SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1997 Commission file number 000-22150

LANDRY'S SEAFOOD RESTAURANTS, INC.
(Exact name of the registrant as specified in its charter)

DELAWARE 76-0405386
(State of incorporation) (I.R.S. Employer Identification No.)
1400 POST OAK BLVD., SUITE 1010 (713) 850-1010
HOUSTON, TX 77056 (Registrant's telephone number)
(Address of principal executive offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON SHARES, PAR VALUE $.01 PER SHARE
(Title of Class)
__________________

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

The aggregate market value of the registrant's voting Common Stock held by non-
affiliates of the registrant was approximately $644,600,000 as of February 19,
1998, based on the NASDAQ National Market System closing price on that date. For
this purpose, all shares held by officers and directors of the registrant are
considered to be held by affiliates, but neither the registrant nor such persons
concede that they are affiliates of the registrants.

The number of shares outstanding of the registrant's common stock is 26,004,449
as of February 12, 1998.

DOCUMENTS INCORPORATED BY REFERENCE

The Proxy Statement for the Registrant's 1998 Annual Meeting of Stockholders,
to be filed pursuant to regulation 14A under the Securities Exchange Act of
1934, as amended, is incorporated by reference into Part III of this Form 10-K.
Although such Proxy Statement is not currently available, it will be filed with
the Commission within 120 days after December 31, 1997.

LANDRY'S SEAFOOD RESTAURANTS, INC.

TABLE OF CONTENTS

PAGE NO.
--------
PART I.

Item 1. Business...................................................... 2

Item 2. Properties.................................................... 8

Item 3. Legal Proceedings............................................. 8

Item 4. Submission of Matters to a Vote of Security Holders........... 9

PART II.

Item 5. Market For the Registrant's Common Stock and Related
Stockholder Matters........................................... 9

Item 6. Selected Financial Data....................................... 10

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 11

Item 8. Financial Statements and Supplementary Data................... 15

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................... 15

PART III.

Item 10. Directors and Executive Officers of the Registrant............ 15

Item 11. Executive Compensation........................................ 15

Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................... 15

Item 13. Certain Relationships and Related Transactions................ 15

PART IV.

Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K...................................................... 16

SIGNATURES.............................................................. 33
EXHIBIT INDEX........................................................... 34
EXHIBITS................................................................ 35

LANDRY'S SEAFOOD RESTAURANTS, INC.

PART I

ITEM 1. BUSINESS

GENERAL

The Company owns and operates full-service, mid-priced, casual dining,
seafood restaurants located in 26 states, under the restaurant divisional
names "Joe's Crab Shack," "Landry's Seafood House," and "The Crab House." As
of February 19, 1998, the Company operated 122 full service restaurants,
including 58 Joe's Crab Shack restaurants, 43 Landry's Seafood House division
restaurants and 21 The Crab House restaurants. In addition, the Company
operates three limited-menu take-out service units. Management believes that
the Company's restaurants appeal to a broad range of customers by offering
generous portions of fresh seafood and excellent service in a high energy
environment at an attractive price-value relationship. The first Landry's
Seafood House restaurant opened in 1980. In 1988, Mr. Tilman J. Fertitta
acquired sole ownership of the two existing Landry's restaurants. The first
Joe's Crab Shack was acquired by the Company in 1994. Following his 1988
acquisition, Mr. Fertitta instituted: (i) new financial, accounting and
reporting systems; (ii) financial incentives for employees; (iii) a system for
training, supervising and retaining employees; (iv) a program for hiring top
management personnel; (v) a site selection and growth strategy; and (vi) an
operating philosophy emphasizing customer service and quality control. As a
result of the implementation of these programs, profitability increased
substantially, and the Company commenced an expansion program.

RESTAURANT CONCEPTS AND STRATEGY

Management believes that the relatively small number of national and
regional chain restaurants competing in the seafood segment of the restaurant
industry, as compared to other restaurant segments, provides the Company a
significant opportunity to capitalize on its high energy, casual dining
seafood restaurant concepts.

The key elements of the Company's restaurant concepts and strategy include
the following:

Variety and Value. The Company's restaurants provide customers an attractive
price-value relationship by serving generous portions of fresh, high quality
seafood at moderate prices. The restaurants feature a wide variety of broiled,
grilled and fried seafood items, including red snapper, shrimp, crawfish, crab
and lump crabmeat, lobster, soft shell crabs, oysters, scallops, flounder and
other traditional seafood items, many with a choice of unique seasonings,
stuffings and toppings. These items are complemented by unique side dishes,
salads, garlic bread, appetizers, and desserts presented in a visually
appealing manner.

Commitment to Customer Satisfaction. The Company is committed to providing
its customers prompt, friendly, efficient service, keeping table-to-waitstaff
ratios low, and staffing each restaurant with an experienced management team
to ensure attentive customer service and consistent food quality. Through the
use of comment cards and a 1-800 telephone number, senior management receives
valuable feedback from customers and, through prompt responses, demonstrates a
continuing interest in customer satisfaction.

Distinctive Design and Decor and Casual Atmosphere. Each restaurant concept
has a distinctive appearance and a flexible design which can accommodate a
wide variety of available sites. The Joe's Crab Shack restaurants are designed
to appear like an old fishing camp with a wood facade, tin roof and a raised
outside deck. Many of the Joe's Crab Shack facilities incorporate a small
playground area for children adjacent to family dining areas. For Landry's
Seafood House, the Company has developed a prototype look that is readily
identified by a large theater-style marquee over the entrance and by a
distinctive brick and wood facade creating the feeling of a traditional old
seafood house restaurant. The Crab House restaurants feature a casual nautical
theme, and many include a fresh seafood salad bar. A casual, energetic dining
atmosphere is created for all of the Company's restaurants through the design
and decor of the dining areas, which generally display vibrant, colorful
interiors. In many locations, the Company's restaurants provide outdoor patio
service for a more casual, open-air dining experience and often feature
waterfront views.

High Profile Restaurant Locations. The Company's site selection strategy is
to locate its restaurants in markets which provide a balanced mix of tourist,
convention, business, and residential clientele. A variety of

factors are analyzed in the site selection process, including local market
demographics, site visibility, aesthetics (including waterfront views) and
accessibility and proximity to significant generators of potential customers
such as major retail centers, office complexes, hotel concentrations,
convention and entertainment complexes, historical areas and entertainment
facilities (stadiums, arenas, theaters, etc.). Management believes that this
strategy results in a high volume of new and repeat customers and provides the
Company with increased name recognition in new markets. The Company's current
restaurants are located in areas that satisfy the Company's site selection
strategy.

Commitment to Attracting and Retaining Quality Employees. By providing
extensive training and attractive compensation, the Company fosters a strong
corporate culture and encourages a sense of personal commitment from its
employees. The Company has a monthly cash bonus program establishing
performance goals on a restaurant-by- restaurant basis for each restaurant's
management team pursuant to which management believes restaurant managers
typically earn bonuses equal to between 15% and 25% of their total cash
compensation. The Company has historically utilized a program of extensive
background checks for prospective management employees (including criminal
checks, credit checks and drug screening). Management believes its policies
have resulted in a low rate of management-level employee turnover.

EXPANSION STRATEGY

Since 1990, the Company has pursued an accelerated expansion strategy through
the opening of new restaurants or the conversion of existing restaurants. The
Company's current development plan is to open at least 45 new restaurants in
1998, of which seven restaurants were open and 31 restaurants were under
construction or development as of February 19, 1998. The number of restaurants
actually opened will vary depending upon, among other things, the Company's
ability to locate suitable restaurant sites, the Company's ability to obtain
satisfactory lease or purchase arrangements for its restaurant locations, the
availability of funds to construct and open such restaurants, the Company's
ability to obtain on a timely basis all necessary governmental permits to
construct and operate such restaurants, the Company's ability to adequately
manage the construction or conversion of such restaurants, the Company's ability
to hire, train and retain skilled management and other restaurant personnel and
general economic conditions. The Company plans to continue expanding principally
through the opening of new restaurants. From time-to-time, the Company will
evaluate the strategic acquisition of existing restaurants. The Company will
also consider the conversion of existing restaurant concepts to one of its
existing concepts, as well as possibly acquiring existing restaurants with
complementary concepts. The Company has no present understandings or agreements
to acquire any restaurant concepts.

The Company plans to focus expansion efforts primarily in the southern and
midwestern portions of the United States, although the Company has and will
continue to develop or acquire restaurants in cities outside of this area.
Further development of locations in an existing market are likely to occur
where management believes the area can effectively support additional quality
seafood restaurants. In connection with this expansion effort, the Company's
primary growth will utilize the Joe's Crab Shack concept although additional
restaurants will be built in the Landry's Seafood House and The Crab House
divisions of the Company. The Company believes that the increased consumption
of seafood due to its taste, variety and perceived health advantages, combined
with the excellent unit economics of its restaurants, support the Company's
decision to concentrate its expansions efforts on quality seafood restaurants
in strategically targeted markets. The Company has designated a team of
employees that are responsible for opening new restaurant locations, including
kitchen personnel and other individuals who are trained as hosts, waiters,
floor managers and bartenders. The Company has enhanced its management
training program to enable assistant general managers to be promoted to
general managers. The Company believes that through its training program and
the hiring of outside personnel it will be able to support its expansion
strategy.

