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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2001

OR

[   ]

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

For the transition period from                          to                          

Commission File Number 23346

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

Delaware (State of or other jurisdiction of incorporation or organization)		13-3534145 (I.R.S. employer identification no.)

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

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

Securities registered pursuant to Section 12 (b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Title of each class
Common Stock, $0.001 par value

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

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

Approximate aggregate market value of the voting stock held by non-affiliates of the registrant as of March 19, 2002 was $30,798,926.

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

Documents Incorporated by Reference: Certain portions of the Registrant’s Proxy Statement relating to Registrant’s annual meeting of stockholders scheduled to be held on May 23, 2002 are incorporated by reference into Part III of this Form 10-K.

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EQUITY MARKETING, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
YEAR ENDED DECEMBER 31, 2001

ITEMS IN FORM 10-K

						Page
Part I
		Item 1.		Business		2
		Item 2.		Properties		5
		Item 3.		Legal Proceedings		6
		Item 4.		Submission of Matters to a Vote of Security Holders		7
Part II
		Item 5.		Market for the Registrant’s Common Equity and Related Stockholder Matters		7
		Item 6.		Selected Financial Data		8
		Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
		Item 7A		Quantitative and Qualitative Disclosures About Market Risk		18
		Item 8.		Financial Statements and Supplementary Data		18
		Item 9.		Changes In and Disagreements With Accountants on Accounting and Financial Disclosure		18
Part III
		Item 10.		Directors and Executive Officers of the Registrant		19
		Item 11.		Executive Compensation		21
		Item 12.		Security Ownership of Certain Beneficial Owners and Management		21
		Item 13.		Certain Relationships and Related Transactions		21
Part IV
		Item 14.		Exhibits, Financial Statements, Schedule and Reports on Form 8-K		22

FORWARD-LOOKING STATEMENTS

Certain expectations and projections regarding the future performance of Equity Marketing, Inc., a Delaware corporation (the “Company”), discussed in this document 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. Readers should not place undue reliance on any such forward-looking statements, which speak only as of the date made. Actual results could vary materially from those anticipated for a variety of reasons. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are advised to review “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Cautionary Statements and Risk Factors.”

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PART I

ITEM 1. BUSINESS

($000’s omitted)

General

Equity Marketing, Inc., a Delaware corporation (“Equity Marketing” or the “Company”), is a leading global marketing services company based in Los Angeles, with offices in London, Paris, New York and Hong Kong. The Company designs and produces custom promotional programs that build sales and brand value for retailers, restaurant chains and consumer goods companies. The Company complements its core promotions business by developing and marketing distinctive consumer products, based on trademarks it owns or classic licensed properties, which are sold through specialty and mass-market retailers. The Company’s products include character figurines, action vehicles, drinking vessels, watches, plush toys, play sets and a variety of other items. Programs of the promotions division of the Company, Equity Promotions (“Equity Promotions” or “Promotions”), are utilized primarily in promotional campaigns implemented by quick service restaurant and consumer products customers, which include Burger King Corporation (“Burger King”), Cadbury, The Coca-Cola Company, CVS/pharmacy, Kellogg’s, Procter & Gamble and others. Equity Consumer Products (“Equity Consumer Products” or “Consumer Products”), the consumer products division of the Company, designs and produces niche products based on trademarks owned by the Company such as Tub Tints® or on classic, time-tested licensed properties such as Scooby-Doo™ for sale to major mass market and specialty market retailers such as Toys ‘R’ Us, Inc. (“Toys ‘R’ Us”), Wal-Mart Stores, Inc. (“Wal-Mart”), Target Stores, Inc. (“Target”), Spencer Gifts, Inc., and to various international distributors worldwide.

