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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2013

OR

For the transition period from                      to                     

Commission file number: 0-28074

Sapient Corporation

(Exact name of registrant as specified in its charter)

617-621-0200

(Registrant’s telephone number, including area code)

(Not applicable)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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SAPIENT CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended September 30, 2013

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements included in this Quarterly Report on Form 10-Q, including those related to our cash and liquidity resources, our cash outlays, our expenditures relating to restructuring and timing for balance payoff, future dividend payments, investing activities, repurchases of our common stock, the nature of our unbilled revenues, our tax rate, our tax estimates and deferred tax assets, the outcome of tax audits and the expiration of tax statutes of limitations, including the impact on our gross unrecognized tax benefits, our intercompany transactions, the effects of restructuring certain subsidiaries, our accrual of contingent liabilities, the impact of acquisitions and acquisition costs and related contingent consideration liabilities and our expected goodwill, costs related to the evaluation of potential acquisition targets, our compensation expense, including with respect to our restricted stock units, the ability of our insurance to cover our indemnification arrangements and our fair value estimates of such arrangements, the effects of changes in interest rates and currency exchange rate fluctuations, the impact of new accounting pronouncements and policies, our use of cash, the temporary nature of certain impairments, our assumptions underlying certain impairment reviews, our revenue recognition, anticipated revenue from our services, including traditional IT consulting services, anticipated client contractual demands, the impact of the recent U.S. government shutdown on our revenues, our ability to meet working capital and capital expenditure requirements, investing activities, stock repurchases and expected cash outlays, the outcome of litigation and the impact of any losses as a result, our accruals for litigation and other loss contingencies, our Global Distributed Delivery model results, benefits of our relationships and strategic alliances, the alignment of our sales professionals, our employee relationships, our competition and our principal competitive factors, our ability to estimate required resources for client arrangements, our technology platforms, our reinvestment of unremitted earnings and our plans regarding whether or not to repatriate overseas funds, our expectations regarding fixed-price contracts and lease extensions, our interest rate risk, and our expectations regarding our financial systems improvements, as well as any statement other than statements of historical facts are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “will,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee future results, levels of activity, performance or achievements, and you should not place undue reliance on our forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks described in Part II, Item 1A, Risk Factors, and elsewhere in this Quarterly Report on Form 10-Q. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or strategic investments. In addition, any forward-looking statements represent our expectation only as of the day this Quarterly Report on Form 10-Q was first filed with the Securities and Exchange Commission (“SEC”) and should not be relied on as representing our expectations as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our expectations change, except as required by law.

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PART I. FINANCIAL INFORMATION

Item 1. Unaudited Consolidated and Condensed Financial Statements

SAPIENT CORPORATION

CONSOLIDATED AND CONDENSED BALANCE SHEETS

(Unaudited)

The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

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SAPIENT CORPORATION

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

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SAPIENT CORPORATION

CONSOLIDATED AND CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

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SAPIENT CORPORATION

CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

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SAPIENT CORPORATION

NOTES TO UNAUDITED CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS

(1) Basis of Presentation

The accompanying unaudited consolidated and condensed financial statements have been prepared by Sapient Corporation (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K. These financial statements reflect all adjustments (consisting solely of normal, recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. Certain items for the three and nine months ended September 30, 2012 and as of the year ended December 31, 2012 have been reclassified to conform to the current period presentation. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Sapient,” “the Company,” “we,” “us” or “our” refer to Sapient Corporation and its consolidated subsidiaries.

Revision of Prior Period Financial Statements

During the quarter ended March 31, 2013, the Company identified certain prior period errors which affected the interim and annual periods in the years ended December 31, 2006 through 2012. The prior period errors primarily relate to the Company’s unrecorded corporate income and employment tax liabilities resulting from cross-border mobility of employees into various countries in prior periods. The net tax liabilities related to the interim and annual periods in the years ended December 31, 2006 through December 31, 2012 amounted to $14.1 million. The Company also has revised the presentation of certain other immaterial prior period errors that were previously corrected in the Company’s consolidated financial statements in reporting periods other than those in which these errors originated. In addition, the Company has included the impact of the revision recorded in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The Company has reflected the correction of all identified prior period errors in the periods in which they originated.

