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Westport Reports Second Quarter Fiscal 2012

August 2, 2012

~Despite Tough Macroeconomic Conditions, Westport Maintains Outlook for
50% Growth~

VANCOUVER, Aug. 2, 2012 /PRNewswire/ – Westport Innovations Inc. (TSX:WPT /
NASDAQ:WPRT), the global leader in natural gas engines, today reported
financial results for the second quarter ended June 30, 2012 and
provided an update on operations. All figures are in U.S. dollars
unless otherwise stated.

“Key segments of the transport market have begun the inevitable shift
from petroleum based fuel to engines powered by cleaner burning, low
cost methane (natural gas), and Westport has a substantial presence in
each market,” said David Demers, CEO of Westport Innovations. “We are
seeing strong growth in all segments and in all of our global markets,
and despite challenging macroeconomic conditions, we expect this to
accelerate as new infrastructure comes onstream over the next two years
and as we launch new products, opening up significant new addressable
markets. At this point, we are reiterating our 2012 revenue guidance of
approximately 50% growth, on a consolidated basis.”

“The global demand for Westport’s and its joint venture’s products is
growing significantly. As a result of the increase in demand, we have
doubled the plant capacity in the Weichai Westport facility to be able
to produce up to 40,000 engines annually. Seeing a similar growth
profile in demand for our Westport LD products in North America, we
have recently announced the completion of an assembly center in
Kentucky with an annual production capacity of up to 20,000 Westport(TM)
WiNG systems.”

“Our second quarter was highlighted by major partnership announcements
with Caterpillar, Volvo and GM and by the start of production of our
Ford F-250/F-350 Westport WING products in Louisville. Our expansion in
OEM relationships and platform capabilities in high-horsepower will
provide both challenges and opportunities for additional revenue
streams. We have been heavily investing in product development with our
partners in heavy-duty, and these programs are moving closer to launch
with evident customer interest. We have increased our focus on
collaboration with fuel providers to ensure infrastructure construction
and fleet customers plans are optimized. We are still at the very early
stages of preparing for this shift to methane, but the evident success
to date gives us confidence in the long-term trend ahead.”

Second Quarter Financial and Business Highlights

        --  Reported consolidated revenues of $106.1 million for the
            quarter ended June 30, 2012 compared with $44.9 million for the
            same period last year, an increase of 136.3%.
        --  Reported net loss attributed to the Company of $6.1 million
            ($0.11 loss per share) for the quarter ended June 30, 2012
            compared with a net loss of $18.1 million ($0.38 loss per
            share) for the same period last year.
        --  Reported cash and short-term investments balance as at June 30,
            2012 of $307.2 million, compared with $333.3 million at March
            31, 2012.
        --  Segmented results: Westport Light-Duty (LD) revenue up 182.2%
            to $30.7 million, Cummins Westport (CWI) revenue up 78.5% to
            $57.0 million with 1,972 engines shipped, and Westport
            Heavy-Duty (HD) revenue up 111.3% to $4.3 million with 75
            systems shipped. Service and other revenue was $14.1 million.
            Although not consolidated, Weichai Westport revenue was up
            205.8% with 5,331 engines shipped in the quarter.
        --  Announced second agreement with General Motors (GM) for
            advanced engineering development for light-duty vehicles.
        --  Announced agreement with Caterpillar to develop natural gas
            technology for off-road equipment.
        --  Announced new product enhancements on its flagship Westport
            HD15L liquefied natural gas (LNG) engine for Class 8 trucking.
        --  Westport LD celebrated the grand opening of the Westport
            Kentucky Integration Center (WKIC), the new Westport WiNG Power
            System assembly center and began delivery of initial orders.

Financial Outlook for 2012
For the calendar year ended December 31, 2012, Westport reiterated its
revenue guidance for growth of approximately 50% year over year with
consolidated revenue expected to be between $400 and $425 million.

