Hello, this is the conference operator. Welcome to the Westport Innovations Inc. Fiscal 2012 Q4 and Year-End Financial Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions) At this time, I would like to turn the conference over to Darren Seed, Vice President of Investor Relations and Communications. Please go ahead, sir.

Thank you, and good afternoon, everyone. Welcome to our fourth quarter and year-end conference call for fiscal 2012 that is being held to coincide with the disclosure of our financial results earlier this afternoon. For those who haven't seen the release and financial statements yet, they can be found on Westport's website at www.westport.com. Speaking on behalf of the company will be Westport's Chief Executive Officer, David Demers and Westport's Chief Financial Officer, Bill Larkin. Attendance at this call is open to the public and to media, but for the sake of brevity, we are restricting questions to analysts. You are reminded that certain statements made in this conference call, and our responses to various questions may constitute forward-looking statements within the meaning of U.S. and applicable Canadian securities law, and such forward-looking statements are made based on our current expectations and involve certain risks and uncertainties. Actual results may differ materially from those projected in the forward-looking statements. Information contained in this conference call is subject to and qualified in its entirety by information contained in the company's public filings and except as required by applicable securities laws, we do not have any intention or obligation to update forward-looking information after this conference call. You are cautioned not to place undue reliance on any forward-looking statements. Now I will turn the call over to David Demers.

Thanks Darren. We've got a lot to talk about today and since we want to leave more time for questions Bill and I are going to be covering a lot of ground quickly. I wanted to kick off the discussion with a brief review of the year just concluded and the strategic position we find ourselves in and then to talk about how we’ve organized and reorganized for the next phase of our company's development. There’s been some big changes and this is also changing our financial presentation which we hope you will agree is going to make it easier to identify trends and see our growth and path to profitability. But just looking back, we talked about this in our last conference call in October, but 2012 was really a remarkable year for Westport. We really believe that we passed with [tipping] [ph] points and we are now in a new era in the market for natural gas as a transportation fuel. In every market segment and in every geographic area, we saw strong evidence that all of the necessary conditions for strong market penetration and growth are now in place or they soon will be. We at Westport have made great efforts over the past decade to promote and deliver, demonstrate some projects that prove that natural gas could be viable as a transportation fuel and in the process we've recruited many partners, we've developed a broad consensus that our approach which coordinates the investment in infrastructure, vehicle development and the market development could realistically deliver exciting returns to all the stakeholders including our customers. So as I said on our last call, we now see broad consensus that natural gas is going to take a pretty meaningful market share in the transportation markets we participate in. Pretty…

Sure, thanks David and good afternoon everyone. With the realignment of our internal teams that David reviewed, we have updated our segment reporting disclosures which provide more transparency into understanding each of our business segments. As you can see, we have changed the financial presentation at CWI. Going forward, we will be using the equity method of accounting for CWI which is consistent with how we account for our interests in our Weichai Westport JV, WWI. Disclosure of both CWI’s and WWI’s operations and financial position will be expanded and disclosed on the footnotes to our financial statements and are expected to provide more transparency and insight into their operating results and financial position. We expect great things from our joint ventures this year with new products launching throughout 2013. With this change in presentation, we've defined six business segments which David has discussed. Those are Applied Technologies, On Road Systems, New Markets and Off Road Systems, Corporate and Technology Investments and of course our two joint ventures CWI and WWI. Under this new management structure, we have more visibility in our businesses moving to product focused business segments and can measure their transition to mature profitable and cash generating businesses such as CWI and WWI. Now I'll walk through the consolidated operating results for the quarter ended December 31, 2012. For the quarter and under the new financial presentation, we recorded consolidated revenue of $39.9 million. This represents a decrease of $3 million or 7% compared with the prior year period due to lower revenues of $1.2 million from our on road business unit and $2 million decrease in service revenue. Our full year consolidated revenues were $155.6 million, up $54.8 million or 54% compared to the prior year period. Our consolidated gross margin for the quarter at December…

We will now begin the question-and-answer session. (Operator Instructions) The first question today comes from Laurence Alexander of Jefferies. Please go ahead.

I guess a couple of questions. First, could you speak a little bit about the levers that might affect your cash burn in 2013 and how you think about sort of the far ends of the barbell so to speak?

Sure. As we mentioned, we invested over 70 million in R&D and these are for programs that will generate result in future products and generate revenues and we think for ‘13 we will probably invest around 80 million. However, we have the opportunity to manage with that level of investment is by choosing which programs we want to invest in going forward. So with that said, right now we're probably looking around about 80 million for investments for 2013.

