##### Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q



x QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003, OR



 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934



COMMISSION FILE NUMBER 0-29375



SAVVIS COMMUNICATIONS CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



|DELAWARE                                                       |  | 43-1809960                          
|-------------------------------------------------------------- |  | ------------------------------------
|(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER IDENTIFICATION NO.)



1 SAVVIS
PARKWAY

ST. LOUIS, MISSOURI 63017

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)



(314-628-7000)

(REGISTRANTS TELEPHONE NUMBER,
INCLUDING AREA CODE)



12851 WORLDGATE DRIVE

HERNDON, VA 20170

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)



(703) 234-8000

(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 Exchange Act). Yes ̈No x



COMMON STOCK, $.01 PAR VALUE  94,028,680 SHARES AS OF May 1, 2002

(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 22.



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##### Table of Contents

SAVVIS COMMUNICATIONS CORPORATION



TABLE OF CONTENTS



|
|

|                                                                                                                        |  | PAGE
|----------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                       
|PART I. FINANCIAL INFORMATION                                                                                           |  |     
|                                                                                                                       
|Item 1. Financial StatementsUNAUDITED:                                                                                 |  |     
|                                                                                                                       
|Condensed Consolidated Balance Sheets as of December 31, 2002 and March 31, 2003                                        |  | 3   
|                                                                                                                       
|Condensed Consolidated Statements of Operations for the three months ended March 31, 2002 and 2003                      |  | 5   
|                                                                                                                       
|Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2003                      |  | 7   
|                                                                                                                       
|Condensed Consolidated Statements of Changes in Stockholders Equity for the period December 31, 2002 to March 31, 2003 |  | 9   
|                                                                                                                       
|Notes to Condensed Consolidated Financial Statements                                                                    |  | 10  
|                                                                                                                       
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                           |  | 15  
|                                                                                                                       
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                                                      |  | 21  
|                                                                                                                       
|Item 4. Controls and Procedures                                                                                         |  | 21  
|                                                                                                                       
|PART II. OTHER INFORMATION                                                                                              |  |     
|                                                                                                                       
|Item 1. Legal Proceedings                                                                                               |  | 22  
|                                                                                                                       
|Item 2. Changes in Securities and Use of Proceeds                                                                       |  | 22  
|                                                                                                                       
|Item 4. Submission of Matters to a Vote of Security Holders                                                             |  | 22  
|                                                                                                                       
|Item 6. Exhibits and Reports on Form 8-K                                                                                |  | 22  
|                                                                                                                       
|Signatures                                                                                                              |  | 23  
|                                                                                                                       
|Certifications                                                                                                          |  | 24  
|                                                                                                                       
|Exhibits                                                                                                                |  | 26  



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PART I. FINANCIAL
INFORMATION



ITEM 1. FINANCIAL STATEMENTS-UNAUDITED



SAVVIS COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)



|                                                                                                                                                                                                         |  | DECEMBER 31, 2002 |         | March 31, 2003
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | --------------
|                                                                                                                                                                                                         |  |                   |         | (Unaudited)   
|ASSETS                                                                                                                                                                                                   |  |                   |         |               
|CURRENT ASSETS:                                                                                                                                                                                          |  |                   |         |               
|                                                                                                                                                                                                        
|Cash and cash equivalents                                                                                                                                                                                |  | $                 | 32,159  |               
|                                                                                                                                                                                                        
|Trade accounts receivable, less allowance for doubtful accounts of $1,023 in 2002 and
$1,053 in 2003 (includes accounts receivable from affiliates of $10,988 and 3,887, respectively, in 2002 and 2003) |  |                   | 15,117  |               
|                                                                                                                                                                                                        
|Prepaid expenses                                                                                                                                                                                         |  |                   | 1,691   |               
|                                                                                                                                                                                                        
|Other current assets                                                                                                                                                                                     |  |                   | 2,119   |               
|                                                                                                                                                                                                         |  |                   |         |               
|                                                                                                                                                                                                        
|TOTAL CURRENT ASSETS                                                                                                                                                                                     |  |                   | 51,086  |               
|                                                                                                                                                                                                        
|Property and equipment, net                                                                                                                                                                              |  |                   | 129,262 |               
|                                                                                                                                                                                                        
|Restricted cash                                                                                                                                                                                          |  |                   | 6,384   |               
|                                                                                                                                                                                                        
|Other non-current assets                                                                                                                                                                                 |  |                   | 9,742   |               
|                                                                                                                                                                                                         |  |                   |         |               
|                                                                                                                                                                                                        
|TOTAL ASSETS                                                                                                                                                                                             |  | $                 | 196,474 |               
|                                                                                                                                                                                                         |  |                   |         |               



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



3



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SAVVIS
COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETSCONTINUED

(Dollars in thousands except, per share amounts)



|                                                                                                                                                                                    |  | DECEMBER 31, 2002 |          |   | March 31, 2003 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | -------- | - | -------------- | -
|                                                                                                                                                                                    |  |                   |          |   | (Unaudited)    |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                |  |                   |          |   |                |  
|                                                                                                                                                                                   
|CURRENT LIABILITIES:                                                                                                                                                                |  |                   |          |   |                |  
|                                                                                                                                                                                   
|Accounts payable                                                                                                                                                                    |  | $                 | 28,528   |   |                | $
|                                                                                                                                                                                   
|Current portion of capital lease obligations                                                                                                                                        |  |                   | 2,705    |   |                |  
|                                                                                                                                                                                   
|Other accrued liabilities                                                                                                                                                           |  |                   | 15,469   |   |                |  
|                                                                                                                                                                                    |  |                   |          |   |                |  
|                                                                                                                                                                                   
|TOTAL CURRENT LIABILITIES                                                                                                                                                           |  |                   | 46,702   |   |                |  
|                                                                                                                                                                                   
|NON-CURRENT LIABILITIES:                                                                                                                                                            |  |                   |          |   |                |  
|                                                                                                                                                                                   
|Capital lease obligations, net of current                                                                                                                                           |  |                   | 62,444   |   |                |  
|                                                                                                                                                                                   
|Other accrued liabilities                                                                                                                                                           |  |                   | 10,411   |   |                |  
|                                                                                                                                                                                    |  |                   |          |   |                |  
|                                                                                                                                                                                   
|TOTAL LIABILITIES                                                                                                                                                                   |  |                   | 119,557  |   |                |  
|                                                                                                                                                                                    |  |                   |          |   |                |  
|                                                                                                                                                                                   
|COMMITMENTS AND CONTINGENCIES (NOTE 4)                                                                                                                                              |  |                   |          |   |                |  
|                                                                                                                                                                                   
|STOCKHOLDERS EQUITY:                                                                                                                                                               |  |                   |          |   |                |  
|                                                                                                                                                                                   
|Convertible preferred stock in accreted value; 50,000,000 shares authorized; 203,070
issued and outstanding in 2002 and 2003                                                        |  |                   | 217,006  |   |                |  
|                                                                                                                                                                                   
|Common stock; $.01 par value, 900,000,000 shares authorized, 94,059,956 shares issued in
2002 and 2003, 94,028,381 and 94,028,634 shares outstanding in 2002 and 2003, respectively |  |                   | 941      |   |                |  
|                                                                                                                                                                                   
|Additional paid-in capital                                                                                                                                                          |  |                   | 351,772  |   |                |  
|                                                                                                                                                                                   
|Accumulated deficit                                                                                                                                                                 |  |                   | (478,432 | ) |                |  
|                                                                                                                                                                                   
|Deferred compensation                                                                                                                                                               |  |                   | (12,270  | ) |                |  
|                                                                                                                                                                                   
|Treasury stock, at cost, 31,575 and 31,322 shares in 2002 and 2003,
respectively                                                                                                    |  |                   | (16      | ) |                |  
|                                                                                                                                                                                   
|Accumulated other comprehensive loss:                                                                                                                                               |  |                   |          |   |                |  
|                                                                                                                                                                                   
|Cumulative foreign currency translation adjustment                                                                                                                                  |  |                   | (2,084   | ) |                |  
|                                                                                                                                                                                    |  |                   |          |   |                |  
|                                                                                                                                                                                   
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                          |  |                   | 76,917   |   |                |  
|                                                                                                                                                                                    |  |                   |          |   |                |  
|                                                                                                                                                                                   
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                          |  | $                 | 196,474  |   |                | $
|                                                                                                                                                                                    |  |                   |          |   |                |  



