Landrys Restaurants (LNY) 10-Q 2007 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007.

Commission file number 000-22150

LANDRY’S RESTAURANTS, INC.

(Exact name of the registrant as specified in its charter)

DELAWARE

(State or other jurisdiction of

incorporation of organization)

76-0405386

(I.R.S. Employer

Identification No.)

1510 West Loop South, Houston, TX 77027

(Address of principal executive offices)

(713) 850-1010

(Registrants telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

AS OF NOVEMBER 5, 2007 THERE WERE

16,146,530 SHARES OF $0.01 PAR VALUE

COMMON STOCK OUTSTANDING

INDEX

		Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets at September 30, 2007 (unaudited) and December 31, 2006	3
	Condensed Unaudited Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2007 and 2006	4
	Condensed Unaudited Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2007	5
	Condensed Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006	6
	Notes to Condensed Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 4.	Submission of Matters to a Vote of Security Holders	32
Item 6.	Exhibits	32
Signatures		33

LANDRY’S RESTAURANTS, INC.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

The accompanying condensed unaudited consolidated financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in our opinion, all adjustments (consisting only of normal recurring entries) necessary for a fair presentation of our results of operations, financial position and changes therein for the periods presented have been included.

The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and related notes to financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Operating results for the nine months ended September 30, 2007 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending December 31, 2007.

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws. Forward-looking statements may include the words “may,” “will,” “plans,” “believes,” “estimates,” “expects,” “intends” and other similar expressions. Our forward-looking statements are subject to risks and uncertainty, including, without limitation, our ability to continue our expansion strategy, our ability to make projected capital expenditures, as well as general market conditions, competition, and pricing. Forward-looking statements include statements regarding:

• potential acquisitions of other restaurants, gaming operations and lines of businesses in other sectors of the hospitality and entertainment industries;

• future capital expenditures, including the amount and nature thereof;

• potential divestitures of restaurants, restaurant concepts and other operations or lines of business,

• business strategy and measures to implement such strategy;

• competitive strengths;

• goals;

• expansion and growth of our business and operations;

• future commodity prices;

• availability of food products, materials and employees;

• consumer perceptions of food safety;

• changes in local, regional and national economic conditions;

• the effectiveness of our marketing efforts;

• changing demographics surrounding our restaurants, hotels and casinos;

• the effect of changes in tax laws;

• actions of regulatory, legislative, executive or judicial decisions at the federal, state or local level with regard to our business and the impact of any such actions;

• our ability to maintain regulatory approvals for our existing businesses and our ability to receive regulatory approval for our new businesses;

• our expectations of the continued availability and cost of capital resources;

• same store sales;

• earnings guidance;

• our ability to obtain long term financing;

• the seasonality of our business;

• weather and acts of God;

• food, labor, fuel and utilities costs;

• plans;

• references to future success; and

• the risks described in “Risk Factors.”

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate, and, therefore, we cannot assure you that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in our forward-looking statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described in Part II under Item 1A. “Risk Factors” and elsewhere in this report. We assume no obligation to modify or revise any forward looking statements to reflect any subsequent events or circumstances arising after the date that the statement was made.

2

LANDRY’S RESTAURANTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2007			December 31, 2006
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	92,687,203		$	31,268,942
Accounts receivable - trade and other, net		15,147,020			26,554,602
Inventories		30,771,956			40,314,151
Deferred taxes		21,996,227			17,044,462
Assets related to discontinued operations		8,110,315			18,819,958
Other current assets		11,266,408			21,623,691
Total current assets		179,979,129			155,625,806
PROPERTY AND EQUIPMENT, net		1,235,836,750			1,207,677,713
GOODWILL		18,527,547			18,527,547
OTHER INTANGIBLE ASSETS, net		39,139,429			39,264,330
OTHER ASSETS, net		49,913,546			43,816,555
Total assets	$	1,523,396,401		$	1,464,911,951
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	69,970,539		$	77,125,839
Accrued liabilities		136,527,049			133,293,224
Income taxes payable		9,181,926			759,891
Current portion of long-term notes and other obligations		255,513			748,122
Liabilities related to discontinued operations		2,945,877			3,132,146
Total current liabilities		218,880,904			215,059,222
LONG-TERM NOTES, NET OF CURRENT PORTION		886,480,087			710,456,197
OTHER LIABILITIES		62,742,119			44,689,069
Total liabilities		1,168,103,110			970,204,488
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common stock, $0.01 par value, 60,000,000 shares authorized, 16,985,986 and 22,132,795 shares issued and outstanding, respectively		169,860			221,328
Additional paid-in capital		232,495,413			331,320,290
Accumulated other comprehensive loss		(7,562,865	)		—
Retained earnings		130,190,883			163,165,845
Total stockholders’ equity		355,293,291			494,707,463
Total liabilities and stockholders’ equity	$	1,523,396,401		$	1,464,911,951

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.

3

LANDRY’S RESTAURANTS, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
REVENUES	$	301,878,112		$	287,209,135		$	896,708,344		$	849,634,871
OPERATING COSTS AND EXPENSES:
Cost of revenues		67,843,191			66,942,201			199,536,225			194,089,225
Labor		99,629,358			93,695,704			288,031,980			274,289,480
Other operating expenses		75,073,838			74,288,593			223,072,310			211,434,170
General and administrative expense		14,403,271			13,557,654			43,911,732			41,396,633
Depreciation and amortization		16,801,430			14,677,468			49,384,447			42,002,404
Asset impairment expense		—			5,225,604			—			5,225,604
Pre-opening expenses		1,112,400			1,798,514			3,286,652			5,050,490
Total operating costs and expenses		274,863,488			270,185,738			807,223,346			773,488,006
OPERATING INCOME		27,014,624			17,023,397			89,484,998			76,146,865
OTHER EXPENSE (INCOME):
Interest expense, net		25,187,357			12,438,479			52,248,522			36,662,827
Other, net		8,408,254			(55,252	)		(3,718,411	)		(1,108,819	)
Total other expense (income)		33,595,611			12,383,227			48,530,111			35,554,008
Income (loss) from continuing operations before income taxes		(6,580,987	)		4,640,170			40,954,887			40,592,857
Provision for income taxes (benefit)		(3,378,618	)		(1,337,232	)		12,758,738			11,033,459
Income (loss) from continuing operations		(3,202,369	)		5,977,402			28,196,149			29,559,398
Loss from discontinued operations, net of taxes		(1,130,291	)		(35,927,075	)		(3,469,920	)		(42,964,127	)
Net income (loss)	$	(4,332,660	)	$	(29,949,673	)	$	24,726,229		$	(13,404,729	)
EARNINGS (LOSS) PER SHARE INFORMATION:
BASIC
Income (loss) from continuing operations	$	(0.18	)	$	0.28		$	1.42		$	1.38
Loss from discontinued operations		(0.07	)		(1.68	)		(0.17	)		(2.01	)
Net income (loss)	$	(0.25	)	$	(1.40	)	$	1.25		$	(0.63	)
Weighted average number of common shares outstanding		17,650,000			21,350,000			19,850,000			21,350,000
DILUTED
Income (loss) from continuing operations	$	(0.18	)	$	0.27		$	1.38		$	1.34
Loss from discontinued operations		(0.07	)		(1.63	)		(0.17	)		(1.95	)
Net income (loss)	$	(0.25	)	$	(1.36	)	$	1.21		$	(0.61	)
Weighted average number of common and common share equivalents outstanding		17,650,000			22,000,000			20,400,000			22,000,000

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.

4

LANDRY’S RESTAURANTS, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

	Common Stock					Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
	Shares		Amount
BALANCE, DECEMBER 31, 2006	22,132,795		$	221,328		$	331,320,290		$	—		$	163,165,845		$	494,707,463
Cumulative effect of adopting FIN 48	—			—			—			—			(982,880	)		(982,880	)
Comprehensive income:
Net income	—			—			—			—			24,726,229			24,726,229
Loss on interest rate swaps, net of tax	—			—			—			(7,562,865	)		—			(7,562,865	)
Total comprehensive income (loss)	—			—			—			—			—			17,163,364
Dividends paid	—			—			—			—			(3,155,350	)		(3,155,350	)
Purchase of common stock held for treasury	(5,478,859	)		(54,788	)		(105,276,133	)		—			(53,562,961	)		(158,893,882	)
Exercise of stock options	228,655			2,286			2,718,577			—			—			2,720,863
Stock based compensation expense	—			—			3,733,713			—			—			3,733,713
Forfeiture of restricted stock	(3,940	)		(39	)		39			—			—			—
Issuance of restricted stock	107,335			1,073			(1,073	)		—			—			—
BALANCE, SEPTEMBER 30, 2007	16,985,986		$	169,860		$	232,495,413		$	(7,562,865	)	$	130,190,883		$	355,293,291

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.

5

LANDRY’S RESTAURANTS, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	24,726,229		$	(13,404,729	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		49,558,053			56,772,277
Asset impairment expense		3,318,295			72,328,297
Gain on disposition of assets		(18,701,269	)		(1,337,506	)
Changes in assets and liabilities, net and other		32,316,129			(4,385,841	)
Total adjustments		66,491,208			123,377,227
Net cash provided by operating activities		91,217,437			109,972,498
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and other		(81,911,630	)		(164,856,007	)
Proceeds from disposition of property and equipment		42,243,949			4,391,896
Purchase of marketable securities		(5,331,308	)		—
Proceeds from the sale of securities		6,609,512			—
Business acquisitions, net of cash acquired		—			(7,860,857	)
Net cash used in investing activities		(38,389,477	)		(168,324,968	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of common stock for treasury		(154,103,310	)		—
Proceeds from exercise of stock options		2,720,863			354,189
Payments of debt and related expenses		(193,153,214	)		(1,424,484	)
Financing proceeds		375,000,000			—
Debt issuance costs		(14,144,375	)		—
Proceeds from credit facility		178,815,778			162,304,898
Payments on credit facility		(183,390,091	)		(115,309,586	)
Dividends paid		(3,155,350	)		(3,286,588	)
Net cash provided by financing activities		8,590,301			42,638,429
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		61,418,261			(15,714,041	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		31,268,942			39,215,562
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	92,687,203		$	23,501,521
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	41,146,618		$	34,476,948
Income taxes	$	895,882		$	10,810,772
Non-cash transaction:
Unsettled treasury stock transactions	$	4,790,572		$	—

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.

6

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We are a national, diversified restaurant, hospitality and entertainment company principally engaged in the ownership and operation of full service, casual dining restaurants, primarily under the names Landry’s Seafood House, The Crab House, Charley’s Crab, The Chart House and Saltgrass Steak House. In addition, we own, operate and license domestic and international rainforest themed restaurants under the trade name Rainforest Cafe, and we own and operate the Golden Nugget Hotels and Casinos in downtown Las Vegas and Laughlin, Nevada.

