SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K




(Mark
One)





xANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For
the fiscal year ended December 31, 2008




OR




oTRANSITION
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




Securities
registered pursuant to Section 12(b) of the Act:


Title
      of each class
                Common
      Shares
              
              Name
      of each exchange on which registered
                Toronto Stock
      Exchange - TSX®
                NASDAQ
      - Global National Market




Securities
registered pursuant to Section 12(g) of the Act: None




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  o Yes x No




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  o Yes x No




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. x Yes o No




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein and will not be contained, to the
registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K o.




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the
Act).


Large
accelerated filer o                                           Accelerated
filer   x                                Non-accelerated
filer    o                                        Smaller
reporting company   o




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  o Yes  x No




The
number of shares of common stock outstanding at March 10, 2009 was 13,498,159.
The aggregate market value of the voting stock of the registrant, excluding
directors, officers and registered holders of 10% as of March 10, 2009 was
approximately $62,000,000.




DOCUMENTS
INCORPORATED BY REFERENCE




1)
 Definitive Proxy statement to be filed within 120 days of December 31,
2008 (Only those portions referenced herein are incorporated in this Annual
Report on Form 10-K).

















TABLE
OF CONTENTS




Item
                        
                        
                        PagePART
      I1.
                        
                        Business
                        31.
      a
                        
                        Risk
      Factors
                        71.
      b
                        
                        Unresolved
      Staff Comments
                        72.
                        
                        Properties
      and Rolling Stock
                        73.
                        
                        Legal
      Proceedings
                        84.
                        
                        Submission
      of Matters to a Vote of Security Holders
                        8PART
      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
                        127.
      a
                        
                        Quantitative
      and Qualitative Disclosures about Market Risk
                        278.
                        
                        Financial
      Statements and Supplementary Data
                        289.
                        
                        Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                        589.
      a
                        
                        Controls
      and Procedures
                        589.
      b
                        
                        Other
      Information
                        60PART
      III10.
                        
                        Directors
      and Executive Officers of the Registrant
                        6011.
                        
                        Executive
      Compensation
                        6012.
                        
                        Security
      Ownership of Certain Beneficial
      Owners and Management
                        6113.
                        
                        Certain
      Relationships and Related Transactions
                        6114.
                        
                        Principal
      Accounting Fees and Services
                        61PART
      IV15.
                        
                        Exhibits,
      Financial Statements Schedules and Reports on Form 8-K
                        61




2




Unless
otherwise indicated all dollar references herein are in United States
dollars.








PART I





ITEM
1 - BUSINESS





OVERVIEW





Vitran
Corporation Inc. (“Vitran” or the “Company”) is a leading, predominantly
non-union, provider of freight surface transportation and related logistics
services throughout Canada and in 29 states in the eastern, central,
southwestern, and western United States. Its business consists of
Less-than-truckload services (“LTL”), Logistics services, and Truckload
services. These services are provided by stand-alone business units within their
respective regions. The business units operate independently or in a
complementary manner to provide solutions depending on a customer’s
needs.  For the years ended December 31, 2008 and 2007, the Company
had revenues of $726.3 million and $670.5 million,
respectively.





CORPORATE
STRUCTURE





Vitran’s
registered office is located at 185 The West Mall, Suite 701, Toronto, Ontario,
Canada, M9C 5L5. Vitran Corporation Inc. was incorporated in Ontario under
the Business Corporation Act (Ontario) on April 29, 1981.





Vitran’s
business is carried on through its subsidiaries which hold the relevant licenses
and permits required to carry on business.  The following are Vitran’s
principal operating subsidiaries (including their jurisdiction of
incorporation), all wholly owned as at December 31, 2008:  Vitran
Express Canada Inc. (Ontario); Can-Am Logistics Inc. (Ontario); Vitran Logistics
Ltd. (Ontario); Expéditeur T.W. Ltée (Canada); Vitran Corporation (Nevada);
Vitran Express Inc. (Indiana); R.A. Christopher Inc. (Kansas); Frontier
Transport Corporation (Indiana); Vitran Logistics Corp. (Delaware); Vitran
Logistics Inc. (Indiana); Vitran Express West Inc. (Nevada); PJAX, Inc.
(Pennsylvania); and Las Vegas/L.A. Express, Inc. (California).





OPERATING
SEGMENTS





Segment financial information is
included in Note 12 to the Consolidated Financial Statements.





LTL
Services





Vitran
has grown organically and made strategic acquisitions to build a comprehensive
LTL network throughout Canada and in the central, southwestern, and western
United States.  On May 31, 2005, Vitran expanded into the southwestern
United States by acquiring Chris Truck Line (“CTL”), a Kansas-based regional
less-than-truckload carrier serving 11 states.  With the acquisition
of CTL, Vitran obtained an additional 19 service centers covering 11 states,
including new territory in Colorado, Kansas, Oklahoma, and Texas.  On
January 3, 2006, Vitran, through its subsidiary Vitran Express West Inc.,
expanded into the western United States by acquiring the assets of Sierra West
Express (“SWE”), a Nevada-based regional less-than-truckload carrier serving
three states.  With the acquisition of SWE, Vitran expanded its
footprint to California, Nevada, and Arizona.   On October 2,
2006, Vitran expanded into the eastern United States by acquiring PJAX Freight
System (“PJAX”), a Pennsylvania-based regional less-than-truckload carrier
serving 11 states.  With the acquisition of PJAX, Vitran obtained 22
service centers including expanded and new state coverage in New Jersey,
Pennsylvania, Delaware, Maryland, West Virginia and Virginia.





Vitran’s
LTL business represented approximately 84.1% of its revenue for the year ended
December 31, 2008.  Within the United States, the Company
operates primarily within the eastern, central, southwestern and western United
States and delivers approximately 90.0% of its freight shipments within one or
two days. In addition, the Company offers its services to the other regions in
the United States (other than Alaska and Hawaii) through its strategic
inter-regional relationships. The service is provided over-the-road, mostly by
Company drivers, which allows more control in servicing these time-sensitive
shipments. As an integral part of its service solution, the U.S. LTL business
was one of the first regional LTL companies to offer an unconditional money-back
service guarantee to its customers.  Vitran’s U.S. LTL regional
business represented approximately 69.8% of LTL revenues for the year ended
December 31, 2008.





3




Within
Canada, the Company provides next-day service within Ontario, Quebec and parts
of western Canada, and generates most of its revenue from the movement of LTL
freight within the three- to five-day east-west service lanes.  The
majority of its trans-Canada freight is shipped intermodally, whereby the
Company’s containers are loaded onto rail cars and trans-loaded to Vitran
facilities where Vitran’s network of owner operators pick up and deliver the
freight to various destinations. An expedited service solution is also offered
nationally using over-the-road driver teams to complete these deliveries in a
shorter time frame.  Vitran’s Canadian LTL business represented
approximately 30.2% of LTL revenues for the year ended December 31,
2008.





Vitran’s
Transborder Service Solution (inter-regional) provides over-the-road service
between its Canadian LTL and U.S. LTL business units. This is the Company’s
highest margin and fastest growing service, achieving approximately 26.5%
year-over-year revenue growth for the year ended December 31, 2008.





Logistics





Vitran’s
Logistics business, which represented approximately 11.2% of its revenues for
the year ended December 31, 2008, consists of two principal lines of business:
(1) Supply Chain Solutions in Canada and the United States including
warehousing, inventory management and flow-through distribution facilities; and
(2) Freight Brokerage, which coordinates the transport of truck and container
loads from sales offices in Toronto, Montreal, and Los Angeles.





Supply Chain
Solutions.Supply chain solutions involve the transportation and
management of goods and the provision of information about such goods as they
pass through the supply chain from manufacturer to end user. Vitran Logistics’
role is to design a supply chain network for a customer, contract with the
necessary suppliers (including Vitran’s LTL services), implement the design and
manage the logistical system.  Vitran’s supply chain business unit
offers a range of services in Canada and the United States including
warehousing, inventory management and flow-through distribution facilities,
focusing primarily on long-term logistics solutions.





Over
the past decade, Vitran has grown the supply chain business unit organically and
on November 30, 2007 announced the strategic acquisition of Las Vegas/L.A.
Express Inc. (“LVLA”), a retail supply chain management specialist based in
Ontario, California.  LVLA operates six facilities, adding 470,000
square feet of logistics space, bringing Vitran’s total to approximately 1.8
million square feet of warehouse and distribution space under management at
December 31, 2008.





Freight
Brokerage.Vitran’s Freight Brokerage unit is headquartered in
Toronto, Ontario, with sales offices in Toronto, Montreal and Los Angeles so as
to capitalize on international traffic flows. Vitran Logistics coordinates the
transport of truck and container loads directly from a customer’s facility to
the customer’s consignee, anywhere in North America. The Freight Brokerage unit
offers both intermodal and highway solutions to customers with any type of full
load requirement. Vitran Logistics supports the movement of freight through
direct computer links with both its carriers and customers.  It
provides customers with real-time tracking, customer support information and
expediting as required.





Truckload





Vitran’s
Truckload business, operating as Frontier Transport Corporation (“Frontier”),
provides truckload service within the United States.  Frontier
utilizes its company-controlled trailing equipment and tractor owner operators.
The business is primarily dry van but also offers temperature-controlled service
in select markets. Frontier operates from two terminals, one in Atlanta and the
other in Indianapolis where the main administration office is
located.  Frontier principally delivers within a 400-mile radius
utilizing 246 owner operators with company-owned or leased trailing
fleet.





THE
TRUCKING INDUSTRY





According
to estimates made by the American Trucking Association, the United States
trucking industry in 2006 accounted for approximately $646 billion, or
approximately 84% of total domestic freight transportation revenue. Trucks
provide freight transportation services to virtually every industry operating in
the United States and Canada and generally offer higher levels of reliability,
shipment integrity, and speed than do other surface transportation options. The
trucking industry is highly competitive on the basis of service and
price.  The LTL portion of the industry accounted for approximately
$48 billion of revenue during 2006.





4




LTL
carriers transport freight for multiple customers to multiple destinations on
each trailer. This service requires a network of local pick-up and delivery
terminals, hub facilities, and driver fleets. The LTL business is capital
intensive and achieving significant density of operations in a given region can
afford a competitive advantage since greater freight volumes are better able to
support fixed costs. Vitran believes the regional LTL industry offers a
favorable operating model and provides substantial growth opportunities for the
following reasons:





•
            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, and





•
            there
      has been a reduction of capacity as weaker competitors exit the
      business.





MARKETING
      AND CUSTOMERS





Vitran
derives its revenue from thousands of customers from a variety of geographic
regions and industries in Canada and the United States. The Company’s largest
customer represents less than 3.0% of Vitran’s revenues.  At December
31, 2008, the Company employed 154 sales associates.  Sales associates
dialogue with new and retained customers within the geographic
market.  New customers are obtained through referrals, cold calls and
trade publications.  The sales associates receive a base salary and,
depending on the business unit, a variable compensation package that can be
linked to revenue generation, business unit profitability and days sales
outstanding.





The
LTL segment utilizes a computerized freight-costing model to determine the price
level that is appropriate for each particular shipment of freight. When
necessary, Vitran competes to secure revenue by participating in bid
solicitations, provided its customer recognizes the Company as a core carrier
over a contracted period of time.





In
the Logistics business, Vitran customizes each solution to fit the needs of the
customer. The Logistics operation pursues opportunities that will not only
increase the profitability of that segment but will supplement profitability in
Vitran’s LTL segment as well.





The
Freight Brokerage business maintains sales offices in Toronto, Montreal, and Los
Angeles to capitalize on international traffic flows.  The Freight
Brokerage unit offers both intermodal and over-the-road truckload solutions to
clients.





EMPLOYEES





At
December 31, 2008, Vitran employed approximately 4,728 full- and part-time
employees and contracted with approximately 485 owner operators.





A
total of 116 Vitran employees are represented by labor unions. The International
Brotherhood of Teamsters and the Canadian Auto Workers Association represent
dock workers in two of Vitran’s Canadian terminals. The Company has two
collective agreements with its unionized employees. These agreements expire on
February 28, 2011, and on March 31, 2015, respectively.





5




INFORMATION
TECHNOLOGY





Vitran
uses technology to reduce costs, improve productivity, and enhance its customer
service. Vitran allows its customers to access or exchange information with the
Company via Vitran’s website, published web services, electronic data
interchange, or over the telephone. The Company uses sophisticated freight
handling software to maximize its load average, reduce freight handling, reduce
transit times, and improve tracking of shipments through its
system.  In the second quarter of 2008, Vitran’s U.S. LTL business
unit completed the process of migrating all of its U.S. LTL operations to a
common transportation operating system that further enhanced the Company’s
technology platform and helped deliver superior service to its
customers.





SEASONALITY





In
the trucking industry for a typical year, the months of September and October
usually have the highest business levels, while the months of December, January
and February generally have the lowest business levels.  Adverse
weather conditions, generally experienced in the first quarter of the year, such
as heavy snow and ice storms, have a negative impact on operating
results.  Accordingly, revenue and profitability are normally lowest
in the first quarter.





REGULATION





Regulatory
agencies exercise broad powers over the trucking industry, generally governing
such activities as authorization to engage in motor carrier operations, safety
and financial reporting. The industry also may become subject to new or more
restrictive regulations relating to fuel emissions, ergonomics, or limits on
vehicle weight and size. Additional changes in the laws and regulations
governing the trucking industry could affect the economics of the industry by
requiring changes in operating practices or by influencing the demand for and
the costs of providing services to customers.





From
time to time, various legislative proposals that might affect the trucking
industry are introduced, including proposals to increase federal, state,
provincial or local taxes, including taxes on motor fuels. Vitran cannot predict
whether, or in what form, any increase in such taxes applicable to the Company
will be enacted. Increased taxes could adversely affect Vitran’s
profitability.





Vitran’s
employees and owner operators also must comply with the safety and fitness
regulations promulgated by the U.S. Department of Transportation (“DOT”) and
various regulatory authorities in Canada, including those relating to drug and
alcohol testing and hours of service.





COMPETITION





Vitran
competes with many other transportation service providers of varying sizes
within Canada and the United States.  In the United States, Vitran
competes mainly in the eastern, central, southwestern and western
states.  The transportation industry is highly competitive on the
basis of both price and service.  The Company competes with regional,
inter-regional and national LTL carriers, truckload carriers, third-party
logistics companies and, to a lesser extent, small-package carriers, air freight
carriers and railroads.  The Company competes effectively in its
markets by providing high quality and timely service at competitive
prices.





AVAILABLE
INFORMATION





Vitran
makes available free of charge on or through its website at www.vitran.com its
Annual Report on Form 10-K (including the Company management’s discussion and
analysis (“MD&A”) at December 31, 2008), Quarterly Reports on Form 10-Q,
current reports on Form 8-K and other information releases, including all
amendments to those reports, as soon as reasonably practicable after such
material is electronically filed with or furnished to the Securities and
Exchange Commission (“SEC”) and System for Electronic Document Analysis and
Retrieval (“SEDAR”).  The information can also be accessed through
EDGAR at www.sec.gov or SEDAR at
www.sedar.com.





6




ITEM
1. a - RISK FACTORS





RISKS
AND UNCERTAINTIES





Information
on the risks and uncertainties relating to the Company appears in the Company
management’s discussion and analysis (“MD&A”) for the year ended December
31, 2008, Item 7, reference to which is hereby made, and the information therein
is incorporated herein by reference.





ITEM
1. b - UNRESOLVED STAFF COMMENTS





None





ITEM
2 - PROPERTIES AND ROLLING STOCK





Vitran’s
corporate office is located at 185 The West Mall, Suite 701, Toronto, Ontario,
Canada, M9C 5L5.The 3,900 square foot office is occupied under a lease terminating in
September 2010.





Each
of Vitran’s operating subsidiaries also maintains a head office as well as
numerous operating facilities. Vitran has not experienced and does not
anticipate difficulties in renewing existing leases on favorable terms or
obtaining new facilities as and when required.





Vitran
operates 130 terminals, 26 of which are located in Canada and 104 of which are
located in the United States.  The Company’s LTL segment operates 112
terminals with a total of 2,931 loading doors in the United States and with a
total of 578 loading doors in Canada.  The 10 largest operating
terminals in Vitran’s LTL segment, in terms of the number of loading doors, are
listed below.





Terminals
            Doors
            Owned/LeasedToronto
            130
            OwnedIndianapolis
            116
            LeasedToledo
            101
            OwnedPhiladelphia
            92
            LeasedMontreal
            85
            OwnedVancouver
            85
            OwnedChicago
            81
            LeasedPittsburgh
            80
            OwnedClinton
            80
            OwnedWinsted
            78
            Owned





Vitran’s
Logistics operates 15 facilities, eight in Canada, and seven in the United
States, for major retailers in their respective markets. Vitran Logistics has
approximately 1.8 million square feet of warehouse and distribution space under
management at December 31, 2008.  Vitran’s Truckload business operates
two terminals, one in Indianapolis and the other in Atlanta.





As
at December 31, 2008, the Company operated 10,101 pieces of owned or leased
rolling stock.  The Company primarily purchases or utilizes operating
lease facilities for the acquisition of new rolling stock for its operations;
however, the Company occasionally purchases pre-owned equipment that meets its
specifications.  As at December 31, 2008 the Company owned or leased
the following equipment.





Owned
                              
                              
                              LeasedTractors
                              
                              
                              2,050
                              
                              
                              
                              196Trailers
                              
                              
                              5,100
                              
                              
                              
                              1,685Containers
                              
                              
                              620
                              
                              
                              
                              -Chassis
                              
                              
                              340
                              
                              
                              
                              110Total
                              
                              
                              8,110
                              
                              
                              
                              1,991





7





ITEM
3 - LEGAL PROCEEDINGS





Vitran is subject to various legal proceedings and claims that have
arisen in the ordinary course of its business that have not been fully
adjudicated.  Many of these are covered in whole or in part by
insurance.  The management of Vitran does not believe that these
actions, when finally concluded and determined, will have a material adverse
effect upon Vitran’s financial condition, results of operations, or cash
flows.





ITEM
4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





None





PART
II





ITEM
5 - MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED
STOCKHOLDERMATTERS





Description
of Share Capital





At
December 31, 2008, there were an unlimited number of shares authorized and
13,498,159 common shares issued and outstanding.  The holders of the
common shares are entitled to one vote for each common share on all matters
voted on at any meetings of Vitran’s shareholders to any dividends that may be
declared by the Company’s Board of Directors thereon, and in the event of the
liquidation, dissolution or winding up of the Company, will be entitled to
receive the remaining property.





Vitran’s
common shares trade on the Toronto Stock Exchange (“TSX”) and the NASDAQ Global
National Market under the symbols VTN and VTNC, respectively.  On
March 10, 2009, there were approximately 46 registered holders of record of the
Company’s common shares.





Vitran
did not pay any dividends on common shares in fiscal 2008 and
2007.  The Company ceased paying dividends in December
2001.  The Board of Directors is responsible for determining the
Company’s dividend policy and does not intend to declare dividends in the
foreseeable future.





