UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the Quarterly Period Ended September 30, 2003 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number: 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. X Yes No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). [X] Yes [ ] No The number of shares outstanding of registrant's Common Stock, par value $0.01 per share, as of October 16, 2003 was 37,430,866 shares. KNIGHT TRANSPORTATION, INC. INDEX PART I - FINANCIAL INFORMATION Page Number Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2003 1 and December 31, 2002 Condensed Consolidated Statements of Income for the Three 3 Months and Nine Months Ended September 30, 2003 and September 30, 2002 Condensed Consolidated Statements of Cash Flows for the Nine 4 Months ended September 30, 2003 and September 30, 2002 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition 10 And Results of Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk 18 Item 4. Controls and Procedures 18 Part II - OTHER INFORMATION Item 1. Legal Proceedings 20 Item 2. Changes in Securities and Use of Proceeds 20 Item 3 Defaults Upon Senior Securities 20 Item 4. Submission of Matters to a Vote of Security Holders 20 Item 5. Other Information 20 Item 6. Exhibits and Reports on Form 8-K 20 Signatures 23 Part I - Financial Information Item 1. Financial Statements KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands) September 30, 2003 December 31, 2002 ------------------------ ----------------------- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 44,814 $ 36,198 Accounts receivable, net of allowance for doubtful accounts of $1,740 and $1,325, respectively 40,914 40,356 Notes receivable, net 628 956 Inventories and supplies 1,348 1,345 Prepaid expenses 9,103 9,653 Deferred tax asset 4,838 3,428 ------------------------ ----------------------- Total current assets 101,645 91,936 ------------------------ ----------------------- PROPERTY AND EQUIPMENT: Land and improvements 13,860 14,158 Buildings and improvements 14,579 12,898 Furniture and fixtures 6,329 6,134 Shop and service equipment 2,351 1,975 Revenue equipment 249,152 211,184 Leasehold improvements 1,303 1,049 ------------------------ ----------------------- 287,574 247,398 Less: Accumulated depreciation and amortization (79,211) (70,505) ------------------------ ----------------------- PROPERTY AND EQUIPMENT, net 208,363 176,893 ------------------------ ----------------------- NOTES RECEIVABLE - long-term, net 524 1,487 ------------------------ ----------------------- OTHER ASSETS 12,578 13,524 ------------------------ ----------------------- $ 323,110 $ 283,840 ======================== ======================= The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (continued) (In thousands, except par values) September 30, 2003 December 31, 2002 ------------------------ -------------------------- (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 9,555 $ 7,749 Accrued payroll 3,909 3,571 Accrued liabilities 5,287 3,227 Current portion of long-term debt - 2,715 Claims accrual 13,541 10,419 ------------------------ --------------------------- Total current liabilities 32,292 27,681 LINE OF CREDIT 12,200 12,200 DEFERRED INCOME TAXES 49,934 44,302 ------------------------ --------------------------- Total liabilities 94,426 84,183 ------------------------ --------------------------- COMMITMENTS AND CONTINGENCIES (note 8) SHAREHOLDERS' EQUITY: Preferred stock, $0.01 par value; authorized 50,000 shares, none issued and outstanding - - Common stock, $0.01 par value; authorized 100,000 shares; 37,401 and 37,145 shares issued and outstanding at September 30, 2003 and December 31, 2002, respectively 374 371 Additional paid-in capital 76,806 73,521 Retained earnings 151,638 126,148 Accumulated other comprehensive loss (134) (383) ------------------------ --------------------------- Total shareholders' equity 228,684 199,657 ------------------------ --------------------------- $323,110 $283,840 ======================== =========================== The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (unaudited) (In thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ---- ---- ---- ---- REVENUE Revenue, before fuel surcharge $84,445 $72,777 $239,786 $202,974 Fuel surcharge 3,194 1,785 10,171 3,756 ---------------- ----------------- ------------------ ------------------ Total revenue 87,639 74,562 249,957 206,730 ---------------- ----------------- ------------------ ------------------ OPERATING EXPENSES: Salaries, wages and benefits 26,908 24,506 77,097 68,706 Fuel 14,277 11,633 42,142 31,343 Operations and maintenance 5,444 4,743 15,165 12,228 Insurance and claims 4,136 3,196 12,237 8,870 Operating taxes and licenses 2,342 1,921 6,758 5,705 Communications 769 577 2,236 1,750 Depreciation and amortization 7,744 5,793 21,796 16,672 Lease expense - revenue equipment 1,920 2,304 5,843 6,904 Purchased transportation 6,465 5,607 18,519 16,134 Miscellaneous operating expenses 1,816 1,784 5,535 5,195 ---------------- ----------------- ------------------ ------------------ 71,821 62,064 207,328 173,507 ---------------- ----------------- ------------------ ------------------ Income from operations 15,818 12,498 42,629 33,223 ---------------- ----------------- ------------------ ------------------ OTHER INCOME (EXPENSE): Interest income 110 276 419 731 Interest expense (165) (237) (548) (750) ---------------- ----------------- ------------------ ------------------ (55) 39 (129) (19) ---------------- ----------------- ------------------ ------------------ Income before taxes 15,763 12,537 42,500 33,204 INCOME TAXES (6,300) (5,100) (17,010) (13,510) ---------------- ----------------- ------------------ ------------------ Net income $9,463 $7,437 $ 25,490 $ 19,694 ================ ================= ================== ================== Net income per common share and common share equivalent: Basic $0.25 $0.20 $0.68 $0.53 ================ ================= ================== ================== Diluted $0.25 $0.20 $0.67 $0.52 ================ ================= ================== ================== Weighted average number of common shares and common share equivalents outstanding: Basic 37,388 37,047 37,305 36,981 ================ ================= ================== ================== Diluted 38,335 38,001 38,230 38,059 ================ ================= ================== ================== The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited) (In thousands) Nine Months Ended September 30, 2003 2002 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 25,490 $ 19,694 Adjustments to reconcile net income to net cash Provided by operating activities: Depreciation and amortization 21,796 16,672 Non-cash compensation expense for issuance of 23 -- stock to certain members of board of directors Allowance for doubtful accounts 401 330 Interest rate swap agreement - fair value change 249 264 Tax benefit from exercise of stock options 1,638 974 Deferred income taxes 4,222 3,705 Changes in assets and liabilities: Increase in trade receivables (973) (5,802) (Increase) decrease in inventories and supplies (3) 728 Decrease (increase) in prepaid expenses 550 (1,153) Increase in other assets (441) -- Increase in accounts payable 1,604 1,256 Increase in accrued liabilities and claims accrual 5,520 6,428 --------------------- ------------------ Net cash provided by operating activities 60,076 43,096 --------------------- ------------------ CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property and equipment, net (53,064) (23,297) Investment in/advances to other companies (213) (925) Cash received from advance to other company 1,600 - Decrease in notes receivable, net 1,305 683 --------------------- ------------------ Net cash used in investing activities (50,372) (23,539) --------------------- ------------------ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited) (continued) (In thousands) Nine Months Ended September 30, 2003 2002 ---- ---- CASH FLOW FROM FINANCING ACTIVITIES: Payments on long-term debt (2,715) (2,614) Proceeds from exercise of stock options 1,627 1,624 ---------------------- --------------------- Net cash used in financing activities (1,088) (990) ---------------------- --------------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 8,616 18,567 CASH AND CASH EQUIVALENTS, Beginning of period 36,198 24,136 ---------------------- --------------------- CASH AND CASH EQUIVALENTS, end of period $ 44,814 $ 42,703 ====================== ===================== SUPPLEMENTAL DISCLOSURES: Noncash investing and financing transactions: Equipment acquired in accounts payable $ 4,476 $ -0- Cash Flow Information: Income taxes paid $ 9,911 $ 5,700 Interest paid 297 589 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. Financial Information The accompanying condensed consolidated financial statements include the accounts of Knight Transportation, Inc., and its wholly owned subsidiaries (the Company). All material inter-company balances and transactions have been eliminated in consolidation. The condensed consolidated financial statements included herein are unaudited and 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, 2002. 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. Stock Based Compensation Stock-Based Compensation - At September 30, 2003, the Company had one stock-based employee compensation plan. The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations including Financial Accounting Standards Board (FASB) Interpretation No. 44, "Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25," issued in March 2000, to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. No stock-based employee compensation cost is reflected in net income, as all options granted under the plan had an exercise price equal to the market value of the underlying common stock on the date of the grant. SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by Statement of Financial Accounting Standards (SFAS) No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 123. The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding and unvested awards for the three and nine-month periods ended September 30, 2003 and 2002 (in thousands, except per share data): Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ---- ---- ---- ---- Net income, as reported $ 9,463 $ 7,437 $ 25,490 $ 19,694 Deduct total stock-based compensation expense determined under fair-value based method for all rewards, net of tax (256) (165) (767) (494) ---------------- ---------------- --------------- ---------------- Pro forma net income $ 9,207 $ 7,272 $ 24,723 $ 19,200 ================ ================ =============== ================ Diluted earnings per share: As reported $0.25 $0.20 $0.67 $0.52 ================ ================ =============== ================ Pro forma $0.24 $0.19 $0.65 $0.50 ================ ================ =============== ================ The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2003: risk free interest rate 3.36%; expected life of six years; expected volatility of 51%; expected dividend yield rate of zero; and expected forfeitures of 3.51%. The following weighted average assumptions were used for grants in 2002: risk free interest rate 3.36%; expected life of six years; expected volatility of 52%; expected dividend yield rate of zero; and expected forfeitures of 3.92%. 