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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004,

OR

COMMISSION FILE NUMBER 0-29375

SAVVIS COMMUNICATIONS CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

1 SAVVIS PARKWAY

TOWN & COUNTRY, MISSOURI 63017

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)

(314-628-7000)

(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  x    No  ¨

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

COMMON STOCK, $0.01 PAR VALUE – 109,488,793 SHARES AS OF May 11, 2004

(INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES

OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE)

The Index of Exhibits appears on page 34.

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SAVVIS COMMUNICATIONS CORPORATION

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY / (DEFICIT)

See the following page for share information.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY / (DEFICIT)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(tabular dollars in thousands, except per share amounts)

(unaudited)

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared under the rules and regulations of the Securities and Exchange Commission on a basis substantially consistent with the audited consolidated financial statements of SAVVIS Communications Corporation and its subsidiaries (collectively, “SAVVIS” or the “Company”) as of and for the year ended December 31, 2003 included in the Company’s Annual Report on Form 10-K/A (the “Annual Report”) as filed with the Securities and Exchange Commission. All intercompany balances and transactions have been eliminated in consolidation. These financial statements should be read in conjunction with the audited consolidated financial statements and the related notes to the consolidated financial statements of the Company included in the Annual Report. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (consisting of normal, recurring adjustments), which management considers necessary to present fairly the condensed consolidated financial position of the Company at March 31, 2004, the results of its operations for the three month periods ended March 31, 2004 and 2003 and cash flows for the three month periods ended March 31, 2004 and 2003. The results of operations for the three month period ended March 31, 2004 may not be indicative of the results expected for any succeeding quarter or for the entire year ending December 31, 2004.

On March 5, 2004, the Company through a wholly owned subsidiary secured all regulatory approvals and closed its acquisition of the assets of Cable & Wireless USA, Inc. and Cable & Wireless Internet Services, Inc. together with the assets of certain of their affiliates (“Cable & Wireless America” or “CWA”). The results of CWA are included in the condensed consolidated financial statements since the date of acquisition.

Cash and Cash Equivalents

The Company classifies cash on hand and deposits in banks, including commercial paper, money market accounts and other investments with an original maturity of three months or less, that the Company may hold from time to time, as cash and cash equivalents.

Restricted Cash

Restricted cash consists of amounts supporting outstanding letters of credit, principally related to office space.

Property and Equipment

Communications equipment are recorded at cost and depreciated using the straight-line method over estimated useful lives of three to fifteen years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related lease which is seven to nine years.

Equipment under Capital Leases

The Company leases certain of its data communications equipment and other fixed assets under capital lease agreements. The assets and liabilities under capital leases are recorded at the lesser of the present value of aggregate future minimum lease payments, including estimated bargain purchase options, or the fair value of the assets under lease. Assets under these capital leases are amortized over the terms of the leases, which approximate the useful lives of the assets of three to five years.

Facilities under Capital Leases

The Company entered into various capital leases for four data centers and one office facility with a third party in the first quarter of 2004. The assets and liabilities under the facility capital leases are recorded at the lesser of the present value of aggregate future minimum lease payments or the fair value of the facilities under the lease. The facilities are amortized over the term of the lease, approximately 15 years, which approximated their remaining useful lives at the time the Company entered into the lease.

Other Non-Current Assets

Other non-current assets consist primarily of deferred financing costs, the unamortized cost of naming rights to a sports arena in St. Louis, Missouri, facility rent and other deposits, and a note receivable. The components of this financial statement line item are in Note 7.

Intangible Assets

The Company accounts for the commercial customer contracts acquired in the WAM!NET transaction in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). The commercial customer contracts acquired were based on their estimated fair value relative to the estimated fair value of the other assets received, including the incremental direct costs incurred in effecting the transaction.

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Based on our evaluation of the useful life of the existing customer contracts, probability of renewals and projected cash flows from these customers, the assets are being amortized over a 3 year life. SFAS 142 requires management to evaluate the remaining useful life of the customer contracts each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of the customer contracts’ remaining useful life changes, the remaining carrying amount is amortized prospectively over that revised remaining useful life. Actual useful lives could differ from those estimated by management, which could have a material affect on our operating results and financial position.