The following table sets forth the high
and low bid prices of our common stock for the periods indicated, as reported by
the TSX and the NASDAQ:





TSX
                                  
                                  
                                  NASDAQQuarter
                                  
                                  High
                                  
                                  
                                  Low
                                  
                                  
                                  Volume
                                  
                                  
                                  High
                                  
                                  
                                  Low
                                  
                                  
                                  Volume(in
      Canadian dollars)
                                  
                                  
                                  (in
      United States dollars)2008Fourth
      Quarter
                                  
                                  $
                                  14.21
                                  
                                  
                                  $
                                  5.26
                                  
                                  
                                  
                                  553,300
                                  
                                  
                                  $
                                  13.60
                                  
                                  
                                  $
                                  4.62
                                  
                                  
                                  
                                  3,668,100Third
      Quarter
                                  
                                  $
                                  20.65
                                  
                                  
                                  $
                                  13.75
                                  
                                  
                                  
                                  1,237,900
                                  
                                  
                                  $
                                  18.97
                                  
                                  
                                  $
                                  13.26
                                  
                                  
                                  
                                  5,332,900Second
      Quarter
                                  
                                  $
                                  16.11
                                  
                                  
                                  $
                                  13.95
                                  
                                  
                                  
                                  159,600
                                  
                                  
                                  $
                                  16.00
                                  
                                  
                                  $
                                  13.50
                                  
                                  
                                  
                                  2,023,000First
      Quarter
                                  
                                  $
                                  14.74
                                  
                                  
                                  $
                                  11.60
                                  
                                  
                                  
                                  256,700
                                  
                                  
                                  $
                                  14.94
                                  
                                  
                                  $
                                  11.21
                                  
                                  
                                  
                                  2,479,1002007Fourth
      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
                                  
                                  
                                  
                                  1,381,300








TSX
                        
                        
                        NASDAQ2008 Monthly
                        
                        High
                        
                        
                        Low
                        
                        
                        Volume
                        
                        
                        High
                        
                        
                        Low
                        
                        
                        Volume(in
      Canadian dollars)
                        
                        
                        (in
      United States dollars)December
                        
                        $
                        7.60
                        
                        
                        $
                        5.26
                        
                        
                        
                        299,000
                        
                        
                        $
                        6.69
                        
                        
                        $
                        4.62
                        
                        
                        
                        1,621,900November
                        
                        $
                        11.25
                        
                        
                        $
                        5.87
                        
                        
                        
                        97,900
                        
                        
                        $
                        9.99
                        
                        
                        $
                        4.63
                        
                        
                        
                        527,600October
                        
                        $
                        14.21
                        
                        
                        $
                        7.58
                        
                        
                        
                        156,400
                        
                        
                        $
                        13.60
                        
                        
                        $
                        5.87
                        
                        
                        
                        1,518,600September
                        
                        $
                        19.91
                        
                        
                        $
                        13.75
                        
                        
                        
                        238,400
                        
                        
                        $
                        18.33
                        
                        
                        $
                        13.26
                        
                        
                        
                        1,341,200August
                        
                        $
                        20.65
                        
                        
                        $
                        16.52
                        
                        
                        
                        346,300
                        
                        
                        $
                        18.97
                        
                        
                        $
                        15.70
                        
                        
                        
                        1,302,400July
                        
                        $
                        18.30
                        
                        
                        $
                        14.28
                        
                        
                        
                        653,200
                        
                        
                        $
                        18.85
                        
                        
                        $
                        14.19
                        
                        
                        
                        2,689,300June
                        
                        $
                        15.40
                        
                        
                        $
                        14.00
                        
                        
                        
                        70,200
                        
                        
                        $
                        15.38
                        
                        
                        $
                        13.50
                        
                        
                        
                        823,600May
                        
                        $
                        15.50
                        
                        
                        $
                        13.95
                        
                        
                        
                        40,700
                        
                        
                        $
                        15.24
                        
                        
                        $
                        13.86
                        
                        
                        
                        751,300April
                        
                        $
                        16.11
                        
                        
                        $
                        14.00
                        
                        
                        
                        48,700
                        
                        
                        $
                        16.00
                        
                        
                        $
                        13.70
                        
                        
                        
                        448,100March
                        
                        $
                        14.74
                        
                        
                        $
                        11.60
                        
                        
                        
                        109,400
                        
                        
                        $
                        14.94
                        
                        
                        $
                        11.21
                        
                        
                        
                        521,400February
                        
                        $
                        14.40
                        
                        
                        $
                        12.08
                        
                        
                        
                        51,600
                        
                        
                        $
                        14.42
                        
                        
                        $
                        12.33
                        
                        
                        
                        807,700January
                        
                        $
                        14.59
                        
                        
                        $
                        12.75
                        
                        
                        
                        95,700
                        
                        
                        $
                        14.87
                        
                        
                        $
                        12.51
                        
                        
                        
                        1,150,000





8




Stock
Option Plan




Plan
      Category
                  
                  Number
      of securities to be issued upon exercise of outstanding
      options
                  
                  
                  Weighted
      average exercise price of outstanding options
                  
                  
                  Number
      of securities remaining available for future issuance (excluding
      securities reflected in column (a))(a)
                  
                  
                  (b)
                  
                  
                  (c)Equity
      compensation plans approved by security holders
                  
                  
                  856,200
                  
                  
                  $
                  13.03
                  
                  
                  
                  500Equity
      compensation plans not approved by security holders
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Total (1)
                  
                  
                  856,200
                  
                  
                  $
                  13.03
                  
                  
                  
                  500


(1)  As
at December 31, 2008.





Vitran
maintains a stock option plan to assist in attracting, retaining and motivating
its directors, officers and employees.  The details of the Company’s
authorized stock option plan are described in Note 9 of the Consolidated
Financial Statements.





Purchases of Equity
Securities





On February 12, 2008 Vitran’s normal
course issuer bid ended.  Vitran did not renew its normal course
issuer bid.  There were no shares repurchased by the Company in
2008.





Transfer
Agents







Computershare
      Investor Services Inc.
            Montreal,
      Toronto
            CanadaComputershare Trust
      Company Inc.
            Denver
            United
    States




9








ITEM
6 - SELECTED FINANCIAL DATA





The
following selected financial data should be read in conjunction with the
Consolidated Financial Statements and Notes under Item 8 of this Annual Report
on Form 10-K.  For a summary of quarterly financial data for fiscal
2008 and 2007, please see the Supplemental Schedule of Quarterly Financial
Information included in the Consolidated Financial Statements.





Selected Financial
Data(Thousands of dollars, except per share amounts)


Year
                                                                          
                                                                          2008
                                                                          
                                                                          
                                                                          2007
                                                                          
                                                                          
                                                                          2006
                                                                          
                                                                          
                                                                          2005
                                                                          
                                                                          
                                                                          2004Statements
      of IncomeRevenue
                                                                          
                                                                          $
                                                                          726,337
                                                                          
                                                                          
                                                                          $
                                                                          670,517
                                                                          
                                                                          
                                                                          $
                                                                          514,059
                                                                          
                                                                          
                                                                          $
                                                                          428,192
                                                                          
                                                                          
                                                                          $
                                                                          374,595Impairment of goodwill(1)
                                                                          
                                                                          
                                                                          107,351
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -Income
      (loss) fromcontinuing operations
                                                                          
                                                                          
                                                                          (97,332
                                                                          )
                                                                          
                                                                          
                                                                          22,999
                                                                          
                                                                          
                                                                          
                                                                          28,040
                                                                          
                                                                          
                                                                          
                                                                          25,427
                                                                          
                                                                          
                                                                          
                                                                          18,977Net
      income (loss) fromcontinuing operations
                                                                          
                                                                          
                                                                          (71,225
                                                                          )
                                                                          
                                                                          
                                                                          13,710
                                                                          
                                                                          
                                                                          
                                                                          19,258
                                                                          
                                                                          
                                                                          
                                                                          17,938
                                                                          
                                                                          
                                                                          
                                                                          14,943Cumulative
      effect ofchange in accounting principle
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          141
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -Net
      income (loss)
                                                                          
                                                                          $
                                                                          (71,225
                                                                          )
                                                                          
                                                                          $
                                                                          13,710
                                                                          
                                                                          
                                                                          $
                                                                          19,399
                                                                          
                                                                          
                                                                          $
                                                                          17,938
                                                                          
                                                                          
                                                                          $
                                                                          14,943Earnings
      (loss) per sharebasic:Net
      income (loss) fromcontinuing operations
                                                                          
                                                                          $
                                                                          (5.28
                                                                          )
                                                                          
                                                                          $
                                                                          1.02
                                                                          
                                                                          
                                                                          $
                                                                          1.49
                                                                          
                                                                          
                                                                          $
                                                                          1.43
                                                                          
                                                                          
                                                                          $
                                                                          1.22Net
      income (loss)
                                                                          
                                                                          $
                                                                          (5.28
                                                                          )
                                                                          
                                                                          $
                                                                          1.02
                                                                          
                                                                          
                                                                          $
                                                                          1.50
                                                                          
                                                                          
                                                                          $
                                                                          1.43
                                                                          
                                                                          
                                                                          $
                                                                          1.22Weighted
      average numberof shares
                                                                          
                                                                          
                                                                          13,485,132
                                                                          
                                                                          
                                                                          
                                                                          13,458,786
                                                                          
                                                                          
                                                                          
                                                                          12,887,401
                                                                          
                                                                          
                                                                          
                                                                          12,516,265
                                                                          
                                                                          
                                                                          
                                                                          12,285,400Earnings
      (loss) per sharediluted:Net
      income (loss) fromcontinuing operations
                                                                          
                                                                          $
                                                                          (5.28
                                                                          )
                                                                          
                                                                          $
                                                                          1.00
                                                                          
                                                                          
                                                                          $
                                                                          1.47
                                                                          
                                                                          
                                                                          $
                                                                          1.40
                                                                          
                                                                          
                                                                          $
                                                                          1.17Net
      income (loss)
                                                                          
                                                                          $
                                                                          (5.28
                                                                          )
                                                                          
                                                                          $
                                                                          1.00
                                                                          
                                                                          
                                                                          $
                                                                          1.48
                                                                          
                                                                          
                                                                          $
                                                                          1.40
                                                                          
                                                                          
                                                                          $
                                                                          1.17Weighted
      average numberof shares
                                                                          
                                                                          
                                                                          13,485,132
                                                                          
                                                                          
                                                                          
                                                                          13,651,799
                                                                          
                                                                          
                                                                          
                                                                          13,124,865
                                                                          
                                                                          
                                                                          
                                                                          12,848,360
                                                                          
                                                                          
                                                                          
                                                                          12,740,477Balance
      SheetsAssets:Current
      assets
                                                                          
                                                                          $
                                                                          80,473
                                                                          
                                                                          
                                                                          $
                                                                          90,417
                                                                          
                                                                          
                                                                          $
                                                                          83,775
                                                                          
                                                                          
                                                                          $
                                                                          71,017
                                                                          
                                                                          
                                                                          $
                                                                          90,177Property
      and equipment,net
                                                                          
                                                                          
                                                                          152,602
                                                                          
                                                                          
                                                                          
                                                                          169,062
                                                                          
                                                                          
                                                                          
                                                                          145,129
                                                                          
                                                                          
                                                                          
                                                                          66,807
                                                                          
                                                                          
                                                                          
                                                                          37,563Intangible
      assets
                                                                          
                                                                          
                                                                          13,279
                                                                          
                                                                          
                                                                          
                                                                          13,645
                                                                          
                                                                          
                                                                          
                                                                          15,888
                                                                          
                                                                          
                                                                          
                                                                          2,456
                                                                          
                                                                          
                                                                          
                                                                          --Goodwill
                                                                          
                                                                          
                                                                          17,057
                                                                          
                                                                          
                                                                          
                                                                          124,375
                                                                          
                                                                          
                                                                          
                                                                          117,146
                                                                          
                                                                          
                                                                          
                                                                          61,448
                                                                          
                                                                          
                                                                          
                                                                          45,304Other
      non-current assets
                                                                          
                                                                          
                                                                          30,181
                                                                          
                                                                          
                                                                          
                                                                          --
                                                                          
                                                                          
                                                                          
                                                                          150
                                                                          
                                                                          
                                                                          
                                                                          --
                                                                          
                                                                          
                                                                          
                                                                          6Total
      assets
                                                                          
                                                                          $
                                                                          293,592
                                                                          
                                                                          
                                                                          $
                                                                          397,499
                                                                          
                                                                          
                                                                          $
                                                                          362,088
                                                                          
                                                                          
                                                                          $
                                                                          201,728
                                                                          
                                                                          
                                                                          $
                                                                          173,050Liabilities
      and Stockholders’ Equity:Current
      liabilities
                                                                          
                                                                          $
                                                                          84,332
                                                                          
                                                                          
                                                                          $
                                                                          86,002
                                                                          
                                                                          
                                                                          $
                                                                          88,669
                                                                          
                                                                          
                                                                          $
                                                                          48,331
                                                                          
                                                                          
                                                                          $
                                                                          38,806Long-term
      debt
                                                                          
                                                                          
                                                                          93,477
                                                                          
                                                                          
                                                                          
                                                                          109,831
                                                                          
                                                                          
                                                                          
                                                                          93,139
                                                                          
                                                                          
                                                                          
                                                                          8,588
                                                                          
                                                                          
                                                                          
                                                                          11,507Other
      non-currentliabilities
                                                                          
                                                                          
                                                                          4,540
                                                                          
                                                                          
                                                                          
                                                                          11,322
                                                                          
                                                                          
                                                                          
                                                                          6,983
                                                                          
                                                                          
                                                                          
                                                                          5,007
                                                                          
                                                                          
                                                                          
                                                                          3,546Total
      stockholders’ equity
                                                                          
                                                                          $
                                                                          111,243
                                                                          
                                                                          
                                                                          $
                                                                          190,344
                                                                          
                                                                          
                                                                          $
                                                                          173,297
                                                                          
                                                                          
                                                                          $
                                                                          139,802
                                                                          
                                                                          
                                                                          $
                                                                          119,191Total
      commitmentsunder
      operating leases
                                                                          
                                                                          $
                                                                          56,673
                                                                          
                                                                          
                                                                          $
                                                                          58,639
                                                                          
                                                                          
                                                                          $
                                                                          38,827
                                                                          
                                                                          
                                                                          $
                                                                          40,239
                                                                          
                                                                          
                                                                          $
                                                                          46,564


10
  Selected Financial Data
(continued)(Thousands of
dollars, except per share amounts)
 
 Year
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006
                  
                  
                  2005
                  
                  
                  2004Operating
      Ratios(2)Total
      company
                  
                  98.6%
                  
                  
                  96.6%
                  
                  
                  94.5%
                  
                  
                  94.1%
                  
                  
                  94.9%Less-than-truckload
                  
                  98.5%
                  
                  
                  96.0%
                  
                  
                  93.7%
                  
                  
                  93.1%
                  
                  
                  94.2%Logistics
                  
                  94.6%
                  
                  
                  93.8%
                  
                  
                  93.3%
                  
                  
                  94.7%
                  
                  
                  95.3%Truckload
                  
                  96.2%
                  
                  
                  94.9%
                  
                  
                  94.7%
                  
                  
                  93.5%
                  
                  
                  94.5%  Notes:


(1)
            Vitran
      recorded a pre-tax non-cash goodwill impairment charge of $107.4 million
      at December 31, 2008.  The assessment of the Company’s goodwill
      for impairment is discussed further under “Critical Accounting Policies
      and Estimates” and note 1(k) of the consolidated financial
      statements.


(2)
            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 excludes the impact of the goodwill impairment charge.  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 31,2008
                                        
                                        
                                        2007
                                        
                                        
                                        2006
                                        
                                        
                                        2005
                                        
                                        
                                        2004Operating
      expenses
                                        
                                        $
                                        629,883
                                        
                                        
                                        $
                                        565,094
                                        
                                        
                                        $
                                        426,515
                                        
                                        
                                        $
                                        357,960
                                        
                                        
                                        $
                                        319,295Selling,
      general and administrative expenses
                                        
                                        
                                        65,737
                                        
                                        
                                        
                                        62,086
                                        
                                        
                                        
                                        47,448
                                        
                                        
                                        
                                        37,881
                                        
                                        
                                        
                                        31,263Other
      expenses (income)
                                        
                                        
                                        (326
                                        )
                                        
                                        
                                        (432
                                        )
                                        
                                        
                                        (434
                                        )
                                        
                                        
                                        (41
                                        )
                                        
                                        
                                        (146
                                        )Depreciation
      and amortization expense
                                        
                                        
                                        21,024
                                        
                                        
                                        
                                        20,770
                                        
                                        
                                        
                                        12,490
                                        
                                        
                                        
                                        6,965
                                        
                                        
                                        
                                        5,206$
                                        716,318
                                        
                                        
                                        $
                                        647,518
                                        
                                        
                                        $
                                        486,019
                                        
                                        
                                        $
                                        402,765
                                        
                                        
                                        $
                                        355,618Revenue
                                        
                                        $
                                        726,337
                                        
                                        
                                        $
                                        670,517
                                        
                                        
                                        $
                                        514,059
                                        
                                        
                                        $
                                        428,192
                                        
                                        
                                        $
                                        374,595Operating
      ratio (“OR”)
                                        
                                        
                                        98.6
                                        %
                                        
                                        
                                        96.6
                                        %
                                        
                                        
                                        94.5
                                        %
                                        
                                        
                                        94.1
                                        %
                                        
                                        
                                        94.9
                                        %





11




ITEM
7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS 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 ability to
      realize cost savings from the reduction initiatives in linehaul, pick-up
      and delivery and service centers in its less-than-truckload
      segment;





•
            the Company’s ability to
      realize wage savings from labour force reductions in the
      less-than-truckload segment;





•
            the Company’s objective to
      improve service to new and existing customers with its less-than-truckload
      segment;





•
            the Company’s intention to
      improve results with an inter-regional sales initiative in its
      less-than-truckload segment;





•
            the Company’s expectation to
      increase square footage under management in its Logistics
      segment;





•
            the Company’s expectation to
      return its days sale outstanding measure to historical
      levels;





•
            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 a 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 diversify 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.





12


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 from www.sedar.com or from www.sec.gov
..





OVERVIEW





Vitran
Corporation Inc. (“Vitran” or the “Company”) is a leading, predominantly
non-union, provider of freight surface transportation and related logistics
services throughout Canada and in 29 states in the eastern, central,
southwestern and western United States.  Its business consists of
three operating segments: (1) Less-than-truckload services (“LTL”), (2)
Logistics services, and (3) Truckload services. These services are provided by
stand-alone business units within their respective regions. Depending on a
customer’s needs, the units can operate independently or in a complementary
manner.  As is more fully described in Item 1 “Business”, the LTL
segment transports shipments in less-than-full trailer load quantities through
freight service center networks, the Logistics segment provides supply chain
solutions and freight brokerage services and the Truckload segment delivers full
trailer loads point to point on a predominantly short-haul basis.





Vitran’s
operating results are generally expected to depend on the number and weight of
shipments transported, the prices received for the services provided, and the
mix of services supplied to clients.  Vitran must manage its fixed and
variable operating cost infrastructure in the face of fluctuating volumes to
realize appropriate margins while maintaining the quality service expected by
its customers.





The
long-term mission of the Company is to build a North American transportation
infrastructure with national and regional coverage in both Canada and the United
States offering regional, inter-regional, national, and transborder LTL
services.  In conjunction with the LTL services, Vitran will also
focus on logistics service offerings that not only are profitable as stand-alone
business opportunities, but also increase the utilization of LTL freight service
assets where appropriate.





EXECUTIVE
SUMMARY





The
year ended December 31, 2008 was a very difficult year for Vitran and the entire
freight transportation industry in North America.  The economic
slowdown in North America persisted throughout the year and got dramatically
worse in the fourth quarter as the global credit crisis and economic recession
took hold.  Price competition in the LTL segment intensified while
retail activity levels slowed down impacting the results for the Logistics
segment and the Company finished 2008 with earnings before goodwill impairment
charges of $0.34(6)per
diluted share.





In
the face of this demanding economic environment, Vitran achieved some very
significant milestones throughout 2008:




January
                        –
                        the
      U.S. LTL business unit purchased facilities in Kansas City and Las
      Vegas;May
                        –
                        the
      U.S. LTL business unit launched a new nationwide Information Technology
      operating system;June
                        –
                        the
      Logistics segment opened a dedicated 530,000 sq. ft. facility, the largest
      in its history;June
                        –
                        the
      Canadian LTL business unit relocated its national office to a newly
      constructed 130 door cross-dock
      facility;August
                        –
                        the
      U.S. LTL business unit successfully integrated the wage and benefit
      structure for its employees;October
                        –
                        the
      U.S. LTL business unit completed the redundant terminal integration in
      Ohio, Michigan, Indiana, Kentucky, Illinois and Pennsylvania;
      andDecember
                        –
                        the
      Company for year ended December 31, 2008 reduced debt by $14.0
      million.




13




In
addition, Las Vegas/L.A. Express Inc. (“LVLA”), acquired in November 30, 2007,
performed at expected levels for 2008 and contributed to a record year for the
Logistics segment that posted revenue of $81.0 and income from operations of
$4.4 million.





