Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

OLD DOMINION FREIGHT LINE, INC.

BALANCE SHEETS

		December 31,
(In thousands, except share and per share data)		2015				2014
ASSETS
Current assets:
Cash and cash equivalents		$	11,472			$	34,787
Customer receivables, less allowances of $8,976 and $9,069, respectively		310,501				303,170
Other receivables		34,547				44,730
Prepaid expenses and other current assets		25,210				21,085
Total current assets		381,730				403,772
Property and equipment:
Revenue equipment		1,358,317				1,158,108
Land and structures		1,221,250				1,088,372
Other fixed assets		365,673				321,310
Leasehold improvements		7,585				6,982
Total property and equipment		2,952,825				2,574,772
Less: Accumulated depreciation		(929,377		)		(831,527		)
Net property and equipment		2,023,448				1,743,245
Goodwill		19,463				19,463
Other assets		41,863				40,386
Total assets		$	2,466,504			$	2,206,866
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	66,774			$	45,314
Compensation and benefits		124,589				106,200
Claims and insurance accruals		44,917				42,271
Other accrued liabilities		22,634				26,139
Current maturities of long-term debt		26,488				35,714
Total current liabilities		285,402				255,638
Long-term debt		107,317				120,000
Other non-current liabilities		154,094				145,752
Deferred income taxes		235,054				191,412
Total long-term liabilities		496,465				457,164
Total liabilities		781,867				712,802
Commitments and contingent liabilities
Shareholders’ equity
Common stock - $0.10 par value, 140,000,000 shares authorized, 84,411,878 and 86,094,297 shares outstanding at December 31, 2015 and 2014, respectively		8,441				8,609
Capital in excess of par value		134,401				134,401
Retained earnings		1,541,795				1,351,054
Total shareholders’ equity		1,684,637				1,494,064
Total liabilities and shareholders’ equity		$	2,466,504			$	2,206,866

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

OLD DOMINION FREIGHT LINE, INC.

STATEMENTS OF OPERATIONS

		Year Ended December 31,
(In thousands, except share and per share data)		2015				2014				2013
Revenue from operations		$	2,972,442			$	2,787,897			$	2,337,648
Operating expenses:
Salaries, wages and benefits		1,569,791				1,381,277				1,170,773
Operating supplies and expenses		353,889				432,675				385,201
General supplies and expenses		89,308				83,165				69,765
Operating taxes and licenses		93,292				83,417				71,599
Insurance and claims		37,368				36,145				30,910
Communications and utilities		26,913				25,507				23,142
Depreciation and amortization		165,343				146,466				127,072
Purchased transportation		116,300				129,312				106,435
Building and office equipment rents		9,620				10,679				11,920
Miscellaneous expenses, net		12,378				17,947				2,393
Total operating expenses		2,474,202				2,346,590				1,999,210
Operating income		498,240				441,307				338,438
Non-operating expense (income):
Interest expense		5,210				6,610				9,620
Interest income		(209		)		(108		)		(147		)
Other expense, net		3,222				2,291				279
Total non-operating expense		8,223				8,793				9,752
Income before income taxes		490,017				432,514				328,686
Provision for income taxes		185,327				165,000				122,573
Net income		$	304,690			$	267,514			$	206,113
Earnings per share:
Basic		$3.57				$3.10				$2.39
Diluted		$3.57				$3.10				$2.39
Weighted average shares outstanding:
Basic		85,378,480				86,162,137				86,164,917
Diluted		85,378,480				86,162,137				86,164,917

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

OLD DOMINION FREIGHT LINE, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

									Capital in
		Common Stock							Excess of				Retained
(In thousands)		Shares			Amount				Par Value				Earnings				Total
Balance as of December 31, 2012		86,165			$	8,616			$	134,401			$	882,952			$	1,025,969
Net income		—			—				—				206,113				206,113
Balance as of December 31, 2013		86,165			$	8,616			$	134,401			$	1,089,065			$	1,232,082
Net income		—			—				—				267,514				267,514
Share repurchases		(71	)		(7		)		—				(5,525		)		(5,532		)
Balance as of December 31, 2014		86,094			$	8,609			$	134,401			$	1,351,054			$	1,494,064
Net income		—			—				—				304,690				304,690
Share repurchases		(1,682	)		(168		)		—				(113,949		)		(114,117		)
Balance as of December 31, 2015		84,412			$	8,441			$	134,401			$	1,541,795			$	1,684,637

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

OLD DOMINION FREIGHT LINE, INC.

