<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

     [X]         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999


                                       OR

     [ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934

                          COMMISSION FILE NUMBER: 23346

                             EQUITY MARKETING, INC.
             (Exact name of registrant as specified in its charter.)

                DELAWARE                                13-3534145
     (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                Identification No.)

         6330 SAN VICENTE BLVD.
            LOS ANGELES, CA                               90048
(Address of principal executive offices)                (Zip Code)

                                 (323) 932-4300
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:

Common Stock, $.001 Par Value, 6,267,415 shares as of November 11, 1999.

                                       1
<PAGE>   2

                             EQUITY MARKETING, INC.

                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
               FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
                               SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
                                                                                  PAGE
                                                                                  -----
<S>                                                                               <C>
PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements                                              3

         Item 2.  Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                     12

PART II.

         Item 6.  Exhibits and Reports on Form 8-K                                 18

</TABLE>
                                       2
<PAGE>   3

PART I. FINANCIAL INFORMATION

         ITEM 1. FINANCIAL STATEMENTS


                             EQUITY MARKETING, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                     ASSETS


<TABLE>
<CAPTION>
                                                           DECEMBER 31,     SEPTEMBER 30,
                                                              1998             1999
                                                           -----------     ------------
                                                                            (UNAUDITED)
<S>                                                         <C>            <C>
CURRENT ASSETS:
  Cash and cash equivalents                                 $  7,250          $   897
  Accounts receivable (net of allowances
    of $3,684 and $2,375 as of December 31, 1998
    and September 30, 1999, respectively)                     57,071           31,093
  Inventory                                                   13,117            9,698
  Prepaid expenses and other current assets                    7,915            6,521
                                                            --------          -------
         Total current assets                                 85,353           48,209
FIXED ASSETS, net                                              5,892            5,234
INTANGIBLE ASSETS, net                                        23,442           22,117
OTHER ASSETS                                                     793            1,510
                                                            --------          -------
         Total assets                                       $115,480          $77,070
                                                            ========          =======
</TABLE>


              The accompanying notes are an integral part of these
                     condensed consolidated balance sheets.

                                       3
<PAGE>   4
                             EQUITY MARKETING, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,         SEPTEMBER 30,
                                                                      1998                  1999
                                                                  ------------         -------------
                                                                                         (UNAUDITED)
<S>                                                               <C>                  <C>
CURRENT LIABILITIES:
  Short-term debt                                                  $  30,000               $  1,000
  Accounts payable                                                    28,432                 14,860
  Accrued expenses and other current liabilities                      22,653                 21,133
                                                                   ---------               --------
         Total current liabilities                                    81,085                 36,993
LONG-TERM LIABILITIES                                                  1,988                  2,014
                                                                   ---------               --------
         Total liabilities                                            83,073                 39,007
                                                                   ---------               --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value per share; 1,000,000                   --                     --
    shares authorized, none issued or outstanding
  Common stock, par value $.001 per share, 20,000,000
    shares authorized, 6,227,718 and 6,237,415 shares
    outstanding as of December 31, 1998 and September 30,
    1999, respectively                                                    --                     --
  Additional paid-in capital                                          15,343                 15,446
  Retained earnings                                                   19,063                 24,434
                                                                   ---------               --------
                                                                      34,406                 39,880
Less--
  Treasury stock, 1,892,841 shares and 1,871,299
    shares, at cost, as of
    December 31, 1998 and September 30, 1999, respectively            (1,279)                (1,268)
  Stock subscription receivable                                          (32)                   (32)
  Unearned compensation                                                 (688)                  (517)
                                                                   ---------               --------
         Total stockholders' equity                                   32,407                 38,063
                                                                   ---------               --------
         Total liabilities and stockholders' equity                $ 115,480               $ 77,070
                                                                   =========               ========
</TABLE>


              The accompanying notes are an integral part of these
                     condensed consolidated balance sheets.

                                       4
<PAGE>   5



                             EQUITY MARKETING, INC.

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                      SEPTEMBER 30,                SEPTEMBER 30,
                                                            --------------------------    --------------------------
                                                                 1998          1999            1998          1999
                                                            -----------    -----------    -----------    -----------
<S>                                                         <C>            <C>            <C>            <C>
REVENUES                                                    $    29,987    $    53,334    $    84,376    $   136,802
COST OF SALES                                                    21,339         39,295         59,636        102,832
                                                            -----------    -----------    -----------    -----------
         Gross profit                                             8,648         14,039         24,740         33,970
                                                            -----------    -----------    -----------    -----------
OPERATING EXPENSES:
  Salaries, wages and benefits                                    3,510          4,433          9,592         11,349
  Selling, general and administrative                             4,410          5,075         11,102         13,720
  Business process reengineering                                  1,549             --          1,549             --
  Restructuring gain                                                 --           (240)            --           (641)
                                                            -----------    -----------    -----------    -----------
         Total operating expenses                                 9,469          9,268         22,243         24,428
                                                            -----------    -----------    -----------    -----------
         Income (loss) from operations                             (821)         4,771          2,497          9,542
INTEREST EXPENSE, net                                              (317)          (151)           (90)          (590)
                                                            -----------    -----------    -----------    -----------
         Income (loss) before provision for income taxes         (1,138)         4,620          2,407          8,952
PROVISION (BENEFIT) FOR INCOME TAXES                               (438)         1,848            926          3,581
                                                            -----------    -----------    -----------    -----------
         Net income (loss)                                  $      (700)   $     2,772    $     1,481    $     5,371
                                                            ===========    ===========    ===========    ===========
BASIC NET INCOME (LOSS) PER SHARE                           $     (0.12)   $      0.44    $      0.25    $      0.86
                                                            ===========    ===========    ===========    ===========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING                     6,085,585      6,230,906      6,043,585      6,221,374
                                                            ===========    ===========    ===========    ===========
DILUTED NET INCOME (LOSS) PER SHARE                         $     (0.12)   $      0.42    $      0.24    $      0.84
                                                            ===========    ===========    ===========    ===========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING                   6,085,585      6,533,737      6,238,634      6,387,617
                                                            ===========    ===========    ===========    ===========
</TABLE>