Although,
Vitran completes its annual assessment of goodwill impairment at September 30,
2008, the Company was required to re-assess its goodwill for impairment at
December 31, 2008.  At that moment in time, the Company’s market
capitalization was significantly lower than the carrying value of its net assets
thereby indicating impairment of goodwill.  Consequently, Vitran
recorded a pre-tax non-cash impairment charge of $107.4 million at December 31,
2008.  The assessment of the Company’s goodwill for impairment is
discussed further under “Critical Accounting Policies and
Estimates”.





RESULTS
OF OPERATIONS


2008
COMPARED TO 2007





CONSOLIDATED
RESULTS





The
following table summarizes the Consolidated Statements of Income for the three
years ended December 31:





(in
      thousands of dollars)2008
                    
                    
                    2007
                    
                    
                    2006
                    
                    
                    2008
      vs 2007
                    
                    
                    2007
      vs 2006Revenue
                    
                    $
                    726,337
                    
                    
                    $
                    670,517
                    
                    
                    $
                    514,059
                    
                    
                    
                    8.3
                    %
                    
                    
                    30.4
                    %Operating
      expenses
                    
                    
                    629,883
                    
                    
                    
                    565,094
                    
                    
                    
                    426,515
                    
                    
                    
                    11.5
                    %
                    
                    
                    32.5
                    %SG&A
      expenses
                    
                    
                    65,737
                    
                    
                    
                    62,086
                    
                    
                    
                    47,448
                    
                    
                    
                    5.9
                    %
                    
                    
                    30.9
                    %Other
      expenses  (income)
                    
                    
                    (326
                    )
                    
                    
                    (432
                    )
                    
                    
                    (434
                    )
                    
                    
                    (24.5
                    %)
                    
                    
                    (0.5
                    %)Impairment
      of goodwill
                    
                    
                    107,351
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    100.0
                    %
                    
                    
                    0.0
                    %Depreciation
      andamortization
                    
                    
                    21,024
                    
                    
                    
                    20,770
                    
                    
                    
                    12,490
                    
                    
                    
                    1.2
                    %
                    
                    
                    66.3
                    %Income
      (loss) fromoperations
                    
                    
                    (97,332
                    )
                    
                    
                    22,999
                    
                    
                    
                    28,040
                    
                    
                    
                    (523.2
                    %)
                    
                    
                    (18.0
                    %)Interest
      expense, net
                    
                    
                    9,223
                    
                    
                    
                    8,426
                    
                    
                    
                    2,660
                    
                    
                    
                    9.5
                    %
                    
                    
                    216.8
                    %Net
      income (loss)
                    
                    $
                    (71,225
                    )
                    
                    $
                    13,710
                    
                    
                    $
                    19,399
                    
                    
                    
                    (619.5
                    %)
                    
                    
                    (29.3
                    %)2008
                    
                    
                    2007
                    
                    
                    2006
                    
                    
                    2008
      vs 2007
                    
                    
                    2007
      vs 2006Earnings(loss)  per
      share:Basic
                    
                    $
                    (5.28
                    )
                    
                    $
                    1.02
                    
                    
                    $
                    1.50
                    
                    
                    
                    (617.6
                    %)
                    
                    
                    (32.0
                    %)Diluted
                    
                    $
                    (5.28
                    )
                    
                    $
                    1.00
                    
                    
                    $
                    1.48
                    
                    
                    
                    (628.0
                    %)
                    
                    
                    (32.4
                    %)Operating
      ratio
                    
                    
                    98.6
                    %
                    
                    
                    96.6
                    %
                    
                    
                    94.5
                    %





Revenue increased 8.3% to $726.3
million in 2008 from $670.5 million in 2007.  Revenue in the LTL,
Truckload and most significantly in the Logistics segments increased 4.5%, 4.5%
and 53.3% respectively.  Revenue in the LTL segment was impacted by a
45.9% increase in fuel surcharge revenue compared to 2007, while the acquisition
of LVLA on November 30, 2007 contributed to the increase in revenue in the
Logistics segment.  Loss from operations was $97.3 million in 2008
compared to income from operations of $23.0 million in
2007.  Excluding the goodwill impairment charge, income from
operations declined 56.4% to $10.0 million in 2008 compared to $23.0 million in
2007.  An increase in income from operations of 33.7% in the Logistics
segment was offset by declines in income from operations at the LTL segment
(excluding goodwill impairment charge) and Truckload segment of 61.2% and 22.1%,
respectively.  The Company’s consolidated operating ratio increased to
98.6% in 2008 compared to 96.6% in 2007.  Detailed explanations for
the fluctuations in revenue and income from operations are discussed below in
“Segmented Results”.





14




Selling,
general and administrative expenses (“SG&A”) increased 5.9% to $65.7 million
in 2008 from $62.1 million in 2007.  The increase in SG&A expenses
for the 2008 year can primarily be attributed to the acquisition of LVLA on
November 30, 2007, not included in the 2007 annual SG&A for the first eleven
months of that year, accounting for $4.3 million of the increase and offset by
reductions in variable compensation expense and share-based compensation expense
of $0.6 million at the Corporate segment.





Depreciation and amortization expense
for 2008 increased slightly compared to 2007 including the acquisition of LVLA
on November 30, 2007.  LVLA, an asset-light business, contributed only
an additional $0.9 million in depreciation and amortization expense for the
year.  This was partially offset by depreciation expense attributable
to rolling stock purchases that declined by $16.0 million compared to
2007.





Interest
expense, net of interest income, was $9.2 million for 2008 compared to $8.4
million for 2007.  The increase can be attributed to $0.9 million of
financing costs that were written off in the fourth quarter of 2008 for a
substantial bank amendment completed December 30, 2008.  The amendment
was completed with the Company’s syndicated lenders and introduced a new pricing
grid that starts December 30, 2008, increasing the Company’s spreads 250 bps on
the $44.5 million of revolving debt and $48.0 million of term debt.





Income
tax recovery for 2008 was $35.3 million compared to an expense of $0.9 million
for 2007.  The tax recovery in 2008 compares to an effective tax rate
of 5.9% for 2007.  The tax recovery can be attributed to a decline in
earnings before tax, recognition of a deferred tax asset related to the
impairment of goodwill and a decline in the effective tax rate.  The
decrease in the effective rate can be attributed to an increase in a higher
proportion of income being earned in lower foreign tax jurisdictions, as well as
a decline in future tax rates in Canada.On a consolidated basis,
the Company generated taxable losses in the United States, which have been
recognized as future tax assets.  These taxable losses are the result
of tax depreciation and amortization on capital assets and goodwill in excess of
GAAP depreciation and amortization attributable to the Company’s acquired
businesses over the last three years.  Management believes the Company
will generate sufficient taxable income to use these losses in the
future.  Should the Company’s
earnings before income tax increase in subsequent quarters, the effective tax
rate should also increase.





Net
loss on a GAAP basis was $71.2 million for 2008 compared to net income of $13.7
million in 2007.  This resulted in GAAP basic and diluted loss per
share of $5.28 for the current year compared to earnings per share of $1.02 and
$1.00, respectively in 2007.  Excluding the goodwill impairment charge
and one-time write-off of previously deferred financing costs, basic and diluted
earnings per share would have been $0.39 for the current year(6)compared to $1.04 and $1.03 in 2007.





On
January 1, 2008, the Company adopted SFAS Statement 157, which provides a
framework for measuring fair value under GAAP.  As defined in SFAS
Statement 157, fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price).  The Company
utilizes market data or assumptions that the Company believes market
participants would use in pricing the asset or liability, including assumptions
about risk and the risks inherent in the inputs to the valuation
technique.  These inputs can be readily observable, market
corroborated or generally unobservable.





On
January 1, 2009, the Company will adopt SFAS Statement 141 (revised), Business
Combinations, for any business acquisitions after January 1, 2009, as required
by the statement.  SFAS Statement 141R established principles and
requirements for how the acquirer:  (i) recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed
and any non-controlling interest in the acquiree; (ii) recognizes and measures
the goodwill acquired in the business combination or a gain from a bargain
purchase; and (iii) determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination.





On
January 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, “Accounting for Uncertainty in Income Taxes”, with no cumulative effect
adjustment recorded at adoption.  The adoption of this standard
requires management to make estimates and assumptions that affect reported
amounts of tax related assets and liabilities that will impact the effective tax
rate of the Company.  In addition, the effective tax rate in all
periods is the result of the mix of income earned in various tax jurisdictions
that apply a broad range of income tax rates.  The income tax expense
differs from the tax computed at the federal statutory income tax rate due
primarily to state and provincial income taxes and earnings in foreign
jurisdictions.   Future effective tax rates could be adversely
affected if earnings are lower than anticipated in jurisdictions with lower
statutory rates, unfavourable changes in tax laws and regulations, or by adverse
tax rulings.





15




SEGMENTED
RESULTS





LTL
(Less-than-truckload)





The
table below provides summary information for the LTL segment for the three years
ended December 31:





(in
      thousands of dollars)
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006
                  
                  
                  2008
      vs 2007
                  
                  
                  2007
      vs 2006Revenue
                  
                  $
                  610,933
                  
                  
                  $
                  584,786
                  
                  
                  $
                  441,499
                  
                  
                  
                  4.5
                  %
                  
                  
                  32.5
                  %Income
      from operations (7)
                  
                  $
                  8,980
                  
                  
                  $
                  23,153
                  
                  
                  $
                  28,029
                  
                  
                  
                  (61.2
                  %)
                  
                  
                  (17.4
                  %)Impairment
      of goodwill
                  
                  $
                  107,351
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  100.0
                  %
                  
                  
                  0.0
                  %Operating
      ratio
                  
                  
                  98.5
                  %
                  
                  
                  96.0
                  %
                  
                  
                  93.7
                  %Number
      of shipments(1)
                  
                  
                  3,930,049
                  
                  
                  
                  4,040,306
                  
                  
                  
                  3,007,985
                  
                  
                  
                  (2.7
                  %)
                  
                  
                  34.3
                  %Weight
      (000s of lbs)(2)
                  
                  
                  5,979,270
                  
                  
                  
                  5,989,123
                  
                  
                  
                  4,669,777
                  
                  
                  
                  (0.2
                  %)
                  
                  
                  28.3
                  %Revenue
      per shipment(3)
                  
                  $
                  155.45
                  
                  
                  $
                  144.74
                  
                  
                  $
                  146.78
                  
                  
                  
                  7.4
                  %
                  
                  
                  (1.4
                  %)Revenue
      per hundredweight(4)
                  
                  $
                  10.22
                  
                  
                  $
                  9.76
                  
                  
                  $
                  9.45
                  
                  
                  
                  4.7
                  %
                  
                  
                  3.3
                  %





Revenue
in the LTL segment increased by 4.5% to $610.9 million in 2008 compared to
$584.8 million in 2007.  The growth in revenue was driven by an
increase in fuel surcharge revenue of $33.8 million, as the average price of
fuel for 2008 exceeded 2007.  Offsetting the increase in fuel
surcharge revenue was the decline in shipments, tonnage and revenue per
hundredweight excluding fuel surcharge of 2.7%, 0.2%, and 1.3%,
respectively.  Although tonnage and revenue per hundredweight
excluding fuel surcharge expanded through the first nine months of 2008, in the
fourth quarter as the global recession, credit crisis and reduction in operating
days impacted shippers, competitive pressures had a negative impact on the
annual operating statistics.  The cross-border service offering for
the year grew 26.5% but could not abate the overall impact of the
economy.  LTL segment activity level measurement, shipments per day,
declined monthly from July to October for the first time in the Company’s
history depicting the deteriorating economic environment in North
America.





More importantly, for the 2008 year,
the LTL segment completed a number of important operating
initiatives.  In the second quarter, the U.S. LTL business unit
completed its new IT operating system, the first step in its integration plan,
which had led to a slight increase in U.S. inter-regional sales
activity.  In the third quarter, the second step, the integrated wage
and benefit structure, was successfully completed in August 2008, which would
result in an annual increase in compensation cost of $1.2
million.  The third step in the integration plan, the physical
integration of service centers, commenced in late August 2008 and was completed
in October 2008.  The elimination of the redundant service centers
will lead to a reduction of linehaul, pick-up and delivery and service centers
expenses of approximately $11.0 million annually and allow the U.S. LTL business
unit to start an inter-regional sales initiative.





These
milestones, although achieved successfully, delayed management’s ability to
reduce costs while revenue and the economic environment worsened.  In
addition to the aforementioned expense savings completed at the end of October,
the company further reduced its labour force late in the fourth quarter
resulting in additional annual savings of approximately $14.0
million.  As a result, the LTL segment operating ratio was 98.5% for
2007 compared to 96.0% in 2007.





16




Logistics





The
table below provides summary information for the Logistics segment for the three
years ended December 31:





(in
      thousands of dollars)
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006
                  
                  
                  2008
      vs 2007
                  
                  
                  2007
      vs 2006Revenue
                  
                  $
                  81,030
                  
                  
                  $
                  52,845
                  
                  
                  $
                  39,762
                  
                  
                  
                  53.3
                  %
                  
                  
                  32.9
                  %Income
      from operations
                  
                  $
                  4,373
                  
                  
                  $
                  3,271
                  
                  
                  $
                  2,679
                  
                  
                  
                  33.7
                  %
                  
                  
                  22.1
                  %Operating
      ratio
                  
                  
                  94.6
                  %
                  
                  
                  93.8
                  %
                  
                  
                  93.3
                  %





Revenue
for the Logistics segment increased by 53.3% to $81.0 million compared to $52.8
million in 2007.   Shipments within the Brokerage business unit
declined by 15.7% in 2008 compared to 2007.  However, within the
Supply Chain business unit, the addition of LVLA acquired November 30, 2007
contributed a full year of revenue in 2008, accounting for $24.8 million of the
segment’s increase compared to 2007.  Furthermore, in June of 2008 the
Supply Chain business unit commenced a new 530,000 square foot dedicated
distribution facility that further increased revenue and income from operations
for the year.  These two significant additions within the Supply Chain
business unit offset retail industry weakness in 2008 and contributed to the
record revenue and income from operations of $81.0 million and $4.4
million.  As at December 31, 2008, the Logistics segment had 1.8
million square feet under management compared to 1.2 million square feet under
management at December 31, 2007.  It is the Company’s expectation to
increase the square footage under management by approximately 15% in
2009.





Truckload





The
table below provides summary information for the Truckload segment for the three
years ended December 31:





(in
      thousands of dollars)
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006
                  
                  
                  2008
      vs 2007
                  
                  
                  2007
      vs 2006Revenue
                  
                  $
                  34,374
                  
                  
                  $
                  32,886
                  
                  
                  $
                  32,798
                  
                  
                  
                  4.5
                  %
                  
                  
                  0.3
                  %Income
      from operations
                  
                  $
                  1,307
                  
                  
                  $
                  1,678
                  
                  
                  $
                  1,734
                  
                  
                  
                  (22.1
                  %)
                  
                  
                  (3.2
                  %)Operating
      ratio
                  
                  
                  96.2
                  %
                  
                  
                  94.9
                  %
                  
                  
                  94.7
                  %


Revenue
for the Truckload segment increased by 4.5% to $34.4 million in 2008 from $32.9
million in 2007. The revenue increase was attributable to shipments increasing
7.8%, partially offset by a decline in revenue per shipment of
3%.  Income from operations declined by 22.1% due to a reduction in
fuel cost recovery of 19.8% and an increase in empty miles of 14.3% as the
Segment travelled further to acquire additional freight.  Therefore,
the operating ratio was 96.2% in 2008 compared to 94.9% in 2007.





RESULTS
OF OPERATIONS


2007
COMPARED TO 2006





CONSOLIDATED
RESULTS





Revenue
increased 30.4% to $670.5 million in 2007 from $514.1 million in
2006.  Revenue in the LTL and Logistics segments increased 32.5% and
32.9% respectively and remained flat in the Truckload segment.  The
revenue increase in the LTL segment was impacted by the acquisition of PJAX on
October 2, 2006.  Income from operations declined 18.0% to $23.0
million in 2007 from $28.0 million in 2006.  An increase in income
from operations of 22.1% in the Logistics segment was offset by declines in
income from operations in the LTL segment and Truckload segment of 17.4% and
3.2%, respectively.  The Company’s consolidated operating ratio
increased to 96.6% in 2007 from 94.5% in 2006.  Detailed explanations
for the fluctuations in revenue and income from operations are discussed below
in “Segmented Results”.





Selling, general and administrative
expenses (“SG&A”) increased 30.9% to $62.1 million in 2007 from $47.4
million in 2006.  The increase in SG&A expenses for 2007 year can
be primarily attributed to the acquisition of PJAX Freight System (“PJAX”) Oct
2, 2006, not included in the 2006 annual SG&A for the first nine months of
that year, as well as the inclusion of Las Vegas/L.A. Express Inc. (“LVLA”)
for one month in December 2007, accounting for $13.2 million of the
variance.  Contributing to the remainder of the increase was a $0.1
million increase in share-based compensation expense and average annual wage
increases of 2% to 3% across all segments of the Company.  With the
addition of LVLA on November 30, 2007 and the increase in ongoing
compensation-related expenses, SG&A is higher in 2008 as compared to
2007.





17




Depreciation
and amortization expense increased 66.3% to $20.8 million in 2007 compared to
$12.5 million in 2006.  The increase is primarily attributed to the
addition of PJAX on October 2, 2006 but also to the increase in capital
expenditures over the previous two years.





Interest
expense net of interest income was $8.4 million for 2007 compared to $2.7
million for 2006.  This increase can be attributed to the draw downs
on Vitran’s credit facilities to fund the acquisition of PJAX on October 2,
2006.   Also on July 31, 2007, Vitran substantially changed its
syndicated credit facilities resulting in a one-time write-off of $0.5 million
of deferred financing costs attributable to its former syndication
agreement.  If not for this write-off, interest expense for the year
would have been approximately $7.9 million.





Income
tax expense for 2007 was $0.9 million compared to $6.1 million in
2006.  The effective tax rate was 5.9% for 2007 compared to 24.1% in
2006.   The decline in income tax expense is due to a decline in
earnings before tax and a decline in the effective tax rate.  The
decrease in the effective tax rate can be attributed to a higher proportion of
income being earned in lower tax jurisdictions as well as a decline in future
tax rates in Canada.  On a consolidated basis, the Company generated
taxable losses in the United States, which have been recognized as future tax
assets.  These taxable losses are the result of tax depreciation and
amortization on capital assets and goodwill in excess of GAAP depreciation and
amortization attributable to the Company’s acquired businesses over the last
three years.  Management believes the Company will generate sufficient
taxable income to use these losses in the future.





Net
income before cumulative change in accounting principle declined by 28.8% to
$13.7 million for 2007 compared to $19.3 million in 2006.  This
resulted in basic and diluted earnings per share before change in cumulative
change in accounting principle of $1.02 and $1.00 for the current year compared
to $1.49 and $1.47 in 2006.  Excluding the one-time write-off of
previously deferred financing costs, basic and diluted earnings per share before
cumulative effect of change in accounting principle would have been $1.04 and
$1.03 for the current year(6).  The
weighted average number of shares for 2007 was 13.5 million basic and 13.7
million diluted compared to 12.9 million basic and 13.1 million diluted shares
in 2006.  The increase is attributable to the issuance of common
shares as part of the purchase consideration for the PJAX acquisition and the
exercise of stock options. Net income declined by 29.3% to $13.7 million for
2007, compared to $19.4 million in 2006.  This resulted in basic and
diluted earnings per share of $1.02 and $1.00 for the current year, compared to
$1.50 and $1.48 in 2006.





On
January 1, 2006, the Company adopted SFAS 123(R), “Share-Based Payments”, using
the modified prospective transition method.  In accordance with the
standard, the Company recognized $0.1 million of income as cumulative effect of
change in accounting principle.





On
January 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, “Accounting for Uncertainty in Income Taxes”, with no cumulative effect
adjustment recorded at adoption.  The adoption of this standard
requires management to make estimates and assumptions that affect reported
amounts of tax related assets and liabilities that will impact the effective tax
rate of the Company.  In addition the effective tax rate in all
periods is the result of the mix of income earned in various tax jurisdictions
that apply a broad range of income tax rates.  The income tax expense
differs from the tax computed at the federal statutory income tax rate due
primarily to state and provincial income taxes and earnings in foreign
jurisdictions.   Future effective tax rates could be adversely
affected if earnings are lower than anticipated in jurisdictions with lower
statutory rates, unfavourable changes in tax laws and regulations, or by adverse
tax rulings.





