DELIVERING VALUE

SECOND QUARTER REPORT 2001

CORPORATE PROFILE

Vitran Corporation provides a range of premium freight and distribution services and solutions in the United States and Canada. Vitran’s backbone is its less-than-truckload (LTL) networkthatstretchesacrossCanadaandcovers18midwestU.S.states.Covera geextendsto another 22 states through strategic partnerships. Vitran Logistics provides additional comprehensive distribution solutions that range from special inventory consolidations to responsibilityforthecompletedistributionfunction,includingtheprovis ionoffacilities.Vitran also provides same-day/next-day Truckload service, as well as Intermodal and Highway Brokerage. These services are provided by over 3,000 employees and associates located at more than 100 facilities and offices throughout North America. Vitran’s fleet consists of over 5,000 tractors and trailing equipment operated by 1,500 drivers and owner/operators.

In summary we provide:
•  Less-than-truckload (LTL)	•  Truckload (TL)
•  Logistics	•  Intermodal & Highway Brokerage

REPORT TO SHAREHOLDERS

SECOND QUARTER 2001
For the period ended June 30, 2001

MANAGEMENT DISCUSSION AND ANALYSIS

This report contains forward-looking information with respect to Vitran’s operations and future financial results. Actual results may differ from expected results for a variety of reasons including factors discussed in the Company’s Management Discussion and Analysis section of Vitran’s 2000 Annual Report.

Overview

The consolidated results for the second quarter of 2001 demonstrated improved performance at the Company’s continuing operations compared to the first quarter of 2001. Income from continuing operations for the quarter increased to $0.25 million or $0.03 per basic share from a loss from continuing operation of $0.78 million or $0.07 per basic share. However, due to the Company’s planned divestiture of the environmental business segment, net income was negatively impacted by a write-down of $3.75 million.

Vitran Corporation Inc. reported its second quarter results on August 13, 2001 with a press release and held an open conference call at 10:00 a.m. on August 14, 2001.

A replay of the conference call is available on Vitran’s website at www.vitran.com until October 14, 2001. Register e-alerts now and receive Vitran’s news as it is released.

Consolidated Results

Revenue from continuing operations for the three-month period was $121.0 million, down slightly compared to the same period in the prior year reflecting a sluggish North American economy. Revenue from continuing operations for the six-month period ended June 30, 2001 was $240.9 million compared to $237.4 million for the same period in 2000.

Gross profit margin for the three-month period declined $2.9 million, or 13.3%, to $18.8 million compared to the same quarter in 2000. Similarly, gross profit margin for the first half of 2001 was 14.1% lower compared to the same period in 2000. The declines can primarily be attributed to increases in operating expenses.

Selling, general and administrative expenses for the second quarter of 2001 increased by $2.5 million to $13.9 million compared to the second quarter of 2000. For the six- months ended June 30, 2001, selling, general and administrative expenses were $26.9 million compared to $23.6 million for the same period in 2000.

Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations declined to $4.9 million in the second quarter of 2001 from $10.3 million in the second quarter of 2000. Depreciation expense for the quarter of $3.1 million was unchanged compared to the same quarter of the previous year. Operating income declined $5.4 million for the second quarter of 2001 compared to the same period in 2000 from $7.2 million to $1.8 million. For the six-month period ended June 30, 2001 income from continuing operations was $2.2 million compared to $11.3 million for the same six-month period in 2000. The operating ratio on a consolidated basis for the second quarter was 98.5% versus 94.1% for the second quarter in 2000, and for the first six months of 2001 was 99.1% compared to 95.2% for the first six months of 2000.

REPORT TO SHAREHOLDERS

Interest expense net of interest income for the second quarter was $1.5 million versus $1.8 million for the second quarter in 2000 and was $3.3 million for the six- months ended June 30, 2001 versus $3.6 million for the same period in 2000. The decrease is due primarily to lower rates on the Company’s floating rate debt.

Basic earnings per share from continuing operations for the quarter were $0.03 compared to $0.34 per share in 2000 and for the six-months ended June 30, 2001 were a loss per share of $0.05 versus earnings per share of $0.5 in the same six-month period in 2000.

As a result of the decision to divest the environmental business segment, the operation was reclassified as discontinued in the financial statements and a provision for loss on disposition of $3.75 million was recorded. The total loss from discontinued operations, including the provision for loss on disposition, for the three-month and six-month periods ended June 30, 2001 was $4.4 million and $4.9 million. In 2000 the environmental business operated just above break-even.

