As filed with the Securities and Exchange Commission on November 14, 2014

Registration No. 333-198497

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

Amendment No. 3

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

ENOVATION CONTROLS, INC.

(Exact name of registrant as specified in its charter)

Delaware

3823

47-1251427

(State or Other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

5311 South 122^ndEast Avenue

Tulsa, Oklahoma 74146

(918) 317-4100

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Patrick W. Cavanagh

President and Chief Executive Officer

Enovation Controls, Inc.

5311 South 122^nd East Avenue

Tulsa, Oklahoma 74146

(918) 317-4241

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

(Copies of all communications, including communications sent to agent for service)

Daryl L. Lansdale, Jr.

Gary H. McDaniel

Fulbright & Jaworski LLP

(a member of Norton Rose Fulbright)

300 Convent Street, Suite 2100

San Antonio, Texas 78205-3792

(210) 224-5575

Richard D. Truesdell, Jr.

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

(212) 450-4674

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)

Issued November 14, 2014

Class A Shares

LOGO

CLASS A COMMON STOCK

Enovation Controls, Inc. is offering shares of its Class A common stock. This is our initial public offering and no public market exists for our shares. We anticipate that the initial public offering price will be between $ and $ per share.

Immediately following the offering, the holders of our Class A common stock will collectively own 100% of the economic interests in Enovation Controls, Inc. and will have % of the voting power of Enovation Controls, Inc. The current owners of Enovation Controls, LLC will have the remaining % of the voting power of Enovation Controls, Inc. through ownership of 100% of the outstanding shares of our Class B common stock. We will be a holding company and our sole asset will be approximately % of the common units of Enovation Controls, LLC. The current owners of Enovation Controls, LLC will own the remaining % of the common units of Enovation Controls, LLC.

Our Class A common stock has been approved for listing on the New York Stock Exchange under the symbol “ENOV.”

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and, as such, may elect to comply with certain reduced reporting requirements after this offering. See “Prospectus Summary—Emerging Growth Company Status.”

Investing in our Class A common stock involves risks. See “Risk Factors” beginning on page 24.

PRICE $ A SHARE

Price to

Public

Underwriting
Discounts

and

Commissions

Proceeds, Before
Expenses, to Us⁽¹⁾

Per share

Total

(1)

We have agreed to reimburse the underwriters for certain FINRA-related expenses. See “Underwriters.”

We have granted the underwriters the right to purchase up to an additional shares of Class A common stock to cover overallotments at the initial public offering price less the underwriting discount.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of Class A common stock to purchasers on , 2014.


MORGAN STANLEY						UBS INVESTMENT BANK


PIPER JAFFRAY		BAIRD		WILLIAM BLAIR		RAYMOND JAMES

, 2014

LOGO

TABLE OF CONTENTS


	Page
ABOUT THIS PROSPECTUS		i
PROSPECTUS SUMMARY		1
RISK FACTORS		24
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		52
THE TRANSACTIONS		54
USE OF PROCEEDS		67
DIVIDEND POLICY		68
CAPITALIZATION		69
DILUTION		70
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION		72
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA		82
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		86
BUSINESS		110
MANAGEMENT		135


	Page
EXECUTIVE COMPENSATION		141
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		153
PRINCIPAL STOCKHOLDERS		162
DESCRIPTION OF CERTAIN INDEBTEDNESS		164
DESCRIPTION OF CAPITAL STOCK		166
SHARES ELIGIBLE FOR FUTURE SALE		173
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES		175
UNDERWRITERS		180
LEGAL MATTERS		184
EXPERTS		185
WHERE YOU CAN FIND MORE INFORMATION		186
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

We are responsible for the information contained in this prospectus and in any related free-writing prospectus we may prepare or authorize to be delivered to you. We and the underwriters have not authorized anyone to give you any other information, and we and the underwriters take no responsibility for any other information that others may give you. We are not, and the underwriters are not, making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

Until , 2014, all dealers that buy, sell, or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

ABOUT THIS PROSPECTUS

Non-GAAP Financial Measures

The SEC has adopted rules to regulate the use in filings with the SEC and in public disclosures of “non-GAAP financial measures,” such as Adjusted EBITDA. These measures are derived on the basis of methodologies other than in accordance with GAAP.

We have included one non-GAAP financial measure in this prospectus, Adjusted EBITDA. See “Prospectus Summary—Summary Historical and Pro Forma Consolidated Financial Data” for a description of the calculation of Adjusted EBITDA, as well as a reconciliation of our Adjusted EBITDA to net income (loss).

Industry and Market Data and Forecasts

This prospectus includes industry and market data and forecasts that we obtained from industry publications and surveys, public filings, and internal company sources. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of such information. We have not independently verified any of the data from third-party sources, nor have we ascertained the underlying economic assumptions relied upon therein. In other cases, such as statements as to our market position and ranking, such information is based on estimates made by our management, based on their industry and market knowledge and information from third-party sources. In addition, projections, assumptions, and estimates of the future performance of the industry in which we operate and our future performance are subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” Those and other factors could cause results to differ materially from those expressed in the estimates made in third-party sources and by us.

Trademarks and Service Marks

We own or have rights to trademarks, service marks, or trade names that we use in connection with the operation of our business, including the Enovation Controls logo, “EControls^®,” “Murphy^®,” and “EICS^™.” Solely for convenience, trademarks, and trade names referred to in this prospectus may appear without the ^® or ^™ symbols. Other trademarks, service marks, and trade names appearing in this prospectus are the property of their respective owners. We do not intend our use or display of other parties’ trademarks, trade names, or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

Financial Statement Presentation

This prospectus includes certain selected historical consolidated financial data for Enovation Controls, LLC and its subsidiaries. Enovation Controls, LLC is our predecessor for financial reporting purposes. Enovation Controls, Inc. will be the financial reporting entity following this offering. The consolidated statement of operations data for each of the years in the three-year period ended December 31, 2013 and the consolidated balance sheet data as of December 31, 2013 and 2012 included in this prospectus are derived from the audited consolidated financial statements of Enovation Controls, LLC and its subsidiaries contained herein. The consolidated statement of operations data for the years ended December 31, 2010 and 2009 and the consolidated balance sheet data as of December 31, 2011, 2010, and 2009, have been derived from Enovation Controls, LLC’s audited consolidated financial statements not included in this prospectus. The consolidated statement of operations data for the nine months ended September 30, 2014 and 2013 and the consolidated balance sheet data as of September 30, 2014 are derived from the unaudited consolidated financial statements of Enovation Controls, LLC and its subsidiaries contained herein. In the opinion of our management, such unaudited financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position and results of operations as of those dates and for those periods. Historical results are not necessarily indicative of results that may be expected for any future period, and the results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.

This prospectus also includes an unaudited pro forma condensed consolidated balance sheet as of September 30, 2014 and unaudited pro forma condensed consolidated statements of operations for the nine month period ended September 30, 2014 and the year ended December 31, 2013. The unaudited pro forma condensed consolidated statements of operations have been prepared to give pro forma effect to (i) the Transactions as described in “The Transactions,” which includes the reorganization transactions and the sale of shares in this offering (excluding shares issuable upon exercise of the underwriters’ option to purchase additional shares) and the application of the net proceeds from this offering as described in “Use of Proceeds,” (ii) the tax receivable agreement we will enter into with the existing Common Unitholders, (iii) a one-time special distribution of $60.0 million to Murphy Group and EControls Group and borrowings of $85.5 million under our senior credit facility to pay this distribution and repay existing debt, which occurred on June 30, 2014, (iv) the

sale of certain assets used to produce wire harnesses to a company jointly owned by Kennon Guglielmo, our Chief Technology Officer, and Frank W. Murphy III, our Executive Chairman, on September 15, 2014, and (v) the purchase of our San Antonio facility on July 25, 2014, from a third-party entity by a company jointly owned by Messrs. Guglielmo and Murphy, in each case as if they had been completed as of January 1, 2013. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2014 has been prepared to give pro forma effect to (i) and (ii) above as if each had been completed as of September 30, 2014. As a result of the purchase described in the foregoing item (v), the company jointly owned by Messrs. Guglielmo and Murphy must be accounted for as a variable interest entity, which will result in the cost of the San Antonio facility, accumulated depreciation, mortgage debt and related depreciation and interest expense being consolidated (and the related rent expense being eliminated) in our financial statements. We have also provided supplemental unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2013, supplemental unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2014, and a supplemental unaudited pro forma condensed consolidated balance sheet as of September 30, 2014. In addition to the pro forma adjustments outlined above, such supplemental unaudited pro forma information is provided to give effect to the exchange of all the remaining Enovation Controls, LLC Common Units (with a corresponding number of Class B Shares) held by the existing owners of Enovation Controls, LLC for shares of Class A common stock of Enovation Controls, Inc. concurrent with the offering. The supplemental unaudited pro forma financial information is presented for illustrative purposes only as future exchanges of the Common Units of Enovation Controls, LLC (with a corresponding number of Class B Shares) for shares of our Class A common stock are dependent on numerous factors and such future exchanges will not occur as a direct result of the Transactions. The unaudited pro forma condensed consolidated financial information reflects pro forma adjustments that are described in the accompanying notes and are based on available information and certain assumptions we believe are reasonable, but which are subject to change. We have made, in our opinion, all adjustments that are necessary to fairly present the unaudited pro forma condensed consolidated financial information. The unaudited pro forma condensed consolidated financial information is presented for informational purposes only and should not be considered indicative of actual results of operations that would have been achieved had the transactions set forth above been consummated on the dates indicated, and do not purport to be indicative of the financial condition or results of operations as of any future date or for any future period.

You should read our selected historical consolidated financial data and unaudited pro forma condensed consolidated financial information and the accompanying notes in conjunction with, and each is qualified in their entirety by reference to, the consolidated historical financial statements and related notes included elsewhere in this prospectus and the financial and other information appearing elsewhere in this prospectus, including information contained in “Risk Factors,” “Use of Proceeds,” “Capitalization,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Other than the inception balance sheet, the financial statements of Enovation Controls, Inc. have not been included in this prospectus as it is a newly incorporated entity, has no business transactions or activities to date, has nominal capitalization, and had no assets or liabilities during the periods presented in this prospectus.

iii

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. This summary may not contain all of the information that is important to you. Before investing in our Class A Shares, you should carefully read this prospectus in its entirety, especially the risks of investing in our Class A Shares that we discuss in the “Risk Factors” section of this prospectus beginning on page 24 of this prospectus and the financial statements and related notes. The following summary is qualified in its entirety by the more detailed information and financial statements and related notes included elsewhere in this prospectus.

In this prospectus, unless otherwise stated or the context otherwise requires, references to “we,” “us,” “our” and similar references refer: (i) following the consummation of this offering and the Transactions, collectively, to Enovation Controls, Inc., and unless otherwise stated, all of its subsidiaries, and (ii) prior to the completion of this offering and the Transactions, collectively, to Enovation Controls, LLC, and unless otherwise stated, all of its subsidiaries.

In this prospectus, we refer to Murphy Group, Inc., an Oklahoma corporation, and to EControls Group, Inc., a Texas corporation, which are currently members of Enovation Controls, LLC, together as the Founder Entities. Murphy Group, Inc. is owned and controlled by Frank W. Murphy, III, our Executive Chairman, and certain trusts for the benefit of his children. EControls Group, Inc. is majority owned and controlled by Kennon Guglielmo, our Chief Technology Officer, his wife, and certain trusts for the benefit of their children. Certain officers and employees of Enovation Controls, LLC hold Class B, C, and D Membership Interests of Enovation Controls, LLC which will be converted into Common Units in Enovation Controls, LLC in connection with this offering. See “Prospectus Summary—Our Structure—Enovation Controls, LLC.”

Company Overview

We are a leading global provider of sophisticated digital control systems for gaseous fuel engines and engine-driven equipment focused on the vehicle and energy markets. With a global installed base of over one million engine control systems, our EControls^® and Murphy^® brands are recognized for providing innovative, ruggedized, integrated turnkey solutions that combine proprietary software platforms and customized hardware. We develop high technology, mission-critical systems that are utilized in commercial CNG/LNG trucks and buses, natural gas production, distributed power generation, and a variety of industrial and off-highway applications. We provide critical solutions across the entire natural gas value chain based on our comprehensive understanding of engines and their applications in both the supply and demand sides of the natural gas market. This allows our customers to meet the most stringent global emissions standards while enabling the efficient, economical, and reliable operation of their equipment in extreme environments.

Due to our proprietary technology and strong engineering expertise, we believe we have developed many highly entrenched customer relationships, including several Fortune Global 500 corporations, based on deep technical collaboration. Our solutions represent a small portion of the overall cost of the end-use application, but are essential and integral to system functionality and operating performance. Many customers seek our assistance in engineering and designing complete engine control systems which creates high switching costs and results in our having a proprietary position for these engine platforms. In 2013, we generated $256 million in revenue and $41 million in operating income by leveraging the technology of our over 70 product families across more than 4,000 customers globally. We are geographically diverse, generating approximately 30% of our revenues in 2013 from international markets, including more than $60 million from the rapidly growing Asian market.

We believe we are well positioned to benefit from a number of significant trends driving demand in the industries in which we compete:

•

Expected significant global increase in the production of and demand for natural gas supported by attractive cost, environmental, and geopolitical benefits relative to other hydrocarbon fuels;

•

Anticipated growth in demand for advanced natural gas compression system controls in oil and gas applications driven by increased shale and tight formation production in the U.S. and globally;

•

Global adoption of natural gas vehicles (NGVs) due to significant economic and environmental advantages:

^¡

NGV Global reports that as of the end of 2012 there were 16.7 million NGVs in operation around the world, a 21.6% compound annual growth rate (CAGR) since 2002 with the fastest growth in the Asia-Pacific region over that period;

^¡

In the United States by 2025, ACT Research forecasts natural gas to power between 20% and 44% of Class 8 trucks sold annually with a most likely/base line scenario of 27%, up from 4% in 2013. Class 8 trucks are heavy duty trucks that are designed to carry more than 33,000 pounds;

^¡

China is one of the largest and fastest growing NGV markets globally—the number of NGVs in China across all classes grew from 36,000 in 2002 to approximately 1.6 million in 2012, at a CAGR of 45.9%, according to NGV Global. Although growth flattened in 2014, we believe that was a temporary effect of diesel engine pre-buying in 2014 in advance of the nationwide enforcement of State Standard 4 diesel emissions standards effective January 1, 2015. We believe that this pre-buying was driven by the approximate 15% price premium of a State Standard 4 diesel certified Class 8 truck over a current equivalent State Standard 3 diesel certified vehicle;

•

Increasingly stringent global emissions regulations driving demand for advanced engine technologies that enable lower emissions, greater fuel economy, and regulatory compliance; and

•

Widespread adoption of advanced digital control solutions which integrate technologies such as high-resolution displays, highly configurable software, GPS navigation, telematics, vehicle management systems, and diagnostics to improve engine safety, energy efficiency, performance, and reliability with less dependence on operator skill.

Our technological expertise and operating history with engine controls form the basis for all of our hardware and software product offerings. Our solutions include a variety of engine control and monitoring systems, sensors, displays, and panels that are used in gaseous fuel engines across several industries. Through our EControls^® and Murphy^® brands, we target two primary end markets: Vehicles and Energy.

In the Vehicle market, we design, engineer, and manufacture control and fuel injection systems for engines utilizing gaseous fuels such as compressed natural gas (CNG), liquefied natural gas (LNG), and liquefied petroleum gas (LPG or propane) as well as liquid fuels such as gasoline or diesel fuel. We are a leading provider of electronic engine control systems for commercial natural gas powered trucks and buses with approximately 200,000 systems deployed. We have deep technical relationships with several of the largest commercial NGV engine manufacturers in China, and we believe that we will continue to benefit from government regulations in this market including increasingly stringent emissions standards as China strives to improve its air quality. We provide complete engine management systems for natural gas, LPG, diesel, and gasoline engines used in off-highway, forklift and mobile, and stationary applications. We integrate products and technologies into our solutions that connect operators to vehicles through graphical displays, telematics, mobile device integration, and electro-hydraulic controls. We are often positioned as the sole-source provider to many of our top customers and develop proprietary engine control solutions for their new engine platforms.

Control System (EICS^TM) is a ground-breaking, turnkey control system primarily designed for natural gas compressor engines which integrates multiple critical functions (including ignition system, air-fuel ratio control, speed control, sensors, diagnostics, and an advanced graphical user interface) into a single pre-configured system. Due to its unique level of integration and ease of installation and operation, EICS^TM is being adopted by large engine OEMs and system integrators. Our marketing team leverages our technology and products to provide solutions to adjacent engine-driven markets with similar requirements, such as oil and gas drilling services equipment and distributed power generation.


Target Markets	Target Applications	Our Hardware and Software Solutions
Vehicle	• Natural Gas Commercial Trucks and Buses • Forklift and Mobile Equipment • Off-Highway Equipment • Off-Highway Recreational Vehicles • Marine • Distributed Power Generation and Industrial	• Engine Control Modules • Fuel Injection Devices • Electro-Hydraulic Control Modules • Fuel Pressure and Flow Control Devices • Engine Aftertreatment Systems • Power Distribution Modules • Advanced Ruggedized Displays • Engine Sensors • Cruise and Speed Control Systems • Telematics
Energy	• Natural Gas Compression Equipment • Natural Gas Engine-Driven Equipment • Oil & Gas Production Equipment • Distributed Power Generation • Industrial Pumping Equipment	• Integrated Engine Control Systems • Supervisory Control Systems • Engine Aftertreatment Systems • Monitoring Equipment • Ignition Systems & Accessories • Level Transmitters and Maintainers • Instrumentation • Pressure Control Valves • Advanced Ruggedized Displays • Vibration, Pressure, and Temperature Sensors • Wireless Sensor Solutions • Telematics

We generally seek to localize our product manufacturing and support to our customer base around the world. We have established manufacturing, sales, and engineering application centers in the U.S., Mexico, the U.K., China, India, and South Korea to serve our key geographies. We currently operate five manufacturing and distribution centers in the U.S., Europe, and Asia. In 2015, we plan to open our state-of-the-art China Enovation Center, co-located with our manufacturing operations in Hangzhou, China. This Center will provide additional technical and support services for our customers in the vehicle market in China, India, South Korea, and Japan and will include sophisticated engine calibration and certification capabilities. We drive operational excellence through advanced manufacturing techniques, leading industry management practices, and global supply chain optimization. We maintain our high standards of quality through disciplined new product design, manufacturing processes, supplier selection, and adherence to global quality certifications along with comprehensive testing and validation laboratories in the U.S. and China. We establish customer intimacy with strong relationships based on ethics, trust, performance, and rapid responsiveness. Our strong track record of consistent revenue growth and cash flow generation is a testament to our ability to continually deliver innovative products in our markets while maintaining a high degree of customer focus.

Industry Overview

Shale Gas Revolution

The natural gas industry has undergone a dramatic transformation in recent years. According to the U.S. Energy Information Administration (EIA), global reserves of natural gas have increased by 56% from 1992 to 2013. North America has seen the strongest production growth in recent years, benefitting from improved production technologies such as hydraulic fracturing, or fracking, and horizontal drilling techniques resulting in increased extraction from shale and tight formations.

Natural gas is expected to become an even more important component of the global energy mix, accounting for approximately 30% of global energy needs by 2035 as the supply of natural gas increases by nearly 50%.

Gas compression is an essential process used throughout the production cycle to lift oil in tight formations and to transport gas to the end user. According to Frost & Sullivan, increases in shale gas production will increase revenues at an accelerating pace from 2012 to 2018 for total compressors in oil and gas applications.

Global Shift to Natural Gas Vehicles

Due to its current and expected long-term benefits, natural gas has become an important and attractive transportation fuel. According to NGV Global, there are approximately 16.7 million NGVs in operation globally. These vehicles include medium- and heavy-duty commercial vehicles, off-highway trucks, buses, light-duty vehicles, locomotives, marine vessels, and recreational vehicles. As natural gas has become increasingly attractive as a low-cost fuel source and government regulators have implemented stringent emissions regulations, the global population of NGVs has increased by more than seven-fold since 2002 according to NGV Global. Commercial NGVs are experiencing adoption rates significantly higher than other vehicle classes due to high annual fuel consumption and the resulting substantial fuel cost per-mile advantages of natural gas. According to Navigant, approximately 170,000 natural gas trucks and buses were sold globally in 2013.

Expanding Natural Gas Refueling Infrastructure

One historical barrier to the adoption of NGVs has been a lack of broad-based refueling infrastructure. This limitation is being addressed through aggressive station buildout in numerous geographies. China is a leader in the buildout of NGV refueling with a network of almost 4,900 refueling stations in 2013, and the number of refueling stations is expected to grow to about 6,000 refueling stations by the end of 2014. In the U.S., natural gas refueling infrastructure has undergone significant growth as well. Since 2010, refueling stations have increased by over 50% to 1,344 nationwide. New public stations were constructed at a rate of approximately 3.4 per week in 2013, compared to a rate of 1.4 in 2010. The refueling station infrastructure continues to be developed across major U.S. shipping corridors to service national fleets of heavy commercial vehicles. While government subsidies exist in some foreign markets, the U.S. NGV refueling station market remains subsidy free and growth is being driven by private companies such as Clean Energy Fuels, Questar Fueling, TruStar Energy, Shell Oil Products U.S., Love’s Travel Stops, Blu LNG, Prometheus Energy, and Kwik Trip.

Stringent Emissions Regulations

Concerns regarding climate change and other environmental considerations have led to implementation of laws and regulations that restrict, cap or tax emissions in the vehicle market and throughout other industries. While emission standards vary significantly around the world, such standards have become increasingly more stringent. Over the last ten years in particular, there has been a significant increase in regulation of commercial on-highway and off-highway engine emissions. Industrial OEMs have also experienced pressure to redesign their engines to address these emission regulations, as products that are unable to meet new standards cannot be sold in the marketplace. However, we believe few suppliers to commercial NGV OEMs and industrial OEMs have been capable of providing, or are willing to make the investments necessary to provide, engine control system products that economically meet the new U.S. Environmental Protection Agency (EPA) and California Air Resources Board (CARB) requirements.

Countries outside of the U.S. have historically adopted emission regulations aligned with those of the U.S., and it is anticipated that regulations comparable to current and future EPA and CARB emission regulations will continue to be implemented internationally. For example, policies in Europe, generally referred to as Euro I, II, III, IV, V, and VI regulations, limit tailpipe emissions of commercial vehicles. Similar to various stages of regulations in the U.S., these regulations in Europe call for comparable reductions in emissions of hydrocarbons, nitrogen oxide, and particulate matter. Emissions standards similar to Euro standards have been adopted by India, China, Argentina, and Brazil.

Competitive Strengths

We believe we have a number of competitive strengths that differentiate us, including:

Leading Provider of Mission-Critical Digital Control Solutions for Natural Gas Engines. We are one of the leading providers of digital control systems for gaseous fuel engines and have an installed base of over one million engine control systems globally. In addition, we are a leading provider of electronic engine control systems for commercial natural gas powered trucks and buses with approximately 200,000 systems deployed, and one of the leading providers of advanced controls for the natural gas compression market. Our EControls^® and Murphy^® brands are recognized for providing innovative, ruggedized, integrated turnkey solutions that deliver consistent and reliable performance for engine-driven equipment operating on a variety of gaseous fuels. Our solutions represent a small portion of the overall cost of the end-use application, but are essential and integral to system functionality and operating performance. We are a preferred partner for global OEMs and end users across a wide variety of high-growth markets, applications, and geographies.

Aligned with Global Industry Trends to Drive Growth. We are strategically positioned to benefit from compelling global trends in each of our primary end markets:

•

Expected significant global increase in the production of and demand for natural gas supported by attractive cost, environmental, and geopolitical benefits relative to other hydrocarbon fuels;

•

Anticipated growth in demand for advanced natural gas compression system controls in oil and gas applications driven by increased shale and tight formation production in the U.S. and globally;

•

Global adoption of NGVs due to significant economic and environmental advantages;

•

Increasingly stringent global emissions regulations driving demand for advanced engine technologies that enable lower emissions, greater fuel economy, and regulatory compliance; and

•

We believe each of these trends will continue to create significant demand for our products.

Innovative Product Design Driven by Deep Application Knowledge. We are a recognized leader in designing and developing innovative and sophisticated new products within our markets. Over the past three years, we have developed and launched 55 new products, which had an average gross margin of approximately 50% for the year ended December 31, 2013. Our intellectual property portfolio includes millions of lines of software source code, proprietary manufacturing techniques and, as of September 30, 2014, 47 issued and pending patents and patent applications. Driven by deep application knowledge, we deliver forward-thinking solutions ahead of our customers’ needs to create sustainable competitive advantages. Our application engineering expertise and know-how enables us to deliver optimized solutions combining proprietary software platforms and customized hardware. Our design and engineering efforts are led by an in-house team of 179 full-time engineers across all disciplines with strong product development and application expertise in gaseous fuel engines and engine-driven equipment.

Entrenched Customer Relationships Built on Technical Collaboration. Our commitment to technological innovation, proven product performance, and superior service has enabled us to develop longstanding, collaborative relationships with a broad group of more than 4,000 customers globally. These customers represent a diverse group of OEMs and distributors located across the globe including Yuchai, Exterran, RES Energy Solutions, and Power Solutions. As a result of our application and engineering expertise, we have a deep and unique understanding of our customers’ gaseous fuel engines and engine-driven equipment, and we are often positioned as the sole-source solution provider to our customers.

Established Global Footprint. We maintain a manufacturing, sales, and service infrastructure presence on three continents, enabling us to effectively serve our worldwide customer base. In 2013, approximately 71% of our net sales were generated in North and South America, 24% in Asia and 5% in Europe, the Middle East, and Africa. We believe we have developed strong, trusting relationships with local customers and suppliers based on our local manufacturing and sales presence, track record of performance, and brand recognition. In 2015, we plan to open our state-of-the-art China Enovation Center, co-located with our manufacturing operations in Hangzhou, China, that will provide additional technical support as well as engine calibration and certification services to our customers in China, India, South Korea, and Japan. We provide natural gas engine control systems to several of the largest commercial NGV engine manufacturers in China—one of the largest and fastest growing commercial NGV markets.

Strong Financial Performance with Attractive Cash Flow. We have demonstrated the strength of our platform through robust growth and cash flow generation. We grew revenues from $148 million in 2010 to $256 million in 2013. This organic growth has been driven by our new product introductions, geographic expansion, acquisition of new customers, and increasing market share, as well as broader market trends such as the proliferation of commercial NGVs and the energy infrastructure buildout. In addition, we estimate that we generate approximately one-third of our revenues from the Energy market from sales of replacement parts and services, which provides an attractive margin and recurring revenue stream. As evidence of our engineering leadership and compelling value proposition, we generated gross margin of 42% in 2013, an increase of more than 477 basis points since 2010, due to disciplined design reuse, modular hardware and software concepts, high-level graphical software configurability, integrated global sourcing, process improvements, strategic value-based pricing, and an intentional focus on a more favorable customer and product sales mix. Our business historically has required low capital expenditures, which have averaged less than 3% of revenue between 2010 and 2013. In 2013, we generated Adjusted EBITDA of $47 million, net income of $40 million, and net cash provided by operations of $37 million before distributions for taxes.

Growth Strategy

We believe that we are well positioned to extend our market leading position in sophisticated digital engine control systems for gaseous fuel engines and engine-driven equipment and capitalize on positive global trends. The principal elements of our growth strategy are as follows:

Accelerate Product Innovation and Expansion. We distinguish ourselves from our competitors with our proprietary technology and strong engineering expertise. We are committed to driving our level of technological sophistication and the pace of product innovation. For example, since 2002, we have successfully developed four generations of innovative gaseous engine control platforms and fuel metering technology, with each new generation advancing fuel economy, decreasing emissions, and improving reliability. We plan to continue to leverage our core technology platforms across many different products and applications targeting our served markets to maximize the impact of our research, development, and engineering investments.

Selectively Pursue Strategic Acquisitions and Alliances. Our industry leadership makes us an ideal platform to acquire or partner with companies in our target markets. We provide complete engine control system solutions across a wide range of applications and will continue to explore synergistic acquisition opportunities which enhance our position in our served markets. We will seek strategic transactions that extend our presence into new geographies or applications, expand our customer base, and/or add new products or technologies to our existing platform solutions.

Risks Associated with Our Business

There are a number of risks and uncertainties that may affect our financial and operating performance, our competitive position, and our growth prospects. You should carefully consider all of the risks discussed under the caption “Risk Factors,” which begins on page 24, before investing in our Class A Shares. These risks include the following:

•

If one or more of the favorable industry trends we have identified fails to occur, or occurs at a slower rate than expected, our business will be adversely affected.

•

If we are unable to continue our technological innovation and successful introduction of new commercial products, our business will be adversely affected.

•

The market for natural gas engines may not develop according to our expectations and, as a result, our business may not grow as planned and our business plan may be adversely affected.

•

Fuel price differentials among natural gas, diesel, and gasoline fuels are hard to predict and may be less favorable in the future.

•

Our growth is partly dependent on global natural gas refueling infrastructure that may not be developed.

•

Changes in laws or government regulations regarding hydraulic fracturing could increase the cost of natural gas exploration and production or limit the areas in which such exploration and production may occur, which could adversely impact the demand for our products and solutions.

•

We currently face, and will continue to face, significant competition, which could materially and adversely affect us.

•

We derive a significant portion of our revenue from a limited number of major customers, and our revenue, profitability, and cash flows could be materially adversely affected if we are unable to maintain relationships with these customers, or if their demand for our products decreases.

•

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

•

The inability to protect our intellectual property and know-how could reduce or eliminate any competitive advantage and reduce our sales and profitability, and the cost of protecting our intellectual property may be significant.

Our Structure

The diagram below depicts our organizational structure immediately prior the consummation of this offering and related transactions. See “—The Transactions.”

LOGO

(1)

The existing members consist of Murphy Group, EControls Group, and Employee Holders. Murphy Group holds an approximately 60.5% economic interest in Enovation Controls, LLC through its ownership of Class A Units. EControls Group holds an approximately 32.5% economic interest in Enovation Controls, LLC through its ownership of Class A Units. Employee Holders hold an approximately 7.0% economic interest in Enovation Controls, LLC through their ownership of Class B, C, and D Management Interests.

(2)	Enovation Controls, LLC’s senior credit facility is guaranteed by its U.S. subsidiaries.

The diagram below depicts our organizational structure immediately after the consummation of this offering and related transactions. See “—The Transactions.”

LOGO

(1)

The existing owners consist of Murphy Group, EControls Group, and Employee Holders. Murphy Group will hold Class B Shares representing % of the voting power and 0% of the economic interest; Murphy Group also will hold a % economic interest in Enovation Controls, LLC. EControls Group will hold Class B Shares representing % of the voting power and 0% of the economic interest; EControls Group also will hold a % economic interest in Enovation Controls, LLC. Employee Holders will hold Class B Shares representing % of the voting power and 0% of the economic interest; Employee Holders also will hold a % economic interest in Enovation Controls, LLC.

(2)	Enovation Controls, LLC’s senior credit facility is guaranteed by its U.S. subsidiaries.

Enovation Controls, LLC. We will operate our business through Enovation Controls, LLC and its consolidated subsidiaries.

The current members of Enovation Controls, LLC are described below.

•

Murphy Group, Inc., which we refer to as the Murphy Group, is owned by Frank W. Murphy, III, our Executive Chairman, and certain trusts for the benefit of his children, and holds an approximately 60.5% economic interest in Enovation Controls, LLC through its ownership of 6,500 Class A Units, which will be converted into an aggregate of approximately million Common Units (with a corresponding number of Class B Shares) in connection with this offering.

•

EControls Group, Inc., which we refer to as the EControls Group, is majority owned by Kennon Guglielmo, our Chief Technology Officer, his wife, and certain trusts for the benefit of their children, and holds an approximately 32.5% economic interest in Enovation Controls, LLC through its ownership of 3,500 Class A Units, which will be converted into an aggregate of approximately million Common Units (with a corresponding number of Class B Shares) in connection with this offering. Certain employees of Enovation Controls, LLC hold a minority ownership interest in EControls Group. We collectively refer to the Murphy Group and EControls Group as the Founder Entities.

•

Certain of our officers and other employees, whom we collectively refer to as the Employee Holders, hold an approximately 7.0% economic interest in Enovation Controls, LLC through their ownership of Class B, C, and D Management Interests which will be converted into an aggregate of approximately million Common Units (with a corresponding number of Class B Shares) in connection with this offering in a manner that reflects the percentage of Enovation Controls, LLC currently owned by the Class B, C, and D Management Interest holders, taking into account their current distribution entitlement and the fair value of Enovation Controls, LLC based on the offering price. Approximately % of converted Common Units will be subject to forfeiture at the time of the conversion and will vest only if the holder remains employed by us through the applicable period or upon a change in control. The conversion will have no direct or indirect economic effect on us.

Enovation Controls, Inc. Upon completion of the offering, we will use the net proceeds received to purchase Common Units directly from the Murphy Group, EControls Group, and Employee Holders. Immediately after our acquisition of these Common Units, our only material asset will be our ownership of % of the total Common Units and our only business will be acting as the sole managing member of Enovation Controls, LLC. You should note, in particular, that:

•

We will be the sole managing member of Enovation Controls, LLC and there will be no other governing body of Enovation Controls, LLC.

•

Investors in this offering will own 100% of our Class A Shares (and % of our Class A Shares on a fully diluted basis assuming all Common Units and Class B Shares are exchanged for Class A Shares). The outstanding Class A Shares will represent 100% of the economic interest in us, but initially only % of our voting power, and we will own % of the economic interest in Enovation Controls, LLC.

•

Our Class A Shares will entitle the holders to receive 100% of any distributions we make. Upon our liquidation, dissolution, or winding up, holders of Class A Shares will be entitled to share ratably in all assets available for distribution after payment of our liabilities.

•

Immediately after the completion of this offering, the only outstanding Class A Shares will be the Class A Shares issued pursuant to this offering.

•

The Common Unitholders will own 100% of our Class B Shares, which will vote together with the Class A Shares as a single class. Each Class A Share has one (1) vote per share and each Class B Share

has one (1) vote per share. The Class B Shares will represent, upon completion of this offering, % of the combined voting power of our common stock. The Class B Shares do not represent an economic interest in us and are therefore not entitled to any dividends that we may pay. However, each holder of a Class B Share owns an economic interest in Enovation Controls, LLC through a corresponding Common Unit. The Common Unitholders will hold substantially more than 50% of the combined voting power of our common stock and they will hold all the Class B Shares.

•

We intend to enter into a stockholders agreement, which we refer to as the Stockholders Agreement, with Murphy Group and EControls Group that will become effective upon the completion of this offering. The Stockholders Agreement will contain provisions that will prevent a Founder Entity from transferring its shares without the consent of the other Founder Entity, except in the case of sales to affiliates, sales to any member of its family group (as defined therein), tag-along sales of our common stock by both Founder Entities, or transfers pursuant to the Registration Rights Agreement, until the earlier of the third anniversary of the offering or the time at which the Founder Entities collectively hold less than 10% of our outstanding Class A Shares and Class B Shares. The Stockholders Agreement will also grant each Founder Entity the right, subject to certain ownership thresholds, to nominate a specified number of designees to our board of directors and committees of our board of directors. Each Founder Entity will have the right to designate two members to our board of directors for so long as such Founder Entity owns 10% or more of our outstanding Class A Shares and Class B Shares on a combined basis. The Founder Entities will also have the right to designate one mutually agreed additional member to our board of directors. The Founder Entities will agree to vote all of their shares of our common stock to elect such designees to our board of directors. If, at any time, a Founder Entity owns 5% or more but less than 10% of our outstanding Class A Shares and Class B Shares on a combined basis, such Founder Entity will have the right to designate one nominee for election to our board of directors. If a Founder Entity’s ownership level falls below 5% of our outstanding Class A Shares and Class B Shares on a combined basis, such Founder Entity will no longer have any right to designate a nominee and the right of the Founder Entities to designate a mutually agreed upon designee will also terminate. In addition, for so long as the Founder Entities together hold at least 25% of the outstanding Class A Shares and Class B Shares on a combined basis, certain actions may not be taken without the prior written consent of each Founder Entity owning at least 5% of the outstanding Class A Shares and Class B Shares on a combined basis. See “The Transactions—Stockholders Agreement” for further information.

•

Pursuant to the amended and restated operating agreement of Enovation Controls, LLC, in order to provide liquidity to the Common Unitholders, each Common Unit, together with the corresponding number of our Class B Shares, held by a Common Unitholder will be exchangeable for (i) one of our Class A Shares, or (ii) at our option, cash equal to the market value of one of our Class A Shares, at any time and from time to time after the expiration or earlier termination (if any) of the lock-up agreement between the underwriters of this offering and each Common Unitholder. These exchange rights may be exercised with respect to unvested Common Units only with our consent. In addition, the percentage of an Employee Holder’s Common Units that can be exchanged (taken together with any Common Units sold to us in connection with the offering) is limited to the aggregate percentage of Common Units exchanged or sold in connection with or following the offering by Murphy Group or EControls Group (whichever is higher). This percentage limitation will expire three years after the offering or, if sooner, when the Founder Entities together cease to own at least 15% of the outstanding Class A Shares and Class B Shares on a combined basis. The business purpose of the percentage limitation is to provide the Common Unitholders (other than the Founder Entities) with the additional incentive that equity ownership provides to continue to assist with our growth while the Founder Entities continue to hold a substantial equity interest in us. The exchange of the Common Units and Class B Shares corresponding to these Common Units for our Class A Shares will increase the number of outstanding Class A Shares and decrease the number of outstanding Class B Shares.

•

Following this offering, the members of Enovation Controls, LLC, other than us, will consist of Murphy Group, EControls Group, and the Employee Holders.

Certain Attributes of Our Structure. Our structure following this offering will be designed to accomplish a number of objectives, the most important of which are as follows:

•

The structure will allow us to serve as a holding company, with our sole asset being our ownership interest in Enovation Controls, LLC. The Common Unitholders, however, will retain their economic investment in the form of direct interests in Enovation Controls, LLC, rather than through our Class A Shares. Following this offering, all of the businesses operated by Enovation Controls, LLC or its subsidiaries prior to this offering, and all of the interests held by Enovation Controls, LLC and its subsidiaries in such businesses prior to this offering, will be operated or held, as the case may be, by Enovation Controls, LLC and its subsidiaries, and our current management will continue to manage these businesses. As a result, we and the Common Unitholders will participate in the net operating results of Enovation Controls, LLC on a pari passu basis, in accordance with our respective ownership of Enovation Controls, LLC.

•

In connection with this offering, we will issue to the Common Unitholders non-economic Class B “vote-only” shares that as a percentage of the combined voting power of our common stock will be equal to their economic ownership in Enovation Controls, LLC.

•

In the event that a Common Unitholder wishes to exchange Common Units for Class A Shares, the holder must deliver the Common Units to us, together with a corresponding number of Class B Shares, and in exchange therefor we will deliver to the exchanging holder a number of Class A Shares corresponding to the number of Common Units delivered to us. We will cancel any Class B Shares delivered to us.

•

Under the terms of the amended and restated operating agreement of Enovation Controls, LLC, Common Unitholders will be able to exchange their Common Units, together with a corresponding number of Class B Shares, for Class A Shares at any time and from time to time after the expiration or earlier termination (if any) of the lock-up agreement between the underwriters of this offering and each Common Unitholder, subject to certain limitations.

The Transactions

In connection with this offering:

•

The amended and restated operating agreement of Enovation Controls, LLC will be amended and restated to provide, among other things, (i) for us to act as the sole managing member and (ii) that Common Units held by the Common Unitholders together with a corresponding number of Class B Shares will be exchangeable for (a) one of our Class A Shares, or (b) at our option, cash equal to the market value of one of our Class A Shares, as applicable, at any time and from time to time after the expiration or earlier termination (if any) of the lock-up agreement between the underwriters of this offering and each Common Unitholder, subject to certain limitations, in order to provide liquidity to these holders.

•

We will issue the Class A Shares for net proceeds of approximately $ million, after deducting underwriting discounts (assuming the Class A Shares are sold at $ per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus).

•

Units being sold to us by the Murphy Group, EControls Group, and Employee Holders is based upon a pro rata allocation among the Murphy Group, EControls Group, and those Employee Holders (based on the number of vested Common Units held by such Employee Holders) electing to participate in the sale. We will use $ million to purchase % of the Common Units held by Murphy Group, $ million to purchase % of the Common Units held by EControls Group and $ million to purchase % of the Common Units held by the Employee Holders. Upon completion of the offering, we will have acquired Common Units representing a % interest in Enovation Controls, LLC.

•

We will enter into a stockholders agreement with Murphy Group and EControls Group immediately prior to this offering. See “The Transactions—Stockholders Agreement.”

•

We will enter into a registration rights agreement with all Common Unitholders immediately prior to this offering. See “The Transactions—Registration Rights Agreement.”

•

We will enter into a tax receivable agreement with all Common Unitholders immediately prior to this offering. See “The Transactions—Tax Receivable Agreement.”

•

We will amend and restate our certificate of incorporation to provide for, among other things, the issuance of our Class A Shares and Class B Shares.

We refer to the foregoing collectively as the “Transactions.” No fairness opinion was sought nor was one obtained for any aspect of the Transactions. If you invest in our Class A Shares, your interest in us will be diluted to the extent of the difference between the initial public offering price per Class A Share and the pro forma net tangible book value per Class A Share after this offering, which is $ . Assuming we sell the Class A Shares in this offering at $ per share, the extent of your dilution will be $ per share. See “Dilution” for further information.

Tax Receivable Agreement. As described in “The Transactions,” we intend to enter into a tax receivable agreement with all Common Unitholders. The tax receivable agreement will require us to pay those Common Unitholders 85% of the amount of cash savings, if any, in U.S. federal, state and local income or franchise tax that we actually realize, or in some circumstances we are deemed to realize, in any tax year beginning with and following 2014 (a “covered tax year”) from increases in tax basis realized as a result of the initial purchase and any future exchanges by Common Unitholders of their Common Units (and Class B Shares) for Class A Shares (or cash), including increases attributable to payments made under the tax receivable agreement and deductions attributable to imputed interest. We expect to benefit from the remaining 15% of cash savings, if any, in income and franchise tax that we actually realize during a covered tax year.

Controlled Company Status

As a result of the significant ownership of our Class B Shares by the Founder Entities and the Stockholders Agreement described above, more than 50% of the combined voting power of our common stock will be held by the Founder Entities. As a result, we will be considered a “controlled company” under the rules of the NYSE. A controlled company may elect not to comply with certain NYSE corporate governance standards, including the requirements that: (i) a majority of our board of directors consist of independent directors; (ii) we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and (iii) we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. Following this offering, in reliance upon the foregoing exemptions, a majority of our board of directors will not consist of independent directors and we will not have a nominating and corporate governance committee, and we may use any of these exemptions for so long as we are a controlled company. Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE. See “Risk Factors—Risks Related to this Offering and Ownership of Our

Class A Shares—As a controlled company, we will not be subject to all of the corporate governance rules of the NYSE” and “Management—Director Independence” for further information.

Upon the consummation of this offering, the Founder Entities will control % of the combined voting power of our common stock. As a result, the Founder Entities will be able to significantly influence and control the outcome of all matters requiring a stockholder vote, including: the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; the amendment of our certificate of incorporation and our bylaws; and our winding up and dissolution. This concentration of ownership may delay, deter or prevent acts that would be favored by our other stockholders or deprive holders of Class A Shares of an opportunity to receive a premium for their Class A Shares as part of a sale of our business.

The Stockholders Agreement we intend to enter into will grant each Founder Entity the right, subject to certain conditions, to nominate a specified number of designees to our board of directors and committees of our board of directors. Each Founder Entity will have the right to designate two members to our board of directors for so long as such Founder Entity owns 10% or more of our outstanding Class A Shares and Class B Shares. The Founder Entities will also have the right to designate one mutually agreed additional member to our board of directors. We anticipate that our board of directors will initially have five members, and therefore, the designees of the Founder Entities will constitute a majority of our board of directors. Because the Founder Entities will control our board of directors, they will control our actions as managing members of Enovation Controls, LLC. In addition, because the Founder Entities hold economic interests in Enovation Controls, LLC directly, rather than through us, the Founder Entities may have conflicting interests with the holders of Class A Shares. For example, the Founder Entities will have different tax positions from the holders of Class A Shares which could influence their decisions regarding whether and when to dispose of assets, when to make distributions for the purpose of allowing us to pay dividends, and whether and when to incur new or refinance existing indebtedness, especially in light of the tax receivable agreement. See “The Transactions—Stockholders Agreement” and “Risk Factors—Risks Related to Our Organizational Structure—Control by the Founder Entities of % of the combined voting power of our common stock and the fact that they are holding their economic interest through Enovation Controls, LLC may give rise to conflicts of interest” for further information.

The Stockholders Agreement will also contain provisions that will prevent a Founder Entity from transferring its shares without the consent of the other Founder Entity, except in the case of sales to affiliates, sales to any member of its family group (as defined therein), in connection with tag-along sales of our common stock by both Founder Entities, or transfers pursuant to the registration rights agreement, until the earlier of the third anniversary of the offering and the time at which the Founder Entities collectively hold less than 10% of our outstanding Class A Shares and Class B Shares. See “The Transactions—Stockholders Agreement” for further information.

Corporate Information

Our principal executive offices are located at 5311 South 122^nd East Avenue, Tulsa, Oklahoma 74146 and our telephone number at that address is (918) 317-4100. Our website is located at www.enovationcontrols.com. This website and the information contained therein is not part of this prospectus, and you should rely only on the information contained in this prospectus when making a decision as to whether to invest in our Class A Shares.

Emerging Growth Company Status

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies.

Accordingly, we have included detailed compensation information for only our three most highly compensated executive officers and have not included a compensation discussion and analysis (CD&A) of our executive compensation programs in this prospectus. In addition, for so long as we are an “emerging growth company,” we will not be required to:

•

engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes–Oxley Act of 2002 (the “Sarbanes–Oxley Act”);

•

comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (the “PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

•

submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “say-on-golden parachutes;” or

•

disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparison of the chief executive officer’s compensation to median employee compensation.

In addition, the JOBS Act provides that an “emerging growth company” can use the extended transition period for complying with new or revised accounting standards. However, we are choosing to “opt out” of such extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not emerging growth companies. The JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

We will remain an “emerging growth company” until the earliest to occur of:

•

our reporting $1 billion or more in annual gross revenues;

•

our issuance, in a three year period, of more than $1 billion in non-convertible debt;

•

the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter; and

•

December 31, 2019.

THE OFFERING


Class A Shares being offered by us		Class A Shares

Underwriters’ overallotment option to purchase additional Class A Shares		Class A Shares

Class A Shares to be outstanding immediately after this offering		Class A Shares

Class A Shares to be outstanding immediately after this offering, assuming the exchange of all Common Units		Class A Shares. See “—Exchange Rights” below.

Class B Shares to be held by the holders of Common Units immediately after this offering		Class B Shares

Voting		Each of our Class A Shares will entitle its holder to one (1) vote on all matters to be voted on by stockholders generally. Each of our Class B Shares will entitle its holder to one (1) vote on all matters to be voted on by stockholders generally. Except as required by law, our Class A Shares and Class B Shares will vote together on all matters submitted to a vote of our stockholders.



Use of proceeds		We estimate that the net proceeds from this offering will be approximately $ million, after deducting underwriting discounts (assuming the Class A Shares are sold at $ per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), or $ million if the underwriters exercise in full their option to purchase additional shares to cover overallotments. We intend to use all of the net proceeds of this offering to purchase Common Units of Enovation Controls, LLC directly from the EControls Group, Murphy Group and Employee Holders at a price per Common Unit equal to the public offering price per share of our Class A Shares, less underwriting discounts plus the pro rata portion of offering expenses to be reimbursed by the underwriters. The number of Common Units being sold to us by the Murphy Group, EControls Group, and Employee Holders is based upon a pro rata allocation among the Murphy Group, EControls Group, and those Employee Holders (based on the number of vested Common Units held by such Employee Holders) electing to participate in the sale. Upon completion of the offering, we will have acquired Common Units representing a % economic interest in Enovation Controls, LLC (or Common Units representing a % economic interest if the underwriters exercise in full their option to purchase additional shares to cover overallotments).



		We will not retain any of the proceeds used to purchase the Common Units from the Common Unitholders. The net proceeds from any exercise of the underwriters’ overallotment option will be used to purchase a corresponding additional number of Common Units directly from the EControls Group, Murphy Group, and Employee Holders at a price per Common Unit equal to the public offering price per share of our Class A Shares, less underwriting discounts plus the pro rata portion of offering expenses to be reimbursed by the underwriters. See “Use of Proceeds.”