In evaluating whether the Company’s previously issued consolidated financial statements were materially misstated, the Company considered the guidance in ASC Topic 250, Accounting Changes and Error Corrections, ASC Topic 250-10-S99-1, Assessing Materiality, and ASC Topic 250-10-S99-2, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. The Company concluded that these errors were not material individually or in the aggregate to any of the prior reporting periods, and therefore, amendments of previously filed reports are not required. However, if the entire correction had been recorded in the first quarter of 2013, the cumulative amount would be material in the year ending December 31, 2013 and would impact comparisons to prior periods. As such, the revisions for these corrections are reflected in the financial information of the applicable prior periods and will be reflected in future filings containing such financial information.

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The effects of these prior period errors on the consolidated financial statements are as follows (in thousands, except per share amounts):

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(2) Business Acquisitions

2013 Acquisition

iThink Comunicação e Publicidade Ltda.

On January 16, 2013, the Company acquired 81% of the outstanding securities of iThink Comunicação e Publicidade Ltda. (“iThink”), an independent digital agency based in Sao Paulo, Brazil. The Company acquired iThink to expand Sapient’s combination of brand, digital and commerce service offerings to global clients in Latin America. iThink’s results of operations are reflected in the Company’s consolidated statements of operations from the acquisition date, and the acquisition added approximately 65 people.

The acquisition date fair value, net of cash acquired, was $6.8 million for the purchase of 81% of iThink’s outstanding securities, including the fair value amount of $1.2 million of noncontrolling interest. This total consisted of $4.9 million of cash paid (net of cash acquired and working capital adjustments), deferred contingent consideration with an estimated fair value of $0.7 million, and noncontrolling interest with an estimated fair value of $1.2 million. Of the cash amount paid, $2.0 million was placed into escrow, of which $1.5 million serves as security for any claims made by the Company under the terms of an escrow agreement between the Company and the former owners of iThink. The remaining amounts were related to other adjustments, including net working capital adjustments, and were released from escrow during the three months ended June 30, 2013.

The consideration paid was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair values of identifiable intangible assets were based on valuations using the income approach and estimates provided by management. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The final allocations to goodwill, intangible assets and net assets were $6.3 million, $1.4 million, and $(0.4) million, respectively.

The Company believes the amount of goodwill resulting from the purchase price allocation is attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and the expected synergistic benefits of being able to leverage iThink’s expertise with the Company’s existing services to provide integrated marketing services to the customer bases of both the Company and iThink in Latin America. All of the goodwill was allocated to the Company’s SapientNitro reportable segment. The following table presents the estimated fair values (in thousands) and useful lives of intangible assets acquired:

The useful lives of these intangible assets were based upon the patterns and periods in which the economic benefits related to such assets are expected to be realized, and the intangible assets will be amortized on a basis reflecting those economic patterns. The acquired goodwill and intangible assets will not be deductible for tax purposes.

The former owners of iThink are eligible to receive additional cash consideration of up to $11.7 million, which is contingent on the fulfillment of certain financial conditions during the three years ending December 31, 2015. Using a discounted cash flow method, the Company recorded an estimated contingent consideration liability of $0.7 million as of the acquisition date, and less than $0.1 million as of September 30, 2013. The Company will continue to assess the probability that the conditions will be fulfilled, and until the liability is fully settled, any subsequent changes in the estimated fair value of the liability will be reflected in “Acquisition costs and other related (benefits) charges” in the Company’s unaudited consolidated and condensed statements of operations. The contingent consideration liability is denominated in a foreign currency and, therefore, its value as reported in U.S. dollars on the Company’s unaudited consolidated and condensed balance sheet may also change from period to period due to currency exchange rate fluctuations.