The net loss for the quarter, including the provision for loss on discontinued operations, was $4.2 million or $0.42 per basic share compared to net income of $3.4 million or $0.35 per basic share for the same quarter in 2000. For the six- months ended June 30, 2001 the Company incurred a net loss of $5.5 million or $0.55 per basic share compared to net income of $5.0 million or $0.51 per basic share for the same six-month period in 2000.

SEGMENTED RESULTS

Less-than-truckload (LTL)

The continued economic slowdown in both Canada and the United States continued to adversely impact the revenue and operating results at the less-than-truckload operation, Vitran’s largest business segment. Other public operators in the LTL business continue to report similar declines in business activity and lower than normal levels of profitability.

Revenue for the second quarter was $94.7 million or 0.7% less than revenue for the same three-month period last year. Operating income for the second quarter declined by $4.5 million from $6.8 million in the second quarter 2000 to $2.3 million. For the six-month period ending June 30, 2001 revenue was $187.7 million compared to $185.9 million in the previous year. Operating income for the six months ended June 30, 2000 was $3.4 million versus $11.1 million the year before.

The Canadian LTL business unit continued to perform well, notwithstanding the soft economic environment. Revenue for the second quarter was in line with the same prior year period. While tonnage and shipments declined by 9% and 4% respectively, revenue per hundredweight was 10.5% ahead of the prior year quarter.

The US LTL business improved steadily in the second quarter after a very challenging April period. Significant adjustments were made to bring expenses more in line with revenue and changes were made in the management team and operations to make them leaner and more productive. Revenue for the quarter was 4.2% less than the same period a year ago, which was approximately the average decline experienced by industry peers. Tonnage was down 5.8% and shipments were down 3.7%, but revenue per hundredweight increased by 1.6%. These results were very encouraging given the improvement over the first quarter 2001 and the first month of the second quarter.

Logistics and Intermodal

Revenue for the Logistics and Intermodal segment in the second quarter was similar to the same quarter in 2000. The Logistics unit recorded increased revenue

REPORT TO SHAREHOLDERS

from its new 80,000 square foot dedicated flow-through facility in Canada. Gains from the Logistic business were offset by less-than-expected performance at the Intermodal and Highway Brokerage unit. Management is taking action to improve profitability at this business unit.

Truckload

     Revenue for the Truckload (TL) segment for the three-month and six-month period ended June 30, 2001 have remained relatively constant relative to the same periods in the prior year. Income from operations for the three-months ending June 30, 2001 was down slightly from the same period a year ago, but the performance was above the industry norm. The Truckload segment of the transportation industry has been more severely impacted by the economic slowdown than the LTL business. Year-to-date volumes for Vitran’s business are lower in 2001 than 2000.

Liquidity and Capital Resources

Cash flow from operations for the six-months before non-cash working capital changes generated $6.5 million as compared to $11.7 million in the prior year period and $3.8 million in the quarter compared to $6.9 million in the prior year quarter. The decrease in cash generated from operations is primarily attributed to declines in income from continuing operations.

Non-cash working capital changes for the six-months consumed $11.3 million compared to $1.6 million in the prior year period and consumed $5.9 million in the quarter versus generating $1.5 million in the prior year quarter.

At June 30, 2001 interest-bearing debt as a percentage of total capital was 52.3% compared with 48.6% at December 31, 2000. The increase can primarily be attributed to a net loss of $5.5 million for the six-month period of 2001.

Capital expenditures for the second quarter of 2001 amounted to $1.1 million compared to $1.2 million for the same period of the prior year. Management expects that the existing working capital, together with available revolving facilities, will be sufficient to fund the operating capital and principal debt repayment requirements of the Company for the remainder of 2001.

Outlook

The slowdown in the North American economy in 2001 has impacted the performance of almost all transportation companies and the current consensus is that any upturn will not materialize until sometime in 2002. Adjustments for the lower levels of business activity have been made at Vitran and the performance of our continuing operations improved in the second quarter compared to the first quarter. Management will continue to focus on productivity and cost-containment initiatives to improve performance.

Information in this news announcement relating to projected growth, improvements in productivity and future results constitutes forward looking statements. Actual results in future periods may differ materially from the forward-looking statements because of a number of risks and uncertainties, including but not limited to economic factors, demand for the Company’s services, fuel price fluctuations, the availability of employee drivers and independent contractors, risks associated with geographic expansion, capital requirements, claims exposure and insurance costs, competition and environmental hazards. Additional information about these and other factors that could affect the Company’s business is set forth in the Company’s 2000 Annual Report on Form 20-F and other filings with the Securities and Exchange Commission.

