10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
Or
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                       to

Commission File Number: 001-32396

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.)
20002 North 19th Avenue Phoenix, Arizona 85027 (Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:		602-269-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x  Yes       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 (§232.405 of this Chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x  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 the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X]	Accelerated filer [  ]
Non-accelerated filer [  ]	Smaller reporting company [  ]

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 July 28, 2016, was 80,017,790 shares.

KNIGHT TRANSPORTATION, INC.

TABLE OF CONTENTS

		Page Number
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Unaudited Balance Sheets as of June 30, 2016 and December 31, 2015	1
	Condensed Consolidated Unaudited Statements of Income for the three and six months ended June 30, 2016 and 2015	3
	Condensed Consolidated Unaudited Statements of Comprehensive Income for the three and six months ended June 30, 2016 and 2015	4
	Condensed Consolidated Unaudited Statements of Cash Flows for the six months ended June 30, 2016 and 2015	5
	Notes to Condensed Consolidated Unaudited Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
Part II – OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures		37

PART I - FINANCIAL INFORMATION

Item 1.                      Financial Statements

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES Condensed Consolidated Unaudited Balance Sheets (in thousands)
	June 30, 2016			December 31, 2015
ASSETS
Current Assets:
Cash and cash equivalents	$	9,564		$	8,691
Trade receivables, net of allowance for doubtful accounts of $2,780 and $3,106, respectively		134,753			131,945
Notes receivable, net of allowance for doubtful notes receivable of $265 and $273, respectively		549			648
Prepaid expenses		11,894			17,320
Assets held for sale		21,091			29,327
Other current assets		9,171			14,215
Income tax receivable		17,923			41,967
Total current assets		204,945			244,113
Property and Equipment:
Revenue equipment		883,910			866,252
Land and land improvements		53,131			52,951
Buildings and building improvements		142,256			139,102
Furniture and fixtures		19,955			18,363
Shop and service equipment		16,438			16,729
Leasehold improvements		4,475			3,061
Gross property and equipment		1,120,165			1,096,458
Less:  accumulated depreciation and amortization		(316,032	)		(292,815	)
Property and equipment, net		804,133			803,643
Notes receivable, long-term		3,435			3,419
Goodwill		47,040			47,050
Intangible assets, net		2,825			3,075
Other long-term assets, restricted cash and investments		24,416			18,932
Total long-term assets		881,849			876,119
Total assets	$	1,086,794		$	1,120,232

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

1

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES Condensed Consolidated Unaudited Balance Sheets (continued) (in thousands, except par values)
	June 30, 2016		December 31, 2015
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	28,491	$	14,818
Accrued payroll and purchased transportation		21,567		23,776
Accrued liabilities		16,504		21,609
Claims accrual – current portion		20,315		19,471
Dividend payable – current portion		314		349
Total current liabilities		87,191		80,023
Long-term Liabilities:
Claims accrual – long-term portion		12,192		11,508
Long-term dividend payable and other liabilities		1,888		2,164
Deferred tax liabilities		177,200		174,165
Long-term debt		60,000		112,000
Total long-term liabilities		251,280		299,837
Total liabilities		338,471		379,860
Commitments and Contingencies (Note 6)
Shareholders' 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; 79,991 and 80,967 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively		800		810
Additional paid-in capital		216,022		205,648
Accumulated other comprehensive income		733		2,573
Retained earnings		529,017		529,367
Total Knight Transportation shareholders' equity		746,572		738,398
Noncontrolling interest		1,751		1,974
Total shareholders’ equity		748,323		740,372
Total liabilities and shareholders' equity	$	1,086,794	$	1,120,232

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

2

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES Condensed Consolidated Unaudited Statements of Income (in thousands, except per share data)
	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
REVENUE:
Revenue, before fuel surcharge	$	253,859		$	268,623		$	507,442		$	525,837
Fuel surcharge		22,459			33,199			40,964			66,266
Total revenue		276,318			301,822			548,406			592,103
OPERATING EXPENSES:
Salaries, wages and benefits		84,440			84,381			168,043			164,407
Fuel		33,429			42,362			60,200			80,451
Operations and maintenance		19,094			21,547			37,104			41,675
Insurance and claims		8,257			7,995			17,080			16,928
Operating taxes and licenses		4,612			4,725			10,099			10,581
Communications		1,043			1,077			2,248			2,217
Depreciation and amortization		28,955			27,364			57,357			54,524
Purchased transportation		53,918			60,619			111,703			120,164
Miscellaneous operating expenses		4,489			10,133			7,764			13,234
Total operating expenses		238,237			260,203			471,598			504,181
Income from operations		38,081			41,619			76,808			87,922
Interest income		82			104			176			236
Interest expense		(258	)		(211	)		(559	)		(493	)
Other income		1,927			2,436			3,213			4,899
Income before income taxes		39,832			43,948			79,638			92,564
Income taxes		14,861			15,759			31,645			34,434
Net income		24,971			28,189			47,993			58,130
Net income attributable to noncontrolling interest		(296	)		(551	)		(748	)		(930	)
Net income attributable to Knight Transportation	$	24,675		$	27,638		$	47,245		$	57,200
Earnings per share:
Basic	$	0.31		$	0.34		$	0.59		$	0.70
Diluted	$	0.31		$	0.33		$	0.58		$	0.69
Dividends declared per share	$	0.06		$	0.06		$	0.12		$	0.12
Weighted Average Shares Outstanding:
Basic		80,105			81,894			80,407			81,959
Diluted		80,781			82,852			81,079			83,020

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

3

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES

Condensed Consolidated Unaudited Statements of Comprehensive Income

(in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net income	$	24,971		$	28,189		$	47,993		$	58,130
Other comprehensive income, net of tax:
Realized gains from available-for-sale securities reclassified to net income(1)		(907	)		(1,344	)		(1,888	)		(2,782	)
Unrealized (loss)/gain from changes in fair value of available-for-sale securities(2)		(75	)		(3,010	)		48			(3,271	)
Comprehensive income		23,989			23,835			46,153			52,077
Comprehensive income attributable to noncontrolling interest		(296	)		(551	)		(748	)		(930	)
Comprehensive income attributable to Knight Transportation	$	23,693		$	23,284		$	45,405		$	51,147

(1)	Net of current income tax expense of $567, $849, $1,181, and $1,757, respectively.
(2)	Net of deferred income tax (benefit)/expense of $(50), $(1,903), $24, and $(2,145), respectively.

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

4

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES Condensed Consolidated Unaudited Statements of Cash Flows (in thousands)
	Six Months Ended June 30,
	2016			2015
Cash Flows From Operating Activities:
Net income	$	47,993		$	58,130
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		57,357			54,524
Gain on sale of equipment		(5,845	)		(9,912	)
Gain from sale of available-for-sale securities		(3,069	)		(4,539	)
Gain from sale of Transportation Resource Partners I		-			(122	)
Income from investment in Transportation Resource Partners III		(144	)		(239	)
Non-cash compensation expense for issuance of common stock to certain members of Board of Directors		398			354
Provision for doubtful accounts and notes receivable		317			803
Excess tax benefits related to stock-based compensation		(690	)		(2,748	)
Stock-based compensation expense, net		2,581			3,600
Deferred income taxes		4,193			(9,141	)
Changes in operating assets and liabilities:
Trade receivables		(3,115	)		7,837
Other current assets		5,044			49
Prepaid expenses		5,425			1,379
Income tax receivable		24,043			12,699
Other long-term assets		185			(1,946	)
Accounts payable		5,363			(4,857	)
Accrued liabilities and claims accrual		(6,512	)		1,596
Net cash provided by operating activities		133,524			107,467
Cash Flows From Investing Activities:
Purchases of property and equipment		(75,446	)		(86,930	)
Proceeds from sale of equipment/assets held for sale		40,050			47,321
Proceeds from notes receivable		262			822
Change in restricted cash and investments		(19	)		(8	)
Proceeds from sale of available-for-sale securities		5,183			6,188
Cash payments to Transportation Resource Partners		(11,028	)		-
Cash proceeds from Transportation Resource Partners		423			251
Net cash used in investing activities		(40,575	)		(32,356	)

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

5

KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES Condensed Consolidated Unaudited Statements of Cash Flows (continued) (in thousands)
	Six Months Ended June 30,
	2016			2015
Cash Flows From Financing Activities:
Dividends paid	$	(9,938	)	$	(10,135	)
Payments to repurchase company stock		(36,566	)		(30,345	)
Payments on line of credit borrowings, net		(52,000	)		(49,400	)
Excess tax benefits related to stock-based compensation		690			2,748
Cash distribution to noncontrolling interest holder		(972	)		(603	)
Proceeds from exercise of stock options		6,710			6,488
Net cash used in financing activities		(92,076	)		(81,247	)
Net increase (decrease) in Cash and Cash Equivalents		873			(6,136	)
Cash and Cash Equivalents, beginning of period		8,691			17,066
Cash and Cash Equivalents, end of period	$	9,564		$	10,930
Supplemental Disclosures:
Non-cash investing and financing transactions:
Equipment acquired included in accounts payable	$	12,528		$	13,821
Transfer from property and equipment to assets held for sale	$	18,776		$	19,944
Financing provided to independent contractors for equipment sold	$	157		$	424
Net dividend accrued for restricted stock units	$	77		$	86
Cash flow information:
Income taxes paid	$	2,667		$	28,253
Interest expense paid	$	591		$	529

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

6

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 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, 2015.

Note 2.                      Stock-Based Compensation

In May 2015, our shareholders approved the Amended and Restated 2015 Omnibus Incentive Plan (the “2015 Plan”). This plan combines into a single plan the Company’s 2005 Executive Cash Bonus Plan (the “2005 Plan”) and the 2012 Equity Compensation Plan (the “2012 Plan”) and allows for future grants under the 2015 Plan.  Grants outstanding under the 2005 Plan and 2012 Plan will continue in force and effect and continue to be governed solely by the terms and conditions of the instrument evidencing such grants, and will be interpreted under the terms of the 2005 Plan and the 2012 Plan, as applicable. Since approval of the 2015 Plan in May 2015, all grants of stock-based compensation are made under the 2015 Plan.  Stock-based compensation expense for the three months and six months ended June 30, 2016, and 2015, are as follows (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Stock compensation expense for options, net of forfeitures	$	513	$	280	$	884	$	446
Stock compensation expense for restricted stock units and performance restricted stock units, net of forfeitures		1,288		1,167		1,697		3,154
Total stock compensation expense	$	1,801	$	1,447	$	2,581	$	3,600

Our policy is to recognize compensation expense on a straight-line basis over the requisite service period for the entire award.

As of June 30, 2016, we have approximately $4.3 million of unrecognized compensation expense related to unvested options.  This cost is expected to be recognized over a weighted-average period of 1.9 years and a total period of 3.7 years.  We have approximately $9.4 million of unrecognized compensation expense related to restricted stock unit awards, which is anticipated to be recognized over a weighted-average period of 3.5 years and a total period of 6.6 years. We also have approximately $8.2 million of unrecognized compensation cost related to unvested performance awards.  That cost is expected to be recognized over a weighted-average period of 2.8 years and total period of 3.6 years.

7

A total of 569,480 and 590,141 stock options were granted during the first six months of 2016 and 2015, respectively. We received approximately $6.7 million in cash from the exercise of stock options during the six months ended June 30, 2016, compared to $6.5 million for the same period in 2015.

A summary of the option award activity under our equity compensation plan as of June 30, 2016, and changes during the six months ended June 30, 2016, is presented below:

	Option Totals			Weighted Average Exercise Price Per Share
Outstanding as of December 31, 2015		2,008,872		$	21.41
Granted		569,480			24.23
Exercised		(371,805	)		17.94
Forfeited		(61,830	)		25.59
Outstanding as of June 30, 2016		2,144,717		$	23.04

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model.  Listed below are the weighted-average assumptions used for the fair value computation:

	Six Months Ended June 30,
	2016			2015
Dividend yield (1)		0.99	%		0.80	%
Expected volatility (2)		27.91	%		25.88	%
Risk-free interest rate (3)		0.90	%		0.98	%
Expected term (4)	2.74 years			2.74 years
Weighted-average fair value of options granted	$	4.28		$	5.00

(1)	Dividend yield – the dividend yield is based on our historical experience and future expectation of dividend payouts.
(2)	Expected volatility – we analyzed the volatility of our stock using historical data.
(3)	Risk-free interest rate – 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)	Expected term – the expected term 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.

A total of 4,350 and 13,950 restricted stock unit awards were granted during the first six months of 2016 and 2015, respectively. A summary of the restricted stock unit award activity under our equity compensation plans as of June 30, 2016, and changes during the six months ended June 30, 2016, is presented below:

	Number of Restricted Stock Unit Awards			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2015		879,173		$	16.45
Granted		4,350			26.38
Vested		(154,667	)		16.73
Forfeited		(5,240	)		16.43
Unvested as of June 30, 2016		723,616		$	16.45

The fair value of each restricted stock unit is based on the closing market price on the date of grant.

8

Beginning in 2014, we issued performance restricted stock units (“PRSUs”) to selected key employees that may be earned based on revenue growth and return on assets, and may then be modified based on our total shareholder return, as defined in the instrument evidencing the grant, over a three-year period. The primary award adjustment may range from 0 percent to 150 percent of the initial grant, based upon performance achieved over the three-year period. The primary award modifier, which would multiply the adjusted primary award by 75 percent to 125 percent, is measured by determining the percentile rank of the total shareholder return, as defined in the instrument evidencing the grant, of Knight Transportation common stock in relation to the total shareholder return of a peer group for the three-year period. The final award will be based on performance achieved in accordance with the scale set forth in the plan agreement. PRSUs do not earn dividend equivalents.

A total of 177,741 and 165,720 PRSUs were granted in the first six months of 2016 and 2015, respectively. A summary of the performance restricted stock unit award activity for the six months ended June 30, 2016 is presented below:

	Number of Performance Restricted Stock Unit Awards			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2015		341,782		$	26.46
Granted		177,741			23.89
Shares earned above target		2,516			23.85
Vested		(5,391	)		23.85
Cancelled		(1,238	)		23.89
Unvested as of June 30, 2016		515,410		$	25.59

The number of granted shares, cancelled shares, and unvested shares are included in the table above based on the performance target established at the initial grant date.

The performance measurement period for the awards granted in the six months ended June 30, 2016, is January 1, 2016 to December 31, 2018. These awards will vest January 31, 2020, or thirteen months following the expiration of the performance period. The fair value of each PRSU grant is estimated on the date of grant using the Monte Carlo Simulation valuation model.  Listed below are the weighted-average assumptions used for the fair value computation:

	Six Months Ended June 30,
	2016			2015
Dividend yield (1)		0.99	%		0.80	%
Expected volatility (2)		27.95	%		23.18	%
Average peer volatility (2)		34.37	%		30.70	%
Average peer correlation coefficient (3)		0.6022			0.49
Risk-free interest rate (4)		0.89	%		0.78	%
Expected term (5)		2.84			2.63
Weighted-average fair value of PRSUs granted	$	23.89		$	29.30

(1)	The dividend yield, used to project stock price to the end of the performance period, is based on our historical experience and future expectation of dividend payouts. Total shareholder return is determined assuming that dividends are reinvested in the issuing entity over the performance period, which is mathematically equivalent to utilizing a 0% dividend yield.
(2)	We (or peer company) estimated volatility using our (or their) historical share price performance over the remaining performance period as of the grant date.
(3)	The correlation coefficients are used to model the way in which each entity tends to move in relation to each other; the correlation assumptions were developed using the same stock price data as the volatility assumptions.
(4)	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 performance award.
(5)	Since the Monte Carlo simulation valuation is an open form model that uses an expected life commensurate with the performance period, the expected life of the PRSUs was assumed to be the period from the grant date to the end of the performance period.

9

Note 3.                      Earnings Per Share

A reconciliation of the basic and diluted earnings per share computations for the three months and six months ended June 30, 2016 and 2015, respectively, is as follows (dollars in thousands except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Weighted-average common shares outstanding – basic		80,105		81,894		80,407		81,959
Dilutive effect of stock options and unvested restricted stock units		676		958		672		1,061
Weighted-average common shares outstanding – diluted		80,781		82,852		81,079		83,020
Net income attributable to Knight Transportation	$	24,675	$	27,638	$	47,245	$	57,200
Basic earnings per share	$	0.31	$	0.34	$	0.59	$	0.70
Diluted earnings per share	$	0.31	$	0.33	$	0.58	$	0.69

Certain shares of options, restricted stock units, and PRSUs (collectively, “equity awards”) were excluded from the computation of diluted earnings per share because the equity award’s exercise prices were greater than the average market price of the common shares and the sum total of assumed proceeds resulted in fewer shares repurchased than the weighted equity awards outstanding hypothetically exercised per the treasury method.

The number of anti-dilutive shares are:

	Three Months Ended June 30,		Six Months Ended June 30,
	2016	2015	2016	2015
Number of anti-dilutive shares	1,274,322	338,898	1,185,126	183,788

Note 4.                      Segment Information

We have two operating and reportable segments:  (i) the Trucking segment comprised of three operating units (Dry Van, Refrigerated, and Drayage), and (ii) the Logistics segment comprised of two operating units (Brokerage and Intermodal). We also provide logistics, freight management and other non-trucking services through our Logistics businesses. Through our Trucking and Logistics segment capabilities, we are able to transport, or can arrange for the transportation of, general commodities for customers throughout the United States and parts of Canada and Mexico.

In determining our reportable segments, we focus on financial information such as operating revenues and expenses, operating income, operating ratios, and other key operating statistics common in the industry.  The chief operating decision makers also use this information to evaluate segment performance and allocate resources to our operations.

10

Our segments provide transportation and related services for one another. Such services are billed at cost, and no profit is earned. Such intersegment revenues and expenses are eliminated in our consolidated results.

The following table sets forth revenue and operating income between the Trucking and Logistics segments for the three months and six months ended June 30, 2016 and 2015 (dollars in thousands).

	Three Months Ended June 30, 2016					Three Months Ended June 30, 2015					Six Months Ended June 30, 2016					Six Months Ended June 30, 2015
Revenues:	$			%		$			%		$			%		$			%
Trucking Segment	$	226,423		81.9		$	245,627		81.4		$	444,379		81.0		$	480,917		81.2
Logistics Segment		51,703		18.7			60,718		20.1			110,312		20.1			118,566		20.0
Subtotal		278,126					306,345					554,691					599,483
Intersegment Eliminations Trucking		(34	)	0.0			(60	)	0.0			(72	)	0.0			(78	)	0.0
Intersegment Eliminations Logistics		(1,774	)	(0.6	)		(4,463	)	(1.5	)		(6,213	)	(1.1	)		(7,302	)	(1.2	)
Total	$	276,318		100	%	$	301,822		100	%	$	548,406		100	%	$	592,103		100	%
Operating Income:
Trucking Segment	$	35,286		92.7		$	37,944		91.2		$	71,208		92.7		$	80,091		91.1
Logistics Segment		2,795		7.3			3,675		8.8			5,600		7.3			7,831		8.9
Total	$	38,081		100	%	$	41,619		100	%	$	76,808		100	%	$	87,922		100	%

No segmental asset or liability information is provided as we do not prepare balance sheets by segment, and the chief operating decision makers do not review segment assets or liabilities to make operating decisions.

Note 5.                      Joint Ventures

In 2014, we formed an Arizona limited liability company, Kool Trans, LLC, for the purpose of expanding our refrigerated trucking business. In 2015, we changed the company name to Kold Trans, LLC. We are entitled to 80% of the profits of the entity and have effective control over the management of the entity. In accordance with ASC 810-10-15-8, Consolidation, we consolidate the financial activities of this entity into these condensed consolidated financial statements. The noncontrolling interest for this entity is presented as a separate component of the condensed consolidated financial statements.

In 2010, we partnered with a non-related investor to form an Arizona limited liability company for the purpose of sourcing commercial vehicle parts. We contributed $26,000 to acquire 52% ownership of this entity. In accordance with ASC 810-10-15-8, Consolidation, we consolidate the financial activities of this entity into the condensed consolidated financial statements. The noncontrolling interest for this entity is presented as a separate component of the condensed consolidated financial statements.

Note 6.                      Commitments and Contingencies

We are a party to certain claims and pending litigation arising in the normal course of business.  These proceedings primarily involve claims for personal injury, property damage, physical damage, and cargo loss incurred in the transportation of freight or for personnel matters, as well as certain class action litigation in which plaintiffs allege failure to provide meal and rest breaks, unpaid wages, unauthorized deductions, and other items.

We are insured against auto liability (“AL”) claims under a primary self-insured retention ("SIR") policy with retention ranging from $1.0 million to $3.0 million per occurrence and in some years, depending on the applicable policy year, we have been responsible for aggregate losses up to $1.5 million within the primary AL layer.  For the policy periods March 1, 2016 to March 1, 2017, and March 1, 2015 to March 1, 2016, the SIR is $2.5 million with no additional aggregate limits or deductibles within the primary AL policy.  We have secured excess liability coverage up to $130.0 million per occurrence for the policy period March 1, 2016 to March 1, 2017. For policy period March 1, 2015 to March 1, 2016, our excess liability coverage limit was $105.0 million per occurrence. We also carry a $2.5 million aggregate deductible for any loss or losses within the excess coverage layer.

11

We are self-insured for workers' compensation coverage. On March 31, 2016, the self-retention level was increased from a maximum $500,000 per occurrence to a maximum $1,000,000 per occurrence. We also maintain primary and excess coverage for employee medical expenses and hospitalization, with self-insured retention of $240,000 per claimant in 2016, and $225,000 per claimant in 2015.

Based on our present knowledge of the facts, and in certain cases, advice of outside counsel, management believes the resolution of open claims and pending litigation, taking into account existing reserves, is not likely to have a materially adverse effect on our consolidated financial statements.

Note 7.                      Property and Equipment

To ensure that our facilities remain modern and efficient, we periodically have facility upgrades, or new construction, in process at our various service center or corporate headquarters locations. Until these projects are completed, we consider these to be assets not yet placed in service and they are not depreciated.  Once they are placed into service, we depreciate them according to our depreciation policy. At June 30, 2016 and December 31, 2015, we had approximately $9.2 million and $17.5 million, respectively, of facility construction in process assets included under "Buildings and building improvements” on the accompanying condensed consolidated balance sheets.

Note 8.                      Goodwill and Intangibles, net

Goodwill represents the excess of the purchase price of our acquisitions over the fair value of the net 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 amounts of goodwill were as follows (dollars in thousands):

	Six Months Ended June 30, 2016
Goodwill at beginning of period	$	47,050
Amortization relating to deferred tax assets		(10	)
Goodwill at end of period	$	47,040

In conjunction with our acquisitions, identifiable intangible assets subject to amortization have been recorded at fair value and are being amortized over a weighted-average amortization period of 7.6 years.

Intangible asset balances were as follows (dollars in thousands):

	June 30,  2016			December 31, 2015
Gross carrying amount	$	3,700		$	3,700
Accumulated amortization		(875	)		(625	)
Intangible assets, net	$	2,825		$	3,075

12

Amortization expense associated with these intangible assets was $0.1 million and $0.3 million for the three and six months ended June 30, 2016, and 2015, respectively, and is included in “Depreciation and amortization” on the accompanying condensed consolidated statements of income. Future amortization expense for intangible assets is estimated at $0.2 million for the remainder of 2016, $0.5 million for each of the years 2017 through 2019, and $0.4 million in 2020 and 2021.

Note 9.                      Investments and Related Commitments

In 2003, we signed a partnership agreement with Transportation Resource Partners ("TRP"), a company that makes privately negotiated equity investments. Per the original partnership agreement, we committed to invest $5.0 million in TRP. In 2006, we increased the commitment amount to $5.5 million. No gain or loss was recognized from TRP investment activity in the second quarter of 2016, and we recognized a net gain of $122,000 in the second quarter of 2015. The carrying value of our investment in TRP was $300,000 at June 30, 2016 and December 31, 2015. Our investment in TRP is accounted for using the cost method, and the balance is included within "Other long-term assets, restricted cash and investments" on our accompanying condensed consolidated balance sheets.

