<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 3, 1998

   [ ]        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 103
         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. [ ]

The aggregate market value of Common Stock, $.05 par value, held by
non-affiliates of the Registrant on March 6, 1998, based upon the last sale
price of such stock on that date was $145,821,852. At March 6, 1998, 8,938,572
shares of Common Stock, $.05 par value, were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
Documents                                                                 Form 10-K Reference
------------------                                                        -------------------
<S>                                                                       <C>
Notice of 1998 Annual Meeting of Shareholders and Proxy Statement         Part III, Items 10, 11, 12 and 13
to be filed within 120 days of January 3, 1998, excluding therefrom
the sections titled "Board Compensation Committee Report on Executive
Compensation" and "Performance Graph"
</TABLE>




<PAGE>   2


                         MARK VII, INC. AND SUBSIDIARIES

                         1997 ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS

                                     

<TABLE>
<CAPTION>
                                     PART I
                                                                                                              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  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..............................................   10

Item 11.    Executive Compensation..........................................................................   10

Item 12.    Security Ownership of Certain Beneficial Owners and Management..................................   10

Item 13.    Certain Relationships and Related Transactions..................................................   10

                                     PART IV

Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................   11
</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") and Mark VII's subsidiaries. The
Company is a Delaware corporation, but was originally organized in 1976 as a
Missouri corporation. 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 133 branch
sales offices in 37 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 calls 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 call 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 raw potato
delivery for a number of processing plants of a major potato chip manufacturer.




                                       2
<PAGE>   4

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 and operation of small dedicated fleets to serve several
logistics customers.

         Information/knowledge based services involve management and
consultation on any and all aspects of transportation for a shipper or carrier,
including dedicated fleet and warehousing. The Company utilizes its sales
network to design transportation and distribution programs for customers with
complex logistical needs. For example, ERX Logistics, L.L.C., a joint venture
between the Company and a warehousing firm, provides a major household appliance
manufacturer with warehousing and time-sensitive delivery of its appliances to
its dealers and building contractor customers.

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 railroads,
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. Although the
Company owns or leases only a limited equipment base, it 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 133 branch offices, 25 are operated by the Company and
108 are operated under agency agreements. Contracts with agents 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 one to four 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.




                                       3

<PAGE>   5

         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 design and management of dedicated trucking operations
and truck brokerage are available to the logistics management services
operations. The Company currently uses a Data General model MV9600 computer and
customized software which integrates shipment tracking, customer records and
billing, accounts payable and general accounting. A new system currently being
developed, which is year 2000 compliant, will greatly expand the Company's
capabilities in the area of information systems. Scheduled to be implemented
during the second half of 1998, the system will employ the latest in
client/server technologies. Components of the system 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
will greatly improve the Company's efficiency in processing thousands of
shipments per day as well as enhancing certain 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 and third quarters than in the first and fourth
quarters.

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 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 308 individuals at March 6, 1998. 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 25 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 108 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 involved in various legal proceedings 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
known pending or threatened legal proceedings or claims, 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

         (a)   A Special Meeting of Shareholders of the Company was held on
               November 7, 1997.

         (b)   Not Applicable

         (c)   1. Amendment to the Certificate of Incorporation to Increase
                  Authorized Shares. The Company's Certificate of Incorporation
                  was amended to increase the number of authorized shares of
                  common stock from 10 million shares to 20 million shares and 
                  to reduce the par value from $.10 per share to $.05 per share
                  pursuant to the following vote:

                  Votes in Favor        Withheld/Against         Abstained
                  --------------        ----------------         ---------
                    3,529,417               1,066,455              2,100

         (d)  Not Applicable








                                       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> 
            1996
            ----
            First Quarter..............................$   8 15/16     $   8
            Second Quarter.............................   10 5/16          8 5/8
            Third Quarter..............................   11              10 1/16
            Fourth Quarter.............................   14 3/4          10 11/16

            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 (through March 6, 1998)......$  19            $ 14 3/4
</TABLE>

         On March 6, 1998, the last sale price per share of the common stock was
 $18. At March 6, 1998, 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 3, 1998 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)
                                             ----------------------------------------------------------------------------
                                                1993            1994             1995             1996             1997
                                             ----------       ----------      ----------       ----------      ----------
                                                                  (in thousands, except per share data)
<S>                                          <C>              <C>             <C>              <C>             <C>
STATEMENTS OF INCOME INFORMATION:
  Operating revenues.........................$  341,532       $  428,772      $  459,160       $  563,913      $  667,374
  Transportation costs.......................   296,656          370,232         391,845          489,292         582,843
                                             ----------       ----------      ----------       ----------      ----------
  Net revenues...............................    44,876           58,540          67,315           74,621          84,531

