UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q




x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR


15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934





FOR
THE QUARTER ENDED SEPTEMBER 30, 2008





OR




oTRANSITION REPORT PURSUANT TO
SECTION 13 OR


15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934





FOR
THE TRANSITION PERIOD
FROM                 to








Commission
file number:





VITRAN
CORPORATION INC.








Ontario,
      Canada
            
            (I.R.S.
      Employer(State
      of incorporation)
            
            Identification
      No.)





185
The West Mall, Suite 701, Toronto, Ontario, Canada, M9C 5L5


(Address
of principal executive offices) (Zip Code)





416-596-7664


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes xNo o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





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





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes o No x





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





The
number of shares of common shares outstanding at October 21, 2008 was
13,498,159.



















TABLE
OF CONTENT




Item
            
            
            PagePART
      I
            
            Financial
      Information1.
            
            Financial
      Statements
            32.
            
            Management’s
      Discussion and Analysis
            123.
            
            Quantitative
      and Qualitative Disclosures About Market Risk
            194.
            
            Controls
      and Procedures
            20PART
      II
            
            Other
      Information1.
            
            Legal
      Proceedings
            201.
      A
            
            Risk
      Factors
            202.
            
            Unregistered
      Sale of Equity and Use of Proceeds
            203.
            
            Defaults
      Upon Senior Securities
            204.
            
            Submission
      of Matters to a Vote of Security Holders
            205.
            
            Other
      Information
            206.
            
            Exhibits
      and Reports on Form 8-K
            20







2





Part
I. Financial Information





Item
1: Financial Statements





VITRAN
CORPORATION INC.





CONSOLIDATED
STATEMENTS OF INCOME


(Unaudited)





(In
thousands of United States dollars except for per share amounts)





Three
      months
              Ended
              Sept
      30, 2008
            
            
            Three
      months
              Ended
              Sept
      30, 2007
            
            
            Nine
      months
              Ended
              Sept
      30, 2008
            
            
            Nine
      months
              Ended
              Sept
      30, 2007Revenue
            
            $
            198,605
            
            
            $
            171,927
            
            
            $
            572,102
            
            
            $
            496,207Operating
      expenses
            
            
            173,414
            
            
            
            145,457
            
            
            
            491,615
            
            
            
            414,693Selling,
      general and administrative expenses
            
            
            16,162
            
            
            
            15,633
            
            
            
            50,852
            
            
            
            46,015Other
      income
            
            
            (155
            )
            
            
            (53
            )
            
            
            (288
            )
            
            
            (125
            )Depreciation
      and amortization expense
            
            
            5,203
            
            
            
            5,321
            
            
            
            15,968
            
            
            
            15,375Total
      operating expenses
            
            
            194,624
            
            
            
            166,358
            
            
            
            558,147
            
            
            
            475,958Income
      from operations before undernoted
            
            
            3,981
            
            
            
            5,569
            
            
            
            13,955
            
            
            
            20,249Interest
      expense, net
            
            
            2,158
            
            
            
            2,325
            
            
            
            6,410
            
            
            
            6,504Income
      from operations before income taxes
            
            
            1,823
            
            
            
            3,244
            
            
            
            7,545
            
            
            
            13,745Income
      taxes (recovery)
            
            
            (243
            )
            
            
            123
            
            
            
            (232
            )
            
            
            1,704Net
      income
            
            $
            2,066
            
            
            $
            3,121
            
            
            $
            7,777
            
            
            $
            12,041Income
      per share:Basic
            
            $
            0.15
            
            
            $
            0.23
            
            
            $
            0.58
            
            
            $
            0.89Diluted
            
            $
            0.15
            
            
            $
            0.23
            
            
            $
            0.57
            
            
            $
            0.88Weighted
      average number of shares:Basic
            
            
            13,493,757
            
            
            
            13,475,685
            
            
            
            13,480,805
            
            
            
            13,459,180Diluted
            
            
            13,647,774
            
            
            
            13,668,819
            
            
            
            13,632,628
            
            
            
            13,660,723




See
accompanying notes to consolidated financial statements





3





VITRAN
CORPORATION INC.





CONSOLIDATED
BALANCE SHEETS





(In
thousands of United States dollars)





Sept.
      30, 2008
                
                
                Dec.
      31, 2007(Unaudited)
                
                
                (Audited)AssetsCurrent
      assets:Accounts
      receivable
                
                $
                93,250
                
                
                $
                74,261Inventory,
      deposits and prepaid expenses
                
                
                11,155
                
                
                
                11,325Income
      and other taxes recoverable
                
                
                1,837
                
                
                
                2,232Deferred
      income taxes
                
                
                3,097
                
                
                
                2,599109,339
                
                
                
                90,417Property
      and equipment
                
                
                162,068
                
                
                
                169,062Intangible
      assets
                
                
                13,910
                
                
                
                13,645Goodwill
                
                
                121,537
                
                
                
                124,375$
                406,854
                
                
                $
                397,499Liabilities
      and Shareholders’ EquityCurrent
      liabilities:Bank
      overdraft
                
                $
                690
                
                
                $
                390Accounts
      payable and accrued liabilities
                
                
                76,117
                
                
                
                67,468Current
      portion of long-term debt
                
                
                15,393
                
                
                
                18,14492,200
                
                
                
                86,002Long-term
      debt
                
                
                107,578
                
                
                
                109,831Other
                
                
                3,438
                
                
                
                3,512Deferred
      income taxes
                
                
                7,431
                
                
                
                7,810Shareholders’
      equity:Common
      shares, no par value, unlimited authorized, 13,498,159 and 13,448,159
      issued and outstanding at September 30, 2008 and December 31, 2007
      respectively
                
                
                77,500
                
                
                
                77,246Additional
      paid-in capital
                
                
                3,284
                
                
                
                2,436Retained
      earnings
                
                
                112,255
                
                
                
                104,478Accumulated
      other comprehensive income
                
                
                3,168
                
                
                
                6,184196,207
                
                
                
                190,344$
                406,854
                
                
                $
                397,499




Contingent
liabilities (note 10)





See
accompanying notes to consolidated financial statements.





4





VITRAN
CORPORATION INC.





CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY


(Unaudited)





(In
thousands of United States dollars, except share amounts)





AccumulatedAdditional
            
            
            
            
            
            other
            
            
            TotalCommon
      shares
            
            
            Paid-in
            
            
            Retained
            
            
            comprehensive
            
            
            Shareholders’Shares
            
            
            Amount
            
            
            Capital
            
            
            Earnings
            
            
            income
            
            
            EquityDecember
      31, 2007
            
            
            13,448,159
            
            
            $
            77,246
            
            
            $
            2,436
            
            
            $
            104,478
            
            
            $
            6,184
            
            
            $
            190,344Shares
      issued upon exercise of employee stock options
            
            
            50,000
            
            
            
            254
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            254Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            7,777
            
            
            
            -
            
            
            
            7,777Other
      comprehensive income (loss)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3,016
            )
            
            
            (3,016
            )Share-based
      compensation
            
            
            -
            
            
            
            -
            
            
            
            848
            
            
            
            -
            
            
            
            -
            
            
            
            848September
      30, 2008
            
            
            13,498,159
            
            
            $
            77,500
            
            
            $
            3,284
            
            
            $
            112,255
            
            
            $
            3,168
            
            
            $
            196,207





AccumulatedAdditional
            
            
            
            
            
            other
            
            
            TotalCommon
      shares
            
            
            Paid-in
            
            
            Retained
            
            
            comprehensive
            
            
            Shareholders’Shares
            
            
            Amount
            
            
            Capital
            
            
            Earnings
            
            
            income
            
            
            EquityDecember
      31, 2006
            
            
            13,419,859
            
            
            $
            76,913
            
            
            $
            1,607
            
            
            $
            90,933
            
            
            $
            3,844
            
            
            $
            173,297Shares
      issued upon exercise of employee stock options
            
            
            58,500
            
            
            
            571
            
            
            
            (168
            )
            
            
            -
            
            
            
            -
            
            
            
            403Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            12,041
            
            
            
            -
            
            
            
            12,041Other
      comprehensive income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,985
            
            
            
            2,985Share-based
      compensation
            
            
            -
            
            
            
            -
            
            
            
            720
            
            
            
            -
            
            
            
            -
            
            
            
            720September
      30, 2007
            
            
            13,478,359
            
            
            $
            77,484
            
            
            $
            2,159
            
            
            $
            102,974
            
            
            $
            6,829
            
            
            $
            189,446





5





VITRAN
CORPORATION INC.





CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)


(In
thousands of United States dollars)





Three
      months
              Ended
              Sept
      30, 2008
            
            
            Three
      months
              Ended
              Sept
      30, 2007
            
            
            Nine
      months
              Ended
              Sept
      30, 2008
            
            
            Nine
      months
              Ended
              Sept
      30, 2007Cash
      provided by (used in):Operations:Net
      income
            
            $
            2,066
            
            
            $
            3,121
            
            
            $
            7,777
            
            
            $
            12,041Items
      not involving cash from operationsDepreciation
      and amortization expense
            
            
            5,203
            
            
            
            5,321
            
            
            
            15,968
            
            
            
            15,375Deferred
      income taxes
            
            
            (21
            )
            
            
            (2,608
            )
            
            
            83
            
            
            
            (13
            )Share-based
      compensation expense
            
            
            279
            
            
            
            261
            
            
            
            848
            
            
            
            720Gain
      on sale of property and equipment
            
            
            (155
            )
            
            
            (53
            )
            
            
            (288
            )
            
            
            (125
            )Change
      in non-cash working capital components
            
            
            679
            
            
            
            4,461
            
            
            
            (9,853
            )
            
            
            (1,302
            )8,051
            
            
            
            10,503
            
            
            
            14,535
            
            
            
            26,696Investments:Purchase
      of property and equipment
            
            
            (1,692
            )
            
            
            (5,458
            )
            
            
            (10,840
            )
            
            
            (16,878
            )Proceeds
      on sale of property and equipment
            
            
            935
            
            
            
            74
            
            
            
            1,387
            
            
            
            312Additional
      payment due to acquisition of subsidiary
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (6,921
            )(757
            )
            
            
            (5,384
            )
            
            
            (9,453
            )
            
            
            (23,487
            )Financing:Change
      in revolving credit facility and bank overdraft
            
            
            (2,987
            )
            
            
            3,468
            
            
            
            8,341
            
            
            
            13,590Repayment
      of long-term debt
            
            
            (2,580
            )
            
            
            (2,255
            )
            
            
            (7,726
            )
            
            
            (6,765
            )Repayment
      of capital leases
            
            
            (2,078
            )
            
            
            (1,858
            )
            
            
            (6,320
            )
            
            
            (5,172
            )Financing
      costs
            
            
            -
            
            
            
            (642
            )
            
            
            -
            
            
            
            (642
            )Issue
      of common sharesupon
      exercise of stock options
            
            
            76
            
            
            
            196
            
            
            
            254
            
            
            
            403(7,569
            )
            
            
            (1,091
            )
            
            
            (5,451
            )
            
            
            1,414Effect
      of translation adjustment on cash
            
            
            275
            
            
            
            (1,256
            )
            
            
            369
            
            
            
            (2,258
            )Increase
      in cash and cash equivalents
            
            
            -
            
            
            
            2,772
            
            
            
            -
            
            
            
            2,365Cash
      and cash equivalents, beginning of period
            
            
            -
            
            
            
            1,047
            
            
            
            -
            
            
            
            1,454Cash
      and cash equivalents, end of period
            
            $
            -
            
            
            $
            3,819
            
            
            $
            -
            
            
            $
            3,819Change
      in non-cash working capital components:Accounts
      receivable
            
            $
            587
            
            
            $
            (2,004
            )
            
            $
            (18,989
            )
            
            $
            (15,368
            )Inventory,
      deposits and prepaid expenses
            
            
            1,083
            
            
            
            233
            
            
            
            170
            
            
            
            1,316Income
      and other taxes recoverable
            
            
            (651
            )
            
            
            3,166
            
            
            
            317
            
            
            
            (732
            )Accounts
      payable and accrued liabilities
            
            
            (340
            )
            
            
            3,066
            
            
            
            8,649
            
            
            
            13,482$
            679
            
            
            $
            4,461
            
            
            $
            (9,853
            )
            
            $
            (1,302
            )





Supplemental
disclosure of non-cash transactions cash flow information:


Capital
      lease additions
            
            $
            1,016
            
            
            $
            4,561
            
            
            $
            1,016
            
            
            $
            8,301





See
accompanying notes to consolidated financial statements.





6








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
United States generally accepted accounting principles.  The Ontario
Business Corporations Act (“OBCA”) regulations allow issuers that are required
to file reports with the Securities and Exchange Commission in the United States
to file financial statements under United States GAAP to meet their continuous
disclosure obligations in Canada.  The interim consolidated
financial statements do not contain all the disclosures required by 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 2007 Annual
Report on Form 10-K.  The interim consolidated financial statements
follow the same accounting principles and methods of application as the most
recent annual consolidated financial statements, except as noted in Note
2.





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 and nine-months ended September 30, 2008 are not necessarily indicative
of the results of operations that may be expected for the year ending December
31, 2008.





2.
            New
      Accounting Pronouncements





SFAS
Statement 157, “Fair Value Measurements”, defines fair values, establishes a
framework for measuring fair value in GAAP, and requires enhanced disclosures
about fair value measurements.  This statement applies when other
accounting pronouncements require or permit fair value
measurements.  SFAS Statement 157 was adopted January 1, 2008 as
described in note 11.





SFAS
Statement 159, “The Fair Value Option for Financial Assets and Financial
Liabilities - Including an amendment of SFAS Statement 115” permits entities to
choose to measure many financial instruments and certain warranty and insurance
contracts at fair value on a contract-by-contract basis.   SFAS
Statement 159 was adopted January 1, 2008 as required by the
statement.  The requirements of SFAS Statement 159 did not have an
effect on the Company’s consolidated financial statements.





SFAS
Statement 161, “Disclosures about Derivative Instruments and Hedging Activities
- an amendment of FASB Statement No. 133”, required enhanced disclosures about
the Company’s derivative and hedging activities.  The Company will be
required to provide enhanced disclosure about a) how and why an entity uses
derivative instruments, b) how derivative instruments and related hedged items
are accounted for under Statement 133 and c) how derivative instruments and
related hedged items affect and entity’s financial position and cash
flows.  SFAS Statement 161 will be adopted January 1, 2009 as required
by the statement.





3.     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.








7





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 $77.4 million is designated as a hedge of the investment in the United States
dollar functional operations, such that related transaction gains and losses are
recorded in the separate component of shareholders’ equity.





4.     Acquisition





On
November 30, 2007, the Company acquired 100 percent of the outstanding shares of
Las Vegas/L.A. Express, Inc. ("LVLA").  The aggregate purchase
consideration was approximately $8.45 million (including transaction
costs).  Approximately $4.35 million of additional cash consideration
is contingent on LVLA meeting certain future financial metrics.  All
additional contingent consideration paid to the vendors will be allocated to
goodwill.    The total amount of goodwill will not be
deductible for tax purposes.





The
following table summarizes the final estimated fair value of the assets acquired
and liabilities assumed at the date of acquisition.