In 2008, we formed Knight Capital Growth, LLC and committed $15.0 million to invest in another partnership managed and operated by the managers and principals of TRP. This partnership, Transportation Resource Partners III, LP ("TRP III"), is focused on investment opportunities similar to TRP. In 2015, TRP III released us from $2.1 million of our outstanding commitment. As of June 30, 2016, we have contributed approximately $11.0 million to TRP III, leaving an outstanding commitment of $1.9 million. Our investment in TRP III is accounted for using the equity method. For the three months ended June 30, 2016, we recorded income of approximately $453,000, for our investment in TRP III, and $121,000 for the three months ended June 30, 2015. The carrying value of our investment in TRP III was $5.5 million and $5.8 million as of June 30, 2016 and December 31, 2015, respectively, and is included within "Other long-term assets, restricted cash and investments" on our accompanying condensed consolidated balance sheets.

In 2015, we committed to invest in another TRP partnership, TRP Capital Partners, LP (“TRP IV”). TRP IV is managed and operated by the managers and principals of TRP and TRP III, and is focused on similar investment opportunities. We committed to contribute a total of $4.9 million to TRP IV, and have contributed approximately $1.0 million, leaving an outstanding commitment of approximately $3.9 million as of June 30, 2016. Our investment in TRP IV is accounted for using the cost method, and the balance is included within "Other long-term assets, restricted cash, and investments" on our accompanying condensed consolidated balance sheets.

In the first quarter of 2016, we committed to invest in another TRP partnership, TRP CoInvest Partners, (NTI) I, LP (“TRP Coinvestment”). The new partnership is managed and operated by the managers and principals of the other TRP partnerships, and is focused on similar investment opportunities. We committed to contribute, and have paid a total of, $10.0 million to the new partnership, leaving no outstanding commitment as of June 30, 2016. Our investment in TRP Coinvestment is accounted for using the equity method, and the carrying value at June 30, 2016 was $10.0 million and is included within "Other long-term assets, restricted cash, and investments" on our accompanying condensed consolidated balance sheets.

Note 10.                      Marketable Equity Securities

We have certain marketable equity securities classified as available-for-sale securities, which are recorded at fair value with unrealized gains and losses, net of tax, as a component of "Accumulated other comprehensive income" in shareholders' equity on the accompanying condensed consolidated balance sheets. Realized gains and losses on available-for-sale securities are included in the determination of net income. We use specific identification to determine the cost of securities sold, or amounts reclassified out of accumulated other comprehensive income into earnings and included in “Other income” on the accompanying condensed consolidated statements of income.

13

The following table shows the Company’s realized gains during the three and six month periods ended June 30, 2016 and 2015, on certain securities that were held as available-for-sale (dollars in thousands).

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Realized gains
Sales proceeds	$	2,330	$	3,042	$	5,183	$	6,188
Cost of securities sold		856		849		2,114		1,649
Realized gain	$	1,474	$	2,193	$	3,069	$	4,539
Realized gains, net of taxes	$	907	$	1,344	$	1,888	$	2,782

As of June 30, 2016, our available-for-sale equity investments included in "Other long-term assets and restricted cash and investments" on the accompanying condensed consolidated balance sheets, was approximately $2.0 million, including gross unrealized gains of approximately $1.2 million, or $0.7 million (net of tax). As of December 31, 2015, our available-for-sale investment balance was approximately $7.1 million, including gross unrealized gains of approximately $4.2 million, or $2.6 million (net of tax).

Note 11.                      Assets Held for Sale

Revenue equipment that is not utilized in continuing operations and is held for sale is classified as "Assets held for sale" on the accompanying condensed consolidated balance sheets.  Assets held for sale at June 30, 2016 and December 31, 2015, totaled $21.1 million and $29.3 million, respectively. Assets held for sale are no longer subject to depreciation, and are recorded at the lower of depreciated carrying value or fair market value less selling costs. We expect to sell these assets and replace them with new assets within twelve months of being classified as "Assets held for sale."

Note 12.                      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. For interim reporting purposes, our income tax provisions are recorded based on the estimated annual effective tax rate. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases 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 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.  We file federal and state income tax returns with varying statutes of limitations. The 2011 through 2015 tax years remain subject to examination by federal and state tax authorities.  As of June 30, 2016, cumulative gross unrecognized tax benefits were $0.7 million.  We had no unrecognized tax benefits as of December 31, 2015.  All unrecognized tax benefits, if recognized, would affect the effective tax rate.

14

With the exception of the unrecognized tax benefits discussed above, we believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our consolidated financial position, results of operations and cash flows.  Our policy is to recognize interest and penalties related to unrecognized tax benefits as income tax expense.  No interest or penalties related to unrecognized tax benefits has been recognized as of June 30, 2016 or December 31, 2015, because the Company has not yet received the refunds related to the uncertain tax benefits.  None of the unrecognized tax benefits are expected to reverse in the next 12 months.

Note 13.                      Company Share Repurchase Programs

In 2011, our Board of Directors unanimously authorized the repurchase of 10.0 million shares of our common stock. The repurchase authorization is intended to afford 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. The Company’s share repurchase program does not obligate it to acquire any specific number of shares. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.

Under the share repurchase program, we repurchased 0.4 million shares for $9.5 million in the three months ended June 30, 2016, and 1.5 million shares for $36.6 million in the six months ended June 30, 2016. We repurchased 1.0 million shares for $30.3 million in the three and six months ended June 30, 2015. As of June 30, 2016, there were 4.4 million shares remaining for future purchases under our repurchase program. The repurchase authorization will remain in effect until the share limit is reached or the program is terminated.

Note 14.                      Fair Value Measurements

Our assets and liabilities measured at fair value are based on principles set forth in ASC 820-10, Fair Value Measurements and Disclosure, for recurring and non-recurring fair value measurements of financial and non-financial assets and liabilities. This standard defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and expands disclosures about fair value measurements. This standard establishes a three-level hierarchy for fair value measurements based upon the significant inputs used to determine fair value.  Observable inputs are those which are obtained from market participants external to us while unobservable inputs are generally developed internally, utilizing management's estimates, assumptions, and specific knowledge of the nature of the assets or liabilities and related markets.  The three levels are defined as follows:

Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we have 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 are 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 our assumptions about the pricing of an asset or liability.

15

In accordance with the fair value hierarchy described above, the following table shows the fair value of our financial assets and liabilities that are required to be measured at fair value as of June 30, 2016 and December 31, 2015 (dollars in thousands). 

	Total		Total		Level One				Level Two				Level Three
	Balance at June 30, 2016		Balance at December 31, 2015		Balance at June 30, 2016		Balance at December 31, 2015		Balance at June 30, 2016		Balance at December 31, 2015		Balance at June 30, 2016		Balance at December 31, 2015
Assets:
Available-for-sale securities:
Equity securities - common shares	$	1,990	$	7,101	$	1,990	$	7,101		-		-		-		-
Restricted cash and investments:
Money market funds	$	1,045	$	1,003	$	1,045	$	1,003		-		-		-		-
Trading securities:
Debt securities - municipal securities	$	2,256	$	2,279		-		-	$	2,256	$	2,279		-		-

Note 15.                      Notes Receivable

We provide financing to independent contractors and third parties on equipment sold or leased under our equipment sale program. Most of the notes are collateralized and are due in weekly installments, comprised of principal and interest payments. Interest rates are set forth in the contracts and generally range from 2% to 20%.

The notes receivable balances are classified separately between current and long-term on the accompanying condensed consolidated balance sheets.  The current and long-term balance of our notes receivable at June 30, 2016 and December 31, 2015, are as follows (dollars in thousands):

	June 30, 2016			December 31, 2015
Notes receivable from independent contractors	$	974		$	794
Notes receivable from third parties		3,275			3,546
Gross notes receivable		4,249			4,340
Allowance for doubtful notes receivable		(265	)		(273	)
Total notes receivable, net of allowance		3,984			4,067
Current portion, net of allowance		549			648
Long-term portion	$	3,435		$	3,419

Note 16.                      Line of Credit

We maintain a revolving line of credit which permits revolving borrowings and letters of credit.  The line of credit is maintained at $300.0 million and matures December 1, 2017. Effective August 8, 2016, we entered into a modification to our line of credit agreement that extends the maturity date to August 1, 2019, and amends our minimum tangible net worth covenant to $500.0 million from $400.0 million. We incur interest on borrowings under the line of credit at the prime rate or LIBOR plus 0.625%, determined by us at the time of borrowing. We had $60.0 million outstanding under the line of credit as of June 30, 2016, compared to $112.0 million as of December 31, 2015.  The weighted average variable annual percentage rate ("APR") for amounts borrowed during the six months ended June 30, 2016 was 1.05%.  Borrowings under the line of credit are recorded in the "Long-term debt" line of the accompanying condensed consolidated balance sheets.  As of June 30, 2016, we also utilized $27.4 million of the line of credit for letters of credit issued to various regulatory authorities in connection with our self-insurance programs.  With the outstanding letters of credit and debt borrowed, we have $212.6 million available for future borrowings as of June 30, 2016.  After consideration of fees incurred for the unused portion of our line of credit, our weighted average variable APR for the six months ended June 30, 2016 was 1.21%. We are obligated to comply with certain financial and other covenants under the line of credit agreement and were in compliance with such covenants at and for the three and six months ended June 30, 2016 and for the year ended December 31, 2015.

16

Note 17.                      Recent Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting. The objective of this update is to simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the new guidance to determine the impact it may have on our condensed consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).  This update clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The amendments in this update affect the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date for the amendments in this update is the same as the effective date of ASU 2014-09 which will be effective for reporting periods beginning after December 15, 2017. We are currently evaluating the effect that this guidance will have on our condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update seeks to increase the transparency and comparability among entities by requiring public entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. To satisfy the standard’s objective, a lessee will recognize a right-of-use asset representing its right to use the underlying asset for the lease term and a lease liability for the obligation to make lease payments. Both the right-of-use asset and lease liability will initially be measured at the present value of the lease payments, with subsequent measurement dependent on the classification of the lease as either a finance or an operating lease. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. Accounting by lessors will remain mostly unchanged from current U.S. GAAP.

In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that companies may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. The transition guidance also provides specific guidance for sale and leaseback transactions, build-to-suit leases, leveraged leases, and amounts previously recognized in accordance with the business combinations guidance for leases. The new standard is effective for public companies for annual periods beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. We are currently evaluating the effect that adopting this standard will have on our condensed consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall (Subtopic 825-10). This update was issued to enhance the reporting model for financial instruments regarding certain aspects of recognition, measurement, presentation, and disclosure. The update (i) requires equity investments (except those accounted for under the equity method or that are consolidated) to be measured at fair value with changes in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for an entity to disclose the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost; (iv) requires an entity to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and (v) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. These provisions are effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. The standard is to be applied using a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption. We are currently evaluating the effect that adopting this standard will have on our condensed consolidated financial statements.

17

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The main objective of this update is to require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The guidance in this update supersedes virtually all present U.S. GAAP guidance on revenue recognition. The amendments to the standard require the use of more estimates and judgments than the present standards and require additional disclosures. In July 2015, the FASB deferred the effective date for the revenue recognition standard. The accounting standard will now be effective for reporting periods beginning after December 15, 2017. We are currently evaluating this standard and our existing revenue recognition policies to determine which of our customer arrangements in the scope of the guidance will be affected by the new requirements and what impact they would have on our condensed consolidated financial statements upon adoption of this standard.

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

Cautionary Note Regarding Forward-Looking Statements

This Quarterly 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 and the Private Securities Litigation Reform Act of 1995, as amended.  All statements, other than statements of historical or current fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of earnings, revenues, cash flows, dividends, 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.  In this Item 2, statements relating to the ability of our infrastructure to support future growth, the flexibility of our model to adapt to market conditions, our ability to recruit and retain qualified drivers, our ability to react to market conditions, our ability to gain market share, future tractor prices, potential acquisitions, our equipment purchasing plans and equipment turnover, the expected freight environment and economic trends, whether we grow organically, our ability to obtain favorable pricing terms from vendors and suppliers, expected liquidity and methods for achieving sufficient liquidity, future fuel prices, future third-party service provider relationships and availability, future compensation arrangements with independent contractors and drivers, our expected need or desire to incur indebtedness, expected sources of liquidity for capital expenditures and allocation of capital, expected tractor trade-ins, expected sources of working capital and funds for acquiring revenue equipment, expected capital expenditures, future asset utilization, future capital requirements, future trucking capacity, future consumer spending, expected freight demand and volumes, future rates, future depreciation and amortization, expected tractor and trailer fleet age, regulatory changes and the impact thereof, and future purchased transportation expense, among others, are forward-looking statements. Such statements may be identified by their use of terms or phrases such as "believe," "may," "could," "expects," "estimates," "projects," "anticipates," "plans," "intends," "hope," and similar terms and phrases.  Forward-looking statements are based on currently available operating, financial, and competitive information.  Forward-looking statements are inherently subject to risks 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, 2015, along with any supplements in Part II below, and various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

18

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.  We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in the events, conditions, or circumstances on which any such statement is based.

Introduction

Business Overview

We offer a broad range of full truckload transportation and logistics services with one of North America's largest tractor fleets, operated through a nationwide network of service centers, and contractual access to thousands of third-party capacity providers.  We have grown substantially by increasing the geographic reach of our service center network and by expanding the breadth of our services for customers.  Our Trucking segment provides truckload transportation, including dedicated services, of various products, goods, and materials for our diverse customer base through our Dry Van, Refrigerated, and Drayage operating units.  The Brokerage and Intermodal operating units of our Logistics segment provide a multitude of shipment solutions, including additional sources of truckload capacity and alternative transportation modes, by utilizing our vast network of third-party capacity providers and rail providers, as well as certain logistics, freight management, and other non-trucking services.  Our objective is to operate our Trucking and Logistics business with industry-leading margins and growth while providing safe, high-quality, cost-effective solutions for our customers.

Factors that affect our results of operations are industry-wide economic factors, such as freight demand, truckload and rail intermodal capacity, fuel prices, inventory levels, industrial production, government regulation, and unemployment rates, as well as our capital allocation, sales and marketing, operating, and spending decisions. We measure our results through key metrics, such as 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), freight volumes brokered to third-party capacity providers (including our rail partners), driver and independent contractor recruitment and retention, and our ability to control costs on a company-wide basis, as measured by cost per mile in our Trucking segment and non-GAAP operating ratio in both segments.  Our success depends on our ability to efficiently and effectively manage our resources in providing transportation and logistics solutions to our customers in light of such factors.  We evaluate the growth opportunities for each of our Trucking and Logistics businesses based on customer demand and supply chain trends, availability of drivers and third-party capacity providers, expected returns on invested capital, expected net cash flows, and our company-specific capabilities.

19

Recent Consolidated Results of Operations and Quarter-End Financial Condition

Our consolidated results of operations for the three months ended June 30, 2016, compared to the three months ended June 30, 2015, were as follows:

● Total revenue decreased 8.5%, to $276.3 million from $301.8 million;

● Revenue, before fuel surcharge, decreased 5.5%, to $253.9 million from $268.6 million;

● Net income attributable to Knight Transportation decreased 10.7%, to $24.7 million from $27.6 million; and

● Net earnings attributable to Knight Transportation per diluted share decreased to $0.31 per share from $0.33 per share.

The freight environment in the second quarter of 2016 was more challenging than the same period of the prior year. We attribute the change to excess trucking capacity in the markets we serve, and fewer non-contract opportunities from a weak spot market that pressured our revenue per loaded mile. Although we experienced modest improvements toward the end of the quarter in some regional markets, non-contract pricing opportunities were weak in comparison to the second quarter of 2015. We continue to experience an environment of trucking capacity surplus. However, we believe significantly declining new truck orders, declining used equipment prices, increased bankruptcies, reduction in the driver workforce, and additional regulatory burdens expected to phase in over the coming quarters has, and we anticipate will continue to, reduce available capacity and begin to lead to improvements in the supply and demand relationship in the coming quarters.

During the second quarter of 2016, our Trucking segment produced a non-GAAP operating ratio of 82.7% compared to 82.1% in the same quarter of 2015, while trucking revenue, excluding trucking fuel surcharge, decreased 4.0% in the quarter year over year.  Please see the reconciliation table below for a reconciliation of GAAP operating ratio to non-GAAP operating ratio. Productivity, as measured by average revenue per tractor, before fuel surcharge, decreased 1.5% in the second quarter of 2016 compared to the same quarter of 2015, attributable to a 2.4% decrease in average revenue per loaded mile, and an increase in non-paid empty mile percentage of 70 basis points, partially offset by a 1.7% increase in average miles per tractor.

Our Logistics segment produced an operating ratio of 94.4% in the second quarter of 2016 compared to 93.5% for the same quarter in 2015, with revenue declining 11.2%.  The decrease in revenue is attributable primarily to a decline in non-trucking service revenue in the second quarter of 2016 from the same quarter of 2015, as we exited our agricultural sourcing business in the first quarter of 2016, as well as a decrease in revenue per load in our Brokerage business, the largest component of our Logistics segment. Although revenue per load decreased, our Brokerage business increased load volume by 28.4%, increased revenue 2.1%, and expanded gross margins 110 basis points, which resulted in a 6.2% increase in Brokerage operating income compared to the second quarter of 2015.

In the second quarter of 2016, we returned $14.3 million to our shareholders in the form of quarterly cash dividends and stock buy-backs and ended the quarter with $746.6 million of shareholders' equity. In the second quarter of 2016, we generated $65.5 million in cash flow from operations and used $23.7 million for capital expenditures net of equipment sales.

Our liquidity is not materially affected by off-balance sheet transactions.  See the discussion under "Off-Balance Sheet Transactions" and "Liquidity and Capital Resources" for a description of our off-balance sheet transactions.

Consolidated Revenue and Expenses

We primarily generate revenue by transporting freight for our customers in our Trucking segment or arranging for the transportation of customer freight in our Logistics segment.  Our total revenue is reported under "Results of Operations" and categorized as (i) Trucking revenue, before fuel surcharge, (ii) Trucking fuel surcharge revenue, and (iii) Logistics revenue.  Trucking revenue, before fuel surcharge, and Trucking fuel surcharge revenue is largely generated by the trucking services provided by our three Trucking operating units (Dry Van, Refrigerated, and Drayage) whereas Logistics revenue is mostly generated by the logistics services provided by our two Logistics operating units (Brokerage and Intermodal). We also provide logistics, freight management, sourcing, and other non-trucking services, such as used equipment sales and leasing to independent contractors and third-parties, through our Logistics business.

20

The total revenue and operating expenses of our Trucking and Logistics segments are similarly affected by certain factors that generally relate to, among other things, overall economic and weather conditions in the United States, customer inventory levels, specific customer demand, the levels of truckload and rail intermodal capacity, and availability of qualified drivers, independent contractors, and third-party capacity providers. See the section entitled "Item 1A. Risk Factors," set forth in our Form 10-K for the year ended December 31, 2015, along with various disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.

To reduce our risk to fuel price fluctuations in our Trucking segment, we have a fuel surcharge program under which we obtain additional fuel surcharges from our customers that generally recover a majority, but not all, of the increased fuel costs; however, we cannot ensure that current recovery levels will continue in the future.  In discussing our overall and segment-based results of operations, because changes in fuel costs typically cause fuel surcharge revenue to fluctuate, we identify Trucking fuel surcharge revenue separately and omit fuel surcharge revenue from our statistical calculations.  We believe that omitting this potentially volatile source of revenue provides a more meaningful comparison of our operating results from period to period.

A primary measure we use to evaluate the profitability of our overall and segment based operations is operating ratio, measured both on a GAAP basis (operating expenses expressed as a percentage of revenue) and on a non-GAAP basis (“non-GAAP operating ratio”) that many in our industry use (operating expenses, net of Trucking fuel surcharge revenue, expressed as a percentage of Trucking revenue, excluding Trucking fuel surcharge revenue).  We believe the second method allows us to more effectively compare periods while excluding the potentially volatile effect of changes in fuel prices.  Non-GAAP operating ratio is not a substitute for or superior to, and should be considered in addition to, GAAP operating ratio. Pursuant to the requirements of Regulation G, the tables below compare our operating ratio using both methods on a consolidated basis.

The following table reconciles consolidated GAAP operating ratio to consolidated non-GAAP operating ratio (dollars in thousands):

	Three Months Ended June 30, 2016				Three Months Ended  June 30, 2015				Six Months Ended June 30, 2016				Six Months Ended June 30, 2015
GAAP Presentation:	$		%		$		%		$		%		$		%
Total revenue	$	276,318			$	301,822			$	548,406			$	592,103
Total operating expenses		238,237		86.2		260,203		86.2		471,598		86.0		504,181	85.2
Income from operations		38,081				41,619				76,808				87,922

	Three Months Ended June 30, 2016					Three Months Ended June 30, 2015					Six Months Ended June 30, 2016					Six Months Ended June 30, 2015
Non-GAAP Presentation(1):	$			%		$			%		$			%		$			%
Total revenue	$	276,318				$	301,822				$	548,406				$	592,103
Less fuel surcharge		(22,459	)				(33,199	)				(40,964	)				(66,266	)
Revenue, before fuel surcharge		253,859					268,623					507,442					525,837
Total operating expenses		238,237					260,203					471,598					504,181
Less fuel surcharge		(22,459	)				(33,199	)				(40,964	)				(66,266	)
Total operating expenses, net of fuel surcharge		215,778			85.0		227,004			84.5		430,634			84.9		437,915		83.3
Income from operations		38,081					41,619					76,808					87,922

 (1) These items represent non-GAAP financial measures and are not substitutes for or superior to, and should be considered in addition to, the GAAP financial measures presented in the previous table.

21

The following table sets forth revenue and operating income between the Trucking and Logistics segments for the three months and six months ended June 30, 2016 and 2015 (dollars in thousands).

	Three Months Ended June 30, 2016					Three Months Ended June 30, 2015					Six Months Ended June 30, 2016					Six Months Ended June 30, 2015
Revenues:	$			%		$			%		$			%		$			%
Trucking Segment	$	226,423		81.9		$	245,627		81.4		$	444,379		81.0		$	480,917		81.2
Logistics Segment		51,703		18.7			60,718		20.1			110,312		20.1			118,566		20.0
Subtotal		278,126					306,345					554,691					599,483
Intersegment Eliminations Trucking		(34	)	0.0			(60	)	0.0			(72	)	0.0			(78	)	0.0
Intersegment Eliminations Logistics		(1,774	)	(0.6	)		(4,463	)	(1.5	)		(6,213	)	(1.1	)		(7,302	)	(1.2	)
Total	$	276,318		100	%	$	301,822		100	%	$	548,406		100	%	$	592,103		100	%
Operating Income:
Trucking Segment	$	35,286		92.7		$	37,944		91.2		$	71,208		92.7		$	80,091		91.1
Logistics Segment		2,795		7.3			3,675		8.8			5,600		7.3			7,831		8.9
Total	$	38,081		100	%	$	41,619		100	%	$	76,808		100	%	$	87,922		100	%

Trucking Strategy and Segment Information

Our Trucking operating strategy is to achieve a high level of asset utilization within a highly disciplined operating system while maintaining strict controls over our cost structure.  To achieve these goals, we operate primarily in high-density, predictable freight lanes in select geographic regions and attempt to develop and expand our customer base around each of our service centers by providing multiple truckload services for each customer.  This operating strategy allows us to take advantage of the large amount of freight transported in regional markets.  Our service centers enable us to better serve our customers and work more closely with our driving associates.  We operate a premium, modern fleet to appeal to drivers and customers, reduce maintenance expenses and driver and equipment downtime, and enhance our fuel and other operating efficiencies.  We employ technology in a cost-effective manner to assist us in controlling operating costs and in enhancing revenue.

Trucking revenue is generated by our Dry Van, Refrigerated, and Drayage operating units.  Generally, we are paid a predetermined rate per mile or per load for our Trucking services.  Additional revenues are generated by charging for tractor and trailer detention, loading and unloading activities, dedicated services, 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 Trucking revenue are the revenue per mile we receive from our customers, the percentage of miles for which we are compensated, and the number of loaded miles we generate with our equipment.

Effectively controlling our expenses is an important element of maximizing our profitability.  The most significant expenses of our Trucking segment are primarily variable and include fuel and fuel taxes, driver-related expenses (such as wages, benefits, training, and recruitment) and costs associated with independent contractors (which are primarily included in purchased transportation expense recorded on the "Purchased transportation" line in the accompanying condensed consolidated statements of income).  Expenses that have both fixed and variable components include maintenance expense (which includes costs for replacement tires for our revenue equipment) 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.  The main fixed costs for our Trucking segment are the acquisition and depreciation of long-term assets (such as revenue equipment and service centers) and the compensation of non-driver personnel.