18





SEGMENTED
RESULTS





LTL
(Less-than-truckload)





Revenue
in the LTL segment increased 32.5% to $584.8 million in 2007 compared to $441.5
million in 2006.  This significant growth in revenue was driven
primarily by the acquisition of PJAX on October 2, 2006 but was also augmented
by a 26.9% increase in the cross border service offering.   The
new inter-regional service launched in 2007 represented in excess of 2.0% of
total LTL revenue.   The Canadian business unit posted historical
revenue growth rates for 2007 despite being impacted by a slowdown in the
Canadian economy in the fourth quarter of the year.  The U.S. LTL
business unit struggled with a sluggish U.S. domestic economy throughout 2007
that resulted in a deterioration of regional LTL revenues within all U.S.
regions.  The impact of the economic slowdown was most severe in the
final month of the year.





The
LTL segment, which included a full year of PJAX results in 2007, increased
shipments, tonnage and revenue per hundredweight compared to 2006 by 34.3%,
28.3% and 3.3%, respectively.  However, income from operations
decreased 17.4% to $23.1 million in 2007 compared to $28.0 million in
2006.  The aforementioned economic environment resulted in competitive
pricing pressure that negatively impacted the operating margin of the
segment.  Income from operations was significantly impacted in the
2007 fourth quarter, particularly the month of December, as income from
operations declined $6.1 million or 73.2% compared to the same quarter in
2006.   The LTL segment operating ratio was 96.0% for 2007
compared to 93.7% in 2006.





Logistics





Revenue
for the Logistics segment increased by 32.9% to $52.8 million compared to $39.8
million in 2006.  Shipments within the Brokerage business unit
declined 3.9% in 2007 compared to 2006.  However, the Supply Chain
business unit grew revenue and income from operations acquiring new
transactional and expanded dedicated contracts in 2007.  Prior to the
acquisition of LVLA, square footage under management at the Supply Chain unit
was 750,000 square feet at December 31, 2007 compared to 622,000 square feet at
December 31, 2006.  Furthermore, the additional 470,000 square feet
under management provided by the addition of LVLA for the month of December
bolstered revenue and income from operations in the Supply Chain business
unit.  These factors resulted in an increase in income from operations
of 22.1% to $3.3 million and an operating ratio of 93.8% in 2007 compared to
93.3% in 2006.





Truckload





Revenue
for the Truckload segment increased 0.3% to $32.9 million in 2007 from $32.8
million in 2006.  Revenue per mile(5) was
flat and shipments increased 3.4% compared to 2006.  This was offset
by an increase in empty miles of 7.7%, resulting in a decline in income from
operations of 3.2% to $1.7 million compared to 2006.   The
operating ratio was 94.9% in 2007 compared to 94.7% in 2006.








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.





19




(6)
            Reconciliation
      to net income and earnings per share excluding the goodwill impairment
      charge and write-off of previously deferred financing
    costs:





Year ended
      December 312008
                                        
                                        
                                        2007Net
      income (loss)
                                        
                                        $
                                        ( 71,225
                                        )
                                        
                                        $
                                        13,710Goodwill
      impairment, net of tax
                                        
                                        
                                        75,844
                                        
                                        
                                        
                                        -Adjusted
      net income before goodwill impairment
                                        
                                        
                                        4,619
                                        
                                        
                                        
                                        13,710Financing
      costs written off, net of tax
                                        
                                        
                                        630
                                        
                                        
                                        
                                        304Adjusted
      net income
                                        
                                        $
                                        5,249
                                        
                                        
                                        $
                                        14,014Weighted
      average shares outstanding:Basic
                                        
                                        
                                        13,480,805
                                        
                                        
                                        
                                        13,458,786Diluted
                                        
                                        
                                        13,632,628
                                        
                                        
                                        
                                        13,651,799Adjusted
      earnings per share before goodwill impairment:Basic
                                        
                                        $
                                        0.34
                                        
                                        
                                        $
                                        1.04Diluted
                                        
                                        $
                                        0.34
                                        
                                        
                                        $
                                        1.03Adjusted
      earnings per share:Basic
                                        
                                        $
                                        0.39
                                        
                                        
                                        $
                                        1.04Diluted
                                        
                                        $
                                        0.39
                                        
                                        
                                        $
                                        1.03





(7)
            Reconciliation
      to LTL segment income from operations excluding the goodwill impairment
      charge:





Year ended
      December 31,
                  2008Income
      from operations
                
                $
                (
      98,371
                )Goodwill
      impairment
                
                
                107,351Adjusted
      income from operations
                
                $
                8,980





20





GENERAL
RISKS AND UNCERTAINTIES





The Company is exposed to a number of
general risks and uncertainties that could impact the results.





The
transportation industry is highly competitiveon the
basis of both price and service.  The Company competes with regional,
inter-regional and national LTL carriers, truckload carriers, third party
logistics companies and, to a lesser extent, small-package carriers, air freight
carriers and railroads.  The Company competes effectively in its
markets by providing high quality and timely service at competitive
prices.





The
Company’s business is sensitive to general economic conditions and seasonal fluctuations,
although these factors are mitigated somewhat by the variable nature of many of
the Company’s costs.  Recessionary economic cycles and downturns in
customer business cycles, as well as downturns in the principal regional
economies where the Company’s operations are located, may affect results of
operations.  As a result of the economic turmoil and its effects on
our market capitalization, Vitran had to reduce the carrying value of goodwill
and recorded a pre-tax non-cash impairment charge of $107.4 million against the
goodwill carrying value in December 2008.  In the trucking industry
for a typical year, the second and third quarters usually have the highest
business levels, while the first and fourth quarters generally have the lowest
business levels.  The fourth quarter holiday season and adverse
weather conditions generally experienced in the first quarter of the year, such
as heavy snow and ice storms, have a negative impact on operating
results.  Accordingly, revenue and profitability are generally lowest
in the first and fourth quarters.





Vitran
is dependent on a major
railroad for its national LTL service in Canada.  Any reduction
in service by the railroad is likely to increase costs for the Company and
reduce the reliability, timeliness and overall attractiveness of rail-based
services.





The
Company’s exposure to credit
risk is not significant as it is not dependent on any particular industry
or customer.  The Company’s single largest customer accounted for 2.6%
of revenue in 2008.  The general manufacturing industry at
approximately 41.2% of total LTL revenue in 2008 represents the most significant
industry serviced by the Company.





Labor
represents Vitran’s most significant cost and key to service
quality.  The Company has a history of positive labor relations that will
continue to be important to future success.  The two unionized
terminals in Canada, representing 2.2% of the Company’s labor force, are
represented by the International Brotherhood of Teamsters and the Canadian Auto
Workers Association. The collective bargaining agreements between the Company
and its unionized employees expire on February 28, 2011, and on March 31, 2015,
respectively.





The
Company is dependent on its ability to hire and retain qualified drivers including
owner operators.  Depending on the driver market, Vitran may adjust
its compensation packages or operate with fewer drivers, all of which could
impact profitability.  Furthermore, the Company is dependent on
certain key management
personnel for the successful operation of the business.  Loss of key
personnel could harm Vitran’s operations and financial condition.





While
diesel fuel expenses
represent an important cost component to Vitran, the extensive use of owner
operators and the ability to share significant fuel increases with customers in
the form of a fuel surcharge reduce this risk.





The
Company is subject to numerous laws and regulations by the DOT,
Environmental Protection Agency (“EPA”), Internal Revenue Service, Canada
Customs Regulation Agency and various other federal, state, provincial and
municipal authorities.  New or more comprehensive laws and regulations
including but not limited to fuel emission, driver hours-of-service, taxation or
other mandated regulation could impact profitability.





Measures
taken by the U.S. and Canadian governments to strengthen border security
regulations could impact service levels.  Vitran’s cross-border
activity represented approximately 4.5% of the LTL segment revenue in 2008 and
the Company has responded to the new requirements to ensure compliance and
safety without jeopardizing the quality of service.




21


In
order to mitigate the exposure to interest rate riskin 2008 and
for future periods, the Company entered into floating-to-fixed interest rate
swap contracts with various expiry dates extending to December 31,
2011.  At December 31, 2008, 68% of the Company’s syndicated credit
facility was subject to fixed interest rate derivatives.  Of Vitran’s
total debt, 73% is subject to fixed interest rates.  Management
continues to evaluate the Company’s need to fix interest rate exposure or unwind
current interest rate swap contracts on an ongoing basis.





The
Company has exposure to foreign
currency riskas fluctuations in the U.S. dollar against the Canadian
dollar can impact the financial results of the Company.  Management
has designated the Company’s $81.1 million of U.S. dollar denominated
long-term debt in Canada as a hedge to the foreign currency exposure generated
by the Company’s U.S. operations.  The Company’s Canadian operations
realize foreign exchange gains and losses on the U.S. dollar revenue generated
against expenses denominated in Canadian dollars.  Furthermore, the
Company reports its results in U.S. dollars thereby exposing the results of the
Company’s Canadian operations to foreign currency fluctuations.





The
Company is subject to financial
maintenancetests under its term and revolving credit
facilities.  These tests require maintenance of certain maximum
leverage and minimum interest coverage ratios, among other restrictions, that
could limit the availability of capital to fund future growth.





Vitran
Corporation Inc. is a holding
company.  The Company’s ability to meet its financial
obligations is dependant primarily upon the receipt of interest and principal
payments on intercompany advances, management fee payments, cash dividends and
other payments from the Company’s subsidiaries together with the proceeds raised
through the issuance of debt.





The
Company operates a highly
capital intensive business.  Vitran depends on operating
leases, lines of credit, secured equipment financing and cash flow from
operations to finance the purchase of tractors, trailing fleet, information
technology hardware and terminals.





The
Company invests in new operating equipment and is dependent on the availability of rolling
stock.  Vitran’s investment in rolling stock is a significant
part of the annual capital expenditure expense and the supply and price of such
equipment may be adversely impacted by new regulations on
engines.   Vitran is also dependent on the availability and price of terminal
facilities.





The
Company is exposed to insurance
and claims expenses.Vitran is exposed to claims resulting
from cargo loss, auto liability and workers’ compensation.  An
increase in the number and severity of future claims could have an impact on
profitability.





The
Company has integrated the
information technology and operationsof its acquired companies and will
integrate future acquisitions within its U.S. LTL business
unit.  Integration initiatives may not realize the anticipated
benefits due to operational issues, disruptions and distractions for employees
and management, and potential failures in due diligence.





LIQUIDITY
AND CAPITAL RESOURCES





Cash flow from operations for the year
decreased to $28.2 million in 2008 compared to $33.0 million in
2007.  The decline is attributable to a decrease in profitability, as
described in the Consolidated and Segmented Results section of the MD&A,
partially offset by the increase in non-cash working capital compared to
2007.    The increase in working capital was the result of a
reduction in accounts receivable and a decrease in accounts
payable.  The change in accounts receivable, the critical influencer
for working capital changes at a transportation company, decreased December 31,
2008 compared to December 31, 2007 due to an approximate 11.5% decline in the
fourth quarter revenue compared to the same period in 2007.  Although
revenue declined, the Company experienced an increase in average days sales
outstanding to 43.0 days compared to 38.9 days at December 31,
2007.  The escalation in days sales outstanding can be attributed to
customers slowing their payment cycle in the tough economic
environment.   To match, the Company slowed their payments cycle
over the last two weeks of the fourth quarter thereby increasing its accounts
payable and accrued liabilities.





22


Albeit
the Company’s DSO has risen in 2008, we believe this to be a temporary anomaly
associated with the lackluster economy.  It is management’s intention
to return DSO to its historical levels of approximately 40 days over the next
twelve months if the economic environment returns to normal.  We do
not believe there will be a material impact to the financial position or
liquidity of the Company.





On
December 30, 2008, the Company substantially amended the terms and conditions of
its existing seven bank syndicated credit facilities.  Pursuant to
this amendment, the Company increased its interest rate spreads on currently
drawn debt from 150 bps to 400 bps, provided perfected security on certain
assets and significantly increased its leverage ratio covenants for the balance
of 2009.  Consequently, the company wrote off $0.9 million of
previously capitalized syndication fees and paid an additional $1.0 million in
fees to complete the new amendment.





Within
the syndicated credit facilities at December 31, 2008, interest-bearing debt was
$92.5 million consisting of $48.0 million of term debt and $44.5 million drawn
under the revolving credit facility.  In addition, the Company had
$1.9 million of additional term debt and $16.0 million of capital leases for a
total of $110.4 million of interest-bearing debt outstanding at December 31,
2008.  At December 31, 2007, interest-bearing debt was
$128.0 million consisting of $58.9 million of term debt, capital leases of
$22.9 million, $45.0 million drawn under the revolving credit facility and a
note payable of $1.2 million.





During the year, the Company repaid
$10.2 million of term debt and $7.9 million of capital leases and borrowed $3.1
million on the revolving credit facility, as well as $1.0 million of new capital
leases.  At December 31, 2008, the Company had $30.1 million of
unused credit facilities, net of outstanding letters of credit.





The Company generated $1.6 million in
proceeds and a gain on sale of $0.3 million on the divestiture of surplus
facilities in Coffeyville, Kansas; Cedar Rapids, Iowa and miscellaneous
equipment throughout the year. Capital expenditures amounted to $13.3 million
for 2008 and were primarily funded out of operating cash flows, new capital
leases and the revolving credit facility.  The majority of capital
expenditures in 2008 were for replacement rolling stock and real estate related
expenditures.  The Company purchased facilities in Kansas City,
Kansas; Las Vegas, Nevada and completed the construction of its new LTL service
center in Toronto, Ontario.  The table below sets forth the Company’s
capital expenditures for the years ended December 31, 2008, 2007 and
2006.





(in
      thousands of dollars)
                        
                        Year
      ended December 31,2008
                        
                        
                        2007
                        
                        
                        2006Real
      estate and buildings
                        
                        $
                        8,857
                        
                        
                        $
                        10,728
                        
                        
                        $
                        14,459Tractors
                        
                        
                        1,545
                        
                        
                        
                        13,362
                        
                        
                        
                        3,056Trailing
      fleet
                        
                        
                        1,374
                        
                        
                        
                        5,580
                        
                        
                        
                        7,587Information
      technology
                        
                        
                        583
                        
                        
                        
                        1,471
                        
                        
                        
                        761Leasehold
      improvements
                        
                        
                        185
                        
                        
                        
                        245
                        
                        
                        
                        186Other
      equipment
                        
                        
                        809
                        
                        
                        
                        1,840
                        
                        
                        
                        1,087Total
                        
                        $
                        13,353
                        
                        
                        $
                        33,226
                        
                        
                        $
                        27,136





Management estimates that cash capital
expenditures for the 2009 fiscal year will be between $6.0 million and $12.0
million.  The Company may potentially enter into operating leases to
fund the acquisition of specific equipment should the business levels exceed the
current equipment capacity of the Company.  The Company expects to
finance its capital requirements with cash flow from operations, new capital or
operating leases and, if required, its $30.1 million of unused credit
facilities.





The Company has contractual obligations
that include long-term debt consisting of term debt facilities, revolving credit
facilities, capital leases for operating equipment and off-balance sheet operating
leases primarily consisting of tractor, trailing fleet and real estate
leases.  Operating leases form an integral part of the Company’s
financial structure and operating methodology as they provide an alternative
cost effective and flexible form of financing.  The following table
summarizes our significant contractual obligations and commercial commitments as
of December 31, 2008:





23


(in thousands of dollars)
                          
                          Payments
      due by periodContractual
      Obligations
                          
                          Total
                          
                          
                          2009
                          
                          
                          2010
      & 2011
                          
                          
                          2012
      & 2013
                          
                          
                          ThereafterTerm
      credit facilities
                          
                          $
                          49,877
                          
                          
                          $
                          11,073
                          
                          
                          $
                          28,804
                          
                          
                          $
                          10,000
                          
                          $
                          NilRevolving
      credit facilities
                          
                          
                          44,550
                          
                          
                          Nil
                          
                          
                          Nil
                          
                          
                          
                          44,550
                          
                          
                          NilCapital
      lease obligations
                          
                          
                          15,975
                          
                          
                          
                          5,852
                          
                          
                          
                          7,873
                          
                          
                          
                          2,250
                          
                          
                          NilEstimated
      interest payments (1)
                          
                          
                          18,274
                          
                          
                          
                          7,161
                          
                          
                          
                          9,632
                          
                          
                          
                          1,481
                          
                          
                          NilSub-total
                          
                          $
                          128,676
                          
                          
                          $
                          24,086
                          
                          
                          $
                          46,309
                          
                          
                          $
                          58,281
                          
                          $
                          NilOff-balance
      sheet commitmentsOperating
      leases
                          
                          
                          56,673
                          
                          
                          
                          17,448
                          
                          
                          
                          21,961
                          
                          
                          
                          11,903
                          
                          
                          5,361Total
      contractual obligations
                          
                          $
                          185,349
                          
                          
                          $
                          41,534
                          
                          
                          $
                          68,270
                          
                          
                          $
                          70,184
                          
                          $
                          5,361





(1)
            The
      Company has estimated its interest obligation on its fixed and variable
      rate obligations.  For fixed rate debt where variable-to-fixed
      interest rate swaps are in place, the fixed interest rate was used to
      determine the interest obligation until the interest rate swaps
      mature.  For other fixed rate debt, the fixed rate was used to
      determine the interest rate obligation.  For variable rate debt
      the variable rate in place at December 31, 2008 was used to determine the
      total interest obligation.





In
addition to the above-noted contractual obligations, as at December 31, 2008,
the Company utilized the revolving credit facility for standby letters of credit
of $20.3 million.  The letters of credit are used as collateral for
self-insured retention of insurance claims.





A significant decrease in demand for
our services could limit the Company’s ability to generate cash flow and affect
its profitability.  The Company’s credit agreement contains certain
financial maintenance tests that require the Company to achieve stated levels of
financial performance, which, if not achieved, could cause an acceleration of
the payment schedules.  Management does not anticipate a significant
decline in business levels or financial performance and expects that existing
working capital, together with available revolving facilities, will be
sufficient to fund operating and capital requirements in 2009 as well as service
the contractual obligations.





OUTLOOK





The 2008 fiscal year, strategically,
was a very rewarding year, albeit, financially, a challenging year for
Vitran.  The Logistics segment added significant contracts expanding
its square footage under management from 1.2 million to 1.8
million.  The U.S. LTL unit completed its operational integration in
the fourth quarter of the year as the North American economy and transportation
pricing environment further deteriorated.





In 2009, Vitran’s LTL segment will be
dedicated to expanding its revenue by leveraging its client base across new
expanded operating footprint.  The LTL segment will leverage the new
U.S I.T. system and integrated operating infrastructure to deliver improved
service to its existing and new customers.  LTL management intends to
continue its focus on the LTL transborder business with a view to maintaining an
above- average year-over-year revenue growth.





The Logistics segment will continue to
concentrate on gaining new profitable business that also utilizes the services
of the Company’s LTL infrastructure.  Preparations for the new
distribution center, commencing the first quarter of 2009, are underway and will
expand revenue and income from operations for the year.





Truckload
segment management will focus on expanding and diversifying its customer base,
margin expansion and asset utilization.





On
a consolidated basis, the Company is now in position to reap the benefits of an
improvement in the economic environment should it materialize; however, should
the environment worsen, management will continually adjust its strategy and
tactics for the betterment of the Company, the employees and most importantly,
the shareholders.





24





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





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.  Critical revenue-related policies
and estimates for the Company’s LTL business unit relate to revenue adjustments
and allowance for doubtful accounts.  Critical revenue-related
policies and estimates for the Company’s Logistics and Truckload segment include
allowance for doubtful accounts.  At December 31, 2008, the allowance
for doubtful accounts was $3.8 million or approximately 5.5% of total trade
receivables.  The Company believes that its revenue recognition
policies are appropriate and that its revenue-related estimates and judgments
provide a reasonable approximation of actual revenue earned.





