<PAGE>   1



                                  UNITED STATES
                       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 January 2, 1999

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

             For the transition period from __________ to ________.

                           Commission File No. 0-14810

                                 MARK VII, INC.
             (Exact name of Registrant as specified in its charter)

                Delaware
       (State or other jurisdiction                     43-1074964
    of incorporation or organization)       (I.R.S. Employer Identification No.)

   965 Ridge Lake Boulevard, Suite 100
           Memphis, Tennessee                             38120
  (Address of principal executive offices)              (Zip Code)

       Registrant's telephone number, including area code: (901) 767-4455
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.05 par value
                                (Title of Class)

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. [X]

The aggregate market value of Common Stock, $.05 par value, held by
non-affiliates of the Registrant on March 5, 1999, based upon the last sale
price of such stock on that date was $134,746,128. At March 5, 1999, 8,963,270
shares of Common Stock, $.05 par value, were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Documents                                      Form 10-K Reference
------------------                             -------------------
Notice of 1999 Annual Meeting of               Part III, Items 10, 11, 12 and 13
Shareholders and Proxy Statement                    
to be filed within 120 days of 
January 2, 1999, excluding 
therefrom the sections titled
"Board Compensation Committee 
Report on Executive Compensation" 
and "Performance Graph"


<PAGE>   2

   
    

                         MARK VII, INC. AND SUBSIDIARIES

                         1998 ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS

                                     PART I


<TABLE>
<CAPTION>

                                                                              Page
                                                                              ----
<S>         <C>                                                               <C>

Item  1.    Business.........................................................  2

Item  2.    Properties.......................................................  5

Item  3.    Legal Proceedings................................................  5

Item  4.    Submission of Matters to a Vote of Security Holders..............  5

                                     PART II

Item  5.    Market for Registrant's Common Equity and Related
            Stockholder Matters..............................................  6

Item  6.    Selected Financial Data..........................................  7

Item  7.    Management's Discussion and Analysis of Financial
            Condition and Results of Operations..............................  8

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk....... 10

Item  8.    Financial Statements and Supplementary Data...................... 10

Item  9.    Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosures............................. 10

                                    PART III

Item 10.    Directors and Executive Officers of the Registrant............... 11

Item 11.    Executive Compensation........................................... 11

Item 12.    Security Ownership of Certain Beneficial Owners and Management... 11

Item 13.    Certain Relationships and Related Transactions................... 11

                                     PART IV

Item 14.    Exhibits, Financial Statement Schedules, and Reports
            on Form 8-K...................................................... 12


</TABLE>





                                       1
<PAGE>   3


                    NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Except for the historical information contained herein, this document
contains forward-looking statements based on management's current expectations
of the Company's near term results, based on current information available
pertaining to the Company. Actual future results and trends may differ
materially depending on a variety of factors, including competition in the
marketplace, changes in the carrier base, changes in capacity and changes in
government regulations.

                                     PART I

ITEM 1.      BUSINESS

GENERAL

         Mark VII, Inc. (the "Company") is a holding company, the principal
assets of which are its transportation services subsidiary, Mark VII
Transportation Company, Inc. ("Mark VII Transportation"), and Mark VII
Transportation's subsidiaries. The Company is a service organization that acts
as a provider of transportation and logistics services. As a provider of
transportation services, the Company arranges for domestic and international
transportation, using a number of different transportation modes, including
rail, truck, ship and air. As a logistics manager, the Company provides its
customers with value-added elements of the distribution chain, such as private
fleet management, warehousing and regional and local distribution.

         The Company has established a network of transportation sales personnel
and logistics managers at its headquarters in Memphis, Tennessee and 125 branch
sales offices in 33 states. The majority of the Company's branch offices are
operated by independent commission agents responsible for the client
relationships, office expenses and billing. The Company supports its agency
offices by providing expertise in multiple transportation modes, rate
negotiation and logistics design, as well as administrative and credit services.

         The Company acts as a link between shippers and carriers. Shippers use
transportation services companies to complement in-house transportation
departments. The Company augments in-house shipping departments by providing
expertise in multiple modes of transportation, providing access to additional
transportation equipment, negotiating transportation rates and increasing the
productivity of in-house personnel. The Company provides shippers with an
opportunity to outsource all or part of the transportation function, thereby
allowing them to devote assets and personnel to their primary business. The
Company's services are also used by transportation carriers to supplement their
in-house sales departments and to improve equipment utilization. The Company
maintains close relationships with major railroads, trucklines, shipping lines
and air freight carriers.

SERVICES PROVIDED

         The Company's transportation services can be broadly classified into
the following categories:

         Transaction Based Services. "Transaction based services" are identified
with the traditional freight brokerage business where a shipper contacts a
transportation services company to arrange for service on a shipment-by-shipment
basis. The transportation services company then assumes responsibility for the
transportation carrier's obligations to perform in accordance with the shipper's
specifications. Similarly, a carrier may contact the transportation services
company when it has resources available to transport freight. The transportation
services company arranges a match and adds a fee to the carrier's rate.

         Logistics Management Services. "Logistics management services" include
both process based and information/knowledge based services. Process based
services involve the Company taking responsibility for all transactions of a
particular type for a shipper or carrier. The Company's expertise in intermodal
service and trucking has led shippers and carriers to request the Company to
regularly arrange shipments for a pre-arranged fee. Both shippers and carriers
avail themselves of this service, often realizing financial savings due to the
Company's volume and information base and its ability to arrange shipments more
efficiently. The Company can help trucklines maintain competitive positions,
including allowing them to supplement their sales and marketing efforts without
incremental fixed costs. Process based services generally are a result of the
full or partial outsourcing of internal traffic department functions. For
example, the Company currently coordinates the time-sensitive delivery of raw
materials as well as outbound finished product for a number of processing



                                       2
<PAGE>   4

plants of a major potato chip manufacturer. Other examples of process based
services currently executed by the Company are the procurement of truck and rail
services for a substantial portion of a customer's shipments from a particular
location, procurement of backhaul shipments for private fleets, freight
consolidation and forwarding for a customer with complex logistical needs, and
utilization management of an equipment owner's fleet.

         Information/knowledge based services involve management and
consultation on any and all aspects of transportation for a client, including
equipment management and specialized systems applications. The Company utilizes
highly skilled personnel, leading edge systems and its sales network to design
transportation and distribution programs for customers with complex logistical
needs.

TRANSPORTATION MODES

         Transportation modes used by the Company have been organized into
product lines. Each product line has one or more managers to provide marketing
and operational support to the Company's network of sales people and logistics
professionals.

         Rail Services. Intermodal services involve arranging for the pick up
and delivery of shipments by trucks, and the shipments' transport by railroad,
in a coordinated manner. Other rail services involve rail transport by boxcar or
flatcar for shippers' heavy or bulky freight. Related services may include load
stabilization, load expediting and equipment selection.

         Truck Services. Truck services involve arranging for the pick up and
delivery of shipments that will be transported over the road using trucks. In
addition to locating appropriate equipment to meet shippers' needs, trucklines
actively solicit shipments from the Company's sales offices. The Company has
access to an abundant supply of truckload units provided by trucklines meeting
the Company's safety and service criteria.

         NVOCC Brokerage. Ocean freight brokerage involves acting as agents for
shippers and importers under non-vessel operating common carrier authority
(NVOCC), issued by the Federal Maritime Commission, to arrange for the services
of ocean carriers.

         Other Services. Other services, such as air freight forwarding, local
truckload and heavy equipment transport, are important to the Company's strategy
because they respond to a customer's total transportation needs and provide the
Company's network of sales personnel and logistics managers a complete range of
services to sell.

AGENCY NETWORK AND OPERATIONS

         The Company's operations are decentralized and are conducted primarily
in branch offices. Of the 125 branch offices, 23 are operated by the Company and
102 are operated under agency agreements. Contracts with agents generally have a
duration of ten years and are terminable by either party on each anniversary of
the agreement by giving 30 days' notice. Although the Company's contracts with
its agents are non-exclusive, the Company's agents generally do not provide
services on behalf of other transportation services companies. Agency offices
operate as independent businesses, responsible for all costs associated with
sales, operations, billing and any related overhead for these items and are
compensated by a percentage of fees associated with transportation arranged.
Each of the agency branches is responsible for obtaining its own office
facilities. Offices operated by employees, rather than agents, are structured as
stand-alone business units. Most offices have two to six operations people, who
are responsible for controlling all aspects of executing the shipment, including
(i) taking the order from the customer, (ii) arranging for transportation
services, (iii) monitoring progress of the shipment and reporting back to the
customer and (iv) billing the customer on the Company's invoices. To foster the
growth of its agency network, the Company provides new agents with advances to
cover start-up and initial operating costs. These advances are typically repaid
over 24 months.