The Company has the right (but not the obligation) to purchase the remaining 19% noncontrolling interest in iThink at certain times and under certain circumstances (the “Call Option”) as defined by the terms of the purchase agreement. With respect to any of the remaining equity interests in iThink for which the Company does not exercise its purchase option, the owners of the noncontrolling interest in iThink have the right (but not the obligation) (the “Put Option”) to sell their equity interests to the Company. The Call Option and Put Option may only be exercised for a period of 30 days following specific circumstances. The Call Option and Put Option are embedded features of the noncontrolling interest and are not freestanding financial instruments. Due to the presence of the Put Option, the noncontrolling interest in iThink is classified as temporary equity, between liabilities and permanent equity, in the Company’s unaudited consolidated and condensed balance sheets. The noncontrolling interest was initially recorded at fair value and is subsequently adjusted at each reporting period for comprehensive income (loss) of the subsidiary attributed to the noncontrolling interest, dividends paid to the noncontrolling interest, and changes in the controlling entity’s ownership interest.

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Service revenues for iThink during the three and nine months ended September 30, 2013 were $0.7 million and $2.6 million, respectively. Net losses for iThink during the three and nine months ended September 30, 2013 were $0.6 million and $1.3 million, respectively.

Prior Year Acquisitions

(m)Phasize, LLC

On December 27, 2012, the Company acquired 100% of the membership interests of (m)Phasize, LLC (“(m)Phasize”), a marketing analytics company located in Westport, Connecticut. The Company acquired (m)Phasize to strengthen Sapient’s analytics services and marketing mix modeling capabilities. (m)Phasize’s results of operations are reflected in the Company’s consolidated statements of operations from the acquisition date, and the acquisition added approximately 16 people.

The acquisition date fair value, net of cash acquired, was $18.5 million for the purchase of 100% of (m)Phasize’s membership interests. This total consisted of $12.1 million in cash, inclusive of net working capital adjustments, stock-based awards with an estimated fair value of $0.3 million, and deferred contingent consideration with an estimated fair value of $6.1 million. Of the cash amount paid, $2.5 million was placed into escrow; $1.2 million serves as security for any claims made by the Company under the terms of an escrow agreement between the Company and the former owners of (m)Phasize; $1.0 million was contingent upon meeting certain revenue targets and was released to the former owners of (m)Phasize during the three months ended March 31, 2013; and $0.3 million was related to final working capital adjustments and was released to the former owners of (m)Phasize in July 2013.

The consideration paid was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair values of identifiable intangible assets were based on valuations using the income approach and estimates provided by management. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The final allocations to goodwill, intangible assets and net assets were approximately $11.8 million, $5.9 million, and $0.8 million, respectively.

The former members of (m)Phasize are eligible to receive additional consideration of up to $12.8 million, which is contingent on the fulfillment of certain financial conditions during the years ending December 31, 2013 and 2014. If such conditions are achieved, the consideration is payable under certain circumstances in cash or a combination of cash and common stock. Using a discounted cash flow method, the Company recorded an estimated contingent consideration liability of $6.1 million as of December 31, 2012 and $5.1 million as of September 30, 2013. The Company will continue to assess the probability that the conditions will be fulfilled, and any subsequent changes in the estimated fair value of the liability will be reflected in earnings until the liability is fully settled. During the three and nine months ended September 30, 2013, the Company recorded an expense of $0.1 million and a benefit of $1.0 million, respectively, relating to the remeasurement of the fair value of the contingent liability, which are included in “Acquisition costs and other related (benefits) charges” in the Company’s unaudited consolidated and condensed statements of operations.

Second Story Inc.

On November 1, 2012, the Company acquired Second Story Inc. (“Second Story”), an interactive studio operating in Portland, Oregon. The Company acquired Second Story to strengthen the Company’s ability to craft physical and digital experiences from web and mobile to in-store and in-venue. Second Story’s results of operations are reflected in the Company’s consolidated statements of operations from the acquisition date, and the acquisition added approximately 35 people.

