DELIVERING VALUE

THIRD 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) network that stretches across Canada and covers 18 midwest U.S. states. Coverage extends to another 22 states through strategic partnerships. Vitran Logistics provides additional comprehensive distribution solutions that range from special inventory consolidations to responsibility for the complete distribution function, including the provision of facilities. 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

THIRD QUARTER 2001
For the period ended September 30, 2001

MANAGEMENT DISCUSSION AND ANALYSIS

This report contains forward-looking information with respect to Vitran Corporation Inc.’s (“Vitran”) 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

For the second straight quarter the consolidated results for the continuing operations of Vitran reflect improved performance compared to the first quarter of 2001. Income from continuing operations grew to $2.0 million or $0.21 per share basic for the third quarter compared to earnings of $0.03 per share basic and a loss of $0.08 per share basic in the second and first quarters respectively. Including the losses from the discontinued environmental business segment, the company recorded net income of $1.7 million or $0.18 per share basic.

Vitran Corporation Inc. reported its third quarter results after trading hours on November 5, 2001 with a press release and held a conference call at 10:00 a.m. on November 6, 2001.

A replay of the conference call is available on Vitran’s website at www.vitran.com until November 20, 2001. Register for e-alerts on the Vitran Corporation web site (www.vitran.com) and receive Vitran’s news as it is released.

Consolidated Results

Revenue from continuing operations for the three-month period was $122.3 million compared to $120.6 million for the same period a year ago reflecting small revenue gains in all Vitran transportation segments. Revenue from continuing operations for the nine-month period ended September 30, 2001 was $363.2 compared to $358.0 for the same period in 2000.

Gross profit for the three-month period declined $1.2 million, or 5.7% to $19.5 million compared to the same quarter in 2000. For the nine-month period ended September 30, 2001 gross profit from continuing operations of $54.9 million was 11.3% lower than the same period in 2000 reflecting higher operating costs. Operating efficiencies are however being achieved and gross profit has improved over the last two quarters.

Selling, general and administrative expense for the third quarter of 2001 increased $1.8 million to $12.2 million compared to the third quarter of 2000. For the nine-months ended September 30, 2001, selling, general and administrative expenses were $39.0 million compared to $33.9 million. The increase was due to a number of factors including reorganization expenses needed to generate long-term savings recorded in the current period and bad debt recoveries in the prior year period.

REPORT TO SHAREHOLDERS

Earnings before interest, taxes depreciation and amortization (“EBITDA”) from continuing operations declined to $7.4 million in the third quarter of 2001 compared to $10.3 million in the third quarter of 2000. Operating income (“EBIT”) was $4.3 million, resulting in an operating ratio of 96.5% for the third quarter of 2001 compared to $7.2 million and an operating ratio of 94.0% in the same quarter of 2000. Although the operating income of $6.5 million for 9 months ending September 30, 2001 was lower than the comparable prior-year amounts of $18.5 million, there has been steady month-to-month improvement since the first quarter. The operating ratio for the nine-month period ended September 30, 2001 was 98.2% compared to 94.8% for the same nine-month period in 2000.

Interest expense net of interest income for the third quarter was $1.4 million versus $1.9 million for the third quarter in 2000 and was $4.7 million for the nine-months ended September 30, 2001 versus $5.5 million for the same period in 2000. The decline is primarily attributable to lower interest rates on the Company’s floating rate debt.

The decline in the effective tax rate for the third quarter and the nine-month period ending September 30, 2001 compared to the same periods in 2000 reflects a greater percentage of income earned in lower tax jurisdictions.

Basic earnings per share from continuing operations, while still behind prior year results does reflect improved quarter-over-quarter performance in 2001 from the Vitran Distribution System. Basic earnings per share from continuing operations for the third quarter was $0.21 per share, compared to the third quarter of 2000 results of $0.33 per share. This nonetheless reflects a significant improvement over the first and second quarter loss of $0.08 per share basic and income of $0.03 per share basic respectively. For the nine-months ended September 30, 2001 basic earning per share from continuing operations was $0.15 per share compared to $0.83 for the same period in 2000. The Company’s stock options are not dilutive therefore basic and diluted earnings per share are identical.