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



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SAVVIS
COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)



|                                                                         |  | Three Months Ended March 31, |        
|------------------------------------------------------------------------ |  | ---------------------------- | -------
|                                                                         |  | 2002                         |        
|TOTAL REVENUES(1)                                                        |  |                              | 62,180 
|                                                                         |  |                              |        
|                                                                        
|Data communications and operations expenses(2)                           |  |                              | 45,095 
|                                                                         |  |                              |        
|                                                                        
|GROSS MARGIN                                                             |  |                              | 17,085 
|                                                                        
|Sales, general and administrative expenses(3)                            |  |                              | 15,922 
|                                                                        
|Depreciation and amortization                                            |  |                              | 16,449 
|                                                                        
|Asset impairment & other write-downs of assets                           |  |                              | 1,000  
|                                                                        
|Non-cash equity-based compensation                                       |  |                              | 2,674  
|                                                                         |  |                              |        
|                                                                        
|TOTAL OTHER OPERATING EXPENSES                                           |  |                              | 36,045 
|                                                                         |  |                              |        
|                                                                        
|LOSS FROM OPERATIONS                                                     |  |                              | (18,960
|                                                                        
|NON-OPERATING INCOME (EXPENSES):                                         |  |                              |        
|Interest income                                                          |  |                              | 78     
|Interest expense                                                         |  |                              | (4,805 
|Gains on extinguishment of debt                                          |  |                              | 58,625 
|                                                                         |  |                              |        
|                                                                        
|TOTAL NON-OPERATING INCOME (EXPENSES)                                    |  |                              | 53,898 
|                                                                         |  |                              |        
|                                                                        
|INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE |  |                              | 34,938 
|                                                                         |  |                              |        
|                                                                        
|Cumulative effect of change in accounting principle (Note 1)             |  |                              | (2,772 
|                                                                         |  |                              |        
|                                                                        
|NET INCOME (LOSS)                                                        |  |                              | 32,166 
|                                                                        
|Accreted and deemed dividend on preferred stock                          |  |                              | (53,633
|                                                                         |  |                              |        
|                                                                        
|LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS                                 |  | $                            | (21,467
|                                                                         |  |                              |        



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SAVVIS
COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)



|                                                                                            |  | Three Months Ended March 31, |           
|------------------------------------------------------------------------------------------- |  | ---------------------------- | ----------
|                                                                                            |  | 2002                         |           
|BASIC AND DILUTED LOSS PER SHARE BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE |  | $                            | (0.20     
|Cumulative effect of change in accounting principle                                         |  |                              | (0.03     
|                                                                                            |  |                              |           
|BASIC AND DILUTED LOSS PER COMMON SHARE                                                     |  | $                            | (0.23     
|                                                                                            |  |                              |           
|WEIGHTED AVERAGE SHARES OUTSTANDING                                                         |  |                              | 93,386,548



(1) Including $28.2
million and $21.0 million from affiliates in the three months ended March 31, 2002 and 2003, respectively.



(2) Excluding $0.4 million and $0.5 million of non-cash equity-based compensation in the three months ended in March 31, 2002 and 2003, respectively and exclusive of depreciation shown separately
below.



(3) Excluding $2.3 million and $2.2 million of non-cash
equity-based compensation in the three months ended in March 31, 2002 and 2003, respectively.



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



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SAVVIS
COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

|                                                                              |  | Three Months Ended March 31, |        
|----------------------------------------------------------------------------- |  | ---------------------------- | -------
|                                                                              |  | 2002                         |        
|OPERATING ACTIVITIES:                                                         |  |                              |        
|Net income (loss)                                                             |  | $                            | 32,166 
|Reconciliation of net income (loss) to net cash used in operating
activities: |  |                              |        
|Extraordinary gain                                                            |  |                              | (58,625
|Asset impairment & other write-downs of assets                                |  |                              | 1,000  
|Cumulative effect of change in accounting principle                           |  |                              | 2,772  
|Accrued interest                                                              |  |                              | 2,965  
|Depreciation and amortization                                                 |  |                              | 16,449 
|Non-cash equity-based compensation                                            |  |                              | 2,674  
|Net changes in operating assets and liabilities:                              |  |                              |        
|Trade accounts receivable                                                     |  |                              | (3,151 
|Prepaid expenses and other                                                    |  |                              | 1,673  
|Other non-current assets                                                      |  |                              | 1,051  
|Accounts payable                                                              |  |                              | (12,458
|Other accrued liabilities                                                     |  |                              | (3,506 
|                                                                              |  |                              |        
|Net cash used in operating activities                                         |  |                              | (16,990
|                                                                              |  |                              |        
|INVESTING ACTIVITIES:                                                         |  |                              |        
|                                                                             
|Capital expenditures                                                          |  |                              | (654   
|                                                                              |  |                              |        
|Net cash used in investing activities                                         |  |                              | (654   
|                                                                              |  |                              |        
|FINANCING ACTIVITIES:                                                         |  |                              |        
|                                                                             
|Issuance of preferred stock, net of issue costs                               |  |                              | 55,374 
|Principal payments under capital lease obligations                            |  |                              | (5,143 
|Repayment of borrowings                                                       |  |                              | (12,750
|Other                                                                         |  |                              | 14     
|                                                                              |  |                              |        
|Net cash provided by (used in) financing activities                           |  |                              | 37,495 
|                                                                              |  |                              |        
|Effect of exchange rate changes on cash and cash equivalents                  |  |                              | (1,021 
|                                                                              |  |                              |        
|                                                                             
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          |  |                              | 18,830 
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                |  |                              | 14,405 
|                                                                              |  |                              |        
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                      |  | $                            | 33,235 
|                                                                              |  |                              |        



