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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 
 FORM 10-Q [X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR
     15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTER ENDED MARCH 31, 2004 OR [  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR
     15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM          to Commission file number: 
 VITRAN CORPORATION INC. Ontario, Canada
    
    (I.R.S. Employer(State of incorporation)
    
    Identification No.)
 185 The West Mall, Suite 701, Toronto, Ontario, Canada, M9C 5L5
(Address of principal executive offices)(Zip Code) 416-596-7664
(Registrants telephone number, including area code) 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. Yes [X]No [ ] Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [  ]    No [X] Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date. The number of shares of common stock outstanding at April 21 2004 was
12,211,978.




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TABLE OF CONTENTS Item
    
    
    
    PagePART I
    
    Financial Information1.
    
    Financial Statements
    
    
    32.
    
    Management Discussion and Analysis
    
    
    103.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    144.
    
    Controls and Procedures
    
    
    14PART II
    
    Other Information1.
    
    Legal Proceedings
    
    
    152.
    
    Changes in Securities and Use of Proceeds
    
    
    153.
    
    Defaults Upon Senior Securities
    
    
    154.
    
    Submission of Matters to a Vote of Security Holders
    
    
    155.
    
    Other Information
    
    
    156.
    
    Exhibits and Reports on Form 8-K
    
    
    15EX-31EX-32
 2




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Part I. Financial Information 
 Item 1: Financial Statements VITRAN CORPORATION INC. CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited) (In thousands of United States dollars except for per share amounts) Three months
    
    Three monthsEnded
    
    EndedMar. 31, 2004
    
    Mar. 31, 2003Revenue
    
    $
    87,146
    
    
    $
    77,469Operating expenses
    
    
    75,574
    
    
    
    67,084Selling, general and administrative expenses
    
    
    8,163
    
    
    
    6,93383,737
    
    
    
    74,017Income from operations before depreciation
    
    
    3,409
    
    
    
    3,452Depreciation expense
    
    
    1,308
    
    
    
    1,369Income from operations before undernoted
    
    
    2,101
    
    
    
    2,083Interest expense, net
    
    
    (43
    )
    
    
    (453
    )Gain on sale of capital assets
    
    
    76
    
    
    
    4033
    
    
    
    (413
    )Income from operations before income taxes
    
    
    2,134
    
    
    
    1,670Income taxes
    
    
    485
    
    
    
    253Net income
    
    $
    1,649
    
    
    $
    1,417Retained earnings, beginning of period
    
    $
    40,029
    
    
    $
    30,044Cost of repurchase of Class A shares in
excess of book value
    
    nil
    
    
    (170
    )Retained earnings, end of period
    
    $
    41,678
    
    
    $
    31,291Earnings per share:Basic
    
    $
    0.14
    
    
    $
    0.15Diluted
    
    $
    0.13
    
    
    $
    0.14
 See accompanying notes to consolidated financial statements. 3




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VITRAN CORPORATION INC. CONSOLIDATED BALANCE SHEETS
(Unaudited) (In thousands of United States dollars) AS ATMar. 31, 2004
    
    Dec. 31, 2003AssetsCurrent assets:Cash
    
    $
    2,360
    
    
    $
    12,417Marketable securities (2004 - Cdn
$35,200, 2003 - Cdn $35,000)
    
    
    26,837
    
    
    
    26,996Accounts receivable
    
    
    40,689
    
    
    
    35,685Inventory, deposits and prepaid expenses
    
    
    5,853
    
    
    
    5,847Future income tax assets
    
    
    4,386
    
    
    
    4,10180,125
    
    
    
    85,046Capital assets
    
    
    35,151
    
    
    
    35,102Goodwill
    
    
    44,802
    
    
    
    44,865$
    160,078
    
    
    $
    165,013Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    
    30,198
    
    
    $
    34,092Income and other taxes payable
    
    
    2,722
    
    
    
    4,007Current portion of long-term debt
    
    
    8,674
    
    
    
    8,31341,594
    
    
    
    46,412Long-term debt
    
    
    15,761
    
    
    
    17,931Future income tax liabilities
    
    
    3,311
    
    
    
    2,715Shareholders equity:Capital stock (note 3)
    
    
    59,709
    
    
    
    59,358Retained earnings
    
    
    41,678
    
    
    
    40,029Cumulative translation adjustment (note 2)
    
    
    (1,975
    )
    
    
    (1,432
    )99,412
    
    
    
    97,955$
    160,078
    
    
    $
    165,013
 See accompanying notes to consolidated financial statements. 4




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VITRAN CORPORATION INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands of United States dollars) Three months
    
