10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED JUNE 30, 2009

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:

VITRAN CORPORATION INC.

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

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

(Address of principal executive offices)(Zip Code)

416-596-7664

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yeso Nox

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

Large accelerated filero Accelerated filerx Non-accelerated filero Smaller reporting companyo

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

Yeso Nox

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

The number of shares of common shares outstanding at July 22, 2009 was 13,498,159.

TABLE OF CONTENT

Item		Page
PART I	Financial Information
1.	Financial Statements	3
2.	Management’s Discussion and Analysis	11
3.	Quantitative and Qualitative Disclosures About Market Risk	21
4.	Controls and Procedures	21
PART II	Other Information
1.	Legal Proceedings	22
1. A	Risk Factors	22
2.	Unregistered Sale of Equity and Use of Proceeds	22
3.	Defaults Upon Senior Securities	22
4.	Submission of Matters to a Vote of Security Holders	22
5.	Other Information	22
6.	Exhibits and Reports on Form 8-K	22

2

Part I. Financial Information

Item 1: Financial Statements

VITRAN CORPORATION INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

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

	Three months Ended June 30, 2009			Three months Ended June 30, 2008			Six months Ended June 30, 2009			Six months Ended June 30, 2008
Revenue	$	158,682		$	195,990		$	298,317		$	373,497
Operating expenses:
Salaries, wages and other employee benefits		65,815			72,648			129,394			142,128
Purchased transportation		22,223			26,126			40,281			51,265
Depreciation and amortization		4,947			5,205			9,974			10,765
Maintenance		7,791			8,171			13,362			16,035
Rents and leases		6,650			6,655			13,139			13,204
Purchased labor and owner operators		19,373			21,727			36,560			42,030
Fuel and fuel-related expenses		15,651			32,860			29,087			60,062
Other operating expenses		14,203			14,684			27,774			28,167
Operating loss (gain)		(8	)		(134	)		(437	)		(133	)
Total operating expenses		156,645			187,942			299,134			363,523
Income (loss) from operations before undernoted		2,037			8,048			(817	)		9,974
Interest expense, net		2,514			2,122			4,710			4,252
Income (loss) from operations before income taxes		(477	)		5,926			(5,527	)		5,722
Income tax expense (recovery)		(917	)		1,349			(3,611	)		11
Net income (loss)	$	440		$	4,577		$	(1,916	)	$	5,711
Income (loss) per share:
Basic	$	0.03		$	0.34		$	(0.14	)	$	0.42
Diluted	$	0.03		$	0.34		$	(0.14	)	$	0.42
Weighted average number of shares:
Basic		13,498,159			13,483,159			13,498,159			13,474,258
Diluted		13,592,162			13,630,974			13,498,159			13,621,759

See accompanying notes to consolidated financial statements

3

VITRAN CORPORATION INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of United States dollars)

	June 30, 2009			Dec. 31, 2008
	(Unaudited)			(Audited)
Assets
Current assets:
Accounts receivable	$	72,230		$	65,741
Inventory, deposits and prepaid expenses		12,881			12,063
Income and other taxes recoverable		1,992			792
Deferred income taxes		2,175			1,877
		89,278			80,473
Property and equipment		148,729			152,602
Intangible assets		12,017			13,279
Goodwill		17,302			17,057
Deferred income taxes		32,365			30,181
	$	299,691		$	293,592
Liabilities and Shareholders’ Equity
Current liabilities:
Bank overdraft	$	4,798		$	3,912
Accounts payable and accrued liabilities		64,626			63,495
Current portion of long-term debt		18,075			16,925
		87,499			84,332
Long-term debt		96,838			93,477
Other		3,732			4,540
Shareholders’ equity:
Common shares, no par value, unlimited authorized, 13,498,159 issued and outstanding at June 30, 2009 and December 31, 2008.		77,500			77,500
Additional paid-in capital		3,965			3,525
Retained earnings		31,337			33,253
Accumulated other comprehensive loss		(1,180	)		(3,035	)
		111,622			111,243
	$	299,691		$	293,592

Contingent liabilities (note 7)

See accompanying notes to consolidated financial statements.

4

VITRAN CORPORATION INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

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

										Accumulated
					Additional					other			Total
	Common shares				Paid-in		Retained			comprehensive			Shareholders’
	Shares		Amount		Capital		Earnings			Loss			Equity
December 31, 2008		13,498,159	$	77,500	$	3,525	$	33,253		$	(3,035	)	$	111,243
Net loss		-		-		-		(1,916	)		-			(1,916	)
Other comprehensive income		-		-		-		-			1,855			1,855
Share-based compensation		-		-		440		-			-			440
June 30, 2009		13,498,159	$	77,500	$	3,965	$	31,337		$	(1,180	)	$	111,622

									Accumulated
					Additional				other			Total
	Common shares				Paid-in		Retained		comprehensive			Shareholders’
	Shares		Amount		Capital		Earnings		income			Equity
December 31, 2007		13,448,159	$	77,246	$	2,436	$	104,478	$	6,184		$	190,344
Shares issued upon exercise of employee stock options		35,000		178		-		-		-			178
Net income		-		-		-		5,711		-			5,711
Other comprehensive loss		-		-		-		-		(1,260	)		(1,260	)
Share-based compensation		-		-		569		-		-			569
June 30, 2008		13,483,159	$	77,424	$	3,005	$	110,189	$	4,924		$	195,542

5

VITRAN CORPORATION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands of United States dollars)

