##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 
 FORM 10-Q  þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTER ENDED MARCH 31, 2005 OR  o TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
 FOR THE TRANSITION PERIOD FROM     to Commission file number: 
 VITRAN CORPORATION INC. Ontario, Canada
(State of incorporation)
    
    (I.R.S. Employer
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 þ No o Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes þ No o 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 20, 2005 was 12,380,278.




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TABLE OF CONTENTS
 Item
    
    
    
    PagePART I
    
    Financial Information1.
    
    Financial Statements
    
    32.
    
    Management Discussion and Analysis
    
    113.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    174.
    
    Controls and Procedures
    
    17PART II
    
    Other Information1.
    
    Legal Proceedings
    
    172.
    
    Changes in Securities and Use of Proceeds
    
    183.
    
    Defaults Upon Senior Securities
    
    184.
    
    Submission of Matters to a Vote of Security Holders
    
    185.
    
    Other Information
    
    186.
    
    Exhibits and Reports on Form 8-K
    
    19
 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, 2005
    
    
    Mar. 31, 2004Revenue
    
    $
    93,941
    
    
    $
    87,146Operating expenses
    
    
    80,144
    
    
    
    75,574Selling, general and administrative expenses
    
    
    8,817
    
    
    
    8,163Other expenses (income)
    
    
    (10
    )
    
    
    (76
    )88,951
    
    
    
    83,661Income from operations before depreciation
    
    
    4,990
    
    
    
    3,485Depreciation expense
    
    
    1,331
    
    
    
    1,308Income from operations before undernoted
    
    
    3,659
    
    
    
    2,177Interest expense (income), net
    
    
    (48
    )
    
    
    43Income from operations before income taxes
    
    
    3,707
    
    
    
    2,134Income taxes
    
    
    953
    
    
    
    485Net income
    
    $
    2,754
    
    
    $
    1,649Retained earnings, beginning of period
    
    
    54,972
    
    
    
    40,029Cost of repurchase of common shares in
excess of book value
    
    
    (452
    )
    
    nilRetained earnings, end of period
    
    $
    57,274
    
    
    $
    41,678Earnings per share:Basic
    
    $
    0.22
    
    
    $
    0.14Diluted
    
    $
    0.22
    
    
    $
    0.13
 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, 2005
    
    
    Dec. 31, 2004AssetsCurrent assets:Cash
    
    $
    3,765
    
    
    $
    7,375Marketable securities (note 3)
    
    
    31,539
    
    
    
    33,087Accounts receivable
    
    
    43,485
    
    
    
    40,124Inventory, deposits and prepaid expenses
    
    
    5,600
    
    
    
    5,924Future income taxes
    
    
    3,477
    
    
    
    3,66787,866
    
    
    
    90,177Capital assets
    
    
    42,343
    
    
    
    37,563Goodwill (note 4)
    
    
    45,266
    
    
    
    45,304$
    175,475
    
    
    $
    173,044Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    
    34,926
    
    
    $
    33,377Income and other taxes payable
    
    
    1,638
    
    
    
    2,399Current portion of long-term debt
    
    
    3,781
    
    
    
    3,03040,345
    
    
    
    38,806Long-term debt
    
    
    10,187
    
    
    
    11,507Future income taxes
    
    
    3,930
    
    
    
    3,546Shareholders equity:Common shares, no par value, unlimited authorized,
12,380,278 and 12,419,678 issued and outstanding at
March 31, 2005 and December 31, 2004, respectively (note 5)
    
    
    60,595
    
    
    
    60,798Contributed surplus
    
    
    452
    
    
    
    323Retained earnings
    
    
    57,274
    
    
    
    54,972Cumulative translation adjustment (note 2)
    
    
    2,692
    
    
    
    3,092121,013
    
    
    
    119,185$
    175,475
    
    
    $
    173,044
 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, 2005
    
    
    Mar. 31, 2004Cash provided by (used in):Operations:Net income
    
    $
    2,754
    
    
    $
    1,649Items not involving cash from operationsDepreciation expense
    
    
    1,331
    
    
    
    1,308Future income taxes
    
    
    565
    
    
    
    296Stock based compensation expense
    
    
    129
    
    
    
    Loss (gain) on sale of capital assets
    
    
    (10
    )
    
    
    (76
    )4,769
    
    
    
    3,177Change in non-cash working capital
components
    
    
    (2,249
    )
    
    
    (10,189
    )2,520
    
    
    
    (7,012
    )Investments:Purchase of capital assets
    
    
    (6,222
    )
    
    
    (1,635
    )Proceeds on sale of capital assets
    
    
    14
    
    
    
    135Marketable securities
    
    
    1,369
    
    
    
    (145
    )(4,839
    )
    
    
    (1,645
    )Financing:Repayment of long-term debt
    
    
    (570
    )
    
