MCA to Take $35-Million Charge in Quarter

MCA Inc. said Tuesday that it was taking a $35-million charge against its second-quarter earnings, partly because of heavy returns of a toy gun that shoots paint.

Harold Haas, MCA chief financial officer, declined to say whether the after-tax charge would wipe out MCA’s profit for the quarter that ended in June. Last year, MCA earned $39.3 million in the second quarter.

MCA said the charge resulted from a huge writedown on the company’s inventory of Gotcha! guns and a writedown of its investment in Coleco, the troubled maker of Cabbage Patch dolls. Haas said that MCA wrote down its Coleco investment to about $5.5 million from $20 million.

Haas said that MCA wrote down the Gotcha! gun inventory to “essentially zero.” Many of the $30 toy guns were returned to toy stores after customers complained the guns didn’t shoot properly.

According to one retailer, customers said the paint pellets often got stuck inside the gun and didn’t fire. Additionally, customers said the guns didn’t shoot far enough. MCA said its LJN Toy unit no longer makes the toy gun.

MCA said that without the after-tax charge, LJN would have broken even in the second quarter. The Los Angeles entertainment company said it expects LJN to be profitable for the rest of the year, and that LJN’s second half results will be “better than last year’s performance.”

The video games LJN markets for the popular Nintendo video game system--including a game based on Gotcha! gun--are “enjoying very favorable acceptance,” MCA said.

Last year, MCA earned $137.25 million on revenue of $2.58 billion. Its LJN unit had operating losses of $37.3 million on $110.51 million in sales.