	Three months Ended June 30, 2009			Three months Ended June 30, 2008			Six months Ended June 30, 2009			Six months Ended June 30, 2008
Cash provided by (used in):
Operations:
Net income (loss)	$	440		$	4,577		$	(1,916	)	$	5,711
Items not involving cash from operations
Depreciation and amortization expense		4,947			5,205			9,974			10,765
Deferred income taxes		(966	)		1,302			(3,286	)		104
Share-based compensation expense		206			292			440			569
Loss (gain) on sale of property and equipment		(8	)		(134	)		(437	)		(133	)
Change in non-cash working capital components		(6,817	)		(9,419	)		(7,313	)		(10,532	)
		(2,198	)		1,823			(2,538	)		6,484
Investments:
Purchase of property and equipment		(1,822	)		(2,040	)		(3,449	)		(9,148	)
Proceeds on sale of property and equipment		98			261			1,145			452
		(1,724	)		(1,779	)		(2,304	)		(8,696	)
Financing:
Change in revolving credit facility and bank overdraft		8,453			4,703			13,079			11,328
Repayment of long-term debt		(2,268	)		(2,575	)		(4,536	)		(5,146	)
Repayment of capital leases		(1,392	)		(2,001	)		(3,212	)		(4,242	))
Issue of common shares upon exercise of stock options		-			-			-			178
		4,793			127			5,331			2,118
Effect of translation adjustment on cash		(871	)		(171	)		(489	)		94
Increase in cash and cash equivalents		-			-			-			-
Cash and cash equivalents, beginning of period		-			-			-			-
Cash and cash equivalents, end of period	$	-		$	-		$	-		$	-
Change in non-cash working capital components:
Accounts receivable	$	(6,422	)	$	(11,905	)	$	(6,489	)	$	(19,576	)
Inventory, deposits and prepaid expenses		(1,130	)		(512	)		(818	)		(913	)
Income and other taxes recoverable		(414	)		(163	)		(1,137	)		968
Accounts payable and accrued liabilities		1,149			3,161			1,131			8,989
	$	(6,817	)	$	(9,419	)	$	(7,313	)	$	(10,532	)

See accompanying notes to consolidated financial statements.

6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

1.     Accounting Policies

The interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles.  The interim consolidated financial statements do not contain all the disclosures required by United States generally accepted accounting principles.  The interim consolidated financial statements have been prepared in accordance with instructions to Quarterly Report on Form 10-Q.  The interim consolidated financial statements should be read in conjunction with 2008 Annual Report on Form 10-K.  The interim consolidated financial statements follow the same accounting principles and methods of application as the most recent annual consolidated financial statements, except as noted in Note 2.

These unaudited consolidated interim financial statements reflect all adjustments which are, in the opinion of Management, necessary to a fair presentation of the results of the interim period presented.  Operating results for the quarter and six-months ended June 30, 2009 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2009.

2. New Accounting Pronouncements

SFAS Statement 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133”, requires enhanced disclosures about the Company’s derivative and hedging activities.  The Company is required to provide enhanced disclosure about a) how and why an entity uses derivative instruments, b) how derivative instruments and related hedged items are accounted for under Statement 133 and c) how derivative instruments and related hedged items affect an entity’s financial position and cash flows.  SFAS Statement 161 was adopted January 1, 2009 as described in Note 8.

SFAS Statement 165, “Subsequent Events”, establishes general standards for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued.  In particular, this Statement sets forth:  a)  the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements,  b)  the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and c)  the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.  SFAS Statement 165 was adopted June 30, 2009 as described in Note 10.

3.     Foreign Currency Translation

The United States dollar is the functional currency of the Company’s operations in the United States.  The Canadian dollar is the functional currency of the Company’s Canadian operations.  Each operation translates foreign currency denominated transactions into its functional currency using the rate of exchange in effect at the date of the transaction.  Monetary assets and liabilities denominated in foreign currency are translated into the functional currency of the operation using the period-end rate of exchange giving rise to a gain or loss that is recognized in income during the current period.

For reporting purposes, the Canadian operations are translated into United States dollars using the current rate method.  Under this method, all assets and liabilities are translated at the period-end rate of exchange and all revenue and expense items are translated at the average rate of exchange for the period.  The resulting translation adjustment is recorded as a separate component of shareholders’ equity.  United States dollar debt of $87.1 million is designated as a hedge of the investment in the United States dollar functional operations, such that related transaction gains and losses are recorded in the separate component of shareholders’ equity.

7

4.     Comprehensive income (loss)

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

The following are the components of other comprehensive income (loss), net of income taxes for the three months and six months ended June 30, 2009 and 2008:

	Three months Ended June 30, 2009			Three months Ended June 30, 2008			Six months Ended June 30, 2009			Six months Ended June 30, 2008
Net income (loss)	$	440		$	4,577		$	(1,916	)	$	5,711
Translation adjustment		2,240			(264	)		1,223			(1,289	)
Interest rate swaps		500			1,452			887			55
Tax effect		(141	)		(481	)		(255	)		(26	)
Other comprehensive income (loss)	$	2,599		$	707		$	1,855		$	(1,260	)
Comprehensive net income (loss)	$	3,039		$	5,284		$	(61	)	$	4,451

5.     Computation of Income (Loss) per Share

	Three months Ended June 30, 2009		Three months Ended June 30, 2008		Six months Ended June 30, 2009			Six months Ended June 30, 2008
Numerator:
Net income (loss)	$	440	$	4,577	$	(1,916	)	$	5,711
Denominator:
Basic weighted-average shares outstanding		13,498,159		13,483,159		13,498,159			13,474,258
Dilutive stock options		94,003		147,815		-			147,501
Dilutive weighted-average shares outstanding		13,592,162		13,630,974		13,498,159			13,621,759
Basic income (loss) per share	$	0.03	$	0.34	$	(0.14	)	$	0.42
Diluted income (loss) per share	$	0.03	$	0.34	$	(0.14	)	$	0.42

Due to the net loss for the six months ended June 30, 2009, dilutive shares have no effect on the loss per share.  For the three months ended June 30, 2009 diluted income per share excludes the effect of 635,900 (three and six months ended June 30, 2008- 658,900) anti-dilutive options.

6.     Assets Held for Sale

The Company has certain assets that are classified as assets held for sale.  These assets are carried on the balance sheet at the lower of the carrying amount or estimated fair value, less cost to sell.  Once an asset is classified held for sale, there is no further depreciation taken on the asset.  At June 30, 2009, the net book value of assets held for sale was approximately $5.4 million.  This amount is included in property and equipment on the balance sheet.

7.    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.

8

8. Risk Management Activities and Fair Value Measurements

The Company is exposed to market risks, including the effect of changes in foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business.  The Company does not hold or issue derivatives for trading purposes.