    
    (1,809
    )Issue of common shares
upon exercise of stock options
    
    
    17
    
    
    
    351Repurchase of Common shares
    
    
    (692
    )
    
    
    (1,245
    )
    
    
    (1,458
    )Effect of translation adjustment on cash
    
    
    (46
    )
    
    
    58Increase (decrease) in cash position
    
    
    (3,610
    )
    
    
    (10,057
    )Cash position, beginning of period
    
    
    7,375
    
    
    
    12,417Cash position, end of period
    
    $
    3,765
    
    
    $
    2,360Change in non-cash working capital
components:Accounts receivable
    
    $
    (3,361
    )
    
    $
    (5,004
    )Inventory, deposits and prepaid expenses
    
    
    324
    
    
    
    (6
    )Income and other taxes recoverable/payable
    
    
    (761
    )
    
    
    (1,285
    )Accounts payable and accrued liabilities
    
    
    1,549
    
    
    
    (3,894
    )$
    (2,249
    )
    
    $
    (10,189
    )
 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 Policies The interim consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles with a reconciliation to United States generally
accepted accounting principles in note 9 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 instructions to Quarterly Report on Form 10-Q.
The interim consolidated financial statements should be read in conjunction with the Companys
2004 Annual Report and the 2004 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, 2005 are not necessarily
indicative of the results of operations that may be expected for the year ended December 31,
2005. All amounts in these consolidated interim financial statements are expressed in United
States dollars, unless otherwise stated. 2. Foreign Currency Translation The United States dollar is the functional currency of the Companys operations in the United
States. The Canadian dollar is the functional currency of the Companys Canadian operations. Each operation translates foreign currency denominated transactions into its functional currency
using the rate of exchange in effect at the date of the transaction. Monetary assets and liabilities denominated in 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 $13.9 million is designated as a
hedge of the investment in the United States self-sustaining operations. 3. Marketable Securities The marketable securities are classified as available for sale and are invested in highly
rated treasury bills, investment grade notes and investment grade commercial paper. The market
value of all securities approximates the cost. 4. Goodwill The change in goodwill is attributable to translating the Canadian dollar denominated goodwill
to the United States dollar reporting currency. 6




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5. Common Shares (a) Issued Mar. 31, 2005
    
    
    Mar. 31, 2004Common Shares
    
    Number
    
    
    Amount
    
    
    Number
    
    
    AmountBalance, beginning of year
    
    
    12,419,678
    
    
    $
    60,798
    
    
    
    12,094,278
    
    
    $
    59,358Shares repurchased for cancellation
    
    
    (44,900
    )
    
    
    (220
    )
    
    
    
    
    
    
    Shares issued upon exercise of
employees stock options
    
    
    5,500
    
    
    
    17
    
    
    
    88,700
    
    
    
    351Balance, end of period
    
    
    12,380,278
    
    
    $
    60,595
    
    
    
    12,182,978
    
    
    $
    59,709
 (b) Weighted average number of shares The 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, 2005
    
    
    Mar. 31, 2004Weighted average number of shares:Basic
    
    
    12,411,968
    
    
    
    12,115,292Potential exercise of stock options
    
    
    342,962
    
    
    
    582,702Diluted *
    
    
    12,754,930
    
    
    
    12,697,994
   *
    
    Diluted weighted average number of shares excludes out of the money options. 6. Stock Option Plan 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. There are 834,300 options outstanding
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 Common Shares of the Company
on the Toronto Stock Exchange on the day of the grant. The Company has applied the fair value method for stock options granted on or after January 1,
2003. The Company has applied the pro forma disclosure provisions of the 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, 2005
    
    
    Mar. 31, 2004Net income, as reported
    
    $
    2,754
    
    
    $
    1,649Pro forma net income
    
    $
    2,743
    
    
    $
    1,639Pro forma basic earnings per share
    
    $
    0.22
    
    
    $
    0.14Pro forma diluted earnings per share
    
    $
    0.22
    
    
    $
    0.13
 7




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The fair value of each stock option granted was estimated using the Black-Scholes fair value
option-pricing model with the following assumptions: 2005Options granted
    
    
    43,000Risk-free interest rate
    
    
    4.24
    %Dividend Yield
    
    
    0.0
    %Volatility factor of the future expected market price of the
Companys common shares
    
    
    34.39
    %Expected life of the options
    
    
    8
    years
 The weighted average estimated fair value at the date of grant for the options granted in 2005
was $7.32 per share. Compensation expense related to stock options was $129 for the three
months ended March 31, 2005 (March 31, 2004- Nil). 7. 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. 8. Segmented Information Three months ended
    
    Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Office
    
    
    ConsolidatedMar. 31, 2005
    
    truckload
    
    
    Logistics
    
    
    Truckload
    
    
    Total
    
    
    and Other
    
    
    TotalsRevenue
    
    $
    76,105
    
    
    $
    8,876
    
    
    $
    8,960
    
    
    $
    93,941
    
    
    $
    
    
    
