 1, 2003. In addition in
order to make any such distribution of funds to Dex Media, we
would have to meet the coverage tests relating to the issuance
of indebtedness under the indentures relating to our senior
notes and senior subordinated notes. Although the terms of our
credit facilities permit us to pay cash distributions to Dex
Media in an amount not to exceed 42% of the regularly scheduled
interest payments on the initial $250.0 million of the
$500.0 million of 8% Notes due 2013, we must meet an
interest coverage ratio for the four consecutive fiscal quarters
prior to the payment of the distribution to Dex Media to cover
our 42% portion of the regularly scheduled interest payments on
the remaining $250.0 million of the $500.0 million of
8% Notes due 2013.

Material Trends, Known Facts and
Uncertainties



| |                    
| | -------------------
| | Advertising Revenue

Directory services revenue is our most
significant source of revenue. Competition from other yellow
pages publishers affects our ability to attract and retain
advertisers and to increase advertising rates.

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| |             
| | ------------
| | Paper Prices

Paper is our principal raw material.
Substantially all of the paper that we use (other than for
covers) is supplied by two companies: Nippon Paper Industries
USA Co, Ltd. (formerly Daishowa America Co., Ltd.) and Norske
Skog Canada (USA), Inc. Prices under the two agreements with
these vendors are negotiated each year based on prevailing
market rates, which have been declining consistent with general
U.S. market trends for directory paper over the last three
years.



| |      
| | -----
| | Usage

Based on industry sources, overall usage of
printed yellow pages directories in the U.S. declined by a
compound annual rate of approximately 2% between 1999 and 2003.
Several factors, including the publication of competing
directories and the increased usage of Internet-based
directories, could cause usage of our printed directories to
continue to decline. Any declines in usage could limit our
ability to maintain or increase our advertising prices, cause
businesses that purchase advertising in our yellow pages
directories to reduce or discontinue those purchases and
discourage businesses that do not purchase advertising in our
yellow pages directories from doing so. Any of these factors
could affect our ability to generate revenue and have a material
adverse effect on our business.



| |                  
| | -----------------
| | On-Line Migration

Although we remain primarily focused on our
printed directories, we also market an Internet-based directory
service, DexOnline.com (formerly Qwestdex.com), to our
advertisers. We view our Internet-based directory as a
complement to our print product rather than as a stand-alone
business. We believe that any decline in the usage of our
printed directories could be offset in part by an increase in
usage of our Internet-based directory. We also believe that
increased usage of Internet-based directories will continue to
support overall usage and advertising rates in the
U.S. directory advertising industry and could provide us
with growth in advertisements. However, if we cannot provide
services over the Internet successfully or compete successfully
with other Internet-based directory services, our business would
be negatively impacted.



| |                          
| | -------------------------
| | Reduction of Bond Ratings

In anticipation of the $361.0 million of 9%
Discount Notes due 2013 issued on February 11, 2004 by our
indirect parent, Dex Media, Moodys Investor Service
downgraded the credit ratings of our credit facilities, senior
notes and senior subordinated notes by one notch while
Standard & Poors maintained a negative outlook on
our credit ratings. The rating downgrade does not have any
immediate impact on our financing costs. If we issue new debt or
refinance our existing debt in the future, the downgrade may
result in higher interest costs.



| |            
| | -----------
| | Competition

The U.S. directory advertising industry is
competitive. There are a number of independent directory
publishers and publishers affiliated with local exchange
carriers with which we compete in one or more of the Dex East
States. For example, new competitive directories were introduced
in two of our top ten markets in 2003 compared to just one new
competitive directory in 2002.

Through our Internet-based directory, we compete
with these publishers and with other Internet sites providing
search and classified directory information. In addition, we
compete against other forms of media, including newspapers,
radio, television, the Internet, billboards and direct mail, for
business and professional advertising.

The foregoing list of factors should not be
construed as exhaustive or as an admission regarding the
adequacy of disclosure made by us.

We disclaim any intention or obligation to update
or revise forward-looking statements, whether as a result of new
information, future events or otherwise.

