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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
COMMISSION FILE NO. 0-24946


KNIGHT TRANSPORTATION, INC.
(Exact name of registrant as specified in its charter)


ARIZONA 86-0649974
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)


5601 WEST BUCKEYE ROAD
PHOENIX, ARIZONA
85043
(Address of Principal Executive Offices)
(Zip Code)


Registrant's telephone number, including area code: 602-269-2000


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 [ ]

The number of shares outstanding of registrant's Common Stock, par value $0.01
per share, as of August 9, 2002 was 37,042,634 shares.

KNIGHT TRANSPORTATION, INC.

INDEX


PART I - FINANCIAL INFORMATION PAGE NUMBER

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of June 30, 2002
and December 31, 2001 1

Condensed Consolidated Statements of Income for the Three
months and Six Months Ended June 30, 2002 and June 30, 2001 3

Condensed Consolidated Statements of Cash Flows for the Six
months ended June 30, 2002 and June 30, 2001 4

Notes to Condensed Consolidated Financial Statements 6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 12

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 19

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS 20

ITEM 2. CHANGES IN SECURITIES 20

ITEM 3 DEFAULTS UPON SENIOR SECURITIES 20

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 20

ITEM 5. OTHER INFORMATION 21

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 21

SIGNATURES 22

INDEX TO EXHIBITS 24

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2002 AND DECEMBER 31, 2001

June 30, 2002 December 31, 2001
------------- -----------------
(unaudited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 38,837,138 $ 24,135,601
Accounts receivable, net 33,647,237 31,693,074
Notes receivable, net 659,371 777,218
Inventories and supplies 1,354,778 1,905,934
Prepaid expenses 8,826,426 7,964,109
Deferred tax asset 6,431,723 6,081,462
------------- -------------

Total current assets 89,756,673 72,557,398
------------- -------------

PROPERTY AND EQUIPMENT:
Land and improvements 14,138,241 13,112,344
Buildings and improvements 12,890,728 12,456,546
Furniture and fixtures 6,288,083 6,297,862
Shop and service equipment 1,951,356 1,789,903
Revenue equipment 179,378,849 169,630,340
Leasehold improvements 889,641 666,860
------------- -------------
215,536,898 203,953,855

Less: Accumulated depreciation (59,994,657) (50,258,826)
------------- -------------

PROPERTY AND EQUIPMENT, net 155,542,241 153,695,029
------------- -------------
NOTES RECEIVABLE - long-term 3,197,010 3,108,263
------------- -------------
OTHER ASSETS 12,365,785 11 ,753,359
------------- -------------

$ 260,861,709 $ 241,114,049
============= =============

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

1

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF JUNE 30, 2002 AND DECEMBER 31, 2001

June 30, 2002 December 31, 2001
------------- -----------------
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 4,159,023 $ 3,838,011
Accrued liabilities 12,320,725 6,321,829
Current portion of long-term debt 3,035,583 3,159,162
Claims accrual 8,722,194 7,509,397
------------- -------------

Total current liabilities 28,237,525 20,828,399

LINE OF CREDIT 12,200,000 12,200,000
LONG - TERM DEBT, less current portion 760,944 2,714,526
DEFERRED INCOME TAXES 37,679,954 37,675,395
------------- -------------

Total liabilities 78,878,423 73,418,320
------------- -------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value;
authorized 50,000,000 shares,
none issued and outstanding -- --
Common stock, $0.01 par value;
Authorized 100,000,000 shares;
37,034,022 and 36,834,106 shares issued
and outstanding at June 30, 2002 and
and December 31, 2001, respectively 370,340 368,341
Additional paid-in capital 71,697,753 69,846,990
Retained earnings 110,470,463 98,212,868
Accumulated other comprehensive loss (555,270) (732,470)
------------- -------------

Total shareholders' equity 181,983,286 167,695,729
------------- -------------

$ 260,861,709 $ 241,114,049
============= =============

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

2

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



Three Months Ended Six Months Ended
June 30 June 30
------------------------------ ------------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------

REVENUE
Revenue, before fuel surcharge $ 68,306,843 $ 58,697,743 $ 130,196,868 $ 112,745,349
Fuel surcharge 1,508,907 2,490,201 1,970,353 5,105,616
------------- ------------- ------------- -------------

Total revenue 69,815,750 61,187,944 132,167,221 117,850,965
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Salaries, wages and benefits 22,937,540 19,540,189 44,200,244 37,874,993
Fuel 10,729,091 9,959,204 19,709,136 19,141,316
Operations and maintenance 4,082,768 3,172,348 7,485,046 6,294,236
Insurance and claims 3,016,684 2,194,052 5,674,220 4,250,575
Operating taxes and licenses 1,913,651 1,721,676 3,784,252 3,377,225
Communications 556,782 450,283 1,172,677 849,204
Depreciation and amortization 5,523,284 4,826,744 10,878,119 9,693,913
Lease expense - revenue equipment 2,304,482 2,140,948 4,600,484 3,992,684
Purchased transportation 5,648,483 6,167,230 10,527,590 12,019,256
Miscellaneous operating expenses 1,788,239 1,929,259 3,409,885 3,463,216
------------- ------------- ------------- -------------
58,501,004 52,101,933 111,441,653 100,956,618
------------- ------------- ------------- -------------

Income from operations 11,314,746 9,086,011 20,725,567 16,894,347
------------- ------------- ------------- -------------

OTHER INCOME (EXPENSE):
Interest income 236,119 153,954 454,985 310,719
Interest expense (246,621) (639,872) (512,958) (1,508,415)
------------- ------------- ------------- -------------

(10,502) (485,918) (57,973) (1,197,696)
------------- ------------- ------------- -------------

Income before taxes 11,304,244 8,600,093 20,667,595 15,696,651

INCOME TAXES (4,600,000) (3,540,000) (8,410,000) (6,400,000)
------------- ------------- ------------- -------------

Net income $ 6,704,244 $ 5,060,093 $ 12,257,595 $ 9,296,651
============= ============= ============= =============

Net income per common share and
common share equivalent:
Basic $ 0.18 $ 0.15 $ 0.33 $ 0.27
============= ============= ============= =============
Diluted $ 0.18 $ 0.15 $ 0.32 $ 0.27
============= ============= ============= =============

Weighted average number of common
shares and common share equivalents
outstanding:
Basic 36,975,422 34,041,480 36,947,722 33,967,955
============= ============= ============= =============
Diluted 38,060,131 34,803,425 38,082,216 34,685,471
============= ============= ============= =============


