Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

OLD DOMINION FREIGHT LINE, INC.

BALANCE SHEETS

		December 31,
(In thousands, except share and per share data)		2020				2019
ASSETS
Current assets:
Cash and cash equivalents		$	401,430			$	403,571
Short-term investments			330,274				—
Customer receivables, less allowances of $8,979 and $8,866, respectively			444,653				397,579
Other receivables			9,569				10,586
Prepaid expenses and other current assets			57,413				55,098
Total current assets			1,243,339				866,834
Property and equipment:
Revenue equipment			1,885,649				1,898,999
Land and structures			2,218,290				2,039,937
Other fixed assets			475,264				482,425
Leasehold improvements			12,226				11,709
Total property and equipment			4,591,429				4,433,070
Less: Accumulated depreciation			(1,677,398	)			(1,464,235	)
Net property and equipment			2,914,031				2,968,835
Other assets			212,040				159,899
Total assets		$	4,369,410			$	3,995,568
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	68,511			$	70,254
Compensation and benefits			191,303				192,524
Claims and insurance accruals			53,092				54,330
Other accrued liabilities			51,513				46,130
Income taxes payable			8,711				2,847
Total current liabilities			373,130				366,085
Long-term debt			99,931				45,000
Other non-current liabilities			349,851				241,802
Deferred income taxes			220,210				261,964
Total long-term liabilities			669,992				548,766
Total liabilities			1,043,122				914,851
Commitments and contingent liabilities
Shareholders’ equity
Common stock - $0.10 par value, 280,000,000 shares authorized, 117,057,696 shares outstanding at December 31, 2020 and 140,000,000 shares authorized, 119,532,534 shares outstanding at December 31, 2019			11,706				11,953
Capital in excess of par value			226,451				218,462
Retained earnings			3,088,131				2,850,302
Total shareholders’ equity			3,326,288				3,080,717
Total liabilities and shareholders’ equity		$	4,369,410			$	3,995,568

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)		2020				2019				2018
Revenue from operations		$	4,015,129			$	4,109,111			$	4,043,695
Operating expenses:
Salaries, wages and benefits			2,053,894				2,122,464				2,075,602
Operating supplies and expenses			373,431				473,114				497,476
General supplies and expenses			110,279				123,975				119,180
Operating taxes and licenses			116,943				116,839				112,210
Insurance and claims			42,364				52,549				44,118
Communications and utilities			31,542				29,601				31,070
Depreciation and amortization			261,259				253,681				230,357
Purchased transportation			97,947				89,636				96,017
Miscellaneous expenses, net			20,588				28,546				20,614
Total operating expenses			3,108,247				3,290,405				3,226,644
Operating income			906,882				818,706				817,051
Non-operating expense (income):
Interest expense			2,782				377				189
Interest income			(1,830	)			(6,763	)			(3,113	)
Other expense, net			4,566				1,143				4,462
Total non-operating expense (income)			5,518				(5,243	)			1,538
Income before income taxes			901,364				823,949				815,513
Provision for income taxes			228,682				208,431				209,845
Net income		$	672,682			$	615,518			$	605,668
Earnings per share:
Basic		$	5.71			$	5.11			$	4.93
Diluted		$	5.68			$	5.10			$	4.92
Weighted average shares outstanding:
Basic			117,737,180				120,414,218				122,885,346
Diluted			118,493,203				120,609,599				123,029,672
Dividends declared per share		$	0.60			$	0.45			$	0.35