7 Note 3. Net Income Per Share A reconciliation of the basic and diluted earnings per share computations for the three months and nine months ended September 30, 2003 and 2002 was as follows: (in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ---- ---- ---- ---- Weighted average common shares outstanding - Basic 37,388 37,047 37,305 36,981 Effect of stock options 947 954 925 1,078 ---------------- ---------------- --------------- ---------------- Weighted average common share and common share equivalents outstanding - Diluted 38,335 38,001 38,230 38,059 ================ ================ =============== ================ Net income $ 9,463 $ 7,437 $ 25,490 $ 19,694 ================ ================ =============== ================ Net income per common share and common share equivalent Basic $0.25 $0.20 $0.68 $0.53 ================ ================ =============== ================ Diluted $0.25 $0.20 $0.67 $0.52 ================ ================ =============== ================ Note 4. Comprehensive Income Comprehensive income for the three and nine-month periods ended September 30, 2003 and 2002 was as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ---- ---- ---- ---- Net Income $9,463 $7,437 $25,490 $19,694 Other comprehensive income: Interest rate swap agreement - fair market value adjustment 82 86 249 263 ---------------- ---------------- --------------- ---------------- Comprehensive income $9,545 $7,523 $25,739 $19,957 ================ ================ =============== ================ Note 5. Segment Information Although we have fifteen operating divisions, we have determined that we have one reportable segment. Fourteen of the divisions are managed based on regions in the United States in which we operate. Each of these divisions 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 division exhibits similar financial performance, including average revenue per mile and operating ratio. The remaining 8 division is not reported because it does not meet the materiality thresholds in SFAS No. 131, "Disclosures about Segments of an Enterprise and Related information". 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 6. Derivative Instruments and Hedging Activities 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 assess, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash flows of hedged items. When it is determined that a derivative is not effective as a hedge or that it has ceased to be an effective hedge, we discontinue hedge accounting prospectively. In August and September 2000, and in July 2001, we entered into three agreements, respectively, which are designated as derivative contracts. These three contracts relate to the price of heating oil on the New York Merchantile Exchange ("NYMX") and were entered into in connection with volume diesel fuel purchases between October 2000 and February 2002. The three agreements described above are stated at their fair market value in the accompanying condensed consolidated financial statements. During 2001, we entered into an interest rate swap agreement on the $12.2 million outstanding on our 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 is included in other comprehensive income and is being amortized to interest expense over the original 36-month term of the swap agreement. Note 7. Recently Adopted and to be Adopted Accounting Pronouncements In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities." 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, recognition of costs to consolidate facilities or relocate employees and recognition of costs for 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 adoption of SFAS No. 146 did not have a material impact on our consolidated financial statements. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34." This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. This interpretation also clarifies that a guarantor is required to recognize at the inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of this interpretation are applicable to guarantees issued or modified after December 31, 2002, and are not expected to have a material effect on our consolidated financial statements. The disclosure requirements are effective for financial statements of interim and annual periods ending after December 31, 2002. The application of this interpretation did not have a material effect on our consolidated financial statements. 9 In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51." This interpretation addresses the consolidation by business enterprises of variable interest entities as defined in this interpretation. This interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. For public enterprises with a variable interest in a variable interest entity created before February l, 2003, this interpretation applies to that enterprise no later than the beginning of the first interim or annual reporting period beginning after December 15, 2003. The application of this interpretation is not expected to have a material effect on our consolidated financial statements. In April 2003, the Financial Accounting Standards Board issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." It is effective for contracts entered into or modified after June 30, 2003, except as stated within the statement, and should be applied prospectively. The adoption of SFAS No. 149 did not have a material impact on our consolidated financial statements. On May 15, 2003, the Financial Accounting Standards Board issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150 requires issuers to classify as liabilities (or assets in some circumstances) three classes of freestanding financial instruments that embody obligations for the issuer. Generally, SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. We adopted the provisions of SFAS No. 150 on July 1, 2003. The adoption of SFAS No. 150 did not have a material impact on our consolidated financial statements. 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. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Except for certain historical information contained herein, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, assumptions and uncertainties which 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 in forward-looking statements. 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. 