Okay, and then in terms of your sort of net cash burn across the business, that’s your net number or is that just your R&D number?

That’s just the R&D number. If you look at where adjusted EBITDA burn rate was for last year, it was about 66 million. As we mentioned, we got over 200 million in the bank and so that would say, we've got almost three years of cash just to cover our operations. However, we expect our business to continue to grow. Those businesses are going to generate cash flows and that’s going to continue to add to the [plotted] [ph] cash that we have. So we have sufficient cash and we can continue to manage that going forward by as I mentioned, for adjusting what we choose to invest in going forward.

And then two quick ones, I guess, first of all in terms of change in the accounting, would that tie to the renegotiated agreement with Cummins? And secondly on Applied Technologies the fairly weak growth that you have seen there, can you talk a little bit about the regional mix and what you are seeing by region?

Yeah. I’ll tackle the first one because that’s more of an accounting matter. The accounting rule and this has to with the VIE accounting, it's very, very complex and very judgemental. I think the actual accounting literature is 35 pages, but the interpretations at the [firms of issue] [ph] range from 450 to 500 pages. So in accordance with the guidance and all these interpretations we have to go through and analyse each and every one of our investments and that’s for CWI, that’s for Weichai, and if we have any future investments or create joint ventures, we have to look at those. So we spend a lot of time looking at internally; we’ve talked to our accountants; we’ve had discussions with regulators and based on those discussions and recent or updated interpretations of the guidance, we thought accounting for CWI in the equity method going forward is more appropriate. Also I like the expanded presentation now because I think it gives more clarity and transparency in terms of how each of these businesses are doing and how they are going to progress going forward.

Then the regional.

As we mention in there, yes they were flat year-over-year; as we mentioned, with the weakness over the Eurozone, plus in that business the majority of the revenues are denominated in euros and then when we sit there and consolidate our financial statements we have to go through and translate them, and the weakness in the euro and I think that impact year-over-year was roughly about 11%, so that has, that kind of [messed] [ph] somewhat with that growth. So if we did it on a constant dollar basis, the growth in the business which was much better and that’s also heavily concentrated in Europe however that business is looking to continue to diversify by trying to expand itself, network and penetrate markets in south American and Asia.

The next question comes from Rob Brown of Lake Street Capital Markets. Please go ahead.

Good afternoon, and thanks for the clarity on the kind of the rest of the business outside of CWI. I just wanted to get a sense on your new markets business right now and sort of doesn't generate revenue; when you see that kind of turning on revenue and I assume it’s the HPDI product into Weichai but what else or is that, what drives the revenue and when does it turn on?

Well, Rob that will be giving away all the good stuff, so you will have to wait and see. So the short answer don't give it away is we said we expect the business units to be positive cash flow next year, so we are not going to do that from a standing start, you will see revenue in that business unit this year, they got products in the portfolio some of which you probably haven't heard about yet, but that business has got lots of opportunity and we are quite excited about it. Of course you know the heart of that unit is the relationships with Weichai and Caterpillar. So you can draw your own conclusions from that. And of course we expect to see some HPDI component revenue as we sell through into that market; it’s very clear that the opportunity for LNG trucks in China is just spectacular, you know, we've just announced alliance with ENN for example in North America. Well, ENN is I think looking to build number four in China, I mean everybody is building out LNG infrastructure at a terrific pace and you can see the numbers. I think we are 9000 LNG trucks in the quarter alone in China, I mean this is mostly a trucking story and it’s mostly an LNG story and so this market is I think perfectly timed for the launch of the high performance HPDI trucks that we are talking about. The challenge there is going to be price and so we are working hard to get our supply chain geared up, but fortunately the market volumes are such that we are getting, we are getting lot of interest and I think we can see pretty bright prospects for that business in China with Weichai. But there are a whole range of other products and we will see revenue from the off-road business in 2013, it’s not something that’s way off in the future. I don't know, I hope that gave you something to work with Rob.

That helps, thank you, and I'll ask another one here that you can hopefully you can answer. Could you give us a little more color on these new OEM global relationships, are they in trucking, are they in these new markets and are they, what’s sort of the financial model that these relationships are they may be similar to sort of Volvo where there's some upfront R&D, how quickly can you look at that working?