Current
    assets
              
              $
              4,146Property and
      equipment
              
              
              2,485Identifiable intangible
      assets:Covenants
      not-to-compete (5-year useful life)
              
              
              160Customer
      relationships (8-year useful life)
              
              
              2,000Goodwill
              
              
              2,41511,206Current
      liabilities
              
              
              2,611Deferred income tax
      liability
              
              
              92Capital
    leases
              
              
              624Term loan
              
              
              1,285Net assets
      acquired
              
              
              6,594




5.   
Goodwill




Balance at December 31,
      2007
              
              $
              124,375Transfer of goodwill to
      identifiable intangible assets (note 4)
              
              
              (2,160
              )Foreign
      exchange
              
              
              (678
              )Balance at September 30,
      2008
              
              $
              121,537


The
Company annually compares the implied fair value of its reporting units to the
carrying value to determine if an impairment loss has occurred.  The
fair value based test involves assumptions regarding long-term future
performance of the reporting units,fair value of the assets and liabilities,
cost of capital rates, capital re-investment and other
assumptions.  Actual recovery of goodwill could differ from these
assumptions based on the market conditions and other factors.  In the
event goodwill is determined to be impaired a charge to earnings would be
required.  As at September 30, 2008, the Company completed its annual
goodwill impairment test and concluded that there was no
impairment.





6.    Long-term
debt





On
April 10, 2008, the Company amended its credit agreement in respect of certain
financial maintenance tests.  The amendment is effective March 31,
2008 to December 31, 2008.  As at September 30, 2008, the Company is
in compliance with these amended maintenance tests and management expects to be
for the balance of 2008.





8











7.     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 869,200 options outstanding under the
plan.  The term of each option is ten years and the vesting period is
five years.  The exercise price for options is the trading price of
the Common Shares of the Company on the Toronto Stock Exchange on the day of the
grant.





The
fair value of each stock option granted was estimated using the Black-Scholes
Morton fair value option-pricing model with the following
assumptions:


2008Options
    granted
              
              
              99,000Risk-free interest
      rate
              
              
              3.93
              %Dividend
    yield
              
              
              -Volatility
      factor of the future expected market price of theCompany’scommon shares
              
              
              34.12
              %Expected life of the
      options
              
              6 years
  The
weighted average estimated fair value at the date of grant for the options
granted in 2008 was $5.27 per share.





8.     Comprehensive income
(loss)





The
components of other comprehensive income (loss) such as changes in foreign
currency adjustments are required to be added to the Company’s reported net
income to arrive at comprehensive net income (loss).  Other
comprehensive income (loss) items have no impact on the reported net income as
presented on the Consolidated Statements of Income.





The
following are the components of other comprehensive income, net of income taxes
for the three and six months ended September 30, 2008 and 2007:





Three
      months
              Ended
              Sept
      30, 2008
            
            
            Three
      months
              Ended
              Sept
      30, 2007
            
            
            Nine
      months
              Ended
              Sept
      30, 2008
            
            
            Nine
      months
              Ended
              Sept
      30, 2007Net
      income
            
            $
            2,066
            
            
            $
            3,121
            
            
            $
            7,777
            
            
            $
            12,041Translation
      adjustment
            
            
            (1,805
            )
            
            
            1,752
            
            
            
            (3,094
            )
            
            
            3,499Interest
      rate swaps
            
            
            74
            
            
            
            (770
            )
            
            
            129
            
            
            
            (832
            )Tax
      effect
            
            
            (25
            )
            
            
            281
            
            
            
            (51
            )
            
            
            318Other
      comprehensive income (loss)
            
            $
            (1,756
            )
            
            $
            1,263
            
            
            $
            (3,016
            )
            
            $
            2,985Comprehensive
      net income (loss)
            
            $
            310
            
            
            $
            4,384
            
            
            $
            4,761
            
            
            $
            15,026





9.     Computation
of Income per Share




Three
      months
                Ended
                Sept
      30, 2008
              
              
              Three
      months
                Ended
                Sept
      30, 2007
              
              
              Six
      months
                Ended
                Sept
      30, 2008
              
              
              Six
      months
                Ended
                Sept
      30, 2007Numerator:Net
      income
              
              $
              2,066
              
              
              $
              3,121
              
              
              $
              7,777
              
              
              $
              12,041Denominator:Basic
      weighted-average shares outstanding
              
              
              13,493,757
              
              
              
              13,475,685
              
              
              
              13,480,805
              
              
              
              13,459,180Dilutive
      stock options
              
              
              154,017
              
              
              
              193,134
              
              
              
              151,823
              
              
              
              201,543Dilutive
      weighted-average shares outstanding
              
              
              13,647,774
              
              
              
              13,668,819
              
              
              
              13,632,628
              
              
              
              13,660,723Basic
      income per share
              
              $
              0.15
              
              
              $
              0.23
              
              
              $
              0.58
              
              
              $
              0.89Diluted
      income per share
              
              $
              0.15
              
              
              $
              0.23
              
              
              $
              0.57
              
              
              $
              0.88








9





Diluted
income per share excludes the effect of 658,900 (2007 - 559,900) anti-dilutive
options.





10.  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.





11.
            Risk
      Management Activities and Fair Value
  Measurements





The
Company is exposed to interest rate volatility with regard to existing variable
rate debt.  The Company has entered into variable-to-fixed interest
rate swaps on variable rate term debt and revolving debt.  The swaps
are accounted for as cash flow hedges.  The effective portions of
changes in fair value of the interest rate swaps are recorded in Accumulated
Other Comprehensive Income and are recognized into earnings in the same period
in which the hedged forecasted transaction affects
earnings.  Ineffective portions of changes in fair value are
recognized into earnings as they occur.  At September 30, 2008, the
notional amount of the swaps was $67.1 million, with the average pay rate being
4.59% and the average receive rate being 3.55%.  The swaps mature at
various dates up to December 31, 2011.





Effective
January 1, 2008, the Company adopted SFAS No. 157, which provides a framework
for measuring fair value under GAAP.  As defined in SFAS No. 157, fair
value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date (exit price).  The Company utilizes market data or
assumptions that the Company believes market participants would use in pricing
the asset or liability, including assumptions about risk and the risks inherent
in the inputs to the valuation technique.  These inputs can be readily
observable, market corroborated or generally unobservable.





The
Company primarily applies the income approach for recurring fair value
measurements and endeavors to utilize the best available
information.  Accordingly, the Company utilizes valuation techniques
that maximize the use of observable inputs and minimize the use of unobservable
inputs.  The Company is able to classify fair value balances based on
the observability of those inputs.





SFAS
No. 157 establishes a fair value hierarchy that prioritizes the inputs used to
measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1
measurement) and the lowest priority to unobservable inputs (Level 3
measurement).





Assets
and liabilities measured at fair value on a recurring basis include the
following as of September 30, 2008:





Fair
      Value Measurements Using
            
            Liabilities(in
      thousands)
            Level
      1
            
            Level
      2
            
            Level
      3
            
            At
      Fair ValueLiabilitiesInterest
      rate swaps
            
            $
            -
            
            
            $
            1,426
            
            
            $
            -
            
            
            $
            1,426Total
      liabilities
            
            $
            -
            
            
            $
            1,426
            
            
            $
            -
            
            
            $
            1,426








10





12.  Segmented
Information





Three
      months ended
              September
      30, 2008
            
            Less-than-
              truckload
            
            
            Logistics
            
            
            Truckload
            
            
            Total
            
            
            Corporate
      Office
              and Other
            
            
            Consolidated
              TotalsRevenue
            
            $
            166,227
            
            
            $
            23,375
            
            
            $
            9,003
            
            
            $
            198,605
            
            
            $
            -
            
            
            $
            198,605Operating,
      selling, general andadministrative
      expenses
            
            
            158,812
            
            
            
            21,518
            
            
            
            8,446
            
            
            
            188,776
            
            
            
            800
            
            
            
            189,576Other
      expense (income)
            
            
            (142
            )
            
            
            (13
            )
            
            
            -
            
            
            
            (155
            )
            
            
            -
            
            
            
            (155
            )Depreciation
      and amortization
            
            
            4,514
            
            
            
            419
            
            
            
            249
            
            
            
            5,182
            
            
            
            21
            
            
            