Estimated
Revenue Adjustments





Generally,
the pricing assessed by companies in the LTL business is subject to subsequent
adjustments due to several factors, including weight and freight classification
verifications, shipper bill of lading errors, pricing discounts and other
miscellaneous revenue adjustments.  Revenue adjustments are evaluated
and updated based on revenue levels, current trends and historical
experience.   These revenue adjustments are recorded as a
reduction in revenue from operations and accrued for in the allowance for
doubtful accounts.





Allowance
for Doubtful Accounts





The
Company records an allowance for doubtful accounts related to accounts
receivable that may potentially be impaired.  The Company’s allowance
is estimated by (1) a percentage of its aged receivables reflecting the current
business environment, customer and industry concentrations, and historical
experience and (2) an additional allowance for specifically identified accounts
that are significantly impaired, but payment may be likely.  A change
to these factors could impact the estimated allowance.  The provision
for bad debts is recorded in selling, general and administrative
expenses.





Claims
and Insurance Accruals





Claims
and insurance accruals reflect the estimated ultimate total cost of claims,
including amounts for claims incurred but not reported and future claims
development, for cargo loss and damage, bodily injury and property damage,
workers’ compensation, long-term disability and group health.  In
establishing these accrued expenses, management evaluates and monitors each
claim individually and claim frequency.  Factors such as historical
experience, known trends and third party estimates help determine the
appropriate reserves for the estimated liability.  Changes in severity
of previously reported claims, significant changes in the medical costs and
legislative changes affecting the administration of the plans could
significantly impact the determination of appropriate reserves in future
periods.  In Canada, the Company has a $50,000 deductible and in the
United States $350,000 self-insurance retention (“SIR”) per incident for auto
liability, casualty and cargo claims.  In the United States, the
Company has a $350,000 SIR per incident for workers’ compensation and $250,000
SIR per incident for employee medical.





In
addition to estimates within the self-insured retention, management makes
judgments concerning the coverage limits.  If any claim was to exceed
the coverage limits, the Company would have to accrue for the excess
amount.  The estimate would include evaluation whether a claim may
exceed such limits and, if so, by how much.  A claim or group of
claims of this nature could have a material adverse effect on the Company’s
results from operations.  Currently management is not aware of any
claims exceeding the coverage limit.





Goodwill
and Intangible Assets





The Company performs its goodwill
impairment test annually and more frequently if events or changes in
circumstances indicate that an impairment loss may have
occurred.  Impairment is tested at the reporting unit level by
comparing the reporting unit's carrying amount to its implied fair
value.  The methodology used to measure fair value is a discounted
cash flow method which is an income approach and a market approach which
estimates fair value using market multiples of appropriate financial measures
compared to a set of comparable public companies in the transportation and
logistics industry.  The fair value methods require certain
assumptions for growth in earnings before interest, taxes and depreciation,
future tax rates, capital re-investment, fair value of the assets and
liabilities, and discount rate.  Actual impairment of goodwill could
differ from these assumptions based on market conditions and other
factors.  In the event goodwill is determined to be impaired, a charge
to earnings would be required.  As at September 30, 2008, Vitran
completed its annual goodwill impairment test and concluded that there was no
impairment.





25


One of the indicators of impairment is
a sustained decline in the Company’s share price whereby the market
capitalization of the Company is less than its book value for an extended period
of time.  At December 31, 2008, before recording goodwill impairment
charges, the carrying value of Vitran’s net assets were $187.1 million compared
to the market capitalization of all of the Company’s outstanding shares which
was $84.5 million.  The market valuation of the Company declined
during the fourth quarter as Vitran’s share price on the Nasdaq stock market
decreased from $13.47 at September 30, 2008 to $6.26 at December 31, 2008. These
factors and the depressed macroeconomic environment indicated a triggering event
had occurred requiring the Company, at a reporting unit level, to test for the
impairment of goodwill at December 31, 2008.  Using the income and
market approach for estimating the fair value of each reporting unit, management
concluded that the goodwill in its LTL segment was impaired and there was no
impairment of goodwill in its other reporting units. Therefore, Vitran recorded
a pre-tax non-cash goodwill impairment charge of $107.4 million at December 31,
2008.





Property
and Equipment





Property and equipment are recorded at
cost and depreciated on a straight-line basis over their estimated useful
lives.  Management establishes appropriate useful lives for all
property and equipment based upon, among other considerations, historical
experience, change in equipment manufacturing specifications, the used equipment
market and prevailing industry practice.  Management continually
monitors events and changes in circumstances that could indicate that the
carrying amounts of property and equipment may not be
recoverable.  When indicators of potential impairment are present, the
recoverability of the assets would be assessed from the estimated undiscounted
future operating cash flows expected from the use of the
assets.  Actual recoverability of assets could differ based on
different assumptions, estimates or other factors.  In the event that
recoverability was impaired, the fair value of the asset would be recorded and
an impairment loss would be recognized.  Management believes its
estimates of useful lives and salvage values have been reasonable as
demonstrated by the insignificant amounts of gains and losses on revenue
equipment dispositions.





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 and its affiliates by the Board
of Directors or by the Company’s Compensation Committee.  The Company
accounts for stock options in accordance with SFAS Statement 123(R) with
compensation expense amortized over the vesting period based on the
Black-Scholes-Merton fair value on the grant date.  The assumptions
used to value stock options are dividend yield, expected volatility, risk-free
interest rate, expected life and anticipated forfeiture.  The Company
does not pay any dividends on its common shares, therefore the dividend yield is
zero.  We use the historical method to calculate volatility with the
historical period being equal to the expected life of each
option.  This calculation is then used to approximate the potential
for the share price to increase over the expected life of the
option.  The risk-free interest rate is based on the government of
Canada issued bond rate in effect at the time of the grant. Expected life
represents the length of time the option is estimated to be outstanding before
being exercised or forfeited.  Historical information is used to
determine the forfeiture rate.





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.  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.  Significant judgment is required in determining whether
deferred tax assets will be realized in full or in part.  If it were
ever estimated that it is more likely than not that all or some portion of
specific deferred tax assets will not be realized, a valuation allowance must be
established for the amount of deferred tax assets that is estimated not to be
realized.  A valuation allowance for deferred tax assets has not been
deemed necessary at December 31, 2008.  Accordingly, if the facts or
financial results were to change, thereby impacting the likelihood of realizing
the deferred tax assets, judgment would have to be applied to estimate the
amount of valuation allowance required in any given period.





26


The Company adopted FIN 48, Accounting
for Uncertainty in Income Taxes, on January 1, 2007 with no cumulative effect
adjustment recorded at adoption.  FIN 48 requires that uncertain tax
positions are evaluated in a two-step process, whereby (1) 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 (2) 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.





Management judgment is also required
regarding a variety of other factors, including the appropriateness of tax
strategies, expected future tax consequences, and to the extent tax strategies
are challenged by taxing authorities.  We utilize certain income tax
planning strategies to reduce our overall cost of income taxes.  It is
possible that certain strategies might be disallowed, resulting in an increased
liability for income taxes.  Significant management judgments are
involved in assessing the likelihood of sustaining the strategies and an
ultimate result worse than our expectations could adversely affect our results
of operations.  In 2008, the Company completed audits with the
Internal Revenue Service and Canada Customs and Revenue Agency without material
consequences.





CHANGES
IN ACCOUNTING POLICY





See
Note 1 to the accompanying consolidated financial statements for discussion of
United States GAAP recent accounting pronouncements.





RELATED
PARTIES


None.








ITEM
7. a - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





INTEREST
RATE SENSITIVITY





The
Company is exposed to the impact of interest rate changes. The Company’s
exposure to changes in interest rates is limited to borrowings under the term
bank facilities and revolving credit facilities that have variable interest
rates tied to the LIBOR rate.  As a majority of the Company’s debt is
tied to variable interest rates, we estimate that the fair value of the
long-term debt approximates the carrying value.





(in
      thousands of dollars)
                        
                        Payments
      due by periodLong-term
      debt
                        
                        Total
                        
                        
                        2009
                        
                        
                        2010
      & 2011
                        
                        
                        2012
      & 2013
                        
                        
                        ThereafterVariable
      RateTerm
      bank facility
                        
                        $
                        48,000
                        
                        
                        $
                        10,000
                        
                        
                        $
                        28,000
                        
                        
                        $
                        10,000
                        
                        $
                        NilAverage interest rate
(LIBOR)
                        
                        
                        4.46
                        %
                        
                        
                        4.46
                        %
                        
                        
                        4.46
                        %
                        
                        
                        4.46
                        %Term
      bank facility
                        
                        
                        1,877
                        
                        
                        
                        1,073
                        
                        
                        
                        804
                        
                        
                        Nil
                        
                        
                        NilAverage interest rate
      (LIBOR)
                        
                        
                        2.21
                        %
                        
                        
                        2.21
                        %
                        
                        
                        2.21
                        %Revolving
      bank facility
                        
                        
                        44,550
                        
                        
                        Nil
                        
                        
                        Nil
                        
                        
                        
                        44,550
                        
                        
                        NilAverage interest rate
      (LIBOR)
                        
                        
                        4.46
                        %
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        4.46
                        %Fixed
      RateCapital
      lease obligations
                        
                        
                        15,975
                        
                        
                        
                        5,852
                        
                        
                        
                        7,872
                        
                        
                        
                        2,251
                        
                        
                        NilAverage interest rate
                        
                        
                        6.15
                        %
                        
                        
                        6.15
                        %
                        
                        
                        6.15
                        %
                        
                        
                        6.15
                        %Total
                        
                        $
                        110,402
                        
                        
                        $
                        16,925
                        
                        
                        $
                        36,676
                        
                        
                        $
                        56,801
                        
                        $
                        Nil





27


The
Company uses variable-to-fixed interest rate swaps on its term and revolving
credit facilities with a notional amount of $64.9 million at December 31,
2008.  The average pay rate on the swaps is 4.59% and the average
receive rate is the three-month LIBOR rate, which is currently
1.72%.  To value the interest rate swaps, a discounted cash flow model
is utilized. Primary inputs into the model that will cause the fair value to
fluctuate period-to-period include the fixed interest rates, the future interest
rates, credit risk and the remaining time to maturity of the interest rate
swaps.  Management’s intention is to hold the interest rate swaps to
maturity.





The
Company is exposed to foreign currency risk as fluctuations in the United States
dollar against the Canadian dollar can impact the financial results of the
Company.  The Company’s Canadian operations realize foreign currency
exchange gains and losses on the United States dollar denominated revenue
generated against Canadian dollar denominated expenses.  Furthermore,
the Company reports its results in United States dollars thereby exposing the
results of the Company’s Canadian operations to foreign currency
fluctuations.  In addition, the Company’s United States dollar debt of
$81.1 million is designated as a hedge of the investment in the United States’
self-sustaining foreign operations.





In
addition to the information disclosed above, further information required by
Item 7A of Form 10-K appears in Item 7 of this Annual Report on Form 10-K under
the headings “Liquidity and Capital Resources” and “General Risks and
Uncertainties”.





ITEM
8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





Consolidated Balance Sheets as at
December 31, 2008, and 2007 and the Consolidated Statements of Income,
Shareholders’ Equity and Cash Flow for the years ended December 31, 2008, 2007,
and 2006, are reported on by KPMG LLP, Chartered Accountants.  These
statements are prepared in accordance with GAAP in the United
States.





MANAGEMENT
RESPONSIBILITY OVER FINANCIAL REPORTING





The
Consolidated Financial Statements of the Company are the responsibility of
management and have been prepared in accordance with United States GAAP and,
where appropriate, reflect estimates based on management’s
judgement.  In addition, all other information contained in the Annual
Report on Form 10-K is also the responsibility of management.





The
Company maintains systems of internal accounting and administrative controls
designed to provide reasonable assurance that the financial information provided
is accurate and complete and that all assets are properly
safeguarded.





The
Board of Directors is responsible for ensuring that management fulfills its
responsibility for financial reporting and is ultimately responsible for
reviewing and approving the Consolidated Financial Statements.  The
Board appoints the Audit Committee, comprised of non-management directors, which
meets with management and KPMG LLP, the external auditors, at least once a year
to review, among other things, accounting policies, annual financial statements,
the result of the external audit examination, and the management discussion and
analysis included in the Annual Report on Form 10-K.  The Audit
Committee reports its finding to the Board of Directors so that the Board may
properly approve the financial statements.Additional commentary on
corporate governance appears in the Company’s proxy statement for the 2009
Annual and Special Meeting of its Shareholders and the information therein is
incorporated herein by reference.




28






REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 
 To
the Board of Directors and Shareholders of
 Vitran
Corporation Inc.
  We have
      audited the accompanying consolidated balance sheets of Vitran Corporation
      Inc. (the "Company") as of December 31, 2008 and 2007, and the
      related consolidated statements of income, shareholders' equity and cash
      flows for each of the years in the three-year period ended
      December 31, 2008.  Our audit also included the financial
      statement schedule listed in the Index under Part IV,
      Item 15(a)2.  These consolidated financial statements are
      the responsibility of the Company's management.  Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.
                    
                    We
      conducted our audits in accordance with the standards of the Public
      Company Accounting Oversight Board (United States).  Those
      standards require that we plan and perform the audit to obtain reasonable
      assurance about whether the financial statements are free of material
      misstatement.  An audit includes examining, on a test basis,
      evidence supporting the amounts and disclosures in the financial
      statements.  An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation.  We
      believe that our audits provide a reasonable basis for our
      opinion.
                      
                      In
      our opinion, the consolidated financial statements referred to above
      present fairly, in all material respects, the financial position of Vitran
      Corporation Inc. as of December 31, 2008 and 2007, and the results of its
      operations and its cash flows for each of the years in the three-year
      period ended December 31, 2008, in conformity with U.S. generally
      accepted accounting principles.
                      
                      As
      discussed in note 1 to the consolidated financial statements, on January
      1, 2008, Vitran Corporation changed its method of accounting for fair
      value measurements in accordance with SFAS Statement 157, Fair Value
      Measurements and adopted SFAS Statement 159, The Fair Value Option for
      Financial Assets and Financial Liabilities, including an amendment of SFAS
      Statement 115, permitting entities to choose to measure many financial
      instruments and certain warranty and insurance contract at fair value on a
      contract-by-contract basis. On January 1, 2007, Vitran Corporation Inc.
      changed its method of accounting for income tax uncertainties in
      accordance with guidance provided in FASB Interpretation No. 48,
      Accounting for Uncertainty in Income Taxes - an Interpretation of FASB
      Statement 109.
                      
                      We
      also have audited, in accordance with the standards of the Public Company
      Accounting Oversight Board (United States), Vitran Corporation Inc.'s
      internal control over financial reporting as of December 31, 2008, based
      on criteria established in Internal Control - Integrated Framework issued
      by the Committee of Sponsoring Organizations of the Treadway Commission
      ("COSO") and our report dated March 10, 2009 expressed an unqualified
      opinion on the effectiveness of the Company's internal control over
      financial reporting.
 
  /s/
KPMG LLP
  Chartered
Accountants, Licensed Public Accountants
 
  Toronto,
Canada
  March
10, 2009
  29
  Consolidated
Balance Sheets
 (Amounts
      in thousands of United States
dollars)
 
 December
      31, 2008 and 2007
 2008
                                      
                                      
                                      2007AssetsCurrent
      assets:Accounts
      receivable
                                      
                                      $
                                      65,741
                                      
                                      
                                      $
                                      74,261Inventory,
      deposits and prepaid expenses
                                      
                                      
                                      12,063
                                      
                                      
                                      
                                      11,325Income
      and other taxes recoverable
                                      
                                      
                                      792
                                      
                                      
                                      
                                      2,232Deferred income
      taxes (note 8)
                                      
                                      
                                      1,877
                                      
                                      
                                      
                                      2,599Total
      current assets
                                      
                                      
                                      80,473
                                      
                                      
                                      
                                      90,417Property
      and equipment (note 4)
                                      
                                      
                                      152,602
                                      
                                      
                                      
                                      169,062Intangible
      assets (note 5)
                                      
                                      
                                      13,279
                                      
                                      
                                      
                                      13,645Goodwill
      (note 6)
                                      
                                      
                                      17,057
                                      
                                      
                                      
                                      124,375Deferred
      income taxes (note 8)
                                      
                                      
                                      30,181
                                      
                                      
                                      
                                      -Total
      assets
                                      
                                      $
                                      293,592
                                      
                                      
                                      $
                                      397,499Liabilities
      and Shareholders' EquityCurrent
      liabilities:Bank
      overdraft
                                      
                                      $
                                      3,912
                                      
                                      
                                      $
                                      390Accounts
      payable and accrued liabilities (note 1(r))
                                      
                                      
                                      63,495
                                      
                                      
                                      
                                      67,468Current
      portion of long-term debt (note 7)
                                      
                                      
                                      16,925
                                      
                                      
                                      
                                      18,144Total
      current liabilities
                                      
                                      
                                      84,332
                                      
                                      
                                      
                                      86,002Long-term
      debt (note 7)
                                      
                                      
                                      93,477
                                      
                                      
                                      
                                      109,831Other
                                      
                                      
                                      4,540
                                      
                                      
                                      
                                      3,512Deferred
      income taxes (note 8)
                                      
                                      
                                      -
                                      
                                      
                                      
                                      7,810Shareholders'
      equity:Common
      shares, no par value, unlimited authorized, 13,498,159 and 13,448,159
      issued and outstanding in 2008 and 2007, respectively (note
    9)
                                      
                                      
                                      77,500
                                      
                                      
                                      
                                      77,246Additional
      paid-in capital
                                      
                                      
                                      3,525
                                      
                                      
                                      
                                      2,436Retained
      earnings
                                      
                                      
                                      33,253
                                      
                                      
                                      
                                      104,478Accumulated
      other comprehensive income (note 3)
                                      
                                      
                                      (3,035
                                      )
                                      
                                      
                                      6,184Total
      shareholders' equity
                                      
                                      
                                      111,243
                                      
                                      
                                      
                                      190,344Subsequent
      event (note 7(a))Lease
      commitments (note 14)Contingent
      liabilities (note 16)Total
      liabilities and shareholders' equity
                                      
                                      $
                                      293,592
                                      
                                      
                                      $
                                      397,499
 
 See
accompanying notes to consolidated financial statements.
  30
  Consolidated
Statements of Income
 (Amounts
      in thousands of United States dollars, except per share
      amounts)
 
 Years
      ended December 31, 2008, 2007 and
2006
 2008
                                                  
                                                  
                                                  2007
                                                  
                                                  
                                                  2006Revenue
                                                  
                                                  $
                                                  726,337
                                                  
                                                  
                                                  $
                                                  670,517
                                                  
                                                  
                                                  $
                                                  514,059Operating
      expenses
                                                  
                                                  
                                                  629,883
                                                  
                                                  
                                                  
                                                  565,094
                                                  
                                                  
                                                  
                                                  426,515Selling,
      general and administrative expenses
                                                  
                                                  
                                                  65,737
                                                  
                                                  
                                                  
                                                  62,086
                                                  
                                                  
                                                  
                                                  47,448Other
      income
                                                  
                                                  
                                                  (326
                                                  )
                                                  
                                                  
                                                  (432
                                                  )
                                                  
                                                  
                                                  (434
                                                  )Impairment
      of goodwill
                                                  
                                                  
                                                  107,351
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Depreciation
      and amortization
                                                  
                                                  
                                                  21,024
                                                  
                                                  
                                                  
                                                  20,770
                                                  
                                                  
                                                  
                                                  12,490823,669
                                                  
                                                  
                                                  
                                                  647,518
                                                  
                                                  
                                                  
                                                  486,019Income
      (loss) from operations before the undernoted
                                                  
                                                  
                                                  (97,332
                                                  )
                                                  
                                                  
                                                  22,999
                                                  
                                                  
                                                  
                                                  28,040Interest
      on long-term debt
                                                  
                                                  
                                                  (9,259
                                                  )
                                                  
                                                  
                                                  (8,554
                                                  )
                                                  
                                                  
                                                  (2,887
                                                  )Interest
      income
                                                  
                                                  
                                                  36
                                                  
                                                  
                                                  
                                                  128
                                                  
                                                  
                                                  
                                                  227(9,223
                                                  )
                                                  
                                                  
                                                  (8,426
                                                  )
                                                  
                                                  
                                                  (2,660
                                                  )Income
      (loss) from operations before income taxes
                                                  
                                                  
                                                  (106,555
                                                  )
                                                  