Discontinued Operations

During 2006 as part of a strategic review of our operations, we initiated a plan to divest certain restaurants, including 136 Joe’s Crab Shack units (See Note 2). The results of operations, assets, and liabilities for all units included in the disposal plan have been reclassified to discontinued operations in the statements of income, balance sheets and segment information for all periods presented.

Principles of Consolidation

The accompanying financial statements include the consolidated accounts of Landry’s Restaurants, Inc., a Delaware holding company, and its wholly and majority owned subsidiaries and partnerships. All significant inter-company accounts and transactions have been eliminated in consolidation.

Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by us without audit, except for the consolidated balance sheet as of December 31, 2006. The financial statements include all adjustments, consisting of normal, recurring adjustments and accruals, which we consider necessary for fair presentation of our financial position and results of operations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. This information is contained in our December 31, 2006, consolidated financial statements filed with the Securities and Exchange Commission on Form 10-K.

Restaurant and hospitality revenues are recognized when the goods and services are delivered. Casino revenues are the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs (“casino front money”) and for chips in the customers possession (“outstanding chip liability”). Revenues are recognized net of certain sales incentives as well as accruals for the cost of points earned in cash back point-loyalty programs. The retail value of accommodations, food and beverage, and other services furnished to hotel-casino guests without charge is deducted from revenue as promotional allowances. Proceeds from the sale of gift cards are deferred and recognized as revenue when redeemed by the holder.

Accounts receivable is comprised primarily of amounts due from our credit card processor, receivables from national storage and distribution companies and casino and hotel receivables. The receivables from national storage and distribution companies arise when certain of our inventory items are conveyed to these companies at cost (including freight and holding charges but without any general overhead costs). These conveyance transactions do not impact the consolidated statements of income as there is no revenue or expense recognized in the financial statements since they are without economic substance other than drayage. We reacquire these items, although not obligated to, when subsequently delivered to the restaurants at cost plus the distribution company’s contractual mark-up. Accounts receivable are reduced to reflect estimated realizable values by an allowance for doubtful accounts based on historical collection experience and specific review of individual accounts. Receivables are written off when they are deemed to be uncollectible.

We account for long-lived assets in accordance with SFAS 144,Accounting for the Impairment or Disposal of Long-lived Assets. Our properties are reviewed for impairment on a property by property basis whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The recoverability of properties that are to be held and used is measured by comparison of the estimated future undiscounted cash flows associated with the asset to the carrying amount of the asset. If such assets are considered to be impaired, an impairment charge is recorded in the amount by which the carrying amount of the assets exceeds their fair value. Properties to be disposed of are reported at the lower of their carrying amount or fair value, reduced for estimated disposal costs, and are included in assets related to discontinued operations.

In June 2006, the FASB ratified the consensus reached on EITF Issue No. 06-03,How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (that is, Gross Versus Net Presentation). The scope of EITF 06-03 covers any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a

7

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

seller and a customer. EITF 06-03 provides that a company may adopt a policy of presenting taxes either gross within revenue or on a net basis. We adopted EITF 06-03 on January 1, 2007 with no impact on our financial position or results of operations. We pay gross receipts tax on liquor sales in certain jurisdictions. Our policy is to present these taxes gross within revenues and expenses. The tax amounts included in revenues and expenses are not significant.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements(SFAS 157), which defines fair value, establishes a framework for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 157 is not expected to have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, that the adoption of SFAS 159 will have on our consolidated financial statements.

2. DISCONTINUED OPERATIONS AND IMPAIRMENT OF LONG LIVED ASSETS

During the third quarter of 2006, as part of a strategic review of our operations, we initiated a plan to divest certain restaurants including 136 Joe’s Crab Shack units. During 2007, several additional locations were added to our disposal plan. The results of operations, assets, and liabilities for all stores included in our disposal plan have been classified as discontinued operations in our statements of income, balance sheets and segment information for all periods presented.

On November 17, 2006, we completed the sale of 120 Joe’s restaurants to JCS Holdings, LLC, an unaffiliated entity for approximately $192.0 million, including the assumption of certain working capital liabilities to be finalized in 2007. In connection with the sale we recorded pre-tax impairment charges and a loss on disposal totaling $49.2 million ($29.8 million after tax). Under the terms of the sale, we are providing to JCS Holdings, LLC transitional support services for a period not expected to exceed twelve months. These services include, among other things, IT and purchasing support, as well as office space. Following cessation of these activities, we do not anticipate any significant continuing involvement with or cash flows from JCS Holdings, LLC.

We also expect to sell the land and improvements belonging to the remaining restaurants in the disposal plan, or abandon those locations, within the next 12 to 15 months.

The results of discontinued operations for the three and nine months ended September 30, 2007 and 2006 were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Revenues	$	996,882		$	92,324,142		$	3,740,750		$	277,035,305
Loss from discontinued operations before income taxes	$	(1,823,050	)	$	(59,334,558	)	$	(5,596,645	)	$	(70,956,444	)
Income tax benefit on discontinued operations		(692,759	)		(23,407,483	)		(2,126,725	)		(27,992,317	)
Loss from discontinued operations	$	(1,130,291	)	$	(35,927,075	)	$	(3,469,920	)	$	(42,964,127	)

8

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In accordance with EITF 87-24 “Allocation of Interest to Discontinued Operations”, interest expense is allocated to discontinued operations based on the ratio of net assets to be discontinued to consolidated net assets. For the three months ended September 30, 2007 and 2006, interest expense related to discontinued operations was $0 and $3.2 million, respectively. For the nine months ended September 30, 2007 and 2006, interest expense related to discontinued operations was $0.1 million and $9.3 million, respectively.

3. ACCRUED LIABILITIES

Accrued liabilities are comprised of the following:

	September 30, 2007		December 31, 2006
Payroll and related costs	$	30,399,745	$	31,489,564
Rent and insurance		29,641,909		29,663,840
Taxes, other than payroll and income taxes		16,467,060		17,257,093
Deferred revenue (gift cards and certificates)		13,771,580		17,374,080
Accrued interest		11,512,018		5,008,244
Casino deposits, outstanding chips and other gaming		8,625,667		9,235,038
Other		26,109,070		23,265,365
	$	136,527,049	$	133,293,224

4. DEBT

On July 24, 2007, we were notified by the Trustee under the Indenture covering our $400.0 million 7.50% Senior Notes (Notes), that as a result of not filing with the SEC and delivering to the Trustee our Form 10-K for the year ended December 31, 2006 within the time frame set forth in the rules and regulations of the SEC, the Trustee, upon direction of a majority of the Note Holders, declared the unpaid principal and interest on the Notes due and payable immediately. On August 29, 2007 we entered into a Stipulation of Settlement with U.S. Bank, National Association, Indenture Trustee under our $400.0 million Senior Notes and certain note holders whereby the previous acceleration of the Senior Notes was rescinded and annulled. In connection with the settlement, we agreed to commence an exchange offering on or before October 1, 2007 to exchange the Senior Notes for Senior Exchange Notes (New Notes) with an interest rate of 9.5%, an option for the Company to redeem the New Notes at 1% above par from October 29, 2007 to February 29, 2009 and an option for the note holders to redeem the New Notes at 1% above par from February 28, 2009 to December 15, 2011, both options requiring at least 30 but not more than 60 days notice. The Exchange Offer was completed on October 31, 2007 with all but $4.3 million of the Senior Notes being exchanged. We also agreed to pay certain fees and costs and dismissed the pending litigation we had previously instituted against the Indenture Trustee and certain note holders. As a result of the exchange, we recorded charges during the third quarter of 2007 of $7.9 million, included in interest expense, for deferred loan costs previously being amortized over the term of the 7.5% notes and $3.0 million, included in other income/expense, related to the payment of a consent fee. In connection with issuing the New Notes, we amended our existing Bank Credit Facility to provide for an accelerated maturity should the New Notes be redeemed by the Note Holders, revised certain financial covenants to reflect the impact of the Exchange Offer and redeemed our outstanding Term Loan balance.

In June 2007, our wholly owned unrestricted subsidiary, Golden Nugget, completed a new $545.0 million credit facility consisting of a $330.0 million first lien term loan, a $50.0 million revolving credit facility, and a $165.0 million second lien term loan. The $330.0 million first lien term loan includes a $120.0 million delayed draw component to finance the expansion at the Golden Nugget Hotel and Casino in Las Vegas, Nevada. The revolving credit facility expires on June 30, 2013 and the first lien term loan matures on June 30, 2014. Both the first lien term loan and the revolving credit facility bear interest at Libor or the bank’s base rate plus a financing spread, 2.0% and 0.75%, respectively, at September 30, 2007. In addition, the credit facility requires a commitment fee on the unfunded portion for both the $50.0 million revolving credit facility and the $120.0 million delayed draw component of the first lien term loan. The second lien term loan matures on December 31, 2014 and bears interest at Libor or the bank’s base rate, plus a financing spread, 3.25% and 2.0%, respectively, at September 30, 2007. The financing spreads and commitment fees for the revolving credit facility increase or decrease depending on the leverage ratio as defined in the credit facility. The first lien term loan requires one percent of the outstanding principal balance due annually to be paid in equal quarterly installments commencing on September 30, 2009 with the balance due on maturity. Principal of the second lien term loan is due at maturity.

9

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Golden Nugget’s subsidiaries have granted liens on substantially all real property and personal property as collateral under the credit facility and are guarantors of the credit facility. The proceeds from the credit facility were used to repay all of the Golden Nugget’s outstanding debt, including its 8.75% senior secured notes due December 2011, plus the outstanding balance of approximately $10.0 million on its former $43.0 million revolving credit facility. In addition, the proceeds were used to pay a dividend to one of our unrestricted subsidiaries of $187.5 million, associated tender premiums of approximately $8.8 million due to the early redemption of the 8.75% senior secured notes due December 2011, plus accrued interest and related transaction fees and expenses.

The 8.75% senior secured notes due December 2011 were assumed with the 2005 acquisition of the Golden Nugget at a fair value of $159.3 million. In May 2007 we announced a cash tender offer for the entire $155.0 million principal amount outstanding under the 8.75% senior secured notes due December 2011. We subsequently received tenders and consents of holders with respect to $149.5 million, or 96.5%, of the principal amount outstanding. The total consideration, excluding accrued and unpaid interest, to be paid for each $1,000 principal amount of Notes validly tendered was $1,059. The total consideration was determined using a yield equal to a fixed spread of 50 basis points plus the bid-side yield to maturity of the 4.25% U.S. Treasury Note due November 30, 2007.

