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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended DECEMBER 31, 2002

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Not Applicable

        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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
YES  X  NO     

        The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 28, 2002 was $140,236,888 based upon the $3.16 closing price of such stock as reported by the New York Stock Exchange on such date. Solely for purposes of this calculation, persons holding of record more than 5% of the Company's stock have been included as "affiliates."

COMMON STOCK, $.001 PAR VALUE — 74,363,431 SHARES OUTSTANDING AS OF MARCH 6, 2003

DOCUMENTS INCORPORATED BY REFERENCE

SITEL CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

Forward-Looking Statements

We make statements in this report that are considered forward-looking statements within the meaning of the Securities Exchange Act of 1934. Sometimes these statements will contain words such as "believes," "expects," "intends," "should," "will," "plans," and other similar words. These statements are not guarantees of our future performance and are subject to risks, uncertainties, and other important factors that could cause our actual performance or achievements to be materially different from those we project. These risks, uncertainties, and factors include, but are not limited to:

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reliance on major clients,

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conditions affecting clients' industries,

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clients' budgets and plans,

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unanticipated labor, contract or technical difficulties,

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delays in ramp up of services under contracts,

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reliance on major subcontractors and strategic partners,

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risks associated with managing a global business,

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fluctuations in operating results,

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reliance on telecommunications and computer technology,

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dependence on labor force,

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industry regulation,

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general and local economic conditions,

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competitive pressures in our industry,

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foreign currency risks,

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the effects of leverage,

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dependency on credit availability,

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restrictions imposed by the terms of indebtedness, and

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dependence on key personnel and control by management.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. Please see the other sections of this report and our other periodic reports filed with the Securities and Exchange Commission for more information on these factors.

PART I
Item 1. Business

General

References in this report to "we" and "our" are to SITEL Corporation and its subsidiaries, collectively.

We are a leading global provider of outsourced customer support services. We specialize in the design, implementation, and operation of complex, multi-channel contact centers to assist our clients service, grow, and increase the value of their customers. We support the Customer Relationship Management (CRM) strategies of many of the world's leading brands primarily in the automotive, consumer products, financial services, insurance, technology, telecommunications, ISP and cable, and utilities sectors. By leveraging world-class operations across our global platform of people, processes, and technology, SITEL provides customer acquisition, customer care, technical support, and risk management services on an outsourced basis to help clients service their customers and build greater brand loyalty. In addition, SITEL offers value-added services designed to optimize the experience of each customer and maximize the value of every interaction. We also provide operational and information technology professional services for both outsourced and in-house contact centers focused on delivering productivity improvements and cost efficiencies.

Founded in 1985, we have grown to include operations in North America, Europe, Asia Pacific, and Latin America. Operating from a decentralized business model structure wherein twenty-six separate business units serve over 300 clients around the world, the Company sells and operates locally while utilizing our global experience and expertise. We have approximately 23,000 committed employees worldwide that actively represent many of the world's leading brand names. We operate from over 19,000 workstations in 77 contact centers located in 21 countries. We serve clients' customers in 52 countries communicating in more than 25 languages and dialects.

We operate our contact centers based on the core belief that people do business with people, a reality that persists even in the age of anonymous online communications and one-click shopping. Our customer support services are designed to enhance the quality of interaction at every stage in the customer lifecycle, from identification and acquisition of new customers, to customer service for existing customers, to the provision of technical support, help desks and assistance in managing account receivables. Capitalizing on our experience in operating contact centers, our operational and technology professionals provide design, implementation and operation services to both outsourced and in-house contact center operators to optimize every aspect of their day-to-day contact center operations. Our value added services allow customers to select their preferred channel of communication, including voice, web, e-mail, fax, and wireless interactions.

Industry Overview

Over the last 10 years our industry has evolved from outsourcers providing customer services from primarily a low-technology, single-facility environment to supporting multi-national corporations' CRM strategies from large,

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full service, multi-channel contact centers located around the world. Today, companies are increasingly focused on optimizing the value of their relationships with their customers. Fueling this trend is the explosive growth in consumer use of the Internet and e-mail, and the increasingly remote nature of customer interactions. Companies now face the business imperative to deliver consistent levels of quality customer service regardless of the channel of communication chosen.

With new technologies, each customer interaction via e-mail, the web or directly with a customer service professional, allows companies to learn more about their customer's profile, decision-making process, and channel preference. This data can then be used to update a company's customer information database, enabling true one-to-one marketing. As a result of these advantages, contact center-based customer relationship management activity is becoming central to the way leading organizations choose to build and maintain customer relationships.

The contact center outsourcing market is large and is estimated to grow rapidly over the next three years. IDC, a respected industry analysis group, estimates that the worldwide contact outsource business will grow from $35 billion in the year 2001 to $90 billion by the year 2006, or an average increase of 21% per year. Corporations are increasingly shifting key business processes from internal operations to outsourced partners. The business process outsourcing momentum is creating opportunities for the contact center outsourcing market. The industry is showing corporations that processes can be improved resulting in higher outcomes for the corporations. This trend has been further fueled by the growing complexity of integrating technology and communication. We expect to see the market increase as companies focus on their core competencies and rely on service providers like SITEL to deliver comprehensive contact center solutions.

Our Business

We design, implement, and operate contact centers in support of clients' CRM strategies that allow our clients to enhance the value of their customer contacts, relationships, and information. At every stage of the customer or product lifecycle, we endeavor to give our clients' customers an experience that will:

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reinforce their trust in the brand,

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compel them to stay loyal, and

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encourage their advocacy and support regardless of how they communicate with our clients and their brands.

Whether that is an individual customer or a business customer, and whether they phone, e-mail or browse the client's website, our mission is to create customer loyalty and value, to increase sales, and to differentiate the client's brand in a positive manner.

We operate from 77 facilities in 21 countries throughout the four major regions of the globe, and offer services in more than 25 languages and dialects. We bring industry focus and expertise in the automotive, consumer products, financial services, insurance, technology, telecommunications, ISP and cable, and utilities sectors.

Organizational Structure

SITEL is unique within the outsource contact center industry by providing customer support services through a decentralized organization. Twenty-six business units, organized geographically outside North America and by industry, client and function within North America, provide client centric customer support services using best practices gained from our global experience. By leveraging our global expertise and serving clients locally, we are able to pay attention to detail, therefore, perform better for our clients. Individual business units know their markets, their geographies, the local rules and regulations and are best positioned to, not only perform for existing clients, but to sell to companies in their market. Clients served across business units are managed by a global accounts management team, but served by the individual business units. More and more companies are consolidating the number of outsource contact center vendors and contracting with a company that can services them across geographies. SITEL's decentralized business model is meeting those needs especially in the pan-European market. Our global sales team is responsible for developing and implementing customized industry-specific customer management solutions to prospective multi-national clients.

The Services We Offer

The Company provides innovative customer support services and solutions. We view every customer contact as an opportunity to build our clients' brand equity and strengthen relationships with our clients' customers. We offer a suite of added-value customer support services addressing every stage of the customer or product lifecycle, as well as operational and technology professional services that are designed to optimize every aspect of the day-to-day operation of both outsourced and in-house contact centers. SITEL, through our twenty-six individually managed business units, specializes in providing customer acquisition, customer care, technical support and risk management services using multiple communication channels encompassing phone, e-mail, web and chat to assist clients support and grow their customers. SITEL's business units operates 27 customer support centers in the United States, 5 centers in Canada, 27 centers in Europe, 5 in Asia Pacific, 11 in Latin America, and 2 offshore facilities in Jamaica and India. SITEL's customer service professionals (CSPs) are

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specially trained in the applicable product and/or service they are supporting. The CSPs act as a transparent extension of the client in acquiring and serving the clients' customer. Each of our services leverage our contact center expertise and are tailored to meet the client's unique business requirements. We offer the following services:

Customer Acquisition

Our customer acquisition services include prospect identification, campaign management, lead generation, and fulfillment. In coordination with our clients' sales objectives, we implement and execute marketing campaigns using multi-channel communications in coordination with advertising and promotional sales programs. By tracking customer value over time against the cost of acquisition, we help our clients improve the quality and value of new customers while reducing the total cost of acquisition. We help clients find and win customers through: list building, outbound sales, inbound sales or order taking, lead generation, direct response television/bureau, product information requests related to potential sales, subscription renewals, and database cleaning and updating.

