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FUELED FOR GROWTH V I T R A N  C O R P O R A T I O N  I N C.     2 0 0 4  A N N U A L   R E P O R T  VITRAN CORPORATION Vitran Corporation is a North American provider of freight services and distribution solutions
to a wide variety of companies and industries. Vitran offers Less-than-Truckload (LTL) service
throughout Canada and the United States utilizing its own infrastructure and exclusive partners.
Vitran Logistics provides special distribution solutions that range from inventory consolidation to
responsibility for the complete distribution function as well as highway and rail brokerage. Vitran
also provides premium same-day and next-day Truckload (TL) services in the U.S. Midwest. These services are provided by more than 2,900 employees and associates located at more than 100
facilities and offices in the United States and Canada. Vitran uses 5,800 pieces of equipment,
including tractors, trailers, and containers, operated by 1,300 drivers and independent
contractors. IN SUMMARY, WE PROVIDE THE FOLLOWING SERVICES: Less-than-Truckload (LTL) Logistics including Brokerage Truckload (TL)
  V I T R A N  C O R P O R A T I O N  I N C.          2 0 0 4  A N N U A L   R E P O R T




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HIGHLIGHTS  
    Record year for revenue and net income
    Debt reduced by 45% to 10-year low
    Cross-border revenue grew by over 29% 2004 FINANCIAL HIGHLIGHTS 
 2004
    
    
    2003
    
    
    2002Operating resultsTotal revenue
    
    $
    374,595
    
    
    $
    331,826
    
    
    $
    303,595Income from operations before
depreciation expense
    
    
    24,183
    
    
    
    20,308
    
    
    
    17,817Income from operations
    
    
    18,977
    
    
    
    14,814
    
    
    
    12,509Net income
    
    
    14,943
    
    
    
    10,336
    
    
    
    6,938Cash flow from operations
(before working capital changes)
    
    
    21,592
    
    
    
    15,410
    
    
    
    12,032Per shareBasic
    
    $
    1.22
    
    
    $
    1.07
    
    
    $
    0.72Diluted
    
    $
    1.17
    
    
    $
    1.01
    
    
    $
    0.71Financial positionTotal assets
    
    $
    173,044
    
    
    $
    165,013
    
    
    $
    121,402Cash and marketable securities
    
    
    40,462
    
    
    
    39,413
    
    
    
    8,002Interest-bearing debt
    
    
    14,537
    
    
    
    26,244
    
    
    
    37,510Shareholders equity
    
    
    119,185
    
    
    
    97,955
    
    
    
    52,070
 Revenue increased 12.9% in 2004 to $374.6 million from $331.8 million in 2003 Net income increased 44.6% to $14.9 million in 2004 from $10.3 million in 2003 Diluted earnings per share increased to $1.17 in 2004 from $1.01 in 2003  V I T R A N  C O R P O R A T I O N  I N C.          2 0 0 4  A N N U A L   R E P O R T




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PRESIDENTS MESSAGEto Shareholders Record Revenues of $375 MILLIONin 2004 DEAR SHAREHOLDERS, Vitran experienced another successful year in 2004, achieving record results in many areas of the
business. I will highlight our Companys accomplishments this past year, as well as the
disappointments, and the challenges ahead in 2005. Our Company achieved record revenues of $375 million in 2004, driven by improvements in all three
operating segments: Logistics, Truckload, and, most notably, our core Less-than-Truckload (LTL)
segment. The Logistics segment improved its revenue by 23.9%. This growth was achieved from all business
units
within our Logistics segment. As importantly, this growth translated into an improvement in income
from
operations of 53.9%. Our Supply Chain operation brought on additional real estate capacity in 2004
and,
if successfully filled in the first half of 2005, should generate stronger results. The Truckload segment improved revenues 9.3%, but more importantly, took advantage of reduced
driver
availability, resulting from tighter hours-of-service regulations, demographics, and a strong
economy. Due to this shift in driver availability we were able to improve our yield  the average
price we charge our customer per mile net of fuel surcharge  by 13.4%. This resulted in a
substantial 226.9% increase in income from operations in our Truckload segment and a solid
improvement in its operating ratio to 94.5% from 98.2%. Vitrans core LTL operation, which represents 80% of our business, grew revenues 12.2% and
increased
income from operations 14.4%. LTL revenue per hundredweight, net of fuel surcharge, increased 3.7%
during the year, supporting the slight improvement in operating ratio. Deterioration in the Canadian LTL margins offset the gain of approximately a full point in our U.S.
LTL
segments operating ratio. The CN rail strike in the first quarter of the year and the railways
severe
capacity issues in the back half of the year drove unexpected cost increases into our Canadian LTL
operation in 2004. Vitrans balance sheet continues to be one of the strongest in the industry. Our long-term debt
decreased
45.0% from the prior year end. Cash on hand plus marketable securities increased 4.2% compared to
the
prior year. We successfully renegotiated the Companys banking agreement, increasing the available
capacity under the revolving credit facility to $35 million, and extending the term debt repayment
schedule. Consequently, we have enhanced the Companys financial resources to support acquisition
and expansion opportunities in 2005. We are very proud of the dramatic turnaround in our balance
sheet in the last few years and will continue to manage it aggressively. Although we investigated many opportunities in 2004, we were unable to find an acquisition target
that fit
not only geographically with our LTL infrastructure, but provided to you, our shareholders, the
right accretive return in the long run. We will continue to evaluate future expansion opportunities
with vigour and discipline. We remain focused on our strategy of building an LTL infrastructure in Canada and the United States
that will position Vitran as a prominent LTL transportation company in this market. We will
continue to
seek geographic expansion opportunities in the year ahead that are right for our shareholders,
customers
and employees.  V I T R A N  C O R P O R A T I O N  I N C.          2 0 0 4  A N N U A L   R E P O R T




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As we look ahead to 2005, we face challenges that we expect to manage. First, we believe that
driver
availability in both the Truckload and LTL sectors will continue to tighten. This creates growth
challenges;
however, it also presents an opportunity to continue to charge prices that generate appropriate
returns.
Vitran will continue to work very hard on yield performance. We want to take advantage of the
driver
shortage to continue to increase prices, as we did in 2004. We want to continue to grow our
cross-border
business, which grew again in 2004 by 29.3%, at double-digit rates. The year-over-year cross-border
growth comparables get tougher, yet we are challenging ourselves to maintain double-digit growth in
this
very important part of our business. Finally, the rail service in Canada has clearly caused us difficulty in this past year. We are very
proud of
our long-standing 25-year relationship with CN Railway and we are hopeful that our two companies
will
find a way to make the Canadian intermodal model work better in 2005. In conclusion, I would like to speak briefly about our employees who come to work every day, in all
kinds of weather, to provide our customers with the best service. This year marked our lowest
employee
turnover since we integrated the two operating companies to form Vitran Express in the United
States in
2000. Employee stability has helped us deliver top-quality service and has assisted us in improving
our
business over the past year. I would like to thank them all from the bottom of my heart for their
efforts.
I would also like to recognize all our customers, all our suppliers and, of course, our Board of
Directors for
playing key roles in Vitrans success in 2004. RICK GAETZPresident and Chief Executive Officer  V I T R A N  C O R P O R A T I O N  I N C.          2 0 0 4  A N N U A L   R E P O R T




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CHAIRMANS MESSAGEto Shareholders. Governance at a NEW LEVEL DEAR SHAREHOLDERS,
Governance has always been important at Vitran Corporation; however, we achieved a new level of
excellence in 2004. The Company changed in 2004 from a Foreign Private Issuer to a U.S. Domestic
filer because more than 65% of our shareholders are U.S. residents as a result of the December
2003 financing. In addition to complying with Canadian regulations, the Company is now required to
complete the Certification of Internal Control Over Financial Reporting under section 404 of the
Sarbanes-Oxley Act. The processes and controls required are extremely comprehensive and detailed in
nature and achieving compliance required an intensive year-long work plan. Vitran is one of the first Canadian filers to comply with the Sarbanes-Oxley Act and receive an
unqualified
opinion from our auditors KPMG LLP. The work was completed in-house at a great saving to the
Company with support from Vitrans Audit Committee and attestation by KPMG LLP. Completing the
process on schedule is a testament to the leadership and hard work from the management team.
Complying with a multitude of regulations is costly and frustrating; however, it is now a fact of
public
company life. The Vitran Board of Directors and management are determined to maximize the benefits
to the shareholders. Milestone: On April 15, 2004, Vitran lost one of its co-founders when Albert Gnat passed away.
Albert made a very unique contribution to the growth and evolution of the Company since its
inception in 1983. He was an endless source of new ideas and an advocate of best practices, which
he brought along from his many affiliations. New Directors: William Deluce and Georges Hébert  both successful entrepreneurs with excellent
public
company experience and transportation knowledge  were elected to the Board of Directors at the
annual
meeting on April 21, 2004. While we are proud that Vitran is one of the first Canadian filers to comply with the
Sarbanes-Oxley Act, our true accomplishment in 2004 is achieving the best financial results in the
Companys history. Our goal remains to increase shareholder value, and with a healthy
transportation market and the strongest balance sheet in our history, the outlook is very positive. On behalf of the Board, I would like to congratulate our management and employees on another fine
performance and thank our shareholders for their continued support. RICHARD D. MCGRAWChairman of the Board  V I T R A N  C O R P O R A T I O N  I N C.          2 0 0 4  A N N U A L   R E P O R T




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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K (Mark One)  þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 2004 OR  o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from  to. Commission file number 0-19791  VITRAN CORPORATION INC. (Exact name of registrant as specified in its charter)
 Ontario, Canada(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 185 The West Mall, Suite 701, Toronto, Ontario, Canada, M9C 5L5(Address of principal executive offices) (Zip Code) (Registrants telephone number, including area code)(416) 596-7664 Securities registered pursuant to Section 12(b) of the Act: Title of each class
    
    Name of each exchange on which registeredCommon Shares
    
    Toronto Stock Exchange  TSX®American Stock Exchange  AMEX®
 Securities registered pursuant to Section 12(g) of the Act: None 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. þ Yes o No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein and will not be contained, to the registrants knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to the Form 10-K o. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act). þ Yes o No. The number of shares of common stock outstanding at February 14, 2005 was 12,423,678. The aggregate
market value of the voting stock of the registrant, excluding directors, officers and registered
holders of 10% as of February 14, 2005 was approximately $185,006,029.00. DOCUMENTS INCORPORATED BY REFERENCE 1) Proxy statement to be filed on or about March 24, 2005 (Only those portions referenced herein
are incorporated in this Annual Report on Form 10-K).   V I T R A N  C O R P O R A T I O N  I N C.          2 0 0 4  A N N U A L   R E P O R T




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TABLE OF CONTENTS PageItemPART I1. Business
    32. Properties
    63. Legal Proceedings
    74. Submission of Matters to a Vote of Security Holders
    7PART II5. Market for Registrants Common Equity and Related Stockholder Matters
    76. Selected Financial Data
    97. Management Discussion and Analysis
    127a. Quantitative and Qualitative Disclosures about Market Risk
    238. Financial Statements and Supplementary Data
    249. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    539a. Controls and Procedures
    53PART III10. Directors and Executive Officers of the Registrant
    5511. Executive Compensation
    5612. Security Ownership of Certain Beneficial Owners and Management
    5613. Certain Relationships and Related Transactions
    5614. Principal Accounting Fees and Services
    56PART IV15. Exhibits, Financial Statements Schedules and Reports on Form 8-K
    56
 2




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Unless otherwise indicated all dollar references herein are in United States dollars. 
 PART I 
 ITEM 1 BUSINESS OVERVIEW Vitran Corporation Inc. (Vitran or the Company) is a leading, predominately non-union,
provider of surface transportation and related logistics services throughout Canada and in 18
states in the central and southern United States (the Central States). Its business consists of
less-than-truckload services (LTL), logistics services, and truckload services. These services
are provided by stand-alone business units within their respective regions. The business units
operate independently or in a complementary manner to provide solutions depending on a customers
needs. For the years ended December 31, 2004 and 2003, the Company had revenues of approximately
$374.6 million, and $331.8 million, respectively. CORPORATE STRUCTURE Vitrans registered office is located at 185 The West Mall, Suite 701, Toronto, Ontario,
Canada, M9C 5L5. Vitran Corporation Inc. was incorporated in Ontario under the Business Corporation
Act (Ontario). Vitrans business is carried on through its subsidiaries with a number of these affiliated
corporations holding the relevant licenses and permits required to carry on business. The
following are Vitrans principal operating subsidiaries, all wholly owned (including their
jurisdiction of incorporation) as at December 31, 2004: Vitran Express Canada Inc. (Ontario);
Can-Am Logistics Inc. (Ontario); Vitran Logistics Ltd. (Ontario); Expéditeur T.W. Ltée (Canada);
Vitran Corporation (Nevada); Vitran Express Inc. (Indiana); Frontier Transport Corporation
(Indiana); Vitran Logistics Corp. (Delaware); Vitran Logistics Inc. (Indiana). OPERATING SEGMENTS Segment financial information is included in Note 9 to the Consolidated Financial Statements. LTL Services Vitran has grown organically and made strategic acquisitions to build a comprehensive LTL
network throughout Canada and in the Central United States. Over the past year, Vitrans LTL
business has continued to focus on providing premium service to its customers. Vitrans LTL business represented approximately 80.9% of its revenue for the year ended
December 31, 2004. Within the United States, the Company operates primarily within the Central
United States and delivers approximately 90.0% of its freight shipments within one or two days. In
addition, the Company offers its services to the other regions in the United States (other than
Alaska and Hawaii) through its strategic inter-regional relationships. The service is provided
over-the-road, mostly by Company drivers, which allows US LTL more control in servicing these time
sensitive shipments. As an integral part of its service solution, US LTL was one of the first
regional LTL companies to offer an unconditional money back service guarantee to its customers.
Vitrans US LTL regional business represented approximately 46.0% of its revenues for the year
ended December 31, 2004. Within Canada, the Company provides next-day service within Ontario, Quebec and within parts
of western Canada, and generates most of its revenue from the movement of LTL freight within the
three to five day east/west lanes. Most of its trans-Canada freight is shipped by rail under an
intermodal agreement with CN Rail, under which the Companys containers are loaded onto CN Rail
cars and shipped to various points where Vitrans network of owner operators pick up and deliver
the freight to various destinations. An expedited service solution is also offered nationally using
over-the-road driver teams to complete these moves in a shorter time-frame. Vitrans Canadian LTL
business represented approximately 34.9% of its revenues for the year ended December 31, 2004. 3




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Vitrans Transborder Service Solution (inter-regional) provides over-the-road service
primarily between its
Canadian LTL and US LTL business units. This is the Companys highest margin and fastest growing
service, achieving approximately 29.3% year-over-year revenue growth for the year ended December
31, 2004. In addition, through strategic inter-regional relationships it offers transborder freight
services to the remainder of the continental United States. Logistics Vitrans Logistics business, which represented approximately 9.5% of its revenues for the year
ended December 31, 2004, consists of two principal lines of business: (1) supply chain solutions in
Canada and the United States including warehousing, inventory management and flow-through
distribution facilities, and (2) Freight Brokerage which coordinates the transport of truck and
container loads from sales offices in Toronto, Montreal, and Los Angeles. Supply Chain Solutions.Supply chain solutions involve the transportation, management of
goods and the provision of information about such goods as they pass through the supply chain from
manufacturer to end user. Vitran Logistics role is to design a supply chain network for a
customer, contract with the necessary suppliers (including Vitrans LTL services), and implement
the design and manage the logistical system. Vitrans supply chain services unit offers a range of
services in Canada and the United States including warehousing, inventory management and
flow-through distribution facilities, focusing primarily on long-term logistics solutions. Freight Brokerage.Vitrans Freight Brokerage unit is headquartered in Toronto, Ontario, with
sales offices in Toronto, Montreal and Los Angeles so as to capitalize on international traffic
flows. Vitran Logistics coordinates the transport of truck and container loads directly from a
customers facility to the customers consignee, anywhere in North America. The Freight Brokerage
unit offers both intermodal and highway solutions to customers with any type of full load
requirement. Vitran Logistics supports the movement of freight through direct computer links with
both its carriers and customers. It provides customers with real-time tracking, customer support
information and expediting as required. Truckload Vitrans Truckload business, operating as Frontier Transport Corporation (Frontier),
provides truckload service within the United States. Frontier principally utilizes its
company-owned trailing equipment and tractor owner operators. The business is primarily dry van
with a small temperature controlled service available. Frontier operates out of two terminals, one
in Atlanta, and the other in Indianapolis where the main administration office is located. Frontier
principally delivers within a 400-mile radius utilizing 257 owner operators with company-owned or
leased trailing fleet. THE TRUCKING INDUSTRY According to estimates made by the American Trucking Associations and Global Insight (formerly
DRI-WEFA), the United States trucking industry in 2002 accounted for approximately $585 billion, or
approximately 87% of total domestic freight transportation revenue. Trucks provide freight
transportation services to virtually every industry operating in the United States and Canada and
generally offer higher levels of reliability, shipment integrity, and speed than other surface
transportation options. The trucking industry is highly competitive on the basis of service and
price. The LTL portion of the industry accounted for approximately $58 billion of revenue during
2002. According to the American Trucking Associations and Global Insight, LTL volume is forecasted
to grow in the United States at an average rate of 3.1% per year through 2008. LTL carriers transport freight for multiple customers to multiple destinations on each
trailer. This service requires a network of local pick-up and delivery terminals, hub facilities,
and driver fleets. The LTL business is capital intensive, and achieving significant density of
operations in a given region can afford a competitive advantage since greater freight volumes are
better able to support fixed costs. Vitran believes the regional LTL 4




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industry offers a favorable operating model and provides substantial growth opportunities for the
following reasons:  
    The trend among shippers toward minimal inventories, deferred air freight, and regional
distribution has increased the demand for next-day and second-day delivery service.
    Regional carriers with sufficient scale and freight density to support local terminal
networks can offer greater service reliability and minimize the costs associated with
intermediate handling.
    Regional carriers are predominately non-union, which offers cost savings, greater
flexibility, and a lower likelihood of service disruptions compared with unionized
carriers.
    There has been a reduction of capacity as weaker competitors exit the business. MARKETING AND CUSTOMERS Vitran derives its revenue from thousands of customers from a variety of geographic regions
and industries in Canada and the United States. The Companys largest customer represents less than
3.0% of Vitrans revenues. The LTL segment utilizes a computerized freight-costing model to determine the price level
that is appropriate for each particular shipment of freight. When necessary, Vitran competes to
secure revenue by participating in bid solicitations, provided its customer recognizes the Company
as a core carrier over a contracted period of time. In the Logistics business, Vitran customizes each solution to fit the needs of the customer.
The Logistics operation pursues opportunities that will not only increase the profitability of that
segment but will supplement profitability in Vitrans LTL segment as well. The Freight Brokerage business maintains sales offices in Toronto, Montreal, and Los Angeles,
to capitalize on international traffic flows. The freight brokerage unit offers both intermodal and
over-the-road truckload solutions to clients. EMPLOYEES At December 31, 2004, Vitran employed approximately 2,498 full- and part-time employees and
contracted with approximately 421 owner operators. All of Vitrans 1,256 drivers and owner operators are required to have valid commercial
drivers licenses and pass a stringent Company screening process. Where permitted, the Company
periodically conducts drug and alcohol screening tests. Only 132 of Vitrans employees are represented by labor unions. Two of Vitrans terminals in
Canada operate with unionized dock workers represented by the International Brotherhood of
Teamsters and the Canadian Autoworkers Association. The Company has two collective agreements with
its unionized employees. These agreements expire on March 31, 2008, and on September 30, 2008,
respectively. INFORMATION TECHNOLOGY Vitran uses technology to reduce costs, improve productivity, and enhance its customer
service. Vitran allows its customers to access or exchange information with the Company via
Vitrans website, published web services, electronic data interchange, or over the telephone. The
Company uses sophisticated freight handling software to maximize its load average, reduce freight
handling, reduce transit times, and improve tracking of shipments through its system. 5