The Company assesses the contract intangible assets for impairment losses in accordance with SFAS 142 consistent with the policies above.

The intangible assets acquired in the CWA transaction were valued by the Company in accordance with Statement of Financial Accounting Standards No. 141 “Business Combinations” (“SFAS 141”). Identifiable intangible assets acquired included: trademarks, patents, customer relationships, software and peering agreements. Useful lives of these specifically identified intangible assets are: indefinite for trademarks; 13 years for patents; 4 years for customer relationships; 5 years for software and 7 years for peering agreements. Details of the components of intangible assets as of the balance sheet date are in Note 6.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, trade accounts receivable, restricted cash, accounts payable and accrued liabilities, long term debt and capital lease obligations approximate their fair values.

Asset Retirement Obligations

The Company records any identified asset retirement obligations and the associated asset retirement cost in accordance with Statement of Financial Accounting Standards No. 143 “Accounting for Asset Retirement Obligations” (“SFAS 143”). The value of the obligation is assessed as the present value of the expected future payments to retire the assets. The Company’s asset retirement obligations relate primarily to costs to remove leasehold improvements and return the leased space to its original condition. Only cash flows related to legal obligations as defined in SFAS 143 are recognized. The associated cost of the asset retirement obligation are capitalized and depreciated over their appropriate useful lives as further discussed in Note 10.

Revenue Recognition

Revenues consist primarily of Managed IP VPN, Hosting, Digital Content Management, and Other Network services, which are recognized when earned over the term of the contract. Installation fee revenue and the associated installation costs are deferred in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”). Such deferred revenue and costs are recognized into revenue and data communications and operations costs in the Consolidated Statements of Operations on a straight-line basis over periods of up to 21 months, the estimated average life of a customer contract. For all periods, any services billed and payments received in advance of providing services are deferred until the period such services are earned. Revenues for estimated credits to be issued are recorded as a reduction of revenue based on historical credits issued and known disputes.

Trade Receivables

The Company classifies amounts owed to the Company and due within twelve months, arising from the sale of goods or services in the normal course of business as trade receivables.

Allowance for Doubtful Accounts

The Company continuously monitors collections from its customers and maintains a provision for estimated credit losses based upon historical experience and specific customer information, generally not requiring customer deposits or collateral.

Data Communication Costs

In the ordinary course of business, invoices from communications service providers will exceed the services the Company has actually taken from them. The Company’s practice is to identify these variances and engage in discussions with the vendors to resolve the differences. Accruals are maintained for the best estimate of the difference between what was previously paid to the vendor and the amount that will ultimately be paid to them. Variations in the Company’s estimate and ultimate settlement of vendor billings may have a material impact on the Company’s results of operations.

Depreciation, Amortization, and Accretion

Depreciation and amortization expense consists primarily of the depreciation and amortization of communications equipment, capital leases, and intangibles. Generally, depreciation and amortization is calculated using the straight-line method over the useful life of the associated asset, which ranges from three to fifteen years. Subsequent to the CWA acquisition, accretion expenses related to aging of

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the discounted present value of various liabilities including adjustments for contracts and capital leases are included in this line item. Consistent with historical presentation, the amortization of intangibles and depreciation of long-lived assets are reported in this line item. The CWA acquisition significantly increased the depreciable asset and intangible base as much of the value was assigned to Indefeasible Rights of Use (“IRUs”) network capacity and leasehold improvements.

Integration Costs

Integration costs represents the incremental costs to the combined organization of the CWA acquisition, including rationalization of facilities, retention bonus, integration consulting by third parties and specific costs of the CWA asset purchase agreement including cure costs and contract rejection penalties. These costs provide current or future benefit to the combined company.

Employee Stock Options

As permitted under Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), the Company accounts for employee stock options in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). Under APB 25, compensation expense is recognized based on the intrinsic value of the equity instrument awarded as determined at the measurement date. Compensation expense was recognized related to option grants accounted for in accordance with APB 25 in the amounts of $0.3 million and $2.7 million during the three months ended March 31, 2004 and 2003, respectively.

