Significant accounting policies (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Description of the business

(a) Description of the business:

Vitran Corporation Inc. (“Vitran” or the “Company”) is a provider of freight services to a wide variety of companies and industries. Vitran offers less-than-truckload (“LTL”) services throughout Canada.

On December 9, 2013 , Vitran entered into a definitive agreement with 2398946 Ontario Inc. and North Channel of Georgian Bay Holdings Ltd. (collectively, “Manitoulin Transport”) pursuant to which Manitoulin Transport agreed to acquire all of the outstanding common shares of Vitran for $6.00 in cash per share. Subsequently, on December 20, 2013, the board of directors of Vitran determined that a proposal for $6.50 in cash per share received from TransForce Inc. (“TransForce”) was a “superior proposal” for the purposes of the arrangement agreement (the “Manitoulin Agreement”) among Vitran, and Manitoulin Transport.

On December 30, 2013, Manitoulin Transport waived its right to match the TransForce proposal. Vitran and Manitoulin Transport agreed to terminate the Manitoulin Agreement concurrent with the entering into of a definitive arrangement agreement with TransForce (the “TransForce Agreement”) and the termination fee of $4.0 million payable to Manitoulin Transport was paid by Vitran. On December 30, 2013, Vitran entered into a definitive arrangement agreement with TransForce pursuant to which TransForce has agreed to acquire all of the outstanding common shares of Vitran not already owned by TransForce for $6.50 in cash per share.

The transaction with TransForce is structured as a Plan of Arrangement under the Business Corporations Act (Ontario) (the “Arrangement”). The Arrangement has been unanimously approved by the board of directors of Vitran and was subject to approval by the shareholders of Vitran at a special meeting to be held on March 5, 2014 (the “Special Meeting”). The proposal to approve the Arrangement was voted on and approved at the Special Meeting. The Arrangement was also subject to final approval of the Ontario Superior Court of Justice following the Special Meeting, which was granted by Order of the Court on March 6, 2014. Refer to Note 13 “Subsequent events”. The Arrangement remains subject to the receipt of applicable regulatory approvals (including approval under the Competition Act), and to satisfaction of other customary closing conditions. The Arrangement is not conditional on TransForce obtaining financing or on completion of due diligence. The TransForce Agreement contains customary non-solicitation provisions and provides that the board of directors of Vitran may, under certain circumstances, terminate the TransForce Agreement in order to accept an unsolicited superior proposal, subject to a matching right in favour of TransForce. If the TransForce Agreement is terminated in certain circumstances, including if Vitran accepts a superior proposal, TransForce is entitled to a termination payment of $4.0 million. The Arrangement is expected to close in March 2014. An information circular (the “Information Circular”) outlining details of the Arrangement and Special Meeting was mailed to shareholders in February 2014. Copies of the Information Circular are available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Basis of presentation

(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.

These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). Canadian Securities regulations allow issuers that are required to file reports with the Securities and Exchange Commission in the United States to file financial statements under United States GAAP to meet their continuous disclosure obligations in Canada. All amounts in these consolidated financial statements are expressed in United States dollars, unless otherwise stated.

New accounting pronouncements

(c) New accounting pronouncements:

Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) No. 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” requires expanded disclosures for amounts reclassified out of accumulated other comprehensive income by component. The guidance requires the presentation of amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, a cross-reference to other disclosures that provide additional detail about those amounts is required. The guidance is to be applied prospectively for reporting periods beginning after December 15, 2012. ASU No. 2013-02 was adopted by the Company on January 1, 2013. The new guidance affects disclosures only and did not have an impact on the Company’s results of operations or financial position.

Foreign currency translation

(d) Foreign currency translation:

A majority of the Company’s shareholders and industry analysts are located in the United States. Accordingly, the Company has adopted the United States dollar as its reporting currency.

The Canadian dollar is the functional currency of the Company’s Canadian operations. In respect of 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 transactions are recognized in income.

For reporting purposes, the consolidated operations are translated into United States dollars using the current rate method. Under this method, all assets and liabilities are translated at the period-end rate of exchange and all revenue and expense items are translated at the average rate of exchange for the period. The resulting translation adjustment is recorded as a separate component of shareholders’ equity.

Revenue recognition

(e) Revenue recognition:

The Company recognizes revenue upon the delivery of the related freight and direct shipment costs as incurred. Revenue for transportation services not completed at the end of a reporting period is recognized based on relative transit time in each period with expenses recognized as incurred.

Revenue adjustments are estimated at the end of each quarterly reporting period. These adjustments result from several factors, including weight and freight classification verifications, shipper bill of lading errors, pricing discounts and other miscellaneous revenue adjustments. Revenue adjustments are recorded as a reduction in revenue from operations and accrued for as part of the allowance for doubtful accounts. Allowance for doubtful accounts is recorded as a contra-account to accounts receivable.

Historical experience, trends and current information are used to update and evaluate the estimate. As at December 31, 2013, revenue adjustments as a percentage of revenue were not material.

Accounts receivable

(f) Accounts receivable:

Accounts receivable are presented, net of allowance for doubtful accounts of $0.4 million at December 31, 2013 (2012—$0.4 million).

Cash and cash equivalents

(g) Cash and cash equivalents:

Cash and cash equivalents include cash on account and short-term investments with original maturities of three months or less and are stated at cost, which approximates fair value.

Inventory

(h) Inventory:

Inventory consists of tires and spare parts and is valued at the lower of average cost and replacement cost.