10 Overview We are a dry van truckload carrier based in Phoenix, Arizona. We transport general commodities for shippers throughout the United States, generally focusing our operations on short-to-medium lengths of haul in our eleven operating centers. Over the past five years we have achieved substantial growth from $125.0 million in revenue, before fuel surcharge, and $13.3 million in net income in 1998 to $279.3 million in revenue, before fuel surcharge, and $27.9 million in net income in 2002. The main factors that affect our results are the number of tractors we operate, our revenue per tractor (which includes primarily our revenue per total mile and our number of miles per tractor), and our ability to control our costs. For the quarter ended September 30, 2003, our revenue, before fuel surcharge, increased 16.0% to $84.4 million from $72.8 million for the same quarter of 2002. Net income increased 28.4% to $9.5 million from $7.4 million, and net income per diluted share increased to $0.25 from $0.20. The main factors contributing to the improvement were a 14.8% increase in average tractors and a 1.0% increase in revenue per tractor versus the 2002 quarter. We expanded our business geographically and increased our volume in existing territories. These factors more than offset higher costs of insurance, maintenance and fuel. We ended the quarter with $44.8 million in cash and $12.2 million in borrowings. Our shareholders' equity was $228.7 million. Note Regarding Revenue and Expenses Our total revenue for the three months ended September 30, 2003, increased to $87.7 million from $74.6 million for the same period in 2002. Total revenue included $3.2 million of fuel surcharge revenue in the 2003 period and $1.8 million of fuel surcharge revenue in the 2002 period. In discussing our results of operations we use revenue, before fuel surcharge, (and fuel expense, net of surcharge), because we believe that eliminating this sometimes volatile source of revenue affords a more consistent basis for comparing our results of operations from period to period. We also discuss the changes in our expenses as a percentage of revenue, before fuel surcharge, rather than absolute dollar changes. We do this because we believe the high variable cost nature of our business makes a comparison of changes in expenses as a percentage of revenue more meaningful than absolute changes. Results of Operations Our revenue, before fuel surcharge, for the nine months ended September 30, 2003, increased by 18.1% to $240.0 million from $203.0 million for the same period in 2002. For the three months ended September 30, 2003, revenue, before fuel surcharge, increased by 16.0% to $84.4 million from $72.8 million for the same period in 2002. The increase in revenue, before fuel surcharge, for the first nine months of 2003 resulted primarily from a 14.8% increase in average tractors as we expanded our geographic coverage and increased our business in existing territories, as well as a 1.0% increase in revenue per average tractor. The increase in our revenue per tractor primarily was attributable to increased revenue per mile resulting from our sales efforts and a market that was more receptive to rate increases. Salaries, wages and benefits decreased as a percentage of revenue, before fuel surcharge, to 32.2% for the nine months ended September 30, 2003, from 33.8% for the same period in 2002. For the three months ended September 30, 2003, salaries, wages and benefits decreased as a percentage of revenue, before fuel surcharge, to 31.9% from 33.7% for the same period in 2002. These decreases were primarily the result of increased revenue per mile, which increased the revenue generated per tractor without an increase in the miles for which our drivers were compensated, along with continued efforts at improving efficiencies throughout back-office functions. During this quarter we increased our driver pay scale by $0.01 per mile, and plan to make an additional $0.01 per mile available for our higher performing driving associates by the end of the first quarter of 2004. Our cost of health insurance and worker's compensation programs, which are included in salaries, wages and benefits, remained relatively constant as a percentage of revenue between the two periods. 11 Fuel expense, net of fuel surcharge, decreased as a percentage of revenue, before fuel surcharge, to 13.3% for the nine months ended September 30, 2003, compared to 13.6% for the same period in 2002. For the three months ended September 30, 2003, fuel expense, net of fuel surcharges, as a percentage of revenue, before fuel surcharge, decreased to 13.1% from 13.5% for the same period in 2002. These decreases were primarily the result of increases in revenue per mile. Our independent contractors pay their own fuel costs. Operations and maintenance expense increased as a percentage of revenue, before fuel surcharge, to 6.3% for the nine months ended September 30, 2003 from 6.0% for the same period in 2002. These increases were primarily due to increased tire expenses and increased maintenance expenses due to the aging of our fleet. For the three months ended September 30, 2003, operations and maintenance expense remained relatively unchanged as a percentage of revenue, before fuel surcharge, at 6.4% compared to 6.5% for the same period in 2002. Insurance and claims expense increased as a percentage of revenue, before fuel surcharge, to 5.1% for the nine months ended September 30, 2003, from 4.4% for the same period in 2002. For the three months ended September 30, 2003, insurance and claims expense increased as a percentage of revenue, before fuel surcharge, to 4.9% from 4.4% for the same period in 2002. The primary reasons for these increases were higher insurance premiums and an increase in our self-insurance retention level. Based on our current insurance policies and experience, and assuming the absence of any catastrophic events, we expect our insurance and claims expense to be approximately 4.7% to 5.3% of revenue, before fuel surcharge, for the next several quarters. Operating taxes and licenses remained constant as a percentage of revenue, before fuel surcharge, at 2.8% for the nine months ended September 30, 2003 and for the same period in 2002. For the three months ended September 30, 2003, operating taxes and licenses as a percentage of revenue, before fuel surcharge, increased slightly to 2.8% from 2.6% for the same period of 2002. Communications expense as a percentage of revenue, before fuel surcharge, for both the nine months and three months ended September 30, 2003, remained