Under Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS 148”), the Company is required to provide expanded disclosures concerning stock-based compensation. New accounting standards may be promulgated which would require the Company to account for employee stock options in accordance with SFAS 123 which could have a material impact on the results of operations. Pro forma information regarding net income has been determined as if the Company had accounted for its stock options granted to employees and non-employee members of its Board of Directors under the fair value method of the statement. The fair value of options was estimated at the date of grant. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting periods.

Had compensation cost for the Company’s stock options been determined consistent with the provisions of SFAS 123 based on the fair value at the grant date, the Company’s pro forma net loss would have been as follows:

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Income Taxes

Income taxes are accounted for under the asset and liability method, which provides for the establishment of deferred tax assets and liabilities for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for income tax purposes, applying the enacted statutory tax rates in effect for the years in which differences are expected to reverse. Valuation allowances are established when it is more likely than not the deferred tax assets will not be realized. The Company has provided a full valuation allowance on tax loss carry-forwards and other potential tax benefits according to Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” because the future realization of the tax benefit is uncertain. As a result, to the extent that those benefits are realized in future periods, they will favorably impact net income. At March 31, 2004, the Company has approximately $415.0 million in United States net operating loss carry-forwards expiring between 2011 and 2023, of which approximately $248.0 million is subject to the Section 382 limitation of the Internal Revenue Code.

Foreign Currency

Results of operations of our foreign subsidiaries are translated from the designated functional currency to the United States dollar using average exchange rates during the period, while assets and liabilities are translated at the exchange rate in effect at the reporting date. Resulting gains or losses from translating foreign currency financial statements are included in accumulated other comprehensive loss, a separate component of stockholders’ equity (deficit).

Loss Per Share

All loss per share amounts for all periods have been presented to conform to the provisions of Statement of Financial Accounting Standards No. 128, “Earnings Per Share”. All stock options, warrants, convertible Series A Preferred, and convertible Series B Preferred shares outstanding have been excluded from the computations of diluted loss per share, as their effect would be anti-dilutive. Accordingly, there is no reconciliation between basic and diluted loss per share for the periods presented.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. The Company periodically reviews the credit quality of its customers and generally does not require collateral.

Reclassifications

Certain amounts from prior periods have been reclassified to conform to current period presentation.

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 reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Estimates utilized in the Company’s financial statements include accruals for commercial disputes and billing errors by vendors, allowance for doubtful accounts and revenue credits, valuation of long-lived assets, and the valuation of intangible assets.

NOTE 2—CWA ACQUISITION

In January, 2004, the Company signed a definitive agreement to purchase substantially all of the assets of CWA. CWA, wholly-owned by Cable and Wireless PLC, provided a range of network and hosting services, including internet access to a Tier 1 IP network, colocation, hosting and other value-added services such as managed security and content distribution. The transaction was approved by the U.S. Bankruptcy Court and other regulatory agencies and closed on March 5, 2004. The results of CWA are included in the condensed consolidated financial statements since the closing date of acquisition.

The Company paid $155.0 million in cash in addition to the assumption of certain working capital liabilities and leases for certain data centers and other facilities. In accordance with the CWA asset purchase agreement, the Company agreed to fund CWA’s working capital losses from January 28, 2004 through March 5, 2004, which totaled approximately $14.1 million. Additionally, the Company entered into an agreement to transfer its rights at closing to acquire four of the CWA data centers and one office facility to Du Pont Fabros Interests LLC (“Du Pont Fabros”) for $52.0 million paid directly to the CWA bankruptcy estate. The Company subsequently leased those facilities back from Du Pont Fabros for approximately 15 years. The total cost of the purchased assets after consideration for the subsequent transfer of the Company’s rights to acquire certain facilities was $117.1 million.

