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
      1934For
      the quarterly period ended March 31, 2009or[  ]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      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
              incorporation
      or organization)
            (I.R.S.
      Employer
              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 as required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


x  Y es   
o 
No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


o 
Yes    o  No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of "large accelerated filer," "accelerated
filer," and "smaller reporting company" in Rule 12b-2 of the Exchange
Act:





Large
      accelerated filer  x
            Accelerated
      filer  oNon-accelerated
      filer  o
            Smaller
      reporting company  o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  o 
Yes    x  No





The
number of shares outstanding of registrant's Common Stock, par value $0.01 per
share, as of April 30, 2009 was 83,076,568 shares.








KNIGHT TRANSPORTATION, INC.





TABLE
OF CONTENTS











PART
      I – FINANCIAL INFORMATION
                Page
      NumberItem
      1.
                Financial
      StatementsCondensed
      Consolidated Unaudited Balance Sheets as of March 31, 2009and December 31,
      2008
                1Condensed
      Consolidated Unaudited Statements of Income for the three months ended
      March 31, 2009 and 2008
                3Condensed
      Consolidated Unaudited Statements of Cash Flows for the three months ended
      March 31, 2009 and 2008
                4Notes
      to Condensed Consolidated Unaudited Financial Statements
                6Item 2.
                Management's
      Discussion and Analysis of Financial Conditionand
      Results of Operations
                13Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                21Item
      4.
                Controls
      and Procedures
                22Part
      II – OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                23Item
      1A.
                Risk
      Factors
                23Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                23Item
      3.
                Defaults
      Upon Senior Securities
                23Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                24Item
      5.
                Other
      Information
                24Item
      6.
                Exhibits
                24Signatures
                
                25





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 Table of Contents


PART I  -  FINANCIAL INFORMATION





Item
1.                                Financial
Statements





KNIGHT
      TRANSPORTATION, INC. AND SUBSIDIARIES
                  Condensed
      Consolidated Unaudited Balance Sheets
                  As
      of March 31, 2009 and December 31, 2008
                  (In
      thousands)March
      31,
                  2009
                
                
                December
      31,
                  2008ASSETSCurrent
      Assets:Cash and cash
      equivalents
                
                $
                36,340
                
                
                $
                22,027Short-term
    investment
                
                
                46,663
                
                
                
                31,887Accounts receivable,
      net
                
                
                66,158
                
                
                
                70,810Notes receivable,
    net
                
                
                805
                
                
                
                159Prepaid expenses
                
                
                7,480
                
                
                
                7,108Other current
    assets
                
                
                13,881
                
                
                
                13,258Income tax
    receivable
                
                
                -
                
                
                
                774Current deferred tax
      asset
                
                
                7,205
                
                
                
                6,480Total current
    assets
                
                
                178,532
                
                
                
                152,493Property
      and Equipment:Land and land
      improvements
                
                
                28,571
                
                
                
                28,556Buildings and
      improvements
                
                
                62,551
                
                
                
                58,365Furniture and
      fixtures
                
                
                7,376
                
                
                
                7,472Shop and service
      equipment
                
                
                4,974
                
                
                
                4,970Revenue equipment
                
                
                545,474
                
                
                
                558,561Leasehold
      improvements
                
                
                1,642
                
                
                
                1,185650,588
                
                
                
                659,109Less:  Accumulated
      depreciation and amortization
                
                
                (188,980
                )
                
                
                (186,881
                )Property
      and equipment, net
                
                
                461,608
                
                
                
                472,228Notes
      receivable – long-term
                
                
                1,558
                
                
                
                674Goodwill
                
                
                10,348
                
                
                
                10,353Intangible
      assets, net
                
                
                160
                
                
                
                176Long-term
      deferred tax assets
                
                
                5,696
                
                
                
                5,877Other
      long-term assets & restricted cash
                
                
                5,246
                
                
                
                5,139Total assets
                
                $
                663,148
                
                
                $
                646,940





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


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KNIGHT
      TRANSPORTATION, INC. AND SUBSIDIARIES
                  Condensed
      Consolidated Unaudited Balance Sheets (continued)
                  As
      of March 31, 2009 and December 31, 2008
                  (In
      thousands, except par values)March
      31,
                  2009
                
                
                December
      31,
                  2008LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      Liabilities:Accounts
    payable
                
                $
                7,450
                
                
                $
                6,195Accrued payroll and purchased
      transportation
                
                
                8,469
                
                
                
                7,432Accrued
      liabilities
                
                
                13,957
                
                
                
                6,273Claims accrual – current
      portion
                
                
                14,985
                
                
                
                15,239Total current
      liabilities
                
                
                44,861
                
                
                
                35,139Long-term
      Liabilities:Claims accrual – long-term
      portion
                
                
                14,762
                
                
                
                15,236Deferred tax
      liabilities
                
                
                114,878
                
                
                
                112,661Total long-term
      liabilities
                
                
                129,640
                
                
                
                127,897Total
    liabilities
                
                
                174,501
                
                
                
                163,036Commitments
      and ContingenciesShareholders'
      Equity:Preferred stock, $0.01 par
      value; 50,000 shares authorized;
                  none issued and
      outstanding
                
                
                -
                
                
                
                -Common stock, $0.01 par value;
      300,000 shares authorized;
                  83,067 and 83,383 shares issued
      and outstanding at
                  March 31, 2009 and December 31,
      2008, respectively
                
                
                831
                
                
                
                834Additional paid-in
      capital
                
                
                110,107
                
                
                
                108,885Retained
    earnings
                
                
                377,709
                
                
                
                374,185Total shareholders'
      equity
                
                
                488,647
                
                
                
                483,904Total liabilities and
      shareholders' equity
                
                $
                663,148
                
                
                $
                646,940





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


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KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES
                  Condensed
      Consolidated Unaudited Statements of Income
                  (In
      thousands, except per share data)Three
      Months Ended
                  March
      31,2009
                
                
                2008REVENUE:Revenue, before fuel
      surcharge
                
                $
                133,129
                
                
                $
                141,302Fuel surcharge
                
                
                15,590
                
                
                
                35,109Total revenue
                
                
                148,719
                
                
                
                176,411OPERATING
      EXPENSES:Salaries, wages and
      benefits
                
                
                48,304
                
                
                
                50,011Fuel
                
                
                28,879
                
                
                
                53,557Operations and
      maintenance
                
                
                9,988
                
                
                
                9,301Insurance and
      claims
                
                
                5,316
                
                
                
                7,066Operating taxes and
      licenses
                
                
                3,561
                
                
                
                3,652Communications
                
                
                1,472
                
                
                
                1,414Depreciation and
      amortization
                
                
                17,701
                
                
                
                16,953Lease expense – revenue
      equipment
                
                
                -
                
                
                
                54Purchased
      transportation
                
                
                10,695
                
                
                
                12,921Miscellaneous operating
      expenses
                
                
                3,354
                
                
                
                2,755Total operating
      expenses
                
                
                129,270
                
                
                
                157,684Income from
      operations
                
                
                19,449
                
                
                
                18,727Interest
      income
                
                
                306
                
                
                
                254Other
      expense
                
                
                (21
                )
                
                
                -Income before income
      taxes
                
                
                19,734
                
                
                
                18,981Income
      taxes
                
                
                7,990
                
                
                
                7,564Net income
                
                $
                11,744
                
                
                $
                11,417Earnings
      per common share and common share equivalent:Basic
                
                $
                0.14
                
                
                $
                0.13Diluted
                
                $
                0.14
                
                
                $
                0.13Weighted
      average number of common shares and common share equivalents
      outstanding:Basic
                
                
                83,335
                
                
                
                86,335Diluted
                
                
                83,611
                
                
                