         Typically, a sales person identifies a potential customer and
determines its transportation requirements. The sales person then prepares a
rate proposal from pricing data negotiated by the Company with representatives
of the carriers and the providers of other services that may be required. Before
any freight is handled for a customer, credit approval must be obtained from the
Company's corporate credit department. Upon customer acceptance of a rate
proposal, the operations unit in the branch office assumes responsibility for
executing individual shipment orders for that customer.

         The Company provides administrative support, such as computer systems,
sales support, credit services, collection services and accounts payable
services, to its branch office operations on a centralized basis. Specialty
operations such as the 



                                       3
<PAGE>   5

design and management of dedicated trucking operations and truck brokerage are
available to the logistics management services operations. The Company's
computer systems employ the latest in client/server technologies. Components of
the systems include a powerful Informix Dynamic Server relational database; a
SUN Ultra Enterprise Server operating on SUN's Solaris UNIX Operating System
with attached data storage facilities capable of providing over one terabyte of
available capacity using both magnetic and optical media; Microsoft NT Servers;
and Windows 95 and Windows NT workstations. High speed document imaging,
electronic document interchange, electronic mail, integrated electronic FAX,
internet and networking capabilities greatly enhance the Company's efficiency in
processing thousands of shipments per day as well as expanding customer service
offerings.

SEASONALITY

         Results of operations in the transportation industry generally show a
seasonal pattern, as customers reduce shipments during and after the winter
holiday season. In recent years, the Company's operating income and earnings
have been higher in the second, third and fourth quarters than in the first
quarter.

COMPETITION

         The transportation services industry is highly competitive. The Company
competes against other integrated logistics companies, as well as transportation
companies. The Company also competes against shippers' in-house shipping
departments and carriers' internal sales forces. This competition is based
primarily on freight rates, quality of service (such as damage free shipments,
on-time delivery and consistent transit times), reliable pickup and delivery and
scope of operations. Other logistics companies and transportation services
companies and numerous carriers have substantially greater financial and other
resources than the Company. The Company also competes with transportation
services companies for the services of independent commission agents.

GOVERNMENT REGULATION

         The Company is licensed by the United States Department of
Transportation (the "DOT") to engage in operations as a broker in arranging for
the transportation, by motor vehicle, of general commodities between points in
the United States. The DOT prescribes qualifications for acting in this
capacity, including certain surety bonding requirements. The Company also acts
as a common and contract motor carrier regulated by the DOT. Interstate motor
carrier operations are subject to safety requirements prescribed by the DOT.
Matters such as weight and dimensions of equipment are also subject to federal
regulations.

         In its ocean freight forwarding business, the Company is licensed as an
ocean freight forwarder and as a non-vessel operating common carrier by the
Federal Maritime Commission (the "FMC"). The FMC prescribes qualifications for
acting as a shipping agent, including the filing of tariffs and surety bonding
requirements.

         The Company's air freight forwarding business is subject to regulation,
as an indirect air cargo carrier, under the Federal Aviation Act (the "Act") by
the DOT. The DOT's Economic Aviation Regulations exempt domestic air freight
forwarders from most, but not all, of the Act's requirements. The major
provisions of the Act that remain applicable to the Company forbid solicitation
of certain rebates, require the carrier to provide safe service, equipment and
facilities, prohibit discrimination with respect to foreign air cargo
transportation, prohibit unfair or deceptive practices and authorize the DOT to
inquire into the carrier's management for certain purposes.

         In certain foreign markets in which the Company operates, the air
freight forwarding business is subject to rate schedules and other restrictions
which in the first instance are agreed to by the International Air Transport
Association and subsequently approved by the governments concerned. The Company
also is subject to certain foreign regulations.

         Management does not believe that current regulation of its activities
imposes significant economic restraints upon its operations or upon the entry of
new competitors into the industry in general or into the markets that are served
by the Company in particular.




                                       4
<PAGE>   6


EMPLOYEES

         The Company employed 354 individuals at March 5, 1999. The employees
were not represented by a collective bargaining unit. Management considers
relations with its employees to be good.

ITEM 2.       PROPERTIES

         All of the Company's operations at the 23 company branch locations are
conducted in office space under leases with terms of less than four years.
Although the Company owns the land and building which houses its administrative
offices in Indianapolis, Indiana, the Company's other principal administrative
office is located in leased space in Memphis, Tennessee. Each of the 102 agency
branches is responsible for obtaining its own office facilities.

         The Company also owns, and is holding for sale or lease, office,
maintenance and fuel facilities in St. Joseph, Missouri, and Joplin, Missouri,
and a four acre tract in Los Angeles, California. The Los Angeles property has
been leased through December 2000 and the Joplin property has been leased
through June 2002.

ITEM 3.       LEGAL PROCEEDINGS

         The Company is a defendant in an arbitration proceeding in Belgium with
an ocean carrier who alleges the Company failed to meet certain minimum volume
commitments under a transportation contract. Although management and its legal
counsel believe no contractual volume commitments existed and plan to continue
to vigorously defend the Company's position, in December 1998, the arbitration
panel found the Company to be liable. The Company is awaiting the panel's
determination regarding the amount of damages. Also, during the third quarter of
1998, the Company discovered improper activities conducted by personnel at one
of the Company's last remaining trucking locations. The Company has filed a
claim with its insurance carrier under an existing crime policy. Management
believes, after consultation with counsel, that prospects for recovery on the
crime policy are favorable. Thus, it is possible that all or a portion of the
charges recorded in the third quarter of 1998 relating to this matter could be
reversed in the future. During the third and fourth quarters of 1998, management
accrued a total amount of $1,700,000 for its estimate of probable losses in
connection with these two matters. The Company believes the ultimate resolution
of these two matters could range from a reversal of $1,500,000 previously
accrued to an additional charge of $1,750,000.

         The Company is involved in various other legal proceedings and claims
generally incidental to its business. While the result of any litigation
contains an element of uncertainty, the Company presently believes that the
outcome of any such additional matters, or all of them combined, will not have a
material adverse effect on its results of operations or consolidated financial
position.

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

         No matters were submitted to a vote of security holders of the Company
during the three months ended January 2, 1999.




                                       5
<PAGE>   7


                                     PART II

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

PRICE RANGE OF COMMON STOCK

         The Company's common stock trades on the Nasdaq Stock Market's National
Market System under the symbol: MVII. The following table sets forth the high
and low sale prices per share of the common stock for the periods indicated, as
reported by the Nasdaq Stock Market:

<TABLE>
<CAPTION>

                                                              High          Low
                                                              ----          ---
              <S>                                           <C>           <C>

              1997
              First Quarter................................ $ 16 1/4      $ 13 13/16
              Second Quarter...............................   16 7/8        13 7/8
              Third Quarter................................   16 3/4        14 5/8
              Fourth Quarter...............................   19            13 1/2

              1998
              First Quarter................................ $ 19          $ 14 3/4
              Second Quarter...............................   19            17
              Third Quarter................................   18 1/4        14 1/16
              Fourth Quarter...............................   18 5/8        13 7/8

              1999
              First Quarter (through March 5, 1999)........ $ 18 7/8      $ 16 1/2


</TABLE>

         On March 5, 1999, the last sale price per share of the common stock was
$16 1/2. At March 5, 1999, there were 190 holders of record, representing an
estimated 1,300 individual holders of the Company's common stock.

         On November 7, 1997, the Company's Board of Directors authorized a
two-for-one stock split. All references in the accompanying financial statements
to the number of common shares and per share amounts for periods prior to
November 7, 1997 have been restated to reflect the stock split.

DIVIDENDS

         The Company has never paid a cash dividend on its common stock. It is
the intention of the Board of Directors to continue to retain earnings to
finance the growth of the Company's business rather than to pay cash dividends.
Future payments of cash dividends will depend upon the financial condition,
results of operations and capital commitments of the Company, as well as other
factors deemed relevant by the Board of Directors. The Company and its
subsidiaries are currently subject to a line of credit which limits the payment
of dividends.




                                       6
<PAGE>   8


ITEM 6.       SELECTED FINANCIAL DATA

         The following selected consolidated financial data as of and for each
of the years in the five-year period ended January 2, 1999 are derived from the
Company's consolidated financial statements which have been audited by Arthur
Andersen LLP, independent public accountants. The following selected
consolidated financial data should be read in conjunction with the Consolidated
Financial Statements of the Company and Notes thereto, and Report of Independent
Public Accountants thereon, for the most recent three years, included elsewhere
in this Annual Report.