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


                                       5

<PAGE>   6


                             EQUITY MARKETING, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                  NINE MONTHS ENDED
                                                                                     SEPTEMBER 30,
                                                                               ------------------------
                                                                                 1998            1999
                                                                               --------        --------
<S>                                                                            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                   $  1,481        $  5,371
  Adjustments to reconcile net income to net cash
    provided by operating activities:
        Depreciation and amortization                                             1,401           2,050
        Provision for doubtful accounts                                             282             298
        Loss on asset disposal                                                       --              11
        Tax benefit from exercise of stock options                                  529              39
        Issuance of treasury stock to 401(k) Tax Deferred Savings Plan               --             195
        Other                                                                        --             (31)
        Changes in operating assets and liabilities, excluding effects of
        acquisition:
           Increase (decrease) in cash and cash equivalents:
              Accounts receivable                                                 9,019          25,680
              Inventory                                                          (6,000)          3,419
              Prepaid expenses and other current assets                          (1,648)          1,394
              Other assets                                                           36            (759)
              Accounts payable                                                    2,193         (13,572)
              Accrued expenses and other current liabilities                     (1,030)           (920)
              Deferred revenue                                                      357              --
              Long-term liabilities                                                 (36)             26
                                                                               --------        --------
         Net cash provided by operating activities                                6,584          23,201
                                                                               --------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of fixed assets                                                 (1,947)           (466)
       Payment for purchase of EPI Group Limited                                 (1,003)             --
       Payment for purchase of Contract Marketing, Inc.
          and U.S. Import & Promotions Co.                                      (15,429)           (149)
       Proceeds from sale of fixed assets                                            --              10
       Payment for purchase of Corinthian and Trademark                          (8,436)             --
       Other                                                                        (67)             --
                                                                               --------        --------
          Net cash used in investing activities                                 (26,882)           (605)
                                                                               --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from exercise of stock options                                    1,195              51
       Borrowings under short-term debt                                          24,300              --
       Repayment on short-term debt                                             (12,300)        (29,000)
                                                                               --------        --------
         Net cash provided by (used in) financing activities                     13,195         (28,949)
                                                                               --------        --------
         Net decrease in cash and cash equivalents                               (7,103)         (6,353)
CASH ACQUIRED IN ACQUISITIONS                                                     1,179              --
CASH AND CASH EQUIVALENTS, beginning of period                                    8,935           7,250
                                                                               --------        --------
CASH AND CASH EQUIVALENTS, end of period                                       $  3,011        $    897
                                                                               ========        ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  CASH PAID FOR:
         Interest                                                              $    289        $    835
                                                                               ========        ========
         Income taxes                                                          $  1,456        $  1,110
                                                                               ========        ========
</TABLE>

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


                                       6


<PAGE>   7


                             EQUITY MARKETING, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

NOTE 1 - ORGANIZATION AND BUSINESS

Equity Marketing, Inc., a Delaware corporation (the "Company"), is a leading
marketing services company, providing a wide range of custom promotional
programs that build sales and brand awareness for retailers, restaurant chains
and consumer goods companies such as Burger King Corporation, The Coca-Cola
Company, Exxon Company USA, Sunoco, Inc., CVS/pharmacy and others. The Company
is also a developer and marketer of distinctive, branded consumer products that
complement its core promotions business and are based on trademarks it owns or
classic licensed properties. The Company primarily sells to customers in the
United States.

Equity Marketing Hong Kong, Ltd., a Delaware corporation ("EMHK"), is a 100%
owned subsidiary of the Company. EMHK manages production of the Company's
products by third parties in the Far East and currently is responsible for
product sourcing, product engineering, quality control inspections, independent
safety testing and export/import documentation.

In April 1998, the Company purchased 100% of the common stock of Corinthian
Marketing, Inc., a Delaware corporation ("Corinthian"). Corinthian engaged
principally in the design, manufacture, marketing and distribution of the
Headliners brand of collectible sports figurines.

In July 1998, the Company acquired substantially all of the assets of Contract
Marketing, Inc. ("CMI"), a Massachusetts corporation, and U.S. Import and
Promotions Co. ("USI"), a Florida corporation (CMI and USI are collectively
referred to herein as "USI"). USI focuses primarily on promotions for oil and
gas and other retailers. The Company intends to continue to use the acquired
assets for this purpose. The primary operations of USI are located in West
Boylston, Massachusetts and St. Augustine, Florida.


NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In the opinion of management and subject to year-end audit, the accompanying
unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for a full year. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.

Certain reclassifications have been made to the accompanying 1998 financial
statements to conform them to the current period presentation.