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|                                                                         |  | Three Months Ended March 31,
|------------------------------------------------------------------------ |  | ----------------------------
|                                                                         |  | 2002                        
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                       |  |                             
|NON-CASH INVESTING AND FINANCING ACTIVITIES:                             |  |                             
|Issuance of preferred stock in satisfaction of accounts payable and debt |  | $                           
|Issuance of warrants                                                     |  |                             
|                                                                        
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                       |  |                             
|Cash paid for interest                                                   |  | $                           



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



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SAVVIS
COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY

(DOLLARS IN THOUSANDS)

(Unaudited)

|                                                                               |  | NUMBER OF SHARES |  |                |   |  |                             |  |                             |         |   |              |   |                            |  |   |                     |   |  |                       | CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT |   |                |   |        
|------------------------------------------------------------------------------ |  | ---------------- |  | -------------- | - |  | --------------------------- |  | --------------------------- | ------- | - | ------------ | - | -------------------------- |  | - | ------------------- | - |  | --------------------- | -------------------------------------------------- | - | -------------- | - | -------
|                                                                               |  | COMMON STOCK     |  | TREASURY STOCK |   |  | CONVERTIBLE PREFERRED STOCK |  | CONVERTIBLE PREFERRED STOCK |         |   | COMMON STOCK |   | ADDITIONAL PAID-IN CAPITAL |  |   | ACCUMULATED DEFICIT |   |  | DEFERRED COMPENSATION |                                                    |   | TREASURY STOCK |   |        
|BALANCE, December 31, 2002                                                     |  | 94,059,956       |  | 31,575         |   |  | 203,070                     |  |                             | 217,006 |   |              | $ | 941                        |  | $ | 351,772             |   |  | $                     | (478,432                                           | ) |                | $ | (12,270
|Net loss                                                                       |  |                  |  |                |   |  |                             |  |                             |         |   |              |   |                            |  |   |                     |   |  |                       | (24,450                                            | ) |                |   |        
|Foreign currency translation adjustment                                        |  |                  |  |                |   |  |                             |  |                             |         |   |              |   |                            |  |   |                     |   |  |                       |                                                    |   |                |   |        
|                                                                               |  |                  |  |                |   |  |                             |  |                             |         |   |              |   |                            |  |   |                     |   |  |                       |                                                    |   |                |   |        
|Comprehensive loss                                                             |  |                  |  |                |   |  |                             |  |                             |         |   |              |   |                            |  |   |                     |   |  |                       |                                                    |   |                |   |        
|Deemed dividends on preferred stock allocated to beneficial conversion
feature |  |                  |  |                |   |  |                             |  |                             | (1,657  | ) |              |   |                            |  |   | 1,657               |   |  |                       |                                                    |   |                |   |        
|Deemed dividends on preferred stock                                            |  |                  |  |                |   |  |                             |  |                             | 7,980   |   |              |   |                            |  |   | (7,980              | ) |  |                       |                                                    |   |                |   |        
|Recognition of deferred compensation costs                                     |  |                  |  |                |   |  |                             |  |                             |         |   |              |   |                            |  |   | (63                 | ) |  |                       |                                                    |   |                |   | 2,720  
|Issuance of common and/or treasury stock upon exercise of stock options        |  |                  |  | (253           | ) |  |                             |  |                             |         |   |              |   |                            |  |   |                     |   |  |                       |                                                    |   |                |   |        
|                                                                               |  |                  |  |                |   |  |                             |  |                             |         |   |              |   |                            |  |   |                     |   |  |                       |                                                    |   |                |   |        
|BALANCE, MARCH 31, 2003                                                        |  | 94,059,956       |  | 31,322         |   |  | 203,070                     |  | $                           | 223,329 |   |              | $ | 941                        |  | $ | 345,386             |   |  | $                     | (502,882                                           | ) |                | $ | (9,550 
|                                                                               |  |                  |  |                |   |  |                             |  |                             |         |   |              |   |                            |  |   |                     |   |  |                       |                                                    |   |                |   |        



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





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SAVVIS COMMUNICATIONS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollars in thousands, except per
share amounts)

(Unaudited)



NOTE 1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,
2002 included in the Companys Annual Report on Form 10-K (the Annual Report) as filed with the Securities and Exchange Commission. 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, 2003, the results of its operations and cash flows for the three-month periods ended
March 31, 2003 and 2002. The results of operations for the three-month period ended March 31, 2003 may not be indicative of the results expected for any succeeding quarter or for the entire year ending December 31, 2003.



GOODWILL AND INTANGIBLE ASSETSOn January 1, 2002, the Company
adopted the provisions of SFAS No. 142, Goodwill and Other Intangibles. In accordance with SFAS No. 142, in the first quarter of 2002, the Company assessed the Goodwill on the financial statements and determined that the Goodwill was
impaired. As a result, the Company recorded a $2.8 million charge in 2002 which is reflected in the Consolidated Statements of Operations as a cumulative effect of change in accounting principle. The Company currently does not have any goodwill.



REVENUE RECOGNITIONRevenues consist primarily of
Managed IP networks, Managed Hosting and Internet access service fees, which are fixed monthly amounts, and are recognized in the financial statements when earned during the life of the contract. For all periods, any services billed and payments
received in advance of providing services are deferred until the period such services are earned. Installation and equipment costs deferred in accordance with SAB 101 are recorded on the balance sheet in other assets. Such costs are recognized on a
straight-line basis over periods of up to 18 months, the estimated period over which the related revenues from installation and equipment sales are deferred and recognized.



EMPLOYEE STOCK OPTIONSAs permitted under SFAS No. 123, Accounting for Stock-Based Compensation, the
Company accounts for employee stock options in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees. Under APB No. 25, compensation expense is recognized to the extent the value of
the Companys stock exceeds the exercise price of options or restricted stock at the measurement date. Compensation expense in the amount of $2.7 million was recognized related to option grants accounted for in accordance with APB No. 25 during
the three months ended March 31, 2002 and 2003.



Under SFAS No.
148, the Company is required to provide expanded disclosures concerning stock-based compensation including disclosure of pro forma net earnings and earnings per share had compensation expense relating to grants been measured under the fair value
recognition provisions of SFAS No. 123. 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. The calculation of the fair value of the options granted in 2002 and 2003 assumes a weighted average risk-free interest rate of 5.1 percent and 4.9 percent,
respectively, an assumed dividend yield of zero, and an expected life of the options of four years. The weighted average fair value of options granted was $0.40 per share and $0.21 per share, respectively for 2002 and 2003. For purposes of 2003 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 No. 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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|                                                         |  | For the Three Months Ended March 31, |        
|-------------------------------------------------------- |  | ------------------------------------ | -------
|                                                         |  | 2002                                 |        
|Net loss attributable to common stockholders             |  |                                      |        
|As reported                                              |  | $                                    | (21,467
|Adjustment to net earnings for:                          |  |                                      |        
|Stock based compensation expense as reported, net of tax |  |                                      | 2,674  
|Pro forma stock based compensation, net of tax           |  |                                      | (2,745 
|                                                         |  |                                      |        
|Pro Forma net loss                                       |  | $                                    | (21,538
|Basic and diluted net loss per share                     |  |                                      |        
|As reported                                              |  | $                                    | (0.23  
|Pro Forma                                                |  | $                                    | (0.23  



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



NEW ACCOUNTING STANDARDSThe Company adopted SFAS No. 145 in the fourth quarter of 2002 and the $58.3 million gain on the extinguishment of
debt reflected as extraordinary in the Companys 2002 Form 10Q filings was reclassified in the Consolidated Statement of Operations for the year ended December 31, 2002.



