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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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



For the fiscal year ended December 31, 2004 or
.



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from

to
 .



* Commission file number 000-22150



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LANDRYS RESTAURANTS, INC.

(Exact Name of the Registrant as Specified in
Its Charter)



|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|DELAWARE                                                       |  | 76-0405386                       
|(State or Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification No.)
|                                                               | 
|1510 WEST LOOP SOUTH                                           |  |                                  
|HOUSTON, TX 77027                                              |  | 77027                            
|(Address of Principal Executive Offices)                       |  | (Zip Code)                       



(713) 850-1010

(Registrants Telephone Number, Including Area Code)



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



|                                                        |  |                                                               
|------------------------------------------------------- |  | --------------------------------------------------------------
|Common Stock, par value $.01 per Share (Title of Class) |  | New York Stock Exchange (Name of Exchange on Which Registered)



SECURITIES REGISTERED PURSUANT TO
SECTION 12(g) OF THE ACT: None





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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.   x



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ̈



State the aggregate market value of the voting Common Stock held by non-affiliates computed by reference to the price at which the Common Stock was last
sold on June 30, 2004, the last business day of the registrants most recently completed second fiscal quarter was $681,400,000. 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 registrant.



As of March 11, 2005, there were 24,163,330 shares of the registrants common stock outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



The Proxy Statement for the Registrants 2005 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 Securities and Exchange Commission within 120 days after December 31, 2004.



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LANDRYS RESTAURANTS, INC.



TABLE
OF CONTENTS



|              |  |                                                                                                                  |  |         
|------------- |  | ---------------------------------------------------------------------------------------------------------------- |  | --------
|              |  |                                                                                                                  |  | Page No.
|PART I.       |  | 1                                                                                                               
|              |  |                                                                                                                 
|Item 1.       |  | Business                                                                                                         |  | 1       
|              |  |                                                                                                                 
|Item 2.       |  | Properties                                                                                                       |  | 22      
|              |  |                                                                                                                 
|Item 3.       |  | Legal Proceedings                                                                                                |  | 23      
|              |  |                                                                                                                 
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                                              |  | 23      
|              | 
|PART II.      |  | 24                                                                                                              
|              |  |                                                                                                                 
|Item 5.       |  | Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 24      
|              |  |                                                                                                                 
|Item 6.       |  | Selected Financial Data                                                                                          |  | 25      
|              |  |                                                                                                                 
|Item 7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 27      
|              |  |                                                                                                                 
|Item 7A.      |  | Quantitative and Qualitative Disclosures about Market Risk                                                       |  | 35      
|              |  |                                                                                                                 
|Item 8.       |  | Financial Statements and Supplementary Data                                                                      |  | 35      
|              |  |                                                                                                                 
|Item 9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                             |  | 35      
|              |  |                                                                                                                 
|Item 9A.      |  | Controls and Procedures                                                                                          |  | 36      
|              |  |                                                                                                                 
|Item 9B.      |  | Other Information                                                                                                |  | 37      
|              | 
|PART III.     |  | 38                                                                                                              
|              |  |                                                                                                                 
|Item 10.      |  | Directors and Executive Officers of the Registrant                                                               |  | 38      
|              |  |                                                                                                                 
|Item 11.      |  | Executive Compensation                                                                                           |  | 38      
|              |  |                                                                                                                 
|Item 12.      |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                   |  | 38      
|              |  |                                                                                                                 
|Item 13.      |  | Certain Relationships and Related Transactions                                                                   |  | 40      
|              |  |                                                                                                                 
|Item 14.      |  | Principal Accountant Fees and Services                                                                           |  | 40      
|              | 
|PART IV.      |  | 41                                                                                                              
|              |  |                                                                                                                 
|Item 15.      |  | Exhibits and Financial Statement Schedules                                                                       |  | 41      
|              | 
|SIGNATURES    |  | 79                                                                                                              
|              | 
|EXHIBIT INDEX |  | 80                                                                                                              



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FORWARD LOOKING STATEMENTS



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



| |  |  | potential acquisitions of other restaurants, restaurant concepts and lines of businesses in other sectors of the hospitality and entertainment industries;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | future capital expenditures, including the amount and nature thereof;
| | - |  | ---------------------------------------------------------------------



| |  |  | business strategy and measures to implement such strategy;
| | - |  | ----------------------------------------------------------



| |  |  | competitive strengths;
| | - |  | ----------------------



| |  |  | goals;
| | - |  | ------



| |  |  | expansion and growth of our business and operations;
| | - |  | ----------------------------------------------------



| |  |  | future commodity prices;
| | - |  | ------------------------



| |  |  | availability of food products, materials and employees;
| | - |  | -------------------------------------------------------



| |  |  | consumer perceptions of food safety;
| | - |  | ------------------------------------



| |  |  | changes in local, regional and national economic conditions;
| | - |  | ------------------------------------------------------------



| |  |  | the effectiveness of our marketing efforts;
| | - |  | -------------------------------------------



| |  |  | changing demographics surrounding our restaurants;
| | - |  | --------------------------------------------------



| |  |  | the effect of tax laws and any changes therein;
| | - |  | -----------------------------------------------



| |  |  | same store sales;
| | - |  | -----------------



| |  |  | earnings guidance;
| | - |  | ------------------



| |  |  | the seasonality of our business;
| | - |  | --------------------------------



| |  |  | weather and acts of God;
| | - |  | ------------------------



| |  |  | food, labor, fuel and utilities costs;
| | - |  | --------------------------------------



| |  |  | plans;
| | - |  | ------



| |  |  | references to future success; and
| | - |  | ---------------------------------



| |  |  | the risks described in Risk Factors.
| | - |  | --------------------------------------



Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate, and,
therefore, we cannot assure you that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in our forward-looking statements, the inclusion of such information should not
be regarded as a representation by us or any other person that our objectives and plans will be achieved. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are
more fully described under the heading Risk Factors and elsewhere in this report, or in the documents incorporated by reference herein.



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LANDRYS RESTAURANTS, INC.



PART I



|ITEM 1. | BUSINESS
|------- | --------



General



We are a
national, diversified restaurant company principally engaged in the ownership and operation of full-service, casual dining restaurants, primarily under the names of Joes Crab Shack, Rainforest Cafe, Saltgrass Steak House, Landrys Seafood
House, The Crab House, Charleys Crab and The Chart House. As of December 31, 2004, we owned and operated over 300 full-service and limited-service restaurants in 36 states and were the second largest full-service seafood restaurant
operator in the United States. Our portfolio of restaurants consists of a broad array of formats, menus and price-points that appeal to a wide range of markets and customer tastes. We offer concepts ranging from upscale steak and seafood restaurants
to casual theme-based restaurants. We are also engaged in the ownership and operation of select hospitality businesses that complement our restaurant operations and provide our customers with unique dining, leisure and entertainment experiences.



We opened the first Landrys Seafood House restaurant in
1980. In 1993, we became a public company. Our stock is listed on the New York Stock Exchange under the symbol LNY. In 1994, we acquired the first Joes Crab Shack restaurant and in 1996, acquired the Crab House chain of
restaurants. We acquired Rainforest Cafe, Inc., a publicly traded restaurant company, in 2000. During 2001, we changed our name to Landrys Restaurants, Inc. to reflect our expansion and broadening of operations. During 2002, we acquired 15
Charleys Crab seafood restaurants located primarily in Michigan and Florida, and 27 Chart House seafood restaurants, located primarily on the East and West Coasts of the United States. In October 2002, we purchased 27 Texas-based Saltgrass
Steak House restaurants.



We will continue to add to our base
of restaurants, opening primarily Joes Crab Shack and Saltgrass Steak House restaurants. The majority of our new restaurant expansion will be in sectors where we are already located so we can take advantage of advertising and other economies
of scale, including our existing labor force. In addition, we plan to selectively pursue other hospitality businesses that are complementary to our current operations.



Core Restaurant Concepts



Our core restaurant concepts consist of a variety of formats, each providing our guests with a distinct dining experience. We operate our restaurants
through the following four divisions:



| |  |  | the Landrys Division, our high-profile seafood and signature restaurants;
| | - |  | --------------------------------------------------------------------------



| |  |  | Rainforest Cafe, our rainforest-themed casual dining restaurants;
| | - |  | -----------------------------------------------------------------



| |  |  | Joes Crab Shack, our high-energy casual dining seafood restaurants; and
| | - |  | ------------------------------------------------------------------------



| |  |  | Saltgrass Steak House, our Texas-Western themed casual dining restaurants.
| | - |  | --------------------------------------------------------------------------



Landrys Division.    The Landrys Division is comprised of Landrys Seafood House, The Crab House, Chart House
and C.A. Muer restaurants and a few distinct concept restaurants that offer an upscale dining experience in a unique and memorable setting that we call our signature group. Our signature group of restaurants includes Grotto, Pesce, Vic &
Anthonys Steakhouse, Willie Gs Seafood and Steak House, La Griglia and Brenners Steakhouse.



| |  |  | Landrys Seafood House.    Landrys Seafood House is a full-service traditional Gulf Coast seafood restaurant. It offers an
extensive menu featuring fresh fish, shrimp, crab, lobster, scallops, other seafood, beef and chicken specialties in a comfortable, casual atmosphere. The restaurants feature a prototype
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 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. Dinner entree prices range from $13.99 to $29.99, with certain items offered at market price. Lunch entrees range from $6.99 to $18.99. During the year ended December 31, 2004, alcoholic beverage sales
accounted for approximately 19% of the concepts total restaurant revenues.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Crab House.    The Crab House is a full-service casual dining seafood restaurant with a casual nautical theme. Many of our The Crab House restaurants
feature a fresh seafood salad bar. Dinner entree prices range from $13.99 to $24.99, with certain items offered at market price. Lunch entrees range from $7.99 to $11.99. During the year ended December 31, 2004, alcoholic beverage sales accounted
for approximately 14% of the concepts total restaurant revenues.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Chart House and C.A. Muer.    The Chart House restaurants and C.A. Muer restaurants, which include restaurants under several trade names, primarily
Charleys Crab, have very long and successful operating histories and provide an upscale full-service dining experience. Located on some of the most scenic properties on the East and West Coasts, many Chart House restaurants, which were founded
in 1961, sit on prime waterfront venues. Charleys Crab restaurants, which were founded in 1964, are generally situated throughout Michigan and Florida, include numerous waterfront locations and have unique architectural details with two
restaurants located in renovated historical train stations. Both the Chart House and Charleys Crab restaurant menus offer an extensive variety of seasonal fresh fish, shrimp, beef and other daily seafood specialties, and several restaurants
also offer lunch seating and a Sunday brunch. Chart House dinner entree prices range from $15.95 to $34.95 with lunch entree prices ranging from $8.95 to $18.95. Charleys Crab dinner entree prices range from $16.00 to $28.00 with lunch entree
prices ranging from $ 7.00 to $21.00. During the year ending December 31, 2004, alcoholic beverage sales accounted for approximately 23% of the Chart House restaurant revenues and 21% of the C.A. Muer total restaurant revenues.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Rainforest
Cafe.    The Rainforest Cafe restaurants provide full-service casual dining in a visually and audibly stimulating and entertaining rainforest-themed environment that appeals to a broad range of customers. Each Rainforest Cafe
consists of a restaurant and a retail village. The restaurant provides an attractive value to customers by offering a full menu of high-quality food and beverage items served in a simulated rainforest complete with thunderstorms, waterfalls and
active wildlife. In the retail village, we sell complementary apparel, toys and gifts with the Rainforest Cafe logo in addition to other items reflecting the rainforest theme. Entree prices range from $8.99 to $19.99. During the year ended December
31, 2004, retail sales and alcoholic beverage sales accounted for approximately 22% of the concepts total restaurant revenues. Rainforest Cafe restaurants typically are larger units and generate higher unit volumes than restaurants in our
other concepts, and have operating profit margins that are comparable to our other restaurants.



Joes Crab Shack.    Joes Crab Shack is a full-service seafood restaurant featuring a varied seafood menu and
offering many varieties of crab specialties. The atmosphere of a Joes Crab Shack has an energetic casual feel, with a fun, eclectic decor influenced by a weathered, old beachfront fish shack. Many of our Joes Crab Shack locations
incorporate a small playground area for children adjacent to family dining areas. Dinner entree prices range from $9.99 to $17.99, with certain crab items available at market price. Lunch entree prices range from $5.99 to $12.99. During the year
ended December 31, 2004, alcoholic beverage sales accounted for approximately 13% of the concepts total restaurant revenues.



Saltgrass Steak House.    The Saltgrass Steak House restaurants, that we acquired in 2002 for the purpose of additional growth,
offer full-service casual dining in a Texas-Western theme. Prototype buildings welcome guests into a stone and wood beam ranch house complete with a fireplace and a saloon-style bar. Menu options extend from filet mignon to chicken fried steak to
fresh fish to grilled chicken breast. Dinner entree prices range from $9.99 to $25.99 and lunch prices range from $6.99 to $14.99. During the year ended December 31, 2004, alcoholic beverage sales accounted for approximately 12% of the
concepts total restaurant revenues.



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Specialty Growth Division



Our Specialty Growth Division consists of hospitality and amusement properties that provide ancillary revenue streams and
opportunities complementary to our core restaurant business. The Specialty Growth Division includes the following properties:



Kemah BoardwalkGalveston County, Texas.    Our Specialty Growth Division commenced operations with the opening in 1999 of
the Kemah Boardwalk, our owned amusement, entertainment and retail complex located on approximately 40 acres in Galveston Countys Kemah, Texas. The Kemah Boardwalk has multiple attractions, including specialty retail shops, a boutique hotel, a
marina, and carnival-style rides and games. The Kemah Boardwalks activities are based upon and complementary to the business and traffic generated at our eight wholly owned and operated high-volume restaurants situated at that location, which
include units from most of our core restaurant concepts described above as well as the original Aquarium Restaurant.



Downtown AquariumHouston, Texas.    The Downtown Aquarium in Houston, Texas opened in 2003. The Downtown Aquarium
features our second Aquarium Underwater Dining Adventure restaurant. In addition, the Downtown Aquarium also features a public aquarium complex with over 200 species of fish, a giant acrylic shark tank, dancing water fountains, a mini-amusement park
and a bar/lounge.



Ocean JourneyDenver,
Colorado.    In 2003, we acquired Ocean Journey, a 12-acre aquarium complex located adjacent to downtown Denver, Colorado. This world-class facility, which is wholly owned and operated, and is home to over 500 species of
fish, was built by a non-profit organization in 1999 at a cost of approximately $93.0 million. We purchased this ongoing aquarium enterprise in federal bankruptcy proceedings for $13.6 million with no outstanding debt or other obligations. Upon
assumption of ownership, we reduced the complexs workforce, keeping personnel necessary for ongoing operations and significantly reduced corporate overhead. We are redeveloping this property to add an up-scale Aquarium Restaurant and family
amusements, which will transform the aquarium into a recreational destination, adding a second Downtown Aquarium to the Specialty Growth Division. We expect the redevelopment to be completed in 2005.



Galveston Island Convention Center.    The
revitalization of the Galveston seawall on the Gulf of Mexico, an area that includes a significant number of our restaurants, is underway with the recently opened Galveston Island Convention Center. The convention center is housed on a 26-acre
beachfront locale. The facility accommodates a 43,000 square foot exhibition hall, a 15,500 square foot ballroom and over 12,000 square feet of smaller breakout rooms. The convention center is owned by the City of Galveston and managed and operated
by us.



Holiday Inn on the BeachGalveston,
Texas.    In March 2003, we acquired the Holiday Inn on the Beach, a 180 room beachfront resort hotel located along Galvestons seawall and near the new Galveston Island Convention Center. This property is wholly owned
and operated by us.



Inn at the BallparkHouston,
Texas.    The Inn at the Ballpark is located in downtown Houston directly across the street from Minute Maid Park, home of the Houston Astros baseball team. This new luxury hotel has over 200 rooms and opened in early 2004.
The hotel offers visitors to Houston easy access to all of downtown Houstons amenities, including the newly expanded George R. Brown Convention Center, the new Toyota Center, home of the Houston Rockets basketball team, the theater district,
and our own Downtown Aquarium. The hotel is wholly owned and operated by us.



Flagship Inn and Pleasure PierGalveston, Texas.    In 2003, we purchased the Galveston Flagship Hotel from the City of Galveston for $500,000, subject to an existing lease with option
renewals that will expire in 2031. Upon expiration of the existing lease, we plan to transform the hotel into an 1800s-style inn located on a pier overlooking Galveston Bay and the Gulf of Mexico. The surrounding pier is expected to provide an
assortment of entertainment and boardwalk games, including a roller coaster, ferris wheel and lighthouse reminiscent of an earlier historical leisure-time period.



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Tower of the AmericasSan Antonio, Texas.    In November 2004, we entered
into a 15-year lease agreement with the City of San Antonio to renovate and operate the 750-foot landmark Tower of the Americas. Our plan is to remodel and operate the revolving restaurant and observation deck at the top of the tower, to build and
operate a multi-sensory theater on the ground level and to add a complementary retail and souvenir venue. The Tower of the Americas is a major tourist attraction in San Antonio.