22

The primary measure we use to evaluate the profitability of our Trucking segment is operating ratio, measured both on a GAAP basis (operating expenses expressed as a percentage of revenue) and on a non-GAAP basis that many in our industry use (operating expenses, net of Trucking fuel surcharge revenue, expressed as a percentage of Trucking revenue, excluding Trucking fuel surcharge revenue).  We believe the second method allows us to more effectively compare periods while excluding the potentially volatile effect of changes in fuel prices.  Non-GAAP operating ratio is not a substitute for or superior to, and should be considered in addition to, GAAP operating ratio. Pursuant to the requirements of Regulation G, the tables below compare our operating ratio using both methods.

The following table sets forth the Trucking segment operating ratio on a GAAP basis (dollars in thousands).

GAAP Presentation:	Three Months Ended June 30, 2016			Three Months Ended June 30, 2015			Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Trucking Segment	$		%	$		%	$		%	$		%
Revenue	$	226,423		$	245,627		$	444,379		$	480,917
Operating expenses		191,137	84.4		207,683	84.6		373,171	84.0		400,826	83.3
Operating income	$	35,286		$	37,944		$	71,208		$	80,091

The following table sets forth the non-GAAP operating ratio for our Trucking segment as if fuel surcharges are excluded from total revenue and instead reported as a reduction of operation expenses, excluding intersegment activity (dollars in thousands).

Non-GAAP Presentation(1):	Three Months Ended June 30, 2016				Three Months Ended June 30, 2015				Six Months Ended June 30, 2016				Six Months Ended June 30, 2015
Trucking Segment	$			%	$			%	$			%	$			%
Revenue	$	226,423			$	245,627			$	444,379			$	480,917
Less: Trucking fuel surcharge revenue		(22,459	)			(33,199	)			(40,964	)			(66,266	)
Less: Intersegment transactions		(34	)			(60	)			(72	)			(78	)
Revenue, net of fuel surcharge and intersegment transactions		203,930				212,368				403,343				414,573
Operating expenses		191,137				207,683				373,171				400,826
Less: Trucking fuel surcharge revenue		(22,459	)			(33,199	)			(40,964	)			(66,266	)
Less: Intersegment transactions		(34	)			(60	)			(72	)			(78	)
Operating expenses, net of fuel surcharge and intersegment transactions		168,644		82.7		174,424		82.1		332,135		82.3		334,482		80.7
Operating income	$	35,286			$	37,944			$	71,208			$	80,091

 (1) These items represent non-GAAP financial measures and are not substitutes for or superior to, and should be considered in addition to, the GAAP financial measures presented in the previous table.

23

When evaluating Trucking revenue, we consider the following key operating statistics for each period:  (i) average revenue per tractor; (ii) average length of haul (miles with loaded trailer cargo); (iii) non-paid empty miles percent (miles without trailer cargo); and (iv) average number of tractors and trailers in operation.  The following table sets forth key operating statistics of the Trucking segment for the indicated periods.

	Three Months  Ended June 30, 2016			Three Months Ended June 30, 2015			Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Average revenue per tractor(1)	$	43,414		$	44,087		$	85,943		$	86,532
Average length of haul (miles)		505			510			500			505
Non-paid empty mile percent		12.3	%		11.6	%		12.5	%		11.6	%
Average tractors in operation during period		4,697			4,817			4,693			4,791
Average trailers in operation during period		12,289			11,588			12,128			11,491

(1) Average revenue per tractor is based on trucking revenue, net of intersegment elimination, and does not include fuel surcharge revenue.

Our Trucking segment requires substantial capital expenditures for purchases of new revenue equipment.  We fund these purchases with cash flows from operations and financing available under our existing line of credit.  We operated an average of 4,697 tractors in the second quarter of 2016, of which 4,285 were company-owned tractors as of June 30, 2016. The average age of our company-owned tractor fleet was 1.8 years at June 30, 2016.  We also operated an average of 12,289 trailers in the second quarter of 2016, with an average age of 4.2 years as of June 30, 2016.  Our net property, plant, and equipment at June 30, 2016, was $804.1 million, most of which relates to our Trucking segment. 

Our capital expenditures can also affect depreciation expense.  Trucking depreciation relates primarily to our owned tractors, trailers, electronic logging devices and other communication units, and other similar assets.  Changes to this fixed cost are generally attributed to increases or decreases to company-owned equipment and fluctuations in new equipment purchase prices, which have historically been precipitated in part by new or proposed federal and state regulations (such as the EPA engine emissions requirements relating to post-2014 model tractors and the California trailer efficiency requirements).  Depreciation can also be affected by the cost of used equipment that we sell or trade and the replacement of older used equipment.  Our management periodically reviews the condition, average age, and reasonableness of estimated useful lives and salvage values of our equipment and considers such factors in light of our experience with similar assets, used equipment market conditions, and prevailing industry practice.  Total Trucking segment depreciation and amortization expense was approximately $28.0 million in the second quarter of 2016, and approximately $55.4 million in the first six months of 2016.

24

Logistics Strategy and Segment Information

Logistics revenue is generated primarily by our Brokerage and Intermodal operating units.  We also provide logistics, freight management and other non-trucking services to our customers through our Logistics business.  We are generally paid a predetermined rate per mile or per load for arranging freight transportation for our customers and providing other Logistics services.  Additional revenue is generated by offering specialized logistics solutions (including, but not limited to, origin management, surge volumes, disaster relief, special projects, and other logistics needs).  Our Logistics revenue is mainly affected by the rates we obtain from customers, the freight volumes we ship through our third-party capacity providers, and our ability to secure qualified third-party capacity providers to transport customer freight.

Our Logistics segment is less asset-intensive and is instead dependent upon capable non-driver personnel, modern and effective information technology, and qualified third-party capacity providers.  The most significant expense of our Logistics segment, which is primarily variable, is the cost of purchased transportation that we pay to third-party capacity providers (including our rail providers), which is included in the "Purchased transportation" line in the accompanying condensed consolidated statements of income.  This expense generally varies depending upon truckload and rail capacity, availability of third-party capacity providers, rates charged to customers, and current freight demand and customer shipping needs.  Other Logistics operating expenses are generally fixed and primarily include the compensation and benefits of non-driver personnel (included in salaries, wages and benefits expense recorded on the "Salaries, wages and benefits" line in the accompanying condensed consolidated statements of income) and depreciation and amortization expense.

The following table sets forth the Logistics segment revenue, operating expenses, and operating income (dollars in thousands).

	Three Months Ended June 30, 2016			Three Months Ended June 30, 2015			Six Months Ended June 30, 2016			Six Months Ended June 30, 2015
Logistics Segment	$		%	$		%	$		%	$		%
Revenue	$	51,703		$	60,718		$	110,312		$	118,566
Operating expenses		48,908	94.6		57,043	93.9		104,712	94.9		110,735	93.4
Operating income	$	2,795		$	3,675		$	5,600		$	7,831

The following table sets forth the Logistics segment revenue, operating expenses, and operating income, excluding intersegment transactions (dollars in thousands).

	Three Months Ended  June 30, 2016				Three Months Ended  June 30, 2015				Six Months Ended June 30, 2016				Six Months Ended June 30, 2015
Logistics Segment	$			%	$			%	$			%	$			%
Revenue	$	51,703			$	60,718			$	110,312			$	118,566
Less: Intersegment transactions		(1,774	)			(4,463	)			(6,213	)			(7,302	)
Revenue excluding intersegment transactions		49,929				56,255				104,099				111,264
Operating expenses		48,908				57,043				104,712				110,735
Less: Intersegment transactions		(1,774	)			(4,463	)			(6,213	)			(7,302	)
Operating expenses excluding intersegment transactions		47,134		94.4		52,580		93.5		98,499		94.6		103,433		93.0
Operating income	$	2,795			$	3,675			$	5,600			$	7,831

We primarily measure the Logistics segment's profitability by reviewing the gross margin percentage (revenue net of intersegment elimination, less purchased transportation expense, expressed as a percentage of revenue, net of intersegment elimination) and the operating ratio.  The gross margin percentage can be affected by customer rates and the costs of securing third-party capacity providers.  Our third-party capacity providers generally are not subject to long-term or predetermined contracted rates, and our operating results could be affected if the availability of third-party capacity providers or the rates for such providers change in the future. The following table lists the gross margin percentage for our Brokerage and Intermodal businesses combined.

25

	Three Months Ended June 30, 2016		Three Months Ended June 30, 2015		Six Months Ended June 30, 2016		Six Months Ended June 30, 2015
Combined Brokerage and Intermodal gross margin percent(1)		16.5%		16.3%		17.6%		16.1%

(1) Gross margin percentage is based on revenue net of intersegment elimination.

Our Logistics segment does not require significant capital expenditures and is not asset-intensive like our Trucking segment.  Rather, our Logistics segment depends on effective usage of information systems and technology that enable us to efficiently arrange for the transportation of our customers' freight and remain resourceful and responsive in meeting customer shipping needs.  As our Logistics services evolve, we may incur costs to upgrade, integrate, or expand our information systems and technology.  Total Logistics segment depreciation and amortization expense was approximately $1.0 million in the second quarter of 2016, and $2.0 million in the first six months of 2016, which is primarily attributed to equipment leased to third parties.

Trends and Outlook

For the remainder of 2016, we expect to see the market slowly begin to improve as excess capacity exits the market, as indicated by reduced new truck orders, increased bankruptcies, and a soft used equipment market. Market factors including higher driver wages, lower gain on sale of revenue equipment, less other income, and fewer non-contract opportunities may continue to negatively affect our margins in our Trucking and Logistics segments if capacity is slow to exit the market.  In this environment, we plan to limit organic fleet expansion, focus on cost control, and allocate expansion capital toward Logistics.

Our driver development program remains a primary focus for our management team.  We believe carriers that are well-positioned to develop and retain drivers, withstand supply and demand fluctuations, and provide safe, dependable, and high-quality service to customers will have opportunities to increase freight rates and market share.  We believe domestic and global economic and political conditions present the most direct challenges to improved freight demand.  These threats include the possibility that rising energy prices, an inability of the United States government to timely and adequately address fiscal issues, currency fluctuations, or other factors outside our control could reduce consumer spending or industrial investment, thus negatively affecting freight volumes.

Several issues impacting the trucking industry could also cause our costs to increase for the remainder of 2016. These issues include driver and independent contractor availability, fuel price fluctuations, increases to new tractor and trailer purchase prices, and compliance with new and proposed federal and state regulations.  From a cost perspective, recruiting and retaining sufficient numbers of qualified drivers, independent contractors, and third-party capacity providers may become increasingly costly, equipment prices may continue to rise, and potentially higher fuel prices may not be fully offset by fuel surcharges. In the current economic and regulatory environments, it will be important to allocate equipment to more compensatory shipments, use technology to generate efficiencies, continue to grow our Logistics segment, and effectively manage fuel and other costs.  We believe we have the service center network, modern tractor fleet, comprehensive truckload and logistics services, management team and qualified personnel, technology, intense focus on cost control, and capital resources to successfully overcome these challenges and capitalize on future opportunities.

26

We expect to utilize the flexibility of our model to react and adapt to market conditions.  We believe we can optimize our model and refine our execution in reaction to, or in anticipation of, transportation market dynamics, particularly the markets for truckload and logistics services that we offer. We plan to continue to evaluate acquisition candidates and other opportunities that create value for our shareholders and further advance our long-term strategy.

Results of Operations

The following table sets forth the consolidated statements of income in dollars and as a percentage of total revenue and the percentage increase or decrease in the dollar amounts of those items compared to the prior year (dollars in thousands).

	Three Months Ended June 30, 2016					Three Months Ended June 30, 2015					% Change			Six Months Ended June 30, 2016					Six Months Ended June 30, 2015					% Change
	$			%		$			%		%			$			%		$			%		%
Trucking revenue	$	203,930		73.9	%	$	212,368		70.4	%		(4.0	%)	$	403,343		73.5	%	$	414,573		70.0	%		(2.7	%)
Trucking fuel  surcharge revenue		22,459		8.1			33,199		11.0			(32.4	)		40,964		7.5			66,266		11.2			(38.2	)
Logistics revenue		49,929		18.0			56,255		18.6			(11.2	)		104,099		19.0			111,264		18.8			(6.4	)
Total revenue		276,318		100.0			301,822		100.0			(8.5	)		548,406		100			592,103		100			(7.4	)
Operating expenses:
Salaries, wages and benefits		84,440		30.6			84,381		28.0			0.1			168,043		30.6			164,407		27.8			2.2
Fuel		33,429		12.1			42,362		14.0			(21.1	)		60,200		11.0			80,451		13.6			(25.2	)
Operations and maintenance		19,094		6.9			21,547		7.1			(11.4	)		37,104		6.8			41,675		7.0			(11.0	)
Insurance and claims		8,257		3.0			7,995		2.6			3.3			17,080		3.1			16,928		2.9			0.9
Operating taxes and licenses		4,612		1.6			4,725		1.5			(2.4	)		10,099		1.8			10,581		1.8			(4.6	)
Communications		1,043		0.4			1,077		0.4			(3.2	)		2,248		0.4			2,217		0.4			1.4
Depreciation and amortization		28,955		10.5			27,364		9.1			5.8			57,357		10.5			54,524		9.2			5.2
Purchased transportation(1)		53,918		19.5			60,619		20.1			(11.1	)		111,703		20.4			120,164		20.3			(7.0	)
Miscellaneous operating expenses		4,489		1.6			10,133		3.4			(55.7	)		7,764		1.4			13,234		2.2			(41.3	)
Total operating expenses		238,237		86.2			260,203		86.2			(8.4	)		471,598		86.0			504,181		85.2			(6.5	)
Operating income		38,081		13.8			41,619		13.8			(8.5	)		76,808		14.0			87,922		14.8			(12.6	)
Interest income		82		0.0			104		0.0			(21.2	)		176		0.0			236		0.0			(25.4	)
Interest expense		(258	)	(0.1	)		(211	)	0.0			22.3			(559	)	(0.1	)		(493	)	0.0			13.4
Other income		1,927		0.7			2,436		0.8			(20.9	)		3,213		0.6			4,899		0.8			(34.4	)
Total other income		1,751		0.6			2,329		0.8			(24.8	)		2,830		0.5			4,642		0.8			(39.0	)
Income before income taxes		39,832		14.4			43,948		14.6			(9.4	)		79,638		14.5			92,564		15.6			(14.0	)
Income taxes		14,861		5.4			15,759		5.2			(5.7	)		31,645		5.8			34,434		5.8			(8.1	)
Net income	$	24,971		9.0	%	$	28,189		9.4	%		(11.4	%)	$	47,993		8.7	%	$	58,130		9.8	%		(17.4	%)
Net income attributable to noncontrolling interest		(296	)	(0.1	)		(551	)	(0.2	)		(46.3	)		(748	)	(0.1	)		(930	)	(0.1	)		(19.6	)
Net income attributable to Knight Transportation	$	24,675		8.9	%	$	27,638		9.2	%		(10.7	%)	$	47,245		8.6	%	$	57,200		9.7	%		(17.4	%)

(1) Purchased transportation expense is comprised of (a) payments to independent contractors, which is primarily attributed to our Trucking segment; (b) payments to third-party capacity providers, which is primarily attributed to our Logistics segment; and (c) payments relating to our logistics, freight management and non-trucking services.

27

A discussion of our results of operations for the three months and six months ended June 30, 2016 and June 30, 2015, is set forth below.

Comparison of Three Months and Six Months Ended June 30, 2016 to Three and Six Months Ended June 30, 2015.

Operating Revenue

Total revenue decreased 8.5% and 7.4% for the three months and six months ended June 30, 2016, respectively, or to $276.3 million from $301.8 million in the three-month period, and to $548.4 million from $592.1 million in the six-month period compared to the same periods of 2015. During the second quarter and six-month period of 2016, we operated in a less robust freight environment when compared to the same periods of 2015. Both our Trucking and Logistics segments experienced a more challenging freight market whereby non-contract opportunities were limited as a result of additional competition, when compared to the prior year periods, which combined with fewer trucks, lower revenue per loaded mile, lower fuel surcharge revenue and less non-trucking services revenue, led to the decline in total revenue.

Trucking revenue decreased 4.0% to $203.9 million for the three months ended June 30, 2016, from $212.4 million for the same three months in 2015, and 2.7% to $403.3 million for the six months ended June 30, 2016, from $414.6 million for the same six months in 2015. Tractor productivity, as measured by average revenue, before fuel surcharge, per tractor, decreased 1.5% for the three months ended June 30, 2016, and 0.7% for the six months ended June 30, 2016, compared to the same periods in 2015. Although average miles per tractor increased 1.7% in both the three months and six months ended June 30, 2016, compared to the same periods of 2015, these improvements were offset by decreases in average revenue per loaded mile by 2.4% and 1.4%, and increases in non-paid empty mile percent of 70 and 90 basis points in the same three-month and six-month periods. We plan to limit organic fleet growth and remain focused on improving the productivity of our assets while developing our freight network. If capacity tightens, we expect rates to begin to improve. However, any adverse changes in capacity, among other factors, could prevent rate increases and negatively affect existing rates.

Trucking fuel surcharge decreased 32.4% to $22.5 million in the second quarter of 2016, from $33.2 million in the same quarter of 2015, and decreased 38.2% to $41.0 million in the six months ended June 30, 2016 from $66.3 million in the same six months in 2015.  Average fuel prices decreased in the three months and six months ended June 30, 2016, by 19.4% and 24.2%, respectively, from the same periods of 2015. Typical fuel surcharge programs involve a computation based on the change in national or regional fuel prices.  These programs may update as often as weekly, but typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue for our Trucking segment. Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue for our Trucking segment.

Logistics revenue decreased 11.2% to $49.9 million in the second quarter of 2016, from $56.3 million in the same quarter of 2015, and decreased 6.4% to $104.1 million in the six months ended June 30, 2016, from $111.3 million in the six months ended June 30, 2015. Logistics revenue decreased primarily due to declining revenue from our non-trucking services as we exited our agricultural sourcing business in the first quarter of 2016, and in part due to lower revenue per load as a result of lower fuel surcharge.  Despite the decrease in Logistics segment revenue, our Brokerage business, which is the largest component of our Logistics segment, increased revenue 2.1% in the second quarter of 2016 compared to the same quarter of 2015, as load volume increased 28.4%, offset by a 20.4% decline in revenue per load as a result of lower fuel surcharge, a shorter length of haul, and lower non-contract pricing. We achieved this growth by providing more capacity to our customers through our third-party carriers and rail providers.

28

Operating Expenses

Salaries, wages and benefits expense, as a percentage of total revenue, increased to 30.6% for the three months and six months ended June 30, 2016, compared to 28.0% for the three months ended June 30, 2015 and 27.8% for the six months ended June 30, 2015. These increases in both the three months and six months ended June 30, 2016 from the same periods in 2015, were primarily due to the decrease in total revenue, as a result of lower revenue per loaded mile, combined with increases in driver base pay implemented in 2015. Another contributing factor to the increase in the six-month period, was the shift from purchased transportation expense to driver wages as the percentage of our tractor fleet comprised of company tractors, rather than independent contractors, increased. This percentage was flat in the comparative three-month periods. We believe that the driver market remains challenging and that the implementation of stricter regulations has further reduced the pool of available drivers. We expect that driver pay will continue to be inflationary on a year-over-year basis based on the pay increases that were implemented in 2015. We expect to continue to develop strategies designed to attract and retain safe, high-quality driving associates, including investing in technology and service centers that improve the experience of drivers, and we believe we are well-positioned for further progress developing driving associates in the coming quarters.

Fuel expense, as a percentage of total revenue, decreased to 12.1% for the three months ended June 30, 2016, from 14.0% in same period in 2015, and decreased to 11.0% for the six months ended June 30, 2016, from 13.6% in the same period of 2015. These decreases were primarily due to the U.S. National Average Diesel Fuel Price decreasing by 19.4% and 24.2% in the three and six months ended June 30, 2016, respectively, compared to the same periods in 2015, respectively. Our fuel efficiency initiatives and driver training programs continue to contribute to managing this expense. Our fuel surcharge program helps to offset increases in fuel prices, but applies only to loaded miles and typically does not offset empty miles, idle time, and out of route miles driven.  Typical fuel surcharge programs involve a computation based on the change in national or regional fuel prices.  These programs may update as often as weekly, but typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue for our Trucking segment. Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue for our Trucking segment.  Due to this time lag, our fuel expense, net of fuel surcharge, negatively impacts our operating income during periods of sharply rising fuel costs and positively impacts our operating income during periods of falling fuel costs.

Operations and maintenance expense, as a percentage of total revenue, decreased to 6.9% from 7.1% in the three months ended June 30, 2016, compared to the same period in 2015, and decreased to 6.8% from 7.0% for the six months ended June 30, 2016, compared to the same period in 2015. Operations and maintenance expense consists of direct operating expense, maintenance, and tire expense.  During the second quarter and first six months of 2016, our maintenance costs and tire costs decreased as a percentage of total revenue, before Trucking fuel surcharge, compared to the same quarter and six months of 2015 due to improved cost control measures. Direct operating expenses including road expense, operating supplies, and driver development and recruiting costs also decreased in the quarter and six month periods. We continue to experience tight driver market conditions and we expect the driver market to remain competitive in the remainder of 2016, which could negatively affect our recruiting costs.

Insurance and claims expense, as a percentage of total revenue, increased to 3.0% in the three months ended June 30, 2016 from 2.6% for the same period in 2015, and increased to 3.1% in the six months ended June 30, 2016 from 2.9% for the same period in 2015. These increases were primarily due to the decreases in total revenue in both periods of 2016 compared to the same periods of 2015, combined with slightly higher premium costs. Insurance and claims expense consists of premiums for liability, physical damage, and cargo, and will vary based upon the frequency and severity of claims, as well as our level of self-insurance, and premium expense.

29

Operating taxes and license expense, as a percentage of total revenue, increased slightly to 1.6% for the three months ended June 30, 2016 from 1.5% for the three months ended June 30, 2015, and remained flat at 1.8% for the six months ended June 30, 2016 and the same six months of 2015. The increase in the three-month period was due to the decrease in total revenue since the absolute dollar expense decreased. This expense line is impacted by changes in various fuel tax rates and registration fees associated with our truck fleet and operating regions.

Communications expense, as a percentage of total revenue, remained flat at 0.4% in the three months and six months ended June 30, 2016 and for the same periods of 2015.  Communications expense is comprised of costs associated with our tractor and trailer tracking systems, information technology systems, and phone systems.

Depreciation and amortization expense, as a percentage of total revenue, increased to 10.5% in the three months and six months ended June 30, 2016 from 9.1% and 9.2% in the three months and six months ended June 30, 2015, respectively. This fixed cost as a percentage of total revenue was higher for both the three months and six months ended June 30, 2016, due to a combination of the decrease in fuel surcharge revenue driven by the fall in fuel prices, the decrease in revenue, before fuel surcharge, driven by the decrease in average revenue per truck in our Trucking segment, and the decrease in revenue from our less asset-intensive Logistics segment. Depreciation and amortization expense for our Trucking segment as a percentage of Trucking revenue, before fuel surcharge, increased to 13.7% for the three and six months ended June 30, 2016, from 12.4% for the same three months of 2015, and from 12.7% for the same six months of 2015, as we continued to refresh our tractor and trailer fleets with the U.S. Environmental Protection Agency (“EPA”) emission compliant engines, which are more expensive than previous tractors due to compliance with the National Highway Traffic Safety Administration and EPA emissions standards.  The higher cost of these newer tractors is expected to result in higher depreciation and amortization going forward.  These engines provide substantial emissions reductions, and we believe this investment will contribute to our strategy of maintaining efficiency in our operations by adhering to a relatively consistent tractor trade-in schedule.