    Three monthsEnded
    
    EndedMar. 31, 2004
    
    Mar. 31, 2003Cash provided by (used in):Operations:Net income
    
    $
    1,649
    
    
    $
    1,417Items not involving cash from operationsDepreciation and amortization
    
    
    1,308
    
    
    
    1,369Future income taxes
    
    
    296
    
    
    
    (242
    )Loss (gain) on sale of capital assets
    
    
    (76
    )
    
    
    (40
    )3,177
    
    
    
    2,504Change in non-cash working capital components
    
    
    (10,189
    )
    
    
    (2,261
    )(7,012
    )
    
    
    243Investments:Purchase of capital assets
    
    
    (1,635
    )
    
    
    (1,282
    )Proceeds on sale of capital assets
    
    
    135
    
    
    
    168Purchase of marketable securities
    
    
    (145
    )
    
    
    (1,645
    )
    
    
    (1,114
    )Financing:Repayment of long-term debt
    
    
    (1,809
    )
    
    
    (1,138
    )Issue of Class A Voting shares
upon exercise of stock options
    
    
    351
    
    
    
    92Repurchase of Class A Voting shares
    
    
    
    
    
    
    (325
    )(1,458
    )
    
    
    (1,371
    )Effect of translation adjustment on cash
    
    
    58
    
    
    
    (257
    )Increase (decrease) in cash position
    
    
    (10,057
    )
    
    
    (2,499
    )Cash position, beginning of period
    
    
    12,417
    
    
    
    8,002Cash position, end of period
    
    $
    2,360
    
    
    $
    5,503Change in non-cash working capital components:Accounts receivable
    
    $
    (5,004
    )
    
    $
    (5,752
    )Inventory, deposits and prepaid expenses
    
    
    (6
    )
    
    
    341Income and other taxes recoverable/payable
    
    
    (1,285
    )
    
    
    62Accounts payable and accrued liabilities
    
    
    (3,894
    )
    
    
    3,087$
    (10,189
    )
    
    $
    (2,261
    )
 See accompanying notes to consolidated financial statements. 5




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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (In thousands of United States dollars except for per share amounts)  1.
    
    Accounting PoliciesThe interim consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles with
reconciliation to United States generally accepted accounting principles in
note 7 and follow the same accounting principles and methods of application
as the most recent annual consolidated financial statements. The interim
consolidated financial statements do not contain all the disclosures required
by Canadian and United States generally accepted accounting principles. The
interim consolidated financial statements have been prepared in accordance
with instruction to Quarterly Report on Form 10-Q. The interim consolidated
financial statements should be read in conjunction with the Companys Annual
Report and the Annual Report on Form 10-K.These unaudited consolidated interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
presentation of the results of the interim period presented. Operating
results for the quarter ended March 31, 2004, are not necessarily indicative
of the results of operations that may be expected for the year ended December
31, 2004.All amounts in these consolidated interim financial statements are expressed
in United States dollars, unless otherwise stated.2.
    
    Foreign Currency TranslationThe United States dollar is the functional currency of the Companys
operations in the U.S. The Canadian dollar is the functional currency of the
Companys Canadian operations.Each operation translates foreign currency denominated transactions into its
functional currency using the rate of exchange in effect at the date of the
transaction.Monetary assets and liabilities denominated in foreign currency are
translated into the functional currency of the operation using the period-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 period-end rate of exchange and all
revenue and expense items are translated at the average rate of exchange for
the period. The resulting translation adjustment is recorded as a separate
component of shareholders equity. United States dollar debt of $24.3 million
is designated as a hedge of the investment in the United States
self-sustaining foreign operations.3.
    
    Capital Stock  (a)
    
    Authorized  The Companys capital stock consists of an unlimited number of Class
A Voting shares, Class B non-voting shares and first preference shares, issuable in series.  (b)
    
    Issued Mar. 31, 2004
    
    Mar. 31, 2003Class A Voting shares
    
    Number
    
    Amount
    
    Number
    
    AmountBalance, beginning of year
    
    
    12,094,278
    
    
    $
    59,358
    
    
    
    9,559,818
    
    
    $
    27,857Shares repurchased for cancellation
    
    
    
    
    
    
    
    
    
    
    (54,200
    )
    
    
    (158
    )Shares issued upon exercise of
employees stock options
    
    
    88,700
    
    
    
    351
    
    
    
    21,000
    
    
    
    92Balance, end of period
    
    
    12,182,978
    
    
    $
    59,709
    
    
    
    9,526,618
    
    
    $
    27,791
 6




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(c)
    
    Weighted average number of sharesThe Company uses the treasury-stock method to calculate diluted
earnings per share. Under the treasury-stock method, the weighted
average number of shares outstanding for basic earnings per share is
adjusted to reflect the assumed exercise of the Companys outstanding
stock options less the shares that could otherwise be acquired from
the assumed proceeds on exercise. Three months
    
    Three monthsEnded
    
    EndedMar. 31, 2004
    
    Mar. 31, 2003Weighted average number of shares:Basic
    
    
    12,115,292
    
    
    
    9,555,516Potential exercise of stock options
    
    
    582,702
    
    
    
    395,091Diluted
    
    
    12,697,994
    
    
    
    9,950,607
  4.
    