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

3

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



Six Months Ended
June 30
----------------------------
2002 2001
------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 12,257,595 $ 9,296,651
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 10,878,119 9,693,913
Allowance for doubtful accounts 190,187 164,813
Interest rate swap agreement - fair value change 177,200 (153,194)
Tax benefit from exercise of stock options 497,251 530,434
Deferred income taxes (345,702) 187,354
Changes in assets and liabilities:
(Increase) decrease in trade receivables (2,144,350) 1,985,745
Decrease (increase) in inventories and supplies 551,156 (104,340)
Increase in prepaid expenses (862,317) (2,779,653)
Increase (decrease) in accounts payable 321,012 (271,358)
Increase in accrued liabilities and claims accrual 7,211,693 1,785,943
------------ ------------

Net cash provided by operating activities 28,731,844 20,336,308
------------ ------------

CASH FLOW FROM INVESTING ACTIVITIES:

Purchase of property and equipment, net (12,725,331) (10,360,609)
Increase in other assets (612,426) (1,573,171)
Decrease (increase) in notes receivable, net 29,100 (2,399,370)
------------ ------------

Net cash used in investing activities (13,308,657) (14,333,150)
------------ ------------


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

4

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Six Months Ended
June 30
-----------------------------
2002 2001
------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:

Payments on line of credit, net -0- (3,800,000)
Payments of long-term debt (2,077,161) (7,993,898)
Proceeds from exercise of stock options 1,355,511 1,627,306
------------ ------------

Net cash used in financing activities (721,650) (10,166,592)
------------ ------------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 14,701,537 (4,163,434)
CASH AND CASH EQUIVALENTS,
Beginning of period 24,135,601 6,151,383
------------ ------------

CASH AND CASH EQUIVALENTS, end of period $ 38,837,138 $ 1,987,949
============ ============
SUPPLEMENTAL DISCLOSURES:

Cash Flow Information:
Income taxes paid $ 3,995,386 $ 2,518,731
============ ============
Interest paid $ 453,026 $ 1,674,455
============ ============

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

5

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Financial Information

The accompanying consolidated financial statements include the parent company
Knight Transportation, Inc., and its wholly owned subsidiaries, Knight
Administrative Services, Inc.; Quad-K Leasing, Inc.; KTTE Holdings, Inc., QKTE
Holdings, Inc.; Knight Management Services, Inc.; Knight Transportation Midwest,
Inc.; Knight Transportation Gulf Coast, Inc., (formerly John Fayard Fast
Freight, Inc.); Knight Transportation South Central Ltd.; and KTeCom, L.L.C. All
material inter-company items and transactions have been eliminated in
consolidation.

The condensed consolidated financial statements included herein have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"), pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
have been omitted or condensed pursuant to such rules and regulations. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Results of operations in interim periods are not necessarily indicative of
results for a full year. These condensed consolidated financial statements and
notes thereto should be read in conjunction with the Company's consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2001. The preparation of financial
statements in accordance with GAAP requires management to make estimates and
assumptions. Such estimates and assumptions affect the reported amounts of
assets and liabilities as well as disclosure of contingent assets and
liabilities, at the date of the accompanying condensed consolidated financial
statements, and the reported amounts of the revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

6

Note 2. Net Income Per Share

A reconciliation of the basic and diluted earnings per share computations for
the three months and six months ended June 30, 2002 and 2001 is as follows:



Three Months Ended Six Months Ended
June 30 June 30
------------------------- -------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------

Weighted average common
shares outstanding - Basic 36,975,422 34,041,480 36,947,722 33,967,955

Effect of stock options 1,084,709 761,945 1,134,494 717,516
----------- ----------- ----------- -----------

Weighted average common
share and common share
equivalents outstanding -
Diluted 38,060,131 34,803,425 38,082,216 34,685,471
=========== =========== =========== ===========

Net income $ 6,704,244 $ 5,060,093 $12,257,595 $ 9,296,651
=========== =========== =========== ===========

Net income per common share
and common share equivalent
Basic $ 0.18 $ 0.15 $ 0.33 $ 0.27
=========== =========== =========== ===========
Diluted $ 0.18 $ 0.15 $ 0.32 $ 0.27
=========== =========== =========== ===========


Note 3. Comprehensive Income (Loss)

Comprehensive income (loss) for the period was as follows:



Three Months Ended Six Months Ended
June 30 June 30
------------------------- -------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------

Net Income $ 6,704,244 $ 5,060,093 $12,257,595 $ 9,296,651

Other comprehensive income (loss):
Interest rate swap agreement - fair
market value adjustment 87,964 29,188 177,200 (153,194)
----------- ----------- ----------- -----------

Comprehensive income $ 6,792,208 $ 5,089,281 $12,434,795 $ 9,143,457
=========== =========== =========== ===========


7

NOTE 4. SEGMENT INFORMATION

Although we have nine operating segments, we have determined that we have one
reportable segment. Eight of the segments are managed based on regions in the
United States in which we operate. Each of these segments has similar economic
characteristics as they all provide short to medium-haul truckload carrier
services of general commodities to a similar class of customers. In addition,
each segment exhibits similar financial performance, including average revenue
per mile and operating ratio. The remaining segment is not reported because it
does not meet the materiality thresholds in SFAS No. 131. As a result, we have
determined that it is appropriate to aggregate our operating divisions into one
reportable segment consistent with the guidance in SFAS No. 131. Accordingly, we
have not presented separate financial information for each of our operating
divisions as our consolidated financial statements present our one reportable
segment.

NOTE 5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In June 1998 the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Certain Hedging Activities." In June 2000 the FASB issued SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activity, an Amendment of SFAS 133." SFAS No. 133 and SFAS No. 138 require that
all derivative instruments be recorded on the balance sheet at their respective
fair values. SFAS No. 133 and SFAS No. 138 are effective for all fiscal quarters
of all fiscal years beginning after June 30, 2000; we adopted SFAS No. 133 and
SFAS No. 138 on January 1, 2001.

All derivatives are recognized on the balance sheet at their fair value. On the
date the derivative contract is entered into, we designate the derivative as
either a hedge of the fair value of a recognized asset or liability or of an
unrecognized firm commitment ("fair value" hedge), a hedge of a forecasted
transaction or the variability of cash flows to be received or paid related to a
recognized asset or liability ("cash flow" hedge), a foreign-currency fair-value
or cash-flow hedge ("foreign currency" hedge), or a hedge of a net investment in
a foreign operation. We formally document all relationships between hedging
instruments and hedged items, as well as its risk-management objective and
strategy for undertaking various hedge transactions. This process includes
linking all derivatives that are designated as fair-value, cash-flow, or
foreign-currency hedges to specific assets and liabilities on the balance sheet
or to specific firm commitments or forecasted transactions. We also formally
assess, both at the hedge's inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of hedged items. When it is
determined that a derivative is not highly effective as a hedge or that it has
ceased to be a highly effective hedge, we discontinue hedge accounting
prospectively.

