##### 



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 SEPTEMBER 30, 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
 
 þ o
 þ o
 o þ




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##### 



TABLE OF CONTENTS
 Item
    
    
    
    PagePART I
    
    Financial Information1.
    
    Financial Statements
    
    32.
    
    Management Discussion and Analysis
    
    123.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    184.
    
    Controls and Procedures
    
    18PART II
    
    Other Information1.
    
    Legal Proceedings
    
    192.
    
    Changes in Securities and Use of Proceeds
    
    193.
    
    Defaults Upon Senior Securities
    
    194.
    
    Submission of Matters to a Vote of Security Holders
    
    195.
    
    Other Information
    
    196.
    
    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
    
    
    Three
    
    
    Nine
    
    
    Ninemonths
    
    
    months
    
    
    months
    
    
    monthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSept 30, 2005
    
    

Sept 30, 2004
    
    
    Sept 30, 2005
    
    
    Sept 30, 2004Revenue
    
    $
    116,226
    
    
    $
    96,995
    
    
    $
    315,217
    
    
    $
    278,072Operating expenses
    
    
    96,061
    
    
    
    82,269
    
    
    
    262,947
    
    
    
    236,508Selling, general and administrative expenses
    
    
    10,399
    
    
    
    7,267
    
    
    
    29,011
    
    
    
    23,631Other Income
    
    
    (6
    )
    
    
    (29
    )
    
    
    (33
    )
    
    
    (142
    )106,454
    
    
    
    89,507
    
    
    
    291,925
    
    
    
    259,997Income from operations before depreciation
    
    
    9,772
    
    
    
    7,488
    
    
    
    23,292
    
    
    
    18,075Depreciation expense
    
    
    1,954
    
    
    
    1,295
    
    
    
    4,802
    
    
    
    3,835Income from operations before undernoted
    
    
    7,818
    
    
    
    6,193
    
    
    
    18,490
    
    
    
    14,240Interest expense, net
    
    
    (171
    )
    
    
    (7
    )
    
    
    (209
    )
    
    
    (87
    )Income from operations before income taxes
    
    
    7,647
    
    
    
    6,186
    
    
    
    18,281
    
    
    
    14,153Income taxes
    
    
    2,271
    
    
    
    1,644
    
    
    
    5,355
    
    
    
    3,575Net income
    
    
    5,376
    
    
    
    4,542
    
    
    
    12,926
    
    
    
    10,578Retained earnings, beginning of period
    
    
    61,964
    
    
    
    46,065
    
    
    
    54,972
    
    
    
    40,029Cost of repurchase of common shares in
excess of book value
    
    
    (42
    )
    
    Nil
    
    
    
    (600
    )
    
    NilRetained earnings, end of period
    
    $
    67,298
    
    
    $
    50,607
    
    
    $
    67,298
    
    
    $
    50,607Earnings per share:Basic
    
    $
    0.43
    
    
    $
    0.37
    
    
    $
    1.04
    
    
    $
    0.86Diluted
    
    $
    0.42
    
    
    $
    0.36
    
    
    $
    1.01
    
    
    $
    0.83
 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 ATSept 30, 2005
    
    
    Dec. 31, 2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    10,809
    
    
    $
    7,375Marketable securities (note 4)
    
    
    
    
    
    
    33,087Accounts receivable
    
    
    52,885
    
    
    
    40,124Inventory, deposits and prepaid expenses
    
    
    7,354
    
    
    
    5,924Future income taxes
    
    
    1,675
    
    
    
    3,66772,723
    
    
    
    90,177Capital assets
    
    
    63,683
    
    
    
    37,563Goodwill (note 5)
    
    
    63,990
    
    
    
    45,304$
    200,396
    
    
    $
    173,044Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    
    42,333
    
    
    
    33,377Income and other taxes payable
    
    
    750
    
    
    
    2,399Current portion of long-term debt
    
    
    5,283
    
    
    
    3,03048,366
    
    
    
    38,806Long-term debt
    
    
    12,622
    
    
    
    11,507Future income taxes
    
    
    4,847
    
    
    
    3,546Shareholders equity:Common shares, no par value, unlimited authorized,
12,583,836 and 12,419,678 issued and outstanding at
September 30, 2005 and December 31, 2004,
respectively (note 7)
    
    
    63,361
    
    
    
    60,798Contributed surplus
    
    
    797
    
    
    
    323Retained earnings
    
    
    67,298
    
    
    
    54,972Cumulative translation adjustment (note 3)
    
    
    3,105
    
    
    
    3,092134,561
    
    
    
    119,185$
    200,396
    
    
    $
    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
    
    
    Three
    
    
    Nine
    
    
    Ninemonths
    
    
    months
    
    
    months
    
    
    monthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSept 30, 2005
    
    
    Sept 30, 2004
    
    
    Sept 30, 2005
    
    
    Sept 30, 2004Cash and cash equivalents provided by (used in):Operations:Net income
    