Customer Care

Focused on enhancing the customer experience, our customer care services range from utilizing self-service products for frequently asked questions, to using web chat sessions for complex installation problems, to employing highly trained technicians for product support. We specialize in the design and delivery of complex, multi-channel solutions, including the use of cost competitive offshore locations. We act as the voice of the customer to our clients, providing valuable, real time feedback on new products or campaigns. Our customer care services include: complaint and issue resolution, change of personal details and billing information, thank-you or other client-initiated information contacts, reservations, loyalty initiatives, investor account inquiries, government information, dealer location contacts, insurance claims processing, fraud detection/prevention calls, back office requests, such as connecting a new line, disconnecting service and requesting maintenance support, warranty call handling, and administrative support regarding a customer's policy, lease or account.

Technical Support

Targeted at industries with dynamic product lifecycles, like high technology, we provide a broad range of technical support services focused on achieving measurable, total customer satisfaction. We employ technically trained and dedicated teams on an integrated, multi-channel platform, to provide comprehensive technical product support. We tailor the technical support processes to our clients' needs, including required activities, escalation procedures, and system level reporting. By analyzing product-related call patterns gathered from the technical support function, we are able to provide additional insight into future product development initiatives. In providing technical support services, we handle troubleshooting calls, respond to software and hardware problems, provide support for Internet service problems, manage corporate help desks, and provide warranty or post-warranty support.

Risk Management

We provide international receivables management programs for large corporations. We believe in a consultative approach, sharing industry-wide best practices to tailor a unique solution for each of our client's specific needs. We design programs to ensure optimal loss mitigation while emphasizing customer retention. Our risk management services include: pre- and post-charge-off collections, early fraud identification, credit card activations, property recovery programs, skip tracing, and disaster prevention and recovery.

Professional Services

Designed to optimize every aspect of the day-to-day operation of both outsourced and in-house contact centers, we offer operational and technology professional services to clients worldwide. We help clients align their business with their customers by helping them plan and execute appropriate customer relationship management strategies. Our expertise also includes the ability to deliver complex information technology services, as well as ongoing management services related to the successful operation of large-scale contact centers.

The Communication Channels We Use

We use the telephone, fax, and the Internet as means of communication to provide the services we offer. Each of these communication channels is described below:

Telephone-Based Services

We handle approximately 400 million customer calls annually via the telephone. We have been making and taking telephone calls on behalf of Global 1000 companies since our founding more than seventeen years ago. We have progressively grown our telephone capabilities from operating simple outbound dialing campaigns, to offering robust customer contact strategies to our long-term partners. Our customer service professionals use the telephone as the main communication tool in support of all of our service offerings.

Internet-Based Services

As the Internet has become an increasingly important communications medium between our clients and their customers, we have integrated the Internet into our contact center solutions. Our Internet strategy is to bring human interaction to Internet-based contacts and to use technology enabled by the Internet to handle customer contacts more efficiently and effectively.

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We believe that every remote customer contact, whether by telephone, fax, the Internet, or regular mail should be handled in an integrated fashion, leveraging the same customer service professional training and systems integration. We see it as a key goal within our clients' CRM strategies to deliver a high level of integration and to provide a unified view of the customer. We see this as essential to building strong one-to-one customer relationships. Our Internet-based services are described below.

E-mail Handling

Our customer service professionals provide timely, knowledgeable, and comprehensive replies to incoming e-mails that request customer service and technical support. Our contact center platform also provides automated e-mail response based on key word recognition.

Voice and Text-Based Chat Web Site Support

We provide voice chat support – enabling customers to simultaneously talk to a customer service professional while visiting a client's web site – using the Internet Call Center that we co-developed with Lucent Technologies in 1998. Text-based chat allows for proactive or responsive communications with any web site visitor to provide sales support or customer service. These chat services are further enabled by capabilities to push web pages to web visitors and the ability of the web agent to work collaboratively with the web visitor.

Self-Service and Browsing Support

The Internet can enable customers in certain situations to resolve their problems without human assistance. We are actively working with our clients to incorporate self-service capabilities into our solutions to improve customer satisfaction and reduce cost. Examples of self-service support are customers accessing the answers to frequently asked questions via an 'intelligent' search of a data or "knowledge base" or prospective customers completing online insurance applications that are subsequently reviewed by our licensed insurance service professionals.

Telephone Support

Telephone support, the largest revenue generator, includes technical support and customer service call handling for Internet services and products, as well as closed loop calling in support of electronic processes. For example, we make and receive phone calls inside a client organization ensuring that cases have been successfully closed when web site visitors ask the client organization to contact them or provide a service or information.

Markets and Clients

Our business units implement and operate customized industry-specific customer support solutions by geography and by specific vertical markets. They have primary responsibility for operations, sales and marketing efforts in their defined area. Within this framework, we focus on large and medium size corporations in the automotive, consumer products, financial services, insurance, technology, telecommunications, ISP and cable, and utilities sectors. These industries accounted for approximately 15%, 13%, 21%, 11%, 10%, 20% and 8%, respectively, of our 2002 revenue. Sales in other industries, including travel, healthcare and various others, accounted for 2% of 2002 revenues. We serve over 300 clients in 21 countries. Note 9 of our Notes to Consolidated Financial Statements provides information about our revenues by geographic region. Our top 20 clients accounted for 68.4% of our revenues in 2002, and include multiple independently managed business units of General Motors Corporation. These General Motors business units were responsible for 23.5% of our total revenues in 2002. We did not have any other clients under common control that generated 10% or more of our revenues.

The Industries We Serve

We provide contact center solutions primarily across the following industries:

Automotive

We provide customer support services for several automotive manufacturers including the largest automotive company in the world. Our services support our clients' brands and promote customer satisfaction and loyalty. Services are performed through all communication channels and include general inquiries, dealer questions, warranty questions and support.

Consumer Products

The consumer products industry encompasses a large variety of companies including retail, manufacturing, service, and publishing companies. In addition to traditional product and service support solutions, we also provide specialized service processes such as lead generation, managing product recalls, and performing quality surveys and market analysis.

Energy and Utilities

With the deregulation of the utility industry, companies are expanding their services and emphasizing the growth of their customer base. We provide services to public and private energy and utility companies, including electric power, natural gas, water and integrated energy providers. In addition to traditional customer support services, we have developed several processes to support the industry including: lead generation, loyalty campaign programs, appointment setting and scheduling, database management programs, and end-to-end solutions for supporting the customer from connection to payment.

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Financial Services

Regulatory changes have opened up opportunities for the financial service industry. New product and service offerings have expanded our opportunities in this fast paced industry. We work with financial services companies worldwide to provide a wide range of customer support services including responding to credit card inquiries, transferring balances, taking and processing loan applications. Specialty processes we provide our clients in the financial services industry include managing loyalty programs, generating leads for new customers, and managing customer retention programs.