Strategy



Our objective is to develop and operate a diversified restaurant and hospitality company offering customers unique dining,
leisure and entertainment experiences. We believe that this strategy creates a loyal customer base, generates a high level of repeat business and provides superior returns to our investors. By focusing on high-quality food, superior value and
service, and the ambiance of our locations, we strive to create an environment that fosters repeat patronage and encourages word-of-mouth recommendations. Our operating strategy focuses on the following:



| |  |  | Commitment to providing an attractive price-value relationship.    Our restaurants provide customers an attractive price-value relationship by serving
generous portions with fresh ingredients in high-quality meals at moderate prices.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Commitment to customer satisfaction.    We provide our customers prompt, friendly and efficient service, keeping table-to-wait staff ratios low, and
staffing each restaurant with an experienced management team to ensure attentive customer service and consistent food quality.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Distinctive design and decor and casual atmosphere.    Our restaurant concepts generally have a distinctive appearance and a flexible design, which can
accommodate a wide variety of available sites. We strive to create a memorable dining experience for customers to ensure repeat and frequent patronage.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | High-profile locations for restaurants.    We locate a substantial number of our restaurants in markets that provide a balanced mix of tourist,
convention, business and residential clientele. We believe that this strategy results in a high volume of new and repeat customers and provides us with increased name recognition in new markets. As of December 31, 2004, we had 83 restaurants that
are considered waterfront properties, which we believe is the largest collection of waterfront restaurants of any domestic restaurant company.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Commitment to attracting and retaining quality employees.    We believe there is a high correlation between the quality of restaurant management and its
long-term success. We provide extensive training and attractive compensation as well as promote internally to foster a strong corporate culture and encourage a sense of personal commitment from our employees. Through our cash bonus program, our
managers typically earn bonuses equal to 15% to 25% of their total cash compensation.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expansion of our core restaurant concepts.    We believe we have demonstrated the viability of our restaurant concepts in a wide variety of markets across
the United States. We anticipate continued expansion of our core restaurant concepts by opening additional units in existing markets that provide us economic and operating efficiencies and the ability to leverage our operating expertise and
knowledge. We intend to concentrate on development of the casual dining segment by building Joes Crab Shack and Saltgrass Steak House restaurants in existing markets to increase our competitive position and obtain greater marketing and
operational efficiencies. The specific rate at which we are able to open new restaurants will be determined by our success in locating satisfactory sites, negotiating acceptable lease or purchase terms, securing appropriate local governmental
permits and approvals, and by our ability to supervise construction, recruit and train management personnel, and achieve or exceed targeted financial results and returns.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pursuit of growth through acquisitions.    Acquisitions have contributed significantly to our growth and will continue to play a
substantial role in our growth strategy. We have a history of acquisitions,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | including Joes Crab Shack in 1994, The Crab House in 1996, Rainforest Cafe in 2000, and C.A. Muer, Chart House and Saltgrass Steak House restaurants in
2002. We continuously evaluate attractive acquisition opportunities and, at any given time, may be engaged in discussions with respect to possible material acquisitions, business combinations or investments in the restaurant, hospitality, amusement,
entertainment (including gaming), food service, facilities management or other related industries.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following is a summary of our major acquisitions:



Rainforest Cafe (2000).    Since our acquisition of Rainforest Cafe, we have focused on stabilizing this concepts
operations. We have closed unprofitable locations, renegotiated leases, reduced general and administrative expenses and refreshed the concepts menu with proven menu items from our other concepts. Through these efforts, we have successfully
reversed previous prolonged revenue declines and raised the concepts profit margins. Overall sales trends at Rainforest Cafe units at tourist destinations are dramatically better, resulting in positive comparative sales for 2004.



Chart House and C.A. Muer (2002).    The Chart
House and C.A. Muer restaurant acquisitions enabled us to purchase a collection of valuable restaurant locations, many of which are situated on premium waterfront properties on the Pacific and Atlantic Oceans. We have remodeled many of these units,
freshening and updating the look of these venues. Certain underperforming locations were redeveloped into Joes Crab Shack restaurants or were closed or sold. In addition, these restaurants have undergone menu evaluations and re-engineering in
order for us to feature successful dishes from previous menus side-by-side with bold, fresh ideas from our culinary experts. All of the remodeling and menu changes have been met with favorable results as both of these concepts posted positive
comparable sales for 2004. No near-term expansion of these concepts is currently planned, and future growth will be dependent upon profitability and unit economics.



Saltgrass Steak House (2002).    The nearly seamless integration of Saltgrass Steak House
restaurants into our systems in late 2002 was highlighted by the conversion of all 27 restaurants to our financial tools within 60 days of acquisition. These tools include our point-of-sale system and also implementation of our profitability and
labor/payroll programs. Saltgrass Steak Houses expansion has already begun with the opening of two new steak houses in 2003 and four in 2004. Further expansion of this concept into our existing markets and development of new markets is planned
in the future.



Golden Nugget Casino
(2005).    On February 4, 2005, we entered into an agreement to purchase the Golden Nugget Casino in downtown Las Vegas for $140 million in cash, the assumption of $155 million of Senior Secured Notes due 2011, and the
assumption of certain working capital liabilities to be calculated at closing. Pursuant to the purchase agreement, we will acquire the outstanding capital stock of Poster Financial Group, Inc., the owner of the Golden Nugget Casino. Pursuant to the
terms of the purchase agreement, we deposited $25 million into an escrow account with Chicago Title of Nevada, Inc., the escrow agent. Under the terms of the purchase agreement, Poster Financial Groups currently outstanding Senior Secured
Notes due 2011 will remain outstanding obligations of Poster Financial Group following the closing. The consummation of the sale will result in a change of control of Poster Financial Group under the terms of the senior notes and, as a result,
Poster Financial Group will be required within 30 days of such change of control to commence an offer to purchase the senior notes for 101% of the aggregate principal amount of such senior notes, plus any accrued and unpaid interest. Under the terms
of the purchase agreement, amounts outstanding at closing under Poster Financial Groups senior credit facility will be repaid by us or we will seek consent from the lender under such facility for such amounts to remain outstanding. The Golden
Nugget occupies over eight acres in downtown Las Vegas with approximately 40,000 square feet of gaming area. The property also features three towers containing 1,907 rooms, the largest number of guestrooms in downtown Las Vegas. It is anticipated
that the transaction will close within the next twelve months, subject to customary closing conditions contained in the purchase agreement, including receipt of all necessary governmental, gaming and other regulatory approvals.



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Restaurant Locations



Our restaurants generally range in size from 5,000 square feet to 16,000 square feet, with an average restaurant size of approximately 8,000 square feet.
The seafood restaurants generally have dining room floor seating for approximately 215 customers and additional patio seating on a seasonal basis. Saltgrass restaurants seat approximately 260 guests on average. Both formats offer bar seating for
approximately 10 to 20 additional customers.



The Rainforest
Cafe restaurants are larger, generally ranging in size from approximately 15,000 to 30,000 square feet with an average restaurant size of approximately 20,000 square feet. The Rainforest Cafe restaurants have between 300 and 600 restaurant seats
with an average of approximately 400 seats.



The following
table enumerates by state the location of our restaurants as of December 31, 2004:



|              |  |                |  |  |  |                 |  |               
|------------- |  | -------------- |  |  |  | --------------- |  | --------------
|State         |  | Numberof Units |  |  |  | State           |  | Numberof Units
|Alabama       |  | 3              |  |  |  | Mississippi     |  | 1             
|Arizona       |  | 5              |  |  |  | Missouri        |  | 4             
|California    |  | 26             |  |  |  | Nevada          |  | 5             
|Colorado      |  | 8              |  |  |  | New Jersey      |  | 6             
|Connecticut   |  | 1              |  |  |  | New Mexico      |  | 1             
|Delaware      |  | 1              |  |  |  | New York        |  | 1             
|Florida       |  | 31             |  |  |  | North Carolina  |  | 3             
|Gerogia       |  | 9              |  |  |  | Ohio            |  | 9             
|Idaho         |  | 1              |  |  |  | Oklahoma        |  | 4             
|Illinois      |  | 10             |  |  |  | Oregon          |  | 1             
|Indiana       |  | 5              |  |  |  | Pennsylvania    |  | 4             
|Iowa          |  | 1              |  |  |  | South Carolina  |  | 7             
|Kansas        |  | 2              |  |  |  | Tennessee       |  | 7             
|Kentucky      |  | 3              |  |  |  | Texas           |  | 100           
|Louisiana     |  | 4              |  |  |  | Utah            |  | 3             
|Maryland      |  | 3              |  |  |  | Virginia        |  | 7             
|Massachusetts |  | 2              |  |  |  | Washington      |  | 2             
|Michigan      |  | 13             |  |  |  | Toronto, Canada |  | 1             
|Minnesota     |  | 3              |  |  |  |                 |  |               
|              |  |                |  |  |  |                 |  |               
|              |  |                |  |  |  | Total           |  | 297           
|              |  |                |  |  |  |                 |  |               



We are also the
developer and operator of the Kemah Boardwalk located south of Houston, Texas. We own and operate substantially all of the 40-acre Kemah Boardwalk development, which includes eight restaurants (included in the table above), a hotel, retail shops,
amusement attractions, and a marina.



We own and operate
several additional limited menu restaurants, hospitality venues and other properties which are excluded from the numerical counts due to lack of materiality.



Menu



Our seafood restaurants offer a wide variety of high quality, broiled, grilled, and fried seafood items at moderate prices, including red snapper, shrimp, crawfish, crab, lump crabmeat, lobster, oysters, scallops,
flounder, and many other traditional seafood items, many with a choice of unique seasonings, stuffings and toppings. Menus include a wide variety of seafood appetizers, salads, soups and side dishes. We provide high quality beef, fowl, pastas, and
other American food entrees as alternatives to seafood items. Our restaurants also feature a unique selection of desserts often made fresh on a daily basis at each location. Many of our restaurants



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offer complimentary salad with each entree, as well as certain lunch specials and popularly priced childrens entrees. The Rainforest Cafe menu offers
traditional American fare, including beef, chicken and seafood. Saltgrass Steak House offers a variety of Certified Angus Beef, prime rib, pork ribs, fresh seafood, chicken and other Texas cuisine favorites at moderate prices.



Management and Employees



We staff our restaurants with management that has experience in the
restaurant industry. We believe our strong team-oriented culture helps us attract highly motivated employees who provide customers with a superior level of service. We train our kitchen employees and wait staff to take great pride in preparing and
serving food in accordance with our high standards. 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 hosts
weekly meetings with restaurant general managers to discuss individual restaurant performance and customer comments. Moreover, we require general managers to hold weekly staff meetings at their individual restaurants. We monitor compliance with our
quality requirements through periodic on-site visits and formal periodic inspections by regional field managers and supervisory personnel from our corporate offices.



Our typical seafood unit has a general manager and several kitchen and floor managers. We have internally promoted many of
the general managers after training them in all areas of restaurant management with a strong emphasis on kitchen operations. The general managers typically spend a portion of their time in the dining area of the restaurant, supervising the staff and
providing service to customers.



The Rainforest Cafe unit
management structure is more complex due generally to higher unit level sales, larger facilities, more sophisticated rainforest theming, including animatronics, aquariums, and complementary retail business activity. A management team consisting of
floor, kitchen, retail, facility and outside sales managers supports the general manager.



Each restaurant management team is eligible to receive monthly incentive bonuses. These employees typically earn between 15% and 25% of their total cash compensation under this program.



We have spent considerable effort in developing employee growth programs
whereby a large number of promotions occur internally. We require each trainee to participate in a formal training program that utilizes departmental training manuals, examinations and a scheduled evaluation process. We require newly hired wait
staff to spend from five to ten days in training before they serve our customers. We utilize a program of background checks for prospective management employees, such as criminal checks, credit checks, driving record and drug screening. Management
training encompasses three general areas:



| |  |  | all service positions;
| | - |  | ----------------------



| |  |  | management, accounting, personnel management, and dining room and bar operations; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | kitchen management, which entails food preparation and quality controls, cost controls, training, ordering and receiving and sanitation operations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



Due to our enhanced training program, management training customarily lasts
approximately 8 to 12 weeks, depending upon the trainees prior experience and performance relative to our objectives. As we expand, we will need to hire additional management personnel, and our continued success will depend in large part on
our ability to attract, train, and retain quality management employees. As a result of the enhanced training programs, we attract and retain a greater proportion of management personnel through our existing base of employees and internal promotions
and advancements.



As of December 31, 2004, there were
approximately 70 individuals involved in regional management functions generally performing on-site visits, formal inspections and similar responsibilities. As we grow, we



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plan to increase the number of regional managers, and to have each regional manager responsible for a limited number of restaurants within their geographic
area. We plan to promote successful experienced restaurant level management personnel to serve as future regional managers. Regional management is continuously evaluated for performance and effectiveness.



As of December 31, 2004, we employed approximately 26,000 persons, of whom
1,670 were restaurant managers or manager-trainees, 490 were salaried corporate and administrative employees, approximately 70 were operations regional management employees, 80 were development and construction employees and the rest were hourly
employees (all numbers approximate). Typical restaurant employment for us is at a seasonal low at December 31, and may increase seasonally by 30% or more in the summer months. Our restaurants generally employ an average of approximately 60 to 100
people, depending on seasonal needs. The larger Rainforest Cafe restaurants generally have 160 to 200 employees on average, with certain larger volume units having in excess of 400 people on staff. We believe that our management level employee
turnover for 2004 was within industry standards. None of our employees are covered by a collective bargaining agreement. We consider our relationship with employees to be satisfactory.



Customer Satisfaction



We provide our customers prompt, friendly and efficient service by keeping table-to-wait staff ratios low and staffing each restaurant with an experienced
management team to ensure attentive customer service and consistently high food quality. Through the use of comment cards, a toll-free telephone number, and a web-based customer response site, senior management receives valuable feedback from
customers and demonstrates a continuing interest in customer satisfaction by responding promptly.



Purchasing



We strive
to obtain consistent, quality items at competitive prices from reliable sources. We continually search for and test various product sizes, species, and origins, in order to serve 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 our 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 our primary distributors and major suppliers at prices negotiated primarily by our corporate office. We emphasize availability of the items on our menu, and if an item is in short
supply, restaurant level management is expected to procure the item immediately.



We use many suppliers and obtain our seafood products from global sources in order to ensure a consistent supply of high-quality food and supplies at competitive prices. While the supply of certain seafood species is
volatile, we believe that we have the ability to identify alternative seafood products and to adjust our menus as required. We routinely inventory bulk purchases of seafood products and retail goods for distribution to our restaurants to take
advantage of buying opportunities, leverage our buying power, and hedge against price and supply fluctuations. As we continue to grow, our ability to improve our purchasing and distribution efficiencies will be enhanced.



We believe that our essential food products and retail goods are available,
or can be made available upon relatively short notice, from alternative qualified suppliers and distributors. We primarily use two national distributors in order to achieve certain cost efficiencies, although such services are available from
alternative qualified distributors. We have not experienced any significant delays in receiving our food and beverage products, restaurant supplies or equipment.



Advertising and Marketing



We employ a marketing strategy to attract new customers, to increase the frequency of visits by existing customers, and to establish a high level of name
recognition. We have historically relied primarily on word-of-



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mouth publicity, billboards with distinctive graphics, travel and hospitality magazines and print advertising. Since 1999, we successfully expanded our use
of television and radio commercials. We use multiple billboards on highways to direct potential customers from the highways to our restaurants, as well as to build name recognition within each market. Our advertising expenditures for 2004 were
approximately 2.5% of revenues. We anticipate that future advertising and marketing expenses will remain moderate or increase slightly as a percentage of revenues, and that we may utilize moderate television and radio advertising.



Service Marks



Landrys Seafood House, Joes Crab Shack, Rainforest Cafe, Chart House, Charleys Crab and Saltgrass Steak
House 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. We pursue registration of our important service marks and trademarks and
vigorously oppose any infringement upon them.



Competition



The restaurant industry is intensely competitive with respect to price,
service, the type and quality of food offered, location and other factors. We compete with both locally owned restaurants, as well as national and regional restaurant chains, some of which may be better established in our existing and future
markets. Many of these competitors have a longer history of operations with substantially greater financial resources. We also compete with other restaurant and retail establishments for real estate sites, restaurant personnel and for acquisition
opportunities.



Changes in customer tastes, economic
conditions, demographic trends and the location, number of, and type of food served by competing restaurants could affect our business as could a shortage of experienced management and hourly employees.



We believe our restaurants enjoy a high level of repeat business and customer
loyalty due to high food quality, good perceived price-value relationship, comfortable atmosphere, and friendly efficient service.



Other factors relating to our competitive position in the industry are addressed under the sections entitled Strategy, Purchasing,
and Advertising and Marketing elsewhere in this report.



Rainforest International License and Joint Venture Agreements



Rainforest Cafe has entered into exclusive license arrangements relating to the operations and development of Rainforest Cafes in the United Kingdom, Japan, France and Mexico. There are eight international units in
operation, including seven franchised units and one Company owned and operated unit in Toronto, Canada. Four international franchised units were closed between 2002 and early 2003 due to declining sales and profitability. We own various equity
interests in several of the international locations, which were included when we acquired Rainforest Cafe in 2000. We do not anticipate revenues from international franchises to be significant.



Information as to Classes of Similar Products or Services



We operate in only one industry segment. All significant revenues and
pre-tax earnings relate to retail sales of food, beverages and complementary merchandise and services to the general public through Company-owned and Company-operated properties, substantially all located in the United States.



Risk Factors



The following are factors to be considered:



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Some of our restaurants have limited operating histories, which makes it difficult for us to predict their future
results of operations.



A number of our restaurants have
been open for less than two years. Consequently, the earnings achieved to date by such restaurants may not be indicative of future operating results. Should enough of these restaurants underperform our estimate of their performance, it could have a
material adverse effect on our operating results.



Because many of our
restaurants are concentrated in single geographic areas, our results of operations could be materially adversely affected by regional events.