<TABLE>
<CAPTION>
                                                                        FISCAL YEAR (1) 
                                                   -----------------------------------------------------------        
                                                    1994         1995         1996         1997         1998          
                                                    ----         ----         ----         ----         ----
                                                                   (in thousands, except per share data)
<S>                                               <C>          <C>          <C>          <C>          <C>
STATEMENTS OF INCOME INFORMATION:

  Operating revenues ........................     $428,772     $459,160     $563,913     $667,374     $724,948
  Transportation costs ......................      370,232      391,845      489,292      582,843      636,745
                                                  --------    ---------     --------     --------     --------
  Net revenues ..............................       58,540       67,315       74,621       84,531       88,203
  Operating income ..........................        6,847        8,489       10,205       12,358       16,589

  Income from continuing operations
     before income taxes ....................        6,267        8,024        9,952       12,717       16,217

  Income from continuing operations .........     $  3,667     $  4,734     $  5,772     $  7,376     $  9,568
                                                  ========     ========     ========     ========     ========

  Income from continuing operations
    per common share (2) ....................     $    .38     $    .49     $    .63     $    .80     $   1.07
                                                  ========     ========     ========     ========     ========
Income from continuing operation
    per common share, assuming dilution (2)..     $    .37     $    .47     $    .60     $    .76     $   1.01
                                                  ========     ========     ========     ========     ========

  Average common shares and equivalents
    outstanding (2):
     Basic ..................................        9,558        9,674        9,211        9,185        8,930
     Diluted ................................        9,802        9,990        9,616        9,699        9,449

BALANCE SHEET DATA:
  Total assets ..............................     $ 70,837     $ 76,152     $ 93,597     $108,010     $123,068
  Total debt ................................       10,787        1,588          747          580          468
  Shareholders' investment ..................       23,473       25,888       30,038       32,122       41,243

</TABLE>


(1)  The Company's fiscal year ends on the Saturday nearest December 31. Fiscal
     years 1994, 1995, 1996 and 1998 included 52 weeks and fiscal year 1997
     included 53 weeks.

(2)  Effective January 3, 1998, the Company adopted Statement of Financial
     Accounting Standards No. 128, "Earnings per Share". Earnings per share have
     been restated for all periods presented to conform to this accounting
     standard. In addition, on November 7, 1997, the Company's Board of
     Directors authorized a two-for-one stock split, thereby increasing the
     number of shares issued by 5,003,000 and decreasing the par value of each
     share to $ .05. All references to the number of common shares and per share
     amounts for all periods presented have been restated to reflect the stock
     split.




                                       7
<PAGE>   9


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

NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Except for the historical information contained herein, this document
contains forward-looking statements based on management's current expectations
of the Company's near term results, based on current information available
pertaining to the Company. Actual future results and trends may differ
materially depending on a variety of factors, including competition in the
marketplace, changes in the carrier base, changes in capacity and changes in
government regulations.

RESULTS OF OPERATIONS

Fiscal Years 1998 Compared to 1997 and 1997 Compared to 1996

          Fiscal year 1997 included 53 weeks while fiscal years 1998 and 1996
included 52 weeks. The following table sets forth the percentage relationship of
the Company's revenue and expense items to operating revenues for the periods
indicated:

<TABLE>
<CAPTION>
                                                                 FISCAL YEAR                        
                                                      --------------------------------
                                                        1998       1997       1996   
                                                      ---------  ---------  ----------
        <S>                                           <C>         <C>        <C>
        Operating revenues.........................    100.0%      100.0%     100.0%
        Transportation costs.......................     87.8        87.3       86.8
                                                      -------     ------     ------
        Net revenues...............................     12.2        12.7       13.2

        Operating expenses:
              Salaries and related costs...........      2.5         2.7        2.9
              Selling, general and administrative..      7.4         8.1        8.5
                                                      ------      ------     ------
                  Total operating expenses.........      9.9        10.8       11.4
                                                      ------      ------     ------
        Operating income...........................      2.3         1.9        1.8

        Other (income) expense, net................       .1          --         --
                                                      ------      ------     ------
        Income before income taxes.................      2.2%        1.9%       1.8%
                                                      ======      ======     ======

</TABLE>

          General - The transportation services operation contracts with
carriers for the transportation of freight by rail, truck, ocean or air for
shippers. Operating revenues include the carriers' charges for carrying
shipments plus commissions and fees, as well as revenues from fixed fee
arrangements on a portion of the Company's integrated logistics projects. The
carriers with whom the Company contracts provide transportation equipment, the
charge for which is included in transportation costs. As a result, the primary
operating costs incurred by the transportation services operations and logistics
projects are for purchased transportation. Net revenues include only the
commissions and fees.

          Selling, general and administrative expenses primarily consist of the
percentage of net revenue paid to agencies and independent sales contractors as
consideration for providing sales and marketing, arranging for movement of
shipments, entering billing and accounts payable information on shipments and
maintaining customer relations, as well as other company operating expenses.
Certain costs incurred by the Company's dedicated trucking fleets are also
reported in salaries and related costs and selling, general and administrative
expenses.

          Operating Revenues - The Company's total number of shipments were
715,000, 627,000, and 503,000 in 1998, 1997 and 1996, respectively. Increases in
shipments of 14% and 25% in 1998 and 1997, respectively, were the result of
expanded services to both new and existing customers. Operating revenues
increased 9% and 18% in 1998 and 1997, respectively. Increases in shipments and
operating revenues for 1998 are lower than the Company's historical growth rates
due to four primary factors. During the first quarter of 1998, the Company
ceased operations of a dedicated trucking fleet due to uncontrollable customer
conditions and discontinued certain logistics projects which no longer met its
profitability requirements on an ongoing basis. Secondly, several of the
Company's newer logistics management projects are performed on a management fee
basis, instead of the more traditional arrangement whereby the Company would
collect a management fee and transportation costs. Thirdly, expanding logistics
management business continues to shift the Company's modal mix toward more
trucking and less-than-truckload services. Since operating revenue per truck
shipment averages about 70% of



                                       8
<PAGE>   10

operating revenue per rail shipment, the shipment count growth rate exceeded the
operating revenue growth rate for 1998 and 1997. Finally, fiscal year 1997
included 53 weeks of operation, while fiscal years 1998 and 1996 included 52
weeks.

          Net Revenues. The Company's net revenues as a percentage of operating
revenues were 12.2%, 12.7% and 13.2%, in 1998, 1997 and 1996, respectively. This
decline in net revenues as a percentage of operating revenues during 1998 and
1997 resulted from the closure of dedicated trucking operations and has been
offset by proportionate decreases in operating expenses as a percentage of
operating revenues.

         Operating Expenses - As discussed above in net revenues, the closing of
certain dedicated trucking fleets has resulted in fluctuations in operating
expenses as a percentage of operating revenues. In general, the Company's
dedicated trucking fleets have relatively higher fixed costs compared to
operating revenues than the Company's transportation services and logistics
management operations.

         Selling, general and administrative expenses for the year ended January
2, 1999 included two non-recurring items. First, the Company recognized a gain
on the sale of its 50% interest in a business unit which provided warehouse and
delivery services to a major appliance manufacturer. Secondly, the Company is a
defendant in an arbitration proceeding in Belgium with an ocean carrier who
alleges the Company failed to meet certain minimum volume commitments under a
transportation contract. Although management and its legal counsel believe no
contractual volume commitments existed and plan to continue to vigorously defend
the Company's position, in December 1998, the arbitration panel found the
Company to be liable. The Company is awaiting the panel's determination
regarding the amount of damages. (See further discussion in Note 5 of the Notes
to Consolidated Financial Statements.) The net effect of these two items was to
decrease selling, general and administrative expenses by $462,000 for the fourth
quarter of 1998.

          Other (Income) Expense, Net - Cash flow from operations has been
adequate to cover the Company's operating requirements in recent years,
resulting in decreased interest expense and increased interest income in 1998
and 1997. Included in the current year is a pre-tax charge of $700,000 to
provide for certain costs incurred as a result of improper actions of personnel
at one of the Company's last remaining trucking locations. (See further
discussion in Note 5 of the Notes to Consolidated Financial Statements.)

          Provision for Income Taxes - The Company's effective tax rates were
41% in 1998 and 42% in 1997 and 1996. The differences between the Company's
effective tax rates and the federal statutory tax rates for the three most
recent fiscal years are primarily due to state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

          The Company has available a $25,000,000 unsecured revolving credit
facility (the "Facility"). In recent years, the Company's cash flows from
operations have exceeded its working capital needs and the Company has made no
borrowings under this Facility since its inception in July 1997. On January 2,
1999, letters of credit totaling $2,705,000 had been issued on the Company's
behalf to secure insurance deductibles and purchases of operating services,
resulting in unused borrowing capacity of $22,295,000. The interest rate for
borrowings under the Facility is a variable rate based upon the 30 day LIBOR
Funding Rate, as defined, plus 50 to 125 basis points. The Company pays a
varying fee of .35% to 1.00% on outstanding letters of credit and a varying
commitment fee of .15% to .30% on the unused portion of the Facility, as
defined. At January 2, 1999, the interest rate was 6.04% and the letter of
credit fee and commitment fee were .35% and .15%, respectively. The line of
credit expires on July 1, 2000, but may be extended by mutual agreement of the
lender and the Company, for subsequent periods of one year each.