Exchange rights		Subject to the terms and conditions of the amended and restated operating agreement of Enovation Controls, LLC, each Common Unitholder will have the right to exchange Common Units together with the corresponding number of our Class B Shares, for (i) our Class A Shares, or (ii) at our option, cash equal to the market value of the Class A Shares issuable upon exchange. See “The Transactions—Operating Agreement of Enovation Controls, LLC—Exchange Rights.” To effect an exchange, a Common Unitholder must simultaneously deliver to us its Common Units and a corresponding number of Class B Shares. Unless we exercise our option to pay cash in lieu of Class A Shares, we will deliver an equivalent number of Class A Shares to the exchanging holder. The Class B Shares surrendered by the exchanging holder will be cancelled. As a holder exchanges its Common Units, our percentage of economic ownership of Enovation Controls, LLC will be correspondingly increased.

Dividend policy		We currently anticipate that we will retain all of our future earnings for use in the expansion and operation of our business and do not anticipate paying any cash dividends in the foreseeable future. The declaration and payment of future dividends to holders of Class A Shares will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, legal requirements, restrictions under our senior credit facility and any other debt agreements we are then party to, and other factors our board of directors deems relevant. See “Risk Factors—Risks Related to this Offering and Ownership of Our Class A Shares—We are a holding company and depend upon our subsidiaries for our cash flow.”

NYSE symbol		“ENOV.”



Risk factors		You should read the “Risk Factors” section of this prospectus beginning on page 24 for a discussion of the factors to consider carefully before deciding to purchase any of our Class A Shares.

The number of shares outstanding after this offering and other information based thereon in this prospectus excludes:

•

up to 4,050,000 Class A Shares expected to be available for future grant under the Enovation Controls, Inc. 2014 Long-Term Incentive Plan after the consummation of this offering;

•

up to Class A Shares issuable upon exchange of Common Units by the current holders thereof; and

•

up to Class A Shares that the underwriters may purchase from us to the extent that they exercise their overallotment option.

Except as otherwise indicated, the number of shares outstanding after this offering and other information based thereon in this prospectus includes all of our outstanding Class B Shares.

Except as otherwise indicated, all information in this prospectus assumes an initial public offering price of $ per Class A Share, the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus.

In the event the initial public offering price in this offering is less than $ per share, the aggregate number of Common Units issuable in exchange for the Class B, C, and D Management Interests will decrease and the aggregate number of Common Units issuable to the Murphy Group and the EControls Group will commensurately increase. The exact amount of any such adjustments, if any, will be based on the actual per share initial public offering price. However, any such adjustments will not result in any change to the aggregate number of Class A Shares issuable in exchange for the Common Units, nor any change in the aggregate number of Class A Shares outstanding after this offering.

SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA

The following table presents the summary historical consolidated financial data of Enovation Controls, LLC, our accounting predecessor, and summary unaudited pro forma financial data of Enovation Controls, Inc., for the periods and as of the dates indicated. The summary financial data presented below should be read in conjunction with “Capitalization,” “Unaudited Pro Forma Condensed Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and accompanying notes thereto included elsewhere in this prospectus. Historical results are not necessarily indicative of results that may be expected for any future period, nor should the results for any interim period be considered indicative of the expected results for a full fiscal year.

The consolidated statement of operations data for the years ended December 31, 2013, 2012, and 2011 have been derived from Enovation Controls, LLC’s audited consolidated financial statements included elsewhere in this prospectus. The consolidated statement of operations data for the nine months ended September 30, 2014 and 2013 and the consolidated balance sheet data as of September 30, 2014 are derived from the unaudited consolidated financial statements of Enovation Controls, LLC included elsewhere in this prospectus. In the opinion of management, such unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial position and results of operations as of the dates and for the periods indicated.

The summary unaudited pro forma condensed consolidated balance sheet as of September 30, 2014, and the unaudited pro forma condensed consolidated statements of operations for the nine month period ended September 30, 2014 and the year ended December 31, 2013 present our consolidated financial position and results of operations to give pro forma effect to (i) the Transactions as described in “The Transactions,” which include the reorganization transactions and the sale of shares in this offering (excluding shares issuable upon exercise of the underwriters’ option to purchase additional shares) and the application of the net proceeds from this offering as described in “Use of Proceeds,” and (ii) the tax receivable agreement we will enter into with the existing Common Unitholders, in each case as if they had been completed as of January 1, 2013, with respect to the unaudited pro forma condensed consolidated statements of operations, and September 30, 2014, with respect to the unaudited pro forma condensed consolidated balance sheet.

The summary unaudited pro forma condensed consolidated statements of operations for the nine month period ended September 30, 2014 and the year ended December 31, 2013 present our consolidated financial position and results of operations to give pro forma effect to (i) one-time special distribution of $60.0 million to Murphy Group and EControls Group and borrowings of $85.5 million under our senior credit facility to pay this distribution and repay existing debt, which occurred on June 30, 2014, (ii) the sale of certain assets used to produce wire harnesses to a company jointly owned by Kennon Guglielmo, our Chief Technology Officer, and Frank W. Murphy III, our Executive Chairman, on September 15, 2014, and (iii) the purchase of our San Antonio Farinon facility on July 25, 2014 from a third-party entity by a company jointly owned by Messrs. Guglielmo and Murphy, in each case as if they had been completed as of January 1, 2013. As a result of the purchase described in the foregoing item (iii), the company jointly owned by Messrs. Guglielmo and Murphy must be accounted for as a variable interest entity which will result in the depreciation expense of the San Antonio Farinon facility and interest expense related to the outstanding borrowings being consolidated (and the related rent expense being eliminated) in our consolidated financial statements.

This data is subject, and gives effect, to the assumptions and adjustments described in the notes accompanying the unaudited pro forma condensed consolidated financial information included under “Unaudited Pro Forma Condensed Consolidated Financial Information.” The summary unaudited pro forma condensed consolidated financial data is presented for informational purposes only and should not be considered indicative of actual results of operations that would have been achieved had the foregoing transactions been consummated on the dates indicated, and do not purport to be indicative of statements of financial condition or results of operations as of any future date or for any future period.

The financial statements of Enovation Controls, Inc. have not been presented below as it is a newly incorporated entity, has nominal capitalization, had no business transactions or activities to date, and had no assets or liabilities during the periods presented below. Enovation Controls, LLC will be considered the predecessor of Enovation Controls, Inc. for accounting purposes and the consolidated financial statements of Enovation Controls, LLC will be the historical financial statements of Enovation Controls, Inc. following this offering.


	Pro Forma⁽³⁾	Nine Months Ended September 30,						Pro Forma⁽³⁾
	Nine Months Ended September 30, 2014	Nine Months Ended September 30,						Year Ended December 31, 2013	Year ended December 31,
	Nine Months Ended September 30, 2014	2014			2013			Year Ended December 31, 2013	2013			2012			2011
(in thousands except net income per share and share data)
Consolidated Statement of Operations Data:
Net sales	$	$	215,332		$	194,871		$	$	255,582		$	218,556		$	193,739
Cost of goods sold			124,382			111,376				147,323			137,078			122,069

Gross profit			90,950			83,495				108,259			81,478			71,670

Operating expense:
Selling, general and administrative expenses			64,265			32,506				43,566			36,568			34,708
Research and development expenses			28,707			18,294				23,628			20,429			17,349
Goodwill impairment			—			—				—			6,462			—

Operating expense			92,972			50,800				67,194			63,459			52,057

(Loss) income from operations			(2,022	)		32,695				41,065			18,019			19,613

Other income (expenses)
Interest, net			(830	)		(296	)			(440	)		(482	)		(587	)
Gain on early extinguishment of debt			—			—				—			—			379
Other			7			146				88			251			(387	)

Total other expenses			(823	)		(150	)			(352	)		(231	)		(595	)

(Loss) income before provision for income taxes			(2,845	)		32,545				40,713			17,788			19,018
Provision for income taxes			(1,172	)		(509	)			(793	)		(204	)		(383	)

Net (loss) income		$	(4,017	)	$	32,036			$	39,920		$	17,584		$	18,635

Other comprehensive (loss) income
Foreign currency translation adjustments			(224	)		144				379			468			131
Amounts reclassified from accumulated other comprehensive loss⁽¹⁾			—			—				—			1,143			—

Other comprehensive (loss) income			(224	)		144				379			1,611			131

Comprehensive (loss) income	$	$	(4,241	)	$	32,180		$	$	40,299		$	19,195		$	18,766

Net income attributable to noncontrolling interests	$							$
Net income attributable to controlling interest	$							$

Net income per share:
Basic	$							$
Diluted	$							$

Weighted average shares outstanding:
Basic
Diluted

Other Data:
Adjusted EBITDA⁽²⁾	$	$	40,316		$	37,278		$	$	47,226		$	30,091		$	24,519


	As of September 30, 2014
	Historical			Pro Forma⁽⁴⁾
	(in thousands)
Condensed Balance Sheet Data:
Cash	$	7,070		$

Accounts receivable, net		36,994
Inventories, net		36,012
Property, plant and equipment, net		29,822
Total assets		120,067
Long-term debt (including current portion)		78,410
Total members’/stockholders’ equity attributable to Enovation Controls, Inc.		—
Non-controlling interest		—
Total members’/stockholders’ equity	$	(20,780	)	$

(1)	Reclassification of the foreign currency translation adjustment to income upon the substantially complete liquidation of an investment in a foreign entity.

(2)

We define Adjusted EBITDA as consolidated net income (loss) before depreciation and amortization, interest expense and provision for income tax adjusted for the impact of certain items that we do not consider representative of our ongoing operating performance. Adjusted EBITDA includes adjustments to consolidated net income (loss) before depreciation and amortization, interest expense and provision for income taxes, for impairment of goodwill charges, stock compensation, liability derecognition and Transactions expenses. Because Adjusted EBITDA omits certain non-cash items and other infrequent cash charges, we believe that it is less susceptible to variances in actual performance resulting from depreciation, amortization, other non-cash charges and other infrequent cash charges and is more reflective of our operating performance.

We use Adjusted EBITDA to evaluate and control our cash operating costs and to measure our operating profitability. We believe the presentation of Adjusted EBITDA enhances our investors’ overall understanding of the financial performance and cash flow of our business. We present Adjusted EBITDA because we believe it is useful as a supplemental measure in evaluating the performance of our operating businesses and providing greater transparency into our results of operations. You should not consider Adjusted EBITDA in isolation, nor as an alternative to net income (loss), determined in accordance with GAAP, as an indicator of operating performance, or as an alternative to net cash provided by operating activities, determined in accordance with GAAP, as an indicator of our cash flow. A directly comparable GAAP measure to Adjusted EBITDA is net income (loss). The following is a reconciliation of net income (loss) to Adjusted EBITDA:


	Pro Forma						Pro Forma
	Nine Months Ended September 30, 2014	Nine Months Ended September 30,					Year Ended December 31, 2013	Year ended December 31,
	Nine Months Ended September 30, 2014	2014			2013		Year Ended December 31, 2013	2013		2012		2011
(in thousands)
Net (loss) income	$	$	(4,017	)	$	32,036	$	$	39,920	$	17,584	$	18,635
Plus:
Interest, net			830			296			440		482		587
Provision for income taxes			1,172			509			793		204		383
Depreciation expense			3,091			2,316			3,245		2,441		2,172
Amortization of intangibles			2,149			2,121			2,828		2,918		2,742
Goodwill impairment			—			—			—		6,462		—
Stock compensation			34,631			—			—		—		—
Liability derecognition⁽⁵⁾			(488	)		—
Transactions expenses			2,948			—			—		—		—

Adjusted EBITDA	$	$	40,316		$	37,278	$	$	47,226	$	30,091	$	24,519

Adjusted EBITDA has limitations as an analytical tool, and you should not consider Adjusted EBITDA either in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations are:

•

this measure does not reflect changes in, or cash requirement for, our working capital needs;

•

this measure does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

•

this measure does not reflect our income tax expense or the cash requirements to pay our taxes;

•

this measure does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

•

this measure does not reflect the impact of equity based compensation upon our operations;

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and this measure does not reflect any cash requirements for such replacements; and

•

other companies may calculate this measure differently so our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

(3)

Pro forma amounts give effect to: (i) the Transactions as described in “The Transactions,” which includes the reorganization transactions and the sale of shares in this offering (excluding shares issuable upon exercise of the underwriters’ option to purchase additional shares) and the application of the net proceeds from this offering as described in “Use of Proceeds,” (ii) the tax receivable agreement we will enter into with the existing Common Unitholders, (iii) a one-time special distribution of $60.0 million to Murphy Group and EControls Group and borrowings of $85.5 million under our senior credit facility to pay this distribution and repay existing debt, which occurred on June 30, 2014, (iv) the sale of certain assets used to produce wire harnesses to a company jointly owned by Kennon Guglielmo, our Chief Technology Officer, and Frank W. Murphy III, our Executive Chairman, on September 15, 2014, and (v) the purchase of our San Antonio facility on July 25, 2014 from a third-party entity by a company jointly owned by Messrs. Guglielmo and Murphy, in each case as if they had been completed as of January 1, 2013, with respect to the unaudited pro forma condensed consolidated statements of operations, and September 30, 2014, with respect to the unaudited pro forma condensed consolidated balance sheet. As a result of the purchase described in the foregoing item (v), the company jointly owned by Messrs. Guglielmo and Murphy must be accounted for as a variable interest entity which will result in the cost of the San Antonio facility, accumulated depreciation, mortgage debt and related depreciation and interest expense being consolidated (and the related rent expense being eliminated) in our financial statements.

(4)

(5)

We derecognized a deferred rent liability of $488,000 and recorded income as a result of the purchase of our San Antonio Farinon facility by GTD Development, LLC, an entity owned by Kennon Guglielmo, our Chief Technology Officer, and Frank W. Murphy III, our Executive Chairman, and accounted for as a variable interest entity, which purchase released us from our lease obligation with a third party. See Note 12—“Variable Interest Entity” to our consolidated financial statements included in this prospectus.

RISK FACTORS

Any investment in our Class A Shares involves a high degree of risk. You should carefully consider the risks described below and all of the information contained in this prospectus, including the consolidated financial statements and the related notes thereto appearing at the end of this prospectus, before deciding whether to invest in our Class A Shares. If any of the following risks actually occur, our business, financial condition and results of operations may be adversely affected. In such an event, the value of our Class A Shares could decline and you could lose some or all of your investment.

Risks Related to Our Business Operations

If one or more of the favorable industry trends we have identified fails to occur, or occurs at a slower rate than expected, our business will be adversely affected.

Our operational strategy is premised on a number of favorable industry trends, including: (i) expected significant global increase in the production of and demand for natural gas supported by attractive cost, environmental, and geopolitical benefits relative to other hydrocarbon fuels, (ii) anticipated growth in demand for advanced natural gas compression system controls in oil and gas applications driven by increased shale and tight formation production in the U.S. and globally, (iii) global adoption of commercial NGVs, due to significant economic and environmental advantages, (iv) increasingly stringent global emissions regulations driving demand for advanced engine technologies that enable lower emissions, greater fuel economy, and regulatory compliance and (v) widespread adoption of advanced digital control solutions which integrate technologies such as high resolution displays, configurable software GPS navigation telematics, vehicle management systems, and diagnostics to improve engine safety, energy efficiency, performance, and reliability with less dependence on operator skill. If one or more of these expected industry trends fails to occur, or occurs at a slower rate than expected, our sales growth will be negatively impacted and our business will be adversely affected.

If we are unable to continue our technological innovation and successful introduction of new commercial products, our business will be adversely affected.

The industries we serve experience ongoing technological change and product improvement. Manufacturers periodically introduce new generations of products or require new technological capacity to develop customized products or to respond to industry developments or needs. Our future growth will depend on our ability to gauge the direction of the commercial and technological progress in our markets, as well as our ability to acquire new product technologies or to fund and successfully develop, manufacture and market products in this constantly changing environment. We must continue to identify, develop, manufacture and market innovative products on a timely basis to replace existing products in order to maintain our profit margins and competitive position. We may not be successful in acquiring and developing new products or technologies and any of our new products may not be accepted by our customers. If we fail to keep pace with evolving technological innovations in the markets we serve, our business will be adversely affected.

The market for natural gas engines may not develop according to our expectations and, as a result, our business may not grow as planned and our business plan may be adversely affected.

Our future growth depends in part upon the market for engines using natural gas. However, we cannot assure you that we have accurately predicted the likelihood that emission regulations will be implemented, the potential impact of any new emission regulations, which we believe will increase the desirability of natural gas engines, or the likelihood that our customers or potential customers would increase the adoption of natural gas engines in response to any such regulations. In addition, to the extent that engine manufacturers are able to design and produce emission-compliant engines that use gasoline or diesel fuel at a lower price than we currently expect, engines using traditional fuels will be more competitive with natural gas engines, and customers and potential customers may be less likely to adopt engines using natural gas. Furthermore, even if natural gas

engines are increasingly adopted, we cannot assure you that engines actually using our products would capture any portion of this potential market size increase. If the commercial truck and bus market fails to adopt natural gas engines as we anticipate, or adopts them more slowly than we anticipate, the sales of our products used in connection with such engines, and therefore our business, could be materially adversely affected.

Fuel price differentials among natural gas, diesel and gasoline fuels are hard to predict and may be less favorable in the future.

As a provider of engine control systems specializing in natural gas, we depend on our customers and potential customers choosing natural gas systems. The acceptance of natural gas driven engines by our customers and potential customers depends in part on the price differential among natural gas, diesel, and gasoline fuels. A change in the price differential among these fuels could make natural gas less attractive to our customers and potential customers, which could harm our results. The relative price of natural gas is affected by many factors, including changes in the resource base for natural gas compared with crude oil, availability of shale gas, pipeline transportation capacity for natural gas, refining capacity for crude oil, and government excise and fuel tax policies. There can be no assurance that natural gas will remain less expensive than diesel and gasoline fuels. Moreover, the recent significant volatility in oil and gasoline prices demonstrates that it is difficult to predict future transportation fuel costs. In addition, any new regulations imposed on natural gas extraction in the United States, particularly on extraction of natural gas from shale formations, could increase the costs of domestic gas production, which could lead to substantial increases in the price of natural gas. Reduced prices for gasoline and diesel fuel may cause potential customers to delay or reject converting their fleets to run on natural gas. If the relative price of natural gas increases, this could impact potential customers’ decisions to adopt natural gas as an energy solution, which in turn could materially impact our profitability and results of operations.

Our growth is partly dependent on global natural gas refueling infrastructure that may not be developed.

Our target markets currently have relatively limited infrastructure to deliver natural gas to vehicle-based consumers in compressed (CNG) or liquefied (LNG) form. By contrast, gasoline and diesel fueling stations and service infrastructure are widely available in our target markets. For NGV fuels to achieve more widespread use in our target markets, in particular in the U.S., they will require a promotional and educational effort and the development and supply of more NGVs and fueling stations. This will require significant additional investments and significant continued effort by us, our peers in the natural gas industry, the government, and clean air groups. We cannot assure you that the availability of natural gas as a vehicle fuel will expand or that refueling stations will be built to meet projected demand. Companies may not be willing to invest capital to develop refueling stations and distribution facilities unless they believe there will be demand for such stations, and such demand will depend on such stations being available. If customers are unable to obtain natural gas fuel conveniently and affordably, a mass market for vehicles powered by our technology is unlikely to develop, which could have a material adverse effect on our results of operations.

Changes in laws or government regulations regarding hydraulic fracturing could increase the cost of natural gas exploration and production, limit the areas in which such exploration and production may occur, which could adversely impact the demand for our products and solutions.

Demand for our products and solutions is driven in part by the increased natural gas production resulting from hydraulic fracturing. Presently, hydraulic fracturing is regulated primarily at the state level, typically by state oil and natural gas commissions and similar agencies. However, hydraulic fracturing is currently under public and governmental scrutiny due to potential environmental and physical impacts, including possible contamination of groundwater and drinking water and possible links to earthquakes, and proposals have been made to enact foreign, federal, state and local legislation and regulations that would increase the regulatory burden imposed on hydraulic fracturing. For example, the U.S. Environmental Protection Agency, or the EPA, has asserted federal regulatory authority over certain hydraulic fracturing activities involving diesel under the Safe Drinking Water Act, issued new air emission controls for oil and natural gas production and natural gas processing operations, initiated a study to examine the potential impacts of hydraulic fracturing on drinking water

resources, and intends to propose standards for wastewater discharges from oil and gas extraction activities and regulations that would require companies to disclose information regarding hydraulic fracturing. The U.S. Congress continues to consider amending the Safe Drinking Water Act such that all hydraulic fracturing activities would become subject to it. The U.S. Department of the Interior has proposed a rule that would regulate hydraulic fracturing activities on federal lands. Moreover, many foreign, state and local governments have enacted requirements relating to hydraulic fracturing, including imposing operational restrictions, disclosure requirements and moratoria on hydraulic fracturing activity.

If new foreign, federal, state or local laws or regulations that significantly regulate or restrict hydraulic fracturing are adopted, such legal requirements could result in delays, eliminate certain drilling and injection activities and make natural gas exploration and production more difficult or costly. Any such regulations limiting or prohibiting hydraulic fracturing could reduce natural gas exploration and production activities and, therefore, materially and adversely affect the demand for our products and solutions.

We currently face, and will continue to face, significant competition, which could materially and adversely affect us.

Our products face, and will continue to face, significant competition, including from incumbent technologies, and in particular increased competition from alternative products supplied by our competitors to natural gas engine OEMs. As the market for natural gas engine products continues to grow, this competition may increase. New developments in technology may negatively affect the development or sale of some or all of our products or make our products uncompetitive or obsolete. Other companies, many of which have substantially longer operating histories and larger customer bases, name recognition, and financial and marketing resources than we do, are currently engaged in the development of products and technologies that are similar to, or may compete with, certain of our products and technologies.

We sell products into competitive markets. In the Vehicle market, our gaseous engine control solutions compete in markets worldwide based on technology, emissions capability, durability, quality, cost, manufacturing capabilities, and the technical expertise of our engineering support team. In this market, our primary competitors are Woodward and Fuel System Solutions, and we also compete to a lesser extent with Westport Innovations. In the Energy market, we are a key supplier of integrated engine and application controls for engine-driven natural gas compressors, power units, pumps, and generators. In this market, our primary competitor is Hoerbiger Engine Solutions (Altronic). Within our primary markets, we compete with a range of companies that offer certain individual components of our full system solutions. The components of our overall systems most commonly include displays, panels, sensors, valves, and other end-devices. These competitors include Wachendorff, LOFA, Controls Inc., EMIT, and Kenco.

We also face competition from customers developing products internally. Customers for our products generally have substantial technological capabilities and financial resources. Some customers have traditionally used these resources to develop their own products internally. The future prospects for our products are dependent upon our customers’ acceptance of our products as an alternative to their internally developed products. Future sales prospects also are dependent upon acceptance of third-party sourcing for products as an alternative to in-house development. Customers may in the future continue to use internally developed components. They also may decide to develop or acquire products that are similar to, or that may be substituted for, our products. If our customers fail to accept our products as an alternative, if they develop or acquire the technology to develop such products internally rather than purchase our products, or if we are otherwise unable to develop or maintain strong relationships with them, our business, financial condition and results of operations would be materially and adversely affected.

Competition for our products may come also from new alternative power technologies or improvements to current power technologies. Each of our target markets is currently serviced by existing manufacturers with existing customers and suppliers using proven and widely accepted technologies. Many existing manufacturers have or had natural gas engine development programs and could develop new engines without our help or

components, using more conventional technologies or technologies from competitive companies. Additionally, there are competitors working on developing technologies such as cleaner diesel engines, bio-diesel, fuel cells, advanced batteries and hybrid battery/internal combustion engines, and new fuels in each of our targeted markets. Each of these competitors has the potential to capture market share in various markets, which could have a material adverse effect on our position in the industry and our financial results. For our products to be successful against competing technologies, especially diesel engine technology, they must offer advantages in one or more of these areas: regulated or un-regulated emissions performance, including CO₂ reduction; fuel economy; fuel cost; engine performance; power density; engine and fuel system weight; and engine and fuel system price. There can be no assurance that our products will be able to offer advantages in all or any of these areas. Improvements in technology, including diesel engine technology, may have an adverse impact on the attractiveness of natural gas engines and our products.

Competitive actions, such as price reductions, consolidation in the industry, improved delivery and other actions, could adversely affect our revenue and earnings. We could experience a material adverse effect to the extent that our competitors are successful in reducing our customers’ purchases of products and services from us. Competition could also cause us to lower our prices, which could reduce our margins and profitability.

We derive a significant portion of our revenue from a limited number of major customers, and our revenue, profitability and cash flows could be materially adversely affected if we are unable to maintain relationships with these customers, or if their demand for our products decreases.

Historically, we have derived a significant portion of our revenue from a limited number of major customers. For the years ended December 31, 2013, 2012, and 2011, sales to our top ten customers accounted for approximately 49%, 47%, and 46%, respectively, of our revenue, and in 2013, 2012 and 2011, one customer, Guangxi Yuchai Machinery Group Co., Ltd., accounted for 12%, 13%, and 11%, respectively, of our revenue. It is likely that one or more customers will continue to contribute a significant portion of our revenue in any given year for the foreseeable future. If any of our significant customers were to change suppliers, in-source production, institute significant restructuring or cost-cutting measures, or experience financial distress, these significant customers may substantially reduce purchases from us. Accordingly, our revenue could decrease significantly, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

We rely significantly on trade secrets, including unpatented software algorithms, know-how, technology, and other proprietary information, to maintain our competitive position. We seek to protect software algorithms through encryption mechanisms in the distribution of our binary files used in programming our engine control products. However, we cannot guarantee that these encryption techniques can protect all or any portion of these binary files. In practice, we seek to protect our trade secrets by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. In practice, we also enter into confidentiality and noncompetition agreements with certain of our employees and consultants that obligate them to assign to us any inventions developed in the course of their work for us. However, we cannot guarantee that we have executed these agreements with each party that may have or have had access to our trade secrets or that the agreements we have executed will provide adequate protection. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. As a result, we may be forced to bring claims against third parties, or defend claims that they bring against us, to determine ownership of what we regard as our intellectual property. Monitoring unauthorized disclosure is difficult and we do not know whether the procedures we have followed to prevent such disclosure are, or will be, adequate. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the

outcome is unpredictable. In addition, some courts inside and outside the U.S. may be less willing or unwilling to protect trade secrets. If any of our trade secrets were to be disclosed to, or independently developed by, a competitor, our competitive position would be harmed.

We have obtained and applied for some U.S. and foreign trademark and patent registrations and will continue to evaluate the registration of additional trademarks and patents, as appropriate. The key issued patents in our patent portfolio are scheduled to expire between 2015 and 2030. We cannot guarantee that any of our pending patent and trademark applications will be approved. Moreover, even if the applications are approved, third parties may seek to oppose or otherwise challenge them. An inability to obtain registrations in the United States or elsewhere could limit our ability to protect our trademarks and technologies and could impede our business. Further, the protection of our intellectual property rights may require expensive investment in protracted litigation and substantial management time, and there is no assurance we ultimately would prevail or that a successful outcome would lead to an economic benefit that is greater than the investment in the litigation. Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

We may also face difficulties protecting our intellectual property rights in foreign countries. The laws of foreign countries in which our products are sold or manufactured may not protect our intellectual property rights to the same extent as the laws of the U.S. For example, we are increasing our manufacturing capabilities and sales in China, where laws may not afford the same intellectual property protections.

Our use of open source software may expose us to additional risks.

We use open source software in our business, including in some of our products. While we try to monitor all use of open source software in our business to ensure that no open source software is used in such a way as to require us to disclose the source code to critical or fundamental elements of our software or technology, we cannot be certain that such use may not have inadvertently occurred in deploying our solutions. Furthermore, the terms of many open source licenses have not been interpreted by U.S. courts. As a result, there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products. The risks associated with usage of open source software cannot be eliminated and could potentially have a material adverse effect on our business, financial condition, and results of operations.

If we are alleged to have infringed upon the intellectual property rights owned by others, our business and results of operations could be materially adversely affected.

Competitors or other third parties may allege that we, or consultants or other third parties retained or indemnified by us, infringe on their intellectual property rights. We also may face allegations that our employees have misappropriated intellectual property rights of their former employers or other third parties. From time to time, we receive notices from other companies that allege we may be infringing certain of their patents or other

rights. If we are unable to resolve these matters satisfactorily, or to obtain licenses on acceptable terms, we may face litigation. Given the potential risks and uncertainties of intellectual property-related litigation, an assertion of an infringement claim against us may cause us to spend significant amounts to defend the claim (even if we ultimately prevail), pay significant money damages, lose significant revenues, be prohibited from using the relevant technologies or other intellectual property rights, cease offering certain products or services, or incur significant license, royalty, or technology development expenses. Even in instances where we believe that claims and allegations of intellectual property infringement against us are without merit, defending against such claims is time consuming and expensive and could result in the diversion of time and attention of our management and employees. In addition, although in some cases a third party may have agreed to indemnify us for such costs, such indemnifying party may refuse or be unable to uphold its contractual obligations.

Increased IT security threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, solutions and services.

We are dependent on various information technologies throughout our company to administer, store and support multiple business activities. Increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. While we attempt to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, our systems, networks, products, solutions, and services remain potentially vulnerable to advanced persistent threats. Depending on their nature and scope, such threats could potentially lead to the compromising of confidential information, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes, and operational disruptions, which in turn could adversely affect our reputation, competitiveness, and results of operations.

Due to the nature of our business and products, we may be liable for damages based on product liability, other tort, and warranty claims.

We face an inherent risk of exposure to claims in the event that the failure, use or misuse of our products results, or is alleged to result, in death, bodily injury, property damage, or economic loss. In the past we have been subject to product liability claims relating to our products, and we may be subject to additional product liability claims in the future for both past and current products.

Although we currently maintain product liability coverage, which we believe to be adequate for the continued operation of our business, such insurance may become difficult or impossible to obtain in the future on terms acceptable to us. Moreover, our insurance coverage includes customary exclusions and conditions, may not cover certain specialized applications, and generally does not cover warranty claims. A successful product liability claim or series of claims against us, including one or more consumer claims purporting to constitute class actions or claims resulting from extraordinary loss events, in excess of or outside our insurance coverage, or a significant warranty claim or series of claims against us, could materially decrease our liquidity, impair our financial condition and adversely affect our results of operations. Furthermore, regardless of the outcome, product liability claims can be expensive to defend, can divert the attention of management and other personnel for significant periods of time, and can cause reputational damage.

Our profitability may suffer if we experience changes in product mix as a result of sales increases or decreases.

We sell products that have varying profit margins, and increases or decreases in sales of our various products may change the mix of products that we sell during any period. While we have experienced high profit margins in the past, if our products and solutions with lower profit margins drive a greater proportion of our revenue in the future, our profitability would be reduced and our financial condition, results of operations, and cash flows may be negatively affected.

We do not have contracts with most of our suppliers. The loss of a significant supplier would require us to rely more heavily on our other existing suppliers or to develop relationships with new suppliers. Such a loss may have an adverse effect on our product offerings and our business.

Given the nature of our business, and consistent with industry practice, we do not have contracts with most of our suppliers. We generally make our purchases through purchase orders. Therefore, most of our suppliers have the ability to terminate their relationships with us at any time. Approximately 54%, 40%, 40%, and 45% of our total purchases for the nine months ended September 30, 2014 and for the years ended December 31, 2013, 2012, and 2011, respectively, were from our top ten suppliers. Although we believe there are numerous manufacturers with the capacity to supply the products we distribute, the loss of one or more of our major suppliers could adversely affect our ability to timely obtain the supplies we need to meet our production needs or have an adverse effect on our product offerings and our business. Such a loss would require us to rely more heavily on our other existing suppliers or develop relationships with new suppliers, which may cause us to pay higher prices for products due to, among other things, a loss of volume discount benefits currently obtained from our major suppliers.

Some of our products contain magnets that use rare earth metals, and unavailability or limited supply of these metals could delay production of our products or increase our production costs.

Some of our products contain magnets that use rare earth metals sourced from China. Although such rare earth metals are available from other sources, these alternative sources may be more costly. Reduced availability of such rare earth metals from China through additional export regulations or restrictions, export quotas, tariffs, or for other reasons could impact our ability to obtain magnets that use the required rare earth metals in sufficient quantities, in a timely manner, or at a commercially reasonable cost. In the event that China’s actions cause our suppliers to seek alternate sources of supply for rare earth metals, it could cause a delay in the production of our products that contain magnets using rare earth metals and increase the cost to us of such magnets, thereby reducing or eliminating our profit margin on certain of our products if we are unable to pass the increase in our production costs on to our customers. Increasing prices to our customers due to escalating costs of rare earth metals may reduce demand for our products.

Suppliers may be unable to provide us with materials of sufficient quality or quantity required to meet our production needs at favorable prices or at all.

We are dependent upon suppliers for parts and raw materials used in the manufacture of components that we sell to our customers, and our raw material costs are subject to commodity market fluctuations. We may experience an increase in costs for parts or raw materials that we source from our suppliers, or we may experience a shortage of parts or raw materials for various reasons, such as the loss of a significant supplier, high overall demand creating shortages in parts and supplies we use, financial distress, work stoppages, natural disasters, fluctuations in commodity prices, or production difficulties that may affect one or more of our suppliers. In particular, current or future global economic uncertainty may affect our key suppliers in terms of their operating cash flow and access to financing. This may in turn affect their ability to perform their obligations to us. In addition, quality and sourcing issues that our suppliers may experience can also adversely affect the quality and effectiveness of our products and services and may result in liability or reputational harm to us. Our customers rely on us to provide on-time delivery and have certain rights if our delivery standards are not maintained. A significant increase in our supply costs, including for raw materials that are subject to commodity price fluctuations, or a protracted interruption of supplies for any reason, could result in the delay of one or more of our customer contracts, or could damage our reputation and relationships with our customers. Any of these events could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws and regulations.

The U.S. Foreign Corrupt Practices Act, or the FCPA, and similar anti-bribery laws and regulations in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S.

government officials for the purpose of obtaining or retaining business or securing an improper business advantage. Our policies mandate compliance with these anti-bribery laws. We operate in certain countries that have experienced corruption to some degree. If we are found to be liable for FCPA or other similar anti-bribery law or regulatory violations, whether due to our or others’ actions or inadvertence, we could be subject to civil and criminal penalties or other sanctions that could have a material adverse impact on our business, financial condition, results of operations, and cash flows.

Governmental energy policies could change, or expected changes could fail to materialize, which could adversely affect our business or prospects.

Energy policy can develop rapidly in the markets we serve, including North America, Asia, and Europe. Within the last few years, significant developments have taken place, primarily in international markets that we serve with respect to energy policy and related regulations. We anticipate that energy policy will continue to be an important regulatory priority globally as well as on a national, state and local level. As energy policy continues to evolve, the existing rules and incentives that impact the energy-related segments of our business may change. It is difficult, if not impossible, to predict whether changes in energy policy might occur in the future and the timing of potential changes and their impact on our business.

We sell components and systems that have been designed to meet strict emission standards, including standards that have not yet been implemented but are expected to be implemented soon. We also benefit from certain environmental regulations including those that restrict the sale of engines that do not meet emission standards, fine the sellers of non-compliant engines, tax the operators of diesel engines and require the use of more expensive ultra-low sulphur diesel fuel. Incumbent industry participants with a vested interest in gasoline and diesel, many of which have substantially greater resources and political influence than we do, may invest significant time and money in an effort to influence environmental regulations in ways that delay or repeal requirements for clean vehicle emissions. If these emission standards or other regulations are eased, our products may become unnecessary and/or our future sales could be lower as potential customers select alternative products or delay adoption of our products. The elimination or reduction of favorable policies for our energy-related business, or the failure of governments to adopt expected policies that would benefit our business, could therefore negatively impact our business, financial condition, results of operations, and cash flows. In addition, demand for our products and services may be adversely affected by the perception that emission regulations will be suspended or delayed. Accordingly, we rely on stricter emissions regulations, the adoption of which are out of our control and cannot be assured, to stimulate our growth.

Our business depends in part on environmental regulations and programs in China that promote the use of cleaner burning fuels, including natural gas, for vehicles. In order to meet the demand for natural gas, the Chinese government has encouraged private investment in the necessary transportation, distribution and sales infrastructure for natural gas. Any delay, repeal, or modification of these regulations or programs that encourage the use of natural gas for vehicles could have a detrimental effect on the Chinese natural gas industry, which, in turn, could slow our growth and materially and adversely affect our business.

We face risks associated with conducting business in markets outside of North America.

Since we manufacture and sell our products worldwide, our business is subject to risks associated with doing business internationally. For the nine months ended September 30, 2014 and the years ended December 31, 2013, 2012, and 2011, 24%, 30%, 30%, and 30%, respectively, of our sales were made in markets outside of North America. Our future results could be harmed by a variety of factors, including:

•

changes in the political and economic conditions in the countries in which we operate, including civil uprisings and terrorist acts;

•

unexpected changes in regulatory requirements;

•

the imposition of duties and tariffs and other trade barriers;

•

import and export controls;

•

potentially negative consequences from changes in U.S. and international tax laws;

•

fluctuations in currency exchange rates and the value of the U.S. dollar;

•

exchange controls and currency restrictions;

•

expropriation of property without fair compensation;

•

governmental actions that result in the deprivation of contract or proprietary rights;

•

the acceptance of business practices which are not consistent with or are antithetical to prevailing business practices we are accustomed to in the United States, including export compliance and anti-bribery practices and governmental sanctions;

•

difficulty in staffing and managing geographically widespread operations;

•

the unionization of, or increased union activity, such as strikes or work stoppages, with respect to, our workforce outside the U.S.;

•

differing labor regulations;

•

requirements relating to withholding taxes on remittances and other payments by subsidiaries;

•

different regulatory regimes controlling the protection of our intellectual property;

•

difficulty in enforcement of contractual obligations under non-U.S. law;

•

refusal or inability of foreign banks to make payment on letters of credit in connection with foreign sales, and our inability to collect from our foreign customers in such circumstances;

•

restrictions on our ability to own or operate subsidiaries, repatriate dividends or earnings from our foreign subsidiaries, or to make investments or acquire new businesses in these jurisdictions; and

•

the burden of complying with multiple and potentially conflicting laws.

Our international operations and sales also expose us to different local political, regulatory, and business risks and challenges. For example, we are faced with potential difficulties in staffing and managing local operations and we have to design local solutions to manage credit and legal risks of local customers and distributors, which may not be effective. In addition, because some of our international sales are to suppliers that perform work for foreign governments, we are subject to the political risks associated with foreign government projects. For example, certain foreign governments may require suppliers for a project to obtain products solely from local manufacturers or may prohibit the use of products manufactured in certain countries. Moreover, we plan to open our China Enovation Center in 2015, co-located with our manufacturing operations in Hangzhou, China. The opening of this facility is subject to various risks and uncertainties, including delays in securing necessary permits and/or licenses, which in turn could result in higher than expected costs.

International growth and expansion into markets such as Europe, Asia, and Latin America may cause us difficulty due to greater regulatory barriers than in the United States, the necessity of adapting to new regulatory systems, problems related to entering new markets with different economic, social and political systems and conditions, and significant competition from the primary participants in these markets, some of which may have substantially greater resources and political influence than we do. For example, unstable political conditions or civil unrest could negatively impact our order levels and sales in a region or our ability to collect receivables from customers or operate or execute projects in a region.

Our international operations and transactions also depend upon favorable trade relations between the United States and those foreign countries in which our customers and suppliers have operations. A protectionist trade environment in either the United States or those foreign countries in which we do business or sell products, such as a change in the current tariff structures, export compliance, government subsidies, or other trade policies, may

adversely affect our ability to sell our products or do business in foreign markets. Our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social, and political conditions. We may not succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where we do business and the foregoing factors may cause a reduction in our sales, profitability, or cash flows, or cause an increase in our liabilities.

Successful execution of our marketing strategy in China depends in part on our relationship with AMICO.

We depend in part on our partner AMICO to help us execute our current strategy in China. AMICO assists us with marketing our products in China by introducing us to potential customers, providing technical service support to our existing customers with respect to our engine control systems and advising us on local rules and regulations. We have operated with AMICO in the past under several successive contractual agreements and currently operate under a contractual agreement which expires in September 2018. Any change in our relationship with AMICO, whether as a result of economic or competitive pressures or otherwise, including any decision by AMICO to reduce their commitment to our products and technology in favor of competing products or technologies, or to change or seek to change the terms of our contractual relationship, could have a material adverse effect on our business and financial results.

Fluctuations in exchange and interest rates may affect our operating results and impact our financial condition.

Fluctuations in the value of the U.S. dollar may increase or decrease our sales or earnings. Because our consolidated financial results are reported in U.S. dollars, if we generate sales or earnings in other currencies, or if we pay expenses in other currencies, the translation of those results into U.S. dollars can result in a significant increase or decrease in the amount of those sales or earnings. We also bid for certain foreign projects in U.S. dollars. If the U.S. dollar strengthens relative to the value of the local currency, we may be less competitive on those projects. In addition, our debt service requirements are primarily in U.S. dollars and a portion of our cash flow is generated in yuan, euros or other foreign currencies. Significant changes in the value of the foreign currencies relative to the U.S. dollar could impair our cash flow, results of operations, and financial condition.

In addition, fluctuations in currencies relative to the U.S. dollar may make it more difficult to perform period-to-period comparisons of our reported results of operations. For purposes of accounting, the assets and liabilities of our foreign operations, where the local currency is the functional currency, are translated using period-end exchange rates, and the revenues and expenses of our foreign operations are translated using average exchange rates during each period. For example, we have material yuan-denominated net monetary assets and liabilities. If economic circumstances result in a significant devaluation of the yuan, the value of our yuan-denominated net monetary assets and liabilities would be correspondingly reduced when translated into U.S. dollars for inclusion in our financial statements. In such a case, our business, results of operations, financial condition, and liquidity could be materially adversely affected.

In addition to currency translation risks, we incur currency transaction risk whenever we enter into either a purchase or a sales transaction using a currency other than U.S. dollars. Given the volatility of exchange rates, we may not be able to effectively manage our currency and/or translation risks. Volatility in currency exchange rates may decrease our sales and profitability and impair our financial condition. Though we periodically evaluate our need to hedge our exposures to foreign currencies, we have not hedged any such exposures to date.

Customer credit risks could result in losses.

The concentration of our customers in the energy industry and trucking industry may impact our overall exposure to credit risk as customers may be similarly affected by prolonged changes in economic and industry conditions. Further, laws in some jurisdictions in which we operate could make collection difficult or time

consuming. We perform ongoing credit evaluations of our customers and do not generally require collateral in support of our trade receivables. While we maintain reserves for expected credit losses, we cannot assure you that these reserves will be sufficient to meet write-offs of uncollectible receivables or that our losses from such receivables will be consistent with our expectations.

In addition, a significant portion of our sales in China are supported by notes receivable issued by Chinese banks. These notes receivable are banker’s acceptance drafts drawn on reputable Chinese banks which we endorse as commercial paper and use to pay our suppliers in lieu of paying with cash. Should one or more of these banks refuse or be unable to make payment on such notes receivable, our supplier would have recourse against us. While we would have recourse against our customers in such an event, we may not be successful in collecting any amounts owed from our customers.

Unionization of employees, or the creation of works councils or similar arrangements, at our domestic and foreign facilities could result in increased risk of work stoppages and high labor costs.

With the exception of certain employees located in China that are members of a union in accordance with national and local law, our employees are not members of any union. Moreover, we are not currently party to any collective bargaining agreement. However, there may be efforts in the future to unionize our employees or create works councils or similar arrangements at our domestic and foreign manufacturing and distribution facilities. This possibility is heightened in certain foreign countries where unionization (or the formation of works councils or similar arrangements permitted by applicable foreign laws and regulations) is more common than in the U.S. If employees at our domestic or foreign manufacturing or distribution facilities were to unionize, or if a works council or similar arrangement with respect to such employees were to be formed, our relationship with our employees could be adversely affected. We would also face an increased risk of work stoppages and higher labor costs. Accordingly, unionization of our employees (or the formation of works councils or similar arrangements with respect to our employees) could have a material adverse impact on our operating costs and financial condition and could force us to raise prices on our products, curtail operations, or relocate all or a portion of our operations.

Industry consolidation trends could reduce our sales opportunities, decrease sales prices, and drive down demand for our products.

There has been consolidation and there may be further consolidation in the gas compressor, heavy truck and engine industries. The consolidation in these industries could result in fewer customers with increased buying power that may result in downward pressure on the prices we are able to charge for our products and solutions, and fewer customers may also result in decreased sales opportunities and demand for our products and solutions. Furthermore, consolidation among our peers could heighten the impacts of the competition on our business and results of operations discussed above, particularly if consolidation results in competitors with stronger financial and strategic resources and could also result in increases to the prices we are required to pay for acquisitions we may make in the future. Accordingly, consolidation in the gas compressor, heavy truck, and engine industries, or among our competitors, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our consolidated affiliated entities in China are audited by auditors who are not inspected by the Public Company Accounting Oversight Board and, as such, you are deprived of the benefits of such inspection.

Publicly traded companies in the United States are audited by independent registered public accounting firms registered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Because the auditors of our consolidated affiliated entities in China are located in China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, such auditors are not currently inspected by the PCAOB. On May 24, 2013, the PCAOB announced that it had entered into a memorandum of understanding on enforcement

cooperation with the China Securities Regulatory Commission and the Ministry of Finance of China that establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations in the United States and China. However, direct PCAOB inspections of independent registered accounting firms in China are still not permitted by Chinese authorities. This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating Chinese auditors’ audits and quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

Our product development activities may not be successful or may be more costly than currently anticipated, or we may not be able to produce newly developed products at a cost that meets the anticipated product cost structure.

Our business involves a significant level of product development activities, generally in connection with our customers’ development activities. Industry standards, customer expectations, or other products may emerge that could render one or more of our products or services less desirable or obsolete. Maintaining our market position requires continued investment in research and development. During an economic downturn or a subsequent recovery, we may need to maintain our investment in research and development, which may limit our ability to reduce these expenses in proportion to a sales shortfall. In addition, increased investments in research and development may divert resources from other potential investments in our business, such as acquisitions or investments in our facilities, processes and operations. If these activities are not as successful as currently anticipated, are not completed on a timely basis, or are more costly than currently anticipated, or if we are not able to produce newly developed products at a cost that meets the anticipated product cost structure, then our future sales, margins and/or earnings could be lower than expected, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The unpredictability of customer orders, long sales cycle, customer evaluation process and implementation period of our products and services may increase the costs of obtaining orders and reduce the predictability of sales cycles and our inventory requirements.

Generally, our product sales are made on a purchase order basis, which allows our customers to reduce or discontinue their purchases from us. Accordingly, we cannot predict the timing, frequency, or size of our future customer orders. Our ability to accurately forecast our sales is further complicated by the current global economic and financial uncertainty. If we fail to anticipate the changing needs of our customers and accurately forecast our customer demands, our existing and potential customers may not place orders with us, which would decrease our revenue, and we may accumulate significant inventories of products that we will be unable to sell, which may result in a significant decline in the value of our inventory. As a result, our revenue, gross profit and other operating results and cash flows may be materially and adversely affected. We may continue to make significant investments in our business without any guarantees or long-term commitments from our customers that they will continue to purchase our components and systems with the same timing, frequency and size as we expect. As a result, if there is insufficient demand for our components and systems, we may not recover the costs of any increased investment in our operations, which could have a material, adverse effect on our financial position, liquidity, and results of operations.

Our products and services are technologically complex. Prospective customers generally must commit significant resources to test and evaluate our products and to install and integrate them into larger systems. Orders expected in one quarter may shift to another quarter or be cancelled with little advance notice as a result of customers’ budgetary constraints, internal acceptance reviews and other factors affecting the timing of customers’ purchase decisions. In addition, customers often require a significant number of product presentations and demonstrations before reaching a sufficient level of confidence in the product’s performance and compatibility to secure the approvals that typically accompany our customers’ capital expenditure approval processes. The difficulty in forecasting demand increases the challenge in anticipating sales cycles and our inventory requirements, which may cause us to over-produce finished goods and could result in inventory write-offs, or could cause us to under-produce finished goods, which may cause us to miss delivery deadlines and

result in monetary penalties or cancellations of orders. Any such over-production or under-production could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Due to the nature of our sales cycle, in periods of sales increases it may be difficult to rapidly increase our production of finished goods, particularly if such sales increases are unanticipated. An increase in the production of our finished goods requires increases in both the purchases of raw materials and components and in the size of our workforce. If a sudden, unanticipated need for raw materials, components and labor should arise in order to meet unexpected sales demand, we could experience difficulties in sourcing raw materials, components, and labor at a favorable cost or to meet our production needs. These factors could result in delays in fulfilling customer sales contracts, damage to our reputation and relationships with our customers, an inability to meet the demands of the markets that we serve, which in turn could prevent us from taking advantage of business opportunities or responding to competitive pressures, and result in an increase in variable and fixed costs leading to a decrease in net earnings or even net losses. In addition, a sudden decrease in sales orders could require us to lay off some of our workforce, which could increase our costs in the short term due to severance payments, and our having to write off excess inventory, leading to a decrease in net earnings or even losses.