relatively consistent with the same periods in 2002, at less than 1.0% of revenue. Depreciation and amortization expense as a percentage of revenue, before fuel surcharge, increased to 9.1% for the nine month period ended September 30, 2003, from 8.2% for the same period in 2002. For the three months ended September 30, 2003, depreciation and amortization increased as a percentage of revenue, before fuel surcharge, to 9.2% from 8.0% for the same period in 2002. These increases were primarily related to an increase in the percentage of our company fleet comprised of purchased vehicles. Our company fleet includes purchased vehicles and vehicles acquired under operating lease agreements, while our total fleet includes vehicles in our company fleet and vehicles provided by independent contractors. Lease expense for revenue equipment as percentage of revenue, before fuel surcharge, was 2.4% for the nine months ended September 30, 2003, compared to 3.4% for the same period in 2002. For the three months ended September 30, 2003, lease expense for revenue equipment as a percentage of revenue, before fuel surcharge, was 2.3% compared to 3.2% for the same period in 2002. These decreases were primarily due to the increase in purchased vehicles, and the associated decrease in operating lease vehicles, as a percentage of our company fleet, as discussed above. Purchased transportation decreased as a percentage of revenue, before fuel surcharge, to 7.7% for the nine months ended September 30, 2003, from 7.9% for the same period in 2002. This decrease was primarily due to the increase in revenue per mile. For the three months ended September 30, 2003, and for the same period of 2002, purchased transportation as a percentage of revenue, before fuel surcharge, remained constant at 7.7%. Our independent contractors provided 9.8% of our total fleet at September 12 30, 2003, compared to 9.4% for the same period in 2002. Independent contractors pay their own operating expenses and are compensated at a fixed rate per mile. Miscellaneous operating expenses decreased as a percentage of revenue, before fuel surcharge, to 2.3% for the nine months ended September 30, 2003, from 2.6% for the same period in 2002. For the three months ended September 30, 2003, miscellaneous operating expenses as a percentage of revenue, before fuel surcharge, decreased to 2.2% from 2.5% for the same period in 2002. These decreases as a percentage of revenue were attributable to higher revenue per mile, which more efficiently spread these costs over greater revenue. 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 nine months ended September 30, 2003, decreased to 82.2% from 83.6% for the same period in 2002. Our operating ratio decreased to 81.3% for the three months ended September 30, 2003, compared to 82.8% for the same period in 2002. For the nine months and three months ended September 30, 2003, net interest expense as a percentage of revenue, before fuel surcharge, remained at less than 0.1%, consistent with net interest expense levels for the same periods in 2002. Income taxes have been provided at the statutory federal and state rates, adjusted for certain permanent differences between financial statement and income tax reporting. Our effective tax rate declined from 40.7% to 40.0% from the 2002 periods to the 2003 periods as a result of certain tax management techniques. As a result of the preceding changes, our net income as a percentage of revenue, before fuel surcharge, was 10.6% for the nine months ended September 30, 2003, compared to 9.7% for the same period in 2002. For the three months ended September 30, 2003, net income as a percentage of revenue, before fuel surcharge, was 11.2%, compared to 10.2% for the same period in 2002. Liquidity and Capital Resources The growth of our business has required significant investment in new revenue equipment. Our primary sources of liquidity have been funds provided by operations and our line of credit. Net cash provided by operating activities was approximately $60.1 million for the first nine months of 2003, compared to $43.1 million for the corresponding period in 2002. Net cash used in investing activities totaled $50.4 million for the first nine months of 2003 compared to $23.5 million for the same period in 2002. The increase was the result of an increase in delivery and payment for revenue equipment in the 2003 period, compared to the 2002 period. The 2002 period was an unusually low period for us with respect to deliveries of revenue equipment. We expect our capital expenditures, net of dispositions, to be approximately $10.0 million for the remainder of 2003. Net cash used in financing activities remained relatively consistent at approximately $1.1 million for the first nine months of 2003, compared to $1.0 million for the same period in 2002. Net cash used in financing activities during the first nine months of 2003 and 2002 was primarily for the payment of interest on long-term debt. We currently maintain a line of credit totaling $22.2 million. Historically this line of credit had been maintained at $50.0 million. Due to our continued strong positive cash position, and in an effort to minimize bank fees, we feel it is currently only necessary to maintain a line of credit equal to our current outstanding balance on that line, along with the letter of credit subfacility. We believe any necessary increase in our line of credit could be accomplished quickly as needed. We are obligated to comply with certain financial covenants under our line of credit and were in compliance with these covenants at 13 September 30, 2003. 