Purchased transportation expense, as a percentage of total revenue, decreased to 19.5% for the three months ended June 30, 2016 from 20.1% for the same three months in 2015, and increased slightly to 20.4% for the six months ended June 30, 2016, from 20.3% for the same six months in 2015. Purchased transportation expense is comprised of (i) payments to independent contractors for our Dry Van, Refrigerated, and Drayage operations in our Trucking segment; (ii) payments to third-party capacity providers for our Brokerage operations and to railroads for our Intermodal operations; and (iii) payments relating to logistics, freight management and non-trucking services in our Logistics segment.  Purchased transportation expense expressed as a percentage of total revenue, before fuel surcharge, decreased to 21.3%, and 22.0% in the three and six months ended June 30, 2016, respectively, from 22.6%, and 22.9%, in the same periods of 2015, respectively. Purchased transportation expense for independent contractors in our Trucking segment decreased in both the three months and six months ended June 30, 2016, compared to the same periods of 2015. This was partly due to the decreases in revenue per loaded mile and fuel surcharge, and although in the three-month period of 2016, the percentage of our tractor fleet comprised of company tractors was flat, more of our tractor fleet was comprised of company tractors in the six-month period of 2016, compared to the same periods of 2015.  Purchased transportation expense decreased as expected with the decrease in revenue in our Logistics segment, but this decrease was hindered in the six months ended June 30, 2016 by increased costs associated with exiting our agriculture sourcing business in the first quarter of 2016. Purchased transportation costs generally take into account changes in diesel fuel prices, resulting in lower payments during periods of declining fuel prices. We expect purchased transportation will increase as a percentage of total revenue if we are successful in continuing to grow our Logistics segment.

Miscellaneous operating expenses, as a percentage of total revenue, decreased to 1.6% for the three months ended June 30, 2016, from 3.4% for the same three months during 2015, and decreased to 1.4% for the six months ended June 30, 2016, from 2.2% for the same six months in 2015. These decreases were primarily due to the infrequent expense recorded in the second quarter of 2015 of $7.2 million pretax ($4.4 million after tax) relating to expected settlement costs for two class action lawsuits involving employment-related claims in California and Oregon. Excluding this infrequent expense, and excluding the effect of the decrease in the fuel surcharge component of total revenue, miscellaneous operating expenses increased in both the three months and six months ended June 30, 2016, compared to the same periods in 2015 due to lower gains from the sale of used equipment that offset miscellaneous operating expenses. Gains from the sale of used equipment decreased to $2.7 million for the three months ended June 30, 2016, from $5.2 million for the same three months in 2015, and decreased to $5.8 million for the six months ended June 30, 2016, from $9.9 million for the same six months in 2015. We believe the used equipment market will begin to tighten in the coming quarters and, if so, will help offset other miscellaneous operating expenses.

30

As a result of the above factors, our GAAP operating ratio (operating expenses expressed as a percentage of total revenue) was flat at 86.2% for the second quarter of 2016 and 2015, and increased slightly to 86.0% for the six months ended June 30, 2016, compared to 85.2% for the same six months in 2015.  Our non-GAAP operating ratio based upon total operating expenses, net of fuel surcharge, as a percentage of total revenue, before fuel surcharge, was 85.0% for the second quarter of 2016, compared to 84.5% for the same quarter of 2015, and 84.9% for the six months ended June 30, 2016, compared to 83.3% for the same six months in 2015.  Please see the reconciliation table above for a reconciliation of GAAP operating ratio to non-GAAP operating ratio. Excluding the $7.2 million infrequent expense related to expected settlement costs for two class action lawsuits, our non-GAAP consolidated operating ratio was 81.8% and 81.9% for the three months and six months ended June 30, 2015, respectively.

While interest income remained constant as a percentage of total revenue in the three months and six months ended June 30, 2016 and 2015, interest expense increased slightly. Our maximum borrowing limit under our revolving credit facility remains at $300.0 million. Our debt balance decreased by $52.0 million during the six months ended June 30, 2016, to $60.0 million from $112.0 million at December 31, 2015.

As a percentage of total revenue, other income decreased slightly to 0.7% for the three months ended June 30, 2016, from 0.8% for the same three months in 2015, and decreased to 0.6% for the six months ended June 30 2016, from 0.8% for the same six months in 2015. These decreases were primarily due to investment activity and realized gains on sale of available-for-sale securities.

We provide for income taxes at the statutory federal and state rates, adjusted for certain permanent differences between financial statement income and income for tax reporting.  Our effective tax rate was 37.6% for the three months ended June 30, 2016, and 36.3% for the same three months in 2015, while our effective tax rate was 40.1% for the six months ended June 2016, and 37.6% for the same six months in 2015.

Due to the net result of the preceding financial results, our net income attributable to Knight Transportation decreased 10.7% for the three months ended June 30, 2016, and decreased 17.4% for the six months ended June 30, 2015, compared to the same periods of 2015.

Liquidity and Capital Resources

The growth of our business has required, and will continue to require, significant investment in new revenue equipment.  In our Trucking business, where investments are substantial, the primary investments are in new tractors and trailers and to a lesser extent, in technology, service centers, and working capital.  In our Logistics business, where investments are modest, the primary investments are in technology and working capital.  Our primary sources of liquidity have been funds provided by operations, issuances of our common stock, and borrowings under our line of credit.

Net cash provided by operating activities was $133.5 million for the six months ended June 30, 2016, compared to $107.5 million provided during the same period in 2015. The increase in the 2016 period is primarily due to changes in operating assets and liabilities, and deferred taxes, partially offset by decreased net income in the 2016 period as compared to the 2015 period.

31

Net cash used in investing activities was $40.6 million for the six months ended June 30, 2016, compared to net cash used of $32.4 million for the same period in 2015. Capital expenditures for the purchase of revenue equipment, office equipment, and land and leasehold improvements, net of equipment sales, was $35.4 million for the six months ended June 30, 2016, compared to $39.6 million for the same period in 2015. Excluding acquisitions, we currently anticipate capital expenditures, net of trade-ins, of approximately $51.0 million to $66.0 million for the remainder of 2016.  We expect to use our capital expenditure estimate primarily to acquire new revenue equipment.

Net cash used in financing activities was $92.1 million for the six months ended June 30, 2016, compared to $81.2 million for the same period in 2015.  Net cash payments towards line of credit borrowings were $52.0 million for the six months ended June 30, 2016, compared to $49.4 million in the same period of 2015. We repurchased approximately 1.5 million shares of our common stock for $36.6 million in the six months ended June 30, 2016, compared to 1.0 million shares of our common stock for $30.3 million in the same period of 2015. We also paid $4.8 million for dividends in the six months ended June 30, 2016, and $10.1 million in the same period of 2015.  Proceeds from exercises of stock options were $6.7 million in the six months ended June 30, 2016, compared to $6.5 million in the same period of 2015. 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.

We currently maintain a line of credit that permits revolving borrowings and letters of credit up to an aggregate of $300.0 million. The aggregate amount outstanding under our line of credit was $60.0 million as of June 30, 2016, compared to $112.0 million as of December 31, 2015. Our borrowings under the line of credit are classified as a long-term liability in the accompanying condensed consolidated balance sheets. We also utilized a portion of our line of credit for letters of credit, which are issued to various regulatory authorities in connection with our self-insurance programs.  The issued but unused letters of credit totaled $27.4 million as of June 30, 2016, and December 31, 2015.  Combining the amounts borrowed and letters of credit issued, we had $212.6 million available at June 30, 2016, for future borrowing under our existing line of credit, compared to $160.6 million as of December 31, 2015.  Under our current line of credit agreement, we are obligated to comply with certain financial and other covenants and were in compliance with those covenants as of June 30, 2016, and December 31, 2015.

Effective August 8, 2016, we entered into a modification to our line of credit agreement that extends the maturity date to August 1, 2019, and amends our minimum tangible net worth covenant to $500.0 million from $400.0 million. The foregoing description of the modification is qualified in its entirety by reference to the full text of the modification, a copy of which will be filed as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.

As of June 30, 2016, our cash and cash equivalents totaled approximately $9.6 million compared to $8.7 million as of December 31, 2015.  During the next twelve months and beyond, we believe that we will be able to finance our short-term needs for working capital and acquisitions of revenue equipment with cash, cash flows from operations, and financing available under our existing line of credit.  We expect 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, our financial condition and results of operations, and several other factors over which we have limited control.  Nevertheless, based on our recent operating results, current cash position, anticipated future cash flows, and sources of available financing, we do not expect that we will experience any significant liquidity constraints in the foreseeable future.

32

Off-Balance Sheet Transactions

Our liquidity is not materially affected by off-balance sheet transactions.  Like many other transportation companies, we have periodically utilized operating leases to finance a portion of our revenue equipment requirements and terminal facilities requirements. We lease revenue equipment under non-cancellable operating leases, and we lease some of our service centers and temporary trailer storage under non-cancellable operating leases.  Operating lease expense for such equipment, facilities and trailer storage is reflected in the "Miscellaneous operating expenses" line in the accompanying condensed consolidated statements of income, and totaled $1.2 million for the three months ended June 30, 2016 and 2015, and $2.4 million for the six months ended June 30, 2016 and 2015.

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 condensed 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, which we recognize when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. These conditions are met upon delivery. Furthermore, in accordance with ASC 605-45, Revenue Recognition – Principal Agent Consideration, we account for revenue from our Trucking operations, our Logistics operations, and revenue on freight transported by independent contractors within our Trucking operations on a gross basis. We are the primary obligor in these arrangements, we have the ability to establish prices, we have discretion in selecting the independent contractor or other third party that will perform the service, we have the risk of loss in the event of cargo claims, and we bear the credit risk associated with customer payments.  Accordingly, all such revenue billed to customers is classified as operating revenue and all corresponding payments to carriers for transportation services we arrange in connection with Brokerage and Intermodal activities, and to independent contractor providers of revenue equipment, are classified as purchased transportation expense in the accompanying condensed consolidated statements of income. Other accounting policies deemed critical include allowance for doubtful accounts, 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 six months ended June 30, 2016, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation," included in our 2015 Annual Report on Form 10-K.

Seasonality

In the transportation industry, results of operations generally follow a seasonal pattern. Freight volumes in the first quarter are typically lower due to less consumer demand and customers reducing shipments following the holiday season.  In the first quarter of 2016, freight demand showed typical seasonality and was softer than the prior year first quarter when an unusually strong freight market prevailed. Operating expenses generally increase during the first quarter, and the tractor productivity of our fleet, independent contractors, and third-party carriers decreases in the winter months because of decreased fuel efficiency, increased cold weather-related equipment maintenance and repairs, and increased insurance claims and costs attributed to higher accident frequency from harsh weather. During this period, the profitability of our Trucking operations is generally lower than during other parts of the year.  In our Logistics operations, profitability may be lower due to shipping volumes or may improve if we are able to achieve higher gross margins due to the willingness of third-party capacity providers to accept lower rates from us.

33

Item 3.                      Quantitative and Qualitative Disclosures About Market Risk

Information about market risks as of June 30, 2016, does not differ materially from that discussed under Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2015.

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 Exchange Act) 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 June 30, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We base our internal control over financial reporting on the criteria set forth in the 2013 COSO Internal Control: Integrated Framework.

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 control issues and instances of fraud, if any, have been detected.

PART II - OTHER INFORMATION

Item 1.                      Legal Proceedings

We are a party to certain claims and pending litigation arising in the normal course of business.  These proceedings primarily involve claims for personal injury or property damage incurred in the transportation of freight or for personnel matters, as well as certain class action litigation in which the plaintiffs allege claims for failure to provide meal and rest breaks, unpaid wages, unauthorized deductions, and other items.  We maintain insurance to cover liabilities arising from the transportation of freight in amounts in excess of self-insurance retentions. 

Based on our present knowledge of the facts and in certain cases, advice of outside counsel, management believes the resolution of open claims and pending litigation, taking into account existing reserves and accrued liabilities recorded, is not likely to have a materially adverse effect on us. 

34

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, 2015, 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.

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

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Shares that May Yet Be Purchased Under the Publicly Announced Plans or Programs
April 1-30, 2016
Common Stock Repurchase Program (1)		300	$	24.01		300		4,735,839
Other Transactions (2)		195	$	24.61		-		-
May 1-31, 2016
Common Stock Repurchase Program (1)		288,611	$	25.26		288,611		4,447,228
Other Transactions (2)		-		-		-		-
June 1-30, 2016
Common Stock Repurchase Program (1)		83,183	$	25.94		83,183		4,364,045
Other Transactions (2)		-		-		-		-
Total		372,289	$	25.41		372,289		4,364,045

(1)

In May 2011, our Board of Directors unanimously authorized the repurchase of up to 10.0 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 13 to the Condensed Consolidated Unaudited Financial Statements in this Quarterly Report on Form 10-Q for additional information with respect to our share repurchases.

(2)

Other Transactions include restricted shares of our common stock withheld and used to offset tax withholding obligations that occurred upon vesting and release of restricted shares. The withholding of shares was permitted under the applicable award agreement and was not part of any stock repurchase program.

Item 3.                      Defaults Upon Senior Securities

Not Applicable

Item 4.                      Mine Safety Disclosures

Not Applicable

Item 5.                      Other Information

Not Applicable

35

Item 6.                      Exhibits

Exhibit No.		Description
Exhibit 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)*	2016 Amended and Restated Bylaws of the Company.
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 David A. Jackson, the Company's Chief Executive Officer (principal 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 Adam W. Miller, the Company's Chief Financial Officer (principal 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 David A. Jackson, 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 Adam W. Miller, the Company's Chief Financial Officer.
Exhibit 101		Interactive Data File
	(101.INS)	XBRL Instance Document.
	(101.SCH)	XBRL Taxonomy Extension Schema Document.
	(101.CAL)	XBRL Taxonomy Extension Calculation Linkbase Document.
	(101.DEF)	XBRL Taxonomy Extension Definition Linkbase Document.
	(101.LAB)	XBRL Taxonomy Extension Label Linkbase Document.
	(101.PRE)	XBRL Taxonomy Extension Presentation Linkbase Document.
	*Filed herewith
	**Furnished herewith

36

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		KNIGHT TRANSPORTATION, INC.
Date:  August 8, 2016	By:	/s/ David A. Jackson
		David A. Jackson
		Chief Executive Officer and President, in his capacity as such and on behalf of the registrant
Date:  August 8, 2016	By:	/s/ Adam W. Miller
		Adam W. Miller
		Chief Financial Officer, in his capacity as such and on behalf of the registrant

37

EX-3.2

Exhibit 3.2

2016

AMENDED AND RESTATED BYLAWS

OF

KNIGHT TRANSPORTATION, INC.

2016

AMENDED AND RESTATED BYLAWS

TABLE OF CONTENTS

Section 1.	Identification	1
1.1.	Name	1
1.2.	Principal Office	1
1.3.	Fiscal Year	1
Section 2.	Meetings of Shareholders	1
2.1.	Annual Meeting	1
2.2.	Notice	1
2.3.	Presiding Officer	1
2.4.	Quorum	1
2.5.	Adjournment	2
2.6.	Special Meetings	2
2.7.	Voting	2
2.8.	Order of Business and Rules of Procedure	2
2.9.	Closing of Transfer Books and Fixing Record Date	2
2.10.	Voting List	2
2.11.	Action Without A Meeting	3
2.12.	Stockholder Nominations Included in the Corporation's Proxy Materials	3
Section 3.	Board of Directors	12
3.1.	Number and Class	12
3.2.	Term	12
3.3.	Voting for Directors and Director Resignation Policy	12
3.4.	Annual Meeting	13
3.5.	Special Meetings	13
3.6.	Notice of Meetings	13
3.7.	Place of Meeting	13

3.8.	Quorum	13
3.9.	Chairman and Vice Chair	13
3.10.	Committees of the Board	14
3.11.	Compensation	16
3.12	Vacancies	16
3.13.	Action Without A Meeting	16
3.14.	Leave of Absence from Board of Directors	16
Section 4.	Officers	17
4.1.	Executive	17
4.2.	Tenure of Office	17
4.3.	Chairman and Vice Chair	17
4.4.	Chief Executive Officer	17
4.5.	President	17
4.6.	Vice President	17
4.7.	Secretary	17
4.8.	Chief Financial Officer; Treasurer	18
4.9.	Other Officers	18
Section 5.	Capital Stock	18
5.1.	Payment for Shares	18
5.2.	Certificates Representing Shares	18
5.3.	Lost, Stolen or Destroyed Certificates	19
5.4.	Purchase of Its Own Shares	19
5.5.	Dividends	19
Section 6.	Waiver of Notice	19
Section 7.	Indemnification	20
7.1.	Indemnification	20
7.2.	Determination by Board	20
7.3.	Indemnification Agreement	21
7.4.	Officers	21
7.5.	Non-Exclusivity	21
Section 8.	Amendment and Repeal	21
Section 9.	Effective Date	21

2016

AMENDED AND RESTATED BYLAWS

OF

KNIGHT TRANSPORTATION, INC.

These 2016 Amended and Restated Bylaws of Knight Transportation, Inc., an Arizona corporation (the "Corporation"), set forth below, amend, restate and supersede in their entirety the 2013 Amended and Restated Bylaws adopted by the Corporation as of February 7, 2013, effective as of the time set forth in Section 9 below.

Section 1. Identification

1.1.           Name.  The name of the Corporation is Knight Transportation, Inc.

1.2.           Principal Office.  The principal office of the Corporation shall be at 5601 West Buckeye Road, Phoenix, Arizona, or such other principal office as the Corporation may select, and additional offices may be maintained at such other places within or without the State of Arizona as the Board of Directors may from time to time designate.

1.3.           Fiscal Year.  The fiscal year of the Corporation shall be the calendar year ending December 31 of each year.

Section 2. Meetings of Shareholders

2.1.           Annual Meeting.  The annual meeting of shareholders shall be held in the month of May of each year, on such date and at such time as the Board may from time to time designate and state in the notice of the annual meeting of shareholders.  At the annual meeting, shareholders shall elect a Board of Directors and transact such other business as may properly come before the meeting.

2.2.           Notice.  No notice of the annual meeting need be given.  Unless properly waived, notice of any special meeting shall be mailed to the last known address of each shareholder as the same appears on the records of the Corporation, at least ten (10) days and not more than sixty (60) days prior to such meeting, and shall state in general the purposes for which it is called.  Notice to shareholders shall not be necessary for any adjourned annual or special meeting except the statement at such meeting in making adjournment.

2.3.           Presiding Officer.  The Chairman, or in his absence, a chairman appointed by the shareholders present, shall call meetings of the shareholders to order, and shall act as chairman thereof.

2.4.           Quorum.  A majority of the voting stock issued and outstanding, represented by the holders thereof either in person or by proxy, appointed by an instrument in writing and subscribed by such shareholder, shall be a quorum at all meetings of shareholders.

2.5.           Adjournment.  If at any annual or special meeting of shareholders, a quorum shall fail to attend in person or by proxy, a majority in interest of the shareholders attending in person or by proxy at the time of such meeting may, at the end of an hour, adjourn the meeting from time to time without further notice until a quorum shall attend, and thereupon any business may be transacted which might have been transacted at the meeting as originally called had the same been held.

2.6.           Special Meetings.  Special Meetings of shareholders may be called for any purpose by the vote of a majority of the Corporation's Board of Directors.  Notice of a special meeting of shareholders shall be issued in accordance with Section 2.2.

2.7.           Voting.  At all annual and special meetings of shareholders, every holder of voting shares of stock may appear and vote either in person or by proxy in writing, and shall have one vote for each share of voting stock, so held and represented at such meeting, with the right to cumulate such votes for the election of directors.  All proxies shall be filed with the Secretary of the Corporation prior to any meeting for which they are to be effective.  Upon demand of any shareholder, voting upon any question at any meeting shall be by ballot.

2.8.           Order of Business and Rules of Procedure.  The order of business and the rules of procedure used at any meeting of the shareholders shall be as determined by the chairman.

2.9.           Closing of Transfer Books and Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the Board of Directors of the Corporation may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, sixty (60) days.  If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of the shareholders, the books shall be closed for at least ten (10) days immediately preceding the meeting.  In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date, in any case, to be not more than sixty (60) days nor less than ten (10) days prior to the date on which the particular action requiring this determination of shareholders is to be taken.  If the stock transfer books are not closed and no record date is fixed for any such purpose, then the record date shall be determined in accordance with Section 10-707 of the Arizona Revised Statutes.  When a determination of shareholders has been made as provided in this section, the determination shall apply to any adjournment thereof.

2.10.           Voting List.  The Secretary of the Corporation shall make from the stock transfer books a complete record of the shareholders entitled to vote at the meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each.  Such record shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof.  Failure to comply with the requirements of this section shall not affect the validity of any action taken at the meeting.

-2-

2.11.           Action Without A Meeting.  Any action required to be taken at a meeting of the shareholders of the Corporation, or any action that may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof.  This consent shall have the same effect as a unanimous vote of shareholders and may be stated as such in any document.

2.12.           Stockholder Nominations Included in the Corporation's Proxy Materials.

(a)           Definitions.  For purposes of this Section 2.12, the following terms shall have the meanings set forth below, except as otherwise provided herein.

"Eligible Holder" is a person who has either (i) been a record holder of the shares of common stock of the Corporation used to satisfy the eligibility requirements of Section 2.12(d) continuously for the three-year period as described in Section 2.12(d), or (ii) provides to the Secretary of the Corporation, within the time period specified in Section 2.12(e), evidence of continuous ownership of such shares for such three-year period from one or more securities intermediaries in a form that the Board of Directors, or its designee, acting in good faith, determines would be acceptable for purposes of a shareholder proposal under Rule 14a-8(b)(2).

"Maximum Number" with respect to any annual meeting of the Corporation's stockholders, means that number of nominees for election to the Board of Directors that constitutes no more than 20% of the total number of directors of the Corporation as of the last day on which a Nomination Notice may be submitted pursuant to Section 2.12(e) (rounded down to the nearest whole number), but not less than two.  The Maximum Number shall be subject to the adjustments described in Section 2.12(c).

"Minimum Number" means 3% of the Corporation's issued and outstanding common stock as of the most recent date for which such amount is given in any filing made by the Corporation with the SEC prior to the submission of the Qualified Nomination Notice.

"Qualified Nomination Notice" means a notice given by a Nominating Stockholder that complies with the requirements of Section 2.12(e) and names a Nominee.

"Nominating Stockholder" means an Eligible Holder or group of up to 20 Eligible Holders who nominate a nominee for election to the Corporation's Board of Directors.

"Nominee" means any person nominated for election to the Corporation's Board of Directors by a Nominating Stockholder that, individually and collectively, in the case of a group, satisfy all applicable procedures set forth in Section 2.12(d) and 2.12(e).

-3-

(b)           Inclusion of Nominee in Proxy Statement.  Subject to the provisions of this Section 2.12, if expressly requested in a Qualified Nomination Notice delivered by a Nominating Stockholder, the Corporation shall include in its proxy statement for any annual meeting of its stockholders:

(i)             the name of the Nominee, which shall also be included on the Corporation's form of proxy and ballot;

(ii)            disclosures about the Nominee and the Nominating Stockholder required under the rules of the SEC or other applicable law to be included in the proxy statement;

(iii)           any statement included by the Nominating Stockholder in the Qualified Nomination Notice for inclusion in the proxy statement in support of the Nominee's election to the Board of Directors (subject, without limitation, to Section 2.12(e)(ii)), if such statement does not exceed 500 words; and

(iv)           any other information that the Corporation or the Board of Directors determines, in its discretion, to include in the proxy statement relating to the nomination of the Nominee, including, without limitation, any statement in opposition to the nomination and any of the information provided pursuant to this Section.

(c)           Maximum Number of Nominees.

(i)           The Corporation shall not be required to include in the proxy statement for an annual meeting of stockholders more Nominees than the Maximum Number. The Maximum Number for a particular annual meeting shall be reduced by: (1) Nominees who are subsequently withdrawn or that the Board of Directors itself decides to nominate for election at such annual meeting, and (2) the number of incumbent directors who were Nominees with respect to any of the preceding two annual meetings of stockholders and whose reelection at the upcoming annual meeting is being recommended by the Board of Directors. If one or more vacancies for any reason occurs on the Board of Directors after the deadline set forth in Section 2.12(e) below, but before the date of the annual meeting, and the Board of Directors resolves to reduce the size of the Board in connection therewith, the Maximum Number shall be calculated based on the number of directors in office as so reduced.

(ii)           If the number of Nominees pursuant to this Section 2.12 for any annual meeting of stockholders exceeds the Maximum Number then, promptly upon notice from the Corporation, each Nominating Stockholder will select one Nominee for inclusion in the proxy statement until the Maximum Number is reached, going in order of the amount (largest to smallest) of the ownership position as disclosed in each Nominating Stockholder's Qualified Nomination Notice, with the process repeated if the Maximum Number is not reached after each Nominating Stockholder has selected one Nominee. If, after the deadline for submitting a Qualified Nomination Notice as set forth in Section 2.12(e), a Nominating Stockholder becomes ineligible or withdraws its nomination, or a Nominee becomes unwilling to serve on the Board of Directors, whether before or after the mailing of the definitive proxy statement, then the nomination shall be disregarded, and the Corporation: (1) shall not be required to include in its proxy statement or on any ballot or form of proxy the disregarded Nominee or any successor or replacement Nominee proposed by the Nominating Stockholder or by any other Nominating Stockholder, and (2) may otherwise communicate to its stockholders, including, without limitation, by amending or supplementing its proxy statement or ballot or form of proxy, that the Nominee will not be included as a Nominee in the proxy statement or on any ballot or form of proxy and will not be voted on at the annual meeting.