    Stock Option Plan  Under the Companys stock option plan, options to purchase Class A Voting
            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. There are 736,900 options authorized under
the plan. The term of each option is ten years and the vesting period is
generally five years. The exercise price for options is the trading price of
the Class A Voting shares of the Company on the Toronto Stock Exchange on the
day of the grant.  The Company has applied the new fair value method for stock options granted
on or after January 1, 2003. The Company has applied the pro forma
disclosure provisions of the new standard to awards granted during 2002, and
consistent with the standard, the pro forma effect of stock options granted
prior to January 1, 2002 have not been included. The following table
outlines the impact: Three months
    
    Three monthsEnded
    
    EndedMar. 31, 2004
    
    Mar. 31, 2003Net income, as reported
    
    $
    1,649
    
    
    $
    1,417Pro forma net income
    
    $
    1,639
    
    
    $
    1,408Pro forma basic income per share
    
    $
    0.14
    
    
    $
    0.15Pro forma diluted income per share
    
    $
    0.13
    
    
    $
    0.14
  On March 9, 2004 the Board of Directors of the Company approved an amendment
to the Company stock option plan to increase the aggregate number of Class A
Voting Shares issuable under the Plan by an additional 750,000 Class A Voting shares
and granted 205,000 stock options to executive officers and certain
non-executive employees of the Company. The stock options granted on March
9, 2004 were not expensed in the first quarter financial statements as the
shareholders of the Company had yet to approve the increase to the aggregate
number of Class A Voting Shares reserved under the stock plan. The 205,000
stock options granted by the Board of Directors will be expensed pursuant to
the fair value method commencing the second quarter of 2004 if approved by
the shareholders of the Company at the 2004 Special and Annual Meeting of
Shareholders.5.
    
    Contingent LiabilitiesThere exists certain legal actions against the Company, none of which is
expected to have a material adverse effect on the consolidated financial
position or results of operations of the Company. 7




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6.
    
    Segmented Information Three months ended
    
    Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Office
    
    ConsolidatedMar. 31, 2004
    
    truckload
    
    Logistics
    
    Truckload
    
    Total
    
    and Other
    
    TotalsRevenue
    
    $
    70,259
    
    
    $
    8,167
    
    
    $
    8,720
    
    
    $
    87,146
    
    
    $
    
    
    
    $
    87,146Operating, selling, general and
administrative expenses
    
    
    67,181
    
    
    
    7,747
    
    
    
    8,187
    
    
    
    83,115
    
    
    
    622
    
    
    
    83,737Depreciation
    
    
    1,129
    
    
    
    78
    
    
    
    86
    
    
    
    1,293
    
    
    
    15
    
    
    
    1,308Income (loss) from operations
    
    $
    1,949
    
    
    $
    342
    
    
    $
    447
    
    
    $
    2,738
    
    
    $
    (637
    )
    
    
    2,101Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43
    )Gain on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    485Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,649
 Three months ended
    
    Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Office
    
    ConsolidatedMar. 31, 2003
    
    truckload
    
    Logistics
    
    Truckload
    
    Total
    
    and Other
    
    TotalsRevenue
    
    $
    63,224
    
    
    $
    6,340
    
    
    $
    7,905
    
    
    $
    77,469
    
    
    $
    
    
    
    $
    77,469Operating, selling, general and
administrative expenses
    
    
    59,479
    
    
    
    6,217
    
    
    
    7,712
    
    
    
    73,408
    
    
    
    609
    
    
    
    74,017Depreciation
    
    
    1,188
    
    
    
    52
    
    
    
    117
    
    
    
    1,357
    
    
    
    12
    
    
    
    1,369Income (loss) from operations
    
    $
    2,557
    
    
    $
    71
    
    
    $
    76
    
    
    
    2,704
    
    
    $
    (621
    )
    
    
    2,083Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    453Gain on sale of fixed assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    253Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,417
  7.
    