    $
    93,941Operating, selling, general and
administrative expenses
    
    
    71,770
    
    
    
    8,419
    
    
    
    8,076
    
    
    
    88,265
    
    
    
    696
    
    
    
    88,961Other expenses (income)
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    (10
    )Depreciation
    
    
    1,082
    
    
    
    93
    
    
    
    142
    
    
    
    1,317
    
    
    
    14
    
    
    
    1,331Income (loss) from operations
    
    $
    3,263
    
    
    $
    364
    
    
    $
    742
    
    
    $
    4,369
    
    
    $
    (710
    )
    
    
    3,659Interest expense (income), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    953Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,754
 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
    
    
    
    83,737Other expenses (income)
    
    
    (82
    )
    
    
    5
    
    
    
    1
    
    
    
    (76
    )
    
    
    
    
    
    
    (76
    )Depreciation
    
    
    1,129
    
    
    
    78
    
    
    
    86
    
    
    
    1,293
    
    
    
    15
    
    
    
    1,308Income (loss) from operations
    
    $
    2,031
    
    
    $
    337
    
    
    $
    446
    
    
    $
    2,814
    
    
    $
    (637
    )
    
    
    2,177Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    485Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,649
 8




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9. Canadian and United States accounting policy differences: (a) Consolidated reconciliation of shareholders equity United States GAAP requires the inclusion of a reconciliation of shareholders equity between
Canadian and United States GAAP. Shareholders equity reconciled to United States GAAP is as
follows: Net income
    
    
    Shareholders equityMarch 31, 2005
    
    
    March 31, 2004
    
    
    March 31, 2005
    
    
    March 31, 2004Balance, March
31, based on Canadian
GAAP
    
    $
    2,754
    
    
    $
    1,649
    
    
    $
    121,013
    
    
    $
    99,412Foreign exchange
adjustment
    
    
    
    
    
    
    
    
    
    
    (858
    )
    
    
    (858
    )Balance before
other comprehensive
income and accumulated
other comprehensive
income, March 31,
based on United
States GAAP
    
    $
    2,754
    
    
    $
    1,649
    
    
    $
    120,155
    
    
    $
    98,554Other comprehensive
income:Change in cumulative
translation adjustment
    
    
    (400
    )
    
    
    (543
    )
    
    
    
    
    
    
    Unrealized foreign
exchange loss on
derivative instrument
    
    
    
    
    
    
    
    
    
    
    (101
    )
    
    
    (101
    )Foreign exchange
adjustment
    
    
    
    
    
    
    
    
    
    
    594
    
    
    
    594Balance, March 31,
Based on United
States GAAP
    
    $
    2,360
    
    
    $
    1,106
    
    
    $
    120,648
    
    
    $
    99,047
 Earnings per share Three months
    
    
    Three monthsEnded
    
    
    EndedMar. 31, 2005
    
    
    Mar. 31, 2004Earnings per share underUnited States GAAPBasic
    
    $
    0.22
    

    
    $
    0.14Diluted
    
    $
    0.22
    
    
    $
    0.13
 Three months
    
    
    Three monthsEnded
    
    
    EndedMar. 31, 2005
    
    
    Mar. 31, 2004Weighted average number of shares:Basic
    
    
    12,411,968
    
    
    
    12,115,292Potential exercise of stock options
    
    
    342,962
    
    
    
    582,702Diluted
    
    
    12,754,930
    
    
    
    12,697,994
 9




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(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) Income from operations before depreciation United States GAAP requires that depreciation be included in the determination of income from
operations. Further, United States GAAP does not permit the disclosure of a subtotal of the
amount of income from operations before this item. Canadian GAAP permits the disclosure of a
subtotal of the amount of income from operations before this item. Income from operations based
on United States GAAP is as follows: Three months
    
    
    Three monthsEnded
    
    
    EndedMar. 31, 2005
    
    
    Mar. 31, 2004Income from operations before
depreciation, as reported
    
    $
    4,990
    
    
    $
    3,485Depreciation expense
    
    
    1,331
    
    
    
    1,308Income from operations based on United
States GAAP
    
    $
    3,659
    
    
    $
    2,177
 (d) Stock-based compensation: Pro forma stock option disclosure: For all stock option grants prior to January 01, 2003, stock-based compensation to employees was
accounted for based on the intrinsic value method under APB No. 25 and related interpretations. Canadian GAAP requires pro forma net income and earnings per share disclosure for stock option
grants during 2002. United States GAAP requires pro forma net income and earnings per share
disclosure for stock options granted on or after January 01, 1995. For stock option grants on
or after January 01, 2003 there is no policy difference between Canadian and United States GAAP. 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, 2005
    