                86,792





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


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KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES
                            Condensed
      Consolidated Unaudited Statements of Cash Flows
                            (In
      thousands)Three
      Months Ended
                            March
      31,2009
                          
                          
                          2008Cash
      Flows From Operating Activities:Net
      income
                          
                          $
                          11,744
                          
                          
                          $
                          11,417Adjustments
      to reconcile net income to net cash provided by operating
                            activities:Depreciation and
      amortization
                          
                          
                          17,701
                          
                          
                          
                          16,953Gain on sales of
      equipment
                          
                          
                          (839
                          )
                          
                          
                          (672
                          )Impairment loss from
      fire
                          
                          
                          25
                          
                          
                          
                          -Provision for allowance for
      doubtful accounts
                          
                          
                          848
                          
                          
                          
                          245Excess tax benefits related to
      stock-based compensation
                          
                          
                          (124
                          )
                          
                          
                          (98
                          )Stock option
      expense
                          
                          
                          754
                          
                          
                          
                          665Deferred income
      taxes
                          
                          
                          1,673
                          
                          
                          
                          2,320Changes
      in assets and liabilities:(Increase) decrease in
      short-term investments
                          
                          
                          (14,786
                          )
                          
                          
                          480Decrease in account
      receivables
                          
                          
                          4,245
                          
                          
                          
                          3,310Decrease (increase) in other
      current assets
                          
                          
                          106
                          
                          
                          
                          (500
                          )Increase in prepaid
      expenses
                          
                          
                          (372
                          )
                          
                          
                          (416
                          )Decrease in income tax
      receivable
                          
                          
                          774
                          
                          
                          
                          3,558Decrease in other long-term
      assets and restricted cash
                          
                          
                          5
                          
                          
                          
                          7Increase in accounts
      payable
                          
                          
                          3,190
                          
                          
                          
                          1,473Increase in accrued
      liabilities, claims accrual and other
                          
                          
                          8,120
                          
                          
                          
                          466Net cash provided by operating
      activities
                          
                          
                          33,064
                          
                          
                          
                          39,208Cash
      Flow From Investing Activities:Purchase of property and
      equipment
                          
                          
                          (19,615
                          )
                          
                          
                          (37,104
                          )Proceeds from sales of
      equipment
                          
                          
                          8,735
                          
                          
                          
                          15,479(Increase) decrease in notes
      receivable
                          
                          
                          (5
                          )
                          
                          
                          448Transportation
      Resource Partners Contribution
                          
                          
                          (150
                          )
                          
                          
                          -Return of investment in
      Transportation Resource Partners
                          
                          
                          43
                          
                          
                          
                          -Net cash used in investing
      activities
                          
                          
                          (10,992
                          )
                          
                          
                          (21,177
                          )





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







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KNIGHT
      TRANSPORTATION, INC. AND SUBSIDIARIES
                  Condensed
      Consolidated Unaudited Statements of Cash Flows (continued)
                  (In
      thousands)Three
      Months Ended
                  March
      31,2009
                
                
                2008Cash
      Flow From Financing Activities:Dividends paid
                
                
                (3,323
                )
                
                
                (2,575
                )Payments to acquire treasury
      stock
                
                
                (4,900
                )
                
                
                (18,084
                )Excess tax benefits related to
      stock-based compensation
                
                
                124
                
                
                
                98Proceeds from exercise of
      stock options
                
                
                340
                
                
                
                307Net cash used in financing
      activities
                
                
                (7,759
                )
                
                
                (20,254
                )Net
      increase (decrease) in cash and cash equivalents
                
                
                14,313
                
                
                
                (2,223
                )Cash
      and cash equivalents, beginning of period
                
                
                22,027
                
                
                
                23,688Cash
      and cash equivalents, end of period
                
                $
                36,340
                
                
                $
                21,465Supplemental
      Disclosures:Non-cash investing and
      financing transactions:Equipment acquired in accounts
      payable
                
                $
                1,892
                
                
                $
                416Retirement of treasury
      stock
                
                
                4,900
                
                
                
                18,084Transfer from property and
      equipment to assets held forsale
                
                
                6,573
                
                
                
                4,878Financing provided to owner
      operators for equipmentsold
                
                
                1,654
                
                
                
                24Cash Flow
      Information:Income taxes
    paid
                
                $
                1,216
                
                
                $
                1,038





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


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KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES





NOTES
TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS





Note
1.                                Financial
Information





References
in this Report on Form 10-Q to "we," "us," "our," "Knight," or the "Company" or
similar terms refer to Knight Transportation, Inc. and its consolidated
subsidiaries.  All material inter-company balances and transactions
have been eliminated in consolidation.





The
accompanying condensed consolidated unaudited financial statements of Knight
Transportation, Inc. and its subsidiaries have been prepared in accordance with
accounting principles generally accepted in the United States of America and
Regulation S-X, instructions to Form 10-Q, and other relevant rules and
regulations of the Securities and Exchange Commission (the "SEC"), as applicable
to the preparation and presentation of interim financial
information.  Certain information and footnote disclosures have been
omitted or condensed pursuant to such rules and regulations.  We
believe 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 unaudited financial
statements and notes thereto should be read in conjunction with our consolidated
financial statements and notes thereto included in our Annual Report on Form
10-K for the year ended December 31, 2008.





Note
2.                                Stock-Based
Compensation





At March
31, 2009, we had one stock-based employee compensation plan known as the Knight
Transportation, Inc. 2003 Stock Option Plan, dated June 1, 2003, as amended from
time to time (the "2003 Plan").  Total SFAS 123R compensation cost for
the three months ended March 31, 2009 and 2008, respectively, are as
follows:





Three
      Months Ended
                          March
      31,
                          (in
      thousands)2009
                        
                        
                        2008Gross
      stock compensation expense, net of forfeitures
                        
                        $
                        754
                        
                        
                        $
                        665Income
      tax
                        
                        $
                        (305
                        )
                        
                        $
                        (265
                        )Net
      stock compensation expense after tax
                        
                        $
                        449
                        
                        
                        $
                        400





We
received approximately $340,000 in cash from the exercise of stock options
during the three months ended March 31, 2009, compared to $307,000 for the same
period in 2008.





As of
March 31, 2009, there was $14.5 million of unrecognized compensation cost
related to unvested share-based compensation awards granted under the 2003
Plan.  That cost is expected to be recognized over a weighted-average
period of 2.6 years, and a total period of seven years.


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The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option valuation model
that uses the assumptions noted in the following table:





Three
      Months Ended
                            March
      31,2009
                          
                          
                          2008Dividend
      yield (1)
                          
                          
                          1.20
                          %
                          
                          
                          .81
                          %Expected
      volatility (2)
                          
                          
                          38.20
                          %
                          
                          
                          33.51
                          %Risk-free
      interest rate (3)
                          
                          
                          2.01
                          %
                          
                          
                          2.93
                          %Expected
      terms (4)
                          
                          5.18
      years
                          
                          
                          6.20
      yearsWeighted
      average fair value of options granted
                          
                          $
                          4.37
                          
                          
                          $
                          5.18





(1)
            The
      dividend yield is based on our historical experience and future
      expectation of dividend payouts.  The increase in the dividend
      yield from the 2008 to the 2009 period is due to an increase in dividends
      paid to common stock shareholders.  We increased our quarterly
      cash dividend from $0.03 per share to $0.04 per share in the second
      quarter of 2008.(2)
            We
      analyzed the volatility of our stock using historical data from January 1,
      2003 through the end of the most recent stock option issuance period to
      estimate the expected volatility.(3)
            The
      risk-free interest rate assumption is based on U.S. Treasury securities at
      a constant maturity with a maturity period that most closely resembles the
      expected term of the stock option award.(4)
            The
      expected terms of employee stock options represents the weighted-average
      period the stock options are expected to remain outstanding and has been
      determined based on an analysis of historical exercise behavior from
      January 1, 2003 through the end of the most recent stock option issuance
      period.