The Company’s promotional programs are often based upon characters from entertainment properties licensed by television and motion picture studios and others. Licenses for characters upon which Equity Promotions’ programs are based are generally obtained directly by the Company’s customers (often with the Company’s assistance) from licensors, including Warner Bros. Inc. (“Warner Bros.”), Universal Studios (“Universal”), Nickelodeon, a division of MTV Networks, a division of Viacom, DreamWorks SKG, The Walt Disney Company, Sony Pictures Entertainment and Twentieth Century Fox. Such licenses are typically specific to the promotional campaign implemented by the Company’s customers and generally do not extend beyond the end of the promotional campaign. In contrast, Equity Consumer Products generally obtains licenses directly from licensors. These licenses generally grant the Company rights to design, manufacture and distribute certain specific items or types of items in specific United States and/or international markets for defined terms, typically one to three years.

The Company believes its principal competitive advantages are its extensive brand-building and measurable sales-building experience developed over years of serving Burger King and other customers, extensive creative capabilities, access to a broad range of intellectual property from the worlds of entertainment, music and sports and an infrastructure that can deliver unique, high-quality and cost-effective products and services in a very tight time frame.

The Company is seeking to acquire other companies. On July 31, 2001, the Company acquired 100% of the common stock of Logistix Limited, a United Kingdom corporation (“Logistix”). (see Note 4 of the accompanying Notes to Consolidated Financial Statements). Logistix is a leading marketing services agency which focuses primarily on assisting consumer packaged goods companies in their efforts to market to children between the ages of seven and fourteen by developing and executing premium-based promotions and by providing marketing consulting services. Logistix also derives a portion of its revenues from a consumer products business which holds the licenses for the leading BBC TV program Robot Wars®, UBOS™ (Ultimate Book of Spells) and more recently Ace Lightning™, among others. No assurance can be given that the acquisition of Logistix will be economically successful for the Company. In addition, no assurance can be given that the Company will find additional suitable acquisition candidates or that it will be successful in consummating such transactions.

Equity Promotions

The Company’s largest current market is the design and implementation of fully integrated promotional marketing programs which incorporate products used as free premiums or sold in conjunction with the purchase of meals at Burger King. The Company also produces products and provides related marketing services for use in promotional programs run by its consumer products and oil and gas company customers. Premium-based promotions are used for marketing purposes by both the companies sponsoring the promotions, typically the Company’s clients, and the licensors of the entertainment, music or sports properties on which the promotional products are based. The use of promotional products based upon entertainment, music or sports properties allows promotion sponsors to draw upon the popular identity developed by the licensed characters through exposure in various media such as television programs, motion pictures and publishing. Promotions are designed to benefit sponsors by generating consumer loyalty, building market share and enhancing the sponsors’ images as providers of value-added products and services. In addition, motion picture and television studio licensors often incorporate such promotions into their own marketing plans because of the substantial advertising expenditures made by sponsors of promotions and because the broad exposure of the licensed property to consumers in the sponsors’ restaurants and other retail outlets supplements the marketing of motion pictures and television programs by the studios.

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Equity Promotions performs a wide range of creative, design, development, production and fulfillment services for its customers. The Company assists customers with promotional strategy, calendar planning, and concept development; provides an initial evaluation of intellectual properties for which licenses are available; advises customers as to which licenses are consistent with their marketing objectives; and sometimes assists customers in procuring such licenses. The Company also proposes specific product and non-product based promotions utilizing the properties secured by its customers; develops promotional concepts and designs based on the property; provides the development and engineering necessary to translate the property, which often consists of two-dimensional artwork, into finished products; obtains or coordinates licensor approval of product designs, prototypes and finished products; contracts for and supervises the manufacture of products; arranges for safety testing to customer and regulatory specifications by an independent testing laboratory; and arranges insurance, customs clearance and, in most instances, the shipping of finished products to the customer. In some instances, the Company also provides warehousing, fulfillment and billing services. The Company also provides creative services as needed to customers for packaging and point-of-sale advertising. In some cases, customers obtain license rights or develop promotions concepts independently and engage the Company only to design and produce specific products. In other cases, the Company provides the full range of its services.