Yeah, I hate to be mysterious -- well actually we don't hate to be mysterious. We love to be mysterious Rob, so but you know how these things go. These are relationships that have been underway for sometime. We are at the point now where we are in a commitment of resources for product development. The partners that we are working with will in their own time reveal their product plans and we are not going to tread on that. So we can't say much other than they are both HPDI oriented, so you should presume that's not small CNG vehicles. These are going to be large fuel consumption vehicles that would fit the HPDI profile, but beyond that we really can't say they are global products with we think very bright prospects. Business model, it’s I think pretty settled that what we've done with Volvo and Caterpillar is quite attractive to people; they want - everybody has seen more than just technology licensing opportunity here. We will see some continued product collaboration where a considerable amount of engineering work and product development work is going to be outsourced to Westport for which we will be compensated. We will have those expenses covered. That said we'll be investing with them in market creation and other activities on the side. I think you will see a lot more information on these relationships in 2013 as they talk to their customers in their own time.

Okay. But duration of when this sort of becomes a product and revenue for you, is that sort of that two or three years?

Revenue from services as you can imagine, much like we are with Volvo and the timetable for product launch we’ll have to leave to our partners to tell you.

The next question comes from Ann Duignan of JPMorgan. Please go ahead.

A couple of just quick questions; on [on-highway] [ph] business, you noted warranty costs, I think they were quite sizeable; could you just talk about what those warranty issues are, and is it HPDI, is it the fuel system that’s causing the warranty issues or is there something else should we be considering as that business gets expanded geographically?

Yeah, you are talking on-road units, let me, you know like anything with new products we're going to have some bugs and we've identified what these bugs are. Now we just got to go through and implement the fix and since we’ve identified the fix, quantified it, we have to make that accrual during this period. So those fixes are going to be rolled out over the next quarter or so.

We should be able to see an improvement and or our warranty adjustment on these fixes. It just takes a quarter or so just to work the fixes into the system.

Yeah, but I guess my question was what particularly was the warranty issue?

We haven't disclosed it in the past and I think we would have to consult with, we can follow up with you after Ann on this; we need to consult with Cummins if they are comfortable with us disclosing it. That’s all.

I am not talking about the CWI warranties. I am talking about the HPDI warranties?

Yeah, we got 750 for the quarter.

Right; and my question again was you know what were those warranty issues?

I don’t know; 750,000 for the quarter. You know, it's all the usual stuff that we're seeing on trucks; you know tanks, fuel pumps, fuel injectors, controls, a lot of our early customers as you know we entered in awkward applications so we are getting a lot of stuff shaken a bit which is always entertaining, so I don't see it as anything, there is nothing specific, there is nothing usual, it's changes to the product, which we are undertaking we think for obvious customer support reasons and so as we do those things and correct those errors that results in a large investment.

I think you touched on it is just where those trucks are being used that we’re seeing these type of issues, extremely hard conditions.

Yeah. There is always some surprise, we’re seeing all kinds of various things in field use much as we’ve seen with CWI, people are doing all kinds of interesting things with these vehicles that the engineers didn’t expect and that inevitably is breaking stuff. Early days for natural gas and we want to have customers believe that they are going to get good product and customer support. So we provide pretty good levels of warranty and beyond that we I think give fairly liberal policy adjustments on things in the field even if it's outside technically the warranty. But the net result of all this is that we are taking very prudent warranty accruals and as we fix the bugs of course that warranty accrual will get back into the P&L if we don't need it. I think that in the near-term we are going to see all kinds of challenges in the field. So I don't want to give anybody an illusion that this is being fixed, as we proliferate into new customers and new markets, we are seeing different behaviour in cold weather then in warm weather, and we are seeing different behaviour in altitude and then at sea levels. So we are going to see all kinds of field testing that result in corrections to the product and that’s where we take a good one warranty accrual.

Yeah. And I totally appreciate that, but I just wanted to make sure there was nothing fundamental, I have heard that that is going to be a problem later on. And just a real quick follow-up, in the China business, I always think about once you give away pricing, you can never get it back, can you talk about the opportunities for pricing in China or are we settled now with business that’s going very quickly, but the margins are structurally hurt going forward?