STATEMENTS OF CASH FLOWS

		Year Ended December 31,
(In thousands)		2015				2014				2013
Cash flows from operating activities:
Net income		$	304,690			$	267,514			$	206,113
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		165,343				146,466				127,072
Gain on sale of property and equipment		(3,592		)		(716		)		(5,743		)
Deferred income taxes		43,642				25,544				32,736
Changes in assets and liabilities:
Customer and other receivables, net		(8,672		)		(54,443		)		(30,063		)
Prepaid expenses and other assets		(6,097		)		(4,316		)		1,910
Accounts payable		21,460				8,526				(8,103		)
Compensation, benefits and other accrued liabilities		14,699				13,672				17,714
Claims and insurance accruals		11,549				7,225				6,952
Income taxes, net		11,511				(36,758		)		(12,027		)
Other liabilities		(653		)		18,960				14,105
Net cash provided by operating activities		553,880				391,674				350,666
Cash flows from investing activities:
Purchase of property and equipment		(462,059		)		(367,680		)		(295,606		)
Proceeds from sale of property and equipment		24,442				21,866				11,235
Net cash used in investing activities		(437,617		)		(345,814		)		(284,371		)
Cash flows from financing activities:
Principal payments under long-term debt agreements		(37,778		)		(35,715		)		(38,978		)
Net proceeds (payments) on revolving line of credit		12,317				—				(10,000		)
Payments for share repurchases		(114,117		)		(5,532		)		—
Net cash used in financing activities		(139,578		)		(41,247		)		(48,978		)
(Decrease) increase in cash and cash equivalents		(23,315		)		4,613				17,317
Cash and cash equivalents at beginning of year		34,787				30,174				12,857
Cash and cash equivalents at end of year		$	11,472			$	34,787			$	30,174
Income taxes paid		$	130,058			$	176,221			$	102,448
Interest paid		$	8,414			$	9,710			$	11,585
Capitalized interest		$	2,526			$	2,884			$	1,731

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

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS

Note 1. Significant Accounting Policies

Business

We are a leading, less-than-truckload (“LTL”), union-free motor carrier providing regional, inter-regional and national LTL services, which include ground and air expedited transportation and consumer household pickup and delivery, through a single integrated organization. More than 97% of our revenue is derived from these services. In addition to our core LTL services, we offer a broad range of value-added services including container drayage, truckload brokerage, supply chain consulting and warehousing.

We have one operating segment, and no single customer exceeds 10% of our revenue.

Basis of Presentation

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Certain amounts in prior years have been reclassified to conform prior years’ financial statements to the current presentation.

Unless the context requires otherwise, references in these Notes to “Old Dominion,” the “Company,” “we,” “us” and “our” refer to Old Dominion Freight Line, Inc.

Revenue and Expense Recognition

We recognize revenue based upon when our transportation services have been completed in accordance with the bill of lading contract, our general tariff provisions or contractual agreements with our customers. Generally, this occurs when we complete the delivery of a shipment. For transportation services not completed at the end of a reporting period, we use a percentage of completion method to allocate the appropriate revenue to each separate reporting period. Under this method, we develop a factor for each uncompleted shipment by dividing the actual number of days in transit at the end of a reporting period by that shipment’s standard delivery time schedule. This factor is applied to the total revenue for that shipment and revenue is allocated between reporting periods accordingly.

Expenses are recognized when incurred.

Allowances for Uncollectible Accounts and Revenue Adjustments

We maintain an allowance for uncollectible accounts for estimated losses resulting from the inability of our customers to make required payments. We estimate this allowance by analyzing the aging of our customer receivables, our historical loss experience and other trends and factors affecting the credit risk of our customers. Write-offs occur when we determine an account to be uncollectible and could differ from our allowance estimate as a result of factors such as changes in the overall economic environment or risks surrounding our customers. Additional allowances may be required if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments. We periodically review the underlying assumptions in our estimate of the allowance for uncollectible accounts to ensure that the allowance reflects the most recent trends and factors.

We also maintain an allowance for estimated revenue adjustments resulting from future billing corrections, customer allowances, money-back service guarantees and other miscellaneous revenue adjustments. These revenue adjustments are recorded in our revenue from operations. We use historical experience, trends and current information to update and evaluate these estimates.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of customer receivables. We perform initial and ongoing credit evaluations of our customers to minimize credit risk. We generally do not require collateral but may require prepayment of our services under certain circumstances. Credit risk is generally diversified due to the large number of entities comprising our customer base and their dispersion across many different industries and geographic regions.