Equity Promotions’ principal strategy is to be a market-driven and customer-driven organization that seeks to be a strategic marketing partner with its clients through recommending, executing and measuring a broad range of fully integrated brand-building and sales-building programs that may or may not be product-based. Equity Promotions also intends to continue to diversify its promotions customer base outside of quick service restaurants and to continue to expand its relationship with Burger King. In connection with these strategic goals, the Company acquired Logistix in July 2001, a marketing services agency with offices in London and Paris which focuses primarily on assisting consumer packaged goods companies in their efforts to market to children between the ages of seven and fourteen. Typically, this involves a broad-based strategic relationship, including research, new product development, licensing guidance and the development of premium-based promotions. (see Note 4 of the accompanying Notes to Consolidated Financial Statements). Logistix also derives a portion of its revenues from a consumer products business which holds the licenses for the leading BBC TV program Robot Wars®, UBOS™ (Ultimate Book of Spells) and more recently Ace Lightning™, among others. In addition to providing revenue diversification, access to new clients and greater access to existing markets, the Company intends to use Logistix as a platform from which to expand organically and through acquisition into other international markets not currently served by Logistix or the Company. No assurance can be given that the Company will be successful in pursuing such expansion.

The Company’s international promotions include unique products and programs tailored to local markets and the use of products from promotions originally run in the United States. American entertainment properties are generally released in other countries subsequent to the date of their release in the United States. Because the Company has already made its investment in the creative development of concepts based upon such entertainment properties by the time of their domestic release, it often has completed both creative, and in some instances, production work in advance of their foreign release. The Company pursues promotions opportunities worldwide. In 2001, the Company sold promotional products internationally in the United Kingdom, Germany, Spain, Sweden, Italy, Turkey, Australia, the Philippines, Singapore, Korea, Mexico and throughout Latin America.

Promotions revenues for the years ended December 31, 1999, 2000 and 2001 were $202,195, $208,607 and $117,305 or 89%, 90% and 81% of the Company’s revenues, respectively. A single promotions customer, Burger King, accounted for approximately 80%, 80% and 66% of the Company’s total revenues for the years ended December 31, 1999, 2000 and 2001, respectively. (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Cautionary Statements and Risk Factors”).

Equity Consumer Products

Equity Consumer Products designs and manufactures toys and other consumer products for sale to major mass market retailers such as Toys ‘R’ Us, Wal-Mart and Target, specialty market retailers such as Spencer Gifts, Inc., Store of Knowledge, Zany Brainy, and Blockbuster and to various international distributors worldwide. These products incorporate trademarks the Company owns such as Tub Tints® or licenses of classic, time-tested properties the Company has obtained from entertainment companies such as Warner Bros. In some cases, the products are based on the same licensed properties that are used by Equity Promotions.

In June 1998, the Company obtained a three-year licensing agreement with Warner Bros. to design, manufacture, market and distribute toys based on characters from Scooby-Doo™, one of the longest-running children’s cartoon shows in television history. In September 2000, the Company renewed through the end of 2003 its licensing agreement with Warner Bros. to design, manufacture, market and distribute toys based on characters from Scooby-Doo™. In 2001, the Company elected to exercise its option to design, manufacture, market and distribute toys in the United States and Canada based on the live-action Scooby-Doo™ feature film scheduled to be released by Warner Bros. Pictures in June 2002. Also in 2001, the Company executed a separate agreement with Warner Bros. granting to the Company manufacturing and distribution rights for Scooby-Doo™ toys in Europe and Latin America.

In July 1998, the Company acquired the worldwide rights to manufacture, market and distribute Tub Tints®, a children’s bath product consisting of effervescent tablets which dissolve in the bath and currently come in three colors: red, yellow and blue. Depending on which color tablets are mixed, a wide variety of colors can be created. In 2000, the Company introduced Tub Tints® toys, color tablets

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co-packed with either a wand, submarine or bath book. In 2001, the Company expanded its line of Tub Tints® toys to include, among others, stacking cups, a turtle, a whale and a diver.