    
    Mar. 31, 2004Net income, as reported based on
United States GAAP
    
    $
    2,754
    
    
    $
    1,649Add: Stock-based compensation expense
included in reported net income
    
    
    129
    
    
    
    Deduct: Total stock-based compensation expense
determined using fair value method for all grants
    
    
    (148
    )
    
    
    (41
    )Pro forma net income
    
    $
    2,735
    
    
    $
    1,608Earnings per share:Basic  as reported
    
    $
    0.22
    
    
    $
    0.14Basic  pro forma
    
    $
    0.22
    
    
    $
    0.13Diluted  as reported
    
    $
    0.22
    
    
    $
    0.13Diluted  pro forma
    
    $
    0.21
    
    
    $
    0.13
 10. Comparative figures Certain comparative figures have been reclassified to conform with the financial statement
presentation adopted in the current year. 10




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Item 2. Managements Discussion and Analysis of Results of Operation This MD&A contains forward-looking statements within the meaning of the United States Private
Securities Litigation Reform Act of 1995 concerning Vitrans business, operations, and financial
performance and condition. When used in this MD&A the words believe, anticipate, intend, estimate, expect,
project, may, plans, continue, will, focus, endeavor 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. Specifically, but not limited to, this MD&A and the documents incorporated by reference
contain forward-looking statements regarding:  
    our objective to expand or acquire an LTL operation in a new regional market
    our objective to continue making progress with the railway
    our intention to achieve capacity in the new distribution facility
    our intention to improve results from operating efficiencies
    our intention to purchase a specified level of capital assets 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, regulatory change, the general health of the economy 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. 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. The Companys Annual Report onForm 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. 11




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OVERVIEW The first quarter of 2005 was Vitrans fourteenth consecutive quarter-over-quarter of improved
results with net income increasing 67.0% over the 2004 first quarter. Revenue and income from
operations improved for all segments, LTL, Logistics and Truckload. The LTL segment recorded the
most significant improvement, a 60.7% increase in income from operations for the first quarter
compared to the same period a year ago. Notwithstanding the LTL segments increase revenue per
shipment and revenue per hundredweight in the first quarter of 2005, the Canadian LTL business
unit, in the 2004 first quarter was adversely impacted by a strike at CN Railway Co. (CN) that
reduced revenue and increased operating costs. 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)
    
    2005
    
    
    2004
    
    
    2005 vs 2004Revenue
    
    $
    93,941
    
    
    $
    87,146
    
    
    
    7.8
    %Operating expenses
    
    
    80,144
    
    
    
    75,574
    
    
    
    6.0
    %SG&A expenses
    
    
    8,817
    
    
    
    8,163
    
    
    
    8.0
    %Other expenses (income)
    
    
    (10
    )
    
    
    (76
    )
    
    
    (86.8
    %)Depreciation
    
    
    1,331
    
    
    
    1,308
    
    
    
    1.8
    %Income from operations
    
    
    3,659
    
    
    
    2,177
    
    
    
    68.1
    %Interest expense (income), net
    
    
    (48
    )
    
    
    43
    
    
    
    (211.6
    %)Net income
    
    
    2,754
    
    
    
    1,649
    
    
    
    67.0
    %Earnings per share:Basic
    
    
    0.22
    
    
    
    0.14Diluted
    
    
    0.22
    
    
    
    0.13Operating Ratio(1)
    
    
    96.1
    %
    
    
    97.5
    %
 Revenue increased 7.8% to $93.9 million for the first quarter of 2005 compared to $87.1 million in
the first quarter of 2004. Revenue in the LTL, Logistics and Truckload segment increased 8.3%,
8.7% and 2.8% respectively, contributing to the consolidated improvement. Income from operations
for the first quarter improved 68.1% to $3.7 million compared to $2.2 million in the same period a
year ago. As a result the Companys consolidated operating ratio improved 140 basis points to
96.1% for the first quarter of 2005 from 97.5% in the first quarter of 2004. Detailed explanations
for the improvement in revenue and income from operations are discussed below in Segmented
Results. Selling, general and administrative expenses (SG&A) increased 8% to $8.8 million in the first
quarter compared to $8.2 million in the first quarter of 2004. The increase is due an increase in
non-cash employee stock options expenses in the first quarter of 2005 compared to the same period
in 2004. The remainder of the increase can be primarily attributed to an increase in selling and
administrative headcount within the Logistics segment and salary and wage increases across all
segments of Vitran. The Company generated a nominal amount of interest income in the first quarter of 2005 compared to
a nominal amount of interest expense in the first quarter of 2004. Interest income generated on
the Companys $31.5 million of short-term investment exceeded the expense incurred on the $14.0
million of outstanding debt. 12




