##### 



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 FORM 10-K
 
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from to.
 Commission file number 0-19791
 
 VITRAN CORPORATION INC.
 (Exact name of registrant as specified in its charter)
 
 Ontario, Canada
(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 185 The West Mall, Suite 701, Toronto, Ontario, Canada, M9C 5L5  (Address of principal executive offices) (Zip Code)
 (Registrants telephone number, including area code)  (416) 596-7664
  Title of each class
    
    Name of each exchange on which registeredCommon Shares
    
    Toronto Stock Exchange  TSX®NASDAQ  National Market
  o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 Item
    
    
    
    PagePART I1.
    
    Business
    
    
    31. a
    
    Risk Factors
    
    
    71. b
    
    Unresolved Staff Comments
    
    
    72.
    
    Properties
    
    
    73.
    
    Legal Proceedings
    
    
    74.
    
    Submission of Matters to a Vote of Security Holders
    
    
    7PART II5.
    
    Market for Registrants Common Equity and Related Stockholder Matters
    
    
    86.
    
    Selected Financial Data
    
    
    107.
    
    Managements Discussion and Analysis of Financial
Condition and
    Results of Operations
    
    
    137. a
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    268.
    
    Financial Statements and Supplementary Data
    
    
    279.
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    629. a
    
    Controls and Procedures
    
    
    629. b
    
    Other Information
    
    
    64PART III10.
    
    Directors and Executive Officers of the Registrant
    
    
    6411.
    
    Executive Compensation
    
    
    6412.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    6513.
    
    Certain Relationships and Related Transactions
    
    
    6514.
    
    Principal Accounting Fees and Services
    
    
    65PART IV15.
    
    Exhibits, Financial Statements Schedules and Reports on Form 8-K
    
    
    65
 2




---



##### 



Unless otherwise indicated all dollar references herein are in United States dollars.
 PART I
 ITEM 1BUSINESS
 OVERVIEW
  CORPORATE STRUCTURE
   OPERATING SEGMENTS
  LTL Services
   3




---



##### 



Logistics
  Supply Chain Solutions.
  Freight Brokerage.
 Truckload
  THE TRUCKING INDUSTRY
  4




---



##### 




    
    The trend among shippers toward minimal inventories, deferred air freight, and regional
distribution has increased the demand for next-day and second-day delivery service.
    
    Regional carriers with sufficient scale and freight density to support local terminal
networks can offer greater service reliability and minimize the costs associated with
intermediate handling.
    
    Regional carriers are predominantly non-union, which offers cost savings, greater
flexibility, and a lower likelihood of service disruptions compared with unionized
carriers.
    
    There has been a reduction of capacity as weaker competitors exit the business.
 MARKETING AND CUSTOMERS
     EMPLOYEES
   INFORMATION TECHNOLOGY
  5




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##### 



SEASONALITY
  REGULATION
    COMPETITION
  AVAILABLE INFORMATION
 www.vitran.com www.sec.gov/edgar.shtml www.sedar.com
 6




---



##### 



ITEM 1. aRISK FACTORS
 RISKS AND UNCERTAINTIES
  ITEM 1. bUNRESOLVED STAFF COMMENTS
  ITEM 2PROPERTIES
 .
   Terminals
    
    Doors
    
    Owned/ LeasedToronto
    
    
    132
    
    
    LeasedIndianapolis
    
    
    116
    
    
    LeasedToledo
    
    
    101
    
    
    OwnedPhiladelphia
    
    
    92
    
    
    LeasedMontreal
    
    
    85
    
    
    OwnedVancouver
    
    
    85
    
    
    OwnedChicago
    
    
    81
    
    
    LeasedPittsburgh
    
    
    80
    
    
    OwnedClinton
    
    
    80
    
    
    OwnedWinsted
    
    
    78
    
    
    Owned
  ITEM 3LEGAL PROCEEDINGS
  ITEM 4SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  7




---



##### 



PART II
 ITEM 5 MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 Description of Share Capital
     TSX
    
    NASDAQQuarter
    
    High
    
    Low
    
    Volume
    
    High
    
    Low
    
    Volume(in Canadian dollars)
    
    (in United States dollars)2007Fourth Quarter
    
    $
    18.70
    
    
    $
    12.50
    
    
    
    533,100
    
    
    $
    19.15
    
    
    $
    12.55
    
    
    
    2,979,500Third Quarter
    
    $
    23.20
    
    
    $
    16.40
    
    
    
    454,800
    
    
    $
    22.32
    
    
    $
    16.10
    
    
    
    1,776,900Second Quarter
    
    $
    24.64
    
    
    $
    20.88
    
    
    
    353,900
    
    
    $
    23.35
    
    
    $
    18.50
    
    
    
    1,660,200First Quarter
    
    $
    24.21
    
    
    $
    19.30
    
    
    
    126,700
    
    
    $
    20.97
    
    
    $
    15.76
    
    
    
    1,381,3002006Fourth Quarter
    
    $
    22.31
    
    
    $
    18.10
    
    
    
    381,700
    
    
    $
    19.78
    
    
    $
    16.03
    
    
    
    1,860,000Third Quarter
    
    $
    27.99
    
    
    $
    19.94
    
    
    
    104,400
    
    
    $
    25.72
    
    
    $
    16.74
    
    
    
    1,506,100Second Quarter
    
    $
    27.37
    
    
    $
    21.01
    
    
    
    340,500
    
    
    $
    24.75
    
    
    $
    19.00
    
    
    
    3,273,000First Quarter
    
    $
    24.50
    
    
    $
    21.50
    
    
    
    425,800
    
    
    $
    20.90
    
    
    $
    18.61
    
    
    
    1,654,500
 TSX
    
    NASDAQ2007 Monthly
    
    High
    
    Low
    
    Volume
    
    High
    
    Low
    
    Volume(in Canadian dollars)
    
    (in United States dollars)December
    
    $
    14.63
    
    
    $
    12.92
    
    
    
    111,400
    
    
    $
    15.22
    
    
    $
    13.03
    
    
    
    1,055,800November
    
    $
    14.45
    
    
    $
    12.50
    
    
    
    163,800
    
    
    $
    15.14
    
    
    $
    12.55
    
    
    
    1,129,200October
    
    $
    18.70
    
    
    $
    12.65
    
    
    
    257,900
    
    
    $
    19.15
    
    
    $
    13.14
    
    
    
    794,500September
    
    $
    22.37
    
    
    $
    16.40
    
    
    
    60,600
    
    
    $
    21.07
    
    
    $
    16.10
    
    
    
    570,600August
    
    $
    23.20
    
    
    $
    20.40
    
    
    
    352,400
    
    
    $
    21.94
    
    
    $
    18.93
    
    
    
    451,300July
    
    $
    22.92
    
    
    $
    20.68
    
    
    
    41,800
    
    
    $
    22.32
    
    
    $
    19.21
    
    
    
    755,000June
    
    $
    24.64
    
    
    $
    21.00
    
    
    
    47,500
    
    
    $
    23.35
    
    
    $
    20.21
    
    
    
    516,600May
    
    $
    23.67
    
    
    $
    21.83
    
    
    
    99,900
    
    
    $
    21.28
    
    
    $
    19.96
    
    
    
    696,800April
    
    $
    23.00
    
    
    $
    20.88
    
    
    
    206,500
    
    
    $
    20.50
    
    
    $
    18.50
    
    
    
    446,800March
    
    $
    22.98
    
    
    $
    21.67
    
    
    
    71,900
    
    
    $
    20.16
    
    
    $
    18.36
    
    
    
    510,200February
    
    $
    24.21
    
    
    $
    20.92
    
    
    
    17,100
    
    
    $
    20.97
    
    
    $
    15.76
    
    
    
    511,300January
    
    $
    21.75
    
    
    $
    19.30
    
    
    
    37,700
    
    
    $
    17.85
    
    
    $
    16.38
    
    
    
    359,800
 8




---



##### 



Stock Option Plan
 Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    for future issuancesecurities to be
    
    
    
    
    
    (excludingissued upon
    
    Weighted average
    
    securitiesexercise of
    
    exercise price of
    
    reflected in columnPlan Category
    
    outstanding options
    
    outstanding options
    
    (a))(a)
    
    (b)
    
    (c)Equity compensation plans approved by security holders
    
    
    820,200
    
    
    $
    12.66
    
    
    
    99,500Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total (1)
    
    
    820,200
    
    
    $
    12.66
    
    
    
    99,500
 (1)
    
    As at December 31, 2007.  Purchases of Equity Securities
  Maximum number ofTotal number of
    
    common shares thatAverage price paid
    
    common shares as
    
    may yet beNumber of common
    
    per common share
    
    part of a publicly
    
    purchased under thePeriod
    
    shares purchased
    
    (CAD)
    
    announced plan
    
    planOct. 1 to Oct. 31, 2007
    
    
    21,400
    
    
    $
    12.98
    
    
    
    21,400
    
    
    
    649,593Nov. 1 to Nov. 30, 2007
    
    
    8,800
    
    
    $
    13.15
    
    
    
    8,800
    
    
    
    640,793Dec. 1 to Dec. 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    640,793Total
    
    
    30,200
    
    
    $
    13.03
    
    
    
    30,200
 Transfer Agents
 Computershare Investor Services Inc.
Computershare Trust Company Inc.
    
    Montreal, Toronto
Denver
    
    Canada
United States
 9




---



##### 



ITEM 6SELECTED FINANCIAL DATA
  Selected Financial Data
 Year
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003United States GAAPStatements of IncomeRevenue
    
    $
    670,517
    
    
    $
    514,059
    
    
    $
    428,192
    
    
    $
    374,595
    
    
    $
    331,826Income from continuing operations
before depreciation and
amortization expense (1)
    
    
    43,769
    
    
    
    40,530
    
    
    
    32,392
    
    
    
    24,183
    
    
    
    20,044Income from continuing operations
    
    
    22,999
    
    
    
    28,040
    
    
    
    25,427
    
    
    
    18,977
    
    
    
    14,550Net income from continuing
operations
    
    
    13,710
    
    
    
    19,258
    
    
    
    17,938
    
    
    
    14,943
    
    
    
    10,336Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    13,710
    
    
    $
    19,399
    
    
    $
    17,938
    
    
    $
    14,943
    
    
    $
    10,336Earnings per share basic:Net income from continuing
operations
    
    $
    1.02
    
    
    $
    1.49
    
    
    $
    1.43
    
    
    $
    1.22
    
    
    $
    1.07Net income (loss)
    
    $
    1.02
    
    
    $
    1.50
    
    
    $
    1.43
    
    
    $
    1.22
    
    
    $
    1.07Weighted average number of shares
    
    
    13,458,786
    
    
    
    12,887,401
    
    
    
    12,516,265
    
    
    
    12,285,400
    
    
    
    9,684,901Earnings per share diluted:Net income from continuing
operations
    
    $
    1.00
    
    
    $
    1.47
    
    
    $
    1.40
    
    
    $
    1.17
    
    
    $
    1.01Net income (loss)
    
    $
    1.00
    
    
    $
    1.48
    
    
    $
    1.40
    
    
    $
    1.17
    
    
    $
    1.01Weighted average number of shares
    
    
    13,651,799
    
    
    
    13,124,865
    
    
    
    12,848,360
    
    
    
    12,740,477
    
    
    
    10,263,211Canadian GAAP(2)Statements of IncomeRevenue
    
    $
    670,517
    
    
    $
    514,059
    
    
    $
    428,192
    
    
    $
    374,595
    
    
    $
    331,826Income from continuing operations
before depreciation and
amortization expense (1)
    
    
    41,551
    
    
    
    40,530
    
    
    
    32,392
    
    
    
    24,183
    
    
    
    20,308Income from continuing operations
    
    
    20,781
    
    
    
    28,040
    
    
    
    25,427
    
    
    
    18,977
    
    
    
    14,814Net income from continuing
operations
    
    
    11,492
    
    
    
    19,258
    
    
    
    17,938
    
    
    
    14,943
    
    
    
    10,336Net income (loss)
    
    $
    11,492
    
    
    $
    19,258
    
    
    $
    17,938
    
    
    $
    14,943
    
    
    $
    10,336
 10




---



##### 



Selected Financial Data (continued)
 Year
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Earnings per share basic:Net income from
continuing operations
    
    $
    0.85
    
    
    $
    1.49
    
    
    $
    1.43
    
    
    $
    1.22
    
    
    $
    1.07Net income (loss)
    
    $
    0.85
    
    
    $
    1.49
    
    
    $
    1.43
    
    
    $
    1.22
    
    
    $
    1.07Weighted average number of
shares
    
    
    13,458,786
    
    
    
    12,887,401
    
    
    
    12,516,265
    
    
    
    12,285,400
    
    
    
    9,684,901Earnings per share diluted:Net income from continuing
operations
    
    $
    0.84
    
    
    $
    1.47
    
    
    $
    1.40
    
    
    $
    1.17
    
    
    $
    1.01Net income (loss)
    
    $
    0.84
    
    
    $
    1.47
    
    
    $
    1.40
    
    
    $
    1.17
    
    
    $
    1.01Weighted average number of
shares
    
    
    13,651,799
    
    
    
    13,124,865
    
    
    
    12,848,360
    
    
    
    12,740,477
    
    
    
    10,263,211Dividends per share $US
    
    Nil
    
    Nil
    
    Nil
    
    Nil
    
    NilDividends per share $CAD
    
    Nil
    
    Nil
    
    Nil
    
    Nil
    
    Nil
 Year
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Balance Sheets (United States
GAAP)Assets:Current assets
    
    $
    95,464
    
    
    $
    83,775
    
    
    $
    71,017
    
    
    $
    90,177
    
    
    $
    85,046Property and equipment, net
    
    
    169,052
    
    
    