As a result of the decision to divest the environmental business segment, the operation was reclassified as discontinued in the financial statements during the second quarter of 2000 and a write down of $3.75 million was taken. For the third quarter ending September 30, 2001, a loss of $0.3 million was incurred, consistent with the results of the same quarter in 2000. The loss from discontinued operations for the nine-month period ending September 30, 2001 is $5.2 million including the aforementioned write-down compared to a loss of $0.2 million for the same period in 2000.

The net income for the quarter, including the loss from discontinued operations, was $1.7 million or $0.18 per share basic compared to $2.9 million or $0.30 per share basic in the third quarter of 2000. For the nine months ended September 30, 2001 the Company incurred a net loss of $3.7 million or $0.38 per basic share compared to net income of $7.9 million or $0.80 per basic share for the same nine-month period in 2000.

REPORT TO SHAREHOLDERS

Segmented Results

Less-than-truckload (LTL)

The LTL segment reported improved results for the third quarter of 2001 despite continued economic slowdowns in both Canada and particularly the United States. Canadian LTL maintained its solid results while the initiatives taken in the second quarter at US LTL resulted in improved performance.

Revenue for the third quarter for the whole LTL operation was $95.3 million compared to $94.7 million for the same quarter in 2000. Operating income of $4.7 million in the third quarter increased 103% over the second quarter of 2001, but was $2.5 million behind the third quarter of 2000. Revenue per hundredweight increased 6.6% and total shipments declined 4.4% for the third quarter of 2001 compared to the third quarter of 2000. For the nine-month period ended September 30, 2001 revenue was $283.0 million compared to $280.6 million for the same period in 2000. Operating income for the nine-month period ended September 30, 2001 was $8.1 million compared to $18.3 million for same period a year ago.

The Canadian LTL business maintained its steady performance with revenue off 1.3% for the third quarter of 2001 compared to the third quarter of 2000. Revenue per hundredweight increased 8.3% while tonnage and shipments declined 8.9% and 5.6% respectively, compared to the prior year quarter. Employee count was down 10.8% since the third quarter of 2000 as management adjusted for lower shipping volumes.

The performance of the US LTL business improved significantly during the third quarter compared to the two previous quarters in 2001. The adjustments made by management improved the quarterly income from operations by $2.0 million compared to the second quarter of 2001 and was $1.3 million off the third quarter of 2000. Revenue per hundredweight was unchanged while tonnage and shipments were off 2.4% and 3.7% compared to the same quarter in 2000. Employee count was down 7.7% compared to the third quarter of 2000.

Logistics and Intermodal

Revenue for the Logistics and Intermodal segment was 3.9% higher in the third quarter of 2001 compared to same quarter of 2000, and was 1.2% higher than the second quarter of 2001. The Logistics business continued to report increased revenue due to contributions from its new 80,000 square foot flow-through facility. In addition the initiatives taken by management at the Intermodal and Highway Brokerage business in the second quarter contributed to better results in both the third quarter and the nine-month period ended September 30, 2001.

Truckload

Revenue for the Truckload segment was up 5.2% for the third quarter and 3.3% for the nine-month period ended September 30, 2001 compared to the same time periods in 2000. Income from operations declined $0.2 million for the third quarter of 2001 and $0.4 million for the nine-month period compared to the same period in 2000. Truckload had a disappointing quarter from a profitability perspective due mainly to the decision to expense rather than capitalize and amortize certain expenses relating to the new computer system.

REPORT TO SHAREHOLDERS

Liquidity and Capital Resources

Cash flow from operations for the nine-month period before non-cash working capital changes generated $12.2 million compared to $18.6 million in the prior year period and $5.6 million in the third 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 nine-month period ended September 30, 2001 consumed $11.7 million compared to $5.2 million in the prior year period. However, non-cash working capital only consumed $0.4 million during the third quarter of 2001 compared to $3.6 million in the same quarter of 2000.