Cash and Cash Equivalents

We consider cash on hand and deposits in banks along with certificates of deposit and short-term marketable securities with original maturities of three months or less as cash and cash equivalents.

Property and Equipment

Property and equipment are stated at cost. Major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the lives of the respective assets are charged to expense as incurred. We capitalize the cost of tires mounted on purchased revenue equipment as a part of the total equipment cost. Subsequent replacement tires are expensed at the time those tires are placed in service. We assess the realizable value of our long-lived assets and evaluate such assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the related assets. The following table provides the estimated useful lives by asset type:

Structures		7 to 30 years
Revenue equipment		4 to 15 years
Other equipment		2 to 20 years
Leasehold improvements		Lesser of economic life or life of lease

Depreciation expense, which includes the amortization of capital leases, was $164.8 million, $145.8 million and $126.4 million for 2015, 2014 and 2013, respectively.

Goodwill

Intangible assets have been acquired in connection with business combinations and are comprised of goodwill. Goodwill is calculated as the excess cost over the fair value of assets acquired and is not subject to amortization. We review goodwill annually for impairment as a single reporting unit, unless circumstances dictate more frequent assessments, in accordance with Accounting Standards Update (“ASU”) 2011-08, Testing Goodwill for Impairment. ASU 2011-08 permits an initial assessment, commonly referred to as "step zero", of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and also provides a basis for determining whether it is necessary to perform the two-step goodwill impairment test required by Accounting Standards Codification ("ASC") Topic 350.

We performed the qualitative assessment of goodwill on our annual measurement date of October 1, 2015 and determined that it was more likely than not that the fair value of our reporting unit would be greater than its carrying amount. Therefore, we determined it was not necessary to perform the two-step goodwill impairment test. Furthermore, there has been no historical impairment of our goodwill.

Claims and Insurance Accruals

As of December 31, 2015, we maintained a self-insured retention ("SIR") of $2.75 million per occurrence for bodily injury and property damage ("BIPD") claims; a deductible of $100,000 per claim for cargo loss and damage; and a deductible of $1.0 million per occurrence for workers' compensation claims. We also had an SIR of $500,000 per occurrence (with a $400,000 aggregate over our retention level) for group health claims.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Claims and insurance accruals reflect the estimated cost of claims for cargo loss and damage, BIPD, workers' compensation, group health and group dental not covered by insurance. These accruals include amounts for future claims development and claims incurred but not reported, which are primarily based on historical claims development experience. The related costs for cargo loss and damage and BIPD are charged to "Insurance and claims" on our Statements of Operations, while the related costs for workers' compensation, group health and group dental are charged to "Salaries, wages and benefits" on our Statements of Operations.

Our liability for claims and insurance totaled $119.2 million and $107.7 million at December 31, 2015 and 2014, respectively. The long-term portions of those reserves were $74.3 million and $65.4 million for 2015 and 2014, respectively, which were included in “Other non-current liabilities” on our Balance Sheets.

Share-Based Compensation

Awards of phantom stock to employees and directors are accounted for as a liability under ASC topic 718, Compensation - Stock Compensation. ASC topic 718 requires changes in the fair value of our liability to be recognized as compensation cost over the requisite service period for the percentage of requisite service rendered each period. Changes in the fair value of the liability that occur after the requisite service period are recognized as compensation cost during the period in which the changes occur. We remeasure the liability for the outstanding awards at the end of each reporting period based on the closing price of our common stock at that date, and the compensation cost is based on the change in fair value for each reporting period.

Advertising

The costs of advertising our services are expensed as incurred and are included in “General supplies and expenses” on our Statements of Operations. Advertising costs charged to expense totaled $22.9 million, $19.3 million and $16.7 million for 2015, 2014 and 2013, respectively.

Fair Values of Financial Instruments

The carrying values of financial instruments in current assets and current liabilities approximate their fair value due to the short maturities of these instruments. The carrying value of our total long-term debt, including current maturities, and capital lease obligations was $133.8 million and $155.7 million at December 31, 2015 and 2014, respectively. The estimated fair value of our total long-term debt and capital lease obligations was $139.1 million and $165.5 million at December 31, 2015 and 2014, respectively. The fair value measurement of our senior notes was determined using a discounted cash flow analysis that factors in current market yields for comparable borrowing arrangements under our credit profile. Since this methodology is based upon market yields for comparable arrangements, the measurement is categorized as Level 2 under the three-level fair value hierarchy as established by the Financial Accounting Standards Board (the “FASB”).