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SEASONALITY In the trucking industry for a typical year, the months of September and October usually have
the highest business levels, while the months of December, January and February generally have the
lowest business levels. Adverse weather conditions, generally experienced in the first quarter of
the year, such as heavy snow and ice storms, have a negative impact on operating results.
Accordingly, revenue and profitability are generally lowest in the first quarter. REGULATION Regulatory agencies exercise broad powers over the trucking industry business, generally
governing such activities as authorization to engage in motor carrier operations, safety and
financial reporting. The industry also may become subject to new or more restrictive regulations
relating to fuel emissions, ergonomics, or limits on vehicle weight and size. Additional changes in
the laws and regulations governing the trucking industry could affect the economics of the industry
by requiring changes in operating practices or by influencing the demand for, and the costs of
providing, services to customers. From time to time, various legislative proposals that might affect the trucking industry are
introduced, including proposals to increase federal, state, provincial or local taxes, including
taxes on motor fuels. Vitran cannot predict whether, or in what form, any increase in such taxes
applicable to the Company will be enacted. Increased taxes could adversely affect Vitrans
profitability. Vitrans employees and owner operators also must comply with the safety and fitness
regulations promulgated by the U.S. Department of Transportation (DOT) and various regulatory
authorities in Canada, including those relating to drug and alcohol testing and hours of service. COMPETITION Vitran competes with many other transportation service providers of varying sizes within
Canada and the United States. In the United States, Vitran competes mainly in the central states.
The transportation industry is highly competitive on the basis of both price and service. The
Company competes with regional, inter-regional and national LTL carriers, truckload carriers, third
party logistics companies and, to a lesser extent, small package carriers, air freight carriers and
railroads. The Company competes effectively in its markets by providing high quality and timely
service at competitive prices. RISKS AND UNCERTAINTIES Information on the risks and uncertainties relating to the Company appears in the Companys
management discussion and analysis (MD&A) for the year ended December 31, 2004, Item 7, reference
to which is hereby made, and the information therein is incorporated herein by reference. AVAILABLE INFORMATION Vitran makes available free of charge on or through its website at www.vitran.com, its Annual
Report on Form 10-K (including the MD&A at December 31, 2004), Quarterly Reports on Form 10-Q,
current reports on Form 8-K and other information releases including all amendments to those
reports as soon as reasonably practicable after such material is electronically filed with or
furnished to the Securities and Exchange Commission (SEC) and System for Electronic Document
Analysis and Retrieval (SEDAR). The information can also be accessed through EDGAR at
www.sec.gov/edgar.shtml or SEDAR at www.sedar.com. 
 ITEM 2 PROPERTIES Vitrans corporate office is located at 185 The West Mall, Suite 701, Toronto, Ontario,
Canada, M9C 5L5.The 2,700 square foot office is occupied under a lease terminating in March 2008. 6




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Each of Vitrans operating subsidiaries also maintains a head office as well as numerous
operating facilities. Vitran has not experienced and does not anticipate difficulties in renewing
existing leases on favorable terms or obtaining new facilities as and when required. Vitran operates 70 terminals, 15 of which are located in Canada and 55 of which are located in
the United States. The Companys LTL segment operates 65 terminals with a total of 1,555 loading
doors in the United States and with a total of 558 loading doors in Canada. The 10 largest
terminals in Vitrans LTL segment, in terms of the number of loading doors, are listed below. Terminals
    
    Doors
    
    Owned/ LeasedToronto
    
    
    132
    
    
    LeasedIndianapolis
    
    
    116
    
    
    LeasedMontreal
    
    
    85
    
    
    OwnedVancouver
    
    
    85
    
    
    OwnedChicago
    
    
    81
    
    
    LeasedWinsted
    
    
    78
    
    
    OwnedEdmonton
    
    
    69
    
    
    OwnedSt. Louis
    
    
    65
    
    
    LeasedMinneapolis
    
    
    62
    
    
    LeasedCalgary
    
    
    47
    
    
    Leased
 In addition to two warehouse facilities, Vitrans Logistics business operates two dedicated
flow-through facilities, one in Canada, and the other in the United States, for major retailers in
their respective markets. Vitrans Truckload business operates two terminals, one in Indianapolis
and the other in Atlanta. 
 ITEM 3 LEGAL PROCEEDINGS Vitran is subject to various legal proceedings and claims that have arisen in the ordinary
course of its business that have not been fully adjudicated. Many of these are covered in whole or
in part by insurance. The management of Vitran does not believe that these actions, when finally
concluded and determined, will have a significant adverse effect upon Vitrans financial condition,
results of operations or cash flows. 
 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 
 PART II 
 ITEM 5 MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Description of Share Capital The Company at the April 21st, 2004 Annual and Special Meeting of Shareholders
received approval to eliminate from the Companys authorized capital the Class B non-voting shares

and the first preference shares. The Class A voting shares were redesignated as common shares. At December 31, 2004, there were an unlimited number of shares authorized and 12,419,678
common shares issued and outstanding. The holders of the common shares are entitled to one vote
for each common share on all matters voted on at any meetings of Vitrans shareholders, to any
dividends that may be declared by the Companys Board of Directors thereon and, in the event of the
liquidation, dissolution or winding up of the Company, will be entitled to receive the remaining
property. 7




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Vitrans common shares trade on The Toronto Stock Exchange (TSX) and the American Stock
Exchange (AMEX) under the symbols: vtn and vvn respectively. On February 14, 2005, there were
approximately 46 registered holders of record of the Companys common shares. Vitran did not pay any dividends on common shares in fiscal 2004 and 2003. The Company ceased
paying dividends in December 2001. The board of directors is responsible for determining the
Companys dividend policy and does not intend to declare dividends in the foreseeable future. The following table sets forth the high and low bid prices of our common stock for the periods
indicated, as reported by the TSX and the AMEX: TSX
    
    
    AMEXQuarter
    
    High
    
    
    Low
    
    
    Volume
    
    
    High
    
    
    Low
    
    
    Volume(in Canadian dollars)
    
    
    (in United States dollars)2004Fourth Quarter
    
    $
    22.00
    
    
    $
    18.25
    
    
    
    604,600
    
    
    $
    18.00
    
    
    $
    14.87
    
    
    
    2,365,400Third Quarter
    
    $
    23.48
    
    
    $
    17.94
    
    
    
    403,600
    
    
    $
    17.55
    
    
    $
    13.80
    
    
    
    2,696,400Second Quarter
    
    $
    22.64
    
    
    $
    18.20
    
    
    
    510,800
    
    
    $
    16.60
    
    
    $
    14.02
    
    
    
    3,055,200First Quarter
    
    $
    22.22
    
    
    $
    17.50
    
    
    
    844,000
    
    
    $
    16.14
    
    
    $
    13.15
    
    
    
    3,786,5002003Fourth Quarter
    
    $
    20.00
    
    
    $
    13.90
    
    
    
    729,900
    
    
    $
    15.00
    
    
    $
    10.30
    
    
    
    4,356,000Third Quarter
    
    $
    14.50
    
    
    $
    9.25
    
    
    
    2,770,200
    
    
    $
    10.75
    
    
    $
    7.00
    
    
    
    3,351,300Second Quarter
    
    $
    9.00
    
    
    $
    8.25
    
    
    
    1,402,566
    
    
    $
    7.00
    
    
    $
    5.65
    
    
    
    577,600First Quarter
    
    $
    9.08
    
    
    $
    7.96
    
    
    
    1,375,700
    
    
    $
    6.00
    
    
    $
    5.05
    
    
    
    521,0002002Fourth Quarter
    
    $
    8.24
    
    
    $
    6.83
    
    
    
    77,700
    
    
    $
    5.29
    
    
    $
    4.55
    
    
    
    104,600Third Quarter
    
    $
    7.95
    
    
    $
    6.07
    
    
    
    98,300
    
    
    $
    5.12
    
    
    $
    3.80
    
    
    
    117,000Second Quarter
    
    $
    8.20
    
    
    $
    4.26
    
    
    
    217,100

    
    
    $
    5.43
    
    
    $
    2.80
    
    
    
    179,400First Quarter
    
    $
    5.35
    
    
    $
    3.25
    
    
    
    217,300
    
    
    $
    3.48
    
    
    $
    1.98
    
    
    
    61,800
 TSX
    
    
    AMEX2004 Monthly
    
    High
    
    
    Low
    
    
    Volume
    
    
    High
    
    
    Low
    
    
    Volume(in Canadian dollars)
    
    
    (in United States dollars)December
    
    $
    22.00
    
    

    $
    19.37
    
    
    
    225,500
    
    
    $
    18.00
    
    
    $
    16.15
    
    
    
    496,900November
    
    $
    20.52
    
    
    $
    18.25
    
    
    
    314,000
    
    
    $
    17.48
    
    
    $
    16.30
    
    
    
    1,311,000October
    
    $
    21.00
    
    
    $
    18.25
    
    
    
    65,100
    
    
    $
    16.59
    
    
    $
    14.87
    
    
    
    557,500September
    
    $
    19.42
    
    
    $
    17.94
    
    
    
    338,400
    
    
    $
    15.05
    
    
    $
    13.85
    
    
    
    731,100August
    
    $
    22.60
    
    
    $
    18.00
    
    
    
    4,800
    
    
    $
    16.10
    
    
    $
    13.80
    
    
    
    1,107,800July
    
    $
    23.48
    
    
    $
    20.66
    
    
    
    60,400
    
    
    $
    17.55
    
    
    $
    15.85
    
    
    
    857,500June
    
    $
    22.64
    
    
    $
    21.56
    
    
    
    169,400
    
    
    $
    16.60
    
    
    $
    15.40
    
    
    
    823,500May
    
    $
    21.72
    
    
    $
    20.00
    
    
    
    50,600
    
    
    $
    16.25
    
    
    $
    14.50
    
    
    
    681,500April
    
    $
    20.99
    
    
    $
    18.20
    
    
    
    290,800
    
    
    $
    15.50
    
    
    $
    14.02
    
    
    
    1,550,200March
    
    $
    20.50
    
    
    $
    17.50
    
    
    
    343,500
    
    
    $
    15.60
    
    
    $
    13.15
    
    
    
    1,348,800February
    
    $
    21.15
    
    
    $
    18.40
    
    
    
    335,600
    
    
    $
    16.05
    
    
    $
    14.60
    
    
    
    1,210,500January
    
    $
    22.22
    
    
    $
    17.64
    
    
    
    164,900
    
    
    $
    16.14
    
    
    $
    13.85
    
    
    
    1,227,200
 8




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##### Table of Contents



Stock Option Plan Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    for future issuancesecurities to be
    
    
    
    
    
    (excludingissued upon
    
    Weighted average
    
    securitiesexercise of
    
    exercise price of
    
    reflected in columnPlan Category
    
    outstanding options
    
    outstanding options
    
    (a))(a)
    
    
    
    (b)
    
    
    
    (c)Equity compensation plans approved by security holders
    
    
    796,800
    
    
    $
    8.44
    
    
    
    395,000Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total (1)
    
    
    796,800
    
    
    $
    8.44
    
    
    
    395,000
    Vitran maintains a stock option plan to assist in attracting, retaining and motivating
its directors, officers and employees. The details of the Companys authorized stock option plan
are described in Note 7 of the Consolidated Financial Statements. Use of Proceeds In December of 2003, Vitran, together with the lead underwriting firm, Avondale Partners,
issued 2,300,000 common shares for gross proceeds of $31.6 million in a public offering.
Commissions to the underwriters amounted to $1.6 million and other expenses of the offering
amounted to $0.6 million resulting in net proceeds of $29.4 million. It is the intention of
Vitrans management to use the net proceeds from the public offering to fund possible future
acquisitions, capital expenditures and repay amounts outstanding under credit facilities. Transfer Agents Computershare Investor Services Inc.
    
    Montreal, Toronto
    
    CanadaComputershare Trust Company Inc.
    
    Denver
    
    United States
 
 ITEM 6 SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with the Consolidated
Financial Statements and Notes under Item 8 of this Annual Report on Form 10-K. For a summary of
quarterly financial data for fiscal 2004 and 2003 please see the Supplemental Schedule of Quarterly
Financial Information included in the Consolidated Financial Statements. For a summary of
measurement and disclosure differences between Canadian and United States accounting policies
please see Note 14 to the Consolidated Financial Statements. Please note that there is no
difference in Vitrans 2004 reported net income under Canadian and United States GAAP. 9




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##### Table of Contents



Selected Financial Data(Thousands of dollars, except per share amounts) Year
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Canadian GAAPStatements of IncomeRevenue
    
    $
    374,595
    
    
    $
    331,826
    
    
    $
    303,595
    
    
    $
    310,477
    
    
    $
    323,223Income from continuing operations
before depreciation expense (1)
    
    
    24,183
    
    
    
    20,308
    
    
    
    17,817
    
    
    
    13,938
    
    
    
    22,746Income from continuing operations
    
    
    18,977
    
    
    
    14,814
    
    
    
    12,509
    
    
    
    7,586
    
    
    
    15,841Net income from continuing operations
    
    
    14,943
    
    
    
    10,336
    
    
    
    6,938
    
    
    
    2,335
    
    
    
    6,665Net loss on discontinued operations,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,696
    )
    
    
    (278
    )Net income (loss)
    
    $
    14,943
    
    
    $
    10,336
    
    
    $
    6,938
    
    
    $
    (1,361
    )
    
    $
    6,387Earnings per share basic:Net income from continuing operations
    
    $
    1.22
    
    
    $
    1.07
    
    
    $
    0.72
    
    
    $
    0.24
    
    
    $
    0.67Net income (loss)
    
    $
    1.22
    
    
    $
    1.07
    
    
    $
    0.72
    
    
    $
    (0.14
    )
    
    $
    0.65Weighted average number of shares
    
    
    12,285,400
    
    
    
    9,684,901
    
    
    
    9,691,041
    
    
    
    9,859,296
    
    
    
    9,894,727Earnings per share diluted:Net income from continuing operations
    
    $
    1.17
    
    
    $
    1.01
    
    
    $
    0.71
    
    
    $
    0.24
    
    
    $
    0.67Net income (loss)
    
    $
    1.17
    
    
    $
    1.01
    
    
    $
    0.71
    
    
    $
    (0.14
    )
    
    $
    0.65Weighted average number of shares
    
    
    12,740,477
    
    
    
    10,263,211
    
    
    
    9,784,066
    
    
    
    9,859,296
    
    
    
    9,894,727United States GAAP(2)Revenue
    
    $
    374,595
    
    
    $
    331,826
    
    
    $
    303,595
    
    
    $
    310,477
    
    
    $
    323,223Income from continuing operations
before depreciation expense
    
    
    24,183
    
    
    
    20,044
    
    
    
    17,373
    
    
    
    13,524
    
    
    
    22,746Income from continuing operations
    
    
    18,977
    
    
    
    14,550
    
    
    
    12,065
    
    
    
    7,172
    
    
    
    15,841Net income from continuing operations
    
    
    14,943
    
    
    
    10,336
    
    
    
    6,494
    
    
    
    1,921
    
    
    
    6,665Net loss on discontinued operations,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,696
    )
    
    
    (278
    )Change in method for accounting for
goodwill
    
    
    
    
    
    
    
    
    
    
    (3,023
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    14,943
    
    
    $
    10,336
    
    
    $
    3,471
    
    
    $
    (1,775
    )
    
    $
    6,387Earnings per share basic:Net income from continuing operations
    
    $
    1.22
    
    
    $
    1.07
    
    
    $
    0.67
    
    
    $
    0.19
    
    
    $
    0.67Net income (loss)
    
    $
    1.22
    
    
    $
    1.07
    
    
    $
    0.36
    
    
    $
    (0.18
    )
    
    $
    0.65Weighted average number of shares
    
    
    12,285,400
    
    
    
    9,684,901
    
    
    
    9,691,041
    
    
    
    9,859,296
    
    
    
    9,894,727Earnings per share diluted:Net income from continuing operations
    
    $
    1.17
    
    
    $
    1.01
    
    
    $
    0.66
    
    
    $
    0.19
    
    
    $
    0.67Net income (loss)
    
    
    1.17
    
    
    
    1.01
    
    
    
    0.35
    
    
    
    (0.18
    )
    
    
    0.65Weighted average number of shares
    
    
    12,740,477
    
    
    
    10,263,211
    
    
    
    9,784,066
    
    
    
    9,859,296
    
    
    
    9,894,727Dividends per share $US
    
    Nil
    
    
    Nil
    
    
    Nil
    
    
    $
    0.023
    
    
    $
    0.047Dividends per share $Cdn
    
    Nil
    
    
    Nil
    
    
    Nil
    
    
    $
    0.035
    
    
    $
    0.070
 10




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##### Table of Contents



Selected Financial Data (continued)(Thousands of dollars, except per share amounts) Year
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Balance Sheets (Canadian and United
States GAAP)Assets:Current assets
    
    $
    90,177
    
    
    $
    85,046
    
    
    $
    46,746
    
    
    $
    52,537
    
    
    $
    54,165Property and equipment, net
    
    
    37,563
    
    
    
    35,102
    
    
    
    30,787
    
    
    
    32,032
    
    
    
    39,434Goodwill, net
    
    
    45,304
    
    
    
    44,865
    
    
    
    43,869
    
    
    
    46,874
    
    
    
    48,653Total assets
    
    $
    173,044
    
    
    $
    165,013
    
    
    $
    121,402
    
    
    $
    131,443
    
    
    $
    142,252Liabilities and Stockholders Equity:Current liabilities
    
    $
    38,806
    
    
    $
    46,412
    
    
    $
    36,061
    
    
    $
    37,993
    
    
    $
    43,515Long-term debt
    
    
    11,507
    
    
    
    17,931
    
    
    
    30,504
    
    
    
    40,013
    
    
    
    40,341Other non-current liabilities
    
    
    3,546
    
    
    
    2,715
    
    
    
    2,767
    
    
    
    3,602
    
    
    
    4,184Minority interest
    
    Nil
    
    
    Nil
    
    
    Nil
    
    
    Nil
    
    
    
    397Total stockholders equity 
Canadian GAAP
    
    $
    119,185
    
    
    $
    97,955

    
    
