On April 20, 2021, the Company’s Dura-Line business group paused shipment and sales of small diameter (i.e., 1.5 inch and smaller) natural gas distribution (“NGD”) pipe sold by Dura-Line for use primarily in the United States, in order to investigate a potential quality issue. This issue does not impact Dura-Line’s Datacom conduit products.
Dura-Line has determined that affected NGD pipe had short, localized segments where the pipe walls were thinned below specification. Dura-Line believes the issue occurred intermittently and impacted only a portion of the small diameter NGD pipe produced by Dura-Line. Dura-Line and its advisers are conducting a thorough analysis of the issue (including the population of affected small diameter NGD pipe, the impact on such pipe’s expected useful life, and whether the quality issue is limited to a specific plant or line). That analysis is ongoing. As part of that analysis, Dura-Line has concluded that the issue would impair the performance of affected pipe if the pipe is subjected to axial loading. Based on Dura-Line’s analysis to date, it believes it is highly unlikely that any possibly affected pipe poses a risk of a near-term performance issue.
Dura-Line has informed the relevant customers and regulators and will continue to communicate and collaborate closely with potentially affected parties and others as appropriate and necessary. Dura-Line has resumed shipping and sale of small diameter NGD pipe at its plant in Erwin, Tennessee with enhanced monitoring, production, and quality processes. Dura-Line is allowing its direct and indirect customers to return potentially impacted pipe in exchange for a refund. Dura-Line has received demands for compensation from certain end users for removing and replacing potentially impacted installed pipe. Dura-Line anticipates receiving additional demands for compensation in the future from customers and end users of its small diameter NGD pipe which may result in litigation and could give rise to potential material liabilities.
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