Second Quarter Fiscal 2012 Financial Results
Westport’s consolidated revenue for the three months ended June 30, 2012
was $106.1 million, an increase of $61.2 million, or 136.3%, from $44.9
million for the three months ended June 30, 2011. This increase was
driven by an increase in Westport LD revenue of $19.8 million to $30.7
million as the Company began consolidating previous acquisitions; an
increase in CWI revenue of $25.1 million to $57.0 million; and an
increase in Westport HD revenue of $8.4 million to $10.5 million mostly
due to $6.1 million in service revenue recorded in the current quarter.

Westport LD product revenue for the quarter ended June 30, 2012
increased $19.6 million to $30.4 million compared with $10.8 million in
the prior year period as a result of previous acquisitions. CWI product
revenue for the three months ended June 30, 2012 increased $22.6
million to $47.7 million as unit sales increased from 1,056 units to
1,972 units primarily as the result of increased sales of ISL G engines
in North America and sales of B Gas Plus engines in Latin America.
Westport HD product revenue for the quarter ended June 30, 2012
increased by $2.4 million to $3.7 million as unit shipments increased
to 75 HD systems compared with $1.3 million and 17 HD systems for the
three months ended June 30, 2011.

For the quarter ended June 30, 2012, Westport recorded $14.1 million of
service and other revenue, including $6.1 million recognized under the
Volvo development agreement and $8.0 million recognized as a one-time
license revenue for the transfer of the proprietary know-how related to
the HPDI technology related to the recently announced agreement with
Caterpillar Inc.

CWI parts revenue in the quarter ended June 30, 2012 increased by $2.4
million year over year to $9.3 million. Westport HD parts revenue for
the three months ended June 30, 2012 was $0.6 million compared with
$0.8 million for the three months end June 30, 2011. The number of
engines in the field, their age and their reliability all impacted
parts revenue each period.

For the three months ended June 30, 2012, gross margin was $40.5 million
compared with $15.2 million in the prior year period representing a
166.5% increase.  Westport continues to diversify its revenues among
the business units, which has an impact on the consolidated gross
margin percentage.  The consolidated gross margin percentage for the
quarter ended June 30, 2012 was 38.2% of total revenue compared with
33.9% of total revenue in the prior year period. For the quarter ended
June 30, 2012, Westport LD recorded gross margin and gross margin
percentage of $8.7 million and 28.4%, respectively, compared with $2.2
million and 20.6%, respectively, in the prior year period. CWI gross
margin and gross margin percentage for the quarter ended June 30, 2012
was $17.4 million and 30.6%, respectively, compared with $14.0 million
and 43.9%, respectively, in the prior year period. The decrease in CWI
gross margin percentage is due primarily to warranty and extended
coverage adjustments of $4.8 million and mix of sales. Excluding the
adjustment, CWI gross margin percentage was 39.0%. Westport HD gross
margin (not including service revenue) and gross margin percentage for
the three months ended June 30, 2012 was $0.3 million and 6.3%,
respectively, compared with negative $1.1 million and negative 51.3%,
respectively, in the comparable quarter last year.

For the three months ended June 30, 2012, operating expenses (research
and development, general and administrative and sales and marketing)
were $40.0 million compared with $25.1 million in the prior year
period.

        --  Research and development expenses increased $9.1 million to
            $20.5 million for the quarter ended June 30, 2012, compared
            with $11.4 million for the three months ended June 30, 2011. Of
            the $20.5 million, Westport recorded $4.0 million in research
            and development expenses relating to efforts under the Volvo
            development program, of which $3.8 million was reimbursed in
            the current quarter. The next milestones are scheduled for the
            quarter ended December 31, 2012.
        --  General and administrative expenses increased $2.6 million to
            $9.1 million for the quarter ended June 30, 2012, compared with
            $6.5 million for the three months ended June 30, 2011. The
            increase was primarily due to the addition of acquired
            operations and costs related to an increase in headcount. As of
            June 30, 2012, Westport had 945 employees globally, compared
            with 374 employees on June 30, 2011.
        --  Sales and marketing expenses increased $3.1 million to $10.4
            million for the quarter ended June 30, 2012, compared with $7.3
            million for the three months ended June 30, 2011. The increase
            was primarily due an increase in market development activities
            as products near launch.