The acquisition date fair value, net of cash acquired, was $9.9 million for the purchase of 100% of Second Story’s outstanding shares. This total consisted of $6.0 million in cash, restricted stock with an estimated fair value of $2.1 million, and deferred stock consideration with an estimated fair value of $1.8 million. Of the cash amount paid, $0.9 million was placed into escrow; $0.5 million served as security for any claims made by the Company under the terms of an escrow agreement between the Company and the former owners of Second Story; and $0.4 million was related to final working capital adjustments. These escrow amounts were released to the former owners of Second Story during the three months ended March 31, 2013. The fair value of the restricted stock and deferred stock consideration was determined to be $10.19 per share, the 90-day trailing average closing price of the Company’s common stock on the acquisition date, less reductions of $0.3 million to reflect the impact of the selling restrictions, and $0.6 million to reflect the impact of the passage of time until the deferred stock will be issued. The acquisition of Second Story did not include any contingent consideration. However, the deferred stock consideration will be subject to a resale restriction period upon issuance in the event that the employment of the selling shareholders terminates prior to the contractual stock issuance dates. As a result, $0.3 million of the reduction in the value of the deferred stock consideration is being accounted for as compensation expense over the associated vesting periods. As of September 30, 2013, the fair value of the deferred stock consideration was $2.0 million.

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The consideration paid was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair values of identifiable intangible assets were based on valuations using the income approach and estimates provided by management. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The final allocations to goodwill, intangible assets and net assets were approximately $6.5 million, $2.4 million, and $1.0 million, respectively.

Pro forma results of operations have not been presented, as the acquisitions of iThink, (m)Phasize and Second Story were not material, individually or in the aggregate, to the Company’s results of operations for any periods presented.

D&D Holdings Limited

On September 6, 2011, the Company acquired D&D Holdings Ltd. (“DAD”), a London-based advertising agency operating in the United Kingdom and continental Europe. The Company acquired DAD to strengthen Sapient’s capabilities in marketing campaign production and direct response measurement. The acquisition date fair value, net of cash acquired, was $45.2 million for the purchase of 100% of DAD’s outstanding shares. The $45.2 million consisted of $29.5 million in cash and deferred contingent consideration with an estimated fair value of $15.7 million.

The former shareholders of DAD are eligible to receive additional consideration of up to $20.9 million, which is contingent on the achievement of certain financial conditions within the period from July 1, 2011 to June 30, 2014. If such conditions are achieved, the consideration is payable under certain circumstances in cash, common stock or a combination of both. Using a discounted cash flow method, the Company recorded an estimated contingent consideration liability of $15.7 million as of the acquisition date, $13.7 million as of December 31, 2012, and $7.7 million as of September 30, 2013. At December 31, 2012, one of the financial conditions was achieved and, as a result, $4.8 million was released from escrow to the former shareholders of DAD during the three months ended March 31, 2013.

The Company will continue to assess the probability that the remaining conditions will be achieved, and any subsequent changes in the estimated fair value of the liability will be reflected in earnings until the liability is fully settled. During the three and nine months ended September 30, 2013, the Company recorded benefits of $0.8 million and $1.1 million, respectively, compared to expenses of $0.5 million and $1.8 million for the three and nine months ended September 30, 2012, respectively, relating to the remeasurement of the fair value of the contingent liability, which are included in “Acquisition costs and other related (benefits) charges” in the Company’s unaudited consolidated and condensed statements of operations. The contingent consideration liability is denominated in a foreign currency and, therefore, its value as reported in U.S. dollars on the Company’s unaudited consolidated and condensed balance sheet may also change from period to period due to currency exchange rate fluctuations.

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(3) Marketable Securities and Fair Value Disclosures

Marketable Securities

As of September 30, 2013 and December 31, 2012, all of the Company’s marketable securities were classified as available-for-sale and their estimated fair values were $7.3 million and $7.5 million, respectively.