RESTAURANT LOCATIONS

The Company's restaurants range in size from 5,000 square feet to 16,000
square feet, with the average restaurant approximating 8,000 square feet. The
restaurants generally have dining room floor seating for approximately 215
customers, many with patio seating on a seasonal basis, and bar seating for
approximately 10 to 20 additional customers.

The following table provides information with respect to the states in which
the Company's existing full service restaurants were open as of February 19,
1998:

NUMBER
OF
STATE UNITS
- ----- ------

Alabama................. 3
Arizona................. 4
Arkansas................ 1
California.............. 2
Colorado................ 5
Florida................. 18
Georgia................. 3
Illinois................ 4
Indiana................. 1
Kentucky................ 1
Louisiana............... 4
Maryland................ 1
Michigan................ 1
Mississippi............. 1

NUMBER
OF
STATE UNITS
- ----- ------

Missouri.................. 3
Nevada.................... 2
New Jersey................ 1
New Mexico................ 1
New York.................. 2
North Carolina............ 1
Ohio...................... 5
Oklahoma.................. 2
South Carolina............ 8
Tennessee................. 7
Texas..................... 40
Virginia.................. 1
---
Total................... 122
===

The Company's restaurants offer a wide variety of high quality, broiled,
grilled, and fried seafood items at moderate prices, including red snapper,
shrimp, crawfish, lump crabmeat, lobster, oysters, scallops, flounder, and
other traditional seafood items, many with a choice of unique seasonings,
stuffings and toppings. The Company's restaurants' menus also include a wide
variety of seafood appetizers, salads, soups and side dishes. In order to
provide an alternative to seafood items, the Company's restaurants also offer
high quality beef, fowl, pastas, and

other American food entrees. The Company's restaurants also feature a unique
selection of desserts made fresh on a daily basis at each location. Many of
the Company's restaurants offer complimentary salad and garlic bread with each
entree, as well as certain lunch specials and lower priced children's entrees.

The Company's restaurants emphasize a complete dining experience, and,
accordingly, full liquor service is available. Alcoholic beverages are
primarily served to complement meals, with sales of alcoholic beverages
accounting for between 15% and 16% of the Company's revenues in 1997. The
Company's restaurants generally serve both lunch and dinner. The average
dinner entree menu price for the Company's restaurants is between $11 and $13,
excluding menu entree items which are priced daily "at market," based on cost
and availability to the Company's restaurants. At certain of the Company's
restaurants there is a separate lunch menu with reduced prices on selected
entrees.

MANAGEMENT AND EMPLOYEES

The Company's policy is to staff its restaurants with management that has
significant experience in the restaurant industry. The Company believes its
strong team-oriented culture helps it attract and retain highly motivated
employees who provide customers with a level of service superior to that
normally found in other restaurants. The Company trains its kitchen employees
and waitstaff to take great pride in preparing and serving food in accordance
with the strict standards established by the Company. Restaurant managers and
staff are trained to be courteous and attentive to customer needs, and the
managers, in particular, are instructed to visit each table. Senior corporate
management holds weekly group meetings with restaurant general managers to
discuss individual restaurant performance and customer comments. Moreover, the
Company requires general managers to hold regular staff meetings at their
individual restaurants. Compliance with the Company's quality requirements is
monitored through periodic on-site visits and formal periodic inspections by
the regional field manager and supervisory personnel from the Company's
corporate offices.

The management staff of a typical Company restaurant consists of a five-
person management team (one general manager, two kitchen managers, and two
floor managers) with the general manager having overall responsibility for
restaurant operations. The general managers typically have been promoted after
training in all areas of restaurant level management within the Company. The
kitchen managers in each restaurant supervise kitchen operations, which allows
the general managers to spend most of their time in the dining area of the
restaurant supervising the staff and providing service to customers. Each
restaurant management team is eligible to receive monthly incentive bonuses
subject to achievement of operating performance objectives specifically
tailored for such restaurant for each monthly period. These employees
typically earn between 15% and 25% of their total cash compensation under this
program. In addition, restaurant managers are entitled to participate in the
Company's stock option plans.

The Company has historically spent considerable effort in screening
prospective employees and training and developing employees, allowing it to
promote from within. The Company requires each employee to participate in a
formal training program that utilizes departmental training manuals,
examinations and a scheduled evaluation process. Newly hired waitstaff are
required to spend from 5 to 10 days in training before they serve customers.
The Company has historically utilized a program of extensive background checks
for prospective management employees such as criminal checks, credit checks,
and drug screening. Management believes that its policies have resulted in a
reduced rate of management-level employee turnover. Management training
encompasses three general areas including: (i) all service positions; (ii)
management accounting, personnel management, and dining room and bar
operations; and (iii) kitchen management, which entails food preparation and
quality controls, cost controls, training, ordering and receiving, and
sanitation operations. Due to the Company's enhanced training program,
management training customarily lasts approximately 8 to 12 weeks, depending
upon the trainee's prior experience and performance relative to the Company's
objectives. As the Company expands, it will need to hire additional management
personnel and its continued success will depend in large part on its ability
to attract, train, and retain quality management employees.

As of January 1, 1998, there were approximately 30 individuals involved in
regional management functions. As the Company grows, it plans to increase the
number of regional managers, and to have each regional manager

responsible for a limited number of restaurants within those geographic
regions. The Company plans to promote experienced restaurant level management
personnel to serve as future regional managers as well as hire needed
personnel from outside the Company.

As of December 31, 1997, the Company employed approximately 8,200 persons,
of whom approximately 640 were restaurant managers or manager-trainees,
approximately 260 were corporate and administrative employees, and the rest
were hourly employees. Each restaurant employs an average of approximately 70
to 100 people, depending on seasonal needs. The Company considers its
employees to be high quality and believes that its management level employee
turnover is within industry standards. None of the Company's employees are
covered by a collective bargaining agreement. The Company considers its
relationship with employees to be satisfactory.

CUSTOMER SATISFACTION

The Company is committed to providing its customers prompt, friendly,
efficient service, keeping table-to-waitstaff ratios low and staffing each
restaurant with an experienced management team to ensure attentive customer
service and consistent food quality. Through the use of comment cards and a 1-
800 telephone number, senior management receives valuable feedback from
customers and through prompt responses demonstrates a continuing interest in
customer satisfaction. The Company emphasizes availability of the items on its
menu and, if an item is in short supply, restaurant level management is
expected to use its initiative to procure the item immediately.

PURCHASING

The Company strives to obtain consistent quality items at competitive prices
from reliable sources. The Company continually researches and surveys various
products in an effort to obtain the highest quality products possible and to
be responsive to changing customer tastes. In order to maximize operating
efficiencies and to provide the freshest ingredients for its food products
while obtaining the lowest possible prices for the required quality, each
restaurant's management team determines the daily quantities of food items
needed and orders such quantities from major suppliers at prices often
negotiated directly with the Company's corporate office.

The Company currently uses many distributors for obtaining its seafood
products in order to maintain the freshness and quality required by the
Company, all of which are available on short notice from qualified suppliers.
For non-seafood items, the Company generally uses one national distributor in
order to achieve certain cost efficiencies, but such items are available on
short notice from alternative qualified suppliers. The Company has not
experienced any significant delays in receiving its food and beverage
inventories, restaurant supplies or equipment.

ADVERTISING AND MARKETING

The Company employs a marketing strategy that utilizes frequent, high
profile advertising in order to attract new customers and establish a high
level of name recognition. The Company relies primarily on word-of-mouth
publicity, billboards with distinctive graphics, travel and hospitality
magazines and print advertising. The Company uses multiple billboards on
highways leading to its restaurants to direct potential customers from the
highways to the restaurants, as well as to build name recognition within each
market. Additionally, many of the restaurants offer facilities for banquets,
meetings and private parties. The Company's advertising expenditures for 1997
were approximately 1.5% of revenues.

RESTAURANT REPORTING

Financial controls are maintained through management of an accounting and
management information system that is implemented at the restaurant level.
Administrative and management staff prepare daily reports of cash, deposits,
sales, sales mix, labor, and customer counts. Physical inventories of food,
beverage and supply

items are taken weekly. Weekly and monthly costs of sales and profit and loss
statements are compiled by the Company's accounting department and provided to
the regional managers for analysis and comparison to the Company's budgets.
The Company closely monitors sales, costs of sales, labor and restaurant
trends. Weekly sales data is used by management to detect trends from location
to location and negative trends are immediately investigated and remedied
where possible. The Company purchases food carefully and, through tight
controls, keeps food and beverage waste and theft to a minimum. Management
believes that its current systems are adequate for its planned expansion
strategy.

RESTAURANT SECURITY

The Company takes precautions to protect individual restaurant locations
against theft, robbery and other breaches of security through security
procedures and sophisticated alarm and surveillance systems. A component of
the Company's emphasis on restaurant security is the employment of a licensed
peace officer as Director of Security. The Director of Security, who reports
directly to the corporate office, supervises the installation and operation of
individual restaurant security systems and performs monthly security
inspections at each restaurant to monitor compliance with the Company's
policies relating to theft prevention, employee related security issues and
restaurant facility protection. As a result of the Company's program, it has
experienced no material security problem in its operations.

