Annual report pursuant to Section 13 and 15(d)

Share-Based Compensation

v2.4.0.6
Share-Based Compensation
12 Months Ended
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation
Note 8. Share-Based Compensation

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 and May 17, 2011 (the “Phantom Stock Plan”). The Phantom Stock Plan expired in May 2012; however, the Board of Directors approved the Old Dominion Freight Line, Inc. 2012 Phantom Stock Plan (the "2012 Plan") in October 2012, as described below. Each share of phantom stock awarded to eligible employees under the 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) disability. No shares of common stock will be issued pursuant to the Phantom Stock Plan, as the awards are settled in cash after the required vesting period has been satisfied and upon termination of employment. The maximum number of shares of phantom stock that were available for awards under the Phantom Stock Plan was 843,750. Our Board of Directors approved the initial grant under this plan at its January 2006 meeting and authorized grants annually thereafter until the Phantom Stock Plan's expiration.

Phantom Stock Plan awards vest upon the earlier to occur of the following: the date of a change of control in our ownership; the fifth anniversary of the grant date of the award, provided the participant is employed by us on that date; the date of the participant’s death while employed by us; the date of the participant’s total disability; or 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 Phantom Stock Plan does, however, provide the Board of Directors with discretionary authority to modify and/or accelerate the vesting of awards.

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 (the “Director Phantom Stock Plan” and together with the Phantom Stock Plan, the “Phantom Plans”). Under the Director Phantom Stock Plan, each non-employee eligible director shall be granted an annual award of phantom shares equal to $50,000 on the grant date. Prior to the 2011 grant, the annual award to each non-employee eligible director was equal to $30,000 on the 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 annually thereafter.

Director Phantom Stock Plan awards vest upon the earlier to occur of the following: the one-year anniversary of the grant date; 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; the date of a change of control in our ownership provided that the participant is still in service as a director; or 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 the changes in the number of outstanding phantom stock awards during the year ended December 31, 2012 for the Phantom Plans is provided below. Of these awards, 277,701 and 201,876 phantom shares were vested at December 31, 2012 and 2011, respectively.
 
 
Phantom
Stock Plan
 
Director Phantom
Stock Plan
Balance of shares outstanding at December 31, 2011
 
422,173

 
50,231

Granted
 
111,661

 
10,125

Settled
 
(61,195
)
 

Forfeited
 
(5,012
)
 

Balance of shares outstanding at December 31, 2012
 
467,627

 
60,356


Provisions for the granting of phantom stock shares under the Phantom Stock Plan expired in May 2012. The Board of Directors, however, authorized grants outside the Phantom Stock Plan in July and August of 2012 to retiring employees totaling 4,481 phantom shares with terms and conditions similar to those in the Phantom Stock Plan. These shares vested immediately and the settlement resulted in additional compensation expense of $129,000.

On October 30, 2012, our Board of Directors approved and we adopted the 2012 Plan. Under the 2012 Plan, 1,000,000 shares of phantom stock may be awarded, each of which represent 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. 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. Unvested shares are forefeited upon termination of employment, although our Board of Directors has authority to modify and/or accelerate the vesting of awards.
Participants in the 2012 Plan are entitled to receive amounts due on vested shares 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 (ii) disability. Unless the award agreement specifies otherwise, payments will be made in cash over 24 substantially equal monthly payments.
There were no awards of phantom stock made in 2012 under the 2012 Plan.
Awards of phantom stock are accounted for as a liability under The Financial Accounting Standards Board Accounting Standards CodificationTM (“FASC”) 718, Compensation – Stock Compensation. FASC 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. The liability for these awards totaled $16.2 million and $10.9 million at December 31, 2012 and 2011, respectively. Cash payments for settled shares of phantom stock were $1.1 million, $0.5 million and zero for 2012, 2011 and 2010, respectively. Compensation costs totaled $6.4 million, $4.2 million and $4.4 million for 2012, 2011 and 2010, respectively. Unrecognized compensation cost related to all unvested shares as of December 31, 2012 was $3.7 million based on the price of our common stock on that date.