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, 2017			123,564			$	12,356			$	134,395			$	2,130,103			$	2,276,854
Net income			—				—				—				605,668				605,668
Share repurchases			(1,763	)			(176	)			—				(163,089	)			(163,265	)
Cash dividends declared			—				—				—				(42,594	)			(42,594	)
Share-based compensation and restricted share issuances, net of forfeitures			58				6				4,888				—				4,894
Taxes paid in exchange for shares withheld			(12	)			(1	)			(1,073	)			—				(1,074	)
Balance as of December 31, 2018			121,847				12,185				138,210				2,530,088				2,680,483
Net income			—				—				—				615,518				615,518
Share repurchases			(2,403	)			(240	)			—				(240,720	)			(240,960	)
Cash dividends declared			—				—				—				(54,584	)			(54,584	)
Reclassification of liability for modified equity awards			—				—				64,991				—				64,991
Share-based compensation and restricted share issuances, net of forfeitures			104				10				16,707				—				16,717
Taxes paid in exchange for shares withheld			(15	)			(2	)			(1,446	)			—				(1,448	)
Balance as of December 31, 2019			119,533				11,953				218,462				2,850,302				3,080,717
Net income			—				—				—				672,682				672,682
Share repurchases			(2,508	)			(250	)			—				(363,807	)			(364,057	)
Cash dividends declared			—				—				—				(71,046	)			(71,046	)
Cash paid for fractional shares			(5	)			(1	)			(611	)			—				(612	)
Share-based compensation and restricted share issuances, net of forfeitures			57				6				11,331				—				11,337
Taxes paid in exchange for shares withheld			(19	)			(2	)			(2,731	)			—				(2,733	)
Balance as of December 31, 2020			117,058			$	11,706			$	226,451			$	3,088,131			$	3,326,288

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)		2020				2019				2018
Cash flows from operating activities:
Net income		$	672,682			$	615,518			$	605,668
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			261,267				253,681				230,357
Noncash lease expense			11,963				11,066				—
Loss on disposal of property and equipment			736				6,066				477
Deferred income taxes			(41,011	)			13,157				57,709
Share-based compensation			11,337				16,717				4,894
Changes in assets and liabilities:
Customer and other receivables, net			(49,045	)			30,330				(34,666	)
Prepaid expenses and other assets			(1,722	)			(16,807	)			(12,003	)
Accounts payable			(1,743	)			(8,264	)			4,789
Compensation, benefits and other accrued liabilities			72,928				3,263				47,552
Claims and insurance accruals			(1,459	)			5,297				8,142
Income taxes, net			8,750				32,612				(17,813	)
Other liabilities			(11,659	)			21,252				5,010
Net cash provided by operating activities			933,024				983,888				900,116
Cash flows from investing activities:
Purchase of property and equipment			(225,081	)			(479,325	)			(588,292	)
Proceeds from sale of property and equipment			3,690				5,686				6,983
Purchase of short-term investments			(360,160	)			—				—
Proceeds from maturities of short-term investments			29,988				—				—
Other investing activities, net			(100	)			—				918
Net cash used in investing activities			(551,663	)			(473,639	)			(580,391	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			99,923				—				—
Principal payments under debt agreements			(45,000	)			—				(50,000	)
Dividends paid			(71,023	)			(54,552	)			(42,566	)
Payments for share repurchases			(364,057	)			(240,960	)			(163,265	)
Other financing activities, net			(3,345	)			(1,448	)			(1,074	)
Net cash used in financing activities			(383,502	)			(296,960	)			(256,905	)
(Decrease) increase in cash and cash equivalents			(2,141	)			213,289				62,820
Cash and cash equivalents at beginning of year			403,571				190,282				127,462
Cash and cash equivalents at end of year		$	401,430			$	403,571			$	190,282
Income taxes paid		$	266,506			$	157,290			$	170,035
Interest paid		$	5,686			$	3,857			$	4,525
Capitalized interest		$	2,473			$	3,128			$	3,237

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 one of the largest North American less-than-truckload (“LTL”) motor carriers. We provide regional, inter-regional and national LTL services through a single integrated, union-free organization. Our service offerings, which include expedited transportation, are provided through an expansive network of service centers located throughout the continental United States. Through strategic alliances, we also provide LTL services throughout North America. In addition to our core LTL services, we offer a range of value-added services including container drayage, truckload brokerage and supply chain consulting.

We have one operating segment and no single customer exceeds 5% of our revenue. The composition of our revenue is summarized below:

		Year Ended December 31,
(In thousands)		2020				2019				2018
LTL services		$	3,961,054			$	4,055,467			$	3,982,658
Other services			54,075				53,644				61,037
Total revenue		$	4,015,129			$	4,109,111			$	4,043,695

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 and related services have been completed in accordance with the bill of lading (“BOL”) contract, our general tariff provisions and contractual agreements with our customers. Generally, our performance obligations begin when we receive a BOL from a customer and are satisfied when we complete the delivery of a shipment and related services. We recognize revenue for our performance obligations under our customer contracts over time, as our customers receive the benefits of our services in accordance with Accounting Standards Update (“ASU”) 2014-09. With respect to 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. Payment terms vary by customer and are short-term in nature.