Consistent with our policy to manage our exposure to interest rate risk and in conformity with the requirements of the first and second lien facilities we entered into interest rate swaps for all of the first and second lien borrowings of the Golden Nugget that fix the interest rates at between 5.4% and 5.5%, plus the applicable margin. We have designated $210.0 million of the first lien interest rate swaps and all of the second lien swaps as cash flow hedging transactions as set forth in SFAS 133, as amended. These swaps mirror the terms of the underlying debt and reset using the same index and terms. The remaining interest rate swaps associated with the $120.0 million of first lien borrowings reflecting the delayed draw construction loan have not been designated as hedges and the change in fair market value will be reflected as other income/expense in the consolidated financial statements. A non-cash loss associated with these swaps of approximately $1.6 million is reflected in the quarter ended September 30, 2007.

In December 2004, we entered into a $450.0 million bank credit facility consisting of a $300.0 million revolving credit facility and a $150.0 million term loan. In November 2006, we utilized proceeds from the Joe’s Crab Shack sale to pay down approximately $109.5 million on the term loan, leaving a balance outstanding of approximately $37.8 million, as of December 31, 2006. The term loan was repaid in September 2007. The revolving credit facility matures in December 2009. The revolving credit facility bears interest at Libor or the bank’s base rate plus a financing spread, 1.50% for Libor and 0.50% for base rate borrowings at September 30, 2007. In addition, the revolving credit facility requires a commitment fee on the unfunded portion. The financing spread and commitment fee increases or decreases based on a financial leverage ratio as defined in the credit agreement. We and certain of our 100% owned guarantor subsidiaries granted liens on substantially all real and personal property as security under the bank credit facility.

Concurrent with the $450.0 million bank credit facility, we issued $400.0 million in 7.5% senior notes due December 2014 through a private placement. The notes are general unsecured obligations and require semi-annual interest payments in June and December. On June 16, 2005, we completed an exchange offering whereby substantially all of the senior notes issued under the private placement were exchanged for senior notes registered under the Securities Act of 1933.

Net proceeds from the $450.0 million bank credit facility and the $400.0 million in 7.5% senior notes due December 2014 totaled $536.6 million and were used to repay all outstanding liabilities under the Former Bank Credit Facility and $150.0 million in Senior Notes. These debt repayments resulted in a pre-tax charge of $16.6 million in the fourth quarter of 2004.

In connection with the 7.5% senior notes due December 2014, we entered into two interest swap agreements aggregating $100.0 million notional value with the objective of managing our exposure to interest rate risk. Prior to the agreement to issue New Notes, these interest rate swap agreements qualified as fair value hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” As a result of the Exchange Offer, these swaps are no longer considered effective hedges and the change in their fair value will be recorded in other income/expense. The aggregate estimated fair value of these swaps at September 30, 2007 was a liability of $1.3 million, which is included in other liabilities on our consolidated balance sheet and a corresponding amount has been recognized as other expense in the quarter ended September 30, 2007.

We assumed an $11.4 million, 9.39% non-recourse, long-term mortgage note payable, due May 2010, in connection with an asset purchase in March 2003. Principal and interest payments aggregate $102,000 monthly.

Our debt agreements contain various restrictive covenants including minimum fixed charge, net worth, and financial leverage ratios as well as limitations on dividend payments, capital expenditures and other restricted payments as defined in the agreements.

10

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As of September 30, 2007, our average interest rate was 8.44% and on floating-rate debt was 7.37%, we had approximately $14.3 million in letters of credit outstanding, and our available capacity was $188.7 million.

Long-term debt is comprised of the following:

	September 30, 2007		December 31, 2006
$300.0 million Bank Syndicate Credit Facility, Libor + 1.50% interest only, due December 2009	$	97,000,000	$	71,771,982
$150.0 million Term loan facility, Libor + 1.75%, interest paid quarterly, $97,000 principal paid quarterly, due December 2010		—		37,832,754
$400.0 million Senior Notes, 7.5% interest only, due December 2014		400,000,000		400,000,000
$50.0 million revolving credit facility, Libor + 2.0%, due June 2013		—		—
$330.0 million First Lien Term Loan, Libor +2.0%, 1% of principal paid quarterly beginning September 30, 2009, due June 2014		210,000,000		—
$165.0 million Second Lien Term Loan, Libor +3.25%, interest only, due December 2014		165,000,000		—
Non-recourse long-term note payable, 9.39% interest, principal and interest aggregate $101,762 monthly, due May 2010		10,679,160		10,826,014
Other long-term notes payable with various interest rates, principal and interest paid monthly		56,440		230,047
$155.0 million GN senior secured notes, 8.75% interest only, due December 2011		—		158,391,867
$43.0 million GN senior secured revolving credit facility, Libor + 2.0%, interest only, due January 2009		—		29,802,331
$4.0 million seller note, 7.0%, interest paid monthly, due November 2010		4,000,000		4,000,000
Interest rate swaps		—		(1,650,676	)
Total debt		886,735,600		711,204,319
Less current portion		255,513		748,122
Long-term portion	$	886,480,087	$	710,456,197

11

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

5. EARNINGS PER SHARE

A reconciliation of the amounts used to compute earnings (loss) per share is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Income (loss) from continuing operations	$	(3,202,369	)	$	5,977,402		$	28,196,149		$	29,559,398
Loss from discontinued operations, net of taxes		(1,130,291	)		(35,927,075	)		(3,469,920	)		(42,964,127	)
Net income (loss)	$	(4,332,660	)	$	(29,949,673	)	$	24,726,229		$	(13,404,729	)
Weighted average common shares outstanding—basic		17,650,000			21,350,000			19,850,000			21,350,000
Dilutive common stock equivalents (1):
Stock options		—			620,000			500,000			620,000
Restricted stock		—			30,000			50,000			30,000
Weighted average common and common share equivalents outstanding—diluted		17,650,000			22,000,000			20,400,000			22,000,000
Earnings (loss) per share—basic
Income (loss) from continuing operations	$	(0.18	)	$	0.28		$	1.42		$	1.38
Loss from discontinued operations, net of taxes		(0.07	)		(1.68	)		(0.17	)		(2.01	)
Net income (loss)	$	(0.25	)	$	(1.40	)	$	1.25		$	(0.63	)
Earnings (loss) per share—diluted
Income (loss) from continuing operations	$	(0.18	)	$	0.27		$	1.38		$	1.34
Loss from discontinued operations, net of taxes		(0.07	)		(1.63	)		(0.17	)		(1.95	)
Net income (loss)	$	(0.25	)	$	(1.36	)	$	1.21		$	(0.61	)

(1) Dilutive common stock equivalents, consisting of 465,000 stock options and 60,000 restricted shares, are not included for the three months ended September 30, 2007, as inclusion would be anti-dilutive.

During the nine months ended September 30, 2007 we purchased approximately 5.5 million shares of our common stock to be held in treasury.

6. STOCK-BASED COMPENSATION

In December 2004, the FASB issued SFAS No. 123R,Share-Based Payments. SFAS No. 123R requires the recognition of the cost of employee services received in exchange for awards of equity instruments, such as stock options and restricted stock, based on the fair value of those awards at the date of grant. We adopted SFAS No. 123R effective January 1, 2006 using the modified-prospective method. We have several stock-based employee compensation plans, which are more fully described in our 2006 Annual Report on Form 10-K.

Total stock-based compensation expense, which includes both stock options and restricted stock, totaled $1.1 million and $1.3 million, for the three months ended September 30, 2007 and 2006, respectively, and $3.7 million and $3.3 million for the nine months ended September 30, 2007 and 2006, respectively. Stock-based compensation expense is not reported at the segment level as these amounts are not included in internal measurements of segment operating performance.

During the quarter ended March 31, 2007, we awarded 103,335 shares of restricted stock with an aggregate value at their date of grant of $3.2 million, which primarily vest over a period of ten years. During the three months ended September 30, 2007, we awarded 4,000 shares of restricted stock with an aggregate value at their date of grant of $0.1 million and vest over a period of two years.

7. INCOME TAXES

Effective January 1, 2007, we adopted the provisions of the FASB issued Interpretation No. 48 (FIN 48),Accounting for Uncertainty in Income Taxes. In connection with the adoption of FIN 48, we recognized an increase of approximately $1.0 million to our tax reserves for uncertain positions, which was accounted for as a reduction to retained earnings as of January 1, 2007. As of January 1, 2007, we had approximately $8.4 million of unrecognized tax benefits, including $1.7 million of interest and penalties, which represents the amount of unrecognized tax benefits that, if recognized, would favorably impact our effective income tax rate in future periods. There were no material changes in unrecognized benefits for the period ended September 30, 2007.

12

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. We have substantially concluded all U.S. federal income tax matters for years through 2002. Substantially all material state and local income tax matters have been concluded for years through 2002. The Internal Revenue Service has begun an audit of our consolidated federal income tax returns for the years ended December 31, 2004 and December 31, 2005. There have been no material issues identified to date.

Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

8. COMMITMENTS AND CONTINGENCIES

Building Commitments

As of September 30, 2007, we had future development, land purchases and construction commitments anticipated to be expended within the next twelve months of approximately $4.9 million, including completion of construction on certain new restaurants. In addition, we expect to spend an estimated $81.2 million for the renovation of the Golden Nugget – Las Vegas during the next twelve months.

In connection with our purchase of an 80% interest in T-Rex in February 2006, we committed to spend an estimated aggregate of $48.0 million during 2006, 2007 and 2008 to complete one T-Rex restaurant in Kansas City, Kansas, construct two additional T-Rex restaurants, and also to construct an Asian themed restaurant in Walt Disney World Florida theme parks.

In 2003, we purchased the Flagship Hotel and Pier from the City of Galveston, Texas, subject to an existing lease. Under this agreement, we have committed to spend an additional $15.0 million to transform the hotel and pier into a 19^th century style Inn and entertainment complex complete with rides and carnival type games. The property is currently occupied by a tenant and renovations are not expected to begin until 2009.

Other Commitments

Our casino employees at the Golden Nugget in Las Vegas, Nevada that are members of various unions and are covered by union-sponsored, collective bargained, multi-employer health and welfare and defined benefit pension plans. Under our obligation to these plans, we recorded expenses of $2.4 million and $2.1 million for the three months ended September 30, 2007 and 2006 and $6.8 million and $6.4 million for the nine months ended September 30, 2007 and 2006, respectively. The plans’ sponsors have not provided sufficient information to permit us to determine its share of unfunded vested benefits, if any. However, based on available information, we do not believe that unfunded amounts attributable to our casino operations are material.

We are self-insured for most health care benefits for our non-union casino employees. The liability for claims filed and estimates of claims incurred but not reported is included in “accrued liabilities” in the accompanying consolidated balance sheets.

In connection with certain of our discontinued operations, we remain the guarantor or assignor of a number of leased locations. In the event of future default under any of such leased locations we may be responsible for significant damages to existing landlords which may materially affect our financial condition, operating results and/or cash flows.

We manage and operate the Galveston Island Convention Center in Galveston, Texas. In connection with the Galveston Island Convention Center Management Contract (“Contract”), we agreed to fund operating losses, if any, subject to certain rights of reimbursement. Under the Contract, we have the right to one-half of any profits generated by the operation of the Convention Center.