            5,203Income
      (loss) from operations
            
            $
            3,043
            
            
            $
            1,451
            
            
            $
            308
            
            
            $
            4,802
            
            
            $
            (821
            )
            
            
            3,981Interest
      expense, net
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,158Income
      taxes (recovery)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (243
            )Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            2,066





Three
      months ended
              September
      30, 2007
            
            Less-than-
              truckload
            
            
            Logistics
            
            
            Truckload
            
            
            Total
            
            
            Corporate
      Office
              and Other
            
            
            Consolidated
              TotalsRevenue
            
            $
            150,283
            
            
            $
            13,690
            
            
            $
            7,954
            
            
            $
            171,927
            
            
            $
            -
            
            
            $
            171,927Operating,
      selling, general andadministrative
      expenses
            
            
            139,809
            
            
            
            12,713
            
            
            
            7,256
            
            
            
            159,778
            
            
            
            1,312
            
            
            
            161,090Other
      expense (income)
            
            
            (53
            )
            
            
            -
            
            
            
            -
            
            
            
            (53
            )
            
            
            -
            
            
            
            (53
            )Depreciation
      and amortization
            
            
            4,840
            
            
            
            177
            
            
            
            278
            
            
            
            5,295
            
            
            
            26
            
            
            
            5,321Income
      (loss) from operations
            
            $
            5,687
            
            
            $
            800
            
            
            $
            420
            
            
            $
            6,907
            
            
            $
            (1,338
            )
            
            
            5,569Interest
      expense, net
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,325Income
      taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            123Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            3,121





Nine
      months ended
              September
      30, 2008
            
            Less-than-
              truckload
            
            
            Logistics
            
            
            Truckload
            
            
            Total
            
            
            Corporate
      Office
              and Other
            
            
            Consolidated
              TotalsRevenue
            
            $
            483,803
            
            
            $
            62,449
            
            
            $
            25,850
            
            
            $
            572,102
            
            
            $
            -
            
            
            $
            572,102Operating,
      selling, general andadministrative
      expenses
            
            
            456,453
            
            
            
            58,208
            
            
            
            24,094
            
            
            
            538,755
            
            
            
            3,712
            
            
            
            542,467Other
      expense (income)
            
            
            (244
            )
            
            
            (33
            )
            
            
            (11
            )
            
            
            (288
            )
            
            
            -
            
            
            
            (288
            )Depreciation
      and amortization
            
            
            13,873
            
            
            
            1,272
            
            
            
            759
            
            
            
            15,904
            
            
            
            64
            
            
            
            15,968Income
      (loss) from operations
            
            $
            13,721
            
            
            $
            3,002
            
            
            $
            1,008
            
            
            $
            17,731
            
            
            $
            (3,776
            )
            
            
            13,955Interest
      expense, net
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            6,410Income
      taxes (recover)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (232
            )Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            7,777





Nine
      months ended
              September
      30, 2007
            
            Less-than-
              truckload
            
            
            Logistics
            
            
            Truckload
            
            
            Total
            
            
            Corporate
      Office
              and Other
            
            
            Consolidated
              TotalsRevenue
            
            $
            437,055
            
            
            $
            34,579
            
            
            $
            24,573
            
            
            $
            496,207
            
            
            $
            -
            
            
            $
            496,207Operating,
      selling, general andadministrative
      expenses
            
            
            402,156
            
            
            
            32,165
            
            
            
            22,675
            
            
            
            456,996
            
            
            
            3,712
            
            
            
            460,708Other
      expense (income)
            
            
            (130
            )
            
            
            -
            
            
            
            5
            
            
            
            (125
            )
            
            
            -
            
            
            
            (125
            )Depreciation
      and amortization
            
            
            14,109
            
            
            
            438
            
            
            
            774
            
            
            
            15,321
            
            
            
            54
            
            
            
            15,375Income
      (loss) from operations
            
            $
            20,920
            
            
            $
            1,976
            
            
            $
            1,119
            
            
            $
            24,015
            
            
            $
            (3,766
            )
            
            
            20,249Interest
      expense, net
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            6,504Income
      taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,704Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            12,041




13.  Comparative
figures





Certain
comparative figures have been reclassified to conform to the financial statement
presentation adopted in the current year.





11





Item
2. Management’s Discussion and Analysis of Results of Operation





This
MD&A and the documents incorporated by reference contains forward-looking
statements within the meaning of the United States Private Securities Litigation
Reform Act of 1995 and applicable Canadian securities laws concerning Vitran’s
business, operations, and financial performance and condition.





Forward-looking
statements may be generally identifiable by use of the words “believe”,
“anticipate”, “intend”, “estimate”, “expect”, “project”, “may”, “plans”,
“continue”, “will”, “focus”, “should”, “endeavor” or the negative of these words
or other variation on these words or comparable terminology.  These
forward-looking statements are based on current expectations and are subject to
uncertainty and changes in circumstances that may cause actual results to differ
materially from those expressed or implied by such forward-looking
statements.





The MD&A and the documents
incorporated by reference herein contain forward-looking statements regarding,
but not limited to, the following:





•
            the Company’s objective to
      expand or acquire a less-than-truckload (“LTL”) or logistics
      operation;





•
            the Company’s objective to
      maximize operating initiatives in pick-up and delivery and linehual
      operations within the U.S. LTL business
  unit;





•
            the Company’s objective to
      realize revenue growth with the inter-regional marketing initiative within
      its U.S. LTL business unit;





•
            the Company’s objective to
      realize operating efficiencies at the new Toronto service centre and
      develop revenue growth initiatives in its Canadian LTL business
      unit;





•
            the Company’s objective
      maximize its facility infrastructure and develop new logistics management
      opportunities within the Logistics
  segment;





•
            the Company’s intention to
      continue to grow its cross-border and inter-regional LTL revenue at above
      average rates;





•
            the Company’s intention to
      purchase a specified level of capital assets and to finance such
      acquisitions with cash flow from operations and, if necessary, from the
      Company’s revolving credit
facilities.





Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause Vitran’s actual results, performance or
achievements to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking
statements.  Factors that may cause such differences include but are
not limited to technological change, increase in fuel costs, regulatory change,
changes in tax legislation, the general health of the economy, changes in labor
relations, geographic expansion, capital requirements, availability of
financing, claims and insurance costs, environmental hazards, availability of
qualified drivers and competitive factors.  More detailed information
about these and other factors is included in the MD&A.  Many of
these factors are beyond the Company’s control; therefore, future events may
vary substantially from what the Company currently foresees. You should not
place undue reliance on such forward-looking statements.  Vitran
Corporation Inc. does not assume the obligation to revise or update these
forward-looking statements after the date of this document or to revise them to
reflect the occurrence of future unanticipated events, except as may be required
under applicable securities laws.





Unless otherwise indicated all
dollar references herein are in U.S. dollars.  The Company’s Annual
Report on Form 10-K, as well as all the Company’s other required filings, may be
obtained from the Company atwww.vitran.comor fromwww.sedar.comor fromwww.sec.gov/edgar.shtml. This MD&A and the documents
incorporated by reference contain forward-looking statements within the meaning
of the United States Private Securities Litigation Reform Act of 1995 and
applicable Canadian securities laws concerning Vitran’s business, operations,
and financial performance and condition.





12





Overview





The
third quarter of 2008 was a challenging quarter for Vitran, the economic
activity deteriorated throughout North America impacting the Company’s operating
results.  However, despite the macro-economic pressure Vitran
continued to execute its U.S. LTL integration plan that commenced with the
acquisition of PJAX Freight Systems (“PJAX”) in 2006.  On May 19,
2008, the U.S. LTL business launched its new I.T. operating system and
stabilized it over the subsequent 60 day period into the third
quarter.  The next step in the integration plan was successfully
completed on August 5, 2008 when the U.S. LTL business harmonized its employee
wage and benefit structure.  On August 23, 2008 the business unit
began integrating overlap service centers and had successfully completed all
overlap markets except Columbus, Toledo and Grand Rapids by the end of the third
quarter.  The remaining three service centers were effectively merged
on October 12, 2008.  Having completed the aforementioned operating
initiatives, Vitran can maximize operating activities and is in position to
execute the inter-regional marketing plan.