Interest Rate Swaps

The Company is exposed to interest rate volatility with regard to existing variable rate debt.  The Company has entered into variable-to-fixed interest rate swaps on variable rate term debt and revolving debt to limit its exposure to changing interest rates and future cash flows for interest.  The interest rate swaps provide for the Company to pay an amount equal to a specified fixed rate of interest times a notional principal amount and to receive in return an amount equal to a variable rate of interest times the same notional amount.  The swaps are accounted for as cash flow hedges.  The effective portions of changes in fair value of the interest rate swaps are recorded in Accumulated Other Comprehensive Income and are recognized into earnings in the same period in which the hedged forecasted transaction affects earnings.  Ineffective portions of changes in fair value are recognized into earnings as they occur.  At June 30, 2009, the notional amount of the swaps was $60.3 million, with the average pay rate being 4.57% and the average receive rate being 0.65%.  The swaps mature at various dates up to December 31, 2011.

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

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

Assets and liabilities measured at fair value on a recurring basis include the following as of June 30, 2009:

	Fair Value Measurements Using									Liabilities
(in thousands)	Level 1			Level 2			Level 3			At Fair Value
Liabilities
Interest rate swaps		$	-		$	2,090		$	-		$	2,090
Total liabilities		$	-		$	2,090		$	-		$	2,090

The following table presents the fair value of derivative instruments for the three months and six months ended June 30, 2009:

	Notional Amount		Fair Value		Balance Sheet Location	Gain in OCI Three months ended June 30, 2009		Gain in OCI Six months ended June 30, 2009
Interest rate swaps	$	60,341	$	2,090	Other liabilities	$	500	$	887

9

9. Segmented Information

	Three months Ended June 30, 2009			Three months Ended June 30, 2008			Six months Ended June 30, 2009			Six months Ended June 30, 2008
Revenue:
LTL	$	131,667		$	168,161		$	247,030		$	317,576
Logistics		18,569			19,314			34,831			39,074
Truckload		8,446			8,515			16,456			16,847
Corporate office and other		-			-			-			-
	$	158,682		$	195,990		$	298,317		$	373,497
	Three months Ended June 30, 2009			Three months Ended June 30, 2008			Six months Ended June 30, 2009			Six months Ended June 30, 2008
Operating income (loss):
LTL	$	1,157		$	8,541		$	(1,527	)	$	10,678
Logistics		1,433			831			1,854			1,551
Truckload		256			321			448			700
Corporate office and other		(809	)		(1,645	)		(1,592	)		(2,955	)
	$	2,037		$	8,048		$	(817	)	$	9,974
	Three months Ended June 30, 2009			Three months Ended June 30, 2008			Six months Ended June 30, 2009			Six months Ended June 30, 2008
Depreciation and amortization:
LTL	$	4,295		$	4,500		$	8,669		$	9,359
Logistics		396			434			787			853
Truckload		232			249			473			510
Corporate office and other		24			22			45			43
	$	4,947		$	5,205		$	9,974		$	10,765

10.  Subsequent events

The Company has completed an evaluation of all subsequent events through July 24, 2009, which is the issuance date of these consolidated financial statements and concluded no subsequent events occurred that required recognition or disclosure.

11.  Comparative figures

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

10

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

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

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

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

• The Company’s belief it will generate sufficient taxable income to use deferred tax assets;

• the Company’s ability to realize cost savings from re-engineering its linehaul and pick-up and delivery operations in the U.S. LTL business unit;

• the Company’s ability to realize cost savings from wage and salary reductions;

• the Company’s intention to maintain sales momentum and to achieve income from operations in the  LTL segment;

• the Company’s expectation to return its days sales outstanding measure to historical levels;

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

• the Company’s expectation to improve profitability from estimated market share gains in the LTL segment;

• the Company’s ability to meet future debt covenants and develop successful financing alternatives;

• the Company’s ability to generate future operating cash flows from profitability and managing working capital;

• the Company’s intention to develop new accounts in the Logistics segment;

• the Company’s ability to benefit from an improvement in the economic environment;

• the Company’s expectation to continually adjust its strategy and tactics for the betterment of the Company, the employees and the shareholders.

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

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

11

CONSOLIDATED RESULTS

The following table summarizes the Consolidated Statements of Income (loss) for the three- and six-month periods ended June 30:

For the three months ended June 30,										For the six months ended June 30,
(in thousands)	2009			2008			2009 vs 2008			2009			2008			2009 vs 2008
Revenue	$	158,682		$	195,990			(19.0	%)	$	298,317		$	373,497			(20.1	%)
Salaries, wages and employee benefits		65,815			72,648			(9.4	%)		129,394			142,128			(9.0	%)
Purchased transportation		22,223			26,126			(14.9	%)		40,281			51,265			(21.4	%)
Depreciation and amortization		4,947			5,205			(5.0	%)		9,974			10,765			(7.3	%)
Maintenance		7,791			8,171			(4.7	%)		13,362			16,035			(16.7	%)
Rents and leases		6,650			6,655			(0.1	%)		13,139			13,204			(0.5	%)
Purchased labor and owner operators		19,373			21,727			(10.8	%)		36,560			42,030			(13.0	%)
Fuel and fuel related expenses		15,651			32,860			(52.4	%)		29,087			60,062			(51.6	%)
Other operating expenses		14,203			14,684			(3.3	%)		27,774			28,167			(1.4	%)
Operating loss (gain)		(8	)		(134	)		(94.0	%)		(437	)		(133	)		228.6	%
Total Expenses	$	156,645		$	187,942			(16.7	%)	$	299,134		$	363,523			(17.7	%)
Income from operations		2,037			8,048			(74.7	%)		(817	)		9,974			(108.2	%)
Interest expense, net		2,514			2,122			18.5	%		4,710			4,252			10.8	%
Income tax recovery		(917	)		1,349			(168.0	%)		(3,611	)		11			n/a
Net income (loss)	$	440		$	4,577			(90.4	%)	$	(1,916	)	$	5,711			(133.5	%)
Income (loss) per share:
Basic	$	0.03		$	0.34					$	(0.14	)	$	0.42
Diluted	$	0.03		$	0.34					$	(0.14	)	$	0.42
Operating Ratio (1)		98.7	%		95.9	%					100.3	%		97.3	%

Revenue decreased 19.0% to $158.7 million for the second quarter of 2009 compared to $196.0 million in the second quarter of 2008.  Revenue in the LTL, Logistics, and Truckload segments decreased 21.7%, 3.9% and 0.8%, respectively.   Revenue for the second quarter of 2009 was impacted by a weaker Canadian dollar and decline in fuel surcharge revenue, accounting for approximately $26.4 million of the consolidated revenue decline.  For the six months ended June 30, 2009, revenue decreased 20.1% to $298.3 million compared to $373.5 million for the same six-month period in 2008.  Consolidated revenue for the comparable six-month periods were also impacted by a weaker Canadian dollar and decline in fuel surcharge revenue accounting for approximately $48.4 million of the total revenue decline.  Detailed explanations for the fluctuations in revenue are discussed below in “Segmented Results”.