A summary
of the award activity under the 2003 Plan as of March 31, 2009, and changes
during the three-month period is presented below:





Option
      Totals
                      
                      
                      Weighted
                        Average
      Exercise
                        Price
      Per Share ($)Outstanding
      12/31/2008
                      
                      
                      4,993,691
                      
                      
                      
                      14.69Granted
                      
                      
                      12,500
                      
                      
                      
                      13.31Exercised
                      
                      
                      (73,021
                      )
                      
                      
                      4.66Forfeited
                      
                      
                      (138,166
                      )
                      
                      
                      14.10Outstanding
      as of 03/31/2009
                      
                      
                      4,795,004
                      
                      
                      
                      14.81





Note
3.                                Earnings
Per Share (in thousands, except per share data)





A
reconciliation of the basic and diluted earnings per share computations for the
three months ended March 31, 2009 and 2008, respectively, is as
follows:





Three
      Months Ended
                  March
      31,2009
                
                
                2008Weighted
      average common shares outstanding – basic
                
                
                83,335
                
                
                
                86,335Effect
      of stock options
                
                
                276
                
                
                
                457Weighted
      average common share and common shareequivalents outstanding –
      diluted
                
                
                83,611
                
                
                
                86,792Net
      income
                
                $
                11,744
                
                
                $
                11,417Earnings
      per common share and common share equivalentBasic
                
                $
                0.14
                
                
                $
                0.13Diluted
                
                $
                0.14
                
                
                $
                0.13





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Certain
shares of common stock were excluded from the computation of diluted earnings
per share because the options' exercise prices were greater than the average
market price of the common shares, and therefore, the effect would be
anti-dilutive.  A summary of those options follows:





Three
      Months Ended
                    March
      31,2009
                  
                  
                  2008Number
      of anti-dilutive shares
                  
                  
                  3,664,373
                  
                  
                  
                  1,315,510





Note
4.                                Segment
Information





We have
determined that we have two operating segments.  Our operating
segments consist of (i) our asset-based segment and (ii) our non-asset-based
segment.  Our asset-based segment includes our dry van, temperature
controlled, and drayage operations.  We have service centers located
throughout the United States.  Each of the asset-based service centers
have similar economic characteristics, as they all provide truckload carrier
services of general commodities to a similar class of customers.  As a
result, we have determined that it is appropriate to aggregate these service
centers into one reportable operating segment consistent with the guidance in
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information."  Accordingly, we have not presented separate financial
information for each of these service centers.We have also determined
that our brokerage operations qualify as an operating segment under SFAS No.
131.  However, because its results of operations are not material to
our consolidated financial statements as a whole, we have not presented separate
financial information for this segment.  For the three months ended
March 31, 2009, our brokerage segment, including intercompany transactions and
fuel surcharge, accounted for 5.0% of our consolidated revenue, 2.0% of our
consolidated net income, and 1.0% of our consolidated assets.





Brokerage
revenue including intercompany transactions and fuel surcharge for the
three-months ended March 31, 2009 was $7.5 million, compared to $9.7 million for
the same period a year ago.  Net income for our brokerage segment was
approximately $0.2 million for three-months ended March 31, 2009, compared to
$0.4 million a year ago, and our brokerage segment had assets of $6.5 million at
March 31, 2009, compared to $6.4 million a year ago.





Note
5.                                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
any currently pending or threatened legal proceedings will not have a material
adverse effect upon our financial position or results of
operations.





Note
6.                                Dividends





On
February 12, 2009, we declared a cash dividend of $0.04 per share of our common
stock.  The dividend was payable to shareholders of record on March 6,
2009, and was paid on March 27, 2009.  This is a $0.01 increase per
share from the dividend paid in the first quarter of 2008.  We
currently expect to continue to pay quarterly cash dividends in the
future.  Future payment of cash dividends, and the amount of any such
dividends, will depend upon our financial condition, results of operations, cash
requirements, tax treatment, and certain corporate law requirements, as well as
other factors deemed relevant by our Board of Directors.





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Note
7.                     
Goodwill & Intangible Assets





Goodwill
represents the excess of the purchase price of our acquisitions over the fair
value of the assets acquired.  The tax benefit from the recognition on
the tax return of the amortization of the excess tax goodwill over book goodwill
is treated as a reduction in the book basis of goodwill.  The changes
in the carrying amount of goodwill and intangible assets for the three months
ended March 31, 2009 follow:





Goodwill:
                      
                      In
      ThousandsBalance
      at December 31, 2008
                      
                      $
                      10,353Amortization
      relating to deferred excess tax goodwill
                      
                      
                      (5
                      )Balance
      at March 31, 2009
                      
                      $
                      10,348





Intangible
      Assets:
                      
                      In
      ThousandsBalance
      at December 31, 2008
                      
                      $
                      176Amortization
                      
                      
                      (16
                      )Balance
      at March 31, 2009
                      
                      $
                      160





Intangible
assets are being amortized on a straight-line method over a five year
period.  Annual amortization expense is expected to be $62,000 for
fiscal years 2009 to 2010 and $52,000 for fiscal year 2011.





Note
8.                      Investment
Commitments





In 2003,
we signed a partnership agreement with Transportation Resource Partners, LP
("TRP"), who makes privately negotiated equity investments.  Per the
original partnership agreement, we were committed to pledge $5.0 million out of
approximately $260.0 million total.  In early 2006, we increased the
commitment amount to $5.5 million.  Our investment in TRP is accounted
for using the cost method as our level of influence over the operations of TRP
is minor.  At March 31, 2009, the carrying book balance of our
investment in TRP was $3.7 million, and our ownership interest was approximately
2.2%.





In the
fourth quarter of 2008 we formed Knight Capital Growth, LLC and committed $15.0
million to invest in a new partnership managed and operated by the managers and
principals of TRP.  The new partnership, Transportation Resource
Partners III, LP ("TRP III"), is focused on the same investment opportunities as
TRP.  As of March 31, 2009, we had contributed $270,000 to TRP III and
our outstanding commitment to TRP III was approximately $14.7
million.





Note
9.                      Assets
Held for Sale





Included
in "Other current assets" on the Balance Sheet at March 31, 2009 and December
31, 2008 is $10.8 million and $10.0 million, respectively, of revenue equipment
that will not be utilized in continuing operations and is being held for
sale.  Assets held for sale are no longer subject to depreciation, and
are recorded at the lower of depreciated value or fair market value less selling
costs.  We periodically review the carrying value of these assets for
possible impairment.  No impairments were recorded in the three months
ended March 31, 2009.  We expect to sell these assets and replace them
with new assets within twelve months.


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Note
10.                      Income
Taxes





We
account for income taxes under the asset and liability method, which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial
statements.  Under this method, deferred tax assets and liabilities
are determined based on the differences between the financial statements and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.  The effect of a
change in tax rates on deferred tax assets and liabilities is recognized in
income in the period that includes the enactment date.





We record
net deferred tax assets to the extent we believe these assets will more likely
than not be realized.  In making such determination, we consider all
available positive and negative evidence, including scheduled reversals of
deferred tax liabilities, projected future taxable income, tax planning
strategies and recent financial operations.  A valuation allowance for
deferred tax assets has not been deemed necessary due to our profitable
operations.





We
adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
("FIN 48") effective January 1, 2007.  This interpretation was issued
to clarify accounting for income taxes recognized in financial statements by
prescribing a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return.  We recognize a tax benefit from an uncertain
tax position when it is more likely than not that the position will be sustained
upon examination, including resolutions of any related appeals or litigation
processes, based on the technical merits.