    $
    52,070
    
    
    $
    49,836
    
    
    $
    53,356Total stockholders equity  United
States GAAP
    
    $
    118,826
    
    
    $
    97,590
    
    
    $
    51,853
    
    
    $
    49,923
    
    
    $
    52,847Total commitments under operating lease
    
    $
    46,564
    
    
    $
    48,580
    
    
    $
    57,475
    
    
    $
    56,338
    
    
    $
    53,907Operating Ratios(3)Total company
    
    
    94.9
    %
    
    
    95.5
    %
    
    
    95.9
    %
    
    
    97.6
    %
    
    
    95.1
    %Less-than-truckload
    
    
    94.2
    %
    
    
    94.3
    %
    
    
    94.6
    %
    
    
    96.6
    %
    
    
    93.7
    %Logistics
    
    
    95.3
    %
    
    
    96.2
    %
    
    
    96.5
    %
    
    
    99.8
    %
    
    
    98.7
    %Truckload
    
    
    94.5
    %
    
    
    98.2
    %
    
    
    98.0
    %
    
    
    97.4
    %
    
    
    95.4
    %
     (1)
    Income from continuing operations before depreciation expense (EBITD) is a non-GAAP
financial measure which does not have any standardized meaning prescribed by GAAP. EBITD
represents net income, plus net loss on discontinued operations, plus amortization of
goodwill, minus minority interest, plus (minus) income tax expense (benefit), plus net
interest expense, and plus depreciation. The Company believes EBITD is useful in evaluating
its operating performance compared to that of other companies in its industry, as the
calculation of EBITD eliminates the effects of financing, income taxes and the accounting
effects of capital spending, which items may vary for different companies for reasons
unrelated to overall operating performance. When analyzing its operating performance,
however, investors should use EBITD in addition to, not as an alternative for, income from
operations and net income, as those items are defined by GAAP. Investors should also note
that the Companys presentation of EBITD may not be comparable to similarly titled measures
used by other companies. EBITD is reconciled to net income as follows: Year ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Net income
    
    $
    14,943
    
    
    $
    10,336
    
    
    $
    6,938
    
    
    $
    (1,361
    )
    
    $
    6,387Net loss on discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,696
    
    
    
    278Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,350
    
    
    
    1,211Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    (33
    )Income tax expense
    
    
    3,983
    
    
    
    3,158
    
    
    
    2,282
    
    
    
    153
    
    
    
    3,139Interest expense, net
    
    
    51
    
    
    
    1,320
    
    
    
    3,289
    
    
    
    3,833
    
    
    
    4,859Depreciation
    
    
    5,206
    
    
    
    5,494
    
    
    
    5,308
    
    
    
    6,352
    
    
    
    6,905EBITD
    
    $
    24,183
    
    
    $
    20,308
    
    
    $
    17,817
    
    
    $
    13,938
    
    
    $
    22,746
  (2)
    Please see Note 14 to the Consolidated Financial Statements for differences between Canadian
and United States GAAP.  (3)
    Operating ratio (OR) is a non-GAAP financial measure which does not have any standardized
meaning prescribed by GAAP. OR is the sum of operating expenses, selling, general and
administrative expenses, other expenses (income), and depreciation expense, divided by
revenue. OR allows management to measure the Company and its various segments operating
efficiency. OR is a widely recognized measure in the transportation industry which provides a
comparable benchmark for evaluating the Companys performance compared to its competitors.
Investors should also note that the Companys presentation of OR may not be comparable to
similarly titled measures by other companies. OR is calculated as follows: Year ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Operating expenses
    
    $
    319,295
    
    
    $
    282,016
    
    
    $
    254,405
    
    
    $
    263,524
    
    
    $
    268,131Selling, general and
administrative
expenses
    
    
    31,263
    
    
    
    29,366
    
    
    
    31,084
    
    
    
    32,291
    
    
    
    31,673Other expenses (income)
    
    
    (146
    )
    
    
    136
    
    
    
    289
    
    
    
    724
    
    
    
    673Depreciation expense
    
    
    5,206
    
    
    
    5,494
    
    
    
    5,308
    
    
    
    6,352
    
    
    
    6,905$
    355,618
    
    
    $
    317,012
    
    
    $
    291,086
    
    
    $
    302,891
    
    
    $
    307,382Revenue

    
    $
    374,595
    
    
    $
    331,826
    
    
    $
    303,595
    
    
    $
    310,477
    
    
    $
    323.223Operating ratio (OR)
    
    
    94.9
    %
    
    
    95.5
    %
    
    
    95.9
    %
    
    
    97.6
    %
    
    
    95.1
    %
 11




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##### Table of Contents



ITEM 7 MANAGEMENT DISCUSSION AND ANALYSIS Forward-Looking Statements: This MD&A contains forward-looking statements within the meaning of the United States Private
Securities Litigation Reform Act of 1995 concerning Vitrans business, operations, and financial
performance and condition. When used in this MD&A the words believe, anticipate, intend, estimate, expect,
project, may, plans, continue, focus, endeavor and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements contain such
words. These forward-looking statements are based on current expectations and are naturally
subject to uncertainty and changes in circumstances that may cause actual results to differ
materially from those expressed or implied by such forward-looking statements. Specifically, but not limited to, this MD&A and the documents incorporated by reference
contain forward-looking statements regarding:  
    our objective to expand or acquire an LTL operation in a new regional market
    our intention to achieve an above average transborder growth rate
    our plan to develop revenue, density and yield improvements
    our intention to improve linehaul efficiency and dock operations
    our focus on driver retention Such forward-looking statements involve known and unknown risks, uncertainties and other
factors that may cause Vitrans actual results, performance or achievements to differ materially
from any future results, performance or achievements expressed or implied by such forward-looking
statements. Factors that may cause such differences include but are not limited to technological
change, regulatory change, the general health of the economy and competitive factors. More
detailed information about these and other factors is included in the MD&A. Many of these factors
are beyond the Companys control; therefore, future events may vary substantially from what the
Company currently foresees. You should not place undue reliance on such forward-looking statements.
Vitran Corporation Inc. is under no obligation to update or alter such forward-looking statements
whether as a result of new information, future events or otherwise. Unless otherwise indicated all
dollar references herein are in U.S. dollars. The Companys Annual Report onForm 10-K, as well as
all the Companys other required filings, may be obtained from
the Company at www.vitran.com or
from www.sedar.com or from www.sec.gov. OVERVIEW Vitran Corporation Inc. (Vitran or the Company) is a leading, predominately non-union,
provider of surface transportation and related logistics services throughout Canada and in 18
states in the central and southern United States (the Central States). Its business consists of
three operating segments: (1) Less-than-truckload services (LTL), (2) Logistics services, and (3)
Truckload services. These services are provided by stand-alone business units within their
respective regions. Depending on a customers needs, the units can operate independently or in a
complementary manner. As more fully described in Item 1 Business, the LTL segment transports
shipments in less than full trailer load quantities through freight service center networks, the
Logistics segment provides supply chain solutions and freight brokerage services and the Truckload
segment delivers full trailer loads point to point on a predominantly short haul basis. 12




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##### Table of Contents



Vitrans operating results are generally expected to depend on the number and weight of
shipments transported, the prices received for the services provided, and the mix of services
supplied to clients. Therefore, Vitran must manage its fixed and variable operating cost
infrastructure to fluctuating volumes to realize appropriate margins while maintaining the quality
service expected by its customers. The long-term mission of the Company is to build a North American transportation
infrastructure with national and regional coverage in both Canada and the United States offering
regional, interregional, national, and transborder LTL services. In conjunction with the LTL
services, Vitran will also focus on logistics service offerings that are not only profitable as
stand-alone business opportunities, but also increase the utilization of LTL freight service assets
where appropriate. EXECUTIVE SUMMARY In 2004 Vitran achieved its all-time best financial results. Notwithstanding the CN Railway
strike in the first quarter and subsequent rail capacity issues that persisted through 2004 that
affected its LTL segment and a 23% dilution of the Companys outstanding common shares due the
Companys equity offering completed in the fourth quarter of 2003, records were achieved in: Revenue
    
    $374.6 million,Income from operations
    
    $19.0 million,Net income
    
    $14.9 million and,Earnings-per-share, diluted
    
    $1.17.
 All three of the Companys operating segments, LTL, Truckload and Logistics, contributed to
the year-over-year improvements that were driven by an improved economy, company-specific
initiatives and tighter capacity. In its fourth quarter, although a seasonally challenging
quarter, Vitran posted its thirteenth consecutive quarter of year-over-year improved net income. The Company generated cash flows from operations of $21.6 million in 2004 of which $11.7
million was used to reduce long-term debt to a ten-year low of $14.5 million. During the fourth
quarter, the Company improved its financial capacity to pursue opportunistic growth strategies by
increasing the availability under its revolving credit facility to $35.0 million and extending the
repayment of its term credit facility an additional thirteen months. CONSOLIDATED RESULTS The following table summarizes the Consolidated Statements of Income for the three years ended
December 31: (in thousands)
    
    2004
    
    
    2003
    
    
    2002
    
    
    2004 vs 2003
    
    2003 vs 2002Revenue
    
    $
    374,595
    
    
    $
    331,826
    
    
    $
    303,595
    
    
    
    12.9
    %
    
    
    9.3
    %Operating expenses
    
    
    319,295
    
    
    
    282,016
    
    
    
    254,405
    
    
    
    13.2
    %
    
    
    10.8
    %SG&A expenses
    
    
    31,263
    
    
    
    29,366
    
    
    
    31,084
    
    
    
    6.5
    %
    
    
    (5.5
    %)Other expenses
(income)
    
    
    (146
    )
    
    
    136
    
    
    
    289
    
    
    
    (207.4
    %)
    
    
    (52.9
    %)Depreciation
    
    
    5,206
    
    
    
    5,494
    
    
    
    5,308
    
    
    
    (5.2
    %)
    
    
    3.5
    %Income from
operations
    
    
    18,977
    
    
    
    14,814
    
    
    
    12,509
    
    
    
    28.1
    %
    
    
    18.4
    %Interest expense, net
    
    
    51
    
    
    
    1,320
    
    
    
    3,289
    
    
    
    96.1
    %
    
    
    (59.9
    %)Net income
    
    
    14,943
    
    
    
    10,336
    
    
    
    6,938
    
    
    
    44.6
    %
    
    
    49.0
    %
 13




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##### Table of Contents



Consolidated Results (continued) 2004
    
    
    2003
    
    
    2002
    
    
    2004 vs 2003
    
    2003 vs 2002Earning per share:Basic
    
    $
    1.22
    
    
    $
    1.07
    
    
    $
    0.72
    
    
    
    14.0
    %
    
    
    48.6
    %Diluted
    
    
    1.17
    
    
    
    1.01
    
    
    
    0.71
    
    
    
    15.8
    %
    
    
    42.3
    %Operating ratio
    
    
    94.9
    %
    
    
    95.5
    %
    
    
    95.9
    %
 Results of Operations 2004 Compared to 2003 Revenue increased 12.9% to $374.6 million in 2004 from $331.8 million in 2003. Revenue in the
LTL, Truckload and Logistics segments increased 12.2%, 9.3% and 23.9%, respectively, contributing
to the consolidated improvement. Income from operations improved 28.1% to $19.0 million in 2004
from $14.8 million in 2003. All three segments, LTL, Truckload and Logistics, contributed to the
improvement posting increases of 14.4%, 226.9% and 53.9%, respectively, to their income from
operations. Accordingly, the Companys consolidated operating ratio improved to 94.9% in 2004 from
95.5% in 2003. Detailed explanations for the improvements in revenue and income from operations
are discussed below in Segmented Results. Selling, general and administrative expenses (SG&A) increased 6.5% to $31.3 million in 2004
from $29.4 million in 2003. The increase is partially attributable to the earlier adoption of new
accounting standards for the expensing of employee stock options. The new standard was applied
prospectively and in 2004 resulted in a $0.3 million non-cash employee stock option expense
compared to nil in 2003. An increase in Sarbanes-Oxley 404 certification expenses added an
additional $0.2 million in 2004 compared to 2003. The Companys 2003 results include a foreign
exchange gain of $0.4 million from the repatriation of capital from a foreign subsidiary and from
the sale proceeds from the equity offering in the fourth quarter of 2003. The remaining component
of the increase is primarily the result of increases to workers compensation and health care
expenses in the United States. Depreciation expense declined 5.2% to $5.2 million in 2004 from $5.5 million in 2003. The
Company changed the estimated useful life for its tractors from seven years to eight years and its
trailers from ten years to twelve years to more accurately reflect the actual useful life of its
equipment. This change in estimate was recorded prospectively and resulted in a $0.7 million
reduction in depreciation expense for 2004 compared to 2003. Interest expense net of interest income was $0.1 million for 2004 compared to $1.3 million for
2003. This reduction was primarily due to the Companys $33.1 million in short-term investments
generating interest income of $0.7 million. As well, the Company repaid $11.7 million of its
outstanding debt obligations and had a 50-basis- point reduction in interest rate spreads starting
in February 2004. Income tax expense for 2004 was $4.0 million compared to $3.2 million in 2003. In the fourth
quarter of 2004, the Company recorded a one-time deferred tax benefit of $0.7 million attributable
to the reduction in the valuation allowance on loss carryforwards. The effective tax rate,
excluding the one-time deferred tax benefit, was 24.7% for 2004 compared to 23.4% 2003. The
increase in the effective tax rate can be attributed to an increase in statutory rates as well as a
higher proportion of income being earned in higher tax jurisdictions. Net income improved by 44.6% to $14.9 million for 2004, compared to $10.3 million in 2003.
This resulted in basic and diluted earnings per share of $1.22 and $1.17 for the current year,
compared to $1.07 and $1.01 in 2003. The weighted average number of shares for 2004 was 12.3
million basic and 12.7 million diluted compared to 9.7 million basic and 10.3 million diluted
shares in 2003. The weighted average number of shares for 2004 includes the Companys 2.3 million
share equity offering in the fourth quarter of 2003, and dilution resulting from a majority of
outstanding stock options in the money in 2004. 14




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##### Table of Contents



SEGMENTED RESULTS LTL (Less-than-truckload) The table below provides summary information for the LTL segment for the three years ended
December 31: (in thousands)
    
    2004
    
    
    2003
    
    
    2002
    
    
    2004 vs 2003
    
    2003 vs 2002Revenue
    
    $
    303,017
    
    
    $
    270,189
    
    
    $
    241,916
    
    
    
    12.2
    %
    
    
    11.7
    %Income from operations
    
    
    17,604
    
    
    
    15,386
    
    
    
    12,968
    
    
    
    14.4
    %
    
    
    18.6
    %Operating ratio
    
    
    94.2
    %
    
    
    94.3
    %
    
    
    94.6
    %Number of shipments(1)
    
    
    2,415,204
    
    
    
    2,311,935
    
    
    
    2,238,119
    
    
    
    4.47
    %
    
    
    3.30
    %Weight (000s of lbs)(2)
    
    
    3,894,005
    
    
    
    3,680,893
    
    
    
    3,536,004
    
    
    
    5.79
    %
    
    
    4.10
    %Revenue per shipment(3)
    
    $
    125.47
    
    
    $
    116.87
    
    
    $
    108.09
    
    
    
    7.36
    %
    
    
    8.12
    %Revenue per hundredweight(4)
    
    
    7.78
    
    
    
    7.34
    
    
    
    6.84
    
    
    
    5.99
    %
    
    
    7.31
    %
 In spite of the CN Railway strike in the first quarter and railway capacity issues that
persisted through the remainder of 2004 that significantly reduced LTL revenue, the segment
increased revenue by 12.2% to $303.0 million from $270.2 million in 2003. Revenue increases were
recorded throughout the Canadian and U.S. infrastructure in all lines of business: regional,
national, expedited and, most notably, a 29.3% increase in transborder revenue. A firm pricing
environment within the LTL segment coupled with an improved economy led to increased shipments,
tonnage and revenue per hundredweight of 4.47%, 5.79% and 5.99%, respectively. Consequently,
income from operations improved 14.4% to $17.6 million in 2004 compared to $15.4 million in 2003. Despite the 14.4% improvement in income from operations, the 2004 LTL segment operating ratio
of 94.2% was only slightly better than the 94.3% recorded in 2003. The aforementioned CN Railway
strike in the first quarter of 2004, as well as railway capacity and railway operating challenges
that persisted through the balance of the year, caused expenses in the national line of business to
rise. This resulted in an increase in linehaul expenses and dock wages as a percentage of revenue
compared to same period last year. Logistics The table below provides summary information for the Logistics segment for the three years
ended December 31: (in thousands)
    
    2004
    
    
    2003
    
    
    2002
    
    
    2004 vs 2003
    
    2003 vs 2002Revenue
    
    $
    35,499
    
    
    $
    28,642
    
    
    $
    27,665
    
    
    
    23.9
    %
    
    
    3.5
    %Income from
operations
    
    
    1,668
    
    
    
    1,084
    
    
    
    955
    
    
    
    53.9
    %
    
    
    13.5
    %Operating ratio
    
    
    95.3
    %
    
    
    96.2
    %
    
    
    96.5
    %
 Revenue and income from operations for the Logistics segment were up 23.9% and 53.9% for 2004
compared to 2003. Revenue increases were attributable to improvements across all the Logistics
business units with strong growth coming from the supply chain unit. Revenue growth outpaced
income from operations increases, as the supply chain unit worked to fill the capacity of its new
distribution facility opened at the end of the 2004 second quarter. Gross margin declined 1.5% in
the second half of 2004 compared to 2003; however, once the capacity of the new facility is fully
utilized in 2005, operating expenses as a percentage of revenue should decline and gross margin and
operating ratio should improve. 15




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##### Table of Contents



Truckload The table below provides summary information for the Truckload segment for the three years
ended December 31: (in thousands)
    
    2004
    
    
    2003
    
    
    2002
    
    
    2004 vs 2003
    
    2003 vs 2002Revenue
    
    $
    36,079
    
    
    $
    32,995
    
    
    $
    34,014
    
    
    
    9.3
    %
    
    
    (3.0
    %)Income from
operations
    
    
    1,968
    
    
    
    602
    
    
    
    679
    
    
    