Stock Repurchase Program

On November 10, 2014, we announced that our Board of Directors had approved a stock repurchase program authorizing us to repurchase up to an aggregate of $200.0 million of our outstanding common stock. We may repurchase shares from time-to-time in open market purchases or through privately negotiated transactions. The program expires on November 6, 2016. Shares of our common stock repurchased by us under the repurchase program are canceled at the time of repurchase and are authorized but unissued shares of our common stock. As of December 31, 2015, we had repurchased 1,753,039 shares for $119.6 million, and $80.4 million remained authorized under the program.

Comprehensive Income

The Company has no components of other comprehensive income. Accordingly, net income equals comprehensive income for all periods presented in this report.

Earnings Per Share

Earnings per common share is computed using the weighted-average number of common shares outstanding during the period. There were no potentially dilutive shares outstanding at the end of each period presented in this report.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Supplemental Disclosure of Noncash Investing and Financing Activities

Investing and financing activities that are not reported in the Statements of Cash Flows due to their non-cash nature are summarized below:

		Year Ended December 31,
(In thousands)		2015				2014				2013
Acquisition of property and equipment by capital lease		$	3,552			$	—			$	—

In addition, during 2013, we completed a nonmonetary exchange of property. We acquired a service center with a fair value of $6.6 million, which resulted in a gain of $3.4 million. The resulting gain was recorded in "Miscellaneous expenses, net" on our Statements of Operations.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers" (Topic 606). This ASU supersedes the previous revenue recognition requirements in ASC Topic 605—Revenue Recognition and most industry-specific guidance throughout the ASC. The core principle within this ASU is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration expected to be received for those goods or services. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers", which deferred the effective date for ASU 2014-09 by one year to fiscal years beginning after December 15, 2017, while providing the option to early adopt for fiscal years beginning after December 15, 2016. Transition methods under ASU 2014-09 must be through either (i) retrospective application to each prior reporting periods presented, or (ii) retrospective application with a cumulative effect adjustment at the date of initial application. We continue to assess the method of application and impact, if any, of the adoption of ASU 2014-09 on our financial position, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement" (Topic 350). This ASU provides additional guidance to customers about whether a cloud computing arrangement includes a software license. Under ASU 2015-05, if a cloud computing arrangement contains a software license, customers should account for the license element of the arrangement in a manner consistent with the acquisition of other software licenses. If the arrangement does not contain a software license, customers should account for the arrangement as a service contract. The Company will adopt the provisions of ASU 2015-05 in the first quarter of fiscal 2016, and is currently evaluating the impact on our financial position, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs" (Topic 835-30). This ASU requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the related debt's carrying value, which is consistent with the presentation of debt discounts. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015. The Company does not believe the adoption of ASU 2015-03 will have a material impact on its financial position, results of operations or cash flows.

In November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes" (Topic 740). This ASU requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. The ASU is effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted. We early adopted this ASU on a retrospective basis during the fourth quarter of 2015. Accordingly, deferred income tax assets in the amount of $29.4 million that were formerly classified as current assets at December 31, 2014, have been reclassified to non-current deferred income tax liabilities in our balance sheet.

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). This ASU requires a lessee to recognize a right-of-use asset and a lease liability under most operating leases in its balance sheet. The ASU is effective for annual and interim periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects that the adoption of ASU 2016-02 will have on our financial position, results of operations or cash flows.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Note 2. Long-term Debt

Long-term debt consisted of the following:

		December 31,
(In thousands)		2015				2014
Senior notes		$	120,000			$	155,714
Revolving credit facility		12,317				—
Capitalized lease obligations		1,488				—
Total long-term debt		133,805				155,714
Less: Current maturities		(26,488		)		(35,714		)
Total maturities due after one year		$	107,317			$	120,000

We had two outstanding unsecured senior note agreements with an aggregate amount outstanding of $120.0 million at December 31, 2015. At December 31, 2014, we had three outstanding unsecured senior note agreements with an aggregate amount outstanding of $155.7 million. These notes include scheduled principal payments with maturities that range from 2016 to 2021, of which $25.0 million is due in the next twelve months. Interest rates on these notes are fixed and range from 4.00% to 5.85%. The effective average interest rate on our outstanding senior note agreements was 4.68% and 4.87% at December 31, 2015 and 2014, respectively.