Upon
adoption of FIN48 our unrecognized tax benefits as of January 1, 2007 totaled
approximately $405,000.  During 2007, we resolved certain tax
positions, leaving unrecognized tax benefits of approximately $195,000 as of
December 31, 2007.  The balance has not changed since then and
remained at $195,000 at March 31, 2009.





The total
amount of unrecognized tax benefits that, if recognized, would favorably affect
the effective tax rate in future periods was approximately $126,000 as of March
31, 2009.





Potential
interest and penalties accrual related to unrecognized tax benefits are
recognized as a component of income tax expense.  Accrued interest as
of March 31, 2009 and 2008 was $66,000 and $51,000,
respectively.  Accrued penalties as of March 31, 2009 and 2008 was
$49,000.





We file
U.S. and state income tax returns with varying statutes of
limitations.  The 2005 through 2008 tax years generally remain subject
to examination by federal authority, and the 2004 through 2008 tax years
generally remain subject to examination by state tax authorities.  We
do not believe the unrecognized tax benefits will change significantly over the
next 12 months.





Note
11.                      Company
Share Repurchase Program





On
November 8, 2007, our Board of Directors unanimously authorized the repurchase
of up to 3.0 million shares of the Company's Common Stock.  The
repurchase authorization was to remain in effect until the share limit was
reached or the program was terminated.  This authorization has expired
as the full 3.0 million shares were purchased in 2008.  Under the
Company’s share repurchase program, repurchased shares are constructively
retired and returned to unissued status.





On
November 13, 2008, our Board of Directors unanimously authorized an additional
repurchase of up to 3.0 million shares of the Company's Common
Stock.  The repurchase authorization will remain in effect until the
share limit is reached or the program is terminated.  The repurchase
authorization is intended to afford the Company the flexibility to acquire
shares opportunistically in future periods and does not indicate an intention to
repurchase any particular number of shares within a definite
timeframe.  Any repurchases would be effected based upon share price
and market conditions.




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In 2008,
we repurchased a total of 3,590,044 shares under both authorizations for
approximately $53.6 million.  In the first quarter of 2009, we
purchased 389,000 shares of our common stock in the open market for
approximately $4.9 million.  The shares acquired have been retired and
are available for future issuance.  The purchases were made in
accordance with Security and Exchange Commission Rule 10b-18, which limits the
amount and timing of repurchases.  As of March 31, 2009, there were
2,020,956 shares remaining for future purchases under our repurchase
program.





Note
12.                      Cash
& Cash Equivalents and Short-Term Investments





Our cash
and cash equivalents are comprised of short-term, highly liquid instruments with
insignificant interest rate risk and effective maturities of three months or
less.





Our
short-term investments are comprised of trading marketable debt securities
(which includes municipal securities) and variable rate demand notes with
effective maturities of greater than three months and represent an investment of
cash that is available for current operations.  These debt securities
are recorded at fair value with realized and unrealized gains and losses
included in interest income on our consolidated statements of
income.  At March 31, 2009, our short term investments consisted of
municipal securities only.  Our short-term investments did not
experience any significant unrealized gain or loss for the period.





Note
13.                      Fair
Value Measurements





In
September 2006, the FASB issued SFAS No. 157,"Fair Value Measurements" ("SFAS
157").  SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements.  SFAS 157 emphasizes that
fair value is a market-based measurement, as opposed to a transaction-specific
measurement.  The adoption of FSP No. FAS 157 did not have a material
impact on the Company’s consolidated financial statements.





Fair
value is defined by SFAS 157 as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  Depending on the nature of the
asset or liability, various techniques and assumptions can be used to estimate
the fair value.  Financial assets and liabilities are measured using
inputs from three levels of the fair value hierarchy, as defined in SFAS
157.  The three levels are as follows:





Level 1 –
Inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement
date.  An active market is defined as a market in which transactions
for the assets or liabilities occur with sufficient frequency and volume to
provide pricing information on an ongoing basis.





Level 2 –
Inputs include quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets or liabilities in markets
that are not active (markets with few transactions), inputs other than quoted
prices that are observable for the asset or liability (i.e., interest rates,
yield curves, etc.), and inputs that derived principally from or corroborated by
observable market data correlation or other means (market corroborated
inputs).





Level 3 –
Unobservable inputs, only used to the extent that observable inputs are not
available, reflect the Company’s assumptions about the pricing of an asset or
liability.





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In
accordance with the fair value hierarchy described above, the following table
shows the fair value of the Company’s financial assets and liabilities that are
required to be measured at fair value as of March 31, 2009.




Balance
      at
                    March
                    31,
      2009
                  
                  
                  Level
      1
                  
                  
                  Level
      2
                  
                  
                  Level
      3(In
      thousands)Assets:Money
      market funds
                  
                  $
                  30,119
                  
                  
                  $
                  30,119
                  
                  
                  
                  -
                  
                  
                  
                  -Short-term
      investments
                  
                  $
                  46,663
                  
                  
                  
                  -
                  
                  
                  $
                  46,663
                  
                  
                  
                  -





We did
not have any variable rate demand notes as of March 31, 2009.


Note
14.                      Recent
Accounting Pronouncements





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations, ("SFAS No. 141(R)").  SFAS No. 141(R) clarifies and
amends the accounting guidance for how an acquirer in a business combination
recognizes and measures the assets acquired, liabilities assumed, and any
non-controlling interest in the acquiree.  We adopted the provisions
of SFAS No. 141(R) on January 1, 2009.




On April
9, 2009, the FASB issued three final Staff Positions (FSPs) intended to provide
additional application guidance and enhance disclosures regarding fair value
measurements and impairments of securities.




FSP FAS
157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly, relates to determining fair values when there is no active
market or where the price inputs being used represent distressed
sales.  It reaffirms what Statement 157 states is the objective of
fair value measurement—to reflect how much an asset would be sold for in an
orderly transaction (as opposed to a distressed or forced transaction) at the
date of the financial statements under current market
conditions.  Specifically, it reaffirms the need to use judgment to
ascertain if a formerly active market has become inactive and in determining
fair values when markets have become inactive.  This FSP will be
effective for interim and annual reporting periods ending after June 15,
2009.  The adoption of this FSP will not have a material impact on our
consolidated financial statements.




FSP FAS
107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments, relates to fair value disclosures for any financial instruments
that are not currently reflected on the balance sheet at fair
value.  Prior to issuing this FSP, fair values for these assets and
liabilities were only disclosed once a year.  The FSP now requires
these disclosures on a quarterly basis, providing qualitative and quantitative
information about fair value estimates for all those financial instruments not
measured on the balance sheet at fair value.  This FSP will be
effective for interim and annual reporting periods ending after June 15,
2009.  The adoption of this FSP will not have a material impact on our
consolidated financial statements.




FSP FAS
115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments,  is intended to bring greater consistency to the timing of
impairment recognition, and provide greater clarity to investors about the
credit and noncredit components of impaired debt securities that are not
expected to be sold.  The FSP also requires increased and more timely
disclosures regarding expected cash flows, credit losses, and an aging of
securities with unrealized losses.  This FSP will be effective for
interim and annual reporting periods ending after June 15, 2009.  The
adoption of this FSP will not have a material impact on our consolidated
financial statements.






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In
December 2007, the FASB issues SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an Amendment of ARB 51(“SFAS No.
160”).  This statement amends ARB 51 and revises accounting and reporting
requirements for noncontrolling interests (formerly minority interests) in a
subsidiary and for the deconsolidation of a subsidiary.  Upon its adoption,
noncontrolling interests will be classified as equity, and income attributed to
the noncontrolling interest will be included in the Company’s income.  The
provisions of this standard are applied retrospectively upon adoption.  We
adopted this pronouncement on January 1, 2009, and it did not have a material
impact on our consolidated financial statements.