Furthermore,
late in the second quarter the Canadian LTL business moved into its new Toronto
cross-dock and national office and the Logistics segment commenced operations of
the new 500,000 dedicated distribution centre all of which positively impacted
the results in the third quarter.





Revenue
for the quarter increased 15.5% to $198.6 million compared to the third quarter
of 2007.  The Logistics segment ended the quarter with the most
significant improvement of 70.7% compared to the 2007 third
quarter.  Income from operations for the 2008 third quarter declined
28.5% compared to the 2007 third quarter.  For the 2008 nine-month
period, the company posted revenue of $572.1 million and income from operations
of $14.0 million compared to revenue of $496.2 million and income from
operations of $20.2 million the same period a year ago.  The 2008
results for the Logistics segment included Las Vegas/L.A. Express, Inc. (“LVLA”)
acquired November 30, 2007.





CONSOLIDATED
RESULTS





The
following table summarizes the Consolidated Statements of Income for the three-
and nine-month periods ended September 30:





For
      the three months ended Sept 30
            
            
            For
      the nine months ended Sept 30(in
      thousands)
            
            2008
            
            
            2007
            
            
            2008
      vs 2007
            
            
            2008
            
            
            2007
            
            
            2008
      vs 2007Revenue
            
            $
            198,605
            
            
            $
            171,927
            
            
            
            15.5
            %
            
            $
            572,102
            
            
            $
            496,207
            
            
            
            15.3
            %Operating
      expenses
            
            
            173,414
            
            
            
            145,457
            
            
            
            19.2
            %
            
            
            491,615
            
            
            
            414,693
            
            
            
            18.5
            %SG&A
      expenses
            
            
            16,162
            
            
            
            15,633
            
            
            
            3.4
            %
            
            
            50,852
            
            
            
            46,015
            
            
            
            10.5
            %Other
      expense (income)
            
            
            (155
            )
            
            
            (53
            )
            
            
            192.5
            %
            
            
            (288
            )
            
            
            (125
            )
            
            
            130.4
            %Depreciation
      and amortization
            
            
            5,203
            
            
            
            5,321
            
            
            
            (2.2
            )%
            
            
            15,968
            
            
            
            15,375
            
            
            
            3.9
            %Income
      from operations
            
            
            3,981
            
            
            
            5,569
            
            
            
            (28.5
            %)
            
            
            13,955
            
            
            
            20,249
            
            
            
            (31.1
            %)Interest
      expense, net
            
            
            2,158
            
            
            
            2,325
            
            
            
            (7.2
            )%
            
            
            6,410
            
            
            
            6,504
            
            
            
            (1.4
            %)Income
      (recovery) tax
            
            
            (243
            )
            
            
            123
            
            
            
            (297.6
            %)
            
            
            (232
            )
            
            
            1,704
            
            
            
            (113.6
            %)Net
      income
            
            $
            2,066
            
            
            $
            3,121
            
            
            
            (33.8
            %)
            
            $
            7,777
            
            
            $
            12,041
            
            
            
            (35.4
            %)Income
      per share:Basic - net
    income
            
            $
            0.15
            
            
            $
            0.23
            
            
            
            
            
            
            $
            0.58
            
            
            $
            0.89Diluted - net
      income
            
            $
            0.15
            
            
            $
            0.23
            
            
            
            
            
            
            $
            0.57
            
            
            $
            0.88Operating Ratio(1)
            
            
            98.0
            %
            
            
            96.8
            %
            
            
            
            
            
            
            97.6
            %
            
            
            95.9
            %





Revenue
increased 15.5% to $198.6 million for the third quarter of 2008 compared to
$171.9 million in the third quarter of 2007.  Revenue in the LTL,
Logistics and Truckload segments increased 10.6%, 70.7% and 13.2%,
respectively.  Domestic U.S. revenue accounts for 69.3% of total
revenue in the third quarter of 2008 compared to 66.9% in the third quarter of
2007.  For the nine months ended September 30, 2008 revenue increased
15.3% to $572.1 million compared to $496.2 million for the same period in
2007.  Revenue for the third quarter and nine-month period of 2008
compared to same periods in 2007 were augmented by the contribution of LVLA,
acquired on November 30, 2007.  Detailed explanations for the
fluctuations in revenue are discussed below in “Segmented Results”.





13








Income
from operations for the third quarter declined to $4.0 million compared to $5.6
million in the same quarter a year ago.  The Company’s consolidated
operating ratio was 98.0% for the third quarter of 2008 compared to 96.8% in the
third quarter of 2007.  For the nine months ended September 30, 2008
income from operations was $14.0 million compared to $20.2 million for the same
period in 2007.  Detailed explanations for the fluctuations in income
from operations are discussed below in “Segmented Results”.





Selling,
general and administrative expenses (“SG&A”) increased 3.4% to $16.2 million
in the third quarter compared to $15.6 million in the third quarter of
2007.  For the nine-month period ended September 30, 2008 SG&A
increased 10.5% to $50.9 million compared $46.0 million for the same period a
year ago.  The increase in SG&A expenses for the quarter and
nine-month period can primarily be attributed to the addition of LVLA, not
included in the 2007 comparative figures.  The remainder of the
increase is due to increased share-based compensation and healthcare
expenses.  Furthermore, with the addition of LVLA and increases in
healthcare and on-going compensation-related expenses, SG&A should continue
to be higher than the prior year periods.





The
Company incurred interest expense of $2.2 million in the third quarter of 2008
compared to $2.3 million in the third quarter of 2007.  The Company’s
total long-term debt increased to $123.0 million at September 30, 2008 compared
to the $120.2 million at September 30, 2007.  The increase in debt is
primarily attributable to facility additions of $7.6 million and $8.5 million
for the acquisition of LVLA in the fourth quarter of 2007.  Total debt
at September 30, 2008 consisted of $53.1 million drawn on the Company’s
revolving credit facilities, $52.1 million of term debt, $0.2 million note
payable and $17.6 million of capital leases.





Income
tax recovery for the third quarter of 2008 was $0.2 million compared to an
expense of $0.1 million for the same quarter a year ago.  The tax
recovery in the third quarter of 2008 compares to an effective tax rate of 3.8%
for the third quarter of 2007.  The tax recovery can be attributed to
a decline in earnings before tax and a decline in the effective tax
rate.  The decrease in the effective rate can be attributed to an
increase in a higher proportion of income being earned in lower foreign tax
jurisdictions as well as a decline in future tax rates in Canada.For the nine-month
period, on a consolidated basis, the Company generated taxable losses in the
United States, which have been recognized as future tax assets.  These
taxable losses are the result of tax depreciation and amortization on capital
assets and goodwill in excess of GAAP depreciation and amortization attributable
to the Company’s acquired businesses over the last three
years.  Management believes the Company will generate sufficient
taxable income to use these losses in the future.  Should the Company’s
earnings before income tax increase in subsequent quarters, the quarterly
effective tax rate should also increase.





Net
income decreased by 33.8% to $2.1 million for the 2008 third quarter compared to
$3.1 million for the same quarter in 2007.  This resulted in basic and
diluted income per share of $0.15 for the third quarter of 2008 compared to
basic and diluted income per share from operations of $0.23 for the third
quarter of 2007.  The weighted average number of shares for the
current quarter was 13.5 million basic and 13.6 million diluted compared to 13.5
million basic and 13.7 million diluted shares in the third quarter of
2007.  For the nine months ended September 30, 2008, net income
decreased 35.4% to $7.8 million compared to $12.0 million in the same period a
year ago.  This resulted in basic earnings per share of $0.58 and
diluted earnings per share of $0.57 for the 2008 nine-month period, compared to
basic and diluted earnings per share of $0.89 and $0.88 in the same period in
2007.  The weighted average number of shares for the nine month period
of 2008 was 13.5 million basic and 13.6 million diluted shares compared to 13.5
million basic and 13.7 million diluted shares in the nine-month period of
2007.








