Yum Brands Posts 13% Drop in Earnings

Yum Brands Inc., the operator of the Taco Bell, KFC and Pizza Hut fast-food chains, said second-quarter earnings fell 13% because it lost a lawsuit over who created a talking dog used in Taco Bell commercials.

Net income fell to $122 million, or 40 cents a share, from $140 million, or 45 cents, a year earlier, the Louisville, Ky.-based company said. Sales rose 9.6% to $1.94 billion.

In June, Yum was ordered to pay $30.2 million to two Michigan men who sued the company, saying they created the talking Chihuahua. Yum took a $35-million charge as a result of the judgment.

Excluding the legal expenses, Yum said it earned 48 cents a share in the quarter. On that basis, the company had been expected to earn 46 cents, the average forecast of analysts surveyed by Thomson First Call.

Shares of Yum fell 70 cents to $29.65 on the NYSE before the earnings announcement.