    $
    5,376
    
    
    $
    4,542
    
    
    $
    12,926
    
    
    $
    10,578Items not involving cash from operationsDepreciation
    
    
    1,954
    
    
    
    1,295
    
    
    
    4,802
    
    
    
    3,835Future income taxes
    
    
    2,030
    
    
    
    1,726
    
    
    
    2,677
    
    
    
    1,557Stock based compensation expense
    
    
    181
    
    
    
    119
    
    
    
    474
    
    
    
    177Gain on sale of capital assets
    
    
    (6
    )
    
    
    (29
    )
    
    
    (33
    )
    
    
    (142
    )9,535
    
    
    
    7,653
    
    
    
    20,846
    
    
    
    16,005Change in non-cash working capital components
    
    
    (3,961
    )
    
    
    (480
    )
    
    
    (6,658
    )
    
    
    (7,221
    )5,574
    
    
    
    7,173
    
    
    
    14,188
    
    
    
    8,784Investing:Purchase of capital assets
    
    
    (10,806
    )
    
    
    (915
    )
    
    
    (17,651
    )
    
    
    (3,993
    )Proceeds on sale of capital assets
    
    
    50
    
    
    
    28
    
    
    
    88
    
    
    
    242Acquisition of subsidiary
    
    
    (1,693
    )
    
    
    
    
    
    
    (28,192
    )
    
    
    Marketable securities
    
    
    3,193
    
    
    
    (148
    )
    
    
    31,974
    
    
    
    (439
    )(9,256
    )
    
    
    (1,035
    )
    
    
    (13,781
    )
    
    
    (4,190
    )Financing:Revolving credit facility
    
    
    5,074
    
    
    
    
    
    
    
    5,074
    
    
    
    Repayment of long-term debt
    
    
    (570
    )
    
    
    (2,169
    )
    
    
    (1,710
    )
    
    
    (6,146
    )Issue of common shares
upon exercise of stock options
    
    
    18
    
    
    
    503
    
    
    
    60
    
    
    
    1,402Repurchase of common shares
    
    
    (65
    )
    
    
    
    
    
    
    (921
    )
    
    
    4,457
    
    
    
    (1,666
    )
    
    
    2,503
    
    
    
    (4,744
    )Effect of translation adjustment on cash
    
    
    498
    
    
    
    63
    
    
    
    524
    
    
    
    229Increase in cash position
    
    
    1,273
    
    
    
    4,535
    
    
    
    3,434
    
    
    
    79Cash and cash equivalents position, beg. of period
    
    
    9,536
    
    
    
    7,961
    
    
    
    7,375
    
    
    
    12,417Cash and cash equivalents position, end of period
    
    $
    10,809
    
    
    $
    12,496
    
    
    $
    10,809
    
    
    $
    12,496Change in non-cash working capital components:Accounts receivable
    
    $
    (5,886
    )
    
    $
    (2,343
    )
    
    $
    (9,717
    )
    
    $
    (9,179
    )Inventory, deposits and prepaid expenses
    
    
    534
    
    
    
    (1,077
    )
    
    
    (921
    )
    
    
    (393
    )Income and other taxes payable
    
    
    (1,565
    )
    
    
    (1,019
    )
    
    
    (1,649
    )
    
    
    (1,078
    )Accounts payable and accrued liabilities
    
    
    2,956
    
    
    
    3,959
    
    
    
    5,629
    
    
    
    3,429$
    (3,961
    )
    
    $
    (480
    )
    
    $
    (6,658
    )
    
    $
    (7,221
    )
 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
    2.
    
    Deferred Share Units
  3.
    
    Foreign Currency Translation
     4.
    
    Marketable Securities
  5.
    
    Goodwill
   6




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##### 



6. Acquisition
    Current assets
    
    $
    3,557Capital assets
    
    
    12,375Goodwill and other intangible assets
    
    
    18,425$
    34,357Current liabilities
    
    $
    3,362Total purchase price
    
    $
    30,995
  Three months
    
    Three months
    
    Nine months
    
    Nine monthsEnded
    
    Ended
    
    Ended
    
    EndedSept 30, 2005
    
    Sept 30, 2004
    
    Sept 30, 2005
    
    Sept 30, 2004Pro forma revenue
    
    $
    116,226
    
    
    $
    104,002
    
    
    $
    327,404
    
    
    $
    297,849Pro forma net income
    
    
    5,376
    
    
    
    5,322
    
    
    
    14,068
    
    
    
    12,516Pro forma diluted earnings per share
    
    $
    0.42
    
    
    $
    0.41
    
    
    $
    1.09
    
    
    $
    0.97
 7.
    