At September 30, 2001 interest-bearing debt as a percentage of total capital was 50.2% compared with 48.6% at December 31, 2000. The increase can be attributed to the decline in cash generated from operating activities.

Capital expenditures for the third quarter of 2001 were $0.6 million compared to $1.7 million for the same quarter in 2000.

On November 6, 2001, the Company announced that its Board of Directors had voted to suspend payment of the semi-annual dividend of $0.035 per share, effective immediately. The change in policy had been made so that all internally generated funds will be used to repay debt and support future capital expenditure programs.

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.

Outlook

The North American economy has clearly softened further since the events of September 11 and most economists have revised their previous predictions of an economic recovery early in 2002. Almost all companies in the freight industry have reported lower year-over-year income as a result of reduced volume reflecting the general state of the economy.

Vitran results have improved over the last two quarters as company specific issues were addressed, but are less than prior year periods. Efforts are being made to continue the improving trends while dealing with the challenges of a soft market.

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.

 
Richard D. McGraw
President and
Chief Executive Officer

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

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

		Three			Three			Nine			Nine
		months			months			months			months
		ended			ended			ended			ended
		Sep. 30,			Sep. 30,			Sep. 30,			Sep. 30,
		2001			2000			2001			2000
Revenue		$	122,316		$	120,594		$	363,171		$	358,042
Operating Expenses			102,795			99,902			308,314			296,231
Gross Profit			19,521			20,692			54,857			61,811
Selling, general and administrative expenses			12,171			10,346			39,037			33,901
Income from operations before depreciation and amortization			7,350			10,346			15,820			27,910
Depreciation and Amortization			3,082			3,137			9,354			9,437
Income (loss) from operations			4,268			7,209			6,466			18,473
Net interest expense			1,393			1,874			4,678			5,501
Gain/(loss) on sale of fixed assets			(229	)		(565	)		(287	)		(797	)
			1,622			2,439			4,965			6,298
Income (loss) from continuing operations before income taxes and minority interest			2,646			4,770			1,501			12,175
Income taxes (recovery)			623			1,541			146			4,001
Income before minority interest			2,023			3,229			1,355			8,174
Minority interest			—			(3	)		132			12
Income (loss) from continuing operations			2,023			3,226			1,487			8,186
Income (loss) from discontinued operations			(294	)		(293	)		(5,226	)		(244	)
Net (loss) income		$	1,729		$	2,933		$	(3,739	)	$	7,942
Retained earnings, beginning of period		$	35,648		$	37,534		$	41,462		$	32,873
Dividends — $0.035 per share									(346	)		(348	)
Retained earnings, end of period		$	37,377		$	40,467		$	37,377		$	40,467
Earnings per share:
	Basic — continuing operations	$	0.21		$	0.33		$	0.15		$	0.83
	Basic — discontinued operations	$	(0.03	)	$	(0.03	)	$	(0.53	)	$	(0.03	)
	Basic — net income	$	0.18		$	0.30		$	(0.38	)	$	0.80
	Diluted — continuing operations	$	0.21		$	0.33		$	0.15		$	0.83
	Diluted — discontinued operations	$	(0.03	)	$	(0.03	)	$	(0.53	)	$	(0.03	)
	Diluted — net income	$	0.18		$	0.30		$	(0.38	)	$	0.80
Number of shares outstanding			9,859,778			9,878,178			9,859,778			9,901,968

CONSOLIDATED BALANCE SHEETS

(Unaudited)
(In thousands of Canadian dollars)