  Operating income...........................     4,457            6,847           8,489           10,205          12,358

  Income from continuing operations
     before income taxes.....................     4,199            6,267           8,024            9,952          12,717

  Income from continuing operations..........$    2,490       $    3,667      $    4,734       $    5,772      $    7,376
                                             ==========       ==========      ==========       ==========      ==========

  Income from continuing operations
    per common share (2).....................$      .26       $      .38      $      .49       $      .63      $      .80        
                                             ==========       ==========      ==========       ==========      ==========
  Income from continuing operations
    per common share, assuming dilution (2)..$      .26       $      .37      $      .47       $      .60      $      .76
                                             ==========       ==========      ==========       ==========      ==========

  Average common shares and equivalents 
   outstanding:
     Basic...................................     9,534            9,558           9,674            9,211           9,185
     Diluted.................................     9,682            9,802           9,990            9,616           9,699

BALANCE SHEET DATA:
  Total assets...............................$   65,151       $   70,837      $   76,152       $   93,597      $  108,010
  Total debt.................................    11,337           10,787           1,588              747             580
  Shareholders' investment...................    21,047           23,473          25,888           30,038          32,122
</TABLE>


(1)  The Company's fiscal year ends on the Saturday nearest December 31. Fiscal
     years 1993, 1994, 1995 and 1996 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 the periods presented to conform to the new 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.





                                       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 1997 Compared to 1996 and 1996 Compared to 1995

          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
                                                     -----------------------------------------------------
                                                        1997                  1996                 1995
                                                     ---------             ---------             ---------
        <S>                                          <C>                   <C>                   <C>
        Operating revenues.........................     100.0%                100.0%                100.0%
        Transportation costs.......................      87.3                  86.8                  85.3
                                                     --------              --------              --------
        Net revenues...............................      12.7                  13.2                  14.7

        Operating expenses:
              Salaries and related costs...........       2.7                   2.9                   3.5
              Selling, general and administrative..       8.1                   8.5                   9.4
                                                     --------              --------              --------
                  Total operating expenses.........      10.8                  11.4                  12.9
                                                     --------              --------              --------

        Operating income...........................       1.9                   1.8                   1.8

        Interest and other expense.................         -                     -                    .1
                                                     --------              --------              --------

        Income from continuing operations
              before income taxes..................       1.9%                  1.8%                  1.7%
                                                     ========              ========              ========
</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.

          Revenues - The Company's total number of shipments were 627,000,
503,000, and 414,000 in 1997, 1996 and 1995, respectively. Increases in
shipments of 25% and 21% in 1997 and 1996, respectively, were the result of
expanded services to both new and existing customers. The Company also increased
the number of sales offices by 11 offices in 1996 and 20 offices in 1997.

          Net Revenues. The Company's net revenues as a percentage of operating
revenues were 12.7%, 13.2% and 14.7%, in 1997, 1996 and 1995, respectively.
During 1996, the Company closed several of its unprofitable dedicated trucking
operations, resulting in decreased net revenues as a percentage of operating
revenues in 1996 and 1997. These decreases in net revenues as a percentage of
operating revenues have been offset by proportionate changes in operating
expenses as a percentage of operating revenues.




                                       8

<PAGE>   10

          In recent years, truck related services have grown at a faster rate
than rail and other modes. This increase in truck shipments has been fueled by
the Company's growth of comprehensive logistics management services which have
higher levels of over-the-road freight than other modes. Since operating revenue
per truck shipment averages about 60% of operating revenue per rail shipment,
the shipment count growth rate exceeded the operating revenue growth rate for
1997. The net revenue as a percentage of operating revenue is slightly higher
for truck shipments than rail shipments, however, any resulting increases in net
revenues as a percentage of operating revenues have been offset by the Company's
downsizing of dedicated trucking operations in recent years.

          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.

          Interest and Other Expense, Net - Cash flow from operations has been
adequate to cover the Company's operating needs and capital requirements in
recent years, resulting in decreased interest expense and increased interest
income in 1997 and 1996.

          Provision for Income Taxes - The Company's effective tax rates were
42% in 1997 and 1996 and 41% in 1995.

LIQUIDITY AND CAPITAL RESOURCES

          In recent years, the Company's cash flows from operations have
exceeded its working capital needs. In addition, the Company has available a
$25,000,000 unsecured revolving credit facility (the "Facility"). On January 3,
1998, there were no borrowings under the Facility, but letters of credit
totaling $3,953,000 had been issued on the Company's behalf to secure insurance
deductibles and purchases of operating services, resulting in unused borrowing
capacity of $21,047,000. 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 3, 1998, the interest rate was
6.46% 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.