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, including anticipated changes to future performance. 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, current information and anticipated changes to future performance to update and evaluate these estimates.

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.

Short-term Investments

The Company’s investments in certificates of deposit, U.S. government securities, and commercial paper with an original maturity of greater than three months have been classified and accounted for as trading securities, and are reported in “Short-term investments” on our Balance Sheet. These investments are measured at fair value each reporting period, with gains or losses recorded in “Non-operating expense (income)” on our Statement of Operations.

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 was $261.3 million, $253.7 million and $230.4 million for 2020, 2019 and 2018, respectively.

Claims and Insurance Accruals

We carry a significant amount of insurance with third-party insurance carriers that provides various levels of protection for our risk exposure, including protection in the areas of property, casualty, cyber, management, and group health, with coverage limits and retention and deductible levels that we believe are reasonable given historical claim activity and severity. We believe that our policy of maintaining self-insured retentions or deductibles under these various insurance programs for a portion of our risks, supported by our safety, claims management and loss prevention programs, is an effective means of managing insurance costs. We periodically review our risk exposure and insurance coverage applicable to those risks and believe that we maintain sufficient insurance coverage.

Claims and insurance accruals reflect the estimated cost of claims for cargo loss and damage, BIPD, workers’ compensation, group health and group dental. 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 cost for cargo loss and damage and BIPD is 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 $139.6 million and $141.1 million at December 31, 2020 and 2019, respectively. The long-term portions of those reserves were $86.5 million and $86.7 million for 2020 and 2019, respectively, which were included in “Other non-current liabilities” on our Balance Sheets.

Share-Based Compensation

We have various share-based compensation plans for our employees and non-employee directors. Our share-based compensation includes awards of phantom stock, restricted stock, and performance-based restricted stock units which are accounted for under ASC Topic 718, Compensation - Stock Compensation. All share-based compensation expense is presented in “Salaries, wages and benefits” for employees and “Miscellaneous expenses, net” for non-employee directors in the accompanying Statements of Operations. Total compensation expense recognized for all share-based compensation awards, including cash settled phantom shares, was $14.3 million, $42.9 million and $10.7 million during 2020, 2019, and 2018, respectively. The total tax benefit recognized related to these awards was ($3.8) million, ($10.8) million and ($3.2) million during 2020, 2019, and 2018, respectively.

Cash settled phantom stock awards are accounted for as a liability under ASC Topic 718 and changes in the fair value of our liability are recognized as compensation cost over the remaining requisite service 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 and the compensation cost is based on the change in fair market value for each reporting period.

In December 2019, we modified our employee and director phantom stock plans to permit the settlement of outstanding phantom stock awards in shares of the Company’s common stock in lieu of cash settlement. Awards for plan participants electing to settle their awards in stock were amended and certain vesting provisions were waived. Modified awards are accounted for as equity awards rather than liability awards under ASC Topic 718, as they are settled in common stock rather than cash. The total compensation cost of the amended awards was remeasured on the modification date. Any excess over the previously recognized compensation cost will be recognized on a straight-line basis over the requisite remaining period.

Awards of restricted stock and performance-based restricted stock units are accounted for as equity under ASC Topic 718. We recognize compensation cost, net of estimated forfeitures, for restricted stock awards on a straight-line basis over the requisite service period of each award. Compensation cost for performance-based restricted stock unit awards is recognized using the accelerated attribution method over the requisite service period of each award. At the end of each reporting period, we reassess the probability of achieving performance targets and changes to our initial assessment are reflected in the reporting period in which the change in estimate occurs.

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 $19.0 million, $28.3 million and $28.2 million for 2020, 2019 and 2018, respectively.

Common Stock Split

On February 21, 2020, we announced that our Board of Directors approved a three-for-two split of our common stock for shareholders of record as of the close of business on the record date of March 10, 2020. On March 24, 2020, those shareholders received one additional share of common stock for every two shares owned. In lieu of fractional shares, shareholders received a cash payment based on the average of the high and low sales prices of our common stock on the record date.