In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.
SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and supercedes Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an
exit or disposal plan and also establishes fair value as the objective for initial measurement of the costs. The Company was required to adopt SFAS No. 146 for exit or disposal activities that are initiated after December 31, 2002. The adoption of
SFAS No. 146 did not have a material impact on our financial position, results of operations or cash flows.



In November 2002, the Emerging Issues Task Force (EITF) reached consensus on issue No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables on a model to be used to
determine when a revenue arrangement with multiple deliverables should be divided into separate units of accounting and, if separation is appropriate, how the arrangement consideration should be allocated to the identified accounting units. The EITF
also reached a consensus that this guidance should be effective for all revenue arrangements entered into during fiscal periods beginning after June 15, 2003, which for SAVVIS would be the quarter ending September 30, 2003. The Company does not
expect the adoption of issue No. 00-21 to have a material impact on our financial position, results of operations or cash flows.



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 reserves for commercial disputes and billing errors by vendors, allowance for doubtful accounts and the valuation of long-lived assets.



NOTE 2RELATED PARTY TRANSACTIONS



In March 2002, the Company issued $40.9 million of convertible preferred stock to Reuters Holdings Switzerland S.A. (together
with affiliates, Reuters) in satisfaction of all outstanding principal and accrued interest on the Companys 12% convertible senior notes.



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 SAVVIS. As of March 31, 2003, the Company has $3.5 million of receivables due from Reuters related to the network service agreement.



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Since we entered into the
network services agreement in September 2001, Reuters has been SAVVIS largest customer. In connection with the network services agreement, SAVVIS also entered into a transitional services agreement with Reuters, pursuant to which Reuters has
agreed to provide SAVVIS with technical, administrative and other services, pending SAVVIS establishing its own capabilities. During the three months ended March 31, 2002 the Company incurred $1.7 million of costs related to the transitional
services agreements. SAVVVIS has since internalized these technical and administrative functions. Accordingly, no such expenses were incurred in 2003.



In connection with Bridges acquisition of the Company, Bridge funded the Companys operations during 1999 and up through our IPO date. At
December 31, 2001, the Company had amounts payable to Bridge of approximately $23 million consisting of a note payable and accrued interest on the note. In addition, at December 31, 2001, the Company had amounts receivable from Bridge of
approximately $12.8 million, relating to network services provided by us to Bridge. In February 2002, the Company entered into a series of agreements that resolved substantially all of the outstanding balances, both due to and due from Bridge. The
Company earned $0.7 million in revenues from transactions with Bridge during the three months ended March 31, 2002, primarily for services rendered under the Bridge Network Services Agreement. This amount represented approximately 1% of the
Companys revenues for the three months ended March 31, 2002.



In February 2002, the Company entered into an agreement with Bridge wherein the Company agreed to pay Bridge $11.9 million in satisfaction of $27.5 million representing all amounts due to Bridge. The Company also agreed not to pursue
the collection of $18.7 million of pre-petition receivables owed to it by Bridge and to assign to Bridge any claims it had against other Bridge entities with the exception of Bridge Canada where the Company retained its right to receive a pro rata
distribution of assets from the liquidation of Bridge Canada. All amounts due under the settlement agreement were paid in March 2002.



Revenue from affiliates was as follows:



|        |  | Three Months Ended March 31,
|------- |  | ----------------------------
|        |  | (Dollars in millions)       
|        |  | 2002                        
|Bridge  |  | $                           
|       
|Reuters |  |                             
|        |  |                             
|Total   |  | $                           
|        |  |                             



NOTE 3PROPERTY,
PLANT AND EQUIPMENT



|                                                |  | December 31, 2002 |          |   | March 31, 2003 |  
|----------------------------------------------- |  | ----------------- | -------- | - | -------------- | -
|Communications equipment                        |  | $                 | 146,401  |   |                | $
|Data centers                                    |  |                   | 60,406   |   |                |  
|Equipment under capital leases                  |  |                   | 95,791   |   |                |  
|Leaseholds, office equipment and other          |  |                   | 12,904   |   |                |  
|                                                |  |                   |          |   |                |  
|Total                                           |  |                   | 315,502  |   |                |  
|Less: accumulated depreciation and amortization |  |                   | (186,240 | ) |                |  
|                                                |  |                   |          |   |                |  
|Total                                           |  | $                 | 129,262  |   |                | $
|                                                |  |                   |          |   |                |  



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NOTE 4COMMITMENTS
AND CONTINGENCIES



We have arrangements with various
suppliers of communications services that require us to maintain minimum spending levels some of which increase over time. Our aggregate minimum spending level is approximately $ 50.0 million, $ 59.0 million, and $ 18.3 million in years 2003 to
2005, 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, 2003, the maximum termination liability would amount to approximately $ 86.7 million.



On August 23, 2002, Highland Capital Management, L.P., on behalf of itself and various equity funds under its management,
each a former debt holder of Bridge filed suit against the Company and entities and individuals affiliated with Welsh Carson, in the District Court of Dallas County, Texas. Plaintiffs were seeking an unspecified amount of damages in connection with
certain payments made by Bridge to the Company prior to Bridges bankruptcy and certain other matters. The Company has reached a full and final settlement with plaintiffs where the Company, without admitting wrongdoing or liability of any kind,
paid to plaintiffs an amount not material to our financial statements, in exchange for a dismissal of all claims with prejudice and a release of all existing or potential claims plaintiffs have or may have related to this matter against the Company.



Including the foregoing matters, the Company is subject to
various other 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.



NOTE 5 SUBSEQUENT EVENTS



On May 14, 2003, the Company entered into a binding term sheet with Reuters America to sell its data center located in Hazelwood, MO for gross proceeds of
$35.0 million. The Company retained the right of use of approximately one-third of the data center for a period of ten years, including a rent-free period for approximately five years. Furthermore, Reuters granted SAVVIS certain rights to bid for
new services not contemplated under the original Network Services Agreement, which, provided Reuters is not contractually bound to purchase such services from other providers, shall be awarded to SAVVIS upon satisfying certain performance and other
criteria. In addition, SAVVIS has reduced certain minimum revenue commitments of Reuters under the existing Network Services Agreement principally occurring in 2006. As required in its existing outstanding debt agreement, SAVVIS will reduce its
long-term debt obligations with GECC by approximately $12.9 million from the gross proceeds of the transaction.



The Company is in the process of revaluating its estimate for loss on impaired leaseholds and may record an additional restructuring charge in the second quarter of 2003.