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

(Unaudited)
(In thousands of Canadian dollars
except for per share amounts)

		Three			Three			Six			Six
		months			months			months			months
		ended			ended			ended			ended
		June 30,			June 30,			June 30,			June 30,
		2001			2000			2001			2000
Revenue		$	120,974		$	121,887		$	240,855		$	237,447
Operating Expenses			102,129			100,143			205,519			196,329
Gross Profit			18,845			21,744			35,336			41,118
Selling, general and administrative expenses			13,900			11,426			26,866			23,555
Income from operations before depreciation and amortization			4,945			10,318			8,470			17,563
Depreciation and Amortization			3,119			3,119			6,272			6,300
Income (loss) from operations			1,826			7,199			2,198			11,263
Net interest expense			1,462			1,796			3,285			3,627
Gain/(loss) on sale of fixed assets			(185	)		(212	)		(58	)		(232	)
			1,647			2,008			3,343			3,859
Income (loss) from continuing operations before income taxes and minority interest			179			5,191			(1,145	)		7,404
Income taxes (recovery)			24			1,815			(477	)		2,460
Income before minority interest			155			3,376			(668	)		4,944
Minority interest			91			4			132			15
Income (loss) from continuing operations			246			3,380			(536	)		4,959
Income (loss) from discontinued operations			(4,424	)		34			(4,932	)		50
Net (loss) income		$	(4,178	)	$	3,414		$	(5,468	)	$	5,009
Retained earnings, beginning of period		$	40,172		$	34,468		$	41,462		$	32,873
Dividends — $0.035 per share			(346	)		(348	)		(346	)		(348	)
Retained earnings, end of period		$	35,648		$	37,534		$	35,648		$	37,534
Earnings per share:
	Basic — continuing operations	$	0.03		$	0.34		$	(0.05	)	$	0.50
	Basic — discontinued operations	$	(0.45	)	$	0.01		$	(0.50	)	$	0.01
	Basic — net income	$	(0.42	)	$	0.35		$	(0.55	)	$	0.51
	Fully diluted — continuing operations	$	0.03		$	0.34		$	(0.05	)	$	0.50
	Fully diluted — discontinued operations	$	(0.45	)	$	0.01		$	(0.50	)	$	0.01
	Fully diluted — net income	$	(0.42	)	$	0.35		$	(0.55	)	$	0.51
Number of shares outstanding			9,859,778			9,887,316			9,859,778			9,911,149

CONSOLIDATED BALANCE SHEETS

(Unaudited)
(In thousands of Canadian dollars)

		Six months		Twelve months
		ended June 30,		ended Dec. 31,
		2001		2000
Assets
Current Assets:
	Cash	$	—	$	—
	Accounts receivable		62,419		58,450
	Inventory, deposits and prepaid expenses		7,086		6,727
	Income taxes recoverable		6,961		688
			76,466		65,865
Net assets of discontinued operations			2,016		6,349
Fixed assets, net of accumulated depreciation			53,825		59,132
Goodwill, net of accumulated amortization			72,536		72,955
		$	204,843	$	204,301
Liabilities and Shareholders’ Equity
Current Liabilities:
	Bank indebtedness	$	5,501	$	2,795
	Accounts payable and accrued liabilities		40,878		43,428
	Income and other taxes payable		4,553		2,709
	Current portion of long-term debt		20,675		12,106
			71,607		61,038
Long-term debt			55,497		60,492
Future income taxes			2,776		2,168
Minority interest			464		596
Shareholders’ equity:
	Capital stock		38,837		38,837
	Retained earnings		35,648		41,463
	Cumulative translation adjustment		14		(294	)
			74,499		80,006
		$	204,843	$	204,301

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
(In thousands of Canadian dollars)