                                                  
                                                  14,573
                                                  
                                                  
                                                  
                                                  25,380Income
      taxes (recovery) (note 8):Current
                                                  
                                                  
                                                  109
                                                  
                                                  
                                                  
                                                  1,638
                                                  
                                                  
                                                  
                                                  4,177Deferred
                                                  
                                                  
                                                  (35,439
                                                  )
                                                  
                                                  
                                                  (775
                                                  )
                                                  
                                                  
                                                  1,945(35,330
                                                  )
                                                  
                                                  
                                                  863
                                                  
                                                  
                                                  
                                                  6,122Net
      income (loss) before cumulative effect of change in accounting
      principle
                                                  
                                                  
                                                  (71,225
                                                  )
                                                  
                                                  
                                                  13,710
                                                  
                                                  
                                                  
                                                  19,258Cumulative
      effect of change in accounting principle
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  141Net
      income (loss)
                                                  
                                                  $
                                                  (71,225
                                                  )
                                                  
                                                  $
                                                  13,710
                                                  
                                                  
                                                  $
                                                  19,399Income
      (loss) per share:Basic:Net
      income (loss) before cumulative effect of change in accounting
      principle
                                                  
                                                  $
                                                  (5.28
                                                  )
                                                  
                                                  $
                                                  1.02
                                                  
                                                  
                                                  $
                                                  1.49Cumulative
      effect of change in accounting principle
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  0.01Net
      (loss) income
                                                  
                                                  $
                                                  (5.28
                                                  )
                                                  
                                                  $
                                                  1.02
                                                  
                                                  
                                                  $
                                                  1.50Diluted:Net
      income (loss) before cumulative effect of change in accounting
      principle
                                                  
                                                  $
                                                  (5.28
                                                  )
                                                  
                                                  $
                                                  1.00
                                                  
                                                  
                                                  $
                                                  1.47Cumulative
      effect of change in accounting principle
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  0.01Net
      income (loss)
                                                  
                                                  $
                                                  (5.28
                                                  )
                                                  
                                                  $
                                                  1.00
                                                  
                                                  
                                                  $
                                                  1.48Weighted
      average number of shares:Basic
                                                  
                                                  
                                                  13,485,132
                                                  
                                                  
                                                  
                                                  13,458,786
                                                  
                                                  
                                                  
                                                  12,887,401Diluted
                                                  
                                                  
                                                  13,485,132
                                                  
                                                  
                                                  
                                                  13,651,799
                                                  
                                                  
                                                  
                                                  13,124,865
 
 See
accompanying notes to consolidated financial statements.
  31
  Consolidated
      Statements of Shareholders'
Equity
 (Amounts
      in thousands of United States
dollars)
 
 
 Years
      ended December 31, 2008, 2007 and
2006
 AccumulatedAdditional
                              
                              
                              
                              
                              
                              other
                              
                              
                              TotalCommon
      shares
                              
                              
                              paid-in
                              
                              
                              Retained
                              
                              
                              comprehensive
                              
                              
                              shareholders'Number
                              
                              
                              Amount
                              
                              
                              capital
                              
                              
                              earnings
                              
                              
                              income
                              
                              
                              equityDecember
      31, 2007
                              
                              
                              13,448,159
                              
                              
                              $
                              77,246
                              
                              
                              $
                              2,436
                              
                              
                              $
                              104,478
                              
                              
                              $
                              6,184
                              
                              
                              $
                              190,344Shares
      issued upon exercise of employee stock options
                              
                              
                              50,000
                              
                              
                              
                              254
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              254Net
      income (loss)
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (71,225
                              )
                              
                              
                              -
                              
                              
                              
                              (71,225
                              )Other
      comprehensive loss (note 3)
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (9,219
                              )
                              
                              
                              (9,219
                              )Share-based
      compensation (note 9)
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,089
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              1,089December
      31, 2008
                              
                              
                              13,498,159
                              
                              
                              $
                              77,500
                              
                              
                              $
                              3,525
                              
                              
                              $
                              33,253
                              
                              
                              $
                              (3,035
                              )
                              
                              $
                              111,243
 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(m))
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (141
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (141
                                  )December
      31, 2006
                                  
                                  
                                  13,419,859
                                  
                                  
                                  $
                                  76,913
                                  
                                  
                                  $
                                  1,607
                                  
                                  
                                  $
                                  90,933
                                  
                                  
                                  $
                                  3,844
                                  
                                  
                                  $
                                  173,297
 See
accompanying notes to consolidated financial statements.
  32
  Consolidated
      Statements of Cash Flows
 (Amounts
      in thousands of United States
dollars)
 Years
      ended December 31, 2008, 2007 and
2006
 2008
                                            
                                            
                                            2007
                                            
                                            
                                            2006Cash
      provided by (used in):Operations:Net
      income (loss)
                                            
                                            $
                                            (71,225
                                            )
                                            
                                            $
                                            13,710
                                            
                                            
                                            $
                                            19,399Items
      not involving cash from operations:Depreciation
      and amortization
                                            
                                            
                                            21,024
                                            
                                            
                                            
                                            20,770
                                            
                                            
                                            
                                            12,490Impairment of
      goodwill
                                            
                                            
                                            107,351
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Deferred income
      taxes
                                            
                                            
                                            (35,439
                                            )
                                            
                                            
                                            (775
                                            )
                                            
                                            
                                            1,945Gain on
      sale of property and equipment
                                            
                                            
                                            (326
                                            )
                                            
                                            
                                            (432
                                            )
                                            
                                            
                                            (434
                                            )Share-based
      compensation expense
                                            
                                            
                                            1,089
                                            
                                            
                                            
                                            997
                                            
                                            
                                            
                                            839Cumulative
      effect of change in accounting principle
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (141
                                            )Change
      in non-cash working capital components
                                            
                                            
                                            5,772
                                            
                                            
                                            
                                            (1,274
                                            )
                                            
                                            
                                            1,02628,246
                                            
                                            
                                            
                                            32,996
                                            
                                            
                                            
                                            35,124Investments:Purchases of
      property and equipment
                                            
                                            
                                            (12,337
                                            )
                                            
                                            
                                            (22,870
                                            )
                                            
                                            
                                            (27,136
                                            )Proceeds on
      sale of property and equipment
                                            
                                            
                                            1,572
                                            
                                            
                                            
                                            931
                                            
                                            
                                            
                                            2,490Acquisition of
      subsidiary, net
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (5,990
                                            )
                                            
                                            
                                            (89,284
                                            )Additional
      payments due to acquisition of subsidiary
                                            
                                            
                                            (3,250
                                            )
                                            
                                            
                                            (8,901
                                            )
                                            
                                            
                                            -Acquisition of
      business assets
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (2,251
                                            )(14,015
                                            )
                                            
                                            
                                            (36,830
                                            )
                                            
                                            
                                            (116,181
                                            )Financing:Change
      in revolving credit facility and bank overdraft
                                            
                                            
                                            3,063
                                            
                                            
                                            
                                            22,793
                                            
                                            
                                            
                                            4,230Proceeds from
      long-term debt
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            70,500Repayment of
      long-term debt
                                            
                                            
                                            (10,214
                                            )
                                            
                                            
                                            (9,124
                                            )
                                            
                                            
                                            (5,825
                                            )Repayment of
      capital leases
                                            
                                            
                                            (7,902
                                            )
                                            
                                            
                                            (7,842
                                            )
                                            
                                            
                                            (1,644
                                            )Financing
      costs
                                            
                                            
                                            (1,007
                                            )
                                            
                                            
                                            (917
                                            )
                                            
                                            
                                            -Issue
      of common shares upon exercise of stock options
                                            
                                            
                                            254
                                            
                                            
                                            
                                            403
                                            
                                            
                                            
                                            479Repurchase of
      common shares
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (403
                                            )
                                            
                                            
                                            (33
                                            )(15,806
                                            )
                                            
                                            
                                            4,910
                                            
                                            
                                            
                                            67,707Effect
      of translation adjustment on cash
                                            
                                            
                                            1,575
                                            
                                            
                                            
                                            (2,530
                                            )
                                            
                                            
                                            212Decrease
      in cash and cash equivalents
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (1,454
                                            )
                                            
                                            
                                            (13,138
                                            )Cash
      and cash equivalents, beginning of year
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,454
                                            
                                            
                                            
                                            14,592Cash
      and cash equivalents, end of year
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            1,454Change
      in non-cash working capital components:Accounts
      receivable
                                            
                                            $
                                            8,520
                                            
                                            
                                            $
                                            (5,254
                                            )
                                            
                                            $
                                            2,278Inventory,
      deposits and prepaid expenses
                                            
                                            
                                            269
                                            
                                            
                                            
                                            975
                                            
                                            
                                            
                                            598Income
      and other taxes recoverable/payable
                                            
                                            
                                            956
                                            
                                            
                                            
                                            (2,157
                                            )
                                            
                                            
                                            151Accounts
      payable and accrued liabilities
                                            
                                            
                                            (3,973
                                            )
                                            
                                            
                                            5,162
                                            
                                            
                                            
                                            (2,001
                                            )$
                                            5,772
                                            
                                            
                                            $
                                            (1,274
                                            )
                                            
                                            $
                                            1,026Supplemental
      cash flow information:Interest
      paid
                                            
                                            $
                                            8,479
                                            
                                            
                                            $
                                            8,827
                                            
                                            
                                            $
                                            2,480Income
      taxes paid
                                            
                                            
                                            2,433
                                            
                                            
                                            
                                            6,997
                                            
                                            
                                            
                                            5,586Supplemental
      disclosure of non-cash transactions:Capital
      lease additions
                                            
                                            
                                            1,016
                                            
                                            
                                            
                                            10,356
                                            
                                            
                                            
                                            -Issuance of
      shares to seller in acquisition
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            12,797
  See
accompanying notes to consolidated financial statements.
  33
  
  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").  The Ontario
Business Corporations Act 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 was no longer be
required.
  All
amounts in these consolidated financial statements are expressed in United
States dollars, unless otherwise stated.
  (c)
                New
      accounting pronouncements:
  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 was adopted January 1, 2008, as required by the
statement.  The requirements of SFAS Statement 159 did not have an
effect on the Company's consolidated financial statements.
  34
   1.
                Significant
      accounting policies (continued):
  (c)
                New
      accounting pronouncements
(continued):
  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 was adopted on January 1, 2008 as
required by the statement as described in note 11.
  SFAS
Statement 161, Disclosures about Derivative Instruments and Hedging
Activities - an amendment of FASB Statement No. 133, requires enhanced
disclosures about the Company's derivative and hedging
activities.  The Company will be required to provide enhanced
disclosure about (i) how and why an entity uses derivative instruments; (ii) how
derivative instruments and related hedged items are accounted for under
Statement 133 and (iii) how derivative instruments and related hedged items
affect an entity's financial position and cash flows.  SFAS Statement
161 will be adopted on January 1, 2009, as required by the
statement.
  SFAS
Statement 141 (revised), Business Combinations objective is to improve the
relevance, representational faithfulness, and comparability of the information
that the Company provides in its financial reports about a business combination
and its effects.  SFAS Statement 141R established principles and
requirements for how the acquirer:  (i) recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed
and any non-controlling interest in the acquiree; (ii) recognizes and measures
the goodwill acquired in the business combination or a gain from a bargain
purchase; and (iii) determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination.  SFAS Statement 141R applies prospectively to
business combinations for which the acquisition date is on or after January 1,
2009.  Statement 141R will be adopted for any business acquisitions
after January 1, 2009, as required by the statement.
  (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.
  35
   1.
                Significant
      accounting policies (continued):
  (d)
                Foreign
      currency translation (continued):
  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.
  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 $81.1
million (2007 - $72.2 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.
  Within
the LTL business unit, revenue adjustments are estimated at the end of each
quarterly reporting period.  These adjustments result from several
factors, including weight and freight classification verifications, shipper bill
of lading errors, pricing discounts and other miscellaneous revenue
adjustments.  The revenue adjustments are recorded as a reduction in
revenue from operations and accrued for as part of the allowance for doubtful
accounts.  Allowance for doubtful accounts is recorded as a
contra-account to Accounts Receivable.
  Historical
experience, trends and current information are used to update and evaluate the
estimate.  As at December 31, 2008 revenue adjustments as a percentage
of revenue was not material.
  (f)
                Accounts
      receivable:
  Accounts
receivable are presented net of allowance for doubtful accounts of
$3.8 million at December 31, 2008 (2007 - $2.5 million).
  36
   
  (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.
  (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)
                Assets
      held for sale:
  The
Company has certain assets that are classified as assets held for
sale.  These assets are carried on the balance sheet at the lower of
the carrying amount or estimated fair value, less cost to sell.  Once
an asset is classified held for sale, there is no further depreciation taken on
the asset.  At December 31, 2008, the net book value of assets held
for sale was approximately $4.6 million.  This amount is included in
property and equipment on the balance sheet.
  (k)
                Goodwill
      and intangible assets:
  SFAS
statement 142 requires that goodwill and certain intangible assets be assessed
for impairment on an annual basis and more frequently if indicators of
impairment exist, using fair value measurement techniques.  The
goodwill impairment test compares the implied fair value of the reporting unit’s
goodwill with the carrying amount of that goodwill to measure the amount of
impairment loss, if any.    The implied fair value of
goodwill is determined in the same manner as in a business
combination.  Determining the fair value of the implied goodwill is
judgemental in nature and often involves the use of significant estimates and
assumptions.  As at September 30, 2008, the Company completed its
annual goodwill impairment test and concluded there was no
impairment.
  37
   
  1.
                Significant
      accounting policies (continued):
  One
of the indicators of impairment is a sustained decline in the Company’s share
price whereby the market capitalization of the Company is less than its book
value for an extended period of time.  At December 31, 2008, before
recording goodwill impairment charges, the carrying value of Vitran’s net assets
were $187.1 million compared to the market capitalization of all of the
Company’s outstanding shares which was $84.5 million.  The market
valuation of the Company declined during the fourth quarter as Vitran’s share
price on the Nasdaq stock market decreased from $13.47 at September 30, 2008 to
$6.26 at December 31, 2008. These factors and the depressed macroeconomic
environment indicated a triggering event had occurred requiring the Company, at
a reporting unit level, to test for the impairment of goodwill at December 31,
2008.  Using the income and market approach for estimating the fair
value of each reporting unit, management concluded that the goodwill in its LTL
segment was impaired and there was no impairment of goodwill in its other
reporting units.
  SFAS
Statement 157 establishes a fair value hierarchy that prioritizes the inputs
used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurement) and the lowest priority to unobservable inputs (Level 3
measurement).   The fair value used to value the Company’s
goodwill is a Level 3.
  Under
SFAS Statement 142 the determination of the amount of goodwill impairment
requires comparing the implied fair value of the affected reporting unit’s
goodwill with the carrying value of that goodwill. The impairment analysis
concluded that the LTL segment’s goodwill was impaired requiring a pre-tax
non-cash charge of $107.4 million.
  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.
  (l)
                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.  FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes ("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.
  38
   1.
                Significant
      accounting policies (continued):
  (m)
                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 856,200 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.
  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).
  The
Company recorded an income of $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.
  (n)
                Advertising
      costs:
  Advertising
costs are expensed as incurred.  Advertising costs amounted to $462 in
2008 (2007 - $784; 2006 - $595).
  (o)
                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 2008 and 2007, the Company has not identified any
indicators that would require testing for an impairment.
  39
   
  
  1.
                Significant
      accounting policies (continued):
  (p)
                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.
  (q)
                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.
  (r)
                Accounts
      payable and accrued liabilities:
 2008
                                  
                                  
                                  2007Accounts
      payable
                                  
                                  $
                                  28,667
                                  
                                  
                                  $
                                  33,988Accrued
      wages and benefits
                                  
                                  
                                  9,159
                                  
                                  
                                  
                                  11,458Accrued
      claims, self insurance and workers' compensation
                                  
                                  
                                  11,765
                                  
                                  
                                  
                                  9,314Amounts
      payable to vendors of acquisitions
                                  
                                  
                                  3,250
                                  
                                  
                                  
                                  -Other
                                  
                                  
                                  10,654
                                  
                                  
                                  
                                  12,708$
                                  63,495
                                  
                                  
                                  $
                                  67,468
 
  40
   1.
                Significant
      accounting policies (continued):
  (s)
                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.
  (t)
                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, fair value measurements,
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 total amount of
goodwill, once determined, is not deductible for tax purposes.  At
December 31, 2008, the operating results for LVLA exceeded the financial metrics
required for the first contingent payment to the vendors.  The Company
recorded a $3.25 million liability to the vendors as an adjustment to
goodwill.
  41
   
  2.
                Acquisitions
      (continued):
  PJAX Freight
System
  On
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 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.
  42
   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
                                            
                                            
                                            2006LVLA
                                            
                                            
                                            SWE
                                            
                                            
                                            PJAXCurrent
      assets
                                            
                                            $
                                            4,146
                                            
                                            
                                            $
                                            1,776
                                            
                                            
                                            $
                                            25,087Property
      and equipment
                                            
                                            
                                            2,485
                                            
                                            
                                            
                                            2,127
                                            
                                            
                                            
                                            62,848Identifiable
      intangible assets:Covenants
      not-to-compete (3- to 6-year useful life)
                                            
                                            
                                            160
                                            
                                            
                                            
                                            45
                                            
                                            
                                            
                                            2,700Customer
      relationships (8-year useful life)
                                            
                                            
                                            2,000
                                            
                                            
                                            
                                            540
                                            
                                            
                                            
                                            11,000Other
      assets
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            165Goodwill
                                            
                                            
                                            6,529
                                            
                                            
                                            
                                            1,164
                                            
                                            
                                            
                                            55,76815,320
                                            
                                            
                                            
                                            5,652
                                            
                                            
                                            
                                            157,568Current
      liabilities
                                            
                                            
                                            2,611
                                            
                                            
                                            
                                            3,155
                                            
                                            
                                            
                                            17,646Deferred
      income tax liability
                                            
                                            
                                            956
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Capital
      leases
                                            
                                            
                                            624
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            21,319Term
      loans
                                            
                                            
                                            1,285
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            5,785Net
      assets acquired
                                            
                                            $
                                            9,844
                                            
                                            
                                            $
                                            2,497
                                            
                                            
                                            $
                                            112,818
  3.
                Comprehensive
      income:
  The
components of other comprehensive income (loss), such as changes in foreign
currency adjustments, are required to be added to the Company's reported net
income, net of tax to arrive at comprehensive income (loss).  Other
comprehensive income (loss) items have no impact on the reported net income as
presented on the Consolidated Statements of Income.
 Foreign
                                          
                                          
                                          Interestcurrency
                                          
                                          
                                          ratetranslation
                                          
                                          
                                          swap
                                          
                                          
                                          TotalBalance
      at December 31, 2005
                                          
                                          $
                                          3,689
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          3,689Other
      comprehensive income (loss):Translation
      adjustment
                                          
                                          
                                          (77
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (77
                                          )Unrealized
      loss
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (25
                                          )
                                          
                                          
                                          (25
                                          )Tax
      effect
                                          
                                          
                                          247
                                          
                                          
                                          
                                          10
                                          
                                          
                                          
                                          257170
                                          
                                          
                                          
                                          (15
                                          )
                                          
                                          
                                          155
 
  43
   3.
                Comprehensive
      income (continued):
 Balance
      at December 31, 2006
                                                    
                                                    
                                                    3,859
                                                    
                                                    
                                                    
                                                    (15
                                                    )
                                                    
                                                    
                                                    3,844Other
      comprehensive income (loss):Translation
      adjustment
                                                    
                                                    
                                                    4,442
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    4,442Unrealized
      loss
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (1,541
                                                    )
                                                    
                                                    
                                                    (1,541
                                                    )Tax
      effect
                                                    
                                                    
                                                    (1,060
                                                    )
                                                    
                                                    
                                                    499
                                                    
                                                    
                                                    
                                                    (561
                                                    )3,382
                                                    
                                                    
                                                    
                                                    (1,042
                                                    )
                                                    
                                                    
                                                    2,340Balance
      at December 31, 2007
                                                    
                                                    
                                                    7,241
                                                    
                                                    
                                                    
                                                    (1,057
                                                    )
                                                    