    Common Shares
 (a) Issued
 Sept 30, 2005
    
    
    Sept 30, 2004Common Shares
    
    Number
    
    
    Amount
    
    
    Number
    
    
    AmountBalance, beginning of year
    
    
    12,419,678
    
    
    $
    60,798
    
    
    
    12,094,278
    
    
    $
    59,358Shares repurchased for cancellation
    
    
    (59,800
    )
    
    
    (297
    )
    
    
    
    
    
    
    Shares issued upon exercise of
employees stock options
    
    
    21,500
    
    
    
    60
    
    
    
    318,300
    
    
    
    1,402Shares issued upon acquisition of
subsidiary
    
    
    202,458
    
    
    
    2,800
    
    
    
    
    
    
    
    Balance, end of period
    
    
    12,583,836
    
    
    $
    63,361
    
    
    
    12,412,578
    
    
    $
    60,760
 7




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##### 



(b) Weighted average number of shares
  Three months
    
    
    Three months
    
    
    Nine months
    
    
    Nine monthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSept 30, 2005
    
    
    Sept 30, 2004
    
    
    Sept 30, 2005
    
    
    Sept 30, 2004Weighted average number of shares:Basic
    
    
    12,584,358
    
    
    
    12,339,956
    
    
    
    12,481,840
    
    
    
    12,241,013Potential exercise of stock options
    
    
    337,337
    
    
    
    434,788
    
    
    
    338,032
    
    
    
    489,052Diluted *
    
    
    12,921,695
    
    
    
    12,774,744
    
    
    
    12,819,872
    
    
    
    12,730,065
 
 *
     Diluted weighted average number of shares excludes out of the money options. 8.
    
    Stock Option Plan
   Three months
    
    
    Three months
    
    
    Nine months
    
    
    Nine monthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSept 30, 2005
    
    
    Sept 30, 2004
    
    
    Sept 30, 2005
    
    
    Sept 30, 2004Net income, as reported
    
    $
    5,376
    
    
    $
    4,542
    
    
    $
    12,926
    
    
    $
    10,578Pro forma net income
    
    $
    5,365
    
    
    $
    4,532
    
    
    $
    12,893
    
    
    $
    10,548Pro forma basic income per share
    
    $
    0.43
    
    
    $
    0.37
    
    
    $
    1.03
    
    
    $
    0.86Pro forma diluted income per share
    
    $
    0.42
    
    
    $
    0.35
    
    
    $
    1.01
    
    
    $
    0.83
  2005Options granted
    
    78,000Risk-free interest rate
    
    3.88% to 4.24%Dividend Yield
    
    0.0%Volatility factor of the future expected market price of the
Companys common shares
    
    33.84% to 34.39%Expected life of the options
    
    8 years
  9.
    
    Commitments and Contingent Liabilities
  8




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##### 



10.
    
    Segmented Information
 Three months ended
    
    Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Office
    
    
    ConsolidatedSeptember 30, 2005
    
    truckload
    
    
    Logistics
    
    
    Truckload
    
    
    Total
    
    
    and Other
    
    
    TotalsRevenue
    
    $
    96,658
    
    
    $
    10,652
    
    
    $
    8,916
    
    
    $
    116,226
    
    
    $
    
    
    
    $
    116,226Operating, selling, general and
administrative expenses
    
    
    87,215
    
    
    
    10,007
    
    
    
    8,343
    
    
    
    105,565
    
    
    
    895
    
    
    
    106,460Other expenses (income)
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    (6
    )
    
    
    
    
    
    
    (6
    )Depreciation
    
    
    1,712
    
    
    
    94
    
    
    
    135
    
    
    
    1,941
    
    
    
    13
    
    
    
    1,954Income (loss) from operations
    
    $
    7,734
    
    
    $
    551
    
    
    $
    441
    
    
    $
    8,726
    
    
    $
    (908
    )
    
    
    7,818Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,271Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,376
 Three months ended
    
    Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Office
    
    
    ConsolidatedSeptember 30, 2004
    
    truckload
    
    
    Logistics
    
    
    Truckload
    
    
    Total
    
    
    and Other
    
    
    TotalsRevenue
    
    $
    78,727
    
    
    $
    8,936
    
    
    $
    9,332
    
    
    $
    96,995
    
    
    $
    
    
    
    $
    96,995Operating, selling, general and
administrative expenses
    
    
    71,748
    
    
    
    8,491
    
    
    
    8,675
    
    
    
    88,914
    
    
    
    622
    
    
    
    89,536Other expenses (income)
    
    
    (23
    )
    
    
    (3
    )
    
    
    (3
    )
    
    
    (29
    )
    
    
    
    
    
    
    (29
    )Depreciation
    
    
    1,107
    
    
    
    78
    
    
    
    95
    
    
    
    1,280
    
    
    
    15
    
    
    