In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(“SFAS No. 157”).  SFAS No. 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements.  SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years.  In February 2008, the FASB
issued a staff position delaying the effective date of certain non-financial
assets and liabilities to fiscal periods beginning after November 15,
2008.  We adopted SFAS No. 157 on January 1, 2008 for all financial assets
and liabilities and on January 1, 2009 for the non-financial assets and
liabilities addressed by staff position noted above.  The adoption did not
have a material impact on our consolidated financial statements but did result
in additional disclosures.




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





Cautionary
Note Regarding Forward-Looking Statements





Except
for certain historical information contained herein, this report contains
certain statements that may be considered "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended,
and such statements are subject to the safe harbor created by those
sections.  All statements, other than statements of historical fact,
are statements that could be deemed forward-looking statements, including
without limitation: any projections of revenues, earnings, cash flows, capital
expenditures, or other financial items; any statement of plans, strategies, and
objectives of management for future operations; any statements concerning
proposed acquisition plans, new services, or developments; any statements
regarding future economic conditions or performance; and any statements of
belief and any statement of assumptions underlying any of the
foregoing.  Words such as "believe," "may," "could," "expects,"
"hopes," "estimates," "projects," "intends," "anticipates," and "likely," and
variations of these words, or similar expressions, terms, or phrases, are
intended to identify such forward-looking statements.  Forward-looking
statements are inherently subject to risks, assumptions, and uncertainties, some
of which cannot be predicted or quantified, which could cause future events and
actual results to differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements.  Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in the section entitled "Item 1A. Risk
Factors," set forth in our form 10-K for the year ended December 31,
2008, as supplemented in Part II below.





All
such forward-looking statements speak only as of the date of this Form
10-Q.  You are cautioned not to place undue reliance on such
forward-looking statements.  The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the
Company's expectations with regard thereto or any change in the events,
conditions, or circumstances on which any such statement is based.







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Introduction





Business
Overview





We are a
truckload carrier headquartered in Phoenix, Arizona.  The
transportation services we provide are asset-based dry van truckload carrier
services, temperature controlled truckload carrier services, and drayage
activities at the ports, along with non-asset-based brokerage services, both on
highway and rail.  Through our asset-based and non-asset-based
capabilities we are able to transport, or arrange for the transportation of,
general commodities for customers throughout the United
States.




Knight
Refrigerated and Knight Brokerage, established in 2004 and 2005 respectively,
reflect our strategy to bring complementary services to our customers that also
bring operational and economic benefits to Knight.  In 2008, we
further enhanced our services with our drayage activities through Knight
Intermodal at the Southern California ports.


The
results of our brokerage activities were relatively insignificant for the first
quarter of 2009 and therefore a detailed discussion of the financial results of
these operations will not be separately presented.  As of March 31,
2009, we operated 35 asset-based service centers (consisting of 29 dry van and
six temperature controlled service centers) and 12 non-asset-based brokerage
branches.  The main factors that affect our results of operation 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.





Operating
and Growth Strategy





Historically,
the primary source of our revenue growth has been our ability to open and
develop new regional service centers and brokerage branches in selected
geographic areas.  Our brokerage business enables us to add customers
and gain market share without adding tractor capacity.  More recently
we expanded our intermodal activities at the Southern California
ports.  Our ongoing commitment to environmentally sound business
practices and our intimate familiarity with the West Coast port markets leaves
us well positioned for continued growth in this area.  As part of our
growth strategy, we also evaluate acquisition opportunities that meet our
financial and operating criteria.





During
2008 and continuing into 2009, numerous industry competitors have closed down,
and many that remained in business have downsized their fleets in response to
economic weakness, rising costs, and tight credit conditions.  We have
not been immune to the economic environment.  In the first quarter of
this year we operated 10 fewer trucks compared to year-end, but approximately 15
more than the first quarter of last year.





The first
quarter is typically the slowest from a seasonal perspective.  The
rapid decline in industry-wide shipment activity that was evident in the fourth
quarter initially carried over into the first quarter of this
year.  However, as the quarter progressed we experienced some
moderation in the pace of the decline as some sectors of the economy appeared to
replenish very low inventory levels.  Importantly, we believe our
multiple-truckload service offerings enabled us to grow our market share as seen
in our year-over-year growth in the number of loads hauled, particularly within
Knight Refrigerated and our drayage activity through Knight
Intermodal.






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While we
are cautiously optimistic about modest seasonal recovery in business activity,
it is not within our means to foresee when industry supply and demand
fundamentals will come back into balance.  However, we are confident
in our competitive position and our ability to execute our model.  We
believe we are in a strong financial position, and that our strategy for growth
is sound.  We believe that our level of profitability, fleet renewal
strategy, and use of owner-operators should enable us to internally finance
attractive levels of fleet growth when demand conditions are
right.  Based on our growing network, a history of low cost operation
and solid execution, and access to substantial capital resources, we are very
optimistic about our competitive position and our ability to perpetuate our
model based on leading growth and profitability.


Revenue
and Expenses





We
primarily generate revenue by transporting freight for our
customers.  Generally, we are paid a predetermined rate per mile or
per load for our services.  We enhance our revenue by charging for
tractor and trailer detention, loading and unloading activities, brokerage
operations, and other specialized services, as well as through the collection of
fuel surcharges to mitigate the impact of increases in the cost of
fuel.  The main factors that affect our revenue are the revenue per
mile we receive from our customers, the percentage of miles for which we are
compensated, and the number of miles we generate with our
equipment.  These factors relate to, among other things, the general
level of economic activity in the United States, inventory levels, specific
customer demand, the level of capacity in the trucking industry, and driver
availability.





The main factors that impact our
profitability in terms of expenses are the variable costs of transporting
freight for our customers.  These costs include fuel expense,
driver-related expenses, such as wages, benefits, training and recruitment, and
independent contractor and third party carrier costs, which are recorded on the
"Purchased Transportation" line of our consolidated statements of
income.  Expenses that have both fixed and variable components include
maintenance and tire expense and our total cost of insurance and
claims.  These expenses generally vary with the miles we travel, but
also have a controllable component based on safety, fleet age, efficiency, and
other factors.  Our main fixed costs are the acquisition and financing
of long-term assets, such as revenue equipment and service centers and the
compensation of non-driver personnel.  Effectively controlling our
expenses and managing our net cost of revenue equipment acquisition and
disposition, including any related gains or losses, are important elements of
assuring our profitability.  The primary measure we use to evaluate
our profitability is operating ratio, excluding the impact of fuel surcharge
revenue (operating expenses, net of fuel surcharge, expressed as a percentage of
revenue, before fuel surcharge).





Recent
Results of Operations and Quarter-End Financial Condition





For the
quarter ended March 31, 2009, our results of operations changed as follows
versus the same period in 2008:






            Revenue,
      before fuel surcharge, decreased 5.8%, to $133.1 million from $141.3
      million;
            Net
      income increased 2.9% to $11.7 million, compared to $11.4 million;
      and
            Net
      income per diluted share increased 6.8%, to $0.14, compared to
      $0.13.




Our
industry is facing significant challenges due to weak demand for transportation
and pricing competition.  Despite these challenges our load count
increased 1.5% in our dry van operations, and increased 30% in our temperature
controlled operations.  Our brokerage operations experienced a
year-over-year decline in overall shipments as there was less freight to move
via brokerage.




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In the
first quarter our average revenue per tractor (excluding fuel surcharges)
decreased 4.7%, to $33,983, compared to $35,668 in the same quarter a year
ago.  Our non-paid empty mile percentage increased to 12.5% from 11.9%
in the year ago period, and reflected weak freight demand.  Our
average length of haul decreased to 481 miles from 527 miles in the same period
last year.  The drayage activities in our intermodal business
contributed to the decrease in our average length of haul.