In August and September 2000, we entered into two agreements to obtain price
protection to reduce a portion of our exposure to fuel price fluctuations. Under
these agreements, we purchased 1,000,000 gallons of diesel fuel, per month, for
a period of six months from October 1, 2000 through March 31, 2001. If during
the 48 months following March 31, 2001, the price of heating oil on the New York
Mercantile Exchange (NY MX HO) falls below $.58 per gallon, we may be obligated
to pay, for a maximum of 12 different months selected by the contract holder
during the 48-month period beginning after March 31, 2001, the difference
between $.58 per gallon and NY MX HO average price for the minimum volume
commitment. In July 2001, we entered into a similar agreement. Under this
agreement, we purchased 750,000 gallons of diesel fuel, per month, for a period
of six months beginning September 1, 2001 through February 28, 2002. If during
the 12-month period commencing January 2005 through December 2005, the price

8

index discussed above falls below $.58 per gallon, we may be obligated to pay
the difference between $.58 and the stated index. The three agreements are
stated at their fair value of $750,000 which is included in accrued liabilities
in the accompanying condensed consolidated financial statements.

During 2001, we entered into an interest rate swap agreement on the $12.2
million outstanding under the revolving line of credit for purposes of better
managing cash flow. On November 7, 2001, we paid $762,500 to settle this swap
agreement. The amount paid is included in other comprehensive loss and is being
amortized to interest expense over the original 36 month term of the swap
agreement.

NOTE 6. RECENTLY ADOPTED ACCOUNTING STANDARDS

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" (SFAS No.
141) and SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142).
SFAS No. 141 requires that the purchase method of accounting be used for all
business combinations. SFAS No. 141 specifies criteria that intangible assets
acquired in a business combination must meet to be recognized and reported
separately from goodwill. SFAS No. 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead tested
for impairment at least annually in accordance with the provisions of SFAS No.
142. SFAS No. 142 also requires that intangible assets with estimable useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with
ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS (SFAS No. 144).

We adopted the provisions of SFAS No. 141 as of July 1, 2001, and SFAS No. 142
as of January 1, 2002. Goodwill and intangible assets determined to have an
indefinite useful life acquired in a purchase business combination completed
after June 30, 2001, are not amortized. Goodwill and indefinite useful life
intangible assets acquired in business combinations completed before July 1,
2001 continued to be amortized through December 31, 2001. Amortization of such
assets ceased on January 1, 2002 upon adoption of SFAS 142.

Upon adoption of SFAS No. 142, we were required to evaluate our existing
intangible assets and goodwill that were acquired in purchase business
combinations, and to make any necessary reclassifications in order to conform
with the new classification criteria in SFAS No. 141 for recognition separate
from goodwill. We were also required to reassess the useful lives and residual
values of all intangible assets acquired, and make any necessary amortization
period adjustments by the end of the first interim period after adoption. For
intangible assets identified as having indefinite useful lives, we were required
to test those intangible asset for impairment in accordance with the provisions
of SFAS No. 142 within the first interim period. Impairment was measured as the
excess of carrying value over the fair value of an intangible asset with an
indefinite life. The results of this analysis did not require us to recognize an
impairment loss.

In connection with SFAS No. 142's transitional goodwill impairment evaluation,
the Statement required us to perform an assessment of whether there was an
indication that goodwill is impaired as of the date of adoption. To accomplish
this, we were required to identify our reporting units and determine the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of January 1, 2002. We were required to determine the fair value of each
reporting unit and compare it to the carrying amount of the reporting unit
within six months of January 1, 2002. To the extent the carrying amount of a
reporting unit exceeded the fair value of the reporting unit, an indication
existed that the reporting unit goodwill may be impaired and we would be
required to perform the second step of the transitional impairment test.

9

We identified our reporting units to be at the same level as our operating
segments as of January 1, 2002. As of January 1, 2002, we had eight operating
segments, however, these operating segments have been aggregated and reported as
one reportable segment in accordance with the aggregation provisions of SFAS No.
131. In applying this same aggregation criteria, we have determined that we have
one reporting unit as of January 1, 2002. At January 1, 2002, the carrying value
of the reporting unit goodwill was $7,504,067. We compared the implied fair
value of the reporting unit goodwill with the carrying amount of the reporting
unit goodwill, both of which were measured as of the date of adoption. The
implied fair value of goodwill was determined by allocating the fair value of
the reporting unit to all of the assets (recognized and unrecognized) and
liabilities of the reporting unit in a manner similar to a purchase price
allocation, in accordance with SFAS No. 141. The residual fair value after this
allocation was the implied fair value of the reporting unit goodwill. The
implied fair value of the reporting unit exceeded its carrying amount and we
were not required to recognize an impairment loss.

Application of the provisions of SFAS No. 142 has affected the comparability of
current period results of operations with prior periods because goodwill is no
longer being amortized. Thus, the following transitional disclosure presents net
earnings and earnings per share, adjusted as shown below:



THREE MONTHS ENDED SIX MONTHS ENDED
30-JUN-01 30-JUN-01
------------- -------------

Net earnings $ 5,060,093 $ 9,296,651
Add back: amortization of goodwill, net of taxes* 138,265 372,095
------------- -------------
Adjusted net earnings $ 5,198,358 $ 9,668,746
============= =============

Basic earnings per share $ 0.15 $ 0.27
Add back: amortization of goodwill, net of taxes* -0- 0.01
------------- -------------
Adjusted basic earnings per share $ 0.15 $ 0.28
============= =============

Diluted earnings per share $ 0.15 $ 0.27
Add back: amortization of goodwill, net of taxes* -0- 0.01
------------- -------------
Adjusted diluted earnings per share $ 0.15 $ 0.28
============= =============


* Amortization of goodwill was non-deductible for tax purposes; therefore, the
tax component of the adjustment for amortization of goodwill is $0.

In August 2001, the FASB issued SFAS No. 144. SFAS No. 144 addresses financial
accounting and reporting for impairment or disposal of long-lived assets. This
statement supersedes SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS TO BE DISPOSED OF, and the accounting and reporting provisions of APB
Opinion No. 30, REPORTING THE RESULTS OF OPERATIONS-REPORTING THE EFFECTS OF
DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY
OCCURRING EVENTS AND TRANSACTIONS, for the disposal of a segment of a business.
This statement also amends ARB No. 51, CONSOLIDATED FINANCIAL STATEMENTS to
eliminate the exception to consolidate a subsidiary for which control is likely
to be temporary. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001. We adopted SFAS No. 144 on January 1, 2002 and there was no
impact on our results of operations or financial position.