    Canadian and United States accounting policy differences:  (a)
    
    Consolidated Statements of changes in shareholders equityUnited States GAAP requires the inclusion of a consolidated statement of
changes in shareholders equity for each statement of income year.
Shareholders equity under United States GAAP is as follows: OtherCapital
    
    Retained
    
    comprehensivestock
    
    earnings
    
    income
    
    TotalBalance, December 31, 2003
    
    $
    59,358
    
    
    $
    39,171
    
    
    $
    5,237
    
    
    $
    103,766Net income
    
    
    
    
    
    
    1,649
    
    
    
    
    
    
    
    1,649Unrealized foreign currency loss
    
    
    
    
    
    
    
    
    
    
    (543
    )
    
    
    (543
    )Shares issued upon exercise of options
    
    
    351
    
    
    
    
    
    
    
    
    
    
    
    351Balance, March 31, 2004
    
    $
    59,709
    
    
    $
    40,820
    
    
    $
    4,694
    
    
    $
    105,223
  (b)
    
    Consolidated statements of cash flows:Canadian GAAP permits the disclosure of a subtotal of the amount of
cash provided by operations before changes in non-cash working capital
items in the consolidated statements of cash flows. United States GAAP does
not permit this subtotal to be included.(c)
    
    Statement of net income (loss) and comprehensive income (loss)The following table reconciles net income for the three-month and
nine-month periods as reported in the consolidated statement of operations
to what would have been reported had the statements been prepared in
accordance with United States GAAP. 8




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United States GAAP requires the disclosure of a Statement of Comprehensive
Income. Comprehensive income generally encompasses all changes in
shareholders equity, except those arising from transactions with
shareholders. Three months
    
    Three monthsEnded
    
    EndedMar. 31, 2004
    
    Mar. 31, 2003Net income based on Canadian and
United States GAAP
    
    $
    1,649
    
    
    $
    1,417Net income based on United States GAAP
    
    $
    1,649
    
    
    $
    1,417Other comprehensive income:Change in cumulative translation adjustment
    
    
    (543
    )
    
    
    1,287Obligation for derivative instruments (i)
    
    
    
    
    
    
    116Comprehensive income based
on United States GAAP
    
    $
    1,106
    
    
    $
    2,820
 Three months
    
    Three monthsEnded
    
    EndedEarnings per share
    
    Mar. 31, 2004
    
    Mar. 31, 2003Earnings per share under United States GAAPBasic
    
    $
    0.14
    
    
    $
    0.15Diluted
    
    $
    0.13
    
    
    $
    0.14
  (i)
    
    The change in the fair value of the Companys obligation for
its interest rate swap, which was designated as a cash flow hedge,
has been included net of the income tax effect of nil ($78,000).  (d)
    
    Income from operations before depreciationUnited States GAAP requires that depreciation be included in the
determination of income from operations. Further, U.S. GAAP does not permit
the disclosure of a subtotal of the amount of income from continuing
operations before this item. Canadian GAAP requires the disclosure of a
subtotal of the amount of income from operations before this item.(e)
    
    Stock-based compensation:Pro forma stock option disclosure:The following table outlines the pro forma impact if the compensation cost
for the Companys stock options is determined under the fair value method for
awards granted on or after January 1, 1995. Three months
    
    Three monthsEnded
    
    EndedMar. 31, 2004
    
    Mar. 31, 2003Net income based on
United States GAAP
    
    $
    1,649
    
    
    $
    1,417Pro forma net income
    
    $
    1,608
    
    
    $
    1,364Pro forma basic income per share
    
    $
    0.14
    
    
    $
    0.14Pro forma diluted income per share
    
    $
    0.13
    
    
    $
    0.14
 9




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Item 2. Managements Discussion and Analysis of Results of Operation Forward-Looking Statements:This Quarterly Report contains forward-looking
statements within the meaning of the United States Private Securities
Litigation Reform Act of 1995 concerning Vitran Corporation Inc.s business,
operations, and financial performance and condition. When used in this
Quarterly Report, the words believe, anticipate, intend, estimate,
expect, project and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such words. These forward-looking statements are based on current expectations
and are naturally 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. Factors that may cause such differences
include but are not limited to technological change, regulatory change, the
general health of the economy and competitive factors. More detailed
information about these and other factors are included in the 2003 Annual
Report and the Companys Form 10-K in respect of 2003. 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. is
under no obligation to update or alter such forward-looking statements whether
as a result of new information, future events or otherwise. Unless otherwise
indicated all dollar references herein are in U.S. dollars. Overview The first quarter of 2004 proved to be very challenging for Vitran.
Nonetheless the Company responded well and produced respectable results. The
Companys LTL segment was significantly impacted by the five-week strike at CN
Railway Co. (CN) that disrupted linehaul operations at the Canadian LTL
business unit, reducing revenue and considerably increasing operating costs.
However, the Company efficiently diverted many shipments over-the-road during
the strike, and quickly resumed normal operations once the strike ended. CN is
one of two national rail carriers operating in Canada. Also contributing to
the quarter were much improved quarter-over-quarter results at the Logistics
and Truckload segments. Consolidated Results The following table summarizes the Consolidated Statements of Income for the
three-month periods ended March 31: For the three months ended March 31,(in thousands)
    