Despite
the difficult operating environment, we were able to grow both our operating
income and net income in the first quarter.  Our operating ratio, net
of fuel surcharge (operating expenses, net of fuel surcharge, expressed as a
percentage of revenue, before fuel surcharge), was 85.4% for the quarter ended
March 31, 2009, as compared to 86.7% for the same period a year
ago.  Profitability in the quarter was helped by lower diesel fuel
prices, ongoing internal initiatives to reduce costs, and the flexibility of our
decentralized business model to adjust and adapt to market
conditions.





Price
competition remained intense during the quarter, and we experienced a high level
of bid activity in the quarter.  This activity has now tapered off to
a more normal pace.  However, the security of our strong financial
position, the high levels of localized service provided through our network of
service centers and branches, along with our diversified customer base, helped
to mitigate some of these pricing pressures.  While we do not
underestimate the pricing challenges ahead of us, we believe our model provides
us with the flexibility to respond appropriately in this
environment.





Average
number of tractors operated was essentially constant, at 3,721 tractors in the
first quarter of 2009, compared to 3,723 for the same period a year
ago.  Tractor count at March 31, 2009 increased slightly to 3,689
tractors, from 3,674 tractors a year ago.  For the quarter, we spent
$10.9 million in net capital expenditures.  At March 31, 2009, our
balance sheet remained debt free, our cash and cash equivalents and short term
investments totaled $83.0 million, and our shareholders' equity was $488.6
million.


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Results
of Operations





The
following table sets forth the percentage relationships of our expense items to
total revenue, including fuel surcharge (Columns A), and revenue, before fuel
surcharge (Columns B), for the three months ended March 3, 2009 and 2008,
respectively.  Fuel expense as a percentage of revenue, before fuel
surcharge, is calculated using fuel expense, net of fuel
surcharge.  Management believes that eliminating the impact of this
sometimes volatile source of revenue affords a more consistent basis for
comparing our results of operations from period to period.





(A)
                      Three
      Months Ended
                      March
      31,
                    
                    
                    
                    
                    (B)
                      Three
      Months Ended
                      March
      31,2009
                    
                    
                    2008
                    
                    
                    
                    
                    2009
                    
                    
                    2008Total revenue, including fuel
      surcharge
                    
                    
                    100.0
                    %
                    
                    
                    100.0
                    %
                    
                    Revenue, before fuel
    surcharge
                    
                    
                    100.0
                    %
                    
                    
                    100.0
                    %Operating
      expenses:
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    Operating
      expenses:Salaries, wages and
      benefits
                    
                    
                    32.5
                    
                    
                    
                    28.3
                    
                    
                    Salaries, wages and
      benefits
                    
                    
                    36.3
                    
                    
                    
                    35.4Fuel (1)
                    
                    
                    19.4
                    
                    
                    
                    30.4
                    
                    
                    Fuel (2)
                    
                    
                    10.0
                    
                    
                    
                    13.1Operations and
      maintenance
                    
                    
                    6.7
                    
                    
                    
                    5.3
                    
                    
                    Operations and
      maintenance
                    
                    
                    7.5
                    
                    
                    
                    6.6Insurance and
      claims
                    
                    
                    3.6
                    
                    
                    
                    4.0
                    
                    
                    Insurance and
      claims
                    
                    
                    4.0
                    
                    
                    
                    5.0Operating taxes and
      licenses
                    
                    
                    2.4
                    
                    
                    
                    2.1
                    
                    
                    Operating taxes and
      licenses
                    
                    
                    2.7
                    
                    
                    
                    2.6Communications
                    
                    
                    1.0
                    
                    
                    
                    0.8
                    
                    
                    Communications
                    
                    
                    1.1
                    
                    
                    
                    1.0Depreciation and
      amortization
                    
                    
                    11.9
                    
                    
                    
                    9.6
                    
                    
                    Depreciation and
      amortization
                    
                    
                    13.3
                    
                    
                    
                    12.0Lease expense – revenue
      equipment
                    
                    
                    0.0
                    
                    
                    
                    0.0
                    
                    
                    Lease expense – revenue
      equipment
                    
                    
                    0.0
                    
                    
                    
                    0.0Purchased
      transportation
                    
                    
                    7.2
                    
                    
                    
                    7.3
                    
                    
                    Purchased
      transportation
                    
                    
                    8.0
                    
                    
                    
                    9.1Miscellaneous operating
      expenses
                    
                    
                    2.2
                    
                    
                    
                    1.6
                    
                    
                    Miscellaneous operating
      expenses
                    
                    
                    2.5
                    
                    
                    
                    1.9Total
      operating expenses
                    
                    
                    86.9
                    
                    
                    
                    89.4
                    
                    
                    Total
      operating expenses
                    
                    
                    85.4
                    
                    
                    
                    86.7Income
      from operations
                    
                    
                    13.1
                    
                    
                    
                    10.6
                    
                    
                    Income
      from operations
                    
                    
                    14.6
                    
                    
                    
                    13.3Net
      interest and other income
                    
                    
                    0.2
                    
                    
                    
                    0.2
                    
                    
                    Net
      interest and other income
                    
                    
                    0.2
                    
                    
                    
                    0.2Income
      before income taxes
                    
                    
                    13.3
                    
                    
                    
                    10.8
                    
                    
                    Income
      before income taxes
                    
                    
                    14.8
                    
                    
                    
                    13.5Income
      taxes
                    
                    
                    5.4
                    
                    
                    
                    4.3
                    
                    
                    Income
      taxes
                    
                    
                    6.0
                    
                    
                    
                    5.4Net
      Income
                    
                    
                    7.9
                    %
                    
                    
                    6.5
                    %
                    
                    Net
      Income
                    
                    
                    8.8
                    %
                    
                    
                    8.1
                    %





(1)
            Gross
      fuel expense without fuel surcharge revenue.(2)
            Net
      fuel expense including fuel surcharge revenue.*
            There
      are minor rounding differences in the
table.







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A
discussion of our results of operations for the three months ended March 31,
2009 and March 31, 2008 is set forth below.


Comparison
of Three Months Ended March 31, 2009 to Three Months Ended March 31,
2008





Total
revenue for the quarter ended March 31, 2009 decreased 15.7% to $148.7 million,
from $176.4 million for the same period in 2008.  Total revenue for
the 2009 period included $15.6 million of fuel surcharge revenue, compared to
$35.1 million in the 2008 period.  In discussing our results of
operations, we use revenue, before fuel surcharge, and fuel expense, net of fuel
surcharge, because management believes that eliminating the impact of 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, before fuel surcharge, more
meaningful than absolute dollar changes.





Revenue,
before fuel surcharge, decreased 5.8% to $133.1 million for the quarter ended
March 31, 2009, from $141.3 million for the same period in 2008.  The
industry wide supply of truckload equipment continued to outpace demand in the
first quarter, which resulted in a 4.7% decrease in equipment
utilization.  At the end of the quarter we operated 10 fewer trucks
compared to year-end, but approximately 15 more than the first quarter of last
year.  Our average length of haul decreased 8.7% to 481
miles.  While revenue per loaded mile was up about 60 basis points
year-over-year, it was not enough to offset an increase in non-paid miles and a
decrease in average miles per tractor, resulting in a 4.7% decrease in average
revenue per tractor.  Non-paid miles increased to 12.5% from 11.9% in
the first quarter of last year.





Salaries,
wages and benefits expense as a percentage of revenue, before fuel surcharge,
increased to 36.3% for the quarter ended March 3, 2009, from 35.4% for the same
period in 2008.  The increase is primarily due to a combination of a
decrease in revenue, lower equipment utilization, and a slight increase in
workers compensation costs.  For our employees, we record accruals for
workers' compensation benefits as a component of our claims reserve, and the
related expense is reflected in salaries, wages and benefits in our consolidated
statements of income.