Salaries, wages and employee benefits declined 9.4% for the second quarter of 2009 compared to the same period a year ago.  This is consistent with the decline in employee headcount at June 30, 2008 of 5,243 employees compared to 4,887 employees at June 30, 2009.  The majority of the headcount reductions took place in the fourth quarter of 2008; therefore salaries, wages and employee benefits declined 9.0% for the six-month period of 2009 compared to the same period a year ago.

Purchased transportation declined 14.9% in the second quarter of 2009 compared to the second quarter of 2008 due to an emphasis on purchased transportation cost reductions in the U.S. LTL business resulting from the new integrated operating region.  Furthermore, the general decline in economic activity, as indicated by the decline in total LTL shipments of 7.9% for the second quarter and 10.2% for the six-month period, resulted in 14.9% and 21.4% less purchased transportation expense throughout the Company in the comparable three-month and six-month periods, respectively.

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Depreciation and amortization expense declined for the three- and six-month periods of 2009 compared to the same periods in 2008, and is primarily attributable to the sale of rolling stock in the first quarter of 2009 and the fourth quarter of 2008.  The Company sold 258 units in the first quarter of 2009 and 108 units in the fourth quarter of 2008.  This resulted in gains on rolling stock dispositions of approximately $0.4 million in the 2009 six-month period.

Maintenance expense declined 4.7% to $7.8 million for the three-month period ended June 30, 2009 compared to $8.2 million for the three-month period ended June 30, 2008.  The decline in maintenance expense can be attributed to the aforementioned reductions in rolling stock as well as the closure of 13 operating facilities due to the completion of the U.S. LTL operations integration in the fourth quarter of 2008.  Furthermore, in April of 2009 the U.S. LTL business unit re-engineered its linehaul model and closed another 11 in market terminals contributing to further maintenance cost reductions.

Rents and leases expense were flat for the comparable second quarters and six-month periods in 2008 and 2009 due to increase in square footage under lease in the asset light Logistics segment offset by declines in facility lease costs in the U.S. LTL business unit.

Purchased labor and owner operator expenses, primarily driven by the Canadian LTL business unit, declined in the comparable three- and six-month periods of 2009 to 2008 due to a decline in shipments and tonnage.  Shipments and tonnage declined 7.9% and 12.6% respectively for the comparable three-month periods and 10.2% and 13.4% for the comparable six-month periods.  Furthermore, declines in retail supply chain revenues in the Logistics segment’s California operations resulted in an additional reduction of purchased labor over the first six months of 2009.

Fuel and fuel-related expenses declined approximately 52% for the three-month and six-month periods ended June 30, 2009 compared to the same periods ended June 30, 2008.  The average price of diesel declined approximately 43.2% in the first six months of 2009 compared to first six months of 2008.  Furthermore, the Company’s fuel consumption declined, as indicated by an approximately 7.4% reduction in miles in the first six months of 2009 compared to the first six months of 2008.  The reduction in miles can be attributed to the completion of the U.S. LTL operations integration in the fourth quarter of 2008 and the reduction in shipments for the six-month period of 2009 compared to the same period a year ago.

The Company incurred interest expense of $2.5 million in the second quarter of 2009 compared to interest expense of $2.1 million for the same quarter a year ago.  The Company’s interest rate spread on its syndicated revolving and term debt was 300 bps greater than the second quarter and six-month period of 2008; however, the underlying decline in average LIBOR borrowings on the syndicated debt partially offset the increase in interest rate spread resulting in a $0.5 million increase in interest expense for the comparable six month periods.

Income tax recovery for the second quarter of 2009 was $0.9 million compared to an expense of $1.3 million for the same quarter a year ago due to an increase in loss before income tax expense in the current quarter.  On a consolidated basis, the Company generated taxable losses in the United States, which have been recognized as deferred tax assets.  Due to the improvement in the 2009 second quarter results compared to the first quarter of 2009, the Company has reduced the rate of accumulation of loss carry-forwards and Management believes the Company will generate sufficient taxable income to use these losses in the future.  

Net income for the 2009 second quarter was $0.4 million compared to net income of $4.6 million for the same quarter in 2008.  This resulted in basic and diluted income per share of $0.03 for the second quarter of 2009 compared to basic and diluted income per share of $0.34 for the second quarter of 2008.  The weighted average number of shares for the current quarter was 13.5 million basic and 13.6 million diluted shares compared to 13.5 million basic and 13.6 million diluted shares in the second quarter of 2008. For the six months ended June 30, 2009, the Company incurred a net loss of $1.9 million compared to net income of $5.7 million in the same six-month period a year ago.  This resulted in a net loss per share of $0.14 basic and diluted compared to earnings per share of $0.42 basic and diluted for the 2008 six-month period.  The weighted average number of shares for the six-month period of 2009 was 13.5 million basic and diluted shares compared to 13.5 million basic and 13.6 million diluted shares in the six-month period of 2008.

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SEGMENTED RESULTS

Less-Than-Truckload (LTL)

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

For the three months ended June 30,										For the six months ended June 30,
(in thousands)	2009			2008			2009 vs 2008			2009			2008			2009 vs 2008
Revenue	$	131,667		$	168,161			(21.7	%)	$	247,030		$	317,576			(22.2	%)
Income from operations (loss)		1,157			8,541			(86.4	%)		(1,527	)		10,678			(114.3	%)
Operating ratio		99.1	%		94.9	%					100.6	%		96.6	%
Number of shipments (2)		955,708			1,037,700			(7.9	%)		1,809,376			2,015,511			(10.2	%)
Weight (000s of lbs) (3)		1,387,349			1,587,453			(12.6	%)		2,664,016			3,077,927			(13.4	%)
Revenue per shipment (4)	$	137.77		$	162.05			(15.0	%)	$	136.53		$	157.57			(13.3	%)
Revenue per hundredweight (5)	$	9.49		$	10.59			(10.4	%)	$	9.27		$	10.32			(10.2	%)

Revenue in the LTL segment decreased 21.7% to $131.7 million in the second quarter of 2009 compared to $168.2 million in the same period a year ago.  The decrease in revenue was significantly influenced by fuel surcharge which represented 9.1% of revenue in the second quarter of 2009 compared to 19.4% of revenue in the second quarter of 2008.  Revenue, net of fuel surcharge, was impacted by the weak economic environment in North America in the second quarter of 2009 as indicated by the decline in shipments and tonnage of 7.9% and 12.6% respectively compared to the second quarter of 2008.

