SecProbe.io

CORRESP
1
filename1.htm

October 29, 2012

Mr. Martin James
 Senior Assistant Chief Accountant
 Division of Corporation Finance
 U.S. Securities and Exchange Commission
 100 F Street, N.E.
 Washington, D.C. 20549

Re:                             Westport Innovations Inc.

Amendment No. 1 to Form 40-F for

the Nine months Ended December 31, 2011

Filed September 25, 2012

Response Letter Dated September 25, 2012

File No. 1-34152

Dear Mr. James:

I am writing in response to your letter dated September 28, 2012 setting forth comments regarding our Amended No. 1 to Form 40-F for the nine months ended December 31, 2011 (the “2011 Form 40-F/A”) of Westport Innovations Inc. (“Westport” or the “Company”) and our response letter dated September 25, 2012.

To facilitate your consideration of Westport’s response, we have included below the comments and have provided Westport’s response immediately following.

Amendment No. 1 to Form 40-F for the Nine Months Ended December 31, 2011

Exhibit 99.2

Note 21.  Investment in Joint Ventures, (a) Cummins Westport Inc., page 37

1.                                      Further to your response to prior comment 2, please explain how you evaluated the impact of adopting ASU 2009-17.  In your response, explain how you determined that the company is the primary beneficiary of CWI.  We note that as a result of the adoption of ASU 2009-17, you are now required to perform the assessment of whether the Company is the primary beneficiary of CWI on an ongoing basis.  Please discuss how you considered ASC 810-10-25-38-A to 38-G.

Response:

With respect to the adoption of ASU 2009-17, we performed the assessment of whether the Company is the primary beneficiary of CWI on an ongoing basis as per our analysis below:

·                  As detailed in our letter to the SEC dated February 25, 2010 in response to prior comment 2, we completed a formal VIE assessment on January 1, 2004, the effective date of the First Amended and Restated Joint Venture Agreement of CWI (“First Amended and Restated JVA”) and concluded that CWI was a VIE and Westport was the primary beneficiary.

·                  For Westport, ASU 2009-17 was effective for our fiscal year ended March 31, 2011 (beginning April 1, 2010) commencing with the first quarter ended June 30, 2010.

Westport Innovations Inc.

October 29, 2012

Page 2

·                  Upon adoption of ASU 2009-17 on April 1, 2010, we re-evaluated whether CWI was still a VIE as of the date Westport first became involved in accordance with the guidance in ASC 810-10-65-2(f).  This included an evaluation of whether any of the Variable Interest Model’s scope exceptions were applicable.  We concluded that our historical conclusion that CWI was a VIE continued to apply after the adoption of ASU 2009-17.  This conclusion was primarily based on that Westport had the sole responsibility for reimbursing any financial losses incurred by CWI up to and including December 31, 2004.  Westport would have received the entire benefit of any financial profits of CWI up to and including December 31, 2004.  Also, Westport’s and Cummins’ interests in CWI are equity ownership interests, the value of which changes with the fair value of CWI’s net assets.

·                  In addition, also in accordance with ASC 810-10-65-2(f) we re-evaluated whether Westport continued to be the primary beneficiary of CWI.  This re-evaluation was made based on the criteria applicable after application of ASU 2009-17.  We concluded that our historical conclusion that Westport was the primary beneficiary of CWI continued to apply after the adoption of ASU 2009-17.

·                  Details of our qualitative analysis with respect to how we considered ASC 810-10-25-38-A to 38-G to the assessment as to whether Westport is the primary beneficiary are provided in the table included in Appendix A.

·                  For your information, for periods subsequent to the date of adoption of ASC 2009-17, we have continued to consider whether any events have occurred which would give rise to a subsequent re-evaluation of the primary beneficiary definition, including a change to the conclusion that Westport is the primary beneficiary.   This qualitative analysis considers CWI’s “purpose and design including the risks that the entity was designed to create and pass through to its variable interest holders.”  We also considered the activities that impact CWI’s economic performance and determined whether Westport continues to have the power to direct those activities.

Conclusion: As indicated in Appendix A, there is no change to the initial conclusion that Westport is the primary beneficiary of CWI and continues to consolidate CWI accordingly.

2.                                      Further, with respect to the Second Amended and Restated Joint Venture Agreement dated February 20, 2012, please discuss why you believe that the agreement does not include changes to characteristics or adequacy of the legal entity’s equity investment at risk.  Compare the new agreement to the old agreement.  Refer to ASC 810-10-35-4(a).