Fuel
expense, net of fuel surcharge, as a percentage of revenue before fuel
surcharge, decreased to 10.0% for the three months ended March 31, 2009, from
13.1% for the same period in 2008.  The decrease in fuel expense is
due to lower diesel fuel prices combined with ongoing success of internal
initiatives to improve fuel efficiency.  These initiatives enabled us
to show improvements in reducing idle time, controlling out-of-route miles, and
improving fuel purchasing.  We maintain a fuel surcharge program to
assist us in recovering a portion of our fuel expense.  Fuel surcharge
revenue was $15.6 million for the three months ended March 31, 2009, compared to
$35.1 million for the same period in 2008.


Operations
and maintenance expense, as a percentage of revenue, before fuel surcharge,
increased to 7.5% for the three months ended March 31, 2009, compared to 6.6%
for the same period in 2008.  Operations and maintenance increased as
a percentage of revenue primarily because of a modest increase in fleet age and
a decrease in revenue per tractor that less efficiently covered the fixed
portion of these costs.  Independent contractors pay for the
maintenance of their own vehicles.





Insurance
and claims expense as a percentage of revenue, before fuel surcharge, decreased
to 4.0% for the three months ended March 31, 2009, compared to 5.0% for the same
period in 2008.  During the quarter we saw benefits from continued
improvement in insurance and claims expense.  Over the last 24 months
we have implemented the Smith Systems training throughout our service center
network.  We believe such training and other management efforts were
contributing factors to the reduction in our insurance and claims
expense.






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Operating
taxes and licenses expense as a percentage of revenue, before fuel surcharge,
increased slightly 2.7% for the three months ended March 31,  2009,
compared to 2.6% for the same period in 2008.





Communications
expense as a percentage of revenue, before fuel surcharge, increased slightly to
1.1% for the three months ended March 31, 2009, compared to 1.0% for the same
period in 2008.





Depreciation
and amortization expense as a percentage of revenue, before fuel surcharge,
increased to 13.3% for the three months ended March 31, 2009, compared to 12.0%
for the same period in 2008.  The increase in depreciation and amortization
expense is primarily due to decrease in revenue and lower equipment
utilization.





Purchased
transportation represents the amount that independent contractors, as well as
contracted carriers for our brokerage division, are paid to haul freight for us
on a mutually agreed upon per-mile or per-shipment basis.  Purchased
transportation expense as a percentage of revenue, before fuel surcharge,
decreased to 8.0% for the three months ended March 31, 2009, from 9.1% for the
same period in 2008.  The decrease in this category is mainly due to a
decrease in payments made to outside carriers for transportation services
arranged by our brokerage division, which experienced a year-over-year decline
in brokerage revenue.  Excluding purchased transportation activities
from our brokerage division, this expense as a percentage of revenue, before
fuel surcharge, would have decreased slightly to 3.4% for the quarter ended
March 31, 2009, compared to 3.7% for the same period in 2008.  As of
March 31, 2009, 6.7% of our fleet was comprised of independent contractors,
compared to 5.3% a year ago.





Miscellaneous
operating expenses as a percentage of revenue, before fuel surcharge, increased
to 2.5% for the three months ended March 31, 2009, compared to 1.9% for the same
period in 2008.  The increase is due to the combination of increases
in bad debt expense, computer expense, rent expense, and general administrative
expense.  Gains from sale of used equipment are included in
miscellaneous operating expenses.  Gains from sale of equipment increased
to $839,000 in the first quarter of 2009, compared to $672,000 for the same
period a year ago.





As a
result of the above factors, our operating ratio, net of fuel surcharge
(operating expenses, net of fuel surcharge, expressed as a percentage of
revenue, before fuel surcharge), was 85.4% for the three months ended March 31,
2009, compared to 86.7% for the same period in 2008.





Net
interest income and other income as a percentage of revenue, before fuel
surcharge, remained constant at 0.2% for both quarters ended March 31, 2009 and
2008.  We had no outstanding debt at March 31, 2009 or
2008.





Income
taxes have been provided for at the statutory federal and state rates, adjusted
for certain permanent differences between financial statement income and income
for tax reporting.  Our effective income tax rates have increased slightly
to 40.5% for the quarter ended March 31, 2009, compared to 39.9% for the same
period a year ago.





As a
result of the preceding changes, our net income, as a percentage of revenue
before fuel surcharge, increased to 8.8% for the three months ended March 31,
2009, compared to 8.1% for the same period in 2008.






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Liquidity
and Capital Resources





The
growth of our business has required, and will continue to require, a significant
investment in new revenue equipment.  Our primary source of liquidity
has been funds provided by operations.





We
generated significant cash flow from operations during the first quarter of
2009.  Net cash provided by operating activities was $33.1 million for
the three months ended March 31, 2009, compared to $39.2 million for the same
period in 2008.  Excluding the increase in our short-term investments
due to investing more cash, our net cash provided by operating activities would
have been $47.9 million for the three months ended March 31, 2009, compared to
$38.7 million for the same period a year ago.  Our cash, cash
equivalents, and short-term investments grew by $29.1 million since December 31,
2008, after spending $8.2 million during the quarter for dividends and stock
re-purchases.





Net cash
used in investing activities was $11.0 million for the three months ended March
31, 2009, compared to $21.2 million for the 2008 period.  The decrease
is mainly due to a reduction in capital expenditures for revenue equipment in
the current period.  Net capital expenditures for the purchase of
revenue equipment, office equipment, land and leasehold improvements, less
equipment sales, decreased $10.7 million, to $10.9 million for the three months
ended March 31, 2009, compared to $21.6 million for the 2008
period.  We currently anticipate total capital expenditures, net of
equipment sales, of approximately $70.0 million for the year.  This
will be used primarily to acquire new revenue equipment.





Net cash
used in financing activities was approximately $7.8 million for the three months
ended March 31, 2009, compared to $20.3 million for the same period in
2008.  The decrease in cash used in financing activities is primarily
due to reduced payments relating to our stock repurchase plan.  In the
three months ended March 31, 2009, we spent $4.9 million to repurchase 389,000
shares of our common stock, compared to $18.1 million spent to repurchase
1,218,500 shares of our common stock for the three months ended March 31,
2008.  Cash dividends paid in the first quarter of 2009 also increased
approximately $750,000, compared to the 2008 period.  This increase
resulted from us increasing our quarterly cash dividend paid to common stock
shareholders from $0.03 per share to $0.04 per share in the second quarter of
2008.





We
currently maintain a line of credit that permits revolving borrowings and
letters of credit totaling $50.0 million.  At March 31, 2009, the line
of credit consisted solely of issued but unused letters of credit totaling $35.2
million.  These letters of credit are issued to various regulatory
authorities in connection with our self-insurance programs.  We are
obligated to comply with certain financial covenants under our line of credit
agreement, and we were in compliance with these covenants at March 31,
2009.





As of
March 31, 2009, our balance sheet continued to be debt-free while our cash and
short-term investment balance grew to $83.0 million.  During
encouraging freight markets, we have historically self-funded our growth by
purchasing equipment with the cash generated from our
operations.  Even during the less-encouraging freight market that
existed during the first quarter of 2009, we continued to generate a significant
amount of cash which allowed us to repurchase shares, return capital to
shareholders as a dividend, and be in a position to fund possible strategic
acquisitions.


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We
believe that we will be able to finance our near term needs for working capital
over the next twelve months, as well as acquisitions of revenue equipment during
such period, with cash balances, cash flows from operations, and borrowings, if
any, available under our existing line of credit.  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
additional capital will depend upon prevailing market conditions, the market
price of our common stock, and several other factors over which we have limited
control, as well as our financial condition and results of
operations.  Nevertheless, based on our recent operating results,
current cash position, anticipated future cash flows, and sources of financing
that we expect will be available to us, we do not expect that we will experience
any significant liquidity constraints in the foreseeable future.