I mean, I will kick off and then let Bill do the hard stuff. I think the first point we want to make is that these joint ventures, Cummins Westport and Weichai Westport neither one of them today are really Westport content as we have talked about before, these are engine joint ventures that we entered into over several years ago with key partners and as much as anything they are creating market for us, but we aren’t really engine manufactures; that’s not Westport’s business model. The joint venture is a way for Cummins and for Weichai to get into the business at lower risk, because we were in there helping them with it. But the engine business is a pretty interesting place these days, as you know Ann and so Weichai is running the show on how to sell natural gas engine as much as they are in diesel engines and in China it’s becoming incredibly competitive. The natural gas business is doing really well and what the scale now - with these numbers it’s actually become a big business, so I think Weichai is very pleased with the opportunity. What we want to do now is follow-up by shipping Westport technology to those customers and we will be selling tanks and pumps and fuel injectors to the joint venture; we are going to be selling the fuel systems, we’ll introduce low pressure fuel systems and things like that. We are going to be selling other components to the joint venture and that business is going to be under our control and we will set our prices. So over the next year or two, you will start to see that business evolve and we are pretty confident that we can get decent margins and attractive pricing on the Westport business. How the joint ventures sell the total engines is going to be determined by that very competitive industry and of course by the overall pricing and portfolio strategies that Weichai and Cummins have. Not seeing that that's a business that we are going to repeat with our other partners that you know those were kind of one-time things that we are able to do in the market conditions over the past decade as we got things going but its not necessary with our new partners to demonstrate that there is a market for natural gas engines or to mitigate their risk on launching these products. So they are going to be doing that and you can go and quiz those guys on their own natural gas engines business and margins, how they do it. We just want to make sure that our product plans and our business is successful and we think we are in good shape to do that.

Yeah, I think we've talked about this before in our previous earnings call, and as you know, it’s extremely competitive over in China, and that has an impact on margins. We don't know but Weichai is the largest producer of natural gas in the trucking market. However, they are not the market leader for bus engines or for the bus markets. And six to nine months ago, the joint venture with Weichai made a conscious decision that they want to go after that comment because they wanted to be the market leader. Essentially they dropped their price on those engine sizes, typically the seven and 9-liter engines to go after that market. So it’s only with respect to a couple of engine platforms, they have multiple engine platforms, and from my understanding, they have not made any significant changes on the larger engine platforms, and those margins are still -- they are decent, they are not coming to see (indiscernible) but they are still pretty good. So we are in discussions with our joint venture partners and discussing what is the strategy, because this is a rapidly growing market. We want to capture as much as that potential market as possible and participate in that upside. So we are going to continue to work closely with our joint venture partner and make sure that we understand and we support their strategy. Another thing too is if you look at the operating expenses in the Weichai joint venture, they have been growing very rapidly year-over-year, but if you look at, they delivered over 22,000 engines this year which is over 160% year-over-year growth, and they are projecting very steep growth as well in 2013, and to support that growth, they have to make a lot of investments in those support activities to support that level of growth going forward. So, that's why you are starting to see a steep ramp in operating expenses because they are trying to stay one step ahead so they don't miss an opportunity in that market.

Great, yes I was just, you know the size of the revenues versus the profits that just kind of magnified the issue again, so I appreciate it, I'll follow-up offline with my other detailed questions. Thanks.

The next question comes from Jerry Revich of Goldman Sachs. Please go ahead.

Ravi Gill on for Jerry. On the business segment realignment, can you speak about the commonalities you hope to achieve between the HPDI business and the WiNG business; perhaps can you quantify any R&D or distribution expense reduction opportunities from bringing them together?

Yeah, I think that the primary thing we want to achieve with this is the geographic concentration on the market development activities and relationships with fuel providers on the sales force. There are obviously big differences in what you are selling in terms of Ford F-250 compared to a big truck with an HPDI engine, but we're launching range of new products into those markets over the next two years as you know. So we're trying to set ourselves up so that we have got what amounts to an on-road OEM support team on the market creation side, interacting with the infrastructure guys on a coordinated basis, because again load is load for fuel partners like ENN or Clean Energy or Shell. So that’s really what we're trying to do with these units is create some geographic and industry focus as well as really focus on specific OEM partners and their product lines, so that they can be successful. So the on-road business unit is really the heart of the HPDI trucking business, but they are also responsible for our Volvo car initiative. Why, well because Volvo car is literally across the parking lot from Volvo on the truck side and we've got people in that location and why don’t we operate both relationships from that one location? So, I think it makes sense. There is no easy way to align business units in a global business. There isn’t a perfect answer. I think this one is going to serve us well for the next few years at least as the market grows from where it is today to what we expect it to be in three to five years, and we're getting each group a specific mission that they can focus on. Hope [multiple speakers].