    1,295Income (loss) from operations
    
    $
    5,895
    
    
    $
    370
    
    
    $
    565
    
    
    $
    6,830
    
    
    $
    (637
    )
    
    
    6,193Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,644Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,542
 Nine months ended
    
    Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Office
    
    
    ConsolidatedSeptember 30, 2005
    
    truckload
    
    
    Logistics
    
    
    Truckload
    
    
    Total
    
    
    and Other
    
    
    TotalsRevenue
    
    $
    259,191
    
    
    $
    29,144
    
    
    $
    26,882
    
    
    $
    315,217
    
    
    $
    
    
    
    $
    315,217Operating, selling, general and
administrative expenses
    
    
    237,513
    
    
    
    27,336
    
    
    
    24,588
    
    
    
    289,437
    
    
    
    2,521
    
    
    
    291,958Other expenses (income)
    
    
    (14
    )
    
    
    
    
    
    
    (19
    )
    
    
    (33
    )
    
    
    
    
    
    
    (33
    )Depreciation
    
    
    4,072
    
    
    
    277
    
    
    
    412
    
    
    
    4,761
    
    
    
    41
    
    
    
    4,802Income (loss) from operations
    
    $
    17,620
    
    
    $
    1,531
    
    
    $
    1,901
    
    
    $
    21,052
    
    
    $
    (2,562
    )
    
    
    18,490Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,355Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,926
 Nine months ended
    
    Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Office
    
    
    ConsolidatedSeptember 30, 2004
    
    truckload
    
    
    Logistics
    
    
    Truckload
    
    
    Total
    
    
    and Other
    
    
    TotalsRevenue
    
    $
    224,943
    
    
    $
    25,872
    
    
    $
    27,257
    
    
    $
    278,072
    
    
    $
    
    
    
    $
    278,072Operating, selling, general and
administrative expenses
    
    
    208,342
    
    
    
    24,490
    
    
    
    25,490
    
    
    
    258,322
    
    
    
    1,817
    
    
    
    260,139Other expenses (income)
    
    
    (148
    )
    
    
    8
    
    
    
    (2
    )
    
    
    (142
    )
    
    
    
    
    
    
    (142
    )Depreciation
    
    
    3,290
    
    
    
    232
    
    
    
    269
    
    
    
    3,791
    
    
    
    44
    
    
    
    3,835Income (loss) from operations
    
    $
    13,459
    
    
    $
    1,142
    
    
    $
    1,500
    
    
    $
    16,101
    
    
    $
    (1,861
    )
    
    
    14,240Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,575Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    10,578
 9




---



##### 



11.
    
    Canadian and United States accounting policy differences:
 (a) Consolidated reconciliation of shareholders equity
  Net income
    
    Net incomethree months ended
    
    nine months ended
    

Shareholders equitySept 30, 2005
    
    Sept 30, 2004
    
    Sept 30, 2005
    
    Sept 30, 2004
    
    Sept 30, 2005
    
    Sept 30, 2004Balance, based on
Canadian GAAP
    
    $
    5,376
    
    
    $
    4,542
    
    
    $
    12,926
    
    
    $
    10,578
    
    
    $
    134,561
    
    
    $
    111,831Foreign exchange
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (858
    )
    
    
    (858
    )Balance before
other comprehensive
income and accumulated
other comprehensive
income,
based on United States GAAP
    
    $
    5,376
    
    
    $
    4,542
    
    
    $
    12,926
    
    
    $
    10,578
    
    
    $
    133,703
    
    
    $
    110,973Other comprehensive
income:Change in cumulative
translation adjustment
    
    
    1,669
    
    
    
    3,061
    
    
    
    13
    
    
    
    1,719
    
    
    
    
    
    
    
    Unrealized foreign
exchange loss on derivative instrument
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101
    )
    
    
    (101
    )Foreign exchange
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    594
    
    
    
    594Balance, Based on United
States GAAP
    
    $
    7,045
    
    
    $
    7,603
    
    
    $
    12,939
    
    
    $
    12,297
    
    
    $
    134,196
    
    
    $
    111,466
 Earnings per share
 Three months
    
    
    Three months
    
    
    Nine months
    
    
    Nine monthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSept 30, 2005
    
    
    Sept 30, 2004
    
    
    Sept 30, 2005
    
    
    Sept 30, 2004Earnings per share under
United States GAAPBasic
    
    $
    0.43
    
    
    $
    0.37
    
    
    $
    1.04
    
    
    $
    0.86Diluted
    
    $
    0.42
    
    
    $
    0.36
    
    
    $
    1.01
    
    
    $
    0.83
 Three months
    
    
    Three months
    
    
    Nine months
    
    
    Nine monthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSept 30, 2005
    
    
    Sept 30, 2004
    
    
    Sept 30, 2005
    
    
    Sept 30, 2004Weighted average number of shares:Basic
    
    
    12,584,358
    
    
    