All references in this report to shares outstanding, weighted average shares outstanding, earnings per share, and dividends per share amounts have been restated retroactively to reflect this stock split. Split-adjusted per-share metrics may not recalculate precisely due to rounding.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The levels of inputs used to measure fair value are:

• Level 1 — Quoted prices for identical instruments in active markets;

• Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and

• Level 3 — Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.

Our short-term investments and our long-term debt, including current maturities, are measured at fair value on a recurring basis, and are further described in Note 9. Our other financial securities in current assets and current liabilities approximate their fair value due to the short-term maturities of these instruments.

Stock Repurchase Program

On May 1, 2020, we announced that our Board of Directors had approved a new two-year stock repurchase program authorizing us to repurchase up to an aggregate of $700.0 million of our outstanding common stock (the “2020 Repurchase Program”). The 2020 Repurchase Program became effective upon the termination of our $350.0 million repurchase program on May 29, 2020, as of which date $21.5 million remained authorized under the prior program. Under the 2020 Repurchase Program, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions. Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock. As of December 31, 2020, we had $555.2 million remaining authorized under the 2020 Repurchase 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.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Statements” (Topic 326). This ASU modified the methodology for establishing a provision against financial assets, including customer receivables, to include an expected future performance component. We adopted ASU 2016-13 on January 1, 2020. The adoption did not have a material impact to our financial position, results of operations, or cash flow.

Note 2. Long-term Debt

Long-term debt, net of unamortized debt issuance costs, consisted of the following:

		December 31,
(In thousands)		2020				2019
Senior notes		$	99,931			$	45,000
Revolving credit facility			—				—
Total long-term debt			99,931				45,000
Less: Current maturities			—				—
Total maturities due after one year		$	99,931			$	45,000

Senior Note Agreements

We had an unsecured senior note agreement with a principal amount outstanding of $45.0 million at December 31, 2019 (the “Senior Note”). The agreement for the Senior Note called for a scheduled principal payment of $45.0 million, with an interest rate of 4.79%, on January 3, 2021, which was paid in the fourth quarter of 2020.

On May 4, 2020, we entered into a Note Purchase and Private Shelf Agreement with PGIM, Inc. (“Prudential”) and certain affiliates and managed accounts of Prudential (the “Note Agreement”). The Note Agreement, which is uncommitted and subject to Prudential’s sole discretion, provides for the issuance of senior promissory notes with an aggregate principal amount of up to $350.0

million through May 4, 2023. Pursuant to the Note Agreement, we issued $100.0 million aggregate principal amount of senior promissory notes (the “Series B Notes”), the proceeds of which are available for capital expenditures, share repurchases, dividends, acquisitions, or general corporate purposes. Borrowing availability under the Note Agreement is reduced by the outstanding amount of the existing Series B Notes, and all other senior promissory notes issued pursuant to the Note Agreement.

The Series B Notes bear interest at 3.10% per annum and mature on May 4, 2027, unless prepaid. Principal payments are required annually beginning on May 4, 2023 in equal installments of $20.0 million through May 4, 2027. The Series B Notes are senior unsecured obligations and rank pari passu with our other senior unsecured indebtedness.

Credit Agreement

On November 21, 2019, we entered into a second amended and restated credit agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders (the “Credit Agreement”). The Credit Agreement provides for a five-year, $250.0 million senior unsecured revolving line of credit and a $150.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $400.0 million. Of the $250.0 million line of credit commitments under the Credit Agreement, up to $100.0 million may be used for letters of credit.

At our option, borrowings under the Credit Agreement bear interest at either: (i) LIBOR (including applicable successor provisions) plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 1.000% to 1.375%; or (ii) a Base Rate plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 0.000% to 0.375%. Letter of credit fees equal to the applicable margin for LIBOR 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 0.100% to 0.175% (based upon the ratio of net debt-to-total capitalization) are charged quarterly in arrears on the aggregate unutilized portion of the Credit Agreement.

For periods covered under the Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees were 1.000% and commitment fees were 0.100%.

The Credit Agreement replaced our previous five-year, $300.0 million senior unsecured revolving credit agreement dated as of December 15, 2015, as amended on September 9, 2016 (the “Prior Credit Agreement”).

There were $42.1 million and $48.9 million of outstanding letters of credit at December 31, 2020 and 2019, respectively.