SERVICE MARKS

Landry's Seafood House and Joe's Crab Shack are each registered as a federal
service mark on the Principal Register of the United States Patent and
Trademark Office. The Crab House is a registered design mark. In addition, the
Company has registered numerous other marks related to its business and
advertising.

COMPETITION

The restaurant industry is intensely competitive with respect to price,
service, the type and quality of food offered, location and other factors. The
Company has many well established competitors, both seafood and non-seafood,
with substantially greater financial resources and a longer history of
operations than the Company. The Company competes with both locally-owned
seafood and non-seafood restaurants, as well as national and regional seafood
and non-seafood restaurant chains, some of which may be better established in
the Company's existing and future markets. In particular, Red Lobster, a
national seafood restaurant chain, operates approximately 700 seafood
restaurants nationwide, many of which operate in the Company's existing and
future markets. The Company also competes with other restaurant and retail
establishments for sites. Changes in customer tastes, economic conditions,
demographic trends and the location and number of, and type of food served by,
competing restaurants could adversely affect the Company's business as could
the unavailability of experienced management and hourly employees. Management
believes its restaurants enjoy a high level of repeat business and customer
loyalty due to high food quality, comfortable atmosphere, and friendly
efficient service.

INFORMATION AS TO CLASSES OF SIMILAR PRODUCTS OR SERVICES.

The Company operates in only one industry segment. All significant
revenues and pre-tax earnings relate to retail sales of food and beverages to
the general public through company-owned and company-operated restaurants. The
Company has no operations outside the continental United States.

ITEM 2. PROPERTIES

RESTAURANT LOCATIONS

For information concerning the location of the Company's restaurants
see Item 1. Business - Restaurant Locations.

ITEM 3. LEGAL PROCEEDINGS

The Company is a defendant from time to time in routine lawsuits
incidental to its business. The Company believes that none of the current legal
proceedings, individually or in the aggregate, will have a material adverse
effect upon the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders of the
Company during the fourth quarter of the fiscal year ended December 31, 1997.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

PRICE RANGE OF COMMON STOCK

The Company effected its initial public offering of Common Stock on August
18, 1993, at a price to the public of $6.00 per share (adjusted for the
Company's 2-for-1 stock split effected in June 1995). Since that date, the
Common Stock has been traded on the Nasdaq National Market. As of February 19,
1998, there were approximately 1,943 stockholders of record of the Common
Stock.

The table below sets forth, for the periods indicated, the high and low sale
prices as reported on the Nasdaq National Market for the Common Stock since
January 1, 1995.

HIGH LOW
------ ------

1995
First Quarter............................................ $15.75 $12.75
Second Quarter........................................... 22.25 14.88
Third Quarter............................................ 22.00 16.00
Fourth Quarter........................................... 18.25 12.50
1996
First Quarter............................................ $19.75 $14.00
Second Quarter........................................... 25.75 17.50
Third Quarter............................................ 28.38 18.75
Fourth Quarter........................................... 26.25 19.50
1997
First Quarter............................................ $23.25 $15.63
Second Quarter........................................... 23.00 13.13
Third Quarter............................................ 30.00 20.88
Fourth Quarter........................................... 32.38 18.00
1998
First Quarter (through February 19, 1998)................ $29.06 $21.25

DIVIDEND POLICY

The Company's Board of Directors does not anticipate payment of any cash
dividends in the foreseeable future and intends to maintain a policy of
retaining earnings for reinvestment in the Company's operations. The payment
of cash dividends in the future will depend upon the Company's earnings
levels, capital requirements, financial condition, and other factors deemed
relevant by the Board of Directors. Pursuant to the Company's revolving credit
facility with a group of banks headed by Bank of America, the Company is
restricted in paying cash dividends to an amount not to exceed 10% of the
Company's net income for the previous fiscal year.

ITEM 6. SELECTED FINANCIAL DATA

The following table contains selected consolidated financial data for each of
the past five fiscal years. All numbers are in thousands, except per share
data.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

YEAR ENDED DECEMBER 31,
--------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------

INCOME STATEMENT DATA (1)
Revenues:
Restaurant............... $ 58,041 $ 96,262 $149,737 $232,597 $311,673
Processing plant......... 2,626 4,511 7,883 3,510 --
-------- -------- -------- -------- --------
Total revenues........... $ 60,667 $100,773 $157,620 $236,107 $311,673
Operating costs and ex-
penses:
Cost of sales............ 18,759 31,424 47,978 72,304 95,639
Restaurant labor......... 14,591 23,986 38,595 60,249 80,837
Other restaurant
operating expenses...... 13,614 21,606 31,662 51,077 66,227
Merger costs............. -- -- -- 25,971(2) --
Depreciation and
amortization............ 1,783 4,060 7,817 12,978 17,080
Processing plant cost of
sales and operating
expenses................ 2,519 4,328 7,686 3,857 --
General and
administrative expenses. 4,147 6,117 8,437 9,447 10,517
-------- -------- -------- -------- --------
Total operating costs
and expenses.......... 55,413 91,521 142,175 235,883 270,300
Operating income........... 5,254 9,252 15,445 224(2) 41,373
Other (income) expense:
Interest (income)
expense, net............ (47) (915) (1,604) (2,379) (1,063)
Other, net............... (130) 39 55 318 (394)
-------- -------- -------- -------- --------
Total other (income)
expense............... (177) (876) (1,549) (2,061) (1,457)
Income before income taxes
and cumulative effect of
accounting change ........ 5,431 10,128 16,994 2,285(2) 42,830
Provision for income
taxes..................... 1,543(3) 3,520 5,946 779 15,400
-------- -------- -------- -------- --------
Income before cumulative
effect of accounting
change.................... 3,888(3) 6,608 11,048 1,506(2) 27,430
Cumulative effect of
accounting change......... 223 -- -- -- --
-------- -------- -------- -------- --------
Net income................. $ 4,111(3) $ 6,608 $ 11,048 $ 1,506(2) $ 27,430
======== ======== ======== ======== ========
Net income before
cumulative effect of
accounting change per
share..................... $ 0.34
Cumulative effect of
accounting change per
share..................... $ 0.02
--------
Net income per share--
basic..................... $ 0.36 $ 0.41 $ 0.58 $ 0.06(2) $ 1.07
======== ======== ======== ======== ========
Net income per share--
diluted................... $ 0.36 $ 0.41 $ 0.57 $ 0.06(2) $ 1.03
======== ======== ======== ======== ========
Weighted average number of
common shares--basic...... 11,266 16,098 19,051 23,360 25,518
======== ======== ======== ======== ========
Weighted average number of
common shares and common
share
equivalents--diluted...... 11,266 16,098 19,300 24,100 26,600
======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END
OF PERIOD)(1)
Working capital............ $ 8,931 $ 23,258 $ 11,279 $ 64,377 $ 35,058
Total assets............... 48,339 99,667 187,866 281,199 382,281
Short-term notes payable
and current portion of
long-term notes and other
obligations............... 896 855 2,677 492 72
Long-term notes and other
obligations, noncurrent... 3,054 5,494 16,204 221 50,235
Stockholders' equity....... $ 38,428 $ 82,966 $144,791 $256,447 $296,738

- --------
(1) On August 9, 1996, the Company acquired Bayport Restaurant Group, Inc.
("Bayport") pursuant to a merger transaction (the "Bayport Merger). The
Bayport Merger was accounted for as a pooling of interests and, accordingly,
the consolidated financial statements of the Company have been restated to
include the accounts and operations of Bayport for all periods represented.
(2) In connection with the Bayport Merger, the Company incurred certain costs.
Without giving effect to such costs, the Company's income before income
taxes, net income, and net income per share (diluted) would have been
approximately $28,257, $18,000 and $0.75, respectively.
(3) Presented on a pro forma basis to give effect to a pro forma tax provision
as a result of the Company's conversion from S Corporation to C Corporation
status upon consummation of the Company's initial public offering.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

INTRODUCTION

As of December 31, 1997, the Company owned and operated 115 full-service,
casual dining seafood restaurants located in 25 states. In addition, the
Company operates three limited-menu take-out service units.

The Company's operations may be impacted by changes in federal and state
taxes and other federal and state governmental policies, which include many
possible factors such as the level of minimum wages, the deductibility of
business and entertainment expenses, levels of disposable income, and national
and regional economic growth. The enactment of staged increases to the
federally mandated minimum wage has increased the Company's labor costs.
Effective October 1, 1996, the federal minimum wage increased from $4.25/hour
to $4.75/hour, and further increased to $5.15/hour effective September 1,
1997. The new minimum wage increases affected primarily initial entry-level
wages of the least skilled jobs in the Company's restaurant kitchens, as the
federal law mandated an offsetting increase in the tip-credit amounts for
tipped employees (i.e., waitstaff). However, the increases in minimum wage
have increased pressure for further wage increases of the other restaurant
staff.