10

NOTE 7. RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" (SFAS No. 143). SFAS No. 143 requires the Company to record the
fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of tangible
long-lived assets that result from the acquisition, construction, development
and/or normal use of the assets. The Company also records a corresponding asset
which is depreciated over the life of the asset. Subsequent to the initial
measurement of the asset retirement obligation, the obligation will be adjusted
at the end of each period to reflect the passage of time and changes in the
estimated future cash flows underlying the obligation. The Company is required
to adopt SFAS No. 143 on January 1, 2003. Because of the extensive effort needed
to evaluate the impact of adopting SFAS No. 143, it is not practicable to
reasonably estimate the impact of adopting the Statement on the Company's
financial statements at the date of this report.

In April 2002, the FASB issued Statement of Financial Accounting Standard No.
145, RESCISSION OF FASB STATEMENTS NO.4, 44 and 64, AMENDMENT OF FASB STATEMENT
NO. 13, AND TECHNICAL CORRECTIONS (SFAS NO. 145), which addresses financial
accounting and reporting for reporting gains and losses from extinguishment of
debt, accounting for intangible assets of motor carriers and accounting for
leases. SFAS No. 145 requires that gains and losses from the early
extinguishment of debt should not be classified as extraordinary, as previously
required. SFAS No. 145 also rescinds Statement 44, which was issued to establish
accounting requirements for the effects of transition to the provisions of the
Motor Carrier Act of 1980 (Public Law 96-296, 96th Congress, July 1, 1980).
Those transitions are completed; therefore, Statement 44 is no longer necessary.
SFAS No. 145 also amends Statement 13 to require sale-leaseback accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also makes various technical
corrections to existing pronouncements. Those corrects are not substantive in
nature. The provisions of this statement relating to Statement 4 are applicable
in fiscal years beginning after May 15, 2002. The provisions of this Statement
related to Statement 13 are effective for transactions occurring after May 15,
2002. All other provisions of this Statement are effective for financial
statements issued on or after May 15, 2002. The adoption of SFAS No. 145 is not
expected to have a material impact on our consolidated financial statements.

In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146, ACCOUNTING FOR EXIT OR DISPOSAL ACTIVITIES (SFAS NO. 146). SFAS NO. 146
addresses the recognition, measurement and reporting of costs associated with
exit and disposal activities, including restructuring activities. SFAS No. 146
also addresses recognition of certain costs related to terminating a contract
that is not a capital lease, costs to consolidate facilities or relocate
employees and termination of benefits provided to employees that are
involuntarily terminated under the terms of a one-time benefit arrangement that
is not an ongoing benefit arrangement or an individual deferred compensation
contract. SFAS No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. The Company is in the process of evaluating
the adoption of SFAS No. 146 and its impact on the financial position or results
of operations of the Company.

NOTE 8. COMMITMENTS AND CONTINGENCIES

We are involved in certain legal proceedings arising in the normal course of
business. In the opinion of management, our potential exposure under pending
legal proceedings is adequately provided for in the accompanying condensed
consolidated financial statements.

NOTE 9. RECAPITALIZATION AND STOCK SPLIT

On May 9, 2001, the Board of Directors approved a three-for-two stock split,
effected in the form of a 50 percent stock dividend. The stock split occurred on
June 1, 2001, to all shareholders of record as of the close of business on May
18, 2001. Also on December 7, 2001 our Board of Directors approved another
three-for-two stock split, effected in the form of a 50 percent stock dividend.
The stock split occurred on December 28, 2001, to all stockholders of record as

11

of the close of business on December 7, 2001. These stock splits have been given
retroactive recognition for all periods presented in the accompanying
consolidated financial statements. All share amounts and earnings per share
amounts have been retroactively adjusted to reflect the stock splits.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FORWARD LOOKING STATEMENTS

Except for certain historical information contained herein, this Quarterly
Report on Form 10-Q contains forward-looking statements that involve risks,
assumptions and uncertainties that are difficult to predict. All statements,
other than statements of historical fact, are statements that could be deemed
forward-looking statements, including any projections of earnings, revenues, or
other financial items, any statement of plans, strategies, and objectives of
management for future operations; any statements concerning proposed new
strategies or developments; any statements regarding future economic conditions
or performance; any statements of belief and any statement of assumptions
underlying any of the foregoing. Words such as "believe," "may," "could"
"expects," "anticipates'" and "likely," and variations of these words, or
similar expressions, are intended to identify such forward-looking statements.
Our actual results could differ materially from those discussed here. Factors
that could cause or contribute to such differences include, but are not limited
to, those items discussed in the section entitled "Factors That May Affect
Future Results," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," set forth in our Annual Report on Form
10-K, which is by this reference incorporated herein. We do not assume, and
specifically disclaim, any obligation to update any forward-looking statement
contained in this Quarterly Report.

RESULTS OF OPERATIONS

Our revenue, before fuel surcharge, for the six months ended June 30, 2002,
increased by 15.5% to $130.2 million from $112.7 million over the same period in
2001. For the three months ended June 30, 2002, revenue, before fuel surcharge,
increased by 16.4% to $68.3 million from $58.7 million over the same period in
2001. The increase in revenue, before fuel surcharge, resulted from expansion of
our customer base and increased volume from existing customers. Our fleet
increased by 8.9% to 1,957 tractors (including 199 owned by independent
contractors) as of June 30, 2002, from 1,797 tractors (including 209 owned by
independent contractors) as of June 30, 2001.

Salaries, wages and benefits increased as a percentage of revenue, before fuel
surcharge, to 33.9% for the six months ended June 30, 2002, from 33.6% for the
same period in 2001. For the three months ended June 30, 2002, salaries, wages
and benefits increased as a percentage of revenue, before fuel surcharge, to
33.6% from 33.3% for the same period in 2001. These increases were primarily the
result of the increase in the ratio of Company drivers to independent
contractors. At June 30, 2002, 90% of our fleet was operated by Company drivers,
compared to 88% at June 30, 2001. We record the cost of medical insurance
coverage, along with the uninsured portion, to salaries, wages and benefits
expense. Our insurance program for medical claims, which involves self-insurance
with risk retention levels, was higher for the 2002 period compared to the 2001
period. Our health insurance self-insurance level is $100,000 per person per
year, and our worker's compensation self-insurance is at a maximum of $500,000.
Claims in excess of these retention levels are covered by insurance, which
management considers adequate. For Company drivers and non-driving employees, we
record accruals for worker's compensation as a component of our claims accrual,
and the related expense is reflected in salaries, wages and benefits expense in
our consolidated statements of income.