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The acquisition has been accounted for as a purchase under SFAS 141. The preliminary allocation of the purchase price, pending final determination of certain acquired balances, accepted contracts and final resolution in the U.S. Bankruptcy Court, is as follows:

The estimated fair value of CWA assets acquired and liabilities assumed exceeded the acquisition cost. Therefore, in accordance with SFAS 141, the excess value over the acquisition cost has been allocated as a pro rata reduction of the amounts that otherwise would have been assigned to the acquired assets, except with respect to the following:

The amount reflected in the purchase price allocation represents the Company’s current estimate of the liabilities relating to contractual agreements it intends to assume. Additionally, the liabilities assumed by the Company included adjustments to properly reflect the fair market value of long term facility leases ($13.8 million); the idle capacity related to the long term IRU operations, maintenance and power contract ($26.7 million); the cost of leased facilities that will remain idle ($18.9 million); and the obligation to rehabilitate the long term lease spaces at varying lease terminations ($17.9 million). These liabilities are not a result of an exit plan, rather they relate solely to properly reflecting the fair value of assets and liabilities assumed.

The fair market value of the long term facility leases was calculated considering the difference between fair market rents and contractually required rents in addition to any inherited “dark space” that is not expected to be utilized. Contracts have been reflected at their fair market value of the service to be provided at the time of the merger, in addition to any inherited purchase commitments for which the combined entity does not plan to utilize. The asset retirement obligation liability was calculated and recorded at the present value of expected future payments required to restore the lease space to it original condition.

The Company has $6.9 million of involuntary employee termination costs accrued in the opening balance sheet as a liability. This amount will be paid in cash during the second and third quarters of this year. These costs meet the definition of costs to exit an activity of an acquired company as defined in EITF 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination. Management began to assess and formulated a plan to terminate all redundant positions as of the acquisition date. In total, approximately 350 employees will be terminated in various departments. The details of the severance package have been finalized and include the costs of severance, insurance, and outplacement services. All employee terminations are expected to be completed by March, 2005, with approximately 90% completed by September, 2004.

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The following unaudited pro forma financial information presents the combined results of operations of the Company and CWA, as if the acquisition had occurred as of January 1, 2004, after giving effect to certain adjustments, including depreciation, accretion, interest, the issuance of Series B Convertible Preferred Stock and the issuance of additional debt. The pro forma financial information is for the current period only, as the 2003 financial information for the assets acquired from CWA is currently being prepared and reviewed by the Company. The acquired assets did not represent a historical reporting segment and no historical stand-alone audited financial statements of CWA have been prepared prior to the acquisition date. Management believes pro forma disclosure of prior periods at this time is premature and any effort to prepare those numbers would be arbitrary in nature. The required historical audits of the CWA financial information are in progress at this time. The pro forma financial information does not necessarily represent the results of operations that would have occurred had the Company and CWA been a single entity during such period.

NOTE 3—LONG-TERM DEBT

In the first quarter of 2004, the Company issued $200.0 million of its Series A Subordinated Notes (“Subordinated Notes”). The proceeds were used to fund the CWA acquisition and to fund the on-going operational, working capital and capital expenditure requirements of the Company related to the CWA acquired assets or caused by the CWA acquisition. The debt issuance costs associated with the Subordinated Notes were $2.0 million and are classified as other non-current assets on the Condensed Consolidated Balance Sheet. These costs consist of fees paid to the purchasers of the Subordinated Notes and are amortized to interest expense using the effective interest method until the maturity date of the Subordinated Notes. The Subordinated Notes accrue interest based on a 365 day year at a rate of 12.5% per annum until February 3, 2005 and 15% per annum thereafter, paid in kind semi-annually on June 30 and December 31. The Subordinated Notes contain an early redemption feature, a make whole premium, a change of control clause and various other restrictive covenants. Upon a change of control the holders of the Subordinated Notes have the right to require the Company to redeem any or all of the Subordinated Notes at a cash price equal to 100% of the principal amount of the Subordinated Notes, plus all accrued and unpaid interest as of the effective date of a change in control. The Subordinated Notes mature in a single installment on February 9, 2009.