Our business is subject to a variety of governmental regulations that may restrict our business and may result in costs and penalties.

We are subject to a variety of federal, state, and local laws and regulations relating to foreign business practices, labor and employment, construction, land use, and taxation, among others. These laws and regulations are complex, change frequently and have tended to become more stringent over time. Failure to comply with these laws and regulations may result in a variety of administrative, civil and criminal enforcement measures, including assessment of monetary penalties and the imposition of corrective requirements. From time to time, as part of the regular overall evaluation of our operations, including newly acquired operations, we may be subject to compliance audits by regulatory authorities. In addition, any failure to comply with regulations related to the government procurement process at the federal, state, or local level or restrictions on political activities and lobbying may result in administrative or financial penalties including being barred from providing services to governmental entities.

Our business is subject to environmental, health, and safety laws, regulations, and permit requirements, which may result in significant costs and liabilities.

We are subject to various foreign, federal, state and local environmental, health, and safety laws and regulations governing, among other things the generation, storage, handling, use and transportation of hazardous materials; the emission and discharge of hazardous materials into the ground, air or water; and employee health and safety. We are also required to obtain permits from regulators for certain operations. If we violate or fail to comply with these laws, regulations, or permits, we could be fined or otherwise sanctioned by regulators. Under certain environmental laws, we could be held responsible for all of the costs relating to any contamination at our past or present facilities and at third-party waste disposal sites, even if we did not know of or cause such contamination. Environmental laws are complex, change frequently and have tended to become more stringent over time. We cannot assure you that our costs of complying with current and future environmental, health, and safety laws, and our liabilities arising from past or future releases of, or exposure to, hazardous substances will not materially adversely affect our results of operations.

Our operations expose us to risks of non-compliance with numerous countries’ import and export laws and regulations.

Due to our significant foreign sales, we are subject to trade and import and export regulations in multiple jurisdictions, including the U.S. Treasury Department’s Office of Foreign Assets Control’s regulations. As a result, compliance with multiple trade sanctions and embargoes and import and export laws and regulations pose a constant challenge and risk to us. Furthermore, the laws and regulations concerning import activity, export

recordkeeping and reporting, export control and economic sanctions are complex and constantly changing. Any failure to comply with applicable legal and regulatory trading obligations could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from governmental contracts, seizure of shipments, loss of import and export privileges, reputational damage, and a reduction in the value of our common stock.

If we lose key personnel, we may be unable to effectively manage our business or continue our growth.

Our future performance depends to a significant degree upon the continued contributions of and our ability to attract, hire, train and retain qualified managerial, marketing, engineering, and operations personnel. The loss or unavailability to us of managerial, marketing, engineering, or operations personnel could have a material adverse effect on us to the extent we are unable to timely find adequate replacements. We compete for these professionals with our customers and other companies operating in our industry, and we may incur significant costs to attract and retain them. If we are unsuccessful in attracting, hiring, training and retaining qualified managerial, marketing, engineering, and operations personnel, this could have a material adverse effect on our business, results of operations, and profitability.

Our existing indebtedness could adversely affect our business and growth prospects.

As of September 30, 2014, we had total indebtedness (including the current portion) of approximately $78.4 million. We will not use any of the proceeds of this offering to repay outstanding debt and therefore will continue to have significant debt service obligations following the completion of this offering. Our indebtedness, or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we will be able to take any of such actions on a timely basis, on terms satisfactory to us or at all.

Our indebtedness, the cash flow needed to satisfy our debt and the covenants contained in our senior credit facility have important consequences, including:

•

limiting funds otherwise available for financing our capital expenditures by requiring us to dedicate a portion of our cash flows from operations to the repayment of debt and the interest on this debt;

•

limiting our ability to incur additional indebtedness;

•

limiting our ability to capitalize on significant business opportunities;

•

placing us at a competitive disadvantage to those of our competitors that are less indebted than we are;

•

making us more vulnerable to rising interest rates; and

•

making us more vulnerable in the event of a downturn in our business.

More specifically, under the terms of our senior credit facility, we have agreed to certain financial covenants. In addition, our senior credit facility places limitations on our ability to make capital expenditures and to acquire other companies. Any failure by us to comply with the financial or other covenants set forth in our senior credit facility in the future, if not cured or waived, could result in our senior lender accelerating the maturity of our indebtedness or preventing us from accessing availability under our senior credit facility. See “Description of Certain Indebtedness.” If the maturity of our indebtedness is accelerated, we may not have sufficient cash resources to satisfy our debt obligations and we may not be able to continue our operations as planned.

We may need additional capital in the future, and it may not be available on acceptable terms, or at all.

We may require additional capital in the future to:

•

fund our operations;

•

finance investments in equipment and infrastructure needed to maintain and expand our manufacturing and distribution capabilities;

•

enhance and expand the range of products we offer; and

•

respond to potential strategic opportunities, such as investments, acquisitions, and international expansion.

We can give no assurance that additional financing will be available on terms favorable to us, or at all. The terms of available financing may place limits on our financial and operating flexibility. If adequate funds are not available on acceptable terms, we may be forced to reduce our operations or to delay, limit or abandon expansion opportunities. Moreover, even if we are able to continue our operations, the failure to obtain additional financing could reduce our competitiveness. Our senior credit facility limits our ability to incur additional debt and therefore we likely would have to issue additional equity to raise additional capital. If we issue additional equity, your interest in us will be diluted.

Regulations related to “conflict minerals” may force us to incur additional expenses and may result in damage to our reputation.

Following this offering, we will be subject to SEC regulations applicable to companies that use certain minerals and metals, known as conflict minerals, in their products or in the production of their products, whether or not these products are manufactured by third parties. These requirements will require us to conduct an inquiry into the country of origin of the conflict minerals used, and if it is determined that the conflict minerals used may have originated in the Democratic Republic of Congo or other covered countries, conduct due diligence on the source and chain of custody of the conflict minerals. These requirements could adversely affect the sourcing, availability and pricing of minerals used in the manufacture of our products. In addition, we will incur additional costs to comply with the disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals used in our products or in the manufacturing process. Since our supply chain is complex, we may not be able to sufficiently verify the origins for these minerals and metals used in our products through the due diligence procedures that we implement, which may harm our reputation. In such event, we may also face difficulties in satisfying customers who require that all of the components of our products be conflict mineral free.

We may fail to successfully acquire or integrate companies that provide complementary products or technologies.

In the future we may seek to acquire businesses that complement our existing products and services. Such a strategy involves the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities, and potential profitability of acquisition candidates and in integrating the operations of acquired companies. In addition, any acquisitions of businesses with foreign operations or sales may increase our exposure to risks inherent in doing business outside the United States. From time to time, we may have acquisition discussions with potential target companies both domestically and internationally. If a large acquisition opportunity arises and we proceed, a substantial portion of our cash and surplus borrowing capacity could be used for the acquisition or we may seek additional debt or equity financing. Any acquisition may or may not occur and, if an acquisition does occur, it may not be successful in enhancing our business for one or more of the following reasons:

•

Any business acquired may not be integrated successfully and may not prove profitable;

•

The price we pay for any business acquired may overstate the value of that business or otherwise be too high;

•

Liabilities we take on through the acquisition may prove to be higher than we expected;

•

We may fail to achieve acquisition synergies; or

•

The focus on the integration of operations of acquired entities may divert management’s attention from the day-to-day operation of our businesses.

Inherent in any future acquisition is the risk of transitioning company cultures and facilities. The failure to efficiently and effectively achieve such transitions could increase our costs and decrease our profitability.

Risks Related to Our Organizational Structure

We will be required to pay Common Unitholders for most of the benefits relating to any additional tax depreciation or amortization deductions we may claim as a result of any tax basis step-up and certain interest deductions we receive in connection with the purchase of Common Units with the proceeds of this offering and in connection with any future exchanges of Common Units for Class A Shares (or cash).

We intend to use all of the net proceeds of this offering to purchase Common Units from the existing members of Enovation Controls, LLC. In addition, as described under “The Transactions—Operating Agreement of Enovation Controls, LLC—Exchange Rights,” Common Unitholders may in the future exchange Common Units (and Class B Shares) for Class A Shares on a one-for-one basis (or, at our option, cash). Enovation Controls, LLC will have in effect an election under Section 754 of the Code, which will result in an adjustment to our share of the tax basis of the assets owned by Enovation Controls, LLC at the time of such initial purchase of and subsequent exchanges of Common Units.

The initial purchase of the Common Units will result in an increase in our share of the tax basis of the tangible and intangible assets of Enovation Controls, LLC that otherwise would not have been available. Similarly, subsequent exchanges of Common Units will result in an increase in our share of the tax basis in the tangible and intangible assets of Enovation Controls, LLC, if the amount of any cash and the fair market value of any Class A Shares received for such Common Units exceeds the exchanging Common Unitholder’s allocable portion of the tax basis in the assets of Enovation Controls, LLC. Any such increases in tax basis will, in turn, create incremental tax deductions that would reduce the amount of tax that we may otherwise be required to pay in the future. These increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

We intend to enter into a tax receivable agreement with all Common Unitholders that will require us to pay them 85% of the amount of cash savings, if any, in U.S. federal, state and local income and franchise tax that we actually realize in any tax year beginning with 2014 from increases in tax basis realized as a result of the initial purchase and any future exchanges by Common Unitholders of their Common Units (and Class B Shares) for Class A Shares (or cash), including increases attributable to payments made under the tax receivable agreement and deductions attributable to imputed interest. We expect to benefit from the remaining 15% of cash savings, if any, in income and franchise tax that we actually realize during a covered tax year. The cash savings in income and franchise tax paid to any such Common Unitholders will reduce the cash that may otherwise be available to us for working capital, capital expenditures, acquisitions, and other general corporate purposes, as well as to make future distributions to holders of Class A Shares, including the investors in this offering.

For purposes of the tax receivable agreement, cash savings in income and franchise tax will be computed by comparing our actual income and franchise tax liability for a covered tax year to the amount of such taxes that we would have been required to pay for such covered tax year had there been (i) no increase to our share of the tax basis of the tangible and intangible assets of Enovation Controls, LLC as a result of the initial purchase and any future exchanges and (ii) no deductions or imputed interest with respect to payments under the tax receivable agreement, and had we not entered into the tax receivable agreement. The tax receivable agreement continues until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the tax receivable agreement upon a change in control for an amount based on the remaining payments expected to be made under the tax receivable agreement or we breach any of our material obligations under the tax receivable

agreement in which case all obligations will generally be accelerated and due. Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors.

While the actual amount and timing of any payments under this agreement will vary depending upon a number of factors (including the timing of exchanges, the amount of gain recognized by an exchanging Common Unitholder, the amount and timing of our income and the tax laws and tax rates in effect at the time any incremental tax deductions resulting from the increase in tax basis are utilized), we expect that the payments that we may make to the Common Unitholders pursuant to the tax receivable agreement could be substantial during the expected term of the tax receivable agreement. After giving effect to the sale of Class A Shares at an assumed offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and subject to various assumptions, including that no changes occur in the current relevant tax law over the term of the tax receivable agreement and that we earn sufficient taxable income to realize the full tax benefits subject to the tax receivable agreement, we currently expect aggregate future payments to the Common Unitholders under the tax receivable agreement in connection with this offering will be approximately $ million. Any future exchanges by the Common Unitholders of their Common Units (and Class B Shares) for our Class A Shares (or cash) would create additional liability under the tax receivable agreement that is not possible to estimate at this time due to the number of factors impacting the calculation. We will bear the costs of implementing the provisions of the tax receivable agreement.

In certain cases, payments under the tax receivable agreement to the Common Unitholders may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement, and if the tax reporting positions we determine are not respected, our tax attributes could be adversely affected and the amount of our tax liabilities could materially increase.

The tax receivable agreement provides that upon certain changes in control, we will be required to pay the Common Unitholders amounts based on assumptions regarding the remaining payments expected to be made under the tax receivable agreement (at our option, these payments can be accelerated into a single payment at the time of the change in control). As a result, we could be required to make payments under the tax receivable agreement that are greater than or less than the specified percentage of the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement, and the upfront payment may be made years in advance of any actual realization of such future benefits. In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity, and there can be no assurance that we will be able to finance our obligations under the tax receivable agreement.

A tax authority may challenge all or part of the tax basis increases or the amount or availability of any tax attributes discussed above, as well as other related tax positions we take, and a court could sustain such a challenge. The Common Unitholders will not reimburse us for any payments previously made to them pursuant to the tax receivable agreement in the event that, due to a successful challenge by the IRS or any other tax authority of the amount of any tax basis increase or the amount or availability of any tax attributes, our actual cash tax savings are less than the cash tax savings previously calculated and upon which prior payments under the tax receivable agreement were based. Instead, any excess cash payments made by us to a Common Unitholder will be netted against any future cash payments that we might otherwise be required to make under the terms of the tax receivable agreement. However, we might not determine that we have effectively made an excess cash payment to the Common Unitholders for a number of years following the initial time of such payment. As a result, in certain circumstances we could make payments under the tax receivable agreement to the Common Unitholders in excess of our cash tax savings. A successful challenge to our tax reporting positions could also adversely affect our other tax attributes and could materially increase our tax liabilities.

Enovation Controls, LLC is currently taxed as a partnership for U.S. federal income tax purposes. As an organization that is classified as a partnership for U.S. federal income tax purposes, Enovation Controls, LLC is

not subject to U.S. federal income tax itself. Rather, each member of Enovation Controls, LLC will be required to report on its income tax return and will be taxed upon its distributive share of each item of Enovation Controls, LLC’s income, gain, loss, deduction, and credit for each taxable year. As a result, each member of Enovation Controls, LLC, including the Common Unitholders and Enovation Controls, Inc., may have a cash income tax obligation with respect to its share of the earnings of Enovation Controls, LLC. Enovation Controls, LLC thus intends to make cash distributions (referred to as tax distributions) to facilitate the payment by the Common Unitholders and Enovation Controls, Inc. in satisfaction of such cash tax obligations. The amended and restated operating agreement of Enovation Controls, LLC requires Enovation Controls, LLC to make pro rata tax distributions to all of its members, including Enovation Controls, Inc., on a quarterly basis by the tenth day of each March, June, September, and December of each taxable year. This tax distribution is distinct from the payment obligations created by the tax receivable agreement. Tax distributions are subject to the availability of sufficient funds and to restrictions or limitations imposed by applicable law or by any agreement by which Enovation Controls, LLC is bound. The tax distributions to the Common Unitholders and Enovation Controls, Inc. will be made at the highest combined marginal federal, state, and local tax rate then applicable (including any Medicare Contribution tax on net investment income) to an individual (or if higher, to a corporation) resident in Tulsa, Oklahoma (assuming the maximum limitations on the use of deductions for state and local taxes), which may require cash to be distributed to the Common Unitholders in excess of the amount that would be paid for taxes if all the earnings were taxed at the Enovation Controls, Inc. effective rate. This could reduce liquidity and the cash available to reinvest in the business.

Control by the Founder Entities of % of the combined voting power of our common stock and the fact that they are holding their economic interest through Enovation Controls, LLC may give rise to conflicts of interest.

Upon consummation of this offering, the Founder Entities will control % of the combined voting power of our common stock. As a result, the Founder Entities will be able to significantly influence and control the outcome of all matters requiring a stockholder vote, including: the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; the amendment of our certificate of incorporation and our bylaws; and our winding up and dissolution. This concentration of ownership may delay, deter or prevent acts that would be favored by our other stockholders or deprive holders of Class A Shares of an opportunity to receive a premium for their Class A Shares as part of a sale of our business.

As long as the Founder Entities and their affiliates control at least a majority of the voting power of our common stock, the Founder Entities and their affiliates will be able to approve all voting matters by written consent and without soliciting the votes of the other Class A Shareholders. Consequently, if the Founder Entities elect to approve matters requiring a stockholder vote by written consent, the Class A Shareholders will only receive information statements setting forth the actions previously taken by the Founder Entities and their affiliates by written consent rather than a proxy statement soliciting their vote on the voting matters.

The interests of the Founder Entities may not always coincide with our interests or the interests of our other stockholders. The Founder Entities have significant relationships which they have developed over the years or may develop in the future and these relationships may affect who we work with to implement our strategy and could be influenced by motivations that may not directly benefit us, subject to applicable fiduciary or contractual duties. Also, the Founder Entities may seek to cause us to take courses of action that, in their judgment, could enhance their investment in us, but which might involve risks to our other stockholders or adversely affect us or our other stockholders, including investors in this offering. This concentration of ownership may adversely affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders. See “Principal Stockholders” and “Description of Capital Stock—Common Stock—Voting Rights.”

In addition, because the Founder Entities hold economic interests in Enovation Controls, LLC directly, rather than through us, the Founder Entities may have conflicting interests with holders of Class A Shares. For

example, the Founder Entities will have different tax positions from the holders of Class A Shares which could influence their decisions regarding whether and when to dispose of assets, when to make distributions for the purpose of allowing us to pay dividends, and whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the tax receivable agreement. In addition, the structuring of future transactions may take into consideration the Founder Entities’ tax considerations even where no similar benefit would accrue to us. Also, Enovation Controls, LLC may sell additional Common Units to its current equity holders or to third parties, which could dilute the indirect aggregate economic interest of the holders of the Class A Shares in Enovation Controls, LLC. Any such issuance would be subject to our approval as the managing member of Enovation Controls, LLC, although the Founder Entities control our board of directors and their principal owners consist of our senior management.

The influence of the Founder Entities over our policies is further enhanced by the terms of the Stockholders Agreement that we intend to enter into with the Founder Entities upon completion of this offering and by the provisions of our amended and restated certificate of incorporation. Under the terms of the Stockholders Agreement, the Founder Entities have the right, subject to certain ownership thresholds, to nominate their respective designees to our board of directors and committees of our board of directors. Each Founder Entity will have the right to designate two members to our board of directors for so long as such Founder Entity owns 10% or more of our outstanding Class A Shares and Class B Shares on a combined basis. The Founder Entities will also have the right to designate one mutually agreed upon additional member to our board of directors. We anticipate that our board of directors will initially have five members and, therefore, the designees of the Founder Entities will constitute the majority of our board of directors. The Founder Entities will agree to vote all of their shares of our common stock to elect such designees to our board of directors. If, at any time, a Founder Entity owns 5% or more but less than 10% of our outstanding Class A Shares and Class B Shares on a combined basis, such Founder Entity will have the right to designate one nominee for election to our board of directors. If a Founder Entity’s ownership level falls below 5% of our outstanding Class A Shares and Class B Shares on a combined basis, such Founder Entity will no longer have any right to designate a nominee and the right of the Founder Entities to mutually designate a mutually agreed upon designee will also terminate. In addition, for so long as the Founder Entities together hold at least 25% of the outstanding Class A Shares and Class B Shares on a combined basis, certain actions may not be taken without the prior written consent of each Founder Entity owning at least 5% of the outstanding Class A Shares and Class B Shares on a combined basis.

Due to the nature and complexity of our organizational structure, our Class A Shares may be less attractive to investors than securities of public companies with typical organizational structures, which may result in a less active and liquid trading market for our Class A Shares and greater volatility of our stock price.

Due to the nature and complexity of our organizational structure, some investors may find investing in our Class A Shares less attractive than investing in other public companies having a more typical organizational structure, which may result in an active public market for our Class A common stock never developing or not being sustained after the offering. If an active public market does not develop or is not sustained, the liquidity of our Class A Shares, your ability to sell your Class A Shares when desired and the prices that you may obtain for your Class A Shares will be adversely affected. In addition, in a less active trading market the market price of our Class A Shares may be highly volatile and could be subject to wide fluctuations. See “—Risks Related to this Offering and Ownership of Our Class A Shares—An active, liquid trading market for our Class A Shares may never develop or be sustained, which could limit your ability to sell your Class A Shares at an attractive price, or at all” and “—The market price and trading volume of our Class A Shares may be volatile, which could result in rapid and substantial losses for our stockholders.”

Risks Related to this Offering and Ownership of Our Class A Shares

As a controlled company, we will not be subject to all of the corporate governance rules of the NYSE.

We expect to be a “controlled company” under the rules of the NYSE. Controlled companies are exempt from the NYSE corporate governance rules requiring that listed companies (i) have a majority of their board of directors consisting of “independent directors,” as defined under the NYSE rules; (ii) have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and (iii) have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. Following this offering, in reliance upon the foregoing exemptions, a majority of our board of directors will not consist of independent directors and we will not have a nominating and corporate governance committee, and we may use any of these exemptions for so long as we are a controlled company. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE. See “Management—Director Independence” for further information.

We are a holding company and depend upon our subsidiaries for our cash flow.

We will be a holding company and will have no material assets other than our ownership of Common Units. Our subsidiaries, including Enovation Controls, LLC, will conduct all of our operations and own substantially all of our assets, and we will have no independent means of generating revenue. Consequently, our cash flow and our ability to meet our obligations or to pay expenses, taxes and dividends (if and when declared by our board of directors) or make other distributions in the future will depend upon the ability of our subsidiaries to make payments to us in the form of dividends, tax distributions or otherwise, which will in turn depend upon our subsidiaries’ cash flow, earnings, the terms of their current and future indebtedness, tax considerations, and legal and contractual restrictions on their ability to make distributions. For example, while our senior credit facility allows us to make tax distributions to the members of Enovation Controls, LLC, including us, it currently imposes significant limitations on the ability of Enovation Controls, LLC to make non-tax distributions to its members, including us, and consequently limits our ability to pay dividends. Subject to limitations in our senior credit facility, our subsidiaries may also enter into additional agreements that contain covenants prohibiting them from distributing or advancing funds or transferring assets to us under certain circumstances, including to pay dividends. To the extent that we need funds and our subsidiaries are restricted from making such distributions under applicable law or regulation or under any present or future debt or other covenants or is otherwise unable to provide such funds, it could materially adversely affect our business, financial condition, results of operations, and cash flows.

Our subsidiaries are separate and distinct legal entities. Any right that we have to receive any assets of or distributions from any of our subsidiaries upon the bankruptcy, dissolution, liquidation, or reorganization, or to realize proceeds from the sale of their assets, will be junior to the claims of that subsidiary’s creditors, including trade creditors and holders of debt that the subsidiary issued.

We do not currently intend to pay dividends in the foreseeable future.

We do not currently intend to pay dividends for the foreseeable future. As a result, you may receive a return on your investment in our Class A Shares only if the market price of our Class A Shares increases. Our ability to pay dividends is constrained by our holding company structure under which we are dependent on our subsidiaries for payments. Additionally, our subsidiaries are parties to our senior credit facility that restricts their ability to pay dividends to us. See “Dividend Policy” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facilities.”

The obligations associated with being a public company will require significant resources and management attention, which may divert us from our business operations.

As a result of this offering, we will become subject to the reporting requirements of the Exchange Act and the Sarbanes–Oxley Act. The Exchange Act requires that we file annual, quarterly, and current reports with respect to our business and financial condition. The Sarbanes–Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. As a result, we will incur significant legal, accounting and other expenses that we did not previously incur.

Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our business strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes to our internal controls, including information technology controls, and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. If we do not continue to develop and implement the right processes and tools to manage our changing enterprise and maintain our culture, our ability to compete successfully and achieve our business objectives could be impaired, which could negatively impact our business, financial condition and results of operations. In addition, we cannot predict or estimate the amount of additional costs we may incur to comply with these requirements. We anticipate that these costs will materially increase our general and administrative expenses.

For as long as we are an “emerging growth company,” we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.

We are an “emerging growth company,” as defined in the Securities Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes–Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy and information statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and of shareholder approval of any golden parachute payments not previously approved. Because we intend to take advantage of these exemptions, some investors may find our Class A Shares less attractive, which may result in a less active trading market for our Class A Shares and our stock price may be more volatile.

In addition, the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period for complying with new or revised accounting standards. We intend to “opt out” of such extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

We could remain an “emerging growth company” until December 31, 2019 or, if earlier, (a) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (b) if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of the second fiscal quarter of any fiscal year, the last day of such fiscal year, or (c) the date on which we have issued more than $1 billion in non-convertible debt securities during the preceding three-year period.

We have not previously been required to assess the effectiveness of our internal controls over financial reporting and we may identify deficiencies when we are required to do so.

We are not currently required to comply with Section 404(a) of the Sarbanes–Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC’s rules

implementing Sections 302 and 404 of the Sarbanes–Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. Although we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. However, as an “emerging growth company,” as defined in the JOBS Act, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an “emerging growth company.” At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.

To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal control can divert our management’s attention from other matters that are important to the operation of our business. In addition, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. If we identify material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A Shares could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

An active, liquid trading market for our Class A Shares may never develop or be sustained, which could limit your ability to sell your Class A Shares at an attractive price, or at all.

Prior to this offering, there has been no public market for our Class A Shares. Although our Class A Shares have been approved for trading on the NYSE, an active trading market for our Class A Shares may not develop on that exchange or elsewhere or, if developed, that market may not be sustained. Accordingly, if an active trading market for our Class A Shares does not develop or is not maintained, the liquidity of our Class A Shares, your ability to sell your Class A Shares when desired and the prices that you may obtain for your Class A Shares will be adversely affected. See “—Risks Related to Our Organizational Structure—Due to the nature and complexity of our organizational structure, our Class A Shares may be less attractive to investors than securities of public companies with typical organizational structures, which may result in a less active and liquid trading market for our Class A Shares and greater volatility of our stock price.”

The market price and trading volume of our Class A Shares may be volatile, which could result in rapid and substantial losses for our stockholders.

Even if an active trading market develops, the market price of our Class A Shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our Class A Shares may fluctuate and cause significant price variations to occur. The initial public offering price of our Class A Shares will be determined by negotiation between us, the Founder Entities, and the representatives of the underwriters based on a number of factors and may not be indicative of prices that will prevail in the open market following the completion of this offering. If the market price of our Class A Shares declines significantly, you may be unable to resell your shares at or above your purchase price, if at all. The market price of our Class A Shares may fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our Class A Shares include:

•

variations in our quarterly or annual operating results;

•

changes in our earnings estimates (if provided) or differences between our actual financial and operating results and those expected by investors and analysts;

•

the contents of published research reports about us or our industry or the failure of securities analysts to cover our Class A Shares after this offering;

•

additions or departures of key management personnel;

•

any increase in indebtedness we may incur in the future;

•

announcements by us or others and developments affecting us;

•

actions by institutional stockholders;

•

litigation and governmental investigations;

•

legislative or regulatory changes;

•

changes in government programs and policies;

•

changes in market valuations of similar companies (including changes in market valuations of similar companies that are driven by underlying factors inapplicable to us);

•

speculation or reports by the press or investment community or in online investor forums with respect to us or our industry in general;

•

announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic relationships, joint ventures or capital commitments; and

•

general market, political and economic conditions, including any such conditions and local conditions in the markets in which we conduct our operations.

These broad market and industry factors may decrease the market price of our Class A Shares, regardless of our actual operating performance. The stock market in general has from time to time experienced extreme price and volume fluctuations. In addition, in the past, following periods of volatility in the overall market and decreases in the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

Future offerings of debt or equity securities by us may adversely affect the market price of our Class A Shares.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional Class A Shares or offering debt or other equity securities. In particular, future acquisitions could require substantial additional capital in excess of cash from operations. We would expect to finance the capital required for acquisitions through a combination of additional issuances of equity, corporate indebtedness, asset-based acquisition financing and/or cash from operations.

Issuing additional Class A Shares or other equity securities or securities convertible into equity may dilute the economic benefit and voting power of our existing stockholders or reduce the market price of our Class A Shares or both. Upon liquidation, holders of debt securities and preferred shares, if issued, and lenders with respect to other borrowings would receive a distribution of our available assets prior to the holders of our Class A Shares. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing or nature of our future offerings. Thus, holders of our Class A Shares bear the risk that our future offerings may reduce the market price of our Class A Shares and dilute their stockholdings in us. See “Description of Capital Stock.”

Although we have no current plans to cause Enovation Controls, LLC to issue additional Common Units, our board of directors may in the future determine that it is in our best interests to issue additional Common Units

of Enovation Controls, LLC rather than additional Class A Shares. If we elect to have Enovation Controls, LLC issue additional Common Units, we will issue one Class B Share for each newly issued Common Unit, which will dilute the economic benefit and voting power of the existing holders of our Class A Shares.

The market price of our Class A Shares could be negatively affected by sales of substantial amounts of our Class A Shares in the public markets, or the perception in the public markets that these sales may occur.

After this offering, there will be Class A Shares outstanding, or Class A Shares outstanding if the underwriters exercise their option to purchase additional shares in full. Of our issued and outstanding shares, all the Class A Shares sold in this offering will be freely transferable, except for any shares held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. Following completion of this offering, the Common Unitholders will own Common Units in the aggregate, which are exchangeable, subject to certain limitations, at any time by the Common Unitholders for an equal number of Class A Shares. We have agreed to register the exchange of all these interests upon the expiration or earlier termination (if any) of their lock-up agreements with the underwriters of this offering, which expire 180 days after the date of this prospectus. The Class A Shares received upon exchange may be freely resold into the public market unless held by a Common Unitholder which is an affiliate of us. Certain of these holders (as well as other Common Unitholders) will have the right to demand that we register the resale of their Class A Shares received upon exchange and certain “piggyback” registration rights. See “Shares Eligible For Future Sale.”

We, Enovation Controls, LLC and all of our directors and officers and the holders of Common Units and all of our outstanding stock and stock options have agreed with the representatives on behalf of the underwriters that, subject to certain exceptions, for a period of 180 days after the date of this prospectus, without the prior written consent of the representatives on behalf of the underwriters, to not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock; file any registration statement with the SEC relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock whether any such transaction described above is to be settled by delivery of Class A Shares or such other securities, in cash or otherwise. In addition, we, Enovation Controls, LLC and all of our directors and officers and the holders of Common Units and all of our outstanding stock and stock options have agreed that, without the prior written consent of the representatives on behalf of the underwriters, we or such other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the registration of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock. The representatives may waive these restrictions at their discretion. See “Underwriters.”

The market price of our Class A Shares may decline significantly when the restrictions on resale by our existing stockholders lapse. A decline in the price of our Class A Shares might impede our ability to raise capital through the issuance of additional Class A Shares or other equity securities.

The future issuance of additional Class A Shares in connection with our incentive plans, acquisitions, or otherwise will dilute all other stockholdings.

After this offering, assuming the underwriters exercise their option to purchase additional shares in full, we will have an aggregate of Class A Shares authorized but unissued. We may issue all of these Class A Shares without any action or approval by our stockholders, subject to certain exceptions. Any Class A Shares issued in connection with our incentive plans, the exercise of outstanding stock options or otherwise would dilute the percentage ownership held by the investors who purchase Class A Shares in this offering.

To the extent Enovation Controls, LLC issues additional Common Units and an equivalent number of Class B Shares, the economic interest we hold in Enovation Controls, LLC will be diluted and the fully-diluted percentage ownership of Enovation Controls, Inc. held by the investors who purchase Class A Shares in this offering would be diluted.

Our future operating results may fluctuate significantly and our current operating results may not be a good indication of our future performance. Fluctuations in our quarterly financial results could affect our stock price in the future.

Our operating results have historically varied from period-to-period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control. If our quarterly financial results or our forecasts of future financial results fail to meet the expectations of securities analysts and investors, our Class A Share price could be negatively affected. Any volatility in our quarterly financial results may make it more difficult for us to raise capital in the future or pursue acquisitions that involve issuances of our stock. Our operating results for prior periods may not be effective predictors of our future performance.

Our business and stock price may suffer as a result of our lack of public company operating experience. In addition, if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

We have been a privately-held company, and our lack of public company operating experience may make it difficult to forecast and evaluate our future prospects. If we are unable to execute our business strategy, either as a result of our inability to effectively manage our business in a public company environment or for any other reason, our business, prospects, financial condition and results of operations may be harmed.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business or our industry. As a new public company, we do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock could be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

You will incur immediate dilution as a result of this offering.

If you purchase Class A Shares in this offering, you will pay more for your shares than the amounts paid by existing stockholders for their shares (assuming all Common Unitholders exchanged their Common Units for Class A Shares). As a result, you will incur immediate dilution of $ per share, representing the difference between the initial public offering price of $ per share and our pro forma net tangible book value per Class A Share after giving effect to this offering. See “Dilution.”

Delaware law and our organizational documents, as well as our existing and future debt agreements, may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium for their shares.

We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders. In addition, provisions of our amended and restated certificate of incorporation and amended and restated bylaws that will be effective upon completion of this offering may make it more difficult for, or prevent a third party from, acquiring control of us without the approval of our board of directors. Among other things, these provisions:

•

provide for a classified board of directors with staggered three-year terms so that not all members of our board of directors are elected at one time and directors will be able to be removed from office only for cause;

•

do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;

•

delegate the sole power to a majority of the board of directors to fix the number of directors;

•

provide the power to our board of directors to fill any vacancy on our board of directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise;

•

authorize the issuance of “blank check” preferred stock without any need for action by stockholders, the terms of which may be established, and shares of which may be issued, without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock;

•

limit the ability of certain stockholders owning 15% or more of our outstanding voting stock to merge or enter into other business combinations with us;

•

eliminate the ability of stockholders to call special meetings of stockholders after the Founder Entities no longer beneficially own at least a majority of the voting power of our common stock;

•

eliminate the ability of stockholders to take action by written consent without a meeting of the stockholders after the Founder Entities no longer beneficially own at least a majority of the voting power of our common stock; and

•

establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

Under the terms of the Stockholders Agreement, for so long as the Founder Entities together hold at least 25% of the outstanding Class A Shares and Class B Shares on a combined basis, certain actions may not be taken without the approval of each Founder Entity that continues to hold at least 5% of the outstanding Class A Shares and Class B Shares on a combined basis, including:

•

any merger, recapitalization, issuance of voting securities or other adjustment in voting rights if, following such event, Murphy Group and EControls Group would not together have sufficient voting power or otherwise be entitled to elect a majority of our board of directors;

•

any sale of all or substantially all of our assets or the assets of Enovation Controls, LLC;

•

the issuance of any debt securities or equity securities by us or by any of our subsidiaries, other than certain issuances in accordance with employee benefit programs;

•

the creation of any new class or series of shares of equity securities that are senior to or on a parity with our Class A Shares and Class B Shares; and

•

any amendment of our certificate of incorporation or bylaws or the equivalent organization documents of us or of any of our subsidiaries in a manner that could reasonably be expected to adversely affect the rights of Murphy Group or EControls Group.

In addition, under our senior credit facility, the acquisition by any person prior to June 30, 2015 of more than 35% of our outstanding voting securities (or, if the Founder Entities own more than 35% of our voting securities, a higher percentage than the percentage owned by the Founder Entities), would constitute an event of default permitting acceleration of the indebtedness. There can be no assurance that we would have sufficient cash to repay our outstanding debt if it were accelerated.

The foregoing factors, as well as the significant common stock ownership by the Founder Entities, could impede a merger, takeover or other business combination or discourage a potential investor from making a tender offer for our Class A Shares, which, under certain circumstances, could reduce the market value of our Class A Shares. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire. See “Description of Capital Stock.”

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or with our directors, officers, employees, or agents.

Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive forum for any stockholder (including a beneficial owner) to bring: any derivative action or proceeding brought on our behalf; any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees, or agents to us or our stockholders, creditors, or other constituents; any action asserting a claim against us or any of our directors, officers, employees, or agents arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us or any of our directors, officers, employees, or agents governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and to have consented to the foregoing provisions of our amended and restated certificate of incorporation. These provisions may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers, employees, or agents, which may discourage such lawsuits against us and our directors, officers, employees, and agents. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.

The historical and pro forma financial information in this prospectus may make it difficult to accurately predict our costs of operations in the future.

The historical financial information in this prospectus does not reflect the added costs we expect to incur as a public company or the resulting changes that will occur in our capital structure and operations. Our unaudited pro forma condensed consolidated statements of operations give pro forma effect to, among other items, (i) the Transactions as described in “The Transactions,” which includes the reorganization transaction and the sale of Class A Shares in this offering at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus), and the application of the net proceeds from this offering as described in “Use of Proceeds,” (ii) the tax receivable agreement we will enter into with the existing Common Unitholders, (iii) one-time special distribution of $60.0 million to Murphy Group and EControls Group and borrowings of $85.5 million under our senior credit facility to pay this distribution and repay existing debt, which occurred on June 30, 2014, (iv) the sale of certain assets used to produce wire harnesses to a company jointly owned by Kennon Guglielmo, our Chief Technology Officer, and Frank W. Murphy III, our Executive Chairman, on September 15, 2014, and (v) the purchase of our San Antonio facility on July 25, 2014, from a third-party entity by a company jointly owned by Messrs. Guglielmo and Murphy, in each

case as if they had been completed as of January 1, 2013. Our unaudited pro forma condensed consolidated balance sheet gives pro forma effect to (i) and (ii) above as if they had been completed as of September 30, 2014. As a result of the purchase described in the foregoing item (v), the company jointly owned by Messrs. Guglielmo and Murphy must be accounted for as a variable interest entity which will result in the cost of the San Antonio facility, accumulated depreciation, mortgage debt and related depreciation and interest expense being consolidated (and the related rent expense being eliminated) in our financial statements. The estimates we used in our pro forma financial information may not be similar to our actual experience as a public company. The unaudited pro forma condensed consolidated financial information is presented for informational purposes only and should not be considered indicative of actual results of operations that would have been achieved had the transactions set forth above been consummated on the dates indicated, and do not purport to be indicative of the financial condition or results of operations as of any future date or for any future period. For more information on our historical financial information and pro forma financial information, see “Unaudited Pro Forma Condensed Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements included elsewhere in this prospectus.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements which reflect management’s expectations regarding our future growth, results of operations, operational and financial performance and business prospects and opportunities. All statements, other than statements of historical fact, are forward-looking statements. You can identify such statements because they contain words such as “plans,” “expects” or “does expect,” “budget,” “forecasts,” “anticipates” or “does not anticipate,” “believes,” “intends” and similar expressions or statements that certain actions, events, or results “may,” “could,” “would,” “might,” or “will” be taken, occur, or be achieved. Although the forward-looking statements contained in this prospectus reflect management’s current beliefs based upon information currently available to management and upon assumptions which management believes to be reasonable, actual results may differ materially from those stated in or implied by these forward-looking statements.

A number of factors could cause actual results, performance or achievements to differ materially from the results expressed or implied in the forward-looking statements, including those listed in the “Risk Factors” section of this prospectus. These factors should be considered carefully and readers should not place undue reliance on the forward-looking statements. Forward-looking statements necessarily involve significant known and unknown risks, assumptions, and uncertainties that may cause our actual results, performance, and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things:

•

the failure of one or more favorable industry trends to occur, or to occur at the expected pace;

•

our ability to continue technological innovation and successful introduction of new and higher margin products;

•

the failure of the market for natural gas engines to develop according to our expectations;

•

future fuel price differentials among natural gas, diesel, and gasoline fuels;

•

the failure of natural gas refueling infrastructure to develop according to our expectations;

•

changes in laws or government regulations unfavorable to hydraulic fracturing;

•

the impact of competition, including from incumbent technologies and alternative products;

•

our ability to maintain relationships with major customers;

•

our ability to protect our trade secrets and our intellectual property and know-how, the inability to commercialize one or more of our products due to use of open source technology, or the alleged infringement of intellectual property rights owned by others;

•

IT security threats and sophisticated and targeted computer crime;

•

material product liability, tort, and warranty claims;

•

adverse changes in environmental regulations and programs in China promoting the use of cleaner burning fuels, including natural gas, for vehicles;

•

any negative change in our relationship with AMICO, our strategic partner in China;

•

loss of one or more significant suppliers;

•

the availability of rare earth metals used in our products;

•

the ability of our suppliers to provide materials sufficient for our production needs;

•

violation of the U.S. Foreign Corrupt Practices Act or similar anti-bribery laws or regulations;

•

the failure of favorable government energy policies to materialize;

•

risks associated with conducting business outside of the U.S.;

•

fluctuations in exchange and interest rates;

•

our ability to collect amounts owed to us by our customers;

•

work stoppages and increased labor costs due to unionization or the creation of works councils or similar arrangements;

•

reduced sales opportunities and demand for our products due to industry consolidation;

•

uncertainties related to limitations on PCAOB accounting firm inspections in China;

•

costly or unsuccessful product development activities;

•

uncertainties relating to the long sales cycle, the unpredictability of customer orders, the customer evaluation process, and the implementation period of our products and services;

•

failure to comply with applicable government regulations, including environmental, health, and safety regulations;

•

violation of laws and regulations governing business activities with countries subject to sanctions or embargoes or governing the import and export of our products;

•

the loss or unavailability of managerial, marketing, engineering, or operations personnel;

•

the impact of current or future indebtedness on our business;

•

failure to raise additional capital or to generate the significant capital necessary to continue to grow our business;

•

the impact of regulations related to “conflict minerals”;

•

failure to successfully acquire or integrate companies that provide complementary products or technologies;

•

the amount of payments required under the tax receivable agreement;

•

conflicts of interest between us or our stockholders and the Founder Entities;

•

the nature and complexity of our organizational structure;

•

the impact of reduced NYSE corporate governance rules applicable to us due to our status as a controlled company;

•

our dependence on our subsidiaries for our cash flow due to our status as a holding company;

•

the impact of exemptions available to us as an “emerging growth company”;

•

unfavorable changes in the market price of our capital stock; and

•

our lack of public company operating experience.

Although we have attempted to identify important risks and uncertainties that could cause actual actions, events or results to differ materially from those described in or implied by our forward-looking statements, other risks and uncertainties may cause actions, events or results to differ materially from those anticipated, estimated or intended. We cannot assure you that forward-looking statements will prove to be accurate, as actual actions, results and future events could differ materially from those anticipated or implied by such statements. Accordingly, as noted above, readers should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date of this prospectus and, except as required by law, we assume no obligation to update or revise them to reflect new events or circumstances.

THE TRANSACTIONS

The diagram below depicts our organizational structure immediately prior the consummation of this offering and related transactions. See “—The Transactions.”

LOGO

(1)

(2)	Enovation Controls, LLC’s senior credit facility is guaranteed by its U.S. subsidiaries.

The diagram below depicts our organizational structure immediately after the consummation of this offering and related transactions.

LOGO

(1)

(2)	Enovation Controls, LLC’s senior credit facility is guaranteed by its U.S. subsidiaries.

Enovation Controls, LLC. We will operate our business through Enovation Controls, LLC and its consolidated subsidiaries.

The current members of Enovation Controls, LLC are as follows:

•

Murphy Group, which is owned by Frank W. Murphy, III, our Executive Chairman, and certain trusts for the benefit of his children, holds an approximately 60.5% economic interest in Enovation Controls, LLC through its ownership of 6,500 Class A Units, which will be converted into an aggregate of approximately million Common Units (with a corresponding number of Class B Shares) in connection with this offering.

•

EControls Group, which is majority owned by Kennon Guglielmo, our Chief Technology Officer, his wife, and certain trusts for the benefit of their children, holds an approximately 32.5% economic interest in Enovation Controls, LLC through its ownership of 3,500 Class A Units, which will be converted into an aggregate of approximately million Common Units (with a corresponding number of Class B Shares) in connection with this offering. Certain employees of Enovation Controls, LLC hold minority ownership interests in EControls Group.

•

Certain of our officers and other employees, whom we collectively refer to as the Employee Holders, hold an approximately 7.0% economic interest in Enovation Controls, LLC through their ownership of Class B, C, and D Management Interests which will be converted into an aggregate of approximately million Common Units (with a corresponding number of Class B Shares) in connection with this offering in a manner that reflects the percentage of Enovation Controls, LLC currently owned by the Class B, C, and D Management Interest holders, taking into account their current distribution entitlement and the fair value of Enovation Controls, LLC based on the offering price. Approximately % of the converted Common Units will be subject to forfeiture at the time of the conversion and will vest only if the holder remains employed by us through the applicable period or upon a change in control. The conversion will have no direct or indirect economic effect on us.

•

We will be the sole managing member of Enovation Controls, LLC and there will be no other governing body of Enovation Controls, LLC.

•

Immediately after the completion of this offering, the only outstanding Class A Shares will be the Class A Shares issued pursuant to this offering.

•

The Common Unitholders will own 100% of our Class B Shares, which will vote together with the Class A Shares as a single class. Each Class A Share has one (1) vote per share and each Class B Share has one (1) vote per share. The Class B Shares will represent, upon completion of this offering, % of the combined voting power of our common stock. The Class B Shares do not represent an economic interest in us and are therefore not entitled to any dividends that we may pay. However, each holder of a Class B Share owns an economic interest in Enovation Controls, LLC through a corresponding

Common Unit. The Common Unitholders will hold substantially more than 50% of the combined voting power of our common stock and they will hold all the Class B Shares.

•

We intend to enter into a stockholders agreement, which we refer to as the Stockholders Agreement, with Murphy Group and EControls Group that will become effective upon the completion of this offering. The Stockholders Agreement will contain provisions that will prevent a Founder Entity from transferring its shares without the consent of the other Founder Entity, except in the case of sales to affiliates, sales to any member of its family group (as defined therein), tag-along sales of our common stock by both Founder Entities, or transfers pursuant to the Registration Rights Agreement, until the earlier of the third anniversary of the offering or the time at which the Founder Entities collectively hold less than 10% of our outstanding Class A Shares and Class B Shares. The Stockholders Agreement will also grant each Founder Entity the right, subject to certain ownership thresholds, to nominate a specified number of designees to our board of directors and committees of our board of directors. Each Founder Entity will have the right to designate two members to our board of directors for so long as such Founder Entity owns 10% or more of our outstanding Class A Shares and Class B Shares on a combined basis. The Founder Entities will also have the right to designate one mutually agreed additional member to our board of directors. The Founder Entities will agree to vote all of their shares of our common stock to elect such designees to our board of directors. If, at any time, a Founder Entity owns 5% or more but less than 10% of our outstanding Class A Shares and Class B Shares on a combined basis, such Founder Entity will have the right to designate one nominee for election to our board of directors. If a Founder Entity’s ownership level falls below 5% of our outstanding Class A Shares and Class B Shares on a combined basis, such Founder Entity will no longer have any right to designate a nominee and the right of the Founder Entities to mutually designate a designee will also terminate. In addition, for so long as the Founder Entities together hold at least 25% of the outstanding Class A Shares and Class B Shares on a combined basis, certain actions may not be taken without the prior written consent of each Founder Entity owning at least 5% of the outstanding Class A Shares and Class B Shares on a combined basis, including:

•

any sale of all or substantially all of our assets or the assets of Enovation Controls, LLC;

•

the issuance of any debt securities or equity securities by us or by any of our subsidiaries, other than certain issuances in accordance with employee benefit programs;

•

the creation of any new class or series of shares of equity securities that are senior to or on a parity with our Class A Shares and Class B Shares; and

•

on a combined basis. The business purpose of the percentage limitation is to provide the Common Unitholders (other than the Founder Entities) with the additional incentive that equity ownership provides to continue to assist with our growth while the Founder Entities continue to hold a substantial equity interest in us. The exchange of the Common Units and Class B Shares corresponding to these Common Units for our Class A Shares will increase the number of outstanding Class A Shares and decrease the number of outstanding Class B Shares.

•

Following this offering, the members of Enovation Controls, LLC, other than us, will consist of Murphy Group, EControls Group and the Employee Holders.

Certain Attributes of Our Structure. Our structure following this offering will be designed to accomplish a number of objectives, the most important of which are as follows:

•

The structure will allow us to serve as a holding company, with our sole material asset being our ownership interest in Enovation Controls, LLC. The Common Unitholders, however, will retain their economic investment in the form of direct interests in Enovation Controls, LLC, rather than through our Class A Shares. Following this offering, all of the businesses operated by Enovation Controls, LLC or its subsidiaries prior to this offering, and all of the interests held by Enovation Controls, LLC and its subsidiaries in such businesses prior to this offering, will be operated or held, as the case may be, by Enovation Controls, LLC and its subsidiaries, and our current management will continue to manage these businesses. As a result, we and the Common Unitholders will participate in the net operating results of Enovation Controls, LLC on a pari passu basis, in accordance with our respective ownership of Enovation Controls, LLC.