                                                    
                                                    6,184Other
      comprehensive income (loss):Translation
      adjustment
                                                    
                                                    
                                                    (10,350
                                                    )
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (10,350
                                                    )Unrealized
      loss
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (1,442
                                                    )
                                                    
                                                    
                                                    (1,442
                                                    )Tax
      effect
                                                    
                                                    
                                                    2,214
                                                    
                                                    
                                                    
                                                    359
                                                    
                                                    
                                                    
                                                    2,573(8,136
                                                    )
                                                    
                                                    
                                                    (1,083
                                                    )
                                                    
                                                    
                                                    (9,219
                                                    )Balance
      at December 31, 2008
                                                    
                                                    $
                                                    (895
                                                    )
                                                    
                                                    $
                                                    (2,140
                                                    )
                                                    
                                                    $
                                                    (3,035
                                                    )2008
                                                    
                                                    
                                                    2007
                                                    
                                                    
                                                    2006Net
      income (loss)
                                                    
                                                    $
                                                    (71,225
                                                    )
                                                    
                                                    $
                                                    13,710
                                                    
                                                    
                                                    $
                                                    19,399Other
      comprehensive income (loss)
                                                    
                                                    
                                                    (9,219
                                                    )
                                                    
                                                    
                                                    2,340
                                                    
                                                    
                                                    
                                                    155Comprehensive
      income (loss)
                                                    
                                                    $
                                                    (80,444
                                                    )
                                                    
                                                    $
                                                    16,050
                                                    
                                                    
                                                    $
                                                    19,554
 
 
  4.
                Property
      and equipment:
 2008
                                  
                                  
                                  2007Land
                                  
                                  $
                                  34,573
                                  
                                  
                                  $
                                  35,085Buildings
                                  
                                  
                                  68,665
                                  
                                  
                                  
                                  67,894Leasehold
      interests and improvements
                                  
                                  
                                  749
                                  
                                  
                                  
                                  2,276Vehicles
                                  
                                  
                                  107,033
                                  
                                  
                                  
                                  112,622Machinery
      and equipment
                                  
                                  
                                  24,585
                                  
                                  
                                  
                                  26,361235,605
                                  
                                  
                                  
                                  244,238Less
      accumulated depreciation
                                  
                                  
                                  83,003
                                  
                                  
                                  
                                  75,176$
                                  152,602
                                  
                                  
                                  $
                                  169,062
  Interest
costs of $290 attributable to the construction of a new facility in Toronto have
been capitalized for the year ended December 31, 2008 (2007 -
$718).
  44
   5.
                Intangible
      assets:
 2008
                                      
                                      
                                      2007Customer
      relationships
                                      
                                      $
                                      13,840
                                      
                                      
                                      $
                                      13,840Acquired
      customer relationships
                                      
                                      
                                      2,000
                                      
                                      
                                      
                                      -15,840
                                      
                                      
                                      
                                      13,840Covenants
      not-to-compete
                                      
                                      
                                      2,985
                                      
                                      
                                      
                                      2,985Acquired
      covenants not-to-compete
                                      
                                      
                                      160
                                      
                                      
                                      
                                      -3,145
                                      
                                      
                                      
                                      2,985Less
      accumulated amortization
                                      
                                      
                                      5,706
                                      
                                      
                                      
                                      3,180$
                                      13,279
                                      
                                      
                                      $
                                      13,645
 
  The
Company completed its identifiable intangible assets valuation for the LVLA
acquisition (note 2) in 2008 and allocated $2,160 of goodwill to the appropriate
intangible asset as indicated above.
  Amortization
expense was $2.5 million in 2008 (2007 - $2.2 million).  Amortization
expense for the following five years and thereafter is estimated to be as
follows:
 Year
      ending December 31:2009
                                
                                $
                                2,5142010
                                
                                
                                2,4982011
                                
                                
                                2,4622012
                                
                                
                                2,3492013
                                
                                
                                1,908Thereafter
                                
                                
                                1,548$
                                13,279
  6.
                Goodwill:
 2008
                                  
                                  
                                  2007Opening
      balance
                                  
                                  $
                                  124,375
                                  
                                  
                                  $
                                  117,146Foreign
      exchange
                                  
                                  
                                  (1,921
                                  )
                                  
                                  
                                  1,527Transfer
      of goodwill to identifiable intangible assets, net of $864 of
      tax
                                  
                                  
                                  (1,296
                                  )
                                  
                                  
                                  -Adjustment
      to goodwill (note 2)
                                  
                                  
                                  3,250
                                  
                                  
                                  
                                  1,173Acquired
      goodwill (note 2)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  4,529Impairment
      of goodwill (note 1(k))
                                  
                                  
                                  (107,351
                                  )
                                  
                                  
                                  -$
                                  17,057
                                  
                                  
                                  $
                                  124,375
 
  45
   
  7.
                Long-term
      debt:
 2008
                                  
                                  
                                  2007Term
      bank credit facilities (a)
                                  
                                  $
                                  49,877
                                  
                                  
                                  $
                                  58,911Revolving
      credit facility (b)
                                  
                                  
                                  44,550
                                  
                                  
                                  
                                  45,023Capital
      leases (c)
                                  
                                  
                                  15,975
                                  
                                  
                                  
                                  22,860Note
      payable (d)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,181110,402
                                  
                                  
                                  
                                  127,975Less
      current portion
                                  
                                  
                                  16,925
                                  
                                  
                                  
                                  18,144$
                                  93,477
                                  
                                  
                                  $
                                  109,831
  On
April 10, 2008, the Company amended its credit agreement in respect of certain
financial maintenance tests with substantially the same terms.  On
December 30, 2008, the Company amended its credit agreement with substantially
different terms and conditions, including certain financial maintenance
tests.  Deferred financing costs of $0.9 million related to the
previous credit agreement and amendment were written off in 2008.
  (a)
                The
      term bank credit facility is secured by accounts receivable, property and
      equipment and general security agreements of the Company and of all its
      subsidiaries.
  The
amended credit agreement provides a $60 million term credit facility maturing
July 31, 2012.  The Company had $48 million, bearing interest at
5.46%, outstanding under the term facility at December 31, 2008.  The
provisions of the term facility impose certain financial maintenance
tests.  On March 6, 2009, the Company completed an amendment to its
Net Worth covenant to exclude any impact from non-cash impairment charges
related to goodwill and intangibles arising on or after  December 31,
2008.  At December 31, 2008, the Company was in compliance with these
financial maintenance tests and expects to be in compliance for the next twelve
months.
  The
Company had an additional $2.9 million, bearing interest at 4.74%, outstanding
under a separate term credit facility maturing on September 30,
2010.
  (b)
                The
      Company revolving debt facility provides up to $100 million, maturing
      July 31, 2012.  The Company had $44.6 million, bearing
      interest at 4.5% to 6.18%, outstanding at December 31,
      2008.  The provisions of the revolving facility impose certain
      financial maintenance tests.  At December 31, 2008, the
      Company was in compliance with these financial maintenance tests and
      expects to be in compliance for the next twelve
  months.
  (c)
                During
      2008, the Company financed certain equipment by entering into additional
      capital leases of $1.0 million.  The Company had $16.0 million
      of capital leases remaining at December 31,
  2008.
  46
   7.
                Long-term
      debt (continued):
  At
December 31, 2008, the required future principal repayments on all long-term
debt and capital leases are as follows:
 Year
      ending December 31:2009
                                
                                $
                                16,9252010
                                
                                
                                17,1082011
                                
                                
                                19,5692012
                                
                                
                                56,5762013
                                
                                
                                224$
                                110,402
 
  8.
                Income
      taxes:
  Income
tax expense (recovery) differs from the amount that would be obtained by
applying statutory federal, state and provincial income tax rates to the
respective year's income from operations before income taxes as
follows:
 2008
                                  
                                  
                                  2007
                                  
                                  
                                  2006Effective
      statutory federal, state and provincial income tax rate
                                  
                                  
                                  33.5
                                  %
                                  
                                  
                                  36.12
                                  %
                                  
                                  
                                  36.12
                                  %Effective
      tax expense (recovery) on income before income taxes
                                  
                                  $
                                  (35,696
                                  )
                                  
                                  $
                                  5,264
                                  
                                  
                                  $
                                  9,167Increase
      (decrease) results from:Non-deductible
      share-based compensation expense
                                  
                                  
                                  322
                                  
                                  
                                  
                                  354
                                  
                                  
                                  
                                  303Income
      taxed at different rates in foreign jurisdictions
                                  
                                  
                                  (4,372
                                  )
                                  
                                  
                                  (4,930
                                  )
                                  
                                  
                                  (3,072
                                  )Impairment of
      goodwill
                                  
                                  
                                  4,456
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Other
                                  
                                  
                                  (40
                                  )
                                  
                                  
                                  175
                                  
                                  
                                  
                                  (276
                                  )Actual
      income tax expense (recovery)
                                  
                                  $
                                  (35,330
                                  )
                                  
                                  $
                                  863
                                  
                                  
                                  $
                                  6,122
 
  
  47
   8.
                Income
      taxes (continued):
 
 Income
tax expense (recovery):
 2008
                                    
                                    
                                    2007
                                    
                                    
                                    2006Current
      income tax expense (recovery):Canada:Federal
                                    
                                    $
                                    422
                                    
                                    
                                    $
                                    589
                                    
                                    
                                    $
                                    2,922Provincial
                                    
                                    
                                    271
                                    
                                    
                                    
                                    304
                                    
                                    
                                    
                                    1,695United
      States:Federal
                                    
                                    
                                    (1,127
                                    )
                                    
                                    
                                    78
                                    
                                    
                                    
                                    (602
                                    )State
                                    
                                    
                                    288
                                    
                                    
                                    
                                    364
                                    
                                    
                                    
                                    12Other
                                    
                                    
                                    255
                                    
                                    
                                    
                                    303
                                    
                                    
                                    
                                    150109
                                    
                                    
                                    
                                    1,638
                                    
                                    
                                    
                                    4,177Deferred
      income tax expense (recovery):Canada:Federal
                                    
                                    
                                    333
                                    
                                    
                                    
                                    483
                                    
                                    
                                    
                                    (754
                                    )Provincial
                                    
                                    
                                    214
                                    
                                    
                                    
                                    250
                                    
                                    
                                    
                                    (437
                                    )United
      States:Federal
                                    
                                    
                                    (28,541
                                    )
                                    
                                    
                                    (1,240
                                    )
                                    
                                    
                                    2,398State
                                    
                                    
                                    (7,445
                                    )
                                    
                                    
                                    (268
                                    )
                                    
                                    
                                    738(35,439
                                    )
                                    
                                    
                                    (775
                                    )
                                    
                                    
                                    1,945$
                                    (35,330
                                    )
                                    
                                    $
                                    863
                                    
                                    
                                    $
                                    6,122
  A
summary of the principal components of deferred income tax assets and
liabilities is as follows:
 2008
                                  
                                  
                                  2007Current
      deferred income tax assets:Allowance for
      doubtful accounts
                                  
                                  $
                                  674
                                  
                                  
                                  $
                                  536Insurance
      reserves
                                  
                                  
                                  1,161
                                  
                                  
                                  
                                  2,063Financing
      costs
                                  
                                  
                                  42
                                  
                                  
                                  
                                  -$
                                  1,877
                                  
                                  
                                  $
                                  2,599Non-current
      deferred income tax assets:Financing
      costs
                                  
                                  $
                                  104
                                  
                                  
                                  $
                                  -Loss
      carryforwards
                                  
                                  
                                  18,295
                                  
                                  
                                  
                                  9,935Other
                                  
                                  
                                  2,707
                                  
                                  
                                  
                                  -Goodwill and
      intangibles
                                  
                                  
                                  22,256
                                  
                                  
                                  
                                  -43,362
                                  
                                  
                                  
                                  9,935
 
  
  48
   8.
                Income
      taxes (continued):
 
 Non-current
      deferred income tax liabilities:Financing
      costs
                            
                            
                            -
                            
                            
                            
                            (27
                            )Property and
      equipment
                            
                            
                            (13,181
                            )
                            
                            
                            (11,061
                            )Goodwill and
      intangibles
                            
                            
                            -
                            
                            
                            
                            (6,317
                            )Other
                            
                            
                            -
                            
                            
                            
                            (340
                            )(13,181
                            )
                            
                            
                            (17,745
                            )$
                            30,181
                            
                            
                            $
                            (7,810
                            )
  At
December 31, 2008, the Company had approximately $43.1 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 2008 and will expire in 2027 and 2028, respectively, if
not utilized.
  The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, on January 1, 2007.    At
December 31, 2008, the Company had unrecognized tax benefits of approximately
$1.6 million, of which an estimated $1.4 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.  The Company had approximately $0.3 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 Internal Revenue Service has since completed its
examination of the 2004 and 2005 tax years.  The Canada Revenue Agency
has also completed its examination of the 2003 and 2004 tax years; however, it
has commenced examination of the 2006 and 2007 tax years.  The
examinations are expected to be completed by 2009.  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 2005 to 2007 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, 2008
                              
                              $
                              2,119Additions
      related to tax positions taken in the current year
                              
                              
                              191Additions
      related to tax positions taken in previous years
                              
                              
                              186Decreases
      related to tax positions taken in previous years
                              
                              
                              (470
                              )Decreases
      related to settlement with taxing authorities
                              
                              
                              (161
                              )Reductions
      due to expiry of statute of limitations
                              
                              
                              (37
                              )Decrease
      due to foreign exchange translation
                              
                              
                              (261
                              )Balance
      at December 31, 2008
                              
                              $
                              1,567
 
  49
   9.
                Common
      shares:
  (a)
                Normal
      course issuer bid:
  The
Company purchased nil common shares for cancellation during 2008
(2007 - 30,200) under a normal course issuer bid.  The cost
of the repurchase in excess of the book value of the shares in 2008 was nil
(2007 - $165).
  (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 856,200 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 2008 was $5.27 (2007 - $7.12) per share.
  The
fair value of each option granted was estimated on the date of grant using the
Black-Scholes-Merton fair value option pricing model with the following
assumptions:
 2008
                                    
                                    
                                    2007
                                    
                                    
                                    2006Risk-free
      interest rate
                                    
                                    
                                    3.93
                                    %
                                    
                                    
                                    4.20
                                    %
                                    
                                    
                                    4.19
                                    %Volatility
      factor of the future expected market price of the Company's common
      shares
                                    
                                    
                                    34.12
                                    %
                                    
                                    
                                    31.76
                                    %
                                    
                                    
                                    33.22
                                    %Expected
      life of the options
                                    
                                    6
      years
                                    
                                    
                                    6
      years
                                    
                                    
                                    6
      years
 
  50
   9.
                Common
      shares (continued):
  Details
of stock options are as follows:
 2008
                                                  
                                                  
                                                  2007Weighted
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  Weightedaverage
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  averageexercise
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  exerciseNumber
                                                  
                                                  
                                                  price
                                                  
                                                  
                                                  Number
                                                  
                                                  
                                                  priceOutstanding,
      beginning of year
                                                  
                                                  
                                                  820,200
                                                  
                                                  
                                                  $
                                                  12.66
                                                  
                                                  
                                                  
                                                  767,700
                                                  
                                                  
                                                  $
                                                  11.42Granted
                                                  
                                                  
                                                  99,000
                                                  
                                                  
                                                  
                                                  12.57
                                                  
                                                  
                                                  
                                                  115,000
                                                  
                                                  
                                                  
                                                  18.08Forfeited
                                                  
                                                  
                                                  (13,000
                                                  )
                                                  
                                                  
                                                  17.34
                                                  
                                                  
                                                  
                                                  (4,000
                                                  )
                                                  
                                                  
                                                  16.31Exercised
                                                  
                                                  
                                                  (50,000
                                                  )
                                                  
                                                  
                                                  5.07
                                                  
                                                  
                                                  
                                                  (58,500
                                                  )
                                                  
                                                  
                                                  6.88Outstanding,
      end of year
                                                  
                                                  
                                                  856,200
                                                  
                                                  
                                                  $
                                                  13.03
                                                  
                                                  
                                                  
                                                  820,200
                                                  
                                                  
                                                  $
                                                  12.66Exercisable,
      end of year
                                                  
                                                  
                                                  522,500
                                                  
                                                  
                                                  $
                                                  11.10
                                                  
                                                  
                                                  
                                                  465,400
                                                  
                                                  
                                                  $
                                                  9.13
  At
December 31, 2008, the range of exercise prices, the weighted average exercise
price and the weighted average remaining contractual life are as
follows:
 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
                                              
                                              
                                              
                                              2.94
                                              
                                              
                                              $
                                              2.29
                                              
                                              
                                              
                                              132,800
                                              
                                              
                                              $
                                              2.29$4.77
      - $ 5.44
                                              
                                              
                                              
                                              77,500
                                              
                                              
                                              
                                              0.78
                                              
                                              
                                              
                                              4.83
                                              
                                              
                                              
                                              77,500
                                              
                                              
                                              
                                              4.83$12.57
      - $18.99
                                              
                                              
                                              
                                              645,900
                                              
                                              
                                              
                                              6.85
                                              
                                              
                                              
                                              16.21
                                              
                                              
                                              
                                              312,200
                                              
                                              
                                              
                                              16.40$2.20
      - $18.99
                                              
                                              
                                              
                                              856,200
                                              
                                              
                                              
                                              5.70
                                              
                                              
                                              $
                                              13.03
                                              
                                              
                                              
                                              522,500
                                              
                                              
                                              $
                                              11.10
  Compensation
expense related to stock options was $1,089 for the year ended December 31,
2008 (2007 - $997; 2006 - $839).
  51
   10.
                Computation
      of income per share:
  2008
                                              
                                              
                                              2007
                                              
                                              
                                              2006Numerator:Net
      income (loss)
                                              
                                              $
                                              (71,225
                                              )
                                              
                                              $
                                              13,710
                                              
                                              
                                              $
                                              19,399Denominator:Basic
      weighted average shares outstanding
                                              
                                              
                                              13,485,132
                                              
                                              
                                              
                                              13,458,786
                                              
                                              
                                              
                                              12,887,401Dilutive stock
      options
                                              
                                              
                                              -
                                              
                                              
                                              
                                              193,013
                                              
                                              
                                              
                                              237,464Dilutive
      weighted average shares outstanding
                                              
                                              
                                              13,485,132
                                              
                                              
                                              
                                              13,651,799
                                              
                                              
                                              
                                              13,124,865Basic
      income (loss) per share before cumulative effect of a change in accounting
      principle
                                              
                                              $
                                              (5.28
                                              )
                                              
                                              $
                                              1.02
                                              
                                              
                                              $
                                              1.49Effect
      of a change in accounting principle
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              0.01Basic
      income (loss) per share
                                              
                                              
                                              (5.28
                                              )
                                              
                                              
                                              1.02
                                              
                                              
                                              
                                              1.50Dilutive
      income (loss) per share before cumulative effect of a change in accounting
      principle
                                              
                                              
                                              (5.28
                                              )
                                              
                                              
                                              1.00
                                              
                                              
                                              
                                              1.47Effect
      of a change in accounting principle
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              0.01Diluted
      income (loss) per share
                                              
                                              
                                              (5.28
                                              )
                                              
                                              
                                              1.00
                                              
                                              
                                              
                                              1.48
  Due
to the net loss for the year ended December 31, 2008, the 141,137 dilutive
shares have no effect on the loss per share.  Diluted income per share
excludes the effect of 559,900 anti-dilutive options for the year ended December
31, 2007 (2006 - 465,900).
  11.
                Risk
      management activities:
  The
Company is exposed to interest rate volatility with regard to existing variable
rate debt.  The Company has entered into variable-to-fixed interest
rate swaps on variable rate term debt and revolving debt.  The swaps
are accounted for as cash flow hedges.  The effective portions of
changes in fair value of the interest rate swaps are recorded in Accumulated
Other Comprehensive Income and are recognized into earnings in the same period
in which the hedged forecasted transaction affects
earnings.  Ineffective portions of changes in fair value are
recognized into earnings as they occur.  At December 31, 2008, the
notional amount of the swaps was $64.9 million, with the average pay rate being
4.59% and the average receive rate being 1.72%.  The swaps mature at
various dates up to December 31, 2011.
  52
   11.
                Risk
      management activities (continued):
  Effective
January 1, 2008, the Company adopted SFAS Statement 157, which provides a
framework for measuring fair value under GAAP.  As defined in SFAS
Statement 157, fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price).  The Company
utilizes market data or assumptions that the Company believes market
participants would use in pricing the asset or liability, including assumptions
about risk and the risks inherent in the inputs to the valuation
technique.  These inputs can be readily observable, market
corroborated or generally unobservable.
  The
Company primarily applies the income approach for recurring fair value
measurements and endeavours to utilize the best available
information.  Accordingly, the Company utilizes valuation techniques
that maximize the use of observable inputs and minimize the use of unobservable
inputs.  The Company is able to classify fair value balances based on
the observability of those inputs.
  SFAS
Statement 157 establishes a fair value hierarchy that prioritizes the inputs
used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurement) and the lowest priority to unobservable inputs (Level 3
measurement).
  Assets
and liabilities measured at fair value on a recurring basis include the
following as of December 31, 2008:
 LiabilitiesLevel
      1
                                  
                                  
                                  Level
      2
                                  
                                  
                                  Level
      3
                                  
                                  
                                  at
      fair valueLiabilities:Interest rate
      swaps
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  2,973
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  2,973Total
      liabilities
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  2,973
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  2,973
 
  53
  
 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.
 