    2004
    
    2003
    
    2004 vs 2003Revenue
    
    $
    87,146
    
    
    $
    77,469
    
    
    
    12.5
    %Income from operations
    
    
    2,101
    
    
    
    2,083
    
    
    
    1.0
    %Interest expense, net
    
    
    43
    
    
    
    453
    
    
    
    (90.5
    %)Net Income
    
    
    1,649
    
    
    
    1,417
    
    
    
    16.4
    %Operating Ratio
    
    
    97.6
    %
    
    
    97.3
    %
 Revenue increased 12.5% to $87.1 million for the first quarter of 2004 compared
to $77.5 million in the first quarter of 2003. Revenue in the LTL segment
increased 11.1% including the impact of the CN strike, while Logistics and
Truckload segments 28.5% and 10.4% respectively, generating the consolidated
improvement in revenue. Income from operations for the first quarter of 2004 was in line with the first
quarter of 2003 at $2.1 million. This was driven by the increase in costs
attributable to the CN rail strike. Offsetting this decline were improvements
at the Logistics and Truckload segments as well as improving fundamentals in
the LTL segment. In addition, the Company changed the estimated useful life
for its tractors from 7 years to 8 years and its trailers from 10 years to 12
years to more accurately reflect the actual useful life of its equipment and to
bring the Companys policy in line with its peer group. This change in
estimate was booked prospectively and resulted in a reduction in depreciation
expense of $0.2 million for the 2004 first quarter. The net impact of the
items discussed above was that the consolidated operating ratio for the first
quarter of 2004 increased to 97.6% compared to 97.3% in the first quarter of
2003. Interest expense net of interest income was $43,000 for the first quarter of
2004 compared to $0.5 million in the first quarter of 2003. The decline is
attributable to the company repaying $1.8 million of its outstanding debt
obligations and a 50 basis point reduction in interest rate spreads starting in
February 2004. As well, the Companys Cdn $35.0 million in short-term
investment generated interest income of Cdn $0.2 million. 10




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Income tax expense for the first quarter of 2004 was $0.5 million compared to
$0.3 million in the first quarter of 2003. The effective tax rate was 22.7%
for the first quarter of 2004 compared to 15.1% in the first quarter of 2003
resulting from an increase in statutory rates as well as a higher proportion of
income being earned in higher tax jurisdictions. Net income improved by 16.4% to $1.6 million for the first quarter of 2004
compared to $1.4 million in the first quarter of 2003. This resulted in $0.14
per share basic and $0.13 diluted for the quarter, compared to $0.15 per share
basic and $0.14 per share diluted in 2002. The weighted average number of
shares for the first quarter of 2004 was 12.1 million basic and 12.7 million
diluted compared to 9.6 million basic and 10.0 million diluted in the first
quarter of 2003. The weighted average number of shares for 2004 reflects the
Companys 2.3 million share equity offering in the fourth quarter of 2003, and
more dilution due to the fact that all outstanding stock options were in the
money in the first quarter of 2004. Segmented Results Less-Than-Truckload (LTL) The table below provides summary information for the LTL segment for the
three-month periods ended March 31: For the three months ended March 31,(in thousands)
    
    2004
    
    2003
    
    2004 vs 2003Revenue
    
    $
    70,259
    
    
    $
    63,224
    
    
    
    11.1
    %Income from operations
    
    
    1,949
    
    
    
    2,557
    
    
    