          Among the covenants contained in the Facility are maintenance of
certain financial ratios, including debt to net worth, cash plus accounts
receivable to current liabilities plus debt and debt to earnings before income
taxes, interest, depreciation and amortization (all as defined). Other covenants
include the level of capital and lease expenditures, acquisitions and mergers,
dividends and redemptions of stock.

          At January 2, 1999, the Company had a ratio of current assets to
current liabilities of approximately 1.31 to 1. Management believes that the
Company will have sufficient cash flow from operations and borrowing capacity to
cover its operating needs and capital requirements for the foreseeable future.



                                       9

<PAGE>   11

YEAR 2000

          In 1996, the Company conducted an extensive review of its financial
and administrative information system. The review evaluated the Company's
computer systems in terms of Year 2000 compliance, capacity, general efficiency,
compatibility and competitive advantage. As a result of the review, the Company
has designed and implemented a new financial and administrative system which is
Year 2000 compliant to replace the previous system, which was over ten years
old. Since October 1996, the Company has spent approximately $2,500,000 on the
design and implementation of this system. Additionally, during this same period,
the Company performed extensive reviews of all other peripheral systems not
included in the above system. The Company has spent approximately $100,000 in
order to ensure that its peripheral systems are Year 2000 compliant. The Company
expects to spend no more than an additional $100,000 on its Year 2000 compliance
efforts. All funds for Year 2000 projects have been derived from operating cash
flows. The Company has sent a survey to its significant third party suppliers
and customers inquiring into their Year 2000 compliance status and gathering
information to assess the effect of any noncompliance on the Company's
operations. The Company has had no indication that these third parties will not
be Year 2000 compliant. Although no one can accurately predict how many Year
2000 related failures will occur or the severity, duration or financial
consequences of such failures, the Company believes its most reasonably likely
worst case scenario is that it could sustain what are expected to be nonmaterial
operational inconveniences and inefficiencies and be involved in nonmaterial
business disputes related to the Company or one of its vendor's or customer's
inability to carry out certain contractual obligations. Therefore, the Company
has determined that the need for a major contingency plan is not appropriate at
this time.

OTHER INFORMATION

          As the Company continues its expansion into more comprehensive
logistics management programs, the credit risk exposure on a limited number of
major customers increases. While the Company takes measures to continually
evaluate, monitor and, if necessary, reserve for these and other credit risks,
it is possible, although unlikely, that circumstances could develop on a
particular major customer which could have a material effect on the Company's
short-term results.

          Results of operations in the transportation industry generally show a
seasonal pattern, as customers reduce shipments during and after the winter
holiday season. In recent years, the Company's operating income and earnings
have been higher in the second, third and fourth quarters than in the first
quarter.

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

            The Company has no exposure to market risk associated with
activities in derivative financial instruments, other financial instruments, or
derivative commodity instruments.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements required under this item and set forth
elsewhere in this Form 10-K as indicated in the following index are incorporated
herein by reference.

<TABLE>
<CAPTION>
                   Index to Consolidated Financial Statements
                                                                           Page
                                                                           ----
         <S>                                                               <C>
         Consolidated Balance Sheets......................................  16
         Consolidated Statements of Income................................  17
         Consolidated Statements of Shareholders' Investment..............  18
         Consolidated Statements of Cash Flows............................  19
         Notes to Consolidated Financial Statements.......................  20
         Report of Independent Public Accountants.........................  27
</TABLE>


ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURES

                                      None.




                                       10
<PAGE>   12


                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         The sections entitled "Election of Directors" and "Executive Officers
and Key Employees" of the Company's Notice of the 1999 Annual Meeting of
Shareholders and Proxy Statement which will be filed within 120 days of January
2, 1999 are incorporated herein by reference.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         The information required hereunder is incorporated by reference from
the section entitled "Compliance with Section 16(a) of the Securities Exchange
Act of 1934" of the Company's Notice of the 1999 Annual Meeting of Shareholders
and Proxy Statement which will be filed within 120 days of January 2, 1999.

ITEMS 11, 12, AND 13. EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS

         The information required under these items is incorporated by reference
from the Company's Notice of the 1999 Annual Meeting of Shareholders and Proxy
Statement which will be filed within 120 days of January 2, 1999.




                                       11
<PAGE>   13


                                     PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

          (a)(1)    Financial Statements

                    All financial statements of the Registrant as set forth
                    under Item 8 of this Annual Report on Form 10-K.

             (2)    Financial Statement Schedules

<TABLE>
<CAPTION>
                    Schedule
                     Number               Description                Page of 1998 10-K
                    ------                -----------                -----------------
                    <S>        <C>                                   <C>
                      II       Valuation and Qualifying Accounts             28
</TABLE>


         The report of the Registrant's independent public accountants with
respect to the above-listed financial statements and financial statement
schedule appears on page 27 of this Annual Report on Form 10-K.

         All other financial schedules not listed above have been omitted since
the required information is included in the consolidated financial statements or
the notes thereto, or is not applicable or required.

             (3)    Exhibits


<TABLE>
<CAPTION>

Exhibit                                                                Page Number or Incorporation
Number          Description                                               by Reference to            
------          -----------                                            ------------------------------            
<S>           <C>                                                      <C>
      2         Agreement and Plan of Merger dated as of May 2,        Annex A to Proxy Statement for
                1996 between Mark VII, Inc., a Missouri                1996 Annual Meeting of Shareholders
                corporation ("Mark VII Missouri"), and Mark VII,
                Inc., a Delaware corporation and wholly owned
                subsidiary of Mark VII Missouri.

   3(a)         Certificate of Incorporation                           Annex B to Proxy Statement for
                                                                       1996 Annual Meeting of Shareholders

   3(b)         By-Laws of Mark VII, Inc.                              Annex C to Proxy Statement for
                                                                       1996 Annual Meeting of Shareholders

   10.1      *  MNX Incorporated Amended and Restated 1986             Exhibit 10(g) to 1990 Annual
                Incentive Stock Option Plan                            Report on Form 10-K

   10.2      *  Amendment No. 5 to the MNX Incorporated                Exhibit 10(g) to 1991 Annual
                Amended and Restated 1986 Incentive Stock              Report on Form 10-K
                Option Plan

   10.3      *  MNX Incorporated 1992 Non-Qualified Stock              Exhibit 10(s) to 1991 Annual
                Option Plan                                            Report on Form 10-K

   10.4      *  MNX Incorporated Stock Appreciation Rights             Exhibit 10(o) to 1992 Annual
                Program, dated April 24, 1990                          Report on Form 10-K

   10.5      *  Employment and Noncompete Agreement between            Exhibit 3 to Current Report on Form
                R.C. Matney and the Registrant dated as of             8-K dated May 9, 1995
                April 1, 1992.  Revised Addendum to Employment
                and Noncompete Agreement dated as of July 1, 1994

   10.6      *  Addendum No. 3 to Employment and Noncompete            Exhibit 10.6 to 1997 Annual Report
                Agreement between R.C. Matney and the Registrant       on Form 10-K
                dated as of October 1, 1997

</TABLE>




                                       12
<PAGE>   14

<TABLE>
<CAPTION>

Exhibit                                                                     Page Number or Incorporation
Number          Description                                                   by Reference to            
------          -----------                                                 -----------------------------            
<S>          <C>                                                            <C>
   10.7      *  Addendum No. 4 to Employment and Noncompete                 Filed herewith
                Agreement between R.C. Matney and the Registrant
                Dated as of February 1, 1999

   10.8      *  Employment and Noncompete Agreement between                 Filed herewith
                Mark A. Skoda and the Registrant dated as of
                December 15, 1998

   10.9      *  Employment and Noncompete Agreement between                 Exhibit 10.8 to 1997 Annual Report
                David H. Wedaman and the Registrant dated                   on Form 10-K
                as of January 1, 1997. Addendum to Employment
                and Noncompete Agreement dated as of May 15, 1997

  10.10      *  Addendum No. 2 to Employment and Noncompete                 Filed herewith
                Agreement between David H. Wedaman and the
                Registrant dated as of January 1, 1999

  10.11      *  Employment and Noncompete Agreement between Exhibit 6 to    Exhibit 6 to Current Report on 
                Current Report on Form Robert E. Liss and Jupiter           Form 8-K dated May 9, 1995
                Transportation, Inc., 8-K dated May 9, 1995 an indirect
                wholly owned subsidiary of the Registrant, dated as
                of July 1, 1994

  10.12      *  Addendum to Employment and Noncompete Agreement             Filed herewith
                between Robert E. Liss and Taurus Trucking, Inc.
                dated as of December 23, 1998

  10.13      *  Employment and Noncompete Agreement between                 Exhibit 10.10 to 1995 Annual 
                Michael J. Musacchio and Mark VII Logistics, a              Report on Form 10-K
                Division of Mark VII Transportation Co., Inc., a
                wholly owned subsidiary of the Registrant dated
                as of June 1, 1995. Addendum to Employment and
                Noncompete Agreement between Michael J.
                Musacchio and Mark VII Logistics dated as of
                September 1, 1995