    145,129
    
    
    
    66,807
    
    
    
    37,563
    
    
    
    35,102Intangible assets
    
    
    13,645
    
    
    
    15,888
    
    
    
    2,456
    
    
    
    
    
    
    
    Goodwill, net
    
    
    124,375
    
    
    
    117,146
    
    
    
    61,448
    
    
    
    45,304
    
    
    
    44,865Other assets
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    6
    
    
    
    Total assets
    
    $
    402,546
    
    
    $
    362,088
    
    
    $
    201,728
    
    
    $
    173,050
    
    
    $
    165,013Liabilities and Stockholders
Equity:Current liabilities
    
    $
    91,133
    
    
    $
    88,669
    
    
    $
    48,331
    
    
    $
    38,806
    
    
    $
    46,412Long-term debt
    
    
    109,831
    
    
    
    93,139
    
    
    
    8,588
    
    
    
    11,507
    
    
    
    17,931Other non-current liabilities
    
    
    11,414
    
    
    
    6,983
    
    
    
    5,007
    
    
    
    3,546
    
    
    
    2,715Total stockholders equity
    
    $
    190,168
    
    
    $
    173,297
    
    
    $
    139,802
    
    
    $
    119,191
    
    
    $
    97,955Balance Sheets (Canadian
GAAP) (2)Assets:Current assets
    
    $
    95,464
    
    
    $
    83,775
    
    
    $
    71,017
    
    
    $
    90,177
    
    
    $
    85,046Property and equipment, net
    
    
    169,052
    
    
    
    145,129
    
    
    
    66,807
    
    
    
    37,563
    
    
    
    35,102Intangible assets
    
    
    13,645
    
    
    
    15,888
    
    
    
    2,456
    
    
    
    
    
    
    
    Goodwill, net
    
    
    124,375
    
    
    
    117,146
    
    
    
    61,448
    
    
    
    45,304
    
    
    
    44,865Other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total assets
    
    $
    402,546
    
    
    $
    361,938
    
    
    $
    201,728
    
    
    $
    173,044
    
    
    $
    165,013Liabilities and Stockholders
Equity:Current liabilities
    
    $
    91,133
    
    
    $
    88,669
    
    
    $
    48,331
    
    
    $
    38,806
    
    
    $
    46,412Long-term debt
    
    
    109,831
    
    
    
    93,139
    
    
    
    8,588
    
    
    
    11,507
    
    
    
    17,931Other non-current liabilities
    
    
    11,414
    
    
    
    6,983
    
    
    
    5,007
    
    
    
    3,546
    
    
    
    2,715Total stockholders equity
    
    $
    190,027
    
    
    $
    173,171
    
    
    $
    139,802
    
    
    $
    119,185
    
    
    $
    97,955Total commitments under
operating leases
    
    $
    58,639
    
    
    $
    38,827
    
    
    $
    40,239
    
    
    $
    46,564
    
    
    $
    48,580
 11




---



##### 



Selected Financial Data (continued)
 Year
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Operating Ratios(3)Total company
    
    
    96.6
    %
    
    
    94.5
    %
    
    
    94.1
    %
    
    
    94.9
    %
    
    
    95.5
    %Less-than-truckload
    
    
    96.0
    %
    
    
    93.7
    %
    
    
    93.1
    %
    
    
    94.2
    %
    
    
    94.3
    %Logistics
    
    
    93.8
    %
    
    
    93.3
    %
    
    
    94.7
    %
    
    
    95.3
    %
    
    
    96.2
    %Truckload
    
    
    94.9
    %
    
    
    94.7
    %
    
    
    93.5
    %
    
    
    94.5
    %
    
    
    98.2
    %
 
 Notes:(1)
    
    Income from continuing operations before depreciation and amortization expense (EBITDA) is
a non-GAAP financial measure which does not have any standardized meaning prescribed by GAAP.
EBITDA represents net income, minus cumulative change in accounting policy, plus (minus)
income tax expense (benefit), plus net interest expense, and plus depreciation and
amortization. The Company uses EBITDA in evaluating its operating performance compared to that
of other companies in its industry, as the calculation of EBITDA eliminates the effects of
financing, income taxes and the accounting effects of capital spending, which items may vary
for different companies for reasons unrelated to overall operating performance. When
analyzing its operating performance, however, investors should use EBITDA in addition to, not
as an alternative for, income from operations and net income, as those items are defined by
GAAP. Investors should also note that the Companys presentation of EBITDA may not be
comparable to similarly titled measures used by other companies. EBITDA is reconciled to net
income as follows: Year ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Net income
    
    $
    13,710
    
    
    $
    19,399
    
    
    $
    17,938
    
    
    $
    14,943
    
    
    $
    10,336Cumulative change in accounting principle
    
    
    
    
    
    
    (141
    )
    
    
    
    
    
    
    
    
    
    
    Income tax expense
    
    
    863
    
    
    
    6,122
    
    
    
    7,191
    
    
    
    3,983
    
    
    
    3,158Interest expense, net
    
    
    8,426
    
    
    
    2,660
    
    
    
    298
    
    
    
    51
    
    
    
    1,320Depreciation and amortization
    
    
    20,770
    
    
    
    12,490
    
    
    
    6,965
    
    
    
    5,206
    
    
    
    5,494EBITDA
    
    $
    43,769
    
    
    $
    40,530
    
    
    $
    32,392
    
    
    $
    24,183
    
    
    $
    20,308
 
 (2)
    
    Please see Note 18 to the Consolidated Financial Statements for differences between United
States and Canadian GAAP.(3)
    
    Operating ratio (OR) is a non-GAAP financial measure which does not have any standardized
meaning prescribed by GAAP. OR is the sum of operating expenses, selling, general and
administrative expenses, other expenses (income), and depreciation and amortization expense,
divided by revenue. OR allows management to measure the Company and its various segments
operating efficiency. OR is a widely recognized measure in the transportation industry which
provides a comparable benchmark for evaluating the Companys performance compared to its
competitors. Investors should also note that the Companys presentation of OR may not be
comparable to similarly titled measures by other companies. OR is calculated as follows: Year ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Operating expenses
    
    $
    565,094
    
    
    $
    426,515
    
    
    $
    357,960
    
    
    $
    319,295
    
    
    $
    282,016Selling, general and administrative expenses
    
    
    62,086
    
    
    
    47,448
    
    
    
    37,881
    
    
    
    31,263
    
    
    
    29,366Other expenses (income)
    
    
    (432
    )
    
    
    (434
    )
    
    
    (41
    )
    
    
    (146
    )
    
    
    136Depreciation and amortization expense
    
    
    20,770
    
    
    
    12,490
    
    
    
    6,965
    
    
    
    5,206
    
    
    
    5,494$
    647,518
    
    
    $
    486,019
    
    
    $
    402,765
    
    
    $
    355,618
    
    
    $
    317,012Revenue
    
    $
    670,517
    
    
    $
    514,059
    
    
    $
    428,192
    
    
    $
    374,595
    
    
    $
    331,826Operating ratio (OR)
    
    
    96.6
    %
    
    
    94.5
    %
    
    
    94.1
    %
    
    
    94.9
    %
    
    
    95.5
    %
 12




---



##### 



ITEM 7MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements:
 This MD&A and the documents incorporated by reference contain forward-looking statements
within the meaning of the United States Private Securities Litigation Reform Act of 1995 and
applicable Canadian securities laws concerning Vitrans business, operations, and financial
performance and condition.
 Forward-looking statements may be generally identifiable by use of the words believe,
anticipate, intend, estimate, expect, project, may, plans, continue, will,
focus, should, endeavor or the negative of these words or other variation on these words or
comparable terminology. These forward-looking statements are based on current expectations and are
subject to uncertainty and changes in circumstances that may cause actual results to differ
materially from those expressed or implied by such forward-looking statements.
 The MD&A and the documents incorporated by reference herein contain forward-looking statements
regarding, but not limited to, the following:
 
    
    the Companys objective to complete its LTL IT system and operating integration
initiatives and realize superior service for its customers, linehaul optimization and new
inter-regional marketing opportunities;
    
    the Companys objective to expand, or acquire a less-than-truckload operation, in a new
regional market;
    
    the Companys objective to achieve profitable revenue growth in the less-than-truckload
segment;
    
    the Companys intention to improve results from yield improvement and operating
efficiencies in the less-than-truckload segment;
    
    the Companys intention to achieve above average transborder and inter-regional growth
rates;
    
    the Companys intention to develop profitable accounts in the Logistics segment;
    
    the Companys intention to increase revenue and income from the previously announced new
major supply chain contract in the Logistics segment;
    
    the Companys ability to achieve margin and asset utilization gains in its Truckload
segment;
    
    the Companys ability to expand and diversity its customer base in the Truckload
segment; and
    
    the Companys intention to purchase a specified level of capital assets and to finance
such acquisitions with cash flow from operations and, if necessary, from the Companys
unused credit facilities.
 Such forward-looking statements involve known and unknown risks, uncertainties and other
factors that may cause Vitrans actual results, performance or achievements to differ materially
from any future results, performance or achievements expressed or implied by such forward-looking
statements. Factors that may cause such differences include but are not limited to technological
change, increase in fuel costs, regulatory change, the general health of the economy, changes in
labor relations, geographic expansion, capital requirements, availability of financing, claims and
insurance costs, environmental hazards, availability of qualified drivers and competitive factors.
More detailed information about these and other factors is included in the MD&A. Many of these
factors are beyond the Companys control; therefore, future events may vary substantially from what
the Company currently foresees. You should not place undue reliance on such forward-looking
statements. Vitran Corporation Inc. does not assume the obligation to revise or update these
forward-looking statements after the date of this document or to revise them to reflect the
occurrence of future unanticipated events, except as may be required under applicable securities
laws.
 13




---



##### 



Unless otherwise indicated all dollar references herein are in U.S. dollars. The Companys
Annual Report on Form 10-K, as well as all the Companys other required filings, may be obtained
from the Company at www.vitran.com or fromwww.sedar.com or from www.sec.gov/edgar.shtml .
 OVERVIEW
     EXECUTIVE SUMMARY
   .
 14




---



##### 



RESULTS OF OPERATIONS 2007 COMPARED TO 2006
 CONSOLIDATED RESULTS
  (in thousands of dollars)
    
    2007
    
    2006
    
    2005
    
    2007 vs 2006
    
    2006 vs 2005Revenue
    
    $
    670,517
    
    
    $
    514,059
    
    
    $
    428,192
    
    
    
    30.4
    %
    
    
    20.0
    %Operating expenses
    
    
    565,094
    
    
    
    426,515
    
    
    
    357,960
    
    
    
    32.5
    %
    
    
    19.2
    %SG&A expenses
    
    
    62,086
    
    
    
    47,448
    
    
    
    37,881
    
    
    
    30.9
    %
    
    
    25.3
    %Other expenses
(income)
    
    
    (432
    )
    
    
    (434
    )
    
    
    (41
    )
    
    
    (.5
    %)
    
    
    958.5
    %Depreciation and
amortization
    
    
    20,770
    
    
    
    12,490
    
    
    
    6,965
    
    
    
    66.3
    %
    
    
    79.3
    %Income from
Operations
    
    
    22,999
    
    
    
    28,040
    
    
    
    25,427
    
    
    
    (18.0
    %)
    
    
    10.3
    %Interest expense, net
    
    
    8,426
    
    
    
    2,660
    
    
    
    298
    
    
    
    216.8
    %
    
    
    792.6
    %Net income
    
    $
    13,710
    
    
    $
    19,399
    
    
    $
    17,938
    
    
    
    (29.3
    %)
    
    
    8.1
    %
 2007
    
    2006
    
    2005
    
    2007 vs 2006
    
    2006 vs 2005Earnings per share:Basic
    
    $
    1.02
    
    
    $
    1.50
    
    
    $
    1.43
    
    
    
    (32.0
    %)
    
    
    4.9
    %Diluted
    
    $
    1.00
    
    
    $
    1.48
    
    
    $
    1.40
    
    
    
    (32.4
    %)
    
    
    5.7
    %Operating ratio
    
    
    96.6
    %
    
    
    94.5
    %
    
    
    94.1
    %
   15




---



##### 



(6)
   16




---



##### 



SEGMENTED RESULTS
 LTL (Less-than-truckload)
  (in thousands of dollars)
    
    2007
    
    2006
    
    2005
    
    2007 vs 2006
    
    2006 vs 2005Revenue
    
    $
    584,786
    
    
    $
    441,499
    
    
    $
    352,693
    
    
    
    32.5
    %
    
    
    25.2
    %Income from operations
    
    
    23,153
    
    
    
    28,029
    
    
    
    24,494
    
    
    
    (17.4
    %)
    
    
    14.4
    %Operating ratio
    
    
    96.0
    %
    
    
    93.7
    %
    
    
    93.1
    %Number of shipments(1)
    
    
    4,040,306
    
    
    
    3,007,985
    
    
    
    2,484,064
    
    
    
    34.3
    %
    
    
    21.1
    %Weight (000s of lbs)(2)
    
    
    5,989,123
    
    
    
    4,669,777
    
    
    
    3,922,323
    
    
    
    28.3
    %
    
    
    19.1
    %Revenue per shipment(3)
    
    $
    144.74
    
    
    $
    146.78
    
    
    $
    141.99
    
    
    
    (1.4
    %)
    
    
    3.4
    %Revenue per
hundredweight(4)
    
    
    9.76
    
    
    
    9.45
    
    
    
    8.99
    
    
    
    3.3
    %
    
    
    5.1
    %
   Logistics
  (in thousands of dollars)
    