Many of our existing and planned restaurants are concentrated in the southern half of the United States. This concentration in a particular region could
affect our operating results in a number of ways. For example, our results of operations may be adversely affected by economic conditions in that region and other geographic areas into which we may expand. Also, given our present geographic
concentration, adverse publicity relating to our restaurants could have a more pronounced adverse effect on our overall revenues than might be the case if our restaurants were more broadly dispersed. In addition, in view of the location of many of
our existing restaurants in the Gulf Coast area from Texas to Florida, we are particularly susceptible to damage caused by hurricanes or other severe weather conditions. While we maintain business interruption insurance, there can be no assurance
that if a severe hurricane or other natural disaster should affect our geographical areas of operations, we would be able to maintain our current level of operations or profitability.



If we are unable to obtain a seafood supply in sufficient quality and quantity to support our operations, our results of operations could
be materially adversely affected.



In the recent past,
certain types of seafood have experienced fluctuations in availability. We have in the past utilized several seafood suppliers and have not experienced any difficulty in obtaining adequate supplies of fresh seafood on a timely basis. In addition,
some types of seafood have been subject to adverse publicity due to certain levels of contamination at their source, which can adversely affect both supply and market demand. We maintain an in-house inspection program for our seafood purchases and,
in the past, have not experienced any detriment from contaminated seafood. However, we can make no assurances that in the future either seafood contamination or inadequate supplies of seafood might not have a significant and materially adverse
effect on our operating results and profitability.



If we are unable to
anticipate and react to changes in food and other costs, our results of operations could be materially adversely affected.



Our profitability is dependent on our ability to anticipate and react to increases in food, labor, employee benefits, and similar costs over which we have
limited or no control. Specifically, our dependence on frequent deliveries of fresh seafood and produce subjects us to the risk of possible shortages or interruptions in supply caused by adverse weather or other conditions that could adversely
affect the availability and cost of such items. Our business may also be affected by inflation. In the past, management has been able to anticipate and avoid any adverse effect on our profitability from increasing costs through our purchasing
practices and menu price adjustments, but there can be no assurance that we will be able to do so in the future.



The restaurant industry is peculiarly affected by trends and fluctuations in demand and is highly competitive. If we are unable to successfully surmount these
challenges presented by the restaurant industry, our business and results of operations could be materially adversely affected.



The restaurant industry is intensely competitive and is affected by changes in consumer tastes and by national, regional, and local economic conditions
and demographic trends. The performance of individual restaurants may be affected by factors such as:



| |  |  | traffic patterns,
| | - |  | -----------------



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| |  |  | demographic considerations,
| | - |  | ---------------------------



| |  |  | the amounts spent on, and the effectiveness of, our marketing efforts;
| | - |  | ----------------------------------------------------------------------



| |  |  | weather conditions, and
| | - |  | -----------------------



| |  |  | the type, number, and location of competing restaurants.
| | - |  | --------------------------------------------------------



We have many well established competitors with greater financial resources and longer histories of operation than ours, including competitors already
established in regions where we are planning to expand, as well as competitors planning to expand in the same regions. We face significant competition from mid-priced, full-service, casual dining restaurants offering seafood and other types and
varieties of cuisine. Our competitors include national, regional, and local chains as well as local owner-operated restaurants. We also compete with other restaurants and retail establishments for restaurant sites.



Our growth strategy depends on opening new restaurants. Our ability to expand our
restaurant base is influenced by factors beyond our control, which may slow restaurant development and expansion and impair our growth strategy.



We are pursuing an aggressive but disciplined growth strategy which, to be successful, will depend in large part on our ability to open new restaurants
and to operate these restaurants on a profitable basis. We anticipate that our new restaurants will generally take several months to reach planned operating levels due to inefficiencies typically associated with new restaurants, including lack of
market awareness, the need to hire and train sufficient personnel and other factors. We cannot guarantee that we will be able to achieve our expansion goals or operating results similar to those of our existing restaurants. One of our biggest
challenges in meeting our growth objectives will be to locate and secure an adequate supply of suitable new restaurant sites. We have experienced delays in opening some of our restaurants and may experience delays in the future. Delays or failures
in opening new restaurants could materially and adversely affect our planned growth. The success of our planned expansion will depend upon numerous factors, many of which are beyond our control, including the following:



| |  |  | the hiring, training and retention of qualified personnel, especially managers;
| | - |  | -------------------------------------------------------------------------------



| |  |  | reliance on the knowledge of our executives to identify available and suitable restaurant sites;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | competition for restaurant sites;
| | - |  | ---------------------------------



| |  |  | negotiation of favorable lease terms;
| | - |  | -------------------------------------



| |  |  | timely development of new restaurants, including the availability of construction materials and labor;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | management of construction and development costs of new restaurants;
| | - |  | --------------------------------------------------------------------



| |  |  | securing required governmental approvals and permits in a timely manner, or at all;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | cost and availability of capital;
| | - |  | ---------------------------------



| |  |  | competition in our markets; and
| | - |  | -------------------------------



| |  |  | general economic conditions.
| | - |  | ----------------------------



In addition, we contemplate entering new markets in which we have no operating experience. These new markets may have different demographic
characteristics, competitive conditions, consumer tastes and discretionary spending patterns than our existing markets, which may cause the new restaurants to be less successful in these new markets than in our existing markets.



Our growth strategy may strain our management, financial and other resources.
For instance, our existing systems and procedures, restaurant management systems, financial controls, information systems, management



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resources and human resources may be inadequate to support our planned expansion of new restaurants. We may not be able to respond on a timely basis to all
of the changing demands that the planned expansion will impose on our infrastructure and other resources.



The expansion of our business through acquisitions poses risks that may reduce the benefits we anticipate and could harm our business and our financial condition.



We have historically been, and we expect to continue to be, an active
acquirer of restaurants, hospitality and entertainment properties and other related businesses. Part of our strategy involves acquisitions of restaurants and restaurant concepts and businesses involved in the hospitality, amusement and entertainment
(including gaming) industries designed to expand and enhance our core restaurant operations. We have evaluated and expect to continue to evaluate possible acquisition and investment transactions on an ongoing basis and, at any given time, may be
engaged in discussions with respect to possible acquisitions, business combinations or investments. Certain of these transactions, if consummated, could be material to our operations and financial condition.



Our ability to benefit from acquisitions depends on many factors, including
our ability to identify acquisition prospects, access capital markets at an acceptable cost of capital, negotiate favorable transaction terms and successfully integrate any businesses we acquire. Integrating businesses we acquire into our
operational framework may involve unanticipated delays, costs and other operational problems. If we encounter unexpected problems with one of our acquisitions or alliances, our senior management may be required to divert attention away from other
aspects of our businesses to address these problems. Acquisitions also pose the risk that we may be exposed to successor liability relating to actions by an acquired company and its management before the acquisition. The due diligence we conduct in
connection with an acquisition, and any contractual guarantees or indemnities that we receive from the sellers of acquired companies, may not be sufficient to protect us from, or compensate us for, actual liabilities. A material liability associated
with an acquisition could adversely affect our reputation and results of operations and reduce the benefits of the acquisition.



We cannot predict the results of gaming operations if we enter that market because we have no experience in the gaming industry and have no operating history with that
line of business.



We have entered into a purchase
agreement that gives us the right to acquire the Golden Nugget Casino. Although many aspects of the gaming industry are related to our core restaurant business or our specialty growth division, we have no history of gaming operations and our current
management does not have any experience in the gaming industry. If the acquisition is completed, gaming operations will be a new line of business for us. There are significant risks and costs inherent in our efforts to undertake entering into gaming
operations. These include the risk that our new line of business may not be profitable. We will be required to devote a great deal of capital, management time and other resources to entering into the gaming business. The devotion of these resources
to gaming operations could adversely affect our existing business.



Entering into the gaming industry may require substantial changes, including acquisition costs, capital development expenditures, adding management and employees who possess the skills we believe we will need to operate a gaming business,
and realigning our current organization to reflect this new line of business. Entering into the gaming industry will require an investment in personnel and assets and the assumption of risks that may be greater than we have previously assumed. Due
to the capital costs involved with entering into the gaming industry, it is extremely difficult to forecast our future financial performance if we complete the acquisition.



In addition to the typical risks of entering into a new line of business, the gaming industry is subject to extensive state
and local regulation. The acquisition of the Golden Nugget Casino will be contingent upon our receipt and maintenance of all regulatory licenses, permits, approvals, registrations, findings of suitability, orders and authorizations necessary for the
conduct of gaming operations in the State of Nevada. The laws, regulations and ordinances requiring these licenses, permits and other approvals generally relate to the responsibility, financial stability and character of the owners and managers of
gaming operations, as well as persons financially interested or involved in gaming operations.



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The scope of the approvals required to acquire and operate a facility is extensive. Obtaining all of such
governmental licenses, permits and other approvals will be costly and may require a significant amount of the time of our executive officers at the expense of our other operations. We do not currently hold any state and local licenses and related
permits and other approvals necessary to conduct our planned gaming operations in Nevada. Such licenses, permits and other approvals are deemed to be privileges under state law, and we cannot be certain that we will obtain at all, or on a timely
basis, all of such required licenses, permits and other approvals. Failure to obtain or maintain the necessary licenses, permits and other approvals could significantly impair our financial positions and results of operations and prevent or delay
the acquisition of the Golden Nugget Casino. In the event we do not consummate the Golden Nugget transaction, including among other reasons, our inability to obtain a gaming license, we may be required to forfeit our $25 million deposit placed into
escrow at the time we entered into the purchase agreement to acquire the Golden Nugget Casino.



The Nevada Gaming Commission may, in its discretion, require the holder of any securities we issue, to file applications, be investigated and be found suitable to own our securities if it has reason to believe that
the security ownership would be inconsistent with the declared policies of the State of Nevada.



Additionally, Nevada regulatory authorities have broad powers to request detailed financial and other information, to limit, condition, suspend or revoke
a registration, gaming license or related approval and to approve changes in our operations. Substantial fines or forfeiture of assets for violations of gaming laws or regulations may be levied. The suspension or revocation of any license that may
be granted to us or the levy of substantial fines or forfeiture of assets could significantly harm our business, financial condition and results of operations. Furthermore, compliance costs associated with gaming laws, regulations and licenses are
significant. Any change in the laws, regulations or licenses applicable to our business or a violation of any current or future laws or regulations applicable to our business or a violation of any current or future laws or regulations applicable to
our business or gaming license could require us to make substantial expenditures or could otherwise negatively affect our gaming operations.



If we enter the gaming industry, we will face intense competition.



The United States gaming industry is intensely competitive and features many participants, including riverboat casinos, dockside casinos, land-based
casinos, video lottery and poker machines not located in casinos, Native American gaming, Internet gaming and other forms of gambling in the United States. We would have to compete with many world class destination resorts with greater name
recognition, different attractions, amenities and entertainment options than the facilities that we are proposing to acquire. In a broader sense, gaming operations face competition from all manner of leisure and entertainment activities.



We do not have any experience in the gaming industry. If we close the
acquisition of the Golden Nugget Casino, our competitors will have more gaming industry experience, and many will be larger and have significantly greater financial, selling and marketing, technical and other resources. Our competitors will include
multinational corporations that enjoy widespread name recognition, established brand loyalty, decades of casino operation experience and a diverse portfolio of gaming assets. In addition, our competitors may have superior facilities and/or operating
conditions in terms of:



| |  |  | themes and attractions which draw a significant number of visitors;
| | - |  | -------------------------------------------------------------------



| |  |  | amenities offered at the gaming facility and the related support and entertainment facilities;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | a location more favorably situated to the population base of a market and ease of accessibility to the casino site; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | favorable tax or regulatory factors.
| | - |  | ------------------------------------



If we enter the gaming industry, we will face ongoing competition as a result of the upgrading or expansion of facilities by existing market participants,
the entrance of new gaming participants into a market or legislative changes. Certain states have recently legalized, and several other states are currently considering legalizing, casino gaming in designated areas. Legalized casino gaming in these
states and on Indian reservations would increase competition and could adversely affect any future gaming operations.



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The cost of compliance with the significant governmental regulation to which we are subject or our failure to comply
with such regulation could materially adversely affect our results of operations.



The restaurant industry is subject to extensive state and local government regulation relating to the sale of food and alcoholic beverages and to sanitation, public health, fire and building codes. Alcoholic beverage
control regulations require each of our restaurants to apply for and obtain from state authorities a license or permit to sell alcohol on the premises. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any
time. Alcoholic beverage control regulations affect various aspects of daily operations of our restaurants, including minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling,
storage and dispensing of alcoholic beverages. In certain states, we may be subject to dram shop statutes, which generally provide a person injured by an intoxicated person the right to recover damages from the establishment which
wrongfully served alcoholic beverages to the intoxicated person. We carry liquor liability coverage as part of our comprehensive general liability insurance.



Our 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 unemployment, and
| | - |  | -------------------------------------------------



| |  |  | national and regional economic growth.
| | - |  | --------------------------------------



There are various federal, state and local governmental initiatives to increase the level of minimum wages which would increase our labor costs.



Difficulties or failures in obtaining required licensing or
other regulatory approvals could delay or prevent the opening of a new restaurant. The suspension of, or inability to renew a license could interrupt operations at an existing restaurant, and the inability to retain or renew such licenses would
adversely affect the operations of such restaurant. Our operations are also subject to requirements of local governmental entities with respect to zoning, land use and environmental factors which could delay or prevent the development of new
restaurants in particular locations.



At the federal and state
levels, there are from time to time various proposals and initiatives under consideration to further regulate various aspects of our business and employment regulations. These and other initiatives could adversely affect us as well as the restaurant
industry in general. In addition, seafood is harvested on a world-wide basis and, on occasion, imported seafood is subject to federally imposed import duties.



Our business is subject to seasonal fluctuations, and, as a result, our results of operations for any given quarter may not be indicative of the results that may be
achieved for the full fiscal year.



Our business is
subject to seasonal fluctuations. Historically, our highest earnings have occurred in the second and third quarters of the fiscal year, as our revenues in most of our restaurants have typically been higher during the second and third quarters of the
fiscal year. As a result, results of operations for any single quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. Quarterly results have been, and in the future will continue to be, significantly
impacted by the timing of new restaurant openings and their respective pre-opening costs.



Our international operations subject us to certain external business risks that do not apply to our domestic operations.



Rainforest Cafe has license arrangements relating to the operations and development of Rainforest Cafes in the United Kingdom, Japan, France, Mexico,
and Canada. These agreements include a per unit development fee and restaurant royalties ranging from 3% to 7% of revenues. There are eight international units in operation; one



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is owned outright, and the rest are franchises. We own various equity interests in several of the international franchise locations. Our international
operations will be subject to certain external business risks such as exchange rate fluctuations, political instability and the significant weakening of a local economy in which a foreign unit is located. In addition, it may be more difficult to
register and protect our intellectual property rights in certain foreign countries.



If we are unable to protect our intellectual property rights, it could reduce our ability to capitalize on our brand names, which could have an adverse affect on our business and results of operations.



Landrys Seafood House, Joes Crab Shack, Rainforest Cafe,
Charleys Crab, Saltgrass Steak House and Chart House 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. We pursue registration
of our important service marks and trademarks and vigorously oppose any infringement upon them. There is no assurance that any of our rights in any of our intellectual property will be enforceable, even if registered, against any prior users of
similar intellectual property or against any of our competitors who seek to utilize similar intellectual property in areas where we operate or intend to conduct operations. The failure to enforce any of our intellectual property rights could have
the effect of reducing our ability to capitalize on our efforts to establish brand equity.



We face the risk of adverse publicity and litigation, the cost of which could have a material adverse effect on our business and results of operations.



We may from time to time be the subject of complaints or litigation from
customers alleging illness, injury or other food quality, health or operational concerns. Publicity resulting from these allegations may materially adversely affect us, regardless of whether the allegations are valid or whether we are liable. In
addition, employee claims against us based on, among other things, wage and hour violations, discrimination, harassment or wrongful termination may divert our financial and management resources that would otherwise be used to benefit the future
performance of our operations. A significant increase in the number of these claims or an increase in the number of successful claims could materially adversely affect our business, prospects, financial condition, operating results and/or cash
flows.



Unfavorable publicity relating to one or more of our restaurants in
a particular brand may taint public perception of the brand.



Multi-unit restaurant businesses can be adversely affected by publicity resulting from poor food quality, illness or other health concerns or operating issues stemming from one or a limited number of restaurants. In particular, since we
depend heavily on the Joes Crab Shack brand for a majority of our revenues, unfavorable publicity relating to one or more Joes Crab Shack restaurants could have a material adverse effect on our business, results of
operations, and financial condition.



Labor shortages or increases in labor
costs could slow our growth or harm our business.



Our
success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees, including regional operational managers and regional chefs, restaurant general managers and executive chefs, necessary to continue
our operations and keep pace with our growth. Qualified individuals that we need to fill these positions are in short supply and competition for these employees is intense. If we are unable to recruit and retain sufficient qualified individuals, our
business and our growth could be adversely affected. Additionally, competition for qualified employees could require us to pay higher wages, which could result in higher labor costs. If our labor costs increase, our results of operations will be
negatively affected.



Health concerns relating to the consumption of
seafood, beef and other food products could affect consumer preferences and could negatively impact our results of operations.



Consumer food preferences could be affected by health concerns about the consumption of various types of seafood or beef. In addition, negative publicity
concerning food quality or possible illness and injury resulting



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from the consumption of certain types of food, such as negative publicity concerning the levels of mercury or other carcinogens in certain types of seafood,
e-coli, mad cow and foot-and-mouth disease relating to the consumption of beef and other meat products and the publication of government, academic or industry findings about health concerns relating to food products served by
any of our restaurants could also affect consumer food preferences. These types of health concerns and negative publicity concerning the food products we serve at any of our restaurants may adversely affect the demand of our food and negatively
impact our results of operations.