14





SEGMENTED
RESULTS





Less-Than-Truckload
(LTL)





The
table below provides summary information for the LTL segment for the three- and
nine-month periods ended September 30:





For
      the three months ended September 30
            
            
            For
      the nine months ended September 30(in
      thousands)
            
            2008
            
            
            2007
            
            
            2008
      vs 2007
            
            
            2008
            
            
            2007
            
            
            2008
      vs 2007Revenue
            
            $
            166,227
            
            
            $
            150,283
            
            
            
            10.6
            %
            
            $
            483,803
            
            
            $
            437,055
            
            
            
            10.7
            %Income
      from operations
            
            
            3,043
            
            
            
            5,687
            
            
            
            (46.5
            %)
            
            
            13,721
            
            
            
            20,920
            
            
            
            (34.4
            %)Operating
      ratio
            
            
            98.2
            %
            
            
            96.2
            %
            
            
            
            
            
            
            97.2
            %
            
            
            95.2
            %Number
      of shipments (2)
            
            
            1,029,978
            
            
            
            1,032,178
            
            
            
            (0.2
            %)
            
            
            3,045,489
            
            
            
            3,071,284
            
            
            
            (0.8
            %)Weight
      (000s of lbs) (3)
            
            
            1,564,394
            
            
            
            1,529,573
            
            
            
            2.3
            %
            
            
            4,642,321
            
            
            
            4,553,748
            
            
            
            1.9
            %Revenue
      per shipment (4)
            
            $
            161.39
            
            
            $
            145.60
            
            
            
            10.8
            %
            
            $
            158.86
            
            
            $
            142.30
            
            
            
            11.6
            %Revenue
      per hundredweight (5)
            
            $
            10.63
            
            
            $
            9.83
            
            
            
            8.1
            %
            
            $
            10.42
            
            
            $
            9.60
            
            
            
            8.5
            %





Revenue
in the LTL segment increased 10.6% to $166.2 million, in the third quarter of
2008 compared to $150.3 million in the same quarter a year ago.  The
increase in revenue was influenced by the fuel surcharge which represented 19.8%
of revenue in the third quarter of 2008 compared to 12.7% of revenue in the
third quarter of 2007. In addition, revenue from the LTL segment’s cross border
service offering was up 34.9% compared to the 2007 third
quarter.  More importantly, late in the second quarter the U.S. LTL
business unit completed its new IT operating system, the first step in its
integration plan, which has led to a slight increase in U.S. inter-regional
sales activity.  The second step, the integrated wage and benefit
structure, was successfully launched on August 4, 2008.  The new wage
and benefit structure increased compensation costs in the 2008 third quarter
compared to the prior year quarter.  The physical integration of
service centers commenced on August 23, 2008 and was completed on October 12,
2008.  The elimination of the redundant service centers will lead to a
reduction of linehaul, pick up and delivery and service centers costs and allow
the U.S. LTL business unit to start an inter-regional sales
initiative.





These
milestones were overshadowed by the feeble North American economic environment
and competitive pricing pressure compared to the third quarter of
2007.  Activity levels in the LTL segment deteriorated sequentially
each month in the third quarter of 2008.  The LTL segment’s shipments
per day were down 1.8% and tonnage was up 0.7% in the 2008 third quarter
compared to the 2007 third quarter. Revenue per hundredweight increased 8.1% in
the current quarter compared to the third quarter of 2007.  The
increase in revenue per hundredweight is due to the increase in fuel surcharge
compared to the 2007 third quarter.  However, revenue per
hundredweight net of fuel surcharge for the thrid quarter of 2008 declined
compared to the prior year period, coupled with the aforementioned negative
activity levels and increased costs, resulted in a third quarter operating ratio
of 98.2% compared to 96.2% in the 2007 second quarter.





For
the nine-month period ended September 30, 2008, revenue in the LTL segment
increased 10.7% to $483.8 million, compared to $437.0 million in the same period
a year ago.  The increase in revenue was influenced by the fuel
surcharge which represented 18.4% of revenue in 2008 compared to 12.1% of
revenue in the 2007 nine-month period.  Cross border revenue increased
38.3% for the nine-months of 2008 compared to the 2007
period.   However, these improvements were mitigated by the
persistent slow down in the North American economy, competitive pricing pressure
and reduced fuel surcharge recovery margin compared to 2007 the nine-month
period.  Furthermore, the increased wage and benefit package in the
U.S. LTL business unit commenced in August and abnormally severe weather
conditions and rail service issues in Canada in February and March in the first
quarter of 2008 impacted the nine-month results.  The LTL segment’s
shipments decreased 0.8% and tonnage increased 1.9% in the 2008 nine-month
period compared to the 2007 nine-month period. Revenue per hundredweight
increased 8.5% taking into account that the Canadian LTL domestic revenue was
translated into US dollars at a more favorable foreign exchange rate compared to
the same 2007 nine-month period.  Removing this foreign exchange
component revenue per hundredweight increased 6.4% compared to the same period a
year ago.  The increase in revenue per hundredweight is due to the
increase in fuel surcharge compared to the 2007 nine month
period.  Consequently, the 2008 nine-month period operating ratio was
97.2% compared to 95.2% in the 2007 nine-month period.





15





Logistics





The
table below provides summary information for the Logistics segment for the
three- and nine-month periods ended September 30:





For
      the three months ended September 30
            
            
            For
      the nine months ended September 30(in
      thousands)
            
            2008
            
            
            2007
            
            
            2008
      vs 2007
            
            
            2008
            
            
            2007
            
            
            2008
      vs 2007Revenue
            
            $
            23,375
            
            
            $
            13,690
            
            
            
            70.7
            %
            
            $
            62,449
            
            
            $
            34,579
            
            
            
            80.6
            %Income
      from operations
            
            
            1,451
            
            
            
            800
            
            
            
            81.4
            %
            
            
            3,002
            
            
            
            1,976
            
            
            
            51.9
            %Operating
      ratio
            
            
            93.8
            %
            
            
            94.2
            %
            
            
            
            
            
            
            95.2
            %
            
            
            94.3
            %





Revenue
and income from operations for the Logistics segment increased 70.7% and 81.4%,
respectively for the third quarter of 2008 compared to the same quarter in
2007.  For the nine-month period ended September 30, 2008, revenue and
income from operations for the Logistics segment increased 80.6% and 51.9%
respectively compared to the same period in 2007.  The increase in
revenue and income from operations is attributable to the acquisition of LVLA on
November 30, 2007.  In addition the Logistics segment commenced
operations of a new 500,000 square foot dedicated retail distribution facility
late in the second quarter of 2008 that contributed to the third quarter
improvement.  Albeit the results of the Logistics segment demonstrated
improvement to the comparative prior year periods, operating margins showed the
impact of a slowdown in retail sales activity in North America.  The
2008 third quarter operating ratio was 93.8% compared to 94.2% in the 2007 third
quarter.