    (23.8
    %)Operating ratio
    
    
    97.2
    %
    
    
    96.0
    %
 In spite of the CN strike that reduced LTL income from operations by
approximately $1.0 million, the segment increased 2004 first quarter revenue by
11.1% to $70.3 compared to $63.2 million in the first quarter of 2003. Of
particular note was the 22.9% growth in the LTL transborder activity for the
first quarter 2004 compared to the first quarter 2003 that offset some of the
margin declines resulting from the CN strike. The LTL segments operating
ratio increased to 97.2% in the first quarter of 2004 from 96.0% in the first
quarter of 2003. The Canadian LTL business unit increased revenue in three of its lines of
business: regional, expedited, and transborder. However, the national line of
business that was most significantly impacted by the CN strike recorded a decline
in revenue. Once the CN strike ended, the Canadian LTL unit together with CN
worked diligently to schedule shipments through the intermodal yards resulting
in a significant rebound in shipments and revenue in the second half of March.
Both shipments and tonnage increased 5.8% while revenue per hundredweight
declined 1.5% for the first quarter of 2004 compared to the first quarter of
2003. The U.S. LTL business unit increased revenue by 6.9% to $40.4 million for the
first quarter of 2004 compared to $37.8 million in the first quarter of 2003.
The improvement in revenue was driven by increase in shipments of 4.6% and an
increase in tonnage of 9.5%. Revenue per hundredweight declined 2.3% percent
for the quarter driven by an increase in average shipment size of 4.6% and a
change in freight mix. Logistics The table below provides summary information for the Logistics segment for the
three-month periods ended March 31: For the three months ended March 31,(in thousands)
    
    2004
    
    2003
    
    2004 vs 2003Revenue
    
    $
    8,167
    
    
    $
    6,340
    
    
    
    28.8
    %Income from operations
    
    
    342
    
    
    
    71
    
    
    
    381.7
    %Operating ratio
    
    
    95.8
    %
    
    
    98.9
    %
 Revenues for the Logistics segment were up 28.8% for the first quarter of 2004,
and operating ratio improved to 95.8% compared to 98.9% in the first quarter of
2003. Revenue and income from operation increases were attributable to
improvements across all the logistics business units. 11




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##### Table of Contents



Truckload (TL) The table below provides summary information for the TL segment for the
three-month periods ended March 31: For the three months ended March 31,(in thousands)
    
    2004
    
    2003
    
    2004 vs 2003Revenue
    
    $
    8,720
    
    
    $
    7,905
    
    
    
    10.3
    %Income from operations
    
    
    447
    
    
    
    76
    
    
    
    488.2
    %Operating ratio
    
    
    94.9
    %
    
    
    99.0
    %
 Revenue for the Truckload segment increased from 10.3% to $8.7 million in the
first quarter of 2004 compared to $7.9 million in the first quarter of 2003.
The Truckload segment successfully increased revenue per total mile by 9.2% and
decreased empty miles by 18.8% while shipments declined slightly by 1.6% for
the first quarter of 2004 compared to the same period in 2003. The revenue
increase and yield improvement lowered the operating ratio to 94.9% from 99.0%
in the first quarter of 2003. LIQUIDITY AND CAPITAL RESOURCES Cash flow from continuing operations before working capital changes for the
2004 first quarter was $3.2 million compared to $2.5 million in 2003 due
primarily to the increase in net income. Non-cash working capital changes
consumed $10.2 million in the first quarter of 2004 compared to $2.3 million in
2003. While accounts receivable increased in the first quarter of 2004
compared to December 2003 due to higher revenue, average days sales outstanding
declined to 39.4 days in the first quarter of 2004 compared to 39.8 days in the
fourth quarter of 2003. Interest-bearing debt decreased to $24.4 million at March 31, 2004 from $26.2
million at the end of 2003. The interest-bearing debt is comprised of $24.3
million drawn under the term bank credit facility and a capital lease of $0.1
million. During the first quarter the company repaid $1.8 million of
interest-bearing debt. At March 31, 2004, the Company had Cdn $21.6 million of
unused credit facilities. In December 2003, the Company issued and sold, in an underwritten public
offering, 2,300,000 shares of Class A Voting stock in consideration for net
proceeds of $29.4 million. The proceeds of the offering are to be used to fund
possible future acquisitions and capital expenditures and may be used to repay
amounts outstanding under the Companys credit facilities. At March 31, 2004,
the Company had $2.4 million of cash on hand as well as Cdn $35.2 million in
investment grade short-term securities. Capital expenditures amounted to $1.6 million for the first quarter of 2004 and
were funded out of operating cash flows of the Company. The table below sets
forth the Companys capital expenditures for the three-month periods ended
March 31. For the three months ended March 31,
    
    2004
    
    2003Real estate and buildings
    
    $
    32
    
    
    $
    9Tractors
    
    
    92
    
    
    
    Trailing fleet
    
    
    1,085
    
    
    
    764Information technology
    
    
    279
    
    
    
    763Leasehold improvements
    
    
    4
    
    
    
    Other equipment
    
    
    142
    
    
    