Insurance

We are a leader in providing a broad range of services to the insurance industry. With over 350 in-house agents holding in excess of 17,000 licenses we have written over $8 billion of premiums over the last five years. We direct market fully underwritten Property & Casualty and Life & Health products. We also support the accidental death and disability, credit life, and supplemental health insurance markets. Our customer support services for the insurance industry include all of the traditional services, such as customer inquiries, policy changes, claims processing and full back-office support.

Technology

We provide technical sales, technical support and customer support services for Technology sector companies including computer hardware manufacturers, software publishers, and PDA and other wireless device suppliers. We have developed processes supporting the technology industry including processes for product launches, complete sales and account management programs, corporate help desk, and warranty or post-warranty sales and support programs.

Telecommunications, ISP and Cable

We provide a full range of sales and customer service activities to domestic and international long distance providers, local exchange carriers, cellular and PCS providers, Internet Service Providers, telecommunications equipment manufacturers, and cable and satellite TV companies. In addition to traditional product and service support solutions, we deliver advanced order management, provisioning, and B2B support, and have developed specific end-to-end solutions for Internet service providers and wireless service providers.

Information Technology

We use industry-standard software from Microsoft, Oracle, and others across the administrative functions of our business units. Within industry sectors, we use industry-specific contact processing application systems. We have designed and implemented client (or industry) specific applications to provide highly customized solutions to clients' specific requirements.

We also utilize a state-of-the-art technology platform (UNIX and NT architecture) with Windows 95/98/2000 and NT-based Compaq, Dell and IBM workstations, predictive dialers and automated call distributors. Our customer service professionals have the tools to initiate and receive effectively and efficiently millions of service transactions per month.

We have designated Siebel e-Business Applications as our preferred technology platform. Siebel interfaces with Oracle as the database engine and Avaya for the computer telephony integration. This provides flexibility and continued return from our investment in existing switch and dialer platforms.

Human Resource Management

Efficient management and operation of large-scale contact center solutions is a highly people intensive business. One of our core competencies is managing a diverse, worldwide workforce. We place great emphasis on our integrated human resource management strategies, including the recruitment, training, development, and retention of our employees at all levels of the organization.

We seek to locate customer contact centers in communities and cities with favorable workforce demographics and populations with necessary language skills. We are committed to equal employment opportunity in every market we serve.

To build rewarding careers for our employees and enable effective planning for future growth:

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we have developed training and education programs, as well as performance management and career planning processes, designed to enable people to learn (both in classrooms as well as on the job) and perform at optimum levels on the diverse range of daily e-media customer contacts, on behalf of our multiple-industry clients,

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we encourage employee self-development, and have developed our own corporate e-Learning university (SITEL University), and

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we aim to develop and promote individuals from within the organization as much as possible.

As of December 31, 2002, we had approximately 23,000 employees. In our European region, employees in Belgium, Germany, Sweden, and Spain are within the scope of government sponsored collective bargaining agreements and are represented by either a labor union or a statutory work council arrangement. In countries with labor unions or work councils, our ability to reduce our workforce or wage rates is subject to agreement or

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consultation with the appropriate labor union or works council. We consider relations with our employees to be good.

Offshore

The use of offshore facilities to service clients' customers from a location that offers reliable cost efficient labor is a growing trend in the industry. We intend to continue to expand and pursue growth opportunities in offshore markets. Our offshore locations include Jamaica, India, Panama, and Canada which service English speaking customers, and various Latin American countries that provide offshore services for Spanish language customers in the United States and Spain.

Competition

We are one of the largest independent companies executing contact center solutions. Our largest direct competitors include:

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TeleTech Holdings, Inc.,

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Convergys Corporation,

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Sykes Enterprises, Incorporated,

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APAC Customer Services, Inc., and

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West Corporation.

The industry in which we compete is extremely competitive and fragmented. We compete with a variety of companies from small firms offering specific applications to companies listed above to divisions of large enterprises. We also compete with in-house customer service departments throughout the world. In-house departments continue to comprise the largest segment of contact center expenditures. Additional competitors with greater resources than we have may enter the customer relationship management industry.

Like us, most of the major outsourcing companies are positioning themselves as providers of contact center solutions. However, we believe we are in a leadership position in terms of global presence, solutions provided, industries served and large-scale project implementation and operational experience. We have implemented and now manage integrated programs using all e-media across the broad range of contact center solutions designed to support the entire customer lifecycle.

Government Regulation

Our business is subject to laws and regulations concerning teleservices, web-services, collection agencies, consumer protection, and the collection and use of consumer data.

United States

In the United States, the Federal Trade Commission (FTC) and many states regulate teleservices, web-services, consumer privacy and the collection and use of consumer data.

The Federal Telephone Consumer Protection Act of 1991 (TCPA) prohibits teleservices firms from initiating telephone solicitations to residential telephone subscribers during certain times, prohibits the use of automated telephone dialing equipment to call certain telephone numbers, and requires teleservices firms to maintain a "do not call" list of residential customers.

The FTC issued its original Telemarketing Sales Rule in 1995 pursuant to the federal Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994. The original rule prohibited misrepresentation regarding products or services offered by telephone solicitation and addressed other perceived telemarketing abuses in the offering of prizes and the sale of business opportunities or investments.

The FTC amended its Telemarketing Sales Rule in December 2002. The amended rule:

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establishes a national do not call registry

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requires specified disclosures in outbound telephone calls and in upsells to induce the purchase of goods or services

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prohibits unauthorized billing and requires express agreement after certain disclosures to ensure authorization to bill,

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newly restricts charitable solicitations

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prohibits call abandonment beyond a safe harbor

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requires transmission of information to consumers' caller identification phone service

Most provisions of the amended rule are effective in March 2003. The national do not call registry will be phased-in during 2003. The transmission to caller identification phone service takes effect in March 2004.

There are many federal and state laws and regulations governing web-services, consumer privacy, and the collection and use of consumer data. Key federal laws include the:

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Gramm-Leach-Bliley Act,

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Health Insurance Portability and Accountability Act of 1996,

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Children's Online Privacy Protection Act, and

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Federal Drivers Privacy Protection Act of 1994.

Our international risk management business is required to be licensed under various federal, state and provincial collection agency laws and regulations and to comply with fair debt collection practices and consumer credit laws and regulations.

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International

Countries outside the United States where we have substantial operations generally have not enacted detailed regulatory frameworks for teleservices. The European Union (EU) has adopted various directives impacting the teleservices industry, which EU member countries are in various stages of implementing. Many countries, including those in the EU, have enacted or proposed laws that regulate consumer privacy and the collection and use of consumer data.

Many of these laws are based on the privacy principles established by the Organization for Economic Co-operation and Development (OCED) in its Guidelines on the Protection of Privacy and Transborder Flows of Personal Data. These laws generally provide individuals with a right to access and correct inaccurate information. Many of these laws provide that personally identifiable information can only be used or disclosed for specified and lawful purposes and include civil and criminal penalties for violations.

Key EU actions include the:

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Distance Selling Directive 97/7/EC adopted in 1997 – protects consumers who shop by phone, mail order, on the Internet, or digital TV.

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Telecoms Directive 97/66/EC, adopted in 1997 – establishes guidelines for the processing of personal data in the telecommunications sector.

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E-Commerce Directive 00/31/EC adopted in 2000 – seeks boost consumer confidence in e-commerce and give information service providers legal certainty without excessive over-regulation.

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Standard contractual clauses the EC Commission adopted in 2001, supplementing the Data Privacy Directive 95/46/EC – oblige the data controller and data processor to observe and implement certain measures to protect personal data and aloe its legal transmission outside the EU.

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Privacy and Electronic Communications Directive adopted in June 2002 – aimed primarily at on-line business.