The $200.0 million in proceeds were allocated between long-term debt and Series B Preferred (Original Issue Discount) based on their relative fair values. The fair value of the Subordinated Notes is reflected as long-term debt and is increased for accrued interest on the $200.0 million proceeds as well as accreted interest on the Original Issue Discount. The fair value of the Series B Preferred was determined with the assistance of an external independent third party appraiser. The allocated fair value of the Series B Preferred is reflected in the accompanying financial statements as components of Stockholder’s Equity / (Deficit) in the amount of $65.9 in additional paid-in capital and $0.1 million, the par value, in Series B Preferred.

The following table summarizes the long-term debt activity for the three month period ended March 31, 2004.

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NOTE 4—COMMON AND PREFERRED STOCK TRANSACTIONS

Common Stock

An initial public offering of the Company’s common stock was completed in February 2000. A total of 17.0 million shares were sold in the offering at $24 per share. The Company received net proceeds from this offering of approximately $333 million.

In 2002, the stockholders of SAVVIS approved the authorization of up to 900.0 million shares of common stock.

Warrants Outstanding

In connection with the Company’s recapitalization in 2002, five-year warrants were issued to Nortel Networks, Inc. and GECC to purchase approximately 6.4 million and 9.6 million shares, respectively, of the Company’s common stock at $0.75 per share. In the first quarter of 2004, GECC exercised their warrant pursuant to a “cashless exercise” and received approximately 7.0 million shares of the Company’s common stock.

Additionally in 2002, the Company issued five-year performance warrants to entities affiliated with Constellation Ventures (“Constellation”) to acquire shares of common stock at $0.75 per share. Constellation earns the right to exercise the warrants when it meets certain performance criteria related to aiding the Company in winning new business. During the fourth quarter of 2003 and the first quarter of 2004, respectively, Constellation met the performance criteria under the warrants for the first and second of three tranches causing two-thirds, or 6.6 million warrants, to vest resulting in non-cash equity-based compensation expense of $3.4 million and $6.6 million, respectively. When and if management estimates that Constellation will meet the performance criteria for the vesting of their remaining unvested 3.3 million warrants, the Company will record a charge based on the fair value of the warrants at that time as calculated using the Black-Scholes model and current market and company assumptions. In the first quarter of 2004, Constellation exercised their first tranche of vested warrants pursuant to a “cashless exercise” and received approximately 2.6 million shares of the Company’s common stock.

Series A Convertible Preferred Stock

In 2002 the Company’s Board of Directors authorized 210,000 shares of Series A Convertible Preferred Stock (“Series A Preferred”) and the Company issued 203,070 shares of Series A Preferred to entities and individuals affiliated with Welsh, Carson, Anderson & Stowe (“Welsh Carson”), Constellation, Reuters, and other parties.

The Company incurred $3.0 million in offering costs related to the issuance of the Series A Preferred, which was recorded as a reduction of the Series A Preferred Stock balance in Stockholders’ Equity (Deficit) in the Condensed Consolidated Balance Sheets.

The Series A Preferred accrues dividends at the rate of 11.5% per annum on the outstanding accreted value thereof (initially $1,000 per share). Dividends may not be paid in cash until after the eighth anniversary of the original issuance date. Accrued but unpaid dividends are added to the outstanding accreted value quarterly. As of March 31, 2004, accrued and unpaid Series A Preferred dividends totaled $49.7 million. The Series A Preferred is convertible into such number of our common stock equal to the outstanding accreted value divided by the conversion price of $0.75. The Series A Preferred is entitled to vote on all matters (other than any voluntary repurchase of the Series A Preferred) submitted to the common stockholders on an as-if-converted basis and represented approximately 66% of the voting stock of the Company as of March 31, 2004. The conversion price of $0.75 was set a few days before the commitment date for the Series A Preferred issued in March 2002. On the commitment date, the closing price of the Company’s common stock was $1.00. Accordingly, the Company recorded a non-cash beneficial conversion feature of $52.7 million, representing the $0.25 per share intrinsic value of that feature, as a return to the Series A Preferred stockholders in March 2002. The Company also recorded a non-cash beneficial conversion feature of $1.9 million related to accrued dividends for the three months ended March 31, 2004.

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Below is a summary of Series A Preferred transactions as of March 31, 2004.