12

Fuel expense, net of fuel surcharge, increased as a percentage of revenue,
before fuel surcharge, to 13.6% for the six months ended June 30, 2002, compared
to 12.5% for the same period in 2001. For the three months ended June 30, 2002,
fuel expense as a percentage of revenue, before fuel surcharge, increased to
13.5% from 12.7% for the same period in 2001. This increase was primarily the
result of the increase in the ratio of Company vehicles to independent
contractors, as well as a reduction in fuel surcharge billings to customers.
Independent contractors pay their own fuel costs.

Operations and maintenance expense increased as a percentage of revenue, before
fuel surcharge, to 5.7% for the six months ended June 30, 2002 from 5.6% for the
same period in 2001. For the three months ended June 30, 2002, operations and
maintenance expense increased as a percentage of revenue, before fuel surcharge,
to 6.0% compared to 5.4% for the same period in 2001. These increases were
primarily due to the increase in the ratio of Company vehicles to independent
contractors, along with a slight aging of our fleet.

Insurance and claims expense increased as a percentage of revenue, before fuel
surcharge, to 4.4% for the six months ended June 30, 2002, from 3.8% for the
same period in 2001. For the three months ended June 30, 2002, insurance and
claims expense increased as a percentage of revenue, before fuel surcharge, to
4.4% from 3.7% for the same period in 2001. The primary reason for these
increases is due to increases in insurance premiums and the higher
self-insurance retention levels assumed by us. Our insurance program for
liability, physical damage and cargo damage involves self-insurance with varying
risk retention levels. Claims in excess of these risk retention levels are
covered by insurance which management considers adequate. We currently
self-insure for a portion of our claims expense resulting from personal injury,
cargo loss and property damage combined up to a maximum of $1,750,000 per
occurrence. We accrue the estimated cost of the uninsured portion of pending
claims. These accruals are estimated based on management's evaluation of the
nature and severity of individual claims and estimates of future claims
development based on historical claims development trends.

Operating taxes and licenses decreased as a percentage of revenue, before fuel
surcharge, to 2.9% for the six months ended June 30, 2002, from 3.0% for the
same period in 2001. For the three months ended June 30, 2002, operating taxes
and licenses as a percentage of revenue, before fuel surcharge, decreased to
2.8% compared to 2.9% for the same period in 2001. These decreases were
primarily due to improved utilization of revenue equipment.

Communications expense as a percentage of revenue, before fuel surcharge, for
both the six months and three months ended June 30, 2002, remained relatively
consistent with the same periods in 2001, at less than 1.0% of revenue.

Depreciation and amortization expense as a percentage of revenue, before fuel
surcharge, decreased to 8.4% for the six month period ended June 30, 2002, from
8.6% for the same period in 2001. For the three months ended June 30, 2002,
depreciation and amortization decreased as a percentage of revenue, before fuel
surcharge, to 8.1% from 8.2% for the same period in 2001. These decreases were
primarily related to increased utilization of our revenue equipment and
discontinuing the amortization of goodwill on January 1, 2002, in accordance
with SFAS No. 142.

Lease Expense - Revenue Equipment as percentage of revenue, before fuel
surcharge, was 3.5% for the six months ended June 30, 2002, compared to 3.5% for
the same period in 2001. For the three months ended June 30, 2002 Lease Expense
- - Revenue Equipment as a percentage of revenue, before fuel surcharge, was 3.4%
compared to 3.6% for the same period in 2001. This decrease was primarily due to
increased utilization of our revenue equipment. Under this leasing program we
had 568 tractors at both June 30, 2002 and June 30, 2001, under operating leases
with an average term of 3.5 years.

13

Purchased transportation decreased as a percentage of revenue, before fuel
surcharge, to 8.1% for the six months ended June 30, 2002, from 10.7% for the
same period in 2001. For the three months ended June 30, 2002, purchased
transportation as a percentage of revenue, before fuel surcharge, decreased to
8.3% from 10.5% for the same period in 2001. These decreases were due to the
decrease in the ratio of independent contractors to Company drivers to 10% as of
June 30, 2002, from 12% as of June 30, 2001. Independent contractors pay their
own expenses, including fuel, and are compensated at a fixed rate per mile.

Miscellaneous operating expenses decreased as a percentage of revenue, before
fuel surcharge, to 2.6% for the six months ended June 30, 2002, from 3.1% for
the same period in 2001. For the three months ended June 30, 2002, miscellaneous
operating expenses as a percentage of revenue, before fuel surcharge, decreased
to 2.6% from 3.3% for the same period in 2001. These decreases were primarily
due to the increase in the utilization of our revenue equipment and decreased
travel expenses.

As a result of the above factors, our operating ratio (operating expenses, net
of fuel surcharge, as a percentage of revenue, before fuel surcharge) for the
six months ended June 30, 2002, decreased to 84.1% from 85.0% for the same
period in 2001. Our operating ratio decreased to 83.4% for the three months
ended June 30, 2002, compared to 84.5% for the same period in 2001.

For the six months ended June 30, 2002, net interest expense decreased as a
percentage of revenue, before fuel surcharge, to less than 0.1% compared to 1.1%
for the same periods in 2001. This decrease was primarily due to the reduction
of our outstanding debt to approximately $16.0 million at June 30, 2002,
compared to $42.6 million at June 30, 2001. Debt reduction was facilitated, in
part, by proceeds received from the offering of our Common Stock that closed on
November 7, 2001.

Income taxes have been provided at the statutory federal and state rates,
adjusted for certain permanent differences between financial statement and
income tax reporting.

As a result of the preceding changes, our net income as a percentage of revenue,
before fuel surcharge, was 9.4% for the six months ended June 30, 2002, compared
to 8.2% for the same period in 2001. For the three months ended June 30, 2002,
net income as a percentage of revenue, before fuel surcharge, was 9.8%, compared
to 8.6% for the same period in 2001.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with
accounting policies generally accepted in the United States of America requires
management to make decisions based upon estimates, assumptions, and factors we
consider as relevant to the circumstances. Such decisions include the selection
of applicable accounting principles and the use of judgement in their
application, the results of which impact reported amounts and disclosures.
Changes in future economic conditions or other business circumstances may effect
the outcomes of our estimates and assumptions. Accordingly, actual results could
differ from those anticipated. A summary of the significant accounting policies
followed in preparation of the consolidated financial statements is contained in
Note 1 of the consolidated financial statements contained in our annual report
on Form 10-K. Other footnotes describe various elements of the consolidated
financial statements and the assumption on which specific amounts were
determined.