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Long Distance Selling of Financial Services Directive 02/65/EC adopted in 2002 – applies to all financial services able to be provided at a distance.

Industry Regulation

The industries we serve are subject to varying degrees of government regulation. For example, our employees who sell certain U.S. insurance products are typically required to be licensed by state insurance commissions and may also be required to participate in regular continuing education programs, which we currently provide in-house.

We generally rely on our clients and their advisors to develop the scripts and client information we use in making or receiving customer contacts. We generally require our clients to indemnify us against claims and expenses arising from their products or services, scripts, and directives.

The teleservices and web-service industries, consumer groups, and regulatory and legislative bodies are increasingly concerned about "right of privacy" issues as technological advances have dramatically increased the availability of information about consumers. Various technology and direct-marketing industry groups have been addressing the issue of consumer privacy. The U.S. Direct Marketing Association, the leading trade association of direct marketers, recommends industry participants follow its guidelines for the fair use of information.

Complying with applicable laws, regulations and industry guidelines to date has not had a material adverse effect on our business. However, in the US alone, compliance with the newly amended FTC rule and the increasing regulation of our industry at the state level is imposing significant additional costs and burdens upon our business. Many proposed laws and regulations are in early stages of consideration, and we cannot yet determine the impact these might have on our business. Governments, trade associations, and industry self-regulatory groups may enact even more burdensome laws, regulations and guidelines, which might directly affect our business, or affect our clients' businesses and thus indirectly our business, in material and adverse ways.

Existing and future laws and regulations may require our clients to change their products or services in ways that could diminish the commercial viability of those products or services or require us to modify our contact center solutions to continue effectively meeting our clients' needs.

Quarterly Results and Seasonality

We have experienced, and expect to continue to experience, quarterly variations in our results of operations mostly due to:

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the timing of our clients' customer relationship management initiatives and customer acquisition and loyalty campaigns,

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the commencement and terms of new contracts,

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revenue mix,

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the timing of additional operating, selling, and administrative expenses to support new business, and

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the timing of recognition of incentive fees.

We experience periodic fluctuations in our results of operations related to both the start-up costs associated with expansion and the implementation of clients' CRM activities. In addition, our business generally tends to be slower in the third quarter due to summer holidays in Europe.

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Item 2. Properties

Our executive offices are located in Baltimore, Maryland.

As of December 31, 2002, we operated Company Centers in various facilities that we lease and Client Centers that are on client premises as shown in the table below. In addition, we were in the process of starting operations at a Company Center in Italy at December 31, 2002.

** centers operated by our joint ventures

We contract and operate out of several Client Centers to support specific client initiatives. We believe our current facilities are adequate for our current operations, but additional facilities will be required to support growth. We believe suitable additional or alternative space will be available as needed on commercially reasonable terms. Our policy is to rent contact center space, but at times we have built or purchased facilities and, in certain cases, subsequently sold them in sale-leaseback transactions.

Item 3. Legal Proceedings

From time to time, we are involved in litigation incidental to our business. We cannot predict the ultimate outcome of such litigation with certainty, but management believes, after consultation with counsel, that the resolution of such matters will not have a material adverse effect on our consolidated financial position or results of operations.

One of our clients has received letters from time to time containing an offer to license and suggesting that the client might be infringing certain patents related to computerized telephonic voice response systems without the license. The client has indicated that if any infringement occurred the client would seek contractual indemnity from us. In such an event, we would expect to seek contractual indemnity from certain of our vendors. Any such contractual indemnity we might obtain likely would not be sufficient to cover all of the costs of investigating and resolving such matter. We might also seek a license under the patents. Any such license may not be available under commercially reasonable terms. Any license costs would increase the cost of doing business in the future and may or may not be fully reflected in our pricing. To our knowledge, no litigation has been initiated against our client or us concerning this matter. At this stage, due to the inherent uncertainties, we are unable to predict whether this matter may have a material adverse effect on our business or on our financial condition or results of operation.

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

Not applicable.

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Executive Officers of the Registrant

Executive officers of SITEL Corporation at the date of this report are:

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Our common stock is traded on the New York Stock Exchange under the symbol SWW. The following table sets forth the high and low sale prices of our common stock for the quarters indicated, as reported by the New York Stock Exchange.

Shares Outstanding and Holders of Common Stock

As of March 6, 2003, we had 74,363,431 shares of common stock outstanding and 609 record holders of our common stock.

Dividend Policy

We have not declared or paid any cash dividends on our common stock since our inception. The Board of Directors currently intends to retain all earnings for use in the business for the foreseeable future. Furthermore, our Senior Subordinated Notes and revolving credit facility contain certain restrictions on the payment of cash dividends.

Equity Compensation Plan Information

The information required by this item with respect to equity compensation plans is set forth in the Proxy Statement under the caption "Equity Compensation Plans" and is incorporated herein by reference.

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Item 6. Selected Financial Data

The following Selected Financial Data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations beginning on the following page, the Consolidated Financial Statements beginning on page F-3, and the Notes to Consolidated Financial Statements beginning on page F-7.

(a)

We discuss asset impairment and restructuring expenses in Note 11 to the Consolidated Financial Statements.

(b)

We discuss the cumulative effect of a change in accounting for goodwill in Note 3 to the Consolidated Financial Statements.

(c)

During 2002, we adopted the provisions of SFAS 142, Goodwill and Other Intangible Assets, and ceased amortizing goodwill. If we had not amortized our goodwill during the four years ended December 31, 2001 our net income (loss) would have been $(19,138) in 2001, $15,753 in 2000, $2,817 in 1999 and $2,558 in 1998.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

General

References in this report to "we" and "our" are to SITEL Corporation and its subsidiaries, collectively.

We are a leading global provider of outsourced customer support services. We specialize in the design, implementation, and operation of complex, multi-channel contact centers. We support the Customer Relationship Management (CRM) strategies of large corporations in North America, Europe, Asia Pacific, and Latin America. We provide customer acquisition, customer care, technical support and risk management services on an outsourced basis, as well as operational and information technology professional services for both outsourced and in-house contact centers. We serve clients primarily in the automotive, consumer products, financial services, insurance, technology, telecommunications, ISP and cable, and utilities sectors.

In Management's Discussion and Analysis, we provide information about our general business risks, critical accounting policies and estimates, results of operations, financial condition and liquidity, and certain other matters affecting our operating results for the periods covered by this report.

As you read this discussion and analysis, refer to our Consolidated Statements of Income (Loss), which present the results of our operations for 2002, 2001, and 2000, and are summarized on the following pages. We analyze and explain the differences between periods for the components of net income (loss) in the following sections. Our analysis is important in making decisions about your investment in SITEL Corporation.

General Business Risks, Critical Accounting Policies and Estimates

General Business Risks

Our business success depends on our ability to efficiently deploy our human and capital resources in the delivery of services to our clients. Consequently, the needs of our clients may significantly impact our results of operations, financial condition, and liquidity.

Our results of operations and operating cash flows may vary with periodic wins and losses of client contracts and with changes in the scope of client requirements. Our top 20 clients accounted for 68.4% of our revenues in 2002, and include multiple independently managed business units of General Motors Corporation. These General Motors business units were responsible for 23.5% of our total revenues in 2002. We did not have any other clients under common control that generated 10% or more of our revenues. Two of the primary General Motors contracts expire in January 2004. We are currently in negotiations regarding the continuation of services for these clients beyond the expiration date. The financial failure of any of these clients or the loss of any or all of their business could have an adverse impact on our operating results.

Our liquidity, including our ability to comply with debt covenants, may be adversely affected if we were to lose a significant client or as a result of significant changes in client demand if we are unable to efficiently re-deploy our human and capital resources.