-4-

(d)           Eligibility of Nominating Stockholder.

(i)           An Eligible Holder or group of up to 20 Eligible Holders may submit a nomination in accordance with this Section 2.12 only if the person or group (in the aggregate) has continuously owned at least the Minimum Number of shares of the Corporation's common stock (as adjusted for any stock splits, stock dividends or similar events) throughout the three-year period preceding, including the date of submission of the Qualified Nomination Notice, and continues to own at least the Minimum Number through the date of the annual meeting.  A group of funds under common management and investment control shall be treated as one Eligible Holder if such Eligible Holder shall provide, together with the Qualified Nomination Notice, documentation reasonably satisfactory to the Corporation that demonstrates that the funds are under common management and investment control. For the avoidance of doubt, in the event of a nomination by a group of Eligible Holders, any and all requirements and obligations for an individual Eligible Holder that are set forth in this Section 2.12, including the minimum holding period, shall apply to each member of such group; provided, however, that the Minimum Number shall apply to the ownership of the group in the aggregate. If any stockholder withdraws from a group of Eligible Holders acting together as a Nominating Stockholder at any time prior to the annual meeting, the group of Eligible Holders shall only be treated as owning the shares held by the remaining members of the group.

(ii)           For purposes of this Section 2.12(d), an Eligible Holder "owns" only those outstanding shares of the Corporation as to which the Eligible Holder possesses both:

(A)           the full voting and investment rights pertaining to the shares; and

(B)           the full economic interest in (including the opportunity for profit and risk of loss on) such shares.

-5-

The number of shares calculated in accordance with clauses (A) and (B) shall not include any shares: (1) sold by such Eligible Holder or any of its affiliates in any transaction that has not been settled or closed, (2) borrowed by such Eligible Holder or any of its affiliates for any purpose or purchased by such Eligible Holder or any of its affiliates pursuant to an agreement to resell, or (3) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such Eligible Holder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of outstanding shares of the Corporation, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of: (x) reducing in any manner, to any extent or at any time in the future, such Eligible Holder's or any of its affiliates' full right to vote or direct the voting of any such shares, and/or (y) hedging, offsetting, or altering to any degree, gain or loss arising from the full economic ownership of such shares by such Eligible Holder or any of its affiliates.

An Eligible Holder "owns" shares held in the name of a Nominee or other intermediary, so long as the Eligible Holder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest (including the opportunity for profit and risk of loss on) in the shares. An Eligible Holder's ownership of shares shall be deemed to continue during any period in which the Eligible Holder has delegated any voting power by means of a proxy, power of attorney, or other similar instrument or arrangement that is revocable at any time by the Eligible Holder. The terms "owned," "owning" and other variations of the word "own" shall have correlative meanings. Whether outstanding shares of the Corporation are "owned" for these purposes shall be determined by the Board, acting in good faith.

(iii)           No person shall be permitted to be in more than one group constituting a Nominating Stockholder, and if any person appears as a member of more than one group, it shall be deemed to be a member of the group that has the largest ownership position as reflected in the Qualified Nomination Notice.

(e)           Qualified Nomination Notice.  To nominate a Nominee, the Nominating Stockholder must, no earlier than 150 calendar days and no later than 120 calendar days before the anniversary of the date that the Corporation mailed its proxy statement for the prior year's annual meeting of stockholders, submit to the Secretary of the Corporation at the principal executive office of the Corporation all of the following information and documents (collectively, the "Qualified Nomination Notice"); provided, however, that if (and only if) the annual meeting is not scheduled to be held within a period that commences 30 days before the anniversary date of the prior year's annual meeting of stockholders and ends 30 days after such anniversary date (an annual meeting date outside such period being referred to herein as an "Other Meeting Date"), the Qualified Nomination Notice shall be given in the manner provided herein by the later of the close of business on the date that is 180 days prior to such Other Meeting Date or the tenth day following the date such Other Meeting Date is first publicly announced or disclosed:

-6-

(i)           A Schedule 14N (or any successor form) relating to the Nominee, completed and filed with the SEC by the Nominating Stockholder as applicable, in accordance with SEC rules;

(ii)           A written notice of the nomination of such Nominee that includes the following additional information, agreements, representations and warranties by the Nominating Stockholder (including each group member):

(A)           the details of any relationship that existed within the past three years and that would have been described pursuant to Item 6(e) of Schedule 14N (or any successor item) if it existed on the date of submission of the Schedule 14N;

(B)           a representation and warranty that the Nominating Stockholder did not acquire, and is not holding, securities of the Corporation for the purpose or with the effect of influencing or changing control of the Corporation;

(C)           a representation and warranty that the Nominee's candidacy or, if elected, Board membership would not violate applicable state or federal law or the rules of any stock exchange on which the Corporation's securities are traded;

(D)           a representation and warranty that the Nominee:

(1)           does not have any direct or indirect relationship with the Corporation other than those relationships that have been deemed categorically immaterial pursuant to the Corporation's Corporate Governance Guidelines as most recently published on its website and otherwise qualifies as independent under the rules of the primary stock exchange on which the Corporation's securities are traded;

(2)           meets the audit committee independence requirements under the rules of any stock exchange on which the Corporation's securities are traded;

(3)           is a "non-employee director" for the purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (or any successor rule);

(4)           is an "outside director" for the purposes of Section 162(m) of the Internal Revenue Code, as amended (or any successor provision); and

(5)           is not and has not been subject to any event specified in Rule 506(d)(1) of Regulation D (or any successor rule) under the Securities Act of 1933, as amended (the "Securities Act") or Item 401(f) of Regulation S-K (or any successor rule) under the Exchange Act, without reference to whether the event is material to an evaluation of the ability or integrity of the Nominee;

-7-

(E)           a representation and warranty that the Nominating Stockholder satisfies the eligibility requirements set forth in Section 2.12(d) and has provided evidence of ownership to the extent required by Section 2.12(d);

(F)           a representation and warranty that the Nominating Stockholder intends to continue to satisfy the share ownership eligibility requirements described in Section 2.12(d) through the date of the annual meeting;

(G)          details of any position of the Nominee as an officer or director of any competitor (that is, any entity that produces products or provides services that compete with or are alternatives to the principal products produced or services provided by the Corporation or its affiliates) of the Corporation, within the five years preceding the submission of the Qualified Nomination Notice;

(H)          a representation and warranty that the Nominating Stockholder will not engage in a "solicitation" within the meaning of Rule 14a-1(I) of the Exchange Act (without reference to the exception in Section 14a-(I)(2)(iv) of the Exchange Act) (or any successor rules) with respect to the annual meeting, other than with respect to the Nominee or any nominee of the Board;

(I)            a representation and warranty that the Nominating Stockholder will not use any proxy card other than the Corporation's proxy card in soliciting stockholders in connection with the election of a Nominee at the annual meeting;

(J)            if desired, a statement for inclusion in the proxy statement in support of the Nominee's election to the Board of Directors, provided that such statement shall not exceed 500 words and shall fully comply with Section 14 of the Exchange Act and the rules and regulations thereunder, including Rule 14a-9; and

(K)           in the case of a nomination by a group, the designation by all group members of one group member who is authorized to act on behalf of all group members with respect to all matters relating to the nomination, including withdrawal of the nomination;

(iii)           An executed agreement, which must be submitted within seven days of the Nominating Stockholder's first submission of any information required by this Section 2.12, in a form deemed satisfactory by the Board of Directors or its designee, acting in good faith, pursuant to which the Nominating Stockholder (including each group member) agrees:

-8-

(A)           to comply with all applicable laws, rules and regulations in connection with the nomination, solicitation and election;

(B)           to file any written solicitation or other communication with the Corporation's stockholders relating to one or more of the Corporation's directors or director nominees or any Nominee with the Securities and Exchange Commission, regardless of whether any such filing is required under rule or regulation or whether any exemption from filing is available for such materials under any rule or regulation;

(C)           to assume all liability stemming from an action, suit or proceeding concerning any actual or alleged legal or regulatory violation arising out of any communication by the Nominating Stockholder with the Corporation, its stockholders or any other person in connection with the nomination or election of directors, including, without limitation, the Qualified Nomination Notice;

(D)           to indemnify and hold harmless (jointly with all other group members, in the case of a group member) the Corporation and each of its directors, officers and employees individually against any liability, loss, damages, expenses or other costs (including attorneys' fees) incurred in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of or relating to a failure or alleged failure of the Nominating Stockholder to comply with, or any breach or alleged breach of, its obligations, agreements or representations under this Section 2.12, or otherwise arising out of any nomination, solicitation or other activity by any Nominating Stockholder in connection with its efforts under this Section 2.12;

(E)           if any information included in the Qualified Nomination Notice, or any other communication by the Nominating Stockholder (including with respect to any group member), with the Corporation, its stockholders or any other person in connection with the nomination or election ceases to be true and accurate in all material respects (or due to a subsequent development omits a material fact necessary to make the statements made not misleading), or the Nominating Stockholder (including any group member) fails to continue to satisfy the eligibility requirements described in Section 2.12(d), to promptly (and in any event within 48 hours of discovering such misstatement or omission) notify the Corporation and any other recipient of such communication of the misstatement or omission in such previously provided information and of the information that is required to correct the misstatement or omission; and

(iv)           An executed agreement, which must be submitted within seven days of the Nominating Stockholder's first submission of any information required by this Section 2.12, in a form determined to be satisfactory by the Board of Directors, or its designee, acting in good faith, by the Nominee:

-9-

(A)           to provide to the Corporation such other information, including completion of the Corporation's director questionnaire, as it may reasonably request;

(B)           that the Nominee has read and agrees, if elected, to serve as a member of the Board of Directors, to adhere to the Corporation's Corporate Governance Guidelines and Code of Ethical Conduct and any other Corporation policies and guidelines applicable to directors as adopted from time to time; and

(C)           covenant that the Nominee will promptly and fully disclose to the Corporation if the Nominee is or becomes a party to (i) any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity in connection with service or action as a director of the Corporation (ii) any agreement, arrangement or understanding with any person or entity as to how the Nominee would vote or act on any issue or question as a director (a "Voting Commitment") that has not been disclosed to the Corporation, or (iii) any Voting Commitment that could limit or interfere with the Nominee's ability to comply, if elected as a director of the Corporation, with its fiduciary duties under applicable law.

The information and documents required by this Section 2.12(e) shall be: (i) provided with respect to and executed by each group member, in the case of information applicable to group members; and (ii) provided with respect to the persons specified in Instruction 1 to Items 6(c) and (d) of Schedule 14N (or any successor item) in the case of a Nominating Stockholder or group member that is an entity. The Qualified Nomination Notice shall be deemed submitted on the date on which all the information and documents referred to in this Section 2.12(e) (other than such information and documents contemplated to be provided after the date the Qualified Nomination Notice is provided) have been delivered to or, if sent by mail, received by the Secretary of the Corporation.

(f)           Exceptions.

(i)           Notwithstanding anything to the contrary contained in this Section 2.12, the Corporation may omit from its proxy statement any Nominee and any information concerning such Nominee (including a Nominating Stockholder's statement in support) and no vote on such Nominee will occur (notwithstanding that proxies in respect of such vote may have been received by the Corporation), and the Nominating Stockholder may not, after the last day on which a Qualified Nomination Notice would be timely, cure in any way any defect preventing the nomination of the Nominee, if:

(A)           the Nominating Stockholder or the designated lead group member, as applicable, or any qualified representative thereof, does not appear at the meeting of stockholders to present the nomination submitted pursuant to this Section 2.12 or the Nominating Stockholder withdraws its nomination;

-10-

(B)           the Board of Directors, acting in good faith, determines that such Nominee's nomination or election to the Board of Directors would result in the Corporation violating or failing to be in compliance with the Corporation's bylaws or certificate of incorporation or any applicable law, rule or regulation to which the Corporation is subject, including any rules or regulations of any stock exchange on which the Corporation's securities are traded;

(C)           the Nominee was nominated for election to the Board of Directors pursuant to this Section 2.12 at one of the Corporation's two preceding annual meetings of stockholders and either withdrew or became ineligible or received a vote of less than 25% of the shares of common stock entitled to vote for such Nominee;

(D)           the Nominee has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914, as amended; or

(E)           the Corporation is notified, or the Board of Directors acting in good faith determines, that a Nominating Stockholder has failed to continue to satisfy the eligibility requirements described in Section 2.12(d), any of the representations and warranties made in the Qualified Nomination Notice ceases to be true and accurate in all material respects (or omits a material fact necessary to make the statement not misleading), the Nominee becomes unwilling or unable to serve on the Board of Directors or any material violation or breach occurs of the obligations, agreements, representations or warranties of the Nominating Stockholder or the Nominee under this Section 2.12;

(ii)           Notwithstanding anything to the contrary contained in this Section 2.12, the Corporation may omit from its proxy statement, or may supplement or correct, any information, including all or any portion of the statement in support of the Nominee included in the Nomination Notice, if the Board of Directors in good faith determines that:

(A)           such information is not true in all material respects or omits a material statement necessary to make the statements made not misleading;

(B)           such information directly or indirectly impugns character, integrity or personal reputation of, or directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation, with respect to, any person; or

(C)           the inclusion of such information in the proxy statement would otherwise violate the SEC proxy rules or any other applicable law, rule or regulation.

-11-

The Corporation may solicit against, and include in the proxy statement its own statement relating to, any Nominee.

Section 3. Board of Directors

3.1.           Number and Class.

(a)           The Articles of Incorporation authorize the business and affairs of the Corporation to be managed and controlled by a Board of Directors of not less than three (3) nor more than eleven (11) directors, who need not be shareholders of the Corporation or residents of this State.  By a vote of a majority of the Board of Directors, additional directors may be added, up to the maximum number of directors allowed, or the number of directors may be decreased to a number of not less than three (3).

(b)           The Corporation's Board of Directors shall be divided into three classes of directors (Class I, Class II and Class III).  The number of directors in each class shall be at least three (3) and each class shall be as equal as reasonably possible, taking into account the total number of directors.

(c)           Newly created directorships resulting from any increase in the number of authorized directors, vacancies arising from a director's resignation or removal, or directorships eliminated as a result of a decrease in the number of authorized directors, shall be apportioned by the Board of Directors among the Class I, Class II and Class III directors as nearly equally as reasonably possible; provided, however, that no decrease in the number of authorized directors shall shorten the term or effect the removal of any incumbent director, or alter the number of classes of directors.

3.2.           Term.  Shareholders have elected Class I, Class II and Class III directors as provided in the Company's Articles of Incorporation and its Bylaws.  Continuing at each annual meeting of shareholders after the establishment of the three director classes, each director elected in a class shall be elected to serve for a term ending with the conclusion of the third succeeding annual meeting of shareholders after the date of such director's election.

3.3.           Voting for Directors and Director Resignation Policy.  The system of cumulative voting shall be applied to the election of Directors within each class of Directors.  The Board of Directors shall designate the class to which each Director is assigned.  Except as prohibited by law or by the Artic1es of Incorporation, in an uncontested election, any director nominee who receives a greater number of votes cast "withheld" for his or her election than "for" his or her election at a meeting of shareholders duly called and at which a quorum is present shall promptly tender his or her resignation to the Nominating and Corporate Governance Committee (the "Nominating Committee"), or its successor, for consideration by the Nominating Committee.  The Nominating Committee, or its successor, shall evaluate the director's tendered resignation, taking into consideration the best interests of the Company and its shareholders, and shall recommend to the Board of Directors whether to accept or reject such resignation.  In making its recommendation to the Board, the Nominating Committee, or its successor, shall consider the effect of the exercise of cumulative voting in the election if a director resignation is accepted or rejected, and the legal right of shareholders to cumulate votes in the election of directors, and such other matters as it determines to be appropriate.  The Board of Directors shall determine whether to accept or reject such nominee's resignation within ninety (90) days following certification of the shareholder vote and shall publicly disclose its decision and the rationale for its decision.  Any director who tenders his or her resignation pursuant to this provision shall not participate in any committee or Board of Directors consideration thereof until the status of his or her tendered resignation is determined by the Board.  A resignation tendered by a nominee under this provision shall not be effective until it is accepted by the Board.

-12-

3.4.           Annual Meeting.  Immediately after the annual meeting of the shareholders, the newly-elected directors shall meet for the purpose of organization, the election of officers, and the transaction of other business.

3.5.           Special Meetings.  Special meetings of the Board may be held after proper notice has been given, unless properly waived.  Unless otherwise specified in the notice thereof, any and all business may be transacted at a special meeting.  The Chairman may, from time to time, call a special meeting whenever he shall deem it proper to do so and shall do so when a majority of the Board of Directors shall request that he do so.

3.6.           Notice of Meetings.  No notice of the annual meeting of the Board of Directors need be given.  Unless properly waived, notice of any special meeting of the Board of Directors, stating the time and in general terms the purpose or purposes thereof, shall be mailed to all of the directors at least two (2) days prior to such meeting, to the last known address of each director as the same appear on the records of the Corporation.

3.7.           Place of Meeting.  The directors shall hold their meetings, have an office and keep the books of the Corporation at such place or places within or without the State of Arizona as the Board of Directors from time to time may determine.  Unless otherwise determined, such place shall be at the principal office of the Corporation, as stated in Section 1.2 hereof.  Meetings of the Board of Directors, whether regular or special, may be held by means of telephone conference or similar equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting.

3.8.           Quorum.  A majority of the Board of Directors shall constitute a quorum for the transaction of business.  The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the act of a greater number is required by statute, the Articles of Incorporation or the Bylaws.

3.9.           Chairman and Vice Chair.  At all meetings of the Board of Directors the Chairman, or in his absence, a chairman chosen by the directors present, shall preside.  The Board may elect one or more Vice Chairs to assist the Chairman and, with the consent of the Chairman, any Vice Chair may preside over meetings of the Board of Directors.

-13-

3.10.           Committees of the Board.  The Board of Directors may establish such committees of the Board as it determines to be appropriate from time to time, and each committee may appoint officers from among its members and prescribe its own rules.  The following shall be standing committees of the Board of Directors:

(a)           Executive Committee:  The Executive Committee shall consist of the Chairman of the Board and at least one other director who is not an officer of the Corporation, who shall be appointed annually by the Board of Directors, and who shall continue to serve until his successor is appointed.  The Committee shall act as an Executive Committee of the Board, except when the Board is in session, and shall have and exercise all powers that the Board of Directors may exercise or lawfully delegate.  A quorum of the Committee for the transaction of business shall be a majority of its members, including not less than one Director who is not an officer of the Corporation.  The powers of the Executive Committee shall not include the power:

(1)           to authorize distributions;

(2)           to approve or submit to shareholders any action that requires shareholders approval under Arizona law;

(3)           to fill vacancies on the Board of Directors or any Board Committee;

(4)           to amend the Articles of Incorporation (except that a Committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 10-602 of the Business Corporation Act of the State of Arizona, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series);

(5)           to approve a plan of merger or consolidation not requiring shareholder approval;

(6)           to recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets;

(7)           to recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution;

(8)           to adopt, amend or repeal the Bylaws of the Corporation; and

(9)           to fix the compensation of directors serving on the Board or on any Committee of the Board;

-14-

(b)           Audit Committee:  The Audit Committee shall consist of not less than three directors of the Corporation, none of whom are employees, officers, or 10% or greater shareholders of the Corporation.  All members of the Audit Committee shall be determined by the Board to be independent, as that standard is defined by the Corporate Governance Rules, Section 303A of the NYSE's Listed Company Manual.  The Board of Directors shall adopt and maintain a written charter specifying the Audit Committee's duties, which shall include assisting the Company to ensure the fairness and accuracy of the Corporation's financial statements and the existence of adequate internal financial controls, and the independence of the independent public accountants engaged to audit the Corporation's financial statements and books and records and to render financial reports concerning the Corporation and its subsidiaries.  The Audit Committee shall prepare a report, as required by the United States Securities and Exchange Commission ("SEC") for inclusion in the Corporation's annual proxy statement.  Each member of the Audit Committee shall have a general familiarity with the requirements of financial reporting and accountability, and at least one member of the Audit Committee shall be a "financial expert," as defined in Corporate Governance Rules, Section 303A of the NYSE's Listed Company Manual.

(c)           Nominating and Corporate Governance Committee:  The Nominating Committee shall consist of not less than two directors of the Corporation, none of whom are employees, officers, or 10% or greater shareholders of the Corporation.  All members of the Nominating Committee shall be determined by the Board to be independent, as that standard is defined by the Corporate Governance Rules, Section 303A of the NYSE's Listed Company Manual.  The Board of Directors shall adopt a written charter specifying the Nominating Committee's duties, which will include, at minimum, that the Nominating Committee shall (i) identify individuals qualified to become members of the Board and assist the Board of Directors in selecting nominees for the annual meeting of shareholders and (ii) recommend to the Board measures for appropriate corporation governance that comply with all corporate governance rules and standards applied by the NYSE and the SEC.

(d)           Compensation Committee: The Compensation Committee ("Compensation Committee") shall consist of not less than two directors of the Corporation who are not employees, officers, or 10% or greater shareholders of the Corporation.  All members of the Compensation Committee shall be determined by the Board to be independent, as that standard is defined by the Corporate Governance Rules, Section 303A of the NYSE's Listed Company Manual.  The Board of Directors shall adopt and maintain a written charter specifying the Compensation Committee's duties, which will include, at minimum, that the Compensation Committee shall review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO's performance in light of those goals and objectives, and, either as a committee or together with the other independent directors (as directed by the Board), determine and approve the CEO's compensation level based on the evaluation; make recommendations to the Board with respect to non-CEO compensation; assist in the development and implementation of a management succession plan, and produce a Compensation Committee report on executive compensation as required by the SEC to be included in the Corporation's annual proxy statement or annual report.

-15-

3.11.           Compensation.  Any officer or employee of the Corporation serving as a director and all members of committees shall serve without compensation; however, they shall be reimbursed for the necessary expenses incurred in the execution of their duties.  Independent directors who are not employees of the Corporation may receive such compensation as the Board of Directors, from time to time, determines appropriate.  Nothing herein shall preclude the paying by the Corporation of a salary or other compensation to an officer or employee who is also a director.

3.12.           Vacancies.  In case of any vacancy among the directors due to death, resignation, disqualification, or other cause, or in the case of a vacancy arising from the creation of a new directorship, the other directors, by affirmative vote of a majority thereof, may fill such vacancy for the unexpired portion of the term of directorship which is vacant, and until the election and qualification of his successor; provided that any director appointed to fill a vacancy pursuant to the procedures set forth in this Section 3.12 shall stand for election at the next annual meeting of shareholders for the remainder of the term to which the director was appointed, notwithstanding the fact that the term of the other directors in the same Class to which the appointed director belongs may not have expired.  After standing for election at the annual meeting of shareholders following such appointment, the director shall stand for election with his or her respective Class, regardless of the length of the term served.

3.13.           Action Without A Meeting.  Any action that may be taken at a meeting of the directors or of a committee may be taken without a meeting if a consent in writing, setting forth the action taken, shall be signed by all of the directors or all of the members of the committee, as the case may be.  For purposes of providing a consent in writing to any actions proposed or taken by the Board of Directors, a consent evidenced by an e-mail or other electronic transmission expressing the director's approval of the actions shall constitute written consent for all purposes and such consents shall be maintained as part of the Corporation's minutes.

3.14.           Leave of Absence from Board of Directors.  Upon approval by a majority of directors of the Nominating Committee (excluding therefrom any director who is not "independent," as defined by the New York Stock Exchange Listing Rules), a member of the Board of Directors may be placed upon a leave of absence from his or her duties as a director of the Corporation, upon a showing that the director is unable to perform his or her duties, on a short- term basis, due to any illness, injury, or other incapacity, including without limitation, temporary disability.  The determination as to whether a director shall be granted a leave of absence shall be made solely by the Nominating Committee, after considering such factual information as the Nominating Committee, in its discretion, determines to be appropriate.  Any single leave of absence shall not exceed a period that ends on the earlier of (i) seven (7) days after the date the director recovers; or (ii) twelve (12) months after the date the leave of absence was approved.  The Nominating Committee, in its discretion, may authorize a leave of absence to be extended.  The Nominating Committee, in determining whether to nominate a director for a new term, may consider the effect, if any, of a leave of absence granted under this provision.  While a director is on a leave of absence, the director's responsibilities to the Corporation and its shareholders shall be deemed to be suspended.