In January 2002, the Company obtained a three-year licensing agreement with MGM to design, manufacture, market and distribute toys based on characters from The Pink Panther™. Under terms of the agreement, Equity Marketing will design and produce Pink Panther™ plush items for distribution to mass and specialty markets in the United States and Canada. The first products developed under this agreement will be available by spring 2002. The Pink Panther™ first debuted in 1964. Over the past 38 years, the Pink Panther™ has won an animated short Academy Award® for “Pink Phink’’ (1964) and has been featured in a total of nine live-action films and 176 cartoon shorts. Additionally, the Pink Panther™ serves as the proud “spokescat” for Owens Corning building materials/insulation and German telecommunications giant Deutsche Telekom.

Equity Consumer Products’ principal strategy is to focus on distinctive, niche products that compliment the Company’s promotions business and are based on trademarks owned by the Company or on classic, time-tested licensed properties that are likely to produce revenue for several years, thus increasing the predictability of the Company’s revenues. The Company intends to implement this strategy through internal growth. No assurance can be given that the Company will be successful in obtaining or renewing licenses under satisfactory terms.

Equity Consumer Products’ revenues were $24,868, $23,680 and $27,011 or 11%, 10% and 19% of the Company’s total revenues, for the years ended December 31, 1999, 2000 and 2001, respectively.

Backlog

Order backlog at March 22, 2001 and March 19, 2002 was approximately $66,108 and $106,150, respectively. The Company expects the 2002 order backlog to be filled by December 31, 2002.

Manufacturing

The Company’s products are manufactured according to Company and customer specifications by unaffiliated contract manufacturers. Equity Marketing Hong Kong, Ltd., a wholly owned subsidiary of the Company (“Equity Marketing HK”), manages production of the Company’s products by third parties in the Far East and currently is responsible for performing and/or procuring product sourcing, product engineering, quality control inspections, independent safety testing and export/import documentation. The Company believes that the presence of a dedicated staff in Hong Kong results in lower net costs, increased ability to respond rapidly to customer orders and maintenance of more effective quality control standards. The Company’s products are also manufactured by third parties in the United States. Equity Marketing generally retains, for itself or on behalf of its customers, ownership of the molds and tooling required for the manufacture of its products. The Company is not a party to any long-term contractual arrangements with any manufacturer. During 2001, approximately 95% of the Company’s products were manufactured in China. China currently enjoys permanent “normal trade relations” (“NTR”) status under US tariff laws, which provides a favorable category of US import duties. China’s NTR status became permanent on January 1, 2002, following enactment of a bill authorizing such status upon China’s accession to the World Trade Organization, which occurred in December 2001. This substantially reduces the possibility of China losing its NTR status, which would result in increased costs for the Company. The impact of such an event on the Company could be somewhat mitigated by the Company’s ability to source product for the US market from countries other than China. (see “Cautionary Statements and Risk Factors”).

Virtually all of the Company’s raw materials are available from numerous suppliers. The Company does not have long-term supply contracts in place with its suppliers. Accordingly, petroleum price increases could result in higher prices for the Company’s products which the Company may not be able to fully pass on to its customers. Any such failure could negatively impact the Company’s business, financial condition or results of operations.

Trademarks and Copyrights

The Company does not own trademarks or copyrights on properties on which most of its current products are based. These rights are typically owned or controlled by the creator of the property or by the entity which develops or promotes a property, such as a motion picture or television producer.

Competition

The domestic and international promotions and consumer products businesses are highly competitive. In its core domestic promotions business, Equity Marketing competes with several other companies. Competitors in promotions include the Alcone Marketing Group, a subsidiary of Omnicom Group, Inc., Marketing Store Worldwide, Promotional Partners International and DraftWorldwide, a subsidiary of The Interpublic Group of Companies. Competition in the international promotions industry includes local companies in each market and a small number of emerging international promotions companies. The Company expects that in 2002 the principal competitors to the Company’s consumer products business will be mid-sized toy companies like Trendmasters, Inc. and JAKKS Pacific, Inc. However, the toy industry includes major toy and game manufacturers such as Hasbro, Inc. and Mattel, Inc. that compete in some of the same product categories as Equity Consumer Products. The Company believes the principal competitive factors affecting its business are development of client promotional strategy, creative execution, license selection, price, product quality and safety and speed of

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production. The Company’s consumer products competitors include companies which have far more extensive sales and development staffs and significantly greater financial resources than does the Company. There can be no assurance that the Company will be able to compete effectively against such companies in the future.