Truckload





The
table below provides summary information for the Truckload segment for the
three- and nine-month periods ended September 30:





For
      the three months ended September 30
            
            
            For
      the nine months ended September 30(in
      thousands)
            
            2008
            
            
            2007
            
            
            2008
      vs 2007
            
            
            2008
            
            
            2007
            
            
            2008
      vs 2007Revenue
            
            $
            9,003
            
            
            $
            7,954
            
            
            
            13.2
            %
            
            $
            25,850
            
            
            $
            24,573
            
            
            
            5.2
            %Income
      from operations
            
            
            308
            
            
            
            420
            
            
            
            (26.7
            %)
            
            
            1,008
            
            
            
            1,119
            
            
            
            (9.9
            %)Operating
      ratio
            
            
            96.6
            %
            
            
            94.7
            %
            
            
            
            
            
            
            96.1
            %
            
            
            95.4
            %





Revenue
in the Truckload segment improved 13.2% to $9.0 million for the third quarter of
2008 compared to $7.9 million for the third quarter of 2007.  In the
2008 third quarter shipments increased by 14.7% but were offset by a decline in
revenue per mile(6)of
4.2% and an increase in empty miles of 24.5% compared to the 2007 third quarter.
As a result income from operations decreased $0.1 million and the operating
ratio was 96.6% for the third quarter of 2008 compared to 94.7% for the third
quarter of 2007.  Revenue for the nine-month period of 2008 was up
5.2% while income from operations was down $0.1 million compared to the same
period in 2007, resulting in and operating ratio of 96.1% for the 2008 nine
month period and compared to 95.4% prior year nine-month period.





LIQUIDITY
AND CAPITAL RESOURCES





Cash
flow from operations, including working capital changes, decreased to $14.5
million for the 2008 nine-month period compared to $26.7 million in the 2007
nine-month period.  The decline is primarily attributable to a
decrease in net income and the increase in working capital compared to the 2007
nine-month period.  Accounts receivable increased, compared to
December 31, 2007, due to higher revenue; average days sales outstanding was
45.9 days compared to 38.9 days for the Company.  The increase in days
sales outstanding can be attributed to customers’ slower payment cycle in the
tough economic environment and U.S. LTL system conversion late in the second
quarter of 2008.  Accounts payable and accrued liabilities increased
compared to December 31, 2007 due to the timing of payments.





Interest-bearing
debt, excluding bank overdraft, was $123.0 million at September 30, 2008
consisting of $52.1 million of term debt, capital leases of $17.6 million, $0.2
million note payable and $53.1 million drawn under the revolving credit
facility.  At December 31, 2007 interest-bearing debt was $128.0
million consisting of $58.9 million of term debt, capital leases of $22.9
million, $1.2 million note payable and $45.0 million drawn under the revolving
credit facility.  For the nine-month period ended September 30, 2008,
the Company repaid $7.7 million of term debt and $6.3 million of capital
leases.  At September 30, 2008, the Company had $25.3 million of
unused credit facilities.








16





Capital
expenditures amounted to $2.7 million for the third quarter of 2008 and were
funded from operating cash flows and the revolving credit facilities of the
Company.  The majority of capital expenditures were for the final
construction outlays for the new LTL service centre in Toronto
(Ontario).  The table below sets forth the Company’s capital
expenditures for the three- and nine-month periods ended September 30,
2008.





For
      the three months ended September 30,
            
            
            For
      the nine months ended September 30,(in
      thousands of dollars)
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Real
      estate and buildings
            
            $
            895
            
            
            $
            2,694
            
            
            $
            8,531
            
            
            $
            8,370Tractors
            
            
            1,220
            
            
            
            5,245
            
            
            
            1,267
            
            
            
            10,587Trailing
      fleet
            
            
            111
            
            
            
            1,236
            
            
            
            769
            
            
            
            3,921Information
      technology
            
            
            203
            
            
            
            356
            
            
            
            487
            
            
            
            929Leasehold
      improvements
            
            
            12
            
            
            
            89
            
            
            
            104
            
            
            
            122Other
      equipment
            
            
            267
            
            
            
            399
            
            
            
            698
            
            
            
            1,250Total
            
            $
            2,708
            
            
            $
            10,019
            
            
            $
            11,856
            
            
            $
            25,179





Management
estimates that cash capital expenditures for the remainder of 2008, will be
between $2.0 million and $4.0 million, the majority of which will be fleet
replacement and information technology expenditures.  The Company also
anticipates entering into operating leases to fund the acquisition of equipment
with a capital cost of between $1.0 million and $4.0 million.  The
Company expects to finance its cash capital requirements with cash flow from
operations, and if required, its revolving credit facilities.





The
Company has contractual obligations for principal payments that include
long-term debt consisting of term debt facilities, revolving credit facilities
and capital leases for operating equipment. The Company utilizes off-balance sheetoperating
leases primarily consisting of tractor, trailing fleet and real estate
leases.  Operating leases form an integral part of the Company’s
financial structure and operating methodology as they provide an alternative
cost effective and flexible form of financing.





The
following table summarizes our significant contractual obligations and
commercial commitments as of September 30, 2008:





(in
      thousands of dollars)
            
            
            
            
            Payments
      due by periodContractual
      Obligations
            
            Total
            
            
            2008
            
            
            2009
      & 2010
            
            
            2011
      & 2012
            
            
            ThereafterTerm
      credit facilities
            
            $
            52,145
            
            
            $
            2,255
            
            
            $
            23,890
            
            
            $
            26,000
            
            $
            NilRevolving
      credit facilities
            
            
            53,050
            
            
            Nil
            
            
            Nil
            
            
            
            53,050
            
            
            NilCapital
      lease obligations
            
            
            17,557
            
            
            
            1,850
            
            
            
            9,929
            
            
            
            5,778
            
            
            NilNote
      payable
            
            
            219
            
            
            
            219
            
            
            Nil
            
            
            Nil
            
            
            NilSub-total
            
            
            122,971
            
            
            
            4,324
            
            
            
            33,819
            
            
            
            84,828
            
            
            NilOperating
      leases
            
            
            60,260
            
            
            
            5,245
            
            
            
            28,636
            
            
            
            17,197
            
            
            
            9,182Total
      Contractual Obligations
            
            $
            183,231
            
            
            $
            9,569
            
            
            $
            62,455
            
            
            $
            102,025
            
            $
            
            9,182





In
addition to the above-noted contractual obligations, the Company, as at
September 30, 2008, utilized the revolving credit facilities for standby letters
of credit of $18.8 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.  On April 10, 2008, the Company amended its
credit agreement in respect of certain financial maintenance
tests.  The amendment is effective March 31, 2008 to December 31,
2008.  As at September 30, 2008, the Company is in compliance with
these amended maintenance tests.  Management does not anticipate a
significant decline in business levels or financial performance and expects that
existing working capital, together with available revolving facilities, will be
sufficient to fund operating and capital requirements in 2008 as well as to
service the contractual obligations.








17





OUTLOOK





The
third quarter of 2008 was an extremely challenging quarter for Vitran, however,
the U.S. LTL business unit integrated its wage and benefit packages and began
merging redundant overlap service centers from the 2006 acquisition of PJAX
Inc.  The Logistics segment, although hampered by the retail slowdown
in North America, had record months in August and then September.





With
the U.S. LTL business unit completing the integration and closure of overlap
service centers on October 12, 2008, it is positioned to further improve
operating efficiencies by maximizing density in its pick-up and delivery
operations and streamlining linehaul schedules.  Furthermore, the U.S.
LTL business will initiate the all important inter-regional sales
program.





The
Canadian LTL business unit will focus on service centre efficiencies at its new
Toronto location and revenue growth initiatives.   The Logistics
segment will endeavor to fully maximize its facility infrastructure and develop
new logistics management opportunities.





Lastly
the Company remains committed to its objectives to expand or acquire into new
regional LTL markets and opportunistically add complementary Logistics
operations.