The following table presents details of the Company’s marketable securities as of September 30, 2013 and December 31, 2012 (in thousands):

During the quarter ended June 30, 2013, one of the Company’s auction rate securities (“ARS”) holdings was redeemed by the issuer at its amortized cost of $1.0 million, resulting in no realized gain or loss. Also during the quarter ended June 30, 2013, the Company accepted an offer to sell an ARS holding with an amortized cost of $0.4 million, resulting in a realized loss of $28,000. This realized loss is included in “Interest and other income, net” in the Company’s unaudited consolidated and condensed statements of operations. As a result of these transactions, the Company no longer held any ARS as of June 30, 2013.

As of December 31, 2012, all of the Company’s available-for-sale ARS had been in an unrealized loss position for more than twelve months. Using a discounted cash flow analysis, the Company determined that the fair value of its ARS classified as available-for-sale securities was $198,000 less than their amortized cost as of December 31, 2012. The gross unrealized losses on ARS of $198,000 as of December 31, 2012 are included, net of taxes, in “Accumulated other comprehensive loss” on the Company’s unaudited consolidated and condensed balance sheets.

There were no other-than-temporary impairment losses recorded during the three or nine months ended September 30, 2013 or 2012. Any other-than-temporary impairment losses on marketable securities would be recorded in “Interest and other income, net” in the Company’s unaudited consolidated and condensed statements of operations.

Actual maturities of the Company’s marketable securities may differ from contractual maturities because some borrowers have the right to call or prepay the obligations. Gross gains and losses realized on sales of securities are calculated using the specific identification method, and no such gains or losses were recorded during the three or nine months ended September 30, 2013 and 2012.

Fair Value Disclosures

The Company records certain assets and liabilities at fair value. The following tables present the Company’s fair value hierarchy for its assets and liabilities which are measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012 (in thousands):

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The Company did not have any transfers of assets or liabilities between Level 1 and Level 2 or Level 3 of the fair value measurement hierarchy during the three or nine months ended September 30, 2013.

Level 1 assets consist of money market fund deposits and mutual funds that are traded in active markets with sufficient volume and frequency of transactions. The fair values of these assets were determined from quoted prices in active markets for identical assets.

Level 2 assets consist of bank time deposits and Level 2 liabilities consist of foreign exchange option contracts. The fair values of these assets and liabilities were determined from inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 assets included ARS investments structured with short-term interest rate reset dates of generally less than 90 days, but with contractual maturities that can be well in excess of 10 years. At the end of each reset period, which occurs every seven to 35 days, investors can continue to hold the investments at par or sell the securities at auction provided there are willing buyers to make the auction successful. Level 3 assets and liabilities also include the following financial assets and liabilities, recorded as the result of acquisitions: indemnification assets, and contingent consideration liabilities.

The fair value of an acquired indemnification asset is affected most significantly by changes in the fair value of the subject of the indemnification and changes in the expected probabilities of collecting the asset amounts. The fair value of an acquisition-related contingent consideration liability is affected most significantly by changes in the estimated probabilities of the contingencies being achieved.

The following table presents a summary of changes in fair value of the Company’s Level 3 financial assets and liabilities measured on a recurring basis for the nine months ended September 30, 2013 (in thousands):

The Company’s non-financial assets and liabilities, which include goodwill and long-lived assets held and used, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur, or if an annual impairment test is required, the Company would evaluate the non-financial assets and liabilities for impairment. If an impairment was to occur, the asset or liability would be recorded at its estimated fair value. During the three and nine months ended September 30, 2013, the Company recorded an impairment of its Nitro customer list intangible asset in the amount of $0.6 million and $2.1 million, respectively. See Note 12, Goodwill and Purchased Intangible Assets, for additional information.