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Critical Accounting Policies and
Estimates

We have identified the policies below as critical
to our business operations and the understanding of our results
of operations. The effect and any associated risks related to
these policies on our business operations is discussed
throughout Managements Discussion and Analysis of
Financial Condition and Results of Operations where these
policies affect our reported and expected financial results.



| |                    
| | -------------------
| | Revenue Recognition

The sale of advertising in printed directories
published by us is our primary source of revenue. We recognize
revenue ratably over the life of each directory using the
deferral and amortization method of accounting, with revenue
recognition commencing in the month of delivery. Our directories
are initially published with an estimated 12-month useful life,
although we may revise the estimate of a directory life
subsequent to its publication in order to better manage customer
and production workflow as it relates to other directories
published in the same period. Because we generally have the
right to bill and collect revenue related to the extension of
directory publishing dates, a revision in the estimated life of
a given directory should not have a significant impact on our
results of operations or cash flows.



| |                
| | ---------------
| | Cost of Revenue

Direct costs related to the sales, production and
distribution of directories are recognized ratably over the life
of each directory under the deferral and amortization method of
accounting, with cost recognition commencing in the month of
delivery. Direct costs include sales commissions, graphics costs
and the costs of printing, publishing and distribution.
Revisions in the estimated useful lives of directories after
their initial publication may cause the acceleration or
deceleration of cost recognition related to the amortization of
deferred directory costs. Although we cannot predict the extent
such changes could have on future cost recognition, the movement
of book publishing dates has historically had a minimal impact
on cost recognition between periods.



| |                                                         
| | --------------------------------------------------------
| | Allowance for Doubtful Accounts and Bad
    Debt Expense

We periodically make judgments regarding the
collectibility of outstanding receivables and provide
appropriate allowances when collectibility becomes doubtful.
Although we believe our allowance for doubtful accounts
adequately reflects that portion of our receivables that are
uncollectible, we may revise our estimates in future periods
based upon new circumstances and such revisions may be material.



| |             
| | ------------
| | Income Taxes

It is our determination that it is more likely
than not that we will utilize our deferred tax assets before the
expiration of the net operating loss carryforward periods. This
determination is based upon our estimation of projected book and
taxable income over the next several years. To the extent our
projections vary significantly from actual results, a portion of
our deferred tax benefits may not be realizable, resulting in a
charge to income tax expense.

Disclosure Regarding Forward-Looking
Statements

This Form 10-Q contains forward-looking
statements. These statements relate to future events or our
future financial performance, and involve known and unknown
risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be
materially different from any future results, levels of
activity, performance or achievements expressed or implied by
these forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as
may, will, should,
expects, intends, plans,
anticipates, believes,
estimates, predicts,
potential, continue or the negative of
these terms or other comparable terminology. These statements
are only predictions. Actual events or results may differ
materially.

23



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Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance
or achievements. These forward-looking statements are made as of
the date of this prospectus and, except as required under the
federal securities laws and the rules and regulations of the
SEC, we assume no obligation to update or revise them or to
provide reasons why actual results may differ.






|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures
    About Market Risk

Long-Term Debt

As of March 31, 2004, we had a total
outstanding debt balance of $2,066.0 million comprising of
$1,091.0 million of variable rate debt drawn under the
secured credit facilities, $450.0 million of senior notes
and $525.0 million of senior subordinated notes. The credit
facilities were made up of $547.5 million of Tranche A
Term Loan maturing in November 2008 and $543.5 million of
Tranche B Term Loan maturing in May 2009. Due to the
variable rate characteristics of the credit facilities, the
carrying amounts of Tranche A Term Loan and Tranche B
Term Loan approximated fair values.

The $450.0 million of unsecured senior notes
bearing a fixed interest rate of 9.875% matures in November
2009. Due to changes in interest rates and market conditions
since the issuance of these fixed rate notes, the fair value of
the notes was $506.3 million at March 31, 2004.

The $525.0 million of unsecured senior
subordinated notes bearing a fixed interest rate of 12.125%
matures in November 2012. Due to changes in interest rates and
market conditions since the issuance of these fixed rate notes,
the fair value of the notes was $612.9 million at
March 31, 2004.

Interest Rate Risk

As of March 31, 2004, we had no debt
outstanding under our revolving credit facility (although
approximately $1 million was committed under a stand-by
letter of credit), $547.5 million of debt outstanding under
our Tranche A term loan facility and $543.5 million of
debt outstanding under our Tranche B term loan facility.
Our revolving credit facility and each of our term loan
facilities are subject to variable rates. Accordingly, our
earnings and cash flow are affected by changes in interest
rates. As required by the terms of our credit facilities, we
have hedged a portion of our interest rate risk. The interest
rate swap agreements have an aggregate notional amount of
$370.0 million and applicable fixed rates ranging from
2.354% to 4.085%. They will expire in various terms ranging from
November 2004 to May 2008. The notional amount of our interest
rate cap totals $200.0 million, has a cap interest rate of
4.75% and expires in May 2005. Assuming we had incurred this
level of borrowings on January 1, 2004 at variable rates
and assuming a one percentage point increase in the average
interest rate under these borrowings, our interest expense for
the three months ended March 31, 2004 would have increased
by $1.8 million. We will not use any financial derivative
instruments for speculative purposes.