---



##### 



Income tax expense for the first quarter of 2005 was $1.0 million compared to $0.5 million in for
the same quarter a year ago. The effective tax rate was 25.7% for the first quarter of 2005
compared to 22.7% for the first quarter in 2004. The increase in the effective rate can be
attributed to an increase in a higher proportion of income being earned in higher tax
jurisdictions. Net income improved by 67.0% to $2.7 million for the first quarter compared to $1.6 million for the
same quarter in 2004. This results in basic and diluted earnings per share of $0.22 for the first
quarter of 2005 compared to basic and diluted earnings per share $0.14 and $0.13 for the first
quarter of 2004. The weighted average number of shares for the current quarter was 12.4 million
basic and 12.8 million diluted compares to 12.1 million basic and 12.7 million diluted shares 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)
    
    2005
    
    
    2004
    
    
    2005 vs 2004Revenue
    
    $
    76,105
    
    
    $
    70,259
    
    
    
    8.3
    %Income from operations
    
    
    3,263
    
    
    
    2,031
    
    
    
    60.7
    %Operating ratio
    
    
    95.7
    %
    
    
    97.1
    %Number of shipments (2)
    
    
    571,992
    
    
    
    575,549
    
    
    
    (0.62
    %)Weight (000s of lbs) (3)
    
    
    901,436
    
    
    
    946,106
    
    
    
    (4.7
    %)Revenue per shipment (4)
    
    $
    133.06
    
    
    $
    122.07
    
    
    
    9.0
    %Revenue per hundredweight (5)
    
    $
    8.44
    
    
    $
    7.43
    
    
    
    13.6
    %
 The LTL segment posted significant improvements in the first quarter of 2005 compared to the same
period a year ago, revenue and income from operations increased 8.3% and 60.7%. The LTL segment in
the 2005 first quarter was not impacted by a CN strike that reduced revenue and increased operating
costs in the 2004 first quarter. However, CN intermodal issues that manifested throughout 2004
resulted in a decline in shipments in the 2005 first quarter. These operating issues that impacted
results in 2004 continued into the 2005 first quarter, however the impact was less significant.
Offsetting the reduction in shipments was a 9.0% increase in revenue per shipment resulting in a
13.6% improvement in revenue per hundredweight. In addition transborder revenue increased 7.8% in
the current quarter compared to the same period a year ago. In the absence of a CN strike in the quarter, more normalized operating efficiencies were achieved
and the LTL segment increased gross margin 1.2% over the 2004 first quarter. Consequently the
operating ratio improved to 95.7% in the first quarter of 2005 compared to 97.1% in the first
quarter of 2004. 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)
    
    2005
    
    
    2004
    
    
    2005 vs 2004Revenue
    
    $
    8,876
    
    
    $
    8,167
    
    
    
    8.7
    %Income from operations
    
    
    364
    
    
    
    337
    
    
    
    8.0
    %Operating ratio
    
    
    95.9
    %
    
    
    95.9
    %
 13




---



##### 



Revenue and income from operations for the Logistics segment were up 8.7% and 8.0% for the first
quarter of 2005 compared to the same period in 2004. Revenue increases were attributable to
developments in the brokerage and supply chain management units that led to an increase in income
from operations. The supply chain unit continues to make progress to fill the capacity of its new
distribution facility opened in 2004. Once the capacity of the new facility is fully utilized, the
operating ratio should improve. 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)
    
    2005
    
    
    2004
    
    
    2005 vs 2004Revenue
    
    
    8,960
    
    
    
    8,720
    
    
    
    2.8
    %Income from operations
    
    
    742
    
    
    
    446
    
    
    
    66.4
    %Operating ratio
    
    
    91.7
    %
    
    
    94.9
    %
 Revenue for the Truckload segment in the first quarter of 2005 increased 2.8% to $9.0 million
compared to $8.7 million in the first quarter of 2004. The strong pricing environment that
developed in the truckload sector in 2004 continued into the first quarter of 2005 as the qualified
truckload driver market remained tight. Consequently, the Truckload operation has focused on
better yielding freight resulting in an increase in revenue per total mile(6) of 7.7%
while shipments have declined 6.7% for the first quarter of 2005 over the first quarter of 2004.
Trailer lease costs declined 29.9% in the first quarter of 2005, due to the expiration of operating
leases at the beginning of the quarter, also contributing to the improvement of the operating ratio
to 91.7% compared to 94.9% for the 2004 first quarter. LIQUIDITY AND CAPITAL RESOURCES Cash flow from continuing operations before working capital changes for the 2005 first quarter was
$4.8 million compared to $3.2 million in 2004 due primarily to the increase in net income.
Non-cash working capital changes consumed $2.2 million in the first quarter of 2005 compared to
$10.2 million for the same period a year ago. While accounts receivable increased in the first
quarter of 2005 compared to December 31, 2004 due to higher revenue, average days sales outstanding
declined to a record low of 38.2 days for the Company. Interest-bearing debt decreased to $14.0 million at March 31, 2005 from $14.5 million at the end of
2004. The interest-bearing debt is comprised of $13.9 million drawn under the term bank credit
facility and a capital lease of $0.1 million. During the 2005 first quarter the Company repaid
$0.6 million of interest-bearing debt. At March 31, 2005, the Company had $30.6 million of unused
credit facilities, net of $4.4 million in letters of credit, of which the Company could draw an
additional $28.0 million. At March 31, 2005 the Company had available capital of $36.5 million, consisting of $5 million cash
on hand as well as $31.5 million in investment grade short-term securities. In December of 2003
the Company raised the majority of this capital in an underwritten public offering of 2,300,000
shares in consideration for net proceeds of $29.4 million. It is the Companys intention to use
the funds for possible future acquisitions, capital expenditures or to repay amounts outstanding
under the Companys credit facilities. Capital expenditures amounted to $6.2 million for the first quarter of 2005 and were funded out of
operating cash flows of the Company.The increase in capital expenditures results from information
technology upgrades and trailing fleet acquisition that were deferred from the fourth quarter of
2004 to the first quarter of 2005. The table below sets forth the Companys capital expenditures
for the three-month period ended March 31, 2005. 14