Government Regulation

In the United States, the Company is subject to the provisions of, among other laws, the Federal Consumer Product Safety Act and the Federal Hazardous Substances Act (the “Acts”). The Acts empower the Consumer Product Safety Commission (the “CPSC”) to protect the public against unreasonable risks of injury associated with consumer products, including toys and other articles. The CPSC has the authority to exclude from the market articles which are found to be hazardous and can require a manufacturer to repair or repurchase such toys under certain circumstances. Any such determination by the CPSC is subject to court review. Violations of the Acts may also result in civil and criminal penalties. Similar laws exist in some states and cities in the United States and in many jurisdictions throughout the world. The Company performs quality control procedures (including the inspection of goods at factories and the retention of independent testing laboratories) to ensure compliance with applicable laws. Notwithstanding the foregoing, there can be no assurance that all of the Company’s products are or will be hazard-free. Any material product recall could have a material adverse effect on the Company’s results of operations and financial condition and could also negatively effect the Company’s reputation and the sales of its other products. (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”).

Employees

As of December 31, 2001, Equity Marketing employed a total of 219 individuals, including 135 individuals located in the United States, 43 individuals located in Europe and 41 individuals employed by and located at Equity Marketing HK. In addition, the Company utilizes, on an ongoing basis, the services of freelance artists and other temporary staff. Equity Marketing believes it maintains satisfactory relations with its employees.

ITEM 2. PROPERTIES

On January 4, 1999, Equity Marketing occupied its corporate offices and studio facilities of approximately 54,000 square feet of leased space in Los Angeles, California. The lease expires July 31, 2005. Equity Marketing Hong Kong, Ltd. occupies approximately 6,000 square feet of leased space in Hong Kong, under a lease which expires August 31, 2002. Logistix occupies approximately 3,800 square feet of leased space in Gerrards Cross outside of London under a lease that expires September 19, 2011 and approximately 6,300 square feet of leased space in Paris under a lease that expires January 2, 2004.

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ITEM 3. LEGAL PROCEEDINGS

The Perper Matter

On February 1, 2002, Alan Perper filed a complaint (No. BC 267 408) against the Company, Donald A. Kurz (Chairman of the Board and Chief Executive Officer of the Company) and Gaetano Mastropasqua (Executive Vice President, Client Services, of the Company) in the Superior Court of the State of California, County of Los Angeles. The plaintiff is a former employee of the Company who was terminated in November 2001. The complaint alleges that the plaintiff was wrongfully terminated and seeks $2,000,000 in compensatory damages plus punitive damages, interest and attorneys’ fees for (i) breach of written contract; (ii) breach of covenant of good faith and fair dealing; (iii) fraudulent deceit; (iv) intentional infliction of emotional distress; and (v) negligent infliction of emotional distress. Pursuant to indemnification agreements between the Company and each of Messrs. Kurz and Mastropasqua, the Company is obligated to defend and indemnify them in this matter. The Company believes the allegations of the complaint are without merit and intends to defend the action vigorously.

General Litigation

The Company is involved in various other legal proceedings generally incidental to its business. While the result of any litigation contains an element of uncertainty, management presently believes that the outcome of any other known, pending or threatened legal proceeding or claim, individually or combined, will not have a material adverse effect on the Company’s financial position or results of operations.

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

     None

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company’s Common Stock is traded on the Nasdaq National Market under the symbol EMAK.

As of January 16, 2002 there were approximately 1,165 beneficial holders of the Company’s Common Stock.

The Company currently has no plans to pay dividends on its Common Stock. The Company intends to retain all earnings for use in its business. Under the Company’s current credit facility, the Company cannot pay dividends on its Common Stock without the prior consent of the lenders. (see Note 6 of the accompanying Notes to Consolidated Financial Statements).