          At January 3, 1998, the Company had a ratio of current assets to
current liabilities of approximately 1.24 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.

OTHER INFORMATION

          In response to expanding capabilities in the area of information
systems and issues related to the year 2000, the Company is designing a new
financial and administrative system scheduled for implementation during the
second half of 1998. The total cost of this system is not expected to exceed
$1,500,000, the majority of which was expended in 1997. Additionally, the
Company is performing an in-depth review of the year 2000 compliance aspects of
all peripheral systems not included in the above system. Management is uncertain
at this time what additional costs, if any, may be incurred in connection with
these peripheral systems. Management is confident that all issues relating to
the Company's internal information systems arising from the year 2000 will be
addressed during the course of these two projects. The Company is also in the
process of seeking information concerning year 2000 compliance from vendors,
customers and other third parties upon whom the Company relies.

          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 and third quarters than in the first and fourth
quarters.




                                       9
<PAGE>   11


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................................... 15
         Consolidated Statements of Income............................. 16
         Consolidated Statements of Shareholders' Investment........... 17
         Consolidated Statements of Cash Flows......................... 18
         Notes to Consolidated Financial Statements.................... 19
         Report of Independent Public Accountants...................... 26
</TABLE>

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

         None.


                                    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 1998 Annual Meeting of
Shareholders and Proxy Statement which will be filed within 120 days of January
3, 1998 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 1998 Annual Meeting of Shareholders
and Proxy Statement which will be filed within 120 days of January 3, 1998.

ITEM 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 1998 Annual Meeting of Shareholders and Proxy
Statement which will be filed within 120 days of January 3, 1998.




                                       10
<PAGE>   12


                                     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 1997 10-K
                    --------                   -----------                   -----------------
                    <S>           <C>                                        <C>
                      II          Valuation and Qualifying Accounts                 27
</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 26 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. 2 to Employment and Noncompete                  Filed herewith
                Agreement between R.C. Matney and the Registrant
                dated as of October 1, 1997
</TABLE>



                                       11

<PAGE>   13
<TABLE>
<CAPTION>
Exhibit                                                                      Page Number or Incorporation
Number          Description                                                     by Reference to
-------         -----------                                                  ----------------------------
<S>             <C>                                                          <C>
   10.7    *    Employment and Noncompete Agreement between                  Filed herewith
                Philip L. Dunavant and the Registrant dated as of
                May 16, 1997

   10.8    *    Employment and Noncompete Agreement between                  Filed herewith
                David H. Wedaman and the Registrant dated
                as of January 1, 1997.  Addendum to Employment
                and Noncompete Agreement dated as of May 15, 1997

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

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

  10.11    *    Employment and Noncompete Agreement between                  Exhibit 10.10 to 1995 Annual Report
                Michael J. Musacchio and Mark VII Logistics, a               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

 10.12     *    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 File
                Incorporated 1992 Non-Qualified Stock Option Plan)           No. 33-86174)
                dated September 22, 1994

 10.13          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.

 10.14          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.

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

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


                                       12

<PAGE>   14
<TABLE>
<CAPTION>
Exhibit                                                                      Page Number or Incorporation
Number          Description                                                     by Reference to
-------         -----------                                                  ----------------------------
<S>             <C>                                                          <C>
 10.17          Revolving Loan and Promissory Note dated                     Filed herewith
                July 29, 1997 by and among NationsBank of
                Tennessee, N.A., Mark VII, Inc. and Mark VII
                Transportation Co., Inc.

 10.18          Loan Agreement dated as of July 29, 1997 by and              Filed herewith
                among NationsBank of Tennessee, N.A., Mark VII,
                Inc. and Mark VII Transportation Co., Inc.

 10.19          First Modification of Loan Agreement dated as of             Filed herewith
                October 20, 1997 by and among NationsBank of
                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 (SEC Use Only)                       Filed herewith
</TABLE>

------------
       *    Management contracts or compensatory plans


(b)      Reports on Form 8-K

         None







                                       13
<PAGE>   15


                                   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, President
                                              and Chief Executive Officer

Date: March 26, 1998

     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, President,                    March 26, 1998
-------------------------------      Chief Executive Officer and Director
R. C. Matney                         


/s/  Philip L. Dunavant              Executive Vice President, Chief Financial            March 26, 1998
-------------------------------      Officer (Principal Financial and Accounting
Philip L. Dunavant                   Officer)


/s/  James T. Graves                 Vice Chairman, Secretary, General Counsel            March 26, 1998
-------------------------------      and Director
James T. Graves                      