NOTE 6INDUSTRY SEGMENT AND GEOGRAPHIC REPORTING



SFAS No. 131 Disclosures about Segments of an Enterprise and Related
Information, established standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise engaging in business activities about which separate financial
information is available that is evaluated regularly by management to assess performance and to allocate resources.



The Companys operations are organized into three geographic operating segments: Americas, Europe and Asia. The Company evaluates the performance of
its segments and allocates resources to them based on revenue and operating (loss) income. Operating (loss) income by region does not reflect the allocation of centrally incurred network management and support, executive and other administrative
costs. Financial information for the Companys geographic segments for the three months ended March 31, 2002 and 2003 is presented below. For the three months ended March 31, 2002 and 2003 revenues earned in the United States represented
approximately 88% and 58%, respectively, of total revenues.



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|                                  |  | Americas |         |   | Europe |   | Asia   |  | Eliminations |        |  | Total |        
|--------------------------------- |  | -------- | ------- | - | ------ | - | ------ |  | ------------ | ------ |  | ----- | -------
|Three months ended March 31, 2002 |  |          |         |   |        |   |        |  |              |        |  |       |        
|Revenue                           |  | $        | 41,160  |   |        | $ | 9,250  |  | $            | 11,770 |  | $     |       
|Operating loss (income)           |  |          | (26,595 | ) |        |   | 1,961  |  |              | 5,674  |  |       |       
|Assets                            |  |          | 261,438 |   |        |   | 5,826  |  |              | 4,250  |  |       | (23,400
|Capital Additions                 |  |          | 276     |   |        |   |       |  |              | 22     |  |       |       
|                                 
|Three months ended March 31, 2003 |  |          |         |   |        |   |        |  |              |        |  |       |        
|Revenue                           |  | $        | 32,242  |   |        | $ | 10,413 |  | $            | 12,546 |  | $     |       
|Operating loss (income)           |  |          | (33,057 | ) |        |   | 2,895  |  |              | 7,690  |  |       |       
|Assets                            |  |          | 212,872 |   |        |   | 3,850  |  |              | 3,646  |  |       | (45,876
|Capital Additions                 |  |          | 4,704   |   |        |   | 28     |  |              | 123    |  |       |       



MAJOR CUSTOMERS



The Companys major
customer revenues are identified below.



|          |  | Three Months Ended March 31, |     
|--------- |  | ---------------------------- | ----
|          |  | 2002                         |     
|          |  | Amount                       |     
|          |  | (in millions)                |     
|Reuters   |  | $                            | 27.5
|Moneyline |  |                              | 19.5
|Bridge    |  |                              | 0.7 



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



YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH (1) OUR ACCOMPANYING UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO,
AND (2) OUR AUDITED CONSOLIDATED FINANCIAL STATEMENTS, NOTES THERETO AND MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2002 INCLUDED IN OUR ANNUAL REPORT ON FORM
10-K FOR SUCH PERIOD AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE RESULTS SHOWN HEREIN ARE NOT NECESSARILY INDICATIVE OF THE RESULTS TO BE EXPECTED IN ANY FUTURE PERIODS. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS (AS SUCH TERM
IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) BASED ON CURRENT EXPECTATIONS WHICH INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS AND THE TIMING OF EVENTS COULD DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS AS A RESULT
OF A NUMBER OF FACTORS. FOR A DISCUSSION OF THE MATERIAL FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS, YOU SHOULD READ RISK FACTORS INCLUDED IN PART I, ITEM 1 OF OUR 2002 ANNUAL REPORT
ON FORM 10-K.



General



SAVVIS is a global managed service provider, delivering mission-critical IP
applications for a diverse mix of industries. SAVVIS can offer its customers cutting edge technology at an affordable price because its network and hosting infrastructure was built to support real-time IP applications worldwide.



SAVVIS services are briefly described below:



| | o |  | MANAGED IP VPNs combine the advantages of private networks (reliability, performance and security) with the popular features of the Internet (scalability and
flexibility). Enterprises can connect their offices, partners, remote employees and telecommuters over a private network that is fully meshed and assures quality for each application site-to-site.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o |  | MANAGED HOSTINGservices from SAVVIS allow enterprises to outsource their mission-critical content in a highly secure, fault tolerant data center environment
without sacrificing the control and oversight typically found with an in-house solution. Through its Intelligent HostingSMproduct set, SAVVIS can satisfy complex hosting needs with its a la carte service offering or provide pre-packaged solutions for web, enterprise and database applications.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o |  | INTERNET ACCESSservices from SAVVIS bypasses the bottlenecks of the public Internet, based on our PrivateNAPSMarchitecture. Available in both managed and unmanaged offerings, this service is most popular when bundled with our IP VPN service.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



SAVVIS began commercial operations in 1996,
offering Internet access services to local and regional Internet service providers. Our customer base has grown from 15 customers at the end of 1996 to 2,042 at March 31, 2003.



Revenue



The Companys revenue is derived primarily from the sale of managed IP, managed hosting and Internet access services. For the three months ended
March 31, 2002 and 2003, revenue from related parties (Bridge and Reuters) represented approximately 45% and 38%, respectively, of our total revenue. We expect our revenues from related parties to decrease as a percentage of our total revenues as we
expand our managed IP, Internet access and hosting customer base.



We charge each customer an initial installation fee that typically equals one months revenue and a fixed monthly fee that varies depending on the services provided, the bandwidth used and the quality of service level chosen.
Our customer agreements are typically for 12 to 36 months in length. These fees are recognized in income over the average life of the customer contracts.



Prices for telecommunication services, including the services we offer, have decreased significantly over the past several years and we expect this trend
to continue for the foreseeable future.



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Direct Costs and Expenses



Data communications and operations. Data
communications and operations expenses include the cost of:



| | o |  | leasing local access lines to connect customers to our points of presence (POPS);
| | - |  | -----------------------------------------------------------------------------------



| | o |  | leasing backbone circuits to interconnect our POPS;
| | - |  | ---------------------------------------------------



| | o |  | rental costs, utilities, and other operating costs for hosting space
| | - |  | --------------------------------------------------------------------



| | o |  | salaries and related benefits for engineering and operations personnel who maintain our network, monitor network performance, resolve service faults, and install new
sites;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o |  | other related repairs and maintenance items; and
| | - |  | ------------------------------------------------



Data communications and operations expense decreased as we negotiated unit price reductions with our vendors. We expect that these costs will continue to
decline as a percentage of revenues.



Sales, general and
administrative. These expenses include the cost of:



| | o |  | sales and marketing salaries and related benefits;
| | - |  | --------------------------------------------------



| | o |  | product management, pricing and support;
| | - |  | ----------------------------------------



| | o |  | sales commissions and referral payments;
| | - |  | ----------------------------------------



| | o |  | advertising, direct marketing and trade shows;
| | - |  | ----------------------------------------------



| | o |  | occupancy costs;
| | - |  | ----------------



| | o |  | executive, financial, legal, tax and administrative support personnel and related costs;
| | - |  | ----------------------------------------------------------------------------------------

| | 
| | 

| | o |  | professional services, including legal, accounting, tax and consulting services; and
| | - |  | ------------------------------------------------------------------------------------



| | o |  | bad debt expense.
| | - |  | -----------------



These expenses are expected to continue to increase as we continue to add more sales personnel, increase our marketing initiatives to support the
expansion of our customer base, add to our support personnel, infrastructure and back office systems, as the business continues to grow.