---



##### 



For the three months ended March 31,2005
    
    
    2004Real estate and buildings
    
    $
    0
    
    
    $
    32Tractors
    
    
    415
    
    
    
    92Trailing fleet
    
    
    5,199
    
    
    
    1,085Information technology
    
    
    523
    
    
    
    279Leasehold improvements
    
    
    16
    
    
    
    5Other equipment
    
    
    69
    
    
    
    142Total
    
    $
    6,222
    
    
    $
    1,635
 Management estimates that cash capital expenditures for the remainder of 2005 will be between $6
million and $10 million the majority of which will be for tractors and trailing fleet. The Company
also anticipates entering into operating leases to fund the acquisition of equipment with a capital
cost of between $3.0 million and $5.0 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 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 March 31, 2005: (in thousands of dollars)
    
    
    
    
    
    
    
    
    
    Payments due by periodContractual Obligations
    
    Total
    
    
    2005
    
    
    2006 & 2007
    
    
    2008 & 2009
    
    
    ThereafterLong-term debt
    
    $
    13,872
    
    
    $
    2,437
    
    
    $
    11,435
    
    
    $
    Nil
    
    
    $
    NilCapital lease obligations
    
    
    96
    
    
    
    23
    
    
    
    73
    
    
    $
    Nil
    
    
    $
    NilSub-total
    
    
    13,968
    
    
    
    2,460
    
    
    
    11,508
    
    
    
    Nil
    
    
    
    NilOff-balance sheet commitmentsOperating leases
    
    
    45,641
    
    
    
    10,809
    
    
    
    20,820
    
    
    
    9,783
    
    
    
    4,229Total Contractual Obligations
    
    $
    59,609
    
    
    $
    13,269
    
    
    $
    32,328
    
    
    $
    9,783
    
    
    $
    4,229
 In addition to the above noted contractual obligations, the Company, as at March 31, utilized the
revolving credit facility for standby letters of credit of $4.4 million. The letters of credit are
used as collateral for self-insured retention of insurance claims. A significant decrease in demand for the Companys 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, is
sufficient to fund operating and capital requirements in 2005 as well as service the contractual
obligations. OUTLOOK The first quarter of 2005 was another successful quarter for Vitran, marking the fourteenth
consecutive quarter of year-over-year net income improvement. All operating segments performed
well and are ahead of the prior year quarterly results. Railway capacity issues that manifested
throughout 2004 within the LTL segment have improved slightly in the current quarter. The Company
expects to continue this progress during the balance of the year, which augers well for operating
efficiencies. The Logistics segment, as it fills the capacity of its new distribution facility,
should realize operating ratio improvements. Lastly, it is still the Companys objective to use
the proceeds from the December 2003 public offering with in LTL segment to expand or acquire in a
new regional market contiguous to the existing network. 15




---



##### 



QUARTERLY RESULTS Canadian GAAP 
 (thousands of dollars
    
    2005
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2003
    
    
    2003
    
    
    2003except per share amounts)
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2Revenue
    
    $
    93,941
    
    
    $
    96,523
    
    
    $
    96,995
    
    
    $
    93,931
    
    
    $
    87,146
    
    
    $
    85,333
    
    
    $
    84,889
    
    
    $
    84,135Income from operations
    
    
    3,659
    
    
    
    4,737
    
    
    
    6,193
    
    
    
    5,870
    
    
    
    2,177
    
    
    
    4,296
    
    
    
    4,462
    
    
    
    3,933Net Income
    
    
    2,754
    
    
    
    4,365
    
    
    
    4,542
    
    
    
    4,387
    
    
    
    1,649
    
    
    
    3,150
    
    
    
    3,045
    
    
    