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(4) Stock-Based Compensation

Project personnel expenses, selling and marketing expenses and general and administrative expenses presented in the accompanying unaudited consolidated and condensed statements of operations include the following stock-based compensation expense amounts (in thousands):

Stock-based compensation costs capitalized relating to individuals working on internally developed software were immaterial during all periods presented. The Company values restricted stock units (“RSUs”) based on performance conditions and RSUs contingent on employment based on the fair market value on the date of grant, which is equal to the quoted closing market price of the Company’s common stock on the date of grant.

For only those awards that are expected to vest, the Company recognizes stock-based compensation expense, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period of the award when the only condition to vesting is continued employment. If vesting is subject to a market or performance condition, vesting is based on the derived service period. The Company estimates its forfeiture rate based on its historical experience.

During the second quarter of 2011, the Company granted an aggregate maximum of 294,000 RSUs with service and performance conditions to six members of its leadership team. The performance conditions relate to Company performance for fiscal years 2011, 2012, and 2013 (98,000 units for each year). Any units which become eligible for vesting as a result of achievement of the performance conditions will vest only if the recipient also fulfills the service condition, which requires continuous employment with the Company through April 1, 2014. The performance conditions for the years ended December 31, 2012 and 2011 were partially achieved and as a result, the recipients became eligible to vest in a total of 69,848 and 87,268 units, respectively, provided they fulfill the service condition.

During the second quarter of 2010, the Company granted RSUs with service and performance conditions to its Chief Executive Officer (“CEO”). The performance conditions for the three year period ended December 31, 2012 were partially achieved and as a result, the CEO vested in a total of 34,306 units (of a maximum of 100,000) on the service vesting date, March 1, 2013. The CEO also vested in an additional 50,000 units (of a maximum of 50,000) on March 1, 2013 based on the achievement of strategic objectives, with achievement having been determined by the Company’s Board of Directors.

The following table presents activity relating to stock options under all of the Company’s stock option plans during the nine months ended September 30, 2013 (in thousands, except prices):

The aggregate intrinsic value of stock options exercised in the nine months ended September 30, 2013 and 2012 was $5.5 million and $3.2 million, respectively, determined at the exercise date. As of September 30, 2013, the weighted average remaining contractual term for stock options outstanding, vested, and exercisable was less than 1 year. As of September 30, 2013, there was no remaining unrecognized compensation expense related to non-vested stock options.

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The following table presents activity relating to RSUs during the nine months ended September 30, 2013 (in thousands, except prices):

The weighted average grant date fair value of RSUs granted during the nine months ended September 30, 2013 and 2012 was $12.08 and $12.23 per RSU, respectively. The aggregate intrinsic value of RSUs vested during the nine months ended September 30, 2013 and 2012 was $28.1 million and $23.9 million, respectively. As of September 30, 2013, the aggregate intrinsic value of non-vested RSUs, net of estimated forfeitures, was $107.2 million. As of September 30, 2013, unrecognized compensation expense related to non-vested RSUs was $59.6 million, net of estimated forfeitures, which is expected to be recognized over a weighted average period of 2.5 years.

(5) Net Income Per Share

The following table presents the computation of basic and diluted net income per share for the periods presented (in thousands, except per share amounts):

Weighted average dilutive common share equivalents include the dilutive impact of deferred stock consideration and restricted stock associated with the acquisitions of Second Story, DAD, and Nitro Group Limited (“Nitro”, acquired in 2009). These shares are reflected in weighted average dilutive common share equivalents because they were contingent shares during the relevant periods presented.

(6) Commitments and Contingencies

The Company is subject to certain legal proceedings and claims incidental to the operation of its business. The Company is also subject to certain other legal proceedings and claims that have arisen in the ordinary course of business and that have not been fully adjudicated. Although the Company intends to defend these matters vigorously, the ultimate outcome of these matters is uncertain. The Company currently does not anticipate that these matters, if resolved against the Company, will have a material adverse impact on its financial results.