Revenue in the LTL segment decreased 22.2% to $247.0 million for the six-month period ended June 30, 2009 compared to $317.6 million for the same six-month period a year ago.  The decrease in revenue was influenced by fuel surcharge which represented 9.2% of revenue in the first six months of 2009 compared to 17.7% of revenue in the first six months of 2008.  Shipment and tonnage declines of 10.2% and 13.4%, respectively, in the comparable six-month period impacted revenue excluding fuel surcharge.

Although the economic environment continued to be challenging, shipments per day in the U.S. LTL business unit increased 11.0% for the second quarter of 2009 compared to the first quarter of 2009.  This can be attributed to the new integrated operating footprint in the United States, allowing the business unit to expand its service offering across longer lanes and achieve market share growth.  This was confirmed by the 12.5% increase in length of haul from March 31, 2009 to June 30, 2009 and a 23.8% increase in length of haul(7) since the second quarter of 2008.   The increase in length of haul therefore, resulted in an increase in revenue per hundredweight exclusive of fuel surcharge in the comparable quarters.

In addition to the aformentioned improvement in daily activity levels, the LTL segment made additional changes in early April 2009 re-engineering its linehaul and pick-up and delivery operations to reduce claims expenses, dock handling costs and linehaul expenses.  On April 13, 2009, the Company announced a 5% reduction in wages and salaries for all employees.  These initiatives resulted in a signficant improvement in the second quarter results as the LTL segment posted income from operations and an operating ratio of 99.1% compared to a loss from operations and an operating ratio of 102.3% in the first quarter of 2009.  Management believes that with the new integrated U.S. LTL operating model, the current sales momentum and additional operating initiatives in the third quarter, the segment will contribute income from operations in the quarters ahead.

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Logistics

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

For the three months ended June 30,										For the six months ended June 30,
(in thousands)	2009			2008			2009 vs 2008			2009			2008			2009 vs 2008
Revenue	$	18,569		$	19,314			(3.9	%)	$	34,831		$	39,074			(10.9	%)
Income from operations (loss)		1,433			831			72.4	%		1,854			1,551			19.5	%
Operating ratio		92.3	%		95.7	%					94.7	%		96.0	%

Revenue in the Logistics segment declined 3.9%; however, income from operations increased by 72.4% for the second quarter of 2009 compared to the second quarter 2008.  Revenue declined 10.9% and income from operations improved by 19.5% for the six-month period ended June 30, 2009 compared to the same period in 2008.  Albeit retail economic activity levels across North America remained stagnant, the Logistics segment continued to add new significant contracts.  The improvement in income from operations for 2009 is primarily attributable to two dedicated distribution facilities not included in the comparative figures for 2008.   The Logistics segment commenced operations of a new 500,000 square foot facility late in the second quarter of 2008 and a new 240,000 square foot dedicated distribution facility on March 1, 2009.  With this momentum, Logistics segment Management expects to add another significant account in 2009 that will make a positive contribution to the operating results.

 Truckload

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

For the three months ended June 30,										For the six months ended June 30,
(in thousands)	2009			2008			2009 vs 2008			2009			2008			2009 vs 2008
Revenue	$	8,446		$	8,515			(0.8	%)	$	16,456		$	16,847			(2.3	%)
Income from operations (loss)		256			321			(20.2	%)		448			700			(36.0	%)
Operating ratio		97.0	%		96.2	%					97.3	%		95.8	%

Revenue in the Truckload segment of $8.5 million for the second quarter of 2009 was 0.8% less than the second quarter of 2008.  Total shipments increased 0.4% and total empty miles improved 2.0% in the second quarter of 2009 compared to the same period in 2008.  However, revenue per mile(6) decreased 4.3% and as a result, income from operations decreased $0.1 million and the Truckload segment posted an operating ratio of 97.0% in the second quarter of 2009 compared to 96.2% for the second quarter of 2008.  Revenue and income from operations for the six-month period of 2009 declined 2.3% and 36.0% respectively compared to the same period in 2008.  This resulted in an operating ratio of 97.3% for the six months ended June 30, 2009 compared an operating ratio of 95.8% for the six months ended June 30, 2008.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operations for the second quarter of 2009 consumed $2.2 million compared to the second quarter of 2008 that generated $1.8 million.  The decline is attributable to a decrease in profitability, as described in the Consolidated and Segmented Results sections of the MD&A and an increase non-cash working capital, primarily accounts receivable.  Accounts receivable at June 30, 2009 increased compared to March 31, 2009, due to an increase in 2009 second quarter revenue offset by a decline in days sales outstanding (“DSO”) compared to the first quarter of 2009.  Due to the challenging economic environment, customers have slowed their payment cycle compared to 2008; however at June 30, 2009, the Company’s DSO was 42.4 days compared to 45.7 days at March 31, 2009 and 45.8 days at December 31, 2008.

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It is Management’s intention to return DSO to historical levels of approximately 40 days.   The Company’s future operating cash flows are primarily dependent upon the Company’s profitability and its ability to manage its working capital requirements, primarily accounts receivable, accounts payable, and wage and benefit accruals.

Within the syndicated credit facilities at June 30, 2009, interest-bearing debt was $105.6 million consisting of $44.0 million of term debt and $61.6 million drawn under the revolving credit facility.  In addition, the Company had $1.3 million of additional term debt and $12.8 million of capital leases for a total of $119.7 million of interest-bearing debt outstanding at June 30, 2009.  At June 30, 2008, interest-bearing debt was $130.3 million consisting of $54.4 million of term debt, capital leases of $18.6 million, $56.8 million drawn under the revolving credit facility and a note payable of $0.5 million.