In addition, we cannot
guarantee that our operational controls and employee training will be effective in preventing food-borne illnesses, such as hepatitis A, and other food safety issues that may affect our restaurants. Food-borne illness incidents could be caused by
food suppliers and transporters and, therefore, would be outside of our control. Any publicity relating to health concerns or the perceived or specific outbreaks of food-borne illnesses or other food safety issues attributed to one or more of our
restaurants, could result in a significant decrease in guest traffic in all of our restaurants and could have a material adverse effect on our results of operations. We face the risk of litigation in connection with any outbreak of food-borne
illnesses or other food safety issues at any of our restaurants. If a claim is successful, our insurance coverage may not be adequate to cover all liabilities or losses and we may not be able to continue to maintain such insurance, or to obtain
comparable insurance at a reasonable cost, if at all. If we suffer losses, liabilities or loss of income in excess of our insurance coverage or if our insurance does not cover such loss, liability or loss of income, there could be a material adverse
effect on our results of operations.



Expanding our restaurant base by
opening new restaurants in existing markets could reduce the business of our existing restaurants.



Our growth strategy includes opening restaurants in markets in which we already have existing restaurants. We may be unable to attract enough customers to
the new restaurants for them to operate at a profit. Even if we are able to attract enough customers to the new restaurants to operate them at a profit, those customers may be former customers of one of our existing restaurants in that market and
the opening of new restaurants in the existing market could reduce the revenue of our existing restaurants in that market.



Restaurant companies have been the target of class actions and other lawsuits alleging, among other things, violation of federal and state law.



We are subject to a variety of claims arising in the ordinary course of our
business brought by or on behalf of our customers or employees, including personal injury claims, contract claims, and employment-related claims. In recent years, a number of restaurant companies have been subject to lawsuits, including class action
lawsuits, alleging violations of federal and state law regarding workplace, employment and similar matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. We are currently defending purported
collective action lawsuits alleging violations of minimum wage provisions of the federal labor laws. Regardless of whether any claims against us are valid or whether we are ultimately determined to be liable, claims may be expensive to defend and
may divert time and money away from our operations and hurt our performance. A judgment significantly in excess of our insurance coverage, if any, for any claims could materially adversely affect our financial condition or results of operations, and
adverse publicity resulting from these allegations may materially adversely affect our business. We offer no assurance that we will not incur substantial damages and expenses resulting from lawsuits, which could have a material adverse effect on our
business.



Rising interest rates would increase our borrowing costs, which
could have a material adverse effect on our business and results of operations.



We currently have, and may incur, additional indebtedness that bears interest at variable rates. Accordingly, if interest rates increase, so will our interest costs, which may have an adverse effect on our business,
results of operations and financial condition.



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The capital costs of operations in our specialty growth division are extremely high. As a result, the failure of any
one of these could have a material adverse effect on our operations.



In connection with operations in our specialty growth division, we incur significant capital expenditures. As a result, the failure one or more of these projects could have a significant affect on our financial
condition and operations.



The loss of Tilman J. Fertitta could have a
material adverse effect on our business and development.



We believe that the development of our business has been, and will continue to be, dependent on Tilman J. Fertitta, our Chief Executive Officer, President, and Chairman of the Board. The loss of Mr. Fertittas services could have a
material adverse effect upon our business and development, and there can be no assurance that an adequate replacement could be found for Mr. Fertitta in the event of his unavailability.



Other risk factors may adversely affect our financial performance.



Other risk factors that could cause our actual results to differ materially from those indicated in the
Forward-Looking Statements in this report include, without limitation, changes in travel and outside dining habits as a result of terrorist activities perceived or otherwise, weather and other acts of God.



There are inherent limitations in all control systems, and misstatements due to error that
could seriously harm our business may occur and not be detected.



Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls and disclosure controls will prevent all possible error and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of
controls must be relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, in our Company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by the individual acts of some persons or by
collusion of two or more persons. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, a control may be inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.



Our
acquisition of the Golden Nugget Casino is subject to approval by Nevada Gaming Authorities and we cannot provide any assurances that we will receive such approval



On February 4, 2005, we entered into an agreement to purchase the Golden Nugget Casino in downtown Las Vegas. The gaming
industry is highly regulated. The closing of the acquisition and, if successful, our ownership and operation of the Golden Nugget Casino in the State of Nevada is subject to the Nevada Gaming Control Act and the regulations made under such Act, as
well as to various local ordinances. Gaming registrations, licenses and approvals, once obtained, can be suspended or revoked for a variety of reasons. The Golden Nugget Casino is subject to the licensing and regulatory control of the Nevada Gaming
Commission, the Nevada State Gaming Control Board and the Clark County Liquor and Gaming License Board, which we refer to herein collectively as the Nevada Gaming Authorities. We cannot assure you that we will obtain all required registrations,
licenses and approvals on a timely basis or at all, or that, once obtained, the registrations, findings of suitability, licenses and approvals will not be suspended, conditioned, limited or revoked. If we ever are prohibited from operating the
Golden Nugget Casino, we cannot assure you that we would recover the full value of our investment.



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The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon
declarations of public policy. These public policy concerns include, among other things:



| |  |  | preventing unsavory or unsuitable persons from being directly or indirectly involved with gaming at any time or in any capacity;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | establishing and maintaining responsible accounting practices and procedures;
| | - |  | -----------------------------------------------------------------------------



| |  |  | maintaining effective controls over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs, and safeguarding assets and revenue,
providing reliable recordkeeping and requiring the filing of periodic reports with the Nevada Gaming Authorities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | preventing cheating and fraudulent practices; and
| | - |  | -------------------------------------------------



| |  |  | providing a source of state and local revenue through taxation and licensing fees.
| | - |  | ----------------------------------------------------------------------------------



Changes in these laws, regulations and procedures could have significant negative effects on the Golden Nugget Casinos
gaming operations, if our acquisition is consummated, and our financial condition and results of operations.



Regulation and Licensing for Gaming Operations



On February 4, 2005, we entered into an agreement to purchase the Golden Nugget Casino in downtown Las Vegas. It is anticipated that a wholly-owned subsidiary of ours will acquire the outstanding capital stock of
Poster Financial Group, Inc., the owner of the Golden Nugget and that the acquisition will close within the next twelve months, subject to customary closing conditions contained in the purchase agreement. The closing of the acquisition and, if
successful, our operation of the Golden Nugget Casino will be subject to the gaming regulations described below.



Introduction.    The ownership and operation of casino gaming facilities in the State of Nevada is subject to the Nevada Gaming
Control Act and the regulations made under such Act, as well as to various local ordinances. The Golden Nugget Casino is subject to the licensing and regulatory control of the Nevada Gaming Commission, the Nevada State Gaming Control Board and the
Clark County Liquor and Gaming License Board, which we refer to herein collectively as the Nevada Gaming Authorities.



Owner and Operator Licensing Requirements.    GNLV, Corp., a subsidiary of Poster Financial Group, as the owner and operator of
the Golden Nugget Casino, has been licensed by, the Nevada Gaming Authorities as a corporate licensee, which we refer to herein as a company licensee. As a company licensee, GNLV will have to pay periodic fees and taxes. The gaming licenses are not
transferable.



Company Registration
Requirements.    Before our acquisition of the Golden Nugget Casino, we will be required to apply to, and be found suitable by, the Nevada Gaming Commission to own the equity interests of the subsidiary of ours that will
acquire the outstanding capital stock of Poster Financial Group and to be registered by the Nevada Gaming Commission as a publicly traded corporation, which we refer to herein as a registered company, for the purposes of the Nevada Gaming Control
Act. Our subsidiary that acquires the stock of Poster Financial Group will be required to apply to, and be found suitable by, the Nevada Gaming Commission to own the equity interests of Poster Financial Group and to be registered by the Nevada
Gaming Commission as an intermediary company.



Periodically, we
will be required to submit detailed financial and operating reports to the Nevada Gaming Commission and provide any other information that the Nevada Gaming Commission may require. Substantially all of our material loans, leases, sales of securities
and similar financing transactions must be reported to, or approved by, the Nevada Gaming Commission.



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Individual Licensing Requirements.    No person may become a stockholder of,
or receive any percentage of the profits of, an intermediary company or company licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Nevada Gaming Authorities may investigate any individual who has a
material relationship to or material involvement with us to determine whether the individual is suitable or should be licensed as a business associate of a gaming licensee. We and our officers, directors and certain key employees will be required to
file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable.
A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. An applicant for licensing or an applicant for a finding of suitability must pay or
must cause to be paid all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensing, the
Nevada Gaming Authorities have the jurisdiction to disapprove a change in a corporate position.



If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a
relationship with us, we would have to sever all relationships with that person. In addition, the Nevada Gaming Commission may require us to terminate the employment of any person who refuses to file appropriate applications. Determinations of
suitability or questions pertaining to licensing are not subject to judicial review in Nevada.



Consequences of Violating Gaming Laws.    If the Nevada Gaming Commission decides that we have violated the Nevada Gaming Control Act or any of its regulations, it could limit, condition,
suspend or revoke our registrations and gaming license. In addition, we and the persons involved could be subject to substantial fines for each separate violation of the Nevada Gaming Control Act, or of the regulations of the Nevada Gaming
Commission, at the discretion of the Nevada Gaming Commission. Further, the Nevada Gaming Commission could appoint a supervisor to operate the Golden Nugget Casino and, under specified circumstances, earnings generated during the supervisors
appointment (except for the reasonable rental value of the premises) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any of our gaming licenses and the appointment of a supervisor could, and revocation of any
gaming license would, have a significant negative effect on our gaming operations.



Requirements for Beneficial Securities Holders.    Regardless of the number of shares held, any beneficial holder of our voting securities, may be required to file an application, be
investigated and have that persons suitability as a beneficial holder of voting securities determined if the Nevada Gaming Commission has reason to believe that the ownership would otherwise be inconsistent with the declared policies of the
State of Nevada. If the beneficial holder of our voting securities who must be found suitable is a corporation, partnership, limited partnership, limited liability company or trust, it must submit detailed business and financial information
including a list of its beneficial owners. The applicant must pay all costs of the investigation incurred by the Nevada Gaming Authorities in conducting any investigation.



The Nevada Gaming Control Act requires any person who acquires more than 5% of the voting securities of a registered company
to report the acquisition to the Nevada Gaming Commission. The Nevada Gaming Control Act requires beneficial owners of more than 10% of a registered companys voting securities to apply to the Nevada Gaming Commission for a finding of
suitability within 30 days after the Chairman of the Nevada State Gaming Control Board mails the written notice requiring such filing. Under certain circumstances, an institutional investor, as defined in the Nevada Gaming Control Act,
which acquires more than 10%, but not more than 15%, of the registered companys voting securities may apply to the Nevada Gaming Commission for a waiver of a finding of suitability if the institutional investor holds the voting securities for
investment purposes only. An institutional investor which has obtained such a waiver may, in certain circumstances, hold up to 19% of a registered companys voting securities and maintain the waiver for a limited period of time. An
institutional investor will not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of



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causing, directly or indirectly, the election of a majority of the members of the board of directors of the registered company, a change in the corporate
charter, bylaws, management, policies or operations of the registered company, or any of its gaming affiliates, or any other action which the Nevada Gaming Commission finds to be inconsistent with holding the registered companys voting
securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include:



| |  |  | voting on all matters voted on by stockholders or interest holders;
| | - |  | -------------------------------------------------------------------



| |  |  | making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies
or operations; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | other activities that the Nevada Gaming Commission may determine to be consistent with such investment intent.
| | - |  | --------------------------------------------------------------------------------------------------------------



Consequences of Being Found Unsuitable.    Any
person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Gaming Commission or by the Chairman of the Nevada State Gaming Control Board, or who refuses or fails to pay
the investigative costs incurred by the Nevada Gaming Authorities in connection with the investigation of its application, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify
the beneficial owner. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of any voting security or debt security of a registered company beyond the period of time as may be prescribed by the Nevada Gaming
Commission may be guilty of a criminal offense. We will be subject to disciplinary action if, after we receive notice that a person is unsuitable to hold an equity interest or to have any other relationship with, we:



| |  |  | pay that person any dividend or interest upon any voting securities;
| | - |  | --------------------------------------------------------------------



| |  |  | allow that person to exercise, directly or indirectly, any voting right held by that person relating to us;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | pay remuneration in any form to that person for services rendered or otherwise; or
| | - |  | ----------------------------------------------------------------------------------



| |  |  | fail to pursue all lawful efforts to require the unsuitable person to relinquish such persons voting securities including, if necessary, the immediate purchase of the voting
securities for cash at fair market value.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Gaming Laws Relating to Securities Ownership.    The Nevada Gaming Commission may, in its discretion, require the holder of any debt or similar securities of a registered company, such as our 7.5% senior notes due
2014, to file applications, be investigated and be found suitable to own the debt or other security of the registered company if the Nevada Gaming Commission has reason to believe that such ownership would otherwise be inconsistent with the declared
policies of the State of Nevada. If the Nevada Gaming Commission decides that a person is unsuitable to own the security, then under the Nevada Gaming Control Act, the registered company can be sanctioned, including the loss of its approvals if,
without the prior approval of the Nevada Gaming Commission, it:



| |  |  | pays to the unsuitable person any dividend, interest or any distribution whatsoever;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | recognizes any voting right by the unsuitable person in connection with the securities;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | pays the unsuitable person remuneration in any form; or
| | - |  | -------------------------------------------------------



| |  |  | makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



We and our subsidiary that will acquire Poster Financial Group will be
required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of
the beneficial owner to the Nevada Gaming Authorities. A failure to make the disclosure may be grounds for finding



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the record holder unsuitable. We will be required to render maximum assistance in determining the identity of the beneficial owner of any of our or such
subsidiarys voting securities. The Nevada Gaming Commission has the power to require the stock certificates of any registered company to bear a legend indicating that the securities are subject to the Nevada Gaming Control Act. We do not know
whether this requirement will be imposed on us. However, the certificates representing shares of common stock of our subsidiary that will acquire Poster Financial Group will note that the shares are, or may become, subject to restrictions imposed by
applicable gaming laws.



Approval of Public
Offerings.    We may not make a public offering of any of our securities without the prior approval of the Nevada Gaming Commission if we intend to use the proceeds from the offering to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for those purposes or for similar transactions. Any approval that we might receive in the future relating to future offerings will not constitute a finding, recommendation or approval
by any of the Nevada Gaming Authorities as to the accuracy or adequacy of the offering documents or the investment merits of the securities. Any representation to the contrary is unlawful.



Approval of Changes in Control.    Before any
person may acquire control of a registered company, such person must obtain the prior approval of the Nevada Gaming Commission with respect to a change in control through:



| |  |  | merger;
| | - |  | -------



| |  |  | consolidation;
| | - |  | --------------



| |  |  | stock or asset acquisitions;
| | - |  | ----------------------------



| |  |  | management or consulting agreements; or
| | - |  | ---------------------------------------



| |  |  | any act or conduct by a person by which the person obtains control of us.
| | - |  | -------------------------------------------------------------------------



Entities seeking to acquire control of a registered company must satisfy the Nevada State Gaming Control Board and Nevada Gaming Commission with respect
to a variety of stringent standards before assuming control of the registered company. The Nevada Gaming Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with
the entity proposing to acquire control to be investigated and licensed as part of the approval process relating to the transaction.



Approval of Defensive Tactics.    The Nevada legislature has declared that some corporate acquisitions opposed by management,
repurchases of voting securities and corporate defense tactics affecting Nevada gaming licenses or affecting registered companies that are affiliated with the operations permitted by Nevada gaming licenses may be harmful to stable and productive
corporate gaming. The Nevada Gaming Commission has established a regulatory scheme to reduce the potentially adverse effects of these business practices upon Nevadas gaming industry and to further Nevadas policy to:



| |  |  | assure the financial stability of corporate gaming operators and their affiliates;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | preserve the beneficial aspects of conducting business in the corporate form; and
| | - |  | ---------------------------------------------------------------------------------



| |  |  | promote a neutral environment for the orderly governance of corporate affairs.
| | - |  | ------------------------------------------------------------------------------



Once we become a registered company, approvals may be required from the Nevada Gaming Commission before we can make exceptional repurchases of voting
securities above their current market price and before a corporate acquisition opposed by management can be consummated. The Nevada Gaming Control Act also requires prior approval of a plan of recapitalization proposed by a registered companys
board of directors in response to a tender offer made directly to its stockholders for the purpose of acquiring control.



Fees and Taxes.    License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are
payable to the State of Nevada and to the counties and cities in which the licensed



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subsidiaries respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly,
quarterly or annually and are based upon either:



| |  |  | a percentage of the gross revenue received;
| | - |  | -------------------------------------------



| |  |  | the number of gaming devices operated; or
| | - |  | -----------------------------------------



| |  |  | the number of table games operated.
| | - |  | -----------------------------------



A live entertainment tax is also paid by casino operations where entertainment is furnished in connection with admission charges or the selling or serving
of food or refreshments or the selling of merchandise.