As at		Sep. 30, 2001		Dec. 31, 2000
Assets Current Assets:
	Cash	$	350	$	—
	Accounts receivable		64,652		58,450
	Inventory, deposits and prepaid expenses		9,543		6,727
	Income taxes recoverable		7,490		688
			82,035		65,865
Net assets of discontinued operations			2,780		6,349
Fixed assets, net of accumulated depreciation			51,046		59,132
Goodwill, net of accumulated amortization			74,611		72,955
		$	210,472	$	204,301
Liabilities and Shareholders’ Equity
Current Liabilities:
	Bank indebtedness	$	—	$	2,795
	Accounts payable and accrued liabilities		45,001		43,428
	Income and other taxes payable		5,209		2,709
	Current portion of long-term debt		24,276		12,106
			74,486		61,038
Long-term debt			54,701		60,492
Future income taxes			3,060		2,168
Minority interest			—		596
Shareholders’ equity:
	Capital stock		38,837		38,837
	Retained earnings		37,377		41,463
	Cumulative translation adjustment		2,011		(294	)
			78,225		80,006
		$	210,472	$	204,301

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
(In thousands of Canadian dollars)

			Three			Three			Nine			Nine
			months			months			months			months
			ended			ended			ended			ended
			Sep. 30,			Sep. 30,			Sep. 30,			Sep. 30,
			2001			2000			2001			2000
Cash provided by (used in):
Operations:
	Income (loss) from continuing operations		$	2,023		$	3,226		$	1,487		$	8,186
	Items not involving cash from operations:
		Depreciation and amortization		3,082			3,137			9,354			9,437
		Future income taxes		284			17			892			222
		Loss (Gain) on sale of fixed assets		229			565			287			797
		Minority interest		—			3			132			(12	)
				5,618			6,948			12,152			18,630
	Change in non-cash working capital components			(438	)		(3,586	)		(11,747	)		(5,211	)
				5,180			3,361			405			13,419
Investments:
	Purchase of fixed assets			(607	)		(1,682	)		(2,783	)		(4,639	)
	Proceeds on sale of fixed assets			157			194			3,020			652
				(450	)		(1,487	)		237			(3,987	)
Financing:
	Repayment of long-term debt			(64	)		(34,047	)		(8,760	)		(34,680	)
	Issue of long-term debt			—			28,355			11,806			28,394
	Dividend payment			—			—			(346	)		(348	)
	Issue (repurchase) of Class A voting shares			—			—			—			(561	)
				(64	)		(5,692	)		2,700			(7,195	)
Cash provided (used) for discontinued operations				(924	)		(621	)		(1,524	)		(2,303	)
Effect of translation adjustment on cash				2,109			655			1,327			1,178
Increase (Decrease) in cash position				5,851			(3,784	)		3,145			1,112
Cash position, beginning of year				(5,501	)		2,410			(2,795	)		(2,486	)
Cash position, end of period			$	350		$	(1,374	)	$	350		$	(1,374	)
Change in non-cash working capital components:
	Accounts receivable		$	(2,233	)	$	(1,266	)	$	(6,202	)	$	(5,742	)
	Inventory, deposits and prepaid expenses			(2,457	)		(641	)		(2,816	)		(3,416	)
	Income and other taxes recoverable/payable			127			34			(4,301	)		1,073
	Accounts payable and accrued liabilities			4,124			(1,714	)		1,572			2,874
			$	(438	)	$	(3,586	)	$	(11,747	)	$	(5,211	)

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:

Nine months ended September 30,	2001			2000
Revenue	$	14,908		$	21,592
Income (loss) from operations		(1,974	)		(17	)
Interest Expense		410			335
Other Income (loss)		(24	)		2
Income (loss) before income taxes		(2,408	)		(350	)
Income taxes		(698	)		(107	)
Income (loss) for the period, before provision		(1,710	)		(243	)
Provision for loss on sale of discontinued operations		(3,516	)		—
Income (loss) from discontinued operations	$	(5,226	)	$	(243	)