General Debt Provisions

The Credit Agreement and Note 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. The Credit Agreement and Note Agreement also include 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 are ongoing (or would be caused by such restricted payment).

Note 3. Leases

We lease certain assets under operating leases, which at December 31, 2020 primarily consist of real estate leases for 27 of our 244 service center locations and automotive leases for private passenger vehicles. 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.

The right-of-use assets and corresponding lease liabilities on our Balance Sheet represent payments over the lease term, which includes renewal options for certain real estate leases that we are likely to exercise. These renewal options begin in 2021 and continue through 2033, and range from one to ten years in length. Short-term leases, which have an initial term of 12 months or less, are not included in our right-of-use assets, or corresponding lease liabilities.

Of our total lease liabilities, $13.0 million and $10.4 million are classified as current and are presented within “Other accrued liabilities,” and $93.3 million and $56.1 million are classified as non-current and is presented within “Other non-current liabilities,” on our Balance Sheet as of December 31, 2020 and 2019, respectively. Our right-of-use assets totaled $104.4 million and $65.3 million and are presented within “Other assets,” which is classified as long-term, on our Balance Sheet as of December 31, 2020 and 2019, respectively.

Future lease payments for assets under operating leases, as well as a reconciliation to our total lease liabilities as of December 31, 2020, are as follows:

(In thousands)		Lease Payments (a)
2021		$	16,017
2022			14,011
2023			12,688
2024			11,278
2025			10,052
Thereafter			63,790
Total lease payments		$	127,836
Less: imputed interest			(21,519	)
Total lease liabilities		$	106,317

(a) Lease payments include lease extensions that are reasonably certain to be exercised

The weighted average lease term for our operating leases was 9.4 years at each of December 31, 2020 and 2019, respectively. The discount rate used in the calculation of our right-of-use assets and corresponding lease liabilities was determined based on the stated rate within each contract when available, or our collateralized borrowing rate from lending institutions. The weighted average discount rate for our operating leases was 3.1% and 4.0% as of December 31, 2020 and 2019, respectively.

Cash paid for amounts included in the measurement of our operating leases was $14.5 million and $14.3 million for the years ended December 31, 2020 and 2019, respectively. Aggregate expense under operating leases was $16.0 million, $14.7 million and $12.6 million for 2020, 2019 and 2018, respectively. Certain operating leases include rent escalation provisions, which we recognize as expense on a straight-line basis. Lease expense is presented within “Operating supplies and expenses” or “General supplies and expenses,” depending on the nature of the use of the leased asset. During the years ended December 31, 2020 and 2019, we added $51.1 million and $8.3 million of right-of-use assets, respectively, in exchange for new operating lease liabilities.

Note 4. Income Taxes

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

		Year Ended December 31,
(In thousands)		2020				2019				2018
Current:
Federal		$	216,469			$	152,836			$	113,491
State			53,224				42,438				38,647
			269,693				195,274				152,138
Deferred:
Federal			(35,372	)			12,013				49,125
State			(5,639	)			1,144				8,582
			(41,011	)			13,157				57,707
Total provision for income taxes		$	228,682			$	208,431			$	209,845

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 2020, 2019 and 2018:

		Year Ended December 31,
(In thousands)		2020				2019				2018
Tax provision at statutory rate		$	189,287			$	173,029			$	171,258
State income taxes, net of federal benefit			39,098				35,507				36,396
Other, net			297				(105	)			2,191
Total provision for income taxes		$	228,682			$	208,431			$	209,845

Deferred tax assets and liabilities, which are included in “Other assets” and “Deferred income taxes” on our Balance Sheets, consist of the following:

		December 31,
(In thousands)		2020				2019
Deferred tax assets:
Claims and insurance reserves		$	28,863			$	28,390
Accrued vacation			15,867				17,642
Deferred compensation			43,134				42,417
Other			29,451				11,843
Total deferred tax assets			117,315				100,292
Deferred tax liabilities:
Depreciation and amortization			(330,751	)			(354,762	)
Other			(3,640	)			(3,617	)
Total deferred tax liabilities			(334,391	)			(358,379	)
Net deferred tax liability		$	(217,076	)		$	(258,087	)

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 2017 through 2020. We also remain open to examination by various state tax jurisdictions for tax years 2016 through 2020.