Off-Balance
Sheet Transactions





Our
liquidity is not materially affected by off-balance sheet
transactions.  Like many other trucking companies, we have
periodically utilized operating leases to finance our revenue equipment
purchases.  As of March 31, 2009, we did not have any tractors held
under operating leases, compared to 13 tractors held under operating leases at
March 31, 2008.  Vehicles held under operating leases were not carried
on our balance sheet, and lease payments in respect of such vehicles are
reflected in our income statements in the line item "Lease expense – revenue
equipment".





Critical
Accounting Policies and Estimates





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.  Management bases its estimates on
historical experience and various other assumptions believed to be
reasonable.  Although these estimates are based on management's best
knowledge of current events and actions that may impact us in the future, actual
results may differ from these estimates and assumptions.  Our critical
accounting policies are those that affect, or could affect our financial
statements materially and involve a significant level of judgment by
management.  The accounting policies we deem most critical to us
include, revenue recognition, depreciation, claims accrual, accounting for
income taxes and share based payments.  There have been no significant
changes to our critical accounting policies and estimates during the three
months ended March 31, 2009, compared to those disclosed in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operation," included in our 2008 Annual Report on Form 10-K.





Item
3.                                Quantitative
and Qualitative Disclosures About Market Risk





We are
exposed to market risk changes in interest rate on debt and from changes in
commodity prices.





Under
Financial Accounting Reporting Release Number 48 and SEC rules and regulations,
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.





We
currently do not use derivative financial instruments for risk management
purposes and do not use them for either speculation or
trading.  Because our operations are mostly confined to the United
States, we are not subject to a material amount of foreign currency
risk.


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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 or
otherwise.  We attempt to manage our interest rate risk by managing
the amount of debt we carry.  We did not have any debt outstanding at
March 31, 2009, and therefore had no market risk related to debt.





Commodity
Price Risk





We also
are subject to commodity price risk with respect to purchases of
fuel.  The price and availability of diesel fuel can fluctuate due to
market factors that are beyond our control.  We believe fuel
surcharges are effective at mitigating most, but not all, of the risk of high
fuel prices because we do not recover the full amount of fuel price
increases.  As of March 31, 2009, we did not have any derivative
financial instruments to reduce our exposure to fuel price
fluctuations.





Item
4.                                Controls
and Procedures





We have
established disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended) to ensure
that material information relating to us, including our consolidated
subsidiaries, is made known to the officers who certify our financial reports
and to other members of senior management and the Board of
Directors.  Our management, with the participation of our principal
executive officer and principal financial officer, conducted an evaluation of
the effectiveness of our disclosure controls and procedures.  Based on
this evaluation, as of the end of the period covered by this Quarterly Report on
Form 10-Q, our principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures are effective to ensure
that the information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is (i) recorded, processed, summarized, and
reported within the time periods specified in the SEC rules and forms, and (ii)
accumulated and communicated to management, including our principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.





There was
no change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March
31, 2009, that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.





We have
confidence in our disclosure controls and procedures and internal control over
financial reporting.  Nevertheless, our management, including our
principal executive officer and principal financial officer, does not expect
that our disclosure controls and procedures and internal control over financial
reporting will prevent all errors, misstatements, or fraud.  A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are
met.  Further, the design of a 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 control systems, no evaluation of controls can provide
absolute assurance that all of our control issues and instances of fraud, if
any, have been detected.


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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
1A.                      Risk
Factors





While we
attempt to identify, manage, and mitigate risks and uncertainties associated
with our business, some level of risk and uncertainty will always be
present.  Our Annual Report on Form 10-K for the year ended December
31, 2008, in the section entitled "Item 1A.  Risk
Factors," describes some of the risks and uncertainties associated with
our business.  These risks and uncertainties have the potential to
materially affect our business, financial condition, results of operations, cash
flows, projected results, and future prospects.  In addition to the
risk factors set forth on our Form 10-K, we believe that the following
additional issues, uncertainties, and risks, should be considered in evaluating
our business and growth outlook:





Our
business is subject to certain credit factors affecting the global economy that
are largely out of our control and that could have a material adverse effect on
our operating results.





There
continues to be widespread concern over the instability of the credit markets
and the current credit market effects on the economy.  If the economy and
credit markets continue to weaken, our business, financial results, and results
of operations could be materially and adversely affected, especially if consumer
confidence declines and domestic spending decreases.  Although we think it
is unlikely given our current cash position, we may need to incur indebtedness
or issue debt or equity securities in the future to fund working capital
requirements, make investments, or for general corporate purposes.  If
the credit and equity markets continue to erode, our ability to do so may be
constrained.  Additionally, the stresses in the credit market have
caused uncertainty in the equity markets, which may result in volatility of the
market price for our securities.




Item 2.  Unregistered
Sales of Equity Securities and Use of Proceeds




Period
                      
                      Total
      Number of Shares Purchased
                      
                      
                      Average
                        Price
      Paid per Share
                      
                      
                      Total
      Number of Shares Purchased as Part of Publicly Announced
      Program
                      
                      
                      Maximum
      Number of Shares that May Yet Be Purchased Under the
    Program01/01/09
      – 01/31/09
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,409,95602/01/09
      – 02/28/09
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,409,95603/01/09
      – 03/31/09
                      
                      
                      389,000
                      
                      
                      $
                      12.60
                      
                      
                      
                      389,000
                      
                      
                      
                      2,020,956Total
                      
                      
                      389,000
                      
                      
                      $
                      12.60
                      
                      
                      
                      389,000
                      
                      
                      
                      2,020,956





On
November 13, 2008, our Board of Directors unanimously authorized the repurchase
of up to 3.0 million shares of our Common Stock.  The repurchase
authorization will remain in effect until the share limit is reached or the
program is terminated.  See Note 11 for additional information with
respect to our share repurchase programs.





Item
3.                      Defaults
Upon Senior Securities





Not
Applicable





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





Not
Applicable





Item
5.                                Other
Information





Not
Applicable





Item
6.                                Exhibits





Exhibits
required by Item 601 of Regulation S-K





Exhibit No.
            
            DescriptionExhibit
      3
            
            Articles
      of Incorporation and Bylaws(3.1)
            Second
      Amended and Restated Articles of Incorporation of the Company.(Incorporated
      by reference to Appendix A to the Company's Definitive Proxy Statement on
      Schedule 14A filed April 20, 2007.)(3.2)
            Sixth
      Amended and Restated Bylaws of the Company.(Incorporated
      by reference to Exhibit 3 to the Company's Report on Form 8-K dated
      December 18, 2007 and filed on December 19, 2007.)Exhibit
      4
            
            Instruments
      defining the rights of security holders, including
    indentures(4.1)
            Articles
      4, 10, and 11 of the Second Amended and Restated Articles of Incorporation
      of the Company.  (Incorporated by reference to Exhibit 3.1 to
      this Report on Form 10-Q.)(4.2)
            Sections
      2 and 5 of the Sixth Amended and Restated Bylaws of the
      Company.  (Incorporated by reference to Exhibit 3.2 to this
      Report on Form 10-Q.)(4.3)
            Knight
      Transportation, Inc. Amended and Restated 2003 Stock Option Plan.(Incorporated
      by reference to the Company's Definitive Proxy Statement on Schedule 14A
      filed December 1, 2005.)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 David A. Jackson, 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 David A. Jackson, the Company's Chief
      Financial Officer.*Filed
      herewith.







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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:
      May 11, 2009
              By:
              /s/
      Kevin P. KnightKevin
      P. KnightChief
      Executive Officer, in his capacity as such and on behalf of the
      registrantDate:
      May 11, 2009
              By:
              /s/
      David A. JacksonDavid
      A. JacksonChief
      Financial Officer, in his capacity as such and on behalf of the
      registrant