And on China, you had great bus engine sales in the quarter, but obviously the truck market is the more important long-term market for Westport. Your competitor Yuchai spoke about a slower expected ramp on the LNG infrastructure build out between cities, can you talk about how that impacts your near-term view particularly as you introduce the 12-liter HPDI product in that market?

I think that they are saying it's slower because it's been at such a torrid pace everybody in China is now complaining they are way overbuilt, so it's really quite funny that people are interpreting that as a slowdown. We agree that they are probably ahead of themselves in the market; China tends to do five times as much as anybody thinks it’s possible, and then they wait and see how it shapes out, so right now there are more stations built and more people jostling which is driving prices down than we see in North America. And so, I think that we are going to see a slowdown in LNG infrastructure investment in China, and that’s why we are seeing people like ENN come to North America where they tell us, this is such a nice open easy field. We might make some money. So, I think there is lots of LNG infrastructure, there is lots of LNG capacity and more coming, and so I don't see any issue with that in Asia. We have seen expanded interest now in other parts of the world, I think people are looking at the leadership in China and North America. The LNG is becoming a pretty hot topic in lots of industries, lots of chat recently about rail and mining, but it's just as lively in marine applications, other big equipment like construction and of course trucking. And so, I think we are going to see a pretty broad consensus around LNG as a fuel for high fuel consumption and that’s creating new life in the CNG business. So we are very busy on the infrastructure side everywhere. China as I say, it tends to be pretty volatile, its either all on or all off for a bit, but there is lots of capacity today and now we want to go fill that up with products.

The next question comes from Vishal Shah of Deutsche Bank. Please go ahead.

Can you just talk about your expectations and your guidance for the year for the new products in 12-liter and the ramp that you expect for the year for the new products?

I am looking at it Bill, we have never done, I shouldn't say we have never, rarely do a specific product guidance or give backlog numbers for what I think are obvious reasons. There has been some talk recently about 12 being late, but we are not sure where this is coming from, it’s on schedule, we are seeing as expected CWI is in production, I think April 1st early [multiple speakers], looking around which is exactly we have been saying for a while, full throttle production is early summer, I think July or August, we will see production volumes and we are going to have a great year with that product. We haven't given specific numbers, there are I know people speculating about the numbers. I think it’s very hotly anticipated product with every truck manufacturer keen get their hands on engine. So, our customers are going have a great year. With that said, we want to be disciplined about it. This is a new plant in Cummins', Jamestown, is producing this engine. They haven't produced natural gas engines before. So, we got a disciplined rollout procedure as you can imagine. These are new engines going into heavy duty cycle applications, so we want to be disciplined about training the fleets and training the dealers of these new applications which is why there's a ramp [Audio dip] but lots of customer enthusiasm, lot's of demand I think it’s going to do real well, and of course next year it could be another story, I think that the breaks are off for next year, and if we do well in 2013, that could be a great product for the industry next year. The only other comment I'd say is its clear that people are waiting for this product. There's been lots of enthusiasm. The early field trial trucks had been out there and they have been well received, so I think a lot of people are paused -- waiting to write a check for a truck with this new product, so we are looking at second half of the year being much busier than first half of the year because of that.

We have a number of Westport WiNG product launches that we are pretty proud of. Obviously the 250/350 is launching its first full year production. We've got the F-450 and 550 that's been unveiled with Westport WiNG at the NTEA Show earlier this week. So, we also have a couple of technology and product displays coming up on March 19 at our Louisville, Kentucky event. I'd encourage anyone to come, but there's also the Weichai 12-liter product with Westport HPDI that we expect to get into some customer hand later this year, and as David mentioned on prudent rollout and development schedule just like Cummins’ Westport did with their 12-liter, we don't expect to do ours any differently and get’s [your testing] (ph). I don't know, does that answer your question?

Yeah, I know that's very helpful. Thank you. And just one other follow-up, you know I appreciate the color on the warranty expense, but should we assume that given some of the new product launches and a busy schedule for the next couple of years, we should expect similar levels of warranty charges for the next couple of quarters. Thank you.

They are not going to be warranty charges. The margins, whenever we launch new products, they are very similar to 9-liter back in 2007. They are going to be heavily burdened with warranty, so it’s going to be a part of the cost of sales and that's going to drive down the margins, and over several quarters it’s going to be shooting bugs as issues or problems arise, and we will continue to fix those and then as we fix some, we start seeing improvements in reliability and those bugs falling off. We will start reducing that warranty piece of the cost of goods sold and that's going to drive an increase in margins. However whenever there is an adjustment to whatever that rate’s going to be, it’s very process oriented, and in terms of the data used and how they calculate their warranty is a very detailed complex calculation. So when there's any changes in there, that's where you get these kind of warranty charges on I'd say more mature-type products.