Income from investment accounted for by the equity method for the three
months ended June 30, 2012 was $1.0 million, which related to
Westport’s 35% interest in Weichai Westport (WWI) of $1.1 million and a
loss in the Westport’s 50% interest in Minda-Emer Technologies Ltd. of
$0.1 million. This is compared with Westport’s 35% interest in WWI of
$0.4 million in the prior year period. CWI’s net income attributable to
Westport was $3.6 million, an increase of 24.1% compared with $2.9
million in the prior year period.

For the three months ended June 30, 2012, Westport reported consolidated
adjusted EBITDA of a loss $0.2 million compared with a loss of $10.6
million in the prior year period. The reconciliation of adjusted EBITDA
is described below.

Westport’s consolidated net loss attributed to the Company for the three
months ended June 30, 2012 was $6.1 million, or a loss of $0.11 per
share, compared with net loss of $18.1 million, or a loss of $0.38 per
share, in the three months ended June 30, 2011. During the quarter, the
Company recognized a net foreign exchange gain of $4.9 million with the
movement in the Canadian dollar relative to the U.S. dollar. This
compares with a net foreign exchange loss of $0.1 million for the three
months ended June 30, 2011. Excluding this gain, Westport’s
consolidated net loss attributed to the Company for the three months
ended June 30, 2012 was $10.9 million, or a loss of $0.20 per share.

As at June 30, 2012, Westport’s cash, cash equivalents and short-term
investment position was $307.2 million compared with $333.3 million as
at March 31, 2012.

        --  For the three months ended June 30, 2012, cash used in
            operations was $14.1 million with $0.8 million generated from
            operating purposes, offset by cash used in working capital of
            $14.9 million.
        --  Cash used in investing activities included cash paid to
            purchase short-term investments of $7.1 million and purchase of
            fixed assets of $4.9 million.
        --  Cash flows from financing included $0.1 million in shares
            issued for stock option exercises offset by $2.9 million
            repayment of the Company's operating lines of credit and
            repayment of long-term debt of $2.1 million within Emer.
        --  Foreign exchange cash balances negatively impacted cash and
            cash equivalents by approximately $0.5 million.

Westport Light-Duty (Westport LD) Business Unit Highlights
For the three months ended June 30, 2012, Westport LD revenue was $30.7
million compared with $10.9 million for the three months ended June 30,
2011.

During the quarter, Westport announced a second agreement with GM for
advanced engineering development for light-duty vehicles. Westport and
GM are now developing two different combustion, controls and emissions
approaches to natural gas engines, with the first cooperative
technology project being announced in June 2011. This new program will
optimize advanced natural gas technologies and applications for maximum
CO(2) reduction and fuel efficiency in light-duty vehicles.

In June, Westport LD celebrated the grand opening of the Westport
Kentucky Integration Center (WKIC), which is home to the new Westport
WiNG Power System assembly center, capable of delivering up to 20,000
trucks per year. The WKIC has an ideal location close to the Ford Motor
Company Kentucky Truck Plant. To establish the Center, Westport
invested significantly in both infrastructure, through renovating a
previously vacant building, and product training and skill development
for its new employees. Westport LD has also established its new
Plymouth, Michigan technical center as part of its global operations.

The Westport WiNG Power System is designed, built, installed and
delivered Key-Ready(TM) to customers through Westport LD authorized Ford
dealers/distributors. Road test reviews of the WiNG-powered F-250 have
been positive considering the potential fuel cost savings from low
natural gas prices. Shipments of the WiNG-powered vehicles began in
June.

Westport LD in Sweden is the sole supplier of natural gas fuel systems
to Volvo Car Company (VCC) for the bi-fuel version of the popular V70
wagon. In May, Westport LD launched the 2013 model year 2.0-litre
turbocharged V70 with improved fuel efficiency and extended range
compared with the previous model. Westport LD builds and installs the
natural gas systems at facilities located inside VCC’s main production
center in Gothenburg.