Litigation and Claims

On April 4, 2006, a purported class action lawsuit was filed against Joe’s Crab Shack—San Diego, Inc. in the Superior Court of California in San Diego by Kyle Pietrzak and others similarly situated. The lawsuit alleges that the defendant violated wage and hour laws, including the failure to pay hourly and overtime wages, failure to provide meal periods and rest periods, failing to provide minimum reporting time pay, failing to compensate employees for required expenses, including the expense to maintain uniforms, and violations of the Unfair Competition Law. In June 2006, the lawsuit was amended to include Kristina Brask as a named plaintiff and named Crab Addison, Inc. and Landry’s Seafood House—Arlington, Inc. as additional defendants. We have reached a tentative settlement agreement which we expect to submit to the court and fully accrued the amount, which is not believed to be material to our financial position. There is no certainty, however, that the settlement agreement, when submitted, will be approved by the court.

13

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On February 18, 2005, and subsequently amended, a purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in San Bernardino by Michael D. Harrison, et. al. Subsequently, on September 20, 2005, another purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in Los Angeles by Dustin Steele, et. al. On January 26, 2006, both lawsuits were consolidated into one action by the state Superior Court in San Bernardino. The lawsuits allege that Rainforest Cafe violated wage and hour laws, including not providing meal and rest breaks, uniform violations and failure to pay overtime. We have reached a tentative settlement agreement which we expect to submit to the court and fully accrued the amount, which is not believed to be material to our financial position. There is no certainty, however, that the settlement agreement, when submitted, will be approved by the court.

On August 21, 2006 and subsequently amended on January 5, 2007, a purported shareholder derivative action entitledAlbert D. Hulliung, derivatively on Behalf of Nominal Defendant Landry’s Restaurants, Inc. was brought against certain members of our Board of Directors and certain of our current and former executive officers in the District Court of Harris County, Texas. The lawsuit alleges breach of fiduciary duties, unjust enrichment and other violations of law relating to the Company’s historical stock option practices. Plaintiff seeks to recover damages in the favor of the Company for damages sustained by the Company, disgorgement of profits, and attorney’s fees and expenses. The Company has formed an independent special committee (the Special Litigation Committee) of the Board of Directors to investigate the allegations and has filed a motion with the court to stay the proceedings pending the outcome of the investigation. The Special Litigation Committee is made up of the same directors and is represented by the same independent counsel that conducted the investigation of the Company’s option granting processes. The Special Litigation Committee has completed its investigation and has recommended to the court that the matter be dismissed. In view of the findings in that investigation, the Company does not expect the results of this litigation to be material.

We are subject to legal proceedings and claims that arise in the ordinary course of business. Management does not believe that the outcome of any of those matters will have a material adverse effect on our financial position, results of operations or cash flows.

14

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

9. SEGMENT INFORMATION

The following table presents certain financial information for continuing operations with respect to our reportable segments:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Revenue:
Restaurant and Hospitality	$	239,176,894		$	235,767,221		$	696,741,126		$	679,349,611
Gaming		62,701,218			51,441,914			199,967,218			170,285,260
Total	$	301,878,112		$	287,209,135		$	896,708,344		$	849,634,871
Unit level profit:
Restaurant and Hospitality	$	46,355,865		$	44,264,859		$	135,556,457		$	132,962,714
Gaming		12,975,860			8,017,778			50,511,372			36,859,282
Total	$	59,331,725		$	52,282,637		$	186,067,829		$	169,821,996
Depreciation, amortization and impairment:
Restaurant and Hospitality	$	12,201,017		$	16,888,964		$	35,890,825		$	38,514,593
Gaming		4,600,413			3,014,108			13,493,622			8,713,415
Total	$	16,801,430		$	19,903,072		$	49,384,447		$	47,228,008
Income (loss) before taxes:
Unit level profit	$	59,331,725		$	52,282,637		$	186,067,829		$	169,821,996
Depreciation, amortization and impairment		16,801,430			19,903,072			49,384,447			47,228,008
General and administrative		14,403,271			13,557,654			43,911,732			41,396,633
Pre-opening expenses		1,112,400			1,798,514			3,286,652			5,050,490
Interest expense, net		25,187,357			12,438,479			52,248,522			36,662,827
Other expenses (income)		8,408,254			(55,252	)		(3,718,411	)		(1,108,819	)
Income (loss) from continuing operations before taxes	$	(6,580,987	)	$	4,640,170		$	40,954,887		$	40,592,857
							September 30, 2007			December 31, 2006
Segment assets:
Restaurant and Hospitality							$	751,355,877		$	756,619,394
Gaming								552,021,333			495,962,913
Corporate and other (1)								220,019,191			212,329,644
							$	1,523,396,401		$	1,464,911,951

(1) Includes intersegment eliminations and assets and liabilities related to discontinued operations

10. SUPPLEMENTAL GUARANTOR INFORMATION

In December 2004, we issued, in a private offering, $400.0 million of 7.5% senior notes due in 2014 (see “Debt”). In June 2005, substantially all of these notes were exchanged for substantially identical notes in an exchange offer registered under the Securities Act of 1933. In August 2007, we agreed to exchange these notes in the fourth quarter of 2007 for 9.5% Senior Exchange notes. These notes are fully and unconditionally guaranteed by us and certain of our 100% owned subsidiaries, “Guarantor Subsidiaries”.

The following condensed consolidating financial statements present separately the financial position, results of operations and cash flows of our Guarantor Subsidiaries and Non-guarantor Subsidiaries on a combined basis with eliminating entries.

15

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Unaudited Consolidating Financial Statements

Balance Sheet

September 30, 2007

	Parent		Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,125,348	$	8,222,604		$	81,339,251		$	—		$	92,687,203
Accounts receivable - trade and other, net		4,942,464		5,987,544			4,217,012			—			15,147,020
Inventories		13,819,806		12,790,585			4,161,565			—			30,771,956
Deferred taxes		18,113,807		—			3,882,420			—			21,996,227
Assets related to discontinued operations		5,638,912		2,471,403			—			—			8,110,315
Other current assets		1,844,092		3,573,028			5,849,288			—			11,266,408
Total current assets		47,484,429		33,045,164			99,449,536			—			179,979,129
PROPERTY AND EQUIPMENT, net		44,056,086		648,156,109			543,624,555			—			1,235,836,750
GOODWILL		—		18,527,547			—			—			18,527,547
OTHER INTANGIBLE ASSETS, net		1,501,733		69,445			37,568,251			—			39,139,429
INVESTMENT IN AND ADVANCES TO SUBSIDIARIES		830,362,413		(151,611,767	)		(198,778,213	)		(479,972,433	)		—
OTHER ASSETS, net		26,956,172		942,765			22,014,609			—			49,913,546
Total assets	$	950,360,833	$	549,129,263		$	503,878,738		$	(479,972,433	)	$	1,523,396,401
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	33,464,348	$	20,692,398		$	15,813,793		$	—		$	69,970,539
Accrued liabilities		32,487,864		65,483,986			38,555,199			—			136,527,049
Income taxes payable		7,874,287		—			1,307,639			—			9,181,926
Current portion of long-term debt and other obligations		56,439		—			199,074			—			255,513
Liabilities related to discontinued operations		—		2,945,877			—			—			2,945,877
Total current liabilities		73,882,938		89,122,261			55,875,705			—			218,880,904
LONG-TERM NOTES, NET OF CURRENT PORTION		497,000,000		—			389,480,087			—			886,480,087
DEFERRED TAXES		—		—			8,332,487			(8,332,487	)		—
OTHER LIABILITIES		24,184,604		12,125,509			26,432,006			—			62,742,119
Total liabilities		595,067,542		101,247,770			480,120,285			(8,332,487	)		1,168,103,110
COMMITMENTS AND CONTINGENCIES
TOTAL STOCKHOLDERS’ EQUITY		355,293,291		447,881,493			23,758,453			(471,639,946	)		355,293,291
Total liabilities and stockholders’ equity	$	950,360,833	$	549,129,263		$	503,878,738		$	(479,972,433	)	$	1,523,396,401

16

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Consolidating Financial Statements

Balance Sheet

December 31, 2006

	Parent		Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—	$	9,982,920		$	23,403,386		$	(2,117,364	)	$	31,268,942
Accounts receivable - trade and other, net		10,071,384		8,200,773			8,282,445			—			26,554,602
Inventories		22,487,193		13,481,691			4,345,267			—			40,314,151
Deferred taxes		15,466,541		—			1,577,921			—			17,044,462
Assets related to discontinued operations		10,100,000		8,719,958			—			—			18,819,958
Other current assets		1,358,868		3,196,450			17,068,373			—			21,623,691
Total current assets		59,483,986		43,581,792			54,677,392			(2,117,364	)		155,625,806
PROPERTY AND EQUIPMENT, net		45,824,759		651,847,672			510,005,282			—			1,207,677,713
GOODWILL		—		18,527,547			—			—			18,527,547
OTHER INTANGIBLE ASSETS, net		1,501,733		103,195			37,659,402			—			39,264,330
INVESTMENT IN AND ADVANCES TO SUBSIDIARIES		952,178,263		(226,316,235	)		(320,929,033	)		(404,932,995	)		—
OTHER ASSETS, net		30,519,067		996,352			12,301,136			—			43,816,555
Total assets	$	1,089,507,808	$	488,740,323		$	293,714,179		$	(407,050,359	)	$	1,464,911,951
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	41,050,233	$	28,577,861		$	7,497,745		$	—		$	77,125,839
Accrued liabilities		29,625,479		65,568,222			38,099,523			—			133,293,224
Income taxes payable		—		—			2,810,811			(2,050,920	)		759,891
Current portion of long-term debt and other obligations		407,317		—			340,805			—			748,122
Liabilities related to discontinued operations		207,571		2,924,575			—			—			3,132,146
Total current liabilities		71,290,600		97,070,658			48,748,884			(2,050,920	)		215,059,222
LONG-TERM NOTES, NET OF CURRENT PORTION		507,635,058		—			202,821,139			—			710,456,197
DEFERRED TAXES		—		—			7,920,788			(7,920,788	)		—
OTHER LIABILITIES		15,874,687		14,164,695			14,649,687			—			44,689,069
Total liabilities		594,800,345		111,235,353			274,140,498			(9,971,708	)		970,204,488
COMMITMENTS AND CONTINGENCIES
TOTAL STOCKHOLDERS’ EQUITY		494,707,463		377,504,970			19,573,681			(397,078,651	)		494,707,463
Total liabilities and stockholders’ equity	$	1,089,507,808	$	488,740,323		$	293,714,179		$	(407,050,359	)	$	1,464,911,951