Foreign Gaming Investigations.    Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with those persons, collectively, referred to as licensees,
and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada State Gaming Control Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada State Gaming Control Board of the licensees or registrants participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Gaming Commission. Licensees and
registrants are required to comply with the reporting requirements imposed by the Nevada Gaming Control Act. A licensee or registrant is also subject to disciplinary action by the Nevada Gaming Commission if it:



| |  |  | knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | engages in any activity or enters into any association that is unsuitable because it poses an unreasonable threat to the control of gaming in Nevada, reflects or tends to reflect,
discredit or disrepute upon the State of Nevada or gaming in Nevada, or is contrary to the gaming policies of Nevada;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | engages in activities or enters into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees; or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | employs, contracts with or associates with a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of unsuitability.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



License for Conduct of Gaming and Sale of
Alcoholic Beverages.    The conduct of gaming activities and the service and sale of alcoholic beverages at the Golden Nugget Casino is subject to licensing, control and regulation by the Clark County Liquor and Gaming
Licensing Board. The Clark County Liquor and Gaming License Board has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming license. All licenses are revocable and are not transferable. The
county agency has full power to limit, condition, suspend or revoke any license. Any disciplinary action could, and revocation would, have a substantial negative impact upon our operations.



|ITEM 2. | PROPERTIES
|------- | ----------



Restaurant Locations



For information concerning the location of our restaurants see BusinessRestaurant Locations.



Our corporate office in Houston, Texas is a multi-story building owned by us and includes meeting and training facilities, and a research and development
test kitchen. We also own and operate approximately 75,000 square feet of warehouse facilities used primarily for construction activities and related storage and retail goods storage and distribution related activities.



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|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------



On July 31, 2002, and subsequently amended, a purported collective action lawsuit against us entitled Meaghan Bollenberg, et. al. v. Landrys
Restaurants, Inc. was filed in the United States District Court for the Northern District of Illinois, and subsequently moved to a Court in the Southern District of Texas. The lawsuit was filed by six plaintiffs who were servers on behalf of
themselves and others similarly situated. The lawsuit alleges that the Company violated certain minimum wage laws under the federal Fair Labor Standards Act and seeks damages and costs. The Company is vigorously defending this litigation. Because
the case is in its early stages, the financial impact to the Company, if any, cannot be predicted.



General Litigation



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



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



We did not submit any matters to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2004.



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PART II



|ITEM 5. | MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ----------------------------------------------------------------------------------------------------------------



Price Range of Common Stock



Our common stock trades on the New York Stock Exchange under the symbol
LNY. As of January 10, 2005, there were approximately 1,104 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 New York Stock Exchange.



|               |  |      |       |     |   |      
|-------------- |  | ---- | ----- | --- | - | -----
|               |  | High |       | Low
|2003           |  |      |       |     |   |      
|First Quarter  |  | $    | 21.68 |     | $ | 15.05
|Second Quarter |  |      | 24.71 |     |   | 16.35
|Third Quarter  |  |      | 24.00 |     |   | 19.36
|Fourth Quarter |  |      | 26.78 |     |   | 20.60
|2004           |  |      |       |     |   |      
|First Quarter  |  | $    | 30.82 |     | $ | 25.30
|Second Quarter |  |      | 33.74 |     |   | 26.61
|Third Quarter  |  |      | 30.79 |     |   | 25.85
|Fourth Quarter |  |      | 30.48 |     |   | 24.75



Dividend Policy



Commencing in 2000, we began to pay an annual $0.10 per share dividend,
declared and paid in quarterly installments of $0.025 per share. In April 2004, the annual dividend was increased to $0.20 per share, declared and paid in quarterly installments of $0.05 per share. While we have paid a dividend every quarter since
April 2000, the actual declaration and payment of cash dividends depends upon our actual earnings levels, capital requirements, financial condition, and other factors deemed relevant by the Board of Directors. The indenture under which our senior
notes due 2014 were issued and our bank credit facility limit our ability to pay increased dividends on our common stock.



Stock Repurchase



In November 1998, we announced the authorization of an open market stock buy back program, and renewed it April 2000, for an additional $36 million. In
October 2002, we authorized a $50 million open market stock buy back program and in September 2003, we authorized another $60 million open market stock repurchase program. In October 2004, the Company authorized a $50 million open market stock
repurchase program. In early 2005, the Company announced a $50 million authorization to repurchase common stock. These programs have resulted in our aggregate repurchasing of approximately 12.8 million shares of common stock for approximately $157
million through December 31, 2004.



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##### Table of Contents

All repurchases of our common stock during the fourth quarter of 2004 were made pursuant to our open
market stock repurchase program. The following table summarizes repurchases of our common stock during the fourth quarter of 2004 pursuant to our open market stock repurchase program.



|                                               |  |                                           |  |                                      |       |                                                                                         |         |                                                                                                                   |   |           
|---------------------------------------------- |  | ----------------------------------------- |  | ------------------------------------ | ----- | --------------------------------------------------------------------------------------- | ------- | ----------------------------------------------------------------------------------------------------------------- | - | ----------
|PERIOD                                         |  | Total Number ofShares (or Units)Purchased |  | Average PricePaid per Share(or Unit) |       | Total Number ofShares (or Units)Purchased as Part ofPublicly AnnouncedPlans or Programs |         | Maximum Number(or ApproximateDollar Value) ofShares (or Units)that May yet BePurchased Under thePlans or
Programs
|                                               |  | (a)                                       |  | (b)                                  |       | (c)                                                                                     |         | (d)                                                                                                              
|October 2004 (October 1 through October 22)    |  | 884,600                                   |  | $                                    | 27.46 |                                                                                         | 884,600 |                                                                                                                   | $ | 91,685,396
|November 2004                                  |  |                                          |  |                                      |      |                                                                                         |        |                                                                                                                   | $ | 91,685,396
|December 2004 (December 9 through December 14) |  | 84,400                                    |  | $                                    | 28.18 |                                                                                         | 84,400  |                                                                                                                   | $ | 89,307,337
|                                               |  |                                           |  |                                      |       |                                                                                         |         |                                                                                                                   |   |           
|Total                                          |  | 969,000                                   |  | $                                    | 27.52 |                                                                                         | 969,000 |                                                                                                                   | $ | 89,307,337



ITEM 6.    SELECTED FINANCIAL DATA



The following table sets forth our selected consolidated financial data as of and for the years ended December 31, 2004, 2003, 2002, 2001, and 2000. The financial data as of and for the years ended December 31, 2004,
2003, and 2002 are derived from our audited consolidated financial statements which are incorporated by reference herein, and should be read in conjunction with our consolidated financial statements and the notes thereto, which have been audited by
Grant Thornton LLP for the year ended December 31, 2004 and Ernst & Young LLP for the years ended December 31, 2003 and 2002. The financial data as of and for the years ended December 31, 2001 and 2000 has been derived from our consolidated
financial statements which were previously audited by Arthur Andersen, LLP independent public accountants. These financial statements have been restated to reflect corrections to our accounting for leases. As Arthur Andersen LLP has ceased
operations, the adjustments necessary to reflect the corrected lease accounting treatment have not been audited. The financial statements for 2003 and 2002 have been restated to reflect adjustments to our previously filed financial statements that
are further described in Note 2 Restatement under Notes to Consolidated Financial Statements included in Item 8. The data set forth below should be read in conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations, Risk Factors and our Consolidated Financial Statements and Notes. All amounts are in thousands, except per share data.



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SELECTED CONSOLIDATED FINANCIAL INFORMATION



|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|--------------------------------------------------------------------------- |  | ----------------------- | --------- | ------------ | - | --------- | ------------ |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                                            |  | Year Ended December 31, |          
|                                                                            |  | 2004                    |           | 2003Restated |   |           | 2002Restated |  |   | 2001Restated |   |  | 2000Restated |        
|INCOME STATEMENT DATA                                                       |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Revenues                                                                    |  | $                       | 1,167,475 |              | $ | 1,105,755 |              |  | $ | 894,795      |   |  | $            | 746,642 |   |  | $ | 520,980 |  
|Operating costs and expenses:                                               |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Cost of revenues                                                            |  |                         | 326,108   |              |   | 321,783   |              |  |   | 257,945      |   |  |              | 219,684 |   |  |   | 156,787 |  
|Restaurant labor                                                            |  |                         | 337,633   |              |   | 323,284   |              |  |   | 259,198      |   |  |              | 215,662 |   |  |   | 147,192 |  
|Other restaurant operating expenses                                         |  |                         | 282,412   |              |   | 271,271   |              |  |   | 224,122      |   |  |              | 186,529 |   |  |   | 122,674 |  
|General and administrative expenses                                         |  |                         | 58,320    |              |   | 51,704    |              |  |   | 43,384       |   |  |              | 38,004  |   |  |   | 26,652  |  
|Depreciation and amortization(1)                                            |  |                         | 57,294    |              |   | 49,092    |              |  |   | 40,729       |   |  |              | 34,975  |   |  |   | 27,265  |  
|Asset impairment expense(1)                                                 |  |                         | 1,709     |              |   | 13,144    |              |  |   | 2,200        |   |  |              | 2,394   |   |  |   | 6,292   |  
|Restaurant pre-opening expenses                                             |  |                         | 5,203     |              |   | 8,650     |              |  |   | 4,591        |   |  |              | 2,598   |   |  |   | 3,402   |  
|Store closings and charges(3)                                               |  |                         |          |              |   |          |              |  |   |             |   |  |              |        |   |  |   | 2,000   |  
|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Total operating costs and expenses                                          |  |                         | 1,068,679 |              |   | 1,038,928 |              |  |   | 832,169      |   |  |              | 699,846 |   |  |   | 492,264 |  
|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Operating income                                                            |  |                         | 98,796    |              |   | 66,827    |              |  |   | 62,626       |   |  |              | 46,796  |   |  |   | 28,716  |  
|Other (income) expense:                                                     |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Interest (income) expense, net                                              |  |                         | 15,185    |              |   | 9,561     |              |  |   | 4,997        |   |  |              | 9,402   |   |  |   | 6,617   |  
|Other, net                                                                  |  |                         | 13,544    |              |   | 1,463     |              |  |   | (887         | ) |  |              | (56     | ) |  |   | 887     |  
|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Total other (income) expense(4)                                             |  |                         | 28,729    |              |   | 11,024    |              |  |   | 4,110        |   |  |              | 9,346   |   |  |   | 7,504   |  
|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Income before taxes & cumulative effect of accounting change                |  |                         | 70,067    |              |   | 55,803    |              |  |   | 58,516       |   |  |              | 37,450  |   |  |   | 21,212  |  
|Provision for income taxes(2)                                               |  |                         | 3,545     |              |   | 10,889    |              |  |   | 18,025       |   |  |              | 11,502  |   |  |   | 7,021   |  
|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Net income                                                                  |  | $                       | 66,522    |              | $ | 44,914    |              |  | $ | 40,491       |   |  | $            | 25,948  |   |  | $ | 14,191  |  
|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Earnings per share information:                                             |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Basic                                                                       |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Net income (loss)                                                           |  | $                       | 2.46      |              | $ | 1.63      |              |  | $ | 1.56         |   |  | $            | 1.19    |   |  | $ | 0.61    |  
|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Average number of common shares outstanding                                 |  |                         | 27,000    |              |   | 27,600    |              |  |   | 25,900       |   |  |              | 21,750  |   |  |   | 23,400  |  
|Diluted                                                                     |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Net income (loss)                                                           |  | $                       | 2.39      |              | $ | 1.59      |              |  | $ | 1.51         |   |  | $            | 1.15    |   |  | $ | 0.60    |  
|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Weighted average number of common shares and equivalents outstanding        |  |                         | 27,800    |              |   | 28,325    |              |  |   | 26,900       |   |  |              | 22,535  |   |  |   | 23,600  |  
|OTHER DATA                                                                  |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|EBITDA (Earnings before interest, taxes, depreciation, and amortization)    |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Total Operating Income                                                      |  | $                       | 98,796    |              | $ | 66,827    |              |  | $ | 62,626       |   |  | $            | 46,796  |   |  | $ | 28,716  |  
|Add back:                                                                   |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Depreciation and amortization                                               |  |                         | 57,294    |              |   | 49,092    |              |  |   | 40,729       |   |  |              | 34,975  |   |  |   | 27,265  |  
|Asset impairment expense                                                    |  |                         | 1,709     |              |   | 13,144    |              |  |   | 2,200        |   |  |              | 2,394   |   |  |   | 6,292   |  
|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|EBITDA                                                                      |  | $                       | 157,799   |              | $ | 129,063   |              |  | $ | 105,555      |   |  | $            | 84,165  |   |  | $ | 62,273  |  
|                                                                            |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|BALANCE SHEET DATA (AT END OF PERIOD)                                       |  |                         |           |              |   |           |              |  |   |              |   |  |              |         |   |  |   |         |  
|Working capital (deficit)                                                   |  | $                       | 161,515   |              | $ | (38,767   | )            |  | $ | (55,475      | ) |  | $            | (6,017  | ) |  | $ | (39,657 | )
|Total assets                                                                |  | $                       | 1,344,952 |              | $ | 1,104,883 |              |  | $ | 934,898      |   |  | $            | 692,105 |   |  | $ | 666,729 |  
|Short-term notes payable and current portion of notes and other obligations |  | $                       | 1,700     |              | $ | 1,963     |              |  | $ | 1,783        |   |  | $            |        |   |  | $ | 60      |  
|Long-term notes and other obligations, noncurrent                           |  | $                       | 559,545   |              | $ | 299,736   |              |  | $ | 189,404      |   |  | $            | 175,000 |   |  | $ | 155,000 |  
|Stockholders equity                                                        |  | $                       | 600,897   |              | $ | 599,894   |              |  | $ | 563,406      |   |  | $            | 391,032 |   |  | $ | 362,885 |  

---

|(1) | In 2004, 2003, 2002, 2001 and 2000, we recorded asset impairment charges of $1.7 million (1.2 million after tax), $13.1 million ($9.1 million after tax), $2.2 million ($1.5 million
after tax), $2.4 million ($1.6 million after tax) and $6.3 million ($4.3 million after tax), respectively, related to the adjustment to estimated fair value of certain restaurant properties and assets. The Company considers the asset impairment
expense as additional depreciation and amortization, although shown as a separate line item in the consolidated income statements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(2) | In 2004 and 2003, we recognized $18.5 million and $6.3 million in income tax benefits for a reduction of the valuation allowance and deferred tax liabilities attributable to tax
benefits deemed realizable and reduced accruals.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In the second quarter of 2000, we recorded a $2.0 million special charge to expense merger costs for our initial failed offer to acquire Rainforest Cafe.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | In 2004 we recorded prepayment penalty expense and other costs related to the refinancing of our long-term debt of approximately $16.6 million ($11.3 million after tax).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



EBITDA is not a generally accepted accounting principles
(GAAP) measurement and is presented solely as a supplemental disclosure because the Company believes that it is a widely used measure of operating performance in the restaurant industry. EBITDA is not intended to be viewed as a source of
liquidity or as a cash flow measure as used in the statement of cash flows. EBITDA is simply shown above as it is a commonly used non-GAAP valuation statistic.



|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



Introduction



We own and operate full-service, casual dining restaurants. As of December 31, 2004, we operated 297 restaurants. In addition to these units, there were
several limited menu restaurants and other properties (as described in Item 1. Business), and two restaurants that were closed temporarily for renovation.



During 2003, we completed a series of relatively small acquisitions, including: separate acquisitions of several well-known individual upscale Houston
restaurants; Ocean Journey (a 12 acre aquarium complex in Denver, Colorado): the Holiday Inn on the Beach in Galveston, Texas; and the Galveston Flagship Hotel (subject to an existing lease), for an aggregate cash purchase price of all such
acquisitions of approximately $27.0 million, plus the assumption of an $11.4 million non-recourse long-term note payable. These acquisitions included certain future commitments as described in Notes to the Consolidated Financial Statements,
Commitments and Contingencies in the paragraph titled Building Commitments. The estimated cost of such future commitments are included in the Contractual Obligations table amounts under Other Long-Term Obligations, that is included
within this Item 7.



In February 2002, we acquired 15 seafood
restaurants located primarily in Michigan and Florida in connection with the acquisition of C.A. Muer, Inc., (the Muer Acquisition). In August 2002, we purchased 27 Chart House seafood restaurants, located primarily on the East and West
Coasts of the United States. These acquisitions included plans for the redevelopment of ten additional lower profitability restaurants, which were also then acquired, into Joes Crab Shack restaurants, and the sale or disposal of approximately
six additional acquired, but non-strategic locations. In October 2002, we purchased 27 Texas-based Saltgrass Steak House restaurants.



The Specialty Growth Division is primarily engaged in operating complementary entertainment and hospitality activities, such as miscellaneous beverage
carts and various kiosks, amusement rides and games and some associated limited hotel properties, generally at locations in conjunction with our core restaurant operations. The total assets, revenues, and operating profits of these complementary
specialty business activities are considered not material to the overall business and below the threshold of a separate reportable business segment under SFAS No. 131.



The Company is in the business of operating restaurants and the above-mentioned complementary activities. The Company does
not engage in real estate operations other than those associated with the ownership and operation of its business. The Company owns a fee interest (owns the land and building) in a number of properties underlying its businesses, but it does not
engage in real estate sales or real estate management in any



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significant fashion or format. The Chief Executive Officer, who is responsible for the Companys operations, reviews and evaluates both core and
non-core business activities and results, and determines financial and management resource allocations and investments for all business activities.