During the second quarter of 2009, the Company repaid $2.3 million of term debt and $1.4 million of capital leases and borrowed $8.5 million on the revolving credit facility.  The additional borrowings in the second quarter of 2009 were primarily attributable to a $3.25 million contingent acquisition payment for Las Vegas/L.A. Express Inc. (“LVLA”) acquired on November 30, 2007.  LVLA met certain financial hurdles for the twelve months ended December 31, 2008 resulting in the contingent payment in the second quarter of 2009.  At June 30, 2009, the Company had $14.9 million of unused credit facilities, net of outstanding letters of credit.  The Company was in compliance with its debt covenants at June 30, 3009.  Due to macro economic conditions, the Company is closely monitoring compliance with its debt covenants and will evaluate financing alternatives should that become necessary.

The Company generated $1.1 million in proceeds and gains on sale of $0.4 million on the divestiture of surplus equipment and a facility in Louisville, Kentucky in the first six months of 2009.  Capital expenditures amounted to $3.4 million for the 2009 six-month period and were primarily funded out of proceeds from sale and the revolving credit facility. The capital expenditures in 2009 six-month period were for land in Winnipeg, rolling stock and information technology expenditures.  In the first six months of 2008 the majority of capital expenditures were for the purchase of facilities in Kansas City, Kansas; Las Vegas, Nevada; and construction costs of the new LTL service center in Toronto, Ontario.  The table below sets forth the Company’s capital expenditures for the three- and six-month periods ended June 30, 2009 and 2008.

	For the three months ended June 30,				For the six months ended June 30,
(in thousands of dollars)	2009		2008		2009		2008
Real estate and buildings	$	16	$	1,261	$	720	$	7,636
Tractors		-		-		516		47
Trailing fleet		1,668		450		1,683		658
Information technology		12		56		266		284
Leasehold improvements		36		20		40		92
Other equipment		90		253		224		431
Total	$	1,822	$	2,040	$	3,449	$	9,148

Management estimates that cash capital expenditures, excluding real estate additions for the remainder of 2009, will be between $ 4.0 million and $ 6.0 million.   The Company may potentially enter into operating leases to fund the acquisition of specific equipment should the business levels exceed the current equipment capacity of the Company.  The Company expects to finance its capital requirements with cash flow from operations, operating leases and, if required, its $14.9 million of unused credit facilities.

The Company has contractual obligations for principal payments that include long-term debt consisting of term debt facilities, revolving credit facilities and capital leases for operating equipment. The Company utilizes off-balance 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.

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The following table summarizes our significant contractual obligations and commercial commitments as of June 30, 2009:

(in thousands of dollars)			Payments due by period
Contractual Obligations	Total		2009		2010 & 2011		2012 & 2013		Thereafter
Term credit facilities	$	45,341	$	6,537	$	28,804	$	10,000	$ Nil
Revolving credit facilities		61,607	Nil		Nil			61,607	Nil
Capital lease obligations		12,763		2,641		7,873		2,249	Nil
Estimated interest payments (1)		17,430		3,869		11,604		1,957	Nil
Sub-total		137,141		13,047		48,281		75,813	Nil
Operating leases		63,832		12,192		27,866		15,658		8,116
Total Contractual Obligations	$	200,973	$	25,239	$	76,147	$	91,471	$	8,116

(1)  The Company has estimated its interest obligation on its fixed and variable rate obligations.  For fixed rate debt where variable-to-fixed interest rate swaps are in place, the fixed interest rate was used to determine the interest obligation until the interest rate swaps mature.  For other fixed rate debt, the fixed rate was used to determine the interest rate obligation.  For variable rate debt the variable rate in place at June 30, 2009 was used to determine the total interest obligation.

In addition to the above-noted contractual obligations, the Company, as at June 30, 2009, utilized the revolving credit facilities for standby letters of credit (“LOC”) of $22.7 million.  The letters of credit are used as collateral for self-insured retention of insurance claims.  During the second quarter of 2009, Export Development Canada (“EDC”) provided guarantees up to $12.2 million on specific LOC’s to the Company’s syndicated lenders.  In so doing the Company’s definition of funded debt in the associated credit agreement was amended to exclude LOC’s guaranteed by EDC.

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.  Should the current macro-economic environment further destabilize, the Company may fail to comply with the aforementioned debt covenants within the next twelve months.  As a result, the Company may seek to amend the debt covenants in its existing syndicated credit agreement.  Management does not anticipate a significant decline in business levels or financial performance and expects that existing working capital, together with available revolving credit facilities, will be sufficient to fund operating and capital requirements as well as service the contractual obligations.

OUTLOOK

The first six months of 2009 have proven to be a challenging operating evironment in the North American transportation industry; however, Vitran has sequentially improved its quarterly results in 2009.  The Company’s new integrated operating footprint in the LTL segment helped secure in excess of $32.0 million of annual revenue commitments.  The Logistics segment secured a new dedicated distribution contract in California and should have an additional account in place within the next six months.

Given the challenging economic backdrop and competitive pricing environment, there is uncertainty as to the timing of an economic upturn and the direction of the transportation sector in 2009.  As such, Management is closely monitoring financing alternatives for capital and other needs.  On a consolidated basis, the Company is operationally positioned to reap the benefits of an improvement in the economic environment should it materialize; however, should the environment worsen, Management will continually adjust its strategy and tactics for the betterment of the Company, the employees and most importantly, the shareholders.  Lastly, on a commercial basis, the Company intends to launch a new marketing campaign throughout North America, fully integrated across the LTL and Logistics segments. Management expects this initiative will lead to further increases in daily activity levels.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In preparing the financial statements, Management makes estimates and assumptions that affect reported amounts and disclosures.  Management periodically reviews its critical accounting policies and estimates and their underlying assumptions in light of current economic conditions, operating performance and as new information and regulatory changes become known.  In the opinion of Management, the accounting policies that generally have the most significant impact on the financial position and results of operations of the Company include:

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Revenue Recognition

The Company’s LTL and Truckload business units and Freight Brokerage operations recognize revenue upon the delivery of the related freight and direct shipment costs as incurred.  Revenue for the Logistics operations is recognized as the management services are provided.  Critical revenue-related policies and estimates for the Company’s LTL business unit relate to revenue adjustments and allowance for doubtful accounts.  Critical revenue-related policies and estimates for the Company’s Logistics and Truckload segment include allowance for doubtful accounts.   The Company believes that its revenue recognition policies are appropriate and that its revenue-related estimates and judgments provide a reasonable approximation of actual revenue earned.