    2007
    
    2006
    
    2005
    
    2007 vs 2006
    
    2006 vs 2005Revenue
    
    $
    52,845
    
    
    $
    39,762
    
    
    $
    40,261
    
    
    
    32.9
    %
    
    
    (1.2
    %)Income from operations
    
    
    3,271
    
    
    
    2,679
    
    
    
    2,141
    
    
    
    22.1
    %
    
    
    25.1
    %Operating ratio
    
    
    93.8
    %
    
    
    93.3
    %
    
    
    94.7
    %
  17




---



##### 



Truckload
  (in thousands of dollars)
    
    2007
    
    2006
    
    2005
    
    2007 vs 2006
    
    2006 vs 2005Revenue
    
    $
    32,886
    
    
    $
    32,798
    
    
    $
    35,238
    
    
    
    0.3
    %
    
    
    (6.9
    %)Income from operations
    
    
    1,678
    
    
    
    1,734
    
    
    
    2,308
    
    
    
    (3.2
    %)
    
    
    (24.9
    %)Operating ratio
    
    
    94.9
    %
    
    
    94.7
    %
    
    
    93.5
    %
 (5)
 RESULTS OF OPERATIONS 2006 COMPARED TO 2005
 CONSOLIDATED RESULTS
       18




---



##### 



SEGMENTED RESULTS
 LTL (Less-than-truckload)
   Logistics
  Truckload
 (5)
 19




---



##### 



Notes:(1)
    
    A shipment is a single movement of goods from a point of origin to its final destination as
described on a bill of lading document.(2)
    
    Weight represents the total pounds shipped by each LTL business unit.(3)
    
    Revenue per shipment represents revenue divided by the number of shipments.(4)
    
    Revenue per hundredweight is the price obtained for transporting 100 pounds of LTL freight
from point to point, calculated by dividing the revenue for an LTL shipment by the
hundredweight (weight in pounds divided by 100) for a shipment.(5)
    
    Revenue per total mile represents revenue divided by the total miles driven.(6)
    
    Reconciliation to net income and earnings per share excluding the one-time write-off of
previously deferred financing costs: Year ended December 312007Net income
    
    $
    13,710Financing costs written-off, net of tax
    
    
    304Adjusted net income
    
    
    14,014Weighted average shares outstanding:Basic
    
    
    13,458,786Diluted
    
    
    13,651,799Adjusted earnings per share:Basic
    
    $
    1.04Diluted
    
    $
    1.03
 GENERAL RISKS AND UNCERTAINTIES
  highly competitive
 economic conditions seasonal fluctuations
 dependent on a major railroad
 credit risk
 20




---



##### 



labor relations
 qualified drivers key management
 diesel fuel expenses
 laws and regulations
 strengthen border security regulations
 interest rate risk
 foreign currency risk
 financial maintenance
 holding company
 highly capital intensive
 availability of rolling
stock availability and price of terminal
facilities.
 21




---



##### 



insurance and claims expenses.
 integrate the information technology and operations
 LIQUIDITY AND CAPITAL RESOURCES
      Year ended December 31,(in thousands of dollars)
    
    2007
    
    
    2006
    
    
    2005Real estate and buildings
    
    $
    10,728
    
    
    $
    14,459
    
    
    $
    7,632Tractors
    
    
    13,362
    
    
    
    3,056
    
    
    
    2,793Trailing fleet
    
    
    5,580
    
    
    
    7,587
    
    
    
    10,969Information technology
    
    
    1,471
    
    
    
    761
    
    
    
    938Leasehold improvements
    
    
    245
    
    
    
    186
    
    
    
    277Other equipment
    
    
    1,840
    
    
    
    1,087
    
    
    
    254Total
    
    $
    33,226
    
    
    $
    27,136
    
    
    $
    22,863
 22




---



##### 



off-balance
sheet
 (in thousands of dollars)
    
    Payments due by periodContractual Obligations
    
    Total
    
    2008
    
    2009 & 2010
    
    2011 & 2012
    
    ThereafterTerm credit facilities
    
    $
    58,911
    
    
    $
    9,020
    
    
    $
    23,891
    
    
    $
    26,000
    
    
    $
    NilRevolving credit facilities
    
    
    45,023
    
    
    Nil
    
    
    Nil
    

    
    
    45,023
    
    
    NilCapital lease obligations
    
    
    22,860
    
    
    
    7,943
    
    
    
    9,260
    
    
    
    5,657
    
    
    NilNote payable
    
    
    1,181
    
    
    
    1,181
    
    
    Nil
    

    
    Nil
    
    

    NilSub-total
    
    
    127,975
    
    
    
    18,144
    
    
    
    33,151
    
    
    
    76,680
    
    
    NilOff-balance sheet commitmentsPurchase Commitments
    
    
    5,000
    
    
    
    5,000
    
    
    Nil
    
    
    Nil
    
    
    NilOperating leases
    
    
    58,639
    
    
    
    17,425
    
    
    
    23,169
    
    
    
    13,838
    
    
    
    4,207Total contractual obligations
    
    $
    191,614
    
    
    $
    40,569
    
    
    $
    56,320
    
    
    $
    90,518
    
    
    $
    4,207
   OUTLOOK
   23




---



##### 



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Revenue Recognition
  Allowance for Doubtful Accounts
  Claims and Insurance Accruals
  24




---



##### 



Goodwill and Intangible Assets
   Property and Equipment
  Share-Based Compensation
  Income Taxes
  25




---



##### 



CHANGES IN ACCOUNTING POLICY
  RELATED PARTIES
  ITEM 7.aQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 INTEREST RATE SENSITIVITY
  (in thousands of dollars)
    
    Payments due by periodLong-term debt
    
    Total
    
    2008
    
    2009 & 2010
    
    2011 & 2012
    
    ThereafterVariable RateTerm bank facility
    
    $
    56,000
    
    
    $
    8,000
    
    
    $
    22,000
    
    
    $
    26,000
    
    
    $
    NilAverage interest rate (LIBOR)
    
    
    6.08
    %
    
    
    6.08
    %
    
    
    6.08
    %
    
    
    6.08
    %Term bank facility
    
    
    2,911
    
    
    
    1,020
    
    
    
    1,891
    
    
    Nil
    
    
    NilAverage interest rate (LIBOR)
    
    
    6.58
    %
    
    
    6.58
    %
    
    
    6.58
    %Revolving bank facility
    
    
    30,900
    
    
    Nil
    
    
Nil

        
    
    30,900
    
    
    NilAverage interest rate (LIBOR)
    
    
    6.08
    %
    
    
    
    
    
    
    
    
    
    
    6.08
    %Revolving bank facility
    
    
    14,123
    
    
    Nil
    
    
    Nil
    
    
    
    14,123
    
    
    NilAverage interest rate (CAD BA)
    
    
    5.64
    %
    
    
    
    
    
    
    
    
    
    
    5.64
    %Fixed RateCapital lease obligations
    
    
    22,860
    
    
    
    7,943
    
    
    
    9,260
    
    
    
    5,657
    
    
    NilAverage interest rate
    
    
    6.15
    %
    
    
    6.15
    %
    
    
    6.15
    %
    
    
    6.15
    %Note payable
    
    
    1,181
    
    
    
    1,181
    
    
    Nil
    
    
    Nil
    
    
    NilAverage interest rate
    
    
    6.0
    %
    
    
    6.0
    %Total
    
    $
    127,975
    
    
    $
    18,144
    
    
    $
    33,151
    
    
    $
    76,680
    
    
    $
    Nil
    26




---



##### 



ITEM 8FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
   MANAGEMENT RESPONSIBILITY OVER FINANCIAL REPORTING
    27




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
         
 28




---



##### 



2007
    
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,131
    
    
    $
    5,208Accounts receivable
    
    
    74,261
    
    
    
    66,051Inventory, deposits and prepaid expenses
    
    
    11,325
    
    
    
    10,796Income and other taxes recoverable
    
    
    2,232
    
    
    
    Deferred income taxes (note 8)
    
    
    2,599
    
    
    
    1,720Total current assets
    
    
    95,548
    
    
    
    83,775Property and equipment (note 4)
    
    
    169,062
    
    
    
    145,129Intangible assets (note 5)
    
    
    13,645
    
    
    
    15,888Goodwill (note 6)
    
    
    124,375
    
    
    
    117,146Other
    
    
    
    
    
    
    150Total assets
    
    $
    402,630
    
    
    $
    362,088Liabilities and Shareholders EquityCurrent liabilities:Bank overdraft
    
    $
    5,521
    
    
    $
    3,754Accounts payable and accrued liabilities (note 1(q))
    
    
    67,468
    
    
    
    67,916Income and other taxes payable
    
    
    
    
    
    
    1,275Current portion of long-term debt (note 7)
    
    
    18,144
    
    
    
    15,724Total current liabilities
    
    
    91,133
    
    
    
    88,669Long-term debt (note 7)
    
    
    109,831
    
    
    
    93,139Other
    
    
    3,512
    
    
    
    Deferred income taxes (note 8)
    
    
    7,810
    
    
    
    6,983Shareholders equity:Common shares, no par value, unlimited
authorized, 13,448,159 and 13,419,859
issued and outstanding in 2007
and 2006, respectively (note 9)
    
    
    77,246
    
    
    
    76,913Additional paid-in capital
    
    
    2,436
    
    
    
    1,607Retained earnings
    
    
    104,478
    
    
    
    90,933Accumulated other comprehensive income (note 3)
    
    
    6,184
    
    
    
    3,844Total shareholders equity
    
    
    190,344
    
    
    
    173,297Lease commitments (note 14)Contingent liabilities (note 16)Total liabilities and shareholders equity
    
    $
    402,630
    
    
    $
    362,088
 On behalf of the Board:/s/ RICHARD D. McGRAW
    
    
    
    /s/ JOHN R. GOSSLINGChairman
    
    
    
    Director
  29




---



##### 



20052007
    
    2006
    
    (US and(US GAAP)
    
    (US GAAP)
    
    CDN GAAP)Revenue
    
    $
    670,517
    
    
    $
    514,059
    
    
    $
    428,192Operating expenses
    
    
    565,094
    
    
    
    426,515
    
    
    
    357,960Selling, general and administrative expenses
    
    
    62,086
    
    
    
    47,448
    
    
    
    37,881Other income
    
    
    (432
    )
    
    
    (434
    )
    
    
    (41
    )Depreciation and amortization
    
    
    20,770
    
    
    
    12,490
    
    
    
    6,965647,518
    
    
    
    486,019
    
    
    
    402,765Income from operations before the undernoted
    
    
    22,999
    
    
    
    28,040
    
    
    
    25,427Interest on long-term debt
    
    
    (8,554
    )
    
    
    (2,887
    )
    
    
    (771
    )Interest income
    
    
    128
    
    
    
    227
    
    
    
    473(8,426
    )
    
    
    (2,660
    )
    
    
    (298
    )Income from operations before income taxes
    
    
    14,573
    
    
    
    25,380
    
    
    
    25,129Income taxes (recovery) (note 8):Current
    
    
    1,638
    
    
    
    4,177
    
    
    
    3,506Deferred
    
    
    (775
    )
    
    
    1,945
    
    
    
    3,685863
    
    
    
    6,122
    
    
    
    7,191Net income before cumulative effect of
change in accounting principle
    
    
    13,710
    
    
    
    19,258
    
    
    
    17,938Cumulative effect of change in accounting principle
    
    
    
    
    
    
    141
    
    
    
    Net income
    
    $
    13,710
    
    
    $
    19,399
    
    
    $
    17,938Income per share:Basic:Net income before cumulative effect
of change in accounting principle
    
    $
    1.02
    
    
    $
    1.49
    
    
    $
    1.43Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.01
    
    
    
    Net income
    
    $
    1.02
    
    
    $
    1.50
    
    
    $
    1.43Diluted:Net income before cumulative effect
of change in accounting principle
    
    $
    1.00
    
    
    $
    1.47
    
    
    $
    1.40Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.01
    
    
    
    Net income
    
    $
    1.00
    
    
    $
    1.48
    
    
    $
    1.40Weighted average number of shares:Basic
    
    
    13,458,786
    
    
    
    12,887,401
    
    
    
    12,516,265Diluted
    
    
    13,651,799
    
    
    
    13,124,865
    
    
    
    12,848,360
   30




---



##### 



AccumulatedAdditional
    
    
    
    
    
    other
    
    TotalCommon shares
    
    paid-in
    
    Retained
    
    comprehensive
    
    shareholdersNumber
    
    Amount
    
    capital
    
    earnings
    
    income
    
    equityDecember 31, 2006
    
    
    13,419,859
    
    
    $
    76,913
    
    
    $
    1,607
    
    
    $
    90,933
    
    
    $
    3,844
    
    
    $
    173,297Shares issued upon exercise of
employee stock options
    
    
    58,500
    
    
    
    571
    
    
    
    (168
    )
    
    
    
    
    
    
    
    
    
    
    403Shares repurchased for
cancellation (note 9)
    
    
    (30,200
    )
    
    
    (238
    )
    
    
    
    
    
    
    (165
    )
    
    
    
    
    
    
    (403
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,710
    
    
    
    
    
    
    
    13,710Other comprehensive income (note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,340
    
    
    
    2,340Share-based compensation (note 9)
    
    
    
    
    
    
    
    
    
    
    997
    
    
    
    
    
    
    
    
    
    
    
    997December 31, 2007
    
    
    13,448,159
    
    
    $
    77,246
    
    
    $
    2,436
    
    
    $
    104,478
    
    
    $
    6,184
    
    
    $
    190,344
 AccumulatedAdditional
    
    
    