Response:

The JVA was amended to provide for, among other things, clarification concerning the scope of products within CWI.  In addition, Cummins and Westport also revised certain economic terms of the JVA.  Please see our analysis in the Appendix B on why we believe that the Second Amended and Restated Joint Venture Agreement of CWI (“Second Amended and Restated JVA”) with Cummins Inc. (“Cummins”) effective February 19, 2012 does not include changes to characteristics or adequacy of the legal entity’s equity investment at risk by comparing the new to the old agreement in accordance with ASC 810-10-35-4(a).

In accordance with ASC 810-10-35-4(a), we evaluated the adequacy of the entity’s equity investment at risk, as defined in ASC 810-10-15-14(a) immediately before and immediately after the change in the entity’s governing documents or contractual arrangements occurs.

Conclusion:  As indicated in Appendix B, the Second Amended and Restated JVA did not cause any change the characteristics or adequacy of CWI’s equity investment at risk.  Therefore, a reconsideration event has not occurred.

Westport Innovations Inc.

October 29, 2012

Page 3

3.                                      With respect to your response to prior comment 3, please tell us how you considered the requirements of ASC 810-10-45-25.

Response:

Westport had included CWI’s condensed balance sheet in Note 21 (a) — Investment in Joint Ventures — Cummins Westport Inc.  In future filings commencing with the Consolidated Financial Statements, for the three and nine months ended September 30, 2012 and 2011, Westport will parenthetically disclose on the Consolidated Balance Sheet, “the assets of a consolidated VIE that can be used only to settle obligations of the consolidated VIEs” and “liabilities of a consolidated VIE for which creditors (or beneficial interest holders) do not have recourse to the general credit of the primary beneficiary” as per ASC 810-10-45-25 for the Company’s consolidated VIEs.

For example, future filing disclosure will provide the following disclosure on the face of the consolidated balance sheet after the line classification for each relevant asset or liability:

eg. “Cash and cash equivalent ($X,XXX and $X,XXX attributable to our VIEs)”

Note 23.  Segment Information, page 40

4.                                      Further to your response to prior comment 4 and the changes made to Exhibit 99.2 in Amendment No. 1 to your Form 40-F, please revise future filings to also revise the line item title for segment net operating profit or loss in the segment table to more accurately reflect its components.

Response:

In future filings, commencing with our interim financial statements for the three and nine months ended September 30, 2012, we will revise the description of the line item for segment net operating profit or loss in the segment table to state “Net operating income (loss) before depreciation and amortization.”

5.                                      With reference to your response to prior comment 6, we note that you believe it is not practical to disclose material revenues from external customers attributed to individual foreign countries.  As required by ASC 280-10-50-41, in future filings please disclose, to the extent applicable, that providing the geographic information is impracticable.

Response:

In future filings, commencing with our interim financial statements for the three and nine months ended September 30, 2012, we will disclose that geographical information by country is impracticable.  The future disclosure will state “It is impracticable for the Company to provide geographical revenue information by individual countries, however it is practicable to provide by geographical regions.”

6.                                      We note that your certifications continue to be dated February 29, 2012 in Amendment No. 1 to your Form 40-F which was filed September 25, 2012.  Please amend your Form 40-F, as required by Rule 12B-15, to include revised currently dated certifications by each principal executive officer and the principal financial officer of the registrant.

Response:

To comply with Rule 12-B-15, we are concurrently filing Amendment No. 2 to our December 31, 2011 Form 40-F to reflect currently dated certifications.

Westport Innovations Inc.

October 29, 2012

Page 4

Please do not hesitate to contact the undersigned or Ric Leong, Westport’s Director, Accounting, at 604-718-1600 or RLeong@westport.com, if you should have any questions or concerns.

Sincerely,

/s/   William Larkin

William Larkin

Chief Financial Officer

Westport Innovations Inc.

cc:

Gary   Newberry

Kate   Tillan

(U.S.   Securities and Exchange Commission)

Eva   Davis

(Kirkland &   Ellis LLP)

Anthony   Lindsay

(KPMG   LLP)

David   R. Demers

(Westport   Innovations Inc.)

Suite 101 – 1750 West 75th Avenue  ::  Vancouver, B.C.  ::  Canada  V6P 6G2  ::  t: 604-718-2000  f: 604-718-2001  ::  www.westport.com

Westport Innovations Inc.