                                       7
<PAGE>   8

NET INCOME PER SHARE

Diluted Earnings Per Share ("EPS") reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock. When dilutive, stock options are included as share
equivalents in computing diluted earnings per share using the treasury stock
method. During a loss period, the assumed exercise of in-the-money stock options
has an anti-dilutive effect. As a result, these shares are not included with the
weighted average shares outstanding of 6,085,585 used in the calculation of
diluted loss per share for the three months ended September 30, 1998. The impact
of including unexercised dilutive options was to increase weighted average
shares outstanding by 302,831 at quarter end September 30, 1999. The impact of
including unexercised dilutive options was to increase weighted average shares
outstanding by 195,049 and 166,243 for the nine months ended September 30, 1998
and 1999, respectively. Options to purchase 1,587,981 and 320,000 shares of
common stock were outstanding as of September 30, 1998 and 1999, respectively,
which were excluded from the computation of diluted income per share as they
would have been anti-dilutive.

INVENTORY

Inventory consists of production-in-process which primarily represents tooling
costs which are deferred and amortized over the life of the products and
finished products held for sale to customers and finished products in transit to
customers' distribution centers. Inventory is stated at the lower of average
cost or market. As of December 31, 1998 and September 30, 1999, inventory
consisted of the following:

<TABLE>
<CAPTION>
                                 DECEMBER 31,     SEPTEMBER 30,
                                    1998              1999
                                 -----------      ------------
<S>                              <C>              <C>
Production-in-process              $ 2,140           $  601
Finished goods                      10,977            9,097
                                   -------           ------
                                   $13,117           $9,698
                                   =======           ======
</TABLE>

NOTE 3 - ACQUISITIONS

On April 24, 1998, the Company acquired 100% of the common stock of Corinthian
and certain trademarks related to its business, including the "Headliners"
trademark (the "Trademark"), from Corinthian Marketing PLC, for total cash
consideration of $7,892 plus related transaction costs of $544 at the closing.
The total consideration was net of a holdback amount for which the Company
accrued approximately $600 as of the acquisition date. In September 1999, this
holdback was settled and the accrual was reversed as a reduction to goodwill.
Corinthian engaged principally in the design, manufacture, marketing and
distribution of the Headliners brand of collectible sports figurines.

On July 23, 1998, the Company acquired substantially all of the assets of CMI
and USI, in exchange for $15,000, which includes amounts deposited in an escrow
account, plus related transaction costs of $429. In November 1998, the Company
received from the escrow account a refund of $341 which was recorded as a
reduction to goodwill. Potential additional cash consideration may be paid based
upon the results of operations of USI during each calendar year through December
31, 2002 as set forth in the respective Asset Purchase Agreements, dated July
23, 1998, by and among the Company and each of CMI and USI. In August, 1999, an
additional $149 was paid to the stockholders of CMI and USI and allocated to
Goodwill.

These acquisitions have been accounted for under the purchase method of
accounting. The financial statements reflect the operating results of these
acquired entities from the date of acquisition.

The following unaudited pro forma information presents a summary of the
consolidated results of operations of the Company as if the acquisitions of
Corinthian and USI had occurred at the beginning of 1998 and includes pro forma
adjustments to give effect to the amortization of goodwill, decreased interest
income, increased interest expense associated with funding the acquisitions, and
certain other adjustments, together with the related income tax effects. The pro
forma financial information is presented for informational purposes only and may
not be indicative of the results of operations as they would have been if the
Company, Corinthian and USI had been a single entity during 1998, nor is it
necessary indicative of the results of operations that may occur in the future.

                                       8
<PAGE>   9



<TABLE>
<CAPTION>
                                                          NINE MONTHS
                                                   ENDED SEPTEMBER 30, 1998
                                                   ------------------------
<S>                                                <C>
Pro forma revenues                                       $   91,992
Pro forma net income                                            756
Pro forma basic income per share                                .13
Pro forma diluted net income per share                          .12
Pro forma basic weighted average
          shares outstanding                              6,043,585
Pro forma diluted weighted average
          Shares outstanding                              6,238,634
</TABLE>

NOTE 4 - SEGMENTS

Effective January 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information." The Company has identified two reportable
segments through which it conducts its continuing operations: promotions and
consumer products. The factors for determining the reportable segments were
based on the distinct nature of their operations. They are managed as separate
business units because each requires and is responsible for executing a unique
business strategy. The promotions segment produces promotional products used as
free premiums or sold in conjunction with the purchase of other items at a
retailer or quick service restaurant. Promotional products are used for
marketing purposes by both the companies sponsoring the promotions and the
licensors of the entertainment properties on which the promotional products are
based. The consumer products segment designs and contracts for the manufacture
of toys and other consumer products for sale to major mass market retailers, who
in turn sell the products to consumers.

Earnings of industry segments exclude interest income, interest expense,
depreciation and amortization expense, and other unallocated corporate expenses.
Income taxes are allocated to segments on the basis of operating results.
Identified assets are those assets used in the operations of the segments.
Corporate assets consist of cash, certain corporate receivables, fixed assets,
and intangibles.