-16-

Section 4. Officers

4.1.           Executive.  The officers of the Corporation shall be a Chairman, Chief Executive Officer, President, Vice President, Chief Financial Officer, and Secretary and any other officers as may from time to time be appointed by the Board or the Chief Executive Officer, each of whom shall hold his office at the pleasure of the Board of Directors.

4.2.           Tenure of Office.  All officers shall be subject to removal at any time, with or without cause, by the affirmative vote of a majority of the Board of Directors.

4.3.           Chairman and Vice Chair.  The Chairman shall preside at all meetings of the shareholders and of the directors.  The Chairman may, from time to time, call special meetings of the Board of Directors whenever he shall deem it proper to do so and shall do so when a majority of the Board of Directors shall request him in writing to do so.  The Chairman, in the event of the Chief Executive Officer's absence or inability to act, shall have all of the powers of the Chief Executive Officer.  The Chairman may sign and execute all authorized contracts, checks, and other instruments or obligations in the name of the Corporation.  The Chairman shall perform such other duties and have such other powers as from time to time may be assigned to him by the Board of Directors.  The Board may designate any director as a Vice Chair, to serve as Chair of the Board in the absence or unavailability of the Chairman, or for any other reason.

4.4.           Chief Executive Officer.  The Chief Executive Officer shall be the chief executive officer of the Corporation, and shall have general authority and charge of the business and affairs of the Corporation.  The Chief Executive Officer may sign and execute all authorized contracts, checks, and other instruments or obligations in the name of the Corporation.  The Chief Executive Officer, in the event of the Chairman's absence or inability to act, shall have all of the powers of the Chairman.  The Chief Executive Officer shall perform such other duties and have such other powers as, from time to time, may be assigned to him by the Board of Directors.

4.5.           President.  The President shall do and perform such duties and have such powers as from time to time may be assigned to him by the Board of Directors or the Chief Executive Officer.  The President may sign and execute all authorized contracts, checks, and other instruments or obligations in the name of the Corporation.  The President, in the event of the absence or inability of the Chairman and Chief Executive Officer to act, shall have all the powers of both officers.  The President shall perform such other duties and have such other powers as from time to time may be assigned to him by the Board of Directors or by the Chief Executive Officer.

4.6.           Vice President.  The Corporation may have one or more Vice Presidents, who shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors or the Chief Executive Officer.

4.7.           Secretary.  The Secretary shall keep the minutes of all proceedings of the Board and the minutes of all meetings of shareholders.  The Secretary may hold any other position to which he has been appointed.  The Secretary may sign with the President, in the name of the Corporation, all contracts authorized by the Board, and shall have authority to attest to the authority of the Corporation to act and, if necessary, affix the seal (or other mark) of the Corporation thereto.  He shall have charge of all certificate books and such other books and papers as the Board may direct.  The Secretary shall perform such duties and have such powers as from time to time may be assigned to him by the Board of Directors or the Chief Executive Officer.

-17-

4.8.           Chief Financial Officer; Treasurer.  The office of Chief Financial Officer, and the office of Treasurer, if any, may be occupied by the same person or by different persons.  The Corporation need not have a Treasurer, as long as these functions are assigned to another officer, without regard to his or her title.  The Chief Financial Officer and the Treasurer, if any, shall have custody of all the funds and securities of the Corporation, subject to all applicable internal controls.  The Chief Financial Officer and the Treasurer may endorse on behalf of the Corporation for collection, checks, notes and other obligations, and shall deposit the same to the credit of the Corporation in such bank or banks or depositories as the Board of Directors may designate.  The Chief Financial Officer and the Treasurer, if any, may (i) sign receipts and vouchers for payments made to the Corporation and (ii) sign checks made by the Corporation and pay out and dispose of the same under the direction of the Board, the Chief Executive Officer or the President.  The Chief Financial Officer and the Treasurer, if any, shall perform other duties and have such powers as from time to time may be assigned to them by the Board of Directors or the Chief Executive Officer.

4.9.           Other Officers.  The Corporation may have such other officers, including Assistant Secretaries, Assistant Treasurers, and other operating officers or divisional presidents as may be appointed by the Chief Executive Officer or the Board of Directors, or a delegate of either.  The officers so appointed shall perform the duties the Board of Directors or the Chief Financial Officer may assign.

Section 5. Capital Stock

5.1.           Payment for Shares.  The consideration for the issuance of shares may be paid, in whole or in part, in money, in other property, tangible or intangible, or in labor or services actually performed for the Corporation.  When payment of the consideration for which shares are to be issued shall have been received by the Corporation, or any wholly owned subsidiary, such shares shall be deemed to be fully paid and nonassessable.  Neither promissory notes nor future services shall constitute consideration for the issuance of shares.  In the absence of fraud in the transaction, the judgment of the Board of Directors as to the value of the consideration received for shares shall be final and conclusive.  No certificate shall be issued for any share until the share is fully paid.

5.2.           Certificates Representing Shares.  Each holder of capital stock of the Corporation shall be entitled to a certificate signed by (i) any of the Chairman of the Board, the Chief Executive Officer, or the President and (ii) the Chief Financial Officer, the Secretary, or any Assistant Secretary of the Corporation, and sealed with the corporate seal, if any, setting forth the number of shares owned by him in the Corporation, unless and until the Board of Directors of the Corporation adopts a resolution permitting shares to be issued in uncertificated form.  The Board may by resolution authorize other officers of the Corporation to sign share certificates on behalf of the Corporation.  Notwithstanding the adoption of a resolution authorizing shares to be issued in uncertificated form, every holder of capital stock of the Corporation theretofore represented by certificates and, upon request, every holder of uncertificated shares, shall be entitled to have a certificate for shares of capital stock in the Corporation issued and signed by an authorized officer of the Corporation, as contemplated hereby.

-18-

5.3.           Lost, Stolen or Destroyed Certificates.  The Corporation shall issue a new stock certificate in place of any certificate theretofore issued where the holder of record of the certificate:

(a)           Makes proof in affidavit form that the certificate has been lost, destroyed or wrongfully taken;

(b)           Requests the issuance of a new certificate before the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim;

(c)           Gives a bond in such form and with such surety as the Corporation may direct, to indemnify the Corporation against any claim that may be made on account of the alleged loss, destruction, or theft of the certificate; and

(d)           Satisfies any other reasonable requirement imposed by the Corporation.

When a certificate has been lost, apparently destroyed, or wrongfully taken and the holder of record fails to notify the Corporation within a reasonable time after he has notice of it, and the Corporation registers a transfer of the shares represented by this certificate before receiving such notification, the holder of record is precluded from making any claim against the Corporation for the transfer or for a new certificate.

5.4.           Purchase of Its Own Shares.  The Corporation may purchase its own shares of stock from the holders thereof subject to the limitations imposed by the Articles of Incorporation with respect thereto.

5.5.           Dividends.  The Board, in its discretion, may from time to time declare dividends upon the capital stock from the surplus or net profits of the Corporation when and in the manner it deems advisable, so long as no rule of law is thereby violated.

Section 6. Waiver of Notice

Any shareholder, director or officer may waive any notice required to be given by these Bylaws of any meeting otherwise prescribed hereunder.  Any meeting at which all shareholders or directors are present (or with respect to which notice is waived by any absent shareholder or director) may be held at any time for any purpose and at any place and shall be deemed to have been validly called and held, and all acts performed and all business conducted at such meeting shall be valid in all respects.

-19-

Section 7. Indemnification

7.1.           Indemnification.  The Corporation shall indemnify and save harmless all of its existing and former directors from and against all expenses incurred by them, including, but not limited to, legal fees, judgments, penalties, and amounts paid in settlement or compromise, to the fullest extent not prohibited by law, as it now exists or may hereafter be amended, in connection with any proceeding, actual or threatened, to which they may be made a party by reason of their service to or at the request of the Corporation (including, without limitation, service on behalf of affiliates of the Corporation or with unrelated entities, if serving at the request of the Corporation), unless it is established that: (i) the act or omission of the indemnified party was committed in bad faith; (ii) the indemnified party did not believe such act or omission to be in, or not opposed to, the best interests of the Corporation; (iii) in the case of any criminal proceeding, the indemnified party had reasonable cause to believe that the act or omission was unlawful; or (iv) the indemnified party is adjudged to be liable to the Corporation unless a court of competent jurisdiction determines that such person is entitled to indemnity.  The Corporation shall advance to any director seeking indemnification pursuant to Section 7.1 expenses, including attorneys' fees, actually and reasonably incurred in investigating or defending any civil or criminal action, suit or proceeding in advance of any final disposition of such action, suit or proceeding upon the Corporation's receipt of an undertaking by or on behalf of the director seeking indemnification to repay such amount if it is ultimately determined that he is not entitled to be indemnified by the Corporation.  If the Corporation is requested to indemnify an existing or former director in connection with any threatened, pending or completed action or suit by or in the right of the Corporation to procure judgment in its favor by reason of the fact that such person was a director, officer, or employee or agent of the Corporation, or is or was serving at the request of the Corporation in such capacity, the Corporation shall indemnify such person against expenses, including attorneys' fees, but excluding judgments and fines, and for amounts paid in settlement, actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, if such person acted, or failed to act, in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation, unless and only to the extent that a court in which such action or suit was brought shall determine, upon application, that despite the adjudication of liability, but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem to be proper.

7.2.           Determination by Board.  Whenever any existing or former director shall report to the President that he has incurred or may incur expenses described in Section 7.1, the Board of Directors (other than any interested director) shall, at its next regular meeting or at a special meeting held within a reasonable time thereafter, determine whether, in regard to the matter involved, the person in question is entitled to indemnification pursuant to Section 7.1.  If the Board determines that the standards of Section 7.1 are met, indemnification shall be made.  If the Board of Directors refuses to indemnify a person who is determined by a court of competent jurisdiction to be entitled to indemnification under Section 7.1 or applicable law, the Corporation shall, in addition to extending such indemnification, reimburse the person entitled to indemnification for all attorneys' fees and costs of court actually incurred.  The Corporation shall have the right to refuse indemnification in any instance in which the person to whom indemnification would otherwise have been extended unreasonably refuses to cooperate in the investigation or defense of such matter or to permit the Corporation, at its own expense, to retain counsel of its own choosing to defend him.

-20-

7.3.           Indemnification Agreement.  The Board of Directors may authorize the Corporation to indemnify directors, officers, or employees to the fullest extent permitted by law.

7.4.           Officers.  Officers of the Corporation shall have the same rights to indemnity (and shall be subject to the same indemnity procedures) as a director of the Corporation, subject to any limitation on indemnity and any other indemnity procedures the Board of Directors may adopt from time to time.

7.5.           Non-Exclusivity.  The indemnification rights contained in this Section 7 shall not be exclusive of or preclude any other rights of indemnification to which a director, officer, employee or agent may be entitled, whether pursuant to law or agreement.

Section 8. Amendment and Repeal

These Bylaws may be amended or repealed or new Bylaws may be adopted by the Board of Directors in such instance as the Board may determine to be advisable; provided, however, that the provisions of Section 7 shall not be amended except with the consent of a sixty-seven percent (67%) majority of the Board of Directors.  No notice need be given of any action concerning these Bylaws previous to any such meeting, if the proposed amendment, repeal or adoption of new Bylaws is one of necessity arising at such meeting, and is in furtherance of the legitimate aims of the Corporation.  In all other situations, unless properly waived, notice of any meeting at which any action concerning the Bylaws is proposed shall be mailed to all directors at least ten (10) days prior to such meeting, and in the same manner prescribed for giving notice of special meetings of the Board of Directors.  Such notice shall state in general terms the nature of any proposed action concerning the Bylaws.

Section 9. Effective Date

These 2016 Amended and Restated Bylaws of Knight Transportation, Inc. shall become effective as of May 12, 2016, by reason of Resolutions and Actions adopted by the Board of Directors of the Corporation as of May 12, 2016.

-21-

IN WITNESS WHEREOF, the foregoing 2016 Amended and Restated Bylaws of Knight Transportation, Inc. are hereby adopted as of the date set forth above.

KNIGHT TRANSPORTATION, INC.
By:	/s/ David A. Jackson
	David A. Jackson, Chief Executive Officer
By:	/s/ Adam Miller
	Adam Miller, Secretary

-22-

CERTIFICATE OF SECRETARY

The undersigned, Adam Miller, Secretary of Knight Transportation, Inc., does hereby certify that the foregoing copy of the 2016 Amended and Restated Bylaws of Knight Transportation, Inc. is a true and correct copy of the 2016 Amended and Restated Bylaws of Knight Transportation, Inc., duly adopted by the Board of Directors, and that such 2016 Amended and Restated Bylaws of Knight Transportation, Inc. have not been amended or repealed.

DATED:  May 12, 2016.

/s/ Adam Miller 

Adam Miller, Secretary

-23-

Return to Form 10-Q

EX-31.1

Exhibit 31.1

CERTIFICATION

I, David A. Jackson, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Knight Transportation, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)              Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)              Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)              Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)              Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.           The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)              All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)              Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  August 8, 2016	By:	/s/ David A. Jackson
		David A. Jackson
		Chief Executive Officer (principal executive officer)

Back to Form 10-Q

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Adam W. Miller, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of Knight Transportation, Inc.;

2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)              Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)              Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)              Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)              Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.           The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)              All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)              Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  August 8, 2016	By:	/s/ Adam W. Miller
		Adam W. Miller
		Chief Financial Officer (principal financial officer)

Back to Form 10-Q

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

  In connection with the Quarterly Report of Knight Transportation, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David A. Jackson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 8, 2016	By:	/s/ David A. Jackson
		David A. Jackson
		Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Knight Transportation, Inc. and will be retained by Knight Transportation, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Back to Form 10-Q

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Knight Transportation, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Adam W. Miller, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 8, 2016	By:	/s/ Adam W. Miller
		Adam W. Miller
		Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Knight Transportation, Inc. and will be retained by Knight Transportation, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Back to Form 10-Q

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 28, 2016
Document Information [Line Items]
Entity Registrant Name	KNIGHT TRANSPORTATION INC
Entity Central Index Key	0000929452
Trading Symbol	knx
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	Yes
Entity Common Stock, Shares Outstanding (in shares)		80,017,790
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Condensed Consolidated Unaudited Balance Sheets - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Current Assets:
Cash and cash equivalents	$ 9,564,000	$ 8,691,000
Trade receivables, net of allowance for doubtful accounts of $2,780 and $3,106, respectively	134,753,000	131,945,000
Notes receivable, net of allowance for doubtful notes receivable of $265 and $273, respectively	549,000	648,000
Prepaid expenses	11,894,000	17,320,000
Assets held for sale	21,091,000	29,327,000
Other current assets	9,171,000	14,215,000
Income tax receivable	17,923,000	41,967,000
Total current assets	204,945,000	244,113,000
Property and Equipment:
Revenue equipment	883,910,000	866,252,000
Land and land improvements	53,131,000	52,951,000
Buildings and building improvements	142,256,000	139,102,000
Furniture and fixtures	19,955,000	18,363,000
Shop and service equipment	16,438,000	16,729,000
Leasehold improvements	4,475,000	3,061,000
Gross property and equipment	1,120,165,000	1,096,458,000
Less: accumulated depreciation and amortization	(316,032,000)	(292,815,000)
Property and equipment, net	804,133,000	803,643,000
Notes receivable, long-term	3,435,000	3,419,000
Goodwill	47,040,000	47,050,000
Intangible assets, net	2,825,000	3,075,000
Other long-term assets, restricted cash and investments	24,416,000	18,932,000
Total long-term assets	881,849,000	876,119,000
Total assets	1,086,794,000	1,120,232,000
Current Liabilities:
Accounts payable	28,491,000	14,818,000
Accrued payroll and purchased transportation	21,567,000	23,776,000
Accrued liabilities	16,504,000	21,609,000
Claims accrual - current portion	20,315,000	19,471,000
Dividend payable - current portion	314,000	349,000
Total current liabilities	87,191,000	80,023,000
Long-term Liabilities:
Claims accrual - long-term portion	12,192,000	11,508,000
Long-term dividend payable and other liabilities	1,888,000	2,164,000
Deferred tax liabilities	177,200,000	174,165,000
Long-term debt	60,000,000	112,000,000
Total long-term liabilities	251,280,000	299,837,000
Total liabilities	338,471,000	379,860,000
Shareholders' Equity:
Preferred stock, $0.01 par value; 50,000 shares authorized; none issued and outstanding	0	0
Common stock, $0.01 par value; 300,000 shares authorized; 79,991 and 80,967 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively	800,000	810,000
Additional paid-in capital	216,022,000	205,648,000
Accumulated other comprehensive income	733,000	2,573,000
Retained earnings	529,017,000	529,367,000
Total Knight Transportation shareholders' equity	746,572,000	738,398,000
Noncontrolling interest	1,751,000	1,974,000
Total shareholders' equity	748,323,000	740,372,000
Total liabilities and shareholders' equity	$ 1,086,794,000	$ 1,120,232,000

XML

Condensed Consolidated Unaudited Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Allowance for doubtful accounts	$ 2,780	$ 3,106
Allowance for doubtful notes receivable	$ 265	$ 273
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	50,000,000	50,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	300,000,000	300,000,000
Common stock, shares issued (in shares)	79,991,000	80,967,000
Common stock, shares outstanding (in shares)	79,991,000	80,967,000

XML

Condensed Consolidated Unaudited Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
REVENUE:
Revenue, before fuel surcharge	$ 253,859	$ 268,623	$ 507,442	$ 525,837
Fuel surcharge	22,459	33,199	40,964	66,266
Total revenue	276,318	301,822	548,406	592,103
OPERATING EXPENSES:
Salaries, wages and benefits	84,440	84,381	168,043	164,407
Fuel	33,429	42,362	60,200	80,451
Operations and maintenance	19,094	21,547	37,104	41,675
Insurance and claims	8,257	7,995	17,080	16,928
Operating taxes and licenses	4,612	4,725	10,099	10,581
Communications	1,043	1,077	2,248	2,217
Depreciation and amortization	28,955	27,364	57,357	54,524
Purchased transportation	53,918	60,619	111,703	120,164
Miscellaneous operating expenses	4,489	10,133	7,764	13,234
Total operating expenses	238,237	260,203	471,598	504,181
Income from operations	38,081	41,619	76,808	87,922
Interest income	82	104	176	236
Interest expense	(258)	(211)	(559)	(493)
Other income	1,927	2,436	3,213	4,899
Income before income taxes	39,832	43,948	79,638	92,564
Income taxes	14,861	15,759	31,645	34,434
Net income	24,971	28,189	47,993	58,130
Net income attributable to noncontrolling interest	(296)	(551)	(748)	(930)
Net income attributable to Knight Transportation	$ 24,675	$ 27,638	$ 47,245	$ 57,200
Earnings per share:
Basic (in dollars per share)	$ 0.31	$ 0.34	$ 0.59	$ 0.70
Diluted (in dollars per share)	0.31	0.33	0.58	0.69
Dividends declared per share (in dollars per share)	$ 0.06	$ 0.06	$ 0.12	$ 0.12
Weighted Average Shares Outstanding:
Basic (in shares)	80,105	81,894	80,407	81,959
Diluted (in shares)	80,781	82,852	81,079	83,020

XML

Condensed Consolidated Unaudited Statements of Comprehensive Income - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net income		$ 24,971	$ 28,189	$ 47,993	$ 58,130
Other comprehensive income, net of tax:
Realized gains from available-for-sale securities reclassified to net income(1)	[1]	(907)	(1,344)	(1,888)	(2,782)
Unrealized (loss)/gain from changes in fair value of available-for-sale securities(2)	[2]	(75)	(3,010)	48	(3,271)
Comprehensive income		23,989	23,835	46,153	52,077
Comprehensive income attributable to noncontrolling interest		(296)	(551)	(748)	(930)
Comprehensive income attributable to Knight Transportation		$ 23,693	$ 23,284	$ 45,405	$ 51,147

[1] Net of current income tax expense of $567, $849, $1,181, and $1,757, respectively.

[2] Net of deferred income tax (benefit)/expense of $(50), $(1,903), $24, and $(2,145), respectively.

XML

Condensed Consolidated Unaudited Statements of Comprehensive Income (Parentheticals) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net of current income taxes	$ (567)	$ (849)	$ (1,181)	$ (1,757)
Net of deferred income taxes	$ (50)	$ (1,903)	$ 24	$ (2,145)

XML

Condensed Consolidated Unaudited Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash Flows From Operating Activities:
Net income	$ 47,993,000	$ 58,130,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	57,357,000	54,524,000
Gain on sale of equipment	(5,845,000)	(9,912,000)
Gain from sale of available-for-sale securities	(3,069,000)	(4,539,000)
Gain from sale of Transportation Resource Partners I		(122,000)
Income from investment in Transportation Resource Partners III	(144,000)	(239,000)
Non-cash compensation expense for issuance of common stock to certain members of Board of Directors	398,000	354,000
Provision for doubtful accounts and notes receivable	317,000	803,000
Excess tax benefits related to stock-based compensation	(690,000)	(2,748,000)
Stock-based compensation expense, net	2,581,000	3,600,000
Deferred income taxes	4,193,000	(9,141,000)
Changes in operating assets and liabilities:
Trade receivables	(3,115,000)	7,837,000
Other current assets	5,044,000	49,000
Prepaid expenses	5,425,000	1,379,000
Income tax receivable	24,043,000	12,699,000
Other long-term assets	185,000	(1,946,000)
Accounts payable	5,363,000	(4,857,000)
Accrued liabilities and claims accrual	(6,512,000)	1,596,000
Net cash provided by operating activities	133,524,000	107,467,000
Cash Flows From Investing Activities:
Purchases of property and equipment	(75,446,000)	(86,930,000)
Proceeds from sale of equipment/assets held for sale	40,050,000	47,321,000
Proceeds from notes receivable	262,000	822,000
Change in restricted cash and investments	(19,000)	(8,000)
Proceeds from sale of available-for-sale securities	5,183,000	6,188,000
Cash payments to Transportation Resource Partners	(11,028,000)
Cash proceeds from Transportation Resource Partners	423,000	251,000
Net cash used in investing activities	(40,575,000)	(32,356,000)
Cash Flows From Financing Activities:
Dividends paid	(9,938,000)	(10,135,000)
Payments to repurchase company stock	(36,566,000)	(30,345,000)
Payments on line of credit borrowings, net	(52,000,000)	(49,400,000)
Excess tax benefits related to stock-based compensation	690,000	2,748,000
Cash distribution to noncontrolling interest holder	(972,000)	(603,000)
Proceeds from exercise of stock options	6,710,000	6,488,000
Net cash used in financing activities	(92,076,000)	(81,247,000)
Net increase (decrease) in Cash and Cash Equivalents	873,000	(6,136,000)
Cash and Cash Equivalents, beginning of period	8,691,000	17,066,000
Cash and Cash Equivalents, end of period	9,564,000	10,930,000
Non-cash investing and financing transactions:
Equipment acquired included in accounts payable	12,528,000	13,821,000
Transfer from property and equipment to assets held for sale	18,776,000	19,944,000
Financing provided to independent contractors for equipment sold	157,000	424,000
Net dividend accrued for restricted stock units	77,000	86,000
Cash flow information:
Income taxes paid	2,667,000	28,253,000
Interest expense paid	$ 591,000	$ 529,000

XML

Note 1 - Financial Information

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

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 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, 2015.

XML

Note 2 - Stock-based Compensation

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 2.     Stock-Based Compensation

In May 2015, our shareholders approved the Amended and Restated 2015 Omnibus Incentive Plan (the “2015 Plan”). This plan combines into a single plan the Company’s 2005 Executive Cash Bonus Plan (the “2005 Plan”) and the 2012 Equity Compensation Plan (the “2012 Plan”) and allows for future grants under the 2015 Plan. Grants outstanding under the 2005 Plan and 2012 Plan will continue in force and effect and continue to be governed solely by the terms and conditions of the instrument evidencing such grants, and will be interpreted under the terms of the 2005 Plan and the 2012 Plan, as applicable. Since approval of the 2015 Plan in May 2015, all grants of stock-based compensation are made under the 2015 Plan. Stock-based compensation expense for the three months and six months ended June 30, 2016, and 2015, are as follows (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Stock compensation expense for options, net of forfeitures	$	513	$	280	$	884	$	446
Stock compensation expense for restricted stock units and performance restricted stock units, net of forfeitures		1,288		1,167		1,697		3,154
Total stock compensation expense	$	1,801	$	1,447	$	2,581	$	3,600

Our policy is to recognize compensation expense on a straight-line basis over the requisite service period for the entire award.