Estimated Revenue Adjustments

Generally, the pricing assessed by companies in the LTL business is subject to subsequent adjustments due to several factors, including weight and freight classification verifications, shipper bill of lading errors, pricing errors, pricing discounts and other miscellaneous revenue adjustments.  Revenue adjustments may also include customer short payment write-offs, overcharge and undercharge claims.  The provision for revenue adjustments is evaluated and updated based on revenue levels, current trends and historical experience.   These revenue adjustments are recorded as a reduction in revenue from operations and accrued for in the allowance for doubtful accounts.  As part of its ongoing review of critical accounting policies and estimates, the Company is currently reviewing its revenue adjustment process which may give rise to changes in this estimate in the future.

Allowance for Doubtful Accounts

The Company records an allowance for doubtful accounts related to accounts receivable that may potentially be impaired.  The Company’s allowance is estimated by (1) a percentage of its aged receivables reflecting the current business environment, customer and industry concentrations, and historical experience and (2) an additional allowance for specifically identified accounts that are significantly impaired, but payment may be likely.  A change to these factors could impact the estimated allowance.  The provision for bad debts is recorded in other operating expenses.

Claims and Insurance Accruals

Claims and insurance accruals reflect the estimated ultimate total cost of claims, including amounts for claims incurred but not reported and future claims development, for cargo loss and damage, bodily injury and property damage, workers’ compensation, long-term disability and group health.  In establishing these accrued expenses, Management evaluates and monitors each claim individually and claim frequency.  Factors such as historical experience, known trends and third party estimates help determine the appropriate reserves for the estimated 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.  In Canada, the Company has a $50,000 deductible 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 a $350,000 SIR per incident for workers’ compensation and $250,000 SIR per incident for employee medical.

In addition to estimates within the self-insured retention, Management makes judgments concerning the coverage limits.  If any claim was to exceed the coverage limits, the Company would have to accrue for the excess amount.  The estimate would include evaluation whether a claim may exceed such limits and, if so, by how much.  A claim or group of claims of this nature could have a material adverse effect on the Company’s results from operations.  Currently, Management is not aware of any claims exceeding the coverage limit.

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Goodwill and Intangible Assets

The Company performs its goodwill impairment test annually and more frequently if events or changes in circumstances indicate that an impairment loss may have occurred.  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 a discounted cash flow method which is an income approach and a market approach which estimates fair value using market multiples of appropriate financial measures compared to a set of comparable public companies in the transportation and logistics industry.  The fair value methods require 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.  Actual impairment 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.

Property and Equipment

Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives.  Management establishes appropriate useful lives for all property and equipment based upon, among other considerations, historical experience, change in equipment manufacturing specifications, the used equipment market and prevailing industry practice.  Management continually monitors events and changes in circumstances that could indicate that the carrying amounts of property and equipment may not be recoverable.  When indicators of potential impairment are present, the recoverability of the assets would be assessed from the estimated undiscounted future operating cash flows expected from the use of the assets.  Actual recoverability of assets could differ based on different assumptions, estimates or other factors.  In the event that recoverability was impaired, the fair value of the asset would be recorded and an impairment loss would be recognized.  Management believes its estimates of useful lives and salvage values have been reasonable as demonstrated by the insignificant amounts of gains and losses on revenue equipment dispositions.

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 and its affiliates by the Board of Directors or by the Company’s Compensation Committee.  The Company accounts for stock options in accordance with SFAS Statement 123(R) with compensation expense amortized over the vesting period based on the Black-Scholes-Merton fair value on the grant date.  The assumptions used to value stock options are dividend yield, expected volatility, risk-free interest rate, expected life and anticipated forfeiture.  The Company does not pay any dividends on its common shares, therefore the dividend yield is zero.  We use the historical method to calculate volatility with the historical period being equal to the expected life of each option.  This calculation is then used to approximate the potential for the share price to increase over the expected life of the option.  The risk-free interest rate is based on the government of Canada issued bond rate in effect at the time of the grant. Expected life represents the length of time the option is estimated to be outstanding before being exercised or forfeited.  Historical information is used to determine the forfeiture rate.

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.  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.  Significant judgment is required in determining whether deferred tax assets will be realized in full or in part.  If it were ever estimated that it is more likely than not that all or some portion of specific deferred tax assets will not be realized, a valuation allowance must be established for the amount of deferred tax assets that is estimated not to be realized.  A valuation allowance for deferred tax assets has not been deemed necessary at June 30, 2009.  Accordingly, if the facts or financial results were to change, thereby impacting the likelihood of realizing the deferred tax assets, judgment would have to be applied to estimate the amount of valuation allowance required in any given period.

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FIN 48 requires that uncertain tax positions are evaluated in a two-step process, whereby (1) 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 (2) 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.

Management judgment is also required regarding a variety of other factors, including the appropriateness of tax strategies, expected future tax consequences, and to the extent tax strategies are challenged by taxing authorities.  We utilize certain income tax planning strategies to reduce our overall cost of income taxes.  It is possible that certain strategies might be disallowed, resulting in an increased liability for income taxes.  Significant Management judgments are involved in assessing the likelihood of sustaining the strategies and an ultimate result worse than our expectations could adversely affect our results of operations.

QUARTERLY RESULTS

(thousands of dollars  except per share amounts)		2009 Q2		2009 Q1			2008 Q4			2008 Q3		2008 Q2		2008 Q1		2007 Q4		2007 Q3
Revenue	$	158,682	$	139,635		$	154,235		$	198,605	$	195,990	$	177,507	$	174,310	$	171,927
Goodwill impairment		-		-			* 107,351					-				-
Income from operations		2,037		(2,854	)		(111,287	)		3,981		8,048		1,926		2,750		5,569
Net Income		440		(2,356	)		(79,002	)		2,066		4,577		1,134		1,669		3,121
Income per share:
Basic	$	0.03	$	(0.17	)	$	(5.85	)	$	0.15	$	0.34	$	0.08	$	0.12	$	0.23
Diluted		0.03		(0.17	)		(5.85	)		0.15		0.34		0.08		0.12		0.23
Weighted average number of shares:
Basic		13,498,159		13,498,159			13,498,159			13,493,757		13,483,159		13,465,357		13,457,619		13,475,685
Diluted		13,592,162		13,498,159			13,498,159			13,647,774		13,630,974		13,611,446		13,621,272		13,668,819

*   In the fourth quarter of 2008, Vitran recorded a pre-tax non-cash goodwill impairment charge of $107.4 million negatively impacting income from operations.