  10.14      *  Employment and Noncompete Agreement between                 Exhibit 7 to Current Report on 
                James T. Graves and the Registrant dated as of              Form 8-K dated May 9, 1995
                August 1, 1992

  10.15      *  Employment and Noncompete Agreement between                 Exhibit 10.7 to 1997 Annual 
                Philip L. Dunavant and the Registrant dated as of           Report on Form 10-K
                May 16, 1997

  10.16      *  Addendum No. 1 to Employment and Noncompete                 Filed herewith
                Agreement between Philip L. Dunavant and the Registrant
                dated as of January 1, 1999. Addendum No. 2 to
                Employment and Noncompete Agreement dated as of
                February 2, 1999

  10.17      *  Amendment Number 1 to the Mark VII, Inc. 1992               Exhibit 99.1 to Registration
                Non-Qualified Stock Option Plan (formerly the MNX           Statement on Form S-8 (SEC 
                Incorporated 1992 Non-Qualified Stock Option Plan)          File No. 33-86174)
                dated September 22, 1994

</TABLE>


 
                                       13
<PAGE>   15


<TABLE>
<CAPTION>

 Exhibit                                                                 Page Number or Incorporation
 Number         Description                                                 by Reference to            
 ------         -----------                                              --------------------------------            
<S>             <C>                                                      <C>
  10.18         Asset Purchase Agreement dated June 17, 1994 by          Appendix B to Proxy Statement for
                and among Swift Transportation Co., Inc. (Nevada),       1994 Annual Meeting of Shareholders
                Swift Transportation Co., Inc. (Arizona), Mark VII,
                Inc., MNX Carriers, Inc., and Missouri-Nebraska
                Express, Inc.

  10.19         Amendment No. 1 to Asset Purchase Agreement              Exhibit 10.14 to 1994 Annual
                dated September 30, 1994 by and among Swift              Report on Form 10-K
                Transportation Co., Inc. (Nevada), Swift
                Transportation Co., Inc. (Arizona), Mark VII,
                Inc., MNX Carriers, Inc., and Missouri-Nebraska
                Express, Inc.

  10.20         Mark VII, Inc. 1995 Omnibus Stock Incentive              Appendix A to Proxy Statement for
                Plan                                                     1995 Annual Meeting of Shareholders

  10.21         Amendment No. 1 to the Mark VII, Inc. 1995               Annex E to Proxy Statement for 1995
                Omnibus Stock Incentive Plan                             Annual Meeting of Shareholders

  10.22         Revolving Loan and Promissory Note dated                 Exhibit 10.17 to 1997 Annual Report
                July 29, 1997 by and among NationsBank of                on Form 10-K
                Tennessee, N.A., Mark VII, Inc. and Mark VII
                Transportation Co., Inc.

  10.23         Loan Agreement dated as of July 29, 1997 by and          Exhibit 10.18 to 1997 Annual Report
                among NationsBank of Tennessee, N.A., Mark VII,          on Form 10-K
                Inc. and Mark VII Transportation Co., Inc.

  10.24         First Modification of Loan Agreement dated as of         Exhibit 10.19 to 1997 Annual Report
                October 20, 1997 by and among NationsBank of             on Form 10-K
                Tennessee, N.A., Mark VII, Inc. and Mark VII
                Transportation Co., Inc.

     21         Subsidiaries of Registrant                               Filed herewith

     23         Consent of Independent Public Accountants                Filed herewith

     27         Financial Data Schedule                                  Filed herewith

</TABLE>

     ------------

             *  Management contracts or compensatory plans

(b)      Reports on Form 8-K

         None





                                       14
<PAGE>   16


                                   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.


                                             MARK VII, INC.



                                             By:  /s/ R.C. Matney
                                                 ------------------------------
                                                  R. C. Matney
                                                  Chairman of the Board
                                                  and Chief Executive Officer

Date:    March 29, 1999

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


<TABLE>
<CAPTION>

SIGNATURE                                       TITLE                          DATE
<S>                                    <C>                                 <C>

/s/  R.C. Matney                       Chairman of the Board, Chief        March 29, 1999
-------------------------------        Executive Officer and Director
R. C. Matney                           


/s/  Mark A. Skoda                     President                           March 29, 1999
-------------------------------
Mark A. Skoda

/s/  Philip L. Dunavant                Executive Vice President, Chief     March 29, 1999
-------------------------------        Financial Officer (Principal
Philip L. Dunavant                     Financial and Accounting
                                       Officer) 
                                      

/s/  James T. Graves                   Vice Chairman, Secretary,           March 29, 1999
-------------------------------        General Counsel 
James T. Graves                        and Director


/s/  David H. Wedaman                  Executive Vice President,           March 29, 1999
-------------------------------        Chief Operating
David H. Wedaman                       Officer and Director

/s/  Douglass Wm. List                 Director                            March 29, 1999
-------------------------------
Douglass Wm. List

/s/  William E. Greenwood              Director                            March 29, 1999
-------------------------------
William E. Greenwood

/s/  Jay U. Sterling                   Director                            March 29, 1999
-------------------------------
Dr. Jay U. Sterling


/s/  Thomas J. Fitzgerald              Director                            March 29, 1999
-------------------------------
Thomas J. Fitzgerald

</TABLE>



                                       15
<PAGE>   17


                         MARK VII, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                  (Dollars in thousands, except share amounts)


<TABLE>
<CAPTION>
                                                                           JANUARY 2,    JANUARY 3,
                                                                              1999         1998              
                                                                              ----         ----              
<S>                                                                        <C>            <C>
                                     ASSETS

Current Assets:
   Cash and cash equivalents ........................................     $   3,758      $   3,732
   Accounts receivable, less allowances of $4,289 and
     $2,641 in 1998 and 1997, respectively ..........................        97,879         82,917
   Notes and other receivables, less allowances of $301
     and $537 in 1998 and 1997, respectively ........................         4,406          4,399
   Other current assets .............................................           451          1,755
                                                                          ---------      ---------
     Total current assets ...........................................       106,494         92,803
                                                                          ---------      ---------

Deferred Income Taxes ...............................................           519          1,262
                                                                          ---------      ---------
Property and Equipment, at cost:
   Transportation equipment .........................................         6,034          4,394
   Computer equipment, furniture and other ..........................         9,414          7,026
                                                                          ---------      ---------
                                                                             15,448         11,420
   Less: Accumulated depreciation ...................................         6,175          4,829
                                                                          ---------      ---------
     Net property and equipment .....................................         9,273          6,591
                                                                          ---------      ---------
Intangible and Other Assets .........................................         6,782          7,354
                                                                          ---------      ---------
                                                                          $ 123,068      $ 108,010
                                                                          =========      =========

                          LIABILITIES AND SHAREHOLDERS' INVESTMENT

Current Liabilities:
   Accrued  transportation charges ..................................     $  70,340      $  63,094
   Deferred income taxes ............................................         4,166          5,591
   Other current and accrued liabilities ............................         6,607          6,258
                                                                          ---------      ---------
     Total current liabilities ......................................        81,113         74,943
                                                                          ---------      ---------

Long-Term Obligations ...............................................           712            945
                                                                          ---------      ---------

Contingencies and Commitments (Note 5)

Shareholders' Investment:
   Common stock, $.05 par value, authorized 20,000,000 shares; issued
     10,035,020 shares in 1998 and 10,009,822 shares in 1997 ........           502            501
   Paid-in capital ..................................................        29,938         29,623
   Retained earnings ................................................        23,676         14,108
                                                                          ---------      ---------
                                                                             54,116         44,232
   Less:  Treasury stock, at cost, 1,115,850 shares in 1998 and
             1,071,250 shares in 1997 ...............................       (12,873)       (12,110)
                                                                          ---------      ---------
     Total shareholders' investment .................................        41,243         32,122
                                                                          ---------      ---------
                                                                          $ 123,068      $ 108,010
                                                                          =========      =========

</TABLE>


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



                                       16

<PAGE>   18


                         MARK VII, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                  FOR THE YEARS ENDED
                                                      -----------------------------------------
                                                        JANUARY 2,    JANUARY 3,    DECEMBER 28, 
                                                          1999           1998           1996   
                                                       -----------    -----------    -----------
<S>                                                    <C>            <C>            <C>   
Operating Revenues ...............................     $ 724,948      $ 667,374      $ 563,913
Transportation Costs .............................       636,745        582,843        489,292
                                                       ---------      ---------      ---------
Net Revenues .....................................        88,203         84,531         74,621

Operating Expenses:
   Salaries and related costs ....................        18,118         17,894         16,501
   Selling, general and administrative ...........        53,496         54,279         47,915
                                                       ---------      ---------      ---------
     Total operating expenses ....................        71,614         72,173         64,416
                                                       ---------      ---------      ---------

Operating Income .................................        16,589         12,358         10,205

Other (Income) Expense:
   Interest expense ..............................            38            171            266
   Interest income ...............................          (624)          (711)          (177)
   Other .........................................           958            181            164
                                                       ---------      ---------      ---------
     Total other (income) expense, net ...........           372           (359)           253
                                                       ---------      ---------      ---------
Income Before Provision for Income Taxes .........        16,217         12,717          9,952

Provision for Income Taxes .......................         6,649          5,341          4,180
                                                       ---------      ---------      ---------
Net Income .......................................     $   9,568      $   7,376      $   5,772
                                                       =========      =========      =========
Net Income Per Common Share ......................     $    1.07      $     .80      $     .63
                                                       =========      =========      =========
Net Income Per Common Share, Assuming Dilution ...     $    1.01      $     .76      $     .60
                                                       =========      =========      =========
Average Common Shares and Equivalents Outstanding:
     Basic .......................................         8,930          9,185          9,211
     Diluted .....................................         9,449          9,699          9,616

</TABLE>


        The accompanying notes are an integral part of these statements.