Upon the consummation of the Bayport Merger in 1996 the Company recognized a
one-time charge of approximately $26 million before taxes and $17 million
after provision for income taxes. The American Institute of Certified Public
Accountants may issue a proposed accounting standard during 1998 that would
require entities to expense pre-opening costs as incurred. If adopted, the
standard may require the Company to expense previously capitalized pre-opening
costs as a cumulative effect of a change in accounting principle. At December
31, 1997, unamortized pre-opening costs were $5,162,503.

RESULTS OF OPERATIONS

Restaurant Profitability

The following table sets forth the percentage relationship to total
restaurant revenues of certain restaurant operating data for the periods
indicated:

YEAR ENDED
DECEMBER 31
-------------------
1995 1996 1997
----- ----- -----

Restaurant revenues.................................. 100.0% 100.0% 100.0%
Restaurant cost of sales............................. 32.0 31.1 30.7
Restaurant labor..................................... 25.8 25.9 25.9
Other restaurant operating expenses (1).............. 21.2 21.9 21.2
----- ----- -----
Restaurant level profit (1).......................... 21.0% 21.1% 22.2%
===== ===== =====

- --------
(1) Excludes depreciation and amortization.

Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996

Revenues increased $75,565,680, or 32.0%, from $236,106,877 to $311,672,557
for the year ended December 31, 1997, compared to the year ended December 31,
1996. The increase in revenues was attributable to revenues from new
restaurant openings offset by a reduction in processing plant revenues. There
was a nominal change in revenues from units opened prior to 1996.

As a primary result of increased restaurant revenues, restaurant cost of
sales increased $23,335,688, or 32.3%, from $72,303,748 to $95,639,436 for the
year ended December 31, 1997 compared to the prior year. Restaurant cost of
sales as a percentage of restaurant revenues for the year ended December 31,
1997 decreased

to 30.7% from 31.1% in 1996. The decrease in restaurant cost of sales as a
percentage of restaurant revenues reflects slightly lower product costs and
better management cost controls in 1997. Product prices for shrimp, which are
a very high use product, are expected to be higher in 1998 than in 1997. This
cost increase may be partially offset by decreases in other product costs and
management measures, but the overall effect may increase restaurant cost of
sales as a percentage of revenues in 1998.

Restaurant labor expenses increased $20,588,224, or 34.2%, from $60,248,830
to $80,837,054 for the year ended December 31, 1997 compared to the prior
year, primarily as a result of increased openings of new restaurants.
Restaurant labor expenses as a percentage of restaurant revenues for the year
ended December 31, 1997, remained flat in 1997 and 1996 at 25.9%. The Company
continues to experience labor cost pressures attributable in part to recent
increases in federally mandated minimum wages.

Other restaurant operating expenses increased $15,150,467, or 29.7%, from
$51,076,737 to $66,227,204 for the year ended December 31, 1997, compared to
the prior year, as a result of increased revenues and the opening of new
restaurants. Such expenses decreased as a percentage of restaurant revenues to
21.2% from 21.9% primarily due to revenue growth of newly opened restaurants
exceeding the increase in other restaurant operating expenses.

Depreciation and amortization expenses increased $4,101,307, or 31.6%, from
$12,978,075 to $17,079,382 in 1997, compared to the prior year. The dollar
increase was primarily due to the addition of new restaurants and purchases of
new equipment. Depreciation and amortization as a percentage of restaurant
revenue remained flat in 1997 and 1996 at 5.5%. A decrease in pre-opening
amortization expense during the first six months of 1997 was offset by a
subsequent increase in pre-opening expense during the last six months of 1997.
These changes were due to changes in the number of units subject to
amortization and changes in the per unit pre-opening expenses.

General and administrative expenses increased $1,069,952, or 11.3%, from
$9,446,541 to $10,516,493 for the year ended December 31, 1997, compared to
the prior year, and decreased as a percentage of restaurant revenues to 3.4%
from 4.1%. During the first seven months of 1996, Landry's and Bayport
operated as separate companies and were, therefore, incurring separate general
and administrative expenses to support each company's separate growth plans.
However, upon the consummation of the Bayport Merger, Bayport's corporate
offices were closed and substantially all of Bayport's office employees were
terminated. As a result, general and administrative expenses, as a percentage
of revenues, were less than the combined expenses of the separate companies
for 1997, compared to the prior year. The dollar increase resulted primarily
from increased personnel, salaries and travel to support the combined
Company's expansion plans offset by the reduction of Bayport's general and
administrative expenses upon consummation of the Bayport Merger.

The decrease in net interest income of $1,317,014 is the result of lower
excess cash balances in 1997, as compared to the prior year. The change in
other expense was not deemed significant.

Provision for income taxes increased due to the increase in the Company's
income. The Company anticipates that its 1998 effective tax rate may decline
primarily due to the effect of FICA tax tip credits.

Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995

Restaurant revenues increased $82,859,829, or 55.3%, from $149,736,680 to
$232,596,509 for the year ended December 31, 1996, compared to the year ended
December 31, 1995. The increase in revenues was attributable to revenues from
new restaurant openings. There was a nominal change in revenues from units
opened prior to 1995. Several of the Company's restaurants that opened during
1995 opened at volumes in excess of the Company's average unit volumes.
Subsequently, however, the Company has experienced a moderation of their
initial unit volumes.

As a primary result of increased revenues, restaurant cost of sales
increased $24,325,584, or 50.7%, from $47,978,164 to $72,303,748 for the year
ended December 31, 1996 compared to the prior year. Restaurant cost

of sales as a percentage of restaurant revenues for the year ended December
31, 1996 decreased to 31.1% from 32.0% in 1995. The decrease in restaurant
cost of sales as a percentage of restaurant revenues reflects favorable
product prices and better management cost controls in 1996.

Restaurant labor expenses increased $21,654,012, or 56.1%, from $38,594,818
to $60,248,830 for the year ended December 31, 1996 compared to the prior
year. Restaurant labor expenses as a percentage of restaurant revenues for the
year ended December 31, 1996, increased to 25.9% from 25.8% in 1995. The
increase in restaurant labor as a percentage of restaurant revenues was
primarily a result of increased labor costs of new Crab House restaurants.

Other restaurant operating expenses increased $19,413,943, or 61.3%, from
$31,662,794 to $51,076,737 for the year ended December 31, 1996, compared to
the prior year, as a result of increased revenues and the opening of new
restaurants in 1996. Such expenses increased as a percentage of restaurant
revenues to approximately 21.9% in 1996 from 21.2% in 1995 primarily a result
of higher occupancy and other operating costs of new Crab House restaurants.

Depreciation and amortization expenses increased $5,160,809, or 66.0%, from
$7,817,266 to $12,978,075 for the year ended December 31, 1996, compared to
the prior year. The increase was primarily due to the addition of new
restaurants and purchases of new equipment.

General and administrative expenses increased $1,009,657, or 12.0%, from
$8,436,884 to $9,446,541 for the year ended December 31, 1996, compared to the
prior year, and decreased as a percentage of total revenues to 4.0% from 5.4%.
During 1995 and the first seven months of 1996 Landry's and Bayport operated
as separate companies and were, therefore, incurring separate general and
administrative expenses to support each company's separate growth plans.
However, upon the consummation of the Bayport Merger, Bayport's corporate
offices were closed and substantially all of Bayport's office employees were
terminated. As a result, general and administrative expenses were less than
the combined expenses of the separate companies, causing the decrease in
general and administrative expenses as a percentage of sales in 1996 compared
to 1995. In August 1996, merger costs were incurred related to the Bayport
Merger. These costs primarily include investment banking fees, legal and
accounting fees, printing, filing and related costs, employee severance
payments and write-off of specific assets which included duplicative
facilities locations and certain non-operating properties.

Net interest income increased by $775,350 from $1,604,081 to $2,379,431 in
1996 compared to 1995. The increase resulted primarily from the Company's
investment of excess cash in interest bearing securities subsequent to the
Company's public stock offerings. Other expenses were not deemed significant.

Provision for income taxes decreased by $5,166,399 from $5,945,850 in 1995
to $779,451 in 1996 primarily due to the change in the Company's income.

LIQUIDITY AND CAPITAL RESOURCES

In 1995, the Company, exclusive of Bayport, spent approximately $71 million
on capital expenditures. Since 1993, the Company has funded capital
expenditures primarily from proceeds of common stock offerings, and in part
from cash flow from operations. Separately, Bayport spent approximately $19
million in 1995 on capital expenditures, which was primarily funded out of
borrowings.

In 1996, the combined capital expenditures of the Company were approximately
$64 million. The Company funded capital expenditures out of existing cash
balances and cash flow from operations during 1996. Bayport's portion of
capital expenditures was funded, up to the date of the Bayport Merger, out of
additional borrowings. In addition, the Company incurred merger costs related
to the acquisition of Bayport and repaid the pre-merger outstanding
indebtedness of Bayport. As a result, the combined entities cash balances
declined from approximately $119 million at June 30, 1996, immediately prior
to the merger, to approximately $57 million at December 31, 1996, and the
majority of the outstanding debt of the combined companies was repaid. For the
year ended December 31, 1997, the capital expenditures of the Company were
approximately $136 million which were primarily funded out of existing cash
balances, cash flow from operations and borrowings.