Yeah, I will chime in a second on Bill’s comment on warranty, unfortunately it is something that is very technical and it’s prescribed and it really isn't very forgiving of changes in use for the products. So, for example when CWI launched its 8.9-liter engine, it was being targeted at buses with a little bit of refuse truck, and so that establishes a warranty profile in over a few quarters that we stick with. We always are quite prudent when we launch the product, but that is -- we establish the baseline in those early applications, and then what happened with the 8.9 is we started to see sales in completely different applications like trucking and which of course screws up the warranty profile until you establish a base. It’s difficult to change your warranty accrual rates on the fly until you get a good baseline, and particularly when we are shooting bugs as we go to that baseline [stutters] (ph) up and down, and that’s why you get adjustments. So, it's more with market success in new applications that you are breaking that traditional take at good warranty accrual, and then watch your warranty accrual rates drop with maturity. So, same thing on the 12. I don’t expect we're going to see lots of warranty adjustments when we launch the 12, but we are going to launch with a big warranty accrual which will result in low margins. Similarly, on the HPDI products, what we're seeing the adjustments for is unanticipated applications like off road hauling in the frac sites and things like that. That’s not the profile that we established at the ports in LA where we had some pretty civilized trucks running around southern California. So, warranty is a fairly technical issue. It's not really very easy to figure out exactly what's going on just by looking at the warranty rates. Hope that all makes sense. Now the other point we want to make on warranty is that of course this is cash that just sits on the balance sheet. It doesn’t necessarily mean it's being used. It means that we’ve got cash put away for what the current expense run rate looks like if we have to apply to the entire vehicle population, but of course the engineers’ job is to make sure we don’t burn that cash and bring it back into balance sheet. So it's a constantly fluctuating game where we’ve got a pile of cash sitting out there waiting for customer claim activity.

The next question comes from Alex Potter of Piper Jaffray. Please go ahead.

I was wondering, first of all, if you could chat a little bit. I was listening to the Clean Energy call here, I guess a couple of weeks ago, and they make the claim effectively that a lack of infrastructure in North America can no longer be used as an excuse for a lack of heavy-duty truck sales in the natural gas context. So, I was wondering if given that statement, whether A, you agree, and B, if you do agree at what point you think the 15-liter HPDI engine starts ramping?

Two different questions. I don't think it's easy enough to just say infrastructure is done, much as we appreciate Clean Energy’s bravery in getting over and building these stations, there really are still just a few dozen LNG stations covering the entire inner states network. So, yeah, it's great it's much better than it was, but it is not by any means going to satisfy every customer, and a lot of the customers on the 15-liter just to get specific, all the 15 customers aren’t stopping at public truck stops, they are looking for stations that are their control in their yard. So, yes, there is a little more nuance situation let’s say on infrastructure and product mapping. I think that Clean Energy network is going to be very appropriate for trucks with the new CWI 12-liter. The fleet profile and the activity profile we are expecting should feed straight into that network, but at the same time to get a full infrastructure network in North America, we are going to need tens of thousands of fuel stations, not a couple of dozen. So, this will get built out over time, there is all kinds of economic argument to build a station if you have got even 20 or 30 trucks servicing that station and building the load. So we are going to see the infrastructure built. Today, lots more infrastructure than there was, and it's not fully utilized, so we are going to do our best to fill those stations up with truck load for sure.

I think in addition what is going to help is new product launches such as the 12 liter in a number of OEMs this year in addition to our expected Volvo or the expected Volvo product launch next year with the 13-liter engine?