                                       17
<PAGE>   19

                         MARK VII, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
                                 (In thousands)


<TABLE>
<CAPTION>
                                                     COMMON STOCK
                                                  -----------------        PAID-IN     RETAINED     TREASURY
                                                  SHARES      AMOUNT       CAPITAL     EARNINGS      STOCK         TOTAL  
                                                  ------      ------       -------     --------      -----         -----  
<S>                                             <C>         <C>          <C>          <C>          <C>           <C> 
Balance, December 30, 1995 ................       9,776     $    489     $ 27,875     $    960     $ (3,436)     $ 25,888
  Net income ..............................          --           --           --        5,772           --         5,772
  Issuance of common stock under
     stock-based compensation plans .......         125            6          790           --           --           796
  Purchase of treasury stock (264 shares)..          --           --           --           --       (2,418)       (2,418)
                                               --------     --------     --------     --------     --------      --------

Balance, December 28, 1996 ................       9,901          495       28,665        6,732       (5,854)       30,038
  Net income ..............................          --           --           --        7,376           --         7,376
  Issuance of common stock under
     stock-based compensation plans .......         109            6          958           --           --           964
  Purchase of treasury stock (407 shares)            --           --           --           --       (6,256)       (6,256)
                                               --------     --------     --------     --------     --------      --------

Balance, January 3, 1998 ..................      10,010          501       29,623       14,108      (12,110)       32,122
  Net income ..............................          --           --           --        9,568           --         9,568
  Issuance of common stock under
     stock-based compensation plans .......          25            1          315           --           --           316
  Purchase of treasury stock (45 shares) ..          --           --           --           --         (763)         (763)
                                               --------     --------     --------     --------     --------      --------

Balance, January 2, 1999 ..................      10,035     $    502     $ 29,938     $ 23,676     $(12,873)     $ 41,243
                                               ========     ========     ========     ========     ========      ========

</TABLE>


        The accompanying notes are an integral part of these statements.




                                       18
<PAGE>   20


                         MARK VII, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                         FOR THE YEARS ENDED 
                                                                ---------------------------------------
                                                                JANUARY 2,     JANUARY 3,  DECEMBER 28,
                                                                   1999          1998         1996  
                                                                ----------    -----------   -------- 
<S>                                                             <C>           <C>          <C> 
Operating Activities:
   Net income ...............................................   $  9,568      $  7,376      $  5,772
   Adjustments to reconcile net income to
     net cash provided by operating activities:
       Depreciation .........................................      1,857         1,054         1,130
       Amortization .........................................        410           250           254
       Provision for doubtful accounts and notes receivable..      3,167         2,672         2,014
       Provision for deferred income taxes ..................        542         1,737         1,803
       Changes in assets and liabilities:
         Accounts receivable ................................    (17,655)      (11,205)      (19,009)
         Accrued transportation charges .....................      7,246        10,360         9,488
         Other ..............................................     (1,268)         (536)        3,249
                                                                --------      --------      --------
   Net cash provided by operating activities ................      3,867        11,708         4,701
                                                                --------      --------      --------
Investing Activities:
   Additions to property and equipment ......................     (5,189)       (3,600)       (1,821)
   Retirements of property and equipment ....................        650           473           572
   Proceeds from sale of business unit ......................      1,462            --            --
                                                                --------      --------      --------
   Net cash used for investing activities ...................     (3,077)       (3,127)       (1,249)
                                                                --------      --------      --------
Financing Activities:
   Exercise of stock options ................................        233           615           494
   Repayments of debt and capital lease obligations .........       (234)         (167)         (841)
   Purchase of treasury stock ...............................       (763)       (6,256)       (2,418)
                                                                --------      --------      --------
   Net cash used for financing activities ...................       (764)       (5,808)       (2,765)
                                                                --------      --------      --------
Net increase in cash and cash equivalents ...................         26         2,773           687

Cash and cash equivalents:

   Beginning of year ........................................      3,732           959           272
                                                                --------      --------      --------
   End of year ..............................................   $  3,758      $  3,732      $    959
                                                                ========      ========      ========
Supplemental Disclosure of Cash Flow Information:

   Cash paid during the year for:
     Interest ...............................................   $     37      $    150      $    196
     Income taxes, net of refunds received ..................      4,627         2,930         2,731


</TABLE>



        The accompanying notes are an integral part of these statements.




                                       19
<PAGE>   21


                         MARK VII, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REPORTING ENTITY AND PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include Mark VII, Inc., a Delaware
corporation, and its wholly owned subsidiaries, collectively referred to herein
as the "Company." The Company is a sales, marketing and service organization
that acts as a provider of transportation services and a transportation
logistics manager. The Company has a network of transportation sales personnel
that provides services throughout the United States, as well as Mexico and
Canada. The principal operations of the Company are conducted by its
transportation services subsidiary, Mark VII Transportation Company, Inc. ("Mark
VII Transportation").

REVENUE

Revenues earned as a third party agent include the carriers' charges for
carrying the shipment plus commissions and fees, as well as revenues from fixed
fee arrangements on a portion of the Company's integrated logistics projects.
Revenues and related expenses are recognized on completion of the Company's
service obligation.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization of
property and equipment are provided using the straight-line method based on the
estimated useful lives of the respective assets as follows:

      Transportation equipment                          3 to 7 years
      Computer equipment, furniture and other           3 to 10 years

The accompanying financial statements include depreciation expense of
$1,857,000, $1,054,000 and $1,130,000 in 1998, 1997 and 1996, respectively.

CASH AND CASH EQUIVALENTS

The Company considers cash on hand, deposits in banks, certificates of deposit
and short-term marketable securities with maturities of 90 days or less when
purchased, as cash and cash equivalents.

The Company utilizes a cash management system under which, at times, cash
overdrafts exist in the book balances of its primary disbursing accounts. These
overdrafts represent the uncleared checks in the disbursing accounts. At January
3, 1998, an overdraft of $2,851,000 was reclassified to accrued transportation
charges. No overdraft existed in the Company's book balances at January 2, 1999.

INTANGIBLE ASSETS

Goodwill and other intangible assets are being amortized on the straight-line
basis over 10 to 20 years. Goodwill and other intangible assets consisted of the
following: 

<TABLE>
<CAPTION>
                                                               1998          1997 
                                                               ----          ---- 
                                                                 (in thousands)

         <S>                                                <C>           <C>
         Goodwill and other intangible assets.............. $  5,121      $  5,121
         Less accumulated amortization.....................    2,083         1,674
                                                            --------      --------
                                                            $  3,038      $  3,447
                                                            ========      ========
</TABLE>

FISCAL YEAR

The Company's fiscal year ends on the Saturday nearest December 31. Fiscal years
1996 and 1998 included 52 weeks and fiscal year 1997 included 53 weeks.




                                    20

<PAGE>   22


EARNINGS PER SHARE

Effective January 3, 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share". Earnings per share have been restated
for all periods presented to conform to this accounting standard. In addition,
on November 7, 1997, the Company's Board of Directors authorized a two-for-one
stock split, thereby increasing the number of shares issued by 5,003,000 and
decreasing the par value of each share to $ .05. All references to the number of
common shares and per share amounts for the periods presented have been restated
to reflect the stock split.