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



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



In this report, we have made forward-looking statements. Our forward-looking statements are subject to risks and uncertainty, including without
limitation, our ability to continue our expansion strategy, our ability to make projected capital expenditures, as well as potential acquisitions of other restaurants, restaurant concepts and lines of businesses in other sectors of the hospitality
and entertainment industries, general market conditions, competition, and pricing. Forward-looking statements include statements regarding: future capital expenditures (including the amount and nature thereof); business strategy and measures to
implement that strategy; competitive strengths; goals; expansion and growth of our business and operations; future commodity prices; availability of food products, materials and employees; consumer perceptions of food safety; changes in local,
regional and national economic conditions; the effectiveness of our marketing efforts; changing demographics surrounding our restaurants; the effect of tax laws, and any changes therein; same store sales; earnings guidance; the seasonality of our
business; weather and acts of God; food, labor, fuel and utilities costs; plans; references to future success; the risks described in Risk Factors as well as other statements which include words such as anticipate,
believe, plan, estimate, expect, intend and other similar expressions. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, we cannot assure you that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements, the
inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.



Restatement



In late 2004 and early 2005, a number of companies within the restaurant industry announced adjustments to their accounting for leases and the
depreciation of leasehold improvements. In consultation with our current and prior external auditors, we also determined that an adjustment was necessary to modify our accounting in these areas. As a result, we have restated our consolidated
financial statements for years prior to 2004. Historically, unless otherwise deemed immaterial, we recorded rent expense on a straight-line basis over the initial non-cancelable lease term, with the term commencing when actual rent payments began.
We depreciated our buildings, leasehold improvements and other long-lived assets on those properties over a period that included both the initial non-cancelable lease term and options, where the failure to renew would result in economic penalty (or
the useful life of the assets, if shorter). We previously believed that these longstanding accounting treatments were appropriate under generally accepted accounting principles. We now have restated our financial statements to recognize rent expense
on a straight-line basis over the expected lease term, including option periods where failure to exercise such options would result in an economic penalty. The lease term commences on the date when we become legally obligated under the lease
regardless of when actual rent payments begin.



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All of the following discussion involving results of operations refers to the restated financial
statements.



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, |  
|                                    |  | 2004                    |   |  | 2003  |   |  | 2002  |  
|Revenues                            |  | 100.0                   | % |  | 100.0 | % |  | 100.0 | %
|Cost of revenues                    |  | 27.9                    | % |  | 29.1  | % |  | 28.8  | %
|Restaurant labor                    |  | 28.9                    | % |  | 29.2  | % |  | 29.0  | %
|Other restaurant operating expenses |  | 24.2                    | % |  | 24.5  | % |  | 25.0  | %
|                                    |  |                         |   |  |       |   |  |       |  
|Restaurant level profit             |  | 19.0                    | % |  | 17.2  | % |  | 17.2  | %
|                                    |  |                         |   |  |       |   |  |       |  



Year ended December
31, 2004 Compared to the Year ended December 31, 2003



Revenues increased $61,720,108 or 5.6%, from $1,105,755,057 to $1,167,475,165 in the year ended December 31, 2004, compared to the year ended December 31, 2003. The total increase/change in revenue is comprised of the following approximate
amounts: 2004 restaurant openings$87 million; restaurant closings decrease to 2004 revenues$13 million; locations open 2004 and 2003 including honeymoon periodsdecrease $13 million. The total number of units open as of
December 31, 2004 and 2003 were 297 and 286, respectively.



As
a primary result of increased revenues, cost of revenues increased $4,324,630, or 1.3%, from $321,783,377 to $326,108,007 in the year ended December 31, 2004, compared to the same period in the prior year. Cost of revenues as a percentage of
revenues for the year ended December 31, 2004, decreased to 27.9% from 29.1% in 2003. The decrease in cost of revenues as a percentage of revenues primarily reflects a moderate menu price increase, stable commodities prices and a shift in product
mix.



Restaurant labor expenses increased $14,349,131, or 4.4%,
from $323,284,399 to $337,633,530 in the year ended December 31, 2004, compared to the same period in the prior year, principally as a result of increased revenues. Restaurant labor expenses as a percentage of revenues for the year ended December
31, 2004, decreased to 28.9% from 29.2% in 2003, principally due to efficiencies gained from improved scheduling and training techniques.



Other restaurant operating expenses increased $11,141,084, or 4.1%, from $271,270,870 to $282,411,954 in the year ended December 31, 2004, compared to the
same period in the prior year, principally as a result of increased revenues. Such expenses decreased as a percentage of revenues to 24.2% in 2004 from 24.5% in 2003, as a primary result of lower advertising partially offset by increased rent
expense.



General and administrative expenses increased
$6,615,542, or 12.8%, from $51,704,100 to $58,319,642 in the year ended December 31, 2004, compared to the same period in the prior year, and increased as a percentage of revenues to 5.0% in 2004 from 4.7% in 2003. The increase is due to increased
compensation and personnel and higher professional fees related to Sarbanes-Oxley.



Combined depreciation and amortization expense and asset impairment expense decreased an aggregate of $3,233,054, or 5.2%, from an aggregate of $62,235,831 to $59,002,777 in the year ended December 31, 2004, compared
to the same period in the prior year. The decrease for 2004 was primarily due to an increase in



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depreciation related to the addition of new restaurants and equipment offset by a decrease in impairment charges. Asset impairment expense of approximately
$1,700,000 relating to underperforming and closed restaurants was recorded for 2004, while approximately $13,100,000 was included in the 2003 amount.



The impairment charge in fiscal 2004 resulted from sales declines in one particular restaurant, combined with deterioration in the specific
restaurants profitability and managements lowered outlook for improvement in such specific property. Assets that were impaired are primarily leasehold improvements and to a lesser extent equipment. A similar evaluation of our units was
performed in 2003, resulting in the write down of six under-performing and three closed restaurants. Included in the 2003 amounts were four Landrys division, three Joes Crab Shack, and two Crab House units. The following is a summary of
related charges and expenses:



|                                             |  |                          |           |      |   |            |  |   |          
|-------------------------------------------- |  | ------------------------ | --------- | ---- | - | ---------- |  | - | ---------
|                                             |  | Years ended December 31,
|                                             |  | 2004                     |           | 2003 |   | 2002      
|Asset Impairment                             |  | $                        | 1,700,000 |      | $ | 13,100,000 |  | $ | 2,200,000
|Accrued Estimated Lease Termination Payments |  | $                        |          |      | $ | 1,300,000  |  | $ |         
|                                             |  |                          |           |      |   |            |  |   |          
|                                             |  | $                        | 1,700,000 |      | $ | 14,400,000 |  | $ | 2,200,000
|                                             |  |                          |           |      |   |            |  |   |          



Restaurant pre-opening
expenses were $5,203,518 for the year ended December 31, 2004, compared to $8,650,178 for the same period in the prior year. The decrease for the 2004 period was attributable to a decrease in units opened in 2004 as compared to 2003.



The increase in net interest expense in the year ended December 31, 2004 as
compared to the prior year is primarily due to higher borrowings, as well as an increase in our average borrowing rate.



The increase in other expense, net is comprised primarily of $14.6 million in pre-payment penalties, and related fees associated with the pay down of our
$150 million senior notes and bank credit facility both of which were entered into in 2003 partially offset by $1.1 million in business interruption insurance recoveries. Other expense for 2003 is primarily expenses related to abandoned project
costs.



Provision for income taxes decreased by $7,343,739 to
$3,544,778 in the year ended December 31, 2004 from $10,888,517 in 2003 primarily due to changes in our pre-tax income offset by a net $18.5 million income tax benefit gained from a reversal of the remaining valuation allowance attributable to tax
benefits associated with the Rainforest Cafe acquisition deemed realizable. The previously established valuation allowance was reversed at December 31, 2004, due to the strong 2004 and future forecasted profitability of the Rainforest Cafe
restaurants, a successful transition from a tax-loss incurring stand-alone public company to a highly profitable and taxable income producing wholly-owned subsidiary of the Company, coupled with the approaching end of specific recognition
limitations on allowable deductions and tax assets and the 2004 resolution of certain tax issues, which caused management to believe the remaining deferred tax assets previously reserved would more likely than not be realized. In 2003, an income tax
benefit of $6.3 million was recognized from reversal of the valuation reserve attributable to tax assets deemed realizable and reduced accruals.



Year ended December 31, 2003 Compared to the Year ended December 31, 2002



Revenues increased $210,960,436, or 23.6%, from $894,794,621 to $1,105,755,057 for the year ended December 31, 2003,
compared to the year ended December 31, 2002. The total increase/change in revenue is comprised of the following approximate amounts: 2003 restaurant openings$81 million; 2002 acquisitions incremental revenues for 2003 over 2002 partial year
results$139 million; restaurant closings decrease to 2003 revenues$8 million; locations open 2003 and 2002 including honeymoon periodsdecrease $2 million. The total number of units open as of December 31, 2003 and 2002
were 286 and 267, respectively.



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As a primary result of increased revenues, cost of revenues increased $63,838,636, or 24.7%, from
$257,944,741 to $321,783,377 in the year ended December 31, 2003, compared to the same period in the prior year. Cost of revenues as a percentage of revenues for the year ended December 31, 2003, increased to 29.1%, from 28.8% in 2002. The increase
in cost of revenues as a percentage of revenues primarily reflects the higher cost of sales from the Saltgrass and other 2002 acquisitions, and higher product costs at the Companys seafood restaurants.



Restaurant labor expenses increased $64,086,435, or 24.7%, from $259,197,964
to $323,284,399 in the year ended December 31, 2003, compared to the same period in the prior year, principally as a result of increased revenues. Restaurant labor expenses as a percentage of revenues for the year ended December 31, 2003, increased
to 29.2% from 29.0% in 2002, principally due to inefficiencies attributable to a comparatively large number of new unit openings during the 2003 period.



Other restaurant operating expenses increased $47,149,352, or 21.0%, from $224,121,518 to $271,270,870 in the year ended December 31, 2003, compared to
the same period in the prior year, principally as a result of increased revenues. Such expenses decreased as a percentage of revenues to 24.5% in 2003 from 25.0% in 2002, as a primary result of lower rent expense from the acquired Saltgrass Steak
House restaurants.



General and administrative expenses
increased $8,320,301, or 19.2%, from $43,383,799 to $51,704,100 in the year ended December 31, 2003, compared to the same period in the prior year, and decreased as a percentage of revenues to 4.7% in 2003 from 4.8% in 2002. The dollar increase was
a result of increased personnel and travel required to support our operations. Such expenses decreased as a percentage of revenues as a result of increased revenues from acquisitions and new restaurants thereby leveraging our corporate expenses.



Combined depreciation and amortization expense and asset
impairment expense increased an aggregate of $19,306,121, or 45.0%, from an aggregate of $42,929,710 to $62,235,831 in the year ended December 31, 2003, compared to the same period in the prior year. The increase for 2003 was primarily due to the
addition of new restaurants and equipment and restaurant acquisitions. Asset impairment expense of $13,100,000 relating to six underperforming and three closed restaurants was included in the 2003 amount, and $2,200,000 was included for 2002.
Included in the 2003 amounts were four Landrys division, three Joes Crab Shack, and two Crab House restaurants.



Restaurant pre-opening expenses were $8,650,178 for the year ended December 31, 2003, compared to $4,590,972 for the same period in the prior year. The
increase for the 2003 period was attributable to an increase in units opened in 2003 as compared to 2002.



The increase in net interest expense in the year ended December 31, 2003, as compared to the prior year, is primarily due to our higher borrowings. Other
expense for 2003 is primarily expenses related to abandoned development projects. Other expense (income) for 2002 includes additional income of $1,100,000 for a settlement from a vendor, and a gain of $875,000 on investment assets held for sale
reduced by a loss of $1,500,000 on similar assets during the last six months of 2002.



Provision for income taxes decreased by $7,136,218 to $10,888,517 in the year ended December 31, 2003 from $18,024,735 in 2002 primarily due to changes in our pre-tax income offset by a $6,300,000 income tax benefit
gained from a reduction of the valuation allowance and deferred tax liabilities attributable to tax benefits deemed realizable and reduced accruals. The previously established valuation allowance was reduced at December 31, 2003, due to the strong
2003 and future forecasted profitability of the Rainforest Cafe restaurants, 2003 completion of a successful transition from a tax-loss incurring stand-alone public company to a highly profitable and taxable income producing wholly-owned subsidiary
of the Company, coupled with the approaching end of specific recognition limitations on allowable deductions and tax assets and the 2003 resolution of certain tax issues, which caused management to believe that a portion of the deferred tax assets
previously reserved would more likely than not be realized and accruals reduced.



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Liquidity and Capital Resources



In December 2004, the Company refinanced its existing revolving credit facility and existing senior notes by entering into a
new five year $300.0 million Bank Credit Facility and a six year $150.0 million Term Loan. The Bank Credit Facility matures in December 2009 and the Term Loan matures in December 2010. Interest on the Bank Credit Facility is payable monthly or
quarterly at Libor or the banks base rate plus a financing spread. Interest on the Term Loan is payable quarterly at Libor plus a financing spread. The Companys financing spread under both the Bank Credit Facility and the Term Loan is
currently 1.75% for Libor borrowings and 0.75% for base rate borrowings. As of December 31, 2004, the Company had approximately $286.2 million available under the existing credit facility for expansion and working capital purposes.



Concurrent with the closing of the Bank Credit Facility and Term Loan in
December 2004, the Company also issued $400.0 million in senior notes through a private placement offering. The senior notes are general unsecured obligations of the Company and mature December 2014. Interest is payable semi-annually at 7.5%.



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



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



In October
2003, the Company refinanced a previous bank credit facility by issuing long-term notes totaling $150.0 million through a private placement of debt and amending and extending the existing bank credit facility to a four-year $200.0 million revolving
credit facility (the Former Bank Credit Facility) later increased to $225 million. The long-term notes had maturities ranging from October 2009 through October 2013, and the Former Bank Credit Facility matured in October 2007. Interest
on the long-term notes was paid quarterly at an average rate of 5.95%. Interest on the Former Bank Credit Facility was payable monthly or quarterly at Libor or the banks base rate plus a financing spread. The Former Bank Credit Facility,
long-term notes, and all future related liabilities were paid down in full with the proceeds from the December 2004 refinancing.



A wholly-owned subsidiary of ours assumed an $11.4 million 9.39% non-recourse, long-term note payable (due May 2010) in connection with an asset purchase
in March 2003. Principal and interest payments under this note aggregate $102,000 monthly.



During the year ended December 31, 2004, the Company repurchased $62.8 million of common stock. In September 2003, the Company authorized an open market stock repurchase program for $60 million. In October 2004, the
Company authorized a $50 million stock repurchase program. In early 2005, the Company authorized a $50 million stock repurchase program. The Company expects to make opportunistic repurchases of its common stock.



Working capital increased from a deficit of $38.8 million as of December 31,
2003 to $161.5 million as of December 31, 2004 primarily due to issuance of the 7.5% senior notes and a refinancing of the Companys bank debt in December 2004. Cash flow to fund future operations, new restaurant development, and acquisitions
will be generated from operations and available capacity under the Companys current Bank Credit Facility.



In 2004, the Company spent $96.4 million on capital expenditures including opening 16 new units. An additional five Chart House units were purchased out
of a master lease agreement for $14.3 million. Also included in cash flow from investing activities was the payment to settle all future contingent obligations related to the financial performance of the Saltgrass Steak House restaurants and
settlement of certain acquisition



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integration costs. In 2005, we expect to spend approximately $60 million including opening 12  15 units. We also plan to spend an additional $140
million plus certain working capital liabilities in 2005 or 2006 to complete our pending acquisition of the Golden Nugget Hotel and Casino in downtown Las Vegas, Nevada.



As of December 31, 2004, the Company had contractual obligations as described below. These obligations are expected to be
funded primarily through cash on hand, cash flow from operations, working capital, the Bank Credit Facility and additional financing sources in the normal course of business operations.



|                                            |  |      |         |           |   |           |  |            |        |  |   |        
|------------------------------------------- |  | ---- | ------- | --------- | - | --------- |  | ---------- | ------ |  | - | -------
|Contractual Obligations (in thousands)      |  | 2005 |         | 2006-2007 |   | 2008-2009 |  | Thereafter
|Operating Leases                            |  | $    | 44,040  |           | $ | 79,408    |  | $          | 63,298 |  | $ | 248,197
|Long-Term Debt                              |  | $    | 1,700   |           | $ | 3,461     |  | $          | 3,502  |  | $ | 552,582
|Unconditional Purchase Obligations          |  | $    | 52,119  |           | $ | 5,091     |  | $          | 2,757  |  | $ | 1,550  
|Other Long-Term Obligations                 |  | $    | 6,822   |           | $ | 9,044     |  | $          | 566    |  | $ | 15,000 
|                                            |  |      |         |           |   |           |  |            |        |  |   |        
|Total Cash Obligations                      |  | $    | 104,681 |           | $ | 97,004    |  | $          | 70,123 |  | $ | 817,329
|                                            |  |      |         |          
|Other Commercial Commitments (in thousands) |  | 2005 |         | 2006-2007 |   | 2008-2009 |  | Thereafter
|Line of Credit                              |  | $    |        |           | $ |          |  | $          |       |  | $ |       
|Standby Letters of Credit                   |  | $    | 13,767  |           | $ |          |  | $          |       |  | $ |       
|                                            |  |      |         |           |   |           |  |            |        |  |   |        
|Total Commercial Commitments                |  | $    | 13,767  |           | $ |          |  | $          |       |  | $ |       



From time to time, we
review opportunities for restaurant acquisitions and investments in the hospitality, entertainment, amusement, food service and facilities management and other industries. Our exercise of any such investment opportunity may impact our development
plans and capital expenditures. We believe that adequate sources of capital are available to fund our business activities through December 31, 2005.



As a primary result of establishing long-term borrowings, the Company will incur higher interest expense in the future. However, the Company has mitigated
a portion of the higher interest expense by entering into a fair value hedge with a notional amount of $50.0 million, whereby the Company swapped higher fixed interest rates of the 7.5% senior notes due 2014 for floating interest rates equal to six
month Libor plus a financing spread of 2.38%.