Depreciation and amortization.Depreciation and amortization expense consists primarily of the depreciation and amortization of communications
equipment, capital leases, and intangibles. We expect these expenses to decrease as a portion of our fixed assets fully depreciate in 2003. Generally, depreciation is calculated using the straight-line method over the useful life of the associated
asset, which ranges from three to five years. Our data center assets are generally depreciated over 20 years.



Interest expense.Historical interest expense prior to March 2002 is related to indebtedness to banks, vendor financing agreements convertible notes, loans from Bridge and capitalized leases.
The vendor financing agreements, the convertible notes and the loans from Bridge were settled in a series of transactions described in the Notes to the Consolidated Financial Statements in form 10K for the period ended December 31, 2002. In March
2002, the Company also refinanced the majority of its capital lease liability. Although we do not pay cash interest until 2005 on our capital lease liability with GECC, we expect our interest expense to increase as accrued interest will also bear
interest until cash interest payments commence in 2005.



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Income tax expense. We
have incurred operating losses from inception through March 2003 and, therefore, have not recorded a provision for income taxes in our historical financial statements. We have recorded a valuation allowance for the full amount of our net deferred
tax assets because the future realization of the tax benefit is uncertain.



An ownership change as defined in Section 382 of the Internal Revenue Code, restricts the Companys ability to use future US taxable income against the companys U.S. net operating loss carry forward. Section 382 may also
limit the utilization of other U.S. carryover tax attributes upon the occurrence of an ownership change. Such an ownership change occurred during 1999 as a result of the acquisition of our company by Bridge and in 2002 as a result of the issuance of
$203.1 million of preferred stock. Management believes that this limitation restricts our ability to offset any future US taxable income against its net operating losses carry-forward over the U.S. Statutory carry-forward periods ranging from 15 to
20 years, to approximately $5 million a year before the net effect of future recognized built-in gains or losses existing as of the date of the ownership change. As we continue to increase our employee base to support our expanded
operations and invest in our marketing and sales operations, we expect to incur net losses at least through 2003.



Results of Operations



The historical financial information included in this Form 10-Q does not reflect our future results of operations, financial position and cash flows.



THREE MONTHS ENDED MARCH 31, 2003 AS COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2002



Summary



Summary.The
Companys revenues decreased 11% in the period ended March 31, 2003, as growth in our Managed IP and Managed Hosting products was offset by reductions in internet access and services provided to Reuters and Moneyline Telerate from the level of
service provided in the prior year. Gross margin increased by approximately $1.4 million as the $7.0 million decrease in our revenues was offset by $8.4 million of reductions in data communications costs due to reductions in capacity, unit costs,
refunds of sales taxes and reduction of accruals for such costs.



Net (loss) increased by $56.7 million due primarily to a $58.6 million gain on the extinguishment of debt in the first quarter of 2002, a $3.6 million increase in sales and marketing and a $3.0 million increase in general and
administrative expenses offset by the improvement in gross margin, a $0.7 million reduction in depreciation and amortization, a $2.7 million reduction in interest expense, a $1.0 million reduction of asset impairment charges recorded and a $2.8
million reduction in the cumulative effect of the change in accounting principle recorded in the first quarter of 2002.



Revenues



|                                                                                                                 |  | Three Months Ended March 31, ( in millions)
|---------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------
|                                                                                                                 |  | 2002                                       
|Diversified Revenues                                                                                             |  |                                            
|Managed IP                                                                                                       |  | $                                          
|Managed Hosting                                                                                                  |  |                                            
|Internet Access                                                                                                  |  |                                            
|Other                                                                                                            |  |                                            
|                                                                                                                 |  |                                            
|Subtotal                                                                                                         |  |                                            
|                                                                                                                
|Reuters and Moneyline Telerate(1)                                                                                |  |                                            
|                                                                                                                 |  |                                            
|Total Revenue                                                                                                    |  | $                                          
|                                                                                                                 |  |                                            
|                                                                                                                
|(1)    The three months ended March 31, 2002,
includes $0.7 million in revenues From Bridge Information Systems.



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Revenue.Revenue was
$55.2 million for the quarter ended March 31, 2003, a decrease of $7.0 million or 11%, from $62.2 million for the quarter ended March 31, 2002. Managed IP revenue derived from our diversified customer base grew $4.3 million, or 58%, to $11.7 million
in the quarter ended March 31, 2003. Diversified Managed Hosting revenues increased $1.1 million, or 61%, to $2.9 million in 2003 from $1.8 million in 2002. The increase in Managed Hosting revenue is attributable to additional contracts awarded in
the fourth quarter of 2002 related to the Intel customer transition. Internet access revenues decreased 20% to $3.7 million in the quarter ended March 31, 2003, compared to $4.6 million for the comparable period in 2002. The decrease in Internet
access revenue was due to the economic downturn affecting the Internet sector which resulted in the loss of customers, pricing pressure in the Internet access business and the Companys continued initiatives designed to encourage customers to
purchase access services as part of their managed network service. Other revenues, consisting of installation and equipment sales, remained constant at $0.7 million for the three months ended March 31, 2002 and 2003. Reuters and Moneyline Telerate
revenues were $36.2 million for the quarter ended March 31, 2003, a decrease of $11.5 million or 24% from $47.7 million for the quarter ended March 31, 2002. The decline resulted from the termination of service locations by Reuters and Moneyline in
connection with their integration of the Bridge acquisition, workforce reductions implemented by some of their customers and reduced pricing for some services. The effect of these factors is expected to result in a decline in Reuters and Moneyline
revenue in 2003 as compared to 2002.



Data Communications and
Operations



Data Communications and
Operations. (exclusive of non-cash compensation). Data communications and operations expenses were $36.7 million for the quarter ended March 31, 2003; a decrease of $8.4 million, or 19%, from $45.1 million for the quarter ended March 31, 2002.
The decline in data communications costs is a result of significant unit price reductions for long-haul capacity, reductions in internet connectivity capacity and unit prices and reductions in connections with Reuters and Moneyline and unit price
reductions from vendors. These costs were also reduced by $1.0 million as a result of reductions in estimated accruals for commercial disputes and billing errors which we believe are no longer required and $0.5 million of sales tax refunds related
to such costs. Cost reductions in data communications costs were partially offset by additional employees needed in operations to assume services previously provided by Reuters and Moneyline, and transitional costs associated with taking over
certain services from Reuters.