    12,339,956
    
    
    
    12,481,840
    
    
    
    12,241,013Potential exercise of stock options
    
    
    337,337
    
    
    
    434,788
    
    
    
    338,032
    
    
    
    489,052Diluted
    
    
    12,921,695
    
    
    
    12,774,744
    
    
    
    12,819,872
    
    
    
    12,730,065
 10




---



##### 



(b) Consolidated statements of cash flows:
  (c) Income from operations before depreciation
  Three months
    
    Three months
    
    Nine months
    
    Nine monthsEnded
    
    Ended
    
    Ended
    
    EndedSept 30, 2005
    
    Sept 30, 2004
    
    Sept 30, 2005
    
    Sept 30, 2004Income from operations before
depreciation, as reported
    
    $
    9,772
    
    
    $
    7,488
    
    
    $
    23,292
    
    
    $
    18,075Depreciation expense
    
    
    1,954
    
    
    
    1,295
    
    
    
    4,802
    
    
    
    3,835Income from operations based
on United
States GAAP
    
    $
    7,818
    
    
    $
    6,193
    
    
    $
    18,490
    
    
    $
    14,240
 (d) Stock-based compensation:
     Three months
    
    
    Three months
    
    
    Nine months
    
    
    Nine monthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSept 30, 2005
    
    
    Sept 30, 2004
    
    
    Sept 30, 2005
    
    
    Sept 30, 2004Net income, as reported based on
United States GAAP
    
    $
    5,376
    
    
    $
    4,542
    
    
    $
    12,926
    
    
    $
    10,578Add: Stock-based compensation expense
included in reported net income
    
    
    181
    
    
    
    119
    
    
    
    474
    
    
    
    177Deduct: Total stock-based compensation
expense determined using fair value
method for all grants
    
    
    (201
    )
    
    
    (132
    )
    
    
    (532
    )
    
    
    (258
    )Pro forma net income
    
    $
    5,356
    
    
    $
    4,529
    
    
    $
    12,868
    
    
    $
    10,497Earnings per share:Basic  as reported
    
    $
    0.43
    
    
    $
    0.37
    
    
    $
    1.04
    
    
    $
    0.86Basic  pro forma
    
    $
    0.43
    
    
    $
    0.37
    
    
    $
    1.03
    
    
    $
    0.86Diluted  as reported
    
    $
    0.42
    
    
    $
    0.36
    
    
    $
    1.01
    
    
    $
    0.83Diluted  pro forma
    
    $
    0.41
    
    
    $
    0.35
    
    
    $
    1.00
    
    
    $
    0.82
 12.
    
    Comparative figures
  11




---



##### 



Item 2. Managements Discussion and Analysis of Results of Operation
    
    
    our objective to expand or acquire an LTL operation
    
    our objective to continue making operations related progress with the railway
    
    our intention to improve results from operating efficiencies
    
    our intention to purchase a specified level of capital assets
    
    our intention to realize contributions from LTL cross-selling initiatives
  12




---



##### 



overview
   CONSOLIDATED RESULTS
  For the three months ended Sept 30
    
    For the nine months ended Sept 30(in thousands)
    
    2005
    
    2004
    
    2005 vs 2004
    
    2005
    
    2004
    
    2005 vs 2004Revenue
    
    $
    116,226
    
    
    $
    96,995
    
    
    
    19.8
    %
    
    $
    315,217
    
    
    $
    278,072
    
    
    
    13.4
    %Operating expenses
    
    
    96,061
    
    
    
    82,269
    
    
    
    16.8
    %
    
    
    262,947
    
    
    
    236,508
    
    
    
    11.2
    %SG&A expenses
    
    
    10,399
    
    
    
    7,267
    
    
    
    43.1
    %
    
    
    29,011
    
    
    
    23,631
    
    
    
    22.8
    %Other expenses (income)
    
    
    (6
    )
    
    
    (29
    )
    
    
    
    
    
    
    (33
    )
    
    
    (142
    )Depreciation
    
    
    1,954
    
    
    
    1,295
    
    
    
    50.9
    %
    
    
    4,802
    
    
    
    3,835
    
    
    
    25.2
    %Income from operations
    
    
    7,818
    
    
    
    6,193
    
    
    
    26.2
    %
    
    
    18,490
    
    
    
    14,240
    
    
    
    29.8
    %Interest expense, net
    
    
    171
    
    
    
    7
    
    
    
    
    
    
    
    209
    
    
    
    87Net income
    
    
    5,376
    
    
    
    4,542
    
    
    
    18.4
    %
    
    
    12,926
    
    
    
    10,578
    
    
    
    22.2
    %Earnings per share:Basic
    
    $
    0.43
    
    
    $
    0.37
    
    
    