Definitions of non-GAAP measures:

(1) Operating ratio (“OR”) is a non-GAAP financial measure which does not have any standardized meaning prescribed by GAAP. OR is the sum of total operating expenses, divided by revenue. OR allows management to measure the Company and its various segments’ operating efficiency.  OR is a widely recognized measure in the transportation industry which provides a comparable benchmark for evaluating the Company’s performance compared to its competitors. Investors should also note that the Company’s presentation of OR may not be comparable to similarly titled measures by other companies. OR is calculated as follows:

	Three Months			Three months			Six months			Six months
	Ended			Ended			Ended			Ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008
Total Operating expenses	$	156,645		$	187,942		$	299,134		$	363,523
Revenue	$	158,682		$	195,990		$	298,317		$	373,497
Operating ratio (“OR”)		98.7	%		95.9	%		100.3	%		97.3	%

(2) A shipment is a single movement of goods from a point of origin to its final destination as described on a bill of lading document.

(3) Weight represents the total pounds shipped.

(4) Revenue per shipment represents revenue divided by the number of shipments.

(5) Revenue per hundredweight is the price obtained for transporting 100 pounds of LTL freight from point to point, calculated by dividing the revenue for an LTL shipment by the hundredweight (weight in pounds divided by 100) for a shipment.

(6) Revenue per total mile represents revenue divided by the total miles driven.

(7) The Company began to measure length of haul in July 2008, but believes the July length of haul is indicative of the 2008 second quarter for comparative purposes.  Length of haul is the sum of total miles derived between the zip code origin and zip code destination of shipments divided by the number of shipments.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

(in thousands of dollars)				Payments due by period
Long-term debt	Total			2009			2010 & 2011			2012 & 2013				Thereafter
Variable Rate
Term bank facility	$	44,000		$	6,000		$	28,000		$	10,000		$	Nil
Average interest rate (LIBOR)		5.10	%		5.10	%		5.10	%		5.10	%
Term bank facility		1,341			537			804		Nil				Nil
Average interest rate (LIBOR)		2.35	%		2.35	%		2.35	%
Revolving bank facility		55,950		Nil			Nil				55,950			Nil
Average interest rate (LIBOR)		5.10	%								5.10	%		Nil
Revolving bank facility		5,657		Nil			Nil				5,657			Nil
Average interest rate (CAD Prime)		7.0	%								7.0	%
Fixed Rate
Capital lease obligations		12,763			2,641			7,873			2,249			Nil
Average interest rate		6.15	%		6.15	%		6.15	%		6.15	%
Total	$	119,711		$	9,178		$	36,677		$	73,856		$	Nil

The Company uses variable-to-fixed interest rate swaps on its term and revolving credit facilities with a notional amount of $60.3 million at June 30, 2009.  The average pay rate on the swaps is 4.57% and the average receive rate is the three-month LIBOR rate, which is currently 0.65%.  To value the interest rate swaps, a discounted cash flow model is utilized. Primary inputs into the model that will cause the fair value to fluctuate period-to-period include the fixed interest rates, the future interest rates, credit risk and the remaining time to maturity of the interest rate swaps.  Management’s intention is to hold the interest rate swaps to maturity.

The Company is exposed to foreign currency risk as fluctuations in the United States dollar against the Canadian dollar can impact the financial results of the Company.  The Company’s Canadian operations realize foreign currency exchange gains and losses on the United States dollar denominated revenue generated against Canadian dollar denominated expenses.  Furthermore, the Company reports its results in United States dollars thereby exposing the results of the Company’s Canadian operations to foreign currency fluctuations.  In addition, the Company’s United States dollar debt of $87.1 million is designated as a hedge of the investment in the United States’ self-sustaining foreign operations.

Item 4. Controls and Procedures

a) As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of Company Management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design, implementation and operation of its “disclosure controls and procedures”, as such term is defined in Rule 13a-15(e) of the Exchange Act.  Based on this evaluation, the Company’s CEO and CFO have concluded that the Company’s “disclosure controls and procedures” are effective as of June 30, 2009 to enable the Company to record, process, summarize and report in a timely manner the information that the Company is required to disclose in submissions and filings with the SEC in accordance with the Exchange Act.

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b) There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of its business that have not been fully adjudicated.  Many of these are covered in whole or in part by insurance.  The Management of Vitran does not believe that these actions, when finally concluded and determined, will have a significant adverse effect upon Vitran’s financial condition, results of operations or cash flows.

Item 1A.  Risk Factors

See Part 1A of the Company’s 2008 Annual Report on Form 10-K.

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

Item 3.  Defaults Upon Senior Securities      - -     None

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

Item 5. Other Information     - -     None

Item 6. Exhibits and Reports on Form 8-K

Exhibits

Exhibit Number	Description of Exhibit
31	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 22, 2009.
32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated July 22, 2009.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		VITRAN CORPORATION INC.
	By:	/s/ SEAN P. WASHCHUK
Date:  July 22, 2009		Sean P. Waschuk  Vice President of Finance and Chief Financial Officer (Principle Financial Officer)
		/s/ FAYAZ D. SULEMAN
Date:  July 22, 2009		Fayaz D. Suleman  Corporate Controller (Principle Accounting Officer)

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EX-31

 Exhibit 31

CERTIFICATIONS

I, Richard E. Gaetz, certify that:

1.       I have reviewed this Quarterly Report on Form 10-Q 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: July 22, 2009

/s/ RICHARD E. GAETZ

Richard E. Gaetz

President and

Chief Executive Officer

I, Sean  P. Washchuk, certify that:

1.       I have reviewed this Quarterly Report on Form 10-Q 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: July 22, 2009

/s/ SEAN P. WASHCHUK

Sean P. Washchuk

Vice President, Finance and

Chief Financial Officer

EX-32

 Exhibit 32

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 Quarterly Report of Vitran Corporation Inc. on Form 10-Q for the three months ended June 30, 2009, 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:	July 22, 2009	By:	/s/ RICHARD E. GAETZ
			Richard E. Gaetz President  and Chief Financial Officer
			/s/ SEAN P. WASHCHUK
			Sean P. Washchuk Vice President Finance and Chief Financial Officer