    
    
    other
    
    TotalCommon shares
    
    paid-in
    
    Retained
    
    comprehensive
    
    shareholdersNumber
    
    Amount
    
    capital
    
    earnings
    
    income
    
    equityDecember 31, 2005
    
    
    12,647,636
    
    
    $
    63,604
    
    
    $
    956
    
    
    $
    71,553
    
    
    $
    3,689
    
    
    $
    139,802Shares issued upon exercise of
employee stock options
    
    
    97,300
    
    
    
    526
    
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    479Shares repurchased for
cancellation (note 9)
    
    
    (2,000
    )
    
    
    (14
    )
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    (33
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,399
    
    
    
    
    
    
    
    19,399Other comprehensive income (note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    155Share-based compensation (note 9)
    
    
    
    
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    
    
    
    
    839Shares issued upon acquisition of
subsidiary (note 2)
    
    
    676,923
    
    
    
    12,797
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,797Cumulative effect of a change in
accounting principle (note 1(l))
    
    
    
    
    
    
    
    
    
    
    (141
    )
    
    
    
    
    
    
    
    
    
    
    (141
    )December 31, 2006
    
    
    13,419,859
    
    
    $
    76,913
    
    
    $
    1,607
    
    
    $
    90,933
    
    
    $
    3,844
    
    
    $
    173,297
 AccumulatedAdditional
    
    
    
    
    
    other
    
    TotalCommon shares
    
    paid-in
    
    Retained
    
    comprehensive
    
    shareholdersNumber
    
    Amount
    
    capital
    
    earnings
    
    income
    
    equityDecember 31, 2004
    
    
    12,419,678
    
    
    $
    60,798
    
    
    $
    323
    
    
    $
    54,215
    
    
    $
    3,855
    
    
    $
    119,191Shares issued upon exercise of
employee stock options
    
    
    85,300
    
    
    
    303
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    282Shares repurchased for cancellation
    
    
    (59,800
    )
    
    
    (297
    )
    
    
    
    
    
    
    (600
    )
    
    
    
    
    
    
    (897
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,938
    
    
    
    
    
    
    
    17,938Other comprehensive loss (note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (166
    )
    
    
    (166
    )Share-based compensation (note 9)
    
    
    
    
    
    
    
    
    
    
    654
    
    
    
    
    
    
    
    
    
    
    
    654Shares issued upon acquisition
of subsidiary (note 2)
    
    
    202,458
    
    
    
    2,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,800December 31, 2005
    
    
    12,647,636
    
    
    $
    63,604
    
    
    $
    956
    
    
    $
    71,553
    
    
    $
    3,689
    
    
    $
    139,802
  31




---



##### 



20052007
    
    2006
    
    (US and(US GAAP)
    
    (US GAAP)
    
    CDN GAAP)Cash provided by (used in):Operations:Net income
    
    $
    13,710
    
    
    $
    19,399
    
    
    $
    17,938Items not involving cash from operations:Depreciation and amortization
    
    
    20,770
    
    
    
    12,490
    
    
    
    6,965Deferred income taxes
    
    
    (775
    )
    
    
    1,945
    
    
    
    3,685Gain on sale of property and equipment
    
    
    (432
    )
    
    
    (434
    )
    
    
    (41
    )Share-based compensation expense
    
    
    997
    
    
    
    839
    
    
    
    654Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (141
    )
    
    
    Change in non-cash working capital components
    
    
    (1,274
    )
    
    
    1,026
    
    
    
    (2,034
    )32,996
    
    
    
    35,124
    
    
    
    27,167Investments:Purchases of property and equipment
    
    
    (22,870
    )
    
    
    (27,136
    )
    
    
    (22,863
    )Proceeds on sale of property and equipment
    
    
    931
    
    
    
    2,490
    
    
    
    97Acquisition of subsidiary, net
    
    
    (5,990
    )
    
    
    (89,284
    )
    
    
    (28,192
    )Additional payments due to acquisition of subsidiary
    
    
    (8,901
    )
    
    
    
    
    
    
    Acquisition of business assets
    
    
    
    
    
    
    (2,251
    )
    
    
    Marketable securities
    
    
    
    
    
    
    
    
    
    
    31,974(36,830
    )
    
    
    (116,181
    )
    
    
    (18,984
    )Financing:Change in revolving credit facility and bank overdraft
    
    
    24,170
    
    
    
    7,984
    
    
    
    2,947Proceeds from long-term debt
    
    
    
    
    
    
    70,500
    
    
    
    Repayment of long-term debt
    
    
    (9,124
    )
    
    
    (5,825
    )
    
    
    (3,030
    )Repayment of capital leases
    
    
    (7,842
    )
    
    
    (1,644
    )
    
    
    Financing cost
    
    
    (917
    )
    
    
    
    
    
    
    Issue of common shares upon exercise of stock options
    
    
    403
    
    
    
    479
    
    
    
    282Repurchase of common shares
    
    
    (403
    )
    
    
    (33
    )
    
    
    (921
    )6,287
    
    
    
    71,461
    
    
    
    (722
    )Effect of translation adjustment on cash
    
    
    (2,530
    )
    
    
    212
    
    
    
    (244
    )Increase (decrease) in cash and cash equivalents
    
    
    (77
    )
    
    
    (9,384
    )
    
    
    7,217Cash and cash equivalents, beginning of year
    
    
    5,208
    
    
    
    14,592
    
    
    
    7,375Cash and cash equivalents, end of year
    
    $
    5,131
    
    
    $
    5,208
    
    
    $
    14,592Change in non-cash working capital components:Accounts receivable
    
    $
    (5,254
    )
    
    $
    2,278
    
    
    $
    (3,419
    )Inventory, deposits and prepaid expenses
    
    
    975
    
    
    
    598
    
    
    
    (1,963
    )Income and other taxes recoverable/payable
    
    
    (2,157
    )
    
    
    151
    
    
    
    (1,275
    )Accounts payable and accrued liabilities
    
    
    5,162
    
    
    
    (2,001
    )
    
    
    4,623$
    (1,274
    )
    
    $
    1,026
    
    
    $
    (2,034
    )Supplemental cash flow information:Interest paid
    
    $
    8,827
    
    
    $
    2,480
    
    
    $
    769Income taxes paid
    
    
    6,997
    
    
    
    5,586
    
    
    
    5,063Supplemental disclosure of non-cash transactions:Capital lease additions
    
    
    10,356
    
    
    
    
    
    
    
    Issuance of shares to seller in acquisition
    
    
    
    
    
    
    12,797
    
    
    
    2,800
  32




---



##### 



1.
    
    Significant accounting policies:
 (a)
    
    Description of the business:Vitran Corporation Inc. (Vitran or the Company) is a North American provider of
freight services and distribution solutions to a wide variety of companies and
industries. Vitran offers less-than-truckload (LTL) service throughout Canada and the
United States. Vitran Logistics offers supply chain solutions in Canada and the United
States, including warehousing, inventory management and flow-through distribution
facilities, as well as freight brokerage services. Vitran also provides same-day and
next-day truckload services in the United States.(b)
    
    Basis of presentation:These consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. All material intercompany transactions and balances have
been eliminated on consolidation.These consolidated financial statements have been prepared in accordance with United
States generally accepted accounting principles (GAAP) with a reconciliation to
Canadian generally accepted accounting principles in note 18. The Ontario Business
Corporations Act (OBCA) regulations allow issuers that are required to file reports
with the Securities and Exchange Commission in the United States to file financial
statements under United States GAAP to meet their continuous disclosure obligations in
Canada. Prior to 2006, Vitran prepared its consolidated financial statements in
accordance with Canadian GAAP with a reconciliation to United States GAAP. Commencing
the first quarter of 2008, the reconciliation to Canadian GAAP will no longer be
required.All amounts in these consolidated financial statements are expressed in United States
dollars, unless otherwise stated.(c)
    
    New accounting pronouncements:FSP FIN 48-1, Definition of Settlement in FASB Interpretation No. 48, amends FASB
Interpretation No. 48, Accounting for Uncertainty in Income Tax, to provide guidance on
how an enterprise should determine whether a tax position is effectively settled for the
purpose of recognizing previously unrecognized tax benefits. The FSP is to be adopted
upon initial adoption of FIN 48 with retroactive treatment if required. The Company
adopted FIN 48 January 1, 2007, consistent with the provisions of the FSP, with no cumulative
effect adjustment recorded at adoption.
 33




---



##### 



1.
    
    Significant accounting policies (continued):
 (c)
    
    New accounting pronouncements (continued):SFAS Statement 159, The Fair Value Option for Financial Assets and Financial Liabilities
  Including an amendment of SFAS Statement 115, permits entities to choose to measure
many financial instruments and certain warranty and insurance contracts at fair value on
a contract-by-contract basis. SFAS Statement 159 will be adopted January 1, 2008, as
required by the statement. The requirements of SFAS Statement 159 are not expected to
have an effect on the Companys consolidated financial statements.SFAS Statement 157, Fair Value Measurements, defines fair values, establishes a
framework for measuring fair value in GAAP, and requires enhanced disclosures about fair
value measurements. This statement applies when other accounting pronouncements require
or permit fair value measurements. SFAS Statement 157 will be adopted January 1, 2008
as required by the statement.EITF 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment
Awards, requires that the tax benefit received on dividends associated with share-based
awards that are charged to retained earnings should be recorded in additional paid-in
capital and included in the pool of excess tax benefits available to absorb potential
future tax deficiencies on share-based payment awards. EITF 06-11 will be adopted
January 1, 2008 as required by the guidance. The requirement of EITF 06-11 will not
have an effect on the Companys consolidated financial statements.(d)
    
    Foreign currency translation:A majority of the Companys shareholders, customers and industry analysts are located in
the United States. Accordingly, the Company has adopted the United States dollar as its
reporting currency.The United States dollar is the functional currency of the Companys operations in the
United States. The Canadian dollar is the functional currency of the Companys Canadian
operations.Each operation translates foreign currency-denominated transactions into its functional
currency using the rate of exchange in effect at the date of the transaction.Monetary assets and liabilities denominated in a foreign currency are translated into
the functional currency of the operation using the year-end rate of exchange giving rise
to a gain or loss that is recognized in income during the current period.
 34




---



##### 



1.
    
    Significant accounting policies (continued):
 (d)
    
    Foreign currency translation (continued):For reporting purposes, the Canadian operations are translated into United States
dollars using the current rate method. Under this method, all assets and liabilities
are translated at the year-end rate of exchange and all revenue and expense items are
translated at the average rate of exchange for the year. The resulting translation
adjustment is recorded as a separate component of shareholders equity. United States
dollar debt of $72.2 million (2006  $85.2 million) is designated as a hedge of the
investment in the United States dollar functional operation, such that related
transaction gains and losses are recorded in the separate component of shareholders
equity.In respect of other transactions denominated in currencies other than the Canadian
dollar, the monetary assets and liabilities of the Company are translated at the
year-end rates. Revenue and expenses are translated at rates of exchange prevailing on
the transaction dates. All of the exchange gains or losses resulting from these other
transactions are recognized in income.(e)
    
    Revenue recognition:The Companys LTL and truckload business units and freight brokerage operations
recognize revenue upon the delivery of the related freight and direct shipment costs as
incurred. Revenue for the logistics operations is recognized as the management services
are provided.(f)
    
    Accounts receivable:Accounts receivable are presented net of allowance for doubtful accounts of $2.5 million
at December 31, 2007 (2006  $2.2 million).(g)
    
    Cash and cash equivalents:Cash and cash equivalents include cash on account and short-term investments with
maturities of three months or less at the date of purchase and are stated at cost, which
approximates market value.(h)
    
    Inventory:Inventory consists of tires and spare parts and is valued at the lower of average cost
and replacement cost.
 35




---



##### 



1.
    
    Significant accounting policies (continued):
 (i)
    
    Property and equipment:Property and equipment are recorded at cost. Depreciation of property and equipment is
provided on a straight-line basis from the date assets are put in service over their
estimated useful lives as follows:
 Buildings
    
    3031.5 yearsLeasehold interests and improvements
    
    Over term of leaseVehicles:Trailers and containers
    
    12 yearsTrucks
    
    8 yearsMachinery and equipment
    
    510 years
 Tires purchased as part of a vehicle are capitalized as a cost to the vehicle.
Replacement tires are expensed when placed in service.(j)
    
    Goodwill and intangible assets:As at September 30, 2007, the Company completed its annual goodwill impairment test and
concluded there was no impairment. The change in goodwill is attributable to
translating the Canadian dollar-denominated goodwill to the United States dollar
reporting currency and to the acquisition of a subsidiary and acquisition of a business
(note 2).Intangible assets consist of not-to-compete covenants and customer relationships and are
amortized on a straight-line basis over their expected lives ranging from three to eight
years.(k)
    
    Income taxes:The Company uses the asset and liability method of accounting for income taxes. Under
the asset and liability method, deferred tax assets and liabilities are recognized for
the deferred tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax
bases. Significant judgment is required in determining whether deferred tax assets will
be realized in full or in part. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the year
that includes the date of enactment. The Company adopted FASB Interpretation No. 48,
Accounting for Uncertainty
 36




---



##### 



1.
    