    226.9
    %
    
    
    (11.3
    %)Operating ratio
    
    
    94.5
    %
    
    
    98.2
    %
    
    
    98.0
    %
 Revenue for the Truckload segment increased 9.3% to $36.1 million in 2004 from $33.0 million
in 2003. With a strong pricing environment in the midwestern U.S. attributable to a tight driver
market that reduced capacity in the truckload market place, the Companys Truckload segment focused
on better yielding freight in 2004. Consequently, revenue per total mile(5) has
increased by 12.5% while empty mileshave decreased by 19.9%. Total shipments for 2004
decreased 5.8% compared to 2003; however, this was offset by the 16.2% increase in revenue per
shipment versus 2003. The aforementioned revenue quality development and yield progress increased
gross margin to 15.5% in 2004, resulting in the operating ratio improving to 94.5% from 98.2% in
2003. RESULTS OF OPERATIONS 2003 COMPARED TO 2002 Consolidated Results Revenue increased 9.3% to $331.8 million in 2003 from $303.6 million in 2002. Revenue in the
LTL segment and Logistics segment increased 11.7% and 3.5%, respectively, contributing to the
consolidated improvement in revenue, despite a lackluster economy for most of the year. Offsetting
this progress was a 3.0% decline in revenue in the Truckload segment. Income from operations rose by 18.4% from $12.5 million in 2002 to $14.8 million in 2003
driven by the improvement in revenue as well as operating improvements. Ongoing cost controls and
the reduction of discretionary spending also contributed to improved operating income. In 2003,
Vitran recorded foreign exchange gains totaling $0.4 million from the repatriation of capital from
a foreign subsidiary and from the sale of proceeds from the equity offering. The Companys 2002
results include foreign exchange gains of $0.6 million offset by the one-time special retirement
bonus of $0.6 million to the founding President and Chief Executive Officer. The net impact of the
items discussed above was that the consolidated operating ratio for 2003 improved to 95.5% compared
to 95.9% in 2002. Interest expense net of interest income was $1.3 million in 2003 compared to $3.3 million in
2002. The decline is attributable to the Company repaying $11.4 million of its outstanding debt
obligations and a 50-basis-point reduction in interest rate spreads due to the Company meeting
certain debt obligations in 2003. As well, the Companys 8.95% fixed interest rate swap expired on
January 26, 2003 and was not renewed. Accordingly, all of the Companys borrowings were at
floating interest rates based on LIBOR. Income tax expense in 2003 was $3.2 million compared to $2.3 million in 2002, reflecting
higher profitability in 2003. The effective tax rate, however, was lower in 2003 than in 2002
resulting from declines in statutory rates as well as a higher proportion of income being earned in
lower tax jurisdictions. Net income improved by 49.0% to $10.3 million in 2003 compared to $6.9 million in 2002. This
resulted in record earnings of $1.07 per share basic and $1.01 per share diluted in 2003, compared
to $0.72 per share basic and $0.71 per share diluted in 2002. The weighted average number of
shares for 2003 was similar to 2002 at 9.7 million; however, the diluted number of shares increased
to 10.3 million in 2003 compared to 9.8 million in 2002. The increase is primarily attributable to
the significant increase in the market price of the Company stock compared to the average
historical price of the Companys stock options. As at December 31, 2003 all outstanding stock
options were in the money. 16




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##### Table of Contents



Segmented Results LTL (Less-than-truckload) In spite of the continued lackluster performance of the North American economy, revenue at the
LTL segment increased from $241.9 million in 2002 to $270.2 million in 2003, of which $13.4 million
resulted from the strengthening Canadian dollar. Of particular note was the 30.3% growth in the
LTL transborder activity during 2003. This is an important part of Vitrans business because it
provides the opportunity to add significant value to customers and, accordingly, is the Companys
highest margin business. The LTL segments operating ratio improved to 94.3% in 2003 from 94.6% in
2002. Improvements were demonstrated in both the Canadian LTL and US LTL business units. The
continuing effect of fuel price pressures in 2003 was successfully offset by the Companys ability
to pass through fuel price increases to its customers. The Canadian LTL business unit achieved superior performance in 2003, improving both revenue
and operating ratio year over year. Revenue increases were recorded in all four lines of business,
being national, regional, expedited and, most notably, the transborder offering. Shipments,
tonnage and revenue per hundredweight increased 7.4%, 6.7%, and 3.2%, respectively, largely as a
result of market share gains. The stronger revenue and yield led to an improved operating ratio and
offset increased costs generated by significant changes in the business units major third party
linehaul supplier. The US LTL business unit also surpassed its 2002 results and posted improvements in both
revenue and operating ratio for 2003. In addition to terminal rationalization and linehaul
optimization programs that yielded a 4.4% reduction in pick-up and delivery expenses, increases in
shipments, tonnage and revenue per hundredweight of 1.0%, 2.0%, and 1.8%, respectively, bolstered
income from operations for 2003. However, these achievements were partially offset by increases in
insurance and workers compensation expenses in 2003. Logistics Revenues for the Logistics segment were up 3.5% for 2003, and operating ratio improved to
96.2% in 2003 from 96.5% in 2002. Revenue increases at the Logistics business unit were
attributable to the increased occupancy at the new 80,000 square foot distribution facility in
Canada and the addition of a new five-year contract with a major Canadian shoe retailer. These
results were tempered by a 37.7% reduction of revenue at the U.S. Freight Brokerage business unit.
This reduction is the result of the program that was initiated in 2002 and completed in the third
quarter of 2003 to eliminate customers providing inadequate profitability. Truckload Revenue for the Truckload segment declined 3.0% to $33.0 million in 2003 from $34.0 million in
2002. While the Truckload segment successfully increased revenue per mile by 2.9% in 2003, overall
volumes declined due to the sluggish mid-west manufacturing sector and the plant relocation of a
significant customer. Consolidated shipments declined 8.4% in 2003, which had a negative impact on
profitability, and the operating ratio increased to 98.2% in 2003 from 98.0% in 2002.     (1)
    A shipment is a single movement of goods from a point of origin to its final destination as
described on a bill of lading document.  (2)
    Weight represents the total pounds shipped by each LTL business unit.  (3)
    Revenue per shipment represents revenue divided by the number of shipments.  (4)
    Revenue per hundredweight is the price obtained for transporting 100 pounds of LTL freight
from point to point, calculated by dividing the revenue for an LTL shipment by the
hundredweight (weight in pounds divided by 100) for a shipment.  (5)
    Revenue per total mile represents revenue divided by the total miles driven. 17




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##### Table of Contents



GENERAL RISKS AND UNCERTAINTIES The Company is exposed to a number of general risks and uncertainties that could impact the
results. The transportation industry is highly competitiveon the basis of both price and service. The
Company competes with regional, inter-regional and national LTL carriers, truckload carriers, third
party logistics companies and, to a lesser extent, small package carriers, air freight carriers and
railroads. The Company competes effectively in its markets by providing high quality and timely
service at competitive prices. The Companys business is sensitive to general economic conditionsand seasonal fluctuations,
although these factors are mitigated somewhat by the variable nature of many of the Companys
costs. Recessionary economic cycles and downturns in customer business cycles, as well as
downturns in the principal regional economies where the Companys operations are located may affect
results of operations. In the trucking industry for a typical year, the second and third quarters
usually have the highest business levels, while the first and fourth quarters generally have the
lowest business levels. The fourth quarter holiday season and adverse weather conditions,
generally experienced in the first quarter of the year, such as heavy snow and ice storms, have a
negative impact on operating results. Accordingly revenue and profitability are generally lowest
in the first and fourth quarters. Vitran is dependent on a major railroadfor its national LTL service in Canada. Any reduction
in service by the railroad is likely to increase costs for the Company and reduce the reliability,
timeliness and overall attractiveness of rail-based services. For example, the railroad labor
strike in the first quarter of 2004 and other service issues with the railroad have impacted the
results of operations of the Companys LTL segment. The Companys exposure to credit riskis not significant as it is not dependent on any
particular industry or customer. The Companys single largest customer accounted for 2.3% of
revenue in 2004. Labor represents Vitrans most significant cost and key to service quality. The Company has a
history of positive labor relationsthat will continue to be important to future success. The two
unionized terminals in Canada, representing 5.2% of the Companys labor force, is represented by
the International Brotherhood of Teamsters and the Canadian Autoworkers Association. The collective
bargaining agreements between the Company and its unionized employees expire on March 31, 2008 and
on September 30, 2008, respectively. The Company is dependent on its ability to hire and retain qualified driversincluding owner
operators. The ground transportation industry as a whole has experienced an imbalance in the
number of qualified drivers in 2004. The shortage has not affected the Company in 2004, but should
an imbalance in the number of qualified drivers persist, Vitran may adjust is compensation package
or operate with fewer drivers, all of which could impact profitability. Furthermore, the Company
is dependent on certain key managementpersonnel for the successful operation of the business.
Loss of key personnel could harm Vitrans operations and financial condition. The Company has exposure to foreign currency riskas fluctuations in the U.S. dollar against
the Canadian dollar can impact the financial results of the Company. Management has designated the
Companys $14.4 million of U.S. denominated long-term debt as a hedge to the foreign currency
exposure generated by the Companys U.S. operations. The Companys Canadian operations realize
foreign exchange gains and losses on the U.S. dollar revenue generated against expenses denominated
in Canadian dollars. Furthermore, the Company reports its results in U.S. dollars thereby exposing
the results of the Companys Canadian operations to foreign currency fluctuations. While diesel fuel expensesrepresent an important cost component to Vitran, the extensive use
of owner/operators and the ability to share significant fuel increases in the form of a fuel
surcharge with customers reduces this risk. The Company is subject to numerous laws and regulationby the DOT, Environmental Protection
Agency (EPA), and various other federal, state, provincial and municipal authorities. New or
more comprehensive laws and regulation including but not limited to fuel emission, driver
hours-of-service, taxation or other mandated regulation could impact profitability. 18




---



##### Table of Contents



Measures taken by the U.S. and Canadian governments to strengthen border security regulations
could impact service levels. Vitrans cross-border activity represented approximately 5.0% of the
LTL segment revenue in 2004 and the Company has responded to the new requirements to ensure
compliance and safety without jeopardizing the quality of service. The Company is exposed to interest rate riskat December 31, 2004 as its entire debt portfolio
bears interest at floating rates. In the past, management has used fixed interest rate instruments
to mitigate the exposure to fluctuations in interest rates and on an ongoing basis continues to
evaluate the Companys need to fix interest rates. The Company operates a highly capital intensivebusiness. Vitran depends on operating leases,
lines of credit, secured equipment financing and cash flow from operations to finance the purchase
of tractors, trailing fleet, information technology hardware and terminals. LIQUIDITY AND CAPITAL RESOURCES In 2004, the Company demonstrated improved cash flow, reducing interest-bearing debt while
preserving the proceeds from its December 2003 equity offering. As well, the Company amended its
existing credit agreement. Under the amended credit agreement, the available revolving credit
facility was increased from Cdn $25.0 million (US$19.0 million) to $35.0 million, and the term
facility was extended thirteen months to September 30, 2007. Cash flow from continuing operations before working capital changes for the year increased to
$21.6 million in 2004 compared to $15.4 million in 2003 due primarily to the increase in net
income. Non-cash working capital changes consumed $6.8 million primarily due to an increase in
accounts receivable attributable to higher revenue in 2004. The increase was, however, mitigated
by improved collections that resulted in 39.7 days sales outstanding for 2004 compared to 40.0 days
for 2003. Interest-bearing debt decreased to $14.5 million at the end of 2004 from $26.2 million at the
end of 2003. The interest-bearing debt is comprised of $14.4 million drawn under the term bank
credit facility and a capital lease of $0.1 million. During the year, the Company repaid $11.7
million of interest-bearing debt. At December 31, 2004, the Company had $30.6 million, of unused
credit facilities, net of outstanding letters of credit. At December 31, 2004, the Company increased its available capital on the balance sheet by $1.4
million to $40.8 million, consisting of $7.4 million of cash on hand as well as $33.1 million of
highly rated marketable securities. These investments, consisting of commercial paper and
preferred shares, provide certain tax advantages and are highly liquid at the option of the
Company. In December 2003, the Company issued and sold, in an underwritten public offering, 2,300,000
common shares in consideration for net proceeds of $29.4 million. It is the Companys intention to
use the funds for possible future acquisitions, capital expenditures or to repay amounts
outstanding under the Companys credit facilities. Capital expenditures amounted to $6.2 million for 2004 and were funded out of operating cash
flows of the Company. The majority of capital expenditures in 2004 were for the acquisition of
tractors and trailing fleet to maintain the quality of the Companys rolling stock. The table
below sets forth the Companys capital expenditures for the years ended December 31, 2004, 2003 and
2002. (in thousands of dollars)
    
    Year ended December 31,2004
    
    
    2003
    
    
    2002Real estate and buildings
    
    $
    346
    
    
    $
    359
    
    
    $
    2,349Tractors
    
    
    1,275
    
    
    
    520
    
    
    
    726Trailing fleet
    
    
    3,339
    
    
    
    4,488
    
    
    
    483Information technology
    
    
    626
    
    
    
    896
    
    
    
    464Leasehold improvements
    
    
    143
    
    
    
    77
    
    
    
    241Other equipment
    
    
    513
    
    
    
    555
    
    
    
    335Total
    
    $
    6,242
    
    
    $
    6,895
    
    
    $
    4,598
 19




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##### Table of Contents



Management estimates that cash capital expenditures for 2005 will be between $12.0 million and
$16.0 million, the majority of which will be for tractors and trailing equipment. The Company also
anticipates entering into operating leases to fund the acquisition of equipment with a capital cost
of between $3.0 million and $5.0 million. The Company has contractual obligations that include long-term debt consisting of a term debt
facility, capital leases for operating equipment in the Logistics segment and off-balance sheet
operating leases primarily consisting of tractor, trailing fleet and real estate leases. Operating
leases form an integral part of the Companys financial structure and operating methodology as they
provide an alternative cost effective and flexible form of financing. The following table
summarizes our significant contractual obligations and commercial commitments as of December 31,
2004: (in thousands of dollars)
    
    
    
    
    
    Payments due by periodContractual Obligations
    
    Total
    
    
    2005
    
    
    2006 & 2007
    
    
    2008 & 2009
    
    
    ThereafterLong-term debt
    
    $
    14,434
    
    
    $
    3,000
    
    
    $
    11,434
    
    
    $
    Nil
    
    
    $
    NilCapital lease obligations
    
    
    103
    
    
    
    30
    
    
    
    73
    
    
    Nil
    
    
    NilSub-total
    
    
    14,537
    
    
    
    3,030
    
    
    
    11,507
    
    
    Nil
    
    
    NilOff-balance sheet commitmentsOperating leases
    
    
    46,564
    
    
    
    14,349
    
    
    
    19,470
    
    
    
    8,783
    
    
    
    3,962Total contractual obligations
    
    $
    61,101
    
    
    $
    17,379
    
    
    $
    30,977
    
    
    $
    8,783
    
    
    $
    3,962
 In addition to the above noted contractual obligations, the Company, as at December 31,
2004, utilized the revolving credit facility for standby letters of credit of $4.4 million. The
letters of credit are used as collateral for self-insured retention of insurance claims. A significant decrease in demand for our services could limit the Companys ability to
generate cash flow and affect its profitability. The Companys credit agreement contains certain
financial maintenance tests that require the Company to achieve stated levels of financial
performance, which, if not achieved, could cause an acceleration of the payment schedules.
Management does not anticipate a significant decline in business levels or financial performance
and expects that existing working capital, together with available revolving facilities, is
sufficient to fund operating and capital requirements in 2005 as well as service the contractual
obligations. OUTLOOK Fiscal 2004 was another rewarding year for the Company. The LTL segment achieved a double
digit transborder growth rate and both the Canadian LTL and US LTL business units expanded revenue
and yield. The Logistics and Truckload segments posted significant improvements in 2004 compared
to 2003 by increasing their customer base and leveraging margins with existing customers. However,
despite evaluating a number of LTL acquisition targets in 2004, the Company did not expand into a
new regional market. Also, despite management efforts, the US LTL business unit did not reduce its
claims costs to desired levels in 2004. For 2005, Vitrans objective is still to acquire or develop its LTL operation in a new
regional market. Management will continue to evaluate LTL expansion opportunities with a view to
ensuring the appropriate fit to its existing LTL network. At December 31, 2004, the Company had
$40.5 million of cash and marketable securities, of which $29.4 million was raised in the December
2003 public offering. In addition, the Company has increased its financial capacity with a new
$35.0 million revolving credit facility. Management intends to continue its focus on the LTL transborder business with a view to
maintaining above average year-over-year revenue growth. The Canadian LTL business unit will
endeavor to improve third party linehaul efficiency activities and continue to evaluate the need to
change certain linehaul activities to Company-controlled rolling stock. The US LTL business unit
plans to execute its sales strategy that will increase revenue and density throughout the operation
without negatively impacting yield and on-time delivery performance. Furthermore, focus will be on
linehaul efficiency and dock operations with the objective of further reducing claims expense in
2005. 20




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##### Table of Contents



The Logistics segment will continue to concentrate on gaining new profitable business that
also utilizes the services of the Companys LTL infrastructure. In light of an expected tight
driver market in 2005 the Truckload segment will focus on driver retention and margin expansion. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company prepares its financial statements in accordance with generally accepted accounting
principles (GAAP) in Canada together with a reconciliation to United States GAAP, as disclosed in
Note 14 to the Consolidated Financial Statements. The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during the reporting period.
Significant accounting policies and methods used in preparation of the financial statements are
described in Note 1 to the Consolidated Financial Statements. The Company evaluates its estimates
and assumptions on a regular basis, based on historical experience and other relevant factors.
Significant estimates are used in determining, but not limited to, the allowance for doubtful
accounts, income tax valuation allowances and the fair value of reporting units for purposes of
goodwill impairment tests. Actual results could differ materially from those estimates and
assumptions. Revenue Recognition The Companys LTL and Truckload business units and Freight Brokerage operations recognize
revenue and direct shipment costs upon the delivery of the related freight. Revenue for the
Logistics operations is recognized as the management services are provided. Allowance for Doubtful Accounts The Company records an allowance for doubtful accounts related to accounts receivable that may
potentially be impaired. The allowance is based on the Companys knowledge of the financial
condition of its customers, the aging of the receivables, current business environment, customer
and industry concentrations, and historical experience. A change to these factors could impact the
estimated allowance and the provision for bad debts recorded in selling, general and administrative
expenses. Income Tax Valuation Allowance The Company records a valuation allowance against future income tax assets generated when
management believes it is more likely than not that some portion or all of the future income tax
assets will not be realized. Management considers such factors as projected future taxable income
and tax planning strategies. A change to these factors could impact the estimated valuation
allowance and income tax expense. Claims and Insurance Accruals Claims and insurance accruals reflect the estimated ultimate total cost of claims, including
amounts for claims incurred but not reported, for cargo loss and damage, bodily injury and property
damage, workers compensation, long-term disability and group health. In Canada the Company has
$42,000 (Cdn$50,000) and in the United States $350,000 self-insurance retention (SIR) per
incident for auto liability, casualty and cargo claims. In the United States the Company has an
SIR of $350,000 per incident for workers compensation and $250,000 per incident for employee
medical. In establishing these accrued expenses, management evaluates and monitors each claim
individually, and uses factors such as historical experience, known trends and third party
estimates to determine the appropriate reserves for potential liability. Changes in severity of
previously reported claims, significant changes in the medical costs and legislative changes
affecting the administration of the plans could significantly impact the determination of
appropriate reserves in future periods. 21




