Forward-Looking Statements

In addition to historical information, this Annual Report on Form 10-K and MD&A 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.

These forward-looking statements contain forward-looking statements regarding, but not limited to, the following:

• the Company's expectation that the sale of the SCO business will close on or before March 1, 2013 based on the agreement signed on February 12, 2013 and that Legacy will close its financing to fund the purchase price;

• the Company's expectation that efficiencies and optimization of technology within the U.S. LTL business unit will reduce salaries, wages and employee benefits expense as a percentage of revenue;

• the Company's expectation that revenue per hundredweight will increase in upcoming quarters as the freight mix and internal leadership in the pricing department impacts the LTL segment;

• the Company's expectation that it will be able to reduce maintenance expense as a percentage of revenue;

• the Company's expectation that operating initiatives implemented will continue to improve productivity and service levels within the U.S. LTL business unit;

• the Company's expectation that fuel economy will continue to improve moderately and as a result fuel costs will decrease;

• the Company's expectation that operational improvements within the U.S. LTL business unit will have a positive impact on future financial results;

• the Company's expectation that activity levels will improve;

• the Company's ability to maintain DSO below 40 days;

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

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

• the Company's operational plan will improve service and efficiencies in the U.S. LTL business unit; and

• the Company's ability to benefit from an improvement in the economic and pricing environment.

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, 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 and in Item 1A
- Risk Factors. 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.

Vitran Corporation Inc. ("Vitran" or the "Company") is a leading, predominantly non-union, provider of freight surface transportation and related supply chain services throughout Canada and in 34 states in the eastern, southeastern, central, southwestern and western United States. These services are provided by stand-alone business units within their respective regions. Depending on a customer's needs, the units can operate independently or in a complementary manner. As is more fully described in Item 1 "Business", the LTL segment transports shipments in less-than-full trailer load quantities through freight service center networks.

Vitran's operating results are generally expected to depend on the number and weight of shipments transported, the prices received for the services provided, and the mix of services supplied to clients. Vitran must manage its fixed and variable operating cost infrastructure in the face of fluctuating volumes to realize appropriate margins while maintaining the quality service expected by its customers.

The long-term mission of the Company is to build a premier North American transportation infrastructure in both Canada and the United States offering regional, inter-regional, national, and transborder LTL services.

In 2010, Vitran divested of substantially all of the rolling stock of its Truckload business. The Truckload business delivered full trailer loads point to point on a predominantly short-haul basis. This operation was not connected to the LTL segment and was not considered strategic to the continuing operations of Vitran.

On February 19, 2011, Vitran acquired selected assets of Milan Express Inc.'s LTL division, a private LTL carrier headquartered in Milan, Tennessee. With the acquisition of Milan, Vitran added 19 service centers, including expanded and new state coverage in Alabama, Georgia, Mississippi, North Carolina and South Carolina.

On February 12, 2013, Vitran signed an agreement to sell its SCO services business to Legacy for $97.0 million in cash, subject to working capital adjustments. The sale of the SCO business is expected to close by March 1, 2013, upon completion of the purchaser's financing, and is subject to customary conditions for this type of transaction. A portion of the proceeds from the sale will be used to fully reduce Vitran's debt under its revolving credit facility, except for outstanding letters of credit, and to support the development of Vitran's LTL operation. The operating results of the SCO segment have been recorded as a discontinued operation.

The 2012 fiscal year marked a difficult yet extremely exciting year for Vitran. Although the Company operated through a number of challenges in its U.S. LTL business unit, a foundation has been built to recover the operating results of this business unit in 2013. Notwithstanding the U.S. LTL business unit, Vitran's other business units prospered operationally in 2012 and as a whole, Vitran had a number of important accomplishments:

• completed the construction of a new terminal in Winnipeg, Manitoba and subsequently financed the facility by adding it to the portfolio of the Company's Canadian real estate term credit facility;

• enhanced liquidity by obtaining a new real estate term facility secured by 18 of the Company's U.S. transportation terminals;

• the CDN LTL business continued to post solid results in 2012;

• completed the build-up of the new U.S. LTL management and leadership team;

• introduced new enhanced technology to the U.S. LTL operations; and

• focus on North American LTL business with divestiture of SCO.

These achievements were the result of tireless effort and support from the management, office staff and most importantly, the front line drivers and dock workers at Vitran.