On December 15, 2015, we entered into an amended and restated credit agreement with Wells Fargo Bank, National Association ("Wells Fargo") serving as administrative agent for the lenders (the "2015 Credit Agreement"). The 2015 Credit Agreement provides for a five-year, $250.0 million senior unsecured revolving line of credit. We may also request an increase in the line of credit commitments up to an aggregate of $350.0 million, which may include Term Loan Commitments, in minimum increments of $25.0 million. Of the $250.0 million line of credit commitments, up to $100.0 million may be used for letters of credit and $30.0 million may be used for borrowings under the Wells Fargo Sweep Plus Loan Program (the "Sweep Program"). We utilize the Sweep Program to manage our daily cash needs, as it automatically initiates borrowings to cover overnight cash requirements primarily for working capital needs.

At our option, borrowings under the 2015 Credit Agreement bear interest at either: (i) LIBOR plus an applicable margin (based on our ratio of debt-to-total capitalization) that ranges from 1.0% to 1.50%; or (ii) a Base Rate plus an applicable margin (based on our ratio of debt-to-total capitalization) that ranges from 0.0% to 0.5%. Loans under the Sweep Program bear interest at the LIBOR plus applicable margin rate. Letter of credit fees equal to the applicable margin for LIBOR and Base Rate loans are charged quarterly in arrears on the daily average aggregate stated amount of all letters of credit outstanding during the quarter. Commitment fees ranging from 0.125% to 0.2% (based upon the ratio of debt-to-total capitalization) are charged quarterly in arrears on the aggregate unutilized portion of the 2015 Credit Agreement. Wells Fargo, as administrative agent, also receives an annual fee for providing administrative services.

For the periods covered under the 2015 Credit Agreement, the applicable margin and letter of credit fees were 1.0% and commitment fees were 0.125%.

The 2015 Credit Agreement superseded and replaced our previous five-year, $200.0 million senior unsecured revolving credit facility dated August 10, 2011, as amended on November 7, 2014 (the "2011 Credit Agreement"). For periods in 2015 and 2014 under the 2011 Credit Agreement, the applicable margin and letter of credit fees were 1.0%, and commitment fees were 0.175%.

There were $67.7 million and $63.2 million of outstanding letters of credit at December 31, 2015 and 2014, respectively.

The 2015 Credit Agreement includes a provision limiting our ability to make restricted payments, including dividends and payments for share repurchases, unless, among other conditions, no defaults or events of default under the 2015 Credit Agreement are ongoing (or would be caused by such restricted payment). We did not declare or pay a cash dividend on our common stock in 2015 or 2014, and we have no plans to declare or pay a cash dividend in 2016. Our share repurchases are described above in “Stock Repurchase Program.”

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Our two outstanding senior note agreements and 2015 Credit Agreement contain customary covenants, including financial covenants that require us to observe a maximum ratio of debt to total capital and a minimum fixed charge coverage ratio. Any future wholly-owned material domestic subsidiaries of the Company would be required to guarantee payment of all of our obligations under these agreements. We were in compliance with all covenants in our outstanding debt instruments for the period ended December 31, 2015.

As of December 31, 2015, aggregate maturities of long-term debt are as follows:

(In thousands)
2016	$	26,488
2017	—
2018	50,000
2019	—
2020	12,317
Thereafter	45,000
	$	133,805

Note 3. Leases

We lease certain assets under operating leases, which primarily consist of real estate leases for 45 of our 225 service center locations at December 31, 2015. Certain operating leases provide for renewal options, which can vary by lease and are typically offered at their fair rental value. We have not made any residual value guarantees related to our operating leases; therefore, we have no corresponding liability recorded on our Balance Sheets.

Future minimum annual lease payments for assets under operating leases as of December 31, 2015 are as follows:

(In thousands)		Total
2016		$	13,761
2017		10,239
2018		6,937
2019		4,424
2020		3,677
Thereafter		26,868
		$	65,906

Aggregate expense under operating leases was $15.2 million, $16.5 million and $17.9 million for 2015, 2014 and 2013, respectively. Certain operating leases include rent escalation provisions, which we recognize as expense on a straight-line basis.