In the following sections, we also discuss the importance of our critical accounting policies and the use of accounting estimates, and their potential impacts on our results of operations.

Critical Accounting Policies

Our significant accounting policies and practices are described in Note 1 to the Consolidated Financial Statements. Of those policies, we have identified the following to be critical accounting policies because they are the most important to the portrayal of our results of operations and financial condition, and they require management's most difficult, subjective, or complex judgments:

•

estimates of uncollectible trade accounts receivable to determine an allowance for doubtful accounts,

•

estimates of the useful lives for property and equipment,

•

estimates of the recovery of our long-lived assets and the fair market value of goodwill, and

•

estimates of future taxable income that is required to support the carrying value of deferred tax assets and estimates of the related valuation allowance.

Trade Accounts Receivable

We report our trade accounts receivable net of an allowance for doubtful accounts, which represents management's estimates of the amount of our receivables that may not be collectible, net of recoveries of amounts previously written off. These estimates are based on a detailed aging analysis of accounts receivable, historical bad debts, client credit-worthiness, and changes in our client payment terms. The financial condition of our clients may deteriorate, which may require us to increase our allowance for doubtful accounts. We would record an increase in the allowance for doubtful accounts as operating, selling, and administrative expense in our Consolidated Statements of Income (Loss), which would

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reduce our results of operations. Our accounts receivable balance at December 31, 2002 was $128.6 million, net of an allowance for doubtful accounts of $4.0 million.

Property and Equipment

We record property and equipment at cost, and calculate depreciation using the straight-line method over the estimated useful lives of the assets, which range from 3 to 20 years. We amortize leasehold improvements and assets under capital leases on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset. If the actual useful lives of these assets are less than the estimated depreciable lives, we would record additional depreciation expense or losses on disposal to the extent the net book value of such asset is not recovered upon sale.

Asset Impairment

In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. We adopted the provisions of SFAS No. 144 effective January 1, 2002. Under this standard, we monitor events and changes in circumstances that may require us to review the carrying value of our long-lived assets. We assess the recoverability of our long-lived assets based on estimated undiscounted future operating cash flows. Our assessment of the recoverability of our long-lived assets will be impacted if estimated future operating cash flows are not achieved.

Goodwill

Goodwill represents the difference between the purchase price we paid in acquisitions, using the purchase method of accounting, and the fair value of the net assets we acquired.

We adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002. As a result of the adoption of this standard, we stopped amortizing our goodwill effective January 1, 2002, which means that we have not recorded any goodwill amortization expense in our Consolidated Statements of Income (Loss) for the year ended December 31, 2002 and we will not record such amortization in future years.

During 2002, we performed a transitional goodwill impairment review in two phases to determine if goodwill that was stated in our Consolidated Balance Sheet at January 1, 2002 was impaired. During the second quarter of 2002, we completed the first phase of the required impairment review, and determined that the goodwill in certain reporting units was impaired at January 1, 2002. We completed the second phase of the transitional impairment review during the fourth quarter of 2002. As a result of these reviews, we recorded a pre-tax goodwill impairment loss of $18.4 million as a cumulative effect of an accounting change in the 2002 financial statements. Effective as of October 1, 2002, we completed a further analysis of our goodwill and determined no additional impairment was required.

As of December 31, 2002, we have goodwill of $49.7 million. At least annually or more frequently as changes in circumstance indicate, we will evaluate the estimated fair value of our goodwill. On these evaluation dates, to the extent that the carrying value of the net assets of any of our reporting units having goodwill is greater than their estimated fair value, we will be required to take additional goodwill impairment charges.

Deferred Income Taxes

We must report some of our revenues and expenses differently for our financial statements than we do for income tax purposes. The future tax effects of the differences in these items, as well as operating loss and tax credit carryforwards, are reported as deferred tax assets or liabilities in our Consolidated Balance Sheets.

We assess the likelihood that our deferred tax assets will be recovered from future estimated taxable income. To the extent we believe that recovery is not likely, we establish valuation allowances to reduce the deferred tax assets to the amount that is more likely than not to be realized. The net deferred tax asset as of December 31, 2002 was $11.3 million, net of a valuation allowance of $43.4 million.

Significant management judgment is required in determining any valuation allowance recorded against our deferred tax assets. We have recorded a valuation allowance of $43.4 million as of December 31, 2002, due to uncertainties related to our ability to utilize some of our deferred tax assets before they expire. These assets consist of tax amortization in excess of book amortization related to the acquisition of a business and certain net operating losses and tax credits carried forward. The valuation allowance is based on our estimates of future taxable income by jurisdiction in which we operate and the period over which our deferred tax assets can be recovered. In the event that actual results differ from these estimates or we revise these estimates in future periods, we may need to adjust the valuation allowance which could materially impact our financial position and results of operations.

Use of Accounting Estimates

Management makes estimates and assumptions when preparing financial statements under generally accepted accounting principles that affect:

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our reported amounts of assets and liabilities at the dates of the financial statements,

•

our disclosure of contingent assets and liabilities at the dates of the financial statements, and

•

our reported amounts of revenues and expenses during the reporting periods.

These estimates involve judgments with respect to, among other things, future economic factors that are difficult to predict and are beyond management's control. As a result, actual amounts could differ from these estimates.

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Results of Operations

In this section, we discuss our operating results and the factors affecting them. We begin with a general overview, then separately discuss the components of net income (loss) in more detail. We describe our general business risks, critical accounting policies, and estimates that are important to our operating results on the previous page. Please refer to that discussion as you read this section.

Overview

We summarize our net income (loss) and net income (loss) per common share – diluted, and the impacts of asset impairment and restructuring expenses, change in accounting method, and other items, in the following tables: Net Income (Loss)

2002 Compared to 2001

We had a net loss of $9.8 million, or ($0.13) per share, in 2002, compared to a net loss of $22.6 million, or ($0.31) per share, in 2001. Results in 2002 were primarily impacted by the $18.4 million goodwill write-off that was recorded as of January 1, 2002, a $1.4 million asset impairment and restructuring charge in the third quarter, and a $2.3 million valuation allowance on deferred tax assets recorded in the fourth quarter. All of these items are summarized in the table above.

Excluding the goodwill write-off and other items described above in 2002 and the asset impairment, restructuring expenses, and other items described above in 2001, we had net income of $11.8 million, or $0.16 per share, in 2002 compared to net income of $0.9 million, or $0.01 per share, in 2001. This increase resulted mostly from a 6.2% increase in revenues and higher operating margins in 2002.

Net Income (Loss) Per Common Share–Diluted

2001 Compared to 2000

We had a net loss of $22.6 million, or ($0.31) per share, in 2001, compared to net income of $12.7 million, or $0.17 per share, in 2000. Results in 2001 were primarily impacted by asset impairment and restructuring expenses and other items that we recorded in the second and third quarters of the year. These charges were offset partially by a $6.0 million net income tax benefit that we recorded as a result of our election to treat certain of our foreign operations as branches of our U.S. company for U.S. income tax purposes. All of these items are summarized in the table above.

Excluding the asset impairment and restructuring expenses and other items described above in 2001 and $2.0 million of after-tax asset impairment and restructuring expenses in 2000, we had net income of $0.9 million, or $0.01 per share, in 2001 compared to net income of $14.7 million, or $0.20 per share, in 2000. This decline resulted mostly from a 5.2% decrease in revenues and lower gross profit margins in 2001.

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Components of Net Income (Loss)

As you read this section, please refer to the following table that summarizes our income statement data on a percentage-of-revenue basis.

a)

During 2002, we adopted the provisions of SFAS 142, Goodwill and Other Intangible Assets, and ceased amortizing goodwill. If we had not amortized our goodwill during the two years ended December 31, 2001 our net income (loss) would have been $(19,138) in 2001, and $15,753 in 2000.