17

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Income

Three Months Ended September 30, 2007

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Elimination			Consolidated Entity
REVENUES	$	340,437		$	228,706,801		$	72,830,874		$	—		$	301,878,112
OPERATING COSTS AND EXPENSES
Cost of revenues		—			61,951,557			5,891,634			—			67,843,191
Labor		—			69,021,060			30,608,298			—			99,629,358
Other operating expenses		(354,595	)		53,958,182			21,470,251			—			75,073,838
General and administrative expenses		14,403,271			—			—			—			14,403,271
Depreciation and amortization		1,130,309			10,384,957			5,286,164			—			16,801,430
Asset impairment expense		—			—			—			—			—
Preopening expenses		—			694,516			417,884			—			1,112,400
Total operating costs and expenses		15,178,985			196,010,272			63,674,231			—			274,863,488
OPERATING INCOME (LOSS)		(14,838,548	)		32,696,529			9,156,643			—			27,014,624
OTHER EXPENSES (INCOME)
Interest expense, net		17,791,850			—			7,395,507			—			25,187,357
Other, net		6,514,341			4,869			1,889,044			—			8,408,254
		24,306,191			4,869			9,284,551			—			33,595,611
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES		(39,144,739	)		32,691,660			(127,908	)		—			(6,580,987	)
PROVISION (BENEFIT) FOR INCOME TAXES		(14,506,679	)		11,188,086			(60,025	)		—			(3,378,618	)
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER TAXES		(24,638,060	)		21,503,574			(67,883	)		—			(3,202,369	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAXES		—			(1,130,291	)		—			—			(1,130,291	)
EQUITY IN EARNINGS OF SUBSIDIARIES		20,305,400			—			—			(20,305,400	)		—
NET INCOME (LOSS)	$	(4,332,660	)	$	20,373,283		$	(67,883	)	$	(20,305,400	)	$	(4,332,660	)

18

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Income

Three Months Ended September 30, 2006

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries		Eliminations		Consolidated Entity
REVENUES	$	949,217		$	221,571,920		$	64,687,998	$	—	$	287,209,135
OPERATING COSTS AND EXPENSES:
Cost of revenues		—			61,150,312			5,791,889		—		66,942,201
Labor		—			64,635,059			29,060,645		—		93,695,704
Other operating expenses		1,006,273			53,501,841			19,780,479		—		74,288,593
General and administrative expenses		13,557,654			—			—		—		13,557,654
Depreciation and amortization		973,934			9,877,502			3,826,032		—		14,677,468
Asset impairment expense		145,409			5,080,195			—		—		5,225,604
Pre-opening expenses		—			74,103			1,724,411		—		1,798,514
Total operating costs and expenses		15,683,270			194,319,012			60,183,456		—		270,185,738
OPERATING INCOME (LOSS)		(14,734,053	)		27,252,908			4,504,542		—		17,023,397
OTHER EXPENSES (INCOME):
Interest expense, net		9,000,354			(393,207	)		3,831,332		—		12,438,479
Other, net		(370,362	)		22,328			292,782		—		(55,252	)
		8,629,992			(370,879	)		4,124,114		—		12,383,227
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(23,364,045	)		27,623,787			380,428		—		4,640,170
PROVISION (BENEFIT) FOR INCOME TAXES		(10,577,854	)		8,983,703			256,919				(1,337,232	)
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES		(12,786,191	)		18,640,084			123,509		—		5,977,402
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF INCOME TAXES		(5,406,169	)		(30,520,906	)		—		—		(35,927,075	)
EQUITY IN EARNINGS OF SUBSIDIARIES		(11,757,313	)		—			—		11,757,313		—
NET INCOME (LOSS)	$	(29,949,673	)	$	(11,880,822	)	$	123,509	$	11,757,313	$	(29,949,673	)

19

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Income

Nine Months Ended September 30, 2007

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Elimination			Consolidated Entity
REVENUES	$	1,294,830		$	668,482,070		$	226,931,444	$	—		$	896,708,344
OPERATING COSTS AND EXPENSES
Cost of revenues		—			182,413,783			17,122,442		—			199,536,225
Labor		—			199,155,154			88,876,826		—			288,031,980
Other operating expenses		182,164			156,950,208			65,939,938		—			223,072,310
General and administrative expenses		43,911,732			—			—		—			43,911,732
Depreciation and amortization		3,472,357			30,369,350			15,542,740		—			49,384,447
Asset impairment expense		—			—			—		—			—
Preopening expenses		—			2,384,108			902,544		—			3,286,652
Total operating costs and expenses		47,566,253			571,272,603			188,384,490		—			807,223,346
OPERATING INCOME (LOSS)		(46,271,423	)		97,209,467			38,546,954		—			89,484,998
OTHER EXPENSES (INCOME):
Interest expense, net		36,676,731			(506	)		15,572,297		—			52,248,522
Other, net		6,587,691			(15,341,144	)		5,035,042		—			(3,718,411	)
		43,264,422			(15,341,650	)		20,607,339		—			48,530,111
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES		(89,535,845	)		112,551,117			17,939,615		—			40,954,887
PROVISION (BENEFIT) FOR INCOME TAXES		(32,257,118	)		38,823,878			6,191,978		—			12,758,738
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER TAXES		(57,278,727	)		73,727,239			11,747,637		—			28,196,149
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAXES		(119,204	)		(3,350,716	)		—		—			(3,469,920	)
EQUITY IN EARNINGS OF SUBSIDIARIES		82,124,160			—			—		(82,124,160	)		—
NET INCOME (LOSS)	$	24,726,229		$	70,376,523		$	11,747,637	$	(82,124,160	)	$	24,726,229

20

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Income

Nine Months Ended September 30, 2006

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
REVENUES	$	2,872,887		$	647,601,133		$	199,160,851		$	—		$	849,634,871
OPERATING COSTS AND EXPENSES:
Cost of revenues		—			178,593,479			15,495,746			—			194,089,225
Labor		—			190,274,819			84,014,661			—			274,289,480
Other operating expenses		2,265,678			150,470,433			58,698,059			—			211,434,170
General and administrative expenses		41,396,598			181			(146	)		—			41,396,633
Depreciation and amortization		2,707,136			29,126,955			10,168,313			—			42,002,404
Asset impairment expense		145,409			5,080,195			—			—			5,225,604
Pre-opening expenses		—			2,658,156			2,392,334			—			5,050,490
Total operating costs and expenses		46,514,821			556,204,218			170,768,967			—			773,488,006
OPERATING INCOME (LOSS)		(43,641,934	)		91,396,915			28,391,884			—			76,146,865
OTHER EXPENSES (INCOME):
Interest expense, net		26,059,519			(844,378	)		11,447,686			—			36,662,827
Other, net		(770,164	)		(1,281,255	)		942,600			—			(1,108,819	)
		25,289,355			(2,125,633	)		12,390,286			—			35,554,008
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(68,931,289	)		93,522,548			16,001,598			—			40,592,857
PROVISION (BENEFIT) FOR INCOME TAXES		(12,683,034	)		18,460,810			5,255,683			—			11,033,459
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES		(56,248,255	)		75,061,738			10,745,915			—			29,559,398
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF INCOME TAXES		(16,324,519	)		(26,639,608	)		—			—			(42,964,127	)
EQUITY IN EARNINGS OF SUBSIDIARIES		59,168,045			—			—			(59,168,045	)		—
NET INCOME (LOSS)	$	(13,404,729	)	$	48,422,130		$	10,745,915		$	(59,168,045	)	$	(13,404,729	)

21

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Cash Flows

Nine months ended September 30, 2007

	Parent			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated Entity
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	24,726,229		$	70,376,523		$	11,747,637		$	(82,124,160	)	$	24,726,229
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,472,357			30,555,007			15,530,689			—			49,558,053
Asset impairment expense		375,000			2,943,295			—			—			3,318,295
(Gain) loss on disposition of assets		39,402			(15,183,336	)		(3,557,335	)		—			(18,701,269	)
Changes in assets & liabilities, net and other		142,169,117			(81,736,372	)		(112,358,140	)		84,241,524			32,316,129
Total Adjustments		146,055,876			(63,421,406	)		(100,384,786	)		84,241,524			66,491,208
Net cash provided by (used in) operating activities		170,782,105			6,955,117			(88,637,149	)		2,117,364			91,217,437
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and/or transfers		(3,234,319	)		(29,736,471	)		(48,940,840	)		—			(81,911,630	)
Proceeds from disposition of property and equipment		5,227,850			21,021,038			15,995,061			—			42,243,949
Purchase of marketable securities		(5,331,308	)		—			—			—			(5,331,308	)
Sale of marketable securities		6,609,512			—			—			—			6,609,512
Net cash provided by (used in) investing activities		3,271,735			(8,715,433	)		(32,945,779	)		—			(38,389,477	)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of common stock for treasury		(154,103,310	)		—			—			—			(154,103,310	)
Proceeds from exercise of stock options		2,720,863			—			—			—			2,720,863
Payments of debt and related expenses		(37,864,627	)		—			(155,288,587	)		—			(193,153,214	)
Financing proceeds		—			—			375,000,000			—			375,000,000
Debt issuance costs		(3,754,086	)		—			(10,390,289	)		—			(14,144,375	)
Payments on credit facility		(141,771,982	)		—			(41,618,109	)		—			(183,390,091	)
Proceeds from credit facility		167,000,000			—			11,815,778			—			178,815,778
Dividends paid		(3,155,350	)		—			—			—			(3,155,350	)
Net cash provided by (used in) financing activities		(170,928,492	)		—			179,518,793			—			8,590,301
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		3,125,348			(1,760,316	)		57,935,865			2,117,364			61,418,261
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		—			9,982,920			23,403,386			(2,117,364	)		31,268,942
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,125,348		$	8,222,604		$	81,339,251		$	—		$	92,687,203

22

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Cash Flows

Nine Months Ended September 30, 2006

	Parent			Guarantor Subsidiaries			Non Guarantor Subsidiaries			Eliminations			Consolidated Entity
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(13,404,729	)	$	48,422,130		$	10,745,915		$	(59,168,045	)	$	(13,404,729	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,705,068			43,915,913			10,151,296			—			56,772,277
Asset Impairment expense		2,290,352			70,037,945			—			—			72,328,297
Gain on disposition of assets		(1,337,506	)		—			—			—			(1,337,506	)
Changes in assets & liabilities, net and other		(66,581,016	)		(100,600,018	)		103,627,148			59,168,045			(4,385,841	)
Total Adjustments		(62,923,102	)		13,353,840			113,778,444			59,168,045			123,377,227
Net cash provided (used) by operating activities		(76,327,831	)		61,775,970			124,524,359			—			109,972,498
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and/or transfers		16,233,180			(64,886,264	)		(116,202,923	)		—			(164,856,007	)
Proceeds from disposition of property and equipment		—			1,450,000			2,941,896			—			4,391,896
Purchase of marketable securities		—			—			—			—			—
Sale of marketable securities		—			—			—			—			—
Business acquisitions and related payments, net of cash acquired		—			—			(7,860,857	)		—			(7,860,857	)
Net cash provided (used) in investing activities		16,233,180			(63,436,264	)		(121,121,884	)		—			(168,324,968	)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of common stock for treasury		—			—			—			—			—
Proceeds from exercise of stock options		354,189			—			—			—			354,189
Payments of debt and related expenses		(1,163,929	)		—			(260,555	)		—			(1,424,484	)
Payments on credit facility		(68,000,000	)		—			(47,309,586	)		—			(115,309,586	)
Proceeds from credit facility		121,000,000			—			41,304,898			—			162,304,898
Dividends paid		(3,286,588	)		—			—			—			(3,286,588	)
Net cash provided (used) in financing activities		48,903,672			—			(6,265,243	)		—			42,638,429
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(11,190,979	)		(1,660,294	)		(2,862,768	)		—			(15,714,041	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		3,655,367			10,372,914			25,187,281			—			39,215,562
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	(7,535,612	)	$	8,712,620		$	22,324,513		$	—		$	23,501,521

23

LANDRY’S RESTAURANTS, INC.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following presents an analysis of the results and financial condition of our continuing operations. Except where indicated otherwise, the results of discontinued operations have been excluded from this discussion.