The Company has a $125 million line of credit from a syndicate of banks
which expires in June 2000. The line of credit is available for expansion,
acquisitions and general corporate purposes. At December 31, 1997, the Company
had $50 million outstanding under this credit facility at an average interest
rate of 6.65% and had cash balances aggregating approximately $17.2 million.
These borrowings were used to fund capital expenditures and working capital.

The Company's current development plans are to open approximately 45
restaurants during 1998, of which seven were opened as of February 19, 1998,
and 31 were under construction or development. During 1997, the Company
commenced construction on a development plan for a waterfront area in South
Houston (the "Kemah Development"). The Kemah Development includes up to eight
restaurant sites, with additional light retail and hotel/motel facilities in a
master planned development. The Company currently operates five restaurants in
this development, and has not determined which portions of the remaining
development it will operate or sublease. Further, the Company is evaluating
the feasibility of building a multistory office building for the Company's
corporate headquarters. Due to the Company's rapid growth and increasing
office needs, the Company has experienced difficulty in obtaining adequate
office space within the desired immediate area of its existing office. To this
end, in July 1997 the Company acquired a four acre undeveloped land parcel in
Houston.

Exclusive of any acquisitions or large real estate purchases, the Company
currently expects to incur capital expenditures of approximately $125 million
in l998, depending upon the actual timing of construction expenditures, the
number of land purchases, the amount of expenditures spent on remodels, and
the mix of leased, owned or conversion type locations, and the actual timing
and number of restaurants built. The Company expects that its average per unit
investment cost, excluding real estate costs, capitalized interest costs and
pre-opening expenses, will approximate $1.9 million. However, individual unit
investment costs can vary from management's expectations due to a variety of
factors. Moreover, average unit investment costs are dependent upon many
factors, including competition for sites, location, construction costs, unit
size and the mix of conversions, build-to-suit, leased and fee-owned
locations. The Company currently anticipates that it will continue to purchase
a portion of its new restaurant locations, which are expected to be more
costly than leased locations. Separately, the Company may spend up to $12 to
$15 million on the Kemah Development and approximately $5 million on the
corporate headquarters development, both of which will be spread over the next
several fiscal years. The Company is reviewing its alternative options related
to the corporate headquarters development, including the viability of a sale-
leaseback, an outright sale and other options. The Company believes that
existing cash balances, cash generated from operations and potential financing
sources will be sufficient to satisfy the Company's working capital and
planned capital expenditures through 1998.

SEASONALITY AND QUARTERLY RESULTS

The Company's business is seasonal in nature, with revenues and, to a
greater degree, operating profits being lower in the first and fourth quarters
than in other quarters due to the Company's reduced winter volumes. The
Company has and continues to open restaurants in highly seasonal tourist
markets and has further noted that the Joe's Crab Shack concept restaurants
tend to experience an even greater seasonality and sensitivity to weather. The
timing of unit openings can and will affect quarterly results. The Company
anticipates some moderation in revenues from the initial volumes of new units.

IMPACT OF INFLATION

Management does not believe inflation has had a significant effect on the
Company's operations during the past several years. Management believes the
Company has historically been able to pass on increased costs through menu
price increases, but there can be no assurance that it will be able to do so
in the future. Future increases in land and construction costs could adversely
affect the Company's ability to expand.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements are set forth herein commencing on page 19.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

During the fiscal years 1995, 1996, and 1997 and through the date of
this report, there have been no changes in the Company's independent public
accountants, nor have any disagreements with such accountants or reportable
events occurred.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information relating to directors and executive officers of
the Company is incorporated by reference herein from the Company's definitive
Proxy Statement in connection with its Annual Meeting of Stockholders, which
proxy statement will be filed with the Securities and Exchange Commission not
later than 120 days after the close of the Company's fiscal year ended December
31, 1997.

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

The following financial statements of the Company are set forth
herein commencing on page 17:

Reports of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended December
31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements

2. Financial Statement Schedules - Not applicable.

3. Exhibits

A list of exhibits required to be filed as part of this report on
Form 10-K is set forth in the "Exhibit Index" which immediately
precedes such exhibits, and is incorporated herein by reference.

(b) Reports on Form 8-K

Not Applicable.

All exhibits required by item 601 are listed in the accompanying
"Exhibit Index" described in (a)3. above.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Landry's Seafood Restaurants, Inc.:

We have audited the accompanying consolidated balance sheets of Landry's Seafood
Restaurants, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of income, stockholders'
equity and cash flows for each of three years in the period ended December 31,
1997. We did not audit the financial statements for the year ended December 25,
1995 of Bayport Restaurant Group, Inc., a company acquired during 1996 in a
transaction accounted for as a pooling of interests, as discussed in Note 7.
Such statements are included in the consolidated financial statements of
Landry's Seafood Restaurants, Inc., and reflect total revenues of 34 percent of
the consolidated total for the year ended December 31, 1995. These statements
were audited by other auditors whose report has been furnished to us and our
opinion, insofar as it relates to amounts included for Bayport Restaurant Group,
Inc., is based solely upon the report of such other auditors. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Landry's Seafood Restaurants, Inc., and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Houston, Texas
February 16, 1998

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Bayport Restaurant Group, Inc.

We have audited the accompanying consolidated balance sheet of Bayport
Restaurant Group, Inc. and subsidaries as of December 25, 1995, and the related
consolidated statements of earnings, stockholders' equity and cash flows for the
year ended December 25, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Bayport Restaurant
Group, Inc. and subsidaries as of December 25, 1995, and the consolidated
results of their operations and their consolidated cash flows for the year ended
December 25, 1995, in conformity with generally accepted accounting principles.

Grant Thornton LLP

Miami, Florida
March 8, 1996

LANDRY'S SEAFOOD RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS

December 31,
-----------------
ASSETS 1997 1996
------ ---- ----

CURRENT ASSETS:

Cash and cash equivalents $ 17,234,130 $ 57,267,986
Accounts receivable - trade and other 8,381,965 10,575,874
Inventory 28,224,551 11,965,894
Other current assets 8,361,755 5,602,727
------------ ------------
Total current assets 62,202,401 85,412,481
------------ ------------

PROPERTY AND EQUIPMENT, net 313,341,200 189,895,392
GOODWILL, net of amortization of $1,120,000
and $1,006,000 in 1997 and 1996, respectively 2,933,590 3,047,950
OTHER ASSETS, net 3,804,294 2,842,892
------------ ------------
Total assets $382,281,485 $281,198,715
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES:

Accounts payable $ 18,050,183 $ 10,655,053
Accrued liabilities 9,022,274 9,888,159
Current portion of long-term notes
and other obligations 71,819 492,555
------------ ------------
Total current liabilities 27,144,276 21,035,767
------------ ------------

LONG-TERM NOTES AND
OTHER OBLIGATIONS, NET OF CURRENT PORTION 50,234,528 221,184
DEFERRED INCOME TAXES AND
OTHER LIABILITIES 8,164,954 3,494,353
------------ ------------
Total liabilities 85,543,758 24,751,304
------------ ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

Preferred stock, $0.01 par value, 2,000,000
shares authorized, 2,702 and 28,398 issued and
outstanding, respectively 27 284
Common stock, $0.01 par value, 60,000,000 shares
authorized, 26,004,449 and 25,225,356 issued and
outstanding, respectively 260,044 252,253
Additional paid-in capital 250,935,805 238,083,067
Retained earnings 45,541,851 18,111,807
------------ ------------
Total stockholders' equity 296,737,727 256,447,411
------------ ------------
Total liabilities and stockholders' equity $382,281,485 $281,198,715
============ ============

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

LANDRY'S SEAFOOD RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------

REVENUES:
Restaurant $311,672,557 $232,596,509 $149,736,680
Processing plant ---- 3,510,368 7,883,637
------------ ------------ ------------
Total revenues 311,672,557 236,106,877 157,620,317
OPERATING COSTS AND EXPENSES:
Cost of sales 95,639,436 72,303,748 47,978,164
Restaurant labor 80,837,054 60,248,830 38,594,818
Other restaurant operating expenses 66,227,204 51,076,737 31,662,794
Merger costs ---- 25,971,815 ----
Depreciation and amortization 17,079,382 12,978,075 7,817,266
Processing plant cost of sales and operating expenses ---- 3,857,224 7,685,788
General and administrative expenses 10,516,493 9,446,541 8,436,884
------------ ------------ ------------
Total operating costs and expenses 270,299,569 235,882,970 142,175,714

OPERATING INCOME 41,372,988 223,907 15,444,603

OTHER (INCOME) EXPENSE:
Interest (income) expense, net (1,062,417) (2,379,431) (1,604,081)
Other, net (394,270) 318,314 55,152
------------ ------------ ------------
(1,456,687) (2,061,117) (1,548,929)

INCOME BEFORE INCOME TAXES 42,829,675 2,285,024 16,993,532
PROVISION FOR INCOME TAXES 15,399,631 779,451 5,945,850
------------ ------------ ------------

NET INCOME $ 27,430,044 $ 1,505,573 $ 11,047,682
============ ============ ============

NET INCOME PER COMMON SHARE - BASIC $1.07 $0.06 $0.58
============ ============ ============

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC 25,518,000 23,360,000 19,051,000
============ ============ ============