2002 Compared to 2001

Revenues

Revenues increased $45.2 million, or 6.2%, in 2002 compared to 2001. The increases in revenues by geographic region are shown in the following table:

The increase in North America revenues was mostly due to additional customer care and customer acquisition services we provided to a number of our large global clients and to new work performed by our risk management business. These increases were partially offset by a reduction in technical support services. The weakening of the U.S. dollar versus the British pound and Euro accounted for about $10.6 million, or 70%, of the increase in Europe along with the ramp of new customer programs. The increase in Latin America revenues was due mostly to new work we performed for clients in Mexico and to revenues from our Panama site, as we began serving clients from that facility during the fourth quarter of 2001.

As a result of certain revisions in the governance of a joint venture, we reported our investment in certain Latin America affiliates using the equity method of accounting, rather than the consolidation method, effective October 1, 2002. As a result of this change, our Latin America revenues will no longer include the revenues associated with the joint venture. Our 2002 revenues were approximately $10 million lower due to the change in accounting.

Direct Labor and Telecommunications Expenses

Direct labor and telecommunications expenses include the compensation of our customer service professionals and their first line supervisors and telephone usage expenses directly related to the production of revenues.

Direct labor and telecommunications expenses as a percentage of revenues can vary based on the nature of the contract, the nature of the work, and the market in which the services are provided. Accordingly, direct labor and telecommunications expenses as a percentage of revenues can vary, sometimes significantly, from year to year.

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Direct labor and telecommunications expenses increased $22.4 million, or 5.5%, in 2002 compared to 2001. As a percentage of revenues, direct labor and telecommunications expenses decreased from 56.7% in 2001 to 56.3% in 2002.

However, as we discuss in the following section, we subcontract certain client services to our India joint venture. We do not incur direct labor and telecommunication expenses for these subcontracted services, as such costs are incurred by the joint venture. Excluding the revenues we have recorded from clients where we have subcontracted the services to our India joint venture, direct labor and telecommunications expenses as a percentage of revenues increased from 56.7% in 2001 compared to 57.5% in 2002, primarily due to lower unit prices from our clients.

Subcontracted and Other Services Expenses

Subcontracted and other services expenses include services provided to clients through subcontractors and other out-of-pocket expenses. Subcontracted and other services expenses increased $18.1 million, or 48.9%, in 2002 compared to 2001. The increase in these expenses was mostly due to subcontracted expenses of $14.3 million paid to our India joint venture as we began serving clients from that facility during the third quarter of 2001.

Operating, Selling and Administrative Expenses

Operating, selling and administrative expenses represent expenses incurred to directly support and manage the business, including costs of management, administration, technology, facilities, depreciation and amortization, maintenance, sales and marketing, and client support services.

Operating, selling and administrative expenses decreased $9.6 million, or 3.7%, in 2002 compared to 2001. Excluding goodwill amortization expense of $3.6 million from the year ended December 31, 2001, operating, selling and administrative expenses decreased $6.0 million, or 2.3%. The decline in these expenses was mostly due to our restructuring plan that began at the end of the third quarter of 2001, partially offset by the ramp up of new customer programs in Europe in the third quarter of 2002. As a percentage of revenues, operating, selling and administrative expenses decreased from 35.4% in 2001, excluding goodwill amortization expense, to 32.6% in 2002.

Asset Impairment and Restructuring Expenses

During 2002, in connection with the restructuring plan announced in 2001, we recorded additional restructuring charges of $1.4 million associated with the write-off of contact center operations and corporate support services identified in 2001.

In 2001, we announced a restructuring plan designed to intensify our focus on core competencies, accelerate revenue growth, and improve profitability. The key components of the restructuring plan include several major organizational changes and the streamlining of contact center operations and corporate support services to improve effectiveness and drive revenue growth.

As part of our restructuring plan, we reduced fixed overhead to improve profitability by substantially completing the following by December 31, 2001:

•

eliminating approximately 350 operating, selling, and administrative positions globally, and

•

reducing excess capacity by closing nine contact centers plus three administrative offices, and downsizing another five contact centers plus two administrative offices, resulting in the elimination of approximately 2,100 workstations.

In the second quarter of 2001, we recorded $23.8 million of asset impairment and restructuring charges, or $22.1 million net of tax, related to the restructuring plan we announced in June 2001 as described above. In the third quarter of 2001, we recorded $2.4 million of additional charges related to the plan.

Operating Income (Loss)

We had operating income of $29.3 million in 2002, compared to an operating loss of $9.7 million in 2001. Excluding the asset impairment and restructuring expenses in both years and goodwill amortization expense in 2001, operating income increased $10.7 million from $20.1 million in 2001 to $30.8 million in 2002. As a percentage of revenues, operating income was 4.0% in 2002 compared to 2.8% in 2001. This change resulted from all of the factors affecting revenues and expenses discussed earlier in this section.

Interest Expense, Net

Interest expense, net of interest income, was slightly lower in 2002 compared to 2001.

Equity in Earnings (Loss) of Affiliates

Equity in earnings (loss) of affiliates represents our percentage share of the earnings (loss) from our investment in a joint venture in India. As discussed previously, effective October 1, 2002, we revised our joint venture agreement and the results of our operations in certain Latin America affiliates are now being accounted for under the equity method.

As a result, equity in earnings (loss) of affiliates increased by $3.7 million in 2002 as compared to 2001 primarily due to us beginning to serve clients from the India facility in the third quarter of 2001.

Other Expense, Net

Other expense, net of other income, decreased $1.7 million in 2002 compared to 2001 mostly because we recorded $1.3 million of losses on disposals of certain assets recognized in 2001.

Income Tax Expense (Benefit)

We recorded income tax expense of $10.4 million in 2002 compared to an income tax benefit of $2.3 million in 2001.

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The 2002 income tax expense reflects a $2.3 million deferred income tax expense we recorded in the fourth quarter to increase the valuation allowance on deferred tax assets that were recorded in prior years related to an Asia Pacific subsidiary.

In 2002, income tax expense as a percentage of income before income taxes, minority interest and change in accounting method, excluding the charge in our deferred tax valuation allowance was 39%. The difference between this rate and the statutory U.S. Federal rate of 35% was primarily due to net operating losses in certain European and Asia Pacific subsidiaries for which no tax benefit was recognized and U.S. state and local income taxes offset by lower international tax rates in certain jurisdictions.

The 2001 benefit reflects:

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a $6.0 million net deferred income tax benefit we recorded in the first quarter that resulted from an election to treat certain of our foreign operations as branches of our U.S. company for U.S. income tax purposes, and

•

the $2.2 million tax benefit we recorded on the asset impairment and restructuring charges and the losses on disposals of assets in the second quarter.

These benefits were offset by a $3.3 million deferred income tax expense we recorded in the second quarter to establish a valuation allowance on deferred tax assets that were recorded in prior years related to our United Kingdom subsidiaries.

2001 Compared to 2000

Revenues

Revenues decreased $39.4 million, or 5.2%, in 2001 compared to 2000. The changes in revenues by geographic region are shown in the following table:

Revenues decreased in Europe mostly due to the loss of two large clients in the United Kingdom, which took their customer acquisition businesses in-house, and lower revenues in Spain. The strength of the U.S. dollar versus the British pound and Euro accounted for about $9.4 million, or 23%, of this decrease. The decrease in Asia Pacific primarily related to restructuring our operations in Japan and transferring our existing Japanese business to Bellsystem24 in the second quarter of 2000. The decrease in North America was primarily attributable to a reduction in customer acquisition revenues that was due, in part, to the September 11^th, 2001 attack on the United States. The increase in Latin America was attributable to new work we performed for clients in Brazil and Mexico.