    Significant accounting policies (continued):
 (k)
    
    Income taxes (continued):in Income Taxes, on January 1, 2007 as described in note 8. FIN 48 requires that
uncertain tax positions are evaluated in a two-step process, whereby (i) the Company
determines whether it is more likely than not that the tax positions will be sustained
based on the technical merits of the position and (ii) for those tax positions that meet
the more-likely-than-not recognition threshold, the Company would recognize the largest
amount of tax benefit that is greater than fifty percent likely of being realized upon
ultimate settlement with the related tax authority.(l)
    
    Share-based compensation:Under the Companys stock option plan, options to purchase common shares of the Company
may be granted to key employees, officers and directors of the Company by the Board of
Directors or by the Companys Compensation Committee. There are 820,200 options
outstanding under the plan. The term of each option is 10 years and the vesting period
is five years. The exercise price for options is the trading price of the common shares
of the Company on The Toronto Stock Exchange on the day of the grant.For all stock option grants prior to January 1, 2003, share-based compensation to
employees was accounted for based on the intrinsic value method under APB No. 25 and
related interpretations. On January 1, 2003, in accordance with a transitional option
permitted under amended SFAS 148, the Company had prospectively applied the
fair-value-based method to all stock options granted on or after January 1, 2003. The
Company recognized share-based compensation for all stock options granted on or after
January 1, 2003 and presented the disclosures required by SFAS 123.On January 1, 2006, the Company adopted SFAS 123(R), Share-Based Payments, using the
modified prospective transition method. In accordance with the modified prospective
transition method, the consolidated financial statements have not been restated to
reflect the impact of SFAS 123(R).Under SFAS 123(R), using the modified prospective method, compensation expense is
recognized for all share-based payments granted prior to, but not yet vested as of,
January 1, 2006 based on the grant date fair value estimated in accordance with the
original provisions of SFAS 123 and compensation expense is recognized for all
share-based payments granted on or after January 1, 2006, based on the grant date fair
value estimated in accordance with the provisions of SFAS 123(R).
 37




---



##### 



1.
    
    Significant accounting policies (continued):
 (l)
    
    Share-based compensation (continued):The Company recorded in income $0.1 million related to the cumulative effect of a change
in accounting principle as of January 1, 2006. In accordance with SFAS 123, the Company
recognized compensation expense assuming all awards will vest and reversed recognized
compensation expense for forfeited awards only when the awards were actually forfeited.
SFAS 123(R) requires an estimate of forfeitures when recognizing share-based
compensation expense. Note 9(b) provides supplemental disclosure for the Companys
stock options.(m)
    
    Advertising costs:Advertising costs are expensed as incurred. Advertising costs amounted to $784 in 2007
(2006  $595; 2005  $538).(n)
    
    Impairment of long-lived assets:An impairment is recognized when the carrying amount of a long-lived asset to be held
and used exceeds the sum of undiscounted cash flows expected from its use and disposal,
and is measured as the amount by which the carrying amount of an asset exceeds its fair
value. A long-lived asset should be tested when events or circumstances indicate that
its carrying amount may not be recoverable. During 2007 and 2006, the Company has not
identified any indicators that would require testing for an impairment.(o)
    
    Derivative instruments:Derivative instruments are used to hedge the Companys exposure to changes in interest
rates. All derivatives are recognized on the Consolidated Balance Sheets at fair value
based on quoted market prices and are recorded in either current or non-current assets
or liabilities based on their maturity. Changes in the fair values of derivatives are
recorded in income or other comprehensive income, based on whether the instrument is
designated as a hedge transaction and, if so, the type of hedge transaction. Gains or
losses on derivative instruments reported in other comprehensive income are reclassified
to income in the period the hedged item affects income. If the underlying hedged
transaction ceases to exist, any associated amounts reported in other comprehensive
income are reclassified into income at that time. Any ineffectiveness is recognized in
income in the current period.
 38




---



##### 



1.
    
    Significant accounting policies (continued):
 (p)
    
    Claims and insurance accruals:Claims and insurance accruals reflect the estimated total cost of claims, including
amounts for claims incurred but not reported, for cargo loss and damage, bodily injury
and property damage, workers compensation, long-term disability and group health. In
Canada and the United States, the Company has self-insurance retention amounts per
incident for auto liability, casualty and cargo claims. In the United States, the
Company has self-insurance retention amounts per incident for workers compensation and
employee medical. In establishing these accruals, management evaluates and monitors
each claim individually, and uses factors such as historical experience, known trends
and third party estimates to determine the appropriate reserves for potential liability.(q)
    
    Accounts payable and accrued liabilities:
 2007
    
    
    2006Accounts payable
    
    $
    33,988
    
    
    $
    26,548Accrued wages and benefits
    
    
    11,458
    
    
    
    10,075Accrued claims, self insurance and
workers compensation
    
    
    9,314
    
    
    
    8,672Amounts payable to vendors of acquisitions
    
    
    
    
    
    
    7,434Other
    
    
    12,708
    
    
    
    15,187$
    67,468
    
    
    $
    67,916
 (r)
    
    Deferred share units:The Company maintains a deferred share unit (DSU) plan for all directors. Under this
plan, all directors receive units at the end of each quarter based on the market price
of common shares equivalent to Cdn. $2,500.00. The Company records compensation expense
and the corresponding liability each period initially for Cdn. $2,500.00 and
subsequently based on changes in the market price of common shares.In addition to the directors DSU plan, the Company adopted a DSU plan for senior
executives. Under this plan, eligible senior executives receive units at the end of
each quarter based on the market price of common shares equivalent to the senior
executives entitlement. The entitlement amount varies based on the senior executives
position in the Company and the years of eligible service. The maximum entitlement
amount varies between $2,500.00 and $20,000.00 per annum. The Company records
compensation expense and the corresponding liability each period based on the market
price of common shares.
 39




---



##### 



1.
    
    Significant accounting policies (continued):
 (s)
    
    Use of estimates:The preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the year. Significant estimates are
used in determining, but not limited to, the allowance for doubtful accounts, deferred
tax assets, claims and insurance accruals, share-based compensation, intangible asset
values and the fair value of reporting units for purposes of goodwill impairment tests.
Actual results could differ from those estimates.
 2.
    
    Acquisitions:Las Vegas/L.A. Express, Inc.On November 30, 2007, the Company acquired 100 percent of the outstanding shares of Las
Vegas/L.A. Express, Inc. (LVLA). The aggregate purchase consideration was approximately
$8.45 million (including transaction costs). This is comprised of $6.25 million in cash,
$1.9 million in assumed debt and transaction costs of approximately $0.3 million. Further,
approximately $4.35 million of additional cash consideration is contingent on the vendors
meeting certain future financial metrics. All additional contingent consideration paid to
the vendors will be allocated to goodwill. The results of operations of LVLA are included in
the consolidated results of the Company commencing December 1, 2007. The cash portion of the
transaction was financed from proceeds from the Companys revolving credit facility. The
Company has not completed the allocation of identifiable intangible assets and goodwill. The
Company does not anticipate that the amortization of intangible assets would be material to
2007 results. The total amount of goodwill, once determined, will not be deductible for tax
purposes.PJAX Freight SystemOn October 2, 2006, the Company acquired 100 percent of the outstanding shares of PJAX, Inc.
and all the real estate held by Woodhurst Realty LLC and Northridge Enterprises LP,
collectively known as PJAX Freight System (PJAX). The aggregate purchase consideration was
approximately $112.8 million (including transaction costs) excluding assumed debt. This is
comprised of approximately $80.0 million in cash, Vitran common shares valued at $12.8
million (676,923 common shares valued at $18.90 per share) and holdbacks of $11.7 million
payable during the year subsequent to the date of acquisition. During the 2006 fourth
quarter, $9.8 million of the holdbacks were paid to the vendors. The remaining amount of
holdbacks were paid in 2007. Transaction costs amounted to approximately $1.6 million.
During the 2006 fourth quarter, Vitran executed a joint election with the seller to structure
the transaction as an asset sale for tax purposes and approximately an additional $5.5
million of cash would be payable in April 2007. In addition, the Company assumed debt of
approximately $27.1 million
 40




---



##### 



bringing the
aggregate purchase consideration to $139.9 million. The results of operations of PJAX are
included in the consolidated results of the Company commencing October 2, 2006. The cash
portion of the transaction was financed from existing cash and proceeds from long-term debt.
The total amount of goodwill is expected to be deductible for tax purposes. Based on the
final calculations for the joint election, an additional $6.7 million of cash was paid in
2007. As such, an additional $1.2 million was recorded as an adjustment to goodwill.Sierra West Express Inc.On January 3, 2006, the Company acquired all the assets and selected liabilities of Sierra
West Express Inc. (SWE), a private LTL carrier headquartered in Sparks, Nevada. SWE added
eight new terminals to Vitrans network in the states of Nevada, California and Arizona. The
aggregate purchase price was $2.5 million, comprised of $2.3 million of cash and a $0.2
million note payable to the vendor in April 2007. The results of operations of SWE are
included in the consolidated results of the Company commencing January 3, 2006. The cash
portion of the transaction was financed from existing cash on-hand. The total amount of
goodwill is expected to be deductible for tax purposes.Chris Truck LineOn May 31, 2005, the Company acquired 100 percent of the outstanding shares of R.A.
Christopher, Inc. and Kansas Motor Freight Corporation collectively operating as Chris Truck
Line (CTL). CTL is a Kansas-based regional LTL carrier operating in 11 states in the
Midwestern and Southwestern United States. The results of operations of CTL are included in
the consolidated results of the Company commencing June 1, 2005. The aggregate purchase
price was $31.0 million, comprised of $26.5 million of cash and 202,458 common shares valued
at $2.8 million. During the 2005 third quarter, Vitran executed a joint election with the
seller to structure the transaction as an asset sale for tax purposes and an additional $1.7
million of cash was paid in April 2006. The cash portion of the transaction was financed
from existing cash and marketable securities balances. The total amount of goodwill is
expected to be deductible for tax purposes.
 41




---



##### 



2.
    
    Acquisitions (continued):The following table summarizes the estimated fair value of the assets acquired and
liabilities assumed at the date of the acquisition, as based on independent appraisals and
management estimates:
 2007
    
    2006
    
    2005LVLA
    
    SWE
    
    PJAX
    
    CTLCurrent assets
    
    $
    4,146
    
    
    $
    1,776
    
    
    $
    25,087
    
    
    $
    3,557Property and equipment
    
    
    2,485
    
    
    
    2,127
    
    
    
    62,848
    
    
    
    12,375Identifiable intangible assets:Covenants not-to-compete
(3- to 6-year useful life)
    
    
    
    
    
    
    45
    
    
    
    2,700
    
    
    
    240Customer relationships
(8-year useful life)
    
    
    
    
    
    
    540
    
    
    
    11,000
    
    
    
    2,300Other assets
    
    
    
    
    
    
    
    
    
    
    165
    
    
    
    Goodwill
    
    
    4,529
    
    
    
    1,164
    
    
    
    55,768
    
    
    
    15,88511,160
    
    
    
    5,652
    
    
    
    157,568
    
    
    
    34,357Current liabilities
    
    
    2,565
    
    
    
    3,155
    
    
    
    17,646
    
    
    
    3,362Deferred income tax liability
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    Capital leases
    
    
    624
    
    
    
    
    
    
    
    21,319
    
    
    
    Term loans
    
    
    1,285
    
    
    
    
    
    
    
    5,785
    
    
    
    Net assets acquired
    
    $
    6,594
    
    
    $
    2,497
    
    
    $
    112,818
    
    
    $
    30,995
 The following pro forma financial information reflects the results of operations of Vitran as
if the acquisition of LVLA had taken place on January 1, 2006. The pro forma financial
information also reflects the results of operations of SWE and PJAX as if their respective
acquisition had taken place on January 1, 2005. The pro forma financial information also
reflects the results of operations of CTL from January 1, 2005 to May 31, 2005. The pro
forma financial information is not necessarily indicative of the results as it would have
been if the acquisition had been effected on the assumed date and is not necessarily
indicative of future results:
 2007
    
    
    2006
    
    
    2005Pro forma revenue
    
    $
    694,869
    
    
    $
    665,122
    
    
    $
    620,025Pro forma net income
    
    
    14,525
    
    
    
    16,740
    
    
    
    18,370Pro forma diluted income per share
    
    
    1.06
    
    
    
    1.23
    
    
    
    1.35
 42




---



##### 



3.
    
    Comprehensive income:
  Foreign
    
    
    
    
    
    Interestcurrency
    
    Marketable
    
    ratetranslation
    
    securities
    
    swap
    
    TotalBalance at December 31, 2004
    
    $
    3,849
    
    
    $
    6
    
    
    $
    
    
    
    $
    3,855Other comprehensive loss:Translation adjustment
    
    
    (160
    )
    
    
    
    
    
    
    
    
    
    
    (160
    )Realized gain
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )Tax effect
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2(160
    )
    
    
    (6
    )
    
    
    
    
    
    
    (166
    )Balance at December 31, 2005
    
    
    3,689
    
    
    
    
    
    
    
    
    
    
    
    3,689Other comprehensive income (loss):Translation adjustment
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    170Unrealized loss
    
    
    
    
    
    
    
    
    
    
    (25
    )
    
    
    (25
    )Tax effect
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    10170
    
    
    
    
    
    
    
    (15
    )
    
    
    155Balance at December 31, 2006
    
    
    3,859
    
    
    
    
    
    
    
    (15
    )
    
    
    3,844Other comprehensive income (loss):Translation adjustment
    
    
    3,382
    
    
    
    
    
    
    
    
    
    
    
    3,382Unrealized loss
    
    
    
    
    
    
    
    
    
    
    (1,541
    )
    
    
    (1,541
    )Tax effect
    
    
    
    
    
    
    
    
    
    
    499
    
    
    
    4993,382
    
    
    
    
    
    
    
    (1,042
    )
    
    
    2,340Balance at December 31, 2007
    
    $
    7,241
    
    
    $
    
    
    
    $
    (1,057
    )
    
    $
    6,184
 2007
    
    2006
    
    2005Net income
    
    $
    13,710
    
    
    $
    19,399
    
    
    $
    17,938Other comprehensive income (loss)
    
    
    2,340
    
    
    
    155
    
    
    
    (166
    )Comprehensive income
    
    $
    16,050
    
    
    $
    19,554
    
    
    $
    17,772
 43




---



##### 



4.
    