The Company’s liability for unrecognized tax benefits was immaterial as of December 31, 2020 and 2019. 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

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 2020. Our employment agreement with David S. Congdon is incorporated by reference as an exhibit to this Annual Report on Form 10-K. We regularly disclose the amount of compensation that we pay to these individuals, as well as the compensation paid to any of their family members employed by us that from time to time may require disclosure, in the proxy statement for our Annual Meeting of Shareholders.

Note 6. Employee Benefit Plans

Defined Contribution Plan

Full-time employees meeting certain eligibility requirements are automatically enrolled 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 2020, 2019 and 2018 were $65.4 million, $60.4 million and $59.8 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 to reflect participant deferrals and the performance of their deemed investments. The amounts owed to the participants totaled $84.2 million and $75.4 million at December 31, 2020 and 2019, respectively, of which $79.1 million and $71.4 million were included in “Other non-current liabilities” on our Balance Sheets as of December 31, 2020 and 2019, respectively.

Note 7. Earnings Per Share

Basic earnings per share is computed by dividing net income by the daily weighted average number of shares of our common stock outstanding for the period, excluding unvested restricted stock. Unvested restricted stock is included in common shares outstanding on our Balance Sheets.

Diluted earnings per share is computed using the treasury stock method. The denominator used in calculating diluted earnings per share includes the impact of unvested restricted stock and other dilutive, non-participating securities under our equity award agreements. The denominator excludes contingently-issuable shares under performance-based award agreements when the performance target has not yet been deemed achieved.

The following table provides a reconciliation of the number of shares of common stock used in computing basic and diluted earnings per share:

		Year Ended December 31,
(In thousands)		2020				2019				2018
Weighted average shares outstanding - basic			117,737,180				120,414,218				122,885,346
Dilutive effect of share-based awards			756,023				195,381				144,326
Weighted average shares outstanding - diluted			118,493,203				120,609,599				123,029,672

Note 8. Share-Based Compensation

Stock Incentive Plan

On May 19, 2016, our shareholders approved the Old Dominion Freight Line, Inc. 2016 Stock Incentive Plan (the “Stock Incentive Plan”) previously approved by our Board of Directors. The Stock Incentive Plan, under which awards may be granted until May 18, 2026 or the Stock Incentive Plan’s earlier termination, serves as our primary equity incentive plan and provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted awards, performance awards, phantom stock awards and other stock-based awards or dividend equivalent awards to selected employees and non-employee directors. The maximum number of shares of common stock that we may issue or deliver pursuant to awards granted under the Stock Incentive Plan is 3,000,000 shares.

Restricted Stock Awards

During 2020, 2019 and 2018, we granted restricted stock awards to selected employees and non-employee directors under the Stock Incentive Plan. The employee restricted stock awards vest in three equal annual installments on each anniversary of the grant date, and the non-employee director restricted stock awards generally vest in full on the first anniversary of the grant date. In both cases, the restricted stock awards are subject to accelerated vesting due to death, total disability, or change in control of the Company. Subject to the foregoing, unvested restricted stock awards are generally forfeited upon termination of employment. The restricted stock awards accrue dividends while the award is unvested and only carry rights to receive the accrued dividends once vested.

Compensation cost for restricted stock awards is measured at the grant date based on the fair market value per share of our common stock.

The following table summarizes our restricted stock award activity for employees and non-employee directors:

		Shares				Weighted Average Grant Date Fair Value Per Share
Unvested at January 1, 2020			163,723			$	90.65
Granted			75,638				149.38
Vested			(80,349	)			85.68
Forfeited			(19,149	)			117.86
Unvested at December 31, 2020			139,863			$	121.53

The weighted average grant date fair value per restricted stock award granted during fiscal years 2020, 2019 and 2018 was $149.38, $96.59 and $91.85, respectively. The total fair value of vested restricted stock awards for fiscal year 2020, 2019 and 2018 was $11.9 million, $7.3 million and $6.2 million, respectively. At December 31, 2020, the Company had $9.9 million of unrecognized stock-based compensation cost, net of estimated forfeitures, related to unvested restricted stock awards that are expected to be recognized over a weighted average period of 1.7 years.