The following table sets forth the high and low sales prices on the Nasdaq National Market for the calendar periods indicated:

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ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read with the Company’s consolidated financial statements and the notes to those statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K. The consolidated statements of operations data for the years ended December 31, 1999, 2000 and 2001 and the consolidated balance sheet data at December 31, 2000 and 2001 are derived from the Company’s consolidated financial statements which have been audited by Arthur Andersen LLP, the Company’s independent public accountants, and are included elsewhere in this Form 10-K. The statements of operations data for the years ended December 31, 1997 and 1998 and the consolidated balance sheets dated as of December 31, 1997, 1998 and 1999 are derived from the Company’s consolidated financial statements which have been audited by Arthur Andersen LLP and are not included in this Form 10-K.

Year Ended December 31,				1997				1998				1999				2000				2001
(in thousands, except share and per share data)
Consolidated Statements of Operations and Per Share Data:
Revenues				$	146,328			$	159,136			$	227,063			$	232,287			$	144,316
Cost of sales					105,310				112,153				170,416				172,270				104,129
Provision for production-in-process losses					—				2,666				—				—				—
	Gross Profit				41,018				44,317				56,647				60,017				40,187
Operating expenses:
		Salaries, wages and benefits			11,563				14,550				17,350				17,610				15,924
		Selling, general and administrative			14,330				22,127				22,829				23,075				18,323
		AmeriServe bankruptcy bad debt expense			—				—				1,014				482				—
		Impairment of assets			—				6,712				—				8,504				—
		Business process reengineering			—				2,220				—				—				—
		Logistix integration costs			—				—				—				—				192
		Restructuring loss (gain)			—				4,121				(604	)			(418	)			—
		Total operating expenses			25,893				49,730				40,589				49,253				34,439
		Income (loss) from operations			15,125				(5,413	)			16,058				10,764				5,748
Other income (expense), net					522				(511	)			(510	)			1,375				1,370
		Income (loss) before provision for income taxes			15,647				(5,924	)			15,548				12,139				7,118
Provision for income taxes					6,024				69				6,134				6,797				2,517
		Net income (loss)		$	9,623			$	(5,993	)		$	9,414			$	5,342			$	4,601
Preferred stock dividends					—				—				—				956				1,500
Net income (loss) available to common stockholders				$	9,623			$	(5,993	)		$	9,414			$	4,386			$	3,101
Basic income (loss) per share:
		Income (loss) per share		$	1.63			$	(0.98	)		$	1.51			$	0.70			$	0.52
Basic weighted average shares outstanding					5,913,313				6,089,618				6,227,842				6,275,590				5,996,662
Diluted income (loss) per share:
		Income (loss) per share		$	1.55			$	(0.98	)		$	1.46			$	0.68			$	0.50
Diluted weighted average shares outstanding					6,216,794				6,089,618				6,440,738				6,460,557				6,164,154

As of December 31,		1997				1998				1999				2000				2001
(in thousands)
Consolidated Balance Sheet Data:
Working capital		$	28,128			$	4,268			$	11,045			$	52,140			$	36,620
Total assets			57,153				115,480				97,244				110,542				99,487
Long-term debt			—				—				—				—				—
Stockholders’ equity			36,140				32,407				42,025				45,241				42,473

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The following table sets forth for the periods indicated the Company’s operating expenses as a percentage of its total revenues:

Year Ended December 31,			1999				2000				2001
Revenues				100.0	%			100.0	%			100.0	%
Cost of sales				75.1	%			74.2	%			72.2	%
Gross Profit				24.9	%			25.8	%			27.8	%
Operating expenses:
	Salaries, wages and benefits			7.6	%			7.6	%			11.0	%
	Selling, general and administrative			10.1	%			9.9	%			12.7	%
	AmeriServe bankruptcy bad debt expense			0.4	%			0.2	%			—	%
	Impairment of assets			—	%			3.7	%			—	%
	Logistix integration costs			—	%			—	%			0.1	%
	Restructuring loss (gain)			(0.3	)%			(0.2	)%			—	%
	Total operating expenses			17.8	%			21.2	%			23.8	%