    2,724Earnings per share:Basic
    
    $
    0.22
    
    
    $
    0.35
    
    
    $
    0.37
    
    
    $
    0.36
    
    
    $
    0.14
    
    
    $
    0.31
    
    
    $
    0.32
    
    
    $
    0.29Diluted
    
    
    0.22
    
    
    
    0.34
    
    
    
    0.36
    
    
    
    0.34
    
    
    
    0.13
    
    
    
    0.29
    
    
    
    0.30
    
    
    
    0.27Weighted average number
of shares:Basic
    
    
    12,411,968
    
    
    
    12,417,594
    
    
    
    12,339,956
    
    
    
    12,266,703
    
    
    
    12,115,292
    
    
    
    10,110,571
    
    
    
    9,557,681
    
    
    
    9,511,133Diluted
    
    
    12,754,930
    
    
    
    12,771,235
    
    
    
    12,774,744
    
    
    
    12,771,784
    
    
    
    12,697,994
    
    
    
    10,768,940
    
    
    
    10,157,160
    
    
    
    9,910,894
 United States GAAP(7) 
 (thousands of dollars
    
    2005
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2003
    
    
    2003
    
    
    2003except per share amounts)
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2Revenue
    
    $
    93,941
    
    
    $
    96,523
    
    
    $
    96,995
    
    
    $
    93,931
    
    
    $
    87,146
    
    
    $
    85,333
    
    
    $
    84,889
    
    
    $
    84,135Income from operations
    
    
    3,659
    
    
    
    4,737
    
    
    
    6,193
    
    

    
    5,870
    
    
    
    2,177
    
    
    
    4,032
    
    
    
    4,462
    
    
    
    3,933Net Income
    
    
    2,754
    
    
    
    4,365
    
    
    
    4,542
    
    
    
    4,387
    
    
    
    1,649
    
    
    
    3,150
    
    
    
    3,045
    
    
    
    2,724Earnings per share:Basic
    
    $
    0.22
    
    
    $
    0.35
    
    
    $
    0.37
    
    
    $
    0.36
    
    
    $
    0.14
    
    
    $
    0.31
    
    
    $
    0.32
    
    
    $
    0.29Diluted
    
    
    0.22
    
    
    
    0.34
    
    
    
    0.36
    
    
    
    0.34
    
    
    
    0.13
    
    
    
    0.29
    
    
    
    0.30
    
    
    
    0.27Weighted average number
of shares:Basic
    
    
    12,411,968
    
    
    
    12,417,594
    
    
    
    12,339,956
    
    
    
    12,266,703
    
    
    
    12,115,292
    
    
    
    10,110,571
    
    
    
    9,557,681
    
    
    
    9,511,133Diluted
    
    
    12,754,930
    
    
    
    12,771,235
    
    
    
    12,774,744
    
    
    
    12,771,784
    
    
    
    12,697,994
    
    
    
    10,768,940
    
    
    
    10,157,160
    
    
    
    9,910,894
   Definitions of non-GAAP measures:
  (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, other expenses (income), and depreciation expense, divided by
revenue. OR allows management to measure the Company and its various segments operating
efficiency. OR is a widely recognized measure in the transportation industry which provides a
comparable benchmark for evaluating the Companys performance compared to its competitors.
Investors should also note that the Companys presentation of OR may not be comparable to
similarly titled measures by other companies. OR is calculated as follows: Three months ended March 31,
    
    2005
    
    
    2004Operating expenses
    
    $
    80,144
    
    
    $
    75,574Selling, general and administrative expenses
    
    
    8,817
    
    
    
    8,163Other expenses (income)
    
    
    (10
    )
    
    
    (76
    )Depreciation expense
    
    
    1,331
    
    
    
    1,308$
    90,282
    
    
    $
    84,969Revenue
    
    $
    93,941
    
    
    $
    87,146Operating ratio (OR)
    
    
    96.1
    %
    
    
    97.5
    %
  (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.(4)
    
    Revenue per shipment represents revenue divided by the number of shipments.(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)
    
    Revenue per total mile represents revenue divided by the total miles driven.(7)
    
    Please see Note 9 to the Interim Consolidated Financial Statements for differences between
Canadian and United States GAAP. Sean P. Washchuk
Vice President Finance &
  Chief Financial Officer
    
    April 20, 2005
 16




---



##### 



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 of $13.9 million had a weighted-average interest rate
on borrowings of 3.50% in the first three months of 2005. We estimate that the fair value of the
term credit approximates the carrying value. (in thousands of dollars)
    
    
    
    
    
    Payments due by periodLong-term debt
    
    Total
    
    
    2005
    
    
    2006 & 2007
    
    
    2008 & 2009
    
    
    ThereafterVariable RateTerm bank credit
    
    $
    13,872
    
    
    $
    2,437
    
    
    $
    11,435
    
    
    $
    Nil
    
    
    $
    NilAverage interest rate
    
    
    4.56
    %
    
    
    4.56
    %
    
    
    4.56
    %Fixed RateCapital lease obligation
    
    
    96
    
    
    