Direct Labor and Telecommunications Expenses

Direct labor and telecommunications expenses include the compensation of our customer service professionals and their first line supervisors and telephone usage expenses directly related to the production of revenues.

Direct labor and telecommunications expenses as a percentage of revenues can vary based on the nature of the contract, the nature of the work, and the market in which the services are provided. Accordingly, direct labor and telecommunications expenses as a percentage of revenues can vary, sometimes significantly, from year to year.

Direct labor and telecommunications expenses increased $12.3 million, or 3.1%, in 2001 compared to 2000. As a percentage of revenues, direct labor and telecommunications expenses increased from 52.2% in 2000 to 56.7% in 2001. This increase was primarily due to reduced labor efficiency caused by:

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an unanticipated decline in revenues,

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a higher than normal number of client programs ramping up and ramping down during the year, and

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some reductions in pricing.

Subcontracted and Other Services Expenses

Subcontracted and other services expenses include services provided to clients through subcontractors and other out-of-pocket expenses. Subcontracted and other services expenses decreased $14.5 million, or 28.2%, in 2001 compared to 2000. The decline in these expenses was due mostly to a reduction in the use of third party contact centers in the U.S. due to a reduction in customer acquisition services and lower reimbursable expenses in the U.S. and Europe.

Operating, Selling and Administrative Expenses

Operating, Selling and Administrative Expenses represent expenses incurred to directly support and manage the business, including costs of management, administration, technology, facilities, depreciation and amortization, maintenance, sales and marketing, and client support services.

Operating, selling and administrative expenses decreased $11.3 million, or 4.2%, in 2001 compared to 2000. The decline in these expenses was mostly due to our restructuring plan that began at the end of the second quarter of 2001. As a percentage of revenues, Operating, selling and administrative expenses were about the same in 2001 as they were in 2000.

Asset Impairment and Restructuring Expenses

In 2001, we announced a restructuring plan designed to intensify our focus on core competencies, accelerate revenue growth, and improve profitability. The key components of the restructuring plan include several major organizational changes and the streamlining of contact center operations and corporate support services to improve effectiveness and drive revenue growth.

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As part of our restructuring plan, we reduced fixed overhead to improve profitability by substantially completing the following by December 31, 2001:

•

eliminating approximately 350 operating, selling, and administrative positions globally, and

•

reducing excess capacity by closing nine contact centers plus three administrative offices, and downsizing another five contact centers plus two administrative offices, resulting in the elimination of approximately 2,100 workstations.

In connection with this restructuring, we recorded $26.2 million of asset impairment and restructuring charges in 2001. We estimate that the ongoing annual savings from the restructuring will exceed $20 million.

We evaluate the recoverability of our long-lived assets, including goodwill, based on estimated undiscounted future operating cash flows. While management currently believes that estimated future operating cash flows will be sufficient to recover such assets, there can be no assurance that such estimates will be achieved. If estimated future operating cash flows are not achieved, we may need to record impairment losses on these assets in future periods.

In 2000, we formed a strategic partnership with Bellsystem24, Inc., Japan's largest comprehensive marketing agency. Under the terms of the partnership, Bellsystem24 provides services and support for our clients in Japan and we provide services and support for Bellsystem24's clients in the United States. In connection with the formation of the partnership, we restructured our operations in Japan and transferred our existing Japanese business to Bellsystem24. In connection with this restructuring, we recorded a $3.5 million asset impairment and restructuring charge, or $2.0 million after tax, in 2000.

Operating Income (Loss)

We had an operating loss of $9.7 million in 2001, compared to operating income of $38.8 million in 2000. Excluding the asset impairment and restructuring expenses discussed earlier, operating income as a percentage of revenues was 2.3% in 2001 compared to 5.5% in 2000. This change resulted from all of the factors affecting revenues and expenses discussed earlier in this section.

Interest Expense, Net

Interest expense, net of interest income, was about the same in 2001 as it was in 2000.

Equity in Earnings (Loss) of Affiliates

We recognized a loss of $0.3 million associated with the operating results of affiliates accounted for under the equity method. This loss was attributed primarily to the establishment of operations in India which did not exist in 2000.

Other Expense, Net

Other expense, net of other income, increased $2.3 million in 2001 compared to 2000 mostly because we recorded $1.3 million of losses on disposals of certain assets, and we wrote off $0.8 million of credit acquisition costs in connection with the amendment of our credit facility in 2001.

Income Tax Expense (Benefit)

We recorded an income tax benefit of $2.3 million in 2001 compared to income tax expense of $12.6 million in 2000. The 2001 benefit reflects:

•

a $6.0 million net deferred income tax benefit we recorded as a result of our election to treat certain of our foreign operations as branches of our U.S. company for U.S. income tax purposes, and

•

a $2.2 million tax benefit we recorded on asset impairment and restructuring charges and losses on disposals of assets in the second quarter of 2001.

These benefits were offset by a $3.3 million deferred income tax expense we recorded to establish a valuation allowance on deferred tax assets that were recorded in prior years related to our United Kingdom subsidiaries.

In 2001, income tax expense as a percentage of income before income taxes and minority interest, excluding asset impairment and restructuring expenses and the above special items, was 57.7%. The difference between income tax expense and the expense which would result from applying the statutory U.S. Federal rate of 34% was primarily due to non-deductible goodwill, net operating losses in certain subsidiaries for which no tax benefit was recognized, higher international tax rates in certain jurisdictions, and U.S. state and local income taxes.

Financial Condition and Liquidity

In this section, we discuss our financial condition and liquidity and the factors affecting them. We separately discuss cash flows, capital resources, and contractual obligations and commitments. We describe our general business risks, critical accounting policies, and estimates that are important to our financial condition and liquidity earlier in this report. Please refer to that discussion as you read this section.

Cash Flows

The following table sets forth summary cash flow data for the periods indicated. Please refer to this summary as you read our discussion of the sources and uses of cash in each year.

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2002

In 2002, cash provided by operating activities came from income before asset impairment and restructuring expenses, depreciation and amortization, and other charges of $43.9 million and a $2.9 million decrease in trade accounts payable, which were partially offset by a $7.4 million increase in trade accounts receivable and other assets.

In 2002, we used cash for investing activities mostly to purchase $30.4 million of property and equipment. We received $1.5 million from the sale of property and equipment associated with our joint ventures.

In 2002, we received cash from financing activities mostly from borrowings under our credit facility.

2001

In 2001, cash provided by operating activities came from income before asset impairment and restructuring expenses, depreciation and amortization, and other charges of $45.0 million and a $15.3 million decrease in trade accounts receivable, which were partially offset by a $10.2 million decrease in other liabilities. Although accounts receivable decreased during the period, we anticipate accounts receivable will increase as we continue to grow, which may require additional financing.

In 2001, we used cash for investing activities mostly to purchase $40.4 million of property and equipment, and we invested $2.3 million in a joint venture in India.

In 2001, we used cash for financing activities mostly to repay $3.8 million of capital lease obligations.

2000

In 2000, cash provided by operating activities consisted mostly of income before non-cash expenses of $60.6 million and a decrease in accounts receivable of $11.1 million, partially offset by a $14.8 million decrease in accounts payable and other liabilities.

In 2000, we used cash for investing activities mostly to purchase $33.1 million of property and equipment. This was partially offset by $7.2 million of cash proceeds we received from sales of property and equipment.

In 2000, we used cash for financing activities to repay $82.3 million of debt and capital lease obligations, net of additional borrowings of $35.0 million under our revolving credit facility, resulting in net repayments of $47.3 million.