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##### Table of Contents



Goodwill The Company performs its goodwill impairment test annually and, more frequently, if events or
changes in circumstances indicate that an impairment loss may have incurred. Impairment is tested
at the reporting unit level by comparing the reporting units carrying amount to its implied fair
value. The methodology used to measure fair value is the discounted cash flow method. The
discounted cash flow method requires certain assumptions for growth in earnings before interest,
taxes and depreciation, future tax rates, capital re-investment, fair value of the assets and
liabilities and discount rate. The discount rate is based on the Companys estimated weighted
average cost of capital. Actual recovery of goodwill could differ from these assumptions based on
market conditions and other factors. In the event goodwill is determined to be impaired a charge
to earnings would be required. As at September 30, 2004, Vitran completed its annual goodwill
impairment test and concluded that there was no impairment. CHANGES IN ACCOUNTING POLICY Impairment of Long-lived Assets The CICA Accounting Standard Board has issued CICA Handbook Section 3063, Impairment of
Long-Lived Assets. This section establishes standards for recognizing, measuring and disclosing
impairment of long-lived assets held for use. An impairment is recognized when the carrying amount
of an asset to be held and used exceeds the sum of undiscounted cash flows expected from its use
and disposal. A long-lived asset should be tested when events or circumstances indicate that its
carrying amount may not be recoverable. The Company adopted Section 3063 on January 1, 2004, and
during 2004 there have not been any events or circumstances to indicate that there may be an
impairment of long-lived assets. Asset Retirement Obligations The CICA Accounting Standards has issued CICA Handbook Section 3110, Asset Retirement
Obligations. The section establishes standards for recognizing, measuring and disclosing certain
legal obligations with respect to the retirement of long-lived tangible assets that result from the
acquisition, construction and development of the assets. The requirements of Section 3110 will not
have a material effect on the Companys Consolidated Financial Statements. Revenue Recognition The Canadian Emerging Issues Committee (EIC) has issued EIC 141, Revenue Recognition, and
EIC 142, Revenue Arrangements with Multiple Deliverables. These recommendations address revenue
recognition principles on delivering services and also when and how an arrangement involving
multiple deliverables should be accounted for. The Company has evaluated and adopted these
recommendations and determined the recommendations will not have a material effect on the Companys
Consolidated Financial Statements. Hedging Relationships The Accounting Standards Board of the CICA issued Accounting Guideline 13, Hedging
Relationships. The guideline establishes criteria for derivatives to qualify for hedge accounting.
A derivative will qualify as a hedge if the hedging relationship is designated; certain
documentation is completed at inception and it remains effective through the life of the hedge.
The Company has adopted the guideline and determined the guideline will not have a material effect
on the Companys Consolidated Financial Statements. Guarantees The Accounting Standards Board of the CICA issued Accounting Guideline 14, Disclosure of
Guarantees. The guideline establishes disclosure requirements for certain guarantees. The Company
has adopted the guideline and made the required disclosures in the Companys Consolidated Financial
Statements. 22




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##### Table of Contents



Variable Interest Entities The Accounting Standards Board of the CICA issued Accounting Guideline 15, Variable Interest
Entities. The guideline establishes requirements for the consolidation of variable interest
entities (VIE) into the consolidated financial statements of a company. The application of the
rules to specific situations is complex and the interpretation of the rules is evolving. The
Company currently accounts for its subsidiaries in accordance with the Companys principles of
consolidation. The Company has evaluated and adopted the guideline and determined the guideline
will not have a material effect on the Companys Consolidated Financial Statements. RELATED PARTIES In 2003, the Company leased a terminal from a former director at market rates. Lease expense
for this terminal amounted to $76,800 in 2003. 
 ITEM 7a QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE SENSITIVITY The Company is exposed to the impact of interest rate changes. The Companys exposure to
changes in interest rates is limited to borrowings under the revolving credit facility and the term
bank facility that have variable interest rates tied to the LIBOR rate. The Company did not have
any borrowings under the revolving credit facility in 2004. The term bank credit facility of $14.4
million had a weighted average annual interest rate in borrowings of 2.72% in 2004. We estimate
that the fair value of the term credit facility approximates the carrying value. (in thousands of dollars)
    
    
    
    
    
    Payments due by periodLong-term debt
    
    Total
    
    
    2005
    
    
    2006 & 2007
    
    
    2008 & 2009
    
    
    ThereafterVariable RateTerm bank facility
    
    $
    14,434
    
    
    $
    3,000
    
    
    $
    11,434
    
    
    $
    Nil
    
    
    $
    NilAverage interest rate
    
    
    3.49
    %
    
    
    3.49
    %
    
    
    3.49
    %Fixed RateCapital lease obligation
    
    
    103
    
    
    
    30
    
    
    
    73
    
    
    Nil
    
    
    NilAverage interest rate
    
    
    6.79
    %
    
    
    6.79
    %
    
    
    6.79
    %Total
    
    $
    14,537
    
    
    $
    3,030
    
    
    $
    11,507
    
    
    $
    Nil
    
    
    $
    Nil
 The Companys investment of $33.1 million in marketable securities is invested in highly rated
treasury bills, investment grade notes and investment grade commercial paper. A portion of the
marketable securities is also invested in highly rated preferred shares. The Companys investment
realized average returns of 2.4% in 2004. The Company is exposed to interest rate changes and
market fluctuations in prices of preferred shares. 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 $14.4 million is designated as a hedge of the investment in the United States
self-sustaining foreign operations. In addition to the information disclosed above, further information required by Item 7A of
Form 10-K appears in Item 7 of this Annual Report on Form 10-K under the headings Liquidity and
Capital Resources and General Risks and Uncertainties. 23




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##### Table of Contents



ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Balance Sheets as at December 31, 2004, and 2003 and the Consolidated Statements
of Income, Retained Earnings and Cash Flow for the years ended December 31, 2004, 2003, and 2002,
reported on by KPMG LLP, Chartered Accountants. These statements are prepared in accordance with
GAAP in Canada and in the United States. A reconciliation of the differences between Canadian and
United States GAAP is included on Note 14 to the Consolidated Financial Statements. MANAGEMENT RESPONSIBILITY OVER FINANCIAL REPORTING The Consolidated Financial Statements of the Company are the responsibility of management and
have been prepared in accordance with GAAP and, where appropriate, reflect estimates based on
managements judgement. In addition, all other information contained in the annual report on form
10-K is also the responsibility of management. The Company maintains systems of internal accounting and administrative controls designed to
provide reasonable assurance that the financial information provided is accurate and complete and
that all assets are properly safeguarded. The Board of Directors is responsible for ensuring that management fulfills its responsibility
for financial reporting and is ultimately responsible for reviewing and approving the Consolidated
Financial Statements. The Board appoints the Audit Committee, comprised of non-management
directors, which meets with management and KPMG LLP, the external auditors, at least once a year to
review, among other things, accounting policies, annual financial statements, the result of the
external audit examination, and the management discussion and analysis included in the annual
report on form 10-K. The Audit Committee reports it finding to the Board of Directors so that the
Board may properly approve the financial statements. Additional commentary on corporate
governance appears in the Companys proxy statement for the 2005 Annual Meeting of its
Shareholders, reference to which is hereby made, and the information therein is incorporated herein
by reference 24




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##### Table of Contents



INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AUDITORS REPORT TO THE SHAREHOLDERS We have audited the consolidated balance sheets of Vitran Corporation Inc. as at December 31, 2004
and 2003 and the consolidated statements of income, retained earnings and cash flows for each of
the years in the three-year period ended December 31, 2004. Our audit also included the financial
statement schedule listed in the Index under Part IV, Item 15(a)2. These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the
standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance whether the consolidated
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements and the financial statement schedule
referred to above present fairly, in all material respects, the financial position of the Company
as at December 31, 2004 and 2003 and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 2004 in accordance with Canadian generally
accepted accounting principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material aspects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of Vitran Corporation Inc.s internal control over
financial reporting as of December 31, 2004, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) and our report dated February 7, 2005 expressed an unqualified opinion on managements
assessment of, and the effective operation of, internal control over financial reporting. /s/ KPMG llp Toronto, Canada
February 7, 2005 25




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##### Table of Contents



Consolidated Balance Sheets
(Amounts in thousands of United States dollars) December 31, 2004 and 2003 2004
    
    
    2003AssetsCurrent assets:Cash and cash equivalents
    
    $
    7,375
    
    
    $
    12,417Marketable securities (note 3)
    
    
    33,087
    
    
    
    26,996Accounts receivable
    
    
    40,124
    
    
    
    35,685Inventory, deposits and prepaid expenses
    
    
    5,924
    
    
    
    5,847Future income taxes (note 6)
    
    
    3,667
    
    
    
    4,10190,177
    
    
    
    85,046Capital assets (note 4)
    
    
    37,563
    
    
    
    35,102Goodwill
    
    
    45,304
    
    
    
    44,865$
    173,044
    
    
    $
    165,013Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    33,377
    
    
    $
    34,092Income and other taxes payable
    
    
    2,399
    
    
    
    4,007Current portion of long-term debt (note 5)
    
    
    3,030
    
    
    
    8,31338,806
    
    
    
    46,412Long-term debt (note 5)
    
    
    11,507
    
    
    
    17,931Future income taxes (note 6)
    
    
    3,546
    
    
    
    2,715Shareholders equity:Common shares, no par value, unlimited authorized,
12,419,678 and 12,094,278 issued and outstanding in 2004 and 2003, respectively (note 7)
    
    
    60,798
    
    
    
    59,358Contributed surplus
    
    
    323
    
    
    
    Retained earnings
    
    
    54,972
    
    
    
    40,029Cumulative translation adjustment (note 8)
    
    
    3,092
    
    
    
    (1,432
    )119,185
    
    
    
    97,955$
    173,044
    
    
    $
    165,013Lease commitments (note 11)Contingent liabilities (note 12)
 See accompanying notes to consolidated financial statements. On behalf of the Board: /s/ RICHARD E. GAETZ
    
    /s/ GRAHAM W. SAVAGEDirector
    
    Director
 26




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##### Table of Contents



Consolidated Statements of Income
(Amounts in thousands of United States dollars, except per share amounts) Years ended December 31, 2004, 2003 and 2002 2004
    
    
    2003
    
    
    2002Revenue
    
    $
    374,595
    
    
    $
    331,826
    
    
    $
    303,595Operating expenses
    
    
    319,295
    
    
    
    282,016
    
    
    
    254,405Selling, general and administration expenses
    
    
    31,263
    
    
    
    29,366
    
    
    
    31,084Other expenses (income)
    
    
    (146
    )
    
    
    136
    
    
    
    289350,412
    
    
    
    311,518
    
    
    
    285,778Income from operations before depreciation
    
    
    24,183
    
    
    
    20,308
    
    
    
    17,817Depreciation
    
    
    5,206
    
    
    
    5,494
    
    
    
    5,308Income from operations before the undernoted
    
    
    18,977
    
    
    
    14,814
    
    
    
    12,509Interest on long-term debt
    
    
    (718
    )
    
    
    (1,346
    )
    
    
    (3,369
    )Interest income
    
    
    667
    
    
    
    26
    
    
    
    80(51
    )
    
    
    (1,320
    )
    
    
    (3,289
    )Income from operations before income taxes
    
    
    18,926
    
    
    
    13,494
    
    
    
    9,220Income taxes (recovery) (note 6):Current
    
    
    2,717
    
    
    
    3,450
    
    
    
    2,341Future
    
    
    1,266
    
    
    
    (292
    )
    
    
    (59
    )3,983
    
    
    
    3,158
    
    
    
    2,282Net income
    
    $
    14,943
    
    
    $
    10,336
    
    
    $
    6,938Earnings per share:Basic - net income
    
    $
    1.22
    
    
    $
    1.07
    
    
    $
    0.72Diluted - net income
    
    $
    1.17
    
    
    $
    1.01
    
    
    $
    0.71Weighted average number of shares:Weighted average number of shares outstanding
    
    
    12,285,400
    
    
    
    9,684,901
    
    
    
    9,691,041Potential exercise of options
    
    
    455,077
    
    
    
    578,310
    
    
    
    93,025Diluted shares
    
    
    12,740,477
    
    
    
    10,263,211
    
    
    
    9,784,066
 Diluted earnings per share excludes the effect of out of the money options, 315,000 in 2004 (2003
- nil; 2002 - 464,000). See accompanying notes to consolidated financial statements. 27




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##### Table of Contents



Consolidated Statements of Retained Earnings
(Amounts in thousands of United States dollars, except per share amounts) Years ended December 31, 2004, 2003 and 2002 2004
    
    
    2003
    
    
    2002Retained earnings, beginning of year
    
    $
    40,029
    
    
    $
    30,044
    
    
    $
    26,602Effect of adoption of goodwill
accounting standard (note 1(i))
    
    
    
    
    
    
    
    
    
    
    (3,023
    )40,029
    
    
    
    30,044
    
    
    
    23,579Net income
    
    
    14,943
    
    
    
    10,336
    
    
    
    6,938Cost of repurchase of common
shares in excess of book value
    
    
    
    
    
    
    (351
    )
    
    
    (473
    )Retained earnings, end of year
    
    $
    54,972
    
    
    $
    40,029
    
    
    $
    30,044
 See accompanying notes to consolidated financial statements. 28




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##### Table of Contents



Consolidated Statements of Cash Flows
(Amounts in thousands of United States dollars) Years ended December 31, 2004, 2003 and 2002 2004
    
    
    2003
    
    
    2002Cash provided by (used in):Operations:Net income
    
    $
    14,943
    
    
    $
    10,336
    
    
    $
    6,938Items not involving cash from operations:Depreciation
    
    
    5,206
    
    
    
    5,494
    
    
    
    5,308Future income taxes
    
    
    1,266
    
    
    
    (292
    )
    
    
    (59
    )Loss (gain) on sale of capital assets
    
    
    (146
    )
    
    
    136
    
    
    
    289Foreign exchange gains
    
    
    
    
    
    
    (264
    )
    
    
    (444
    )Stock-based compensation expense
    
    
    323
    
    
    
    
    
    
    
    21,592
    
    
    
    15,410
    
    
    
    12,032Change in non-cash working capital components
    
    
    (6,839
    )
    
    
    3,339
    
    
    
    4,09014,753
    
    
    
    18,749
    
    
    
    16,122Investments:Purchase of capital assets
    
    
    (6,242
    )
    
    
    (6,895
    )
    
    
    (4,598
    )Proceeds on sale of capital assets
    
    
    248
    
    
    
    423
    
    
    
    712Proceeds on sale of discontinued operations
    
    
    
    
    
    
    
    
    
    
    1,692Marketable securities
    
    
    (3,981
    )
    
    
    (26,996
    )
    
    
    (9,975
    )
    
    
    (33,468
    )
    
    
    (2,194
    )Financing:Change in revolving credit facility
    
    
    
    
    
    
    
    
    
    
    (3,099
    )Repayment of long-term debt
    
    
    (11,716
    )
    
    
    (11,396
    )
    
    
    (9,399
    )Issue of common shares upon exercise of
stock options
    
    
    1,440
    
    
    
    1,607
    
    
    
    33Issue of common shares in public offering
    
    
    
    
    
    
    29,385
    
    
    
    Repurchase of common shares
    
    
    
    
    
    
    (644
    )
    
    
    (1,354

    )(10,276
    )
    
    
    18,952
    
    
    
    (13,819
    )Effect of translation adjustment on cash
    
    
    456
    
    
    
    182
    
    
    
    (193
    )Increase (decrease) in cash and cash equivalents
    
    
    (5,042
    )
    
    
    4,415
    
    
    
    (84
    )Cash and cash equivalents, beginning of year
    
    
    12,417
    
    
    
    8,002
    
    
    
    8,086Cash and cash equivalents, end of year
    
    $
    7,375
    
    
    $
    12,417
    
    
    $
    8,002Change in non-cash working capital components:Accounts receivable
    
    $
    (4,439
    )
    
    $
    (6,053
    )
    
    $
    1,759Inventory, deposits and prepaid expenses
    
    
    (77
    )
    
    
    348
    
    
    
    (732
    )Income and other taxes recoverable/payable
    
    
    (1,608
    )
    
    
    2,266
    
    
    
    914Accounts payable and accrued liabilities
    
    
    (715
    )
    
    
    6,778
    
    
    
    2,149$
    (6,839
    )
    
    $
    3,339
    
    
    $
    4,090Supplemental cash flow information:Interest paid
    
    $
    722
    
    
    $
    1,552
    
    
    $
    3,336Income taxes paid
    
    
    4,608
    
    
    
    2,617
    
    
    
    1,773
 See accompanying notes to consolidated financial statements. 29




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##### Table of Contents



Notes to Consolidated Financial Statements
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002 1. Significant accounting policies:  (a)
    Description of the business:Vitran Corporation Inc. (Vitran or the Company) is a North American provider of
freight services and distribution solutions to a wide variety of companies and
industries. Vitran offers less-than-truckload service throughout Canada and the United
States. Vitran Logistics offers supply chain solutions in Canada and the United States,
including warehousing, inventory management and flow-through distribution facilities, as
well as freight brokerage services. Vitran also provides same-day and next-day
truckload services in the United States.(b)
    Basis of presentation:These Consolidated Financial Statements include the accounts of the Company and its
wholly owned subsidiaries. All material intercompany transactions and balances have
been eliminated on consolidation.All amounts in these Consolidated Financial Statements are expressed in United States
dollars, unless otherwise stated.(c)
    Foreign currency translation:A majority of the Companys shareholders, customers and industry analysts are located in
the United States. Accordingly, the Company adopted the United States dollar as its
reporting currency effective December 31, 2003 and all prior periods have been restated.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 a foreign currency are translated into
the functional currency of the operation using the year-end rate of exchange giving rise
to a gain or loss which is recognized in income during the current period.For reporting purposes, the Canadian operations are translated into United States
dollars using the current rate method. Under this method, all assets and liabilities
are translated at the year-end rate of exchange and all revenue and expense items are
translated at the average rate of exchange for the year. The resulting translation
adjustment is recorded as a separate component of shareholders equity. United States
dollar debt of $14.4 million (2003 - $26.1 million) is designated as a hedge of the
investment in the United States self-sustaining foreign operations. 30




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002 1. Significant accounting policies (continued):  In respect of other transactions denominated in currencies other than the Canadian
dollar, the monetary assets and liabilities of the Company are translated at the
year-end rates. Revenue and expenses are translated at rates of exchange prevailing on
the transaction dates. All of the exchange gains or losses resulting from these other
transactions are recognized in income.(d)
    Revenue recognition:The Companys less-than-truckload, truckload business units and freight brokerage
operations recognize revenue and direct shipment costs upon the delivery of the related
freight. Revenue for the Logistics operations is recognized as the management services
are provided.(e)
    Cash and cash equivalents:Cash and cash equivalents include cash on account and short-term investments with
maturities of three months or less at date of purchase and are stated at cost, which
approximates market value.(f)
    Marketable securities:Marketable securities are recorded at the lower of cost and market value. The
securities are classified as available for sale.(g)
    Inventory:Inventory consists of tires and spare parts and is valued at the lower of average cost
and replacement cost.(h)
    Capital assets:Capital assets are recorded at cost. Depreciation of capital assets is provided on a
straight-line basis from the date assets are put in service over their estimated useful
lives as follows: Buildings
    