•

The Transactions

In connection with this offering:

•

We intend to use the net proceeds that we receive from this offering to purchase Common Units directly from the Murphy Group, EControls Group, and Employee Holders at a price per Common Unit equal to the public offering price per share of our Class A Shares, less underwriting discounts plus the pro rata portion of offering expenses to be reimbursed by the underwriters. The number of Common Units being sold to us by the Murphy Group, EControls Group, and Employee Holders is based upon a pro rata allocation among the Murphy Group, EControls Group, and those Employee Holders (based on the number of vested Common Units held by such Employee Holders) electing to participate in the sale. We will use $ million to purchase % of the Common Units held by Murphy Group, $ million to purchase % of the Common Units held by EControls Group and $ million to purchase % of the Common Units held by the Employee Holders. Upon completion of the offering, we will have acquired Common Units representing a % interest in Enovation Controls, LLC.

•

We will enter into a stockholders agreement with Murphy Group and EControls Group immediately prior to this offering. See “The Transactions—Stockholders Agreement.”

•

We will enter into a registration rights agreement with all Common Unitholders immediately prior to this offering. See “The Transactions—Registration Rights Agreement.”

•

We will enter into a tax receivable agreement with all Common Unitholders immediately prior to this offering. See “The Transactions—Tax Receivable Agreement.”

•

We will amend and restate our certificate of incorporation to provide for, among other things, the issuance of our Class A Shares and Class B Shares.

The primary purposes of this offering are to create a public market for our Class A Shares; allow us easier and quicker access to the public markets should we need additional capital in the future; increase our profile and prestige with existing and potential customers, suppliers, and strategic partners; facilitate the use of our Class A Shares as consideration for future acquisitions; provide liquidity to existing members of Enovation Controls, LLC; and make our securities more valuable and attractive to our employees and potential employees for compensation purposes. In addition, we believe the structure of this offering, as described in “Transactions,” may provide certain economic benefits to us. These benefits are derived in part from our purchase of Common Units from the Common Unitholders, as well as future exchanges of Common Units for Class A Shares (or cash), each of which could result in increases in our share of the tax basis of the tangible and intangible assets of Enovation Controls, LLC that otherwise would not have been available had we simply converted Enovation Controls, LLC into a Delaware corporation and had such entity conducted an initial public offering. Any such increases in tax basis would create incremental tax deductions that would reduce the amount of tax that we may otherwise be required to pay in the future. The tax receivable agreement provides that we will receive 15% of the realized cash savings, if any, associated with the step-up in tax basis of Enovations Controls, LLC’s assets. We can use this additional cash for working capital, capital expenditures, acquisitions, and other general corporate purposes. The tax receivable agreement provides that the Common Unitholders will receive 85% of the realized tax savings, if any, associated with the step-up in tax basis of Enovation Controls, LLC’s assets. Any realized tax savings paid to Common Unitholders pursuant to the tax receivable agreement will reduce the cash that may otherwise be available to us for working capital, capital expenditures, acquisitions, and other general corporate purposes, as well as to make future distributions to holders of Class A Shares. While we believe our organizational structure provides certain benefits to our Common Unitholders and holders of Class A Shares, due to its nature and complexity, some investors may find investing in our Class A Shares less attractive than investing in other public companies having a more typical organizational structure. This could result in an active public market for our

Class A Shares never developing or not being sustained, which would negatively impact both the ability of holders of Class A Shares to sell their Class A Shares and the price at which Class A Shares may be sold. In addition, control by the Founder Entities of % of the combined voting power of our common stock and the fact that they hold economic interests in Enovation Controls, LLC directly, rather than through us, may give rise to conflicts of interest with us and the holders of Class A Shares. For example, the tax consequences of future transactions entered into by Enovation Controls, LLC may differ as between the Founder Entities and us. Enovation Controls, LLC may also sell additional Common Units, which could dilute the indirect aggregate economic interest of the holders of the Class A Shares in Enovation Controls, LLC. See “Risk Factors—Risks Related to Our Organizational Structure.”

Operating Agreement of Enovation Controls, LLC

We will operate our business through Enovation Controls, LLC and its consolidated subsidiaries. The operations of Enovation Controls, LLC, and the rights and obligations of the Common Unitholders, will be set forth in the amended and restated operating agreement of Enovation Controls, LLC. The following description of the Enovation Controls, LLC amended and restated operating agreement is not complete and is qualified by reference to the full text of the agreement, which is filed as an exhibit to the registration statement of which this prospectus is a part.

Reorganization. Immediately prior to this offering, all of the currently outstanding Class B, C, and D Management Interests will be converted into Common Units that are subject to existing vesting requirements. In addition, each holder of a Class B, C, and D Management Interest will receive one Class B Share for each Common Unit it receives in the reorganization, with such Class B Shares subject to the same vesting requirements as the Common Units. We refer to such Common Units that have not yet vested as the Restricted Common Units. As a result of this conversion of membership interests, all of the Common Unitholders will hold the same class of Common Units, except that certain Common Units held by Employee Holders will remain subject to vesting. If any Common Units do not vest and are forfeited, an equal number of Class B Shares will be forfeited.

Governance. We will serve as the sole managing member of Enovation Controls, LLC. As such, we will control its business and affairs and be responsible for the management of its business. No members of Enovation Controls, LLC, in their capacity as such, will have any authority or right to control the management of Enovation Controls, LLC or to bind it in connection with any matter. There will be no governing body of Enovation Controls, LLC other than us and the day-to-day decisions regarding the operations of Enovation Controls, LLC will be made by its officers. As noted above, however, the Founder Entities will have the ability to exercise majority voting control over us by virtue of their ownership of Class B Shares and the Stockholders Agreement, which will give them the ability to elect a majority of our board of directors and therefore control us in our capacity as managing member of Enovation Controls, LLC. Our board of directors will initially be composed of a total of five directors, including three directors appointed by the Founder Entities who will exercise a majority of the director voting power on all matters presented to the board of directors.

Rights of Members. Each Common Unit will entitle the holder to equal economic rights. Common Unitholders will have no voting rights by virtue of their ownership of Common Units, except for the right to approve certain amendments to the operating agreement of Enovation Controls, LLC. See “—Amendments.” Common Unitholders will hold Class B Shares, enabling them to exert a significant percentage of our voting power. See “Risk Factors—Risks Related to Our Organizational Structure—Control by the Founder Entities of % of the combined voting power of our common stock and the fact that they are holding their economic interest through Enovation Controls, LLC may give rise to conflicts of interest.”

As noted above, Enovation Controls, LLC currently has outstanding Class B, C and D Management Interests that were issued to certain of its employees. These interests are subject to forfeiture under some circumstances in connection with a termination of the employee member’s employment. Although these interests will be

converted into Restricted Common Units of Enovation Controls, LLC immediately prior to this offering, to the extent that the previously outstanding Class B, C and D Management Interests were subject to forfeiture at the time of conversion, then the Restricted Common Units issued upon conversion generally also will be subject to forfeiture on the same terms, except that the definition of a change in control that results in a lapse of such forfeiture restrictions will be amended to be consistent with the Enovation Controls, Inc. 2014 Long-Term Incentive Plan, which we refer to as the 2014 Incentive Plan. We do not intend to cause Enovation Controls, LLC to issue profits interests in the future.

Net profits and net losses and distributions of Enovation Controls, LLC generally will be allocated and made to its members pro rata in accordance with the number of Common Units they hold, whether or not vested.

Coordination of Enovation Controls, Inc. and Enovation Controls, LLC. At any time we issue a Class A Share for cash, the net proceeds received by us will be promptly transferred to Enovation Controls, LLC, and Enovation Controls, LLC will issue to us one of its Common Units. At any time we issue a Class A Share pursuant to the 2014 Incentive Plan, we will contribute to Enovation Controls, LLC all of the proceeds that we receive (if any) and Enovation Controls, LLC will issue to us one Common Unit having the same restrictions, if any, attached to the Class A Shares issued under the 2014 Incentive Plan. Conversely, if we redeem or repurchase any of our Class A Shares, Enovation Controls, LLC will, immediately prior to our redemption or repurchase, redeem or repurchase an equal number of Common Units held by us, upon the same terms and for the same price, as the Class A Shares are redeemed or repurchased. We can redeem or repurchase Class A Shares only if Enovation Controls, LLC first redeems or repurchases Common Units we hold.

Under the terms of the Enovation Controls, LLC amended and restated operating agreement, we may in the future cause Enovation Controls, LLC to issue Common Units or other, newly created classes of Enovation Controls, LLC securities to one or more investors having such rights, preferences and other terms as we determine, and in such amount as we may determine. In addition, we may in the future elect to compensate our employees by granting them Common Units, whether or not subject to forfeiture, or profits interests or other securities. Any such issuance would have a dilutive effect on the economic interest we hold in Enovation Controls, LLC. In addition, we will issue our Class B Shares having one (1) vote per share on a one-for-one basis in connection with any future issuances of Common Units, which would have a dilutive effect on the voting power of our then current holders of Class A Shares. The tax receivable agreement would cover any exchanges of Common Units issued to the current parties to that agreement after the offering, and it is possible that new investors in the Common Units issued after the offering may become parties to the tax receivable agreement as well.

Although we have no current plans to cause Enovation Controls, LLC to issue additional Common Units, our board may determine that it is our best interests to issue additional Common Units of Enovation Controls, LLC rather than additional Class A Shares. If we elect to have Enovation Controls, LLC issue additional Common Units, we will issue one Class B Share for each newly issued Common Unit. See “Risk Factors—Risks Related to this Offering and Ownership of Our Class A Shares—The future issuance of additional Class A Shares in connection with our incentive plans, acquisitions, or otherwise will dilute all other stockholdings.”

Issuances and Transfer of Common Units. Membership interests in Enovation Controls, LLC may be issued only to persons or entities to which we agree to permit the issuance of such interests in exchange for cash or other consideration, including, if applicable, the services of employees of Enovation Controls, LLC or its affiliates. The Common Units held by the other Common Unitholders may be transferred without our consent only under limited circumstances, including to certain permitted transferees (i.e., an affiliate, family member or estate planning vehicle), and upon exchange for Class A Shares following this offering. A holder of Common Units may not transfer any Common Units to any person unless he transfers an equal number of our Class B Shares to the same transferee.

Exchange Rights. We have reserved for issuance Class A Shares, representing the number of Common Units that will be owned by the Murphy Group, EControls Group and Employee Holders immediately

following this offering, in respect of the aggregate number of Class A Shares expected to be issued over time upon the exchanges by the Common Unitholders of Common Units, unless we exercise our option to pay cash in lieu of Class A Shares for some or all of such exchanged Common Units. As noted above, we may in the future cause Enovation Controls, LLC to issue additional Common Units that would also be exchangeable for Class A Shares.

Common Unitholders may exchange their Common Units at any time and from time to time after the expiration or earlier termination (if any) of the lock-up agreement between the underwriters of this offering and each Common Unitholder, subject to certain limitations. A Common Unitholder may revoke or modify their exchange election at any time prior to the consummation of the exchange, including at any such time after we exercise our option to pay cash in lieu of Class A Shares for some or all of such exchanged Common Units.

Delivery and Cancellation of Class B Shares. Any holder seeking to exchange Common Units for Class A Shares must also deliver a corresponding number of Class B Shares for cancellation by us.

Indemnification and Exculpation. To the extent permitted by applicable law, Enovation Controls, LLC will indemnify us, as its managing member, its other members, its authorized officers, its other employees and agents from and against any losses, damages or expenses actually or reasonably incurred as a result of any acts or omissions performed or omitted by such person in good faith and in a manner that such person reasonably believed to be in or not opposed to the best interests of Enovation Controls, LLC (and, with respect to a criminal proceeding, having had no reasonable cause to believe such person’s conduct was unlawful) either on behalf of or in furtherance of the interests of Enovation Controls, LLC, and performed or omitted in a manner reasonably believed by such person to be within the scope of his or her authority and so long as such person was not guilty of gross negligence or willful misconduct with respect to such act or omission.

We, as the managing member, the other members and the authorized officers and other employees and agents of Enovation Controls, LLC, will not be liable to Enovation Controls, LLC, its members or their affiliates for damages incurred by any acts or omissions of these persons, provided that the acts or omissions were performed or omitted by such person in good faith and in a manner that such person reasonably believed to be in or not opposed to the best interests of Enovation Controls, LLC (and, with respect to a criminal proceeding, having had no reasonable cause to believe such person’s conduct was unlawful) either on behalf of or in furtherance of the interests of Enovation Controls, LLC, and performed or omitted in a manner reasonably believed by such person to be within the scope of his or her authority and so long as such person was not guilty of gross negligence or willful misconduct with respect to such act or omission.

Amendments. The amended and restated operating agreement of Enovation Controls, LLC may be amended with the written consent of the managing member in its sole discretion; provided, however, that no amendment, subject to certain limited exceptions, may materially and adversely affect the rights of a Common Unitholder, as such, other than on a pro rata basis with other Common Unitholders of the same class, without the consent of such Common Unitholder (or, if there is more than one such Common Unitholder that is so affected, without the consent of a majority of such affected Common Unitholders in accordance with their holdings of Common Units).

Additionally, the consent of each Founder Entity that holds a number of Common Units that is five percent (5%) or more of the number of Common Units outstanding immediately following the closing of this offering is required for any amendment to the amended and restated operating agreement of Enovation Controls, LLC that:

•

reduces the right of any member to receive tax distributions other than on a pro rata basis with a reduction in taxable income allocable to such member and other holders of Common Units of the same class;

•

precludes or limits the rights of any member to exercise its exchange rights under the terms of the amended and restated operating agreement of Enovation Controls, LLC;

•

requires any member to make a capital contribution;

•

materially increases the obligations of any member under the amended and restated operating agreement of Enovation Controls, LLC; or

•

results in Enovation Controls, LLC being treated as a corporation for tax purposes.

Registration Rights Agreement

In connection with the completion of this offering, we intend to enter into a registration rights agreement with all of the Common Unitholders pursuant to which we will be required to register the exchange under the federal securities laws of the Common Units (and Class B Shares) held by them for Class A Shares. We have agreed, at our expense, to use our reasonable best efforts to file with the SEC a shelf registration statement providing for the exchange of the Common Units (and Class B Shares) for Class A Shares and the resale of such shares thereafter upon the expiration or earlier termination (if any) of the lock-up agreement between the underwriters of this offering and each Common Unitholder, and to cause and maintain the effectiveness of this shelf registration statement until such time as all Class A Shares covered by this shelf registration statement have been exchanged. Further, each of the Founder Entities will be entitled to cause us, at our expense, to register the resale of the Class A Shares they will receive upon exchange of their Common Units (and Class B Shares), which we refer to as their “demand” registration rights.

All Common Unitholders (as well as their permitted transferees) will be entitled to exercise “piggyback” rights in connection with any future public underwritten offerings we engage in for our account or for the account of others to whom we have granted registration rights after the expiration or earlier termination (if any) of the lock-up agreements referred to above, subject to pro rata reduction if it is determined that the sale of additional shares would be harmful to the success of the offering. All fees, costs and expenses of underwritten registrations will be borne by us, other than underwriting discounts and selling commissions, which will be borne by each stockholder selling its shares. Our registration obligations will be subject to certain restrictions on, among other things, the frequency of requested registrations, the number of shares to be registered and the duration of these rights.

Tax Receivable Agreement

As described above in “The Transactions,” we intend to use all of the net proceeds of this offering to purchase Common Units from the existing members of Enovation Controls, LLC. In addition, as described under “The Transactions—Operating Agreement of Enovation Controls, LLC—Exchange Rights,” Common Unitholders may in the future exchange Common Units (and Class B Shares) for Class A Shares on a one-for-one basis (or, at our option, cash). Enovation Controls, LLC will have in effect an election under Section 754 of the Code, which will result in an adjustment to our share of the tax basis of the assets owned by Enovation Controls, LLC at the time of such initial purchase of and subsequent exchanges of Common Units. In general, in the case of a transfer of an interest in a partnership (including a limited liability company taxable as a partnership for U.S. federal income tax purposes), Section 754 of the Code allows the partnership to elect to adjust the tax basis of partnership assets to equal the price paid for the partnership interest. Any such basis adjustment is specific to the transferee of the partnership interest.

The initial purchase of the Common Units will result in an increase in our share of the tax basis of the tangible and intangible assets of Enovation Controls, LLC that otherwise would not have been available. Similarly, subsequent exchanges of Common Units will result in an increase in our share of the tax basis in the tangible and intangible assets of Enovation Controls, LLC, if the amount of any cash and the fair market value of any Class A Shares received for such Common Units exceeds the exchanging Common Unitholder’s allocable portion of the tax basis in the assets of Enovation Controls, LLC. Any such increases in tax basis will, in turn, create incremental tax deductions in the form of additional depreciation and/or amortization deductions that would be available to us to offset our share of the taxable income of Enovation Controls, LLC, and which in turn will reduce the amount of tax that we may otherwise be required to pay in the future. These increases in tax basis may also decrease gains (or increase losses) that would otherwise be allocated to us from Enovation Controls,

LLC on future dispositions of certain capital assets to the extent tax basis generated from the basis adjustments is allocated to those capital assets.

We intend to enter into a tax receivable agreement with all Common Unitholders. The tax receivable agreement will require us to pay those Common Unitholders 85% of the amount of cash savings, if any, in U.S. federal, state and local income or franchise tax that we actually realize, or in some circumstances we are deemed to realize, in any tax year beginning with and following 2014 (a “covered tax year”) from increases in tax basis realized as a result of the initial purchase and any future exchanges by Common Unitholders of their Common Units (and Class B Shares) for Class A Shares (or cash), including increases attributable to payments made under the tax receivable agreement and deductions attributable to imputed interest. We expect to benefit from the remaining 15% of cash savings, if any, in income and franchise tax that we actually realize during a covered tax year.

For purposes of the tax receivable agreement, cash savings in income tax and franchise tax will be computed by comparing our actual income and franchise tax liability (and of Enovation Controls, LLC and its subsidiaries, but only with respect to taxes imposed on Enovation Controls, LLC or its subsidiaries and allocable to us) for a covered tax year to the amount of such taxes that we would have been required to pay (and Enovation Controls, LLC and its subsidiaries would have been required to pay, but only with respect to such taxes imposed on Enovation Controls, LLC or its subsidiaries and allocable to us) for such covered tax year had there been (i) no increase to our share of the tax basis of the tangible and intangible assets of Enovation Controls, LLC as a result of the initial purchase and any future exchanges and (ii) no deductions for imputed interest with respect to payments under the tax receivable agreement, and had we not entered into the tax receivable agreement. The tax receivable agreement continues until all such tax benefits have been utilized or expired, unless we exercise our right to terminate the tax receivable agreement upon a change in control for an amount based on the remaining payments expected to be made under the tax receivable agreement or we breach any of our material obligations under the tax receivable agreement in which case all obligations will generally be accelerated and due. Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors.

While the actual amount and timing of any payments that may be made under the tax receivable agreement will vary depending upon a number of factors (including the timing of exchanges, the amount of gain recognized by an exchanging Common Unitholder, the amount and timing of our income and the tax rates in effect at the time any incremental tax deductions resulting from the increase in tax basis are utilized), we expect that the payments that we may make to the Common Unitholders pursuant to the tax receivable agreement could be substantial during the expected term of the tax receivable agreement. In addition, to the extent that we are unable to make payments under the tax receivable agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid by us. The cash savings in income and franchise tax paid to any such Common Unitholders under the tax receivable agreement and any interest costs will reduce the cash that may otherwise be available to us for working capital, capital expenditures, acquisitions, and other general corporate purposes, as well as to make future distributions to holders of Class A Shares, including the investors in this offering. The payments under the tax receivable agreement are not conditioned upon the Common Unitholders’ continued ownership of interests in Enovation Controls, LLC.

Payments under the tax receivable agreement will be based on the tax reporting positions that we determine. A tax authority may challenge all or part of the tax basis increases or the amount or availability of any tax attributes discussed above, as well as other related tax positions we take, and a court could sustain such a challenge. The Common Unitholders will not reimburse us for any payments previously made to them pursuant to the tax receivable agreement in the event that, due to a successful challenge by the IRS or any other tax authority of the amount of any tax basis increase or the amount or availability of any tax attributes, our actual cash tax savings are less than the cash tax savings previously calculated and upon which prior payments under the tax receivable agreement were based. Instead, any excess cash payments made by us to a Common Unitholder will be netted against any future cash payments that we might otherwise be required to make under

the terms of the tax receivable agreement. However, we might not determine that we have effectively made an excess cash payment to the Common Unitholders for a number of years following the initial time of such payment. As a result, in certain circumstances we could make cash payments under the tax receivable agreement to the Common Unitholders in excess of our cash tax savings. A successful challenge to our tax reporting positions could also adversely affect our other tax attributes and could materially increase our tax liabilities.

We will bear the costs of implementing the provisions of the tax receivable agreement. In addition, we will have full responsibility for, and sole discretion over, our tax matters, including the filing and amendment of all tax returns and claims for refund and defense of all tax contests, subject to certain participation and approval rights held by the Founder Entities.

The tax receivable agreement provides that upon certain mergers, asset sales, other forms of business combinations and other changes in control, we will be required to pay the Common Unitholders amounts based on assumptions (including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the tax receivable agreement) regarding the remaining payments expected to be made under the tax receivable agreement (at our option, these payments can be accelerated into a single payment at the time of the change in control). As a result, we could be required to make cash payments under the tax receivable agreement that are greater than or less than the specified percentage of the actual cash tax savings we realize in respect of the tax attributes subject to the tax receivable agreement, and any upfront payment may be made years in advance of any actual realization of such future tax savings. In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity, and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combination, or other changes in control. There can be no assurance that we will be able to finance our obligations under the tax receivable agreement.

Payments are generally due under the tax receivable agreement within a specified period of time following the filing of our tax return for the taxable year with respect to which the payment obligation arises, although interest on such payments will begin to accrue at a rate of LIBOR plus 200 basis points from the due date (without extensions) of such tax return. Any late payments that may be made under the tax receivable agreement will continue to accrue interest at LIBOR plus 400 basis points until such payments are made, including any late payments that we may subsequently make because we did not have enough available cash to satisfy our payment obligations at the time at which they originally arose.

Stockholders Agreement

We expect to enter into the Stockholders Agreement, with Murphy Group and EControls Group that will become effective upon the completion of this offering. The Stockholders Agreement will contain agreements with respect to restrictions on the sale, issuance or transfer of our shares of our common stock that will prevent a Founder Entity from transferring its shares without the consent of the other Founder Entity, except in the case of sales to affiliates, sales to any member of its family group (as defined therein), in connection with a tag-along sale of our common stock by both Founder Entities or pursuant to the Registration Rights Agreement, until the earlier of the third anniversary of the offering and the time at which the Founder Entities collectively hold less than 10% of our outstanding Class A Shares and Class B Shares. The Stockholders Agreement will also grant each Founder Entity the right, subject to certain conditions, to nominate a specified number of designees to our board of directors and committees of our board of directors. Each Founder Entity will have the right to designate two members to our board of directors for so long as such Founder Entity owns 10% or more of our outstanding Class A Shares and Class B Shares. The Founder Entities will also have the right to designate one mutually agreed additional member to our board of directors. The Founder Entities will also agree to vote all of their shares of our common stock to elect such designees to our board of directors. If, at any time, a Founder Entity owns 5% or more but less than 10% of our outstanding Class A Shares and Class B Shares, such Founder Entity will have the right to designate one nominee for election to our board of directors. If a Founder Entity’s ownership level falls below 5% of our outstanding Class A Shares and Class B Shares, such Founder Entity will

no longer have any right to designate a nominee and the right of the Founder Entities to mutually designate a designee will also terminate. In addition, for so long as the Founder Entities together hold at least 25% of the voting power of our outstanding common stock, certain actions may not be taken without the prior written consent of each Founder Entity owning at least 5% of the outstanding Class A Shares and Class B Shares on a combined basis, including:

•

any sale of all or substantially all of our assets or the assets of Enovation Controls, LLC;

•

the issuance of any debt securities or equity securities by us or by any of our subsidiaries, other than certain issuances in accordance with employee benefit programs;

•

the creation of any new class or series of shares of equity securities that are senior to or on a parity with our Class A Shares and Class B Shares; and

•

USE OF PROCEEDS

We estimate that the net proceeds from this offering will be approximately $ million, after deducting underwriting discounts (assuming the Class A Shares are sold at $ per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), or $ million if the underwriters exercise in full their option to purchase additional shares to cover overallotments. We intend to use all of the net proceeds of this offering to purchase Common Units of Enovation Controls, LLC directly from the EControls Group, Murphy Group, and Employee Holders at a price per Common Unit equal to the public offering price per share of our Class A Shares, less underwriting discounts plus the pro rata portion of offering expenses to be reimbursed by the underwriters. The number of Common Units being sold to us by the Murphy Group, EControls Group, and Employee Holders is based upon a pro rata allocation among the Murphy Group, EControls Group, and those Employee Holders (based on the number of vested Common Units held by such Employee Holders) electing to participate in the sale. Upon completion of the offering, we will have acquired Common Units representing a % economic interest in Enovation Controls, LLC (or Common Units representing a % economic interest if the underwriters exercise in full their option to purchase additional shares to cover overallotments).

We will use the net proceeds of this offering to purchase Common Units of Enovation Controls, LLC as described above and will not be retaining any of the net proceeds for reinvestment in our business. The primary purposes of this offering are to create a public market for our Class A Shares; facilitate our future access to the capital markets; increase our profile and prestige with existing and potential customers, suppliers, and strategic partners; facilitate the use of our Class A Shares as consideration for future acquisitions; provide liquidity to existing members of Enovation Controls, LLC; and make our securities more valuable and attractive to our employees and potential employees for compensation purposes.

The net proceeds from any exercise of the underwriters’ overallotment option will be used to purchase a corresponding additional number of Common Units directly from the EControls Group, Murphy Group, and Employee Holders at a price per Common Unit equal to the public offering price per share of our Class A Shares, less underwriting discounts plus the pro rata portion of offering expenses to be reimbursed by the underwriters.

A $1.00 increase (decrease) in the assumed initial public offering price of $ per Class A Share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds by $ million (after deducting the underwriting discounts), and would have no impact upon the number of Common Units purchased by us from the Common Unitholders, assuming the number of Class A Shares offered by us, as set forth on the cover page of this prospectus, remains the same.

DIVIDEND POLICY

We currently anticipate that we will retain all of our future earnings for use in the expansion and operation of our business and do not anticipate paying any cash dividends in the foreseeable future. The declaration and payment of future dividends to holders of Class A Shares will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, legal requirements, restrictions under our senior credit facility and any other debt agreements we are then party to, and other factors our board of directors deems relevant. See “Risk Factors—Risks Related to this Offering and Ownership of Our Class A Shares—We are a holding company and depend upon our subsidiaries for our cash flow.”

On June 30, 2014, Enovation Controls, LLC made a one-time special distribution of $60.0 million to Murphy Group and EControls Group. Enovation Controls, LLC financed the one-time special distribution with borrowings under our senior credit facility. As we were not a member of Enovation Controls, LLC at the time of this distribution, investors in this offering will not be entitled to receive any dividend from us as a result of these prior distributions.

Enovation Controls, LLC paid tax-related distributions and other cash distributions to members of Enovation Controls, LLC during the nine months ended September 30, 2014 and the years ended December 31, 2013, 2012, and 2011. Tax-related distributions paid, in the aggregate, were $19.3 million, $8.7 million, $7.4 million, and $5.6 million for the nine months ended September 30, 2014 and the years ended December 31, 2013, 2012, and 2011, respectively. Other cash distributions paid, in the aggregate, were $67.6 million, $20.3 million, $17.3 million and $8.1 million during the nine month period ended September 30, 2014 and the years ended December 31, 2013, 2012, and 2011, respectively.

CAPITALIZATION

The following table sets forth our cash and capitalization as of September 30, 2014 for:

•

Enovation Controls, LLC, on an unaudited historical basis;

•

Enovation Controls, Inc., on a pro forma basis to give effect to (i) the Transactions as described in “The Transactions,” which include the reorganization transactions and the sale by us of Class A Shares in this offering (excluding shares issuable upon exercise of the underwriters’ option to purchase additional shares to cover overallotments) at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus), and the application of the net proceeds from this offering as described in “Use of Proceeds,” and (ii) the tax receivable agreement we will enter into with the existing Common Unitholders.

You should read this table together with, and it is qualified in its entirety by reference to, “The Transactions,” “Selected Historical Consolidated Financial Data,” “Unaudited Pro Forma Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Use of Proceeds,” and our consolidated financial statements and the related notes and other financial information appearing elsewhere in this prospectus.


	As of September 30, 2014⁽¹⁾ (in thousands)
	Historical Enovation Controls, LLC			Pro Forma Enovation Controls, Inc.
Long-term debt (including current portion)	$	78,410		$
Members’ equity
Members’ equity		(20,965	)
Class A common stock, par value $0.00001 per share, none authorized, issued or outstanding, actual or pro forma; 500,000,000 shares to be authorized, and shares to be issued and outstanding, on a pro forma as adjusted basis		—
Class B common stock, par value $0.00001 per share, none authorized, issued or outstanding, actual or pro forma; 40,000,000 shares to be authorized, and shares to be issued and outstanding, on a pro forma as adjusted basis		—
Accumulated other comprehensive income		185
Additional paid-in capital		—

Total members’/stockholders’ equity attributable to the company		(20,780	)
Non-controlling interest		—

Total equity		(20,780	)

Total capitalization	$	57,630		$

(1)	Cash as of September 30, 2014 was $7,070 and $ on a historical and pro forma basis, respectively.

DILUTION

If you invest in our Class A Shares, your interest will be diluted to the extent of the difference between the offering price per Class A Share and the pro forma net tangible book value per Class A Share after this offering. Dilution results from the fact that the per share offering price of the Class A Shares is substantially in excess of the pro forma net tangible book value per share attributable to the Common Unitholders.

Our pro forma net tangible book value (deficit) as of September 30, 2014, was $ million, or $ per Class A Share, assuming the Common Unitholders exchange all of their Common Units (and Class B Shares) for an equivalent number of our Class A Shares on such date. Tangible book value represents net book equity excluding intangible assets, if any. Pro forma adjustments to tangible book value (deficit) include the net impact on equity due to the step up in basis less the amount owed to members of Enovation Controls, LLC in accordance with the tax receivable agreement of approximately $ million, the conversion of accrued stock compensation to equity of approximately $ million, the impact on equity due to the increase in deferred taxes of approximately $ million related to our proportionate share of Enovation Control, LLC’s book to tax timing differences and the impact upon equity related to the consolidation of the entity which owns our San Antonio facility due to it being accounted for as a variable interest entity of approximately $ million.

After giving effect to the sale of Class A Shares at an assumed offering price of $ per share, the mid-point of the price range set forth on the cover page of this prospectus in this offering and after deducting the underwriting discounts, our pro forma net tangible book value as of September 30, 2014 was $ million, or $ per Class A Share, assuming that the Common Unitholders exchange all of their Common Units (and Class B Shares) for an equivalent number of our Class A Shares on such date.

The following table illustrates the pro forma immediate increase in book value of $ per Class A Share for the Common Unitholders and the immediate dilution of $ per share to purchasers of Class A Shares in this offering, assuming the underwriters do not exercise their option to purchase up to additional Class A Shares to cover overallotments.


Assumed initial public offering price per Class A Share		$
Pro forma net tangible book value (deficit) per Class A Share as of September 30, 2014, before giving effect to this offering	$
Increase in pro forma net tangible book value (deficit) per Class A Share attributable to investors in this offering

Pro forma as adjusted net tangible book value (deficit) per Class A Share after this offering

Dilution per Class A Share to investors in this offering		$

A $1.00 increase (decrease) in the assumed initial public offering price of $ per Class A Share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus) would not impact our net tangible book value or our pro forma as adjusted net tangible book value since all of the net proceeds of this offering will be used to purchase Common Units from the Common Unitholders. A $1.00 increase in the assumed initial public offering price of $ per Class A Share would result in an increase in the dilution to the investors of $ a share or a total dilution of $ per share. A $1.00 decrease in the assumed initial public offering price of $ per Class A Share would result in a decrease in the dilution to the investors of $ or a total dilution of $ per share.

The following table summarizes, on the same pro forma basis as of September 30, 2014, the differences between the Common Unitholders, assuming that each of them exchanges all of their Common Units (and Class B Shares) for an equivalent number of Class A Shares on such date, and the purchasers of Class A Shares in this offering with respect to the number of Class A Shares purchased from us, the total consideration paid by the Common Unitholders and the investors in this offering, and the average price per Class A Share paid by investors in this offering and the average price per Common Unit paid by the Common Unitholders before deducting the underwriting discount and estimated offering expenses.

Shares Purchased

Total Consideration

Number

Percent

Average Price per
Share

Existing equity holders

Investors in this offering⁽¹⁾

(1)	A $1.00 increase (decrease) in the assumed offering price of $ per Class A Share would increase (decrease) total consideration paid by investors in this offering by $ million, assuming the number of Class A Shares offered by us, as set forth on the cover page of this prospectus, remains the same.

If the underwriters’ option to purchase up to additional Class A Shares to cover overallotments is exercised in full, the pro forma as adjusted net tangible book value per Class A Share after this offering as of September 30, 2014 would be $ per Class A Share and the dilution to investors in this offering would be $ per Class A Share. Furthermore, the percentage of our common stock owned (on a fully-diluted basis) by the Common Unitholders would decrease to % and the percentage of our common stock owned (on a fully-diluted basis) by the investors in this offering would increase to %.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following table shows our unaudited pro forma condensed consolidated financial information for the periods and as of the dates indicated. We derived the unaudited pro forma condensed consolidated financial information set forth below by the application of pro forma adjustments to Enovation Controls, LLC’s audited and unaudited condensed consolidated financial statements included elsewhere in this prospectus. The unaudited pro forma condensed consolidated financial information reflects pro forma adjustments that are described in the accompanying notes and are based on available information and certain assumptions we believe are reasonable, but are subject to change. We have made, in our opinion, all adjustments that are necessary to present fairly the unaudited pro forma condensed consolidated financial information.

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2014, and the unaudited pro forma condensed consolidated statements of operations for the nine month period ended September 30, 2014 and the year ended December 31, 2013 present our consolidated financial position and results of operations to give pro forma effect to (i) the Transactions as described in “The Transactions,” which include the reorganization transactions and the sale of Class A Shares in this offering (excluding shares issuable upon exercise of the underwriters’ option to purchase additional shares) at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover of this prospectus), and the application of the net proceeds from this offering as described in “Use of Proceeds,” and (ii) the tax receivable agreement we will enter into with the existing Common Unitholders, in each case as if they had been completed as of January 1, 2013, with respect to the unaudited pro forma condensed consolidated statements of operations, and September 30, 2014, with respect to the unaudited pro forma condensed consolidated balance sheet.

The unaudited pro forma condensed consolidated statements of operations for the nine month period ended September 30, 2014 and the year ended December 31, 2013 present our consolidated results of operations to give pro forma effect to (i) one-time special distribution of $60.0 million to Murphy Group and EControls Group and borrowings of $85.5 million under our senior credit facility to pay this distribution and repay existing debt, which occurred on June 30, 2014, (ii) the sale of certain assets used to produce wire harnesses to a company jointly owned by Kennon Guglielmo, our Chief Technology Officer, and Frank W. Murphy III, our Executive Chairman, on September 15, 2014, and (iii) the purchase of our San Antonio Farinon facility on July 25, 2014 from a third-party entity by a company jointly owned by Messrs. Guglielmo and Murphy, in each case as if they had been completed as of January 1, 2013. As a result of the purchase described in the foregoing item (iii), the company jointly owned by Messrs. Guglielmo and Murphy must be accounted for as a variable interest entity which will result in the depreciation expense of the San Antonio Farinon facility and interest expense related to the outstanding borrowings being consolidated (and the related rent expense being eliminated) in our financial statements.

We have also provided supplemental unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2013, supplemental unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2014, and a supplemental unaudited pro forma condensed consolidated balance sheet as of September 30, 2014. In addition to the pro forma adjustments outlined above, such supplemental unaudited pro forma information is provided to give effect to the exchange of all the remaining Enovation Controls, LLC Common Units (with a corresponding number of Class B Shares) held by the existing owners of Enovation Controls, LLC for shares of Class A common stock of Enovation Controls, Inc. concurrent with the offering. The supplemental unaudited pro forma financial information is presented for illustrative purposes only as future exchanges of the Common Units of Enovation Controls, LLC (with a corresponding number of Class B Shares) for shares of our Class A common stock are dependent on numerous factors and such future exchanges will not occur as a direct result of the Transactions.

The unaudited pro forma condensed consolidated financial information is presented for informational purposes only and should not be considered indicative of actual results of operations that would have been

achieved had the transaction set forth above been consummated on the dates indicated, and do not purport to be indicative of the financial condition or results of operations as of any future date or for any future period. You should read our unaudited pro forma condensed consolidated financial information and the accompanying notes in conjunction with the consolidated historical financial statements and related notes included elsewhere in this prospectus and the financial and other information appearing elsewhere in this prospectus, including information contained in “Risk Factors,” “Use of Proceeds,” “Capitalization,” “Selected Historical Consolidated Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Enovation Controls, Inc.

Unaudited Pro Forma Condensed Consolidated Balance Sheet and

Supplemental Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of September 30, 2014

(Amounts in thousands, except per share data)


	Pro Forma						Supplemental Pro Forma (d)
	Historical Enovation Controls, LLC			Pro Forma Adjustments	Notes	Pro Forma Enovation Controls, Inc.	Supplemental Pro Forma Adjustments	Supplemental Pro Forma Enovation Controls, Inc.
Assets
Current assets:
Cash	$	7,070				$		$
Accounts receivable, net		36,994
Notes receivable		5,972
Inventories, net		36,012
Prepaid expenses, deposits and other current assets		1,909
Current deferred taxes		—			(a)

Total current assets		87,957

Property, plant and equipment, net		29,822
Goodwill		605
Intangible assets		1,177
Deferred tax assets		—			(a)
Other assets		506

Total assets	$	120,067				$		$

Liabilities and members’/stockholders’ equity
Current liabilities:
Accounts payable	$	12,656				$		$
Accrued liabilities		15,108
Current portion of long-term liabilities		1,800

Total current liabilities		29,564

Long-term debt		76,610
Accrued stock compensation		34,631
Other long-term liabilities, net of current portion		—
Payable to related parties pursuant to tax receivable agreement		—			(a)
Deferred tax liabilities		42			(a)

Total liabilities		140,847

Members’/stockholders’ equity		(20,965	)		(c)
Members’ accumulated other comprehensive income		185
Class A common stock		—			(b)
Class B common stock		—			(b)
Additional paid-in capital		—			(b)(c)
Retained earnings		—

Total members’/stockholders’ equity attributable to Enovation Controls, Inc.		(20,780	)
Non-controlling interest		—			(b)(c)

Total members’/stockholders’ equity		(20,780	)

Total liabilities and members’/stockholders’ equity	$	120,067				$		$

The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed consolidated financial information.

Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet

(a)	Reflects adjustments to give effect to the tax receivable agreement (as described in “Certain Relationships and Related Transactions—Tax Receivable Agreement”) based on the following assumptions:

•

we will record an increase of $ million in deferred tax assets for estimated income tax effects of the increase in the tax basis of the purchased interests, based on an effective income tax rate of % (which includes a provision for U.S. federal, state, and local income taxes and franchise taxes);

•

we will record $ million, representing discounted 85% of the estimated realizable tax benefit resulting from (i) the increase in the tax basis of the purchased interests as noted above and (ii) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement as an increase to the liability under the tax receivable agreement;

•

we will record an increase in prepaid taxes of $ million, an increase in current deferred tax assets of $ million and long-term deferred tax liabilities of $ million

•

we will record an increase of $ million to additional paid-in-capital, which is an amount equal to the difference between the increase in deferred tax assets and liabilities and the increase in the liability due to Common Unitholders under the tax receivable agreement; and

•

there are no material changes in the relevant tax law and that we earn sufficient taxable income in each year to realize the full tax benefit of the amortization of our assets.

The step up in basis for the tax receivable agreement will depend on the fair value of the Class A Shares at the time of the exchange, whether the step up is at the time the Transactions are effected or at any future exchange of the Common Units. There is no way to predict the timing or value of the step up of any future exchanges. If the tax receivable agreement were terminated immediately after the offering, we estimate it would require an early termination payment of approximately $ to the Common Unitholders.

(b)

Represents adjustments to stockholders’ equity reflecting (i) par value for Class A and Class B Shares to be outstanding following this offering, (ii) an increase of $ million of additional paid-in-capital due to the deferred tax assets, tax receivable agreement and deferred tax liabilities as described in Note (a) above, (iii) the elimination of Enovation Controls, LLC Members’ deficit of $ million upon consolidation, (iv) the reclassification of the adjusted balance of the accrued stock compensation of $ million to paid-in capital due to converting profits interest units to Common Units of Enovation Controls, LLC and (v) a decrease of $ million of paid-in capital to allocate a portion of the consolidated entities equity to non-controlling interest.

(c)

As described in “The Transactions,” we will become the sole managing member of Enovation Controls, LLC. We will initially own less than 100% of the economic interest in Enovation Controls, LLC, but will have 100% of the voting power and control the management of Enovation Controls, LLC. As a result, we will consolidate the financial results of Enovation Controls, LLC and will record a non-controlling interest. Immediately following this offering, the non-controlling interest, based on the assumptions used to develop the pro forma, will be %.

(d)

These pro forma adjustments assume the exchange of all the remaining Enovation Controls, LLC Common Units (with a corresponding number of Class B Shares) held by the existing owners of Enovation Controls, LLC for shares of Class A common stock of Enovation Controls, Inc. concurrent with the offering. The supplemental pro forma adjustments are presented for illustrative purposes only as such future exchanges will not occur as a direct result of the Transactions and do not necessarily reflect the actual number of exchanges that may occur subsequent to the offering. The supplemental pro forma adjustments consist of:

•

Increasing deferred tax assets by $ (from $ to $ ) to reflect the step up in basis of assets that would result if 100% of the Common Units (with a corresponding number of Class B Shares) were exchanged for Class A common stock compared to the % after this offering.

•

Increasing the payable to related parties pursuant to the tax receivable agreement by $ (from $ to $ ) to reflect the increase in the discounted 85% of the estimated realizable tax benefit discussed in (a) above due to the increase in the step up in basis of assets that would result if 100% of the Common Units (with a corresponding number of Class B Shares) were exchanged for Class A common stock compared to the % after this offering.

•

Elimination of $ in non-controlling interest to reflect the assumption that 100% of the Common Units (with a corresponding number of Class B Shares) were exchanged for Class A common stock compared to the % after this offering.

•

Increase in additional paid-in capital by $ (from $ to $ ) due to the net impact of (1) increasing deferred tax assets, (2) increasing the payable to related parties pursuant to tax receivable agreement and (3) elimination of non-controlling interest that would result from the assumption that 100% of the Common Units (with a corresponding number of Class B Shares) were exchanged for Class A common stock compared to the % after this offering.

Enovation Controls, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations and

Supplemental Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Nine Months Ended September 30, 2014

(Amounts in thousands, except share and per share data)

Pro Forma

Supplemental Pro Forma (m)

Historical
Enovation
Controls,
LLC

Pro Forma
Adjustments

Notes

Pro Forma
Enovation
Controls,
Inc.

Supplemental
Pro Forma
Adjustments

Supplemental
Pro Forma
Enovation
Controls, Inc.

Net sales

215,332

Costs of goods sold

124,382

(k)(l)

Gross profit

90,950

Operating expenses

Selling, general and administrative expenses

64,265

(f)(j)(k)

Research and development expenses

28,707

(j)

Operating expenses

92,972

Loss from operations

(2,022

)

Other expense

Interest, net

(830

)

(e)(j)

Other

Total other expenses

(823

)

Loss before provision for income taxes

(2,845

)

Provision for income taxes

(1,172

)

(g)

Net loss

(4,017

)

Less: Net loss attributable to non-controlling interest

(h)

Net loss attributable to Enovation Controls, Inc.

Net loss attributable to Enovation Controls, Inc. per Class A common share

Basic

(i)

Diluted

(i)

Weighted average shares of Enovation Controls Class A common stock outstanding

Basic

(i)

Diluted

(i)

The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed consolidated financial information.

Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Operations

For the Nine Months Ended September 30, 2014

(e)

Additional interest expense related to the $60.0 million increase in long-term debt associated with the one-time distribution to Murphy Group and EControls Group as if the transaction took place January 1, 2013. Interest expense was calculated using a blended interest rate of one month LIBOR to six month LIBOR plus an applicable margin rate, based upon our current borrowings, and includes the amortized loan origination fees of $0.6 million that are being amortized over the debt agreement term of 5 years. We considered whether to make adjustments to the pro forma interest expense on our credit facility with Prosperity Bank due to the decrease in interest rates that occurred when we refinanced our credit agreement, but it was determined that the net effect was not significant.

(f)

Upon closing the Transactions, we expect to incur direct, incremental general and administrative expenses as a result of being a publicly traded company, including, but not limited to, costs associated with the preparation of annual and quarterly reports we will be required to file with the SEC, tax return preparation, independent auditor fees, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs, independent director compensation, and exchange listing expenses. We estimate these incremental general administrative expenses will initially total approximately $2.5 million annually. These incremental expenses are not reflected in the historical consolidated and combined financial statements or in the unaudited pro forma financial statements.

(g)

Following the Transactions, we will be subject to U.S. federal income taxes, in addition to state and local taxes, with respect to our allocable share of any taxable income of Enovation Controls, LLC. As a result, the pro forma consolidated statement of operations reflects an adjustment to our provision for corporate income taxes to reflect an effective rate of %, which includes provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state and local jurisdictions. We have income tax expense even though we have a loss before income taxes because the $ million of stock compensation is non-deductible for income tax purposes and is a permanent difference.

(h)

As described in “The Transactions,” we will become the sole managing member of Enovation Controls, LLC. We will initially own less than 100% of the economic interest in Enovation Controls, LLC, but will have 100% of the voting power and control the management of Enovation Controls, LLC. Immediately following this offering, the non-controlling interest will be %. Net loss attributable to the non-controlling interest represents %, or $ million of loss before provision for income taxes of $ million for the nine months ended September 30, 2014.

(i)

Class B Shares convert to Class A Shares on a one-for-one basis and increase Enovation Controls, Inc.’s ownership of Enovation Controls, LLC proportionately. The Class B Shares do not share in our earnings and are therefore not included in the weighted average shares outstanding or net income available per share. Enovation Controls, Inc. does not have any dilutive common stock equivalents and accordingly the basic and dilutive earnings per share and shares outstanding are the same.

(j)

Reflects the additional depreciation and interest expense and elimination of rent expense associated with the purchase of the San Antonio facility and related mortgage debt on July 25, 2014 by a company jointly owned by our Chief Technology Officer and Executive Chairman, which is accounted for as the consolidation of a variable interest entity.

(k)	Decrease in cost of goods sold of $ ; selling general and administrative expense of $ ; and research and development expense of $ due to the decrease in accrued stock compensation.

(l)

On September 15, 2014, Enovation Controls, LLC sold certain assets used to produce wire harnesses (see “Certain Relationships and Related Party Transactions—Sale of Certain Assets Used to Produce Wire Harnesses” for more information). The assets were sold for approximately $1.3 million, which approximates our net book basis and accordingly, no gain or loss was recognized on the sale. We will begin to source the wire harness components used in our system solutions at prevailing market rates instead of manufacturing them internally. We estimate that doing so during the nine months ended September 30, 2014 would have reduced our cost of goods sold by approximately $ .

(m)

•

Increasing the provision for income taxes by $ (from $ to $ ) to reflect the assumption that 100% of the Common Units (with a corresponding number of Class B Shares) were exchanged for Class A common stock compared to the % after this offering.

•

Eliminate the net loss attributable to non-controlling interest to reflect the assumption that 100% of the Common Units (with a corresponding number of Class B Shares) were exchanged for Class A common stock compared to the % after this offering.

Enovation Controls, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations and

Supplemental Unaudited Pro Forma Condensed Consolidated Statement of Operations

Year Ended December 31, 2013

(Amounts in thousands, except share and per share data)


	Pro Forma								Supplemental Pro Forma (t)
	Historical Enovation Controls, LLC			Pro Forma Adjustments	Notes			Pro Forma Enovation Controls, Inc.	Supplemental Pro Forma Adjustments	Supplemental Pro Forma Enovation Controls, Inc.
Net sales	$	255,582						$		$
Costs of goods sold		147,323				(s)

Gross profit		108,259

Operating expenses
Selling, general and administrative expenses		43,566				(r	)
Research and development expenses		23,628				(r	)

Operating expenses		67,194

Income from operations		41,065

Other expense
Interest, net		(440	)			(n)(p)
Other		88

Total other expenses		(352	)

Income before provision for income taxes		40,713
Provision for income taxes		(793	)			(o)

Net income	$	39,920								$

Less: Net income attributable to non-controlling interest						(p)

Net income attributable to Enovation Controls, Inc.								$

Net income attributable to Enovation Controls, Inc. per Class A common share
Basic						(q)		$		$
Diluted						(q)		$		$
Weighted average shares of Enovation Controls, Inc. Class A common stock outstanding
Basic						(q)
Diluted						(q)

The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed consolidated financial information.

Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Operations

Year Ended December 31, 2013

(n)

Additional interest expense related to the $60.0 million increase in long-term debt associated with the one-time distribution to Murphy Group and EControls Group as if the transaction took place January 1, 2013. Interest expense was calculated using a blended interest rate of one-month LIBOR to six month LIBOR plus an applicable margin rate, based upon our current borrowings, and includes the amortized loan origination fees of $0.6 million that are being amortized over the debt agreement term of 5 years. We considered whether to make adjustments to the pro forma interest expense on our credit facility with Prosperity Bank due to the decrease in interest rates that occurred when we refinanced our credit agreement, but it was determined that the net effect was not significant.

(o)

(p)

As described in “The Transactions,” we will become the sole managing member of Enovation Controls, LLC. We will initially own less than 100% of the economic interest in Enovation Controls, LLC, but will have 100% of the voting power and control the management of Enovation Controls, LLC. Immediately following this offering, the non-controlling interest will be %. Net income attributable to the non-controlling interest represents %, or $ million of income before provision for income taxes of $ million for the year ended.

(q)

(r)

Reflects the additional depreciation and interest expense and elimination of rent expense associated with the purchase of our San Antonio facility and related mortgage debt on July 25, 2014 by a company jointly owned by Kennon Guglielmo, our Chief Technology Officer, and Frank W. Murphy III, our Executive Chairman, which is accounted for as the consolidation of a variable interest entity.

(s)

On September 15, 2014, Enovation Controls, LLC sold certain assets used to produce wire harnesses (see “Certain Relationships and Related Party Transactions—Sale of Certain Assets Used to Produce Wire Harnesses” for more information). The assets were sold for approximately $1.3 million, which approximates our net book basis and accordingly, no gain or loss was recognized on the sale. We will begin to source the wire harness components used in our system solutions at prevailing market rates instead of manufacturing them internally. We estimate that doing so during the year ended December 31, 2013 would have reduced our cost of goods sold by approximately $275.

(t)

•

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table presents the selected historical consolidated financial data of Enovation Controls, LLC, our accounting predecessor. The consolidated statement of operations data for the years ended December 31, 2013, 2012, and 2011, and the consolidated balance sheet data as of December 31, 2013 and 2012, have been derived from Enovation Controls, LLC’s audited consolidated financial statements included elsewhere in this prospectus. The consolidated statement of operations data for the years ended December 31, 2010 and 2009 and the consolidated balance sheet data as of December 31, 2011, 2010, and 2009, have been derived from Enovation Controls, LLC’s audited consolidated financial statements not included in this prospectus.

The consolidated statement of operations data for the nine months ended September 30, 2014 and 2013 and the consolidated balance sheet data as of September 30, 2014, have been derived from Enovation Controls, LLC’s unaudited consolidated financial statements included elsewhere in this prospectus and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial position and results of operations as of the dates and for the periods indicated.

The selected historical consolidated financial data presented below should be read in conjunction with, and are qualified in their entirety by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and accompanying notes thereto included elsewhere in this prospectus. Historical results are not necessarily indicative of results that may be expected for any future period, and the results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.

The financial statements of Enovation Controls, Inc. have not been presented below as it is a newly incorporated entity, has nominal capitalization, had no business transactions or activities to date and had no assets or liabilities during the periods presented below. Enovation Controls, LLC will be considered the predecessor of Enovation Controls, Inc. for accounting purposes and the consolidated financial statements of Enovation Controls, LLC will be the historical financial statements of Enovation Controls, Inc. following this offering.


	Nine Months Ended September 30,						Year Ended December 31,
	2014			2013			2013			2012			2011			2010			2009⁽¹⁾
(in thousands)
Consolidated Statement of Operations Data:
Net sales	$	215,332		$	194,871		$	255,582		$	218,556		$	193,739		$	147,999		$	79,227
Cost of goods sold⁽²⁾		124,382			111,376			147,323			137,078			122,069			92,365			51,471

Gross profit		90,950			83,495			108,259			81,478			71,670			55,634			27,756

Operating expenses
Selling, general and administrative expenses⁽²⁾		64,265			32,506			43,566			36,568			34,708			25,730			16,395
Research and development expenses⁽²⁾		28,707			18,294			23,628			20,429			17,349			15,384			8,391
Goodwill impairment		—			—			—			6,462			—			—			—

Operating expenses		92,972			50,800			67,194			63,459			52,057			41,114			24,786

(Loss) income from operations		(2,022	)		32,695			41,065			18,019			19,613			14,520			2,970

Other income (expenses)
Interest, net		(830	)		(296	)		(440	)		(482	)		(587	)		(547	)		(592	)
Gain on early extinguishment of debt		—			—			—			—			379			—			—
Other		7			146			88			251			(387	)		(657	)		459

Total other expenses		(823	)		(150	)		(352	)		(231	)		(595	)		(1,204	)		(133	)

(Loss) income before provision for income taxes		(2,845	)		32,545			40,713			17,788			19,018			13,316			2,837
Provision for income taxes		(1,172	)		(509	)		(793	)		(204	)		(383	)		(460	)		(462	)

Net (loss) income	$	(4,017	)	$	32,036		$	39,920		$	17,584		$	18,635		$	12,856		$	2,375

Less income attributable to noncontrolling interest		—			—			—			—			—			—			143

Net income attributable to Enovation Controls, LLC		—			—			—			—			—		$	12,856		$	2,232

Other comprehensive (loss) income
Foreign currency translation adjustments		(224	)		144			379			468			131			—			—
Amounts reclassified from accumulated other comprehensive loss⁽³⁾		—			—			—			1,143			—			—			—

Other comprehensive (loss) income		(224	)		144			379			1,611			131			—			—

Comprehensive (loss) income	$	(4,241	)	$	32,180		$	40,299		$	19,195		$	18,766		$	12,856		$	2,232

Other Data:
Adjusted EBITDA⁽⁴⁾	$	40,316		$	37,278		$	47,226		$	30,091		$	24,519		$	18,931		$	5,699


	As of September 30, 2014			As of December 31,
	As of September 30, 2014			2013		2012		2011		2010		2009
(in thousands)
Balance Sheet Data:
Cash	$	7,070		$	5,985	$	5,266	$	3,509	$	2,918	$	7,230
Working capital		58,393			60,197		48,254		52,537		36,202		30,095
Total assets		120,067			104,735		92,908		101,214		80,434		69,392
Total long-term debt (including current portion)		78,410			17,079		18,032		20,336		10,016		13,890
Members’ equity		(20,780	)		67,863		56,502		61,958		57,051		47,692

(1)	Enovation Controls, LLC’s consolidated financial statements for the year ended December 31, 2009, include full year results for Murphy Industries, LLC and three months results (from October 1, 2009 through December 31, 2009) for EControls, LLC.

(2)

Enovation Controls, LLC’s consolidated statement of operations data for the nine month period ended September 30, 2014 includes stock compensation expense related to the Profits Interest Plan. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of Results of Operations—Stock Compensation” for further discussion. The amount of non-cash expense recorded within the statement of operations data for the nine month period ended September 30, 2014 by statement line item are as follows: cost of goods sold of $1.4 million, selling, general and administrative expenses of $22.3 million, and research and development expenses of $10.9 million.

(3)	Reclassification of the foreign currency translation adjustment to income upon the substantially complete liquidation of an investment in a foreign entity.

(4)

We use Adjusted EBITDA to evaluate and control our cash operating costs and to measure our operating profitability. We believe the presentation of Adjusted EBITDA enhances our investors’ overall understanding of the financial performance and cash flow of our business. We present Adjusted EBITDA because we believe it is useful as a supplemental measure in evaluating the performance of our operating businesses and provides greater transparency into our results of operations. You should not consider Adjusted EBITDA in isolation, nor as an alternative to net income (loss), determined in accordance with GAAP, as an indicator of operating performance, or as an alternative to net cash provided by operating activities, determined in accordance with GAAP, as an indicator of our cash flow. A directly comparable GAAP measure to Adjusted EBITDA is net income (loss). The following is a reconciliation of net income (loss) to Adjusted EBITDA:


	Nine Months Ended September 30,					Year ended December 31,
	2014			2013		2013		2012		2011		2010		2009
(in thousands)
Net (loss) income	$	(4,017	)	$	32,036	$	39,920	$	17,584	$	18,635	$	12,856	$	2,375
Plus:
Interest, net		830			296		440		482		587		547		592
Provision for income taxes		1,172			509		793		204		383		460		462
Depreciation expense		3,091			2,316		3,245		2,441		2,172		1,943		1,549
Amortization of intangibles		2,149			2,121		2,828		2,918		2,742		3,125		721
Goodwill impairment		—			—		—		6,462		—		—		—
Stock compensation		34,631			—		—		—		—		—		—
Liability derecognition⁽⁵⁾		(488	)		—
Transactions expenses		2,948			—		—		—		—		—		—

Adjusted EBITDA	$	40,316		$	37,278	$	47,226	$	30,091	$	24,519	$	18,931	$	5,699

(5)

We derecognized a deferred rent liability of $488,000 and recorded income as a result of the purchase of our San Antonio Farinon facility by GTD Development, LLC (GTD), an entity owned by Kennon Guglielmo, our Chief Technology Officer, and Frank W. Murphy III, our Executive Chairman, and accounted for as a variable interest entity, which purchase released us from our lease obligation with a third party. See Note 12—“Variable Interest Entity” to our consolidated financial statements included in this prospectus.

•

this measure does not reflect changes in, or cash requirements for, our working capital needs;

•

this measure does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

•

this measure does not reflect our income tax expense or the cash requirements to pay our taxes;

•

this measure does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

•

this measure does not reflect the impact of equity based compensation upon our operations;

•

other companies may calculate this measure differently so our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and accompanying notes thereto included elsewhere in this prospectus.

The historical financial data discussed below reflects the historical results of operations and financial condition of Enovation Controls, LLC and its consolidated subsidiaries and does not give effect to the Transactions. See “The Transactions” and “Unaudited Pro Forma Condensed Consolidated Financial Information” included elsewhere in this prospectus for a description of the Transactions and their effect on our historical results of operations.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See “Special Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results may differ materially from those contained in any forward-looking statements.

Overview

We are a global provider of digital control systems for gaseous fuel engines and engine-driven equipment focused on the vehicle and energy markets. We develop systems that are utilized in commercial CNG/LNG trucks and buses, natural gas production, power generation, and a wide variety of industrial and off-highway applications. Our products provide control, protection, and monitoring solutions to our customers, and enable them to meet global emissions standards while allowing operation of their equipment in extreme environments. Our EControls^® and Murphy^® brands provide integrated turnkey solutions that combine proprietary software platforms and customized hardware.

Our solutions represent a small portion of the overall cost of the end-use application, but are integral to system functionality and operating performance. We have developed numerous customer relationships, including several Fortune Global 500 corporations, based on technical collaboration. In 2013, we generated $256 million in revenue and $41 million in operating income from our 70 product families across more than 4,000 customers globally. We are geographically diverse, generating approximately 30% of our revenues in 2013 from international markets, including more than $60 million from the rapidly growing Asian market.

Our solutions include a variety of engine control and monitoring systems, sensors, displays, and supervisory panels that are used across several industries. Through our EControls^® and Murphy^® brands, we target two primary markets: Vehicles and Energy.

Trends Impacting Our Business

We believe we are positioned to benefit from a number of significant trends driving demand in the industries in which we compete:

•

Expected significant global increase in the production of and demand for natural gas supported by attractive cost, environmental, and geopolitical benefits relative to other hydrocarbon fuels;

•

Anticipated growth in demand for advanced natural gas compression system controls in oil and gas applications driven by increased shale and tight formation production in the U.S. and globally;

•

Global adoption of NGVs due to significant economic and environmental advantages:

^¡

NGV Global reports that as of the end of 2012 there were 16.7 million NGVs in operation around the world, a 21.6% CAGR since 2002 with the fastest growth in the Asia-Pacific region over that period;

^¡

China is one of the largest and fastest growing NGV markets globally—the number of NGVs in China across all classes grew from 36,000 in 2002 to approximately 1.6 million in 2012, at a CAGR of 45.9% according to NGV Global. Although growth flattened in 2014, we believe that was a temporary effect of diesel engine pre-buying in 2014 in advance of the nationwide enforcement of State Standard 4 diesel emissions standards effective January 1, 2015. We believe that this pre-buying was driven by the approximate 15% price premium of a State Standard 4 diesel certified class 8 truck over a current equivalent State Standard 3 diesel certified vehicle;

•

Increasingly stringent global emissions regulations driving demand for advanced engine technologies that enable lower emissions, greater fuel economy, and regulatory compliance; and

•

Key Factors Impacting Operations

Since the merger of EControls and Murphy in 2009, a number of key factors have had, and will continue to have, a significant impact on our results of operations and cash flows, including:

•

Our revenues have grown 16.9%, 12.8%, and 30.9% for the years ended 2013, 2012, and 2011, respectively. Core market growth significantly contributed to that growth but new product introductions were also instrumental in creating additional revenue.

•

Our business has low capital intensity. We make significant investments in research and development and in headcount as we grow around the world. We require additional working capital for inventory and accounts receivable to support our sales growth. Historically, capital expenditures of less than 3% of revenue have been adequate to support our growth.

•

In 2010, we merged the general and administrative function and the research and development function of EControls and Murphy, which resulted in improved processes, significant product development velocity, and several new products. Those new products began producing revenue in late 2011 and subsequent years.

•

In 2011, we moved the historical EControls operations into a newly leased 130,000 square foot facility in San Antonio, Texas with significant additional office and manufacturing space. In connection with this move, we increased our engine calibration capacity, and our circuit board production capacity, and added a variety of new research and development test equipment. These increases in production and research and development capacity improved our product testing capability resulting in increased research and development costs but are expected to lead to eventual manufacturing production cost savings.

•

In early 2013, we implemented a number of additional lean productivity initiatives including shorter supplier lead times, visual factory management, and targeted performance metrics. These lean productivity initiatives were fully implemented in 2013 and resulted in a reduction in inventory,

manufacturing lead-time improvements, and improved manufacturing execution which reduced production and overhead costs and significantly improved margins in 2013.

•

In the second quarter of 2013, we moved certain manufacturing operations for the support of the commercial NGV market from the U.S. into our facility in Hangzhou, China, to be closer to our customers which reduced lead times but also increased our working capital requirements for accounts and notes receivables.

Key Operating and Financial Performance Metric

In addition to measures of financial performance presented in our consolidated financial statements, we monitor the key metric set forth below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies.

Adjusted EBITDA

We monitor Adjusted EBITDA, a non-GAAP financial measure, to analyze our financial results and we believe that it is useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance and understanding our past financial performance. We believe that Adjusted EBITDA helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expense items that we exclude from Adjusted EBITDA. Furthermore, we also use Adjusted EBITDA to establish budgets and operational goals for managing our business and evaluating our performance. We also believe that Adjusted EBITDA provides an additional tool for investors to use in comparing our recurring core business operating results over multiple periods with other companies in our industry.

Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP, and our calculation of Adjusted EBITDA may differ from that of other companies in our industry. We have calculated Adjusted EBITDA as net income (loss) before interest, income taxes, depreciation, amortization, impairment of goodwill, stock compensation, liability derecognition, and the Transactions expenses.

The following table reconciles Adjusted EBITDA with our net (loss) income, as derived from our financial statements, for the indicated periods (in thousands):


	Nine Months Ended September 30,					Fiscal Year Ended December 31,
	2014			2013		2013		2012		2011
Net (loss) income	$	(4,017	)	$	32,036	$	39,920	$	17,584	$	18,635
Interest, net		830			296		440		482		587
Provision for income taxes		1,172			509		793		204		383
Depreciation expense		3,091			2,316		3,245		2,441		2,172
Amortization of intangibles		2,149			2,121		2,828		2,918		2,742
Goodwill impairment		—			—		—		6,462		—
Stock compensation		34,631			—		—		—		—
Liability derecognition⁽¹⁾		(488	)		—		—		—		—
Transactions expenses		2,948			—		—		—		—

Adjusted EBITDA	$	40,316		$	37,278	$	47,226	$	30,091	$	24,519

(1)

Components of Results of Operations

Net Sales

We generate revenue from the sale of control and monitoring systems for engines and engine-driven equipment for commercial CNG/LNG trucks and buses, natural gas compressors, natural gas production, distributed power generation and a wide variety of industrial and off-highway applications including industrial mobile and stationary engines and their associated equipment. We also generate revenue from replacement parts and services in the same applications. Net sales are derived from gross sales less sales discounts.

Cost of Goods Sold

Our cost of goods sold includes all of the costs to manufacture our products, such as raw materials, electronic components, direct labor and benefits, indirect labor and benefits, and other factory overhead and supplies. For raw materials, components, accessories and products manufactured by third-party vendors, such costs represent the amounts invoiced by vendors. Shipping costs and depreciation expenses related to manufacturing equipment and facilities are also included in cost of goods sold.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses include salaries, benefits, and other personnel expenses; non-manufacturing overhead; travel expenses; third-party professional fees; and costs of advertising and various marketing programs. Our growth in headcount and operations has resulted in increased employee compensation and benefits as well as additional expenses relating to the acquisition of employee talent including recruiting fees and relocation expenses. We expect this trend to continue as we invest in the business. Warranty reserves and costs associated with the repair and or replacement of our products under warranty are also included in selling costs.

Research and Development Expenses

Research and development expenses include compensation costs and benefits for employees with technical software and hardware engineering expertise, direct materials and expense items incurred in research and development projects, and test equipment operating costs. Testing costs include operating costs, depreciation, and overhead on the test equipment and facilities used for prototyping, testing, and development activities.

Goodwill Impairment and other Intangibles and Long Lived Assets

We hold amortizing and non-amortizing intangible assets and long-lived assets. We evaluate these assets for impairment as further discussed in “—Critical Accounting Policies and Estimates—Goodwill–Impairment Assessments.” These evaluations have in the past resulted in impairment losses for certain of these assets based on the specific facts and circumstances and our estimates of those assets’ fair value. Based on economic conditions or other factors, we may be required to take additional impairment losses to reflect further declines in our asset values.

Interest, net

Interest expense includes the interest charged on our outstanding debt by financing institutions plus the loan origination fees and expenses charged by the lending institutions amortized over the life of the loan. Interest income includes interest earned on short term cash investments.

Income Taxes

Enovation Controls, LLC is currently taxed as a partnership for U.S. federal and state income tax purposes. Therefore, Enovation Controls, LLC is a “flow-through” entity for U.S. tax purposes and as such taxes are paid at the Common Unitholder level and taxes are not recorded on the books of Enovation Controls, LLC for U.S. tax purposes. However, our international subsidiaries are taxable entities and all provisions for income taxes for Enovation Controls, LLC are solely related to its subsidiaries’ international operations. Following the Transactions, Enovation Controls, Inc. will be subject to U.S. federal income taxation and its consolidated income tax expense and deferred tax assets and liabilities will reflect its allocable share of the taxable earnings of Enovation Controls, LLC. Since the members of Enovation Controls, LLC pay taxes on the earnings of Enovation Controls, LLC, each member, including the Common Unitholders and Enovation Controls, Inc., may have a cash tax obligation with respect to its share of those earnings. Enovation Controls, LLC thus intends to make cash distributions (referred to as tax distributions) to facilitate the payment by the Common Unitholders and Enovation Controls, Inc. in satisfaction of such cash tax obligations. The amended and restated operating agreement of Enovation Controls, LLC requires Enovation Controls, LLC to make pro rata tax distributions to all of its members, including Enovation Controls, Inc, on a quarterly basis by the tenth day of each March, June, September, and December of each taxable year for the purpose of providing cash to its members to allow them to make their quarterly estimated tax payments. This tax distribution is distinct from the payment obligations created by the tax receivable agreement. Tax distributions are subject to the availability of sufficient funds and to restrictions or limitations imposed by applicable law or any agreement to which Enovation Controls, LLC is bound.

We will be subject to U.S. federal and state income tax in multiple jurisdictions. Some of these jurisdictions have higher statutory tax rates than others. Accordingly, our effective tax rates will vary depending on the relative proportion of income in various states or jurisdictions, changes in the valuation of our deferred tax assets and liabilities and changes in tax laws.

The tax receivable agreement executed in conjunction with the Transactions will result in a deferred tax asset or a reduction in a deferred tax liability and a payable to the Common Unitholders. See the Unaudited Condensed Pro Forma Consolidated Financial Information for further discussion on taxes after the Transactions.

Stock Compensation

In July 2011, the Class A Unitholders of Enovation Controls, LLC approved a Profits Interest Plan, which we refer to as the Plan, which provides for the issuance of profits interest units to key employees and advisory board directors, which we refer to as Management Interests, of Enovation Controls, LLC. Class B, C, and D profits interest units were issued under the Plan in 2011, 2013 and 2014, respectively. The profits interest units generally vest over four or five years subject to continued service and only provide the participants with benefits (in the form of distributions) if the distributions from Enovation Controls, LLC exceed specified threshold values. Distributions to date have not reached the minimum thresholds, nor are they expected to reach the minimum thresholds prior to Enovation Controls, Inc.’s anticipated initial public offering, for any of the Management Interests.

The profits interest units do not require the payment of an exercise price, but because they are similar economically to stock options, they are classified as options under the definition in Item 402(a)(6)(i) of Regulation S-K as instruments with option-like features. The profits interest units vest as the required service periods are met but are not exercisable. We accounted for these profits interest units as liability awards. Under the award agreements, the units were intended to be settled in cash after seven years or in cash at our option if an employee terminated employment at a valuation to be determined by us. Accounting Standards Codification (ASC) 718, Compensation—Stock Compensation, states that liability awards issued by nonpublic entities have an accounting policy choice when it comes to determining the fair value of the award units. We elected to value these profits interest units utilizing the intrinsic value method. The Plan made it unlikely any payout would occur prior to an event such as a significant investment in Enovation Controls, LLC, a sale of all or part of Enovation Controls, LLC, or an initial public offering. At each of the prior reporting periods, the intrinsic value of the awards was less than the threshold given the valuation methodology used and the fact that no event was anticipated. ASC 718 requires a fair value calculation for liability awards for publicly traded entities. The

September 30, 2014 unaudited consolidated financial statements reflect the award units at estimated fair value using a probability weighted expected return method (PWERM). As of September 30, 2014 there have been no cash payments for these awards. See Note 8—“Stock Compensation” to our consolidated financial statements and “—Critical Accounting Policies and Estimates—Change in Accounting Principle” included in this prospectus for further discussion.

As a result of the change in accounting principle, compensation expense equal to the fair market value of the profit interest units has been recorded in the expense classification in the consolidated statements of operations and comprehensive income where the compensation of the plan participant is normally recorded, as shown below, for the nine months ended September 30, 2014 (in thousands):


	Nine Months Ended September 30, 2014
	(Unaudited)
Cost of goods sold	$	1,430
Selling, general and administrative expenses		22,330
Research and development expenses		10,871

Total	$	34,631

For the years ended December 31, 2013, 2012 and 2011, respectively, there was no compensation expense recorded.

At the effective date of the offering the fair value of the profit interest units will be adjusted to the market value based on the offering price per share of $ (assuming the Class A Shares are sold at $ per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus). The decrease in compensation expenses recorded due to the adjustment to market value would be $ . This decrease in expense will be recorded in costs of goods sold, selling, general, and administrative expenses, and research and development expenses in the quarter in which the offering closes. The profit interest units will be converted into Common Units in connection with the Transactions.

As there are inherent uncertainties related to the factors and management’s judgment in applying them to the fair value determinations, there is a risk that the recorded stock compensation may not accurately reflect the amount ultimately earned.

Results of Operations


	Nine Months Ended September 30,						Fiscal Year Ended December 31,
	2014			2013			2013			2012			2011
	(in thousands)
Net sales	$	215,332		$	194,871		$	255,582		$	218,556		$	193,739
Cost of goods sold		124,382			111,376			147,323			137,078			122,069
Gross profit		90,950			83,495			108,259			81,478			71,670
Operating expenses:
Selling, general and administrative expenses		64,265			32,506			43,566			36,568			34,708
Research and development expenses		28,707			18,294			23,628			20,429			17,349
Goodwill impairment		—			—			—			6,462			—
(Loss) income from operations		(2,022	)		32,695			41,065			18,019			19,613
Interest, net		(830	)		(296	)		(440	)		(482	)		(587	)
Other		7			146			88			251			(8	)
Provision for income taxes		(1,172	)		(509	)		(793	)		(204	)		(383	)

Net (loss) income	$	(4,017	)	$	32,036		$	39,920		$	17,584		$	18,635

Nine Months Ended September 30, 2014 compared to the Nine Months Ended September 30, 2013

Net Sales. Our net sales for the nine months ended September 30, 2014 were $215.3 million reflecting an increase of $20.5 million, or 10.5%, as compared to the same period in 2013. The increase was due to an increase in sales into the Energy market of $20.0 million, or 18.4%, for the nine months ended September 30, 2014 as compared to the same period in 2013 due primarily to increased sales of control systems for natural gas compressors. Sales into the Vehicle market increased slightly by $0.5 million for the nine months ended September 30, 2014 as compared to the same period in 2013. During the nine months ended September 30, 2014, increased sales of our vehicle application control systems and our gaseous engine control systems in North America offset lower sales of our natural gas engine control systems in the Chinese natural gas vehicle market.

Gross Profit. Our gross profit increased $7.4 million for the nine months ended September 30, 2014 as compared to the same period in 2013 primarily due to the increase in sales volume as discussed above. Gross profit as a percent of sales decreased from 42.8% of revenue to 42.2% of revenue primarily due to a $1.4 million charge for stock compensation, as described under “—Components of Results of Operations—Stock Compensation.”

Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased $31.8 million, or 97.7%, for the nine months ended September 30, 2014 as compared to the same period in 2013. The increase resulted primarily from a $22.3 million charge for stock compensation expense, as described under “—Components of Results of Operations—Stock Compensation,” as well as increased compensation and benefit expenses of $4.2 million related to an increase in headcount, professional fees of $2.3 million, and warranty expenses of $2.7 million, which is due primarily to one specific field action program.

Research and Development Expenses. Our research and development expenses increased $10.4 million, or 56.9%, for the nine months ended September 30, 2014 as compared to the same period in 2013. The increase was due to a $10.9 million charge for stock compensation expense, as described under “—Components of Results of Operations—Stock Compensation.”

(Loss) Income from Operations. We incurred a net loss from operations of $2.0 million in the nine months ended September 30, 2014 as compared to income from operations of $32.7 million in the same period in 2013. The net income from operations decreased $34.7 million, or 106.2%, due to a $34.6 million charge for stock compensation expense, as described under “—Components of Results of Operations—Stock Compensation,” which was partially offset by an increase in sales as described above.

Interest Expense. Our interest expense increased $0.5 million in the nine months ended September 30, 2014 as compared to the same period in 2013. The increase was due to an increase in our outstanding borrowings used to fund a $60.0 million distribution to our Class A Unitholders, as described under “—Credit Facilities.”

Other. Our other income decreased $0.1 million in the nine months ended September 30, 2014 as compared to the same period in 2013. The decrease was primarily related to a one-time loss on disposal of property of $0.1 million and the loss of rental income of a tenant in our Hangzhou facility of $0.1 million due to our operational expansion in 2013.

Provision for Income Taxes. The provision for income taxes increased $0.7 million for the nine months ended September 30, 2014 as compared to the same period in 2013 as a result of our transfer of certain manufacturing operations to China from the U.S. during the second quarter of 2013. Consequently, the transfer increased our taxable income in China.

Net (Loss) Income. We incurred a net loss of $4.0 million in the nine months ended September 30, 2014 as compared to net income of $32.0 million in the same period in 2013. The change in net income in the nine

months ended September 30, 2014 compared to the nine months ended September 30, 2013 was primarily due to stock compensation expense of $34.6 million, as described under “—Components of Results of Operations—Stock Compensation.”

Fiscal Year Ended December 31, 2013 compared to the Fiscal Year Ended December 31, 2012

Net Sales. Our net sales for fiscal year 2013 were $255.6 million reflecting an increase of $37.0 million, or 16.9%, as compared to fiscal year 2012. Sales into the Vehicle market increased $17.3 million, or 18.0%, compared to fiscal year 2012 while sales into the Energy market increased $19.7 million, or 16.1%, compared to fiscal year 2012. The increase in sales into the Vehicle market was due to revenue growth from control and fuel systems for commercial natural gas trucks and buses in Asia. The increase in sales into the Energy market was primarily driven by a combination of the demand for improved fuel efficiency, more stringent emissions regulations, and growth in natural gas production in the U.S.

Gross Profit. Our gross profit increased $26.8 million, or 32.9%, for fiscal year 2013 as compared to fiscal year 2012 due primarily to increased sales as discussed above which accounted for $13.8 million of the increase in gross profit. Additionally, gross profit as a percent of sales increased from 37.3% of revenue to 42.4% of revenue primarily due to $5.8 million from a shift in mix towards higher margin, advanced technology products, production labor and overhead efficiencies of $3.6 million, increased pricing on certain products of $2.4 million, and reduced raw material costs of $1.2 million.

Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased $7.0 million, or 19.1%, for fiscal year 2013 as compared to fiscal year 2012. The increase resulted primarily from increased compensation, benefit, and equipment expenses of $5.8 million related to the increase in headcount driven by increase in sales, and an increase in professional fees of $0.5 million.

Research and Development Expenses. Our research and development expenses increased $3.2 million, or 15.7%, for fiscal year 2013 as compared to fiscal year 2012. The increase was primarily due to increased compensation and benefit expenses of $2.0 million for additional software and hardware engineers, $0.6 million of additional project expenses for a large project in 2013 and $0.6 million of additional operating expenses for our new facility and test equipment.

Goodwill Impairment. No impairments of goodwill were recorded in fiscal year 2013. In connection with our annual long-lived asset impairment testing in fiscal year 2012, we recorded an impairment of goodwill of $6.5 million relating to our battery charger products, which we produce and sell primarily in the European markets. The impairment occurred in 2012 as a result of these products’ flat sales volume and weakness in the European markets. See “—Critical Accounting Policies and Estimates—Goodwill–Impairment Assessments” for further information on the 2012 impairment.

Income from Operations. Our income from operations increased $23.0 million, or 127.9%, for fiscal year 2013 as compared to fiscal year 2012. This increase was driven by an 18.0% increase in sales into the Vehicle market and a 16.1% increase in sales into the Energy market. In addition, we had increased margins due to the sale of newly released, advanced technology products, certain price increases and reduced manufacturing and raw material costs partly offset by an increase in selling, general and administrative expenses and research and development expenses as described above.

Interest Expense. Our interest expense decreased $0.1 million for fiscal year 2013 as compared to fiscal year 2012. This decrease was due to a 0.25% decrease in the interest rate under our credit facility with Prosperity Bank in the third quarter of fiscal year 2013.

Other. Our other income decreased $0.2 million for fiscal year 2013 as compared to fiscal year 2012. The decrease was primarily due to foreign currency fluctuations, specifically a weakening of the U.S. dollar with respect to the Chinese yuan.

Provision for Income Taxes. Our income taxes increased $0.6 million for fiscal year 2013 as compared to fiscal year 2012 as a result of our transfer of certain manufacturing operations to China from the U.S. during the second quarter of 2013.

Net income. Our net income increased $22.3 million, or 127.0%, for fiscal year 2013 as compared to fiscal year 2012. This increase was primarily due to a $26.8 million increase in gross profit. Increased sales resulted in $13.8 million of the increase in gross profit and the improvement in gross margin percent from 37.3% to 42.4% accounted for the remaining $13.0 million increase in gross profit. Gross profit as a percent of sales increased due to (1) a shift in mix towards higher margin, advanced technology products, (2) production labor and overhead efficiencies, (3) increased pricing on products, and (4) reduced raw material costs. In addition, we recorded a $6.5 million goodwill impairment charge in 2012 and there was no similar impairment charges in 2013 (see “— Goodwill Impairment”). Improvements in fiscal 2013 net income were partially offset by increased compensation, benefit, and equipment expenses related to selling, general, and administrative headcount of $5.8 million and research and development headcount of $3.2 million.

Fiscal Year Ended December 31, 2012 Compared to the Fiscal Year Ended December 31, 2011

Net Sales. Our net sales for fiscal year 2012 were $218.6 million reflecting an increase of $24.8 million, or 12.8%, as compared to fiscal year 2011. The increase in sales was due primarily to an increase in sales into the Vehicle market of $14.1 million, or 17.2%, compared to fiscal year 2011. This increase was due primarily to increased sales of control and fuel systems for commercial natural gas trucks and buses in Asia. Sales into the Energy market increased approximately $10.7 million, or 9.6%, in fiscal year 2012 compared to fiscal year 2011. The increase in sales was primarily due to increased sales of control systems for natural gas compressors, EICS^TM and monitoring instrumentation for natural gas production. Sales into the Energy market were primarily driven by a combination of the demand for improved fuel efficiency, more stringent emissions regulations, and growth in natural gas production in the U.S.

Gross Profit. Our gross profit increased $9.8 million, or 13.7%, for fiscal year 2012 as compared to fiscal year 2011 due primarily to increased sales which accounted for $9.1 million of gross profit. Gross profit as a percent of sales grew slightly from 37.0% of revenue in fiscal year 2011 to 37.3% of revenue in fiscal year 2012, with the slight increase attributable to higher margins on newly released, advanced technology products of $3.6 million along with a reduction in freight costs of $1.6 million. The increase in gross profit was partially offset by disposal costs of obsolete inventory of $2.4 million created by the standardization of certain product components resulting from the merger of EControls and Murphy and an increase in raw material costs of $2.1 million due to increased magnet costs.

Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased $1.9 million, or 5.4%, for fiscal year 2012 as compared to fiscal year 2011. The increase resulted primarily from increased compensation and benefit expenses of $2.6 million and commission and technical service fees of $1.3 million for sales and service support, which were partly offset by reductions in warranty expense of approximately $1.8 million and professional fees of $0.2 million.

Research and Development Expenses. Our research and development expenses increased $3.1 million, or 17.8%, for fiscal year 2012 as compared to fiscal year 2011. The increase was primarily due to increased compensation and benefit expenses of $2.9 million for additional software and hardware engineers and an increase in operating expenses of $0.2 million for our new research and development equipment and facility in San Antonio, Texas.

Goodwill Impairment. In connection with our annual long-lived asset impairment testing in fiscal year 2012, we recorded an impairment of goodwill of $6.5 million relating to our battery charger products, which we produce and sell primarily in the European markets. The impairment occurred in 2012 as a result of these

products’ flat sales volume and weakness in the European markets. No impairments of goodwill were recorded in fiscal year 2011. See “—Critical Accounting Policies and Estimates—Goodwill–Impairment Assessment” for further information on the 2012 impairment.

Income from Operations. Our income from operations decreased $1.6 million, or 8.1%, for fiscal year 2012 as compared to fiscal year 2011. The decrease was primarily due to the $6.5 million goodwill impairment charge discussed above, which was partly offset by the increase in sales and gross profit discussed above.

Interest Expense. Our interest expense decreased $0.1 million for fiscal year 2012 as compared to fiscal year 2011. This decrease was due primarily to a 0.6% decrease in the average interest rate on our credit facility with Prosperity Bank in 2012.

Other. Our other income increased $0.3 million for fiscal year 2012 as compared to fiscal year 2011. The increase was primarily the result of losses incurred in 2011 that did not recur in 2012 related to the abandonment of certain leasehold improvements in connection with the move of our San Antonio, Texas operations to a new facility in 2011.

Provision for Income Taxes. Our income taxes decreased $0.2 million, or 46.7%, for fiscal year 2012 as compared to fiscal year 2011 as a result of a decrease in the profitability of our U.K. subsidiary.

Net income. Our net income decreased $1.1 million or 5.6% for fiscal year 2012 compared to fiscal year 2011. The decrease was primarily due to a $6.5 million goodwill impairment charge in fiscal year 2012 with no similar impairment charge in fiscal year 2011 (see “—Goodwill Impairment”). In addition, we had increases in compensation, benefit, and equipment expenses related to selling, general, and administrative and research and development headcount of $2.6 million and $2.9 million, respectively. The decrease in net income was partially offset by a $9.8 million increase in gross profit largely related to an increase in sales volume.

Liquidity and Capital Resources

General Overview

Our primary source of liquidity is our cash flows from operations of Enovation Controls, LLC and borrowing availability under our credit facilities, as more fully described below.

In June 2014, we and our wholly-owned subsidiaries entered into a $110 million credit agreement with BOKF, NA, d/b/a Bank of Oklahoma (Bank of Oklahoma), consisting of a $30 million term loan and an $80 million revolving credit facility, which includes a $10 million letter of credit subfacility. On the closing date of the credit agreement, we borrowed an aggregate of $85.5 million, consisting of the $30 million term loan and $55.5 million of loans under the revolving credit facility. The proceeds of these term loans were used to pay off existing debt of $24.4 million under the existing credit facility with Prosperity Bancshares, Inc. (Prosperity Bank), to pay a $60.0 million distribution to Murphy Group and EControls Group, and to pay $0.6 million of financing expenses. The remainder is available for general working capital requirements.

We also have a $7.0 million credit facility with HSBC Bank (China) Company Limited, Hangzhou Branch (HSBC Bank). As of September 30, 2014, we had borrowings availability of $6.0 million under the credit facility with HSBC Bank.

See “—Credit Facilities” for further information on our senior credit facility with Bank of Oklahoma and our credit facilities with Prosperity Bank and HSBC Bank.

As of September 30, 2014 and December 31, 2013, we had cash of $7.1 million and $6.0 million, respectively. As of September 30, 2014 and December 31, 2013, $6.6 million and $5.4 million, respectively, of

our cash was maintained in the accounts of our various foreign subsidiaries and, if such amounts were transferred among countries or repatriated to the U.S., such amounts may be subject to additional tax liabilities, which would be recognized in our financial statements in the period during which such transfer was made. We currently have the intent and ability to reinvest the cash held by our foreign subsidiaries and there are currently no plans that would require the repatriation of such amounts.

Current notes receivable are from certain customers located in China who remit banker’s acceptance drafts drawn on reputable Chinese banks payable based upon agreed terms. These notes can be held to maturity, ranging from 90 to 180 days, discounted for early payment or used as commercial paper to pay suppliers. We intend to hold these notes until maturity or pay suppliers who will accept the notes without discount. We believe the full balance of the notes receivable is realizable and have not provided any reserve for losses on these notes. However, if the financial condition of the issuing banks should deteriorate a reserve might be needed in the future. These notes are recourse notes and if the issuing bank should default we would have recourse against the customer for collection. Likewise, if we had endorsed the notes and used them to pay a supplier, and if the issuing bank should default, the supplier would also have recourse against us. See Note 11—“Commitments and Contingencies” to our consolidated financial statements included elsewhere in this prospectus for a discussion of this potential liability.

We believe our cash on hand, cash generated from operations, and ability to access credit through our credit facilities with Bank of Oklahoma and HSBC Bank will satisfy our liquidity requirements for at least the next twelve months, including our working capital needs, capital expenditures, principal and interest payments on debt, and other liquidity requirements associated with our operations.

As of September 30, 2014, we had working capital of $58.4 million compared to $61.1 million as of September 30, 2013. Our working capital decrease of $2.7 million was primarily attributable to a $4.9 million increase in accounts receivable, net, and a $3.9 million increase in our notes receivable, both due to higher sales in the nine months ended September 30, 2014 compared to the same period in fiscal 2013, and decreases in inventory of $6.2 million and cash of $2.3 million that was primarily used to decrease long-term debt, partially offset by increases in the current portion of long-term debt (due to increased long-term debt to fund the $60.0 million distribution) of $1.6 million and accounts payable of $2.3 million and a decrease in accrued liabilities of $0.6 million.

Tax Receivable Agreement Obligations

It is expected that the initial purchase and future exchanges by Common Unitholders of their Common Units (and Class B Shares) for Class A Shares (or cash) will increase our tax basis in our assets. This increase in tax basis will reduce the amount of future income and franchise tax payments to the extent we have future taxable income. We are obligated pursuant to our tax receivable agreement with all Common Unitholders to pay to such Common Unitholders 85% of the amount of tax we save for each tax period as a result of the tax benefits generated from any exchange of Common Units (and Class B Shares) for our Class A Shares (or cash). Required payments under the tax receivable agreement may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement. See “Risk Factors—Risks Related to our Organizational Structure.”

We expect to fund these long-term requirements with distributions received from Enovation Controls, LLC. The total liability for the tax receivable agreement, assuming current tax laws remain unchanged and assuming adequate income to offset the additional deductions, in connection with this offering, is estimated to be $ million (assuming the Class A Shares are sold at $ per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus).

Cash Flows

The following table sets forth our cash flows for the periods indicated below (in thousands):


	Nine Months Ended September 30,						Fiscal Year Ended December 31,
	2014			2013			2013			2012			2011
Net cash provided by (used in):
Operating activities	$	40,410		$	27,693		$	36,926		$	34,251		$	9,084
Investing activities		(15,612	)		(5,021	)		(6,501	)		(5,516	)		(5,532	)
Financing activities		(23,748	)		(18,713	)		(29,890	)		(26,956	)		(2,968	)
Effect of foreign exchange rate on cash⁽¹⁾		35			102			184			(22	)		7

Net (decrease) increase in cash	$	1,085		$	4,061		$	719		$	1,757		$	591

(1)	The effect of foreign exchange rate on cash is the result of the impact of the fluctuations between the U.S. dollar and the Chinese yuan and the British pound sterling on the assets and liabilities of Enovation Controls, LLC and its China and U.K. subsidiaries, respectively.

Cash flows for the Nine Months Ended September 30, 2014

Operating Activities

Net cash provided by operating activities was $40.4 million for the nine months ended September 30, 2014, and consisted of cash used by a net loss of $4.0 million increased by the add-back of non-cash charges of $40.6 million resulting in cash being generated of $36.6 million and by a net cash provided by operating assets and liabilities of $3.8 million.

Non-cash charges consisted of $34.6 million of stock compensation expense, $5.2 million for depreciation and amortization, $0.7 million for a provision for disposal costs of obsolete inventory and $0.1 million for gain on sale of assets.

Cash used by operating assets and liabilities included a $6.5 million increase in accounts receivables related to increased sales and a $1.2 million increase in notes receivable from customers in China. Cash used by operating assets and liabilities was partially offset by a $1.3 million decrease in inventory due to the transfer of certain manufacturing operations from the U.S. to China, a $2.2 million decrease in other assets due to the payment of a promissory note by a related party, a $3.8 million increase in accounts payable, and a $2.7 million increase in accrued and other liabilities. These changes resulted in $2.3 million of cash being used to fund operating assets and liabilities.

Investing Activities

Net cash used in investing activities was $15.6 million for the nine months ended September 30, 2014, which was primarily due to capital expenditures of $15.3 million (including $9.5 million for the San Antonio Farinon facility that was acquired by a variable interest entity). In addition, $0.5 million was used to fund the acquisition of land use rights in China. These uses of cash were partially offset by $0.2 million in proceeds from the sale of capital assets.

Financing Activities

During the nine month period ended September 30, 2014, we paid $87.0 million of distributions to our Class A Unitholders and $0.7 million of financing issue costs, which was partially offset by $61.4 million of net borrowings on our credit facilities, and made a $2.6 million capital contribution in a variable interest entity, resulting in net cash used in financing activities of $23.7 million during the period. Gross borrowing during the

first nine months of 2014 under our Prosperity Bank credit facility was $52.7 million of which $69.4 million was repaid during the nine month period resulting in net payments of $16.7 million during the period on the Prosperity Bank credit facility. During the same period, an additional $1.0 million was borrowed on the HSBC Bank facility which was repaid in September 2014. On June 30, 2014, the total Prosperity Bank credit facility balance outstanding of $24.4 million was repaid from our new $110.0 million senior credit facility with Bank of Oklahoma (see “Credit Facilities—Credit Agreement with Bank of Oklahoma”), which included a $30.0 million term loan and an $80.0 million revolving credit facility of which $29.6 million and $42.0 million were outstanding, respectively, as of September 30, 2014. The new senior credit facility was used to fund a $60.0 million distribution to our Class A Unitholders as well as $1.1 million to cover financing and general purpose business costs. Our variable interest entity entered into a $7.5 million term note with Wells Fargo Bank in July 2014 to acquire the San Antonio Farinon facility. As of September 30, 2014, $6.8 million was outstanding on the term note. Of the $87.0 million of distributions to our Class A Unitholders, $19.4 million was for payment of United States federal and state income taxes and $67.6 million for distributions other than for taxes.

Cash flows for the Nine Months Ended September 30, 2013

Operating Activities

Net cash provided by operating activities was $27.7 million for the nine months ended September 30, 2013 and consisted of cash provided by net income of $32.0 million increased by the add-back of non-cash charges of $5.8 million resulting in cash being generated of $37.8 million partially offset by a net use of cash for operating assets and liabilities of $10.1 million.

Non-cash charges consisted of $4.4 million for depreciation and amortization and $1.4 million for a provision for disposal costs of obsolete inventory.

Cash used by operating assets and liabilities included a $6.6 million increase in accounts receivable due to increased sales, a $2.1 million increase in notes receivable from customers in China, an $8.6 million increase in inventory, and a $1.1 million increase in other assets related to the increase in sales. Cash used by operating assets and liabilities was offset by a $3.2 million increase in accounts payable and a $5.1 million increase in accrued and other liabilities. These changes resulted in $10.1 million of cash being used to fund operating assets and liabilities.

Investing Activities

Our net cash used for investing activities was $5.0 million in the nine months ended September 30, 2013. This cash was used for purchases of manufacturing equipment for a new product, San Antonio facility improvements, and general manufacturing tooling for new products.

Financing Activities

Net cash used in financing activities was $18.7 million for the nine months ended September 30, 2013. We had net borrowings on our credit facility with Prosperity Bank of $0.2 million. In addition, we paid $18.9 million of distributions to our Class A Unitholders of which $8.6 million was for the payment of U.S. federal and state income taxes and $10.3 million was for distributions other than for taxes.

Cash flows for the Fiscal Year Ended December 31, 2013

Operating Activities

Net cash provided by operating activities was $36.9 million for fiscal year 2013 and consisted of cash provided by net income of $39.9 million increased by the add-back of non-cash charges of $8.0 million resulting in cash being generated of $47.9 million partially offset by a net use of cash for operating assets and liabilities of $11.0 million.

Non-cash charges consisted of $6.1 million for depreciation and amortization and $1.9 million for a provision for excess and obsolete inventory.

Cash used by operating assets and liabilities included a $4.2 million increase in accounts receivable from sales growth, an increase in notes receivable of $4.8 million from customers in China, a $5.1 million increase in inventory from revenue growth as well as holding redundant inventory as we transferred certain manufacturing operations from the U.S. to China, and a $0.2 million decrease in accrued and other liabilities. Cash used by operating assets and liabilities was offset by a $1.7 million increase in accounts payable and $1.6 million decrease in other assets related to the receipt of proceeds from a life insurance premium advance on a split dollar policy held on a former executive. These changes resulted in $11.0 million of cash being used to fund operating assets and liabilities.

Investing Activities

Net cash used for investing activities was $6.5 million for fiscal year 2013. This cash was used for facility improvements at our San Antonio, Tulsa, and Rosenberg facilities, manufacturing equipment for a new product, and general manufacturing tooling for new products.

Financing Activities

Net cash used in financing activities was $29.9 million for fiscal year 2013. A significant portion of the cash used in financing operations was due to $28.9 million of distributions to our Class A Unitholders of which $8.7 million was for the payment of U.S. federal and state income taxes and $20.2 million was for distributions other than for taxes. Additionally, $1.0 million of cash was used to reduce the outstanding balance, net of borrowings, of our credit facility with Prosperity Bank.

Cash flows for the Fiscal Year Ended December 31, 2012

Operating Activities

Net cash provided by operating activities was $34.2 million for fiscal year 2012 and consisted of cash provided by net income of $17.6 million increased by the add-back of non-cash charges of $13.3 million resulting in cash being generated of $30.9 million increased by net cash provided by operating assets and liabilities of $3.3 million.

Non-cash charges consisted of $5.3 million for depreciation and amortization and $6.5 million for goodwill impairment partially offset by a $1.5 million decrease in the provision for obsolete inventory.