Series B Convertible Preferred Stock

During the first quarter of 2004, the Company’s Board of Director’s authorized 11.0 million shares of Series B Convertible Preferred Stock (“Series B Preferred”) at a $.01 par value. In connection with the issuance of the Company’s Series A Subordinated Notes, the Company issued warrants to purchase shares of the Series B Preferred to a group of investors that also included existing stockholders related to Welsh Carson and Constellation. The warrants were exercised simultaneously upon issuance on a “cashless” basis into 6.6 million shares of Series B Preferred and, as a result, the outstanding Series B Preferred is convertible upon stockholder approval into approximately 65.5 million shares of common stock. The common stock issuable upon conversion of the Series B Preferred will not be registered under the Securities Act and, therefore, may not be transferred or sold except pursuant to an effective registration statement or pursuant to an exemption from the registration requirement of the Securities Act. The Company granted Welsh Carson demand and piggy-back registration rights and the Company granted the other stockholders piggy-back registration rights only.

Each share of Series B Preferred is automatically convertible into ten shares of common stock upon the receipt of stockholder approval. Holders of the Series B Preferred do not have voting rights but are entitled to dividends to the extent dividends are paid on the common stock. Upon a liquidation, dissolution or winding up of the Company, the Series B Preferred will rank senior to the Company’s common stock and junior to the Series A Preferred.

The following table summarizes the number of shares on an as converted basis of our voting stock as of March 31, 2004.

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NOTE 5—PROPERTY AND EQUIPMENT

Communications equipment and data center equipment are recorded at cost and depreciated using the straight-line method over estimated useful lives of three to fifteen years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related lease which is seven to nine years. The following table represents the Company’s property and equipment by category.

Accumulated amortization for equipment under capital leases was $13.5 million and $12.8 million as of March 31, 2004 and December 31, 2003, respectively. Accumulated amortization for facilities under capital leases was $0.3 million as of March 31, 2004.

Depreciation expense for the three months ended March 31, 2004 and March 31, 2003 was $9.9 million and $15.0 million, respectively. Amortization expense for equipment and facilities under capital leases for the three months ended March 31, 2004 and March 31, 2003 was $0.9 million and $0.7 million, respectively.

NOTE 6—INTANGIBLES

The table below shows the detail of the intangible asset balances of March 31, 2004 and December 31, 2003.

The Company recorded $0.8 million in amortization expense for intangibles for the three months ended March 31, 2004.

The Company valued the specifically identifiable intangible assets in accordance with SFAS 141 for the intangible assets acquired in the CWA transaction. Identifiable intangible assets acquired included: trademarks, patents, customer relationships, software and peering agreements. Useful lives of these specifically identified intangible assets are: indefinite for trademarks; 13 years for patents; 4 years for customer relationships; 5 years for software and 7 years for peering agreements.

During the third quarter of 2003 the Company recorded an intangible asset in the amount of $5.5 million for the commercial customer contracts and other fees associated with the WAM!NET asset purchase agreement. The Company accounts for the commercial customer contracts acquired in accordance with SFAS 142. The commercial customer contracts acquired are valued in the accompanying Condensed Consolidated Balance Sheets as an asset purchase at an amount which reflects the allocation of the estimated purchase price based on their estimated fair value relative to the estimated fair value of the other assets received, plus the incremental direct costs incurred in effecting the transaction.

The purchase price of the WAM!NET assets was adjusted during the first quarter of 2004 to reflect an achievement of certain performance measures by the acquired customers. The adjustment of $4.4 million represented an increase in the expected earn-out payment to WAM!NET based on customer performance. Of this $4.4 million total adjustment, $2.9 was allocated to the intangible assets acquired with the remainder being allocated to property and equipment.

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SFAS 142 requires the Company to evaluate the remaining useful life of the customer contracts each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of the customer contracts’ remaining useful life changes, the remaining carrying amount is amortized prospectively over that revised remaining useful life. Actual useful lives could differ from those estimated by the Company, which could have a material affect on our operating results and financial position.