    20-31.5 yearsLeasehold interests and improvements
    
    Over term of leaseVehicles:Trailers and containers
    
    12 yearsTrucks
    
    8 yearsMachinery and equipment
    
    5-10 years
 31




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002 1. Significant accounting policies (continued):  Tires purchased as part of a vehicle are capitalized as a cost to the vehicle.
Replacement tires are expensed when placed in service.Effective January 1, 2004, the Company changed the estimated useful life of its vehicles
and equipment to accurately reflect its actual useful life. The useful life of the
Companys trailers was changed from 10 years to 12 years and the trucks from 7 years to
8 years. As a result of the change, income from operations and net income were impacted
by $673 and $505, respectively, in 2004. Basic and diluted earnings per share were
impacted by $0.04, in 2004.(i)
    Goodwill:Goodwill represents the excess of acquisition cost over the fair value of net assets of
businesses acquired. Prior to January 1, 2002, goodwill was amortized over 40 years on
a straight-line basis. Effective January 1, 2002, the Company no longer amortizes
goodwill but annually compares the fair value of its reporting units to the carrying
value to determine if an impairment loss has occurred. A transitional impairment was
recognized as an effect of a change in accounting policy and was charged to opening
retained earnings as of January 1, 2002.At June 30, 2002, the Company completed its initial goodwill impairment test and
concluded that an impairment existed. At September 30, 2002, the amount of the charge
was quantified. Charges of $0.8 million and $2.2 million, respectively, were recorded
in the freight brokerage and the truckload reporting units to adjust the carrying value
of goodwill for each reporting unit to its implied fair value. Such amount has been
reflected as a direct charge to retained earnings effective January 1, 2002.As at September 30, 2004, the Company completed its annual goodwill impairment test and
concluded there was no impairment. The change in goodwill is attributable to
translating the Canadian dollar denominated goodwill to the United States dollar
reporting currency.(j)
    Income taxes:The Company uses the asset and liability method of accounting for income taxes. Under
the asset and liability method, future tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases.
Future tax assets and liabilities are measured using enacted or substantively enacted
tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on future tax assets
and liabilities of a change in tax rates is recognized in income in the year that
includes the date of enactment or substantive enactment. 32




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002 1. Significant accounting policies (continued):  (k)
    Stock-based compensation:Prior to January 1, 2003, The Canadian Institute of Chartered Accountants (CICA)
Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments, required
that effective January 1, 2002, all stock-based compensation to non-employees and direct
awards of stock to employees be accounted for using the fair value method. The Company
has not granted any such awards.The Company has a stock option plan for employees and directors. In 2002, in accordance
with the standard, the Company had elected to use the settlement method for stock
options granted to employees and no compensation expense was recorded. Consideration
paid by employees on the exercise of options is recorded as share capital.The CICA Accounting Standards Board amended CICA Handbook Section 3870, Stock-based
Compensation and Other Stock-based Payments, to require entities to account for stock
options granted to employees and directors using the fair value-based method, beginning
January 1, 2004, with the option to adopt effective January 1, 2003. Under the fair
value-based method, compensation cost is measured at fair value at the date of grant and
is expensed over the awards vesting period, and forfeitures are accounted for as they
occur. In accordance with a transitional option permitted under amended CICA Handbook
Section 3870, the Company has prospectively applied the fair value-based method to all
stock options granted on or after January 1, 2003. Note 7(d) provides supplemental
disclosure for the Companys stock options.(l)
    Advertising costs:Advertising costs are expensed as incurred. Advertising costs amounted to $526 in 2004
(2003 - $501).(m)
    Use of estimates:The preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the year. Actual results could differ
from those estimates.(n)
    Impairment of long-lived assets:On January 1, 2004, the Company adopted CICA Handbook Section 3063, Impairment of
Long-Lived Assets, which establishes standards for recognizing, measuring and disclosing
impairment of long-lived assets held for use. An impairment is recognized when the
carrying amount of an asset to be held and used exceeds the sum of undiscounted cash
flows expected from its use and disposal, 33




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  1.

    Significant accounting policies (continued):  and is measured as the amount by which the carrying amount of assets exceeds its fair
value. A long-lived asset should be tested when events or circumstances indicate that
its carrying amount may not be recoverable. During 2004, the Company has not identified
any indicators that would require recognition of an impairment.(o)
    Claims and insurance accruals:Claims and insurance accruals reflect the estimated total cost of claims, including
amounts for claims incurred but not reported, cargo loss and damage, bodily injury and
property damage, workers compensation, long-term disability and group health. In
Canada and the United States the Company has self-insurance retention amounts per
incident for auto liability, casualty and cargo claims. In the United States the
Company has self-insurance retention amounts per incident for workers compensation and
employee medical.  2.
    Acquisitions and divestitures:Environmental Services Group:On May 15, 2001, the Company determined that it planned to divest its Environmental Services
Business. A provision for the loss on sale of discontinued business was recorded to account
for the sale of capital assets and estimated realizable value of the remaining assets and
liabilities. Effective January 2, 2002, the Company sold substantially all the capital
assets of the business for cash proceeds of $1.7 million.3.
    Marketable securities:The marketable securities are invested in highly rated treasury bills, investment grade notes
and investment grade commercial paper. A portion of the securities is invested in highly
rated preferred shares. The market value of all securities approximates the cost.4.
    Capital assets: 2004
    
    
    2003Land
    
    $
    6,341
    
    
    $
    6,028Buildings
    
    
    24,749
    
    
    
    23,229Leasehold interests and improvements
    
    
    1,558
    
    
    
    1,680Vehicles
    
    
    28,078
    
    
    
    23,724Machinery and equipment
    
    
    16,447
    
    
    
    15,26477,173
    
    
    
    69,925Less accumulated depreciation
    
    
    39,610
    
    
    
    34,823$
    37,563
    
    
    $
    35,102
 34




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002 5. Long-term debt: 2004
    
    
    2003Term bank credit facility (a)
    
    $
    14,434
    
    
    $
    26,122Capital lease (b)
    
    
    103
    
    
    
    12214,537
    
    
    
    26,244Less current portion
    
    
    3,030
    
    
    
    8,313$
    11,507
    
    
    $
    17,931
  (a)
    The term bank credit facility is secured by accounts receivable and general
security agreements of the Company and of all its subsidiaries.During 2004, the Company repaid $11.7 million of borrowings. At December 31, 2004,
$14.4 million (2003 - $26.1 million), bearing interest at 3.49% (2003 - 2.93%), was
drawn under this facility. The agreement requires approximately 21% of the total
principal to be repaid in 2005, with escalating annual repayments, payable in quarterly
instalments to September 30, 2007. The provisions of the term facility impose certain
financial maintenance tests.(b)
    The Company has financed certain equipment by entering into a capital leasing
arrangement expiring in 2007. The capital lease bears interest at approximately 6.79%.(c)
    The Company has a revolving credit facility of up to $35 million. At December
31, 2004, the Company had $30.6 million unused in the credit facility, net of
outstanding letters of credit of $4.4 million.  At December 31, 2004, the required future principal repayments on all long-term debt and
capital lease are as follows: Year ending December 31:2005
    
    $
    3,0302006
    
    
    5,8452007
    
    
    5,662$
    14,537
 35




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  6.
    Income taxes:Income tax expense differs from the amount which would be obtained by applying statutory
federal, state and provincial income tax rates to the respective years income from
operations before income taxes as follows: 2004
    
    
    2003
    
    
    2002Effective statutory federal, state
and provincial income tax rate
    
    
    36.12
    %
    
    
    35.37
    %
    
    
    38.62
    %Effective tax expense on income before
income taxes
    
    $
    6,836
    
    
    $
    4,773
    
    
    $
    3,561Increase (decrease) results from:Valuation allowance
    
    
    (693
    )
    
    
    
    
    
    
    Non-deductible stock-based
compensation expense
    
    
    114
    
    
    
    
    
    
    
    Non-taxable foreign exchange gain
    
    
    
    
    
    
    (104
    )
    
    
    (245
    )Deductible foreign exchange loss
    
    
    
    
    
    
    
    
    
    
    (111
    )Income taxed at different rates
in foreign jurisdictions
    
    
    (1,930
    )
    
    
    (1,852
    )
    
    
    (1,376
    )Other
    
    
    (344
    )
    
    
    341
    
    
    
    453Actual income tax expense
    
    $
    3,983
    
    
    $
    3,158
    
    
    $
    2,282
  Income tax expense: 2004
    
    
    2003
    
    
    2002Current income tax expense:Canada:Federal
    
    $
    976
    
    
    $
    1,478
    
    
    $
    1,378Provincial
    
    
    585
    
    
    
    723
    
    
    
    656United States:Federal
    
    
    777
    
    
    
    943
    
    
    
    82State
    
    
    121
    
    
    
    147
    
    
    
    13Other
    
    
    258
    
    
    
    159
    
    
    
    2122,717
    
    
    
    3,450
    
    
    
    2,341Future income tax expense:Canada:Federal
    
    
    16
    
    
    
    (181
    )
    
    
    324Provincial
    
    
    10
    
    
    
    (88
    )
    
    
    154United States:Federal
    
    
    1,073
    
    
    
    (20
    )
    
    
    (465
    )State
    
    
    167
    
    
    
    (3
    )
    
    
    (72
    )1,266
    
    
    
    (292
    )
    
    
    (59
    )$
    3,983
    
    
    $
    3,158
    
    
    $
    2,282
 36




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  6.
    Income taxes (continued):A summary of the principal components of future income tax assets and liabilities is as
follows: 2004
    
    
    2003Current future income tax assets:Losses carried forward
    
    $
    1,655
    
    
    $
    2,084Allowance for doubtful accounts
    
    
    277
    
    
    
    339Insurance reserves
    
    
    1,372
    
    
    
    941Financing costs
    
    
    363
    
    
    
    767Other
    
    
    
    
    
    
    663Valuation allowance
    
    
    
    
    
    
    (693
    )3,667
    
    
    
    4,101Current future income tax liabilities
    
    
    
    
    
    
    $
    3,667
    
    
    $
    4,101Non-current future income tax assets:Losses carried forward
    
    $
    304
    
    
    $
    Financing costs
    
    
    177
    
    
    
    481
    
    
    
    Non-current future income tax liabilities:Capital assets
    
    
    (1,371
    )
    
    
    (956
    )Goodwill
    
    
    (2,249
    )
    
    
    (1,488
    )Other
    
    
    (407
    )
    
    
    (271
    )(4,027
    )
    
    
    (2,715
    )$
    (3,546
    )
    
    $
    (2,715
    )
  The Company has federal, state and provincial non-capital tax loss carryforwards of
approximately $8.3 million expiring over the next 13 years and for which the tax benefit has
been recognized as set out above. 37




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002 7. Common shares:  (a)
    Authorized:The Companys capital stock consists of an unlimited number of common shares.(b)
    Issued:Common shares 2004
    
    
    2003Number
    
    
    Amount
    
    
    Number
    
    
    AmountBalance, beginning of year
    
    
    12,094,278
    
    
    $
    59,358
    
    
    
    9,559,818
    
    
    $
    27,857Shares repurchased for
cancellation
    
    
    
    
    
    
    
    
    
    
    (106,500
    )
    
    
    (312
    )Shares issued upon exercise
of employee stock options
    
    
    325,400
    
    
    
    1,440
    
    
    
    340,960
    
    
    
    1,607Shares issued in public
offering, net of issue
expenses (i)
    
    
    
    
    
    
    
    
    
    
    2,300,000
    
    
    
    30,206Balance, end of year
    
    
    12,419,678
    
    
    $
    60,798
    
    
    
    12,094,278
    
    
    $
    59,358
   (i)
    
    In 2003, the Company entered into an underwriting agreement and issued
2.3 million shares at $13.75 per share. This resulted in gross proceeds of $31.6
million to the Company before expenses of issue of $1.4 million, net of future
income taxes of $0.8 million.  (c)
    Normal course issuer bid:The Company did not repurchase for cancellation any common shares during 2004 (2003 
repurchased 106,500) under a normal course issuer bid. The cost of the repurchase in
excess of the book value of the shares in 2003 was $351.(d)
    Stock options:The Company provides a stock option plan to key employees, officers and directors to
encourage executives to acquire a meaningful equity ownership interest in the Company
over a period of time and, as a result, reinforce executives attention on the long-term
interest of the Company and its shareholders. Under the plan, options to purchase
common shares of the Company may be granted to key employees, officers and directors of
the Company and its affiliates by the Board of Directors or by the Companys
Compensation Committee. There are 796,800 options authorized under the plan. The term
of each option is 10 years and the vesting period is five years. The exercise price for
options is the trading price of the common shares of the Company on the Toronto Stock
Exchange on the day of the grant. 38




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002 7. Common shares (continued): The following table outlines the impact if the compensation cost for the Companys stock
options granted from January 1, 2002 through to December 31, 2002 were determined under
the fair value-based method. The Company has applied the pro forma disclosure
provisions of the standard to these awards. The pro forma effect of awards granted
prior to January 1, 2002 has not been included. 2004
    
    
    2003
    
    
    2002Options granted
    
    
    355,000
    
    
    
    
    
    
    
    175,000Net income, as reported
    
    $
    14,943
    
    
    $
    10,336
    
    
    $
    6,938Pro forma net income
    
    
    14,902
    
    
    
    10,298
    
    
    
    6,905Pro forma earnings
per share - basic
    
    $
    1.21
    
    
    $
    1.06
    
    
    $
    0.72Pro forma earnings
per share - diluted
    
    $
    1.17
    
    
    $
    1.00
    
    
    $
    0.71
 The weighted average estimated fair value at the date of the grant for the options
granted during 2004 was $8.96 (2003 - nil; 2002 - $1.23) per share. The fair value of each option granted was estimated on the date of grant using the
Black-Scholes fair value option pricing model with the following assumptions: 2004
    
    
    2002Risk-free interest rate
    
    
    4.8
    %
    
    
    5.3
    %Dividend yield
    
    
    
    
    
    
    Volatility factor of the future expected market
price of the Companys common shares
    
    
    34.8 - 36.0
    
    
    
    36.0Expected life of the options
    
    10 years
    
    10 years
 39




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002 7. Common shares (continued): Details of stock options are as follows: 2004
    
    
    2003Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    averageexercise
    
    
    
    
    
    
    exerciseShares
    
    
    price
    
    
    Shares
    
    
    priceOutstanding,
beginning of year
    
    
    825,600
    
    
    $
    3.73
    
    
    
    1,189,160
    
    
    $
    3.93Granted
    
    
    355,000
    
    
    
    15.84
    
    
    
    
    
    
    
    Forfeited
    
    
    (58,400
    )
    
    
    11.47
    
    
    
    (22,600
    )
    
    
    4.13Exercised
    
    
    (325,400
    )
    
    
    3.96
    
    
    
    (340,960
    )
    
    
    4.40Outstanding, end of year
    
    
    796,800
    
    
    
    8.44
    
    
    
    825,600
    
    
    
    3.73Exercisable, end of year
    
    
    385,900
    
    
    $
    3.90
    
    
    
    580,700
    
    
    $
    2.85
 At December 31, 2004, the range of exercise prices, the weighted average exercise price
and the weighted average remaining contractual life are as follows: Options outstanding
    
    
    Options exercisableWeightedaverage
    
    
    Weighted
    
    
    
    
    
    
    Weightedremaining
    
    
    average
    
    
    
    
    
    
    averageRange of exercise
    
    Number
    
    
    contractual
    
    
    exercise
    
    
    Number
    
    
    exerciseprices
    
    outstanding
    
    
    life (years)
    
    
    price
    
    
    exercisable
    
    
    price$2.20 - $4.00
    
    
    281,800
    
    
    
    5.29
    
    
    $
    2.65
    
    
    
    185,900
    
    
    $
    2.80$4.77 - $5.44
    
    
    200,000
    
    
    
    3.98
    
    
    
    4.92
    
    
    
    200,000
    
    
    
    4.92$15.55 - $16.31
    
    
    315,000
    
    
    
    9.50
    
    
    
    15.86
    
    
    
    
    
    
    
    $2.20 - $16.31
    
    
    796,800
    
    
    
    6.62
    
    
    
    8.44
    
    
    
    385,900
    
    
    
    3.90
 Compensation expense related to stock options was $323 for the year ended December 31,
2004 (2003 and 2002 - nil).  8.
    Cumulative translation adjustment:The cumulative translation adjustment represents the unrealized translation gains and losses
from the translation of the Canadian dollar functional currency to the United States dollar
reporting currency. 40




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  9.
    Segmented information: The Companys business operations are grouped into three operating segments:
Less-than-Truckload, Logistics and Truckload, which provide transportation services in Canada
and the United States. Segmented information is presented below for each of the years ended December 31, 2004, 2003
and 2002: Year ended
    
    Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    ConsolidatedDecember 31, 2004
    
    truckload
    
    
    Logistics
    
    
    Truckload
    
    
    Total
    
    
    office and other
    
    
    totalsRevenue
    
    $
    303,017
    
    
    $
    35,499
    
    
    $
    36,079
    
    
    $
    374,595
    
    
    $
    
    
    
    $
    374,595Operating, selling,
general and
administrative expenses
    
    
    281,109
    
    
    
    33,500
    
    
    
    33,748
    
    
    
    348,357
    
    
    
    2,201
    
    
    
    350,558Other expenses (income)
    
    
    (150
    )
    
    
    6
    
    
    
    (2
    )
    
    
    (146
    )
    
    
    
    
    
    
    (146
    )Income (loss) from
operations
before depreciation
    
    
    22,058
    
    
    
    1,993
    
    
    
    2,333
    
    
    
    26,384
    
    
    
    (2,201
    )
    
    
    24,183Depreciation
    
    
    4,454
    
    
    
    325
    
    
    
    365
    
    
    
    5,144
    
    
    
    62
    
    
    
    5,206Income (loss) from
operations
before the undernoted
    
    $
    17,604
    
    
    $
    1,668
    
    
    $
    1,968
    
    
    $
    21,240
    
    
    $
    (2,263
    )
    
    
    18,977Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,983
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,943Capital expenditures
    
    $
    4,699
    
    
    $
    721
    
    
    $
    801
    
    
    $
    6,221
    
    
    $
    21
    
    
    $
    6,242Goodwill
    
    $
    39,418
    
    
    $
    1,121
    
    
    $
    4,765
    
    
    $
    45,304
    
    
    $
    
    
    
    $
    45,304Total assets
    
    $
    122,209
    
    
    $
    5,504
    
    
    $
    12,083
    
    
    $
    139,796
    
    
    $
    33,248
    
    
    $
    173,044
 41




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  9.
    Segmented information (continued): Year ended
    
    Less-than-
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    ConsolidatedDecember 31, 2003
    
    truckload
    
    
    Logistics
    
    
    Truckload
    
    
    Total
    
    
    office and other
    
    
    totalsRevenue
    
    $
    270,189
    
    
    $
    28,642
    
    
    $
    32,995
    
    
    $
    331,826
    
    
    $
    
    
    
    $
    331,826Operating, selling,
general and administrative
expenses
    
    
    250,047
    
    
    
    27,289
    
    
    
    31,843
    
    
    
    309,179
    
    
    
    2,203
    
    
    
    311,382Other expenses
    
    
    54
    
    
    
    27
    
    
    
    55
    
    
    
    136
    
    
    
    
    
    
    
    136Income (loss) from
operations
before depreciation
    
    
    20,088
    
    
    
    1,326
    
    
    
    1,097
    
    
    
    22,511
    
    
    