Cash provided by operating assets and liabilities included a $6.6 million decrease in inventory from a company-wide initiative to reduce our investment in inventory and a $2.3 million increase in accrued and other liabilities as a result of an increase in commission expense related to the sale of systems into the Vehicle market. The inventory was reduced through standardizing product development components, reducing the number of vendors, reducing supplier lead times, installing vendor managed inventory and setting performance measurements around inventory balances. The cash provided by operating assets and liabilities was partially offset by a $2.2 million increase in accounts receivable from the increase in sales, a $2.8 million decrease in accounts payable caused by the decrease in inventory, and a $0.6 million increase in other assets related to the prepayment of the purchase price for certain raw materials. These changes resulted in $3.3 million of cash being provided by operating assets and liabilities.

Investing Activities

Net cash used for investing activities was $5.5 million for fiscal year 2012, which was comprised of cash used for facility improvements related to the relocation of our San Antonio operations, facility improvements at our Rosenberg operations, enhanced manufacturing equipment, and manufacturing tooling equipment.

Financing Activities

Net cash used in financing activities was $27.0 million for fiscal year 2012. For fiscal year 2012, we paid $24.7 million of distributions to our Class A Unitholders of which $7.4 million was for the payment of U.S. federal and state income taxes and $17.3 million were dividends other than for taxes. Additionally, $2.3 million of cash was used to reduce the outstanding balance, net of borrowings, on our credit facility with Prosperity Bank.

Cash flows for the Fiscal Year Ended December 31, 2011

Operating Activities

Net cash provided by operating activities was $9.1 million for fiscal year 2011 and consisted of cash provided by net income of $18.6 million increased by the add-back of non-cash charges of $6.7 million resulting in cash being generated of $25.3 million decreased by a net use of cash for operating assets and liabilities of $16.2 million.

Non-cash charges primarily consisted of $4.9 million for depreciation and amortization and a $1.8 million increase in the provision for obsolete inventory.

Cash used by operating assets and liabilities included a $16.2 million increase in inventory, a $4.8 million increase in accounts receivable from the increase in sales, and a $0.8 million increase in other assets. Cash used by operating assets and liabilities were partially offset by a $2.1 million increase in accounts payable and a $3.5 million increase in accrued and other liabilities. These changes resulted in $16.2 million of cash being used to fund operating assets and liabilities.

Investing Activities

Net cash used for investing activities was $5.5 million for fiscal year 2011 comprised of $4.3 million used for the purchases of manufacturing equipment, manufacturing tooling equipment, and facility improvements related to the relocation of the San Antonio facility and $1.2 million related to intellectual property.

Financing Activities

Net cash used in financing activities was $3.0 million for fiscal year 2011. We paid $13.7 million of distributions to our Class A Unitholders, of which $5.6 million was for the payment of U.S. federal and state income taxes and $8.1 million were distributions other than for taxes. In addition, we entered into an amended credit facility with Prosperity Bank in 2011, and we used $8.8 million of the proceeds from the amended credit facility to repay other long-term debt for no net change in cash. Additional net borrowings under the amended credit facility with Prosperity Bank provided $10.7 million of cash.

Credit Facilities

Credit Agreement with Bank of Oklahoma

On June 30, 2014, we and our wholly-owned subsidiaries entered into a $110 million credit agreement with Bank of Oklahoma, as administrative agent, and various lenders party thereto, consisting of a $30 million term

100

loan and an $80 million revolving credit facility, which includes a $10 million letter of credit subfacility. On the closing date of the credit agreement, we borrowed an aggregate of $85.5 million, consisting of the $30.0 million term loan and $55.5 million of loans under the revolving credit facility. The proceeds of these term loans were used to pay off existing debt of $24.4 million under the existing credit facility with Prosperity Bank, a $60 million distribution to EControls Group and Murphy Group and $0.7 million of financing expenses. The remainder is available for general working capital requirements.

Borrowings under the term loans and revolving loans accrue interest, at our option, at either an alternate base rate or LIBOR plus in each case an applicable margin rate. The applicable margin is currently 0.75% for alternate base rate loans and 1.75% for LIBOR rate loans. A non-use fee between 0.15% and 0.35% per annum, based upon our total leverage ratio, accrues on the amount of unutilized revolving line of credit.

Our senior credit facility with Bank of Oklahoma contains customary negative and affirmative covenants and events of default. For a further description of the terms of our senior credit facility see “Description of Certain Indebtedness.”

Loan Agreement with Prosperity Bank

In September 2013, we entered into a Second Amended and Restated Loan Agreement, which we refer to as the loan agreement, with Prosperity Bank (f/k/a F&M Bank & Trust Company), as administrative and syndication agent, and the other lenders party thereto. As further discussed above, in connection with entering into the senior credit facility with Bank of Oklahoma, the credit facility with Prosperity Bank was paid off and terminated in June 2014. See Note 6—“Long-Term Debt” to our consolidated financial statements included in this prospectus for further discussion of our loan agreement with Prosperity Bank.

Loan Facilities with HSBC Bank

In July 2013, our foreign subsidiary, Murphy EControls Technologies (Hangzhou) Co., Ltd., obtained a dual currency fixed assets loan facility of up to $2.5 million (or equivalent) to fund our Chinese plant expansion and a dual currency revolving loan facility of up to $4.5 million (or equivalent) to finance working capital requirements through HSBC Bank. The loan facilities with HSBC Bank contain customary negative covenants, affirmative covenants and events of default. See Note 6—“Long-Term Debt” to our consolidated financial statements included in this prospectus for further discussion of our credit facilities with HSBC Bank.

Loan Agreement with Wells Fargo Bank

On July 21, 2014, GTD entered into a $7.5 million term note with Wells Fargo Bank that matures on July 25, 2029. The proceeds of the note were used to acquire one of our facilities in San Antonio, which we refer to as the Farinon Facility. The term note bears interest at a fluctuating rate that is 1.75% above the daily one-month LIBOR rate. Principal is paid on the term note in monthly installments of $25,000. The first principal and interest payments on this term note were due and were paid on September 1, 2014. The Farinon Facility has been pledged as collateral on the term note.

101

Contractual Obligations, Commitments and Contingencies

The following table summarizes our continuing contractual obligations as of September 30, 2014 (in thousands):


			Payments Due by Period
	Total		Less Than One Year		1-3 Years		3-5 Years		More Than 5 Years
Long-term debt⁽¹⁾	$	78,410	$	1,800	$	3,600	$	73,010		—
Interest payments⁽²⁾		2,319		552		1,019		748		—
Operating leases⁽³⁾		6,351		1,021		1,747		1,654		1,929

Total	$	87,080	$	3,373	$	6,366	$	75,412	$	1,929

(1)

Long-term debt is based on debt outstanding as of September 30, 2014 under the credit facility with Bank of Oklahoma, as administrative agent, and various lenders party thereto, consisting of a $29.6 million term loan and an $80 million revolving credit facility, which includes a $10 million letter of credit subfacility, and a $6.8 million term note with Wells Fargo Bank to acquire the Farinon Facility through a variable interest entity. See Note 12—“Variable Interest Entity” to our consolidated financial statements included in this prospectus for additional information.

(2)	Interest payments are for the $29.6 million term loan and are based on the LIBOR 30 day rate plus 1.75%, which was 1.90% as of September 30, 2014.

(3)	Operating leases are primarily for facility commitments in the U.S. and China.

In the normal course of business with customers, vendors and others, we are contingently liable for performance under standby letters of credit and bid, performance and surety bonds. We were not contingently liable for any standby letters of credit, trade guarantees given by bankers and bid, performance and surety bonds at September 30, 2014. We do not expect any material amounts to be drawn on these instruments. We guarantee our China subsidiary’s debt with HSBC Bank.

Off-Balance Sheet Arrangements

We pay certain Chinese suppliers with notes receivables we receive from certain customers drawn on Chinese banks which we endorse a percentage of the notes over to our suppliers. We have current notes receivable from certain customers located in China who remit banker’s acceptance drafts drawn on reputable Chinese banks and which are payable based upon agreed terms. These notes can be held to maturity, ranging from 90 to 180 days, discounted for early payment or used as commercial paper to pay suppliers. We intend to hold these notes until maturity or pay suppliers who will accept the notes without discount. These notes are recourse notes and if the issuing bank should default we would have recourse against the customer for collection. Likewise, if we endorsed the notes and used them to pay a supplier and then if the issuing bank should default the supplier would also have recourse against us. We believe the full balance of the notes receivable is realizable and we have not provided any reserve for losses on these notes nor have we recorded a contingent liability. However, if the financial condition of the issuing banks should deteriorate a reserve might be needed in the future. We estimate that we have endorsed approximately $0.8 million as of September 30, 2014 and $1.5 million as of December 31, 2013 of notes which had not met their maturity date and could possibly still be outstanding. See “Risk Factors—Risks Related to Our Business Operations” and Note 11—“Commitments and Contingencies” to our consolidated financial statements included elsewhere herein for a discussion of this potential liability.

We do not have any other material “off-balance sheet arrangements” as such term is defined within the rules and regulations of the SEC.

Impact of Inflation

Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial.

102

Critical Accounting Policies and Estimates

In presenting our financial statements in conformity with generally accepted accounting principles, we are required to make estimates and assumptions that affect the amounts reported therein. Critical estimates include determining the fair value of acquired assets; the collectability of accounts and notes receivable; the recoverability of inventories; the cost of warranty repairs; useful lives and recoverability of property, equipment and amortized intangible assets; the impairment of goodwill; the amount of sales allowances and rebates and accruals for commitments and contingencies, among others. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. We base estimates on historical experience and other assumptions believed to be reasonable under the circumstances and evaluate these estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies and estimates discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Revenue Recognition

We recognize revenue when the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery of the product has occurred or services have been rendered, (3) price is fixed or determinable, and (4) collectability is reasonably assured. Revenue is recognized at the time product is shipped to the customer, which is when title and risk of ownership pass to the customer. Final sales prices are fixed and primarily based on purchase orders. We are not subject to post-shipment obligations or customer acceptance requirements and, other than the two-year warranty we provide on certain products, we have no other return policies or practices. Sales allowances and rebates are treated as reductions to sales and are provided for based on historical experience and current estimates. A portion of our consolidated net sales is transacted through third-party distributors. Sales terms applicable to third-party distributors are similar to terms applicable to customer sales. Sales to customers and third-party distributors are subject to the revenue recognition criteria described above.

Accounts and Notes Receivable

Receivables are recorded at amounts billed to customers, less an allowance for doubtful accounts. The allowance for doubtful accounts is based on historical experience and any specific customer collection issues that have been identified through management’s review of outstanding accounts receivable. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. We generally require no collateral from our customers. The allowance for doubtful accounts was approximately $51,000, $42,000, and $123,000 at September 30, 2014, and December 31, 2013 and 2012, respectively. Recoveries of previously written-off accounts were approximately $81,000 and $42,000 for the years ended December 31, 2013 and 2012, respectively. There were no recoveries of previously written-off accounts in the nine months ended September 30, 2014.

Current notes receivable are from certain customers located in China who remit banker’s acceptance drafts drawn on reputable Chinese banks payable based upon agreed terms. These notes can be held to maturity, ranging from 90 to 180 days, discounted for early payment or used as commercial paper to pay suppliers. We intend to hold these notes until maturity or pay suppliers who will accept the notes without discount. We believe the full balance of the notes receivable is realizable and have not provided any reserve for losses on these notes. However, if the financial condition of the issuing banks should deteriorate a reserve might be needed in the future. These notes are recourse notes and if the issuing bank should default we would have recourse against the customer for collection. Likewise, if we endorsed the notes and used them to pay a supplier, and then if the issuing bank should default, the supplier would also have recourse against us. See “—Off-Balance Sheet Arrangements” and Note 11—“Commitments and Contingencies” in our consolidated financial statements included elsewhere herein for a discussion of this potential liability.

103

Inventory

Inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. Cost in inventory includes product costs, labor, and related fixed and variable overhead. We establish an inventory reserve for excess and obsolete inventories based on an analysis of historical and future demand in relation to the inventory on hand. Based upon the evaluation, provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Inventory consisted of the following (in thousands):


	September 30,			December 31,
	2014			2013			2012
	(unaudited)
Raw material	$	29,490		$	29,651		$	29,612
Work-in-process		1,412			1,006			1,568
Finished goods		6,657			8,778			4,971

		37,559			39,435			36,151
Less—inventory reserve		(1,547	)		(1,343	)		(1,267	)

Total inventories, net	$	36,012		$	38,092		$	34,884

Inventory market values are determined by giving substantial consideration to the expected product selling price. We estimate expected selling prices based on our historical recovery rates, general economic and market conditions, the expected channel of disposition, and current customer contracts and preferences. Actual results may differ from our estimates due to changes in resale or market value and the mix of these factors. Management monitors inventory for events or circumstances, such as negative margins, recent sales history suggesting lower sales value, or changes in customer preferences, which would indicate the market value of inventory is less than the carrying value of inventory, and management records adjustments as necessary. When inventory is written down below cost, such reduced amount is considered the cost for subsequent accounting purposes. Our recording of inventory at the lower of cost or market value has not historically required material adjustments to inventory values once these have been initially established.


	For the nine months ended September 30,			For the year ended December 31,
	2014			2013			2012
(in thousands)	(unaudited)
Inventory reserve, beginning of period	$	1,343		$	1,267		$	2,273
Provision for excess and obsolete inventory		650			1,909			1,516
Write-offs		(446	)		(1,833	)		(2,522	)

Inventory reserve, end of period	$	1,547		$	1,343		$	1,267

Long-Lived Assets

Property, plant and equipment are carried at cost, or fair value if acquired. For financial statement purposes depreciation on property, plant and equipment is calculated using the straight-line method over the estimated useful lives of the respective assets; accelerated depreciation and cost recovery methods are used for income tax purposes. Maintenance and repairs are charged to operating expenses as they are incurred. Improvements and betterments, which extend the useful lives of assets, are capitalized.

104

The estimated useful lives of long-lived assets are as follows:


	Range in Years
Buildings and leasehold improvements		7 - 50
Furniture and office equipment		3 - 10
Computer equipment		3 - 10
Shop machinery and equipment		5 - 10
Tools and dies		3 - 10
Autos, trucks and airplanes		4 - 15

Depreciation expense recognized for long-lived assets was approximately $3.1 million, $2.3 million, $3.2 million, $2.4 million and $2.2 million for the nine months ended September 30, 2014 and 2013 and the years ended December 31, 2013, 2012, and 2011, respectively.

In accordance with GAAP, we review our long-lived assets for indicators of impairment which would require reevaluation of the carrying value of an asset using an estimate of future cash flows. We found no indications of impairment at September 30, 2014 and December 31, 2013, 2012, or 2011, and accordingly, did not reduce the carrying values of our long-lived assets.

Warranty

We warrant, under certain circumstances, that our products will be free from defects for two years. In addition, from time to time, we may get involved in a specific field action program. We provide reserves for costs associated with warranty claims at the time the products are sold. The warranty reserve is provided for by adjusting selling, general and administrative expenses by an amount based on our current and historical warranty claims paid and associated repair costs. These estimates are established using historical information including the nature, frequency, and average cost of warranty claims and are adjusted as actual information becomes available as well as the estimated costs of specific field action programs.

Impairment of Long-Lived Assets, Goodwill, and Intangible Assets

We recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of the consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed (including any contingent consideration) at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recorded to its consolidated statements of operations and comprehensive income.

Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets, support obligations assumed, estimated restructuring liabilities and pre-acquisition contingencies. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and they are inherently uncertain.

Examples of critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to:

•

future expected cash flows from acquired developed technologies and patents and other customer contracts;

105

•

the life of the acquired developed technologies and patents;

•

the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio;

•

risk associated with uncertainty, achievement and payment of any milestones;

•

the life of the acquired developed technologies and patents; and

•

discount rates.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

Goodwill—Impairment Assessments

We perform an annual assessment of our goodwill. We also assess whether or not an indicator of impairment is present that would necessitate a goodwill impairment analysis be performed in an interim period.

The goodwill impairment test compares the carrying value of certain acquired components to their estimated fair value. If the carrying value is more than the estimated fair value, a second step is performed, whereby we calculate the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the component from the estimated fair value of the reporting unit. Impairment losses are recognized to the extent that recorded goodwill exceeds implied goodwill. Our impairment methodology uses discounted cash flows and multiples of cash earnings valuation techniques, plus valuation comparisons to similar businesses. These valuation methods require us to make certain assumptions and estimates regarding future operating results, the extent and timing of future cash flows, working capital, sales prices, profitability, discount rates and growth trends. As a result of its impairment test, we recognized a $6.5 million pre-tax impairment relating to goodwill at Enovation Controls Europe Limited (“MEL”) during the year ended December 31, 2012. No such impairment charges were required at EControls or for other periods presented as the estimated fair value substantially exceeded their carrying values. While we believe that such assumptions and estimates are reasonable, the actual results may differ materially from the projected results.

Change in Accounting Principle

During the quarter ended March 31, 2014, we elected a change in accounting principle related to measuring our profits interests units. The profits interest units are accounted for as liability awards and our management had previously elected to measure these liability awards using the intrinsic value in accordance with Accounting Standards Codification (ASC) 718, Compensation—Stock Compensation. We elected to measure these liability awards using fair value in accordance with ASC 718 during the quarter ended March 31, 2014 in anticipation of an initial public offering.

Our management evaluated this change in accounting principle in accordance with ASC 250, Accounting Changes and Error Corrections. A retrospective application of this change in accounting principle is impractical as it would require our management to make assumptions in the fair value which are not contemporaneous. Our management determined the incremental cost in accordance with ASC 718 and recorded this difference between the fair value and intrinsic value during the reporting period ended March 31, 2014. This change in accounting principle will be applied prospectively.

Fair Value of Financial Instruments

Cash, accounts receivable, notes receivable, accounts payable and accrued liabilities are reflected in the financial statements at carrying value, which management believes approximates fair value because of the short-term nature of those instruments.

106

The fair value of the long-term debt approximates the carrying value as the debt was negotiated in the past 12 months, there have not been significant changes to our overall risk or lending profile, and the interest rates associated with the debt are variable. The interest rates approximate market rates.

We have a profits interest plan which management has determined is a liability award plan in accordance with ASC 718, Compensation—Stock Compensation. Therefore, the September 30, 2014 statements reflect the award units at estimated fair value. The fair market value method was calculated using a PWERM. The key factors used were an assumed 0.25 year term, 0.3% risk free return, an equity volatility of 34.4% with the volatility of the Class B, C, and D Management Interests being 38.5%, 49.4% and 93.5% respectively, and a lack of marketability discount of 4.1%. As there are inherent uncertainties related to the factors and our judgment in applying them to the fair value determinations, there is a risk that the recorded profits interest compensation may not accurately reflect the amount ultimately earned.

Income Taxes

Enovation Controls, LLC is taxed as a partnership for U.S. federal and state income tax purposes and as a result is a “flow-through” entity for U.S. tax purposes. As such, U.S. federal and state income taxes on net domestic taxable earnings are the obligation of Enovation Controls, LLC’s members. Accordingly, no provision for U.S. income taxes has been made in the accompanying consolidated financial statements. Enovation Controls, LLC’s domestic entities and Enovation Controls, LLC’s subsidiaries that operate in foreign jurisdictions are taxable entities. Income taxes incurred by the subsidiaries that operate in foreign jurisdictions are recorded in the “Provision for income taxes” line item in the accompanying consolidated statements of operations and comprehensive income. Pre-tax income from subsidiaries that operate in foreign jurisdictions was $4.6 million, $2.2 million, $4.1 million, $(4.1) million, and $3.9 million for the nine months ended September 30, 2014 and 2013 and the years ended December 31, 2013, 2012, and 2011, respectively. Deferred income taxes of Enovation Controls, LLC’s consolidated subsidiaries that operate in foreign jurisdictions are determined under the asset and liability method, under which deferred tax assets and liabilities are calculated based upon the temporary differences between the financial statement carrying amounts and income tax bases of the foreign subsidiaries’ assets and liabilities using currently enacted tax rates. Enovation Controls, LLC’s deferred tax assets are recorded net of a valuation allowance when, based on the weight of available evidence, it is more likely than not that all or some portion of the recorded deferred tax assets will not be realized in future periods. Decreases to the valuation allowance are recorded as reductions to Enovation Controls, LLC’s provision for income taxes and increases to the valuation allowance result in additional provision for income taxes. As of September 30, 2014, and December 31, 2013 and 2012, Enovation Controls, LLC has deferred long-term tax liabilities related to its foreign jurisdictions of $42,000, $43,000, and $51,000, respectively.

Enovation Controls, LLC evaluates uncertain tax positions for recognition and measurement in the consolidated financial statements. To recognize a tax position, Enovation Controls, LLC determines whether it is more likely than not that the tax positions will be sustained upon examination, including resolution of any related appeals or litigation, based on the technical merits of the position. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the consolidated financial statements. The amount of tax benefit recognized with respect to any tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. Enovation Controls, LLC had no uncertain tax positions that required recognition in the financial statements at September 30, 2014 or December 31, 2013 or 2012. Any interest or penalties would be recognized as a component of income tax expense.

In future periods, our income will be taxable at both the U.S. federal and state level. Following the Transactions, we will be subject to U.S. federal income taxation and our consolidated income tax expense and deferred tax assets and liabilities will reflect our allocable share of the taxable earnings of Enovation Controls, LLC. In addition, deferred taxes will be provided for the differences between the financial reporting and tax bases of assets and liabilities using the tax rate expected to be in effect when the taxes will actually be paid or

107

refunds received. We will be subject to U.S. federal and state income tax in multiple jurisdictions. Some of these jurisdictions have higher statutory tax rates than others. Accordingly, our effective tax rates will vary depending on the relative proportion of income in various states or jurisdictions, changes in the valuation of our deferred tax assets and liabilities and changes in tax laws.

The tax receivable agreement executed in conjunction with the Transactions will result in a deferred tax asset or a reduction in a deferred tax liability and a payable to the Common Unitholders. See “Unaudited Condensed Pro Forma Consolidated Financial Information” for further discussion on taxes after the Transactions.

Recent Accounting Pronouncements

In June 2011, the FASB issued an update related to the presentation of comprehensive income. This update eliminates the option to present the components of other comprehensive income as part of the statement of members’ equity and also requires presentation of reclassification adjustments from other comprehensive income to net income on the face of the financial statements. The update is effective for the year ended December 31, 2012, with early adoption permitted. In December 2011, the FASB issued a deferral of the effective date for certain requirements of the update, which defers certain aspects of the update related to the presentation of reclassification adjustments. We adopted this change retroactively effective from January 1, 2012. This update did not have a material impact on our financial condition, results of operations, or cash flow.

In September 2011, the FASB issued an update relating to testing goodwill for impairment that permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test. We adopted this update on January 1, 2012. The adoption of this update did not have a material impact on our financial condition, results of operations, or cash flows.

In February 2013, the FASB issued an update related to reporting of amounts reclassified out of accumulated other comprehensive income. The update requires disclosure of amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present either on the face of the statement of operations or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This update is effective prospectively for us for annual periods beginning after December 15, 2013. The adoption of the revised guidance is not expected to have a material effect on our financial condition, results of operations, or cash flow.

In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction and industry specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific aspects of revenue recognition and expands disclosures about revenue. ASU 2014-09 is effective for public companies for annual reporting periods beginning after December 15, 2016, including interim periods therein. We are evaluating the impact ASU 2014-09 will have on our consolidated financial statements.

Jumpstart Our Business Startups Act of 2012

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. We intend to “opt out” of such extended transition period and, as a result, we will comply with new or revised accounting

108

standards on the relevant dates on which adoption of such standards is required for companies that are not emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations and foreign currency exchange rate fluctuations.

Interest Rate Risks

Borrowings under our credit facilities with Bank of Oklahoma and HSBC Bank bear floating interest rates that are tied to, in the case of the senior credit facility with Bank of Oklahoma, an alternative base rate or LIBOR plus in each case an applicable margin rate, and in the case of the credit facilities with HSBC Bank, the benchmark lending rate effective on the “rate adjustment date” for that interest period promulgated by the People’s Bank of China for RMB lending with a tenor corresponding to the term of the facility with a 10% mark-up, and for U.S. dollar loans at a rate equal to HSBC Bank’s cost of funds (determined by HSBC Bank) plus 2% per annum. Therefore, our statements of operations and our cash flows will be exposed to changes in interest rates.

We estimate that a 1% change in our interest rates on our outstanding borrowings under our credit facilities with Prosperity Bank would have increased our interest expense approximately $0.1 million as of December 31, 2013.

Additionally, we had cash in bank operating accounts of $7.1 million at September 30, 2014. We maintain significant amounts of cash at one or more financial institutions that are in excess of federally insured limits. We cannot be assured that we will not experience losses on these deposits.

Foreign Currency Risks

We operate on a global basis and are exposed to foreign currency risks related to our revenues and operating expenses denominated in currencies other than the U.S. dollar, principally the Chinese yuan and the British pound sterling. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Movements in currency exchange rates may affect the translated value of our earnings and cash flow associated with our foreign operations as well as the translation of the net asset or liability positions that are denominated in foreign currencies. Approximately 10.5% of our sales in fiscal year 2013 and 1.8% of our sales in fiscal year 2012 were in Chinese yuan. Approximately 4.7% of our sales in fiscal year 2013 and 5.2% of our sales in fiscal year 2012 were in British pound sterling.

We estimate that a 1% change in the exchange rate between the U.S. dollar and Chinese yuan would impact net sales by approximately $0.3 million based on fiscal year 2013 results.

At this time we do not, but we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our interest rate and foreign currency exchange rate risks. It is difficult to predict the impact hedging activities would have on our results of operations.

109

BUSINESS

Company Overview

We believe we are well positioned to benefit from a number of significant trends driving demand in the industries in which we compete:

•

Expected significant global increase in the production of and demand for natural gas supported by attractive cost, environmental, and geopolitical benefits relative to other hydrocarbon fuels;

•

Anticipated growth in demand for advanced natural gas compression system controls in oil and gas applications driven by increased shale and tight formation production in the U.S. and globally;

•

Global adoption of NGVs due to significant economic and environmental advantages:

^¡

NGV Global reports that as of the end of 2012 there were 16.7 million NGVs in operation around the world, a 21.6% CAGR since 2002 with the fastest growth in the Asia-Pacific region over that period;

^¡

•

Increasingly stringent global emissions regulations driving demand for advanced engine technologies that enable lower emissions, greater fuel economy, and regulatory compliance; and

•

Widespread adoption of advanced digital control solutions which integrate technologies such as high-resolution displays, highly configurable software, GPS navigation, telematics, vehicle management

110

systems, and diagnostics to improve engine safety, energy efficiency, performance, and reliability with less dependence on operator skill.

In the Vehicle market, we design, engineer, and manufacture control and fuel injection systems for engines utilizing gaseous fuels such as CNG, LNG, and LPG or propane as well as liquid fuels such as gasoline or diesel fuel. We are a leading provider of electronic engine control systems for commercial natural gas powered trucks and buses with approximately 200,000 systems deployed. We have deep technical relationships with several of the largest commercial NGV engine manufacturers in China, and we believe that we will continue to benefit from government regulations in this market including increasingly stringent emissions standards as China strives to improve its air quality. We provide complete engine management systems for natural gas, LPG, diesel, and gasoline engines used in off-highway, forklift and mobile, and stationary applications. We integrate products and technologies into our solutions that connect operators to vehicles through graphical displays, telematics, mobile device integration, and electro-hydraulic controls. We are often positioned as the sole-source provider to many of our top customers and develop proprietary engine control solutions for their new engine platforms.

In the Energy market, we design, engineer, and manufacture a range of sophisticated products for the monitoring and control of mission-critical equipment including natural gas compressors, generators, pumps, and other engine-driven systems used in the extraction, transmission, and storage of natural gas. We are one of the leading providers of advanced controls for the natural gas compression market. Our Murphy^® branded products include integrated engine management systems, custom-engineered and programmable compressor controls, control end-devices (including valves and sensors), and advanced ruggedized displays. Our Engine Integrated Control System (EICS^TM) is a ground-breaking, turnkey control system primarily designed for natural gas compressor engines which integrates multiple critical functions (including ignition system, air-fuel ratio control, speed control, sensors, diagnostics, and an advanced graphical user interface) into a single pre-configured system. Due to its unique level of integration and ease of installation and operation, EICS^TM is being adopted by large engine OEMs and system integrators. Our marketing team leverages our technology and products to provide solutions to adjacent engine-driven markets with similar requirements, such as oil and gas drilling services equipment and distributed power generation.

Target Markets

Target Applications

Our Hardware and Software Solutions

Vehicle

• Natural Gas Commercial Trucks and Buses

• Forklift and Mobile Equipment

• Off-Highway Equipment

• Off-Highway Recreational Vehicles

• Marine

• Distributed Power Generation and Industrial

• Engine Control Modules

• Fuel Injection Devices

• Electro-Hydraulic Control Modules

• Fuel Pressure and Flow Control Devices

• Engine Aftertreatment Systems

• Power Distribution Modules

• Advanced Ruggedized Displays

• Engine Sensors

• Cruise and Speed Control Systems

• Telematics

111

Target Markets

Target Applications

Our Hardware and Software Solutions

Energy

• Natural Gas Compression Equipment

• Natural Gas Engine-Driven Equipment

• Oil & Gas Production Equipment

• Distributed Power Generation

• Industrial Pumping Equipment

• Integrated Engine Control Systems

• Supervisory Control Systems

• Engine Aftertreatment Systems

• Monitoring Equipment

• Ignition Systems & Accessories

• Level Transmitters and Maintainers

• Instrumentation

• Pressure Control Valves

• Advanced Ruggedized Displays

• Vibration, Pressure, and Temperature Sensors

• Wireless Sensor Solutions

• Telematics

We generally seek to localize our product manufacturing and support to our customer base around the world. We have established manufacturing, sales, and engineering application centers in the U.S., Mexico, U.K., China, India, and South Korea to serve our key geographies. We currently operate five manufacturing and distribution centers in the U.S., Europe, and Asia. In 2015, we plan to open our state-of-the-art China Enovation Center, co-located with our manufacturing operations in Hangzhou, China. This Center will provide additional technical and support services for our customers in the vehicle market in China, India, South Korea, and Japan and will include sophisticated engine calibration and certification capabilities. We drive operational excellence through advanced manufacturing techniques, leading industry management practices, and global supply chain optimization. We maintain our high standards of quality through disciplined new product design, manufacturing processes, supplier selection, and adherence to global quality certifications along with comprehensive testing and validation laboratories in the U.S. and China. We establish customer intimacy with strong relationships based on ethics, trust, performance, and rapid responsiveness. Our track record of consistent revenue growth and cash flow generation is a testament to our ability to continually deliver innovative products in our markets while maintaining a high degree of customer focus.

The following table summarizes our sales by product lines that accounted for 10% or more of our consolidated revenue for the last three fiscal years:


	Year Ended December 31,
	2013		2012		2011
Fuel and Engine Management Systems	$	102,125	$	79,244	$	65,526
Application Control Systems		80,159		70,281		60,492
Monitoring Devices		69,468		64,193		61,830

112

Our Global Footprint⁽¹⁾

LOGO

Notes

1. Employee totals as of September 30, 2014.

2. Surface mount technology.

Industry Overview

Shale Gas Revolution

The natural gas industry has undergone a dramatic transformation in recent years. According to EIA, global reserves of natural gas have increased by 56% from 1992 to 2013. North America has seen the strongest production growth in recent years, benefitting from improved production technologies such as hydraulic fracturing, or fracking, and horizontal drilling techniques resulting in increased extraction from shale and tight formations.

113

U.S. Natural Gas Production by Source in the EIA Reference Case

Trillion Cubic Feet

LOGO

Source

EIA

According to the EIA, over the next ten years, natural gas is expected to contribute the largest share of growth to the U.S. energy supply. Natural gas is widely available, versatile and currently more than three times cheaper on an energy equivalent basis than oil. Natural gas continues to be the fuel of choice for the electric power and industrial sectors in many of the world’s regions, in part because of its lower carbon intensity compared with coal and oil. According to the U.S. Department of Energy, natural gas engines reduce greenhouse gases by up to 26% compared to gasoline engines, which makes it an attractive fuel source in countries where governments are implementing policies to reduce greenhouse gas emissions. The location of substantial natural gas reserves within countries such as the U.S., China, and Russia increases the relative attractiveness of natural gas as a fuel source since it reduces national security concerns over foreign energy dependence. As a result, natural gas is expected to become an even more important component of the global energy mix, accounting for approximately 30% of global energy needs by 2035 as the supply of natural gas increases by nearly 50%.

In the U.S. abundant natural gas supplies have resulted in significant price declines and spurred greater usage of the fuel for electricity generation, industrial production, and transportation. Henry Hub natural gas spot prices have declined from an average of $8.69 per mmbtu in 2005 to $3.73 per mmbtu in 2013. Based on EIA forecasts, the energy equivalent cost of natural gas in North America is expected to maintain a cost advantage over crude oil in excess of three times through 2040.

114

Historical Oil and Barrel of Oil Equivalent Natural Gas Prices

$ / Barrel of Oil Equivalent (BOE)

LOGO

Source

EIA, May 2014

Notes 1.

1 BOE assumed to be 5,800 cubic feet of natural gas

Oil price used is annual average West Texas Intermediate price ($/barrel); Natural gas price used is annual average Citygate price ($/tcf)

As natural gas production increases in volume to meet rising global demand, significant investment in production, pipeline, and storage infrastructure will be required. According to the Interstate Natural Gas Association of America, the average annual infrastructure investment for natural gas and crude oil in the U.S. and Canada is expected to total nearly $30 billion per year through 2035 mainly to accommodate new natural gas supplies from shale plays. Gas compression is an essential process used throughout the production cycle to lift oil in tight formations and to transport gas to the end user. According to Frost & Sullivan, increases in shale gas production will increase revenues at an accelerating pace for total compressors in oil and gas applications from 2012 to 2018.

Total Compressors Market in Oil and Gas Applications: Revenue and Growth Forecast, North America

LOGO

Source

Frost & Sullivan: North American Compressors in Oil and Gas Applications January 2013

115

We believe regulators in the oil and gas industry are increasingly focused on product and equipment integrity, particularly in applications or environments in which products are exposed to high pressure, high temperature, and/or corrosive elements. Many industry participants are implementing more rigorous maintenance, retrofit, and recertification programs for equipment with long useful lives, which we believe will increase the reliance upon and demand for our advanced compression system controls.

Relative to traditional fuels, unconventional natural gas resources contained in shale and tight formations have significant initial production decline rates which necessitate increased drilling activity and compression to maintain production levels. The decline rate measures the reduction in production levels of a well over the course of its life. Typically an exponential curve, the steepness of the decline rate varies according to a number of factors, including general reservoir conditions. Historically, unconventional resources have declined at higher rates than conventional resources. Correspondingly, average well-head pressure falls sharply in the first year and continues to decrease over the life of a well. As a result, compression systems are critical to natural gas extraction from unconventional reserves as early as twelve months after these wells are drilled and play an essential role in transporting gas to downstream production and storage facilities. This trend in decline rates is driving increased compression demand and will benefit companies, such as ourselves, that provide the critical technologies required to operate these systems. Gas lifts, which are predominantly used to artificially lift oil by introducing high pressure compressed gas into the outlet tube of the well, are also increasing in prevalence and resulting in greater compression demand.

Shale Play Production Decline Rates

Average Pressure by Year (psi)

LOGO

Source

Spears and Associates

Global Shift to Natural Gas Vehicles

116

the expansion of the commercial NGV market is simultaneously being supported by a rapidly growing commercial refueling infrastructure in many regions around the world. According to Navigant, approximately 170,000 natural gas trucks and buses were sold globally in 2013.

China and other Asian markets continue to lead the world in commercial NGV adoption. This growth is driven predominantly by the operating cost advantage of natural gas over diesel. The additional cost of a commercial NGV versus its diesel equivalent, which we refer to as the net equipment upcharge, has contracted in China in recent years primarily as a result of both competition and scale advantages of higher production volumes for the tank packages necessary to carry fuel on the natural gas vehicle. As an example, based on a $10,000 net equipment upcharge and a diesel gallon equivalent (DGE) fuel cost difference of $1.50 between the price of diesel and CNG, and subject to the other assumptions and qualifications referenced in the lead-in paragraph and footnotes to the table below, the payback period of a commercial NGV in China would be less than one year as outlined in the payback analysis below. Air quality concerns in China are also driving large scale adoption of natural gas trucks and buses in most major cities in order to decrease pollution levels and improve visibility. Furthermore, natural gas is strategically advantageous compared to diesel because of China’s and nearby Russia’s large natural gas reserves. The number of NGVs in China across all vehicle classes grew from 36,000 in 2002 to approximately 1.6 million in 2012, at a CAGR of 45.9%, according to NGV Global.

The primary benefits of commercial NGV adoption are derived from the lifetime cost advantages generated by the differential between diesel and natural gas fuel prices. According to a recent U.S. Department of Energy Alternative Fuel Price Report, during July 2014 the national average pump price of diesel was $3.91 per gallon compared to $2.42 per DGE for compressed natural gas. A sustained price differential would create significant lifetime fuel savings, especially for high mileage vehicles, which offset the initial incremental costs associated with purchasing vehicles that utilize natural gas fuel. The current net equipment upcharge for heavy-duty commercial vehicles in North America is typically much higher than in China driven primarily by tank package costs. As an example, based on a $40,000 to $55,000 net equipment upcharge, a fuel cost difference of $1.50 per DGE between the price of diesel and CNG, and subject to the other assumptions and qualifications referenced in the lead-in paragraph and footnotes to the table below, the payback period would range from approximately two to four years as outlined in the payback analysis below. Similar to what we have observed in the market for commercial NGVs in China, we believe that additional competition and higher unit volumes for tank packages will be key drivers reducing premiums for commercial NGVs in North America. The annual cost savings for companies operating large commercial fleets could be significant. At payback levels of less than 36 months, for instance, we believe that the annual cost savings for a commercial vehicle fleet of 1,000 Class-8 trucks in regional haul usage could be several million dollars.

The table below shows indicative payback periods in months based on different assumed net equipment upcharges, and the effective average fuel cost difference per gallon, which is equal to diesel cost per gallon minus CNG cost per DGE. There are a number of factors that could cause the effective cost difference between diesel and CNG to be more or less than the difference between average retail prices, including that many truck fleets may receive volume discounts on diesel fuel lowering their effective cost of diesel per gallon, and that many truck fleets may receive volume discounts on CNG at public refueling stations or may have their own private CNG refueling stations which could effectively lower their average CNG costs per DGE.

117

Indicative Commercial Vehicle Fuel Payback Analysis in Months (1)


		Diesel-CNG Retail Cost Difference (D$/DGE)
		2.00		1.80		1.60		1.40		1.20		1.00
	Net Equipment Upcharge ($)

China	10,000		5		6		7		8		10		13

North America	25,000		13		15		17		20		25		33
	40,000		21		23		27		32		40		53
	55,000		28		32		37		45		55		72
	70,000		36		41		47		57		70		92

Notes: *

Analysis based on methodology and payback calculator from Americas Commercial Transportation Research Co., LLC, or ACT Research. This analysis is presented for informational purposes only and does not purport to include all key variables. While we have used assumptions and inputs that we believe are reasonable, any changes in the assumptions and inputs used could materially change the payback analysis.

Key inputs used are based on assumptions in the ACT Research report dated September 2014, or the ACT report; average miles driven per year assumed to be 100,000; diesel fueled truck miles per gallon assumed to be 7.00; natural gas fueled truck miles per gallon assumed to be 5.95; annual diesel particulate filter maintenance cost assumed to be $275.00; diesel exhaust fluid (DEF) cost per gallon assumed to be $2.40; DEF consumption as a % of diesel consumption assumed to be 2.5%.

The midpoint of the retail diesel-CNG cost difference of $1.50 is based on a U.S. Department of Energy Alternative Fuel Price Report dated July 2014, which reports an average pump price of diesel of $3.91 per gallon compared to $2.42 per DGE (diesel gallon equivalent) for compressed natural gas.

According to ACT Research, natural gas could power from 20% up to 44% of Class 8 trucks produced for the U.S. market by 2025 with a most likely/base line scenario of 27%, up from 4% in 2013. In the U.S., we estimate that approximately 50% of new transit buses and refuse trucks are fueled by natural gas. Examples of fleets utilizing NGVs include UPS, Lowe’s, Kroger, FedEx, Procter & Gamble, Schneider, and Ryder. Waste Management currently operates 50 refueling stations and more than 3,000 heavy-duty natural gas trucks, and is planning to upgrade its entire fleet of 18,000 refuse collection vehicles to natural gas operation. With increased adoption and related volumes, we believe the incremental cost of commercial NGVs will decline due to improved economies of scale further driving reductions in the economic payback period and increases in return on investment (ROI) for commercial vehicle operators.

Expanding Natural Gas Refueling Infrastructure

118

U.S. Natural Gas Refueling Infrastructure

LOGO

Source

U.S. Department of Energy

Given the patterns of U.S. freight tonnage, we expect that the current pace of natural gas refueling infrastructure construction along targeted corridors will be able to accommodate higher volumes of commercial NGVs. Several important routes carry the bulk of freight traffic nationwide. Major truck corridors with the heaviest traffic are primarily located along several large interstate highways in the Eastern portion of the country, on the West Coast, and along several large East-West routes. We believe completing refueling infrastructure along these important corridors could capture the majority of the nation’s freight volume.

Stringent Emissions Regulations

In addition to economic and geopolitical considerations, the growth in NGVs has been supported by favorable regulatory trends. Increasingly stringent regulations are driving demand for technologies that make engines more efficient with lower emissions output. Electronic engine management systems are a critical requirement for ensuring compliance with the latest regulations.

Concerns regarding climate change and other environmental considerations have led to implementation of laws and regulations that restrict, cap, or tax emissions in the vehicle market and throughout other industries. While emission standards vary significantly around the world, such standards have become increasingly more stringent. Over the last ten years in particular, there has been a significant increase in regulation of commercial on-highway and off-highway engine emissions. Industrial OEMs have also experienced pressure to redesign their engines to address these emission regulations, as products that are unable to meet new standards cannot be sold in the marketplace. However, we believe few suppliers to commercial NGV OEMs and industrial OEMs have been capable of providing, or are willing to make the investments necessary to provide, engine control system products that economically meet the new EPA and CARB requirements.

Under the Clean Air Act, the EPA regulates exhaust emissions of all new engines that enter commerce in the U.S. In 2004, the EPA approved regulations for the phase-in of Tier 4 emission standards which significantly reduced permitted levels of hydrocarbons, nitrogen oxides, and particulate matter. Just as this Tier 4 phase-in concludes in 2015, the EPA has begun implementing a new wave of standards in 2014 regulating CO₂ emissions.

119

This pattern of increasingly stringent regulations constantly escalates the demands on engine control technology. Our focus on natural gas engines gives us an inherent advantage over more common hydrocarbon fuels in meeting these challenges. For example, natural gas engines reduce greenhouse gases by up to 26% compared to gasoline engines according to the U.S. DOE, and, unlike diesel engines, they generate little particulate matter.

Countries outside of the U.S. have historically adopted emission regulations aligned with those of the U.S., and it is anticipated that regulations comparable to current and future EPA and CARB emission regulations will continue to be implemented internationally. For example, policies in Europe generally referred to as Euro I, II, III, IV, V, and VI regulations limit tailpipe emissions of commercial vehicles. Similar to various stages of regulation in the U.S. over the years, these regulations in Europe call for comparable reductions in emissions of hydrocarbons, nitrogen oxide, and particulate matter.

Increasingly Stringent Euro Standards

% of Euro I Levels

LOGO

Source

European Commission

Emissions standards similar to the Euro standards have been adopted by India, China, Argentina, and Brazil. For example, China is implementing regulations similar to Euro IV—referred to as State Standard IV by the Chinese government—for all diesel commercial vehicles. Beijing also currently requires many elements of the Euro V standard for new vehicles and all commercial NGVs. Beijing, Shanghai, and the Pearl River Delta area are all expected to phase-in additional elements of Euro V throughout 2014. Nationwide implementation of the full State Standard V regulation in China for all diesel engines is expected between 2015 and 2017. India has implemented emissions standards similar to European standards in Delhi and its ten largest cities, and nationwide implementation is expected to follow within the next few years. As foreign jurisdictions continue to adopt emission regulations consistent with those of the U.S. and the European Union, it is expected that the international commercial on-highway and industrial engine OEM market will experience similar pressures to use advanced technology engine control systems.

Emission regulations do not just impact vehicles. Natural gas compression and other stationary and industrial engine applications have come under stringent regulations requiring the same level of electronic engine management sophistication as commercial NGVs. Our EICS^™ system was specifically designed to meet these challenges.

120

Competitive Strengths

We believe we have a number of competitive strengths that differentiate us, including:

Leading Provider of Mission-Critical Digital Control Solutions for Natural Gas Engines. We are a leading provider of digital control systems for gaseous fuel engines and have an installed base of over one million engine control systems globally. In addition, we are a leading provider of electronic engine control systems for commercial natural gas powered trucks and buses with approximately 200,000 systems deployed, and one of the leading providers of advanced controls for the natural gas compression market. Our EControls^® and Murphy^® brands are recognized for providing innovative, ruggedized, integrated turnkey solutions that deliver consistent and reliable performance for engine-driven equipment operating on a variety of gaseous fuels. Our solutions represent a small portion of the overall cost of the end-use application, but are essential and integral to system functionality and operating performance. We are a preferred partner for global OEMs and end users across a wide variety of high-growth markets, applications, and geographies. While ultimately aided by powerful trends in the natural gas sector, we believe that our broad product portfolio and global reach reduce our dependence on any particular market or customer.

Aligned with Global Industry Trends to Drive Growth. We are strategically positioned to benefit from compelling global trends in each of our primary end markets:

•

Expected significant global increase in the production of and demand for natural gas supported by attractive cost, environmental, and geopolitical benefits relative to other hydrocarbon fuels;

•

Anticipated growth in demand for advanced natural gas compression system controls in oil and gas applications driven by increased shale and tight formation production in the U.S. and globally;

•

Global adoption of commercial NGVs due to significant economic and environmental advantages:

•

Increasingly stringent global emissions regulations driving demand for advanced engine technologies that enable lower emissions, greater fuel economy, and regulatory compliance; and

•

We believe each of these trends will continue to create significant demand for our products.

Innovative Product Design Driven by Deep Application Knowledge. We are a recognized leader in designing and developing innovative and sophisticated new products within our markets. Over the past three years, we have developed and launched 55 new products, which had an average gross margin of approximately 50% for the year ended December 31, 2013. Our intellectual property portfolio includes millions of lines of software source code, proprietary manufacturing techniques and, as of September 30, 2014, 47 issued and pending patents and patent applications. Driven by deep application knowledge, we deliver forward-thinking solutions ahead of our customers’ needs to create sustainable competitive advantages. Our application engineering expertise and know-how enables us to deliver optimized solutions combining proprietary software platforms and customized hardware. Our design and engineering efforts are led by an in-house team of 179 full-time engineers across all disciplines with strong product development and application expertise in gaseous fuel engines and engine-driven equipment. Our product development strategy is focused on risk compression, design for reliability, and development speed. This enables us to shorten time-to-market and maximize return on investment early in the product’s lifecycle. This successful approach is supplemented by our design reuse philosophy in which new products are built within the scaffolding of common platforms composed of well-tested designs and core components. We utilize standard products and designs with high software configurability and modular hardware to enable a solution that can be rapidly customized by us or our customers.

121

Entrenched Customer Relationships Built on Technical Collaboration. Our commitment to technological innovation, proven product performance, and superior service has enabled us to develop longstanding, collaborative relationships with a broad group of more than 4,000 customers globally. These customers represent a diverse group of OEMs and distributors located across the globe including Yuchai, Exterran, RES Energy Solutions, and Power Solutions. As a result of our application and engineering expertise, we have a deep and unique understanding of our customers’ gaseous fuel engines and engine-driven equipment, and we are often positioned as the sole-source solution provider to our customers. Due to the long engine development lead times and embedded nature of many of our products, we collaborate closely throughout the design and development phase of our customers’ products. For example, a typical commercial NGV engine development program with one of our OEM customers may span two or more years resulting in an emissions certified package that is specific to the combination of their engine and our electronic controls. Throughout that process, many of our customers rely on us to solve engineering problems related specifically to their engines. As a result, we often have a proprietary position on the engine platform which creates high switching costs with long replacement lead times. We continually seek to strengthen our relationships by working ahead of and with our customers to develop new solutions that meet their dynamic application requirements. We believe this approach has been a key driver of our 52% aggregate sales growth from our top ten customers from 2011 to 2013.