I try to allude it in my speech, but now you have given me an open door to go and rant a bit more, the infrastructure barrier when customers say we can't buy the truck because we don't have the truck stop yet, well, as you know in any sales situation, that is just the first objection, so now we can go in and say, okay, we have got stations, buy the trucks, and they go well, we can't get the truck we want, we want a different model of truck. And so, it’s our job to make sure they can go get the preferred brand, and as we launch new products and new platforms over the next two years, that becomes a lot easier to solve to it. I shouldn’t say it’s an excuse, it’s a legitimate problem for fleets that have built their operation around a specific configuration of vehicles, and we simply can't match every possible configuration of every possible brand of vehicle and with every engine combination that the diesel industry can offer today. So, we are trying to prioritize that, there is going to be a whole bunch of new product this year with the 12 liter with a bunch of new variances, and as we launch other products with people like Volvo over the next two years, that will get filled out, and then we get into the real issue which is the economics, what’s the price of the fuel, what is the price of the truck, how does this fit in with my competitive strategy for my fleet. So, lots of issues to be resolved, I think what we are hoping you can take away from what we have been saying over the last few quarters is that these issues are now getting solved for very large part of the transportation market, and we are going to see a pretty significant market penetration. We are convinced because we have sold those conditions for a good subset of the market, and when we got more and more of it solved, certainly it is our ambition to eat away until we've got a 100% market penetration which will take some time, but it’s not an unrealistic ambition, we don't think.

Okay, great and then last question here, of the 12-liter CWI spark-ignited engines that are out there now for trial purposes out on the road, what percentage of those roughly are CNG and what percent is LNG? Thanks.

Good question actually, I'm not sure I've got the answer. I would be guessing 50-50, but we will have to get back to you on that. It was actually yeah quite a bit of interest in CNG as you could imagine there has been some good experience, it really depends on your duty cycle and how far you are going, so for the regional haulers, particularly the ones that have got 8.9-liter engines in CNG vehicles, they are quite happy to upsize and continue to use some CNG packaging. I think over time as we see more long distance people will migrate to LNG and of course the LNG business, you know, the infrastructure as we talked about is getting built out which is going to make that option a lot more attractive to people which is why we have developed this new LNG system, you know, the tank-pump combination that we announced last fall. I think that's going to make things a lot easier for people adopting LNG with these spark-ignited engines and give people a lot more efficiency on the fuel station, configuration so that they can continue to use cold fuel. So all of those factors I think are going to see LNG percentages in that fleet application rise as people get more comfortable with it. But typically, the early customers for this engine have been people who were CNG customers with the 8.9’s, and so they've got the infrastructure built up that way. So I'm not sure we can give you any real conclusions on what that percentage share was in the field trials because they may not be representative of future market, but ask us in a couple of years, and maybe we will give you some good data.

The next question comes from David Galison of CIBC World Markets. Please go ahead.

So just a quick question on the two GM development programs, just how are things progressing there?

Good.

Is there any update that you can give on them or…?

I'm afraid not, but you can call GM and see what they tell you. Do you expect to bring some of those, I am sorry David, they've been in development now for one of them just over a year and a half and one for just about seven or eight months and the programs are going well. I think the next step is working with GM to decide on when and if there's a commercialization move there and that's what something we would have to work on with GM and be able to disclose at that time.

Then just looking at your -- you gave some guidance for R&D for 2013, can you give a little bit of guidance on how we should think of sales and marketing and G&A over the year as well?

Yeah, actually I think it’s going to be fairly consistent with what we had last year, you know probably on a combined basis, you are probably looking at about $20 million a quarter for both G&A and sales and marketing combined. That can move back and forth between the two buckets, but in total the two are about $29 million a quarter.

And then just looking at the F-450 and F-550 WiNG, would there be similar ASPs to the 250/350, and would you be expecting similar demand from them or how should we think about that?

I believe the selling prices is going to be without the cylinder.

Depending upon their packaging.

Yeah, depending on the packaging because each and every configuration is going to be little bit different on these. They are not going to be very standard, and so there is going to be different packaging and tank sizes. And so depending on that configuration, whether it's the (inaudible) body or with the different body, that ASP is going to go up or down. In terms of volume, what we're finding is the commercial. I noticed we're at the NTEA Show with F450s and 550s earlier this week, David. There is quite a bit more demand just simply because of the commercial application, whether it's coaches running around airports or fire trucks or hydro -- commercial vehicles. There is a great deal of more applications from the 450/550 than just a standard 250/350 work vehicles. So we do expect to -- I think internally, we have great expectations on the WiNG sales for the 450 and 550.

And then just a final question, just looking back at the Weichai, we talked about the operating expenses ramping up. Is it trying to further penetrate the market there? Should we look at a continuation of increased operating expenses as revenues continue to ramp up or are they at a level that they think they need to continue to build out?