NOTE 7—OTHER NON-CURRENT ASSETS

The following table summarizes the components of non-current assets as of March 31, 2004 and December 31, 2003. The significant increase from December 31, 2003 is primarily a result of the CWA acquisition.

NOTE 8—CAPITAL LEASE OBLIGATIONS

In March 2002, the Company entered into a $56.5 million amended and restated master lease agreement with GECC. The amended lease carries a 12% interest rate, which accrues through December 31, 2004, payable in cash thereafter. The amount of the amended lease is due on March 8, 2007. A portion of the Company’s assets serve as collateral under the amended lease. The amended lease calls for excess cash flow, as defined, to be used first for the payment of any accrued and unpaid interest and second for the prepayment of principal on the capital leases. Furthermore, the amended lease contains covenants restricting, among other things the incurrence of debt, capital expenditures that can be made by the Company, and the payment of dividends. As of March 31, 2004, the Company was in compliance with the covenants.

The Company entered into an agreement to transfer its rights at closing to acquire four of the CWA data centers and one office facility to Du Pont Fabros Interests LLC (“Du Pont Fabros”) for $52.0 million paid directly to the CWA bankruptcy estate by Du Pont Fabros. The Company subsequently leased those facilities from Du Pont Fabros for approximately 15 years. Terms of the lease allow for no cash payments for the first nine months of the lease. The effective interest rate on the transaction is approximately 17.4% over the 15 years of the lease. After the initial period during which the Company owes no payments, the Company will make monthly payments which represent a combination of rent and interest. The associated capital lease asset will be depreciated over the approximate remaining useful life. The capital lease asset was recorded at its fair value as the present value of the minimum lease payments exceeded its fair value.

The balance of capital lease obligations as of March 31, 2004 and December 31, 2003 are $112.8 million and $56.9 million, respectively.

Amortization of assets recorded under capital leases is disclosed in Note 5, Property and Equipment.

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NOTE 9—ACCRUED LIABILITIES

The following table summarizes the components of current and non-current other accrued liabilities as of March 31, 2004 and December 31, 2003. The principal reason for the change since December 31, 2003 is the assumption of liabilities as a result of the CWA acquisition and the related purchase accounting adjustments.

NOTE 10—ASSET RETIREMENT OBLIGATIONS

The Company adopted Statement of Financial Accounting Standard No. 143, “Accounting for Asset Retirement Obligations” on January 1, 2003 without material impact on the consolidated financial statements.

The CWA transaction included the recognition of a significant asset retirement obligation (“ARO”) related to the rehabilitation and removal of certain leasehold improvements at the end of certain leases to return the property to its original condition. This $18.2 million liability is reflected as a non-current liability on the Company’s balance sheet. The associated asset was recorded to the opening balance sheet reflecting the preliminary purchase price allocated to the fair value of the ARO cost and will be depreciated over the useful life of the related asset which was approximately 7 years, using the straight-line method. There are no cash flows related to this liability expected in the near term. The legal obligation relates to the end of the lease term in all cases. The weighted average life of the leases is approximately 7 years.

The following table provides a reconciliation of the ARO:

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NOTE 11—OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) is as follows.

NOTE 12—RELATED PARTY TRANSACTIONS

On September 28, 2001 Reuters acquired a portion of the assets of Bridge. In connection with the asset acquisition, Reuters entered into a network services agreement with the Company, pursuant to which the Company agreed to provide continuing network services to the Bridge customers acquired by Reuters as well as Internet access, and colocation services for a period of five years. The network services agreement provides that SAVVIS’ network must perform in accordance with specific quality of service standards. In the event SAVVIS does not meet the required quality of service levels, Reuters would be entitled to credits, and, in the event of a material breach of such quality of service levels, Reuters would be entitled to terminate the network services agreement. The Company is not aware of any material breach. The Company has recognized revenue of $20.0 million and $20.9 million for the three months ended March 31, 2004 and March 31, 2003, respectively, from Reuters under the network services agreement, as amended.

Reuters owned approximately 13% and 16% of our outstanding voting stock as of March 31, 2004 and December 31, 2003, respectively.