    
    
    
    $
    1.04
    
    
    $
    0.86Diluted
    
    $
    0.42
    
    
    $
    0.36
    
    
    
    
    
    
    $
    1.01
    
    
    $
    0.83Operating Ratio(1)
    
    
    93.3
    %
    
    
    93.6
    %
    
    
    
    
    
    
    94.1
    %
    
    
    94.9
    %
    13




---



##### 



.
  SEGMENTED RESULTS
 Less-Than-Truckload (LTL)
  For the three months ended Sept 30
    
    For the nine months ended Sept 30(in thousands)
    
    2005
    
    2004
    
    2005 vs 2004
    
    2005
    
    2004
    
    2005 vs 2004Revenue
    
    $
    96,658
    
    
    $
    78,727
    
    
    
    22.8
    %
    
    $
    259,191
    
    
    $
    224,943
    
    
    
    15.2
    %Income from operations
    
    
    7,734
    
    
    
    5,895
    
    
    
    31.2
    %
    
    
    17,620
    
    
    
    13,459
    
    
    
    30.9
    %Operating ratio
    
    
    92.0
    %
    
    
    92.5
    %
    
    
    
    
    
    
    93.2
    %
    
    
    94.0
    %Number of shipments (2)
    
    
    680,567
    
    
    
    628,081
    
    
    
    8.4
    %
    
    
    1,895,954
    
    
    
    1,831,223
    
    
    
    3.5
    %Weight (000s of lbs) (3)
    
    
    1,074,684
    
    
    
    999,926
    
    
    
    7.5
    %
    
    
    2,994,886
    
    
    
    2,958,655
    
    
    
    1.2
    %Revenue per shipment (4)
    
    $
    142.03
    
    
    $
    125.35
    
    
    
    13.3
    %
    
    $
    136.71
    
    
    $
    122,84
    
    
    
    11.3
    %Revenue per hundredweight (5)
    
    $
    8.99
    
    
    $
    7.87
    
    
    
    14.2
    %
    
    $
    8.65
    
    
    $
    7.60
    
    
    
    13.8
    %
   Logistics
  For the three months ended Sept 30
    
    For the nine months ended Sept 30(in thousands)
    
    2005
    
    2004
    
    2005 vs 2004
    
    2005
    
    2004
    
    2005 vs 2004Revenue
    
    $
    10,652
    
    
    $
    8,936
    
    
    
    19.2
    %
    
    $
    29,144
    
    
    $
    25,872
    
    
    
    12.6
    %Income from operations
    
    
    551
    
    
    
    370
    
    
    
    48.9
    %
    
    
    1,531
    
    
    
    1,142
    
    
    
    34.1
    %Operating Ratio
    
    
    94.8
    %
    
    
    95.9
    %
    
    
    
    
    
    
    94.7
    %
    
    
    95.6
    %
 14




---



##### 



Truckload (TL)
  For the three months ended Sept 30
    
    For the nine months ended Sept 30(in thousands)
    
    2005
    
    2004
    
    2005 vs 2004
    
    
    2005
    
    
    2004
    
    2005 vs 2004Revenue
    
    $
    8,916
    
    
    $
    9,332
    
    
    
    (4.5
    %)
    
    $
    26,882
    
    
    $
    27,257
    
    
    
    (1.4
    %)Income from operations
    
    
    441
    
    
    
    565
    
    
    
    (21.9
    %)
    
    
    1,901
    
    
    
    1,500
    
    
    
    26.7
    %Operating Ratio
    
    
    95.1
    %
    
    
    93.9
    %
    
    
    
    
    
    
    92.9
    %
    
    
    94.5
    %
 (6)
 LIQUIDITY AND CAPITAL RESOURCES
    For the three months ended Sept. 30
    
    
    For the nine months ended Sept. 30(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Real Estate and buildings
    
    $
    7,588
    
    
    $
    
    
    
    $
    7,588
    
    
    $
    32Tractors
    
    
    1,819
    
    
    
    300
    
    
    
    2,397
    
    
    
    1,080Trailing fleet
    
    
    1,189
    
    
    
    211
    
    
    
    6,618
    
    
    
    1,925Information technology
    
    
    158
    
    
    
    107
    
    
    
    810
    
    
    
    428Leasehold improvements
    
    
    7
    
    
    
    75
    
    
    
    106
    
    
    
    90Other equipment
    
    
    45
    
    
    
    222
    
    
    
    132
    
    
    
    438Total
    
    $
    10,806
    
    
    $
    915
    
    
    $
    17,651
    
    
    $
    3,993
 15




---



##### 



off-balance sheet
 (in thousands of dollars)
    