NET INCOME PER COMMON SHARE - DILUTED $1.03 $0.06 $0.57
============ ============ ============

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING - DILUTED 26,600,000 24,100,000 19,300,000
============ ============ ============

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

LANDRY'S SEAFOOD RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY

Preferred Stock Common Stock Additional
--------------- ------------------- Paid-In Retained
Shares Amount Shares Amount Capital Earnings Total
------ ------ ------ ------ ------- -------- -----

BALANCE, January 1, 1995 127,577 $1,276 16,567,267 $165,673 $ 77,240,400 $ 5,558,553 $ 82,965,902

Net income ---- ---- ---- ---- ---- 11,047,681 11,047,681

Issuance of common stock,
net of offering costs ---- ---- 3,179,604 31,796 49,919,651 ---- 49,951,447

Conversion of preferred stock (19,186) (192) 19,186 192 ---- ---- ----

Exercises of stock options
and income tax benefit ---- ---- 98,970 989 769,341 ---- 770,330

Other ---- ---- ---- ---- 55,191 ---- 55,191
------- ------ ---------- -------- ------------ ----------- ------------

BALANCE, December 31, 1995 108,391 1,084 19,865,027 198,650 127,984,583 16,606,234 144,790,551
------- ------ ---------- -------- ------------ ----------- ------------

Net income ---- ---- ---- ---- ---- 1,505,573 1,505,573

Issuance of common stock,
net of offering costs ---- ---- 4,890,000 48,900 105,264,100 ---- 105,313,000

Conversion of preferred stock (79,993) (800) 79,993 800 ---- ---- ----

Exercises of stock options
and income tax benefit ---- ---- 390,336 3,903 4,834,384 ---- 4,838,287
------- ------ ---------- -------- ------------ ----------- ------------

BALANCE, December 31, 1996 28,398 284 25,225,356 252,253 238,083,067 18,111,807 256,447,411
------- ------ ---------- -------- ------------ ----------- ------------

Net income ---- ---- ---- ---- ---- 27,430,044 27,430,044

Conversion of preferred stock (25,696) (257) 25,696 257 ---- ---- ----

Exercises of stock options
and income tax benefit ---- ---- 753,397 7,534 12,852,738 ---- 12,860,272
------- ------ ---------- -------- ------------ ----------- ------------

BALANCE, December 31, 1997 2,702 $ 27 26,004,449 $260,044 $250,935,805 $45,541,851 $296,737,727
======= ====== ========== ======== ============ =========== ============

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

LANDRY'S SEAFOOD RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------- ------------ -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 27,430,044 $ 1,505,573 $ 11,047,682
Adjustments to reconcile net income to net
cash provided by operating activities:
Non-cash merger costs ---- 17,623,337 ----
Depreciation and amortization 17,079,382 12,978,075 7,817,266
Change in assets and liabilities:
(Increase) decrease in trade and other
receivables 2,193,909 (7,495,694) (1,188,181)
(Increase) decrease in inventory (16,158,657) (4,064,313) (4,747,247)
(Increase) decrease in other assets (7,619,919) (5,682,060) (6,670,459)
Increase (decrease) in accounts payable and
accrued and other liabilities 13,890,995 (435,203) 14,077,011
------------- ------------ ------------
Total adjustments 9,385,710 12,924,142 9,288,390
------------- ------------ ------------
Net cash provided by operating activities 36,815,754 14,429,715 20,336,072

CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (135,890,725) (64,468,539) (90,104,574)
Proceeds from maturity and sale of
securities ---- ---- 5,166,362
Other (976,153) (1,253,171) (451,596)
------------- ------------ ------------
Net cash used in investing activities (136,866,878) (65,721,710) (85,389,808)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock - 105,313,000 49,968,756
Proceeds from exercise of stock options 10,182,106 3,564,758 598,209
Notes payable borrowings 50,000,000 10,747,621 15,829,106
Payments on notes payable and borrowings (164,838) (28,767,119) (3,547,202)
------------- ------------ ------------
Net cash provided by financing activities 60,017,268 90,858,260 62,848,869

NET INCREASE (DECREASE) IN CASH (40,033,856) $ 39,566,265 $ (2,204,867)
CASH AT BEGINNING OF YEAR 57,267,986 17,701,721 19,906,588
------------- ------------ ------------
CASH AT END OF YEAR $ 17,234,130 $ 57,267,986 $ 17,701,721
============= ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for--
Interest $ 775,000 $ 162,000 $ 873,000
Income taxes $ 3,409,000 $ 5,320,000 $ 5,764,000

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

LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. PRINCIPLES OF CONSOLIDATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The accompanying financial statements include the consolidated
accounts of Landry's Seafood Restaurants, Inc., a Delaware holding company (the
"Company") and its wholly owned subsidiaries and partnership as of and for the
years ended December 31, 1997 and 1996. The Company owns and operates seafood
restaurants primarily under the trade names Landry's Seafood House, Joe's Crab
Shack and The Crab House. All significant intercompany accounts and transactions
have been eliminated in consolidation.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out
method) or market and consist primarily of food and beverages.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for major
renewals and betterments are capitalized while maintenance and repairs are
expensed as incurred.

The Company computes depreciation using the straight-line method. The
estimated lives used in computing depreciation are as follows :

Years
-----
Buildings and improvements ........... 5-40
Furniture, fixtures and equipment .... 4-10
Leasehold improvements ............... Shorter of 30 years or lease term

PRE-OPENING COSTS

The direct and incremental costs incurred in connection with the
commencement of each restaurant's operations, substantially comprised of
training-related costs, are capitalized as pre-opening costs. Amounts
capitalized are being amortized using the straight-line method over 12 months
and are included in other current assets on the consolidated balance sheets.
Pre-opening costs, net of amortization, as of December 31, 1997 and 1996, were
$5,162,503 and $1,624,840, respectively.

DEVELOPMENT COSTS

Certain direct costs are capitalized in conjunction with site
selection for planned future restaurants and for acquiring restaurant
properties. Direct and certain indirect costs, including interest, are
capitalized in conjunction with constructing new restaurants. These costs are
included in property and equipment in the accompanying consolidated balance
sheets and are amortized over the life of the related building and leasehold
interest. Costs related to abandoned site selections and general site selection
costs which cannot be identified with specific restaurants are charged to
operations.

GOODWILL AND NON-COMPETE AGREEMENTS

Goodwill and non-compete agreements are amortized over 30 years and 15
years (or the life of the related agreement), respectively. These amounts are
included in goodwill and other assets in the accompanying consolidated balance
sheets, respectively.

LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NEW ACCOUNTING PRINCIPLES

The Company, as required, adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share." SFAS No. 128 revised the
historical methodology used in computing earnings per share (EPS) such that the
computations required for primary and fully diluted EPS were replaced with basic
and diluted EPS. Basic EPS is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the year. Diluted
EPS is computed in the same manner as fully diluted EPS, except that, among
other changes, the average share price for the period is used in all cases when
applying the treasury stock method to potentially dilutive outstanding options.
All earnings per share amounts presented herein have been restated to reflect
the adoption of SFAS No. 128.

CASH FLOW REPORTING

For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with original maturities of three months
or less to be cash equivalents.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results may differ from those estimates.

2. ACCRUED LIABILITIES:

Accrued liabilities are comprised of the following:

December 31,
------------
1997 1996
---- ----
Payroll and related costs......................... $2,166,035 $1,431,765

Taxes, other than payroll and income taxes........ 4,001,719 2,352,870

Deferred and state income taxes................... 974,279 300,000

Merger costs...................................... ---- 2,251,923

Other............................................. 1,880,241 3,551,601
---------- ----------

$9,022,274 $9,888,159
========== ==========

LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. INCOME TAXES:

An analysis of the provision for income taxes for the years ended December
31, 1997, 1996 and 1995 is as follows:

1997 1996 1995
----------- ---------- ----------

Current income taxes.................. $ 8,558,391 $ 300,000 $3,645,760
Deferred income taxes................. 6,841,240 479,451 2,300,090
----------- ---------- ----------
Total $15,399,631 $ 779,451 $5,945,850
=========== ========== ==========

Deferred income tax liabilities and assets as of December 31, 1997 and 1996 are
comprised of the following:
1997 1996
----------- ----------
Deferred Liabilities:

Current:
Pre-opening costs and other current
items............................... $ 674,000 $ 200,000
----------- ----------
Non-current:
Property, plant and equipment
and other assets................... 9,765,000 6,102,000
----------- ----------
$10,439,000 $6,302,000
=========== ==========
Deferred Assets:

Non-current:
AMT credit, FICA credit
carry forward and other........... $ 636,000 $1,196,000

Net operating loss
carry forward..................... 961,000 1,439,000
----------- ----------

1,597,000 2,635,000
----------- ----------

Total................................... $ 8,842,000 $3,667,000
=========== ==========

The Company's effective tax rate differs from the federal statutory rate as
follows:

Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----

Statutory rate.......................................... 35.0% 34.0% 34.0%

FICA credit on tips and targeted job credit............. (2.3) (34.6) (2.5)

Goodwill amortization................................... --- 2.9 0.2

Other (including state taxes)........................... 3.3 31.8 3.3
--- ---- ---
36.0% 34.1% 35.0%
==== ==== ====

Accounts receivable, as of December 31, 1997 and 1996 includes income tax receivables of $2,066,000 and $6,387,000, respectively.

LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. PROPERTY AND EQUIPMENT:

Property and equipment is comprised of the following:

December 31,
----------------------------
1997 1996
------------- -------------
Land............................... $ 60,668,579 $ 23,643,858

Buildings and 45,357,143 27,911,331
improvements......................

Furniture, fixtures and 81,430,962 49,929,414
equipment.........................

Leasehold 139,672,349 92,308,705
improvements......................

Construction in 17,526,136 14,971,135
progress.......................... ------------ ------------

344,655,169 208,764,443

Less-accumulated depreciation and (31,313,969) (18,869,051)
amortization...................... ------------ ------------

Property and equipment, $313,341,200 $189,895,392
net............................... ============ ============

5. DEBT:

The Company has a $125 million unsecured line of credit from a syndicate of
banks which matures in June 2000, and is available for expansion, acquisitions,
and other general corporate purposes. Interest on the credit facility is
generally payable quarterly at the Eurodollar rate plus 0.6% or the bank's base
rate. The credit facility is governed by certain financial covenants, including
minimum tangible net worth, a maximum leverage ratio and a minimum fixed charge
coverage ratio. At December 31, 1997 the Company had $50 million outstanding
under this credit facility at an average interest rate of 6.65%.

The Company retired substantially all of Bayport's outstanding debt upon
the consummation of the merger.

LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Interest (income) expense, net includes the following:

Year ended December 31,
---------------------------------
1997 1996 1995
---- ---- ----

Interest expense...... $ 55,082 $ 693,376 $ 527,083
Interest income....... (1,117,499) (3,072,807) (2,131,164)
----------- ----------- -----------
$(1,062,417) $(2,379,431) $(1,604,081)
=========== =========== ===========

6. COMMITMENTS AND CONTINGENCIES:

LEASE COMMITMENTS

The Company has entered into lease commitments for restaurant facilities as
well as certain fixtures, equipment and leasehold improvements. Under most of
the facility lease agreements, the Company pays taxes, insurance and maintenance
costs in addition to the lease payments. Certain facility leases also provide
for additional contingent rentals based on a percentage of sales in excess of a
minimum amount. Rental expense under operating leases was approximately
$13,212,000, $10,639,000 and $7,444,000 during 1997, 1996, and 1995,
respectively.

LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The aggregate amounts of minimum operating lease commitments maturing in
each of the five years subsequent to and thereafter at December 31, 1997, are as
follows:

1998............................. $ 13,070,000
1999............................. 12,993,000
2000............................. 12,920,000
2001............................. 13,031,000
2002............................. 12,991,000
Thereafter....................... 151,455,000
------------
Total minimum rentals....... $216,460,000
============

LITIGATION AND CLAIMS

The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. Management believes, based on discussions with
its legal counsel and in consideration of accruals recorded, that the outcome of
all legal actions and claims will not have a material adverse effect upon the
consolidated financial position and results of operations of the Company.

INSURANCE

Through July 23, 1997, the Company was self-insured with respect to
potential worker's compensation claims in Texas, but retained excess employer's
indemnity coverage for any claim in excess of $100,000. Commencing July 24,
1997, the Company subscribed to worker's compensation insurance in Texas, as it
has done in states other than Texas. The Company maintains a $250,000 aggregate
deductible for losses in most states. Management believes that any claims paid
under its worker's compensation program will not have a material adverse effect
upon the consolidated financial position and results of operations of the
Company because of the Company's historically low level of claims.

7. BUSINESS COMBINATION

On August 9, 1996, the Company, under an Agreement and Plan of Merger (the
"Merger Agreement") exchanged 1.8 million newly issued common shares and .1
million newly issued preferred shares for all of the outstanding common and
preferred shares of Bayport Restaurant Group, Inc. ("Bayport"). Accordingly, a
wholly-owned subsidiary of the Company merged with and into Bayport, resulting
in Bayport becoming a wholly-owned subsidiary of the Company (the "Merger").
Bayport operated 18 full-service casual dining seafood restaurants under the
name "The Crab House". Bayport's Crab House restaurants are located primarily
in Florida.

The exchange of shares was accounted for as a pooling of interests, and,
accordingly, the accompanying consolidated financial statements have been
restated to include the accounts and operations of Bayport for all periods
presented. Adjustments to the balance sheet accounts of Bayport to account for
the merger exchange ratios of common and preferred stock include
reclassifications of stockholders' equity account balances for the restatement
to the equivalent shares issued for Bayport shares as a result of the merger.
Separate results for the combining entities for the most recent interim period
prior to acquisition (six months ended June 30, 1996), and for the year ended
December 31, 1995 are as follows (amounts in thousands, except per share data.)

LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, December 31,
1996 1995
---- ----
(unaudited)
REVENUES:
Previously reported $ 80,999 $104,017
Bayport 38,357 53,603
-------- --------
Combined: $119,356 $157,620
======== ========

NET EARNINGS:
Previously reported $ 7,937 $ 9,584
Bayport 499 1,464
-------- --------
Combined: $ 8,436 $ 11,048
======== ========

WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
SHARE EQUIVALENTS
OUTSTANDING:
Previously reported 19,950 17,320
Bayport 1,957 1,980
-------- --------
Combined: 21,907 19,300
======== ========

EARNINGS PER SHARE:
Previously reported $ 0.40 $ 0.55
Bayport (0.01) 0.02
-------- --------
Combined: $ 0.39 $ 0.57
======== ========

Basic and diluted earnings per share were not materially different.

Merger costs are non-recurring costs related to the merger with Bayport. These
costs primarily include investment banking fees, legal and accounting fees,
printing, filing and related costs, employee severance payments and the write-
off of specific assets which represented duplicative facilities or non-operating
properties.

8. STOCKHOLDERS' EQUITY:

In May 1996, the Company completed a public offering of 4,890,000 shares of
the Company's common stock. Net proceeds of the common stock offering were
approximately $105,000,000. In May 1995, the Company declared a two-for-one
stock split in the form of a dividend on the $.01 par value common stock. The
split was payable to stockholders of record as of June 15, 1995, and was
distributed and effective on June 23, 1995. In April 1995, the Company
completed a public offering of Common Stock for the sale of an aggregate
3,179,604 shares of Common Stock by the Company. Net proceeds to the Company
were approximately $50,000,000, after deducting offering costs.

LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In 1993, the Company established two stock option plans (the Stock Option
Plans), as amended, pursuant to which options may be granted to eligible
employees and nonemployee directors of the Company or its subsidiaries for the
purchase of an aggregate of 2,750,000 shares of common stock of the Company.
The Stock Option Plans are administered by the Stock Option Committee of the
Board of Directors (the Committee), which determines at its discretion, the
number of shares subject to each option granted and the related purchase price,
vesting and option periods. The Committee may grant either nonqualified stock
options or incentive stock options, as defined by the Internal Revenue Code of
1986, as amended.

In June 1995, the Company, with stockholder approval, adopted the 1995
Flexible Incentive Plan (Flex Plan) for key employees of the Company. Under the
Flex Plan, eligible employees may receive stock options, stock appreciation
rights, restricted stock, performance awards, performance stock and other
awards, as defined by the Board of Directors or an appointed committee. The
aggregate number of shares of common stock which may be issued under the Flex
Plan (or with respect to which awards may be granted) may not exceed 1,000,000
shares.

Bayport, prior to the merger, had two Incentive Stock Option Plans under
which options were granted to Bayport employees at an option price which was
equal to or in excess of the market price of the stock on the date of grant. In
addition, various non-qualified options were granted to key Bayport employees at
an option price at least equal to the market price of the stock on grant date.
Stock options granted by Bayport were generally exercisable over two to five
year periods. Further, Bayport had issued warrants which were exercisable
through January 2002. As a result of the merger, the outstanding options and
warrants of Bayport are exercisable into common stock of Landry's at the given
merger exchange ratios.

The stock option plans are accounted for using APB Opinion No. 25, and no
compensation expense has been recorded. If compensation costs for the Company
had been determined using the alternative accounting method based on the fair
value prescribed by SFAS 123, the Company's proforma net income (loss) for 1997,
1996 and 1995 would have been approximately $24,055,000, $(1,511,000) and
$9,642,000, respectively, and the Company's proforma earnings (loss) per share -
basic would have been $0.94, $(0.06) and $0.51, and per share diluted - $0.89,
$(0.06), and $0.49, respectively. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model;
amortization over the respective vesting periods; no dividends; expected lives
of 6.8, 9.5 and 7.6 years for 1997, 1996 and 1995, respectively; expected stock
price volatility of approximately 40% and an interest rate of approximately 7%.
The weighted average fair value of options granted during 1997, 1996 and 1995
was $7.40, $9.95 and $6.16, respectively. These proforma results exclude
consideration of options granted prior to January 1, 1995, and may not be
representative of that to be expected in future years.