NOTE 13—COMMITMENTS AND CONTINGENCIES

The Company’s customer contracts generally span multiple periods, which result in the Company entering into arrangements with various suppliers of communications services that require the Company to maintain minimum spending levels, some of which increase over time, to secure favorable pricing terms. The Company’s remaining aggregate minimum spending level allocated ratably over the contract terms are approximately $25.7 million, $27.5 million, and $11.4 million in years 2004, 2005, and 2006, respectively. Should SAVVIS not meet the minimum spending level in any given year, decreasing termination liabilities representing a percentage of the remaining contracted amount may immediately become due and payable. Furthermore, certain of these termination liabilities are subject to reduction should SAVVIS experience the loss of a major customer or suffer a loss of revenues from a downturn in general economic activity. Before considering the effects of any reductions for the business downturn provisions, if SAVVIS were to terminate all of these agreements as of March 31, 2004, the maximum termination liability would amount to approximately $51.9 million.

The Company entered into a long-term communications services contract during the first quarter of 2004 to obtain power and maintenance services for our IRUs until 2021. This unconditional purchase obligation relative to this long-term contract is approximately $18.8 million in year 1, $18.8 million in years 2 and 3, $14.1 million in years 4-5, and $86.8 million thereafter. This contract was accepted from CWA. The total purchase commitment is $138.5 million.

On August 1, 2003, the Company entered into an asset purchase agreement with WAM!NET, a leading global provider of content management and delivery services, to acquire certain assets related to their commercial business operations including their commercial customer contracts and related customer premise and other equipment. Under the terms of the agreement, the Company made an initial payment of $3.0 million for the acquired assets and has accrued an additional $9.0 million in current liabilities for the estimated earn-out which will be determined in the second quarter of 2004 and paid in nine equal monthly installments. The Company has the option to pay the earn-out in cash or a combination of cash and up to one-half of the total purchase price in SAVVIS common stock. The final payment amount will be determined based on revenue performance of the acquired customers. The estimated purchase price has been allocated to property and equipment and customer contracts based on their relative fair values.

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In August 2000, the Company entered into a 20-year agreement with Kiel Center Partners, L.P. (“KCP”) pursuant to which it acquired the naming rights to an arena in St. Louis, Missouri. Total consideration for these rights amounted to approximately $71.8 million, including 750,000 shares of its common stock issued by the Company to KCP, which had a fair value of $5.8 million at issuance and $66.0 million of cash payments to be made from 2002 through 2020. The related expense will be recognized over the term of the agreement. As of March 31, 2004 the Company had approximately $2.3 million of remaining deferred charges resulting from the issuance of common stock and $64.6 million of remaining cash payments under this agreement.

The Company is subject to various legal proceedings and other actions arising in the normal course of its business. While the results of such proceedings and actions cannot be predicted, management believes, based on facts known to management today, that the ultimate outcome of such proceedings and actions will not have a material adverse effect on the Company’s financial position, results or operations or cash flows.

SAVVIS has employment agreements with several key executive officers. These agreements contain provisions with regard to base salary, bonus, stock options, and other employee benefits. These agreements also provide for severance benefits in the event of employment termination or a change in control of the Company.

NOTE 14—INDUSTRY SEGMENT AND GEOGRAPHIC REPORTING

The Company’s operations are organized into three geographic operating segments: Americas, Europe and Asia. Each geographic operating segment provides outsourced managed network, hosting, and application services to businesses in the legal, media, retail, professional services, healthcare, manufacturing, and financial services industries. The Company evaluates the performance of its segments and allocates resources to them based on revenue and operating income or loss and eliminates intersegment revenues in consolidation. Prior to June 30, 2003 the Company did not allocate centrally incurred network management and support, executive and other administrative costs to the geographic segments as is currently reflected. Accordingly, the prior period amounts have been restated to conform to the current period presentation. Financial information for the Company’s geographic segments for the three months ended March 31, 2004 and 2003 is presented below. For the three months ended March 31, 2004 and 2003 revenues earned in the United States represented approximately 75% and 58%, respectively, of total revenues.