At December 31, 2015, we leased certain information systems under capital leases with a gross carrying value of $3.6 million and accumulated amortization of $0.4 million. We did not have any assets under capital leases at December 31, 2014.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Note 4. Income Taxes

The components of the provision for income taxes are as follows:

		Year Ended December 31,
(In thousands)		2015				2014				2013
Current:
Federal		$	120,437			$	123,598			$	74,202
State		21,248				15,858				15,635
		141,685				139,456				89,837
Deferred:
Federal		38,549				21,542				28,593
State		5,093				4,002				4,143
		43,642				25,544				32,736
Total provision for income taxes		$	185,327			$	165,000			$	122,573

The following is a reconciliation of income tax expense calculated using the U.S. statutory federal income tax rate with our income tax expense for 2015, 2014 and 2013:

		Year Ended December 31,
(In thousands)		2015				2014				2013
Tax provision at statutory rate		$	171,506			$	151,380			$	115,040
State income taxes, net of federal benefit		17,097				14,120				12,083
Meals and entertainment disallowance		1,035				959				872
Tax credits		(3,036		)		(1,307		)		(5,422		)
Other, net		(1,275		)		(152		)		—
Total provision for income taxes		$	185,327			$	165,000			$	122,573

Deferred tax assets and liabilities consist of the following:

		December 31,
(In thousands)		2015				2014
Deferred tax assets:
Claims and insurance reserves		$	41,576			$	36,690
Allowance for doubtful accounts		1,730				2,161
Accrued vacation		22,174				19,291
Deferred compensation		33,382				28,648
Other		12,008				12,924
Total deferred tax assets		110,870				99,714
Valuation allowance		—				(559		)
Net deferred tax assets		110,870				99,155
Deferred tax liabilities:
Depreciation and amortization		(334,379		)		(279,324		)
Unrecognized revenue		(10,062		)		(9,506		)
Other		(1,483		)		(1,737		)
Total deferred tax liabilities		(345,924		)		(290,567		)
Net deferred tax liability		$	(235,054	)		$	(191,412	)

As of December 31, 2015, the Company had various state tax credit carryforwards of approximately $4.2 million that are scheduled to expire in one to fifteen years.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

We are subject to U.S. federal income tax, as well as income tax of multiple state tax jurisdictions. We remain open to examination by the Internal Revenue Service for tax years 2012 through 2015. We remain open to examination by various state tax jurisdictions for tax years 2011 through 2015.

The Company's liability for unrecognized tax benefits was immaterial as of December 31, 2015 and 2014. Interest and penalties related to uncertain tax positions, which are immaterial, are recorded in our Provision for Income Taxes on our Statements of Operations. Changes in our liability for unrecognized tax benefits could affect our effective tax rate, if recognized, but we do not expect any material changes within the next twelve months.

Note 5. Related Party Transactions

Family Relationships

Each of Earl E. Congdon, David S. Congdon and John R. Congdon, Jr. are related to one another and served in various management positions and/or on our Board of Directors during 2015. Our employment agreements with Earl E. Congdon and David S. Congdon are incorporated by reference as exhibits to our Annual Report on Form 10-K. We regularly disclose the amount of compensation that we pay to these individuals, as well as any of their family members employed by us and whose compensation from time to time may require disclosure, in the proxy statement for our Annual Meeting of Shareholders.

Transactions with Old Dominion Truck Leasing, Inc.

Old Dominion Truck Leasing, Inc. (“Leasing”) is a North Carolina corporation whose voting stock is beneficially owned by members of the Congdon family. Leasing is primarily engaged in the business of leasing tractors, trailers and other vehicles as well as providing contract dedicated fleet services. John R. Congdon, Jr. serves as Chairman of the Board of Directors of Leasing. Earl E. Congdon and David S. Congdon currently serve as members of Leasing’s Board of Directors. We have historically collaborated with Leasing for the purchase of certain equipment and fuel. Our collaboration with Leasing for the purchase of fuel ended in the fourth quarter of 2015. We do not believe these arrangements with Leasing had a material impact on our financial results.

We purchased $313,000, $298,000 and $299,000 of maintenance and other services from Leasing in 2015, 2014 and 2013, respectively. We intend to continue to purchase maintenance and other services from Leasing, provided that Leasing’s prices continue to be favorable to us. In addition, we received $12,000, $17,500 and $18,000 from Leasing for the rental of property in 2015, 2014 and 2013, respectively.

Note 6. Employee Benefit Plans

Defined Contribution Plan

Substantially all employees meeting certain service requirements are eligible to participate in our 401(k) employee retirement plan. Employee contributions are limited to a percentage of the employee’s compensation, as defined in the plan. We match a percentage of our employees’ contributions up to certain maximum limits. In addition, we may also provide a discretionary matching contribution as specified in the plan. Our employer contributions, net of forfeitures, for 2015, 2014 and 2013 were $30.3 million, $26.4 million and $20.6 million, respectively.