Performance-Based Restricted Stock Units

During 2020 and 2019, we granted performance-based restricted stock units (“PBRSUs”) to selected employees under the Stock Incentive Plan. The PBRSUs are earned based on the achievement of stated Company performance metrics over a one-year performance period. One-third of the earned PBRSUs vest following the end of the one-year performance period if the performance metrics are satisfied, with an additional one-third of the PBRSUs vesting on each of the next two grant date anniversaries. Earned PBRSUs are subject to accelerated vesting due to death, total disability, or change in control of the Company. Subject to the foregoing, unvested PBRSUs are generally forfeited if minimum threshold performance targets are not achieved or upon termination of employment. The PBRSUs do not include dividend participation rights.

Compensation cost for PBRSUs is measured at the grant date based on the fair market value per share of our common stock, with consideration given to the probability of achieving performance targets. At the end of each reporting period, we reassess the probability of achieving performance targets and changes to our initial assessment are reflected in the reporting period in which the change in estimate occurs. All PBRSUs granted in 2019 were forfeited as the performance metrics were not met.

The following table summarizes our activity for PBRSUs for employees during 2020:

		Shares				Weighted Average Grant Date Fair Value Per Share
Unvested at January 1, 2020			—			$	—
Granted (a)			31,072				146.29
Vested			—				—
Forfeited			—				—
Unvested at December 31, 2020			31,072			$	146.29

(a) Amount represents PBRSUs granted at target. PBRSUs earned may range from zero to 200% of the target award. Actual PBRSUs earned for the 2020 performance period, as determined by the Compensation Committee, were equal to the target amount.

At December 31, 2020, the Company had $1.9 million of unrecognized stock-based compensation cost, net of estimated forfeitures, related to unvested PBRSUs that are expected to be recognized over a weighted average period of 2.1 years.

Phantom Stock Plan

Employee Plans

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 and December 16, 2019 (the “2012 Phantom Stock Plan”). Under the 2012 Phantom Stock Plan, 1,500,000 shares of phantom stock may be awarded, each of which represents a contractual right to receive an amount in cash or common stock 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 (with respect to the cash settlement option). Vesting also occurs on the earliest of (i) a change in control, (ii) death or (iii) total disability. Awards are settled in cash or common stock 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 January 1, 2009, May 18, 2009, May 17, 2011, January 29, 2015 and December 16, 2019 (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 or common stock 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 (with respect to the cash settlement option), (ii) death, or (iii) total disability. 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) with respect to the cash settlement option, the date the participant attains the age of 65 while employed by us. Awards that are not vested upon termination of employment are forfeited. The 2005 Phantom Stock Plan does, however, provide the Board of Directors with discretionary authority to modify and/or accelerate the vesting of awards.

On December 16, 2019, our Board of Directors approved, and the Company adopted, amendments to the Employee Phantom Plans. The amendments permit settlement of outstanding phantom stock awards in shares of the Company’s common stock in lieu of cash settlement, among other administrative changes. For employees who elected to amend their phantom stock awards under the Employee Phantom Plans and settle awards in common stock, the amended award agreements also provide for waivers of the age 65 and age 55 vesting provisions required by the 2012 Phantom Stock Plan and the 2005 Phantom Stock Plan, respectively.

Director Plan

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 April 1, 2011, February 20, 2014, August 7, 2014, February 25, 2016 and December 16, 2019 (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 was granted an annual award of phantom shares. Our Board of Directors approved the initial grant under this plan at its May 2008 meeting and authorized the subsequent annual grants to be made thereafter. For each vested phantom share, participants are entitled to an amount in cash or common stock equal to the fair market value of the award on the date that service as a director terminates for any reason. Our shareholders approved the Stock Incentive Plan at our 2016 Annual Meeting of Shareholders; as a result, no phantom shares have been granted under the Phantom Plans since such approval.

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 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.

On December 16, 2019, our Board of Directors approved, and the Company adopted, an amendment to the Director Phantom Stock Plan. The amendment permits settlement of outstanding phantom stock awards in shares of the Company’s common stock in lieu of cash settlement, among other administrative changes.

Accounting Impact

Modified awards are accounted for as equity awards rather than liability awards under ASC Topic 718, Compensation - Stock Compensation, as they are settled in common stock rather than cash. In December 2019, awards for 613,996 employee and director phantom shares were modified to settle in shares of the Company’s common stock. These modified awards have a weighted average grant date fair value per share of $120.41.