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 applicable margin, or the prime rate. Borrowings under the line of credit amounted to $12.2 million at September 30, 2003. The line of credit expires in September 2005. The line of credit contains a letter of credit subfacility of $10.0 million that directly reduces available borrowing. At September 30, 2003, the total amount of issued but unused letters of credit was $7.7 million. Through our subsidiaries, we have entered into lease agreements under which we lease revenue equipment. The total amount outstanding under these off-balance sheet operating leases as of September 30, 2003, was $8.7 million, with $4.3 million due in the next 12 months. As of September 30, 2003, we held $44.8 million in cash and cash equivalents. We believe we will be able to finance our near term needs for working capital, as well as acquisitions of revenue equipment, with cash flows from operations, borrowings available under our line of credit or other sources, and operating lease financing believed to be available to finance revenue equipment. 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. Critical Accounting Policies The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires that management make a number of assumptions and estimates that affect the reported amounts of assets, liabilities, revenue and expenses in our consolidated financial statements and accompanying notes. Our critical accounting policies are those that affect our financial statements materially and involve a significant level of judgment by management. Our critical accounting policies include revenue recognition, insurance and claims reserves, depreciation and amortization, valuation of long-lived assets and accounting for income taxes. For additional information, please refer to the discussion of Critical Accounting Policies contained in our most recent annual report on Form 10-K under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" and in the footnotes to our consolidated financial statements, particularly note 1. There were no significant changes in our critical accounting policies during the first nine months of 2003. 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 and claims costs, liability claims, regulating requirements that may increase costs or decrease efficiency, including revised hours-of-service requirements for drivers, the availability of qualified drivers, interest rates, fluctuations in the resale value of revenue equipment, economic and customer business cycles and shipping demands are factors over which we have little or no control. Significant increases or rapid fluctuations in fuel prices, interest rates or insurance costs or liability claims, and increases in costs of compliance with, or decreases in efficiency resulting from, regulatory requirements, to the extent not offset by fuel surcharges and increases in freight rates, as well as downward changes in 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 effects of 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. 14 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. During 2002, we were self-insured for personal injury and property damage liability, cargo liability, collision and comprehensive up to a maximum limit of $1.75 million per occurrence. We were self-insured for workers' compensation up to a maximum limit of $500,000 per occurrence. In the first quarter of 2003, we amended our self-insurance retention levels to a combined $2.0 million for personal injury and property damage liability, cargo liability, collision, comprehensive and workers' compensation per occurrence. Our maximum self-retention for workers' compensation where a traffic accident is not involved remains $500,000 per occurrence. We maintain insurance with licensed insurance companies above the amounts for which we self-insure. Following changes made in the first quarter of 2003, our insurance policies now provide for excess personal injury and property damage liability up to a total of $35.0 million per occurrence, compared to $30.0 million per occurrence for 2002, and cargo liability, collision, comprehensive and workers' compensation coverage up to a total of $10.0 million per occurrence. Our personal injury and property damage policies also include coverage for punitive damages where such coverage is allowed. If the number of claims for which we are self-insured increases, our operating results could be adversely affected. After several years of aggressive pricing in the 1990s, insurance carriers raised premiums which increased our insurance and claims expense. The terrorist attacks of September 11, 2001, exacerbated already difficult conditions in the United States insurance market resulting in additional increases in our insurance expenses. If these expenses continue to increase, or if the severity or number of claims increase or exceed our self-retention limits, and if we are unable to offset the resulting increases with higher freight rates, our earnings could be materially and adversely affected. Regulatory Requirements. The United States Department of Transportation (the "DOT") and various state and local agencies exercise broad powers over our business, generally governing such activities as authorization to engage in motor carrier operations, safety, and insurance requirements. The DOT adopted revised hours-of-service regulations for drivers on April 28, 2003. Although the regulations have been adopted, motor carriers are not required to comply until January 4, 2004. The revised regulations could reduce the potential or practical amount of time that drivers can spend driving, if we are unable to limit their other on-duty activities. These changes could adversely affect our profitability if shippers are unwilling to assist in managing the drivers' non-driving activities, such as loading, unloading, and waiting. If the revised regulations increase our costs and we cannot pass the additional costs through to shippers, our operating results could be materially and adversely affected. Our company drivers and independent contractors also must comply with the safety and fitness regulations promulgated by the DOT, including those relating to drug and alcohol testing. We also may become subject to new or more restrictive regulations relating to ergonomics or other matters. In addition to direct regulation by the DOT and other agencies, our business also is subject to the effects of new tractor engine design requirements implemented by the Environmental Protection Agency (the "EPA") effective October 1, 2002, which are discussed below in the paragraph entitled "Revenue Equipment." Additional changes in the laws and regulations governing or impacting our industry could affect the economics of the industry by requiring changes in operating practices or by influencing the demand for, and the costs of providing, services to shippers. 