Deferred Compensation Plan

We maintain a nonqualified deferred compensation plan for the benefit of certain eligible employees, including those whose contributions to the 401(k) employee retirement plan are limited due to provisions of the Internal Revenue Code. Participating employees may elect to defer receipt of a percentage of their compensation, as defined in the plan, and the deferred amount is credited to each participant’s deferred compensation account. The plan is not funded, and the Company does not make a matching contribution to this plan. Although the plan is not funded, participants are allowed to select investment options for which their deferrals and future earnings are deemed to be invested. Participant accounts are adjusted daily to reflect participant deferrals and the performance of their deemed investments. The amounts owed to the participants totaled $48.7 million and $42.7 million at December 31, 2015 and 2014, respectively, of which $44.5 million and $41.2 million were included in "Other non-current liabilities" on our Balance Sheets as of December 31, 2015 and 2014, respectively.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Note 7. Share-Based Compensation

On October 30, 2012, our Board of Directors approved and we adopted the Old Dominion Freight Line, Inc. 2012 Phantom Stock Plan, as amended on January 29, 2015 (the "2012 Phantom Stock Plan"). Under the 2012 Phantom Stock Plan, 1,000,000 shares of phantom stock may be awarded, each of which represents a contractual right to receive an amount in cash equal to the fair market value of a share of our common stock on the settlement date, which is the earliest of the date of the participant's (i) termination of employment for any reason other than for cause, (ii) death or (iii) total disability. Each award vests in 20% increments on the anniversary of the grant date provided that the participant (i) has been continuously employed by us since the grant date, (ii) has been continuously employed by us for ten years and (iii) has reached the age of 65. Vesting also occurs on the earliest of (i) a change in control, (ii) death or (iii) total disability. No shares of common stock will be issued pursuant to the 2012 Phantom Stock Plan, as the awards are settled in cash after the required vesting period has been satisfied and upon termination of employment. Unvested shares are forfeited upon termination of employment, although our Board of Directors has authority to modify and/or accelerate the vesting of awards.

On May 16, 2005, our Board of Directors approved, and the Company adopted, the Old Dominion Freight Line, Inc. Phantom Stock Plan, as amended, effective January 1, 2009, May 18, 2009, May 17, 2011 and January 29, 2015 (the “2005 Phantom Stock Plan” and together with the 2012 Phantom Stock Plan, the “Employee Phantom Plans”). The 2005 Phantom Stock Plan expired in May 2012; however, grants under the 2005 Phantom Stock Plan remain outstanding. Each share of phantom stock awarded to eligible employees under the 2005 Phantom Stock Plan represents a contractual right to receive an amount in cash equal to the fair market value of a share of our common stock on the settlement date, which generally is the earlier of the eligible employee’s (i) termination from the Company after reaching 55 years of age, (ii) death or (iii) total disability. No shares of common stock will be issued pursuant to the 2005 Phantom Stock Plan, as the awards are settled in cash after the required vesting period has been satisfied and upon termination of employment.

Awards under the 2005 Phantom Stock Plan vest upon the earlier to occur of the following: (i) the date of a change of control in our ownership; (ii) the fifth anniversary of the grant date of the award, provided the participant is employed by us on that date; (iii) the date of the participant’s death while employed by us; (iv) the date of the participant’s total disability; or (v) the date the participant attains the age of 65 while employed by us. Awards that are not vested upon termination of employment are forfeited. If termination occurs prior to attaining the age of 55, all vested and unvested awards are generally forfeited unless the termination results from death or total disability. The 2005 Phantom Stock Plan does, however, provide the Board of Directors with discretionary authority to modify and/or accelerate the vesting of awards.

A summary of cash payments for settled shares and compensation costs recognized in “Salaries, wages and benefits” on our Statements of Operations for the Employee Phantom Plans is provided below:

		Year Ended December 31,
(In thousands)		2015				2014				2013
Cash payments for settled shares		$	1,682			$	2,401			$	1,404
Compensation (benefit) expense		(1,612		)		11,249				7,639

Unrecognized compensation cost for all unvested shares under the Employee Phantom Plans as of December 31, 2015 was $10.1 million based on the price of our common stock on that date.