 2008
                                          
                                          
                                          2007
                                          
                                          
                                          2006Revenue:LTL
                                          
                                          $
                                          610,933
                                          
                                          
                                          $
                                          584,786
                                          
                                          
                                          $
                                          441,499Logistics
                                          
                                          
                                          81,030
                                          
                                          
                                          
                                          52,845
                                          
                                          
                                          
                                          39,762Truckload
                                          
                                          
                                          34,374
                                          
                                          
                                          
                                          32,886
                                          
                                          
                                          
                                          32,798Corporate
      office and other
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -$
                                          726,337
                                          
                                          
                                          $
                                          670,517
                                          
                                          
                                          $
                                          514,059Operating
      income (loss):LTL
                                          
                                          $
                                          (98,371
                                          )
                                          
                                          $
                                          23,153
                                          
                                          
                                          $
                                          28,029Logistics
                                          
                                          
                                          4,373
                                          
                                          
                                          
                                          3,271
                                          
                                          
                                          
                                          2,679Truckload
                                          
                                          
                                          1,307
                                          
                                          
                                          
                                          1,678
                                          
                                          
                                          
                                          1,734Corporate
      office and other
                                          
                                          
                                          (4,641
                                          )
                                          
                                          
                                          (5,103
                                          )
                                          
                                          
                                          (4,402
                                          )$
                                          (97,332
                                          )
                                          
                                          $
                                          22,999
                                          
                                          
                                          $
                                          28,040Goodwill
      impairment charges:LTL
                                          
                                          $
                                          107,351
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -Logistics
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Truckload
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Corporate
      office and other
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -$
                                          107,351
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
 
 2008
                                      
                                      
                                      2007
                                      
                                      
                                      2006Depreciation
      and amortization:LTL
                                      
                                      $
                                      18,273
                                      
                                      
                                      $
                                      18,952
                                      
                                      
                                      $
                                      11,174Logistics
                                      
                                      
                                      1,662
                                      
                                      
                                      
                                      688
                                      
                                      
                                      
                                      422Truckload
                                      
                                      
                                      1,006
                                      
                                      
                                      
                                      1,052
                                      
                                      
                                      
                                      848Corporate
      office and other
                                      
                                      
                                      83
                                      
                                      
                                      
                                      78
                                      
                                      
                                      
                                      46$
                                      21,024
                                      
                                      
                                      $
                                      20,770
                                      
                                      
                                      $
                                      12,490Capital
      expenditures:LTL
                                      
                                      $
                                      12,722
                                      
                                      
                                      $
                                      31,103
                                      
                                      
                                      $
                                      18,620Logistics
                                      
                                      
                                      523
                                      
                                      
                                      
                                      1,379
                                      
                                      
                                      
                                      6,966Truckload
                                      
                                      
                                      31
                                      
                                      
                                      
                                      698
                                      
                                      
                                      
                                      1,265Corporate
      office and other
                                      
                                      
                                      77
                                      
                                      
                                      
                                      46
                                      
                                      
                                      
                                      285$
                                      13,353
                                      
                                      
                                      $
                                      33,226
                                      
                                      
                                      $
                                      27,136
 
  
  54
   
 
 12.
                Segmented
      information (continued):
 2008
                                  
                                  
                                  2007Total
      assets:LTL
                                  
                                  $
                                  261,319
                                  
                                  
                                  $
                                  343,679Logistics
                                  
                                  
                                  18,226
                                  
                                  
                                  
                                  27,485Truckload
                                  
                                  
                                  9,563
                                  
                                  
                                  
                                  11,781Corporate
      office and other
                                  
                                  
                                  4,484
                                  
                                  
                                  
                                  14,554$
                                  293,592
                                  
                                  
                                  $
                                  397,499
  Geographic
information for revenue from point of origin and total assets is as
follows:
 
 2008
                                
                                
                                2007
                                
                                
                                2006Revenue:Canada
                                
                                $
                                223,125
                                
                                
                                $
                                212,974
                                
                                
                                $
                                193,656United
      States
                                
                                
                                503,212
                                
                                
                                
                                457,543
                                
                                
                                
                                320,403$
                                726,337
                                
                                
                                $
                                670,517
                                
                                
                                $
                                514,059
 
 2008
                                  
                                  
                                  2007Total
      assets:Canada
                                  
                                  $
                                  67,209
                                  
                                  
                                  $
                                  82,868United
      States
                                  
                                  
                                  226,383
                                  
                                  
                                  
                                  319,762$
                                  293,592
                                  
                                  
                                  $
                                  402,630
 
 2008
                                  
                                  
                                  2007Total
      long-lived assets:Canada
                                  
                                  $
                                  49,295
                                  
                                  
                                  $
                                  58,291United
      States
                                  
                                  
                                  133,643
                                  
                                  
                                  
                                  248,791$
                                  182,938
                                  
                                  
                                  $
                                  307,082
 
 Long-lived
assets include property and equipment, goodwill and intangible
assets.
  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, 2008
and 2007.
  55
   14.
                Lease
      commitments:
  At
December 31, 2008, future minimum rental payments relating to operating
leases for premises and equipment are as follows:
 Year
      ending December 31:2009
                                
                                $
                                17,4482010
                                
                                
                                12,4492011
                                
                                
                                9,5122012
                                
                                
                                7,7012013
                                
                                
                                4,202Thereafter
                                
                                
                                5,361$
                                56,673
  Total
rental expense under operating leases was $18.0 million for the year ended
December 31, 2008 (2007 - $15.6 million; 2006 - $16.3 million).
  The
Company has guaranteed a portion of the residual values of certain assets under
operating leases.  If the market value of the assets at the end of the
lease terms is less than the guaranteed residual value, the Company must, under
certain circumstances, compensate the lessor for a portion of the
shortfall.  The maximum exposure under these guarantees is $5.2
million.
  15.
                Employee
      benefits:
  The
Company sponsors defined contribution plans in Canada and the United
States.  In Canada, the Company matches the employee's contribution to
their registered retirement savings plan up to a maximum
contribution.  In the United States, the Company sponsors 401(k)
savings plans.  The Company matches a percentage of the employee's
contribution subject to a maximum contribution.  The expense related
to the plans was $1.9 million for the year ended December 31, 2008 (2007 - $2.1
million).
  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
2007 and 2006 figures have been reclassified to conform with the financial
statement presentation adopted in 2008.
  
  56
  
 Consolidated
      Supplemental Schedule of Quarterly Financial
  Information
 (In
      thousands of United States dollars, except per share amounts where
      noted)
 First
                                  
                                  
                                  Second
                                  
                                  
                                  Third
                                  
                                  
                                  Fourth2008
      (Unaudited)
                                  
                                  quarter
                                  
                                  
                                  quarter
                                  
                                  
                                  quarter
                                  
                                  
                                  quarterRevenue:Less-than-truckload
                                  
                                  $
                                  149,415
                                  
                                  
                                  $
                                  168,161
                                  
                                  
                                  $
                                  166,227
                                  
                                  
                                  $
                                  127,130Logistics
                                  
                                  
                                  19,760
                                  
                                  
                                  
                                  19,314
                                  
                                  
                                  
                                  23,375
                                  
                                  
                                  
                                  18,581Truckload
                                  
                                  
                                  8,332
                                  
                                  
                                  
                                  8,515
                                  
                                  
                                  
                                  9,003
                                  
                                  
                                  
                                  8,524Total
      revenue
                                  
                                  $
                                  177,507
                                  
                                  
                                  $
                                  195,990
                                  
                                  
                                  $
                                  198,605
                                  
                                  
                                  $
                                  154,235Impairment
      of goodwill
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  107,351Income
      (loss) from operations after depreciation and amortization
                                  
                                  $
                                  1,926
                                  
                                  
                                  $
                                  8,048
                                  
                                  
                                  $
                                  3,981
                                  
                                  
                                  $
                                  (111,287
                                  )Net
      income (loss)
                                  
                                  
                                  1,134
                                  
                                  
                                  
                                  4,577
                                  
                                  
                                  
                                  2,066
                                  
                                  
                                  
                                  (79,002
                                  )Earnings
      (loss) per share:Basic
                                  
                                  $
                                  0.08
                                  
                                  
                                  $
                                  0.34
                                  
                                  
                                  $
                                  0.15
                                  
                                  
                                  $
                                  (5.85
                                  )Diluted
                                  
                                  
                                  0.08
                                  
                                  
                                  
                                  0.34
                                  
                                  
                                  
                                  0.15
                                  
                                  
                                  
                                  (5.85
                                  )
 
 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
                                    
                                    
                                    3,387
                                    
                                    
                                    
                                    5,533
                                    
                                    
                                    
                                    3,121
                                    
                                    
                                    
                                    1,669Earnings
      per share:Basic
                                    
                                    $
                                    0.25
                                    
                                    
                                    $
                                    0.41
                                    
                                    
                                    $
                                    0.23
                                    
                                    
                                    $
                                    0.12Diluted
                                    
                                    
                                    0.25
                                    
                                    
                                    
                                    0.41
                                    
                                    
                                    
                                    0.23
                                    
                                    
                                    
                                    0.12
 
 
 
  57
  
 
 ITEM
9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
ANDFINANCIAL DISCLOSURE
 
 During
the Company’s last two fiscal years, there were no disagreements with KPMG LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of KPMG LLP, would have caused them to make reference to the
subject matter of the disagreement in connection with their
reports.
 
 ITEM
9. a - CONTROLS AND PROCEDURES
 
 As
of the end of the period covered by this Annual Report on Form 10-K, the Company
carried out an evaluation, under the supervision and with the participation of
Company management, including the Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), of the effectiveness of the design, implementation
and operation of its “disclosure controls and procedures”, as such term is
defined in Rule 13a-15(e) of the Exchange Act.  Based on this
evaluation, the Company’s CEO and CFO have concluded that the Company’s
“disclosure controls and procedures” are effective as of December 31, 2008 to
enable the Company to record, process, summarize and report in a timely manner
the information that the Company is required to disclose in submissions and
filings with the SEC in accordance with the Exchange Act.
 
 There
have been no significant changes in our internal control over financial
reporting, which we define to include our control environment, control
procedures, and accounting systems, or any other factors that could materially
affect or are reasonably likely to materially affect our internal control over
financial reporting during the 2008 fourth quarter.
 
 Management’s
Report on Internal Control over Financial Reporting
 
 The
management of Vitran Corporation Inc. (“Vitran”) is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rules 13a-15(f).  Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements.
 
 Vitran’s
management team assessed the effectiveness of its internal control over
financial reporting using the criteria established in the Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”), and based on that assessment concluded that
internal control over financial reporting was effective as of December 31,
2008.
 
 KPMG
LLP, an independent public accounting firm registered with the PCAOB, has issued
an attestation report on the effectiveness of Vitran’s internal control over
financial reporting, as stated in their report which is included
herein.
 
 March
      10, 2009
                
                
                /s/
      Richard E. Gaetz, President and Chief Executive Officer/s/
      Sean P. Washchuk, Vice President Finance and Chief Financial
      Officer
 
  
 
 
 58
 
 
 
 
 
 
 
 The
Board of Directors and Shareholders
 Vitran
Corporation Inc.
 
 We
have audited Vitran Corporation Inc.’s internal control over financial reporting
as of December 31, 2008, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Vitran Corporation Inc.'s management is responsible
for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our
audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
 
 A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 In
our opinion, Vitran Corporation Inc. maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2008,
based on criteria established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
 
 We
also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Vitran Corporation Inc. as of December 31, 2008 and 2007, and the related
consolidated statements of income, shareholders’ equity and cash flows for each
of the years in the three-year period ended December 31, 2008, and our report
dated March 10, 2009 expressed an unqualified opinion on those consolidated
financial statements and included an explanatory paragraph regarding the
Company’s adoption of SFAS Statement 159 - “The Fair Value Option for Financial
Assets and Financial Liabilities” and SFAS Statement 157, “Fair Value
Measurements on January 1, 2008 and the adoption of FASB Interpretation No. 48
“Accounting for Uncertainty in Income Taxes - an Interpretation of FASB
Statement 109” on January 1, 2007.  Our audit also included the
financial statement schedule listed in the Index under Part IV, Item
15(a)2.
 
 
 /s/
KPMG LLP
 
 Toronto,
Canada
 March
10, 2009
  59
  
 ITEM 9. b - OTHER INFORMATION
 
 None.
 
 PART
III
 
 ITEM
10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
 
 The
information for directors, Section 16(a) beneficial ownership reporting and
other compliance as required by Item 407 of Regulation S-K, is reported in the
Company’s definitive proxy statement filed pursuant to Regulation 14A and is
incorporated herein by reference. The following table sets forth certain
information concerning our executive officers:
  Name
                Age
                Position
                
                HistoryRichard
      E. Gaetz
                  (Mississauga,
      Canada)
                51
                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)
                36
                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
      PricewaterhouseCoopers 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.
 
 CODE
OF ETHICS
 
 The Company has adopted a Code of
Ethics and Professional Conduct (the “Code”) for all senior executives and
directors, including the Chief Executive Officer, Chief Financial Officer and Principal
Accounting Officer.  The Code is available free of charge on the
Company’s website at www.vitran.com.  The Code requires that
the Company’s senior executives and directors deal fairly with customers,
suppliers, fellow employees and the general public.  Acceptance of the
Code is mandatory for the Company’s senior executives and
directors.
 
 ITEM
11 - EXECUTIVE COMPENSATION
 
 The information required by Item 11 of Form 10-K appears in the
Company’s definitive proxy statement for the 2009 Annual Meeting of its
Shareholders, reference to which is hereby made, and the information therein is
incorporated herein by reference.
 
  60
  ITEM
12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
 
 The
information required by Item 12 of Form 10-K appears in the Company’s proxy
statement for the 2009 Annual  Meeting of its Shareholders, reference
to which is hereby made, and the information therein is incorporated herein by
reference.
 
 ITEM
13 - CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
 
 None
 
 ITEM
14 - PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 KPMG
LLP has served as the Company’s auditors since 1989.  For the fiscal
years ended December 31, 2008 and 2007, fees billed by KPMG LLP to Vitran for
services were:
 
 Year
      ended December 31,2008
                                          
                                          
                                          2007Audit
      and audit-related fees
                                          
                                          $
                                          562,150
                                          
                                          
                                          $
                                          591,500Tax
      fees
                                          
                                          Nil
                                          
                                          
                                          NilAll
      other fees
                                          
                                          Nil
                                          
                                          
                                          Nil$
                                          562,150
                                          
                                          
                                          $
                                          591,500
 
 All
services provided by KPMG to Vitran for 2008 and 2007 were approved by the Audit
Committee.  The Audit Committee pre-approves all non-audit services to
be provided to the Company or its subsidiary entities by its independent
auditors.  For further details regarding the Audit Committee approval
process, please review the Audit Committee charter which is available free of
charge on Vitran’s website at www.vitran.com.
 
 For
information regarding the members and other applicable information of the Audit
Committee, please review the Company’s proxy statement for the 2009 Annual
Meeting of its Shareholders, reference to which is hereby made, and the
information therein is incorporated herein by reference.
 
 PART
IV
 
 ITEM
15 - EXHIBITS, FINANCIAL STATEMENTS SCHEDULES
 
 (a)             (1)    Financial
Statements
 
 Consolidated Balance Sheets as at
December 31, 2008 and 2007 and the Consolidated Statements of Income,
Shareholders’ Equity and Cash Flows for the years ended December 31, 2008, 2007,
and 2006, are reported on by KPMG LLP, Chartered Accountants.  These
statements are prepared in accordance with GAAP in the United
States.
  61
  
 (2)
                Financial
      Statements Schedule:
 
 Schedule
II - Valuation and Qualifying Accounts
 
 Vitran Corporation Inc.
 Three years ended December 31,
2008
 
 Allowance
      for Doubtful Accounts(in
      thousands of dollars)
                          
                          Description
                        Balance
      at
                          beginning
                          of
      year
                        
                        Charges
      to
                          costs
      and
                          expenses
                        
                        Deductions
                        
                        Balance
                          at
      end
                          of
      yearYear
      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
                        )
                        
                        $
                        2,490Year
      ended December 31, 2008Accounts
      receivable allowances for revenue adjustments and doubtful
      accounts
                        
                        $
                        2,490
                        
                        
                        $
                        2,588
                        
                        
                        $
                        (1,310
                        )
                        
                        $
                        3,768
 
 (3)
                Exhibits
      Filed
 
 The exhibits listed in the accompanying
Exhibit Index are filed as part of this Annual Report on
 Form
10-K.
 
 (b)
                Separate
      Financial Statements
 
 None
  
 62
 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
  63
  10.9.6*
                        
                        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,
      200710.9.7*
                        
                        Amendment
      No.2 to Credit Agreement between JPMorgan Chase Bank N.A. and those banks
      whose names appear on the signature pages hereto and Vitran Corporation
      Inc., Vitran Express Canada Inc. and Vitran Corporation10.9.8*
                        
                        Amendment
      No.3 to Credit Agreement between JPMorgan Chase Bank N.A. and those banks
      whose names appear on the signature pages hereto and Vitran Corporation
      Inc., Vitran Express Canada Inc. and Vitran Corporation10.10*
                        
                        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, 200410.9.9
                        
                        Amendment
      No.4 to Credit Agreement between JPMorgan Chase Bank N.A. and those banks
      whose names appear on the signature pages hereto and Vitran Corporation
      Inc., Vitran Express Canada Inc. and Vitran Corporation31.1
                        
                        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
 
  64
  
 
 SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Toronto, Province of
Ontario, on the 10th day of March, 2009.
  
 Vitran
      Corporation Inc.By:
                    /s/
      SEAN P. WASHCHUKSean
      P. WashchukVice
      President Finance andChief
      Financial Officer
  65
  
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
  Signatures
                  
                  Title
                  
                  Date/s/
      RICHARD D. McGRAW
                  
                  Chairman
      of the Board
                  
                  March
      10, 2009Richard
      D. McGraw/s/
      RICHARD E. GAETZ
                  
                  President
      and Chief Executive Officer, Director
                  
                  March
      10, 2009Richard
      E. Gaetz/s/
      GEORGES L. HÉBERT
                  
                  Director
                  
                  March
      10, 2009Georges
      L. Hébert/s/
      WILLIAM S. DELUCE
                  
                  Director
                  
                  March
      10, 2009William
      S. Deluce/s/
      ANTHONY F. GRIFFITHS
                  
                  Director
                  
                  March
      10, 2009Anthony
      F. Griffiths/s/
      JOHN R. GOSSLING
                  
                  Director
                  
                  March
      10, 2009John
      R. Gossling/s/
      SEAN P. WASHCHUK
                  
                  Vice
      President Finance and Chief Financial Officer
                  
                  March
      10, 2009Sean
      P. Washchuk
                  
                  (Principal
      Financial Officer)/s/
      FAYAZ D. SULEMAN
                  
                  Corporate
      Controller
                  
                  March
      10, 2009Fayaz
      D. Suleman
                  
                  (Principal
      Accounting Officer)
  66