A reconciliation between basic earnings per share and diluted earnings per share
follows:

<TABLE>
<CAPTION>
                                                                            1998      1997       1996 
                                                                         --------   --------    ------
                                                                    (in  thousands, except per share amounts)
     <S>                                                                 <C>         <C>        <C>
     Net income......................................................     $9,568     $7,376     $5,772
                                                                          ======     ======     ======
     Average common shares and equivalents outstanding:
       Basic .........................................................     8,930      9,185      9,211
       Effect of dilutive options ....................................       519        514        405
                                                                          ------     ------     ------
       Diluted .......................................................     9,449      9,699      9,616
                                                                          ======     ======     ======

     Per share amounts:
       Net income per common share ...................................    $ 1.07     $  .80     $  .63
                                                                          ======     ======     ======
       Net income per common share, assuming dilution ................    $ 1.01     $  .76     $  .60
                                                                          ======     ======     ======

</TABLE>


RECLASSIFICATIONS

Certain reclassifications have been made to the 1997 and 1996 financial
statements to conform to the 1998 presentation.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

(2)   CREDIT FACILITY

The Company has a $25,000,000 unsecured revolving credit facility (the
"Facility"). In recent years, the Company's cash flows from operations have
exceeded its working capital needs and the Company has made no borrowings under
this Facility since its inception in July 1997. On January 2, 1999, letters of
credit totaling $2,705,000 had been issued on the Company's behalf to secure
insurance deductibles and purchases of operating services, resulting in unused
borrowing capacity of $22,295,000. The Facility bears a variable interest rate
based upon the 30 day LIBOR Funding Rate, as defined, plus 50 to 125 basis
points. The Company pays a varying fee of .35% to 1.00% on outstanding letters
of credit and a varying commitment fee of .15% to .30% on the unused portion of
the Facility, as defined. At January 2, 1999, the interest rate was 6.04% and
the letter of credit fee and commitment fee were .35% and .15%, respectively.
The line of credit expires on July 1, 2000, but may be extended by mutual
agreement of the lender and the Company, for subsequent periods of one year
each.

Among the covenants contained in the Facility are maintenance of certain
financial ratios, including debt to net worth, cash plus accounts receivable to
current liabilities plus debt and debt to earnings before income taxes,
depreciation and amortization (all as defined). Other covenants include the
level of capital and lease expenditures, acquisitions and mergers, dividends and
redemptions of stock.




                                       21
<PAGE>   23

(3)   INCOME TAXES

Components of the provision for income taxes consisted of the following:

<TABLE>
<CAPTION>

                                                              1998          1997         1996
                                                             -------      --------      ------ 
                                                                       (in thousands)
      <S>                                                   <C>           <C>           <C>
      Federal -
         Currently payable ...............................  $  4,975      $  2,856      $  1,833
         Deferred.........................................       492         1,562         1,610
                                                            --------      --------      --------
            Total federal.................................     5,467         4,418         3,443
                                                            --------      --------      --------
      State -
         Currently payable................................     1,132           748           544
         Deferred.........................................        50           175           193
                                                            --------      --------      --------
            Total state...................................     1,182           923           737
                                                            --------      --------      --------
                                                            $  6,649      $  5,341      $  4,180
                                                            ========      ========      ========
</TABLE>


A reconciliation between the provision for income taxes and the expected taxes
using the federal statutory income tax rate follows:

  
<TABLE>
<CAPTION>
                                                               1998          1997          1996 
                                                              --------      --------       ------
                                                                         (in thousands)
      <S>                                                     <C>           <C>           <C>

      Federal statutory rate.................................     34.4%         34.2%         34.0%

      Tax at statutory rate..................................  $ 5,579      $  4,349      $  3,384
      Increase from -
         State income taxes, net.............................      781           609           486
         Other...............................................      289           383           310
                                                               -------      --------      --------
                                                               $ 6,649      $  5,341      $  4,180
                                                               =======      ========      ========
</TABLE>

Deferred tax assets (liabilities) are comprised of the following:

 
<TABLE>
<CAPTION>

                                                                             1998          1997   
                                                                            -------       -------
                                                                               (in thousands)
      <S>                                                                  <C>           <C>
      Deferred Tax Assets:
         Claims and other reserves.......................................  $  2,901      $  2,140
         Basis difference on property and equipment......................       300           778
         Other...........................................................       219           503
                                                                           --------      --------
          Total deferred tax assets......................................     3,420         3,421
                                                                           --------      --------
      Deferred Tax Liabilities:
         Prepaid expenses................................................      (136)          (35)
         Deferred revenue................................................    (5,755)       (4,910)
         Other...........................................................    (1,176)       (2,805)
                                                                           --------      --------
          Total deferred tax liabilities.................................    (7,067)       (7,750)
                                                                           --------      --------

          Net deferred tax liabilities...................................  $ (3,647)     $ (4,329)
                                                                           ========      ========
</TABLE>





                                       22
<PAGE>   24

(4)   LONG-TERM DEBT AND OPERATING LEASES

Long-term debt included the following:

<TABLE>
<CAPTION>
                                                                 1998       1997   
                                                                 ----       ----   
                                                                  (in thousands)
         <S>                                                    <C>        <C>
         Capital lease obligations for transportation 
           equipment, 9.1%, payable through 2002............... $   468    $   580
         Less - Current maturities.............................     115        116
                                                                -------     ------
                                                                $   353    $   464
                                                                =======    =======
</TABLE>


Property and equipment included the following amounts related to capital lease
obligations:

<TABLE>
<CAPTION>
                                                                   1998      1997   
                                                                   ----      ----   
                                                                    (in thousands)
         <S>                                                     <C>        <C>
         Transportation equipment............................... $   915    $   915
         Less - Accumulated depreciation........................     476        371
                                                                 -------    -------
                                                                 $   439    $   544
                                                                 =======    =======
</TABLE>

Scheduled annual payments on the Company's long-term obligations are as follows:

<TABLE>
<CAPTION>
                                                            Capital Leases
                                                   ---------------------------------
                                                   Future      Interest   Principal
                                                   Payments     Portion    Portion  
                                                   --------    --------   ---------
                                                             (in thousands)
      <S>                                          <C>          <C>         <C>

      1999.......................................  $   151      $   36      $  115
      2000.......................................      161          25         136
      2001.......................................      162          13         149
      2002.......................................       69           1          68
                                                   -------      ------      ------
                                                   $   543      $   75      $  468
                                                   =======      ======      ======
</TABLE>

The Company has scheduled rentals on trailers and containers with lease terms of
one to five years which have annual cancellation provisions. If these leases are
not canceled, the future lease payments would be approximately $1,988,000,
$1,939,000, $1,272,000, $176,000 and $5,000 in 1999, 2000, 2001, 2002 and 2003,
respectively. The accompanying financial statements include rent expense of
$3,967,000, $5,025,000 and $5,737,000 in 1998, 1997 and 1996, respectively.

(5)   CONTINGENCIES AND COMMITMENTS

The Company is a defendant in an arbitration proceeding in Belgium with an ocean
carrier who alleges the Company failed to meet certain minimum volume
commitments under a transportation contract. Although management and its legal
counsel believe no contractual volume commitments existed and plan to continue
to vigorously defend the Company's position, in December 1998, the arbitration
panel found the Company to be liable. The Company is awaiting the panel's
determination regarding the amount of damages. Also, during the third quarter of
1998, the Company discovered improper activities conducted by personnel at one
of the Company's last remaining trucking locations. The Company has filed a
claim with its insurance carrier under an existing crime policy. Management
believes, after consultation with counsel, that prospects for recovery on the
crime policy are favorable. Thus, it is possible that all or a portion of the
charges recorded in the third quarter of 1998 relating to this matter could be
reversed in the future. During the third and fourth quarters of 1998, management
accrued a total amount of $1,700,000 for its estimate of probable losses in
connection with these two matters. The Company believes the ultimate resolution
of these two matters could range from a reversal of $1,500,000 previously
accrued to an additional charge of $1,750,000.

The Company is involved in various other legal proceedings and claims generally
incidental to its business. While the result of any litigation contains an
element of uncertainty, the Company presently believes that the outcome of any
such additional


                                       23
<PAGE>   25

matters, or all of them combined, will not have a material adverse effect on its
results of operations or consolidated financial position.

(6)   STOCK COMPENSATION PLANS

At January 2, 1999, the Company has three stock-based compensation plans: The
1995 Omnibus Stock Incentive Plan (the "1995 Plan"), the 1992 Non-qualified
Stock Option Plan (the "1992 Plan"), and the Amended and Restated 1986 Incentive
Stock Option Plan (the "1986 Plan"). No awards may be granted under the 1992 and
1986 Plans. The Company applies Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees," and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its stock option plans. Had compensation cost for the Company's stock-based
compensation plans been determined consistent with Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
the Company's net income and earnings per share would have been reduced to the
pro forma amounts indicated below (dollars in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                        1998         1997     1996 
                                                      ---------   ---------  -------
<S>                                <C>                <C>         <C>        <C>
Net Income:                        As reported         $9,568       $7,376    $5,772
                                   Pro forma           $9,064       $7,053    $5,617

Net Income Per Common Share:       As reported         $ 1.07       $  .80    $  .63
                                   Pro forma           $ 1.01       $  .77    $  .61

Net Income Per Common Share,
    Assuming Dilution:             As reported         $ 1.01       $  .76    $  .60
                                   Pro forma           $  .97       $  .73    $  .58
</TABLE>

The effects of applying SFAS No. 123 in this pro forma disclosure may not be
indicative of future amounts because SFAS No. 123 does not apply to awards prior
to January 1, 1995, and additional awards in future years are anticipated.