/s/  David H. Wedaman                Executive Vice President, Chief Operating            March 26, 1998
-------------------------------      Officer and Director
David H. Wedaman                    


/s/  Douglass Wm. List               Director                                             March 26, 1998
-------------------------------
Douglass Wm. List


/s/  William E. Greenwood            Director                                             March 26, 1998
-------------------------------
William E. Greenwood


/s/  Jay U. Sterling                 Director                                             March 26, 1998
-------------------------------
Dr. Jay U. Sterling


/s/  Thomas J. Fitzgerald            Director                                             March 26, 1998
-------------------------------
Thomas J. Fitzgerald

</TABLE>






                                       14
<PAGE>   16


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

<TABLE>
<CAPTION>
                                                                                               JANUARY 3,     DECEMBER 28,
                                                                                                   1998           1996
                                                                                               ----------     ------------
                                                          ASSETS
<S>                                                                                            <C>            <C> 
Current Assets:
   Cash and cash equivalents.................................................................  $    3,732      $      959
   Accounts receivable, less allowances of $2,641 and
     $1,693 in 1997 and 1996, respectively ..................................................      82,917          73,315
   Notes and other receivables, less allowances of $537
     and $1,611 in 1997 and 1996, respectively...............................................       4,399           7,583
   Other current assets......................................................................       1,755           1,131
                                                                                               ----------      ----------
     Total current assets....................................................................      92,803          82,988
                                                                                               ----------      ----------

Deferred Income Taxes........................................................................       1,262             946
                                                                                               ----------      ----------

Property and Equipment, at cost:
   Transportation equipment..................................................................       4,394           4,915
   Computer equipment, furniture and other...................................................       7,026           3,817
                                                                                               ----------      ----------
                                                                                                   11,420           8,732
   Less:  Accumulated depreciation...........................................................       4,829           4,214
                                                                                               ----------      ----------
     Net property and equipment..............................................................       6,591           4,518
                                                                                               ----------      ----------

Intangible and Other Assets..................................................................       7,354           5,145
                                                                                               ----------      ----------
                                                                                               $  108,010      $   93,597
                                                                                               ==========      ==========

                                    LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
   Accrued  transportation charges...........................................................  $   63,094      $   52,734
   Deferred income taxes.....................................................................       5,591           2,193
   Other current and accrued liabilities.....................................................       6,258           8,031
                                                                                               ----------      ----------
     Total current liabilities...............................................................      74,943          62,958
                                                                                               ----------      ----------

Long-Term Obligations........................................................................         945             601
                                                                                               ----------      ----------

Contingencies and Commitments (Note 5)

Shareholders' Investment:
   Common stock, $.05 par value, authorized 20,000,000 shares; issued 10,009,822
     shares in 1997 and 9,901,044 shares in 1996.............................................         501             495
   Paid-in capital...........................................................................      29,623          28,665
   Retained earnings ........................................................................      14,108           6,732
                                                                                               ----------      ----------
                                                                                                   44,232          35,892
   Less:  Treasury stock, at cost, 1,071,250 shares in 1997 and 664,000 shares in 1996.......     (12,110)         (5,854)
                                                                                               ----------      ----------
     Total shareholders' investment..........................................................      32,122          30,038
                                                                                               ----------      ----------
                                                                                               $  108,010      $   93,597
                                                                                               ==========      ==========
</TABLE>

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



                                       15






<PAGE>   17


                         MARK VII, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                    (In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                                           FOR THE YEARS ENDED
                                                                              ---------------------------------------------
                                                                              JANUARY 3,       DECEMBER 28,    DECEMBER 30,
                                                                                 1998              1996            1995  
                                                                              ----------       ------------    ------------
<S>                                                                           <C>              <C>             <C> 
Operating Revenues ........................................................   $  667,374        $  563,913      $  459,160
Transportation Costs.......................................................      582,843           489,292         391,845
                                                                              ----------        ----------      ----------
Net Revenues...............................................................       84,531            74,621          67,315

Operating Expenses:
   Salaries and related costs..............................................       17,894            16,501          16,170
   Selling, general and administrative ....................................       54,279            47,915          42,656
                                                                              ----------        ----------      ----------
     Total Operating Expenses..............................................       72,173            64,416          58,826
                                                                              ----------        ----------      ----------

Operating Income ..........................................................       12,358            10,205           8,489

Other Expense (Income):
   Interest expense........................................................          171               266             494
   Interest income.........................................................         (711)             (177)           (193)
   Other ..................................................................          181               164             164
                                                                              ----------        -----------     ----------
     Total Other Expense (Income), Net.....................................         (359)              253             465
                                                                              ----------        ----------      ----------