Cummins Westport Inc. (CWI) Business Unit Highlights
North American refuse hauling companies are increasingly adopting the
CWI ISL G engine due to its low emissions, quiet operation and fuel
cost savings. More than half of the engines sold in North America in
the second quarter of 2012 went into this segment.

CWI is continuing development of the new ISX12 G natural gas engine.
Several leading fleets in the truckload carrier, refuse hauling,
private fleet and oilfield services segments have been participating in
the field trials of this engine and feedback has been very positive.
CWI is working with OEM launch partners for this engine including
Freightliner, Peterbilt, Kenworth, Volvo Trucks and Autocar. Volume
production is expected to begin in early 2013, and the engine will be
manufactured in Cummins’ heavy-duty engine plant in Jamestown, New
York.

Westport Heavy-Duty (Westport HD) Business Unit Highlights
For the quarter ended June 30, 2012, Westport HD shipped 75 HD Systems
to Kenworth and Peterbilt for LNG truck production for customers,
compared with 17 HD Systems in the quarter ended June 30, 2011.
Westport expects an increase in unit sales in the fourth quarter of
2012 as refueling infrastructure becomes available, as reflected by the
build out of LNG infrastructure by Westport fueling partners.

According to U.S. Department of Energy, there are 54 LNG stations in the
U.S. today, which the majority are located in California. Of the 54
stations, 21 are publicly accessible, including the three new public
stations commissioned for LNG refueling in the first half of
2012. Based on Westport analysis, over 60 stations are expected to be
commissioned by the end of the year as part of Clean Energy Fuels’
America’s Natural Gas Highway rollout.  In addition, Shell has also
committed to help build out the LNG fueling infrastructure in North
America. In June, Shell announced an agreement with TravelCenters of
America LLC (TA) to sell LNG to heavy-duty road transport customers in
the U.S. through TA’s existing nationwide network of full-service
fueling centers. The proposed plans include constructing more than 200
LNG fuel lanes at about 100 TA sites and Petro Stopping Centers
throughout the US interstate highway system, with the first fuel lanes
expected to become operational in 2013. Shell also indicated that the
first LNG retail plaza in Calgary is expected to open this year.

In direct response to requests from customers that operate their trucks
in the most demanding of applications, Westport HD announced new
product enhancements on its flagship HD15L LNG engine for Class 8
trucking including automated manual transmission and heavy front end,
both of which are available today, as well as higher horsepower and
torque, and emissions aftertreatment improvements, which will be
available in 2013. These enhancements will further expand the range of
heavy-duty applications that can successfully switch to Westport HD15L
LNG trucks.

For the three months ended June 30, 2012, Westport recorded $6.1 million
in engineering service revenue as a result of delivering certain
milestones during the period under the Volvo development agreement. The
engine development program with Volvo is proceeding as planned.

Weichai Westport Inc. (WWI) Highlights
WWI is aggressively penetrating new markets in China. For the three
months ended June 30, 2012, WWI revenue increased to $68.8 million on
5,331 engines compared with $22.5 million on 1,654 engines for the
quarter ended June 30, 2011. To meet the increasing demand of natural
gas trucks in China, the WWI production facility has been expanded to
an annual capacity of 40,000 engines per year. The Weichai Westport
HPDI engine is currently undergoing road testing with a select OEM
customer, Shaanxi Heavy Duty Automobile Group Co., Ltd. Commercial
launch of this new product is expected in 2013.

High-Horsepower (HHP) Highlights
Westport and Caterpillar Inc. have agreed to co-develop natural gas
technology for off-road equipment. While the agreements initially focus
on engines used in mining trucks and locomotives, the companies will
also develop natural gas technology for Caterpillar’s off-road engines,
which are used in a variety of electric power, industrial, machine,
marine and petroleum applications worldwide. Caterpillar and Westport
are combining technologies and expertise, including Westport HPDI
technology and Caterpillar’s industry leading off-road engine and
machine product technology, to develop the natural gas fuel system. The
development program has started, building on the results from the
evaluation project announced in May 2011. Caterpillar is funding the
majority of the development program and Westport will be reimbursed for
each milestone completed. When the products go to market, Westport
expects to participate in the supply of key components.