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. 15 In the past we have acquired new tractors and trailers at favorable prices, including 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 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 the terms of our agreements with them. Some manufacturers have significantly increased new equipment prices, in part to meet new engine design requirements imposed, effective October 1, 2002, by the EPA, and have eliminated or sharply reduced the price of repurchase commitments. Our business plan takes into account new equipment price increases due to engine design requirements imposed effective October 1, 2002, by the EPA, and potentially lower equipment repurchase prices. If new equipment prices were to increase more than anticipated, or if the price of repurchase commitments were to decrease or fail to be honored by equipment manufacturers, we may be required to increase our depreciation and financing costs, write down the value of used equipment, and/or retain some of our equipment longer, with a resulting increase in maintenance expenses. If our resulting cost of revenue equipment were to increase, and/or prices of used revenue equipment were to decline, our operating costs could increase, which could materially and adversely affect our earnings and cash flows, if we are unable to obtain commensurate rate increases or cost savings. Additionally, the cost of operating new engines is expected to be somewhat higher than the cost of operating older engines, due primarily to lower anticipated fuel efficiency and higher anticipated maintenance expenses. If our fuel or maintenance expenses were to increase as a result of our use of the new, EPA-compliant engines, and we are unable to offset such increases with fuel surcharges or higher freight rates, our results of operations would be adversely affected. 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 materially adverse effect on our growth and profitability. If we do not continue to be successful at deriving a more significant portion of our revenues from markets throughout the United States, our growth and profitability could be materially and adversely affected by general economic declines or natural disasters in those markets. In addition to our headquarters in Phoenix, Arizona, we have established regional operating centers in Katy, Texas; Indianapolis, Indiana; Charlotte, North Carolina; Gulfport, Mississippi; Salt Lake City, Utah; Kansas City, Kansas; Portland, Oregon; Memphis, Tennessee; Atlanta, Georgia; and Denver, Colorado 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. 16 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 2002 and the first nine months of 2003, we experienced fluctuations in fuel costs, as a result of conditions in the petroleum industry. We also have periodically experienced some wage increases for drivers. Increases in fuel costs and driver compensation could continue during 2003 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 a substantial amount of fuel surcharges. Competitive conditions in the transportation industry, including lower demand for transportation services, could limit our ability to continue to obtain rate increases or fuel surcharges. 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 materially 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 further adjust our driver compensation package, which could adversely affect our profitability if not offset by a corresponding increase in rates. During this quarter we increased our driver pay scale by $0.01 per mile, and plan to make an additional $0.01 available for our higher performing driving associates by the end of the first quarter of 2004. 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 have significant operations in Arizona, California and the western United States, winter weather generally has not adversely affected our business. The continued expansion of our operations throughout the United States could expose us to greater operating variances 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 availability of energy. Technology. We utilize Terion's trailer-tracking technology to assist with monitoring the majority of our trailers. Terion has emerged from a Chapter 11 bankruptcy and a plan of reorganization has been approved by the Bankruptcy Court. If Terion ceases operations or abandons that trailer-tracking technology, we would be required to incur the cost of replacing that technology or could be forced to operate without this technology, which could adversely affect our trailer utilization and our ability to assess detention charges. In addition, substantially all of our tractors are equipped with the Qualcomm tracking and communications system. If the Qualcomm system were to fail or experience significant disruptions in service, our tractor utilization might suffer, we may be forced to incur the expense of implementing a new satellite tracking and communications system or to operate without this technology, and our driver turnover could increase as a result of dissatisfaction with the level or quality of satellite communications service available in our trucks. Stock Price Volatility. The market price of our common stock could be subject to significant fluctuations in response to certain factors, such as variations in our anticipated or actual results of operations or in the anticipated or actual results of operations of other companies in the transportation industry, changes in conditions affecting the economy generally, including incidents of military action or terrorism, analyst reports, general trends in the industry, sales of common stock by insiders, as well as other factors unrelated to our operating results. Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares. 17 Investments. We have invested in and/or loaned to Concentrek, Inc., ("Concentrek") a transportation logistics company $2.2 million on a secured basis. Of this $2.2 million, $1.2 million is personally guaranteed by members of the Knight family. We own approximately 17% of Concentrek, and the remainder is owned by members of the Knight family and Concentrek's management. If Concentrek's financial position does not continue to improve, or if it is unable to raise additional capital, we could be forced to write down all or part of this investment. 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 rates on debt and from changes in commodity prices. We have determined that market risk for interest rates and currency fluctuations are not material because of our low level of debt and because all of our transactions are in United States dollars. We have not used derivative instruments for speculation or trading. We have elected to make the disclosures concerning commodity price risk using a sensitivity analysis approach, based on hypothetical changes in commodity prices. Commodity Price Risk. We are 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. We are party to three contracts relating to the price of heating oil on the New York Merchantile Exchange ("NYMX") that we entered into in connection with volume diesel fuel purchases between October 2000 and February 2002. If the price of heating oil on the NYMX falls below $0.58 per gallon we may be required to pay the difference between $0.58 and the index price (1) for 1.0 million gallons per month for any selected twelve months through March 31, 2005, and (2) for 750,000 gallons per month for the twelve months of 2005. At October 10, 2003, the price of heating oil on the NYMX was $0.89 for January 2004 contracts. For each $0.05 per gallon the price of heating oil would fall below $0.58 per gallon during the relevant periods, our potential loss on the contracts would be approximately $1.0 million. However, our net savings on fuel costs from lower contracts would be approximately $700,000 after taking the loss on the contracts into consideration. We have valued these items at fair value in the accompanying September 30, 2003, condensed consolidated financial statements. Item 4. Controls and Procedures As required by Rule 13a-15 under the Exchange Act, the Company has carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of the Company's management, including our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended September 30, 2003 that have materially affected, or that are reasonably likely to materially affect, the Company's internal control over financial reporting. 18 Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer as appropriate, to allow timely decisions regarding disclosures. The Company has confidence in its internal controls and procedures. Nevertheless, the Company's management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors or intentional fraud. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of such internal controls are met. Further, the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. 19 PART II - OTHER INFORMATION Item 1. Legal Proceedings We are a party to ordinary, routine litigation and administrative proceedings incidental to our business. These proceedings primarily involve claims for personal injury or property damage incurred in the transportation of freight and for personnel matters. Item 2. Changes in Securities and Use of Proceeds Not Applicable Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable 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 Articles of Incorporation and Bylaws (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.) (3.1.1) First Amendment to Restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3.1.1 to the Company's report on Form 10-K for the period ending December 31, 2000.) (3.1.2) Second Amendment to Restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3.1.2 to the Company's Registration Statement on Form S-3 No. 333-72130.) (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.) (3.2.1) Amendment to Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K dated February 6, 2003.) 20 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 3, Net Income Per Share, in the Notes To Consolidated Financial Statements on Form 10-Q, for the quarter ended September 30, 2003.) Exhibit 31 Section 302 Certifications (31.1) Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Kevin P. Knight, the Company's Chief Executive Officer (31.2) Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Timothy M. Kohl, the Company's Chief Financial Officer Exhibit 32 Section 906 Certifications (32.1) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Kevin P. Knight, the Company's Chief Executive Officer (32.2) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Timothy M. Kohl, the Company's Chief Financial Officer (b) Reports on Form 8-K During the quarter ended September 30, 2003, the Company filed with, or furnished to, the Securities and Exchange Commission (the "Commission") the following Current Reports on Form 8-K: 21 Current Report on Form 8-K dated July 16, 2003 (furnished to the Commission on July 17, 2003) regarding the issuance of a press release to report the Company's financial results for the quarter and six months ended June 30, 2003; and Current Report on Form 8-K dated September 19, 2003 (filed with the Commission on September 23, 2003) regarding the appointment of Mr. Michael Garnreiter to the Company's Board of Directors, as a Class III director. 22 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: October 31, 2003 By: /s/ Kevin P. Knight ----------------------------------- Kevin P. Knight Chief Executive Officer, in his capacity as such and on behalf of the registrant Date: October 31, 2003 By: /s/ Timothy Kohl ----------------------------------- Timothy Kohl Chief Financial Officer and Principal Financial Officer, in his capacity as such and on behalf of the registrant 23