Property and equipment:
 2007
    
    2006Land
    
    $
    35,085
    
    
    $
    32,295Buildings
    
    
    67,894
    
    
    
    54,992Leasehold interests and improvements
    
    
    2,276
    
    
    
    1,954Vehicles
    
    
    112,622
    
    
    
    89,619Machinery and equipment
    
    
    26,361
    
    
    
    21,182244,238
    
    
    
    200,042Less accumulated depreciation
    
    
    75,176
    
    
    
    54,913$
    169,062
    
    
    $
    145,129
  5.
    
    Intangible assets:
 2007
    
    2006Customer relationships
    
    $
    13,840
    
    
    $
    2,300Acquired customer relationships
    
    
    
    
    
    
    11,54013,840
    
    
    
    13,840Covenants not-to-compete
    
    
    2,985
    
    
    
    240Acquired covenants not-to-compete
    
    
    
    
    
    
    2,7452,985
    
    
    
    2,985Less accumulated amortization
    
    
    3,180
    
    
    
    937$
    13,645
    
    
    $
    15,888
 44




---



##### 



5.
    
    Intangible assets (continued):
  Year ending December 31:2008
    
    $
    2,2432009
    
    
    2,2322010
    
    
    2,2162011
    
    
    2,1802012
    
    
    2,068Thereafter
    
    
    2,706$
    13,645
 6.
    
    Goodwill:
 2007
    
    
    2006Opening balance
    
    $
    117,146
    
    
    $
    61,448Foreign exchange
    
    
    1,527
    
    
    
    (61
    )Adjustment to goodwill (note 2)
    
    
    1,173
    
    
    
    Acquired goodwill (note 2)
    
    
    4,529
    
    
    
    55,759$
    124,375
    
    
    $
    117,146
 45




---



##### 



7.
    
    Long-term debt:
 2007
    
    
    2006Term bank credit facilities (a)
    
    $
    58,911
    
    
    $
    81,930Revolving credit facility (b)
    
    
    45,023
    
    
    
    7,215Capital leases (c)
    
    
    22,860
    
    
    
    19,718Note payable (d)
    
    
    1,181
    
    
    
    127,975
    
    
    
    108,863Less current portion
    
    
    18,144
    
    
    
    15,724$
    109,831
    
    
    $
    93,139
 (a)
    
    The term bank credit facility is secured by accounts receivable and general
security agreements of the Company and of all its subsidiaries.
 During 2007, the Company refinanced its term debt under a new credit agreement.
Deferred financing costs of $0.5 million related to the former credit facilities were
written off during the year. The new credit agreement provides a $60 million term
credit facility maturing July 31, 2012. The Company had $56.0 million bearing interest
at 6.31%, outstanding under the term facility at December 31, 2007. The provisions of
the term facility impose certain financial maintenance tests. At December 31, 2007, the
Company was in compliance with these financial maintenance tests.
  (b)
    
    During 2007, the Company refinanced its revolving debt to provide up to $100
million, maturing July 31, 2012. The Company had $45.0 million, bearing interest at
5.94% to 6.45%, outstanding at December 31, 2007. The provisions of the revolving
facility impose certain financial maintenance tests. At December 31, 2007, the Company
was in compliance with these financial maintenance tests.
 (c)
    
    During 2007, the Company financed certain equipment by entering into additional
capital leases of $10.4 million and assumed $0.6 million of capital leases as part of
the LVLA acquisition. The Company had $22.9 million of capital leases remaining at
December 31, 2007.
 46




---



##### 



7.
    
    Long-term debt (continued):
 (d)
    
    As part of the LVLA acquisition the Company assumed a $1.3 million note payable
to the vendor bearing interest at 6.0%. At December 31, 2007, $1.2 million of the note
payable was outstanding.
  Year ending December 31:2008
    
    $
    18,1442009
    
    
    16,4242010
    
    
    16,7272011
    
    
    19,3892012
    
    
    57,291$
    127,975
 8.
    
    Income taxes:
  2007
    
    2006
    
    2005Effective statutory federal, state
and provincial income tax rate
    
    
    36.12
    %
    
    
    36.12
    %
    
    
    36.12
    %Effective tax expense on income before
income taxes
    
    $
    5,264
    
    
    $
    9,167
    
    
    $
    9,077Increase (decrease) results from:Non-deductible share-based
compensation expense
    
    
    354
    
    
    
    303
    
    
    
    237Income taxed at different rates
in foreign jurisdictions
    
    
    (4,930
    )
    
    
    (3,072
    )
    
    
    (1,888
    )Other
    
    
    175
    
    
    
    (276
    )
    
    
    (235
    )Actual income tax expense
    
    $
    863
    
    
    $
    6,122
    
    
    $
    7,191
 47




---



##### 



8.
    
    Income taxes (continued):
  2007
    
    2006
    
    2005Current income tax expense (recovery):Canada:Federal
    
    $
    589
    
    
    $
    2,922
    
    
    $
    1,053Provincial
    
    
    304
    
    
    
    1,695
    
    
    
    625United States:Federal
    
    
    78
    
    
    
    (602
    )
    
    
    1,339State
    
    
    364
    
    
    
    12
    
    
    
    208Other
    
    
    303
    
    
    
    150
    
    
    
    2811,638
    
    
    
    4,177
    
    
    
    3,506Deferred income tax expense (recovery):Canada:Federal
    
    
    483
    
    
    
    (754
    )
    
    
    1,280Provincial
    
    
    250
    
    
    
    (437
    )
    
    
    760United States:Federal
    
    
    (1,240
    )
    
    
    2,398
    
    
    
    1,424State
    
    
    (268
    )
    
    
    738
    
    
    
    221(775
    )
    
    
    1,945
    
    
    
    3,685$
    863
    
    
    $
    6,122
    
    
    $
    7,191
  2007
    
    2006Current deferred income tax assets:Allowance for doubtful accounts
    
    $
    536
    
    
    $
    397Insurance reserves
    
    
    2,063
    
    
    
    1,229Financing costs
    
    
    
    
    
    
    94$
    2,599
    
    
    $
    1,720Non-current deferred income tax assets:Financing costs
    
    $
    
    
    
    $
    147Loss carryforwards
    
    
    9,935
    
    
    
    Other
    
    
    
    
    
    
    2,2419,935
    
    
    
    2,388Non-current deferred income tax liabilities:Financing costs
    
    
    (27
    )
    
    
    Property and equipment
    
    
    (11,061
    )
    
    
    (5,123
    )Goodwill and intangibles
    
    
    (6,317
    )
    
    
    (4,248
    )Other
    
    
    (340
    )
    
    
    (17,745
    )
    
    
    (9,371
    )$
    (7,810
    )
    
    $
    (6,983
    )
 48




---



##### 



8.
    
    Income taxes (continued):At December 31, 2007, the Company had approximately $23.7 million of net operating loss
carryforwards available to reduce future years taxable income for which a deferred tax asset
has been recognized. The net operating loss was generated in 2007 and will expire in 2027 if
not utilized.The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes, on January 1, 2007. The implementation of Interpretation 48 did not result
in a change in the estimated liability for unrecognized tax benefits at January 1, 2007. At
December 31, 2007, the Company had unrecognized tax benefits of approximately $2.1 million,
of which an estimated $1.9 million if recognized would have an impact on the effective tax
rate.The Company recognizes interest and penalties related to unrecognized tax benefits in the tax
provision. At December 31, 2007, the Company did not recognize a material amount of interest
and penalties. The Company had approximately $0.6 million accrued for interest and
penalties.The Company and its subsidiaries file income tax returns in U.S. and Canadian federal
jurisdictions, and various states, provinces and foreign jurisdictions. The Internal Revenue
Service and Canada Revenue Agency had in 2007 commenced examinations of the 2003, 2004 and
2005 income tax returns. The examinations are expected to be completed by 2008. These
audits may impact the Companys unrecognized tax benefits in the next 12 months; however, the
estimated financial outcome is indeterminable at this time. Overall, the years 1999 to 2006
remain open to examination by tax authorities.A reconciliation of the beginning and ending amount of unrecognized tax benefits is as
follows:
 Balance at January 1, 2007
    
    $
    1,704Additions related to tax positions taken in the current year
    
    
    244Additional related to tax position taken in previous years
    
    
    109Reductions due to expiry of statute of limitations
    
    
    (237
    )Addition due to foreign exchange translation
    
    
    299Balance at December 31, 2007
    
    $
    2,119
 49




---



##### 



9.
    
    Common shares:
 (a)
    
    Normal course issuer bid:The Company purchased 30,200 common shares for cancellation during 2007 (2006  2,000)
under a normal course issuer bid. The cost of the repurchase in excess of the book
value of the shares in 2007 was $165 (2006  $19).(b)
    
    Stock options:The Company provides a stock option plan to key employees, officers and directors to
encourage executives to acquire a meaningful equity ownership interest in the Company
over a period of time and, as a result, reinforce executives attention on the long-term
interest of the Company and its shareholders. Under the plan, options to purchase
common shares of the Company may be granted to key employees, officers and directors of
the Company by the Board of Directors or by the Companys Compensation Committee. There
are 820,200 options outstanding under the plan. The term of each option is 10 years and
the vesting period is five years. The exercise price for options is the trading price
of the common shares of the Company on the Toronto Stock Exchange on the day of the
grant. The Company adopted SFAS Statement 123(R) on January 1, 2006 as described in
note 1(l).The weighted average estimated fair value at the date of the grant for the options
granted during 2007 was $7.12 (2006  $7.69) per share.The fair value of each option granted was estimated on the date of grant using the
Black-Scholes-Morton fair value option pricing model with the following assumptions:
 2007
    
    
    2006
    
    
    2005Risk-free interest rate
    
    
    4.20
    %
    
    
    4.19
    %
    
    
    3.88%  4.24
    %Volatility factor of the future
expected market price of
the Companys common shares
    
    
    31.76
    %
    
    
    33.22
    %
    
    
    33.84%  34.39
    %Expected life of the options
    
    6 years
    
    
    6 years
    
    

    8 years
 50




---



##### 



9.
    
    Common shares (continued):
  2007
    
    2006Weighted
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    averageexercise
    
    
    
    
    
    exerciseNumber
    
    price
    
    Number
    
    priceOutstanding,beginning of year
    
    
    767,700
    
    
    $
    11.42
    
    
    
    777,500
    
    
    $
    9.71Granted
    
    
    115,000
    
    
    
    18.08
    
    
    
    102,500
    
    
    
    18.99Forfeited
    
    
    (4,000
    )
    
    
    16.31
    
    
    
    (15,000
    )
    
    
    16.53Exercised
    
    
    (58,500
    )
    
    
    6.88
    
    
    
    (97,300
    )
    
    
    4.92Outstanding, end of year
    
    
    820,200
    
    
    
    12.66
    
    
    
    767,700
    
    
    
    11.42Exercisable, end of year
    
    
    465,400
    
    
    $
    9.13
    
    
    
    406,900
    
    
    $
    7.48
  Options outstanding
    
    Options exercisableWeightedaverage
    
    Weighted
    
    
    
    
    
    Weightedremaining
    
    average
    
    
    
    
    
    averageRange of exercise
    
    Number
    
    contractual
    
    exercise
    
    Number
    
    exerciseprices
    
    outstanding
    
    life (years)
    
    price
    
    exercisable
    
    price$2.20  $2.61
    
    
    132,800
    
    
    
    3.94
    
    
    $
    2.29
    
    
    
    132,800
    
    
    $
    2.29$4.77  $5.44
    
    
    127,500
    
    
    
    1.23
    
    
    
    4.93
    
    
    
    127,500
    
    
    
    4.93$15.23  $18.99
    
    
    559,900
    
    
    
    7.43
    
    
    
    16.89
    
    
    
    205,100
    
    
    
    16.16$2.20  $18.99
    
    
    820,200
    
    
    
    5.90
    
    
    
    12.66
    
    
    
    465,400
    
    
    
    9.13
  51




---



##### 



10.
    
    Computation of income per share:
 2007
    
    2006
    
    2005Numerator:Net income
    
    $
    13,710
    
    
    $
    19,399
    
    
    $
    17,938Denominator:Basic weighted average
shares outstanding
    
    
    13,458,786
    
    
    
    12,887,401
    
    
    
    12,516,265Dilutive stock options
    
    
    193,013
    
    
    
    237,464
    
    
    
    332,095Dilutive weighted-average
shares outstanding
    
    
    13,651,799
    
    
    
    13,124,865
    
    
    
    12,848,360Basic income per share before
cumulative effect of a change
in accounting principle
    
    $
    1.02
    
    
    $
    1.49
    
    
    $
    1.43Effect of a change in accounting
principle
    
    
    
    
    
    
    0.01
    
    
    
    Basic income per share
    
    
    1.02
    
    
    
    1.50
    
    
    
    1.43Dilutive income per share
before cumulative effect of a
change in accounting principle
    
    
    1.00
    
    
    
    1.47
    
    
    
    1.40Effect of a change in accounting
principle
    
    
    
    
    
    
    0.01
    
    
    
    Diluted income per share
    
    
    1.00
    
    
    
    1.48
    
    
    
    1.40
  11.
    
    Risk management activities:
  52




---



##### 



12.
    