October 29, 2012

Page 5

APPENDIX A

Guidance

Original and First Amended and
   Restated Joint Venture Agreement

Second Amended and Restated
   Joint Venture Agreement

38-A:  A reporting entity with a variable interest   in a VIE shall assess whether the reporting entity has a controlling   financial interest in the VIE and, thus, is the VIE’s primary beneficiary.   This shall include an assessment of the characteristics of the reporting   entity’s variable interest(s) and other involvements (including involvement   of related parties and de facto agents), if any, in the VIE, as well as the   involvement of other variable interest holders. Paragraph 810-10-25-43   provides guidance on related parties and de facto agents. Additionally, the   assessment shall consider the VIE’s purpose and design, including the risks   that the VIE was designed to create and pass through to its variable interest   holders. A reporting entity shall be deemed to have a controlling financial   interest in a VIE if it has both of the following characteristics:

a.  The power to direct the activities of a VIE that most   significantly impact the VIE’s economic performance

b.  The obligation to absorb losses of the VIE that could   potentially be significant to the VIE or the right to receive benefits from   the VIE that could potentially be significant to the VIE. The quantitative   approach described in the definitions of the terms expected losses, expected   residual returns, and expected variability is not required and shall not be   the sole determinant as to whether a reporting entity has these obligations   or rights.

Only   one reporting entity, if any, is expected to be identified as the primary   beneficiary of a VIE. Although more than one reporting entity could have the   characteristic in (b) of this paragraph, only one reporting entity if any,   will have the power to direct the activities of a VIE that most significantly   impact the VIE’s economic performance.

Please   refer to analysis for 38-B to G below.

Please   refer to analysis for 38-B to G below.

Westport Innovations Inc.

October 29, 2012

Page 6

Appendix A Continued

38-B:  A reporting entity must identify which   activities most significantly impact the VIE’s economic performance and   determine whether it has the power to direct those activities. A reporting   entity’s ability to direct the activities of an entity when circumstances   arise or events happen constitutes power if that ability relates to the   activities that most significantly impact the economic performance of the   VIE. A reporting entity does not have to exercise its power in order to have   power to direct the activities of a VIE.

The   activities that would most significantly impact CWI’s economic performance   have been identified as follows:

·      Product development and intellectual property (“IP”)

·      Sales   and marketing and market penetration

·      Manufacturing   process

·      Distribution   channel

Westport   has the power to direct IP development related activities and sales and   marketing activities while Cummins has power to direct manufacturing and   distribution.

The   Intellectual Property contributed by Westport generated the main platform   which included the spark-ignited technology and software to run Cummins   engines on natural gas technology.    Specifically, Westport contributed its expertise and technical   know-how in the control module and software in order to allow engines to run   on natural gas.  Therefore, Westport’s   IP was critical to the successful development of the natural gas engines.

Additionally,   the primary driver of revenue growth is the sales and marketing and new   market penetration.  Westport is   heavily involved in the market development, customer growth strategies and   sales initiatives.  Cummins’   involvement with the sales and marketing function consists of routine   invoicing and management of accounts receivable collections.  Market penetration in the natural gas   engines market is possible because

The   Second Amended and Restated JVA did not make substantive revisions to the   activities that each JV partner is responsible for.  Therefore, Westport still has the power to   direct the activities of CWI that most significantly impact CWI’s economic   performance.

Westport Innovations Inc.

October 29, 2012

Page 7

Appendix A Continued

of   Westport’s IP platform and Cummins engines.

While   Westport and Cummins have equal representation on the Board of Directors, CWI   makes up the majority of Westport’s revenue and profitability while it is a   much less significant part of Cummins global business.  As such, Westport’s executive team is   actively involved in CWI’s business plan and strategy while Cummins plays   less of an active role.  Westport is   also responsible for the management of the CWI treasury function and makes   decisions on reinvestment of excess cash balances.

Therefore,   based on the analysis above, Westport has the power to direct the activities   of CWI that most significantly impact CWI’s economic performance.

38-C:  A reporting entity’s determination of   whether it has the power to direct the activities of a VIE that most   significantly impact the VIE’s economic performance shall not be affected by   the existence of kick-out rights or participating rights unless a single   reporting entity (including its related parties and de facto agents) has the   unilateral ability to exercise those kick-out rights or participating rights.   A single reporting entity (including its related parties and de facto agents)   that has the unilateral ability to exercise kick-out rights or participating   rights may be the party with the power to direct the activities of a variable   interest entity that most significantly impact the