Sales, General
and Administrative. (exclusive of non-cash compensation) Sales, general and administrative expenses were $22.5 million for the quarter ended March 31, 2003, an increase of $6.6 million, or 42%, from $15.9 million in the quarter ended March 31,
2002. This increase is attributed to personnel costs, rent and facilities expenses of $1.3 million, an increase in bad debt expense of $0.3 million in 2003 and an increase of $0.7 million in professional fees and other charges. The increases in rent
expense are primarily from the new headquarters in St. Louis, MO occupied in mid-2002 and additional facilities leases in the U.S. We expect these costs to increase in 2003 to accelerate the growth of our diversified customer base.



Non-cash Equity-based Compensation. Non-cash
equity-based compensation amounted to $2.7 million for the quarters ended March 31, 2003 and 2002. These expenses represent amortization charges to earnings for the difference between the estimated fair market value of our common stock and the
exercise price for options granted to employees and non-employee members of our Board of Directors on various dates in 1999, 2000 and 2002.



Depreciation and Amortization. Depreciation and amortization expense was $15.7 million for the quarter ended March 31, 2003, a
decrease of $0.7 million as compared to $16.4 million for the three months ended March 31, 2002. This decrease results primarily from assets, which have become fully depreciated.



Interest. Interest income amounted to $0.1 million for the three month periods ended March 31, 2003
and 2002. Interest expense for the quarter ended March 31, 2003 was $2.1 million, a decrease of $2.7 million from 2002. The decrease is a result of debt restructuring executed in the first quarter of 2002 that eliminated approximately $170 million
of interest bearing liabilities from the balance sheet.



Gains on Extinguishment of Debt.Gain on extinguishment of debt and liabilities totaled $58.6 million in the quarter ended March 31, 2002. The gain resulted from the recapitalization of the Company in March 2002.



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Asset
Impairment & Change in Accounting Principle.In March 2002, the Company recorded a charge of $1.0 million relating to its investment in Yipes Communications Group, Inc., and a $2.8 million charge related to a change in accounting principle
covering the treatment of goodwill.



Net (Loss) Income.
The net loss for the quarter ended March 31, 2003 was ($24.5) million, a change of $56.7 million from net income for the same period in 2002 of $32.2 million.



LIQUIDITY AND CAPITAL RESOURCES



At March 31, 2003, our cash balances were $21.5 million. Based upon our current plans, these cash balances are sufficient to
fund our operating losses, working capital needs and capital expenditure requirements until the Company reaches operating cash flow positive, which is expected to occur in the fourth quarter of 2003.



Cash used in operating activities decreased to $7.1 million for the three
months ended March 31, 2003 from $17.0 million in 2002. This improvement of $9.9 million is due to a reduction in the payments of accounts payable of $9.5 million in the first quarter of 2003. Payments that had been delayed in 2001 pending the
issuance of the Preferred shares in March of 2002, were settled during the first quarter of 2002.



Net cash used in investing activities for the three months ended March 31, 2003 was approximately $3.0 million, an increase from the $0.7 million used in the three months ended March 31, 2002. This
increase results from capital expenditures related to new customer contracts.



Net cash (used in)/provided by financing activities decreased to ($0.6) million from $37.5 million in the prior period as the Company completed its recapitalization efforts in March 2002. As more fully described below, the Company
issued approximately $203.1 million of Preferred in exchange for a combination of cash, accounts payable and debt. The proceeds from the preferred were used to settle all outstanding obligations to Bridge, to make scheduled payments on capital lease
obligations and to support the Companys working capital requirements, including payments of past due balances with certain of our vendors.



Reuters and MoneyLine Telerate account for approximately 66% of our revenue. The loss of either of these customers, or a significant reduction in the
amount of our services that either customer purchases, could materially reduce our revenues which, to the extent not offset by cost reductions or new customer additions, could materially reduce our cash flow.



In September 2002, the Company raised $22.6 million from the issuance of
Preferred to Welsh Carson.



In June 2002, Preferred totaling
$20.0 million was issued to Constellation Ventures in exchange for cash. The Company also issued five-year performance warrants to Constellation Ventures to acquire shares of common stock at $0.75 per share which it will earn the right to exercise
if it meets certain performance criteria related to aiding the Company in winning new business. As of March 31, 2003, this performance criteria has not been met. In addition, the Company issued $2.4 million of Preferred in satisfaction of certain
vendor obligations.



In May 2002, SAVVIS entered into a 15 year,
office facility lease agreement with Duke Realty Limited Partnership (Duke) with total minimum rent payments of approximately $39.9 million. The Company also entered into an agreement with Duke in which SAVVIS may be required to make
payments of up to $2.0 million plus interest accruing at 4.88% from the date of the agreement if certain events do not occur prior to June 2004. These payments, if required, would be made from July 2005 to June 2007.



On March 18, 2002, the Company issued approximately $158.1 million of
Preferred to (i) Welsh Carson in exchange for approximately $57.5 million in cash, approximately $22.2 million in principal and accrued interest in respect to our 10% convertible senior secured notes and approximately $90.9 million in notes, and
accrued interest, issued pursuant to the credit agreement with Nortel and (ii) Reuters upon conversion of approximately $40.9 million in principal and accrued interest in respect to the 12% convertible senior secured notes.



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In addition, the Company
reached agreements with GECC, Nortel, Bridge and certain other vendors as follows:



Approximately $56.5 million of capital lease obligations were amended with GECC and provides for repayment at the end of the fifth year. Interest, which accrues at 12% per annum, accrues to the capital
lease liability until December 31, 2004, and is payable in cash thereafter.



Release by Nortel from all obligations to purchase optical equipment under the Global Purchase Agreement.



The Company entered into an agreement with Bridge wherein the Company agreed to pay Bridge $11.9 million in satisfaction of $27.5 million
representing all amounts due to Bridge. The Company also agreed not to pursue the collection of $18.7 million of pre-petition receivables owed to it by Bridge and to assign to Bridge any claims it had against other Bridge entities with the exception
of Bridge Canada where the Company retained its right to receive a pro rata distribution of assets from the liquidation of Bridge Canada.



A release by a certain vendor from all obligations under the agreements in exchange for $2.5 million paid in installments over 18 months
and other commercial arrangements.



In
connection with these transactions, the Company also issued five-year warrants to purchase 16.1 million shares of its common stock at $0.75 per share.



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, MO. 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 2006 through 2020. The related expense will be recognized over the term of the agreement. The parties entered into an amendment of the agreement, dated August 21, 2001, providing for the payment of
$1.25 million on each December 31, from 2002 through 2005. These payments will be deducted from payments otherwise owed under the agreement in 2006 through 2009. As of March 31, 2003, the Company has approximately $3.3 million of deferred charges
resulting from the issuance of common stock under this agreement.



We have arrangements with various suppliers of communications services that require us to maintain minimum spending levels some of which increase over time. Our aggregate minimum spending level is approximately $50.0 million, $59.0
million and $18.5 million in years 2003 to 2005, 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. SAVVIS expects to
meet its spending minimums in the current year of communications services agreements. 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, 2003,
the maximum termination liability would amount to approximately, $86.7 million.



|                                   |  | PAYMENTS DUE BY
|---------------------------------- |  | ---------------
|                                   |  | TOTAL          
|Capital lease obligations(1)       |  | $              
|Operating leases                   |  |                
|Unconditional purchase obligations |  |                
|                                   |  |                
|Total contractual cash obligations |  | $              
|                                   |  |                



| | (1) |  | Includes interest payments of $35.7 million over the life of the capital lease obligations.
| | --- |  | -------------------------------------------------------------------------------------------



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We may meet any additional
funding needs through a combination of equity investments, debt financings, renegotiation of repayment terms on existing debt and sales of assets and services. If these additional financings were required, there can be no assurance that we would be
successful in completing any of these financings or that if we were, the terms of such financings would be favorable to us.