We are a national, diversified restaurant, hospitality and entertainment company principally engaged in the ownership and operation of full service, casual dining restaurants. As of September 30, 2007, we operated 179 such restaurants as well as several limited menu restaurants and other properties, including the Golden Nugget Hotels and Casinos (“Golden Nugget”) in Las Vegas and Laughlin, Nevada. We are in the business of operating restaurants and other hospitality and entertainment activities.

During 2006, as part of a strategic review of our operations, we initiated a plan to divest certain restaurants, including 136 Joe’s Crab Shack units. During 2007, several additional locations were added to our disposal plan. The results of operations for all units included in the disposal plan have been reclassified to discontinued operations in the statements of income for all periods presented.

On November 17, 2006, we completed the sale of 120 Joe’s Crab Shack restaurants to JCS Holdings, LLC, an unaffiliated entity for approximately $192.0 million, including the assumption of certain working capital liabilities. Under the terms of the sale, we are providing JCS Holdings, LLC transitional support services for a period not expected to exceed twelve months. These services include, among other things, IT and purchasing support, as well as office space. Following cessation of these activities, we do not anticipate any significant continuing involvement with or cash flows from JCS Holdings, LLC.

The restaurant and gaming industries are intensely competitive and affected by changes in consumer tastes and by national, regional, and local economic conditions and demographic trends. The performance of individual restaurants or casinos may be affected by factors such as: traffic patterns, demographic considerations, marketing, weather conditions, and the type, number, and location of competing operations.

We have many well established competitors with greater financial resources, larger marketing and advertising budgets, and longer histories of operation than ours, including competitors already established in regions where we are planning to expand, as well as competitors planning to expand in the same regions. We face significant competition from other casinos in the markets in which we operate and from other mid-priced, full-service, casual dining restaurants offering or promoting seafood and other types and varieties of cuisine. Our competitors include national, regional, and local chains as well as local owner-operated restaurants. We also compete with other restaurants and retail establishments for restaurant sites. We intend to pursue an acquisition strategy should we be successful in obtaining permanent financing to replace our Senior Notes.

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws. Forward-looking statements may include the words “may,” “will,” “plans,” “believes,” “estimates,” “expects,” “intends” and other similar expressions. Our forward-looking statements are subject to risks and uncertainty, including, without limitation, our ability to continue our expansion strategy, our ability to make projected capital expenditures, as well as general market conditions, competition, and pricing. Forward-looking statements include statements regarding: potential acquisitions of other restaurants, gaming operations and lines of businesses in other sectors of the hospitality and entertainment industries; future capital expenditures, including the amount and nature thereof; potential divestitures of restaurants, restaurant concepts and other operations or lines of business, business strategy and measures to implement such strategy; competitive strengths; goals; expansion and growth of our business and operations; future commodity prices; availability of food products, materials and employees; consumer perceptions of food safety; changes in local, regional and national economic conditions; the effectiveness of our marketing efforts; changing demographics surrounding our restaurants, hotels and casinos; the effect of changes in tax laws; actions of regulatory, legislative, executive or judicial decisions at the federal, state or local level with regard to our business and the impact of any such actions; our ability to maintain regulatory approvals for our existing businesses and our ability to receive regulatory approval for our new businesses; our expectations of the continued availability and cost of capital resources; same store sales; earnings guidance; our ability to obtain long term financing; the seasonality of our business; weather and acts of God; food, labor, fuel and utilities costs; plans; references to future success; the risks described in “Risk Factors.”

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate, and, therefore, we cannot assure you that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in our forward-looking statements, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described in Part II under Item 1A. “Risk Factors” and elsewhere in this report, or in the documents incorporated by reference herein. We assume no obligation to modify or revise any forward looking statements to reflect any subsequent events or circumstances arising after the date that the statement was made.

24

Results of Operations

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
Revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenues	22.5	%	23.3	%	22.3	%	22.8	%
Labor	33.0	%	32.6	%	32.1	%	32.3	%
Other operating expenses (1)	24.9	%	25.9	%	24.9	%	24.9	%
Unit Level Profit (1)	19.6	%	18.2	%	20.7	%	20.0	%

(1) Excludes depreciation, amortization, asset impairment, general and administrative and pre-opening expenses.

Three Months Ended September 30, 2007 Compared to the Three Months Ended September 30, 2006

Revenues increased $14,668,977, or 5.1%, for the three months ended September 30, 2007 compared to the three months ended September 30, 2006.

Restaurant and hospitality revenues increased $3,409,673, or 1.4%, as a result of the following approximate amounts: new restaurant openings—increase $6.5 million; same store sales (restaurants open all of the third quarter of 2007 and 2006) – increase $0.4 million; restaurant closings-decrease $2.3 million; and the remainder of the difference is attributable to the change in sales for stores not open a full comparable period. The total number of units open as of September 30, 2007 and 2006 were 179 and 183, respectively.

Gaming revenues increased $11,259,304, or 21.9%, for the three months ended September 30, 2007 compared to the three months ended September 30, 2006, as a result of improved table games activity and slot hold and win as well increased hotel occupancy, average room rates, and food and beverage sales compared with the prior year period.

Cost of revenues increased $900,990, or 1.3%, in the three months ended September 30, 2007, compared to the same period in the prior year primarily as a result of increased revenues. Cost of revenues as a percentage of revenues for the three months ended September 30, 2007 decreased slightly to 22.5% from 23.3% in 2006 as gaming revenues, which are generally derived from lower cost of revenues, made up a larger portion of total revenues.

Labor expense increased $5,933,654, or 6.3%, for the three months ended September 30, 2007, compared to the three months ended September 30, 2006, principally as a result of increased revenues. Labor expenses as a percentage of revenues for the three months ended September 30, 2007 increased to 33.0% from 32.6% in 2006. Labor increased as a percentage of revenues primarily due to higher restaurant labor costs.

Other operating expenses increased $785,245, or 1.1%, for the three months ended September 30, 2007, compared to the same period in the prior year, principally as a result of increased revenues. Such expenses decreased as a percentage of revenues to 24.9% in 2007 from 25.9% in 2006 primarily as a result of lower restaurant and hospitality advertising expense.

General and administrative expenses increased $845,617, or 6.2%, for the three months ended September 30, 2007 as compared to the prior year, and increased as a percentage of revenues to 4.8% in 2007 from 4.7% in 2006. This increase is primarily attributable to higher professional fees incurred in connection with our voluntary internal review of our historical stock option granting practices, completed in the third quarter of 2007.

Depreciation and amortization expense increased by $2,123,962, or 14.5%, compared to the same period in the prior year. The increase for 2007 was primarily due to the renovation of the Golden Nugget and the addition of new restaurants and equipment.

Pre-opening expenses were $1,112,400 for the three months ended September 30, 2007 compared to $1,798,514 for the same period in 2006. Pre-opening expenses fluctuate based on both the number and type of openings completed each period.

The increase in net interest expense for the three months ended September 30, 2007, as compared to the prior year, is due to increased debt levels associated with the Golden Nugget refinancing and higher average borrowing rates as compared to the prior year period as well as a $7.9 million charge for deferred loan costs written off as a result of the Senior Note exchange.

Other expense was $8,408,254 for the three months ended September 30, 2007 compared to income of $55,252 for the three months ended September 30, 2006. Other expense in the current period primarily related to expenses associated with exchanging the 7.5% Senior Notes for 9.5% Senior Notes and charges related to interest rate swaps.

25

An income tax benefit of $3,378,618 was recorded for the three months ended September 30, 2007 compared to a benefit of $1,337,232 for the same period in the prior year.

The after tax loss from discontinued operations was $1,130,291 for the three months ended September 30, 2007, primarily related to impairments and other operating charges on assets in the disposal plan. The after tax loss from discontinued operations for the three months ended September 30, 2006 was $35,927,075, which was due largely due to charges taken of $55.8 million relating to asset impairment, lease termination and store closure costs.

Nine Months Ended September 30, 2007 Compared to the Nine Months Ended September 30, 2006

Revenues increased $47,073,473, or 5.5%, for the nine months ended September 30, 2007 compared to the same period in the prior year.

Restaurant and hospitality revenues increased $17,391,515, or 2.6%, as a result of the following approximate amounts: new restaurant openings—increase $27.3 million; same store sales (restaurants open all nine months of 2007 and 2006) – increase $2.2 million; restaurant closings-decrease $8.4 million; and the remainder of the difference is attributable to the change in sales for stores not open a full comparable period. The total number of units open as of September 30, 2007 and 2006 were 179 and 183, respectively.

Gaming revenues increased $29,681,958, or 17.4%, for the nine months ended September 30, 2007 compared with the same period in the prior year as a result of improved table games activity and slot hold and win as well increased hotel occupancy, average room rates, and food and beverage sales.

Cost of revenues increased $5,447,000, or 2.8%, in the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006 primarily as a result of increased revenues. Cost of revenues as a percentage of revenues for the nine months ended September 30, 2007 decreased to 22.3% from 22.8% in 2006, as gaming revenues, which are generally derived from a lower cost of revenues, made up a larger portion of total revenues.

Labor expense increased $13,742,500, or 5.0%, for the nine months ended September 30, 2007, compared to the same period in the prior year, principally as a result of increased revenues. Labor expenses as a percentage of revenues for the nine months ended September 30, 2007 decreased slightly to 32.1% from 32.3% in 2006. Labor decreased as a percentage of revenues primarily due to leverage on increased gaming revenues.

Other operating expenses increased $11,638,140, or 5.5%, for the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006, principally as a result of increased revenues. Such expenses as a percentage of revenues were 24.9% in 2007 and 2006. Higher rent and insurance costs were offset by reduced restaurant and hospitality advertising expenses in 2007 compared to 2006.