A summary of the changes in the number of outstanding phantom stock awards during the year ended December 31, 2020 for the Phantom Plans is provided below:

		Employee Phantom Plans				Director Phantom Stock Plan				Total
Balance of shares outstanding at December 31, 2019			637,755				81,106				718,861
Granted			—				—				—
Settled			(104,865	)			—				(104,865	)
Forfeited			—				—				—
Balance of shares outstanding at December 31, 2020			532,890				81,106				613,996

All phantom shares outstanding at December 31, 2020 relate to modified awards. Of these outstanding awards, 600,719 phantom shares were vested at December 31, 2020 with a weighted average grant date fair value per share of $120.56. The remaining phantom shares are unvested and have a weighted average grant date fair value per share of $113.65. There were no unsettled phantom stock awards accounted for as a liability under the Phantom Plans as of December 31, 2020.

While the Stock Incentive Plan currently serves as our primary equity plan, the terms of the Phantom Stock Plans and related award agreements will continue to govern all awards granted under the Phantom Stock Plans until such awards have been settled, forfeited, canceled or have otherwise expired or terminated.

Note 9. Fair Value Measurements

Short-term investments

A summary of the fair value of our short-term investments as of December 31, 2020 is shown in the table below.

	December 31, 2020			Level 1			Level 2			Level 3
Certificates of deposit	$	75,032		$	—		$	75,032		$	—
U.S. government securities		125,379			125,379			—			—
Commercial paper		129,863			—			129,863			—
Total	$	330,274		$	125,379		$	204,895		$	—

Our certificates of deposit are measured at carrying value including accrued interest, which approximates fair value due to their short-term nature. Our commercial paper is valued using broker quotes that utilize observable market inputs.

Long-term debt

The carrying value of our total long-term debt, including current maturities, was $99.9 million and $45.0 million at December 31, 2020 and 2019, respectively. The estimated fair value of our total long-term debt, including current maturities, was $105.4 million and $46.1 million at December 31, 2020 and 2019, 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.

Note 10. Commitments and Contingencies

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

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Old Dominion Freight Line, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Old Dominion Freight Line, Inc. (the Company) as of December 31, 2020 and 2019, the related statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes, as well as the financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, 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 24, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

	Self-Insurance Reserves for Bodily Injury/Property Damage (“BIPD”) and Workers’ Compensation
Description of the Matter	The liability for claims and insurance totaled $139.6 million at December 31, 2020, and the majority of this amount represents the self-insurance reserves for BIPD and workers’ compensation claims. The long-term portion of this liability was $86.5 million, which was included in “Other non-current liabilities”, and the remainder was included in “Claims and insurance accruals” on the Company’s Balance Sheet. As described in Note 1 to the financial statements, claims and insurance accruals include the estimated cost of claims for BIPD and workers' compensation. These accruals include estimates for both future claims development on reported claims as well as claims incurred but not yet reported. The Company uses historical claims experience, known trends and third-party analyses to estimate the liabilities for each of the BIPD and workers’ compensation reserves. These analyses are complex and require significant judgment as the models utilize multiple valuation methods and reflect subjective assumptions, including 1) the weighting of such methods, 2) the loss ratio, 3) the loss trend factor and 4) the loss development factor, among other assumptions.

How We Addressed the Matter in Our Audit

We identified and tested internal controls over management’s review of the estimate for self-insurance reserves for BIPD and workers’ compensation claims, including controls over the completeness and accuracy of data inputs used in the Company’s third-party calculations, the assumptions and reserve calculations, as well as management’s evaluation of service organization controls and user controls over the Company’s claims data managed by its third-party administrator. To test the self-insurance reserves for BIPD and workers’ compensation claims balances, our audit procedures included, among others, evaluating the methodologies used and the significant assumptions discussed above, as well as performing procedures with respect to underlying data and calculations used in the Company’s third-party analyses. We involved our actuarial specialists to assist in our evaluation of the appropriateness of the methods and assumptions used as well as to independently calculate ranges of reasonable reserve estimates developed based on independently selected assumptions and to compare such ranges to the Company’s recorded reserves. We tested claims data by comparing the data to supporting source documentation and payment information as well as performing trend analyses.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1994.

Raleigh, North Carolina

February 24, 2021