INDUSTRY SEGMENTS


<TABLE>
<CAPTION>
                                                  AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
                                              --------------------------------------------------------------
                                                               CONSUMER
                                              PROMOTIONS       PRODUCTS          CORPORATE           TOTAL
                                              -----------      --------          ---------          --------
<S>                                            <C>              <C>              <C>                <C>
Total revenues                                 $18,278          $11,709          $     --           $ 29,987
                                               =======          =======          ========           ========
Income (loss) before provision (benefit)
  for income taxes                             $ 3,219          $   462          $ (4,819)          $ (1,138)
                                               =======          =======          ========           ========
Provision (benefit) for income taxes             1,239              178            (1,855)              (438)
                                               -------          -------          --------           --------
Net income (loss)                              $ 1,980          $   284          $ (2,964)          $   (700)
                                               =======          =======          ========           ========
Fixed asset additions, net                     $    --          $    --          $  1,163           $  1,163
                                               =======          =======          ========           ========
Depreciation and amortization                  $    --          $    --          $    571           $    571
                                               =======          =======          ========           ========
Total assets                                   $13,367          $23,569          $ 43,552           $ 80,488
                                               =======          =======          ========           ========

</TABLE>
                                       9

<PAGE>   10

<TABLE>
<CAPTION>
                                                   AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
                                               ---------------------------------------------------------------
                                                                 CONSUMER
                                               PROMOTIONS        PRODUCTS         CORPORATE             TOTAL
                                               ----------        --------         ---------            -------
<S>                                             <C>               <C>              <C>                 <C>
Total revenues                                  $47,651           $5,683           $     --            $53,334
                                                =======           ======           ========            =======
Income (loss) before provision (benefit)
  for income taxes                              $ 9,711           $  290           $ (5,381)           $ 4,620
                                                =======           ======           ========            =======
Provision (benefit) for income taxes              3,884              116             (2,152)             1,848
                                                -------           ------           --------            -------
Net income (loss)                               $ 5,827           $  174           $ (3,229)           $ 2,772
                                                =======           ======           ========            =======
Fixed asset additions, net                      $    --           $   --           $    294            $   294
                                                =======           ======           ========            =======
Depreciation and amortization                   $    --           $   --           $    679            $   679
                                                =======           ======           ========            =======
Total assets                                    $35,737           $5,054           $ 36,279            $77,070
                                                =======           ======           ========            =======

</TABLE>


<TABLE>
<CAPTION>
                                                  AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                                              -----------------------------------------------------------------
                                                                 CONSUMER
                                              PROMOTIONS         PRODUCTS          CORPORATE             TOTAL
                                              ----------         --------          ---------            -------
<S>                                           <C>                <C>               <C>                 <C>
Total revenues                                  $57,941           $26,435           $     --            $84,376
                                                =======           =======           ========            =======

Income (loss) before provision (benefit)
  for income taxes                              $11,108           $ 1,749           $(10,450)           $ 2,407
                                                =======           =======           ========            =======

Provision (benefit) for income taxes              4,277               673             (4,024)               926
                                                -------           -------           --------            -------
Net income (loss)                               $ 6,831           $ 1,076           $ (6,426)           $ 1,481
                                                =======           =======           ========            =======

Fixed asset additions, net                      $    --           $    --           $  1,947            $ 1,947
                                                =======           =======           ========            =======
Depreciation and amortization                   $    --           $    --           $  1,401            $ 1,401
                                                =======           =======           ========            =======
Total assets                                    $13,367           $23,569           $ 43,552            $80,488
                                                =======           =======           ========            =======
</TABLE>

<TABLE>
<CAPTION>
                                                     AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
                                               -----------------------------------------------------------------
                                                                  CONSUMER
                                               PROMOTIONS         PRODUCTS          CORPORATE             TOTAL
                                               ----------         --------          ---------           --------
<S>                                             <C>               <C>                <C>                <C>
Total revenues                                  $122,723          $ 14,079           $     --           $136,802
                                                ========          ========           ========           ========

Income (loss) before provision (benefit)
  for income taxes                              $ 24,169          $   (299)          $(14,918)          $  8,952
                                                ========          ========           ========           ========

Provision (benefit) for income taxes               9,667              (119)            (5,967)             3,581
                                                --------          --------           --------           --------
Net income (loss)                               $ 14,502          $   (180)          $ (8,951)          $  5,371
                                                ========          ========           ========           ========
Fixed asset additions, net                      $     --          $     --           $    466           $    466
                                                ========          ========           ========           ========
Depreciation and amortization                   $     --          $     --           $  2,050              2,050
                                                ========          ========           ========           ========
Total assets                                    $ 35,737          $  5,054           $ 36,279           $ 77,070
                                                ========          ========           ========           ========
</TABLE>

                                       10
<PAGE>   11
NOTE 5 - SHORT-TERM DEBT

At December 31, 1998 and September 30, 1999, the Company was party to a
revolving credit agreement ("Credit Agreement") with two commercial banks. The
agreement, as amended on October 28, 1999 provides for a line of credit of
$30,000 through October 31, 1999, $33,000 through January 31, 2000 and $25,000
through June 30, 2000 with borrowing availability determined by a formula based
on qualified assets. Interest on outstanding borrowings is based on either a
fixed rate equivalent to LIBOR plus 3.00 percent or a variable rate equivalent
to the lead bank's reference rate plus .50 percent. The Company is also required
to pay an unused line fee of .50 percent per annum and certain letter of credit
fees. The Credit Agreement is secured by substantially all of the Company's
assets. The Credit Agreement requires the Company to comply with certain
restrictions and financial covenants as defined in the agreement. As of December
31, 1998 and March 31, 1999, the Company was out of compliance with certain of
these covenants, for which it has received waivers from its banks. As of
September 30, 1999, the Company was in compliance with these covenants.

As of December 31, 1998 and September 30, 1999 there was $30,000 and $1,000,
respectively, outstanding under the Credit Agreement. Letter of credit amounts
outstanding as of December 31, 1998 and September 30, 1999 were $995 and $401
respectively.