    Segmented information:The Companys business operations are grouped into three operating segments: LTL, logistics
and truckload, which provide transportation services in Canada and the United States.Segmented information is presented below for each of the years ended December 31, 2007, 2006
and 2005:
 Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    ConsolidatedYear ended December 31, 2007
    
    truckload
    
    Logistics
    
    Truckload
    
    Total
    
    office and other
    
    totalsRevenue
    
    $
    584,786
    
    
    $
    52,845
    
    
    $
    32,886
    
    
    $
    670,517
    
    
    $
    
    
    
    $
    670,517Operating, selling, general and
administrative expenses
    
    
    543,095
    
    
    
    48,887
    
    
    
    30,173
    
    
    
    622,155
    
    
    
    5,025
    
    
    
    627,180Other income
    
    
    (414
    )
    
    
    (1
    )
    
    
    (17
    )
    
    
    (432
    )
    
    
    
    
    
    
    (432
    )Depreciation and amortization expense
    
    
    18,952
    
    
    
    688
    
    
    
    1,052
    
    
    
    20,692
    
    
    
    78
    
    
    
    20,770Income (loss) from operations
before the undernoted
    
    $
    23,153
    
    
    $
    3,271
    
    
    $
    1,678
    
    
    $
    28,102
    
    
    $
    (5,103
    )
    
    
    22,999Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,426Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    863Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    13,710Capital expenditures
    
    $
    31,103
    
    
    $
    1,379
    
    
    $
    698
    
    
    $
    33,180
    
    
    $
    46
    
    
    $
    33,226Goodwill
    
    $
    113,924
    
    
    $
    5,686
    
    
    $
    4,765
    
    
    $
    124,375
    
    
    $
    
    
    
    $
    124,375Total assets
    
    $
    343,679
    
    
    $
    27,485
    
    
    $
    11,781
    
    
    $
    382,945
    
    
    $
    19,685
    
    
    $
    402,630
 53




---



##### 



12. Segmented information (continued):
 Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    ConsolidatedYear ended December 31, 2006
    
    truckload
    
    Logistics
    
    Truckload
    
    Total
    
    office and other
    
    totalsRevenue
    
    $
    441,499
    
    
    $
    39,762
    
    
    $
    32,798
    
    
    $
    514,059
    
    
    $
    
    
    
    $
    514,059Operating, selling, general and
administrative expenses
    
    
    402,729
    
    
    
    36,661
    
    
    
    30,217
    
    
    
    469,607
    
    
    
    4,356
    
    
    
    473,963Other income
    
    
    (433
    )
    
    
    
    
    
    
    (1
    )
    
    
    (434
    )
    
    
    
    
    
    
    (434
    )Depreciation and amortization expense
    
    
    11,174
    
    
    
    422
    
    
    
    848
    
    
    
    12,444
    
    
    
    46
    
    
    
    12,490Income (loss) from operations
before the undernoted
    
    $
    28,029
    
    
    $
    2,679
    
    
    $
    1,734
    
    
    $
    32,442
    
    
    $
    (4,402
    )
    
    
    28,040Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,660Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,122Net income before cumulative effect
of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,258Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    19,399Capital expenditures
    
    $
    18,620
    
    
    $
    6,966
    
    
    $
    1,265
    
    
    $
    26,851
    
    
    $
    285
    
    
    $
    27,136Goodwill
    
    $
    111,255
    
    
    $
    1,126
    
    
    $
    4,765
    
    
    $
    117,146
    
    
    $
    
    
    
    $
    117,146Total assets
    
    $
    326,952
    
    
    $
    12,409
    
    
    $
    14,841
    
    
    $
    354,202
    
    
    $
    7,886
    
    
    $
    362,088
 Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    ConsolidatedYear ended December 31, 2005
    
    truckload
    
    Logistics
    
    Truckload
    
    Total
    
    office and other
    
    totalsRevenue
    
    $
    352,693
    
    
    $
    40,261
    
    
    $
    35,238
    
    
    $
    428,192
    
    
    $
    
    
    
    $
    428,192Operating, selling, general
and administrative expenses
    
    
    322,262
    
    
    
    37,745
    
    
    
    32,373
    
    
    
    392,380
    
    
    
    3,461
    
    
    
    395,841Other income
    
    
    (21
    )
    
    
    
    
    
    
    (20
    )
    
    
    (41
    )
    
    
    
    
    
    
    (41
    )Depreciation and amortization expense
    
    
    5,958
    
    
    
    375
    
    
    
    577
    
    
    
    6,910
    
    
    
    55
    
    
    
    6,965Income (loss) from operations
before the undernoted
    
    $
    24,494
    
    
    $
    2,141
    
    
    $
    2,308
    
    
    $
    28,943
    
    
    $
    (3,516
    )
    
    
    25,427Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    298Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,191Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,938Capital expenditures
    
    $
    19,240
    
    
    $
    120
    
    
    $
    3,488
    
    
    $
    22,848
    
    
    $
    15
    
    
    $
    22,863
 54




---



##### 



12.
    
    Segmented information (continued):Geographic information for revenue from point of origin and total assets is as follows:
 2007
    
    
    2006
    
    
    2005Revenue:Canada
    
    $
    212,974
    
    
    $
    193,656
    
    
    $
    175,805United States
    
    
    457,543
    
    
    
    320,403
    
    
    
    252,387$
    670,517
    
    
    $
    514,059
    
    
    $
    428,192
 2007
    
    
    2006Total assets:Canada
    
    $
    82,868
    
    
    $
    66,120United States
    
    
    319,762
    
    
    
    295,968$
    402,630
    
    
    $
    362,0882007
    
    
    
    2006Total long-lived assets:Canada
    
    $
    58,291
    
    
    $
    40,603United States
    
    
    248,791
    
    
    
    237,560$
    307,082
    
    
    $
    278,163
  13.
    
    Financial instruments:The fair values of cash and cash equivalents, bank overdraft, accounts receivable, and
accounts payable and accrued liabilities approximate the carrying values because of the
short-term nature of these instruments. The fair value of the Companys long-term debt,
determined based on the future cash flows associated with each debt instrument discounted
using an estimate of the Companys current borrowing rate for similar debt instruments of
comparable maturity, is approximately equal to the carrying value at December 31, 2007 and
2006.
 55




---



##### 



14.
    
    Lease commitments:At December 31, 2007, future minimum rental payments relating to operating leases for premises
and equipment are as follows:
 Year ending December 31:2008
    
    $
    17,4252009
    
    
    13,4192010
    
    
    9,7502011
    
    
    7,6662012
    
    
    6,172Thereafter
    
    
    4,207$58,639
   15. Employee benefits:
  56




---



##### 



16.
    
    Contingent liabilities:The Company is subject to legal proceedings that arise in the ordinary course of business. In
the opinion of management, the aggregate liability, if any, with respect to these actions,
will not have a material adverse effect on the consolidated financial position, results of
operations or cash flows. Legal costs are expensed as incurred.17.
    
    Comparative figures:Certain 2006 and 2005 figures have been reclassified to conform with the financial statement
presentation adopted in 2007.18.
    
    United States and Canadian accounting policy differences:In accordance with the provisions of the OBCA, issuers that are required to file reports with
the Securities and Exchange Commission in the United States are allowed to file financial
statements under United States GAAP to meet their continuous disclosure obligations in Canada.
Vitran has included a reconciliation highlighting the material differences between its
consolidated financial statements prepared in accordance with United States GAAP compared to
its consolidated financial statements prepared in accordance with Canadian GAAP as described
below. This disclosure is required for a finite period of time under the Ontario Securities
Commission regulations, subsequent to the adoption of United States GAAP. Prior to 2006,
Vitran prepared its consolidated financial statements in accordance with Canadian GAAP with a
reconciliation to United States GAAP.
 57




---



##### 



18. United States and Canadian accounting policy differences (continued):
 (a)
    
    Consolidated reconciliation of net income and shareholders equity:
 Net income
    
    Shareholders equity2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Balance, December 31,
based on United
States GAAP
    
    $
    13,710
    
    
    $
    19,399
    
    
    $
    17,938
    
    
    $
    190,168
    
    
    $
    173,297
    
    
    $
    139,802Effect of change in
accounting
principle (i)
    
    
    
    
    
    
    (141
    )
    
    
    
    
    
    
    (141
    )
    
    
    (141
    )
    
    
    Foreign exchange
adjustment (ii)
    
    
    (2,218
    )
    
    
    
    
    
    
    
    
    
    
    (1,360
    )
    
    
    858
    
    
    
    858Unrealized foreign
exchange loss
on derivative
instrument
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101
    )
    
    
    (101
    )
    
    
    (101
    )Accumulated other
comprehensive
income
adjustment (ii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,461
    
    
    
    (757
    )
    
    
    (757
    )Balance, December 31,
based on Canadian
GAAP
    
    $
    11,492
    
    
    $
    19,258
    
    
    $
    17,938
    
    
    $
    190,027
    
    
    $
    173,156
    
    
    $
    139,802
 
 (i)
    
    The adoption of SFAS 123(R), Share-Based Payments, as described in note
1(l) only applies to United States GAAP. Therefore, the effect of a change in
accounting principle does not impact Canadian GAAP net income or shareholders
equity.(ii)
    
    The Company had foreign exchange losses of $2.2 million that did not
represent a substantially complete liquidation of a foreign operation. In previous
years, the Company had foreign exchange gains of $0.9 million that did not represent
a substantially complete liquidation of a foreign operation. Under Canadian GAAP,
these gains were recognized upon the transfer into income of the related cumulative
translation adjustment. Under United States GAAP, there is no reduction of the
cumulative translation adjustment account. Retained earnings under Canadian GAAP on
a cumulative basis is decreased by $1.4 million (2006  increased $0.9 million) with
a corresponding increase (2006  decrease) to the cumulative translation adjustment
included in accumulated other comprehensive income. 58




---



##### 



18.
    
    United States and Canadian accounting policy differences (continued):
  2007
    
    2006
    
    2005Income per share underCanadian GAAP:Basic  net income
    
    $
    0.85
    
    
    $
    1.49
    
    
    $
    1.43Diluted  net income
    
    
    0.84
    
    
    
    1.47
    
    
    
    1.40Weighted average number of shares:Weighted average number
of shares outstanding
    
    
    13,458,786
    
    
    
    12,887,401
    
    
    
    12,516,265Potential exercise of stock
options
    
    
    193,013
    
    
    
    237,464
    
    
    
    332,095Diluted shares
    
    
    13,651,799
    
    
    
    13,124,865
    
    
    
    12,848,360
 (b)
    
    Share-based compensation:Effective January 1, 2006, the Company adopted SFAS 123(R) as described in note 1(l).
SFAS 123(R) requires compensation expense be recognized for all share-based payments
granted prior to, but not yet vested, as of January 1, 2006, based on the grant date fair
value estimated in accordance with the original provisions of SFAS 123. This is not
required under Canadian GAAP based on the transitional provision of CICA 3870,
Stock-Based Compensation and Other Stock-Based Payments, which Vitran adopted January 1,
2003. Canadian GAAP requires pro forma net income and income per share disclosure for
stock option grants during 2002.The following table outlines the impact if the compensation cost for the Companys stock
options granted from January 1, 2002 through to December 31, 2002 were determined under
the fair value-based method. The Company has applied the pro forma disclosure provisions
of the standard to these awards. The pro forma effect of awards granted prior to January
1, 2002 has not been included.
 2006
    
    2005Net income, as reported under Canadian GAAP
    
    $
    19,258
    
    
    $
    17,938Pro forma net income
    
    
    19,213
    
    
    
    17,895Pro forma income per share  basic
    
    
    1.49
    
    
    
    1.43Pro forma income per share  diluted
    
    
    1.46
    
    
    
    1.39
 59




---



##### 



18. United States and Canadian accounting policy differences (continued):
 (c)
    
    Derivative accounting and financial instruments:Previously under Canadian GAAP, gains and losses on derivatives that are designated as
hedges and that manage the underlying risks of anticipated transactions are not recorded
until the underlying hedged item is recorded in net income and hedge ineffectiveness is
not recorded until settlement. On January 1, 2007, the Company adopted CICA 3865,
Hedges, in accordance with the transitional provisions. Under the transitional
provisions, any hedging relationships that existed and satisfy all the conditions of CICA
3865 are adjusted to the carrying amounts that would have resulted had CICA 3865 always
been applied. Based on the transitional provision there is no longer a difference in
accounting for derivatives for the Company between United States and Canadian GAAP.On January 1, 2007, the Company adopted CICA 3855, Financial Instruments  Recognition
and Measurement. Management evaluated the effect of the standard on the consolidated
financial statements and concluded that the Company does not have a difference between
United States and Canadian GAAP upon adoption of the standard.(d)
    
    Comprehensive income:On January 1, 2007, the Company adopted CICA 1530, Comprehensive Income, in accordance with the
appropriate provisions of the standard. The Company reports comprehensive income as part of its
United States GAAP reporting, therefore, the adoption of this standard eliminates this presentation
difference between United States and Canadian GAAP. However, there may be measurement differences
between comprehensive income under United States and Canadian GAAP.
 60




---



##### 



First
    
    
    Second
    
    
    Third
    
    
    Fourth2007 (Unaudited)
    
    quarter
    
    
    quarter
    
    
    quarter
    
    
    quarterRevenue:Less-than-truckload
    
    $
    136,157
    
    
    $
    150,615
    
    
    $
    150,283
    
    
    $
    147,731Logistics
    
    
    9,663
    
    
    
    11,225
    
    
    
    13,690
    
    
    
    18,267Truckload
    
    
    8,316
    
    
    
    8,304
    
    
    
    7,954
    
    
    
    8,312Total revenue
    
    $
    154,136
    
    
    $
    170,144
    
    
    $
    171,927
    
    
    $
    174,310Income from operations
after depreciation and amortization
    
    $
    5,607
    
    
    $
    9,073
    
    
    $
    5,569
    
    
    $
    2,750Net income  United States GAAP
    
    
    3,387
    
    
    