As of June 30, 2016, we have approximately $4.3 million of unrecognized compensation expense related to unvested options. This cost is expected to be recognized over a weighted-average period of 1.9 years and a total period of 3.7 years. We have approximately $9.4 million of unrecognized compensation expense related to restricted stock unit awards, which is anticipated to be recognized over a weighted-average period of 3.5 years and a total period of 6.6 years. We also have approximately

$8.2 million of unrecognized compensation cost related to unvested performance awards. That cost is expected to be recognized over a weighted-average period of 2.8 years and total period of 3.6 years.

A total of 569,480 and 590,141 stock options were granted during the first six months of 2016 and 2015, respectively. We received approximately $6.7 million in cash from the exercise of stock options during the six months ended June 30, 2016, compared to $6.5 million for the same period in 2015.

A summary of the option award activity under our equity compensation plan as of June 30, 2016, and changes during the six months ended June 30, 2016, is presented below:

	Option Totals			Weighted Average Exercise Price Per Share
Outstanding as of December 31, 2015		2,008,872		$	21.41
Granted		569,480			24.23
Exercised		(371,805	)		17.94
Forfeited		(61,830	)		25.59
Outstanding as of June 30, 2016		2,144,717			23.04

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model. Listed below are the weighted-average assumptions used for the fair value computation:

	Six Months Ended June 30,
	2016			2015
Dividend yield (1)		0.99	%		0.80	%
Expected volatility (2)		27.91	%		25.88	%
Risk-free interest rate (3)		0.90	%		0.98	%
Expected term (years) (4)		2.74			2.74
Weighted-average fair value of options granted	$	4.28		$	5.00

(1)	Dividend yield – the dividend yield is based on our historical experience and future expectation of dividend payouts.
(2)	Expected volatility – we analyzed the volatility of our stock using historical data.
(3)	Risk-free interest rate – 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)	Expected term – the expected term 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.

A total of 4,350 and 13,950 restricted stock unit awards were granted during the first six months of 2016 and 2015, respectively. A summary of the restricted stock unit award activity under our equity compensation plans as of June 30, 2016, and changes during the six months ended June 30, 2016, is presented below:

	Number of Restricted Stock Unit Awards			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2015		879,173		$	16.45
Granted		4,350			26.38
Vested		(154,667	)		16.73
Forfeited		(5,240	)		16.43
Unvested as of June 30, 2016		723,616			16.45

The fair value of each restricted stock unit is based on the closing market price on the date of grant.

Beginning in 2014, we issued performance restricted stock units (“PRSUs”) to selected key employees that may be earned based on revenue growth and return on assets, and may then be modified based on our total shareholder return, as defined in the instrument evidencing the grant, over a three-year period. The primary award adjustment may range from 0 percent to 150 percent of the initial grant, based upon performance achieved over the three-year period. The primary award modifier, which would multiply the adjusted primary award by 75 percent to 125 percent, is measured by determining the percentile rank of the total shareholder return, as defined in the instrument evidencing the grant, of Knight Transportation common stock in relation to the total shareholder return of a peer group for the three-year period. The final award will be based on performance achieved in accordance with the scale set forth in the plan agreement. PRSUs do not earn dividend equivalents.

A total of 177,741 and 165,720 PRSUs were granted in the first six months of 2016 and 2015, respectively.

A summary of the performance restricted stock unit award activity for the six months ended June 30, 2016 is presented below:

	Number of Performance Restricted Stock Unit Awards			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2015		341,782		$	26.46
Granted		177,741			23.89
Shares earned above target		2,516			23.85
Vested		(5,391	)		23.85
Cancelled		(1,238	)		23.89
Unvested as of June 30, 2016		515,410		$	25.59

The number of granted shares, cancelled shares, and unvested shares are included in the table above based on the performance target established at the initial grant date.

The performance measurement period for the awards granted in the six months ended June 30, 2016, is January 1, 2016 to December 31, 2018. These awards will vest January 31, 2020, or thirteen months following the expiration of the performance period. The fair value of each PRSU grant is estimated on the date of grant using the Monte Carlo Simulation valuation model. Listed below are the weighted-average assumptions used for the fair value computation:

	Six Months Ended June 30,
	2016			2015
Dividend yield (1)		0.99	%		0.80	%
Expected volatility (2)		27.95	%		23.18	%
Average peer volatility (2)		34.37	%		30.70	%
Average peer correlation coefficient (3)		0.6022			0.49
Risk-free interest rate (4)		0.89	%		0.78	%
Expected term (5)		2.84			2.63
Weighted-average fair value of PRSUs granted	$	23.89		$	29.30

(1)	The dividend yield, used to project stock price to the end of the performance period, is based on our historical experience and future expectation of dividend payouts. Total shareholder return is determined assuming that dividends are reinvested in the issuing entity over the performance period, which is mathematically equivalent to utilizing a 0% dividend yield.
(2)	We (or peer company) estimated volatility using our (or their) historical share price performance over the remaining performance period as of the grant date.
(3)	The correlation coefficients are used to model the way in which each entity tends to move in relation to each other; the correlation assumptions were developed using the same stock price data as the volatility assumptions.
(4)	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 performance award.
(5)	Since the Monte Carlo simulation valuation is an open form model that uses an expected life commensurate with the performance period, the expected life of the PRSUs was assumed to be the period from the grant date to the end of the performance period.

XML

Note 3 - Earnings Per Share

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

Note 3.

     

Earnings Per Share

A reconciliation of the basic and diluted earnings per share computations for the three months and six months ended June 30, 2016 and 2015, respectively, is as follows (dollars in thousands except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Weighted-average common shares outstanding – basic		80,105		81,894		80,407		81,959
Dilutive effect of stock options and unvested restricted stock units		676		958		672		1,061
Weighted-average common shares outstanding – diluted		80,781		82,852		81,079		83,020
Net income attributable to Knight Transportation	$	24,675	$	27,638	$	47,245	$	57,200
Basic earnings per share	$	0.31	$	0.34	$	0.59	$	0.70
Diluted earnings per share	$	0.31	$	0.33	$	0.58	$	0.69

Certain shares of options, restricted stock units, and PRSUs (collectively, “equity awards”) were excluded from the computation of diluted earnings per share because the equity award’s exercise prices were greater than the average market price of the common shares and the sum total of assumed proceeds resulted in fewer shares repurchased than the weighted equity awards outstanding hypothetically exercised per the treasury method.

The number of anti-dilutive shares are:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Number of anti-dilutive shares		1,274,322		338,898		1,185,126		183,788

XML

Note 4 - Segment Information

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note 4.     Segment Information

We have two operating and reportable segments: (i) the Trucking segment comprised of three operating units (Dry Van, Refrigerated, and Drayage), and (ii) the Logistics segment comprised of two operating units (Brokerage and Intermodal). We also provide logistics, freight management and other non-trucking services through our Logistics businesses. Through our Trucking and Logistics segment capabilities, we are able to transport, or can arrange for the transportation of, general commodities for customers throughout the United States and parts of Canada and Mexico.

In determining our reportable segments, we focus on financial information such as operating revenues and expenses, operating income, operating ratios, and other key operating statistics common in the industry. The chief operating decision makers also use this information to evaluate segment performance and allocate resources to our operations.

Our segments provide transportation and related services for one another. Such services are billed at cost, and no profit is earned. Such intersegment revenues and expenses are eliminated in our consolidated results.

The following table sets forth revenue and operating income between the Trucking and Logistics segments for the three months and six months ended June 30, 2016 and 2015 (dollars in thousands).

	Three Months Ended June 30, 2016						Three Months Ended June 30, 2015						Six Months Ended June 30, 2016						Six Months Ended June 30, 2015
	$			%			$			%			$			%			$			%
Revenues:
Trucking Segment	$	226,423			81.9		$	245,627			81.4		$	444,379			81.0		$	480,917			81.2
Logistics Segment		51,703			18.7			60,718			20.1			110,312			20.1			118,566			20.0
Subtotal		278,126						306,345						554,691						599,483
Intersegment Eliminations Trucking		(34	)		0.0			(60	)		0.0			(72	)		0.0			(78	)		0.0
Intersegment Eliminations Logistics		(1,774	)		(0.6	)		(4,463	)		(1.5	)		(6,213	)		(1.1	)		(7,302	)		(1.2	)
Total	$	276,318			100	%	$	301,822			100	%	$	548,406			100	%	$	592,103			100	%
Operating Income:
Trucking Segment	$	35,286			92.7		$	37,944			91.2		$	71,208			92.7		$	80,091			91.1
Logistics Segment		2,795			7.3			3,675			8.8			5,600			7.3			7,831			8.9
Total	$	38,081			100	%	$	41,619			100	%	$	76,808			100	%	$	87,922			100	%

No segmental asset or liability information is provided as we do not prepare balance sheets by segment, and the chief operating decision makers do not review segment assets or liabilities to make operating decisions.

XML

Note 5 - Joint Ventures

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Joint Venture [Text Block]

Note 5.     Joint Ventures

In 2014, we formed an Arizona limited liability company, Kool Trans, LLC, for the purpose of expanding our refrigerated trucking business. In 2015, we changed the company name to Kold Trans, LLC. We are entitled to 80% of the profits of the entity and have effective control over the management of the entity. In accordance with ASC 810-10-15-8,

Consolidation

, we consolidate the financial activities of this entity into these condensed consolidated financial statements. The noncontrolling interest for this entity is presented as a separate component of the condensed consolidated financial statements.

In 2010, we partnered with a non-related investor to form an Arizona limited liability company for the purpose of sourcing commercial vehicle parts. We contributed $26,000 to acquire 52% ownership of this entity. In accordance with ASC 810-10-15-8,

Consolidation

, we consolidate the financial activities of this entity into the condensed consolidated financial statements. The noncontrolling interest for this entity is presented as a separate component of the condensed consolidated financial statements.

XML

Note 6 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 6.     Commitments and Contingencies

We are a party to certain claims and pending litigation arising in the normal course of business.  These proceedings primarily involve claims for personal injury, property damage, physical damage, and cargo loss incurred in the transportation of freight or for personnel matters, as well as certain class action litigation in which plaintiffs allege failure to provide meal and rest breaks, unpaid wages, unauthorized deductions, and other items.

We are insured against auto liability (“AL”) claims under a primary self-insured retention ("SIR") policy with retention ranging from $1.0 million to $3.0 million per occurrence and in some years, depending on the applicable policy year, we have been responsible for aggregate losses up to $1.5 million within the primary AL layer.  For the policy periods March 1, 2016 to March 1, 2017, and March 1, 2015 to March 1, 2016, the SIR is $2.5 million with no additional aggregate limits or deductibles within the primary AL policy.  We have secured excess liability coverage up to $130.0 million per occurrence for the policy period March 1, 2016 to March 1, 2017. For policy period March 1, 2015 to March 1, 2016, our excess liability coverage limit was $105.0 million per occurrence. We also carry a $2.5 million aggregate deductible for any loss or losses within the excess coverage layer.

We are self-insured for workers' compensation coverage. On March 31, 2016, the self-retention level was increased from a maximum $500,000 per occurrence to a maximum $1,000,000 per occurrence. We also maintain primary and excess coverage for employee medical expenses and hospitalization, with self-insured retention of $240,000 per claimant in 2016, and $225,000 per claimant in 2015.

Based on our present knowledge of the facts, and in certain cases, advice of outside counsel, management believes the resolution of open claims and pending litigation, taking into account existing reserves, is not likely to have a materially adverse effect on our consolidated financial statements.

XML

Note 7 - Property and Equipment

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

Note

7

.     Property and Equipment

To ensure that our facilities remain modern and efficient, we periodically have facility upgrades, or new construction, in process at our various service center or corporate headquarters locations. Until these projects are completed, we consider these to be assets not yet placed in service and they are not depreciated. Once they are placed into service, we depreciate them according to our depreciation policy. At June 30, 2016 and December 31, 2015, we had approximately $9.2 million and $17.5 million, respectively, of facility construction in process assets included under "Buildings and building improvements” on the accompanying condensed consolidated balance sheets.

XML

Note 8 - Goodwill and Intangibles, Net

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note 8.     Goodwill and Intangibles, net

Goodwill represents the excess of the purchase price of our acquisitions over the fair value of the net 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 amounts of goodwill were as follows (dollars in thousands):

	Six Months Ended June 30, 2016
Goodwill at beginning of period	$	47,050
Amortization relating to deferred tax assets		(10	)
Goodwill at end of period	$	47,040

In conjunction with our acquisitions, identifiable intangible assets subject to amortization have been recorded at fair value and are being amortized over a weighted-average amortization period of 7.6 years.

Intangible asset balances were as follows (dollars in thousands):

	June 30, 2016			December 31, 2015
Gross carrying amount	$	3,700		$	3,700
Accumulated amortization		(875	)		(625	)
Intangible assets, net	$	2,825		$	3,075

Amortization expense associated with these intangible assets was $0.1 million and $0.3 million for the three and six months ended June 30, 2016, and 2015, respectively, and is included in “Depreciation and amortization” on the accompanying condensed consolidated statements of income. Future amortization expense for intangible assets is estimated at $0.2 million for the remainder of 2016, $0.5 million for each of the years 2017 through 2019, and $0.4 million in 2020 and 2021.

XML

Note 9 - Investments and Related Commitments

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Investment [Text Block]

Note 9.     Investments and Related Commitments

In 2003, we signed a partnership agreement with Transportation Resource Partners ("TRP"), a company that makes privately negotiated equity investments. Per the original partnership agreement, we committed to invest $5.0 million in TRP. In 2006, we increased the commitment amount to $5.5 million. No gain or loss was recognized from TRP investment activity in the second quarter of 2016, and we recognized a net gain of $122,000 in the second quarter of 2015. The carrying value of our investment in TRP was $300,000 at June 30, 2016 and December 31, 2015. Our investment in TRP is accounted for using the cost method, and the balance is included within "Other long-term assets, restricted cash and investments" on our accompanying condensed consolidated balance sheets.

In 2008, we formed Knight Capital Growth, LLC and committed $15.0 million to invest in another partnership managed and operated by the managers and principals of TRP. This partnership, Transportation Resource Partners III, LP ("TRP III"), is focused on investment opportunities similar to TRP. In 2015, TRP III released us from $2.1 million of our outstanding commitment. As of June 30, 2016, we have contributed approximately $11.0 million to TRP III, leaving an outstanding commitment of $1.9 million. Our investment in TRP III is accounted for using the equity method. For the three months ended June 30, 2016, we recorded income of approximately $453,000, for our investment in TRP III, and $121,000 for the three months ended June 30, 2015. The carrying value of our investment in TRP III was $5.5 million and $5.8 million as of June 30, 2016 and December 31, 2015, respectively, and is included within "Other long-term assets, restricted cash and investments" on our accompanying condensed consolidated balance sheets.

In 2015, we committed to invest in another TRP partnership, TRP Capital Partners, LP (“TRP IV”). TRP IV is managed and operated by the managers and principals of TRP and TRP III, and is focused on similar investment opportunities. We committed to contribute a total of $4.9 million to TRP IV, and have contributed approximately $1.0 million, leaving an outstanding commitment of approximately $3.9 million as of June 30, 2016. Our investment in TRP IV is accounted for using the cost method, and the balance is included within "Other long-term assets, restricted cash, and investments" on our accompanying condensed consolidated balance sheets.

In the first quarter of 2016, we committed to invest in another TRP partnership, TRP CoInvest Partners, (NTI) I, LP (“TRP Coinvestment”). The new partnership is managed and operated by the managers and principals of the other TRP partnerships, and is focused on similar investment opportunities. We committed to contribute, and have paid a total of, $10.0 million to the new partnership, leaving no outstanding commitment as of June 30, 2016. Our investment in TRP Coinvestment is accounted for using the equity method, and the carrying value at June 30, 2016 was $10.0 million and is included within "Other long-term assets, restricted cash, and investments" on our accompanying condensed consolidated balance sheets.

XML

Note 10 - Marketable Equity Securities

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Cash, Cash Equivalents, and Marketable Securities [Text Block]

Note 10.     Marketable Equity Securities

We have certain marketable equity securities classified as available-for-sale securities, which are recorded at fair value with unrealized gains and losses, net of tax, as a component of "Accumulated other comprehensive income" in shareholders' equity on the accompanying condensed consolidated balance sheets. Realized gains and losses on available-for-sale securities are included in the determination of net income. We use specific identification to determine the cost of securities sold, or amounts reclassified out of accumulated other comprehensive income into earnings and included in “Other income” on the accompanying condensed consolidated statements of income.

The following table shows the Company’s realized gains during the three and six month periods ended June 30, 2016 and 2015, on certain securities that were held as available-for-sale (dollars in thousands).

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Realized gains
Sales proceeds	$	2,330	$	3,042	$	5,183	$	6,188
Cost of securities sold		856		849		2,114		1,649
Realized gain	$	1,474	$	2,193	$	3,069	$	4,539
Realized gains, net of taxes	$	907	$	1,344	$	1,888	$	2,782

As of June 30, 2016, our available-for-sale equity investments included in "Other long-term assets and restricted cash and investments" on the accompanying condensed consolidated balance sheets, was approximately $2.0 million, including gross unrealized gains of approximately $1.2 million, or $0.7 million (net of tax). As of December 31, 2015, our available-for-sale investment balance was approximately $7.1 million, including gross unrealized gains of approximately $4.2 million, or $2.6 million (net of tax).

XML

Note 11 - Assets Held for Sale

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Other Assets Disclosure [Text Block]

Note 11.     Assets Held for Sale

Revenue equipment that is not utilized in continuing operations and is held for sale is classified as "Assets held for sale" on the accompanying condensed consolidated balance sheets. Assets held for sale at June 30, 2016 and December 31, 2015, totaled $21.1 million and $29.3 million, respectively. Assets held for sale are no longer subject to depreciation, and are recorded at the lower of depreciated carrying value or fair market value less selling costs. We expect to sell these assets and replace them with new assets within twelve months of being classified as "Assets held for sale."

XML

Note 12 - Income Taxes

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 12.     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. For interim reporting purposes, our income tax provisions are recorded based on the estimated annual effective tax rate. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases 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 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. We file federal and state income tax returns with varying statutes of limitations. The 2011 through 2015 tax years remain subject to examination by federal and state tax authorities. As of June 30, 2016, cumulative gross unrecognized tax benefits were $0.7 million. We had no unrecognized tax benefits as of December 31, 2015. All unrecognized tax benefits, if recognized, would affect the effective tax rate.

With the exception of the unrecognized tax benefits discussed above, we believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our consolidated financial position, results of operations and cash flows. Our policy is to recognize interest and penalties related to unrecognized tax benefits as income tax expense. No interest or penalties related to unrecognized tax benefits has been recognized as of June 30, 2016 or December 31, 2015, because the Company has not yet received the refunds related to the uncertain tax benefits. None of the unrecognized tax benefits are expected to reverse in the next 12 months.

XML

Note 13 - Company Share Repurchase Programs

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Treasury Stock [Text Block]

Note 13.     Company Share Repurchase Programs

In 2011, our Board of Directors unanimously authorized the repurchase of 10.0 million shares of our common stock. The repurchase authorization is intended to afford 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. The Company’s share repurchase program does not obligate it to acquire any specific number of shares. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.

Under the share repurchase program, we repurchased 0.4 million shares for $9.5 million in the three months ended June 30, 2016, and 1.5 million shares for $36.6 million in the six months ended June 30, 2016. We repurchased 1.0 million shares for $30.3 million in the three and six months ended June 30, 2015. As of June 30, 2016, there were 4.4 million shares remaining for future purchases under our repurchase program. The repurchase authorization will remain in effect until the share limit is reached or the program is terminated.

XML

Note 14 - Fair Value Measurements

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note 14.

     

Fair Value Measurement

s

Our assets and liabilities measured at fair value are based on principles set forth in ASC 820-10,

Fair Value Measurements and Disclosure

, for recurring and non-recurring fair value measurements of financial and non-financial assets and liabilities. This standard defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and expands disclosures about fair value measurements. This standard establishes a three-level hierarchy for fair value measurements based upon the significant inputs used to determine fair value. Observable inputs are those which are obtained from market participants external to us while unobservable inputs are generally developed internally, utilizing management's estimates, assumptions, and specific knowledge of the nature of the assets or liabilities and related markets. The three levels are defined as follows:

Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that we have 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 are 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 our assumptions about the pricing of an asset or liability.

In accordance with the fair value hierarchy described above, the following table shows the fair value of our financial assets and liabilities that are required to be measured at fair value as of June 30, 2016 and December 31, 2015 (dollars in thousands). 

	Total		Total		Level One				Level Two				Level Three
	Balance at June 30, 2016		Balance at December 31, 2015		Balance at June 30, 2016		Balance at December 31, 2015		Balance at June 30, 2016		Balance at December 31, 2015		Balance at June 30, 2016		Balance at December 31, 2015
Assets:
Available-for-sale securities:
Equity securities - common shares	$	1,990	$	7,101	$	1,990	$	7,101		-		-		-		-
Restricted cash and investments:
Money market funds	$	1,045	$	1,003	$	1,045	$	1,003		-		-		-		-
Trading securities:
Debt securities - municipal securities	$	2,256	$	2,279		-		-	$	2,256	$	2,279		-		-

XML

Note 15 - Notes Receivable

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Notes Receivable [Text Block]

Note 15.

     

Notes Receivable

We provide financing to independent contractors and third parties on equipment sold or leased under our equipment sale program. Most of the notes are collateralized and are due in weekly installments, comprised of principal and interest payments. Interest rates are set forth in the contracts and generally range from 2% to 20%.

The notes receivable balances are classified separately between current and long-term on the accompanying condensed consolidated balance sheets. The current and long-term balance of our notes receivable at June 30, 2016 and December 31, 2015, are as follows (dollars in thousands):

	June 30, 2016			December 31, 2015
Notes receivable from independent contractors	$	974		$	794
Notes receivable from third parties		3,275			3,546
Gross notes receivable		4,249			4,340
Allowance for doubtful notes receivable		(265	)		(273	)
Total notes receivable, net of allowance		3,984			4,067
Current portion, net of allowance		549			648
Long-term portion	$	3,435		$	3,419

XML

Note 16 - Line of Credit

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Long-term Debt [Text Block]

Note 16.     Line of Credit

We maintain a revolving line of credit which permits revolving borrowings and letters of credit. The line of credit is maintained at $300.0 million and matures December 1, 2017. Effective August 8, 2016, we entered into a modification to our line of credit agreement that extends the maturity date to August 1, 2019, and amends our minimum tangible net worth covenant to $500.0 million from $400.0 million. We incur interest on borrowings under the line of credit at the prime rate or LIBOR plus 0.625%, determined by us at the time of borrowing. We had $60.0 million outstanding under the line of credit as of June 30, 2016, compared to $112.0 million as of December 31, 2015. The weighted average variable annual percentage rate ("APR") for amounts borrowed during the six months ended June 30, 2016 was 1.05%. Borrowings under the line of credit are recorded in the "Long-term debt" line of the accompanying condensed consolidated balance sheets. As of June 30, 2016, we also utilized $27.4 million of the line of credit for letters of credit issued to various regulatory authorities in connection with our self-insurance programs. With the outstanding letters of credit and debt borrowed, we have $212.6 million available for future borrowings as of June 30, 2016. After consideration of fees incurred for the unused portion of our line of credit, our weighted average variable APR for the six months ended June 30, 2016 was 1.21%. We are obligated to comply with certain financial and other covenants under the line of credit agreement and were in compliance with such covenants at and for the three and six months ended June 30, 2016 and for the year ended December 31, 2015.

XML

Note 17 - Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

Note 17.     Recent Accounting Pronouncements

In March 2016, the FASB issued ASU 2016-09,

Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting

.

The objective of this update is to simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for reporting periods beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the new guidance to determine the impact it may have on our condensed consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08,

Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Rep

orting Revenue Gross versus Net).