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



Seasonality and Quarterly Results



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



Critical Accounting Policies



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



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We operate approximately 300 properties and periodically we expect to experience unanticipated individual
unit deterioration in revenues and profitability, on a short-term and occasionally longer-term basis. When such events occur and we determine that the associated assets are impaired, we will record an asset impairment expense in the quarter such
determination is made. Due to our average restaurant net investment cost, generally excluding the owned land component, of approximately $2 million, such amounts could be significant when and if they occur. However, such asset impairment expense
does not affect our financial liquidity, and is usually excluded from many valuation model calculations.



The Company maintains a large deductible insurance policy related to general liability and workers compensation coverage. Predetermined loss
limits have been arranged with insurance companies to limit the Companys per occurrence cash outlay. Accrued expenses and other liabilities include estimated costs to settle unpaid claims and estimated incurred but not reported claims using
actuarial methodologies.



We follow the intrinsic value method
of accounting for stock options, and as such do not record compensation expense related to amounts outstanding. Effective with the quarter ending September 30, 2005, we will expense compensation related to stock options in accordance with SFAS
123(R).



Recent Accounting Pronouncements



The Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. (FIN) 46(R), Consolidation of Variable Interest Entities in January 2003. This interpretation provides guidance on the identification of, and financial reporting for, variable interest entities. Variable
interest entities are entities that lack the characteristics of a controlling financial interest or lack sufficient equity to finance its activities without additional subordinated financial support. FIN 46(R) requires a company to consolidate a
variable interest entity if that company is obligated to absorb the majority of the entitys expected losses or entitled to receive the majority of the entitys residual returns, or both. Adoption of FIN 46(R) did not have a material
impact on the Companys consolidated financial statements.



In November 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 151, Inventory Costs which amended ARB 43. The statement clarifies that abnormal amounts of idle facility expense, freight, handling costs
and wasted materials should be recognized as current period charges, effective for fiscal years beginning after June 15, 2005. Adoption of this standard is not expected to have a material impact on the Companys consolidated financial
statements.



In December 2004, the FASB issued SFAS No. 153,
Exchange of Non-Monetary Assets. This statement amends APB 29 to require certain non-monetary exchange transactions to be recorded on a carry over cost basis if future cash flows are not expected to change significantly. The statement is
effective for fiscal periods beginning after June 15, 2005. Adoption of SFAS No. 153 is not expected to have a material impact on the Companys consolidated financial statements.



In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payments. This statement requires the
expensing of stock options in the financial statements for periods no later than the annual or interim periods beginning after June 15, 2005. The Company has determined at this time to implement the statement during the interim period ending
September 30, 2005, but as of yet the company has not made a determination of the valuation methodology and, therefore, has not determined the impact to future periods.



Impact of Inflation



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



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|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



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



Interest Rate Risk



Total debt at December 31, 2004 included $200.0 million of floating-rate
debt attributed to borrowings at an average interest rate of 5.8%. As a result, our annual interest cost in 2005 will fluctuate based on short-term interest rates.



In connection with the 7.5% senior notes due 2014, the Company entered into an interest swap agreement with the objective of
managing our exposure to interest rate risk and lowering interest expense. The agreement was effective beginning December 2004 and matures in ten years for an aggregate notional amount of $50 million.



The impact on annual cash flow of a ten percent change in the floating-rate
(approximately 0.6%) would be approximately $1.2 million annually based on the floating-rate debt and other obligations outstanding at December 31, 2004, however, there are no assurances that possible rate changes would be limited to such amounts.



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------



The financial statements are set forth commencing on page 47.



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



On April 30, 2004, Ernst & Young LLP (E&Y) was dismissed as independent public accountants for
Landrys Restaurants, Inc. (the Company), effective upon that date, and on May 3, 2004, Grant Thornton LLP was appointed as the new independent public accountants for the Company to replace E&Y for the fiscal year ending
December 31, 2004. The decision to dismiss E&Y and to appoint Grant Thornton LLP was recommended by the Audit Committee of the Companys Board of Directors and was approved by the Companys Board of Directors. The decision to dismiss
E&Y was the result of the Companys and E&Ys conclusion to discontinue the client-auditor relationship.



E&Ys reports on the Companys financial statements for the past two fiscal years did not contain an adverse opinion or disclaimer of
opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.



We have had no disagreements with our accountants on any accounting or financial disclosures.



On July 30, 2002, Arthur Andersen LLP (Andersen) was dismissed as
independent public accountants for Landrys Restaurants, Inc. (the Company) effective upon that date and Ernst & Young LLP was appointed as the new independent public accountants for the Company to replace Andersen for the
fiscal year ending December 31, 2002.



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|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------



Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures



We carried out an evaluation, with the participation of our principal executive officer and principal financial officer, of
the effectiveness of our disclosure controls and procedures as of December 31, 2004. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2004, our disclosure controls and
procedures, as defined in Rule 13a-15(e), were effective to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 (the Exchange Act) are recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.



Managements Report on Internal Control Over Financial Reporting



Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule
13a-15(f). Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as
of December 31, 2004 based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, our management concluded
that our internal control over financial reporting was effective as of December 31, 2004.



Grant Thornton LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report on Form 10-K, has audited our managements assessment of the
effectiveness of our internal control over financial reporting as of December 31, 2004, as stated in their report which is included herein.



Managements Consideration of the Restatement



In coming to the conclusion that our internal control over financial reporting was effective as of December 31, 2004, our management considered,
among other things, the control deficiency related to periodic review of the application of generally accepted accounting principles, which resulted in the need to restate our previously issued financial statements as disclosed in Note 2
to the accompanying consolidated financial statements included in this Form 10-K. After reviewing and analyzing the Securities and Exchange Commissions Staff Accounting Bulletin (SAB) No. 99, Materiality,
Accounting Principles Board Opinion No. 28, Interim Financial Reporting, paragraph 29 and SAB Topic 5 F, Accounting Changes Not Retroactively Applied Due to Immateriality, and taking into consideration (i) that
the restatement adjustments did not have a material impact on the financial statements of prior interim or annual periods taken as a whole; (ii) that the cumulative impact of the restatement adjustments on stockholders equity was not
material to the financial statements of prior interim or annual periods; and (iii) that we decided to restate our previously issued financial statements solely because the cumulative impact of the error, if recorded in the current period, would have
been material to the current years reported net income, our management concluded that the control deficiency that resulted in the restatement of the prior period financial statements was not in itself a material weakness. Furthermore, our
management concluded that, as of December 31, 2004, we otherwise had effective internal control over financial reporting, including controls over the application of accounting principles, and that the control deficiency that resulted in the
restatement when aggregated with other deficiencies did not constitute a material weakness.



Changes in Internal Control over Financial Reporting



Our management carried out an evaluation, with the participation of our principal executive officer and principal financial officer, of changes in our internal control over financial reporting, as defined in Exchange
Act



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Rule 13a-15(f). Based on this evaluation, our management determined that no change in our internal control over financial reporting occurred during the
fourth quarter of fiscal 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------



We have disclosed all information required to be disclosed in a current report on Form 8-K during the fourth quarter of the year ended December 31, 2004
in previously filed reports on Form 8-K.



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PART III



|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|-------- | --------------------------------------------------



Certain information relating to our directors and executive officers are incorporated by reference from our definitive Proxy Statement in connection with
our 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 our fiscal year ended December 31, 2004. The Company has adopted a code of ethics
applicable to its chief executive officer, chief financial officer, controller and other financial officers, which is a Code of Ethics as defined by applicable rules of the Securities and Exchange Commission. A copy of our Code of Ethics
has been previously filed and is incorporated by reference as an exhibit hereto. If the Company makes any amendments to this Code other than technical, administrative, or other non-substantive amendments, or grants any waivers, including implicit
waivers, from a provision of this Code to the Companys chief executive officer, chief financial officer or controller, the Company will disclose the nature of the amendment or waiver, its effective date and to whom it applies on its website or
in a report on Form 8-K filed with the Securities and Exchange Commission.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------



Certain information relating to our directors and executive officers is incorporated by reference herein from our definitive Proxy Statement in connection
with our 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 our fiscal year ended December 31, 2004.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------



Certain information relating to our directors and executive officers is incorporated by reference herein from our definitive
Proxy Statement in connection with our 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 our fiscal year ended December 31, 2004.



Equity Compensation Plan Information



The following table provides information as of December 31, 2004 regarding
the number of shares of Common Stock that may be issued under the Companys equity compensation plans.



|                                                              |  |                                                                                          |  |                                                                          |       |                                                                                                                                       |          
|------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ----- | ------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Plan Category                                                 |  | Number of securities tobe issued upon exerciseof outstanding options,warrants and rights |  | Weighted averageexercise price ofoutstanding options,warrants and rights |       | Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn
(a))
|                                                              |  | (a)                                                                                      |  | (b)                                                                      |       | (c)                                                                                                                                  
|Equity compensation plans approved by the stockholders(1)     |  | 620,223                                                                                  |  | $                                                                        | 9.69  |                                                                                                                                       | 1,300,000
|Equity compensation plans not approved by the stockholders(2) |  | 2,018,100                                                                                |  | $                                                                        | 16.78 |                                                                                                                                       | 200,000  
|                                                              |  |                                                                                          |  |                                                                          |       |                                                                                                                                       |          
|Total                                                         |  | 2,638,323                                                                                |  | $                                                                        | 15.12 |                                                                                                                                       | 1,500,000
|                                                              |  |                                                                                          |  |                                                                          |       |                                                                                                                                       |          

---

|(1) | We have the following compensation plans under which awards have been issued or are authorized to be issued, which were adopted with stockholder approval:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) | The Landrys Restaurants, Inc. 2002 Employee/Rainforest Conversion Plan authorizes the issuance of up to 2,162,500 shares, all of which are currently held in
our treasury. This plan allows awards of non- qualified stock options, which may include stock appreciation rights, to our consultants, employees and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | non-employee directors. The plan is administered by our Compensation committee. Terms of the award, such as vesting and exercise price, are to be determined
by the Compensation committee and set forth in the grant agreement for each award.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | The Company maintains two stock option plans, which were originally adopted in 1993, (the Stock Option Plans), as amended, pursuant to which options may be granted to eligible
employees and non-employee 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 non-qualified stock options or incentive
stock options, as defined by the Internal Revenue Code of 1986, as amended.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | The Company also maintains the 1995 Flexible Incentive Plan, which was adopted in 1995, (Flex Plan), as amended, 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 2,000,000 shares.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | We have the following compensation plans under which awards have been issued or are authorized to be issued, which were adopted without stockholder approval:
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) | The Landrys Restaurants, Inc. 2003 Equity Incentive Plan authorizes the issuance of up to 700,000 shares, all of which are currently held in our treasury. This plan allows
awards of both qualified and non-qualified stock options, restricted stock, cash equivalent values, and tandem awards to employees. The plan is administered by our compensation committee. Terms of the award, such as vesting and exercise price, are
to be determined by the compensation committee and set forth in the grant agreement for each award.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | On July 22, 2002, we issued options to purchase an aggregate of 437,500 shares under individual stock option agreements with individual members of senior management. Options under
these agreements were granted at market price and expire ten years from the date of grant. These options vest in equal installments over a period of five years, provided that vesting may accelerate on certain occurrences, such as a change in control
or, in the case of options granted to our CEO, if our stock hits certain price targets.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | On July 22, 2002, we issued options to purchase an aggregate of 6,000 shares to our non-employee directors. Options under these agreements were granted at market price and expire
ten years from the date of grant. These options vest in equal installments over a period of five years.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | On March 16, 2001, we issued options to purchase an aggregate of 387,500 shares to our senior management under individual stock option agreements with individual members of senior
management. Options under these agreements were granted at market price and expire ten years from the date of grant. These options vest in equal installments over a period of five years, provided that vesting may accelerate on certain occurrences,
such as a change in control or, in the case of options granted to our CEO, if our stock hits certain price targets.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) | On March 16 and September 13, 2001, options to purchase an aggregate of 240,000 shares were issued to certain of our individual employees, under individual option grant agreements.
Options under these agreements were granted at market price and expire ten years from the date of grant. These options vest in equal installments over a period of five years, provided that vesting may accelerate on certain occurrences, such as a
change in control.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f) | On April 27, 1995, Landrys issued options to purchase an aggregate of 600,000 shares under an individual stock option agreement with Landrys President and CEO. Options
under the agreement were granted at market price and expire ten years from the date of grant. These options vested in equal installments over a period of three years.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g) | In addition, the Company will issue pursuant to an employment agreement, over its five year term, 500,000 shares of restricted stock, with a 10 year vest from grant date, and a
minimum of 800,000 stock options. 200,000 restricted common shares have been issued subject to vesting on the tenth anniversary.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------



Certain information relating to our directors and executive officers is incorporated by reference herein from our definitive Proxy Statement in connection
with our 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 our fiscal year ended December 31, 2004.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------



Certain information regarding the fees we paid to our principal accountants, including Audit Fees, Audit-Related Fees, Tax Fees and all other fees is
incorporated by reference herein from our definitive Proxy Statement in connection with our 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
our fiscal year ended December 31, 2004.





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##### Table of Contents

PART IV

|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------



|    |  |                                                                                |  |                                                                                                      
|--- |  | ------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------
|(a) |  | 1.                                                                             |  | Financial Statements                                                                                 
|    | 
|    |  | The following financial statements are set forth herein commencing on page 43:
|    |  |                                                                                |  | Report of Independent Registered Public Accounting Firm                                             
|    |  |                                                                                |  | Grant Thornton LLP                                                                                   
|    |  |                                                                                |  | Ernst & Young LLP                                                                                    
|    |  |                                                                                |  | Consolidated Balance Sheets as of December 31, 2004 and 2003                                        
|    |  |                                                                                |  | Consolidated Statements of Income for the years ended December 31, 2004, 2003 and 2002              
|    |  |                                                                                |  | Consolidated Statements of Stockholders Equity for the years ended December 31, 2004, 2003 and 2002
|    |  |                                                                                |  | Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002.         
|    |  |                                                                                |  | Notes to Consolidated Financial Statements                                                          
|    |  |                                                                               
|    |  | 2.                                                                             |  | Financial Statement SchedulesNot applicable.                                                        
|    | 
|(b) |  | Exhibits                                                                      



|            |  |                                                                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                           
|            | 
|*2.1        |  | Stock Purchase Agreement dated February 3, 2005 between Landrys Restaurants, Inc. and Poster Financial Group, Inc. regarding the acquisition of Golden Nugget Casino.                                                            
|            | 
|3.1         |  | Certificate of Incorporation of Landrys Seafood Restaurants, Inc., as amended (incorporated by reference to Exhibit 3.1 of the Companys Registration Statement of Form S-1, filed
on July 2, 1993, File No. 33-65498).          
|            | 
|3.2         |  | Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Companys Registration Statement of Form S-1, filed on July 2, 1993, File No.
33-65498).                                               
|            | 
|*3.3        |  | Certificate of Amendment to Certificate of Incorporation                                                                                                                                                                          
|            | 
|3.4         |  | Bylaws of Landrys Restaurants, Inc. (incorporated by reference to Exhibit 3.2 of the Companys Registration Statement of Form S-1, filed on July 2, 1993, File No.
33-65498).                                                    
|            | 
|3.5         |  | Amendment to Bylaws (incorporated by reference to Exhibit 3.1 of the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2004, File No. 001-15531).                                                             
|            | 
|10.1        |  | 1993 Stock Option Plan (Plan) (incorporated by reference to Exhibit 10.60 of the Companys Registration Statement of Form S-1, filed on July 2, 1993, File No.
33-65498).                                                       
|            | 
|10.2        |  | Form of Incentive Stock Option Agreement under the Plan (incorporated by reference to Exhibit 10.61 of the Companys Registration Statement of Form S-1, filed on July 2, 1993, File No.
33-65498).                               
|            | 
|10.3        |  | Form of Non-Qualified Stock Option Agreement under the Plan (incorporated by reference to Exhibit 10.62 of the Companys Registration Statement of Form S-1, filed on July 2, 1993,
File No. 33-65498).                           
|            | 
|10.4        |  | Non-Qualified Formula Stock Option Plan for Non-Employee Directors (Directors Plan) (incorporated by reference to Exhibit 10.63 of the Companys Registration Statement
of Form S-1, filed on July 2, 1993, File No. 33-65498).
|            | 
|10.5        |  | First Amendment to Non-Qualified Formula Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit C of the Companys Proxy Statement, filed on May 8, 1995, File
No. 000-22150).                        
|            | 
|10.6        |  | Form of Stock Option Agreement for Directors Plan (incorporated by reference to Exhibit 10.64 of the Companys Registration Statement of Form S-1, filed on July 2, 1993, File No.
33-65498).                                    
|            | 
|10.7        |  | 1995 Flexible Incentive Plan (incorporated by reference to Exhibit B of the Companys Proxy Statement, filed May 8, 1995, File No. 000-22150).                                                                                    