NOTE 6 - RESTRUCTURING RESERVE

In December 1998, the Company announced its decision to exit the
event-based-license consumer products business along with its retail pin
business. In connection with this decision, the Company recorded a restructuring
charge of $4,121. Details of the restructuring charge are as follows:

<TABLE>
<CAPTION>
                                                                                Utilized
                                                                              Nine Months
                                                 Original       Utilized         Ended                           To Be
                                                  Charge          1998      September 30, 1999  Reversed        Utilized
                                                 --------       --------    ------------------  --------        --------
<S>                                              <C>             <C>        <C>                 <C>             <C>
Provision for projected minimum royalty
  guarantee shortfalls                           $ 2,187         $  --            $(267)        $  (641)        $1,279
Employee severance and termination benefits          738          (127)            (444)             --            167
Outstanding inventory purchase commitments           800            --              (45)             --            755
Lease commitment for warehouse facility              396            --              (30)             --            366
                                                 -------         -----            -----         -------         ------
                                                 $ 4,121         $(127)           $(786)        $  (641)        $2,567
                                                 =======         =====            =====         =======         ======
</TABLE>


For the nine months ended September 30, 1999 the Company reversed a portion of
the restructuring reserves for projected minimum royalty guarantee shortfalls as
a result of negotiated settlements with certain licensors. These reversals
totaled $641 and are reflected as a restructuring gain in the accompanying
condensed consolidated statements of income.

                                       11
<PAGE>   12

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

CAUTIONARY STATEMENT

Certain expectations and projections regarding the future performance of Equity
Marketing, Inc. (the "Company") discussed in this quarterly report are
forward-looking and are made under the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These expectations and projections are
based on currently available competitive, financial and economic data along with
the Company's operating plans and are subject to future events and
uncertainties. Forward-looking statements can be identified by the use of
forward looking terminology, such as may, will, should, expect, anticipate,
estimate, continue, plans, intends or other similar terminology. Management
cautions you that the following factors, among others, could cause the Company's
actual consolidated results of operations and financial position in 1999 and
thereafter to differ significantly from those expressed in forward-looking
statements:

MARKETPLACE RISKS

-    Dependence on a single customer, Burger King, which may adversely affect
     the Company's financial condition and results of operations

-    Concentration risk associated with accounts receivable. The Company
     regularly extends credit to several distribution companies in connection
     with its business with Burger King. One of these distribution companies
     accounts for more than 50 percent of the products purchased for the Burger
     King system in any given year. Failure by one or more of these distribution
     companies to honor their payment obligations to the Company could have a
     material adverse effect on the Company's business, financial condition and
     results of operations

-    Significant quarter-to-quarter variability in the Company's revenues and
     net income, which may result in operating results below the expectations of
     securities analysts and investors

-    Dependence on the popularity of licensed entertainment properties, which
     may adversely affect the Company's financial condition and results of
     operations

-    Dependence on the ability to license, develop and market new products,
     which may adversely affect the Company's financial condition and results of
     operations

-    Increased competitive pressure, which may affect the sales of the Company's
     products

-    Dependence on foreign manufacturers, which may increase the costs of the
     Company's products and affect the demand for such products

FINANCING RISKS

-    Currency fluctuations, which may affect the Company's suppliers and the
     Company's reportable income

-    Need for additional working capital to fund the Company's business, which
     may not be available at all or on favorable terms when required

OTHER RISKS

-    Potential negative impact of future acquisitions, which may disrupt the
     Company's ongoing business, distract senior management and increase
     expenses

-    Adverse results of litigation, governmental proceedings or environmental
     matters, which may lead to increased costs or interruption in normal
     business operations of the Company

-    Changes in laws or regulations, both domestically and internationally,
     including those affecting consumer products or environmental activities or
     trade restrictions, which may lead to increased costs

-    Potential inability of computer systems or software products used by the
     Company and\or its customers and suppliers to properly recognize and
     process date-sensitive information beyond January 1, 2000, which may result
     in an interruption in normal business operations of the Company, its
     suppliers and customers

The Company undertakes no obligation to publicly release the results of any
revisions to forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. The risks highlighted herein should not be assumed to be
the only items that could affect future performance of the Company. In addition
to the information contained in this document, readers are advised to review the
Company's Form 10-K for the year ended December 31, 1998, under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Cautionary Statements and Risk Factors."

                                       12
<PAGE>   13
ORGANIZATION AND BUSINESS

Equity Marketing, Inc., a Delaware corporation (the "Company"), is a leading
marketing services company, providing a wide range of custom promotional
programs that build sales and brand awareness for retailers, restaurant chains
and consumer goods companies such as Burger King Corporation, The Coca-Cola
Company, Exxon Company USA, Sunoco, Inc., CVS/pharmacy and others. The Company
is also a developer and marketer of distinctive, branded consumer products that
complement its core promotions business and are based on trademarks it owns or
classic licensed properties. The Company primarily sells to customers in the
United States.

Equity Marketing Hong Kong, Ltd., a Delaware corporation ("EMHK"), is a 100%
owned subsidiary of the Company. EMHK manages production of the Company's
products by third parties in the Far East and currently is responsible for
product sourcing, product engineering, quality control inspections, independent
safety testing and export/import documentation.

In April 1998, the Company purchased 100% of the common stock of Corinthian
Marketing, Inc., a Delaware corporation ("Corinthian"). Corinthian engaged
principally in the design, manufacture, marketing and distribution of the
Headliners brand of collectible sports figurines.