This update clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The amendments in this update affect the guidance in ASU 2014-09,

Revenue from Contracts with Customers (Topic 606)

, which is not yet effective. The effective date for the amendments in this update is the same as the effective date of ASU 2014-09 which will be effective for reporting periods beginning after December 15, 2017. We are currently evaluating the effect that this guidance will have on our condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02,

Leases (Topic 842).

This update seeks to increase the transparency and comparability among entities by requiring public entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. To satisfy the standard’s objective, a lessee will recognize a right-of-use asset representing its right to use the underlying asset for the lease term and a lease liability for the obligation to make lease payments. Both the right-of-use asset and lease liability will initially be measured at the present value of the lease payments, with subsequent measurement dependent on the classification of the lease as either a finance or an operating lease. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. Accounting by lessors will remain mostly unchanged from current U.S. GAAP.

In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that companies may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. The transition guidance also provides specific guidance for sale and leaseback transactions, build-to-suit leases, leveraged leases, and amounts previously recognized in accordance with the business combinations guidance for leases. The new standard is effective for public companies for annual periods beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. We are currently evaluating the effect that adopting this standard will have on our condensed consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01,

Financial Instruments–Overall (Subtopic 825-10).

This update was issued to enhance the reporting model for financial instruments regarding certain aspects of recognition, measurement, presentation, and disclosure. The update (i) requires equity investments (except those accounted for under the equity method or that are consolidated) to be measured at fair value with changes in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for an entity to disclose the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost; (iv) requires an entity to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and (v) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. These provisions are effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. The standard is to be applied using a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption. We are currently evaluating the effect that adopting this standard will have on our condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09,

Revenue from Contracts with Customers

. The main objective of this update is to require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The guidance in this update supersedes virtually all present U.S. GAAP guidance on revenue recognition. The amendments to the standard require the use of more estimates and judgments than the present standards and require additional disclosures. In July 2015, the FASB deferred the effective date for the revenue recognition standard. The accounting standard will now be effective for reporting periods beginning after December 15, 2017. We are currently evaluating this standard and our existing revenue recognition policies to determine which of our customer arrangements in the scope of the guidance will be affected by the new requirements and what impact they would have on our condensed consolidated financial statements upon adoption of this standard.

XML

Note 2 - Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Performance Shares [Member]

Notes Tables

Schedule of Share-based Payment Award, Equity Instruments Other than Stock Options, Valuation Assumptions [Table Text Block]

	Six Months Ended June 30,
	2016			2015
Dividend yield (1)		0.99	%		0.80	%
Expected volatility (2)		27.95	%		23.18	%
Average peer volatility (2)		34.37	%		30.70	%
Average peer correlation coefficient (3)		0.6022			0.49
Risk-free interest rate (4)		0.89	%		0.78	%
Expected term (5)		2.84			2.63
Weighted-average fair value of PRSUs granted	$	23.89		$	29.30

Restricted Stock Units (RSUs) [Member]

Notes Tables

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

	Number of Restricted Stock Unit Awards			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2015		879,173		$	16.45
Granted		4,350			26.38
Vested		(154,667	)		16.73
Forfeited		(5,240	)		16.43
Unvested as of June 30, 2016		723,616			16.45

Stock Compensation Plan [Member]

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Six Months Ended June 30,
	2016			2015
Dividend yield (1)		0.99	%		0.80	%
Expected volatility (2)		27.91	%		25.88	%
Risk-free interest rate (3)		0.90	%		0.98	%
Expected term (years) (4)		2.74			2.74
Weighted-average fair value of options granted	$	4.28		$	5.00

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Stock compensation expense for options, net of forfeitures	$	513	$	280	$	884	$	446
Stock compensation expense for restricted stock units and performance restricted stock units, net of forfeitures		1,288		1,167		1,697		3,154
Total stock compensation expense	$	1,801	$	1,447	$	2,581	$	3,600

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Option Totals			Weighted Average Exercise Price Per Share
Outstanding as of December 31, 2015		2,008,872		$	21.41
Granted		569,480			24.23
Exercised		(371,805	)		17.94
Forfeited		(61,830	)		25.59
Outstanding as of June 30, 2016		2,144,717			23.04

Share-based Compensation, Performance Shares Award Unvested Activity [Table Text Block]

	Number of Performance Restricted Stock Unit Awards			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2015		341,782		$	26.46
Granted		177,741			23.89
Shares earned above target		2,516			23.85
Vested		(5,391	)		23.85
Cancelled		(1,238	)		23.89
Unvested as of June 30, 2016		515,410		$	25.59

XML

Note 3 - Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2016

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Weighted-average common shares outstanding – basic		80,105		81,894		80,407		81,959
Dilutive effect of stock options and unvested restricted stock units		676		958		672		1,061
Weighted-average common shares outstanding – diluted		80,781		82,852		81,079		83,020
Net income attributable to Knight Transportation	$	24,675	$	27,638	$	47,245	$	57,200
Basic earnings per share	$	0.31	$	0.34	$	0.59	$	0.70
Diluted earnings per share	$	0.31	$	0.33	$	0.58	$	0.69

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Number of anti-dilutive shares		1,274,322		338,898		1,185,126		183,788

XML

Note 4 - Segment Information (Tables)

6 Months Ended

Jun. 30, 2016

Notes Tables

Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

	Three Months Ended June 30, 2016						Three Months Ended June 30, 2015						Six Months Ended June 30, 2016						Six Months Ended June 30, 2015
	$			%			$			%			$			%			$			%
Revenues:
Trucking Segment	$	226,423			81.9		$	245,627			81.4		$	444,379			81.0		$	480,917			81.2
Logistics Segment		51,703			18.7			60,718			20.1			110,312			20.1			118,566			20.0
Subtotal		278,126						306,345						554,691						599,483
Intersegment Eliminations Trucking		(34	)		0.0			(60	)		0.0			(72	)		0.0			(78	)		0.0
Intersegment Eliminations Logistics		(1,774	)		(0.6	)		(4,463	)		(1.5	)		(6,213	)		(1.1	)		(7,302	)		(1.2	)
Total	$	276,318			100	%	$	301,822			100	%	$	548,406			100	%	$	592,103			100	%
Operating Income:
Trucking Segment	$	35,286			92.7		$	37,944			91.2		$	71,208			92.7		$	80,091			91.1
Logistics Segment		2,795			7.3			3,675			8.8			5,600			7.3			7,831			8.9
Total	$	38,081			100	%	$	41,619			100	%	$	76,808			100	%	$	87,922			100	%

XML

Note 8 - Goodwill and Intangibles, Net (Tables)

6 Months Ended

Jun. 30, 2016

Notes Tables

Schedule of Goodwill [Table Text Block]

	Six Months Ended June 30, 2016
Goodwill at beginning of period	$	47,050
Amortization relating to deferred tax assets		(10	)
Goodwill at end of period	$	47,040

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

	June 30, 2016			December 31, 2015
Gross carrying amount	$	3,700		$	3,700
Accumulated amortization		(875	)		(625	)
Intangible assets, net	$	2,825		$	3,075

XML

Note 10 - Marketable Equity Securities (Tables)

6 Months Ended

Jun. 30, 2016

Notes Tables

Schedule of Realized Gain (Loss) [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Realized gains
Sales proceeds	$	2,330	$	3,042	$	5,183	$	6,188
Cost of securities sold		856		849		2,114		1,649
Realized gain	$	1,474	$	2,193	$	3,069	$	4,539
Realized gains, net of taxes	$	907	$	1,344	$	1,888	$	2,782

XML

Note 14 - Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Notes Tables

Fair Value Measurements, Nonrecurring [Table Text Block]

	Total		Total		Level One				Level Two				Level Three
	Balance at June 30, 2016		Balance at December 31, 2015		Balance at June 30, 2016		Balance at December 31, 2015		Balance at June 30, 2016		Balance at December 31, 2015		Balance at June 30, 2016		Balance at December 31, 2015
Assets:
Available-for-sale securities:
Equity securities - common shares	$	1,990	$	7,101	$	1,990	$	7,101		-		-		-		-
Restricted cash and investments:
Money market funds	$	1,045	$	1,003	$	1,045	$	1,003		-		-		-		-
Trading securities:
Debt securities - municipal securities	$	2,256	$	2,279		-		-	$	2,256	$	2,279		-		-

XML

Note 15 - Notes Receivable (Tables)

6 Months Ended

Jun. 30, 2016

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	June 30, 2016			December 31, 2015
Notes receivable from independent contractors	$	974		$	794
Notes receivable from third parties		3,275			3,546
Gross notes receivable		4,249			4,340
Allowance for doubtful notes receivable		(265	)		(273	)
Total notes receivable, net of allowance		3,984			4,067
Current portion, net of allowance		549			648
Long-term portion	$	3,435		$	3,419

XML

Note 2 - Stock-based Compensation (Details Textual) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2014
Employee Stock Option [Member] | Weighted Average [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 328 days
Employee Stock Option [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	3 years 255 days
Restricted Stock Units (RSUs) [Member] | Weighted Average [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	3 years 182 days
Restricted Stock Units (RSUs) [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	6 years 219 days
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 9,400
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	4,350	13,950
Performance Shares [Member] | Weighted Average [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	2 years 292 days
Performance Shares [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	3 years 219 days
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 8,200
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	177,741	165,720
Share-based Compensation Arrangement by Share-Based Payment Award, Payout Range, Performance Period			3 years
Share-based Compensation Arrangement by Share-Based Payment Award, Payout Range, Lower Limit			0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Payout Range, Upper Limit			150.00%
Share-based Compensation Arrangement by Share-based Payment Award, Payout Modifier Range, Lower Limit			75.00%
Share-based Compensation Arrangement by Share-based Payment Award, Payout Modifier Range, Upper Limit			125.00%
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year 30 days
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 4,300
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	569,480	590,141
Proceeds from Stock Options Exercised	$ 6,710	$ 6,488

XML

Note 2 - Stock-based Compensation Cost (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Employee Stock Option [Member]
Stock compensation expense	$ 513	$ 280	$ 884	$ 446
RSU and Performance Shares [Member]
Stock compensation expense	1,288	1,167	1,697	3,154
Stock compensation expense	$ 1,801	$ 1,447	$ 2,581	$ 3,600

XML

Note 2 - Summary of Option Award Activity Under Equity Compensation Plan (Details) - $ / shares	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Outstanding as of December 31, 2015 (in shares)	2,008,872
Outstanding as of December 31, 2015 (in dollars per share)	$ 21.41
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	569,480	590,141
Granted (in dollars per share)	$ 24.23
Exercised (in shares)	(371,805)
Exercised (in dollars per share)	$ 17.94
Forfeited (in shares)	(61,830)
Forfeited (in dollars per share)	$ 25.59
Outstanding as of June 30, 2016 (in shares)	2,144,717
Outstanding as of June 30, 2016 (in dollars per share)	$ 23.04

XML

Note 2 - Stock Option Fair Value Assumptions (Details) - Stock Compensation Plan [Member] - $ / shares		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015
Dividend yield (1)	[1]	0.99%	0.80%
Expected volatility (2)	[2]	27.91%	25.88%
Risk-free interest rate (3)	[3]	0.90%	0.98%
Expected term (years) (4)	[4]	2 years 270 days	2 years 270 days
Weighted-average fair value of options granted (in dollars per share)		$ 4.28	$ 5

[1] Dividend yield - the dividend yield is based on our historical experience and future expectation of dividend payouts.

[2] Expected volatility - we analyzed the volatility of our stock using historical data.

[3] Risk-free interest rate - 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] Expected term - the expected term 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.

XML

Note 2 - Summary of Restricted Stock Unit Award Activity under Compensation Plan (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Unvested as of December 31, 2015 (in shares)	879,173
Unvested as of December 31, 2015 (in dollars per share)	$ 16.45
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	4,350	13,950
Granted (in dollars per share)	$ 26.38
Vested (in shares)	(154,667)
Vested (in dollars per share)	$ 16.73
Forfeited (in shares)	(5,240)
Forfeited (in dollars per share)	$ 16.43
Unvested as of June 30, 2016 (in shares)	723,616
Unvested as of June 30, 2016 (in dollars per share)	$ 16.45

XML

Note 2 - Summary of Award Activities (Details) - Performance Shares [Member] - $ / shares	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Unvested as of December 31, 2015 (in shares)	341,782
Unvested as of December 31, 2015 (in dollars per share)	$ 26.46
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	177,741	165,720
Granted (in dollars per share)	$ 23.89	$ 29.30
Shares earned above target (in shares)	2,516
Shares earned above target (in dollars per share)	$ 23.85
Vested (in shares)	(5,391)
Vested (in dollars per share)	$ 23.85
Forfeited (in shares)	(1,238)
Forfeited (in dollars per share)	$ 23.89
Unvested as of June 30, 2016 (in shares)	515,410
Unvested as of June 30, 2016 (in dollars per share)	$ 25.59

XML

Note 2 - Fair Value Assumptions, Performance Shares (Details) - Performance Shares [Member]		6 Months Ended
		Jun. 30, 2016 $ / shares	Jun. 30, 2015 $ / shares
Dividend yield (1)	[1]	0.99%	0.80%
Expected volatility (2)	[2]	27.95%	23.18%
Average peer volatility (2)	[2]	34.37%	30.70%
Average peer correlation coefficient (3)	[3]	0.6022	0.49
Risk-free interest rate (3)	[4]	0.89%	0.78%
Expected term (years) (4)	[5]	2 years 306 days	2 years 229 days
Granted (in dollars per share)		$ 23.89	$ 29.30

[1] Dividend yield - the dividend yield is based on our historical experience and future expectation of dividend payouts.

[2] We (or peer company) estimated volatility using our (or their) historical share price performance over the remaining performance period as of the grant date.

[3] The correlation coefficients are used to model the way in which each entity tends to move in relation to each other; the correlation assumptions were developed using the same stock price data as the volatility assumptions.

[4] 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 performance award.

[5] Since the Monte Carlo simulation valuation is an open form model that uses an expected life commensurate with the performance period, the expected life of the PRSUs was assumed to be the period from the grant date to the end of the performance period.

XML

Note 3 - Reconciliation of Basic and Diluted Earnings Per Share Computation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Weighted-average common shares outstanding - basic (in shares)	80,105	81,894	80,407	81,959
Dilutive effect of stock options and unvested restricted stock units (in shares)	676	958	672	1,061
Weighted-average common shares outstanding - diluted (in shares)	80,781	82,852	81,079	83,020
Net income attributable to Knight Transportation	$ 24,675	$ 27,638	$ 47,245	$ 57,200
Basic earnings per share (in dollars per share)	$ 0.31	$ 0.34	$ 0.59	$ 0.70
Diluted earnings per share (in dollars per share)	$ 0.31	$ 0.33	$ 0.58	$ 0.69

XML

Note 3 - Summary of Anti-dilutive Common Shares (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Number of anti-dilutive shares (in shares)	1,274,322	338,898	1,185,126	183,788

XML

Note 4 - Segment Information (Details Textual)	3 Months Ended
	Jun. 30, 2016
Trucking Segment [Member]
Number of Operating Units	3
Logistics Segment [Member]
Number of Operating Units	2
Number of Operating Segments	2

XML

Note 4 - Revenue and Operating Income Between Trucking and Logistics Segments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Operating Segments [Member] | Trucking Segment [Member]
REVENUE:
Revenues	$ 226,423	$ 245,627	$ 444,379	$ 480,917
Percentage of revenues	81.90%	81.40%	81.00%	81.20%
Operating income	$ 35,286	$ 37,944	$ 71,208	$ 80,091
Percentage of operating income	92.70%	91.20%	92.70%	91.10%
Operating Segments [Member] | Logistics Segment [Member]
REVENUE:
Revenues	$ 51,703	$ 60,718	$ 110,312	$ 118,566
Percentage of revenues	18.70%	20.10%	20.10%	20.00%
Operating income	$ 2,795	$ 3,675	$ 5,600	$ 7,831
Percentage of operating income	7.30%	8.80%	7.30%	8.90%
Operating Segments [Member]
REVENUE:
Revenues	$ 278,126	$ 306,345	$ 554,691	$ 599,483
Percentage of revenues
Intersegment Eliminations [Member] | Trucking Segment [Member]
REVENUE:
Revenues	$ (34)	$ (60)	$ (72)	$ (78)
Percentage of revenues	0.00%	0.00%	0.00%	0.00%
Intersegment Eliminations [Member] | Logistics Segment [Member]
REVENUE:
Revenues	$ (1,774)	$ (4,463)	$ (6,213)	$ (7,302)
Percentage of revenues	(0.60%)	(1.50%)	(1.10%)	(1.20%)
Revenues	$ 276,318	$ 301,822	$ 548,406	$ 592,103
Percentage of revenues	100.00%	100.00%	100.00%	100.00%
Operating income	$ 38,081	$ 41,619	$ 76,808	$ 87,922
Percentage of operating income	100.00%	100.00%	100.00%	100.00%

XML

Note 5 - Joint Ventures (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2010	Oct. 31, 2015
Kool Trans, LLC [Member]
Joint Venture, Percentage of Profits Entitled to Reporting Entity		80.00%
Non-related Investor [Member]
Payments to Acquire Interest in Joint Venture	$ 26,000
Joint Venture, Ownership Interest	52.00%

XML

Note 6 - Commitments and Contingencies (Details Textual) - USD ($)	3 Months Ended
	Jun. 30, 2016	Mar. 31, 2016	Jun. 30, 2015
Policy Period, March 1, 2015 to March 1, 2016 [Member]
Self Insurance Retention	$ 2,500,000
Self Insurance, Aggregate Losses	0
Excess Personal Injury and Property Damage Liability Insurance	105,000,000
Policy Period, March 1, 2016 to March 1, 2017 [Member]
Self Insurance Retention	2,500,000
Self Insurance, Aggregate Losses	0
Excess Personal Injury and Property Damage Liability Insurance	130,000,000
Minimum [Member]
Self Insurance Retention	1,000,000
Self Insurance Retention, Workers Compensation Claims per Occurrence		$ 500,000
Maximum [Member]
Self Insurance Retention	3,000,000
Self Insurance, Aggregate Losses	1,500,000
Self Insurance Retention, Workers Compensation Claims per Occurrence		$ 1,000,000
Insurance, Aggregate Deductible, Amount	2,500,000
Self Retention for Employee Medical Health	$ 240,000		$ 225,000

XML

Note 7 - Property and Equipment (Details Textual) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Building and Building Improvements, Gross [Member]
Construction in Progress, Gross	$ 9.2	$ 17.5

XML

Note 8 - Goodwill and Intangibles, Net (Details Textual) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Amortization of Intangible Assets	$ 0.1	$ 0.1	$ 0.3	$ 0.3
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	7 years 219 days
Finite-Lived Intangible Assets, Amortization Expense, Remainder of Fiscal Year	$ 0.2		0.2
Finite-Lived Intangible Assets, Amortization Expense, Year Two	0.5		0.5
Finite-Lived Intangible Assets, Amortization Expense, Year Three	0.5		0.5
Finite-Lived Intangible Assets, Amortization Expense, Year Four	0.5		0.5
Finite-Lived Intangible Assets, Amortization Expense, Year Five	0.4		0.4
Finite-Lived Intangible Assets, Amortization Expense, after Year Five	$ 0.4		$ 0.4

XML

Note 8 - Changes in Carrying Amount of Goodwill (Details)	6 Months Ended
	Jun. 30, 2016 USD ($)
Goodwill at beginning of period	$ 47,050,000
Amortization relating to deferred tax assets	(10,000)
Goodwill at end of period	$ 47,040,000

XML

Note 8 - Intangible Asset (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Gross carrying amount	$ 3,700,000	$ 3,700,000
Accumulated amortization	(875,000)	(625,000)
Intangible assets, net	$ 2,825,000	$ 3,075,000

XML

Note 9 - Investments and Related Commitments (Details Textual) - USD ($)	3 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015	Dec. 31, 2008	Dec. 31, 2006	Dec. 31, 2003
Transportation Resource Partners [Member]
Income (Loss) from Equity Method Investments	$ 0	$ 122,000
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures						$ 5,000,000
Amounts Committed to Invest					$ 5,500,000
Investments	300,000		$ 300,000
Transportation Resource Partners NTI [Member]
Remaining Investment Commitment	0
Amounts Committed to Invest	10,000,000
Equity Method Investments	10,000,000
Transportation Resource Partners III [Member]
Income (Loss) from Equity Method Investments	453,000	$ 121,000
Remaining Investment Commitment	1,900,000
Amounts Committed to Invest				$ 15,000,000
Investments	11,000,000
Amounts Committed to Invest, Commitment Release			2,100,000
Equity Method Investments	5,500,000		5,800,000
Transportation Resource Partners IV [Member]
Remaining Investment Commitment	3,900,000
Amounts Committed to Invest			$ 4,900,000
Payments for (Proceeds from) Investments	$ 1,000,000

XML

Note 10 - Marketable Equity Securities (Details Textual) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Available-for-sale Securities	$ 2.0	$ 7.1
Available-for-sale Securities, Accumulated Gross Unrealized Gain (Loss), before Tax	1.2	4.2
Available for Sale Securities, Accumulated Gross Unrealized Gain (Loss), Net of Tax	$ 0.7	$ 2.6

XML

Note 10 - Realized Gains On Available-for-sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Sales proceeds	$ 2,330	$ 3,042	$ 5,183	$ 6,188
Cost of securities sold	856	849	2,114	1,649
Realized gain	1,474	2,193	3,069	4,539
Realized gains, net of taxes	$ 907	$ 1,344	$ 1,888	$ 2,782

XML

Note 11 - Assets Held for Sale (Details Textual) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Disposal Group, Including Discontinued Operation, Assets	$ 21.1	$ 29.3

XML

Note 12 - Income Taxes (Details Textual) - USD ($)	3 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
State and Local Jurisdiction [Member] | Earliest Tax Year [Member]
Open Tax Year	2011
State and Local Jurisdiction [Member] | Latest Tax Year [Member]
Open Tax Year	2015
Unrecognized Tax Benefits	$ 700,000	$ 0
Unrecognized Tax Benefits, Income Tax Penalties Accrued	0	$ 0
Decrease in Unrecognized Tax Benefits is Reasonably Possible	$ 0

XML

Note 13 - Company Share Repurchase Programs (Details Textual) - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	May 31, 2011
Stock Repurchase Program, Number of Shares Authorized to be Repurchased					10.0
Treasury Stock, Shares, Acquired	0.4	1.0	1.5	1.0
Treasury Stock, Value, Acquired, Cost Method	$ 9.5	$ 30.3	$ 36.6	$ 30.3
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased	4.4		4.4

XML

Note 14 - Fair Value of Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Inputs, Level 1 [Member]
Equity securities - common shares	$ 1,990	$ 7,101
Money market funds	1,045	1,003
Fair Value, Inputs, Level 2 [Member]
Debt securities - municipal securities	2,256	2,279
Equity securities - common shares	1,990	7,101
Money market funds	1,045	1,003
Debt securities - municipal securities	$ 2,256	$ 2,279

XML

Note 15 - Notes Receivable (Details Textual)	3 Months Ended
	Jun. 30, 2016
Interest on Note Receivable, Minimum	2.00%
Interest on Note Receivable, Maximum	20.00%

XML

Note 15 - Current and Long-term Balance of Notes Receivable (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Notes receivable from independent contractors	$ 974,000	$ 794,000
Notes receivable from third parties	3,275,000	3,546,000
Gross notes receivable	4,249,000	4,340,000
Allowance for doubtful notes receivable	(265,000)	(273,000)
Total notes receivable, net of allowance	3,984,000	4,067,000
Current portion, net of allowance	(549,000)	(648,000)
Long-term portion	$ 3,435,000	$ 3,419,000

XML

Note 16 - Line of Credit (Details Textual) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2016	Aug. 08, 2016	Aug. 07, 2016	Dec. 31, 2015
Revolving Credit Facility [Member] | Subsequent Event [Member]
Debt Covenant, Minimum Tangible Net Worth				$ 500.0	$ 400.0
Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	0.625%
Revolving Credit Facility [Member] | Unused Portion Fees [Member]
Line of Credit Facility, Interest Rate During Period		1.21%
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 300.0	$ 300.0	$ 300.0
Long-term Line of Credit	60.0	60.0	$ 60.0			$ 112.0
Line of Credit Facility, Interest Rate During Period			1.05%
Letter of Credit [Member]
Long-term Line of Credit	27.4	27.4	$ 27.4
Line of Credit Facility, Remaining Borrowing Capacity	$ 212.6	$ 212.6	$ 212.6