The first product delivered under this new alliance will be a locomotive
for Canadian National Railways (CN) which will be delivered as part of
a program with support from Sustainable Development Technology Canada
(SDTC) and in partnership with Electro-Motive Diesel (EMD, a subsidiary
of Progress Rail Services, a Caterpillar Company), CN and Gaz Metro.
The project is now well underway and the consortium successfully
completed the first program milestone during the quarter.

Westport has received funding approval from SDTC to help commercialize
the conversion of a rail locomotive to operate on natural gas. Westport
has signed amendments to the agreements with its consortium partners to
select the EMD SD70 Mainline Locomotive to be converted and to expand
the scope of the program to include the development of an LNG tender
car. In choosing the SD70, the consortium has selected EMD’s latest
locomotive type, powered by their 4,300 horsepower, 16-cylinder 710
series engine. Engine testing is expected to commence in the second
quarter next year and the natural gas locomotive is expected to be
tested in service with CN by 2014 as the first step towards the release
of a full commercial product, with SDTC support. Westport will design
and develop the tender car for this application.

Non-GAAP Financial Measure; Adjusted EBITDA Results
Adjusted EBITDA is used by management to review operational progress of
its business units and investment programs over successive periods and
as a long-term indicator of operational success since it ties closely
to the unit’s ability to generate sustained cash flows. Westport
defines Adjusted EBITDA as net loss attributed to the Company before
(a) income taxes, (b) depreciation and amortization, (c) interest
expense, net, (d) amortization of stock-based compensation, (e)
unrealized foreign exchange loss (gain), (f) income (loss) from
unconsolidated joint ventures and (g) gains and other. The term
Adjusted EBITDA is not defined under U.S. generally accepted accounting
principles, or U.S. GAAP, and is not a measure of operating income,
operating performance or liquidity presented in accordance with U.S.
GAAP. Adjusted EBITDA has limitations as an analytical tool, and when
assessing Westport’s operating performance, investors should not
consider Adjusted EBITDA in isolation, or as a substitute for net loss
or other consolidated statement of operations data prepared in
accordance with U.S. GAAP. Among other things, Adjusted EBITDA does not
reflect Westport’s actual cash expenditures. Other companies may
calculate similar measures differently than Westport, limiting their
usefulness as comparative tools. Westport compensates for these
limitations by relying primarily on its GAAP results and using Adjusted
EBITDA only supplementally.


                              Three Months Ended         Six Months Ended

                                     June 30,                  June 30,

                              2012         2011         2012         2011

    Net loss attributed to $ (6,056)   $ (18,113)   $ (28,684)   $ (32,490)
    the Company

      Provision for income     5,099        3,733       11,299        6,040
      taxes

      Depreciation and         2,766          853        5,285        1,860
      amortization

      Interest expense,          923        1,076        2,194        1,837
      net

      Amortization of          2,896        2,212        6,458        3,638
      stock-based
      compensation

      Unrealized foreign     (4,878)           54      (4,493)        3,329
      exchange loss (gain)

    EBITDA                       750     (10,185)      (7,941)     (15,786)

    Less: Gains (loss) and       (1)            -           53            -
    other

    Less: Income from          (953)        (445)      (1,715)        (818)
    unconsolidated
    joint ventures

    Adjusted EBITDA        $   (204)   $ (10,630)   $  (9,603)   $ (16,604)

Outlook
This press release includes financial outlook information for Westport
and such information is being provided for the purpose of updating
prior revenue disclosure and may not be appropriate for, and should not
be relied upon for, other purposes.