                             2012 COMPARED TO 2011

                              CONSOLIDATED RESULTS

The following table summarizes the Consolidated Statements of Income (Loss) for
the three years ended December 31:



(in thousands of dollars)                      2012            2011            2010           2012 vs 2011          2011 vs 2010

Revenue                                      $ 702,914       $ 686,242       $ 581,594                  2.4 %                18.0 %
Salaries, wages and employee benefits          305,033         283,363         241,200                  7.6 %                17.5 %
Purchased transportation                       104,447         109,133          99,222                 (4.3 %)               10.0 %
Depreciation and amortization                   15,435          14,969          16,748                  3.1 %               (10.6 %)
Maintenance                                     34,201          32,217          25,603                  6.2 %                25.8 %
Rents and leases                                33,823          26,321          18,104                 28.5 %                45.4 %
Owner operators                                 48,345          46,905          42,889                  3.1 %                 9.4 %
Fuel and fuel related expenses                 135,365         130,294          87,105                  3.9 %                49.6 %
Other operating expenses                        64,352          55,679          50,916                 15.6 %                 9.4 %
Other loss (income)                               (235 )         1,945            (141 )             (112.1 %)           (1,479.4 %)

Loss from continuing operations                (37,852 )       (14,584 )           (52 )              159.5 %            27,946.2 %
Interest expense, net                            5,417           6,808           7,325                (20.4 %)               (7.1 %)
Income tax expense (recovery)                     (643 )          (612 )        34,985                  5.1 %              (101.7 %)

Net loss from continuing operations            (42,626 )       (20,780 )       (42,362 )              105.1 %               (50.9 %)

Net income from discontinued operations          6,651           6,767           2,180                 (1.7 %)              210.4 %

Net loss                                     $ (35,975 )     $ (14,013 )     $ (40,182 )              156.7 %               (65.1 %)


                                               2012            2011            2010           2012 vs 2011          2011 vs 2010
Loss per share:
Basic and diluted - continuing operations    $   (2.60 )     $   (1.27 )     $   (2.60 )              104.7 %               (51.2 %)
Basic and diluted - net loss                 $   (2.19 )     $   (0.86 )     $   (2.47 )              154.7 %               (65.2 %)

Operating ratio(1)                               105.4 %         102.1 %         100.0 %

Financial Overview

Revenue increased by 2.4% to $702.9 million in 2012 from $686.2 million in 2011. Revenue for the 2012 year was impacted by a stronger Canadian dollar and an increase in fuel surcharge revenue accounting for approximately $2.8 million of the revenue improvement. Excluding the impact of fuel surcharge revenue and a stronger Canadian dollar, 2012 revenue compared to 2011 improved 2.0%. Shipments and tonnage increased 1.8% and 0.5% respectively compared to 2011.

Salaries, wages and employee benefits increased 7.6% to $305.0 million for 2012 compared to $283.4 million in 2011. This compares with a 1.1% increase in employee headcount compared to 2011. Furthermore, management committed to its U.S. LTL business unit employees to return a quarter of the 2008 5% wage reduction at the commencement of each calendar quarter in 2011, therefore, the full impact of the 5% wage increase is included for a full year in 2012. In addition, the Company has increased wage rates in certain parts of the U.S. to attract and retain drivers. Salary, wages and employee benefit expenses in 2013 should outpace the prior year expenses, but as management improves efficiencies within the U.S. LTL business unit, it is expected to decline on a percentage of revenue basis.

Purchased transportation decreased 4.3% in 2012 compared to 2011 due to a decrease in the use of purchased transportation in the U.S. LTL business unit. The revamped linehaul structure in the U.S., along with a concerted effort to reduce purchased miles, decreased purchased transportation costs during the year compared to 2011. It is management's intention to replace purchased transportation with company drivers and equipment as lane density, revenue per hundredweight and financial results appear sustainable and warrant the commitment to company drivers and the investment in equipment.

Depreciation and amortization expense increased 3.1% for 2012 compared to 2011, and is primarily attributable to the purchase of rolling stock, dock equipment and buildings in 2012. The Company expects to purchase more rolling stock as financial performance improves and therefore expects depreciation expense to increase in coming years.

Maintenance expense increased 6.2% to $34.2 million for 2012 compared to $32.2 million for 2011. As a percentage of revenue, maintenance expense increased to 4.9% compared to 4.7% for 2011. However, on a sequential basis maintenance expense as a percentage of revenue was comparable in the fourth quarter of 2012 compared to the third quarter of 2012. Management is focused on reducing this expense and it is management's expectation that the Company will reduce its maintenance costs as a percentage of revenue in future periods.

Rents and leases expense increased 28.5% for 2012 compared to 2011. The increase is attributable to the 400 new tractors received in 2011, 200 new tractors received by the U.S. LTL business unit in 2012 and 950 new trailers received in 2012 within the LTL segment.

Owner operator expenses increased 3.1% for 2012 compared to 2011, driven by the increase in owner operator expenses in the Canadian LTL business unit due to increased activity levels compared to 2011.