Established Global Footprint. We maintain a manufacturing, sales, and service infrastructure presence on three continents, enabling us to effectively serve our worldwide customer base. In 2013, approximately 71% of our net sales were generated in North and South America, 24% in Asia and 5% in Europe, the Middle East, and Africa. We believe we have developed strong trusting relationships with local customers and suppliers based on our local manufacturing and sales presence, track record of performance, and brand recognition. In 2015, we plan to open our state-of-the-art China Enovation Center, co-located with our manufacturing operations in Hangzhou, China, that will provide additional technical support as well as engine calibration and certification services to our customers in China, India, South Korea, and Japan. We provide natural gas engine control systems to several of the largest commercial NGV engine manufacturers in China—one of the largest and fastest growing commercial NGV markets.

Growth Strategy

122

generations of innovative gaseous engine control platforms and fuel metering technology, with each new generation advancing fuel economy, decreasing emissions, and improving reliability. Our product development strategy, which is focused on risk compression, design for reliability, and development speed, enables us to shorten time-to-market and maximize return on investment early in a product’s lifecycle. This successful approach is supplemented by our design reuse philosophy in which new products are built within the scaffolding of common platforms composed of well-tested designs and core components. We plan to continue to leverage our core technology platforms across many different products and applications targeting our served markets to maximize the impact of our research, development, and engineering investments.

Increase Product Sales and Services with Existing Customers. Our deep relationships with our existing customers, as well as our strong track record of developing innovative and forward-thinking products and solutions, have enabled us to systematically increase sales and margins. We believe this approach has been a key driver of our 52% aggregate sales growth from our top ten customers from 2011 to 2013. As a trusted incumbent solution provider with a wide range of customers across numerous markets, we have numerous cross-selling opportunities in which we leverage our existing technologies and respective customer relationships for incremental sales growth. For example, we have targeted our customers in the industrial mobile market (e.g., forklifts) and industrial stationary market (e.g., generator sets, pumps) for future engine control development programs. We are also executing a series of strategies to grow sales of our highly successful EICS^TM product and its associated replacement parts through wider market penetration. For instance, two leading manufacturers of engines for natural gas compressors are incorporating EICS^™ into some of their products as an OEM or distributor offering.

Develop New Customer Relationships in the Fast Growing Vehicle Market. We are expanding our customer base by developing new OEM relationships in our target markets. We are working with leading North American heavy-duty commercial vehicle manufacturers and global engine OEMs to leverage our technological and engineering capabilities on their new engine platforms. In addition to engine control initiatives, we recently secured multi-year agreements with two significant OEM customers for hydraulic control system products and off-highway recreational vehicle displays. These collaborative product development efforts have deepened our customer intimacy and provided additional long term follow-on opportunities. We believe that our global manufacturing, sales, service infrastructure, and partnerships with customers, position us to capture market share in both mature and high-growth markets.

Drive Continuous Improvement in Manufacturing and Operations. We believe that our strong manufacturing, engineering, and advanced production capabilities, anchored by our focus on efficiency and quality, are core elements of our financial strength. We intend to increase these advantages by leveraging our proprietary Enovation Controls Operating System (ECOS) to enable high flexibility and superior quality in our manufacturing processes. This system allows for the implementation of continuous improvement initiatives that are designed to support significant operating efficiencies and strong profitability. ECOS improvements include a unified, data-driven global strategy to proactively manage cost, standardized manufacturing processes, and labor optimization processes. Our continuous improvement initiatives are evaluated and implemented by cross-functional steering committees that drive Lean Six Sigma projects as well as efforts to continuously improve gross margin.

Selectively Pursue Strategic Acquisitions and Alliances. Our industry leadership makes us an ideal platform to acquire or partner with companies in our target markets. We provide complete engine control system solutions across a wide range of applications and will continue to explore synergistic acquisition opportunities which enhance our position in our served markets. We believe that a number of acquisition opportunities exist where we can extend and further leverage our platforms, strategic competitive advantages, and core competencies. We will seek strategic transactions that extend our presence into new geographies or applications, expand our customer base and/or add new products or technologies to our existing platform solutions.

Our Target Markets and Product Solutions

Our technological expertise and operating history in engine controls forms the basis for all of our hardware and software product offerings. Our solutions include a variety of engine control and monitoring systems,

123

sensors, displays, and panels that are used in natural gas driven engines across several industries. Through our EControls^® and Murphy^® brands, we target two primary end markets: Vehicles and Energy.

Vehicle

In the Vehicle market, we design, engineer, and manufacture control and fuel injection systems for engines utilizing gaseous fuels such as CNG, LNG, and LPG or propane as well as liquid fuels such as gasoline or diesel fuel. We are a leading provider of electronic engine control systems for commercial natural gas powered trucks and buses with approximately 200,000 systems deployed. We are well positioned with significant market share in the rapidly growing Chinese commercial NGV market in addition to a leading global position in industrial emissions certified spark-ignited gaseous engine controls. Engines operating with our advanced EControls^® branded engine control technology meet and exceed the requirements of all current global emissions standards and fuel efficiency regulations. We are strategically positioned to benefit directly from compelling trends that we believe will continue to drive sustainable and profitable growth for our company’s engineered solutions:

•

Increasingly stringent emissions standards in many regions;

•

Natural gas market dynamics and growth; and

•

Increasing engine complexity driving the need for sophisticated electronic control solutions.

We target the growing Vehicle market through our established EControls^® brand as a leading electronic engine control platform provider for commercial natural gas powered trucks and buses while serving as a qualified calibration and emission certification resource for our products on our customer’s engines. Our key growth initiatives across this market are driven by our strategies for commercial NGVs, gaseous industrial engine control systems, hydraulic controls, and sophisticated vehicle display, diagnostic, navigation, and engine safety systems. We intend to increase our market footprint through the integration of our engine control components into new natural gas engine platforms. We also serve many industrial mobile and stationary applications with our engine control systems. We are often positioned as the sole-source provider to many of our top customers and we develop proprietary engine control solutions for their new engine platforms. We integrate products and technologies into our solutions that connect operators to vehicles through graphical displays, telematics, mobile device integration, and electro-hydraulic controls. Representative customers in the Vehicle market include Caterpillar, CNHTC (Sinotruk), Cummins, Hino, John Deere, Kubota, NACCO, Polaris, Power Solutions, and Yuchai.

124

Our Vehicle engine controls are used in a variety of applications:

LOGO

We provide these engineered products for total system control across the engine and vehicle subsystems. In addition, we are positioned as the primary or sole-source spark-ignited fuel injection control provider to many of our top customers in commercial and industrial vehicle applications. Our products are essential to the functionality of a modern electronically controlled gaseous fuel engine.

During the nine months ended September 30, 2014 and 2013 and the fiscal years ended December 31, 2013, 2012, 2011, 2010, and 2009, revenue of $87 million, $86 million, $113 million, $95 million, $82 million, $64 million, and $26 million, respectively, related to our sales into the Vehicle market.

125

Energy

In the Energy market, through our Murphy^® branded products, we design, engineer, and manufacture a range of sophisticated products for the monitoring and control of mission-critical equipment including natural gas compressors, generators, pumps, and other engine-driven systems used in the extraction, transmission, and storage of natural gas. We are one of the leading providers of advanced controls for the natural gas compression market. Our branded products include integrated engine management systems, custom-engineered and programmable compressor controls, control end-devices (including valves and sensors), and advanced ruggedized displays. We believe our solutions lead the industry with superior quality, cutting-edge technology, and dedicated customer support. We are positioned to capitalize on key trends that we believe will drive growth and profitability:

•

Natural gas is becoming the preferred hydrocarbon fuel;

•

Access to abundant natural gas enabled by modern production technologies;

•

Increasingly stringent emissions standards in many regions;

•

Electronics and software enabling optimal machine operation; and

•

Increasing demand for machine information and advanced diagnostics through a user-friendly display interface.

We build products targeted at the Energy market to provide critical control and protection functionality for gas compression and other engine-driven skid systems. Gas compression skids incorporate a natural gas fueled engine as the prime mover, a compressor, a large cooling package, a supervisory control panel, and various gas processing support equipment such as separators, scrubbers, oil reservoirs, and control valves. We also provide control panel solutions for fracking rigs, dewatering pumps, distributed power generation, and other engine-driven applications with adjacent control technology requirements.

LOGO

126

Engine management solutions are an important part of our offering for the Energy market. Our new EICS^TM product integrates three critical engine functions—ignition control, air-fuel ratio control, and speed governing—into a single pre-configured emissions compliant system that allows for easy installation. Due to the system’s success and broad end-customer adoption, two leading manufacturers of engines for natural gas compressors are incorporating EICS^™ into some of their products as an OEM or distributor offering. Since the launch of the EICS^TM product in 2009, we have sold approximately 3,500 systems, and are currently being used or being evaluated by multiple natural gas engine manufacturers.

Our products are designed to allow our customers to reliably achieve emissions compliance while reducing the total cost of equipment ownership. Our products enable advanced operational advantages such as predictive maintenance and remote compressor trouble-shooting via telematics. Our customer base in the Energy market consists of compression system integrators, distributors of natural gas compressors, and “Murphy Master Distributors” (which are a subset of our authorized independent third-party distributors). Representative customers include Exterran, AG Equipment, MidCon Compression, S&R Compression, and NGSG. For 13 of our top 20 customers in the Energy market, we are the primary integrated control system provider. To stay ahead of our customer’s needs and sustain our growth, we maintain a constant stream of new product launches to enhance the operational effectiveness of compressor skids, complement earlier product launches with next-generation technology, and access growing markets like CNG refueling stations that support the rapidly expanding NGV refueling infrastructure in the U.S.

During the nine months ended September 30, 2014 and 2013 and the fiscal years ended December 31, 2013, 2012, 2011, 2010, and 2009, revenue of $129 million, $109 million, $143 million, $123 million, $112 million, $84 million, and $53 million, respectively, related to sales into the Energy market.

Research and Development

Our Technology Advantage

Our current product portfolio is built on successive generations of technology. We believe each generation of our technology has been a commercial success in its own right, and each generation has built upon the success of the previous generation through increased performance, improved durability, lower manufacturing costs, and expanded capability. We believe that the level of refinement achieved over many years through this disciplined process of technology development and deployment provides a sustainable competitive advantage that cannot easily be duplicated.

Our experience with volume production and wide customer deployment of each generation of engine technologies has given us deep application knowledge and expertise. This application knowledge is the basis for what we call our “customer-leading” innovation strategy, which drives our technology advantage forward. By continuing to leverage our experience and expertise to build successive generations of engine technology products and solutions, we reinforce our leadership in the industry and our relationship with our customers. Our leadership is further augmented by our ability to stay ahead of increasingly stringent emissions regulations, higher fuel efficiency standards, and increasing product life cycles. Our strategy is to stay multiple years ahead of these industry trends and our customer’s demand for products that can meet these challenges. This “customer-leading” innovation cycle is at the core of our technology strategy.

For example, all three of our core technologies in our Vehicle market (our engine control modules, our gaseous fuel-injection hardware, and our advanced displays) are in their fourth generation of evolution. We are actively engineering our fifth generation of these technologies to meet future industry requirements. Since each generation is built on the success of the previous one, our high engineering velocity is a competitive advantage over a potential competitor attempting to enter our market. This disciplined engineering approach has resulted in our successful track record to date, and is at the heart of our growth strategy.

127

Our R&D Capabilities

Our approach to new product development is based on a structured system of design reuse, modular hardware and software, and high-level software configurability. We begin with core design elements that can be quickly reused to create new products. Through the disciplined use of these well-established and proven design elements, we create new products with a low risk of encountering unexpected results that force unplanned iterations. Once we have created a new platform product based on these reusable elements, we can rapidly release a wide array of variations of the base platform that meet many different customers’ needs. While our competitors often attempt to drive customers to “standard offerings,” we can use our flexibility to quickly release a variation of a platform product that specifically targets the customer’s needs and provides them with a customized solution. We are also able to leverage these platforms of design to quickly enter new areas of adjacent technology by rapidly developing products for new markets and applications as opportunities arise.

Our disciplined development process allows us to rapidly develop products while enabling high reliability and quality. Each of our product development efforts follow a disciplined phase-gate process based on leading industry standards. The emphasis of the process is to study and rapidly prototype the new and unknown elements of the design as early in the development cycle as possible. We intentionally identify and study the risk of new or unknown design elements before committing large amounts of time and development cost to the overall program. We often identify and eliminate high risk challenges in a new product design within the first month of a program. By eliminating a majority of the risk early, the later and more costly phases of the development program can proceed smoothly and on-schedule.

We have invested in the equipment and facilities necessary to rapidly develop products. To support our process of eliminating risk early in a project, we have the in-house tools and equipment necessary to rapidly prototype working samples of new product designs. It is common for us to fabricate a working sample of a new product concept within days. We also have the in-house equipment to perform the majority of product design validation testing needed to ensure high quality products in a harsh operating environment. These facilities include eight in-house engine dynamometers and advanced emissions analysis equipment, which we use for both new product testing and overall engine performance calibration and testing with our products.

Our product development teams are structured to nurture the creation of industry leading experts within a defined application and technology space. We have built multi-disciplined teams with high focus on their product areas while maintaining close relationships with our customers and the industry in general in order to deepen our application knowledge and industry leading expertise. Our customers often rely upon these teams as their trusted experts and lean on them for leadership and advice in their applications.

We have 5 multi-disciplined product design teams, 4 application engineering teams, and 3 engineering support teams for a total of 179 engineering staff. Our application and product engineering teams are primarily located in the U.S. and China.

Our research and development expenditures for fiscal years 2013, 2012, and 2011 were $24 million, $20 million, and $17 million, respectively.

Manufacturing

We generally seek to localize our product manufacturing and support to our customer base around the world. We currently operate five manufacturing and distribution centers in the U.S., Europe, and Asia. In 2015, we plan to open our state-of-the-art China Enovation Center, co-located with our manufacturing operations in Hangzhou, China, that will provide additional technical and support services for our market customers in China, India, South Korea, and Japan and will include sophisticated engine calibration and certification capabilities. This facility will also contain six engine dynamometers and advanced emissions calibration equipment. We drive operational excellence through advanced manufacturing techniques, leading industry management practices, and global supply chain optimization.

128

Our operational strategy is to implement redundancy and flexibility in the manufacturing of our products for the global Energy and Vehicle markets. Our primary manufacturing facilities are located in Tulsa, Oklahoma and San Antonio, Texas, and consist of approximately 295,000 square feet of usable manufacturing space in two plants. We also have established manufacturing and engineering facilities in Rosenberg, Texas; Birmingham, U.K.; and Hangzhou, China. Our facilities are designed and located globally to respond to customer orders within competitive lead times and to minimize market entry costs, while taking full advantage of our global supply chain.

Suppliers

We aggregate our product sourcing efforts across our large and diverse customer base and across industry categories, capitalizing on volume, economies of scale and global supply opportunities. We have established strong, long-term relationships with our suppliers. During 2013, we purchased approximately $108 million of materials and components from outside suppliers. Our primary purchases from outside vendors include metal stampings, electronic components, magnets, and die castings, among others. Most of our raw materials are available from multiple sources of supply. We carefully screen each of our suppliers and maintain high standards for quality, technical capabilities, and on-time delivery. We source products from a global base of vendors, ensuring that we have the most cost-effective mix of domestic and internationally-sourced products, and enabling us to enhance profitability through supply chain management. We have limited our exposure to increases in input costs through mechanisms such as flexible sourcing, contractual raw material cost variance allowances, and the ability to pass through costs to our customers. During 2013, no single supplier accounted for more than 5% of total cost of goods sold and the top ten suppliers accounted for less than 30% of cost of goods sold.

Sales and Marketing

We deliver our solutions directly to global engine and vehicle manufacturers, engine and equipment distributors, natural gas compressor packagers, Murphy Master Distributors, as well as independent distributors globally. We market these solutions throughout the world primarily through direct sales personnel and independent sales representatives.

Our professional, highly trained sales force is well equipped to solve the technical and complex challenges facing our customers through the application of our products. Our sales representatives are assigned to customers and products within our primary end markets, Vehicles and Energy, and have developed a highly specialized knowledge of our solution set for customers within their respective markets. Our sales team works closely with our customers in each market to provide highly technical and customized solutions, in coordination with our engineering and product development teams.

We have a direct sales force in the U.S., Europe, China, South Korea, India, and Mexico and we utilize select independent sales representatives and distributors to market our products and services in certain other foreign countries that we serve. In addition, we have a value-added exclusive partnership with AMICO, our marketing and support consultant in China. We believe that our experience and growing presence in China along with our partner’s relationships and knowledge of local customs is a competitive benefit for us. Over the last twelve months, we have expanded our in-country management, engineering, sales, and technical support teams in China.

For the years ended December 31, 2013, 2012, and 2011, sales to our top ten customers accounted for approximately 49%, 47%, and 46%, respectively, of our revenue, and in 2013, 2012, and 2011, one customer, Guangxi Yuchai Machinery Group Co., Ltd., accounted for 12%, 13%, and 11%, respectively, of our revenue.

Competition

We believe we are a leading provider of sophisticated digital control systems for gaseous fuel engines and engine-driven equipment. The market for our solutions and certain components to our solutions is intensely

129

competitive, subject to rapid change, and sensitive to new product introductions and changes in technical requirements. Competition in our markets may become more intense as additional companies enter them and as new technologies are adopted.

In the Vehicle market, our gaseous engine control solutions compete in markets worldwide based on technology, emissions capability, durability, quality, cost, manufacturing capabilities, and the technical expertise of our engineering support team. We believe that we have a strong position in each of these categories, and we continue to invest in strengthening these key elements. In this market, our primary competitors are Woodward and Fuel System Solutions, and we also compete to a lesser extent with Westport Innovations. The overall Vehicle market is fragmented due to the variation in content among our various system offerings and product solutions.

We design our proprietary gaseous fuel engine control solution using spark-ignited engine technology. Spark-ignited engines are the dominant technology used in the marketplace today. Third-party engine control competitors, such as Woodward, and in-house engine designs, such as those offered by Cummins, are also based on spark-ignited engine technology. An alternative to spark-ignited technology is micro-pilot diesel ignition. This type of system is available from Westport Innovations (distinct from the Cummins-Westport JV) and is commercially referred to as HPDI. However, gaseous fuel engine control solutions based on HPDI technology have had limited penetration as an alternative technology. According to Westport Innovation’s most recent public information, there have only been approximately 1,000 gaseous fuel commercial vehicle engines sold by Westport Innovation based on HPDI technology.

In the Energy market, we are a key supplier of integrated engine and application controls for engine-driven natural gas compressors, power units, pumps, and generators. We believe we have a strong position supported by our comprehensive suite of integrated products, deep application knowledge and reputation. In this market, our primary competitor is Hoerbiger Engine Solutions (Altronic). We know of no competitor that offers a complete integrated solution with respect to these controls in this market that is similar to ours. The Energy market is relatively concentrated in terms of customer base, engine control options, and geography.

Within our primary markets, we compete with a range of companies that offer certain individual components of our full system solutions. The components of our overall systems most commonly include displays, panels, sensors, valves, and other end-devices. These competitors include Wachendorff, LOFA, Controls Inc, EMIT and Kenco.

Many of our customers are global manufacturers with in-house design and development capability. For certain applications in the Vehicle and Energy markets, such as engine control system components, engine control software, and natural gas compression control systems, we do compete, or potentially could compete, with our current and potential customers’ internal design capability. In these applications our challenge is substantially the same as when we are compared against any other outside competitor in that we compete based on the overall value of our products and solutions.

Our History and Values

Company History

Enovation Controls was created through the merger of FW Murphy and EControls in 2009. Our company combines FW Murphy’s wide-ranging application control capabilities with EControls’ extensive engine control expertise. We believe this uniquely positions us to provide a complete solution approach for engine control, protection, and monitoring across our served markets. The Murphy^® brand has 75 years of application expertise and solution innovation with an established global infrastructure. The EControls^® brand has 20 years of proven engineering expertise and delivers leading-edge technologies for gaseous engine control systems.

130

Our primary motivations for the merger were similar underlying technologies in our products and solutions, a high number of common customers, uniform manufacturing processes, and almost no product overlap. The merger created an opportunity for us to offer our common customers a broader integrated solution for engine control, protection and monitoring while simultaneously combining resources across the engineering, manufacturing, and sales functions. Capitalizing upon the combined companies’ engineering and innovation expertise, ability to deliver complete system solutions, and manufacturing efficiency, we have successfully grown our business across each of our markets and believe we are well positioned for future success.

FW Murphy, founded in 1939, was created when Frank W. “Pat” Murphy developed innovative mechanical solutions to protect engines from various failure modes. FW Murphy grew to become a global provider of electronic systems for visible, high-touch digital application control and display solutions with an emphasis on compression controls used in the production of natural gas. EControls was founded in 1994 with a focus on providing advanced control solutions for spark-ignited engines and a core philosophy of partnering with its customers.

Our Core Values

Enovation Controls takes great pride in providing employees with a challenging and enjoyable work experience. We rely on five core values as building blocks for our success:

•

Customer Focus: We are driven by customer satisfaction and service. Our responsibility is to understand our external and internal customers’ needs, provide timely solutions, and fulfill our commitments. We embrace a culture of humility, which we believe in turn ensures the highest level of customer satisfaction.

•

Ethics: We are honest and fair with employees, customers, and suppliers. This creates an environment of mutual respect and trust.

•

Enovation: We encourage creativity in an environment in which new ideas build on successful platforms and continue the evolution of integrated product offerings. We believe this is how we truly delight our customers.

•

Fanatical Excellence: We strive to achieve the best in all we do. Our responsibility to customers and ourselves is to adopt a sense of healthy paranoia in which quality must be proven and never assumed. We hold each other accountable to the highest standards of performance.

•

Fun: We want employees, customers, and suppliers to enjoy working with our company.

Mission and Vision

Enovation Controls is focused on long-term sustainable and profitable growth and is guided by our common values, vision, mission, and competencies. Our mission is to “Climb to Prime”—the point at which the company is the strongest, most profitable and has clarity of vision. We seek to maintain an even balance between control and flexibility.

Our vision is to provide innovative and state-of-the-art products and services for comprehensive equipment management and digital control systems. We encourage and support our employees as they achieve bold and inspiring common goals in a positive and fun atmosphere. At all times, we strive to exceed the expectations of our employees, customers, and vendors to become their “Preferred Partner.”

Intellectual Property

Our business depends, in part, upon protecting our intellectual property in the technology that we develop. We rely on patents, copyrights, and a combination of software encryption, internal procedures, and nondisclosure agreements for this purpose. We apply for patent protection where we believe it will give us a competitive

131

advantage. As of September 30, 2014 we held 26 issued U.S. patents, with an additional 19 U.S. patent applications pending as well as 2 pending international patent applications. We also have licenses to use technology owned by third parties. In addition, we own a number of trademarks that we believe are well known in our markets and represent a considerable amount of goodwill captured over many years of serving those markets.

Our U.S. patents are expected to expire at various dates between October 27, 2015 and December 8, 2030. The expiration dates of our pending U.S. patent applications, if those applications are issued as patents, are expected to be between February 2024 and October 2034. The expiration dates of our pending non-U.S. patent applications, if those applications are issued as patents, are expected to be as late as June 2032.

Although we believe that our portfolio of patents and trademarks and our licenses provide us with a competitive advantage, we do not consider the expiration or termination of any one or any group of these assets to be of such importance as to have any material or adverse effect on our business. We believe that our primary competitive advantage is based upon our collection of trade secrets, know-how, proprietary manufacturing techniques, and deep customer relationships and application knowledge. Our core products contain a large number of complex algorithms, software, electronics, and mechanical components that have been refined over many years in a confidential customer driven development process. Our processes for manufacturing these products are often similarly complex and well refined, and we believe that those processes represent a significant barrier for competitors attempting to offer a similar product. We believe our customers rely on the inherent advantage that comes from this continuous improvement in our products and processes over time. We believe that our customers also rely on us for our experience and expertise in the application of our products to meet their needs, and in many cases our expertise of a customer’s application exceeds that of the customer.

Environmental, Health and Safety Regulation

Our operations are subject to numerous stringent and complex foreign, federal, state and local laws and regulations governing, among other things, the generation, storage, handling, use, and transportation of hazardous substances, the discharge of hazardous substances into the ground, air, or water, human health and safety and environmental protection. Failure to comply with these laws or regulations or to obtain or comply with permits may result in the assessment of administrative, civil, and criminal penalties, imposition of remedial or corrective action requirements, and the imposition of injunctions to prohibit certain activities or force future compliance. We could also be held liable for any and all consequences arising out of human exposure to hazardous substances or other environmental damage. Under certain environmental laws, we could be held responsible for all of the costs relating to any contamination at our or our predecessors’ past or present facilities and at third party waste disposal sites, even if we did not cause such contamination. We cannot assure you that our costs of complying with current and future environmental and health and safety laws, and our liabilities arising from past or future releases of, or exposure to, hazardous substances will not adversely affect our business, capital expenditures, results of operations, or financial condition.

The trend in environmental regulation has been to impose increasingly stringent restrictions and limitations on activities that may impact the environment, and thus, any changes in environmental laws and regulations or in enforcement policies that result in more stringent and costly waste handling, storage, transport, or disposal remediation requirements could have a material adverse effect on our business, operations and financial position. Moreover, accidental releases or spills of hazardous or regulated substances may occur in the course of our operations, and we cannot assure you that we will not incur significant costs and liabilities as a result of such releases or spills, including any third party claims for damage to property, natural resources, or persons.

The following is a summary of the more significant existing environmental, health and safety laws and regulations in the United States to which our business operations are subject and for which compliance may have a material adverse impact on our business capital expenditures, results of operations, or financial position.

132

Hazardous Substances and Waste

The Resource Conservation and Recovery Act (RCRA) and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal, and cleanup of hazardous and non-hazardous wastes. In many states, the EPA delegates the administration of some or all of the provisions of RCRA to the individual states, some of which also have their own, more stringent requirements. We are required to manage the generation, transportation, storage and disposal of hazardous and non-hazardous wastes in compliance with RCRA.

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as the Superfund law, imposes joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a hazardous substance into the environment. These persons include current and former owners, lessors, and operators of the site where the release occurred, and anyone who disposed or arranged for the disposal of a hazardous substance released at the site. We currently own, lease, or operate numerous properties that have been used for manufacturing and other operations for many years. We also contract with waste removal services and landfills. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA and analogous foreign, state and local laws. Under such laws, we could be required to conduct or incur significant costs in connection with the removal of previously disposed substances and wastes, remediation of contaminated property, or remedial operations to prevent future contamination. In addition, we could be subject to claims by neighboring landowners and other third-parties for personal injury and property damage allegedly caused by hazardous substances released into the environment.

Water Discharges

The Federal Water Pollution Control Act (the Clean Water Act) and analogous foreign, state and local laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the U.S. Such laws provide for administrative, civil and criminal penalties for unauthorized discharges and, together with the federal Oil Pollution Act of 1990, impose rigorous requirements for spill prevention and response planning, as well as substantial potential liability for the costs of removal, remediation, and damages in connection with any unauthorized discharges.

Air Emissions

The federal Clean Air Act and comparable foreign, state, and local laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other emission control requirements. In addition, the EPA has developed, and continues to develop, stringent regulations governing emissions of toxic air pollutants at specified sources. Non-compliance with air permits or other requirements of the federal Clean Air Act and comparable laws and regulations can result in the imposition of administrative, civil, and criminal penalties, as well as the issuance of orders or injunctions limiting or prohibiting non-compliant operations. We are subject to the EPA’s Toxics Release Inventory (TRI) reporting requirements and to annual and semi-annual site level reporting to state departments of environmental quality (DEQ). We are dedicated to compliance with applicable laws and regulations relating to air emissions.

Climate Change

In December 2009, the EPA determined that emissions of carbon dioxide, methane and other greenhouse gases present an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the earth’s atmosphere and other climatic changes. Based on these findings, the EPA has adopted regulations to restrict emissions of greenhouse gases under existing provisions of the federal Clean Air Act including rules regulating emissions of greenhouse gases from motor vehicles and certain large stationary sources. The EPA has also adopted rules requiring the annual reporting of greenhouse gas emissions from specified large greenhouse gas emission sources in the U.S., including petroleum refineries and onshore oil and natural gas production facilities.

133

In addition, Congress has from time to time considered adopting legislation to reduce emissions of greenhouse gases and almost one-half of the states have already taken legal measures to reduce emissions of greenhouse gases primarily through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs.

The adoption of legislation or regulatory programs to reduce emissions of greenhouse gases could require us to incur increased operating costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances or comply with new regulatory or reporting requirements. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the oil and natural gas produced by our customers. Consequently, legislation and regulatory programs to reduce emissions of greenhouse gases could have a direct and indirect adverse effect on our business, financial condition, and results of operations. Finally, it should be noted that some scientists have concluded that increasing concentrations of greenhouse gases in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If any such effects were to occur, they could have an adverse effect on our business, financial condition, results of operations, and cash flow.

Employee Health and Safety

We are subject to a number of foreign, federal, state, and local laws and regulations, including the federal Occupational Safety and Health Act (OSHA) and comparable state statutes, establishing requirements to protect the health and safety of workers. In addition, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities, and the public. Substantial fines and penalties can be imposed and orders or injunctions limiting or prohibiting certain operations may be issued in connection with any failure to comply with laws and regulations relating to worker health and safety.

We also operate in non-U.S. jurisdictions, which may impose similar obligations and liabilities against us.

Employees

As of September 30, 2014, we have 1,030 employees worldwide, including 642 in operations, 179 in engineering, and 117 in sales and marketing.

Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Such litigation may include product liability, tort, warranty, contract, workers’ compensation, and other claims. As of the date of this prospectus, we are not involved in any material legal proceedings.

134

MANAGEMENT

Our Directors, Director Nominees, and Executive Officers

The following table sets forth certain information as of the date of this prospectus concerning our directors, director nominees, and executive officers, upon consummation of the Transactions.


Name	Age	Principal Position(s)

Frank W. Murphy III	47	Executive Chairman, Director

Patrick W. Cavanagh	61	President and Chief Executive Officer, Director

Dennis E. Bunday	63	Chief Financial Officer and Secretary

Kennon Guglielmo, Ph.D.	47	Chief Technology Officer, Director

Eugene J. Bazemore Jr.	43	Vice President, Corporate Development and Investor Relations

Brian L. Cantrell	55	Director Nominee

Ronald L. Hoffman	65	Director Nominee

There are no family relationships between or among any of our executive officers, directors, or director nominees. Set forth below is additional information concerning our executive officers and directors.

Frank W. Murphy III has served as our Executive Chairman since October 2011 and has served on the board of directors of Enovation Controls, Inc. since its inception. Mr. Murphy served as our President and Chief Executive Officer from September 2009 to October 2011. From 1998 through September 2009, Mr. Murphy served as President and Chief Executive Officer of FW Murphy, a global manufacturing company specializing in oil and gas and industrial markets worldwide. During his 23-year tenure with FW Murphy, he assisted FW Murphy with several important achievements, including the founding and management of FW Murphy Instruments (Hangzhou) Co., Ltd. while living in Shanghai, China from 2005 to 2007. Mr. Murphy currently serves on the board of directors of Fiberglass Engineering, Inc. (d/b/a Cobalt Boats) and Chesapeake Holding Company, and was previously a member of the board of directors of The F&M Bank and Trust Company. Additionally, he serves on the board of trustees at the University of Tulsa. Mr. Murphy holds a Bachelor’s degree in Personnel Administration from the University of Kansas and an M.B.A. from Southern Methodist University.

We believe Mr. Murphy is qualified to serve as a member of our board of directors due to his experience serving on other boards, the perspective and experience from his long history with us, including his extensive international business exposure, and his broad knowledge of our products and the markets we serve.

Patrick W. Cavanagh has served as our President and Chief Executive Officer since January 2013 and has served on the board of directors of Enovation Controls, Inc. since its inception. Mr. Cavanagh served as President and Chief Executive Officer of Williams Controls (NYSE: WMCO), a global manufacturer of electronic throttle controls and sensors based in Portland, Oregon that was sold to Curtiss Wright (NYSE: CW) in December 2012, from October 2004 to December 2012. Prior to joining Williams Controls, Mr. Cavanagh served as General Manager of Woodward Controls, Inc., a subsidiary of Woodward Governor Company, an independent manufacturer of engine control systems for industrial engines and turbines. From 1992 to 2003, Mr. Cavanagh served as Corporate Vice President of Knowles Electronics and General Manager of its Automotive Components Group, a producer of engine control systems, actuators and sensors for the automotive, heavy truck and off highway markets. Mr. Cavanagh has served on the board of advisors of Enovation Controls, LLC since February 2010. He served as Chairman of the Heavy Duty Manufacturers Association, the leading industry organization for commercial vehicle and off-highway equipment suppliers, and on the board of its parent organization, the Motor Equipment Manufacturers Association. He also serves on the board of directors of Defiance Metal Products, a supplier of fabricated metal components to the commercial vehicle and off-highway equipment manufacturers. Mr. Cavanagh holds a B.S. in Mechanical Engineering Technology from the Milwaukee School of Engineering.

We believe that Mr. Cavanagh is qualified to serve as a member of our board of directors due to his significant leadership, financial, and manufacturing experience.

135

Dennis E. Bunday has served as our Chief Financial Officer since July 2014. Mr. Bunday served as President and Chief Financial Officer of Pacific Power Products Holdings, Inc. from March 2013 to July 2014. Prior to joining Pacific Power Products Holdings, he served as Executive Vice President, Chief Financial Officer, and Secretary of Williams Controls (NYSE: WMCO) from July 2002 to December 2012. Prior to joining Williams Controls, he served as Vice President-Finance and Chief Financial Officer from 1998 to 2001, for Babler Bros., Inc., a manufacturer of pre-cast concrete products. From 1996 until 1998, he held the same positions with Quality Veneer & Lumber, Inc., and its predecessor, the Morgan Company, a producer of forest products. Prior to 1996, he was Financial Controller and Treasurer of Pope & Talbot, Inc., which at the time was listed on the New York Stock Exchange. Mr. Bunday received a Bachelor’s degree in Accounting from Washington State University. Mr. Bunday was a member of the board of directors and the compensation committee of the board of directors of Southwall Technologies until the sale of that company in November 2011.

Dr. Kennon Guglielmo has served as our Chief Technology Officer since September 2009 and has served on the board of directors of Enovation Controls, Inc. since its inception. As Chief Technology Officer, Dr. Guglielmo provides technical leadership to Enovation Controls. In 1994, Dr. Guglielmo formed EControls and began developing engine management systems for the industrial, marine, and heavy-duty engine markets. Dr. Guglielmo began his career in 1992 at the Engine Research department at Southwest Research Institute in San Antonio, Texas. Dr. Guglielmo holds a B.S. in Mechanical Engineering from Texas A&M University, and an M.S. and Ph.D. in Mechanical Engineering from Georgia Institute of Technology. Throughout his academic career, Dr. Guglielmo focused on advanced control theory in the areas of engine controls, robotics, and other thermodynamic and mechanical systems.

We believe that Dr. Guglielmo is qualified to serve as a member of our board of directors due to his extensive experience with our products and their history and his deep technical expertise.

Eugene J. Bazemore Jr. has served as our Vice President, Corporate Development and Investor Relations since May 2014. From May 2013 to May 2014, Mr. Bazemore served as Vice President, Corporate Development, at AZZ incorporated (NYSE: AZZ), a diversified industrial company based in Fort Worth, Texas. From October 2006 to May 2013, Mr. Bazemore was a senior investment banker in the Industrial Technologies practice of Houlihan Lokey in New York, New York. He also previously worked as Director, Corporate Development at Cooper Industries Ltd., a global electrical products manufacturer, from 2004 to 2006, and in investment banking with UBS Investment Bank from 2000 to 2004. Mr. Bazemore holds a B.S. in Chemical Engineering from Auburn University and an M.B.A. from New York University’s Leonard N. Stern School of Business.

Brian L. Cantrell will become a member of our board of directors subject to and effective upon the listing of our Class A Shares on the NYSE. Mr. Cantrell has served as Senior Vice President and Chief Financial Officer of Alliance Resource Partners, L.P. (NASDAQ: ARLP), a diversified producer and marketer of coal, since October 2003. Mr. Cantrell has also served as Senior Vice President and Chief Financial Officer of Alliance Holdings GP, L.P. (NASDAQ: AHGP), which owns and controls ARLP’s managing general partner, since November 2005. Prior to his current positions, Mr. Cantrell served as President of AFN Communications, LLC from 2001 to 2003 and as Executive Vice President and Chief Financial Officer from 2000 to 2001. Mr. Cantrell has also held leadership positions with several oil and gas exploration and production companies, having served as Chief Financial Officer and Treasurer and a director of Brighton Energy, LLC from 1997 to 2000, as Vice President–Finance of KCS Medallion Resources, Inc., and as Vice President–Finance, Secretary, and Treasurer of Intercoast Oil and Gas Company. Mr. Cantrell serves on the Board of Visitors and the Energy Institute Advisory Board for the Michael F. Price College of Business at the University of Oklahoma. Mr. Cantrell is a Certified Public Accountant and holds a Master of Accountancy and Bachelor of Accountancy from the University of Oklahoma.

We believe Mr. Cantrell is qualified to serve as a member of our board of directors due to his extensive experience in senior corporate leadership positions, as well as his significant knowledge and expertise in public company financial reporting and accounting matters.

136

Ronald L. Hoffman will become a member of our board of directors subject to and effective upon the listing of our Class A Shares on the NYSE. Mr. Hoffman served as Chief Executive Officer and a director of Dover Corporation (NYSE: DOV) (“Dover”), a manufacturer of specialized industrial products and equipment, from January 2005 to December 2008, and as Chief Operating Officer of Dover from July 2003 to December 2004. Prior to his appointment as Chief Executive Officer of Dover, Mr. Hoffman also held several executive management positions with subsidiaries of Dover following the acquisition of Tulsa Winch, of which Mr. Hoffman served as President, in 1996. Mr. Hoffman has served as a director of Pall Corporation (NYSE: PLL), a global provider of filtration, separation, and purification products, since October 2008, with the additional responsibilities of Lead Director since October 2013 and Chairman of the Board from March 2011 to October 2013. Mr. Hoffman also completed the Advanced Executive Program at the Kellogg School of Management of Northwestern University and holds a Bachelor of Science in Engineering Technology from Oklahoma State University.

We believe Mr. Hoffman is qualified to serve as a member of our board of directors due to his extensive senior executive leadership experience, as well as his significant knowledge and experience with respect to matters important to the operation of public companies.

Board of Directors

Our board of directors is divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Effective upon the closing of this offering, our directors will divided among the three classes as follows:

•

The Class I directors are Messrs. Murphy and Guglielmo, and their terms will expire at the annual meeting of stockholders to be held in 2015;

•

The Class II directors are Messrs. Cavanagh and Cantrell, and their terms will expire at the annual meeting of stockholders to be held in 2016; and

•

The Class III director is Mr. Hoffman and his term will expire at the annual meeting of stockholders to be held in 2017.

We intend to enter into the Stockholders Agreement with Murphy Group and EControls Group that will become effective upon the completion of this offering. Pursuant to the Stockholders Agreement, each Founder Entity will have the right to designate two members to our board of directors for so long as such Founder Entity owns 10% or more of our outstanding Class A Shares and Class B Shares, and each will have the right to designate one member to our board of directors if their ownership of our outstanding Class A Shares and Class B Shares is between 5% and 10%. In addition, as long as each Founder Entity owns 10% or more of our outstanding Class A Shares and Class B Shares, they will have the right to designate one mutually agreed additional member to our board of directors. If a Founder Entity’s ownership level falls below 5% of our outstanding Class A Shares and Class B Shares, such Founder Entity will no longer have any right to designate a nominee. If a vacancy on the Board occurs as a result of the death, disability, retirement, resignation, or removal of a designee of the Founder Entities, or the joint designee, the Founder Entity that designated such person, or the Founder Entities jointly in the case of the mutually agreed designee, shall nominate a replacement to fill the vacancy. Each of the Founder Entities has agreed to vote all its shares for the designees of the Founder Entities. Pursuant to the terms of the Stockholders Agreement, Murphy Group nominated Mr. Murphy to our board of directors, EControls Group nominated Mr. Guglielmo to our board of directors and Murphy Group and EControls Group mutually agreed to nominate Mr. Cavanagh to our board of directors. For more information, see “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

Pursuant to the Stockholders Agreement, the Founder Entities will agree that until the earlier of the third anniversary of the closing of the offering being made hereby and the time at which the Founder Entities collectively hold less than 10% of our outstanding Class A Shares and Class B Shares, neither will transfer any

137

shares of our common stock without the consent of the other Founder Entity, other than pursuant to certain permitted transfers, transfers in which the other Founder Entity has a right to participate, and sales pursuant to a registration statement.

Our amended and restated certificate of incorporation will provide that directors may be removed only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of our then outstanding stock voting as a single class at a meeting of stockholders called for that purpose. The certificate will also provide that, if a director is removed or if a vacancy occurs due to either an increase in the size of the board or the death, resignation or other cause, the vacancy will be filled solely by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum remain.

Director Independence

Upon the completion of this offering, we expect that our Class A Shares will be listed on the NYSE. We expect to be a “controlled company” under the NYSE corporate governance standards because more than 50% of the voting power of our common stock following the completion of this offering will be held by the Founder Entities, each of which has agreed to vote their shares together for the election of directors pursuant to the Stockholders Agreement. A “controlled company” may elect not to comply with certain NYSE corporate governance standards, including the requirements that: (i) we have a majority of our board of directors consists of “independent directors,” as defined under the NYSE rules; (ii) we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and (iii) we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. Following this offering, in reliance upon the foregoing exemptions, a majority of our board of directors will not consist of independent directors and we will not have a nominating and corporate governance committee, and we may use any of these exemptions for so long as we are a controlled company. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE. The “controlled company” exception does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of Sarbanes—Oxley and the NYSE. The rules of the NYSE permit the composition of our audit committee to be phased-in as follows: (i) one independent committee member at the time our shares are listed on the NYSE; (ii) a majority of independent committee members within ninety (90) days of the date of this prospectus; and (iii) all independent committee members within one (1) year of the date of this prospectus. Thereafter, we will be required to have an audit committee comprised entirely of independent directors. We expect to appoint two independent directors to our board subject to and effective upon the listing of the Class A Shares on the NYSE. See “Management—Our Directors and Executive Officers.” If at any time we cease to be a “controlled company” under the NYSE rules, our board of directors will take all action necessary to comply with the applicable NYSE rules, including appointing a majority of independent directors to our board of directors and establishing certain committees composed entirely of independent directors, subject to a permitted “phase-in” period.

The board of directors has reviewed the independence of our directors, as well as our director nominees who will join the board of directors subject to and effective upon the listing of our Class A Shares on the NYSE, based on the listing standards of the NYSE. Based on this review, the board of directors determined that each of Messrs. Cantrell and Hoffman are independent within the meaning of the NYSE rules. In making this determination, our board of directors considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence. As required under applicable NYSE rules, we anticipate that our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present.

Board Committees

Our board of directors has established standing committees in connection with the discharge of its responsibilities. These committees include an Audit Committee and a Compensation Committee. Our board of directors has adopted written charters for each of these committees. Upon completion of this offering, copies of

138

the charters will be available on our website. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.

Audit Committee

The Audit Committee will be responsible for, among other matters:

•

appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm;

•

discussing with our independent registered public accounting firm the independence of its members from its management;

•

reviewing with our independent registered public accounting firm the scope and results of their audit;

•

approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;

•

overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC;

•

reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements;

•

coordinating the oversight by our board of directors of our code of business conduct and our disclosure controls and procedures

•

establishing procedures for the confidential and/or anonymous submission of concerns regarding accounting, internal controls or auditing matters; and

•

reviewing and approving related-person transactions.

Upon completion of this offering, our audit committee will consist of Messrs. Cantrell and Hoffman. The NYSE rules require us to have one independent Audit Committee member upon the listing of our Class A Shares, a majority of independent directors within 90 days of the date of this prospectus and all independent Audit Committee members within one year of the date of this prospectus. Our board of directors has affirmatively determined that Messrs. Cantrell and Hoffman meet the definition of “independent director” for purposes of serving on an Audit Committee under Rule 10A-3 and NYSE rules. In addition, our board of directors has determined that Mr. Cantrell will qualify as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.

Compensation Committee

The Compensation Committee will be responsible for, among other matters:

•

reviewing key employee compensation goals, policies, plans and programs;

•

reviewing and approving the compensation of our directors and executive officers;

•

reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and

•

appointing and overseeing any compensation consultants or advisors.

Upon completion of this offering, our Compensation Committee will consist of Messrs. Cantrell and Hoffman.

139

Risk Oversight

Our board of directors will oversee a company-wide approach to risk management. Our board of directors will determine the appropriate risk level for us generally, assess the specific risks faced by us and review the steps taken by management to manage those risks. While our board of directors will have ultimate oversight responsibility for the risk management process, its committees will oversee risk in certain specified areas.

Specifically, our Compensation Committee will be responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our Audit Committee will oversee management of enterprise risks and financial risks, as well as potential conflicts of interests. Our board of directors will be responsible for overseeing the management of risks associated with the independence of our board of directors.

Compensation Committee Interlocks and Insider Participation

All compensation and related matters after this offering will be reviewed by our compensation committee.

Code of Business Conduct and Ethics

Upon or prior to completion of this offering, our board of directors will adopt a code of business conduct and ethics that applies to our directors, officers and employees. Upon completion of this offering, a copy of this code will be available on our website. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.

Indemnification Agreements

We intend to enter into indemnification agreements with each of our directors pursuant to which we will agree to indemnify each director against: (i) expenses, judgments, and settlements paid in connection with third-party claims; and (ii) expenses and settlements paid in connection with claims in our right, in each case provided that the director acted in good faith. In addition, we will agree to indemnify each director to the fullest extent permitted by law against all expenses, judgments, and amounts paid in settlement if the director acted in good faith and in a manner reasonably believed to be in, and not opposed to, our best interests. Subject to the director’s obligation to repay us in the event that he or she is not entitled to such indemnification, we will advance the expenses of the director prior to a final determination as to whether the director is entitled to indemnification.

Director Compensation

In 2013, Enovation Controls, LLC did not have a board of directors or a board of managers, as Enovation Controls, LLC is member-managed. In connection with the organization of Enovation Controls, Inc. in 2014, we appointed three employee directors. Following this offering, we expect to appoint one or more independent directors who will receive compensation that is commensurate with arrangements offered to directors of newly public companies. We have not compensated, nor do we expect to compensate, our employee directors for their service on our board of directors. We expect to reimburse all directors for reasonable out-of-pocket expenses incurred in connection with their service as directors. Our independent directors will also be eligible to receive equity awards when, as and if determined by our Compensation Committee.

140

EXECUTIVE COMPENSATION

Introduction

Our named executive officers for the year ended December 31, 2013, which consists of our President and Chief Executive Officer, our former President and Chief Executive Officer, and our two other most highly compensated executive officers who were serving as executive officers as of December 31, 2013, are as follows:

•

Patrick W. Cavanagh, our President and Chief Executive Officer;

•

Gary Riley, our former President and Chief Executive Officer;

•

Frank W. Murphy III, our Executive Chairman; and

•

Kennon Guglielmo, our Chief Technology Officer.

2013 Summary Compensation Table

The following table summarizes the total compensation paid to or earned by each of our named executive officers in 2013 and 2012.


Name and Principal Position	Year		Salary ($)		Bonus ($)		Option Awards ($)⁽¹⁾		Non-Equity Incentive Plan Compensation ($)⁽²⁾		All Other Compensation ($)⁽³⁾		Total ($)
Patrick W. Cavanagh President and Chief Executive Officer⁽⁴⁾		2013		433,133		—		—		315,042		129,037		877,212

Gary Riley		2013		144,978		—		—		44,003		529,877		718,858
Former President and Chief Executive Officer⁽⁵⁾		2012		500,000		—		—		200,051		48,093		748,144

Frank W. Murphy III		2013		428,087		—		—		128,105		30,100		586,292
Executive Chairman		2012		420,560		—		—		83,790		54,662		559,012

Kennon Guglielmo		2013		412,000		—		—		125,832		7,650		545,482
Chief Technology Officer		2012		407,778		—		—		84,581		10,287		502,646

(1)

Mr. Cavanagh was the only named executive officer that received an option award. In 2013, Mr. Cavanagh received Class C Management Interests of Enovation Controls, LLC. The aggregate intrinsic value of Mr. Cavanagh’s Class C Management Interests was zero, calculated in accordance with FASB ASC Topic 718. See Note 8—“Stock Compensation” to our consolidated financial statements included in this prospectus for further discussion of the valuation methodology. Using the fair market valuation method at September 30, 2014, the value of Mr. Cavanagh’s Class C Management Interests was $4,004,955. For more information relating to the 2013 awards, see the section entitled “Overview of Our 2013 Executive Compensation Program—Elements of Compensation—Annual Equity Incentive Awards” below.