14

Our critical accounting policies include the following:

Revenue Recognition - revenues are recognized on the date shipments are
delivered to the customer.

Insurance and Claims Reserves - The primary claims arising for us consist of
cargo liability, personal injury, property damage, collision and comprehensive,
and employee medical expenses. We maintain self-insurance levels for these
various areas of risk and have established reserves to cover these self-insured
liabilities. We also maintain insurance to cover liabilities in excess of the
self-insurance amounts. The claims reserves represent accruals for the estimated
uninsured portion of pending claims including adverse development of known
claims as well as incurred but not reported claims. These estimates are based on
historical information along with certain assumptions about future events.
Changes in assumptions as well as changes in actual experience could cause these
estimates to change in the near term.

Property and Equipment - Property and equipment are stated at cost. Depreciation
on property and equipment is calculated by the straight-line method over five to
ten years with salvage values ranging from 15% to 40%. We periodically evaluate
the carrying value of long-lived assets held for use for possible impairment
losses by analyzing the operating performance and future cash flows for those
assets. If necessary, we would adjust the carrying value of the underlying
assets if the sum of the undiscounted cash flows were less than the carrying
value. Impairment could be impacted by our projection of future cash flows, the
level of cash flows and salvage values, the methods of estimation used for
determining fair values.

Lease Obligations and Commitments - We have obligations outstanding related to
equipment and debt as of June 30, 2002. We have 568 tractors under noncancelable
operating leases. In accordance with SFAS No. 13, "Accounting for Leases", the
rental expense for these leases is recorded as "lease expense - revenue
equipment." These operating leases are carried off balance sheet in accordance
with SFAS No. 13. The total amount outstanding under these agreements as of June
30, 2002, was $17.9 million, with $8.1 million due in the next 12 months.
Long-term debt and the outstanding balance on our revolving line of credit are
recorded at the carrying amount which represents the amount due at maturity.

Inventories and supplies - Inventory and supplies consist of tires, fuel, and
spare parts which are recorded at the lower of cost, using first-in, first-out
method, or net realizable value.

LIQUIDITY AND CAPITAL RESOURCES

The growth of our business has required a significant investment in new revenue
equipment. Our primary source of liquidity has been funds provided by operations
and our line of credit with our primary lender. During the fourth quarter of
2001, we registered with the Securities and Exchange Commission and sold
2,678,907 shares of our Common Stock through a public offering, which resulted
in net proceeds to us of $41,249,460. See our Registration Statements on Form
S-3 filed with the SEC on October 24, 2001 (File No. 333-72130), and November 2,
2001 (File No. 333-72688). The proceeds we received from this offering were used
for the repayment of indebtedness and for general corporate purposes. Net cash
provided by operating activities was approximately $28.7 million for the first
six months of 2002, compared to $20.3 million for the corresponding period in
2001.

15

Capital expenditures for the purchase of revenue equipment, net of trade-ins,
office equipment and leasehold improvements, totaled $12.7 million for the first
six months of 2002, compared to $10.4 million for the same period in 2001.

Net cash used in financing activities and direct financing was approximately
$0.7 million for the first six months of 2002, compared to net cash used of
$10.2 million for the same period in 2001. Net cash used in financing activities
during the first six months of 2002 was primarily for the payment of long-term
debt.

We maintain a line of credit totaling $50 million with our lender and use this
line to finance the acquisition of revenue equipment and other corporate uses to
the extent our need for capital is not provided by funds from operations. We are
obligated to comply with certain financial covenants under our line of credit.
The rate of interest on borrowings against the line of credit will vary
depending upon the interest rate election made by us, based upon either the
London Interbank Offered Rate ("Libor") plus an adjustment factor, or the prime
rate. The average interest rate for the three months ended June 30, 2002 was
2.47%. Borrowings under the line of credit amounted to $12.2 million at June 30,
2002. The line of credit expires in July 2003.

Through our subsidiaries, we have entered into operating lease agreements under
which we lease revenue equipment to independent contractors who contract to
transport loads for us. The total amount outstanding under these agreements as
of June 30, 2002, was $17.9 million, with interest rates from 5.2% to 8.2%, with
$8.1 million due in the next 12 months.

Management believes the Company has adequate liquidity to meet its current
needs. We will continue to have significant capital requirements over the long
term, which may require us to incur debt or seek additional equity capital. The
availability of this capital will depend upon prevailing market conditions, the
market price of the common stock and several other factors over which we have
limited control, as well as our financial condition and results of operations.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Our future results may be affected by a number of factors over which we have
little or no control. Fuel prices, insurance or claims costs, interest rates,
the availability of qualified drivers, fluctuations in the resale value of
revenue equipment, economic and customer business cycles and shipping demands
are economic factors over which we have little or no control. Significant
increases or rapid fluctuations in fuel prices, interest rates or insurance and
claims costs, to the extent not offset by increases in freight rates, and the
resale value of revenue equipment could reduce our profitability. Weakness in
the general economy, including a weakness in consumer demand for goods and
services, could adversely affect our customers and our growth and revenues, if
customers reduce their demand for transportation services. Weakness in customer
demand for our services or in the general rate environment may also restrain our
ability to increase rates or obtain fuel surcharges. It is also not possible to
predict the medium or long term effects of the September 11, 2001, terrorist
attacks and subsequent events on the economy or on customer confidence in the
United States, or the impact, if any, on our future results of operations.

16

The following issues and uncertainties, among others, should be considered in
evaluating our growth outlook:

BUSINESS UNCERTAINTIES. We have experienced significant and rapid growth in
revenue and profits since the inception of our business in 1990. There can be no
assurance that our business will continue to grow in a similar fashion in the
future or that we can effectively adapt our management, administrative, and
operational systems to respond to any future growth. Further, there can be no
assurance that our operating margins will not be adversely affected by future
changes in and expansion of our business or by changes in economic conditions.

INSURANCE. Our future insurance and claims expenses might exceed historical
levels, which could reduce our earnings. We currently self-insure for a portion
of our claims exposure resulting from cargo loss, personal injury, and property
damage, combined up to $1,750,000 per occurrence. Our worker's compensation
self-insurance level remains at a maximum of $500,000, and our health insurance
self-insurance level is $100,000 per person per year. If the number of claims,
or severity of claims, for which we are self-insured increases, our operating
results could be adversely affected. Also, we maintain insurance with licensed
insurance companies above the amounts for which we self-insure. After several
years of aggressive pricing, insurance carriers have raised premiums which has
increased our insurance and claims expense. The terrorist attacks of September
11, 2001, in the United States, and subsequent events, may result in additional
increases in our insurance expenses. If these expenses continue to increase, and
we are unable to offset the increase with higher freight rates, our earnings
could be materially affected.