    
    Payments due by periodContractual Obligations
    
    Total
    
    
    2005
    
    
    2006 & 2007
    
    
    2008 & 2009
    
    
    ThereafterLong-term debt
    
    $
    12,747
    
    
    $
    1,312
    
    
    $
    11,435
    
    
    $
    Nil
    
    
    
    NilRevolving credit facility
    
    
    5,074
    
    
    
    Nil
    
    
    
    5,074
    
    
    
    Nil
    
    
    
    NilCapital lease obligations
    
    
    84
    
    
    
    8
    
    
    
    76
    
    
    
    Nil
    
    
    
    NilSub-total
    
    
    17,905
    
    
    
    1,320
    
    
    
    16,585
    
    
    
    Nil
    
    
    
    NilOperating leases
    
    
    41,035
    
    
    
    3,754
    
    
    
    21,995
    
    
    
    10,623
    
    
    
    4,663Total Contractual Obligations
    
    $
    58,940
    
    
    $
    5,074
    
    
    $
    38,580
    
    
    $
    10,623
    
    
    $
    4,663
   OUTLOOK
    QUARTERLY RESULTS
 Canadian GAAP
 (thousands of dollars
    
    2005
    
    
    2005
    
    
    2005
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2003except per share amounts)
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4Revenue
    
    $
    116,226
    
    
    $
    105,050
    
    
    $
    93,941
    
    
    $
    96,523
    
    
    $
    96,995
    
    
    $
    93,931
    
    
    $
    87,146
    
    
    $
    85,333Income from operations
    
    
    7,647
    
    
    
    7,013
    
    
    
    3,659
    
    
    
    4,737
    
    
    
    6,193
    
    
    
    5,870
    
    
    
    2,177
    
    
    
    4,296Net Income
    
    
    5,376
    
    
    
    4,796
    
    
    
    2,754
    
    
    
    4,365
    
    
    
    4,542
    
    
    
    4,387
    
    
    
    1,649
    
    
    
    3,150Earnings per share:Basic
    
    $
    0.43
    
    
    $
    0.39
    
    
    $
    0.22
    
    
    $
    0.35
    
    
    $
    0.37
    
    
    $
    0.36
    
    
    $
    0.14
    
    
    $
    0.31Diluted
    
    
    0.42
    
    
    
    0.38
    
    
    
    0.22
    
    
    
    0.34
    
    
    
    0.36
    
    
    
    0.34
    
    
    
    0.13
    
    
    
    0.29Weighted average number
of shares:Basic
    
    
    12,584,358
    
    
    
    12,447,300
    
    
    
    12,411,968
    
    
    
    12,417,594
    
    
    
    12,339,956
    
    
    
    12,266,703
    
    
    
    12,115,292
    
    
    
    10,110,571Diluted
    
    
    12,921,695
    
    
    
    12,778,285
    
    
    
    12,754,930
    
    
    
    12,771,235
    
    
    
    12,774,744
    
    
    
    12,771,784
    
    
    
    12,697,994
    
    
    
    10,768,940
 16




---



##### 



United States GAAP (7)
 (thousands of dollars
    
    2005
    
    
    2005
    
    
    2005
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2003except per share amounts)
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4Revenue
    
    $
    116,226
    
    
    $
    105,050
    
    
    $
    93,941
    
    
    $
    96,523
    
    
    $
    96,995
    
    
    $
    93,931
    
    
    $
    87,146
    
    
    $
    85,333Income from operations
    
    
    7,647
    
    
    
    7,013
    
    
    
    3,659
    
    
    
    4,737
    
    
    
    6,193
    
    
    
    5,870
    
    
    
    2,177
    
    
    
    4,032Net Income
    
    
    5,376
    
    
    
    4,796
    
    
    
    2,754
    
    
    
    4,365
    
    
    
    4,542
    
    
    
    4,387
    
    
    
    1,649
    
    
    
    3,150Earnings per share:Basic
    
    $
    0.43
    
    
    $
    0.39
    
    
    $
    0.22
    
    
    $
    0.35
    
    
    $
    0.37
    
    
    $
    0.36
    
    
    $
    0.14
    
    
    $
    0.31Diluted
    
    
    0.42
    
    
    
    0.38
    
    
    
    0.22
    
    
    
    0.34
    
    
    
    0.36
    
    
    
    0.34
    
    
    
    0.13
    
    
    
    0.29Weighted average number
of shares:Basic
    
    
    12,584,358
    
    
    
    12,447,300
    
    
    
    12,411,968
    
    
    
    12,417,594
    
    
    
    12,339,956
    
    
    
    12,266,703
    
    
    
    12,115,292
    
    
    
    10,110,571Diluted
    
    
    12,921,695
    
    
    
    12,778,285
    
    
    
    12,754,930
    
    
    
    12,771,235
    
    
    
    12,774,744
    
    
    
    12,771,784
    
    
    
    12,697,994
    
    
    