    5,533
    
    
    
    3,121
    
    
    
    1,669Net income  Canadian GAAP
    
    
    3,304
    
    
    
    4,902
    
    
    
    2,521
    
    
    
    765Earnings per share:Basic  United States GAAP
    
    $
    0.25
    
    
    $
    0.41
    
    
    $
    0.23
    
    
    $
    0.12Basic  Canadian GAAP
    
    
    0.25
    
    
    
    0.36
    
    
    
    0.19
    
    
    
    0.06Diluted  United States GAAP
    
    
    0.25
    
    
    
    0.41
    
    
    
    0.23
    
    
    
    0.12Diluted  Canadian GAAP
    
    
    0.24
    
    
    
    0.36
    
    
    
    0.18
    
    
    
    0.06
 First
    
    
    Second
    
    
    Third
    
    
    Fourth2006 (Unaudited)
    
    quarter
    
    
    quarter
    
    
    quarter
    
    
    quarterRevenue:Less-than-truckload
    
    $
    97,423
    
    
    $
    105,213
    
    
    $
    102,858
    
    
    $
    136,005Logistics
    
    
    9,412
    
    
    
    10,251
    
    
    
    10,419
    
    
    
    9,680Truckload
    
    
    8,292
    
    
    
    8,177
    
    
    
    8,235
    
    
    
    8,094Total revenue
    
    $
    115,127
    
    
    $
    123,641
    
    
    $
    121,512
    
    
    $
    153,779Income from operations
after depreciation and amortization
    
    $
    4,972
    
    
    $
    8,128
    
    
    $
    6,797
    
    
    $
    8,143Net income  United States GAAP
    
    
    3,764
    
    
    
    5,776
    
    
    
    4,885
    
    
    
    4,974Net income  Canadian GAAP
    
    
    3,623
    
    
    
    5,776
    
    
    
    4,885
    
    
    
    4,974Earnings per share:Basic  United States GAAP
    
    $
    0.30
    
    
    $
    0.45
    
    
    $
    0.38
    
    
    $
    0.37Basic  Canadian GAAP
    
    
    0.29
    
    
    
    0.45
    
    
    
    0.38
    
    
    
    0.37Diluted  United States GAAP
    
    
    0.29
    
    
    
    0.45
    
    
    
    0.38
    
    
    
    0.37Diluted  Canadian GAAP
    
    
    0.28
    
    
    
    0.45
    
    
    
    0.38
    
    
    
    0.37
  61




---



##### 



ITEM 9
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  ITEM 9.aCONTROLS AND PROCEDURES
   Managements Report on Internal Control over Financial Reporting
      February 7, 2008
    /s/ Richard E. Gaetz,President and Chief Executive Officer/s/ Sean P. Washchuk,Vice President Finance and Chief Financial Officer 62




---



##### 



63




---



##### 



ITEM 9.bOTHER INFORMATION
  PART III
 ITEM 10DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  Name
    
    Age
    
    Position
    
    HistoryRichard E. Gaetz
(Mississauga, Canada)
    
    
    50
    
    
    President and Chief
Executive Officer
    
    Mr. Gaetz has been
working in the
transportation and
logistics industry
for more than 25
years. He has been
actively involved
with the growth and
development of
Vitran and has been
responsible for
Vitrans freight
and logistics
operations since he
joined in 1989. He
was elected to the
Board of Directors
of Vitran in 1995.
Mr. Gaetz has
extensive
experience on both
sides of the
border. Prior to
joining Vitran, he
spent ten years
with Clarke
Transport, a large
Canadian freight
company, in various
positions including
Vice President.
Mr. Gaetz received
a Bachelor of
Commerce degree
from Dalhousie
University in
Halifax in 1979.
He is a Director of
the Ontario
Trucking
Association and the
Canadian Trucking
Alliance, and
Director and
Chairman of Drive
Products Income
Fund.Sean P. Washchuk
(Burlington, Canada)
    
    
    35
    
    
    Vice President
Finance and Chief
Financial Officer
    
    Mr. Washchuk joined
Vitran in 2000 as
the Corporate
Controller and was
appointed Chief
Financial Officer
and Vice President
Finance in 2004.
Prior to joining
Vitran in 2000, he
was a Controller at
a North American
plastics recycling
company and was
also a manager at
PricewaterhouseCoope
rs in the assurance
and business
advisory services
practice. Mr.
Washchuk is a
Chartered
Accountant with the
Canadian Institute
and received a
Bachelor of
Accounting degree
from Brock
University in
Ontario. He is a
Director of
Roll-Tite Inc.
 CODE OF ETHICS
 www.vitran.com
 ITEM 11EXECUTIVE COMPENSATION
  64




---



##### 



ITEM 12SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  ITEM 13CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 14PRINCIPAL ACCOUNTING FEES AND SERVICES
  Year ended December 31,2007
    
    
    2006Audit and audit-related fees
    
    $
    591,500
    
    
    $
    598,078Tax fees
    
    Nil
    
    NilAll other fees
    
    Nil
    
    Nil$
    591,500
    
    
    $
    598,078
   PART IV
 ITEM 15EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
 (a)
    
    (1) Financial Statements
   65




---



##### 



(2) Financial Statements Schedule:
 Schedule IIValuation and Qualifying Accounts
 
 Allowance for Doubtful Accounts(in thousands of dollars)
    
    Balance at
    
    Charges to
    
    
    
    
    
    Balancebeginning
    
    costs and
    
    
    
    
    
    at endDescription
    
    of year
    
    expenses
    
    Deductions
    
    of yearYear ended December 31, 2005Accounts receivable
allowances for revenue
adjustments and doubtful
accounts
    
    $
    1,193
    
    
    $
    757
    
    
    $
    (675
    )
    
    $
    1,275Year ended December 31, 2006Accounts receivable
allowances for revenue
adjustments and doubtful
accounts
    
    $
    1,275
    
    
    $
    1,516
    
    
    $
    (592
    )
    
    $
    2,199Year ended December 31, 2007Accounts receivable
allowances for revenue
adjustments and doubtful
accounts
    
    $
    2,199
    
    
    $
    879
    
    
    $
    (588
    )
    
    $
    2,490
 (3) Exhibits Filed
  (b)
    
    Separate Financial Statements
  66




---



##### 



Exhibit Index
 Exhibit No.
    
    Document1.1*
    
    Underwriting Agreement dated December 16, 1994 between the registrant and Midland Walwyn Capital Inc. and ScotiaMcLeod
Inc.1.2*
    
    Special Warrant Indenture dated December 16, 1994 between the registrant and Montreal Trust Company for Canada, as trustee1.3*
    
    Escrow Agreement dated December 16, 1994 between the registrant and Messrs. Morris/Rose/Ledgett, Barristers and
Solicitors, as trustee1.4*
    
    Subscription Agreements1.5*
    
    Stock Option Plan dated July 16, 19871.6*
    
    Employee Stock Option Plan approved May 17, 19951.7*
    
    Prospectus dated December 16, 20032.1*
    
    Purchase and Sale Agreement dated November 2, 1994 between the registrant and Carl Cook and Daniel L. Cook3.(i).1*
    
    Articles of Incorporation effective April 29, 19813.(i).2*
    
    Articles of Amendment effective May 27, 19873.(i).3*
    
    Articles of Amendment effective July 16, 19873.(i).4*
    
    Articles of Amendment effective February 5, 19913.(i).5*
    
    Articles of Amendment effective April 22, 20043.(ii).1*
    
    By-laws effective May 27, 19873.(ii).2*
    
    By-law to authorize the directors to borrow and give security effective July 16, 19874.1*
    
    Cancellation of Stock Voting Agreement dated February 1, 2003 between Richard D. McGraw, Albert Gnat and Anthony F.
Griffiths9.1*
    
    Stock Voting Agreement dated July 15, 1987 between Richard D. McGraw, Albert Gnat and Anthony F. Griffiths10.1*
    
    Credit Agreement between the registrant, its subsidiaries and the Royal Bank, dated April 25, 199510.2*
    
    Credit Agreement between the Overland Group and Bank One, dated February 4, 1994 (the Overland Credit Agreement)10.3*
    
    First Amendment to the Overland Credit Agreement, effective July 1, 199410.4*
    
    Second Amendment to the Overland Credit Agreement, effective September 30, 199410.5*
    
    Third Amendment to the Overland Credit Agreement, dated December 14, 199410.6*
    
    Fourth Amendment to the Overland Credit Agreement, dated February 1, 199510.7*
    
    Fifth Amendment to the Overland Credit Agreement, effective December 31, 199410.8*
    
    Sixth Amendment to the Overland Credit Agreement, dated March 2, 199510.9*
    
    Operating Credit Agreement between Trans Western Express Inc. and The Bank of Nova Scotia, dated July 25, 199510.9.1*
    
    First Amending Agreement to Credit Agreement between Trans Western Express Inc. and The Bank of Nova Scotia,
dated September 3, 199810.9.2*
    
    Second Amending Agreement to Credit Agreement between Trans Western Express Inc. and The Bank of Nova Scotia,
dated January 8, 199910.9.3*
    
    Amended and Restated Credit Agreement between Vitran Corporation Inc. and Trans Western Express Inc. and The Bank of Nova
Scotia, dated January 31, 200210.9.4*
    
    Second Amended and Restated Credit Agreement between Vitran Corporation Inc. and Vitran Express Canada Inc. and The Bank
of Nova Scotia and Laurentian Bank of Canada, dated May 1, 200610.9.5*
    
    Third Amended and Restated Credit Agreement between Vitran Corporation Inc., Vitran Express Canada Inc., Vitran
Corporation and The Bank of Nova Scotia, Laurentian Bank of Canada and JP Morgan Chase, dated September 20, 2006
 67




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##### 



Exhibit No.
    
    Document10.9.6*
    
    Credit Agreement between JPMorgan Chase Bank, N.A. as Agent and JPMorgan Chase Bank, N.A., JPMorgan Chase Bank, N.A.,
Toronto Branch, those other financial institutions whose names appear on the signature pages hereto and the other persons
from time to time party hereto as Lenders as Lenders and J.P. Morgan Securities Inc.. as Lead Arranger and Sole
Bookrunner and Bank of America, N.A. and Bank of Montreal as Co-Syndication Agents and National Bank of Canada and Fifth
Third Bank as Co-Documentation Agents And Vitran Corporation Inc., Vitran Express Canada Inc. and Vitran Corporation as
Borrowers Dated as of July 31, 200710.10*
    
    Note Purchase Agreement between Trans Western Express Inc., the registrant and certain purchasers, dated July 25, 199510.11*
    
    Amendment No. 1 to Note Agreement (Amending Agreement), dated June 28, 199610.12*
    
    Amendment No. 2 to Note Agreement (Amending Agreement), dated May 13, 199710.13*
    
    Credit Agreement between the registrant and The Bank of Nova Scotia, dated September 3, 199810.14*
    
    Credit Agreement between the registrant and The Bank of Nova Scotia and Laurentian Bank of Canada, dated October 13, 199910.15*
    
    Confidential Transportation Contract dated January 1, 1993 between Trans Western Express Inc. and Canadian National
Railway Company10.16*
    
    Agreement dated April 24, 1995 between the registrant, Borcross Limited, Carl Cook and Daniel L. Cook amending the terms
of the Overland Note10.17*
    
    Engagement Letter dated April 28, 1995 between the registrant and Banc One Capital Corporation10.18*
    
    Offer of Employment dated September 30, 1998 from the registrant to Kevin Glass10.19*
    
    Share Purchase Agreement between the registrant and Randall Quast, dated July 21, 199810.20*
    
    Employment agreement dated November 25, 2004 from the registrant to Sean P. Washchuk10.21*
    
    Employment agreement dated April 29, 2004 from the registrant to Rick E. Gaetz10.22*
    
    Employment agreement dated April 29, 2004 from the registrant to Kevin A. Glass10.3*
    
    Share purchase agreement, by Vitran Corporation and Chris Dugan, dated May 30, 200510.31*
    
    Share purchase agreement, by Vitran Corporation and The Shareholders of PJAX, Inc., dated October 2, 200610.4*
    
    Deferred share unit plan, dated September 14, 200510.41*
    
    Deferred share unit plan, dated March 10, 200614.1*
    
    Code of Ethics and Professional Conduct for Directors, Senior Executives and Employees, dated August 3, 200431.1
    
    Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Previously filed SIGNATURES
  Vitran Corporation Inc.By:
    /s/ SEAN P. WASHCHUKSean P. WashchukVice President Finance and
Chief Financial Officer 68




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##### 



Signatures
    
    Title
    
    Date/s/ RICHARD D. McGRAW
    
    Chairman of the Board
    
    February 7 2008Richard D. McGraw/s/ RICHARD E. GAETZ
    
    President and Chief Executive Officer, Director
    
    February 7, 2008Richard E. Gaetz/s/ GEORGES L. HÉBERT
    
    Director
    
    February 7, 2008Georges L. Hébert/s/ WILLIAM S. DELUCE
    
    Director
    
    February 7, 2008William S. Deluce/s/ ANTHONY F. GRIFFITHS
    
    Director
    
    February 7, 2008Anthony F. Griffiths/s/ JOHN R. GOSSLING
    
    Director
    
    February 7, 2008John R. Gossling/s/ SEAN P. WASHCHUK
    
    Vice President Finance and Chief Financial Officer
    
    February 7, 2008Sean P. Washchuk
    
    (Principal Financial Officer)/s/ FAYAZ D. SULEMAN
    
    Corporate Controller
    
    February 7, 2008Fayaz D. Suleman
    
    (Principal Accounting Officer)ve
 69