The Company accrues for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability. As of September 30, 2013, the Company has recorded an accrual of $0.3 million for loss contingencies, which represents the minimum amount of the probable range between $0.3 million and $5.0 million, related to all probable losses where a reasonable estimate could be made. This range includes a potential liability associated with non-income tax matters in certain of the Company’s foreign jurisdictions.

The Company does not accrue for contingent losses that, in the judgment of the Company, are considered to be reasonably possible, but not probable. As of September 30, 2013, the Company does not have any reasonably possible losses for which an estimate can be made.

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(7) Restructuring and Other Related (Benefits) Charges

2013 – Restructuring Events

During the three and nine months ended September 30, 2013, the Company recorded a restructuring benefit of less than $0.1 million and a charge of $2.0 million, respectively, primarily related to cash severance and other termination benefits for 82 employees whose positions were made redundant. This action was taken primarily in order to improve efficiency based on our revenue mix, skills mix and leverage model. Of the total charges, $1.3 million and $0.5 million were allocated to the Company’s SapientNitro and Sapient Global Markets reportable segments, respectively.

2011 – Restructuring Events

During the three months ended September 30, 2011, the Company consolidated its New York City operations into one office space. As such, the Company exited one leased office space and recorded a restructuring charge of $0.9 million, consisting of contractual rental commitments and related costs, offset by sub-lease income. The term of the restructured lease ends in January 2016.

During the three and nine months ended September 30, 2013, the Company recorded restructuring benefits associated with these 2011 restructuring events of $0.1 million, relating to changes in the estimated facility costs to be incurred.

The following table presents activity during the nine months ended September 30, 2013 related to all restructuring events (in thousands):

The total remaining accrued restructuring balance of $0.5 million as of September 30, 2013 is expected to be paid in full by March 31, 2016.

(8) Income Taxes

During the quarter ended March 31, 2013, the Company identified certain prior period errors which affected the income tax provisions and related tax balance sheet accounts for the interim and annual periods in the years ended December 31, 2006 through 2012. The Company has reflected the correction of all identified prior period errors in the periods in which they originated. For additional details, see Note 1, Basis of Presentation – Revision of Prior Period Financial Statements.

For the three and nine months ended September 30, 2013, the Company recorded income tax provisions of $13.0 million and $31.6 million, respectively, compared to $12.0 million and $31.2 million for the three and nine months ended September 30, 2012. Income tax is related to federal, state, and foreign tax obligations. The changes in tax expense were primarily related to fluctuations in profit before taxes, changes in the mix of jurisdictional profits, and the discrete items relating to each period.

For the three and nine months ended September 30, 2013, the Company’s effective tax rate varied from the statutory tax rate primarily due to state income taxes, the tax rate differential attributable to income earned by the Company’s foreign subsidiaries and the related mix of jurisdictional profits, and changes in uncertain tax positions.

The Company enjoys the benefits of income tax holidays in certain jurisdictions in which it operates. Tax holidays for certain of the Company’s India locations expired on March 31, 2011. In 2009, the Company established a new India unit in a Special Economic Zone (“SEZ”) which is entitled to a five year, 100% tax holiday. Immediately following the expiration of the 100% tax holiday, the SEZ unit is entitled to a five year, 50% tax holiday. In 2011, the Company established three new India business units in SEZs, which are eligible for similar tax benefits.

Deferred tax assets are to be reduced by a valuation allowance if, based on the weight of available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of September 30, 2013, a valuation allowance is maintained against deferred tax assets associated with certain state tax net operating loss carryforwards. The Company also maintains a valuation allowance against certain foreign deferred tax assets, primarily in Switzerland, but believes that deferred tax assets in its other foreign subsidiaries are more likely than not to be realized, and therefore, no valuation allowance has been recorded against these assets.

The Company had gross unrecognized tax benefits, including interest and penalties, of $31.4 million as of September 30, 2013 and $28.1 million as of December 31, 2012. The amounts of unrecognized tax benefits that, if recognized, would result in a reduction of the Company’s effective tax rate were $28.7 million and $25.6 million as of September 30, 2013 and December 31, 2012, respectively. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of September 30, 2013 and December 31, 2012, accrued interest and penalties were $6.2 million and $5.3 million, respectively.