REVENUE EQUIPMENT. Our growth has been made possible through the addition of new
revenue equipment. Difficulty in financing or obtaining new revenue equipment
(for example, delivery delays from manufacturers or the unavailability of
independent contractors) could restrict future growth.

In the past we have acquired new tractors and trailers at favorable prices, and
have entered into agreements with the manufacturers to repurchase the tractors
from us at agreed prices. Current developments in the secondary tractor and
trailer resale market have resulted in a large supply of used tractors and
trailers on the market. This supply of tractors has depressed the market value
of used equipment to levels significantly below the prices at which the
manufacturers have agreed to repurchase the equipment. Accordingly, some
manufacturers may refuse or be financially unable to keep their commitments to
repurchase equipment according to their repurchase agreement terms. We
understand that some manufacturers have communicated to customers their
intention to significantly increase new equipment prices and eliminate or
sharply reduce the price of repurchase commitments. See Part II, Item 1, Legal
Proceedings, below for a discussion of the resolution of our dispute with
Freightliner, L.L.C.

Our business plan and our current contract take into account new equipment price
increases due to engine design requirements imposed effective October 1, 2002,
by the Environmental Protection Agency. If new equipment prices were to increase
more than anticipated, or if the price of repurchase commitments were to
decrease, we may be required to increase our depreciation and financing costs,
write down the value of used equipment, or retain some of our equipment longer,
with the resulting increase in operating expense. If our resulting cost of
revenue equipment were to increase, or prices of used revenue equipment were to
decline, and if we were unable to offset these increases through rate increases
or cost savings, our operating costs could increase, which could materially and
adversely affect our earnings and cash flows.

17

REGIONAL OPERATIONS. Currently, a significant portion of our business is
concentrated in the Arizona and California markets and a general economic
decline or a natural disaster in either of these markets could have a material
adverse effect on our growth and profitability. If we are successful in deriving
a more significant portion of our revenues from markets in the Midwest, South
Central, Southeastern and Southern regions and on the East Coast, our growth and
profitability could be materially adversely affected by general economic
declines or natural disasters in those markets.

In addition to our headquarters in Phoenix, Arizona, we have established
regional operations in Katy, Texas; Indianapolis, Indiana; Charlotte, North
Carolina; Gulfport, Mississippi; Salt Lake City, Utah; Kansas City, Kansas; and
Portland, Oregon in order to serve markets in these regions. These regional
operations require the commitment of additional revenue equipment and personnel,
as well as management resources, for future development. Should the growth of
our regional operations throughout the United States slow or stagnate, the
results of our operations could be adversely affected. We may encounter
operating conditions in these new markets that differ substantially from those
previously experienced in our western United States markets. There can be no
assurance that our regional operating strategy, as employed in the western
United States, can be duplicated successfully in the other areas of the United
States or that it will not take longer than expected or require a more
substantial financial commitment than anticipated.

TECHNOLOGY. We utilize Terion's trailer-tracking technology to assist with
monitoring the majority of our trailers. Terion has filed for bankruptcy
protection and is attempting a reorganization under Chapter 11 of the Federal
Bankruptcy Code. If Terion ceases operations or abandons that technology, we
would be required to incur the cost of replacing that technology or could be
forced to operate without this trailer-tracking technology, which could
adversely affect our trailer utilization and our ability to assess detention
charges.

INVESTMENTS. We have invested $200,000 and loaned approximately $2.26 million to
Concentrek, Inc., ("Concentrek") a transportation logistics company on a secured
basis. We own approximately 17% of Concentrek, and the remainder is owned by
members of the Knight family and Concentrek's management. Randy Knight, Kevin
Knight, Gary Knight and Keith Knight have personally guaranteed $2,100,000 of
our loan to Concentrek. If Concentrek's financial position does not continue to
improve, and if it is unable to raise additional capital, we could be forced to
write down all or part of that investment.

DRIVER RETENTION. Difficulty in attracting or retaining qualified drivers,
including independent contractors, or a downturn in customer business cycles or
shipping demands also could have a material adverse effect on our growth and
profitability. If a shortage of drivers should occur in the future, or if we
were unable to continue to attract and contract with independent contractors, we
could be required to adjust our driver compensation package, which could
adversely affect our profitability if not offset by a corresponding increase in
rates.

SEASONALITY. In the transportation industry, results of operations frequently
show a seasonal pattern. Seasonal variations may result from weather or from
customer's reduced shipments after the busy winter holiday season. To date, our
revenue has not shown any significant seasonal pattern. Because we operate
primarily in Arizona, California and the western United States, winter weather
conditions have generally not adversely affected our business. The expansion of
our operations in the Midwest, Rocky Mountain region the East Coast, and the
Southeast and Gulf Coast regions, could expose us to greater operating variances

18

due to seasonal weather in these regions. Shortage of energy issues in
California and elsewhere in the Western United States could result in an adverse
effect on our operations and demand for our services should these shortages
continue or increase. This risk may exist in the other regions in which we
operate, depending upon future changes in the energy industry.

INFLATION. Many of our operating expenses, including fuel costs and fuel taxes,
are sensitive to the effects of inflation, which could result in higher
operating costs. During 2000, 2001 and the first six months of 2002, we
experienced fluctuations in fuel costs, as a result of conditions in the
petroleum industry. We have also periodically experienced some wage increases
for drivers. Increases in fuel costs and driver compensation are expected to
continue during 2002 and may affect our operating income, unless we are able to
pass those increased costs to customers through rate increases or fuel
surcharges. We have initiated an aggressive program to obtain rate increases and
fuel surcharges from customers in order to cover increased costs due to these
increases in fuel prices, driver compensation and other expenses and have been
successful in implementing some fuel surcharges. Competitive conditions in the
transportation industry, including fluctuating demand for transportation
services, could limit our ability to continue to obtain rate increases or fuel
surcharge.

For other risks and uncertainties that might affect our future operations,
please review Part II of our Annual Report on Form 10-K - "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS -
FACTORS THAT MAY AFFECT FUTURE RESULTS."

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in interest rate on debt and
from changes in commodity prices. Under Financial Accounting Reporting Release
Number 48, we are required to disclose information concerning market risk with
respect to foreign exchange rates, interest rates, and commodity prices. We have
elected to make such disclosures, to the extent applicable, using a sensitivity
analysis approach, based on hypothetical changes in interest rates and commodity
prices.

Except as described below, we have not had occasion to use derivative financial
instruments for risk management purposes and do not use them for either
speculation or tracking. Because our operations are confined to the United
States, we are not subject to foreign currency risk.