In July 1998, the Company acquired substantially all of the assets of Contract
Marketing, Inc. ("CMI"), a Massachusetts corporation, and U.S. Import and
Promotions Co. ("USI"), a Florida corporation (CMI and USI are collectively
referred to herein as "USI"). USI focuses primarily on promotions for oil and
gas and other retailers. The Company intends to continue to use the acquired
assets for this purpose. The primary operations of USI are located in West
Boylston, Massachusetts and St. Augustine, Florida.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the Company's
operating results as a percentage of total revenues:

<TABLE>
<CAPTION>
                                                                     THREE MONTHS            NINE MONTHS
                                                                  ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                                                 --------------------    --------------------
                                                                  1998          1999      1998         1999
                                                                 ------       -------    ------       -------
<S>                                                              <C>          <C>        <C>          <C>
Revenues                                                          100.0%       100.0%     100.0%       100.0%
Cost of sales                                                      71.2         73.7       70.7         75.2
                                                                 ------       ------     ------       ------
         Gross profit                                              28.8         26.3       29.3         24.8
                                                                 ------       ------     ------       ------
Operating Expenses:
  Salaries, wages and benefits                                     11.7          8.3       11.4          8.3
  Selling, general and administrative                              14.7          9.5       13.1         10.0
  Business process reengineering                                    5.1           --        1.8           --
  Restructuring gain                                                 --         (0.4)        --         (0.5)
                                                                 ------       ------     ------       ------
         Total operating expenses                                  31.5         17.4       26.3         17.8
                                                                 ------       ------     ------       ------
         Income (loss) from operations                             (2.7)         8.9        3.0          7.0
Interest income (expense), net                                     (1.1)        (0.2)      (0.1)        (0.4)
                                                                 ------       ------     ------       ------
         Income before provision for income taxes                  (3.8)         8.7        2.9          6.6
Provision (benefit) for income taxes                               (1.5)         3.5        1.1          2.6
                                                                 ------       ------     ------       ------
         Net income (loss)                                         (2.3)%        5.2%       1.8%         4.0%
                                                                 ======       ======     ======       ======

</TABLE>
                                       13

<PAGE>   14

EBITDA

While many in the financial community consider earnings before interest, taxes,
depreciation and amortization, business process reengineering and restructuring
charges ("EBITDA") to be an important measure of comparative operating
performance, it should be considered in addition to, but not as a substitute for
or superior to, operating income, net earnings, cash flow and other measures of
financial performance prepared in accordance with generally accepted accounting
principles. EBITDA does not reflect cash available to fund cash requirements,
and the items excluded from EBITDA, such as depreciation and amortization, are
significant components in assessing the Company's financial performance. Other
significant uses of cash flows are required before cash will be available to the
Company, including debt service, taxes and cash expenditures for various
long-term assets. The Company's calculation of EBITDA may be different from the
calculation used by other companies and, therefore, comparability may be
limited.

The following table sets forth EBITDA for the periods indicated:

<TABLE>
<CAPTION>
                                                         THREE MONTHS                  NINE MONTHS
                                                       ENDED SEPTEMBER 30,          ENDED SEPTEMBER 30,
                                                  -------------------------     -------------------------
                                                      1998           1999          1998           1999
                                                  ----------     ----------     ----------      ---------
<S>                                               <C>            <C>            <C>             <C>
Net income (Loss)                                 $     (700)    $    2,772     $    1,481      $   5,371
Less:    Restructuring gain                               --            240             --            641
Add:     Depreciation and amortization                   571            679          1,401          2,050
         Interest expense, net                           317            151             90            590
         Business process reengineering                1,549             --          1,549             --
         Provision (benefit) for income taxes           (438)         1,848            926          3,581
                                                  ----------     ----------     ----------      ---------
EBITDA                                            $    1,299     $    5,210     $    5,447      $  10,951
                                                  ==========     ==========     ==========      =========
</TABLE>

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998 (DOLLARS IN THOUSANDS):

Revenues for the three months ended September 30, 1999 increased $23,347 or 78%
to $53,334 from $29,987 in the comparable period in 1998. Promotions revenues
increased $29,373 to $47,651 primarily as a result of sales associated with
three Burger King promotions in 1999 related to Warner Bros.' Wild Wild West
movie, Nickelodeon's Back to School program and Gibson Greetings' Silly Slammers
compared to two smaller promotions in 1998 related to DreamWorks SKG's Small
Soldiers movie and Nickelodeon's Nickel-O-Zone television programming block.
Promotions revenue also increased as a result of oil and gas promotion revenue.
Consumer products revenues decreased $6,026 to $5,683 primarily due to lower
sales under event-based-licensed consumer products which the Company decided to
exit in December 1998.

Cost of sales increased $17,956 to $39,295 (73.7% of revenues) for the three
months ended September 30, 1999 from $21,339 (71.2% of revenues) in the
comparable period in 1998 due primarily to higher sales in 1999. The gross
margin percentage for the period decreased to 26.3% for the three months ended
September 30, 1999 from 28.8% in the comparable period in 1998 due to the
planned shift in the company's revenue mix, which was 89% promotions and 11%
consumer products, compared to 61% and 39% for promotions and consumer products,
respectively, one year ago.

Salaries, wages and benefits increased $923, or 26.3% to $4,433 (8.3% of
revenues). This increase was primarily attributable to the accrual of
performance bonuses for employees in 1999. This increase was partially offset by
staffing reductions resulting from the Company's decision to exit the
event-based-licensed consumer products business in 1998.

                                       14

<PAGE>   15

Selling, general and administrative expenses increased $665, or 15.1% to $5,075
(9.5% of revenues). This is due to increased depreciation expense associated
with higher fixed asset levels in 1999. The increase is also attributable to
increased support costs associated with the Company's new enterprise resource
planning system (see "Information Systems"), and increased occupancy costs.
Selling, general and administrative expenses decreased as a percentage of
revenues from 14.7% to 9.5% as a result of revenues which increased at a greater
rate.