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The Company conducts business globally, and as a result, the Company and its subsidiaries file income tax returns in the U.S. federal and state jurisdictions as well as various foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Canada, Germany, India, Switzerland, the United Kingdom and the United States. The Company’s U.S. federal tax filings are open for examination for tax years 2010 through the present. During the quarter ended September 30, 2013, the Company was notified by the Internal Revenue Service that its U.S. federal tax returns for the years ended December 31, 2010 through 2012 have been selected for examination. The statutes of limitations in the Company’s other tax jurisdictions remain open for various periods between 2005 and the present. However, carryforward attributes from prior years may still be adjusted upon examination by tax authorities if they are used in future open periods.

Although the Company believes its tax estimates are appropriate, the final determination of tax audits and proceedings could result in favorable or unfavorable changes in its estimates. The Company anticipates the settlement of tax audits and proceedings, as well as the expiration of relevant statutes of limitations in the next twelve months could result in a decrease in its gross unrecognized tax benefits, including interest and penalties, of between $7.5 million and $10.0 million.

On September 13, 2013, the U.S. Department of the Treasury and Internal Revenue Service released final tangible property regulations that provide guidance on the tax treatment regarding the deduction and capitalization of expenditures related to tangible property. While early adoption is available, the effective date to implement these regulations is for tax years beginning on or after January 1, 2014. The Company is currently assessing these rules and the impact to its financial statements, if any, but believe adoption of these regulations will not have a material impact on our consolidated results of operations, cash flows or financial position.

(9) Noncontrolling Interest Subject to Put Provisions

The Company has potential obligations to purchase the noncontrolling interests held by third parties in connection with its acquisition of iThink. See Note 2, Business Acquisitions. These obligations are in the form of put provisions that are exercisable at the third-party owners’ discretion, within the specified period, as outlined in the iThink purchase and sale agreement. If these put provisions are exercised by the third parties within the specified period, the Company will be required to purchase all of the third-party owners’ noncontrolling interests at a determined put price as outlined in the iThink purchase and sale agreement, which is based on a specified factor multiplied by the average quarterly EBITDA achieved in the 12 quarters subsequent to the acquisition date. The put provisions are not exercisable until after the fiscal year ending December 31, 2015.

The acquisition date fair value of the noncontrolling interest was derived by extrapolating the fair value of the noncontrolling interest ownership based on the consideration transferred for the controlling interest in connection with the acquisition of the majority interest of iThink, net of a discount factor, to take into account the noncontrolling interest’s lack of marketability.

As of September 30, 2013, the Company’s potential obligations under these put options were approximately $0.9 million, of which $0 were exercisable.

The following table presents a roll forward of the noncontrolling interest subject to put provisions from the date of acquisition of iThink (January 16, 2013) through September 30, 2013 (in thousands):

(10) Segment Information

The Company has discrete financial data by operating segments available based on its method of internal reporting, which disaggregates its operations. Operating segments are defined as components of the Company for which separate financial information is available to manage resources and evaluate performance.

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The Company typically does not allocate certain marketing and general and administrative expenses to its operating segments because these activities and costs generally impact areas that support the operating segments and, therefore, are managed centrally. Management does not allocate certain restructuring and other related (benefits) charges, amortization of purchased intangible assets, stock-based compensation expense, acquisition costs and other related (benefits) charges, or interest and other income to the segments for the review of results by the Chief Operating Decision Maker (“CODM”). Asset information by operating segment is not reported to or reviewed by the CODM, and therefore, the Company has not disclosed asset information for the operating segments.

The Company has not disclosed service revenues for each service or group of similar services, as management has concluded that it is impractical to do so.

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The following tables present the service revenues and income before income taxes attributable to the Company’s reportable segments for the periods presented (in thousands):