    (2,203
    )
    
    
    20,308Depreciation
    
    
    4,702
    
    
    
    242
    
    
    
    495
    
    
    
    5,439
    
    
    
    55
    
    
    
    5,494Income (loss) from
operations
before the undernoted
    
    $
    15,386
    
    
    $
    1,084
    
    
    $
    602
    
    
    $
    17,072
    
    
    $
    (2,258
    )
    
    
    14,814Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,320
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,158
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    10,336Capital expenditures
    
    $
    5,699
    
    
    $
    390
    
    
    $
    794
    
    
    $
    6,883
    
    
    $
    12
    
    
    $
    6,895Goodwill
    
    $
    39,021
    
    
    $
    1,079
    
    
    $
    4,765
    
    
    $
    44,865
    
    
    $
    
    
    
    $
    44,865Total assets
    
    $
    118,862
    
    
    $
    5,771
    
    
    $
    10,582
    
    
    $
    135,215
    
    
    $
    29,798
    
    
    $
    165,013
 42




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002 9. Segmented information (continued): Year ended
    
    Less-than-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    ConsolidatedDecember 31, 2002
    
    truckload
    
    
    Logistics
    
    
    Truckload
    
    
    Total
    
    
    office and other
    
    
    totalsRevenue
    
    $
    241,916
    
    
    $
    27,665
    
    
    $
    34,014
    
    
    $
    303,595
    
    
    $
    
    
    
    $
    303,595Operating, selling,
general and
administrative
expenses
    
    
    224,117
    
    
    
    26,495
    
    
    
    32,796
    
    
    
    283,408
    
    
    
    2,081
    
    
    
    285,489Other expenses
    
    
    83
    
    
    
    
    
    
    
    206
    
    
    
    289
    
    
    
    
    
    
    
    289Income (loss) from
operations
before depreciation
    
    
    17,716
    
    
    
    1,170
    
    
    
    1,012
    
    
    
    19,898
    
    
    
    (2,081
    )
    
    
    17,817Depreciation
    
    
    4,748
    
    
    
    215
    
    
    
    333
    
    
    
    5,296
    
    
    
    12
    
    
    
    5,308Income (loss) from
operations
before the undernoted
    
    $
    12,968
    
    
    $
    955
    
    
    $
    679
    
    
    $
    14,602
    
    
    $
    (2,093
    )
    
    
    12,509Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,289
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,282
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,938Capital expenditures
    
    $
    4,141
    
    
    $
    243
    
    
    $
    139
    
    
    $
    4,523
    
    
    $
    75
    
    
    $
    4,598
 43




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  9.
    Segmented information (continued): Geographic information for revenue from point of origin and total assets is as follows: 2004
    
    
    2003
    
    
    2002Revenue:Canada
    
    $
    151,485
    
    
    $
    131,084
    
    
    $
    104,165United States
    
    
    223,110
    
    
    
    200,742
    
    
    
    199,430$
    374,595
    
    
    $
    331,826
    
    
    $
    303,595
 2004
    
    
    2003Total assets:Canada
    
    $
    70,321
    
    
    $
    68,706United States
    
    
    102,723
    
    
    
    96,307$
    173,044
    
    
    $
    165,013
 2004
    
    
    2003Total long-lived assets:Canada
    
    $
    27,526
    
    
    $
    24,175United States
    
    
    55,341
    
    
    
    55,792$
    82,867
    
    
    $
    79,967
  10.
    Financial instruments: The fair values of cash and cash equivalents, marketable securities, accounts receivable, and
accounts payable and accrued liabilities approximate the carrying values because of the
short-term nature of these instruments. The fair value of the Companys long-term debt,
determined based on the future cash flows associated with each debt instrument discounted
using an estimate of the Companys current borrowing rate for similar debt instruments of
comparable maturity, is approximately equal to the carrying values at December 31, 2004 and
2003. 44




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  11.
    Lease commitments: At December 31, 2004, future minimum rental payments relating to operating leases for
premises and equipment are as follows: Year ending December 31: 2005
    
    $
    14,3492006
    
    
    11,3572007
    
    
    8,1132008
    
    
    5,5122009
    
    
    3,271Thereafter
    
    
    3,962$
    46,564
 Total rental expense under operating leases was $16.7 million for the year ended December 31,
2004 (2003  $17.9 million; 2002  $16.9 million). The Company has guaranteed a portion of the residual values of certain assets under operating
leases. If the market value of the assets at the end of the lease terms is less than the
guaranteed residual value, the Company must under certain circumstances compensate the lessor
for a portion of the shortfall. The maximum exposure under these guarantees is $8.3 million.  12.
    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.  13.
    Comparative figures: Certain 2003 and 2002 comparative figures have been reclassified to conform with the
financial statement presentation adopted in 2004. 45




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  14.
    Canadian and United States accounting policy differences:  (a)
    Consolidated reconciliation of shareholders equity: United States GAAP requires the inclusion of a reconciliation of shareholders equity
between Canadian and United States GAAP for each year a statement of income is
presented. Shareholders equity reconciled to United States GAAP is as follows: Net income
    
    
    Shareholders equity2004
    
    
    2003
    
    
    2002
    
    
    2004
    
    
    2003
    
    
    2002Balance, December 31,
based on
Canadian GAAP
    
    $
    14,943
    
    
    $
    10,336
    
    
    $
    6,938
    
    
    $
    119,185
    
    
    $
    97,955
    
    
    $
    52,070Foreign exchange
adjustment (i)
    
    
    
    
    
    
    
    
    
    
    (444
    )
    
    
    (858
    )
    
    
    (858
    )
    
    
    (858
    )Change in method
of accounting for
goodwill (ii)
    
    
    
    
    
    
    
    
    
    
    (3,023
    )
    
    
    
    
    
    
    
    
    
    
    Balance before
other comprehensive
income and accumulated
other comprehensive
income, December 31,
based on United
States GAAP
    
    
    14,943
    
    
    
    10,336
    
    
    
    3,471
    
    
    
    118,327
    
    
    
    97,097
    
    
    
    51,212Other comprehensive
income:Change in cumulative
translation
adjustment
    
    
    4,524
    
    
    
    4,399
    
    
    
    (906
    )
    
    
    
    
    
    
    
    
    
    
    Change in obligation
of derivative
instrument (iii)
    
    
    
    
    
    
    116
    
    
    
    683
    
    
    
    (101
    )
    
    
    (101
    )
    
    
    (217
    )Unrealized gains on
marketable securities (iv)
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    Foreign exchange
adjustment (i)
    
    
    
    
    
    
    (264
    )
    
    
    444
    
    
    
    594
    
    
    
    594
    
    
    
    858Balance, December 31,
based on United
States GAAP
    
    $
    19,473
    
    
    $
    14,587
    
    
    $
    3,692
    
    
    $
    118,826
    
    
    $
    97,590
    
    
    $
    51,853
 46




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002 14. Canadian and United States accounting policy differences (continued): 2004
    
    
    2003
    
    
    2002Earnings (loss) per share under
United States GAAP:Basic  net income before
cumulative effect of accounting
change
    
    $
    1.22
    
    
    $
    1.07
    
    
    $
    0.67Basic  cumulative effect of
change in method of accounting
for goodwill
    
    
    
    
    
    
    
    
    
    
    (0.31
    )Basic  net income
    
    
    1.22
    
    
    
    1.07
    
    
    
    0.36Diluted  net income before
cumulative effect of accounting
change
    
    
    1.17
    
    
    
    1.01
    
    
    
    0.66Diluted  cumulative effect of
change in method of accounting
for goodwill
    
    
    
    
    
    
    
    
    
    
    (0.31
    )Diluted  net income
    
    
    1.17
    
    
    
    1.01
    
    
    
    0.35Weighted average number of shares:Weighted average number of
shares outstanding
    
    
    12,285,400
    
    
    
    9,684,901
    
    
    
    9,691,041Potential exercise of stock options
    
    
    455,077
    
    
    
    578,310
    
    
    
    93,025Diluted shares
    
    
    12,740,477
    
    
    
    10,263,211
    
    
    
    9,784,066
  (i)
    In 2003, the Company had $264 of foreign exchange gains that
represented a substantially complete liquidation of a foreign operation that was
included in selling, general and administration expenses. As the foreign operation
was substantially liquidated, Canadian and United States GAAP require the transfer
into income of the related cumulative translation adjustment. In 2002, the Company had a $444 foreign exchange gain that did not represent a
substantially complete liquidation of a foreign operation included in selling,
general and administration expenses. This gain on repatriation of capital from a
subsidiary arose from the difference between the exchange rate in effect on the
date the capital was returned to Canada compared to the historical rate in effect
when the capital was invested. The gain was recognized upon the transfer into
income of the related cumulative translation adjustment under Canadian GAAP. Under
United States GAAP, there is no reduction of the cumulative translation adjustment
account, nor recognition of associated income resulting from such capital
restructurings. This transaction was not subject to income taxes. 47




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Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  14.
    Canadian and United States accounting policy differences (continued):  (ii)
    A non-cash charge of $3.0 million, to adjust the carrying value of
goodwill to its implied value, was included in opening retained earnings without the
restatement of prior period figures. This charge was the result of the Companys
adoption of the new Canadian accounting standard for goodwill and other intangibles.
Under United States GAAP, FAS 142, the non-cash charge is not recorded as a charge
to opening retained earnings but rather as a charge to income in 2002.(iii)
    The change in the fair value of the Companys obligation for its
interest rate swap, which is designated as a cash flow hedge, has been included net
of the income tax effect of nil (2003  $78; 2002  $474).(iv)
    The unrealized gains on the available for sale securities have been
included, net of the income tax effect of $2.  (b)
    Consolidated statements of cash flows: Canadian GAAP permits the disclosure of a subtotal of the amount of cash provided by
operations before changes in non-cash working capital items in the consolidated
statements of cash flows. United States GAAP does not permit this subtotal to be
included.  (c)
    Income from operations before depreciation: United States GAAP requires that depreciation be included in the determination of income
from operations. Further, United States GAAP does not permit the disclosure of a
subtotal of the amount of income from continuing operations before this item. Canadian
GAAP requires the disclosure of a subtotal of the amount of income from operations
before this item. Income from operations based on United States GAAP is as follows: 2004
    
    
    2003
    
    
    2002Income from operations before
depreciation, as reported
    
    $
    24,183
    
    
    $
    20,308
    
    
    $
    17,817Depreciation expense
    
    
    5,206
    
    
    
    5,494
    
    
    
    5,308Foreign exchange gain (i)
    
    
    
    
    
    
    (264
    )
    
    
    (444
    )Income from operations based
on United States GAAP
    
    $
    18,977
    
    
    $
    14,550
    
    
    $
    12,065
  (i)
    Under Canadian GAAP these gains were included in selling, general and
administration expenses. Under United States GAAP these gains should be disclosed
after income from operations. See note 14(a)(i) for further explanation. 48




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Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  14.
    Canadian and United States accounting policy differences (continued):  (d)
    Other disclosures: United States GAAP requires certain additional disclosures in the consolidated financial
statements, as follows:  (i)
    The total allowance for doubtful accounts at December 31, 2004 was $1.2
million (2003  $1.3 million).(ii)
    Accounts payable and accrued liabilities: 2004
    
    
    2003Accounts payable
    
    $
    16,524
    
    
    $
    16,209Accrued wages and benefits
    
    
    4,320
    
    
    
    3,555Accrued claims, self insurance and
workers compensation
    
    
    5,600
    
    
    
    4,670Other
    
    
    6,933
    
    
    
    9,658$
    33,377
    
    
    $
    34,092
  (e)
    Stock-based compensation: For all stock option grants prior to January 1, 2003, stock-based compensation to
employees was accounted for based on the intrinsic value method under APB No. 25 and
related interpretations. In accordance with one of the transitional options permitted under amended FASB 148, the
Company has prospectively applied the fair value-based method to all stock options
granted on or after January 1, 2003. Canadian GAAP requires pro forma net income and earnings per share disclosure for stock
option grants during 2002. United States GAAP requires pro forma net income and
earnings per share disclosure for stock options granted on or after January 1, 1995.
For stock option grants on or after January 1, 2003, there is no policy difference
between Canadian and United States GAAP. 49




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##### Table of Contents



Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  14.
    Canadian and United States accounting policy differences (continued): Pro forma stock option disclosure: The following table outlines the pro forma impact if the compensation cost for the
Companys stock options is determined under the fair value method for awards granted on
or after January 1, 1995: 2004
    
    
    2003
    
    
    2002Net income, as reported,
based on United States GAAP
    
    $
    14,943
    
    
    $
    10,336
    
    
    $
    3,471Add stock-based compensation
expense included in reported
net income
    
    
    323
    
    
    
    
    
    
    
    Deduct total stock-based
compensation expense
determined using fair value
method for all grants
    
    
    (412
    )
    
    
    (212
    )
    
    
    (399
    )Pro forma net income
    
    $
    14,854
    
    
    $
    10,124
    
    
    $
    3,072Earnings per share:Basic  as reported
    
    $
    1.22
    
    
    $
    1.07
    
    
    $
    0.36Basic  pro forma
    
    $
    1.21
    
    
    $
    1.05
    
    
    $
    0.32Diluted  as reported
    
    $
    1.17
    
    
    $
    1.01
    
    
    $
    0.35Diluted  pro forma
    
    $
    1.17
    
    
    $
    0.99
    
    
    $
    0.31
 The fair value of each option granted was estimated on the date of grant using the
Black-Scholes fair value option pricing model with the following assumptions: 2002
    
    
    1997-2001Risk-free interest rate
    
    
    5.3
    %
    
    
    4.9% - 6.6
    %Dividend yield
    
    
    
    
    
    
    Volatility factor of the future
expected market price of the
Companys common shares
    
    
    36.0
    
    
    
    34.1 - 34.8Expected life of the options
    
    10 years
    
    10 years
 50




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Notes to Consolidated Financial Statements (continued)
(In thousands of United States dollars, except per share amounts where noted) Years ended December 31, 2004, 2003 and 2002  14.
    Canadian and United States accounting policy differences (continued):  (f)
    New United States accounting pronouncement: In May 2003, FASB Statement No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity was issued. This Statement provides
guidance for the classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. The requirements of FASB 150 do not
have an effect on the Companys Consolidated Financial Statements. In December 2003, FASB Statement No. 132 (revised), Employers Disclosures about
Pensions and Other Postretirement Benefits was issued. The Statement requires
additional disclosures about the assets, obligations, cash flows and net periodic
benefit cost of defined benefit pension plans and other post-retirement benefit plans.
The requirements of FASB 132 (revised) do not have an effect on the Companys
Consolidated Financial Statements. In November 2004, FASB Statement No 151, Inventory Costs  An Amendment of ARB No. 43,
Chapter 4 was issued. The Statement clarifies the accounting for abnormal amounts of
idle facility expense, freight, handling costs and wasted material. Additionally,
allocation of fixed overheads to the costs of conversion should be based on the normal
capacity of production facilities. The requirements of FASB 151 do not have an effect
on the Companys Consolidated Financial Statements. In December 2004, FASB Statement No. 153, Exchanges of Non-monetary Assets  An
Amendment to APB Opinion No. 29 was issued. The Statement eliminates the exception to
fair value for exchanges of similar productive assets and replaces it with a general
exception for exchange transactions that do not have commercial substance  that is,
transactions that are not expected to result in significant changes in the cash flows of
the reporting entity. The requirements of FASB 153 do not have an effect on the
Companys Consolidated Financial Statements. In December 2004, FASB Statement No. 123 (revised), Share-based Payment was issued.
This Statement requires an entity to recognize the grant-date fair value of stock
options and other equity-based compensation issued to employees in the income statement.
FASB 123 (revised) eliminates the ability to account for share-based compensation
transactions using the intrinsic value method in APB Opinion No. 25. The Company,
effective January 1, 2003, adopted FASB Statement 123, Accounting for Stock-based
Compensation as amended by FASB Statement 148, Accounting for Stock-based Compensation
  Transition and Disclosure, and will evaluate the effect of FASB No. 123 (revised) on
the Companys Consolidated Financial Statements. 51




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Consolidated Supplemental Schedule of Quarterly Financial Information
(In thousands of United States dollars, except per share amounts where noted) Canadian and United States GAAP First
    
    
    Second
    
    
    Third
    
    
    Fourth2004 (Unaudited)
    
    quarter
    
    
    quarter
    
    
    quarter
    
    
    quarterRevenue:Less-than-truckload
    
    $
    70,259
    
    
    $
    75,958
    
    
    $
    78,727
    
    
    $
    78,073Logistics
    
    
    8,167
    
    
    
    8,768
    
    
    
    8,936
    
    
    
    9,628Truckload
    
    
    8,720
    
    
    
    9,205
    
    
    
    9,332
    
    
    
    8,822Total revenue
    
    $
    87,146
    
    
    $
    93,931
    
    
    $
    96,995
    
    
    $
    96,523Income from operations
after depreciation
    
    $
    2,177
    
    
    $
    5,870
    
    
    $
    6,193
    
    
    $
    4,737Net income
    
    
    1,649
    
    
    
    4,387
    
    
    
    4,542
    
    
    
    4,365Earnings per share:Basic
    
    $
    0.14
    
    
    $
    0.36
    
    
    $
    0.37
    
    
    $
    0.35Diluted
    
    
    0.13
    
    
    
    0.34
    
    
    
    0.36
    
    
    
    0.34
 In 2004, there are no differences in income from operations after depreciation and net income
between Canadian and United States GAAP. First
    
    
    Second
    
    
    Third
    
    
    Fourth2003 (Unaudited)
    
    quarter
    
    
    quarter
    
    
    quarter
    
    
    quarterRevenue:Less-than-truckload
    
    $
    63,224
    
    
    $
    68,503
    
    
    $
    69,228
    
    
    $
    69,234Logistics
    
    
    6,340
    
    
    
    7,106
    
    
    
    7,347
    
    
    
    7,849Truckload
    
    
    7,905
    
    
    
    8,526
    
    
    
    8,314
    
    
    
    8,250Total revenue
    
    $
    77,469
    
    
    $
    84,135
    
    
    $
    84,889
    
    
    $
    85,333Income from operations
after depreciation based on
Canadian GAAP
    
    $
    2,123
    
    
    $
    3,933
    
    
    $
    4,462
    
    
    $
    4,296Income from operations after
depreciation based on
United States GAAP
    
    
    2,123
    
    
    
    3,933
    
    
    
    4,462
    
    
    
    4,032Net income
    
    
    1,417
    
    
    
    2,724
    
    
    
    3,045
    
    
    
    3,150Earnings per share:Basic
    
    $
    0.15
    
    
    $
    0.29
    
    
    $
    0.32
    
    
    $
    0.31Diluted
    
    $
    0.14
    
    
    $
    0.27
    
    
    $
    0.30
    
    
    $
    0.29
 Please refer to Note 14 in the audited consolidated financial statements for differences between
Canadian and United States GAAP. 52