    10,768,940
 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:
 For the three months ended September 30
    
    
    For the nine months ended September 30(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Operating expenses
    
    $
    96,061
    
    
    $
    82,269
    
    
    $
    262,947
    
    
    $
    236,508Selling, general and administrative expenses
    
    
    10,399
    
    
    
    7,267
    
    
    
    29,011
    
    
    
    23,631Other expenses (income)
    
    
    (6
    )
    
    
    (29
    )
    
    
    (33
    )
    
    
    (142
    )Depreciation expense
    
    
    1,954
    
    
    
    1,295
    
    
    
    4,802
    
    
    
    3,835$
    108,408
    
    
    $
    90,802
    
    
    $
    296,727
    
    
    $
    263,832Revenue
    
    $
    116,226
    
    
    $
    96,995
    
    
    $
    315,217
    
    
    $
    278,072Operating ratio (OR)
    
    
    93.3
    %
    
    
    93.6
    %
    
    
    94.1
    %
    
    
    94.9
    %
 (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 11 to the Interim Consolidated Financial Statements for differences between
Canadian and United States GAAP.
 Sean P. WashchukVice President Finance &Chief Financial Officer
    
    October 19, 2005
 17




---



##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  (in thousands of dollars)
    
    
    
    
    
    Payments due by periodLong-term debt
    
    Total
    
    
    2005
    
    
    2006 & 2007
    
    
    2008 & 2009
    
    
    ThereafterVariable RateTerm bank credit
    
    $
    12,747
    
    
    $
    1,312
    
    
    $
    11,435
    
    
    $Nil
    
    $NilAverage interest rate (LIBOR)
    
    
    5.29
    %
    
    
    5.29
    %
    
    
    5.29
    %Revolving bank credit
    
    
    5,074
    
    
    Nil
    
    
    5,074
    
    
    Nil
    
    NilAverage interest rate (CDN BA)
    
    
    4.2
    %
    
    
    4.2
    %
    
    
    4.2
    %Fixed RateCapital lease obligation
    
    
    84
    
    
    
    8
    
    
    
    76
    
    
    Nil
    
    NilAverage interest rate
    
    
    6.79
    %
    
    
    6.79
    %
    
    
    6.79
    %Total
    
    $
    17,905
    
    
    $
    1,320
    
    
    $
    16,585
    
    
    $Nil
    
    $Nil
  Item 4. Controls and Procedures
 a)
    
    As of October 19, 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 September 30, 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.
 18




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##### 



Part II. Other Information
 Item 1. Legal Proceedings
  Item 2. Changes in Securities and Use of Proceeds
  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
    
    
    
    576,084Apr. 1 to Apr. 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    576,084May 1to May 31, 2005
    
    
    900
    
    
    $
    17.71
    
    
    
    900
    
    
    
    575,184Jun. 1 to Jun. 30, 2005
    
    
    10,000
    
    
    $
    18.50
    
    
    
    10,000
    
    
    
    565,184Jul. 1 to Jul. 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    565,184Aug. 1 to Aug. 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    565,184Sept. 1 to Sept. 30, 2005
    
    
    4,000
    
    
    $
    18.75
    
    
    
    4,000
    
    
    
    561,184Total
    
    
    59,800
    
    
    $
    18.70
    
    
    
    59,800
 Item 3. Defaults Upon Senior Securities
 Item 4. Submission of Matters to a Vote of Security Holders 
 Item 5. Other Information
 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 October 19, 2005.32
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, dated October 19, 2005.
 (b)
    
    Reports on Form 8-K
 i)
    
    Vitran Corporation Inc. filed a Current report on Form 8-K dated August 03, 2005
related to the departure of a member of Vitrans Board of Directors.ii)
    
    Vitran Corporation Inc. filed a Current Report on Form 8-K dated August 05, 2005
related to the acquisition of a subsidiary.iii)
    
    Vitran Corporation Inc. filed a Current Report on Form 8-K dated August 12, 2005
related to Vitran not being in compliance with the audit committee NASDAQ stock exchange
listing requirement due to the departure of the audit committee chair reported on August
3, 2005iv)
    
    Vitran Corporation Inc. filed a Current Report on Form 8-K dated September 15,
2005 related to its deferred shared unit plan for members of Vitrans Board of
Directors.v)
    
    Vitran Corporation Inc. filed a Current Report on Form 8-K dated October 21, 2005
related to its 2005 third quarter earnings.
 19




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##### 



SIGNATURE
  VITRAN CORPORATION INC./s/ SEAN P. WASHCHUKSean P. WashchukDate: October 19, 2005
    
    Vice President of Finance andChief Financial Officer(Principle Financial Officer)/s/ FAYAZ D. SULEMANFayaz D. SulemanDate: October 19, 2005
    
    Corporate Controller(Principle Accounting Officer)