Fuel and fuel-related expenses increased 3.9% for 2012 compared to 2011. The average price of diesel increased approximately 2.8% in 2012 compared 2011. Furthermore, the Company's fuel consumption increased due to the increase in activity as indicated by the 1.8% increase in shipments within the LTL segment. Management expects to receive moderately improved fuel economy from improved operating practices in future periods.

The Company incurred net interest expense of $5.4 million in 2012 compared to interest expense of $6.8 million in 2011. Included in interest expense in 2011 is $1.0 million of deferred financing costs that were written off related to the previous senior term and revolving credit facilities. The Company's balance sheet debt net of cash at December 31, 2012 is $32.4 million greater than December 31, 2011. However, the Company's interest rate spread on its revolving and term debt was on average 44 basis points less than 2011.

In accordance with Financial Accounting Standard Board ("FASB") Accounting Standard Codification ("FASB ASC") 740-10, included in the 2010 tax expense is the recognition of a $39.6 million valuation allowance for all U.S. deferred tax assets. As required by this standard, the Company increased the valuation allowance by $15.5 million, which would have been the tax recovery attributable to the Company's U.S. based companies for 2012. Consequently, the Company recorded a consolidated tax recovery of $0.6 million in 2012. The majority of the deferred tax assets were for timing differences related to tax deductible goodwill and net loss carryforwards. The net operating loss carryforwards will begin to expire in 2027 and will continue to be available to offset future years taxable income. Management believes the Company will generate sufficient taxable income to use these losses in the future, but not to the level of certainty required by FASB ASC 740-10.

Net loss from continuing operations was $42.6 million for 2012 compared to a net loss from continuing operations of $20.8 million in 2011. This resulted in basic and diluted loss per share from continuing operations of $2.60 for the current year compared to a loss per basic and diluted share from continuing operations of $1.27 in 2011. Income from discontinued operations was $6.7 million in 2012 compared to $6.8 million in 2011. Therefore, the Company posted a net loss of $36.0 million for 2012 compared to a net loss of $14.0 million in 2011. This resulted in a basic and diluted loss per share of $2.19 for the current year compared to a loss per basic and diluted share of $0.86.

FASB Accounting Standard Update ("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. FASB ASU Update No. 2011-08 was adopted by the Company on January 1, 2012.

FASB ASU No. 2011-05 "Presentation of Comprehensive Income" requires entities to present net income and comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and comprehensive income. FASB has amended ASU No. 2011-05 with ASU 2011-12, which defers the effective date of certain requirements outlined in FASB ASU No. 2011-05 until further deliberated and reinstates the requirements for presentation of reclassifications out of accumulated other comprehensive income that were in place before the issuance of FASB ASU No. 2011-05. FASB ASU No. 2011-5 was adopted by the Company on January 1, 2012.

FASB ASU No. 2011-04, Fair Value Measurement, provides guidance to improve the comparability of fair value measurements presented in financial statements prepared in accordance with GAAP and International Financial Reporting Standards. The new standard requires the Company to report the level in the fair value hierarchy of assets and liabilities not measured at fair value on the balance sheet, but for which the fair value is disclosed, and to expand existing disclosures. FASB ASU No. 2011-04 was adopted by the Company on January 1, 2012.

FASB 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. The new guidance affects disclosures only and will have no impact on the Company's results of operations or financial position.

Operations Overview



                                               2012            2011            2010         2012 vs 2011       2011 vs 2010
Number of shipments(2)                        4,374,202       4,295,432       3,946,952               1.8 %              8.8 %
Weight (000s of lbs)(3)                       6,432,070       6,402,437       5,867,822               0.5 %              9.1 %
Revenue per shipment(4)                     $    160.70     $    159.76     $    147.35               0.6 %              8.4 %
Revenue per hundredweight(5)                $     10.93     $     10.72     $      9.91               2.0 %              8.2 %

Shipments per day in the U.S. LTL business unit increased 2.0% for 2012 compared to 2011, however, decreased 8.4% in the fourth quarter of 2012 compared to the same quarter a year ago. This is attributable to softness in the U.S. market and management's internal focus on improving operations in the U.S. LTL business unit. On a year-over-year basis, 2012 compared to 2011, average length of haul increased 1.0% and average revenue per hundredweight increased 1.9%. Management expects the revenue per hundredweight to increase in the upcoming quarters as the pricing environment continues to favor LTL carriers in the North American market place.

The U.S. LTL business unit had a challenging year operationally in 2012 and did not perform to management's expectations. However, the focus in 2012 was on creating a management structure, operational improvements and technological enhancements, the purpose being to lay a foundation for operating results improvements in 2013.