INTEREST RATE RISK. We are subject to interest rate risk to the extent we borrow
against our line of credit or incur debt in the acquisition of revenue
equipment. We attempt to manage our interest rate risk by managing the amount of
debt we carry. We have not issued debt instruments. An increase in short-term
interest rates could have a material adverse effect on our financial condition
if our debt levels increase and if the interest rate increases are not offset by
freight rate increases or other items. We have entered into an interest rate
swap agreement with our primary lender to better manage cash flow.

Under this swap agreement a one- percent (1%) increase or decrease in interest
rates would result in a corresponding increase or decrease in annual interest
expense of approximately $122,000. Management does not foresee or expect in the
near future any significant changes in our exposure to interest rate
fluctuations or in how that exposure is managed by us. We have not issued
corporate debt instruments.

COMMODITY PRICE RISK. We are also subject to commodity price risk with respect
to purchases of fuel. Prices and availability of petroleum products are subject
to political, economic and market factors that are generally outside our
control. Because our operations are dependent upon diesel fuel, significant
increases in diesel fuel costs could materially and adversely affect our results
of operations and financial condition if we are unable to pass increased costs
on to customers through rate increases or fuel surcharges. Historically, we have
sought to recover a portion of our short-term fuel price increases from
customers through fuel surcharges. Fuel surcharges that can be collected do not
always offset the increase in the cost of diesel fuel. For the three months
ended June 30, 2002, fuel expense, net of fuel surcharge, represented 16.2% of
our total operating expenses, net of fuel surcharge, compared to 15.1% for the
same period ending in 2001.

19

In August and September 2000, we entered into two agreements to obtain price
protection to reduce a portion of our exposure to fuel price fluctuations. Under
these agreements, we purchased 1,000,000 gallons of diesel fuel, per month, for
a period of six months from October 1, 2000 through March 31, 2001. If during
the 48 months following March 31, 2001, the price of heating oil on the New York
Mercantile Exchange (NY MX HO) falls below $.58 per gallon, we may be obligated
to pay, for a maximum of 12 different months as selected by the contract holder
during the 48-month period beginning after March 31, 2001, the difference
between $.58 per gallon and NY MX HO average price for the minimum volume
commitment. In July 2001, we entered into a similar agreement. Under this
agreement, we purchased 750,000 gallons of diesel fuel, per month, for a period
of six months beginning September 1, 2001 through February 28, 2002. If during
the 12-month period commencing January 2005 through December 2005, the price
index discussed above falls below $.58 per gallon, we may be obligated to pay
the difference between $.58 and the stated index. Management estimates that any
potential future payment under any of these agreements would be less than the
amount of our savings for reduced fuel costs. For example, management estimates
that a further reduction of $0.10 in the NY MX HO average price would result in
a net savings, after making a payment on this agreement, to our total fuel
expenses of approximately $1.9 million. Future increases in the NY MX HO average
price would result in us not having to make payments under these agreements.
Management's current valuation of the fuel purchase agreements indicates there
was no material impact upon adoption of SFAS No. 133 on our results of
operations and financial position, and we have valued these items at fair value
in the accompanying June 30, 2002, consolidated financial statements.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a party to ordinary, routine litigation and administrative
proceedings incidental to its business. These proceedings primarily involve
personnel matters, including Equal Employment Opportunity Commission ("EEOC")
claims and claims for personal injury or property damage incurred in the
transportation of freight. The Company maintains insurance to cover liabilities
arising from the transportation of freight for amounts in excess of self-insured
retentions. It is the Company's policy to comply with applicable equal
employment opportunity laws and the Company periodically reviews its policies
and practices for equal employment opportunity compliance.

On July 31, 2002, we reached a resolution of our litigation with Freightliner,
L.L.C. ("Freightliner") through successful mediation. We initiated this
litigation to protect our contractual and other rights concerning new equipment
purchase prices and tractor repurchase commitments made to us by Freightliner.
We are pleased to put this conflict behind us and hope to develop a positive
working relationship with Freightliner in the near future.

ITEM 2. CHANGES IN SECURITIES

Not Applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

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

Not Applicable

20

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits required by Item 601 of Regulation S-K

Exhibit No. Description
----------- -----------
Exhibit 3 Instruments defining the rights of security holders,
including indentures

(3.1) Restated Articles of Incorporation of the Company
(Incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1. No
33-83534.)

(3.2) Amended and Restated Bylaws of the Company
(Incorporated by reference to Exhibit 3.2 to the
Company's report on Form 10-K for the period ending
December 31, 1996.)

Exhibit 4 Instruments defining the rights of security holders,
including indentures

(4.1) Articles 4, 10 and 11 of the Restated Articles of
Incorporation of the Company. (Incorporated by
reference to Exhibit 3.1 to the Company's Report on
Form 10-K for the fiscal year ended December 31, 1994.)

(4.2) Sections 2 and 5 of the Amended and Restated Bylaws of
the Company. (Incorporated by reference to Exhibit 3.2
to the Company's Report on Form 10-K for the fiscal
year ended December 31, 1995.)

Exhibit 11 Schedule of Computation of Net Income Per Share
(Incorporated by reference from Note 2, Net Income Per
Share, in the Notes To Condensed Consolidated Financial
Statements on Form 10-Q, for the quarter ended June 30,
2002.)

(b) Reports on Form 8-K

Form 8-K filed May 3,2002, announcing change in Company's certifying
accountant.


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SIGNATURES

Pursuant to the requirements 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.


KNIGHT TRANSPORTATION, INC.


Date: August 9, 2002 By: /s/ Kevin P. Knight
------------------------------------
Kevin P. Knight
Chief Executive Officer


Date: August 9, 2002 By: /s/ Timothy Kohl
------------------------------------
Timothy Kohl
Chief Financial Officer and
Principal Financial Officer

22

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


EXHIBITS TO
FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,
2002 Commission File No. 0-24946




















23

KNIGHT TRANSPORTATION, INC.

INDEX TO EXHIBITS TO FORM 10-Q

Sequentially
Exhibit No. Description Numbered Pages(1)
- ----------- ----------- -----------------

Exhibit 4 Instruments defining the rights of
security holders, including indentures

(a) Articles 4, 10 and 11 of the Restated
Articles of Incorporation of the Company.
(Incorporated by reference to Exhibit
3.1 to the Company's Report on Form 10-K
for the fiscal year ended December 31, 1994.)

(b) Sections 2 and 5 of the Amended and Restated
By-laws of the Company. (Incorporated by
reference to Exhibit 3.2 to the Company's
Report on Form 10-K for the fiscal year
ended December 31, 1995.)

(1) The page numbers where exhibits (other than those incorporated by
reference) may be found are indicated only on the manually signed report.

24