We are a leading, less-than-truckload (“LTL”), union-free motor carrier providing regional, inter-regional and national LTL services through a single integrated organization. Our service offerings, which include expedited transportation, are provided through an expansive network of service centers located throughout the 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)	2019		2018		2017
LTL services	$	4,055,467	$	3,982,658	$	3,303,611
Other services		53,644		61,037		54,501
Total revenue	$	4,109,111	$	4,043,695	$	3,358,112

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.

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.

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.

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.

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 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 $253.7 million, $230.4 million and $205.6 million for 2019, 2018 and 2017, respectively.

Intangible assets have been acquired in connection with business combinations and represent 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 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 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, 2019 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 quantitative goodwill impairment test. Furthermore, there has been no historical impairment of our goodwill.

As of December 31, 2019, we maintained a self-insured retention (“SIR”) of $3.0 million per occurrence (for any claim that occurs on or after March 30, 2019) or $2.75 million per occurrence (for any claim that occurred between March 30, 2006 and March 29, 2019) for bodily injury and property damage (“BIPD”), plus a one-time, $2.5 million aggregate corridor deductible applicable per policy period to any claim that exceeds $5.0 million and occurs on or after March 30, 2016. We maintained a deductible of $2.0 million per occurrence (for any claim that occurs on or after March 30, 2019) or $1.0 million per occurrence (for any claim that occurred between March 30, 2003 and March 29, 2019) for workers’ compensation claims, and a SIR of $1.0 million per covered person paid during 2019 for group health claims.

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 $141.1 million and $135.8 million at December 31, 2019 and 2018, respectively. The long-term portions of those reserves were $86.7 million and $82.5 million for 2019 and 2018, respectively, which were included in “Other non-current liabilities” on our Balance Sheets.

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 was $42.9 million, $10.7 million and $22.7 million during 2019, 2018, and 2017, respectively. The total tax benefit recognized related to these awards was ($10.8) million, ($3.2) million and ($9.0) million during 2019, 2018, and 2017, respectively.

Awards of phantom stock 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 on a straight-line basis 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.

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 $28.3 million, $28.2 million and $27.3 million for 2019, 2018 and 2017, respectively.

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, was $45.0 million at each of December 31, 2019 and 2018. The estimated fair value of our total long-term debt, including current maturities, was $46.1 million and $45.6 million at December 31, 2019 and 2018, 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”).

During the second quarter of 2019, we completed our stock repurchase program, previously announced on May 17, 2018, to repurchase up to an aggregate of $250.0 million of our outstanding common stock. On May 16, 2019, 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 $350.0 million of our outstanding common stock (the “2019 Repurchase Program”). Under the 2019 Repurchase Program, which became effective upon

the expiration of our prior stock 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, 2019, we had $240.8 million remaining authorized under the 2019 Repurchase Program.

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

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 on its balance sheet for most operating leases. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018, including interim periods within those fiscal years. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which provided companies with an additional optional transition method to apply the new standard to leases in effect at the adoption date through a cumulative effect adjustment. We adopted the new lease standard on January 1, 2019 using this optional transition method.

We elected the package of practical expedients referenced in ASU 2016-02, which permits companies to retain original lease identification and classification without reassessing initial direct costs for existing leases. We also elected (i) the practical expedient that exempts leases with an initial lease term of twelve months or less, (ii) the practical expedient that allows companies to select, by class of underlying asset, not to separate lease and non-lease components, and (iii) the practical expedient that allows companies to apply hindsight in determining lease terms. Our adoption of this standard resulted in the recognition of right-of-use assets and corresponding lease liabilities of $68.0 million and $69.1 million, respectively, as of January 1, 2019. There were no material impacts to our results of operations or our cash flows. Disclosures related to the amount, timing, and uncertainty of cash flows arising from our leases are included in Note 3.