Property and equipment

(i) Property and equipment:

Property and equipment are recorded at cost. Depreciation of property and equipment is provided on a straight-line basis from the date assets are put in service over their estimated useful lives as follows:

Buildings	30 years
Leasehold interests and improvements	Over term of lease
Vehicles:
Trailers and containers	12 years
Trucks	8 years
Machinery and equipment	4 - 10 years

Tires purchased as part of a vehicle are capitalized as a cost to the vehicle. Replacement tires are expensed when placed in service.

Goodwill

(j) Goodwill:

FASB Accounting Standards Codification (“ASC”) 350 requires that goodwill be assessed for impairment on an annual basis and, more frequently, if indicators of impairment exist. In the event goodwill is determined to be impaired, a charge to earnings would be required. FASB ASU No. 2011-08, Testing Goodwill for Impairment, permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. As at September 30, 2013, the Company completed its annual goodwill impairment test and concluded that there was no impairment. At December 31, 2013, the Company has not identified any indicators that would require re-testing for impairment.

Income taxes

(k) Income taxes:

The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Significant judgment is required in determining whether deferred tax assets will be realized in full or in part. Deferred tax assets and liabilities are measured using 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 deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the date of enactment. FASB ASC 740-10, Accounting for Uncertainty in Income Taxes, requires that uncertain tax positions are evaluated in a two-step process, whereby (i) the Company determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company would recognize the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with the related tax authority.

Share-based compensation

(l) Share-based compensation:

Under the Company’s stock option plan, options to purchase common shares of the Company may be granted to key employees, officers and directors of the Company by the Board of Directors or by the Company’s Compensation Committee. There are 557,750 options outstanding 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. Note 7, “Common shares” provides supplemental disclosure for the Company’s stock options.

Advertising costs

(m) Advertising costs:

Advertising costs are expensed as incurred. Advertising costs amounted to $417 in 2013 (2012—$264; 2011—$397).

Impairment of long-lived assets

(n) Impairment of long-lived assets:

An impairment is recognized when the carrying amount of a long-lived asset to be held and used exceeds the sum of undiscounted cash flows expected from its use and disposal, and is measured as the amount by which the carrying amount of an asset 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 the third quarter of 2013, the Company recorded an impairment charge of $49.7 million on the carrying amount of its U.S. LTL business unit in discontinued operations. Refer to Note 2 “Discontinued operations”.

Derivative instruments

(o) Derivative instruments:

Derivative instruments are recognized on the consolidated balance sheets at fair value based on quoted market prices and are recorded in either current or non-current assets or liabilities based on their maturity. Changes in the fair values of derivatives are recorded in income or other comprehensive income, based on whether the instrument is designated as a hedge transaction and, if so, the type of hedge transaction. Gains or losses on derivative instruments reported in other comprehensive income are reclassified to income in the period the hedged item affects income. If the underlying hedged transaction ceases to exist, any associated amounts reported in other comprehensive income are reclassified into income at that time. Any ineffectiveness is recognized in income in the current year.

The Company formally documents all significant relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or anticipated transactions. The Company assesses all hedging relationships to determine whether the criteria for hedge accounting are met. To qualify for hedge accounting, the hedging relationship must be appropriately documented at inception of the hedge and there must be reasonable assurance, both at the inception and throughout the term of the hedge, that the hedging relationship will be effective. Effectiveness requires a high degree of correlation of changes in fair values or cash flows between the hedged item and the hedging instrument. Effectiveness is assessed on an ongoing basis through the term of the hedge in order to determine if hedge accounting remains appropriate. The Company did not have any derivative instruments as at December 31, 2013.

Claims and insurance accruals

(p) Claims and insurance accruals:

Claims and insurance accruals reflect the estimated 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. The Company has self-insurance retention amounts per incident for auto liability, casualty and cargo claims. In establishing these accruals, 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.

Accounts payable and accrued liabilities

(q) Accounts payable and accrued liabilities:

	2013		2012
Accounts payable	$	15,439	$	18,398
Accrued wages and benefits		1,302		1,452
Accrued claims, self-insurance and workers’ compensation		844		698
Other		5,233		3,598
	$	22,818	$	24,146

Deferred share units

(r) Deferred share units:

The Company maintains a deferred share unit (“DSU”) plan for all directors. Under this plan, all directors receive units at the end of each quarter based on the market price of common shares equivalent to the director’s entitlement. The entitlement amount varies based on the director’s position on the Board. The maximum entitlement amount varies between CAD$35,000.00 and CAD$60,000.00 per annum. The Company records compensation expense and the corresponding liability each period based on the market price of common shares.

In addition to the directors’ DSU plan, the Company has adopted a DSU plan for senior executives. Under this plan, eligible senior executives receive units at the end of each quarter based on the market price of common shares equivalent to the senior executive’s entitlement. The entitlement amount varies based on the senior executive’s position in the Company and the years of eligible service. The maximum entitlement amount varies between $2,500.00 and $20,000.00 per annum. The Company records compensation expense and the corresponding liability each period based on the market price of common shares.

Use of estimates

(s) Use of estimates:

The preparation of financial statements in accordance with United States GAAP 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. Significant estimates are used in determining, but not limited to, the allowance for doubtful accounts, deferred tax assets, claims and insurance accruals, share-based compensation and fair value measurements. Actual results could differ from those estimates.