Income Before Provision For Income Taxes...................................       12,717             9,952           8,024

Provision For Income Taxes.................................................        5,341             4,180           3,290
                                                                              ----------        ----------      ----------

Net Income.................................................................   $    7,376        $    5,772      $    4,734
                                                                              ==========        ==========      ==========


Net Income Per Common Share................................................   $      .80        $      .63      $      .49
                                                                              ==========        ==========      ==========

Net Income Per Common Share, Assuming Dilution.............................   $      .76        $      .60      $      .47
                                                                              ==========        ==========      ==========

Average Common Shares and Equivalents Outstanding:
     Basic.................................................................        9,185             9,211           9,674
     Diluted...............................................................        9,699             9,616           9,990
</TABLE>


        The accompanying notes are an integral part of these statements.




                                       16
<PAGE>   18


                         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 31, 1994................   9,562    $     478      $ 26,769     $   (3,774)   $      -       $   23,473
   Net income.............................     -            -             -            4,734           -            4,734
   Issuance of common stock under
     stock-based compensation plans.......     214           11         1,106            -             -            1,117           
   Purchase of treasury stock   
     (400 shares).........................     -            -             -              -          (3,436)        (3,436)
                                          --------    ---------      --------     ----------    ----------     ----------

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
                                          ========    =========      ========     ==========    ==========     ==========


</TABLE>

        The accompanying notes are an integral part of these statements.





                                       17

<PAGE>   19


                         MARK VII, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                                      
<TABLE>
<CAPTION>
                                                                                           FOR THE YEARS ENDED
                                                                             -----------------------------------------------
                                                                              JANUARY 3,        DECEMBER 28,    DECEMBER 30,
                                                                                1998               1996             1995
                                                                             -----------        ------------    ------------
<S>                                                                          <C>                <C>             <C>
Operating Activities:
   Net income .............................................................   $    7,376        $    5,772      $    4,734
   Adjustments to reconcile net income to
     net cash provided by operating activities:
       Depreciation........................................................        1,054             1,130           1,154
       Amortization........................................................          250               254             330
       Provision for doubtful accounts and notes receivable................        2,672             2,014           2,102
       Provision for deferred income taxes.................................        1,737             1,803           2,139
       Changes in assets and liabilities:
         Accounts receivable...............................................      (11,205)          (19,009)         (5,171)
         Accrued transportation charges....................................       10,360             9,488           9,599
         Other ............................................................         (536)            3,249          (3,676)
                                                                              ----------        ----------      ----------
   Net cash provided by operating activities...............................       11,708             4,701          11,211
                                                                              ----------        ----------      ----------

Investing Activities:
   Additions to property and equipment.....................................       (3,600)           (1,821)           (767)
   Retirements of property and equipment...................................          473               572             524
                                                                              ----------        ----------      ----------
   Net cash used for investing activities..................................       (3,127)           (1,249)           (243)
                                                                              ----------        ----------      ----------

Financing Activities:
   Exercise of stock options...............................................          615               494             769
   Repayments of long-term obligations.....................................         (135)             (183)         (1,419)
   Net repayments under line of credit.....................................          (32)             (658)         (7,856)
   Purchase of treasury stock..............................................       (6,256)           (2,418)         (3,436)
                                                                              ----------        ----------      ----------
   Net cash used for financing activities..................................       (5,808)           (2,765)        (11,942)
                                                                              ----------        ----------      ----------

Net increase (decrease) in cash and cash equivalents.......................        2,773               687            (974)

Cash and cash equivalents:

   Beginning of year.......................................................          959               272           1,246
                                                                              ----------        ----------      ----------

   End of year.............................................................   $    3,732        $      959      $      272
                                                                              ==========        ==========      ==========

Supplemental Disclosure of Cash Flow Information:

   Cash paid during the year for:
     Interest..............................................................   $      150        $      196      $      361
     Income taxes, net of refunds received.................................        2,930             2,731           1,180

Supplemental Schedule of Non-cash Financing Activities:

   Direct financings under debt and capital lease obligations..............   $     -           $     -         $       77

</TABLE>

        The accompanying notes are an integral part of these statements.



                                       18


<PAGE>   20


                         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").

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
$1,054,000, $1,130,000 and $1,154,000 in 1997, 1996 and 1995, 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 cash overdrafts exist
in the book balances of its primary disbursing accounts. These overdrafts
represent the uncleared checks in the disbursing accounts. The cash amounts
presented in the consolidated financial statements represent balances on deposit
at other locations, prior to their transfer to the primary disbursing accounts.
Uncleared checks of $2,851,000 and $6,515,000 are included in accrued
transportation charges at January 3, 1998 and December 28, 1996, respectively.