The summarized balance sheets for the
Discontinued Business as at:	Sep. 30, 2001			Dec. 31, 2000
Current assets	$	3,203		$	4,173
Fixed assets		4,041			4,402
Goodwill		859			892
Future income taxes		797			119
		8,900			9,586
Current Liabilities		2,602			3,207
Non-current liabilities		2			30
Net assets of discontinued operations before provision		6,296			6,349
Net realizable value provision		(3,516	)		—
Net assets of discontinued operations	$	2,780		$	6,349

NOTES

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

Nine months ended September 30,	2001			2000
Operating activities	$	(1,234	)	$	22
Investing activities		(364	)		(2,416	)
Financing activities		74			91
Cash used for discontinued operations	$	(1,524	)	$	(2,303	)

4.   ACQUISITIONS

During the third quarter, the Corporation acquired the remaining 18.9% of the voting shares of The Freight Connection Inc., (“TFCI”) for a total cash cost of $US 211,000. There was no goodwill recorded on the transaction. Subsequent to the purchase of shares, the Company delisted and restructured TFCI as a private company.

5.   COMPARATIVE FIGURES

Certain of the 2000 figures presented for comparative purposes have been reclassified to conform with the presentation adopted for 2001.

NOTES

6.   SEGMENTED INFORMATION

	VITRAN DISTRIBUTION SYSTEM
Nine months ended	Less-than-				Logistics &				Corporate			Consolidated
September 30, 2001	truckload		Truckload		intermodal		Total		office & other			totals
Revenue		283,020		36,647		43,504		363,171		0		$	363,171
Operating, selling, general & administrative expenses		266,683		34,650		42,987		344,320		3,031			347,351
Depreciation & amortization		8,220		731		348		9,299		55			9,354
Income (loss) from operations		8,117		1,266		169		9,552		(3,086	)		6,466
Interest expense, net													4,678
Other items, net													155
Income taxes													146
Income (loss) from continuing operations													1,487
Income (loss) from discontinued operations													(5,226	)
Net (loss) income												$	(3,739	)

Three months ended	Less-than-				Logistics &				Corporate			Consolidated
September 30, 2001	truckload		Truckload		intermodal		Total		office & other			totals
Revenue		95,288		12,572		14,456		122,316		—		$	122,316
Operating, selling, general & administrative expenses		87,873		12,087		14,124		114,084		882			114,966
Depreciation & amortization		2,711		236		119		3,066		16			3,082
Income (loss) from operations		4,704		249		213		5,166		(898	)		4,268
Interest expense, net													1,393
Other items, net													229
Income taxes													623
Income (loss) from continuing operations													2,023
Income (loss) from discontinued operations													(294	)
Net (loss) income												$	1,729

Nine months ended	Less-than-				Logistics &				Corporate			Consolidated
September 30, 2000	truckload		Truckload		intermodal		Total		office & other			totals
Revenue		280,638		35,467		41,937		358,042		0		$	358,042
Operating, selling, general & administrative expenses		254,015		33,062		40,994		328,071		2,061			330,132
Depreciation & amortization		8,297		755		326		9,378		59			9,437
Income (loss) from operations		18,326		1,650		617		20,593		(2,120	)		18,473
Interest expense, net													5,501
Other items, net													785
Income taxes													4,001
Income (loss) from continuing operations													8,186
Income (loss) from discontinued operations													(244	)
Net income												$	7,942

Three months ended	Less-than-				Logistics &				Corporate			Consolidated
September 30, 2000	truckload		Truckload		intermodal		Total		office & other			totals
Revenue		94,732		11,947		13,916		120,595		—		$	120,595
Operating, selling, general & administrative expenses		84,782		11,263		13,496		109,541		708			110,249
Depreciation & amortization		2,758		246		111		3,115		21			3,137
Income (loss) from operations		7,192		438		309		7,939		(729	)		7,209
Interest expense, net													1,874
Other items, net													568
Income taxes													1,541
Income (loss) from continuing operations													3,226
Income (loss) from discontinued operations													(293	)
Net (loss) income												$	2,933

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. Griffiths
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. Griffiths
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