(2)

Amounts represent the annual cash incentive awards earned by the named executive officers. Messrs. Cavanagh and Riley participated in our Senior Management Incentive Plan and our Incentive Compensation Plan (OVERDRIVE), which in each case was based on our performance in 2012 and 2013, as applicable. Messrs. Murphy and Guglielmo only participated in our Incentive Compensation Plan (OVERDRIVE). For more information relating to the 2013 annual cash incentive awards, see the section entitled “Overview of Our 2013 Executive Compensation Program—Elements of Compensation—Annual Cash Incentive Awards” below.

(3)

For 2013, amounts represent: (i) for Mr. Cavanagh, a relocation allowance of $80,805, which included a tax gross up on his relocation allowance of $35,441, a club allowance, an automobile allowance, an allowance to purchase life insurance of $12,570, and a 401(k) plan matching contribution of $7,650; (ii) for Mr. Riley, $513,023 in severance in connection with his resignation from Enovation Controls, LLC, an automobile allowance, a relocation allowance, and a 401(k) plan matching contribution of $9,767 (iii) for Mr. Murphy, personal use of fractionally owned Company aircraft, a club allowance, and a 401(k) plan matching contribution of $7,650; and (iv) for Mr. Guglielmo, a 401(k) plan matching contribution of $7,650.

141

For 2012, amounts represent: (i) for Mr. Riley, an automobile allowance, a relocation allowance of $31,883, and a 401(k) plan matching contribution of $7,500; (ii) for Mr. Murphy, personal use of fractionally owned Company aircraft of $33,662, a club allowance, and a 401(k) plan matching contribution of $7,500; and (iii) for Mr. Guglielmo, a 401(k) plan matching contribution of $7,414 and personal use of fractionally owned company aircraft.

The value of personal use of fractionally owned company aircraft is based on our incremental costs, including the cost of fuel, pilot costs, trip-related maintenance, crew travel expenses, on-board catering, landing fees, and trip-related parking/hangar costs. Since our fractionally owned aircraft is used primarily for business travel, we do not include the fixed costs that do not change based on the usage, such as purchase costs and maintenance costs not related to trips. All other dollar amounts reflected in the “All Other Compensation” column are based on our direct costs of providing such perquisites or personal benefits to the named executive officers.

(4)	Mr. Cavanagh’s employment with Enovation Controls, LLC commenced on January 28, 2013.

(5)	Mr. Riley resigned from Enovation Controls, LLC on March 31, 2013.

Overview of Our 2013 Executive Compensation Program

Elements of Compensation

Our executive compensation program consisted of the following components of compensation in 2013:

Base Salary. Each named executive officer receives a base salary for the expertise, skills, knowledge and experience they offer to our management team. Base salaries are periodically adjusted to reflect:

•

The nature, responsibilities, and duties of the officer’s position;

•

The officer’s expertise, demonstrated leadership ability, and prior performance;

•

The officer’s salary history and total compensation, including annual cash incentive awards and annual equity incentive awards; and

•

The competitiveness of the officer’s base salary.

Each named executive officer’s base salary for 2013 is listed in the 2013 Summary Compensation Table.

Annual Cash Incentive Awards. As part of our executive compensation program, the members of Enovation Controls, LLC provide annual cash incentive awards to our named executive officers and other key employees. Each year the members determine the performance goals they believe best align the named executive officers’ annual cash incentive awards with our strategic goals and objectives for the respective year. The annual cash incentive awards are intended to motivate and reward the named executive officers for their contributions in achieving our strategic goals and objectives.

For 2013, there were two separate cash incentive programs, our Senior Management Incentive Plan and our Incentive Compensation Plan (OVERDRIVE). Messrs. Cavanagh and Riley participated in both of these cash incentive programs, but Messrs. Murphy and Guglielmo only participated in our Incentive Compensation Plan (OVERDRIVE).

Under the Senior Management Incentive Plan, in 2013 Messrs. Cavanagh and Riley were provided an opportunity to earn a cash bonus in the event we achieved net sales of $228 million and Adjusted EBITDA as a percentage of revenue of 16.5% for 2013. “Adjusted EBITDA” was defined as net income plus interest, income taxes, depreciation and amortization, and other non-recurring, non-cash charges such as gains/losses on the early extinguishment of debt, goodwill impairment, and equity-based compensation. For 2013, our actual revenue was $256 million and our actual Adjusted EBITDA as a percentage of revenue was 18.5%. Accordingly,

142

Mr. Cavanagh earned a cash bonus under the Senior Management Incentive Plan of $219,560. As a result of Mr. Riley’s resignation from Enovation Controls, LLC in March 2013, he was not eligible to receive a cash bonus under the Senior Management Incentive Plan.

In addition, the named executive officers participated in the Incentive Compensation Plan (OVERDRIVE) which was a company-wide bonus pool for all regular full-time employees. The aggregate amount of the company-wide bonus pool was approximately $7,446,000, which represented approximately 15% of our 2013 net operating income before deducting the Incentive Compensation Plan (OVERDRIVE) expense. Payments under the Incentive Compensation Plan (OVERDRIVE) are paid monthly, if earned. Actual awards under the Incentive Compensation Plan (OVERDRIVE) are based upon us achieving pre-determined performance goals regarding our productivity, safety, delivery, quality, continuous improvement, new product introductions, and sales and margin objectives; provided that no monthly awards are paid unless a threshold level of monthly operating income is achieved which is 70% of the planned operating income of the respective month. In 2013, Messrs. Cavanagh, Riley, Murphy and Guglielmo earned a cash bonus under the Incentive Compensation Plan (OVERDRIVE) of $95,482, $44,003, $128,105, and $125,832, respectively.

See the above 2013 Summary Compensation Table for further information on the payout of the named executive officers’ 2013 annual cash incentive awards.

Annual Equity Incentive Awards. Historically, we have granted Class B, C, and D Management Interests of Enovation Controls, LLC (commonly referred to as a profits interest) under our Profits Interest Plan to our officers, including Mr. Cavanagh, but excluding Messrs. Murphy and Guglielmo. Due to their substantial ownership in us, Messrs. Murphy and Guglielmo have not generally been awarded annual equity incentive awards. Mr. Riley did not receive an annual equity incentive award in 2013.

The Class B, C, and D Management Interests do not have any intrinsic value when granted, generally vest over four years and provide the officers with benefits (in the form of distributions) only if the distributions from Enovation Controls, LLC after the grant date exceed a specified amount, which we refer to as the “threshold value.” The threshold value is increased for each of the Class B, C, and D Management Interests, such that a lower-lettered tranche may become entitled to receive distributions before a higher-lettered tranche.

On February 18, 2013, Mr. Cavanagh was granted Class C Management Interests of Enovation Controls, LLC and the Class C Management Interests have a threshold value of $210 million. Mr. Cavanagh will not receive any distributions with respect to vested Class C Management Interests until Enovation Controls LLC’s total distributions after January 1, 2013 exceed the threshold value of $210 million. The Class C Management Interests are subject to forfeiture restrictions that lapse in equal one-fourth increments beginning on the first anniversary of the date of grant, subject to Mr. Cavanagh’s continued employment.

See the 2013 Summary Compensation Table for further information on the named executive officers’ 2013 annual equity incentive awards.

Other Benefits. We provide one or more of the named executive officers with certain perquisites and other personal benefits, including an annual automobile allowance, club membership dues and payment of certain life insurance premiums, as set forth in more detail in the 2013 Summary Compensation Table.

From time to time, we also provide relocation assistance to move certain of our current employees and new hires, including our named executive officers, covering most of the reasonable costs and expenses incurred during the move. Reasonable costs and expenses include items such as two “house-hunting” trips between their prior home and the relocation city, costs associated with purchasing a new home, assistance with sale of their current residence, loss on sale protection (if necessary), tax assistance for certain relocation benefits, and/or other approved reasonable expenses. In connection with Mr. Cavanagh’s relocation to Tulsa, Oklahoma, he received (i) a company loan of $650,000 for the purchase of a new home, which he paid back to us in August 2013,

143

(ii) loss on sale protection in the event his former home sold for less than $565,000, which he did not use because his former home sold for more than $565,000, (iii) house-hunting expenses, (iv) reimbursement of the closing costs on his new home of $36,844, (v) a tax gross up on his relocation allowance of $35,441 and (vi) other approved reasonable expenses. During 2013, Mr. Cavanagh received aggregate relocation assistance of $80,805.

Messrs. Murphy and Guglielmo are permitted to use fractionally owned company aircraft for personal air travel to the extent it is not otherwise being used for company business. From time to time, they may be accompanied by their family members.

All U.S. employees, including our named executive officers, are eligible to participate in our U.S. benefit programs, including medical, dental, vision, life, and disability insurance and a 401(k) plan with matching contributions.

The Enovation Controls 401(k) Plan provides substantially all U.S. employees with the ability to make pre-tax retirement contributions in accordance with applicable IRS limits. Matching contributions are discretionary based on Company performance. In 2013 matching was equal to 50% of an employee’s contributions up to the first 6% contributed by the employee.

We do not sponsor or maintain any deferred compensation or supplemental retirement plans in addition to our 401(k) plan.

The health, welfare, and other personal perquisites and benefits described above are intended to be part of a competitive overall executive compensation program and help attract and retain employee talent.

The amounts paid to the named executive officers in 2013 in respect of these benefits are reflected above in the 2013 Summary Compensation Table under the “All Other Compensation” column.

In connection with Mr. Riley’s resignation from Enovation Controls, LLC in March 2013, he was entitled to receive (i) twelve months severance, payable bi-weekly and (ii) continuation of health and life insurance benefits for twelve months or until he accepts a position with another company offering comparable benefits, which benefits we valued at $13,023.

Employment Arrangements with Named Executive Officers

Each of our existing named executive officers is a party to a written employment arrangement. The material terms of each of those arrangements is described below. Mr. Riley was also a party to a written employment arrangement, the terms of which are described below. For a description of the compensation actually paid to the named executive officers for 2013, please refer to the 2013 Summary Compensation Table.

Employment Arrangement with Patrick W. Cavanagh

Mr. Cavanagh entered into an amended and restated offer letter with us on July 11, 2014, in connection with his appointment as our President and Chief Executive Officer. Pursuant to the terms of the amended and restated offer letter, Mr. Cavanagh’s employment is “at-will” and he is entitled to the following compensation and benefits:

•

An initial base salary of $440,000, subject to annual review;

•

Participation in our Incentive Compensation Plan (OVERDRIVE) at a target bonus opportunity of 15% of his annual base salary;

•

Participation in our Senior Management Incentive Plan with an annual performance bonus opportunity in the amount of 40% of his annual base salary;

144

•

An award of 110,320 restricted Class C Management Interests of Enovation Controls, LLC, 25% of which vested on January 1, 2014, 25% of which will vest on January 1, 2015, and the remainder of which will vest 25% on each of January 1, 2016 and January 1, 2017, subject to his continued employment with us through such dates;

•

Participation in our employee benefit programs, including medical, dental, vision, and 401(k) plan; and

•

An annual automobile allowance of $15,000, induction fees and advance payment of one-year’s dues at a local country club and the first year club dues in advance to offset the termination of his membership at his former club, an annual physical, paid business class seats on international flights, and company-paid life insurance policies covering his life in the amount of $700,000 and covering his wife’s life in the amount of $25,000.

Under the amended and restated offer letter we also agreed to provide Mr. Cavanagh certain relocation benefits, including reimbursement of up to $80,000 for any losses he would incur if his former home sold for less than $565,000, and a company loan of up to $650,000 for the purchase of a home in Tulsa, Oklahoma. The loan accrued interest at a rate of 0.27% per annum, which was the IRS Applicable Federal Rate at the time for a loan with a duration of less than three years. Mr. Cavanagh repaid the loan in August 2013 upon the sale of his former home. No payments were made by us to Mr. Cavanagh to reimburse him for his losses on the sale of his former home because the home did not sell for less than $565,000.

If we breach our obligations to Mr. Cavanagh under the amended and restated offer letter, his employment is terminated by us other than for cause, or, within 24 months of a change in control he voluntarily terminates his employment for good reason, he is entitled to (i) continuation of full base pay for 12 months in bi-weekly installments, and (ii) continuation of all company-paid insurance benefits for 12 months or until Mr. Cavanagh accepts a position with another company offering comparable benefits. The terms “cause,” “good reason,” and “change in control” are defined in Mr. Cavanagh’s amended and restated offer letter. The following briefly summarizes the meaning of each of these terms as they are defined in Mr. Cavanagh’s offer letter:

•

“Cause” generally means: (i) demonstrated and material neglect or continued failure or refusal to perform his material duties; (ii) conviction of a felony or a crime involving moral turpitude, other than a traffic offense that is not punished by a sentence of incarceration or a felony related to hunting live game; (iii) proven or admitted fraud that is not de minimis and that has caused, is causing, or reasonably is likely to cause harm to us; (iv) misappropriation, theft, or embezzlement, in each case that is not de minimis, that has caused, is causing, or reasonably is likely to cause harm to us; (v) willfully, recklessly, or grossly negligently engaging in misconduct that is materially injurious, monetarily or otherwise, to us, or (vi) use of illegal drugs in the course of, related to or connected with our business.

•

“Good reason” generally means the occurrence of any of the following events without Mr. Cavanagh’s express written consent: (i) a material adverse change in his title, the nature or scope of his authority, powers, functions, duties, responsibilities, or reporting relationship; (ii) a material reduction in his rate of annual base salary; (iii) a change in his primary employment location to a location that is more than 50 miles from its location immediately prior to such relocation; or (iv) the company’s failure to obtain from any successor an express written and unconditional assumption of the Company’s obligations under the offer letter. We have a 30-day period to cure the circumstances giving rise to Mr. Cavanagh’s claim of “good reason.”

•

“Change in control” generally means the occurrence of any of the following events: (i) a transaction pursuant to which a third party acquires beneficial ownership of 50% or more of the combined voting power of our then-outstanding securities; (ii) during any 24-month period, the individuals who, at the beginning of such period, constitute our board of directors (“incumbent directors”) cease to constitute at least a majority of our board of directors (for this purpose an individual who becomes a member of the board of directors subsequent to the beginning of the 24-month period will be deemed to have satisfied the 24-month requirement if he or she was approved by at least two-thirds of the directors who

145

then qualified as incumbent directors); (iii) the sale of all or substantially all of our assets; (iv) a merger or consolidation of us or a subsidiary with any other corporation or other entity, other than certain mergers or consolidations following which the combined voting power of our securities continue to represent more than 50% of the combined voting power of the resulting entity; or (v) our stockholders approve a plan of complete liquidation or dissolution of the company.

In connection with his employment, Mr. Cavanagh entered into our standard Confidentiality and Noncompetition Agreement, which includes customary terms, conditions, and covenants.

Employment Agreement with Kennon Guglielmo

In connection with Mr. Guglielmo’s appointment as Chief Technical Officer, he entered into an employment agreement on September 30, 2009. Pursuant to the terms of Mr. Guglielmo’s employment agreement, he is (i) an at-will employee, (ii) entitled to an initial base salary of $400,000, and (iii) entitled to the payment of premiums on certain term life insurance policies through January 2, 2016. His current base salary for 2014 is $412,000.

Pursuant to the terms of his employment agreement, Mr. Guglielmo is subject to noncompetition and nonsolicitation provisions for the three years immediately following his voluntary termination of employment without Good Reason (as defined below) or his involuntary termination with Cause (as defined below). Mr. Guglielmo’s employment agreement also contains customary confidentiality and invention assignment provisions.

Employment Agreement with Frank W. Murphy III

In connection with Mr. Murphy’s employment with us, he entered into an employment agreement on September 30, 2009. Pursuant to the terms of Mr. Murphy’s employment agreement, he is (i) an at-will employee and (ii) entitled to an initial base salary of $420,000. His current base salary for 2014 is $420,000.

Pursuant to the terms of his employment agreement, Mr. Murphy is subject to noncompetition and nonsolicitation provisions for the three years immediately following his voluntary termination of employment without Good Reason (as defined below) or his involuntary termination with Cause (as defined below). Mr. Murphy’s employment agreement also contains customary confidentiality and invention assignment provisions.

Under the terms of Messrs. Guglielmo’s and Murphy’s employment agreements, “Cause” is defined as (i) a demonstrated and material neglect or continued failure or refusal to perform the material duties of his position (other than any such failure resulting from his incapacity due to a disability), (ii) a conviction of a felony or a crime involving moral turpitude, other than a traffic offense that is not punished by a sentence of incarceration or a felony related to hunting live game, (iii) proven or admitted fraud that is not de minimis and that has caused, is causing, or reasonably is likely to cause harm to us, (iv) misappropriation, theft, or embezzlement, in each case that is not de minimis that has caused, is causing, or reasonably is likely to cause harm to us, (v) willfully, recklessly, or grossly negligently engaging in misconduct that is materially injurious to us, monetarily or otherwise, or (vi) use of illegal drugs in the course of, related to, or connected with our business. For this purpose, no act or failure to act on the part of the employee shall be considered “willful” unless done or omitted by the employee not in good faith and without reasonable belief that his or her action or omission was in our best interest.

Under the terms of the employment agreements of Messrs. Guglielmo and Murphy, “Good Reason” is defined as the occurrence of any one of the following events: (i) any diminution in salary, bonus or benefits as set forth in the respective employment agreement, (ii) a change in the main work location of the respective employee to a location for Mr. Guglielmo, outside of the greater San Antonio, Texas, metropolitan area and for Mr. Murphy, outside of the greater Tulsa, Oklahoma, metropolitan area, or (iii) the failure of the company to pay any compensation in accordance with the terms in his respective employment agreement.

146

Employment Arrangement with Gary Riley

In connection with Mr. Riley’s appointment as Chief Executive Officer, he entered into an offer letter on August 23, 2011. Mr. Riley resigned from Enovation Controls, LLC on March 31, 2013.

Pursuant to the terms of the offer letter, Mr. Riley’s employment was “at-will” and he was entitled to the following compensation and benefits:

•

An initial annual salary of $500,000;

•

A monthly bonus of $20,833, beginning September 1, 2011 and for the remainder of 2011;

•

Starting in 2012, participation in the Incentive Compensation Plan (OVERDRIVE) at a target bonus opportunity of 15% of his annual base salary;

•

Participation in the Senior Management Incentive Plan with an annual performance bonus opportunity in the amount of 35% of his annual base salary;

•

Participation in the Profits Interest Plan, specifically, an award of 170,000 of Class B Management Interests, subject to the terms and conditions outlined in his individual award agreement;

•

Participation in our employee benefit programs, including medical, dental, vision, and 401(k) plans;

•

An annual automobile allowance of $8,700, an annual physical, a commute allowance for either Mr. Riley or his wife to or from Ft. Wayne, Indiana once per month, and a company-paid house, condominium, or apartment; and

•

$150,000 for relocation assistance.

If we terminated Mr. Riley from the position of Chief Executive Officer other than for “cause,” as defined below, or as a result of a transaction which triggered payout of his Class B Management Interests, he was entitled to (i) continuation of full base pay for 12 months, and (ii) continuation of all company-paid insurance benefits for 12 months or until Mr. Riley accepted a position with another company offering comparable benefits. The term “cause” was defined in Mr. Riley’s offer letter as (i) fraud or misappropriation with respect to our property or business or intentional material damage to our property or business, (ii) willful failure to perform his duties and responsibilities and to carry out his authority, (iii) willful malfeasance or misfeasance or breach of fiduciary duty or representation to us or our stockholders, (iv) willful failure to act in accordance with any specific lawful instructions of Enovation Controls, LLC’s advisory board, or (v) conviction of a felony.

In connection with his employment, Mr. Riley entered into our standard confidentiality and noncompetition agreement, which included customary terms, conditions, and covenants.

Outstanding Equity Awards at Fiscal Year End for 2013

The following table sets forth certain information regarding outstanding equity awards held by each of our named executive officers as of December 31, 2013:


Name	Number of shares or units of stock that have not vested			Market value of shares or units of stock that have not vested⁽³⁾
Patrick W. Cavanagh		8,272	⁽¹⁾⁽⁴⁾	$
		110,320	⁽²⁾⁽⁵⁾	$
Gary Riley		—	⁽⁶⁾		—
Frank W. Murphy III		—			—
Kennon Guglielmo		—			—

(1)	These stock awards reflect Class B Management Interests, which have a threshold value of $160 million. Mr. Cavanagh received these Class B Management Interests when he served on the advisory board of Enovation Controls, LLC in 2011.

147

(2)	These stock awards reflect Class C Management Interests, which have a threshold value of $210 million.

(3)	Based on an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus.

(4)	Of the indicated unvested Class B Management Interests, 2,758 are scheduled to vest on December 30, 2014 and 2,757 are scheduled to vest on December 30, 2015 and December 31, 2016.

(5)	Of the indicated unvested Class C Management Interests, 27,580 vested on January 1, 2014, and the remaining unvested Class C Management Interests are scheduled to vest in installments of 27,580 on each of January 1, 2015, 2016, and 2017.

(6)	In connection with Mr. Riley’s resignation from the company in March 2013, all of his unvested Class B Management Interests were forfeited.

The number of Class B and C Management Interests listed in the Outstanding Equity Awards at Fiscal Year End for 2013 table does not reflect the conversions occurring as part of the Transactions. As described in “The Transactions,” each Class B, C, and D Management Interest, including any of those held by the named executive officers, will be converted into Common Units (with a corresponding equal number of Class B Shares) in connection with this offering in a manner that reflects the percentage of Enovation Controls, LLC currently owned by the Class B, C, and D Management Interest holders, taking into account their current distribution entitlement and the fair market value of Enovation Controls, LLC based on the offering price. A substantial amount of these converted Common Units will be subject to forfeiture at the time of conversion and will vest only if the holder remains employed by us through the applicable period or upon a change in control. The following table lists the number of Common Units into which Mr. Cavanagh’s unvested Class B and C Management Interests will be converted in connection with the Transactions.


Name	Number of Common Units Following Conversion
Patrick W. Cavanagh		⁽¹⁾

(1)	Of the reported amount, Common Units will be vested and Common Units will be unvested.

Following the Transactions, each of the named executive officer’s Common Units will be exchangeable (together with a corresponding number of Class B Shares) for one of our Class A Shares or, at our option, cash equal to the market value of one of our Class A Shares.

Enovation Controls, Inc. 2014 Long-Term Incentive Plan

Introduction

To incentivize management members following the completion of this offering, we anticipate that our board of directors will adopt an omnibus long-term incentive plan for employees, consultants, and directors, which we refer to as the LTIP. Once adopted, our named executive officers will be eligible to participate in the LTIP, which we expect will become effective upon the consummation of this offering. We anticipate that the LTIP will provide for the grant of bonus stock, restricted stock, restricted stock units, stock options, stock appreciation rights, dividend equivalent rights, performance awards, annual incentive awards and other stock-based awards intended to align the interests of key employees (including the named executive officers) with those of our stockholders.

Set forth below is a summary of our current expectations of the material features of the LTIP that we anticipate our board of directors will adopt. The terms and conditions described below remain subject to change unless and until our board of directors adopts the LTIP.

The LTIP – Generally

The LTIP will provide us with the flexibility to make grants of stock options (both incentive stock options or options that do not constitute incentive stock options), restricted stock, restricted stock units, stock appreciation rights, dividend equivalents, performance awards, annual incentive awards, bonus stock awards, or

148

other stock-based awards. Officers and employees of us or our subsidiaries, as well as other individuals who provide services to us or our subsidiaries (including directors), will be eligible to receive awards under the LTIP. The LTIP will expire upon the earliest of (i) its termination by our board of directors, or (ii) the tenth anniversary of the effective date of the LTIP. Shares that may be granted under the LTIP are subject to the availability of shares in the share pool.

Administration of the LTIP

The LTIP will initially be administered by our board of directors or a subcommittee thereof (the “Administrator”). The Administrator will have the authority in its sole discretion, subject to and not inconsistent with the express provisions of the LTIP, to administer the LTIP and to exercise all the powers and authorities either specifically granted to it under the LTIP or necessary or advisable in the administration of the LTIP, including, without limitation, the authority (i) to the extent not inconsistent with the LTIP, prescribe, amend and rescind rules and regulations relating to the LTIP including rules governing its own operations, (ii) make all determinations necessary or advisable in administering the LTIP, (iii) correct any defect, supply any omission and reconcile any inconsistency in the LTIP, (iv) grant awards and determine who will receive awards, when such awards will be granted and the terms of such awards, including setting forth provisions with regard to the termination of a recipient’s employment or service, (v) accelerate the time or times at which an award becomes vested, unrestricted or may be exercised, and (vi) waive or amend any goals, restrictions, or conditions set forth in an award agreement, unless otherwise provided in the award agreement. The determinations of the Administrator will be final, binding and conclusive.

Shares Available for Awards Under the LTIP

We expect the aggregate maximum number of Class A Shares that may be issued under the LTIP will not exceed 4,050,000. Class A Shares that are cancelled, settled in cash, forfeited, withheld, or tendered by the participant to satisfy exercise prices or tax withholding obligations will be available for delivery pursuant to other awards. The Class A Shares delivered pursuant to such awards may be Class A Shares authorized but unissued, authorized and issued and held in our treasury, or otherwise acquired for purposes of the LTIP.

We expect the LTIP to provide that in any single calendar year during the term of the LTIP an employee may not be granted stock options or stock appreciation rights relating to more than 600,000 Class A Shares. The LTIP also includes limits on the number of Class A Shares and the dollar amount that may be granted to any non-employee director during any calendar year. Further, we expect that the following limitations will apply with respect to performance awards granted under the LTIP to the extent the performance awards are intended to qualify as “performance-based compensation” under section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and granted to a “covered employee” as defined under section 162(m) of the Code:

•

The maximum number of Class A Shares that may be subject to performance awards granted to any covered employee during any one calendar year in the term of the LTIP (excluding awards granted in connection with this offering) may not exceed 600,000 shares; and

•

The maximum payment under any performance award denominated in dollars that may be granted to a covered employee during any calendar year will be $5 million for each 12-month period contained in the performance period for such performance award.

We expect that the LTIP will provide that in the event that we declare a special or extraordinary dividend or other extraordinary distribution (whether in the form of cash, Class A Shares, or other property), or we undergo a recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, or other similar corporate transaction or event, the Administrator will adjust, as it deems necessary or appropriate, (i) the number and kind of shares of stock which may thereafter be issued in connection with awards, (ii) the number and kind of shares of stock or other property, including cash, issued or issuable in respect of outstanding awards, (iii) the exercise price, grant price, or purchase price relating to any award, and (iv) the total shares available for issuance under the LTIP and individual award limitations. With

149

respect to awards that are incentive stock options, the foregoing adjustments will be made in accordance with Section 424 of the Code. No such adjustment may cause any award under the LTIP which is or becomes subject to Section 409A of the Code to fail to comply with the requirements of Section 409A of the Code.

Types of LTIP Awards

At the discretion of the Administrator, we expect that awards under the LTIP may be granted in the forms described below. Each award will be evidenced by an award agreement setting forth the specific terms and conditions applicable to the award.

Options. The LTIP will provide for the granting of incentive stock options or options that do not constitute incentive stock options. The Administrator will determine the terms of any stock options granted under the LTIP, including the purchase price and when such options become vested and exercisable. The Administrator will also determine the term of each option (up to a maximum term of 10 years), the time at which an option may be exercised, and the method by which payment of the purchase price may be made.

Stock Appreciation Rights. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our Class A Shares between the date of grant and the exercise date. The Administrator will determine the terms of any stock appreciation rights, including when such rights become vested and exercisable and whether to pay the appreciation in cash, in Class A Shares, or a combination thereof. The term of each stock appreciation right may not exceed 10 years from the date of grant.

Restricted Stock. Pursuant to a grant of restricted stock, Class A Shares may be issued or delivered to participants, subject to certain restrictions on the disposition thereof and certain obligations to forfeit the shares to us as may be determined in the discretion of the Administrator. The restrictions on disposition and the forfeiture restriction for restricted stock may lapse at such times and under such circumstances (including based on achievement of performance goals and/or future service requirements) or in such installments as the Administrator may determine. The recipient may not transfer, assign, or otherwise dispose of the shares until the expiration of the restriction period. However, upon the issuance of Class A Shares pursuant to a restricted stock award, except as otherwise determined by the Administrator, the holder will have all the rights of a holder of our Class A Shares with respect to the shares, including the right to vote the shares and to receive all dividends and other distributions paid with respect to the shares. At the discretion of the Administrator, dividends made on restricted stock may or may not be subjected to the same vesting provisions as the restricted stock, depending on the terms of the award agreement pursuant to which the restricted stock award is granted.

Restricted Stock Units. A restricted stock unit is a notional Class A Share that entitles the grantee to receive a Class A Share upon the vesting of the restricted stock unit or, in the discretion of the Administrator, the cash equivalent to the value of a Class A Share. The Administrator may determine to make grants of restricted stock units under the LTIP to participants containing such terms as it determines. The Administrator will determine the period over which restricted stock units granted to participants will vest. Like restricted stock, restricted stock units may vest over time, pursuant to performance criteria, or based on a combination of service and performance.

Performance and Annual Incentive Awards. For awards granted under the LTIP that are based upon performance criteria specified by the Administrator, the Administrator will establish the maximum number of Class A Shares subject to, or the maximum value of, each performance award and the performance period over which the performance applicable to the award will be measured. As determined by the Administrator, the performance goals applicable to an award may provide for a targeted level or levels of achievement relating to (i) earnings, including one or more of operating income, earnings before or after taxes, earnings before or after interest, depreciation, amortization, adjusted EBITDA, economic earnings, or extraordinary or special items or book value per share (which may exclude nonrecurring items); (ii) earnings (as defined in (i), above) as a percentage of revenues; (iii) pre-tax income, after-tax income or adjusted net income; (iv) earnings per share

150

(basic or diluted); (v) operating profit; (vi) revenue, revenue growth or rate of revenue growth; (vii) return on assets (gross or net), return on investment, return on capital, or return on equity; (viii) returns on sales or revenues; (ix) operating expenses; (x) stock price appreciation; (xi) cash flow, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (xii) implementation or completion of critical projects or processes; (xiii) total stockholder return; (xiv) cumulative earnings per share growth; (xv) operating margin or profit margin; (xvi) cost targets, reductions and savings, productivity and efficiencies; (xvii) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, customer satisfaction, employee satisfaction, human resources management, goals relating to acquisitions, divestitures, joint ventures and/or similar transactions and/or goals relating to budget comparisons; and (xviii) any combination of, or a specified increase or decrease in, any of the foregoing. Such performance goals may be measured on a generally accepted accounting principles (GAAP) or non-GAAP basis, and be based solely by reference to the performance of the company as a whole or any subsidiary, division, business segment or business unit of the company, or any combination thereof or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to a peer group of other comparable companies, or as compared to the performance of a published or special index deemed applicable by the Administrator, including but not limited to, the Standard & Poor’s 500 Stock Index. Performance goals may differ from participant to participant and from award to award. Any of these metrics may be subject to adjustment as provided in the LTIP. Payment of a performance award may be made in cash, Class A Shares, or a combination thereof, as determined by the Administrator. The Administrator may establish a performance pool, which will be an unfunded pool, for purposes of measuring the achievement of a performance goal or goals based on one or more criteria set forth above during the given performance period. The Administrator may specify the amount of a performance pool as a percentage of any of such criteria, a percentage in the excess of a threshold amount, or as another amount which need not be linearly related to such criteria.

Bonus Stock Awards. Bonus stock awards are unrestricted Class A Shares that are subject to such terms and conditions as the Administrator may determine. They need not be subject to performance criteria or objectives or to forfeiture.

Other Stock-Based Awards. The Administrator, in its discretion, may also grant to participants an award denominated or payable in, referenced to, or otherwise based on or related to the value of our Class A Shares. The Administrator, in its discretion, may grant dividend equivalent rights (either tandem to other awards or on a stand-alone basis) that entitle the holder to receive cash, stock, or other awards equal to any dividends made on a specified number of Class A Shares.

Clawback. Any award that is subject to recovery under any law, government regulation, or stock exchange listing requirement will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by us pursuant to any such law, government regulation, or stock exchange listing requirement).

Change in Control

The LTIP will provide that, unless otherwise provided in an award agreement, upon a “change in control” (as defined in the LTIP), each award that is not assumed or substituted in connection with such change in control will (i) become fully vested and exercisable, (ii) the restrictions, payment conditions, and forfeiture conditions applicable to such award will lapse, and (iii) any performance conditions imposed with respect to such award will be deemed to be achieved at target. In addition, upon a change in control the Administrator may, in its discretion, provide that any award be cancelled in exchange for a payment in cash or securities in an amount equal to the (x) excess of the consideration paid per Class A Share in the change in control over the exercise or purchase price (if any) per Class A Share subject to the award, multiplied by (y) the number of Class A Shares covered under the award.

151

Amendment and Termination of the LTIP

Our board of directors will be permitted to terminate the LTIP at any time with respect to any Class A Shares for which awards have not been granted. Our board of directors will also be permitted to alter or amend the LTIP or any part thereof or award thereunder from time to time; provided that no change to the LTIP or such award may be made that would materially impair the rights of a participant without consent of the participant. To the extent any amendment to the LTIP requires stockholder approval pursuant to any applicable federal or state law or regulation or the rule of any stock exchange or automated quotation system on which our Class A Shares may then be listed or quoted, including any increase in any share limitation, such amendment will be subject to the approval of our stockholders.

Form S-8

We intend to file with the SEC a registration statement on Form S-8 covering the Class A Shares issuable under the LTIP.

152

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

We or Enovation Controls, LLC have engaged in the following transactions with our directors, executive officers and holders of more than 5% of our voting securities on an as-exchanged to Class A Share basis, and affiliates of our directors, executive officers and holders of more than 5% of our voting securities on such basis.

Prior to or concurrently with the completion of this offering, we will engage in certain transactions related to this offering. The Common Unitholders, including certain of our other officers and directors, will be party to certain of those transactions. Please see the section entitled “The Transactions” for a more detailed description of such transactions.

Operating Agreement of Enovation Controls, LLC

Reorganization. Immediately prior to this offering, all of the currently outstanding Class A Units and Class B, C, and D Management Interests will be converted into Common Units that are subject to existing vesting requirements. In addition, each holder of a Class B, C, and D Management Interest will receive one Class B Share for each Common Unit it receives in the reorganization, with such Class B Shares subject to the same vesting requirements as the Common Units. We refer to such Common Units that have not yet vested as the Restricted Common Units. As a result of this conversion of membership interests, all of the Common Unitholders will hold the same class of Common Units, except that certain Common Units held by Employee Holders will remain subject to vesting. If any Common Units do not vest and are forfeited, an equal number of Class B Shares will be forfeited.

153

the extent that the previously outstanding Class B, C and D Management Interests were subject to forfeiture at the time of conversion, then the Restricted Common Units issued upon conversion generally also will be subject to forfeiture on the same terms, except that the definition of a change in control that results in a lapse of such forfeiture restrictions will be amended to be consistent with the Enovation Controls, Inc. 2014 Long-Term Incentive Plan, which we refer to as the 2014 Incentive Plan. We do not intend to cause Enovation Controls, LLC to issue profits interests in the future.

Coordination of Enovation Controls, Inc. and Enovation Controls, LLC. At any time we issue a Class A Share for cash, the net proceeds received by us will be promptly transferred to Enovation Controls, LLC, and Enovation Controls, LLC will issue to us one of its Common Units. At any time we issue a Class A Share pursuant to the 2014 Incentive Plan, we will contribute to Enovation Controls, LLC all of the proceeds that we receive (if any) and Enovation Controls, LLC will issue to us one Common Unit having the same restrictions, if any, attached to the Class A Shares issued under the 2014 Incentive Plan. Conversely, if we redeem or repurchase any of our Class A Shares, Enovation Controls, LLC will, immediately prior to our redemption or repurchase, redeem or repurchase an equal number of Common Units held by us, upon the same terms and for the same price, as the Class A Shares are redeemed or repurchased. We can redeem or repurchase Class A Shares only if Enovation Controls, LLC first redeems or repurchases Common Units we hold.

Although we have no current plans to cause Enovation Controls, LLC to issue additional Common Units, our board may determine that it is in our best interests to issue additional Common Units of Enovation Controls, LLC rather than additional Class A Shares. If we elect to have Enovation Controls, LLC issue additional Common Units, we will issue one Class B Share for each newly issued Common Unit. See “Risk Factors—Risks Related to this Offering and Ownership of Our Class A Shares—The future issuance of additional Class A Shares in connection with our incentive plans, acquisitions, or otherwise will dilute all other stockholdings.”

Issuances and Transfer of Common Units. Membership interests in Enovation Controls, LLC may be issued only to persons or entities to which we agree to permit the issuance of such interests in exchange for cash or other consideration, including, if applicable, the services of employees of Enovation Controls, LLC or its affiliates. The Common Units held by the other Common Unitholders may be transferred without our consent only under limited circumstances, including to certain permitted transferees (i.e., an affiliate, family member or estate planning vehicle), and upon exchange for Class A Shares following this offering. A holder of Common Units may not transfer any Common Units to any person unless he transfers an equal number of our Class B Shares to the same transferee.

Exchange Rights. We have reserved for issuance Class A Shares, representing the number of Common Units that will be owned by the Murphy Group, EControls Group and Employee Holders immediately

154

Delivery and Cancellation of Class B Shares. Any holder seeking to exchange Common Units for Class A Shares must also deliver a corresponding number of Class B Shares for cancellation by us.

•

precludes or limits the rights of any member to exercise its exchange rights under the terms of the amended and restated operating agreement of Enovation Controls, LLC;

155

•

requires any member to make a capital contribution;

•

materially increases the obligations of any member under the amended and restated operating agreement of Enovation Controls, LLC; or

•

results in Enovation Controls, LLC being treated as a corporation for tax purposes.

Registration Rights Agreement

Tax Receivable Agreement

The initial purchase of the Common Units will result in an increase in our share of the tax basis of the tangible and intangible assets of Enovation Controls, LLC that otherwise would not have been available. Similarly, subsequent exchanges of Common Units will result in an increase in our share of the tax basis in the tangible and intangible assets of Enovation Controls, LLC, if the amount of any cash and the fair market value of any Class A Shares received for such Common Units exceeds the exchanging Common Unitholder’s allocable portion of the tax basis in the assets of Enovation Controls, LLC. Any such increases in tax basis will, in turn, create incremental tax deductions in the form of additional depreciation and/or amortization deductions that would be available to us to offset our share of the taxable income of Enovation Controls, LLC, and which in turn will reduce the amount of tax that we may otherwise be required to pay in the future. These increases in tax basis

156

may also decrease gains (or increase losses) that would otherwise be allocated to us from Enovation Controls, LLC on future dispositions of certain capital assets to the extent tax basis generated from the basis adjustments is allocated to those capital assets.

157

excess cash payment to the Common Unitholders for a number of years following the initial time of such payment. As a result, in certain circumstances we could make cash payments under the tax receivable agreement to the Common Unitholders in excess of our cash tax savings. A successful challenge to our tax reporting positions could also adversely affect our other tax attributes and could materially increase our tax liabilities.

Stockholders Agreement

158

voting power of our outstanding common stock, certain actions may not be taken without the prior written consent of each Founder Entity owning at least 5% of the outstanding Class A Shares and Class B Shares on a combined basis, including:

•

any sale of all or substantially all of the assets of Enovation Controls, LLC or the Company;

•

the issuance of any debt securities or equity securities by us or by any of our subsidiaries, other than certain issuances in accordance with employee benefit programs;

•

the creation of any new class or series of shares of equity securities that are senior to or on a parity with our Class A Shares and Class B Shares; and

•

Real Estate Leases

Affiliates of Frank W. Murphy III, our Executive Chairman, own property located in Afton, Oklahoma, or the Afton Property, our facilities located in Tulsa, Oklahoma, or the Tulsa Facilities, and our facilities in Rosenberg, Texas, or the Houston Facilities, and lease the Afton Property, Tulsa Facilities, and Houston Facilities to us. We currently pay rent of approximately $4,000 per month for the Afton Property, approximately $60,000 per month for the Tulsa Facilities, and approximately $9,000 per month for the Houston Facilities. During the nine months ended September 30, 2014 and during the fiscal years ended December 31, 2013, 2012 and 2011, we paid aggregate rent in the amount of $655,000, $827,000, $827,000 and $827,000, respectively. The lessor of the Afton Property pays for utilities and property taxes with respect to the Afton Property, and we pay insurance with respect to personal property and fixtures and generally pay maintenance expenses. We pay liability and casualty insurance, real property taxes, utilities, and repair and maintenance expenses with respect to the Tulsa Facilities and the Houston Facilities. The leases for the Tulsa Facilities and the Houston Facilities also provide that base rent will increase every two years to an amount equal to the fair market value of rental amounts of comparable properties in the area of the facilities. The leases provide that if we and the lessors cannot agree on fair market value, the fair market value will be determined by real estate brokers licensed in the state in which the facilities are located. We cannot predict the amount by which the base rent with respect to the Tulsa Facilities and the Houston Facilities will increase in the future, and a substantial increase in the base rent of these facilities could have an adverse effect on our financial condition and results of operations.

We lease two facilities located in San Antonio, Texas, which we refer to as the Crosspoint Facilities and the Farinon Facilities. We lease the Crosspoint Facilities from an affiliate of Kennon Guglielmo, our Chief Technology Officer. We lease the Farinon Facilities from a company jointly owned by Frank W. Murphy III, our Executive Chairman, and Kennon Guglielmo. We determined that the company that owns the Farinon Facilities should be accounted for as a variable interest entity; therefore, the results of that company are consolidated into our results. Rent expense and rental revenue are eliminated upon consolidation. We currently pay rent of approximately $18,000 per month for the Crosspoint Facilities and approximately $60,000 per month for the Farinon Facilities. During the nine months ended September 30, 2014 and during the fiscal years ended December 31, 2013, 2012 and 2011, aggregate rent for the Crosspoint Facilities was approximately $165,000, $220,000, $294,000 and $328,000, respectively. The lease for the Farinon Facilities commenced July 24, 2014. We pay for utilities and real property taxes, and are required to maintain certain insurance coverage under the leases. The lease for the Crosspoint Facilities provides that base rent will increase every two years to an amount equal to the fair market value of rental amounts of comparable properties in the area of the facilities. The Crosspoint Facilities lease provides that if we and the lessors cannot agree on fair market value, the fair market value will be determined by real estate brokers licensed in the state in which the facilities are located. The lease

159

for the Farinon Facilities provides that base rent will increase annually by fixed amounts. One of the Crosspoint Facilities we leased was sold during 2012 and our lease of that building terminated.

Executive Loan Agreement

On September 30, 2009, Enovation Controls, LLC entered into a loan agreement with Kennon Guglielmo, our Chief Technology Officer. Pursuant to the loan agreement, Mr. Guglielmo had the right to request advances in an aggregate amount of up to $2,000,000. The loans were to be repaid in connection with cash distributions from Enovation Controls, LLC to EControls Group (in which Mr. Guglielmo has a significant ownership interest), were secured by Mr. Guglielmo’s ownership interests in EControls Group, bore interest at a rate of 2.8% per annum, and were able to be prepaid without penalty. The largest aggregate amount of principal outstanding from January 1, 2011 to September 30, 2014 was $2,000,000. Mr. Guglielmo paid all the outstanding principal of $2,000,000 and interest incurred since inception of $133,403 on March 31, 2014. All principal and interest for the loans were fully repaid and the loan agreement has been terminated with these payments.

Royalty Agreement

Murphy Group, Inc. is party to a royalty agreement with Frank W. Murphy III, our Executive Chairman, under which Mr. Murphy is entitled to certain royalty payments relating to patented improvements to an adjustable hall effect switch gauge of which he was co-inventor. Royalty payments are calculated based on purchases of certain products using the patented technology and the agreement terminated on March 31, 2014. During the nine month period ended September 30, 2014 and during the fiscal years ended December 31, 2013, 2012 and 2011, royalty expense of approximately $54,000, $24,000, $18,000, and $36,000, respectively, was incurred.

Real Property Appreciation Right

Murphy Industries, LLC, a wholly owned subsidiary of Enovation Controls, LLC, is party to a property appreciation agreement with Murphy Group, an entity controlled by Frank W. Murphy III, our Executive Chairman, and in which Mr. Murphy has significant indirect ownership. Pursuant to the agreement, Murphy Industries, LLC has agreed to pay Murphy Group the fair market value of the real property interests upon certain direct and indirect dispositions of the real property interests. This appreciation right obligation was paid on March 31, 2014 in the amount of $1,368,980 and is no longer our obligation.

Sale of Certain Assets Used to Produce Wire Harnesses

On September 15, 2014, we sold certain assets used to produce wire harnesses, which are components in our system solutions, to a limited liability company of which 75% is owned by Kennon Guglielmo, our Chief Technology Officer, and 25% is owned by Frank W. Murphy III, our Executive Chairman. We sold the assets to the limited liability company for approximately $1.3 million, which we believe approximates the net book value of the assets, and we estimate that the approximate dollar value of the amount of the interest of Messrs. Murphy and Guglielmo in the transaction is $325,000 and $975,000, respectively. The original asset sale agreement was reduced by $0.3 million to exclude certain inventory items. We will continue to include wire harnesses as components of our system sales and we intend to purchase wire harnesses at market prices from the entity owned by Messrs. Guglielmo and Murphy. However, we are under no obligation to purchase wire harnesses from such entity, and we have numerous alternative sources available to provide wire harnesses to meet our system sales commitments. Wire harness purchases from the entity, if any, will be subject to our written policy for the approval of “related person transactions,” including the approval of our audit committee. See “—Procedures for the Approval of Related Party Transactions.”

Transactions with Ningbo Global Sourcing Co., Ltd.

Ningbo Global Sourcing Co., Ltd, which we refer to as Ningbo, provides consulting services to Enovation Controls, LLC and assists in its global sourcing efforts. In addition, Enovation Controls, LLC purchases magnets from Ningbo. Gary Riley, an advisory board member of Enovation Controls, LLC and the former Chief

160

Executive Officer of Enovation Controls, LLC until March 2013, owns Ningbo. For the nine months ended September 30, 2014, and the years ended December 31, 2012 and 2011, Enovation Controls, LLC incurred approximately $12,000, $342,000, and $214,000, respectively, in professional consulting expenses with respect to Ningbo. No similar purchases occurred during the year ended December 31, 2013. During the nine months ended September 30, 2014 and during the years ended December 31, 2013, 2012 and 2011, Enovation Controls, LLC purchased approximately $741,000, $1,677,000, $1,856,000 and $0, respectively, of magnets from Ningbo.

Procedures for the Approval of Related Party Transactions

Prior to the completion of this offering, we have not maintained a written policy for the approval of “related person transactions” (as defined below). Our board of directors will adopt a policy regarding the approval of any “related person transaction,” which is any transaction or series of transactions in which we are or are to be a participant, the amount involved exceeds $120,000, and a “related person” (as defined under SEC rules) has a direct or indirect material interest. Under the policy, a related person will need to promptly disclose to our Chief Financial Officer any proposed related person transaction and all material facts about the transaction. Our Chief Financial Officer will then assess and promptly communicate that information to the audit committee of our board of directors. The audit committee will consider all relevant facts and circumstances including: (i) the related person’s relationship to us; (ii) the economic and non-economic terms of the transaction; (iii) the nature of the related person’s direct or indirect interest in the transaction; (iv) the benefits of the transaction to us; (v) the importance of the transaction to the related person and to us; (vi) a summary of the availability of other sources of comparable products or services, if applicable; (vii) whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party; and (viii) any other matters that the audit committee deems appropriate under the circumstances or is required to consider in accordance with applicable law. The audit committee will then decide, using its business judgment, whether or not to approve such proposed transaction and will approve only those proposed transactions that the audit committee believes are fair to us and reasonable in light of the circumstances. If we become aware of an existing related person transaction that has not been pre-approved under this policy, the transaction will be referred to the audit committee which will consider all relevant facts and circumstances as described above and will evaluate, using its business judgment, all options available, including ratification, revision, or termination of such transaction. Our policy will require any director who may be interested in a related person transaction to recuse himself or herself from any consideration of such related person transaction.

161

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of regarding the beneficial ownership of our Class A Shares and Class B Shares and the Common Units of Enovation Controls, LLC for:

•

each person known to us to be the beneficial owner of more than 5% of our voting securities;

•

each of our named executive officers;

•

each of our directors and director nominees; and

•

all of our executive officers and directors as a group.

Enovation Controls, Inc. S-1/A