The effective tax rate for the three months ended September 30, 1999 increased
to 40.0% from 38.5% for the three months ended September 30, 1998. This increase
was attributable to the addition of non-deductible goodwill from the purchase of
Corinthian.

Net income increased $3,472 to $2,772 (5.2% of revenues) from a loss of $700 in
1998 primarily due to greater gross profit earned on increased revenues in 1999
and as a result of the restructuring gain of $240. Excluding the impact of the
restructuring gain, the Company would have reported net income of $2,628 or
$0.40 per diluted share for the three months ended September 30, 1999. Excluding
business process reengineering, net income for the three months ended September
30, 1998 would have been $253 or $0.04 per diluted share.

EBITDA increased $3,911 or 301% primarily due to greater gross profit earned on
increased revenues in 1999. This increase was partially offset by the increase
in salaries, wages and benefits for the three months ended September 30, 1999
compared to the same period in 1998.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998 (DOLLARS IN THOUSANDS):

Revenues for the nine months ended September 30, 1999 increased $52,426 or 62.1%
to $136,802 from $84,376 in the comparable period in 1998. Promotions revenues
increased $64,782 to $122,723 primarily as a result of increased sales of five
Burger King promotions in 1999 related to Mr. Potato Head, The Itsy Bitsy
Entertainment Company's Teletubbies, Warner Bros.' Wild Wild West movie,
Nickelodeon's Back to School promotion, and Gibson Greetings' Silly Slammers
compared to three promotions associated with the release of DreamWorks SKG's
Small Soldiers movie, Nickelodeon's Rugrats and Nickelodeon's Nickel-O-Zone
television programming block for the same period in 1998. Promotions revenue
also increased as a result of the addition of oil and gas promotion revenue
generated by USI which was acquired in the third quarter of 1998. Consumer
products revenues decreased $12,356 to $14,079 primarily due to decreased sales
under event-based-licensed consumer products which the Company decided to exit
in December 1998. This decrease was partially offset by sales of Headliners
subsequent to the acquisition of Corinthian, which was acquired in the second
quarter of 1998.

Cost of sales increased $43,196 to $102,832 (75.2% of revenues) for the nine
months ended September 30, 1999 from $59,636 (70.7% of revenues) in the
comparable period in 1998 due primarily to higher sales in 1999. The gross
margin percentage for the period decreased to 24.8% for the nine months ended
September 30, 1999 from 29.3% in the comparable period in 1998 due primarily to
the planned shift in the company's revenue mix, which was 90% promotions and 10%
consumer products, compared to 69% and 31% for promotions and consumer products,
respectively, one year ago.

Salaries, wages and benefits increased $1,757, or 18.3% to $11,349 (8.3% of
revenues). This increase was primarily attributable to the accrual of
performance bonuses for employees in 1999 and the addition of employees from the
acquisitions of Corinthian and USI. This increase was partially offset by
staffing reductions resulting from the Company's decision to exit the
event-based-licensed consumer products business in December 1998.

Selling, general and administrative expenses increased $2,618, or 23.6% to
$13,720 (10.0% of revenues). This increase is due to increased depreciation and
amortization expense associated with higher fixed asset levels in 1999 and
amortization of intangibles related to the acquisitions of Corinthian in April
1998 and USI in July 1998. The increase is also attributable to increased
support costs associated with the Company's new enterprise resource planning
system (see "Information Systems"), and increased occupancy costs. Selling,
general and administrative expenses decreased as a percentage of revenues from
13.1% to 10.0% as a result of revenues which increased at a greater rate.

                                       15
<PAGE>   16
The effective tax rate for the nine months ended September 30, 1999 increased
to 40.0% from 38.5% for the nine months ended September 30, 1998. This increase
was attributable to the addition of non-deductible goodwill from the purchase of
Corinthian.

Net income increased $3,890 or 262.7% to $5,371 (4.0% of revenues) from $1,481
in 1998 primarily due to greater gross profit earned on the increased revenues
in 1999 and the restructuring gain of $641. The increase in net income was
partially offset by interest expense of $590 on the Company's short-term debt
borrowing for the nine months ended September 30, 1999, compared to interest
expense of $90 for the same period in 1998. Excluding the impact of the
restructuring gain, the Company would have reported net income of $4,986 or
$0.78 per diluted share for the nine months ended September 30, 1999. Excluding
business process reengineering, net income for the nine months ended September
30, 1998 would have been $2,434 or $0.39 per diluted share.

EBITDA increased $5,504 or 101% primarily due to greater gross profit earned on
increased revenues in 1999. This increase was partially offset by the increase
in salaries, wages and benefits for the nine months ended September 30, 1999,
compared to the same period in 1998.

FINANCIAL CONDITION AND LIQUIDITY

As of September 30, 1999, the Company's investment in net accounts receivable
decreased $25,978 from the balance at December 31, 1998. This decrease was
attributable to collections of substantially all of the receivables related to
sales shipped late in the 1998 fourth quarter. As of September 30, 1999,
inventory decreased approximately $3,419 from December 31, 1998 primarily as a
result of consumer products and promotional program inventory which was shipped
during the nine months ended September 30, 1999.

The Company regularly extends credit to several distribution companies in
connection with its business with Burger King. One of these distribution
companies accounts for more than 50 percent of the products purchased for the
Burger King system in any given year. Failure by one or more of these
distribution companies to honor their payment obligations to the Company could
have a material adverse effect on the Company's business, financial condition
and results of operations.