In connection with Company's stock options, certain stock options
aggregating approximately 800,000 shares, granted to a number of restaurant
general managers, operations personnel and one officer at a weighted average
price of $18.02, were repriced to $12.88 during the three month period ended
June 30,1997. Approximately 849,000 options were granted to a variety of
management employees during 1997, at approximately $12.88 per share.

At December 31, 1997, options for 3,095,619 shares were outstanding
(813,622 of which were exercisable) at prices ranging from $6.00 to $24.25 per
share. As of December 31, 1997, all options have been granted at the stock
price on the grant date and are generally exercisable beginning one year from
the date of grant with annual vesting periods.

LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Options outstanding are as follows:

1997 1996 1995
-------------------- --------------------- ---------------------
Wtd. Average Wtd. Average Wtd. Average
Shares Ex. Price Shares Ex. Price Shares Ex. Price
------ --------- ------ --------- ------ ---------

Options outstanding, beginning of year 3,262,812 $15.13 2,834,514 $13.99 1,596,522 $10.78

Granted 1,644,600 12.96 871,357 15.85 1,652,727 9.91

Exercised (753,397) 14.78 (390,336) 12.38 (98,970) 7.80

Terminated (1,058,396) 18.40 (52,723) 13.99 (315,765) 11.84
---------- ------- ---------
Options outstanding, December 31 3,095,619 $13.30 3,262,812 $15.13 2,834,514 $13.99
========== ====== ========= ====== ========= ======
Options exercisable, December 31 813,622 $14.86 775,672 $17.89 276,005 $17.01
========== ====== ========= ====== ========= ======

9. RELATED PARTY TRANSACTIONS

On or about January 4, 1996 Fertitta Hospitality, which is jointly owned by
Mr. Tilman J. Fertitta, Chairman of the Company, and his wife, acquired certain
properties in Galveston, Texas in connection with the acquisition of a major
resort area. A portion of the property acquired by Fertitta Hospitality
contained a leased restaurant site upon which a Landry's Seafood Restaurant was
located and upon which the terms of the lease relating to that restaurant had
been negotiated in 1993 at arm's-length between Landry's and the previous
unaffiliated third party (the Woodlands Corporation, a subsidiary of Mitchell
Energy and Development Corp.) owner/lessor. Upon the acquisition by Fertitta
Hospitality, Landry's continued to pay rent under the original terms of the
lease. The rent was approved in 1993 by the Company's Board of Directors at the
time of the original lease with the unaffiliated party. In May 1997 the
restaurant property, including land, building and improvements was purchased by
the Company for $3,077,000.

LANDRY'S SEAFOOD RESTAURANTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. QUARTERLY FINANCIAL DATA (UNAUDITED):

The following is a summary of unaudited quarterly consolidated results of
operations (in thousands, except per share data) for 1997, 1996 and 1995:

March 31, June 30, September 30, December 31,
1997 1997 1997 1997
---- ---- ---- ----

Quarter Ended:

Restaurant revenues $64,301 $81,182 $ 89,808 $76,382

Operating income $ 8,578 $12,204 $ 13,037 $ 7,554

Net income $ 5,794 $ 8,002 $ 8,574 $ 5,060

Net income per share (basic) $ 0.23 $ 0.31 $ 0.33 $ 0.20
Net income per share (diluted) $ 0.22 $ 0.30 $ 0.32 $ 0.19

March 31, June 30, September 30, December 31,
1996 1996 1996 1996
---- ---- ---- ----
Quarter Ended:

Revenues:

Restaurant $51,562 $64,284 $ 64,390 $52,361

Processing plant 1,509 2,001 ---- ----
--------- -------- -------- -------
Total revenues $53,071 $66,285 $ 64,390 $52,361
--------- -------- -------- -------
Merger expenses $ ---- $ ---- $ 25,972 $ ----

Operating income (loss) $ 5,488 $ 7,564 $(17,672) $ 4,844

Net income (loss) $ 3,459 $ 4,978 $(10,579) $ 3,648

Net income (loss) per share (basic) $ 0.17 $ 0.22 $ (0.42) $ 0.15
Net income (loss) per share (diluted) $ 0.17 $ 0.22 $ (0.42) $ 0.14

March 31, June 30, September 30, December 31,
1995 1995 1995 1995
---- ---- ---- ----
Quarter Ended:

Revenues:

Restaurant $31,355 $39,299 $ 41,443 $37,640

Processing plant 1,655 1,746 2,343 2,139
--------- -------- -------- -------
Total revenues $33,010 $41,045 $ 43,786 $39,779
--------- -------- -------- -------
Operating income $ 3,505 $ 4,318 $ 4,820 $ 2,802

Net income $ 2,398 $ 3,206 $ 3,515 $ 1,929

Net income per share (basic) $ 0.14 $ 0.17 $ 0.18 $ 0.10

Net income per share (diluted) $ 0.14 $ 0.17 $ 0.17 $ 0.09

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized in the City of Houston, State of Texas, on the 20th
day of February, 1998.

Landry's Seafood Restaurants, Inc.

/s/ TILMAN J. FERTITTA
----------------------------------
Tilman J. Fertitta
Chairman of the Board/President
and Chief Executive Officer

Each person whose signature appears below constitutes and appoints Tilman J.
Fertitta, Steven L. Scheinthal and Paul S. West, and each of them (with full
power to each of them to act alone), his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign on his behalf
individually and in each capacity stated below any amendment to this Annual
Report on Form 10-K and any amendment thereto and to file the same, with all
exhibits thereto and other documents in connection therewith with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents and either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons in the capacities and on the dates
indicated.

Signature Title Date
--------- ----- ----

Chairman, President and Chief February 20, 1998
/s/ TILMAN J. FERTITTA Executive Officer, Principal
- ---------------------------- Executive Officer and Director
Tilman J. Fertitta

Executive Vice President , Chief February 20, 1998
/s/ E.A. JAKSA, JR. Operating Officer and Director
- ----------------------------
E.A. Jaksa, Jr.

Vice President, Principal Financial February 20, 1998
/s/ PAUL S. WEST Officer, Principal Accounting
- ---------------------------- Officer and Director
Paul S. West

Vice President, Secretary, General February 20, 1998
/s/ STEVEN L. SCHEINTHAL Counsel and Director
- ----------------------------
Steven L. Scheinthal

/s/ JAMES E. MASUCCI Director February 20, 1998
- ----------------------------
James E. Masucci

/s/ JOE MAX TAYLOR Director February 20, 1998
- ----------------------------
Joe Max Taylor

EXHIBIT INDEX
-------------

Certain of the exhibits to this report on Form 10-K are hereby incorporated
by reference to the Company's Registration Statement on Form S-1 No. 33-65498
and all amendments thereto and the Company's Form 10-Q for the quarterly period
ended June 30, 1995, May 9, 1995 Proxy Statement, the June 25, 1997 Form 8-K,
the 1995 Form 10-K and the May 1996 Form S-4, as filed with the Securities and
Exchange Commission. Such exhibits are denoted with the letter "A," "B", "C,"
"D," "E" and "F" respectively. Exhibits denoted by * are filed herewith.

Exhibit
No. Exhibit
------- -------

2 Agreement and Plan of Merger among Landry's Seafood Restaurants,
Inc., Landry's Acquisition, Inc., and Bayport Restaurant Group,
Inc. - F-

3.1 Certificate of Incorporation of Landry's Seafood Restaurants, Inc. as
filed with the Delaware Secretary of State on June 23, 1993, as
amended -A-(See Exhibit 3.1) and -B-

3.2 Amendment to Certificate of Incorporation -A-

3.3 Bylaws of Landry's Seafood Restaurants, Inc. -A- (See Exhibit 3.2)

4 Specimen Common Stock Certificate, $.01 par value of Landry's Seafood
Restaurants, Inc. -A-

10.1 1993 Stock Option Plan ("Plan") -C-

10.2 Form of Incentive Stock Option Agreement under the Plan -A- (See
Exhibit 10.61)

10.3 Form of Non-Qualified Stock Option Agreement under the Plan -A-
(See Exhibit 10.62)

10.4 Non-Qualified Formula Stock Option Plan for Non-Employee Directors
("Directors' Plan") -A-

10.5 First Amendment to Non-Qualified Formula Stock Option Plan for Non-
Employee Directors -C-

10.6 Form of Stock Option Agreement for Directors' Plan -A- (See
Exhibit 10.64)

10.7 Form of Personal Service and Employment Agreement of Tilman J.
Fertitta -A- (See Exhibit 10.65)

10.8 1995 Flexible Incentive Plan -C-

10.9 Form of Consulting Services Agreement between Landry's Management,
L.P. and Fertitta Hospitality -E-

10.10 Form of Stock Option Agreement between Landry's Seafood Restaurants,
Inc. and Tilman J. Fertitta -E-

10.11 Business Loan Agreement dated June 19, 1997 between Landry's Seafood
Restaurants, Inc. and Bank of America, Texas, N.A., as Agent, Issuing
Bank and a Bank -D-

*11 Statement regarding computation of per share earnings - fully
diluted -

*21 Subsidiaries of Landry's Seafood Restaurants, Inc.

*23 Consent of Arthur Andersen LLP

*23.1 Consent of Grant Thornton LLP

*24 Power of Attorney - (See page 33)

*27 Financial Data Schedule