I mean, I will check if off and Bill will elaborate again. I think we have to just pause a bit and say, this was a hugely unanticipated growth rate. We have been very bullish in China, but we've been marveling, as you know, you have, you followed us for a bit. We said wow, 100% a year, that’s pretty tough. And even in China that means the management teams are scrambling and moving facilities and adding people and doing stuff, and see expenses are not rising as fast as revenue. So we are getting some good leverage, but we do need to keep upping our expectations, and this year was much better than planned, just no other word for it. And we are seeing a lot of it in fourth quarter. So, I would not say that it’s as efficient as it needs to be or will be once things settle down and we get to a reasonable growth rate of may be only 40% or 50% a year, or whatever that might be. So yeah, they are scrambling, we are moving facilities, we are changing suppliers, there is a lot of stuff happening in any business that is growing like that. We are quite comfortable that the product plan looks good. There will be product refreshes, all kinds of changes and developments, competitive position is strong, and the opportunity for improved margins is there. So, I think the joint venture has bright prospects, and we will continue to support it. But anytime you see someone in the automotive business growing like this, and this is pretty big scale now, it's not just a 100% growth on a few million dollars. We are at a quarter billion dollar revenue run rate in US dollars which is a pretty sizable engine company now.

The next question comes from Matthew Blair of Macquarie. Please go ahead.

It looks like there has been some significant interest in natural gas from the railroad community, could you provide an update on your activities in this area and is this partnership with Caterpillar or should we expect new products still about five years down the road or are you ramping up your activities here and may be could bring a product a little bit sooner? And then also, I guess the competing technology in the space is dual fuel, could you talk about how your HPDI technology stacks up against dual fuel? Thanks.

Well, I could go on for a bit on that one, I mean the first answer is no, we are going to have test locomotive, this is no secret. Test locomotive running HPDI with CN Rail coming up, it’s not years old, we are getting ready now, that’s under the [STCC] (ph) program that’s been announced for quite a bit. That is in partnership with Progress Rail under Caterpillar, so it is going to be a real main line test, not a trail, and the rail business is gearing up very rapidly, yeah its quite true, we have been very encouraged by the response in the rail business over the last 18, 24 months, as we have been working up these demos. So, I think people are moving very quickly to say we want to see commercial product, we want a complete system, we want the answers solved, and we want to roll this out as quickly as possible once we see that it’s viable. So this is not proof of concept or demonstration, it really is working out the bugs in the overall strategic plan which is to move to this lower cost fuel as quickly as possible. So lots of work on fuel infrastructure and distribution models. I think the industry is pretty much settled now on a tender car fueling concept and the advantage of a tender car rather than on locomotive fueling is we can really enhance range, so we get much longer range on LNG then you have the diesel locomotives, we can fuel multiple locomotives from a tender car, tender car can be much easier to sell the fuel to distribution channels too because we can deliver full LNG rail cars to where the locomotors need to fuel rather than have to build fuel…

And then also on the revenue guidance Bill, it looks like you provided 2013 revenue guidance both with CWI and without CWI, and I guess if you take the difference there, it implies an incremental 2000 to 2400 engine sales for CWI in 2013, and I'm just wondering if this seems a little conservative considering that in 2012 CWI sold an incremental 1300 engines and this year you will obviously have the 12-liter launch. So should we think about this 12-liter as being another 1000 engines this year to your existing CWI product lineup. Thanks.

I am afraid we are not going to be able to provide any specific details on the mix of engines in that guidance. I think the year-over-year growth is very good, and I think it’s still to be determined and still have to launch the 12-liter product, and so it would be nice to think of the guidance as conservative, but I think time will only tell as we launch the 12-liter, get through the initial production, and then get geared up for full production. So there's a lot of variability in there, and so if you want to look at us conservative, I think there is…

We all hope you are right.

Yes.

I mean the other factor I will rescue you a bit on this one Bill, we have said commercial production second half and again it’s no big secret that we are targeting August deliveries for commercial launch. You know that doesn't give us much of the year to really post spectacular numbers. If we post the numbers that we are talking about that CWI is going to have a great year and that’s the plan that we are telling you about. Obviously there's capacity to do more, obviously if the demand is there, we will be happy to take the order. But there is a supply chain and the supply chain has to be geared up. It's a very significant effort behind getting these trucks and all the suppliers ready, so lets’ hope that you are right and let’s hope that we have a fabulous 2014 with that product.

That is all the time we have left for questions on today’s call. I will now turn the call back over to Mr. Seed for concluding comments.

Thank you everyone for attending, and we’ look forward to seeing you in early May for our Q1 2013 conference call.