There were a number of important initiatives completed in 2012. First, the U.S. LTL business unit added key personnel to leadership positions throughout the organization. This initiative was completed in August 2012 with a number of experienced executives joining the leadership team. Second, the restructuring of the business unit's linehaul network was also completed during the year. This initiative has positively resulted in reduced miles, increase in weight per trailer and improved efficiencies in some key areas of operations. Third, is the technology introduction into the business unit throughout 2012. The customer experience has been greatly improved with the introduction of tablet technology to the pick-up and delivery team and an improved dispatch interface. In addition, new technology was introduced to the operations team in the fourth quarter of 2012 to continue to improve operating efficiencies and customer service levels. The technology has given the leadership team visibility into operations to accurately measure and optimize processes, and in combination with all the initiatives completed and underway, forms the foundation for improved operating efficiencies and customer service levels.

The Canadian LTL business unit posted a solid 2012 benefiting from a strong Canadian economy and a stable operation compared to the U.S. LTL business unit.

It is management's expectation that as the use of the new technology is optimized, the U.S. LTL business unit gains traction from a new operations leadership group and the adoption of all the new systems and processes, the Company will improve customer service levels, sales and operating efficiency. Lastly, management believes that with additional density gains, continued momentum in the North American pricing environment, combined with a continued focus on operational improvements, the LTL segment is well positioned to improve income from operations over the long-term.

Financial Overview

Revenue increased by 18.0% to $686.2 million in 2011 from $581.6 million in 2010. Revenue for the 2011 year was impacted by a stronger Canadian dollar and an increase in fuel surcharge revenue accounting for approximately $48.4 million of the consolidated revenue improvement. Excluding the impact of fuel surcharge revenue and a stronger Canadian dollar, 2011 revenue compared to 2010 improved 9.7%. Revenue net of fuel surcharge was impacted by the additional business from the Milan acquisition on February 19, 2011 as indicated by the increase in shipments and tonnage of 8.8% and 9.1% respectively compared to 2010.

Salaries, wages and employee benefits increased 17.5% to $283.4 million for 2011 compared $241.2 million in 2010. Employee headcount was expected to increase by approximately 600 individuals resulting from the acquisition of the Milan LTL assets on February 19, 2011. However, headcount increased approximately 1,000 employees to handle the increase in business and to recover from the acquired backlog of freight at Milan. Furthermore, management committed to its U.S. LTL business unit employees to return a quarter of the 2008 5% wage reduction at the commencement of each calendar quarter in 2011. As of December 31, 2011 four quarterly increases of 1.25% have been issued.

Purchased transportation increased 10.0% in 2011 compared to 2010 due to an increase in LTL segment activity as indicated by the 8.8% increase in shipments and the 3.1% increase in length of haul within the U.S. LTL business unit. Furthermore, the acquisition of Milan on February 19, 2011 required additional purchased transportation to service Vitran's expanded geographic footprint. Intermodal shipments in the Canadian LTL business unit increased 2.5%, requiring additional railway transportation expense compared to the 2010 comparative period. The Company's U.S. LTL business received 400 additional tractors near the end of the second quarter and beginning of the third quarter of 2011. The additional tractors, along with a concerted effort to reduce purchased miles, decreased purchased transportation costs as a percentage of revenue within the U.S. LTL business unit in the fourth quarter of 2011 compared to the third quarter of 2011.

Depreciation and amortization expense declined 10.6% for 2011 compared to 2010, and is primarily attributable to the sale of rolling stock and buildings during the year. Furthermore, cash capital expenditures have also been lower than historical trends over the past 2 years resulting in less depreciation expense.

Maintenance expense increased 25.8% to $32.2 million for 2011 compared to $25.6 million for 2010. Additional maintenance expense for the Milan acquired fleet and continued focus on the Company's preventative maintenance program increased maintenance expense as a percentage of revenue to 4.7% compared to 4.4% for 2010.

Rents and leases expense increased 45.4% for 2011 compared to 2010. The increase is a result of the aforementioned new tractors, leased equipment added in the Milan acquisition as well as the new short-term leased facilities in the newly acquired territory. In addition, the U.S. LTL business unit expanded into new leased facilities in South Plainfield, NJ and Louisville, KY at the beginning of the 2011 fourth quarter.

Owner operator expenses increased 9.4% for 2011 compared to 2010, attributable to the increase in owner operator expenses in the Canadian LTL business unit as a result of increased activity levels compared to 2010.

Fuel and fuel-related expenses increased 49.6% for 2011 compared to 2010. The average price of diesel increased approximately 27.6% in 2011 compared 2010. Furthermore, the LTL segment's consumption increased due to the increase in activity as indicated by the 8.8% improvements in shipments and the expanded fleet and territory attributable to the Milan acquisition.

During the 2011 fourth quarter, the Company sold six facilities within the U.S. . . .