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ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE During our last two years, there were no disagreements with KPMG LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of KPMG LLP, would have caused them to
make reference to the subject matter of the disagreement in connection with their reports. 
 ITEM 9a CONTROLS AND PROCEDURES As of the end of the period covered by this Annual Report on Form 10-K, the Company conducted
an evaluation of the effectiveness of its disclosure controls and procedures. Based on this
evaluation, the Companys Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have
concluded that the Companys disclosure controls and procedures were effective during the period
covered by this report. There have been no significant changes in our internal controls, which we define to include
our control environment, control procedures, and accounting systems, or in other factors that could
significantly affect our internal controls, since February 7, 2005. The following is managements Annual Report on Internal Control over Financial Reporting: Vitran Corporation Inc.s (Vitran) management is responsible for establishing and
maintaining systems of adequate financial reporting controls, as such term is defined in Exchange
Act Rules 13a-15(f). Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. In 2004 Vitrans management team conducted tests of its internal control over financial
reporting in accordance with the standards set forth by the Public Company Accounting Oversight
Board (PCAOB) in the United States. In accordance with these standards, management assessed and
tested, on a sample basis, Vitrans internal controls over financial reporting according to a
comprehensive risk analysis using the Internal Control  Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). It is managements
opinion that the testing methodology of the internal control framework is appropriate and provides
reasonable assurance as to the integrity and reliability of the internal control over financial
reporting. In managements opinion, based on the assessment completed for the year ended December 31,
2004, the internal control over financial reporting are operating effectively. In addition, it is
managements opinion the assessment is free of material misstatement. KPMG LLP, a public accounting firm registered with the PCAOB, has issued an attestation report
on managements assessment of Vitrans internal controls over financial reporting, as stated in
their report which is included herein. 53




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To: The Board of Directors and Stockholders
       Vitran Corporation Inc.: We have audited managements assessment, included in the accompanying Managements Annual Report on
Internal Control over Financial Reporting,that Vitran Corporation Inc. maintained effective
internal control over financial reporting as of December 31, 2004, based on criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Vitran Corporation Inc.s management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an opinion on
managements assessment and an opinion on the effectiveness of the Companys internal control over
financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion. A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that Vitran Corporation Inc. maintained effective internal
control over financial reporting as of December 31, 2004, is fairly stated, in all material
respects, based on criteria established in Internal ControlIntegrated Framework issued by the
COSO. Also, in our opinion, Vitran Corporation Inc. maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2004, based on criteria established in
Internal ControlIntegrated Framework issued by the COSO. We also have audited, in
accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Vitran Corporation Inc. and subsidiaries
as of December 31, 2004 and 2003, and the related consolidated statements of income, retained
earnings, and cash flows for each of the years in the three-year period ended December 31, 2004,
and our report dated February 7, 2005 expressed an unqualified opinion on those consolidated
financial statements. /s/ KPMG llp Toronto, Canada
February 7, 2005 54




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PART III 
 ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information for directors is reported in our definitive proxy statement filed pursuant to
Regulation 14A, and is incorporated herein by reference. The following table sets forth certain
information concerning our executive officers: Name
    
    Age
    
    Position
    
    HistoryRichard E. Gaetz
(Mississauga, Canada)
    
    
    47
    
    
    President and
Chief Executive
Officer
    
    Mr. Gaetz has been
working in the
transportation and
logistics industry
for more than 25
years. He has been
actively involved
with the growth and
development of
Vitran and has been
responsible for
Vitrans freight
distribution
business since he
joined in 1989. He
was elected to the
Board of Directors
of Vitran in 1995.
Mr. Gaetz has
extensive
experience on both
sides of the
border. Prior to
joining Vitran, he
spent ten years
with Clarke
Transport, a large
Canadian freight
company, in various
positions including
Vice President.
Mr. Gaetz received
a Bachelor of
Commerce degree
from Dalhousie
University in
Halifax in 1979 and
attended the MBA
program at Western
Washington
University. He is
a Director of the
Ontario Trucking
Association and the
Canadian Trucking
Alliance.Sean P. Washchuk
(Burlington, Canada)
    
    
    32
    
    
    Vice President
Finance and Chief
Financial Officer
    
    Mr. Washchuk joined
Vitran in 2000 as
the Corporate
Controller and was
appointed Chief
Financial Officer
and Vice President
Finance in 2004.
Prior to joining
Vitran in 2000, he
was a Controller at
a North American
plastics recycling
company and was
also a manager at
PricewaterhouseCoope
rs in the assurance
and business
advisory services
practice. Mr.
Washchuk is a
Chartered
Accountant with the
Canadian Institute
and received a
Bachelor of
Accounting degree
from Brock
University in
Ontario.
 CODE OF ETHICS The Company has adopted a Code of Ethics and Professional Conduct (the Code) for all senior
executives and directors, including the Chief Executive Officer, Chief Financial Officer and
Principal Accounting Officer. The Code is available free of charge on the Companys website at
www.vitran.com. The Code requires that the Companys senior executives and directors deal fairly
with customers, suppliers, fellow employees and the general public. Acceptance of the Code is
mandatory for the Companys senior executives and directors. 55




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ITEM 11 EXECUTIVE COMPENSATION The information required by Item 11 of Form 10-K appears in the Companys proxy statement for
the 2005 Annual Meeting of its Shareholders, reference to which is hereby made, and the information
therein is incorporated herein by reference. 
 ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 of Form 10-K appears in the Companys proxy statement for
the 2005 Annual Meeting of its Shareholders, reference to which is hereby made, and the information
therein is incorporated herein by reference. 
 ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 of Form 10-K appears in the Companys proxy statement for
the 2005 Annual Meeting of its Shareholders, reference to which is hereby made, and the information
therein is incorporated herein by reference. 
 ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES KPMG LLP has served as the Companys auditors since 1989. For the fiscal years ended December
31, 2004 and 2003 fees billed by KPMG LLP to Vitran for services were: Year ended December 31,2004
    
    
    2003Audit fees
    
    $
    383,256
    
    
    $
    259,324Tax fees
    
    Nil
    
    NilAll other fees
    
    Nil
    
    
    22,676$
    383,256
    
    
    $
    282,000
 All services provided by KPMG to Vitran for 2004 and 2003 were approved by the Audit
Committee. The audit committee pre-approves all non-audit services to be provided to the Company
or its subsidiary entities by its independent auditors. For further details regarding the Audit
Committee approval process please review the Audit Committee charter attached as an appendix to the
Companys proxy statement for the 2004 Annual Meeting of its Shareholders, reference to which is
hereby made, and the information therein is incorporated herein by reference. For information regarding the members and other applicable information of the Audit Committee
please review the Companys proxy statement for the 2005 Annual Meeting of its Shareholders,
reference to which is hereby made, and the information therein is incorporated herein by reference. 
 PART IV 
 ITEM 15 EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K  (a)
    (1) Financial Statements Consolidated Balance Sheets as at December 31, 2004, and 2003 and the Consolidated Statements
of Income, Retained Earnings and Cash Flow for the years ended December 31, 2004, 2003, and 2002,
reported on by KPMG LLP, Chartered Accountants. These statements are prepared in accordance with
GAAP in Canada and in the United States. A reconciliation of the differences between Canadian and
United States GAAP is included in Note 14 to the financial statements. 56




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(2) Financial Statements Schedule: Schedule IIValuation and Qualifying Accounts Vitran Corporation Inc.
Three Years ended December 31, 2004 Allowance for Doubtful Accounts (000s $)Balance at
    
    
    Charges to
    
    
    
    
    
    
    Balancebeginning
    
    
    costs and
    
    
    
    
    
    
    at endDescription
    
    of year
    
    
    expenses
    
    
    Deductions
    
    
    of yearYear ended December 31, 2002Accounts receivable allowances for
revenue adjustments and doubtful
accounts
    
    $
    2,310
    
    
    $
    643
    
    
    $
    (1,087
    )
    
    $
    1,866Year ended December 31, 2003Accounts receivable allowances for
revenue adjustments and doubtful
accounts
    
    $
    1,866
    
    
    $
    1,105
    
    
    $
    (1,705
    )
    
    $
    1,266Year ended December 31, 2004Accounts receivable allowances for
revenue adjustments and doubtful
accounts
    
    $
    1,266
    
    
    $
    584
    
    
    $
    (657
    )
    
    $
    1,193
 Three Years ended December 31, 2004 Tax Valuation Allowance (000s $)Balance at
    
    
    Charges to
    
    
    
    
    
    
    Balancebeginning
    
    
    costs and
    
    
    
    
    
    
    at endDescription
    
    of year
    
    
    expenses
    
    
    Deductions
    
    
    of yearYear ended December 31, 2002Tax valuation allowance
    
    $
    693
    
    
    $
    
    
    
    $
    
    
    
    $
    693Year ended December 31, 2003Tax valuation allowance
    
    $
    693
    
    
    $
    
    
    
    $
    
    
    
    $
    693Year ended December 31, 2004Tax valuation allowance
    
    $
    693
    
    
    $
    
    
    
    $
    (693
    )
    
    $
    
 (3) Exhibits Filed The exhibits listed in the accompanying Exhibit Index are filed as part of this Annual Report
on Form 10-K. (b) Reports on Form 8-K In October 2004, the Company filed an 8-K announcing third quarter results. In December 2004, the Company filed an 8-K announcing the appointment of a principal officer. 57




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Exhibit Index ExhibitNo.
    
    Document1.1*
    
    Underwriting Agreement dated December 16, 1994 between the registrant and Midland Walwyn Capital Inc. and ScotiaMcLeod
Inc.1.2*
    
    Special Warrant Indenture dated December 16, 1994 between the registrant and Montreal Trust Company for Canada, as trustee1.3*
    
    Escrow Agreement dated December 16, 1994 between the registrant and Messrs. Morris/Rose/Ledgett, Barristers and
Solicitors, as trustee1.4*
    
    Subscription Agreements:1.5*
    
    Stock Option Plan dated July 16, 19871.6*
    
    Employee Stock Option Plan approved May 17, 19951.7*
    
    Prospectus dated December 16, 20032.1*
    
    Purchase and Sale Agreement dated November 2, 1994 between the registrant and Carl Cook and Daniel L. Cook3.(i).1*
    
    Articles of Incorporation effective, April 29, 19813.(i).2*
    
    Articles of Amendment effective, May 27, 19873.(i).3*
    
    Articles of Amendment effective, July 16, 19873.(i).4*
    
    Articles of Amendment effective, February 5, 19913.(i).5*
    
    Articles of Amendment effective April 22, 20043.(ii).1*
    
    By-laws effective, May 27, 19873.(ii).2*
    
    By-law to authorize the directors to borrow and give security effective, July 16, 19874.1*
    
    Cancellation of Stock Voting Agreement dated February 1, 2003 between Richard D. McGraw, Albert Gnat and Anthony F.
Griffiths9.1*
    
    Stock Voting Agreement dated July 15, 1987 between Richard D. McGraw, Albert Gnat and Anthony F. Griffiths10.1*
    
    Credit Agreement between the registrant, its subsidiaries and the Royal Bank, dated April 25, 199510.2*
    
    Credit Agreement between the Overland Group and Bank One, dated February 4, 1994 (the Overland Credit Agreement)10.3*
    
    First Amendment to the Overland Credit Agreement, effective July 1, 199410.4*
    
    Second Amendment to the Overland Credit Agreement, effective September 30, 199410.5*
    
    Third Amendment to the Overland Credit Agreement, dated December 14, 199410.6*
    
    Fourth Amendment to the Overland Credit Agreement, dated February 1, 199510.7*
    
    Fifth Amendment to the Overland Credit Agreement, effective December 31, 199410.8*
    
    Sixth Amendment to the Overland Credit Agreement, dated March 2, 199510.9*
    
    Operating Credit Agreement between Trans Western Express Inc. and The Bank of Nova Scotia, dated July 25, 199510.9.1*
    
    First Amending Agreement to Credit Agreement between Trans Western Express Inc. and The Bank of Nova Scotia, dated
September 3, 199810.9.2*
    
    Second Amending Agreement to Credit Agreement between Trans Western Express Inc. and The Bank of Nova Scotia, dated
January 8, 199910.9.3*
    
    Amended and Restated Credit Agreement between Vitran Corporation Inc. and Trans Western Express Inc. and The Bank of Nova
Scotia, dated January 31, 200210.10*
    
    Note Purchase Agreement between Trans Western Express Inc., the registrant and certain purchasers, dated July 25, 199510.11*
    
    Amendment No. 1 to Note Agreement (Amending Agreement), dated June 28, 199610.12*
    
    Amendment No. 2 to Note Agreement (Amending Agreement), dated May 13, 1997
 58




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##### Table of Contents



ExhibitNo.
    
    Document10.13*
    
    Credit Agreement between the registrant and The Bank of Nova Scotia, dated September 3, 199810.14*
    
    Credit Agreement between the registrant and The Bank of Nova Scotia and Laurentian Bank of Canada, dated October 13, 199910.15*
    
    Confidential Transportation Contract dated January 1, 1993 between Trans Western Express Inc. and Canadian National
Railway Company10.16*
    
    Agreement dated April 24, 1995 between the registrant, Borcross Limited, Carl Cook and Daniel L. Cook amending the terms
of the Overland Note10.17*
    
    Engagement Letter dated April 28, 1995 between the registrant and Banc One Capital Corporation10.18*
    
    Offer of Employment dated September 30, 1998 from the registrant to Kevin Glass10.19*
    
    Share Purchase Agreement between the registrant and Randall Quast, dated July 21, 199810.20*
    
    Employment agreement dated November 25, 2004 from the registrant to Sean P. Washchuk10.21*
    
    Employment agreement dated April 29, 2004 from the registrant to Rick E. Gaetz10.22*
    
    Employment agreement dated April 29, 2004 from the registrant to Kevin A. Glass14.1*
    
    Code of Ethics and Professional Conduct for Directors, Senior Executives and Employees, dated August 3, 200431.1
    
    Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   *
    
    Previously filed SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Toronto, Province of Ontario, on the 7th day of February, 2005. Vitran Corporation Inc.By:
    /s/ SEAN P. WASHCHUKSean P. WashchukVice President, Finance and
Chief Financial Officer 59




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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated. Signatures
    
    Title
    
    Date/s/ RICHARD D. McGRAW
    
    Chairman of the Board
    
    February 7, 2005Richard D. McGraw/s/ RICHARD E. GAETZ
    
    President and Chief Executive Officer, Director
    
    February 7, 2005Richard E. Gaetz/s/ GEORGES L. HÉBERT
    
    Director
    
    February 7, 2005Georges L. Hébert/s/ WILLIAM S. DELUCE
    
    Director
    
    February 7, 2005William S. Deluce/s/ ANTHONY F. GRIFFITHS
    
    Director
    
    February 7, 2005Anthony F. Griffiths/s/ GRAHAM W. SAVAGE
    
    Director
    
    February 7, 2005Graham W. Savage/s/ SEAN P. WASHCHUK
    
    Vice President Finance
and Chief Financial Officer
(Principal Financial Officer)
    
    February 7, 2005Sean P. Washchuk/s/ FAYAZ D. SULEMAN
    
    Corporate Controller
    
    February 7, 2005(Principal Accounting Officer)Fayaz D. Suleman
 60




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CERTIFICATIONS I, Richard E. Gaetz, certify that: 1. I have reviewed this Annual Report on Form 10-K of Vitran Corporation Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period
covered by this report; 3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; 4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and 5. The registrants other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the registrants auditors
and the Audit Committee of the registrants Board of Directors: a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial reporting. Date: February 7, 2005 /s/ RICHARD E. GAETZRichard E. GaetzPresident and
Chief Executive Officer 61




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CERTIFICATIONS I, Sean P. Washchuk, certify that: 1. I have reviewed this Annual Report on Form 10-K of Vitran Corporation Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period
covered by this report; 3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; 4. The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the registrants internal control over
financial reporting; and 5. The registrants other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the registrants auditors
and the Audit Committee of the registrants Board of Directors: a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial reporting. Date: February 7, 2005 /s/ SEAN P. WASHCHUKSean P. WashchukVice President, Finance and
Chief Financial Officer 62




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CERTIFICATION Each of the undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Vitran Corporation
Inc., that, to his knowledge, the Annual Report of Vitran Corporation Inc. on Form 10-K for the
year ended December 31, 2004, fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934 and that the information contained in such report fairly presents,
in all material respects, the financial condition and results of operation of Vitran Corporation
Inc. Date: February 7, 2005
    By:
    /s/ RICHARD E. GAETZRichard E. GaetzPresident and
Chief Executive Officer By:
    /s/ SEAN P. WASHCHUKSean P. WashchukVice President Finance and
Chief Financial Officer 63




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CORPORATE DIRECTORY  DirectorsWilliam S. Deluce
President & Chief Executive Officer
CSAE Inc. Rick E. Gaetz
President & Chief Executive Officer
Vitran Corporation Inc. Anthony F. Griffiths
Independent Consultant &
Corporate Director Georges L. Hébert
President
Prosys-Tec Inc. Richard D. McGraw
President
Lochan Ora Group of Companies Graham W. Savage
Chairman
Callisto Capital LP Corporate
OfficersRichard D. McGraw
Chairman Rick E. Gaetz
President & Chief Executive Officer Sean P. Washchuk
Vice President Finance &
Chief Financial Officer Corporate Executive Office Vitran Corporation Inc.
185 The West Mall
Suite 701
Toronto, Ontario
Canada M9C 5L5
Tel: 416-596-7664
Fax: 416-596-8039
 Operating Headquarters Canadian LTL Office
Vitran Express Canada
751 Bowes Road
Concord, Ontario
Canada L4K 5C9
Tel: 416-798-4965
Fax: 416-798-4753 Canada/United States
Logistics Office
Vitran Logistics
751 Bowes Road
Concord, Ontario
Canada L4K 5C9
Tel: 416-798-4965
Fax: 905-738-4140 United States LTL Office
Vitran Express, Inc.
6500 East 30th Street
Indianapolis, Indiana
U.S.A. 46219
Tel: 317-803-6400
Fax: 317-543-1230 United States Truckload Office
Frontier Transport Corporation
1560 West Raymond Street
Indianapolis, Indiana
U.S.A. 46221
Tel: 317-636-1641
Fax: 317-634-0321 Stock Exchange Listings
The Toronto Stock Exchange
Stock Symbol: VTN
The Nasdaq Stock Exchange
Stock Symbol: VTNC
 Transfer
AgentComputershare Investor Services Inc.
100 University Avenue
9th Floor
Toronto, Ontario
Canada M5J 2Y1
Tel: 416-981-9766 Computershare Investor Services LLC
350 Indiana Street
Suite 800
Golden, Colorado
U.S.A. 80401 Shareholder Inquiries
Communications concerning
individual shareholder accounts
should be directed to
Computershare Investor Services Inc.
Attention:
Investor Centre
Tel: 800-564-6253
Fax: 866-249-7775
service@computershare.comwww.computershare.com Annual Meeting
The Annual Meeting of the Shareholders
of Vitran Corporation Inc. will be
held at the Toronto Stock Exchange
Conference Centre Auditorium,
The Exchange Tower,
130 King Street West,
Toronto, Ontario, at 4:30 p.m.
on Wednesday, April 20, 2005. Annual Report on Form 10-K
Please write to:
Vitran Corporation Inc.
or see our website,
www.vitran.com
   64




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(MAP) 65