    23
    
    
    
    73
    
    
    
    Nil
    
    
    
    NilAverage interest rate
    
    
    6.79
    %
    
    
    6.79
    %
    
    
    6.79
    %Total
    
    $
    13,968
    
    
    $
    2,460
    
    
    $
    11,508
    
    
    $
    Nil

    
    
    $
    Nil
 The Companys investment of $31.5 million in marketable securities is invested in highly rated
treasury bills, investment grade notes and investment grade commercial paper. The Companys
investment realized average returns of 2.5% in the first three months of 2005. The Company is
exposed to interest rate changes. 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 $13.9 million is designated as a hedge of the investment in the United States
self-sustaining foreign operations. Item 4. Controls and Procedures  a)
    As of April 20, 2005, 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, 2005. Based on their
evaluation, the Companys Chief Executive Officer and the Chief Financial Officer concluded
that Vitrans disclosure controls and procedures enable Vitran 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. Part II. Other Information Item 1. Legal Proceedings The Company 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 significant adverse effect upon Vitrans financial condition,
results of operations or cash flows. 17




---



##### 



Item 2. Changes in Securities and Use of Proceeds In December of 2003, Vitran, together with the lead underwriting firm, Avondale Partners, issued
2,300,000 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. It is 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. On February 9, 2005 Vitran commenced a normal course issuer bid to repurchase up to 620,984 Common
Shares by way of open market purchases through the facilities of the Toronto Stock Exchange. The
normal course issuer bid expires on February 8, 2006. All shares repurchased are cancelled. The
following table summarizes the purchases: Maximum number ofTotal number of
    
    
    Common Shares thatAverage price paid
    
    
    Common Shares as
    
    
    may yet beNumber of Common
    
    
    per Common Share
    
    
    part of a publicly
    
    
    purchased under thePeriod
    
    Shares purchased
    
    
    (CAD)
    
    
    announced plan
    
    
    planFeb. 9 to Feb. 28, 2005
    
    
    17,700
    
    
    $
    18.75
    
    
    
    17,700
    
    
    
    603,284Mar. 1 to Mar. 31, 2005
    
    
    27,200
    
    
    $
    18.76
    
    
    
    27,200
    
    
    
    576,084Total
    
    
    44,900
    
    
    
    
    
    
    
    44,900
 Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders  a)
    On April 20, 2005 the Company held an Annual and Special Meeting of
Shareholders.b)
    The following directors with the indicated number of votes set forth below: Nominee
    
    For
    
    
    WithheldRichard D. McGraw
    
    
    10,043,563
    
    
    
    555,650Richard E. Gaetz
    
    
    10,536,113
    
    
    
    63,100Anthony F. Griffiths
    
    
    10,040,563
    
    
    
    558,650Graham W. Savage
    
    
    10,546,713
    
    
    
    52,500Georges L Hébert
    
    
    10,548,713
    
    
    
    50,500William S. Deluce
    
    
    10,548,713
    
    
    
    50,500
  c)
    The proposal for the ratification of the appointment of KPMG LLP as Independent
Auditors for 2005 was voted on and approved at the meeting by the following vote:
For: 10,554,711 Withheld: 8,799d)
    The resolution confirming an amendment to by law No. 6 of the Company to amend
the quorum requirements for shareholders meeting was voted on and confirmed at the
meeting by the following vote:
For: 8,246,488 Against: 12,300 . Item 5. Other Information None 18




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##### 



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, 2005.32
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, dated April 20, 2005.
  (b)
    Reports on Form 8-K  i)
    Vitran Corporation Inc. filed a Current Report on Form 8-K dated January 18, 2005 related
to a material definitive agreement and announcing an amendment to the Companys credit
facility.ii)
    Vitran Corporation Inc. filed a Current report on Form 8-K dated February 8,
2005 related to the Company initiating a normal course issuer bid, attendance at a
transportation conference and financial results for the fourth quarter and year ended
2004.iii)
    Vitran Corporation Inc. filed a Current Report on Form 8-K dated March 4, 2005
related to the Company listing on the Nasdaq stock exchange.iv)
    Vitran Corporation Inc. filed a Current Report on Form 8-K dated March 29, 2005
related to its 2004 Annual Report.v)
    Vitran Corporation Inc. filed a Current Report on Form 8-K dated April 22, 2005
related to its 2005 first quarter earnings and announcement of a new contract for
Vitran Logistics. 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/ SEAN P. WASHCHUKSean P. WashchukDate: April 20, 2005
    
    Vice President of Finance andChief Financial Officer(Principle Financial Officer)/s/ FAYAZ D. SULEMANFayaz D. SulemanDate: April 20, 2005
    
    Corporate Controller(Principle Accounting Officer)
 19