Westport Reports Strong Fourth Quarter and Fiscal 2004; CWI Cash Positive in its First Quarter

Business Wire, May 27, 2004

Business Editors

VANCOUVER, British Columbia--(BUSINESS WIRE)--May 27, 2004

Westport Innovations Inc. (TSX:WPT) today reported total consolidated revenues of $32.4 million for fiscal 2004, a 32% increase from prior year revenues of $24.6 million. Engine shipments in Cummins Westport Inc. (CWI) totaled 1,255 compared to 884 engines in 2003. On a US dollar basis, product revenues were up 55% but were offset by the appreciation in the Canadian dollar. Loss for the year was $37.7 million compared to $48.5 million last year, a 22% improvement due to higher revenues and lower research and development spending. The corresponding loss on a per share basis for fiscal 2004 and the year prior was $0.64 and $0.95 respectively.

Revenues in the fourth quarter were $13.3 million, with 463 units shipped compared to $8.3 million and 321 units for the same quarter last year. Loss for the quarter was $6.5 million compared to $11.3 million in the fourth quarter last year. Westport's fourth quarter loss per share was $0.10 compared to $0.22 for the same quarter last year. This was the lowest loss per share for Westport since the inception of CWI three years ago.

Cash use during the quarter, defined as loss for the period adjusted for items not involving cash, a non-GAAP measure, improved to $3.4 million (Figure 1). This is a significant accomplishment over the company's announced goal of $5 million for the quarter. Cash use in the same quarter last year was $9.3 million and in the third quarter this year was $7.6 million.

"We are very pleased with our fiscal 2004 results, which demonstrate our continuing transformation from a technology development company to a growing product company with expanding markets," said David Demers, President and Chief Executive Officer.

Cummins Westport Inc.

At the end of 2003, Westport and Cummins Inc. announced a renewed focus for their 50:50 joint venture company, Cummins Westport Inc. As of January 2004, CWI's new business focus is on the sale of mid-range engines for truck and bus applications worldwide. CWI's first quarter of operations under the new agreement, Westport's fourth fiscal quarter, saw CWI generate positive cashflow on sales of $12.6 million.

Under the new joint venture agreement effective January 1, 2004, CWI is reporting full revenue for its parts business, where previously it reported only gross margin on parts. Parts revenue in the quarter was $2.2 million compared to $0.8 million this quarter last year. In 2004, parts revenue was $4.3 million compared to $3.6 million last year.

During Westport's past fiscal year ended March 31, 2004, 84% of CWI's revenue came from shipments to customers in North America, primarily for transit bus applications, and the balance were to international customers. CWI's installed customer base includes more than 10,000 engines in 18 countries around the world. More than 40 OEM vehicle or chassis manufacturers now incorporate CWI engines into more than 70 different product models.

CWI is focusing its efforts on markets that rank the highest under its target profile. Regions with dense populations, poor air quality, government incentives, natural gas supply and Cummins presence typically rank high in this analysis. CWI is now the dominant supplier of natural gas engines in North American transit buses, with leading fleet operators in cities like Washington DC, Los Angeles, Boston, Tacoma and San Diego selecting CWI engines. Although growth is anticipated in North American markets, particularly in applications such as refuse trucks with the recently introduced L Gas Plus engine, international sales are expected to take an increasingly important role. In key international markets such as India and China, CWI announced that it has signed memorandum of understandings to locally manufacture its new B Gas International engine. This will allow increased penetration of these high-growth markets for natural gas engines. In China, CWI has now delivered engines to nine major cities including Beijing, where approximately 2,300 buses use CWI engines.

Westport Programs Update

Outside of CWI, Westport is investing to develop commercial products in strategic markets with leading international OEM's. These include Isuzu trucks to be sold in Asia and North America, Western European trucks and buses with MAN and VW, and heavy-duty trucks in North America with Cummins. Westport also invests in industry-leading technology research programs, including projects with BMW and Ford on hydrogen engines, and a number of collaborations with governments and universities around the world.

During the quarter, Westport invested $6 million in gross research and development, approximately 25.3% of which was offset by funding from governments and partners. In 2004, more than $8 million was received from government agencies under research collaboration contracts against $34.1 million of gross research and development spending.

Dr. Michael Gallagher, Westport's Chief Operating Officer, said, "We made excellent progress last year and we believe our strong financial results can be sustained. Westport's objective continues to be to develop market alliances with our strategic partners that are similar to our Cummins Westport partnership in order to realize commercial opportunities and grow our business."