			Three			Three			Six			Six
			months			months			months			months
			ended			ended			ended			ended
			June 30,			June 30,			June 30,			June 30,
			2001			2000			2001			2000
Cash provided by (used in):
Operations:
	Income (loss) from continuing operations		$	246		$	3,380		$	(536	)	$	4,960
	Items not involving cash from operations:
		Depreciation and amortization		3,119			3,119			6,272			6,300
		Future income taxes		197			198			608			205
		Loss (Gain) on sale of fixed assets		186			212			58			232
		Minority interest		91			(3	)		132			(15	)
				3,839			6,906			6,534			11,682
	Change in non-cash working capital components			(5,943	)		1,511			(11,309	)		(1,625	)
				(2,105	)		8,417			(4,775	)		10,057
Investments:
	Purchase of fixed assets			(1,097	)		(1,156	)		(2,176	)		(2,957	)
	Proceeds on sale of fixed assets			1,827			327			2,863			458
				730			(829	)		687			(2,500	)
Financing:
	Repayment of long-term debt			(8,587	)		(315	)		(8,696	)		(633	)
	Issue of long-term debt			7,714			(3	)		11,806			39
	Dividend payment			(346	)		(348	)		(346	)		(348	)
	Issue (repurchase) of Class A voting shares			—			(98	)		—			(561	)
				(1,219	)		(765	)		2,764			(1,503	)
Cash provided (used) for discontinued operations				82			(873	)		(600	)		(1,682	)
Effect of translation adjustment on cash				(1,189	)		505			(782	)		523
Increase (Decrease) in cash position				(3,701	)		6,455			(2,706	)		4,896
Cash position, beginning of year				(1,800	)		(4,045	)		(2,795	)		(2,486	)
Cash position, end of period			$	(5,501	)	$	2,410		$	(5,501	)	$	2,410
Change in non-cash working capital components:
	Accounts receivable		$	(70	)	$	(621	)	$	(3,969	)	$	(4,476	)
	Inventory, deposits and prepaid expenses			738			(1,129	)		(359	)		(2,775	)
	Income and other taxes recoverable/payable			(1,855	)		1,359			(4,428	)		1,039
	Accounts payable and accrued liabilities			(4,756	)		1,902			(2,552	)		4,588
				(5,943	)		1,511			(11,309	)		(1,625	)

NOTES

(Unaudited)
(In thousands of Canadian dollars)

1.   ACCOUNTING POLICIES

The interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles and follow the same accounting principles and methods of application as the most recent annual consolidated financial statements. The interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements included in the 2000 Annual Report.

2.   ACCOUNTING CHANGE

Effective January 1, 2001, the Company retroactively adopted the new recommendations of the CICA with respect to the computation of diluted earnings per common share. Under the new standards, the treasury stock method is used in determining the dilutive effect of options. Previously, the imputed earnings approach was used.

3.   DISCONTINUED OPERATIONS

Environmental Services Group

On May 15, 2001 the Company determined that it plans to divest its Environmental Services Business. Divestiture of the Discontinued Business is expected to take place during fiscal 2001. As a result of the plan of disposal, the results of operations for the Discontinued Business have been reported as discontinued operations and previously reported financial statements have been restated. Interest has been allocated to the Discontinued Business based on the debt directly attributable to the business and for debt not directly attributable to the business based on its share of the Company’s net assets. Income taxes have been allocated based on the Company’s effective tax rate.

The summarized statements of operations for the Discontinued Business is as follows:

Six months ended June 30	2001			2000
Revenue		10,197			15,861
Income (loss) from operations		(1,408	)		283
Interest Expense		271			210
Other Income (loss)		(24	)		2
Income (loss) before income taxes		(1,703	)		75
Income taxes		(521	)		25
Income (loss) for the period, before provision		(1,182	)		50
Provision for loss on sale of discontinued operations		(3,750	)		—
Income (loss) from discontinued operations		(4,932	)		50

The summarized balance sheets for the	Six months ended			Twelve months ended
Discontinued Business is as follows:	June 30, 2001			Dec. 31, 2000
Current assets		3,314			4,173
Fixed assets		4,265			4,402
Goodwill		870			892
Future income taxes		620			119
		9,069			9,586
Current Liabilities		3,300			3,207
Non-current liabilities		3			30
Net assets of discontinued operations before provision		5,766			6,349
Net realizable value provision		(3,750	)		—
Net assets of discontinued operations		2,016			6,349

NOTES

Cash from (used for) discontinued operations is as follows:

Six months ended June 30	2001			2000
Operating activities		(200	)		(274	)
Investing activities		(357	)		(1,509	)
Financing activities		(43	)		100
Cash used for discontinued operations		(600	)		(1,683	)