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>
                                                            1997          1996
                                                          --------      -------- 
                                                              (in thousands)
      <S>                                                 <C>           <C>
      Goodwill and other intangible assets.............   $  5,121      $  3,321
      Less accumulated amortization....................      1,674         1,437
                                                          --------      --------
                                                          $  3,447      $  1,884
                                                          ========      ========
</TABLE>





                                       19
<PAGE>   21


FISCAL YEAR

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

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 the periods presented to conform to the new 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>
                                                                    1997          1996          1995
                                                                  --------      --------      --------
                                                                (in thousands, except per share amounts)
      <S>                                                         <C>           <C>           <C>
      Net income..................................................$  7,376      $  5,772      $  4,734
                                                                  ========      ========      ========

      Average common shares and equivalents outstanding:
        Basic.....................................................   9,185         9,211         9,674
        Effect of dilutive options................................     514           405           316
                                                                  --------      --------      --------
        Diluted...................................................   9,699         9,616         9,990
                                                                  ========      ========      ========

      Per share amounts:
        Net income per common share...............................$   .80       $    .63      $    .49
                                                                  =======       ========      ========
        Net income per common share, assuming dilution............$   .76       $    .60      $    .47
                                                                  =======       ========      ========
</TABLE>

RECLASSIFICATIONS

Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform to the 1997 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 million unsecured revolving credit facility (the
"Facility"). 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 3, 1998, the interest rate was 6.46% 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.




                                       20
<PAGE>   22


The following is a summary of data on the credit facility:

<TABLE>
<CAPTION>
                                                   1997         1996            1995
                                                  ------       -------        --------  
                                                         (dollars in thousands)
   <S>                                            <C>          <C>            <C> 
   Balance outstanding at end of period...........$   -        $     32       $    690
   Average amount outstanding.....................    -              75          1,596
   Maximum month end balance outstanding..........    -           1,750          9,310
   Interest rate at year end...................... 6.46%            8.8%           9.0%
   Weighted average interest rate.................    -             8.8%           9.3%
</TABLE>

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.

(3)   INCOME TAXES

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

<TABLE>
<CAPTION>
                                                         1997          1996          1995
                                                       --------      --------      --------
                                                                  (in thousands)
      <S>                                              <C>           <C>           <C>
      Federal -
         Currently payable ............................$  2,856      $  1,833      $    709
         Deferred......................................   1,562         1,610         1,910
                                                       --------      --------      --------
            Total federal..............................   4,418         3,443         2,619
                                                       --------      --------      --------
      State -
         Currently payable.............................     748           544           442
         Deferred......................................     175           193           229
                                                       --------      --------      --------
            Total state................................     923           737           671
                                                       --------      --------      --------

                                                       $  5,341      $  4,180      $  3,290
                                                       ========      ========      ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                          1997         1996          1995
                                                       ---------     --------      --------
                                                                   (in thousands)

      <S>                                              <C>           <C>           <C>
      Federal statutory rate...........................    34.2%           34%           34%

      Tax at statutory rate............................$  4,349      $  3,384      $  2,728
      Increase from -
         State income taxes, net.......................     609           486           443
         Other.........................................     383           310           119
                                                       --------      --------      --------
                                                       $  5,341      $  4,180      $  3,290
                                                       ========      ========      ========
</TABLE>










                                       21



<PAGE>   23
Deferred tax assets (liabilities) are comprised of the following:

<TABLE>
<CAPTION>
                                                                1997          1996
                                                              --------      --------
                                                                  (in thousands)
      <S>                                                     <C>           <C>
      Deferred Tax Assets:
         Claims and other reserves............................$  2,140      $  2,381
         Basis difference on property and equipment...........     778           892
         Other................................................     503           158
                                                              --------      --------
          Total deferred tax assets...........................   3,421         3,431
                                                              --------      --------

      Deferred Tax Liabilities:
         Prepaid expenses.....................................     (35)           (1)
         Deferred revenue.....................................  (4,910)       (4,573)
         Other................................................  (2,805)         (104)
                                                              --------      --------
          Total deferred tax liabilities......................  (7,750)       (4,678)
                                                              --------      --------

          Net deferred tax liabilities........................$ (4,329)     $ (1,247)
                                                              ========      ========
</TABLE>


(4)   LONG-TERM DEBT AND OPERATING LEASES

Long-term debt included the following:

<TABLE>
<CAPTION>
                                                                    1997          1996
                                                                  --------      ---------
                                                                     (in thousands)
       <S>                                                        <C>           <C>
       Capital lease obligations for transportation equipment,
         9.1%, payable through 2002.............................. $    580      $    715
       Less - Current maturities.................................      116           114
                                                                  --------      --------
                                                                  $    464      $    601
                                                                  ========      ========
</TABLE>

Property and equipment included the following amounts related to capital lease
obligations:
                                                                               
<TABLE>
<CAPTION>
                                                                    1997          1996
                                                                  --------      ---------
                                                                     (in thousands)
       <S>                                                        <C>           <C>
       Transportation equipment...................................$    915      $    991
       Less - Accumulated depreciation............................     371           329
                                                                  --------      --------
                                                                  $    544      $    662
                                                                  ========      ========
</TABLE>

Scheduled annual payments on the Company's long-term obligations and commitments
for operating leases are as follows:

<TABLE>
<CAPTION>
                                            Capital Leases
                                 ------------------------------------ 
                                  Future       Interest     Principal     Operating
                                 Payments      Portion       Portion        Leases
                                 --------      --------     ---------     ---------  
                                                    (in thousands)
      <S>                        <C>           <C>          <C>           <C> 
      1998.....................  $   155       $     39      $    116      $  1,834
      1999.....................      161             36           125         1,692
      2000.....................      161             25           136         1,664
      2001.....................      162             13           149         1,158
      2002.....................       55              1            54           157
                                 -------       --------      --------      --------
                                 $   694       $    114      $    580      $  6,505
                                 =======       ========      ========      ========
</TABLE>

Excluded from the operating lease commitments are scheduled rentals on tractors,
trailers and containers with lease terms of one to five years which have annual
cancellation provisions. If these leases are not canceled, the additional future
lease payments would be approximately $1,403,000, $903,000, $825,000, $268,000
and $114,000 in 1998, 1999, 2000, 2001 and 2002, respectively. The accompanying
financial statements include rent expense of $5,025,000, $5,737,000 and
$6,220,000 in 1997, 1996 and 1995, respectively.


                                       22
<PAGE>   24


(5)   CONTINGENCIES AND COMMITMENTS

The Company is involved in various legal proceedings 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 known pending or
threatened legal proceedings or claims, 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 3, 1998, 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>
                                                            1997        1996       1995
                                                           ------      ------     ------
<S>                                    <C>                 <C>         <C>        <C>
Net Income:                            As reported         $7,376      $5,772     $4,734
                                       Pro forma           $7,053      $5,617     $4,694

Net Income Per Common Share:           As reported           $.80        $.63       $.49
                                       Pro forma             $.77        $.61       $.49

Net Income Per Common Share,
    Assuming Dilution:                 As reported           $.76        $.60       $.47
                                       Pro forma             $.73        $.58       $.47
</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 3, 1998, 2,122,748 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>
                                          1997            1996              1995
                                       ---------        ---------         --------
<S>                                    <C>              <C>               <C>
Dividend yield                            none             none               none
Expected volatility                      43.0%             41.0%             43.0%
Risk-free interest rate                   6.5%              6.8%              6.0%
Expected lives                         7.5 years         6.5 years         7.7 years
</TABLE>






                                       23
<PAGE>   25


A summary of the status of stock options granted under the Company's stock
option plans as of January 3, 1998, December 28, 1996 and December 30, 1995 and
changes during the years ended on those dates is presented below:

<TABLE>
<CAPTION>
                                               1997                           1996                          1995
                                       ----------------------       -----------------------        ----------------------
                                                     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      1,217,976      $  6.11        1,244,698       $ 5.54         1,365,500      $ 5.05
Granted                                 160,000        14.60           93,000        11.11            98,000        7.94
Exercised                              (100,778)        4.94         (119,722)        4.11          (213,404)       3.60
Canceled                                 (4,000)        5.63               -            -             (5,398)       2.13
                                      ---------                     ---------                      --------- 
Outstanding at end of year            1,273,198      $  7.27        1,217,976       $ 6.11         1,244,698      $ 5.54
                                      =========                     =========                      =========

Options exercisable at year-end         674,031                       612,176                        581,598
                                      =========                     =========                      =========

Options available for future grant      849,550                     1,017,550                      1,114,350
                                      =========                     =========                      =========

Weighted average fair value of
   options granted during the year       $ 8.37                        $ 5.35                         $ 4.53
                                      =========                     =========                      =========
</TABLE>


The following table summarizes information about stock options outstanding at
January 3, 1998:

<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 1/3/98         Life           Price          at 1/3/98      Price
----------------                   -----------     -----------    ----------       -----------   ----------         
<S>                                <C>             <C>            <C>              <C>           <C>
$ 2.13 to $ 5.63                     430,198        4.5 years       $  3.91          400,198      $   3.78
$ 6.88 to $10.00                     606,000        6.2 years          7.21          245,500          7.31
$10.63 to $14.63                     237,000        8.1 years         13.54           28,333         12.81
                                   ---------        ---------       -------          -------      --------

$ 2.13 to $14.63                   1,273,198        6.0 years       $  7.27          674,031      $   5.44
                                   =========        =========       =======          =======      ========
</TABLE>

In 1990, the Company granted stock appreciation rights for 52,000 shares of the
Company's common stock at a base price of $2.13 per share to key employees of
the Company. On October 1, 1997, the Company issued stock appreciation rights
for an additional 6,000 shares at a base price of $14.50. Stock appreciation
rights for 34,000 shares were outstanding at January 3, 1998. 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, 1997, 1996 and 1995 were $15.25, $8.63 and $8.63 per share,
respectively. Compensation of $128,000, $203,000 and $47,000 was expensed under
this plan in 1997, 1996 and 1995, respectively. The 1997 compensation has been
accrued based on the closing market price of $16.75 per share on January 3,
1998.





                                       24

<PAGE>   26




QUARTERLY FINANCIAL DATA (Unaudited):

The results of operations for each of the four quarters of 1997 and 1996 are
summarized below. Effective January 3, 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share". Earnings per share
have been restated for 1996 to conform to the new accounting standard. 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>
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

1996
----
Operating revenues.....................................   $  122,030     $ 142,755     $  143,701    $  155,427
Operating income ......................................        1,739         2,870          2,990         2,606
Income before income taxes.............................        1,646         2,790          2,947         2,569
Net income.............................................          955         1,618          1,709         1,490

Net income per common share............................   $      .10     $     .18     $      .19    $      .16
Net income per common share, assuming dilution.........   $      .10     $     .17     $      .18    $      .15
</TABLE>













                                       25
<PAGE>   27


                    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 3, 1998, and
December 28, 1996, and the related consolidated statements of income,
shareholders' investment and cash flows for each of the three years in the
period ended January 3, 1998. 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 consolidated 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 3, 1998, and December 28, 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended January 3, 1998 in conformity with generally accepted accounting
principles.

      Our audits were made for the purpose of forming an opinion on the basic
consolidated 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 consolidated 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 consolidated financial statements
taken as a whole.


                                       /s/ Arthur Andersen LLP



Memphis, Tennessee,
February 11, 1998







                                       26

<PAGE>   28



                                                                     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):

   1995  ...................................... $ 1,285         $   581          $  530         $  -           $  1,336
   1996  ......................................   1,336           1,472           1,115            -              1,693
   1997  ......................................   1,693           1,603             655            -              2,641


Allowance for uncollectible notes 
  (deducted from notes and other receivables):

   1995  ...................................... $   517         $ 1,521          $  -           $  -           $  2,038
   1996  ......................................   2,038             542             969            -              1,611
   1997  ......................................   1,611           1,069           2,143            -                537

</TABLE>













                                       27



<PAGE>   29


                                  EXHIBIT INDEX


<TABLE>
<CAPTION>                     
         Exhibit
         Number                                  Description
         -------                                 -----------
<S>                            <C>
         10.6                  Addendum No. 2 to Employment and Noncompete
                               Agreement between R.C. Matney and the Registrant
                               dated as of October 1, 1997

         10.7                  Employment and Noncompete Agreement between
                               Philip L. Dunavant and the Registrant dated as of
                               May 16, 1997

         10.8                  Employment and Noncompete Agreement between
                               David H. Wedaman and the Registrant dated
                               as of January 1, 1997. Addendum to Employment
                               and Noncompete Agreement dated as of May 15, 1997

         10.17                 Revolving Loan and Promissory Note dated
                               July 29, 1997 by and among NationsBank of
                               Tennessee, N.A., Mark VII, Inc. and Mark VII
                               Transportation Co., Inc.

         10.18                 Loan Agreement dated as of July 29, 1997 by and
                               among NationsBank of Tennessee, N.A., Mark VII,
                               Inc. and Mark VII Transportation Co., Inc.

         10.19                 First Modification of Loan Agreement dated as of
                               October 20, 1997 by and among NationsBank of
                               Tennessee, N.A., Mark VII, Inc. and Mark VII
                               Transportation Co., Inc.

         21                    Subsidiaries of Registrant

         23                    Consent of Independent Public Accountants

         27                    Financial Data Schedule (SEC Use Only)

</TABLE>