General and administrative expenses increased $2,515,099, or 6.1%, for the nine months ended September 30, 2007 as compared to the prior year, while as a percentage of revenues remained stable at 4.9% in 2007 and 2006. The increase is primarily attributable to professional fees incurred in connection with our voluntary internal review of our historical stock option granting practices, completed in the third quarter of 2007. These increases more than offset reductions in corporate overhead associated with the sale of 120 Joe’s Crab Shack restaurants in November 2006.

Depreciation and amortization expense increased by $7,382,043, or 17.6%, for the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006. The increase for 2007 was due to the renovation of the Golden Nugget and the addition of new restaurants and equipment.

Pre-opening expenses were $3,286,652 for the nine months ended September 30, 2007 compared to $5,050,490 for the same period in the prior year. Pre-opening expenses fluctuate based on both the number and type of openings completed each period.

The increase in net interest expense for the nine months ended September 30, 2007, as compared to the prior year, is due to higher average borrowing rates as compared to the prior year period as well as a $7.9 million charge for deferred loan costs previously being amortized over the term of the 7.5% Senior Notes. The 7.5% Senior Notes were exchanged for 9.5% Senior Notes as a result of a settlement with the note holders.

Other income was $3,718,411 for the nine months ended September 30, 2007 compared to $1,108,819 for the nine months ended September 30, 2006. Other income in 2007 primarily relates to gains on the disposition of property in Biloxi, MS and investments held for sale, as well as a $15.1 million gain realized on the sale of a single restaurant location. According to the terms of the sale, we will pay the buyer approximately $2.6 million over the next 30 months in return for continuing to operate the restaurant. These gains were offset by expenses associated with exchanging the 7.5% Senior Notes for 9.5% Senior Notes, charges related to interest rate swaps and call premiums and expenses associated with refinancing the Golden Nugget debt. Other income during the nine months ended September 30, 2006 primarily related to the gain on the sale of a restaurant property.

26

The provision for income taxes increased due to the change in our pre-tax income during the periods and an increase in our effective tax rate of 31.2% for the nine months ended September 30, 2007 compared to 27.2% for the same period in the prior year.

The after tax loss from discontinued operations was $3,469,920 for the nine months ended September 30, 2007, primarily related to impairment and other operating charges on assets in the disposal plan. The after tax loss from discontinued operations for the nine months ended September 30, 2006 was $42,964,127, which was due largely due to charges taken of $55.8 million relating to asset impairment, lease termination and store closure costs.

Liquidity and Capital Resources

On July 24, 2007, we were notified by the Trustee under the Indenture covering our $400.0 million 7.50% Senior Notes (Notes), that as a result of not filing with the SEC and delivering to the Trustee our Form 10-K for the year ended December 31, 2006 within the time frame set forth in the rules and regulations of the SEC, the Trustee, upon direction of a majority of the Note Holders, declared the unpaid principal and interest on the Notes due and payable immediately. On August 29, 2007 we entered into a Stipulation of Settlement with U.S. Bank, National Association, Indenture Trustee under our $400.0 million Senior Notes and certain note holders whereby the previous acceleration of the Senior Notes was rescinded and annulled. In connection with the settlement, we agreed to commence an exchange offering on or before October 1, 2007 to exchange the Senior Notes for Senior Exchange Notes (New Notes) with an interest rate of 9.5%, an option for the Company to redeem the New Notes at 1% above par from October 29, 2007 to February 29, 2009 and an option for the note holders to redeem the New Notes at 1% above par from February 28, 2009 to December 15, 2011, both options requiring at least 30 but not more than 60 days notice. The Exchange Offer was completed on October 31, 2007 with all but $4.3 million of the Senior Notes being exchanged. We also agreed to pay certain fees and costs and dismissed the pending litigation we had previously instituted against the Indenture Trustee and certain note holders. As a result of the exchange, we recorded charges during the third quarter of 2007 of $7.9 million, included in interest expense, for deferred loan costs previously being amortized over the term of the 7.5% notes and $3.0 million, included in other income/expense, related to the payment of a consent fee. In connection with issuing the New Notes, we amended our existing Bank Credit Facility to provide for an accelerated maturity should the New Notes be redeemed by the Note Holders, revised certain financial covenants to reflect the impact of the Exchange Offer and redeemed our outstanding Term Loan balance. As a result of the settlement, we anticipate refinancing the New Notes in 2008. Given the uncertainty and volatility in the credit markets, there is no assurance we will obtain new financing on favorable terms.

On June 14, 2007, our wholly owned unrestricted subsidiary, Golden Nugget, Inc. (“Golden Nugget”), completed a new $545.0 million Credit Facility consisting of a $330.0 million first lien term loan which includes a $120.0 million delayed draw component to finance the construction expansion at the Golden Nugget Hotel and Casino in Las Vegas, Nevada, plus a $50.0 million revolving credit facility, and a $165.0 million second lien term loan with terms ranging from 6 to 7 years. The first lien term loan bears interest at Libor or the Bank’s base rate, plus a financing spread, 2.0% for Libor and 0.75% for base rate borrowings. In addition, the Credit Facility requires a commitment fee on the unfunded portion for both the $50.0 million revolving credit facility and the $120.0 million delayed draw term loan. The financing spread and commitment fee for the revolving credit facility increases or decreases depending on the leverage ratio as defined in the Credit Facility. The second lien term facility bears interest at Libor or the Bank’s base rate, plus a financing spread, 3.25% for Libor and 2.0% for base rate borrowings. The second lien term facility matures on December 31, 2014. Both the first and second lien term loans are subject to customary banking covenants and conditions, including minimum EBITDA, interest charge and financial leverage ratios, limitations on acquisitions, debt, investments and other restricted payments as defined in the Credit Facility, plus certain restrictions and conditions to access funds under the $120.0 million delayed draw term loan to finance the construction expansion. The Credit Facility provides for the payment of a one-time dividend of up to $187.5 million to the Company or a designated subsidiary of the Company representing repayment of amounts previously expended on the Golden Nugget. The $187.5 million will be available for acquisitions, debt repayment, stock repurchases and general corporate purposes.

The proceeds from the new $545.0 million Credit Facility were used to repay all of the Golden Nugget’s outstanding debt, including its 8.75% Senior Secured Notes due 2011 totaling $155.0 million, plus the outstanding balance of approximately $10.0 million on its former $43.0 million revolving credit facility with Wells Fargo Foothill, Inc. In addition, the proceeds were used to pay associated tender premiums of approximately $8.8 million due to the early redemption of the Senior Secured Notes, plus accrued interest and related transaction fees and expenses. We expect to incur higher interest expense as a result of the increased borrowings associated with the Golden Nugget financing.

Consistent with our policy to manage our exposure to interest rate risk and in conformity with the requirements of the first and second lien facilities, we entered into interest rate swaps for all of the first and second lien borrowings of the Golden Nugget that fix the interest rates at between 5.4% and 5.5%, plus the applicable margin. We have designated $210.0 million of the first lien interest rate swaps and all of the second lien swaps as cash flow hedging transactions as set forth in SFAS 133. These swaps mirror the terms of the underlying debt and reset using the same index and terms. The remaining interest rate swaps associated with the $120.0 million of first lien borrowings reflecting the delayed draw construction loan have not been designated as hedges and the change in fair market value will be reflected as other income/expense in the consolidated financial statements. Accordingly, a non-cash loss of approximately $1.6 million is reflected in the quarter ended September 30, 2007.

On September 27, 2005, we acquired all of the capital stock of Golden Nugget for $163.0 million in cash, assumption of $155.0 million in 8.75% senior secured notes due 2011, assumption of $27.0 million in bank debt due 2009 and assumption of working capital, including $27.5 million in cash. The purchase price was funded from cash on hand and our revolving credit facility.

27

In December 2004, we refinanced our then existing revolving credit facility and existing senior notes by entering into a new five year $300.0 million Bank Credit Facility and a six year $150.0 million Term Loan. In November 2006 we utilized proceeds from the Joe’s sale to pay down approximately $109.5 million on the term loan, leaving a balance outstanding of approximately $37.8 million as of December 31, 2006. We repaid the remaining balance of the Term Loan in the third quarter of 2007. The Bank Credit Facility matures in December 2009. Interest on the Bank Credit Facility is payable monthly or quarterly at Libor or the bank’s base rate plus a financing spread. The financing spread under the Bank Credit Facility at September 30, 2007 was 1.5% and 0.5% for Libor and base rate borrowings, respectively. As of September 30, 2007, we had approximately $188.7 million available under the existing revolving credit facility for expansion and working capital purposes.

Concurrent with the closing of the Bank Credit Facility and Term Loan in December 2004, we also issued $400.0 million in senior notes through a private placement offering. The senior notes are general unsecured obligations of the Company and mature December 2014. Interest is payable semi-annually at 7.5%. On June 16, 2005, we completed an exchange offering whereby substantially all of the senior notes issued under the private placement were exchanged for senior notes registered under the Securities Act of 1933.

Net proceeds from the Bank Credit Facility and Term Loan and senior notes totaled $536.6 million and were used to repay all outstanding liabilities under our then existing credit facility and senior notes. These debt repayments resulted in a pre-tax charge of $16.6 million in the fourth quarter of 2004.

The Bank Credit Facility and Term Loan are secured by substantially all real and personal property of the guarantor subsidiaries and governed by certain financial covenants, including minimum fixed charge, net worth, and our financial leverage ratios as well as limitations on dividend payments, capital expenditures and other restricted payments as defined in the agreements.

Capital expenditures for the nine months ended September 30, 2007 were $81.9 million, including $2.6 million for land purchases and $47.1 million for the Golden Nugget renovation. We expect capital expenditures to be approximately $34.1 million for the remainder of the year primarily for the renovation and expansion of the Golden Nugget and new restaurants. Treasury stock repurchases for the nine months ended September 30, 2007 totaled $158.9 million.

As a primary result of our 2007 refinancing and the New Notes, we have incurred higher interest expense. We expect to incur additional interest expense in the future as we continue the Golden Nugget expansion. We plan on constructing a 500-room hotel tower at the Golden Nugget – Las Vegas which we expect to complete by 2010 at an estimated cost of $150.0 million, funded primarily by the delayed draw term loan.

We have entered into two interest rate swap agreements, with an aggregate notional value of $100.0 million, with the objective of managing our exposure to interest rate risk and lowering interest expense. We swapped the fixed interest rate of the senior notes due 2014 for floating interest rates equal to six month Libor plus a financing spread between 2.34% and 2.38%. As a result of exchanging the Senior Notes, these interest rate swaps are no longer designated as hedges under SFAS 133.

From time to time, we review opportunities for restaurant acquisitions, and investments in the hospitality, gaming, entertainment, amusement, food service and facilities management and other industries. Our exercise of any such investment opportunity may impact our development plans and capital expenditures. We believe that adequate sources of capital are available to fund our business activities through December 31, 2007.