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

Dex Media East maintains disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Securities
Exchange Act of 1934, as amended that are designed to ensure
that information that would be required to be disclosed in
Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SECs
rules and forms, and that such information is accumulated and
communicated to Dex Media Easts management, including its
Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure.

As of the end of the period covered by this
report, Dex Media East carried out an evaluation, under the
supervision and with the participation of Dex Media Easts
management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and
operation of Dex Media Easts disclosure controls and
procedures. Based on the foregoing, Dex Media Easts Chief
Executive Officer and Chief Financial Officer concluded that Dex
Media Easts disclosure controls and procedures were
effective as of the end of the period covered by this report.

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There have been no significant changes in Dex
Media Easts internal controls or in other factors that
could significantly affect the internal controls subsequent to
the date Dex Media East completed its evaluation.

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PART II.

OTHER INFORMATION






|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

From time to time, we are a party to litigation
matters arising in connection with the normal course of our
business. In many of these matters, plaintiffs allege that they
have suffered damages from errors or omissions or improper
listings contained in directories published by us. Although we
have not had notice of any such claims that we believe to be
material, any pending or future claim could have a material
adverse effect on our business.

In addition, we are exposed to defamation and
breach of privacy claims arising from our publication of
directories and our methods of collecting, processing and using
personal data. The subjects of our data and users of data that
we collect and publish could have claims against us if such data
were found to be inaccurate, or if personal data stored by us
was improperly accessed and disseminated by unauthorized
persons. Although we have not had notice of any material claims
relating to defamation or breach of privacy claims to date, we
may be party to litigation matters that could have a material
adverse effect on our business.






|        |                                              
|------- | ---------------------------------------------
|Item 2. | Changes in Securities and Use of
    Proceeds

None.






|        |                                    
|------- | -----------------------------------
|Item 3. | Defaults upon Senior
    Securities

None.






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

None.






|        |                  
|------- | -----------------
|Item 5. | Other Information

None.






|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits:

|        |      |  |  |             |  |                                                                                                                                 
|------- | ---- |  |  | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 31.1 |  |  |            |  | Certification of Chief Executive Officer of Dex
    Media East LLC pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002
|        | 31.2 |  |  |            |  | Certification of Chief Financial Officer of Dex
    Media East LLC pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002
|        | 32.1 |  |  |            |  | Certification of Chief Executive Officer of Dex
    Media East LLC pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002
|        | 32.2 |  |  |            |  | Certification of Chief Financial Officer of Dex
    Media East LLC pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002

Exhibits 32.1 and 32.2 are being furnished
solely to accompany this Report pursuant to 18 U.S.C.
§ 1350, and are not being filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as
amended, and are not to be incorporated by references into any
of our filings, whether made before or after the date hereof,
regardless of any general incorporation language in such filing.

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(b) Reports on Form 8-K:



| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On February 2, 2004, we filed a Current
    Report on form 8-K, relating to the press release announcing the
    pricing of Dex Medias 9% Discount Notes due 2013 and debt
    repayment goals for 2004.
|
| | On March 25, 2004, we filed a Current Report
    on Form 8-K, relating to the press release announcing
    fourth quarter and full year 2003 earnings.                                                   

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SIGNATURE

Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, Dex Media East LLC has caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



| |                   
| | ------------------
| | DEX MEDIA EAST LLC



| |     |                              
| | --- | -----------------------------
| | By: | /s/ ROBERT M. NEUMEISTER, JR.

| |                                 
| | --------------------------------
| |                                 
| | Robert M. Neumeister, Jr.       
| | Chief Financial Officer and     
| | Executive Vice President        
| | (principal financial officer and
| | duly authorized officer)        

Date: May 14, 2004

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EXHIBIT INDEX

|        |      |  |  |             |  |                                                                                                                                 
|------- | ---- |  |  | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|Number  |      |  |  | Description
|        |      |  |  |            
|        | 31.1 |  |  |            |  | Certification of Chief Executive Officer of Dex
    Media East LLC pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002
|        | 31.2 |  |  |            |  | Certification of Chief Financial Officer of Dex
    Media East LLC pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002
|        | 32.1 |  |  |            |  | Certification of Chief Executive Officer of Dex
    Media East LLC pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002
|        | 32.2 |  |  |            |  | Certification of Chief Financial Officer of Dex
    Media East LLC pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002

Exhibits 32.1 and 32.2 are being furnished
solely to accompany this Report pursuant to 18 U.S.C.
§ 1350, and are not being filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as
amended, and are not to be incorporated by references into any
of our filings, whether made before or after the date hereof,
regardless of any general incorporation language in such filing.