As of September 30, 1999, accounts payable decreased $13,572 compared to
December 31, 1998. This decrease is primarily attributable to payments to
vendors associated with the manufacturing related to the large fourth quarter
1998 promotional programs.

As of September 30, 1999, working capital was $11,216 compared to $4,268 at
December 31, 1998. The increase in working capital was primarily due to the cash
generated by operating activities in the nine months ended September 30, 1999.
The Company did not have any significant investing activities in the quarter.
The Company believes that its cash from operations, cash on hand at September
30, 1999 and its credit facility will be sufficient to fund its working capital
needs for at least the next nine months. The statements set forth herein are
forward-looking and actual results may differ materially.

CREDIT FACILITIES

The Company maintains and periodically amends or replaces a credit agreement
with two commercial banks that is utilized to finance the seasonal working
capital requirements of its operations. The credit facility is secured by
substantially all of the Company's assets. The agreement, as amended on October
28, 1999 provides for a line of credit of $30,000 through October 31, 1999,
$33,000 through January 31, 2000 and $25,000 through June 30, 2000 with
borrowing availability determined by a formula based on qualified assets. As of
September 30, 1999, $1,000 was outstanding under the credit facility. Letters of
credit outstanding as of September 30, 1999 were $401. The credit agreement
requires the Company to comply with certain financial covenants, including
minimum tangible net worth, minimum current ratio, ratio of total liabilities to
tangible net worth, maximum funded debt coverage ratio, minimum fixed charge
coverage ratio and net profit after taxes. The credit agreement also places
restrictions on, among other things, the Company's capital expenditures, payment
of dividends, stock repurchases, acquisitions, investments and transactions with
affiliates. As of September 30, 1999, the Company was in compliance with these
covenants.

                                       16
<PAGE>   17


INFORMATION SYSTEMS

IMPACT OF THE YEAR 2000 ISSUE INTRODUCTION

The term "Year 2000 issue" is a general term used to describe the various
problems that may result from the improper processing of dates and date
sensitive calculations by computers and other machinery as the Year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software have historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000's" from the dates in the "1900's." These
problems may also arise from other sources as well, such as the use of special
codes and conventions in software that makes use of the date field.

STATE OF READINESS

The Company's primary focus has been on its own internal systems. To date, the
Company has completed the Year 2000 conversion with respect to its most critical
computer systems and applications, including its enterprise resource planning
system, computer networks and desktop applications. Based on strategic and
operational assessments, the Company decided to replace its existing information
systems in 1998. The new enterprise resource planning system is designed to
enhance management information, financial reporting, inventory management, order
entry and cost evaluation and control and has the added benefit of addressing
the Year 2000 issues. The new enterprise system went into operation in January
1999.

The Company is also communicating with suppliers, distributors, financial
institutions and others with which it does business to evaluate their Year 2000
compliance plans and state of readiness and to determine the extent to which the
Company will be affected by the failure of others to remediate their own Year
2000 issues. There can be no assurance that the systems of other companies on
which the Company's systems rely will also be timely converted or that any such
failure to convert by another company would not have an adverse effect on the
Company's systems. Failure to complete the system conversion in a timely manner
or any significant disruption of the Company's ability to communicate
electronically with its business partners could negatively impact the Company's
business, financial condition and results of operations. The statements set
forth herein are forward looking and actual results may differ materially.

COSTS TO ADDRESS THE YEAR 2000 ISSUE

To date the Company has spent a total of approximately $4,300 on the conversion
to the new enterprise resource planning system, of which approximately $2,220
was spent on business process reengineering. In accordance with Emerging Issues
Task Force Issue No. 97-13, such business process reengineering costs were
expensed as incurred. Approximately $2,085 of these costs have been capitalized
and are reflected in fixed assets in the accompanying condensed consolidated
balance sheet.

Costs to address the Year 2000 issue affecting all other information systems are
relatively insignificant, with the majority of the work being performed by
Company employees.

CONTINGENCY PLANS

The Company continues to assess and test for any potential Year 2000 issues
relating to its systems, suppliers and customers. The Company is developing, and
will continue to develop, contingency plans for dealing with any material
adverse effect that may become likely in the event the Company's remediation
plans are not successful or third parties fail to remediate their own Year 2000
issues. The Company's contingency planning process is intended to mitigate
worst-case business disruptions. The contingency plans include, but are not
limited to, identification of alternative suppliers, vendors and service
providers.

                                       17
<PAGE>   18

PART II.


       ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits:
<TABLE>
<S>            <C>

        10.1   Third Amendment to Amended and Restated Credit Agreement dated
               October 28, 1999 between the Company and Sanwa Bank California
               and Imperial Bank.

        27.0   Financial Data Schedule.

</TABLE>

         (b)   Reports on Form 8-K:

               Report on Form 8-K filed with the Securities and Exchange
               Commission on July 23, 1999. (Item 5)


                                       18

<PAGE>   19
                                   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, in the City of Los Angeles
and State of California on the 15th day of November, 1999.


                                              EQUITY MARKETING, INC.



                                              /s/ TERESA P. COVINGTON
                                              ---------------------------------
                                              Teresa P. Covington
                                              Vice President, Finance
                                              (Principal Financial and
                                              Accounting Officer)

                                       19
<PAGE>   20
                                  EXHIBIT INDEX


EXHIBIT

<TABLE>
<S>     <C>
        10.1   Third Amendment to Amended and Restated Credit Agreement dated
               October 28, 1999 between the Company and Sanwa Bank California
               and Imperial Bank.

        27.0   Financial Data Schedule

</TABLE>
                                       20