Financial Statements & Management’s Discussion and Analysis
To view Westport’s full financials for the quarter ended June 30, 2012,
please point your browser to the following link: http://www.westport.com/investors/financial

Live Conference Call & Webcast
Westport has scheduled a conference call for today, Thursday, August 2,
2012 at 2:00 pm Pacific Time (5:00 pm Eastern Time) to discuss these
results. The public is invited to listen to the conference call in real
time by telephone or webcast. To access the conference call by
telephone, please dial: 1-800-319-4610 (Canada & USA toll-free) or
604-638-5340. The live webcast of the conference call can be accessed
through the Westport website at www.westport.com/investors.

Replay Conference Call & Webcast
To access the conference call replay, please dial 1-800-319-6413 (Canada
& USA toll-free) or 604-638-9010 using the pass code 1847. The replay
will be available until August 9, 2012. Shortly after the conference
call, the webcast will be archived on the Company’s website and replay
will be available in streaming audio.

About Westport Innovations Inc.
Westport Innovations Inc. is a leading global supplier of proprietary
solutions that allow engines to operate on clean-burning fuels such as
compressed natural gas (CNG), liquefied natural gas (LNG), hydrogen,
and renewable natural gas (RNG) fuels such as landfill gas and helps
reduce greenhouse gas emissions (GHG). Westport technology offers
advanced LNG fueling systems with direct injection natural gas engine
technology for heavy-duty vehicles such as highway trucks and off-road
applications such as mining and rail.  Westport’s joint venture with
Cummins Inc., Cummins Westport Inc. designs, engineers and markets
spark-ignited natural gas engines for North American transportation
applications such as trucks and buses. Westport LD division is one of
the global leaders for natural gas and liquefied petroleum gas (LPG)
fuel in passenger cars, light-duty trucks and industrial applications
such as forklifts. To learn more about our business, visit our website
or subscribe to our RSS feed at www.westport.com, or follow us on
Twitter @WestportDotCom.

This press release contains forward-looking statements, including
statements regarding the consolidated revenue and revenue growth of
Westport for calendar year 2012, rate of adoption of
the CWI ISL G engine by North American refuse hauling companies, timing for launch and volume production of the CWI ISX12 G, projected
Westport HD unit sales in the fourth quarter of 2012, timing for
opening of LNG retail plazas, timing for commercial launch of Weichai
Westport’s HPDI engine by
Shaanxi Heavy Duty Automobile Group Co., Ltd. timing for engine testing
of EMD locomotive engines, timing and expectations for future cash flows, the demand for our
products, the future success of our business and technology strategies,
investment in new product and technology development and otherwise,
cash and capital requirements, intentions of partners and potential
customers, the performance and competitiveness of Westport’s products
and expansion of product coverage, future market opportunities, speed
of adoption of natural gas for transportation and terms of future
agreements as well as Westport management’s response to any of the
aforementioned factors. These statements are neither promises nor
guarantees, but involve known and unknown risks and uncertainties and
are based on both the views of management and assumptions that may
cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels
of activities, performance or achievements expressed in or implied by
these forward looking statements. These risks and uncertainties include
risks and assumptions related to our revenue growth, operating results,
industry and products, the general economy, conditions of and access to
the capital and debt markets, governmental policies and regulation,
technology innovations, fluctuations in foreign exchange rates,  the
availability and price of natural gas,  global government stimulus
packages, the acceptance of and shift to natural gas vehicles, the
relaxation or waiver of fuel emission standards, the inability of
fleets to access capital or government funding to purchase natural gas
vehicles, the sufficiency of bio methane for use in our vehicles, the
development of competing technologies, our ability to adequately
develop and deploy our technology as well as other risk factors and
assumptions that may affect our actual results, performance or
achievements or financial position discussed in our most recent Annual
Information Form and other filings with securities regulators. Readers
should not place undue reliance on any such forward-looking statements,
which speak only as of the date they were made. We disclaim any
obligation to publicly update or revise such statements to reflect any
change in our expectations or in events, conditions or circumstances on
which any such statements may be based, or that may affect the
likelihood that actual results will differ from those set forth in
these forward looking statements except as required by National
Instrument 51-102. The contents of any website, RSS feed or twitter
account referenced in this press release are not incorporated by
reference herein.

 

SOURCE Westport Innovations Inc.


Source: PR Newswire