    46Total
    
    $
    1,635
    
    
    $
    1,282
 Management estimates that cash capital expenditures for the remainder of 2004
will be between $6.4 million and $8.4 million, the majority of which will be
for tractors and trailers. The Company also anticipates entering into
operating leases to fund the acquisition of equipment with a capital cost of
between $7.3 and $9.3 million. The Company has contractual obligations that include long-term debt consisting
of a term debt facility, capital leases for operating equipment in the
Logistics segment and off-balance sheetoperating 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
it provides an alternative cost effective and flexible form of financing. The
following table summarizes our significant contractual obligations and
commercial commitments as of March 31, 2004: 12




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##### Table of Contents



(in thousands of dollars)
    
    Payments due by periodContractual Obligations
    
    Total
    
    2004
    
    2005&2006
    
    2007&2008
    
    ThereafterLong-term debt
    
    $
    24,321
    
    
    $
    6,486
    
    
    $
    17,835
    
    
    $Nil
    
    $NilCapital lease obligations
    
    
    114
    
    
    
    19
    
    
    
    57
    
    
    
    38Sub-total
    
    
    24,435
    
    
    
    6,505
    
    
    
    17,892
    
    
    
    38
    
    
    NilOff-balance sheet commitmentsOperating leases
    
    
    44,218
    
    
    
    11,441
    
    
    
    19,830
    
    
    
    9,266
    
    
    
    3,681Total Contractual Obligations
    
    $
    68,653
    
    
    $
    17,946
    
    
    $
    37,722
    
    
    $
    9,304
    
    
    $
    3,681
 In addition to the above noted contractual obligations, the Company, as at
March 31, 2004, utilized the revolving credit facility for a standby letter of
credit of $2.6 million expiring in November 2004. The letter of credit is 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 covenants 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, is
sufficient to fund operating and capital requirements in 2004 as well as
service the contractual obligations. OUTLOOK Although the first quarter of 2004 posed significant operating challenges due
to the five-week CN strike that affected the Canadian LTL business, the Company
quickly recovered and posted better than expected results. Management intends
to maintain its focus on improving results by focusing on revenue and yield
improvement in its LTL segment. It is still the Companys objective to use the
proceeds from the December 2003 public offering to acquire an LTL operation in
a new regional market contiguous to the existing network. There are promising
signs of economic improvement that augur well for the balance of the year. (1) 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 and depreciation
expense, divided by revenue. Although OR is not a recognized financial measure
defined by GAAP, it is a widely recognized measure in the transportation
industry which the Company believes provides a comparable benchmark for
evaluating its 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: For the three months ended March 31,:
    
    2004
    
    2003Operating expenses
    
    $
    75,574
    
    
    $
    67,088Selling, general and administrative
expenses
    
    
    8,163
    
    
    
    6,930Depreciation expense
    
    
    1,308
    
    
    
    1,369$
    85,045
    
    
    $
    75,387Revenue
    
    $
    87,146
    
    
    $
    77,469Operating ratio (OR)
    
    
    97.6
    %
    
    
    97.3
    %
  (2)
    
    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.  (3)
    
    Weight represents the total pounds shipped by each LTL business unit.  (4)
    
    Revenue per mile represents TL revenue divided by the total number of
miles for the period.  (5)
    
    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.  (6)
    
    Empty miles represents the number of miles driven during the period
without a loaded shipment by a TL segment owner operator. Kevin Glass
Vice President Finance &
    Chief Financial Officer April 16, 2004 13




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##### Table of Contents






Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to the impact of interest rate changes. The Company is
exposed to changes in interest rates on its borrowings under the term bank
facility that has a variable interest rate tied to the LIBOR rate. The term
bank credit facility of $24.3 million had a weighted-average interest rate on
borrowings of 2.65% in the first quarter of 2004. We estimate that the fair
value of the term credit facility approximates the carrying value.

(in thousands of dollars)
    
    Payments due by periodLong-term debt
    
    Total
    
    2004
    
    2005&2006
    
    2007&2008
    
    ThereafterVariable
RateTerm bank facility
    
    $
    24,321
    
    
    $
    6,486
    
    
    $
    17,835
    
    
    $Nil
    
    $NilAverage interest rate
    
    
    2.65
    %
    
    
    2.65
    %
    
    
    2.65
    %Fixed
RateCapital lease obligation
    
    
    114
    
    
    
    19
    
    
    
    57
    
    
    
    38
    
    
    NilAverage interest rate
    
    
    6.79
    %
    
    
    6.79
    %
    
    
    6.79
    %
    
    
    6.79
    %Total
    
    $
    24,435
    
    
    $
    6,505
    
    
    $
    17,892
    
    
    $
    38
    
    
    $Nil


The Companys investment of Cdn $35.2 million in marketable securities is
invested in short-term, highly rated government securities, treasury bills and
investment grade commercial paper and realized average returns of 2.31% for the
first quarter of 2004.




