Procter & Gamble Co. said yesterday it is establishing a $75 million reserve to cover potential financial losses following suspension of sales of its Rely tampon product.
Edward G. Harness, P&G's chairman, announced at the company's annual meeting that the full $75 million would be charged against company earnings for the three months ended Sept. 30.
"We want to put the financial impact of the Rely problem behind us rather than leaving a financial cloud over the heads of either the decision-makers in the business or our shareholders," he said.
The $75 million "is our carefully constructed estimate of the impact on the company if our Rely tampon product can't be returned to the marketplace," he added.
P&G ordered Rely withdrawn from stores last month after studies by the Center for Disease Control showed a link between use of Rely and toxic shock syndrome, a mysterious ailment that has killed at least 40 persons since 1975, most of them young women who used tampons. The company also has been directed by the Food and Drug Administration to conduct an extensive advertising campaign to warn women against the use of the product.
P&G expects to announce earnings from the September quarter within a few weeks. Operating earnings prior tothe $75 million charge will be at record levels, Harness said. During the previous quarter ended June 30, P&G earned $114.3 million on sales of $2.3 billion.
The company did not spell out how the $75 million might be allocated, although a P&G spokesman said it would cover refunds to consumers, losses on inventoryand fixed assets and some provision against claims from lawsuits against the company by Rely users. A number of such suits have been filed since last month, one of them a class-action suit brought by two Sacremento, Calif., women who claim they suffered from toxic shock syndrome and seek to recover all the revenue P&G has received on Rely. Yesterday United Press International reported a $3 million class action suit filed in New York on behalf of Arline Wilder who claims she is suffering from "shock, toxcity and gross infection" because she used Rely tampons this summer.
Harness repeated P&G's position that there is nothing wrong with Rely. The company knows of "no medical or scientific evidence that Rely is in any way defective or that any of its ingredients are harmful" or contribute to the development of toxic shock syndrome.
In another development, the president of the American Medical Association, Dr. Robert Hunter, said that in his view researchers have not yet shown conclusively that tampon use causes toxic shock syndrome. "It's difficult to confirm cases," Hunter told the Associated Press. "Symptoms could be due to many things," said the Washington State family physician. He said he has advised his women patients to change tampons more frequently.
The Center for Disease Control is continuing to investigate the components of Rely and other tampon products, searching for possible connections to the disease, which causes a sudden drop in blood pressure, fever, nausea and vomiting. The CDC has not found a connection yet, a spokesman said. Although the disease has occurred primarily in young women, a few men also have contracted it. Toxic shock syndrome is believed to be caused by staphylococcus aureus, an infectious bacteria that is found on the skin of men and women.