Capital Resources

We have historically used funds generated from operations, leases of property and equipment, equity capital, senior subordinated notes, and borrowings under credit facilities with banks to finance business acquisitions, capital expenditures, and working capital requirements.

Effective December 27, 2002, we closed a three-year $50 million revolving credit facility. This new facility replaced our previous $50 million long-term senior secured credit facility which was due to expire in April 2003.

The new credit facility is secured by accounts receivable in the United States, Canada and the United Kingdom. We intend to utilize the facility, as needed, for ongoing working capital requirements and general corporate purposes.

At December 31, 2002, we had $44.6 million of available borrowings under the new credit facility, and we were in compliance with all financial covenants of the facility.

We expect to finance our current operations, planned capital expenditures, and internal growth for the foreseeable future using funds generated from operations, existing cash, leases of property and equipment, and the funds available under our credit facility. We estimate that our 2003 capital expenditures will range from $25 to $35 million. Future acquisitions, if any, may require additional debt or equity financing.

Under a stock repurchase program that was authorized by our Board of Directors in February 2001, we may repurchase up to $10 million of our shares from time to time in the open market or in privately negotiated transactions, depending on general business and market conditions. Through the date of this report, we had repurchased a total of 171,800 shares at a total cost of $0.3 million.

Contractual Obligations and Commitments

We have various contractual obligations and commitments that are described in the Notes to Consolidated Financial Statements. We summarize our contractual obligations and commitments at December 31, 2002 in the following table:

* We generally do not make unconditional, non-cancelable purchase commitments. We enter into purchase orders in the normal course of business, but these purchase obligations do not exceed one year.

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Other Matters

Quarterly Results and Seasonality

We have experienced, and expect to continue to experience, quarterly variations in our results of operations mostly due to:

•

the timing of our clients' customer relationship management initiatives and customer acquisition and loyalty campaigns,

•

the commencement and terms of new contracts,

•

revenue mix,

•

the timing of additional operating, selling, and administrative expenses to support new business, and

•

the timing of recognition of incentive fees.

We experience periodic fluctuations in our results of operations related to both the start-up costs associated with expansion and the implementation of clients' CRM activities. In addition, our business generally tends to be slower in the third quarter due to summer holidays in Europe.

Effects of Inflation

Inflation has not had a significant effect on our operations. However, there can be no assurance that inflation will not have a material effect on our operations in the future.

Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires us to record the fair value of an asset retirement obligation as a liability in the period in which we incur a legal obligation associated with the retirement of tangible long-lived assets. We are required to adopt SFAS No. 143 on January 1, 2003. The adoption of SFAS No. 143 is not expected to have a material effect on our consolidated financial statements.

In June 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 nullifies Emerging Issues Task Force (EITF) Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of SFAS No. 146 is not expected to have a material effect on our consolidated financial statements.

In October 2002, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on the accounting for revenues in transactions that involve multiple deliverables. The guidance governs how to identify whether goods or services or both, that are to be delivered separately in a bundled sales arrangement, should be accounted for separately. This guidance is effective for fiscal years beginning after December 15, 2003, so we expect to adopt the guidance in our financial statements for the quarter ended March 31, 2004. We have not yet determined the impact of this conclusion on our consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are not expected to have a material effect on our consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation -Transition and Disclosure, an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to these consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. The application of this Interpretation is not expected to have a material effect on our consolidated financial statements.

Reclassifications

We have reclassified certain prior-period amounts for comparative purposes. These reclassifications did not affect consolidated net income for the periods presented.

19

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks associated primarily with changes in foreign currency exchange rates. We have operations in many parts of the world; however, both revenues and expenses of those operations are typically denominated in the currency of the country of operations, providing a natural hedge. From time to time, we enter into certain hedging transactions designed to hedge foreign currency exchange risk related to short-term intercompany loans and specific foreign currency transactions, however the amounts involved have not been material.

We are also exposed to changes in interest rates on our variable rate borrowings. Interest rates on our Senior Subordinated Notes and capital lease obligations are fixed, but rates on borrowings under our bank credit facility are variable. During the year ended December 31, 2002, our average borrowings under our bank credit facility were $2.1 million. Based on our projected cash needs for the foreseeable future, we do not expect that our exposure to changes in interest rates will have a material impact on our interest expense.

Item 8. Financial Statements and Supplementary Data

The information called for by this item is incorporated by reference from our Consolidated Financial Statements and the related Notes to Consolidated Financial Statements beginning on page F-3.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this item with respect to directors is set forth in the Proxy Statement under the captions "Item 1: Board of Directors and Election" and "Section 16(a) Beneficial Ownership Reporting Compliance," and is incorporated herein by reference.

The information required by this item with respect to executive officers pursuant to instruction 3 of paragraph (b) of Item 401 of Regulation S-K, is set forth following Item 4 of Part I of this Form 10-K under the caption "Executive Officers of the Registrant" and in the Proxy Statement under the caption "Section 16(a) Beneficial Ownership Reporting Compliance," and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this item is set forth in the Proxy Statement under the captions "Annual Compensation," "Benefit Plans," "Option Grants and Holdings," "Compensation Committee Report on Executive Compensation," and "Performance Graph," and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this item regarding security ownership of certain beneficial owners and management is set forth in the Proxy Statement under the caption "Common Stock Owned by Certain Beneficial Owners and by Executive Officers and Directors," and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

The information required by this item is set forth in the Proxy Statement under the caption "Compensation Committee Interlocks and Insider Participation; Certain Transactions," and is incorporated herein by reference.

Item 14. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended) as of a date within ninety days of the filing date of this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are adequate and effective.

There were no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the date of such evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

20

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)

The following documents are filed as a part of this report:

1.

Financial Statements – beginning on page F-1 of this report.

•

Independent Auditors' Report

•

Consolidated Statements of Income (Loss) For The Years Ended December 31, 2002, 2001, and 2000

•

Consolidated Balance Sheets at December 31, 2002 and 2001

•

Consolidated Statements of Stockholders' Equity For The Years Ended December 31, 2002, 2001, and 2000

•

Consolidated Statements of Cash Flows For The Years Ended December 31, 2002, 2001, and 2000

•

Notes to Consolidated Financial Statements

2.

Financial Statement Schedule – beginning on page S-1 of this report.

•

Independent Auditors' Report on the Financial Statement Schedule

•

Schedule II – Valuation and Qualifying Accounts

Schedules other than Schedule II are omitted as not applicable or not required.

3.

Exhibits – required by Item 601 of Regulation S-K:

21

(b)

Reports on Form 8-K:
None.

22

SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

23

CERTIFICATIONS

I, James F. Lynch, certify that:

1.

I have reviewed this annual report on Form 10-K of SITEL Corporation;



2.

Based on my knowledge, this annual 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 annual report;



3.

Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;



4.

The registrant's other certifying officer 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 annual 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 annual report (the "Evaluation Date"); and



c)

presented in this annual 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 officer 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 officer and I have indicated in this annual report whether 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: March 27, 2003

24

I, James E. Stevenson, Jr., certify that:

1.

I have reviewed this annual report on Form 10-K of SITEL Corporation;



2.

Based on my knowledge, this annual 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 annual report;



3.

Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;



4.

The registrant's other certifying officer 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 annual 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 annual report (the "Evaluation Date"); and



c)

presented in this annual 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 officer 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 officer and I have indicated in this annual report whether 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: March 27, 2003

25

EXHIBIT INDEX

26

* Filed herewith.

27

SITEL CORPORATION AND SUBSIDIARIES


TABLE OF CONTENTS
Financial Statements and Financial Statement Schedule