Item 4. Controls and Procedures



|a) |  | As of April 20, 2004, the Chief Executive Officer and the Chief Financial
Officer evaluated the effectiveness of the Companys disclosure controls
and procedures in accordance with Rule 13a-15 under the Exchange Act for
the quarter ended March 31, 2004. Based on their evaluation, the
Companys Chief Executive Officer and the Chief Financial Officer
concluded that our disclosure controls and procedures enable us to record,
process, summarize and report in a timely manner the information that we
are required to disclose in our Exchange Act reports.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|b) |  | There were no changes in our internal control over financial reporting
that occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.                                                                                                                                                                                                                                                                                                    

14



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##### Table of Contents



Part II. Other Information 
 Item 1. Legal Proceedings There exists certain legal actions against the Company, none of which is
expected to have a material adverse effect on the consolidated financial
position or results of operations of the Company. 
 Item 2. Changes in Securities and Use of Proceeds In December of 2003 Vitran, using Avondale Partners as the lead underwriting
firm, issued 2,300,000 Class A Voting common shares for gross proceeds of $31.6
million in a public offering. Commissions to the underwriters amounted to $1.6
million and other expenses of the offering amounted to $0.6 million resulting
in net proceeds of $29.4 million. As of March 31, 2004, it is still the
intention of Vitrans management to use the net proceeds from the public
offering to fund possible future acquisitions, capital expenditures and repay
amounts outstanding under credit facilities. 
 Item 3. Defaults Upon Senior Securities None 
 Item 4. Submission of Matters to a Vote of Security Holders  (a)
    
    On April 21, 2004 the Company held an Annual and Special Meeting of
Shareholders.(b)
    
    The following directors were elected for a three year term with the
indicated number of votes set forth below: Nominee
    
    For
    
    WithheldRichard D. McGraw
    
    
    9,763,420
    
    
    
    57,883Richard E. Gaetz
    
    
    9,763,420
    
    
    
    57,883Anthony F. Griffiths
    
    
    9,765,120
    
    
    
    56,183Graham W. Savage
    
    
    9,766,420
    
    
    
    54,883Georges Hébert
    
    
    9,766,420
    
    
    
    54,883William Deluce
    
    
    9,766,420
    
    
    
    54,883
  (c)
    
    The proposal for the ratification of the appointment of KPMG LLP as
Independent Auditors for 2004 was voted on and approved at the meeting
by the following vote:
For: 9,816,820 Withheld: 4,483.(d)
    
    The resolution approving an amendment of the Companys stock option
plan (the Plan) to increase the number of Class A Voting Shares that
were available to be issued pursuant to the Plan from 1,000,000 to
1,750,000 Class A Voting Shares was voted on and approved at the meeting
by the following vote:
For: 4,198,121 Against: 2,847,195 Abstained: 2,775,987(e)
    
    The special resolution approving an amendment to the articles of
incorporation of the Company to cancel the authorized but unissued Class
B non-Voting Shares and First Preference Shares and redesignate the
Class A Voting Shares as Common Shares was voted on and approved at the
meeting by the following vote:
For: 9,809,503 Against: 10,600 Withheld: 1,200. 
 Item 5. Other Information None 
 Item 6. Exhibits and Reports on Form 8-K  (a)
    
    Exhibits ExhibitNumber
    
    Description of Exhibit31
    
    Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, dated April 20, 2004.32
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, dated April 20, 2004.
 15




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##### Table of Contents



(b)
    
    Reports on Form 8-K i) Vitran Corporation Inc. filed a Current Report on Form 8-K dated
February 11, 2004 related to its financial results for the fourth quarter
and year ended 2003. ii) Vitran Corporation Inc. filed a Current Report on Form 8-K dated
March 23, 2004 related to 2003 Annual Report. iii) Vitran Corporation Inc. filed a Current Report on Form 8-K dated
March 22, 2004 related to a press release to update investors on
first quarter 2004 expected results. iv) Vitran Corporation Inc. filed a Current Report on Form 8-K dated
April 15, 2004 related to a press release to update investors on
first quarter 2004 expected results. 
 SIGNATURE Pursuant to the requirements 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. VITRAN CORPORATION INC./s/ KEVIN A. GLASSKevin A. GlassDate: April 20, 2004
    
    
    
    Vice President of Finance andChief Financial Officer(Principal Financial Officer)/s/ SEAN WASHCHUKSean WashchukDate: April 20, 2004
    
    
    
    Corporate Controller(Principal Accounting Officer)
 16