Since April 2000, we have paid an annual $0.10 per share dividend, declared and paid in quarterly amounts. In April 2004, the annual dividend amount was increased to $0.20 per share, declared and paid in quarterly amounts.

Seasonality and Quarterly Results

Our business is seasonal in nature. Our reduced winter restaurant and hospitality volumes cause revenues and, to a greater degree, restaurant and hospitality operating profits to be lower in the first and fourth quarters than in other quarters. We have and will continue to open restaurants in highly seasonal tourist markets. Periodically, our sales and profitability may be negatively affected by adverse weather. The timing of unit openings can and will affect quarterly results.

Critical Accounting Policies

Restaurant and other properties are reviewed on a property by property basis for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The recoverability of properties that are to be held and used is measured by comparison of the estimated future undiscounted cash flows associated with the asset to the carrying amount of the asset. Goodwill and other non-amortizing intangible assets are reviewed for impairment at least annually using estimates of future operating results. If such assets are considered to be impaired, an impairment charge is recorded in the amount by which the carrying amount of the assets exceeds their fair value. Properties to be disposed of are reported at the lower of their carrying amount or fair values, reduced for estimated disposal costs, and are included in other current assets.

28

We operate approximately 179 properties and periodically we expect to experience unanticipated individual unit deterioration in revenues and profitability, on a short-term and occasionally longer-term basis. When such events occur and we determine that the associated assets are impaired, we will record an asset impairment expense in the quarter such determination is made. Due to our average restaurant net investment cost, excluding the owned land component, of approximately $2.0 million, such amounts could be significant when and if they occur. However, such asset impairment expense does not affect our financial liquidity, and is usually excluded from many valuation model calculations.

We maintain a large deductible insurance policy related to property, general liability and workers’ compensation coverage. Predetermined loss limits have been arranged with insurance companies to limit our per occurrence cash outlay. Accrued expenses and other liabilities include estimated costs to settle unpaid claims and estimated incurred but not reported claims using actuarial methodologies.

We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”, as interpreted by FIN 48. SFAS No. 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be recognized. We regularly assess the likelihood of realizing the deferred tax assets based on forecasts of future taxable income and available tax planning strategies that could be implemented and adjust the related valuation allowance if necessary.

Our income tax returns are subject to examination by the Internal Revenue Service and other tax authorities. We regularly assess the potential outcomes of these examinations in determining the adequacy of our provision for income taxes and our income tax liabilities. Inherent in our determination of any necessary reserves are assumptions based on past experiences and judgments about potential actions by taxing authorities. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. We believe that we have adequately provided for any reasonable and foreseeable outcome related to uncertain tax matters.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are used for, but not limited to, the recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived assets and costs to settle unpaid claims. Actual results may differ materially from those estimates.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements(SFAS 157), which defines fair value, establishes a framework for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 157 is not expected to have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, that the adoption of SFAS 159 will have on our consolidated financial statements.

Impact of Inflation

We do not believe that inflation has had a significant effect on our operations during the past several years. We believe we have historically been able to pass on increased costs through menu price increases, but there can be no assurance that we will be able to do so in the future. Future increases in labor costs, including expected future increases in federal and state minimum wages, energy costs, and land and construction costs could adversely affect our profitability and ability to expand.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of market risks including risks related to potential adverse changes in interest rates and commodity prices. We actively monitor exposure to market risk and continue to develop and utilize appropriate risk management techniques. We do not use derivative financial instruments for trading or to speculate on changes in commodity prices.

Interest Rate Risk

Total debt at September 30, 2007 included $197.0 million of floating-rate debt attributed to borrowings at an average interest rate of 7.37%. As a result, our annual interest cost in 2007 will fluctuate based on short-term interest rates. The impact on annual cash flow of a ten percent change in the floating-rate (approximately 0.7%) would be approximately $1.5 million annually based on the floating-rate debt and other obligations outstanding at September 30, 2007; however, there are no assurances that possible rate changes would be limited to such amounts.

29

Consistent with our policy to manage our exposure to interest rate risk and in conformity with the requirements of the first and second lien facilities we entered into interest rate swaps for all of the first and second lien borrowings of the Golden Nugget that fix the interest rates at between 5.4% and 5.5%, plus the applicable margin with the objective of limiting our exposure to increases in interest rates.

In connection with the 7.5% senior notes due 2014, we entered into interest rate swap agreements with a total notional value of $100.0 million. As a result of the exchange offer, these swaps are no longer considered effective hedges.

ITEM 4. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13e-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, 2007, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2007 as discussed in our Form 10-K for the year ended December 31, 2006. During the nine months ended September 30, 2007, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

30

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

General Litigation

On April 4, 2006, a purported class action lawsuit was filed against Joe’s Crab Shack—San Diego, Inc. in the Superior Court of California in San Diego by Kyle Pietrzak and others similarly situated. The lawsuit alleges that the defendant violated wage and hour laws, including the failure to pay hourly and overtime wages, failure to provide meal periods and rest periods, failing to provide minimum reporting time pay, failing to compensate employees for required expenses, including the expense to maintain uniforms, and violations of the Unfair Competition Law. In June 2006, the lawsuit was amended to include Kristina Brask as a named plaintiff and named Crab Addison, Inc. and Landry’s Seafood House—Arlington, Inc. as additional defendants. We have reached a tentative settlement agreement which we expect to submit to the court and fully accrued the amount, which is not believed to be material to our financial position. There is no certainty, however, that the settlement agreement, when submitted, will be approved by the court.

On February 18, 2005, and subsequently amended, a purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in San Bernardino by Michael D. Harrison, et. al. Subsequently, on September 20, 2005, another purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in Los Angeles by Dustin Steele, et. al. On January 26, 2006, both lawsuits were consolidated into one action by the state Superior Court in San Bernardino. The lawsuits allege that Rainforest Cafe violated wage and hour laws, including not providing meal and rest breaks, uniform violations and failure to pay overtime. We have reached a tentative settlement agreement which we expect to submit to the court and fully accrued the amount, which is not believed to be material to our financial position. There is no certainty, however, that the settlement agreement, when submitted, will be approved by the court.

On August 21, 2006 and subsequently amended on January 5, 2007, a purported shareholder derivative action entitledAlbert D. Hulliung, derivatively on Behalf of Nominal Defendant Landry’s Restaurants, Inc. was brought against certain members of our Board of Directors and certain of our current and former executive officers in the District Court of Harris County, Texas. The lawsuit alleges breach of fiduciary duties, unjust enrichment and other violations of law relating to the Company’s historical stock option practices. Plaintiff seeks to recover damages in the favor of the Company for damages sustained by the Company, disgorgement of profits, and attorney’s fees and expenses. The Company has formed an independent special committee (the Special Litigation Committee) of the Board of Directors to investigate the allegations and has filed a motion with the court to stay the proceedings pending the outcome of the investigation. The Special Litigation Committee is made up of the same directors and is represented by the same independent counsel that conducted the investigation of the Company’s option granting processes. The special litigation committee has completed its investigation and has recommended to the court that the matter be dismissed. In view of the findings in that investigation, the Company does not expect the results of this litigation to be material.

We are subject to legal proceedings and claims that arise in the ordinary course of business. Management does not believe that the outcome of any of those matters will have a material adverse effect on our financial position, results of operations or cash flows.

ITEM 1A. Risk Factors

Except as provided below, there have been no material changes to the Risk Factors disclosed in our 2006 Annual Report on Form 10-K. In response to higher insurance costs for our property and casualty coverage due to our large concentration of coastal properties, we continue to maintain reduced aggregate insurance policy limits and we purchased individual windstorm policies for the majority of our operating units located along the Texas gulf coast. There is no assurance that we will have adequate insurance coverage to recover losses that may result from a catastrophic event. In connection with the court settlement with our senior note holders, we may be required to redeem the $400.0 million in senior notes upon no more than 60 and no less than 30 days notice beginning February 28, 2009. As a result, we anticipate refinancing but debt during 2008. Given the uncertainty and volatility in the credit markets, there is no assurance that we will obtain the new financing on favorable terms.

31

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

In November 1998, we announced the authorization of an open market stock buy back program, which was renewed in April 2000, for an additional $36.0 million. In October 2002, we authorized a $50.0 million open market stock buy back program and in September 2003, we authorized another $60.0 million open market stock repurchase program. In October 2004, we authorized a $50.0 million open market stock repurchase program. In March 2005, we announced a $50.0 million authorization to repurchase common stock. In May 2005, we announced a $50.0 million authorization to repurchase common stock. In March and July 2007, we authorized an additional $50.0 million and $75.0 million, respectively, of open market stock repurchases. These programs have resulted in our aggregate repurchasing of approximately 23.1 million shares of common stock for approximately $449.4 million through September 2007.

All repurchases of our common stock during the quarter ended September 30, 2007 were made pursuant to our open market stock repurchase program. We have approximately $21.6 million that may yet be purchased under existing programs. The following table summarizes repurchases of our common stock during the quarter ended September 30, 2007 pursuant to our open market stock repurchase program.

Period	(a) Total Number of Shares (or Units Purchased)	(b) Average Price paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 31, 2007	1,397,981	$	29.88	1,397,981	$	78,492,964
August 31, 2007	1,061,749	$	27.79	1,061,749	$	48,991,075
September 30, 2007	977,840	$	27.98	977,840	$	21,634,671
	3,437,570	$	28.69	3,437,570	$	21,634,671

ITEM 4. Submission of Matters to a Vote of Security Holders

On September 27, 2007, the Company held its 2007 Annual Meeting of Stockholders. At such time, the election of directors was submitted to a vote of stockholders through the solicitation of proxies. The following persons were elected to serve on the Board of Directors (“Board”) until the 2008 Annual Meeting of Stockholders or until their successors have been duly elected and qualified. Each Director received the following votes:

Director	Votes For	Votes Withheld
Tilman J. Fertitta	13,517,186	1,951,234
Steven L. Scheinthal	13,304,238	2,164,182
Michael S. Chadwick	14,592,603	886,817
Michael Richmond	14,615,701	863,719
Joe Max Taylor	11,562,247	3,906,173
Kenneth Brimmer	14,691,693	787,727

ITEM 6. Exhibits

The following Exhibits are set forth herein commencing on page 34:

12.1 –	Ratio of Earnings to Fixed Charges
31.1 –	Certification by Chief Executive Officer
31.2 –	Certification by Chief Financial Officer
32 –	Certification with respect to quarterly report of Landry’s Restaurants, Inc.

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

LANDRY’S RESTAURANTS, INC.

(Registrant)

/s/ TILMAN J. FERTITTA

Tilman J. Fertitta

Chairman of the Board of Directors,

President and Chief Executive Officer

(Principal Executive Officer)

/s/ RICK H. LIEM

Rick H. Liem

Executive Vice President and

Chief Financial Officer

(Principal Financial and Accounting Officer)

Dated: November 9, 2007

33