On May 28, 2008, our Board of Directors approved, and the Company adopted, the Old Dominion Freight Line, Inc. Director Phantom Stock Plan, as amended on April 1, 2011, February 20, 2014, August 7, 2014 and February 25, 2016 (the “Director Phantom Stock Plan” and together with the Employee Phantom Plans, the “Phantom Plans”). Under the Director Phantom Stock Plan, each eligible non-employee director shall be granted an annual award of phantom shares. Each eligible non-employee director received shares equal to $80,000 on each of the 2015 and 2014 grant dates and shares equal to $50,000 on the 2013 grant date. For each vested share, participants are entitled to an amount in cash equal to the fair market value of a share of our common stock on the date that service as a director terminates for any reason. No shares of common stock will be issued pursuant to the Director Phantom Stock Plan, as the awards are settled in cash. Our Board of Directors approved the initial grant under this plan at its May 2008 meeting and have authorized grants to be made annually thereafter.

Director Phantom Stock Plan awards vest upon the earlier to occur of the following: (i) the one-year anniversary of the grant date; (ii) the date of the first annual meeting of shareholders that occurs after the grant date provided the participant is still

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

in service as a director; (iii) the date of a change of control in our ownership provided that the participant is still in service as a director; or (iv) the date of the participant’s death or total disability while still in service as a director. Awards that are not vested upon termination of service as a director are forfeited.

A summary of cash payments for settled shares and compensation costs recognized in “Miscellaneous expenses, net” on our Statements of Operations for the Director Phantom Stock Plan is provided below:

		Year Ended December 31,
(In thousands)		2015				2014				2013
Cash payments for settled shares		$	—			$	—			$	—
Compensation (benefit) expense		(916		)		2,193				1,214

Unrecognized compensation cost for all unvested shares under the Director Phantom Stock Plan as of December 31, 2015 was $0.2 million based on the price of our common stock on that date.

A summary of the changes in the number of outstanding phantom stock awards during the year ended December 31, 2015 for the Phantom Plans is provided below. Of these awards, 294,184 and 325,921 phantom shares were vested at December 31, 2015 and 2014, respectively.

		Employee Phantom Plans			Director Phantom Stock Plan			Total
Balance of shares outstanding at December 31, 2014		551,396			75,737			627,133
Granted		54,924			6,516			61,440
Settled		(86,969	)		—			(86,969	)
Forfeited		—			—			—
Balance of shares outstanding at December 31, 2015		519,351			82,253			601,604

The liability for unsettled phantom stock awards under the Phantom Plans consists of the following:

		December 31,
(In thousands)		2015				2014
Employee Phantom Plans		$	20,566			$	29,058
Director Phantom Stock Plan		4,698				5,614
Total		$	25,264			$	34,672

Note 8. Commitments and Contingencies

We are involved in various legal proceedings and claims that have arisen in the ordinary course of our business and have not been fully adjudicated, some of which are covered in whole or in part by insurance. Certain of these claims include class-action allegations. We do not believe that the resolution of any of these legal proceedings or claims will have a material adverse effect upon our financial position, results of operations or cash flows.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Note 9. Quarterly Financial Information (Unaudited)

A summary of our unaudited quarterly financial information for 2015 and 2014 is provided below. Our tonnage levels and revenue mix are subject to seasonal trends common in the motor carrier industry. Financial results in the first quarter are normally lower due to reduced shipments during the winter months. Harsh winter weather can also adversely impact our performance by reducing demand and increasing operating expenses.

		Quarter
(In thousands, except per share data)		First				Second				Third				Fourth				Total
2015
Revenue		$	696,245			$	762,151			$	779,474			$	734,572			$	2,972,442
Operating income		103,565				140,899				139,854				113,922				498,240
Net income		62,524				85,574				84,368				72,224				304,690
Earnings per share:
Basic and diluted		0.73				1.00				0.99				0.85				3.57
2014
Revenue		$	620,276			$	702,987			$	743,586			$	721,048			$	2,787,897
Operating income		80,052				122,695				126,262				112,298				441,307
Net income		45,887				73,849				77,909				69,869				267,514
Earnings per share:
Basic and diluted		0.53				0.86				0.90				0.81				3.10

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Old Dominion Freight Line, Inc.

We have audited the accompanying balance sheets of Old Dominion Freight Line, Inc. as of December 31, 2015 and 2014, and the related statements of operations, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Old Dominion Freight Line, Inc. at December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Old Dominion Freight Line, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 29, 2016 expressed an unqualified opinion thereon.

			/s/ Ernst & Young LLP

Charlotte, North Carolina

February 29, 2016