Under the provisions of the Company's 1995 Plan, options may be granted to
employees of the Company and to directors who are not employees of the Company
to purchase shares of common stock at a price not less than 100% of its fair
market value at the date of grant. At January 2, 1999, 2,097,550 shares of
common stock were reserved for issuance under all of the Company's stock option
plans. Options granted have a maximum life of 10 years. Vesting requirements are
determined at the discretion of the Compensation/Stock Option Committee of the
Board of Directors. Presently, option vesting periods range from immediate
vesting to vesting over 8 years.

Beginning with the grants issued on or after January 1, 1995, the fair value of
each stock option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>

                                              1998           1997          1996  
                                           ---------      ---------      --------
<S>                                        <C>            <C>           <C>
Dividend yield                                none           none          none
Expected volatility                          42.4%           43.0%         41.0%
Risk-free interest rate                       5.7%            6.5%          6.8%
Expected lives                             7.2 years       7.5 years     6.5 years

</TABLE>



                                       24
<PAGE>   26


A summary of the status of stock options granted under the Company's stock
option plans as of January 2, 1999, January 3, 1998 and December 28, 1996 and
changes during the years ended on those dates is presented below:

<TABLE>
<CAPTION>

                                                  1998                     1997                   1996 
                                      ---------------------------  ---------------------  -----------------------
                                                         Weighted               Weighted                 Weighted
                                                         Average                Average                  Average
                                                         Exercise               Exercise                 Exercise
Stock Options                             Shares          Price    Shares        Price     Shares         Price 
-------------                             ------          -----    ------        -----     ------         ----- 
<S>                                     <C>            <C>        <C>           <C>       <C>            <C>        

Outstanding at beginning of year        1,273,198      $   7.27   1,217,976      $  6.11   1,244,698      $  5.54
Granted                                   101,000         17.88     160,000        14.60      93,000        11.11
Exercised                                 (18,798)         6.43    (100,778)        4.94    (119,722)        4.11
Canceled                                  (40,000)        12.00      (4,000)        5.63          --          --
                                      -----------                ----------               ----------
Outstanding at end of year              1,315,400      $   7.95   1,273,198      $  7.27   1,217,976      $  6.11
                                      ===========                ==========               ==========

Options exercisable at year-end           806,532                   674,031                  612,176
                                      ===========                ==========               ==========

Options available for future grant        782,150                   849,550                1,017,550
                                      ===========                ==========               ==========

Weighted average fair value of
   options granted during the year    $      9.68                $     8.37               $     5.35
                                      ===========                ==========               ==========


</TABLE>

The following table summarizes information about stock options outstanding at
January 2, 1999:

<TABLE>
<CAPTION>
                                               Options Outstanding                   Options Exercisable        
                                    ----------------------------------------      -------------------------        
                                                   Wgtd. Avg.
    Range of                          Number       Remaining       Wgtd. Avg.        Number      Wgtd. Avg
    Exercise                       Outstanding    Contractual      Exercise        Exercisable   Exercise
     Prices                         at 1/2/99        Life           Price           at 1/2/99      Price        
     ------                         ---------        ----           -----           ---------      -----        
<S>                                <C>            <C>              <C>              <C>          <C>
$ 2.13 to $ 5.63                     425,400       3.4 years       $  3.91           408,400      $  3.84
$ 7.00 to $10.63                     629,000       5.4 years          7.41           334,666         7.53
$14.50 to $18.00                     261,000       8.2 years         15.87            63,466        15.24
                                   ---------       ---------       -------          --------      -------
$ 2.13 to $18.00                   1,315,400       5.3 years       $  7.95           806,532      $  6.27
                                   =========       =========       =======           =======      =======
</TABLE>


Stock appreciation rights for 26,000 shares were outstanding at January 2, 1999.
The rights provide for cash payments to holders of the rights for increases in
the market price of the Company's common stock as of April 1 of each year until
and including April 1, 2000. The base price is adjusted each April 1 if the
market closing price on that date is greater than the previous base price. The
adjusted base prices as of April 1, 1998, 1997 and 1996 were $18.50, $15.25 and
$8.63 per share, respectively. Compensation of $84,000, $128,000 and $203,000
was expensed under this plan in 1998, 1997 and 1996, respectively. The 1998
compensation has been accrued based on the closing market price of $18.63 per
share on January 2, 1999.

(7)   UNUSUAL ITEM

The Company recognized a gain of $1,462,000 during the fourth quarter of 1998
resulting from the sale of its 50% interest in ERX Logistics, L.L.C., a company
which provided warehouse and delivery services to a major appliance
manufacturer.




                                       25
<PAGE>   27


QUARTERLY FINANCIAL DATA (Unaudited):

The results of operations for each of the four quarters of 1998 and 1997 are
summarized below. The amounts below are unaudited, but, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such periods have been made (in thousands,
except per share data).


<TABLE>
<CAPTION>
                                                             FIRST        SECOND         THIRD        FOURTH
                                                            QUARTER      QUARTER        QUARTER       QUARTER
                                                            -------      -------        -------       -------
<S>                                                       <C>           <C>           <C>           <C>
1998
Operating revenues......................................  $ 171,800     $ 181,158     $  184,571    $  187,419
Operating income .......................................      2,750         4,301          5,046         4,492
Income before income taxes..............................      2,805         4,389          4,442         4,581
Net income..............................................      1,627         2,617          2,621         2,703

Net income per common share.............................  $     .18     $     .29     $      .29     $     .30
Net income per common share, assuming dilution..........  $     .17     $     .28     $      .28     $     .29

1997
Operating revenues......................................  $ 145,914     $ 164,877     $  168,011     $ 188,572
Operating income .......................................      2,113         3,462          3,452         3,331
Income before income taxes..............................      2,127         3,563          3,615         3,412
Net income..............................................      1,234         2,066          2,097         1,979

Net income per common share.............................  $     .13     $     .22     $      .23     $     .22
Net income per common share, assuming dilution..........  $     .13     $     .21     $      .22     $     .21


</TABLE>



                                       26
<PAGE>   28

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Mark VII, Inc.:

      We have audited the accompanying consolidated balance sheets of MARK VII,
INC. (a Delaware corporation) AND SUBSIDIARIES as of January 2, 1999, and
January 3, 1998, and the related consolidated statements of income,
shareholders' investment and cash flows for each of the three years in the
period ended January 2, 1999. These financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

      We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mark VII, Inc. and
Subsidiaries as of January 2, 1999, and January 3, 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended January 2, 1999 in conformity with generally accepted accounting
principles.

      Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.



                                     /s/ Arthur Andersen LLP



Memphis, Tennessee,
February 9, 1999



                                       27
<PAGE>   29


                                                                    SCHEDULE II


                         MARK VII, INC. AND SUBSIDIARIES
                  SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>

                                               BALANCE AT    ADDITIONS
                                               BEGINNING     CHARGED TO                              BALANCE AT
                                                OF YEAR       EXPENSE      DEDUCTIONS      OTHER     END OF YEAR
                                                -------       -------      ----------      -----     -----------
<S>                                             <C>         <C>            <C>            <C>        <C>
Allowance for doubtful accounts
  (deducted from accounts receivable):

   1996  ...................................... $ 1,336      $  1,472       $ 1,115       $    -     $  1,693
   1997  ......................................   1,693         1,603           655            -        2,641
   1998  ......................................   2,641         2,693         1,045            -        4,289
Allowance for uncollectible notes
  (deducted from notes and other receivables):

   1996  ...................................... $ 2,038      $    542       $   969       $    -     $  1,611
   1997  ......................................   1,611         1,069         2,143            -          537
   1998  ......................................     537           474           710            -          301

</TABLE>









                                       28



<PAGE>   30


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

         Exhibit
         Number                           Description                        
         ------     ----------------------------------------------------------                        
         <S>        <C>
          10.7      Addendum No. 4 to Employment and Noncompete Agreement
                    between R.C. Matney and the Registrant Dated as of February
                    1, 1999

          10.8      Employment and Noncompete Agreement between Mark A. Skoda
                    and the Registrant dated as of December 15, 1998

          10.10     Addendum No. 2 to Employment and Noncompete Agreement
                    between David H. Wedaman and the Registrant dated as of
                    January 1, 1999

          10.12     Addendum to Employment and Noncompete Agreement between
                    Robert E. Liss and Taurus Trucking, Inc. dated as of
                    December 23, 1998

          10.16     Addendum No. 1 to Employment and Noncompete Agreement
                    between Philip L. Dunavant and the Registrant dated as of
                    January 1, 1999. Addendum No. 2 to Employment and Noncompete
                    Agreement dated as of February 2, 1999

          21        Subsidiaries of Registrant

          23        Consent of Independent Public Accountants

          27        Financial Data Schedule (SEC Use Only)

</TABLE>






                                       29