RECENT ACCOUNTING PRONOUNCEMENTS



In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.
SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and supercedes Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires the recognition of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an
exit or disposal plan and also establishes fair value as the objective for initial measurement of the costs. The Company is required to adopt SFAS No. 146 for exit or disposal activities that are initiated after December 31, 2002. The adoption of
SFAS No. 146 did not have a material impact on our financial position, results of operations or cash flows.



In November 2002, the Emerging Issues Task Force (EITF) reached consensus on issue No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables on a model to be used to
determine when a revenue arrangement with multiple deliverables should be divided into separate units of accounting and, if separation is appropriate, how the arrangement consideration should be allocated to the identified accounting units. The EITF
also reach a consensus that this guidance should be effective for all revenue arrangements entered into fiscal periods beginning after June 15, 2003, which for Savvis would be the quarter ending September 30, 2003. The Company does not expect the
adoption of EITF No. 00-21 to have a material impact on our financial position, results of operations or cash flows.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Our primary market risk exposure relates to changes in foreign currency exchange rates.



Changes in foreign exchange rates did not materially impact our results of operations. For the three months ended March 31, 2002 and 2003, 1% and 2%,
respectively, of our service revenue was denominated in currencies other than the United States dollar and approximately 7% and 9%, respectively, of our total direct and operating costs, excluding depreciation and amortization, asset impairments and
restructuring charges, were incurred in currencies other than the United States dollar. We expect these percentages to increase in the periods ahead as our non-U.S. business base grows. In the future, we may engage in hedging transactions to
mitigate foreign exchange risk.



ITEM 4. CONTROLS AND PROCEDURES



Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Companys management, including the Companys Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rule 13a-14 of the Securities Exchange Act of 1934, as amended). Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information relating to the company (including its
consolidated subsidiaries) required to be included in the Companys periodic SEC filings.



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



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PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



On August
23, 2002, Highland Capital Management, L.P., on behalf of itself and various equity funds under its management, each a former debt holder of Bridge filed suit against the Company and entities and individuals affiliated with Welsh Carson, in the
District Court of Dallas County, Texas. Plaintiffs were seeking an unspecified amount of damages in connection with certain payments made by Bridge to the Company prior to Bridges bankruptcy and certain other matters. The Company has reached a
full and final settlement with plaintiffs where the Company, without admitting wrongdoing or liability of any kind, paid to plaintiffs an amount not material to our financial statements, in exchange for a dismissal of all claims with prejudice and a
release of all existing or potential claims plaintiffs have or may have related to this matter against the Company.



Including the foregoing matters, the Company is subject to various legal proceedings and 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 or results of operations.



ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS



Between January 1, 2003 and March 31, 2003, we granted options to purchase 2,308,500 shares of our common stock at exercises prices from $0.40 to $0.44. All of these options were granted pursuant to our 1999 Stock Option Plan as
amended. Of this total, no stock options were granted to the three independent members of our Board of Directors. These issuances were effected in transactions not subject to, or exempt from, the registration requirements of the Securities Act of
1933, and these transactions were effected without the use of an underwriter.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



None



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



(a) Exhibits. The following exhibits are either provided with this Form 10-Q or are incorporated herein by reference.



|Number |  | Exhibit Description                                                                                                                                                                                                                     
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|3.1    |  | Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to the same numbered
exhibit to SAVVIS Registration Statement on Form S-1, as amended (File No. 333-90881)).                            
|      
|3.2    |  | Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant (incorporated by
reference to the same numbered exhibit to SAVVIS Registration Statement on Form S-1, as amended (File No. 333-90881)).
|      
|3.3    |  | Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant (incorporated by
reference to the same numbered exhibit to SAVVIS Quarterly Report on Form 10-Q, dated August 16, 2002).               
|      
|3.4    |  | Amended and Restated Bylaws of the Registrant.                                                                                                                                                                                          
|      
|4.1    |  | Form of Common Stock Certificate (incorporated by reference to the same numbered exhibit to SAVVIS Registration
Statement on Form S-1, as amended (File No. 333-90881)).                                                               
|      
|4.2    |  | Certificate of Designations relating to the Registrants Series A Convertible Preferred Stock (incorporated by
reference to the same numbered exhibit to SAVVIS Current Report on Form 8-K dated March 27, 2002).                      
|      
|4.3    |  | Warrant Agreement, dated as of March 7, 2002, between the Registrant and General Electric Capital Corporation
(incorporated by reference to the same numbered exhibit to SAVVIS Quarterly Report on Form 10-Q, dated May 15, 2002).    





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##### Table of Contents



|     
|-----
|4.4  
|     
|4.5  
|     
|4.6  
|     
|4.7+ 
|     
|4.8+ 
|     
|4.9+ 
|     
|4.10+
|     
|10.1 
|     
|10.2 
|     
|10.3 
|     
|11.1 
|     
|99.1 
|     
|99.2 

---

+ Confidential treatment has been
granted for this exhibit. The copy filed as an exhibit omits the information subject to the request for confidential treatment.



(b) Reports on Form 8-K. On January 22, 2003 and February 5, 2003, we filed Current Reports on Form 8-K with respect to Item 5, Other Events. On March 21,
2003, we filed a Current Report on Form 8-K with respect to Item 4, Changes in Registrants Certifying Accountants.



SIGNATURES



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



|     |  |              |  | SAVVIS Communications
Corporation
|---- |  | ------------ |  | ---------------------------------
|    
|Date |  | May 15, 2003 |  |                                  
|     |  |              |  |                                  
|    
|Date |  | May 15, 2003 |  |                                  
|     |  |              |  |                                  



23



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##### Table of Contents



CERTIFICATIONS



I, Robert A.
McCormick, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of SAVVIS Communications Corporation;
| | -- |  | ----------------------------------------------------------------------------------------

| | 
| | 

| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Date: May 15, 2003 |  |  |  | By:    /s/    Robert A.
McCormick   
|------------------ |  |  |  | ------------------------------------
|                   |  |  |  | Robert A. McCormick                 
|                   |  |  |  | Chairman and Chief Executive Officer



24



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##### Table of Contents



I, Jeff H. Von Deylen, certify
that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of SAVVIS Communications Corporation;
| | -- |  | ----------------------------------------------------------------------------------------

| | 
| | 

| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Date: May 15, 2003 |  |  |  | By:    /s/    Jeffrey H. Von
Deylen                 
|------------------ |  |  |  | ----------------------------------------------------
|                   |  |  |  | Jeffrey H. Von Deylen                               
|                   |  |  |  | Executive Vice President and Chief Financial Officer



25