QUARTERLY
RESULTS





(thousands of
      dollars
              except
      per share
              amounts)
            
            
            2008
              Q3
            
            
            
            2008
              Q2
            
            
            
            2008
              Q1
            
            
            
            2007
              Q4
            
            
            
            2007
              Q3
            
            
            
            2007
              Q2
            
            
            
            2007
              Q1
            
            
            
            2006
              Q4Revenue
            
            $
            198,605
            
            
            $
            195,990
            
            
            $
            177,507
            
            
            $
            174,310
            
            
            $
            171,927
            
            
            $
            170,144
            
            
            $
            154,136
            
            
            $
            153,779Income
      from operations
            
            
            3,981
            
            
            
            8,048
            
            
            
            1,926
            
            
            
            2,750
            
            
            
            5,569
            
            
            
            9,073
            
            
            
            5,607
            
            
            
            8,143Net
      Income
            
            
            2,066
            
            
            
            4,577
            
            
            
            1,134
            
            
            
            1,669
            
            
            
            3,121
            
            
            
            5,533
            
            
            
            3,387
            
            
            
            4,974Income
      per share:Basic
            
            $
            0.15
            
            
            $
            0.34
            
            
            $
            0.08
            
            
            $
            0.12
            
            
            $
            0.23
            
            
            $
            0.41
            
            
            $
            0.25
            
            
            $
            0.37Diluted
            
            
            0.15
            
            
            
            0.34
            
            
            
            0.08
            
            
            
            0.12
            
            
            
            0.23
            
            
            
            0.41
            
            
            
            0.25
            
            
            
            0.37Weighted
      average number of shares:Basic
            
            
            13,493,757
            
            
            
            13,483,159
            
            
            
            13,465,357
            
            
            
            13,457,619
            
            
            
            13,475,685
            
            
            
            13,463,374
            
            
            
            13,438,065
            
            
            
            13,413,153Diluted
            
            
            13,647,774
            
            
            
            13,630,974
            
            
            
            13,611,446
            
            
            
            13,621,272
            
            
            
            13,668,819
            
            
            
            13,661,467
            
            
            
            13,651,872
            
            
            
            13,624,031





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 and amortization expense, divided by revenue.
      OR allows management to measure the Company and its various segments’
      operating efficiency.  OR is a widely recognized measure in the
      transportation industry which provides a comparable benchmark for
      evaluating the Company’s performance compared to its competitors.
      Investors should also note that the Company’s presentation of OR may not
      be comparable to similarly titled measures by other companies. OR is
      calculated as follows:





Three
      months ended
              September
      30,
            
            
            Nine
      months ended
              September
      30,(in
      thousands)
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Operating
      expenses
            
            $
            173,414
            
            
            $
            145,457
            
            
            $
            491,615
            
            
            $
            414,693Selling,
      general and administrative expenses
            
            
            16,162
            
            
            
            15,633
            
            
            
            50,852
            
            
            
            46,015Other
      expenses (income)
            
            
            (155
            )
            
            
            (53
            )
            
            
            (288
            )
            
            
            (125
            )Depreciation
      and amortization expense
            
            
            5,203
            
            
            
            5,321
            
            
            
            15,968
            
            
            
            15,375$
            194,624
            
            
            $
            166,358
            
            
            $
            558,147
            
            
            $
            475,958Revenue
            
            $
            198,605
            
            
            $
            171,927
            
            
            $
            572,102
            
            
            $
            496,207Operating
      ratio (“OR”)
            
            
            98.0
            %
            
            
            96.8
            %
            
            
            97.6
            %
            
            
            95.9
            %








18





(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.





Item
3. Quantitative and Qualitative Disclosures About Market Risk





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


(in thousands of
      dollars)
                    
                    
                    
                    
                    Payments due by
      periodLong-term
    debt
                    
                    Total
                    
                    
                    2008
                    
                    
                    2009 &
    2010
                    
                    
                    2011 &
    2012
                    
                    
                    ThereafterVariable
    RateTerm bank
      facility
                    
                    $
                    50,000
                    
                    
                    $
                    2,000
                    
                    
                    $
                    22,000
                    
                    
                    $
                    26,000
                    
                    
                    $
                    NilAverage
      interest rate (LIBOR)
                    
                    
                    5.26
                    %
                    
                    
                    5.26
                    %
                    
                    
                    5.26
                    %
                    
                    
                    5.26
                    %Term bank
      facility
                    
                    $
                    2,145
                    
                    
                    $
                    255
                    
                    
                    $
                    1,890
                    
                    
                    $
                    Nil
                    
                    
                    $
                    NilAverage
      interest rate (LIBOR)
                    
                    
                    5.51
                    %
                    
                    
                    5.51
                    %
                    
                    
                    5.51
                    %Revolving bank
      facility
                    
                    $
                    53,050
                    
                    
                    $
                    Nil
                    
                    
                    $
                    Nil
                    
                    
                    $
                    53,050
                    
                    
                    $
                    NilAverage
      interest rate (LIBOR)
                    
                    
                    5.26
                    %
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    5.26
                    %Fixed RateCapital lease
      obligations
                    
                    $
                    17,557
                    
                    
                    $
                    1,850
                    
                    
                    $
                    9,929
                    
                    
                    $
                    5,778
                    
                    
                    $
                    NilAverage
      interest rate
                    
                    
                    6.15
                    %
                    
                    
                    6.15
                    %
                    
                    
                    6.15
                    %
                    
                    
                    6.15
                    %Note
      payable
                    
                    $
                    219
                    
                    
                    $
                    219
                    
                    
                    $
                    Nil
                    
                    
                    $
                    Nil
                    
                    
                    $
                    NilAverage
      interest rate
                    
                    
                    6.00
                    %Total
                    
                    $
                    122,971
                    
                    
                    $
                    4,324
                    
                    
                    $
                    33,819
                    
                    
                    $
                    84,828
                    
                    
                    $
                    Nil


The
Company uses variable-to-fixed interest rate swaps on its term and revolving
credit facilities with a notional amount of $67.1 million at September 30,
2008.  The average pay rate on the swaps is 4.59% and the average
receive rate is the three-month LIBOR rate, which is currently
3.55%.  To value the interest rate swaps a discounted cash flow model
is utilized. Primary inputs into the model that will cause the fair value to
fluctuate period-to-period include the fixed interest rates, the future interest
rates, credit risk and the remaining time to maturity of the interest rate
swaps.  Management’s intention is to hold the interest rate swaps to
maturity.





The
Company is exposed to foreign currency risk as fluctuations in the United States
dollar against the Canadian dollar can impact the financial results of the
Company.  The Company’s Canadian operations realize foreign currency
exchange gains and losses on the United States dollar denominated revenue
generated against Canadian dollar denominated expenses.  Furthermore,
the Company reports its results in United States dollars thereby exposing the
results of the Company’s Canadian operations to foreign currency
fluctuations.  In addition, the Company’s United States dollar debt of
$77.4 million is designated as a hedge of the investment in the United States’
self-sustaining foreign operations.




















19








Item
4. Controls and Procedures





a)
            As
      of October 21, 2008, 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, 2008.  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)
            During
      the 2008 second quarter, Vitran implemented a new less-than-truckload
      operating system within its U.S. LTL business unit.  In
      accordance with Vitran’s IT general controls, appropriate internal
      controls were followed in the development and implementation of the
      system.  As a result of the new system, a limited number of IT
      application level controls changed in the second
      quarter.  Management ensured that the application controls were
      appropriately designed and that appropriate levels of monitoring controls
      were in place to ensure that financial information was appropriately
      recorded, processed and disclosed.  Management will test the
      operating effectiveness of the application level controls in the normal
      course as part of its annual certification
      requirements.  Management does not believe there is any material
      affect on 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.





Item
1A.  Risk Factors





See
Part 1A of the Company’s 2007 Annual Report on Form 10-K.





Item 2. Unregistered Sale of Equity
and Use of Proceeds  - -  None





Item 3. Defaults Upon Senior
Securities  - - None





Item 4. Submission of Matters to a
Vote of Security Holders  -
-None





Item 5. Other
Information   - -  None





Item
6. Exhibits and Reports on Form 8-K





Exhibits





Exhibit
              Number
            
            Description
      of Exhibit31
            
            Certifications
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated
      October 21, 2008.32
            
            Certifications
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated
      October 21, 2008.








20








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:  October
      21, 2008
            Vice
      President of Finance andChief
      Financial Officer(Principle
      Financial Officer)/s/ FAYAZ D. SULEMANFayaz
      D. SulemanDate:  October
      21, 2008
            Corporate
      Controller(Principle
      Accounting Officer)







21