NOTES

6.   SEGMENTED INFORMATION

	VITRAN DISTRIBUTION SYSTEM
Six months ended	Less-than-				Logistics					Corporate			Consolidated
June 30, 2001	truckload		Truckload		intermodal			Total		office & other			totals
Revenue		187,732		24,075		29,048			240,855		—		$	240,855
Operating, selling, general & administrative expenses		178,810		22,563		28,863			230,236		2,149			232,385
Depreciation & amortization		5,509		495		229			6,233		39			6,272
Income (loss) from operations		3,413		1,017		(44	)		4,386		(2,188	)		2,198
Interest expense, net														3,285
Other items, net														(74	)
Income taxes														(477	)
Income (loss) from continuing operations														(536	)
Income (loss) from discontinued operations														(4,932	)
Net (loss) income													$	(5,468	)

Three months ended	Less-than-				Logistics					Corporate			Consolidated
June 30, 2001	truckload		Truckload		intermodal			Total		office & other			totals
Revenue		94,734		11,951		14,289			120,974		—		$	120,974
Operating, selling, general & administrative expenses		89,671		11,165		14,201			115,037		992			116,029
Depreciation & amortization		2,741		244		115			3,100		19			3,119
Income (loss) from operations		2,322		542		(27	)		2,837		(1,011	)		1,826
Interest expense, net														1,462
Other items, net														94
Income taxes														24
Income (loss) from continuing operations														246
Income (loss) from discontinued operations														(4,424	)
Net (loss) income													$	(4,178	)

Six months ended	Less-than-				Logistics				Corporate			Consolidated
June 30, 2000	truckload		Truckload		intermodal		Total		office & other			totals
Revenue		185,906		23,520		28,021		237,447		—		$	237,447
Operating, selling, general & administrative expenses		169,233		21,799		27,498		218,530		1,353			219,883
Depreciation & amortization		5,539		509		215		6,263		38			6,300
Income (loss) from operations		11,134		1,212		308		12,654		(1,391	)		11,264
Interest expense, net													3,627
Other items, net													217
Income taxes													2,460
Income (loss) from continuing operations													4,960
Income (loss) from discontinued operations													50
Net (loss) income												$	5,010

Three months ended	Less-than-				Logistics				Corporate			Consolidated
June 30, 2000	truckload		Truckload		intermodal		Total		office & other			totals
Revenue		95,410		11,938		14,538		121,886		—		$	121,886
Operating, selling, general & administrative expenses		85,856		11,099		14,143		111,098		470			111,568
Depreciation & amortization		2,740		255		105		3,100		19			3,119
Income (loss) from operations		6,814		584		290		7,688		(489	)		7,199
Interest expense, net													1,796
Other items, net													208
Income taxes													1,815
Income (loss) from continuing operations													3,380
Income (loss) from discontinued operations													34
Net (loss) income												$	3,414

CORPORATE DIRECTORY
 
 
Directors
 
Carl J. Cook
Decisions Resources LLC
 
G. Mark Curry
President
Revmar Inc.
 
Rick E. Gaetz
President & Chief Operating Officer
Distribution Systems
Vitran Corporation Inc.
 
Albert Gnat, Q.C.
Senior Partner
Lang Michener
 
Anthony F. Griffths
Independent Consultant
and Corporate Director
 
Richard D. McGraw
President & Chief Executive Officer
Vitran Corporation Inc.
 
Graham W. Savage
Managing Director
Savage Walker Capital Inc.
 
 
 
 
Corporate Officers
 
Anthony F. Griffths
Chairman
 
Albert Gnat, Q.C.
Vice Chairman
 
Richard D. McGraw
President & Chief Executive Officer
 
Rick E. Gaetz
President & Chief Operating Officer
Distribution Systems
 
Kevin A. Glass
Vice President Finance &
Chief Financial Officer  
 
 
Corporate Executive Office
 
Vitran Corporation Inc.
70 University Avenue
Suite 350
Toronto, Ontario
Canada M5J 2M4
Tel: (416) 596-7664
Fax: (416) 596-8039
 
 
Distribution System
 
Vitran Canada LTL
Vitran Logistics
751 Bowes Road
Concord, Ontario
Canada L4K 5C9
Tel: (416) 798-4965
Fax: (416) 798-4753
 
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 W. Raymond Street
Indianapolis, Indiana
U.S.A. 46221
Tel: (317) 636-1641
Fax: (317) 634-0321
 
United States Intermodal Office
The Freight Connection Inc.
9870 Highway 92, Suite 110
Woodstock, Georgia (Atlanta)
U.S.A. 30188
Tel: (770) 517-7744
Fax: (770) 517-4774
 
 
Environmental Services
 
ETL Recycling Services Inc.
12345-104th Avenue
Surrey, British Columbia
Canada V3V 3H2
Tel: (604) 589-4385
Fax: (604) 589-7833