41



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                       
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                                                                                               
|            | 
|10.8        |  | 2003 Equity Incentive Plan (incorporated by reference to Exhibit 10.9 of the Companys Form 10-K for the year ended December 31, 2003, filed March 9, 2004, File No.
001-15531).                                                                                                                      
|            | 
|10.9        |  | Form of Stock Option Agreement between Landrys Seafood Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.11 of the Companys Form 10-K for the year
ended December 31, 1995, File No. 000-22150).                                                                    
|            | 
|*10.10      |  | Purchase Agreement dated December 15, 2004 between the Company and the initial purchasers.                                                                                                                                                                                                            
|            | 
|10.11       |  | Indenture Agreement dated as of December 28, 2004 by and among the Company, the Guarantors and Wachovia Securities, National Association (incorporated by reference to Exhibit 10.1 of the
Companys Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).                        
|            | 
|10.12       |  | Registration Rights Agreement date as of December 28, 2004 by and among the Company, the Guarantors and the initial purchasers party thereto (incorporated by reference to Exhibit 10.2 of the
Companys Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).                    
|            | 
|10.13       |  | Credit Agreement dated as of December 28, 2004 by and among the Company, Wachovia Bank, National Association, and the other financial institutions party thereto (incorporated by reference to
Exhibit 10.3 of the Companys Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
|            | 
|10.14       |  | Security Agreement dated as of December 28, 2004 by and among the Company, the additional grantors named therein and Wachovia Bank, National Association (incorporated by reference to Exhibit
10.4 of the Companys Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).        
|            | 
|10.15       |  | Guaranty Agreement dated as of December 28, 2004 between the Company and the Guarantors (incorporated by reference to Exhibit 10.5 of the Companys Current Report on Form 8-K, filed
December 28, 2004, File No. 000-22150).                                                                         
|            | 
|10.16       |  | Employment Agreement between Landrys Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q for the
period ended June 30, 2003, filed August 12, 2003, File No. 001-15531).                                              
|            | 
|10.17       |  | Landrys Restaurants, Inc. 2002 Employee/Rainforest Conversion Plan (incorporated by reference to Exhibit 99.1 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                 
|            | 
|10.18       |  | Landrys Restaurants, Inc. 2002 Employee Agreement No. 1 (incorporated by reference to Exhibit 99.2 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.19       |  | Landrys Restaurants, Inc. 2002 Employee Agreement No. 2 (incorporated by reference to Exhibit 99.3 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.20       |  | Landrys Restaurants, Inc. 2002 Employee Agreement No. 4 (incorporated by reference to Exhibit 99.5 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.21       |  | Landrys Restaurants, Inc. 2001 Employee Agreement No. 1 (incorporated by reference to Exhibit 99.6 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.22       |  | Landrys Restaurants, Inc. 2001 Employee Agreement No. 2 (incorporated by reference to Exhibit 99.7 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.23       |  | Landrys Restaurants, Inc. 2001 Employee Agreement No. 4 (incorporated by reference to Exhibit 99.9 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.24       |  | Form of Management Agreement between Landrys Management, L.P. and Fertitta Hospitality (incorporated by reference to Exhibit 10.34 of the Companys Form 10-K for the year ended
December 31, 2003, File No. 001-15531).                                                                             



42



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                           
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                                                                   
|            | 
|10.25       |  | Ground Lease between Landrys Management, L.P. and 610 Loop Venture, L.L.C. (incorporated by reference to Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q for the period
ended March 31, 1999, File No. 000-22150).                                           
|            | 
|*10.26      |  | Amendment to Ground Lease between Landrys Management, L.P. and 610 Loop Venture, L.L.C.                                                                                                                                                                                  
|            | 
|*10.27      |  | Second Amendment to Contract of Sale and Development Agreement between Landrys Management, L.P. and 610 Loop Venture, LLC                                                                                                                                                
|            | 
|10.28       |  | Form of Landrys Restaurants, Inc. Nonqualified Stock Option Agreement for use in Landrys Restaurants, Inc. 2001 Individual Stock Option Agreements (incorporated by reference to
Exhibit 99.10 of the Companys Form S-8, filed on March 31, 2003, File No. 333-104175).
|            | 
|*10.29      |  | Lease Agreement dated December 1, 2001 between Rainforest Cafe, Inc. and Fertitta Hospitality, LLC                                                                                                                                                                        
|            | 
|*10.30      |  | Form of Restricted Stock Agreement between Landrys Restaurants, Inc. and Tilman J. Fertitta                                                                                                                                                                              
|            | 
|14          |  | Code of Ethics (incorporated by reference to Exhibit 14 of the Companys Form 10-K for the year ended December 31, 2003)                                                                                                                                                  
|            | 
|*21         |  | Subsidiaries of Landrys Restaurants, Inc. (incorporated by reference to Exhibit 21 of the Companys Form 10-K for the year ended December 31, 2003)                                                                                                                      
|            | 
|*23.1       |  | Consent of Grant Thornton LLP                                                                                                                                                                                                                                             
|            | 
|*23.2       |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                              
|            | 
|*31.1       |  | Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)                                                                                                                                                                                                     
|            | 
|*31.2       |  | Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)                                                                                                                                                                                                     
|            | 
|*32         |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13(a)-14(b)                                                                                                                                                                         

---

|* | Filed herewith
|- | --------------





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders

Landrys Restaurants, Inc.



We have audited managements assessment, included in the accompanying Management Report on Internal Control over Financial Reporting, that
Landrys Restaurants, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Landrys Restaurants, Inc. and subsidiaries management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the Companys internal control over financial reporting based on our
audit.



We conducted our audit in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.



A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.



In our
opinion, managements assessment that Landrys Restaurants, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion, Landrys Restaurants, Inc. and subsidiaries maintained effective
internal control over financial reporting as of December 31, 2004, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).



We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the balance sheet of Landrys Restaurants, Inc. and subsidiaries as of December 31, 2004, and the related statements of income, stockholders equity, and cash flows for the year then
ended, and our report dated March 14, 2005 expressed an unqualified opinion on those consolidated financial statements.



GRANT THORNTON LLP



Houston, Texas

March 14, 2005



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and

Stockholders of Landrys Restaurants, Inc.



We have audited the accompanying consolidated balance sheet of Landrys Restaurants, Inc. and subsidiaries as of
December 31, 2004, and the related consolidated statements of income, stockholders equity, and cash flows for the year then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Landrys Restaurants, Inc. and subsidiaries as of December 31, 2004, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the
United States of America.



We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Landrys Restaurants, Inc. and subsidiaries internal control over financial reporting as of December 31, 2004, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 14, 2005, expressed an unqualified opinion thereon.



GRANT THORNTON LLP



Houston, Texas

March 14, 2005



45



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##### Table of Contents

REPORT OF INDEPENDENT PUBLIC REGISTERED PUBLIC ACCOUNTING FIRM



To Landrys Restaurants, Inc.:



We have audited the accompanying consolidated balance sheet of Landrys Restaurants, Inc. and subsidiaries as of December 31, 2003 and the related consolidated statements of income, stockholders equity and cash flows for each of
the two years in the period ended December 31, 2003. 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 the standards of the Public
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit
of the Companys internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly we express no such opinion. 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,
the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Landrys Restaurants, Inc., and subsidiaries as of December 31, 2003 and the results of their operations and their cash
flows for each of the two years in the period ended December 31, 2003, in conformity with U.S. generally accepted accounting principles.



As discussed in Note 2 to the accompanying consolidated financial statements, the Company has restated its 2002 and 2003 financial statements.



ERNST & YOUNG LLP



Houston, Texas

February 11, 2004

except for Note 2 and Note 11

as to which the date is March 14, 2005



46



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LANDRYS RESTAURANTS, INC.



CONSOLIDATED BALANCE SHEETS



|                                                                                                                            |  |              |               |   |               |   |               |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------------- | - | ------------- | - | ------------- | -
|                                                                                                                            |  | December 31, |              
|                                                                                                                            |  | 2004         |               |   | 2003 Restated |  
|ASSETS                                                                                                                      |  |              |               |   |               |   |               |  
|CURRENT ASSETS:                                                                                                             |  |              |               |   |               |   |               |  
|Cash and cash equivalents                                                                                                   |  | $            | 201,394,032   |   |               | $ | 35,211,319    |  
|Accounts receivabletrade and other                                                                                         |  |              | 18,595,531    |   |               |   | 23,271,831    |  
|Inventories                                                                                                                 |  |              | 55,004,153    |   |               |   | 47,772,298    |  
|Deferred taxes                                                                                                              |  |              | 10,859,160    |   |               |   | 6,858,350     |  
|Other current assets                                                                                                        |  |              | 11,630,527    |   |               |   | 7,490,383     |  
|                                                                                                                            |  |              |               |   |               |   |               |  
|Total current assets                                                                                                        |  |              | 297,483,403   |   |               |   | 120,604,181   |  
|                                                                                                                            |  |              |               |   |               |   |               |  
|PROPERTY AND EQUIPMENT, net                                                                                                 |  |              | 1,007,296,936 |   |               |   | 967,672,970   |  
|GOODWILL                                                                                                                    |  |              | 18,527,547    |   |               |   | 7,527,547     |  
|OTHER ASSETS, net                                                                                                           |  |              | 21,644,385    |   |               |   | 9,078,787     |  
|                                                                                                                            |  |              |               |   |               |   |               |  
|Total assets                                                                                                                |  | $            | 1,344,952,271 |   |               | $ | 1,104,883,485 |  
|                                                                                                                            |  |              |               |   |               |   |               |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                        |  |              |               |   |               |   |               |  
|CURRENT LIABILITIES:                                                                                                        |  |              |               |   |               |   |               |  
|Accounts payable                                                                                                            |  | $            | 48,341,318    |   |               | $ | 82,894,048    |  
|Accrued liabilities                                                                                                         |  |              | 84,955,488    |   |               |   | 74,302,641    |  
|Income taxes payable                                                                                                        |  |              | 971,175       |   |               |   | 211,131       |  
|Current portion of long-term notes and other obligations                                                                    |  |              | 1,700,496     |   |               |   | 1,963,189     |  
|                                                                                                                            |  |              |               |   |               |   |               |  
|Total current liabilities                                                                                                   |  |              | 135,968,477   |   |               |   | 159,371,009   |  
|                                                                                                                            |  |              |               |   |               |   |               |  
|LONG-TERM NOTES, NET OF CURRENT PORTION                                                                                     |  |              | 559,545,092   |   |               |   | 299,735,906   |  
|DEFERRED TAXES                                                                                                              |  |              | 13,343,631    |   |               |   | 20,549,998    |  
|OTHER LIABILITIES                                                                                                           |  |              | 35,198,105    |   |               |   | 25,332,659    |  
|                                                                                                                            |  |              |               |   |               |   |               |  
|Total liabilities                                                                                                           |  |              | 744,055,305   |   |               |   | 504,989,572   |  
|                                                                                                                            |  |              |               |   |               |   |               |  
|COMMITMENTS AND CONTINGENCIES                                                                                               |  |              |               |   |               |   |               |  
|STOCKHOLDERS EQUITY:                                                                                                       |  |              |               |   |               |   |               |  
|Common stock, $0.01 par value, 60,000,000 shares authorized, 25,607,573 and 27,653,852 issued and outstanding, respectively |  |              | 256,076       |   |               |   | 276,539       |  
|Additional paid-in capital                                                                                                  |  |              | 401,228,736   |   |               |   | 439,616,066   |  
|Deferred compensation                                                                                                       |  |              | (4,281,670    | ) |               |   | (1,868,750    | )
|Retained earnings                                                                                                           |  |              | 203,693,824   |   |               |   | 161,870,058   |  
|                                                                                                                            |  |              |               |   |               |   |               |  
|Total stockholders equity                                                                                                  |  |              | 600,896,966   |   |               |   | 599,893,913   |  
|                                                                                                                            |  |              |               |   |               |   |               |  
|Total liabilities and stockholders equity                                                                                  |  | $            | 1,344,952,271 |   |               | $ | 1,104,883,485 |  
|                                                                                                                            |  |              |               |   |               |   |               |  



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



47



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



CONSOLIDATED STATEMENTS OF INCOME



|                                                                           |  |                         |               |               |   |               |  |   |             |  
|-------------------------------------------------------------------------- |  | ----------------------- | ------------- | ------------- | - | ------------- |  | - | ----------- | -
|                                                                           |  | Year Ended December 31, |              
|                                                                           |  | 2004                    |               | 2003 Restated |   | 2002 Restated | 
|REVENUES                                                                   |  | $                       | 1,167,475,165 |               | $ | 1,105,755,057 |  | $ | 894,794,621 |  
|OPERATING COSTS AND EXPENSES:                                              |  |                         |               |               |   |               |  |   |             |  
|Cost of revenues                                                           |  |                         | 326,108,007   |               |   | 321,783,377   |  |   | 257,944,741 |  
|Restaurant labor                                                           |  |                         | 337,633,530   |               |   | 323,284,399   |  |   | 259,197,964 |  
|Other restaurant operating expenses                                        |  |                         | 282,411,954   |               |   | 271,270,870   |  |   | 224,121,518 |  
|General and administrative expenses                                        |  |                         | 58,319,642    |               |   | 51,704,100    |  |   | 43,383,799  |  
|Depreciation and amortization                                              |  |                         | 57,294,123    |               |   | 49,091,466    |  |   | 40,729,710  |  
|Asset impairment expense                                                   |  |                         | 1,708,654     |               |   | 13,144,365    |  |   | 2,200,000   |  
|Restaurant pre-opening expenses                                            |  |                         | 5,203,518     |               |   | 8,650,178     |  |   | 4,590,972   |  
|                                                                           |  |                         |               |               |   |               |  |   |             |  
|Total operating costs and expenses                                         |  |                         | 1,068,679,428 |               |   | 1,038,928,755 |  |   | 832,168,704 |  
|OPERATING INCOME                                                           |  |                         | 98,795,737    |               |   | 66,826,302    |  |   | 62,625,917  |  
|OTHER EXPENSE (INCOME):                                                    |  |                         |               |               |   |               |  |   |             |  
|Interest expense, net                                                      |  |                         | 15,185,605    |               |   | 9,561,482     |  |   | 4,997,022   |  
|Other, net                                                                 |  |                         | 13,543,626    |               |   | 1,462,450     |  |   | (886,657    | )
|                                                                           |  |                         |               |               |   |               |  |   |             |  
|                                                                           |  |                         | 28,729,231    |               |   | 11,023,932    |  |   | 4,110,365   |  
|INCOME BEFORE INCOME TAXES                                                 |  |                         | 70,066,506    |               |   | 55,802,370    |  |   | 58,515,552  |  
|PROVISION FOR INCOME TAXES                                                 |  |                         | 3,544,778     |               |   | 10,888,517    |  |   | 18,024,735  |  
|                                                                           |  |                         |               |               |   |               |  |   |             |  
|NET INCOME                                                                 |  | $                       | 66,521,728    |               | $ | 44,913,853    |  | $ | 40,490,817  |  
|                                                                           |  |                         |               |               |   |               |  |   |             |  
|EARNINGS PER SHARE INFORMATION:                                            |  |                         |               |               |   |               |  |   |             |  
|                                                                           |  |                         |              
|BASIC                                                                      |  |                         |               |               |   |               |  |   |             |  
|Net income                                                                 |  | $                       | 2.46          |               | $ | 1.63          |  | $ | 1.56        |  
|Weighted average number of common shares outstanding                       |  |                         | 27,000,000    |               |   | 27,600,000    |  |   | 25,900,000  |  
|                                                                           |  |                         |              
|DILUTED                                                                    |  |                         |               |               |   |               |  |   |             |  
|Net income                                                                 |  | $                       | 2.39          |               | $ | 1.59          |  | $ | 1.51        |  
|Weighted average number of common and common share equivalents outstanding |  |                         | 27,800,000    |               |   | 28,325,000    |  |   | 26,900,000  |  



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



48



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



|                                           |  |              |   |  |                          |         |   |                           |   |             |                  |  |   |            |   |  |   |             |   |  |   |             |  
|------------------------------------------ |  | ------------ | - |  | ------------------------ | ------- | - | ------------------------- | - | ----------- | ---------------- |  | - | ---------- | - |  | - | ----------- | - |  | - | ----------- | -
|                                           |  | Common Stock |   |  | AdditionalPaid-InCapital |         |   | DeferredStockCompensation |   |             | RetainedEarnings |  |   | Total      |  
|                                           |  | Shares       |   |  | Amount                   |         |   |                           |   |            
|BALANCE, December 31, 2001                 |  | 21,996,369   |   |  | $                        | 219,964 |   |                           | $ | 305,598,659 |                  |  | $ |           |   |  | $ | 87,852,000  |   |  | $ | 393,670,623 |  
|Prior period adjustments, net of tax       |  |             |   |  |                          |        |   |                           |   |            |                  |  |   |           |   |  |   | (2,638,836  | ) |  |   | (2,638,836  | )
|                                           |  |              |   |  |                          |         |   |                           |   |             |                  |  |   |            |   |  |   |             |   |  |   |             |  
|BALANCE, December 31, 2001 (Restated)      |  | 21,996,369   |   |  |                          | 219,964 |   |                           |   | 305,598,659 |                  |  |   |           |   |  |   | 85,213,164  |   |  |   | 391,031,787 |  
|Net income (Restated)                      |  |             |   |  |                          |        |   |                           |   |            |                  |  |   |           |   |  |   | 40,490,817  |   |  |   | 40,490,817  |  
|Dividends paid                             |  |             |   |  |                          |        |   |                           |   |            |                  |  |   |           |   |  |   | (2,500,387  | ) |  |   | (2,500,387  | )
|Issuance of common stock, net              |  | 5,297,500    |   |  |                          | 52,975  |   |                           |   | 132,524,341 |                  |  |   |           |   |  |   |            |   |  |   | 132,577,316 |  
|Purchase of common stock held for treasury |  | (304,904     | ) |  |                          | (3,049  | ) |                           |   | (5,317,638  | )                |  |   |           |   |  |   | (1,413,550  | ) |  |   | (6,734,237  | )
|Exercise of stock options and tax benefit  |  | 782,514      |   |  |                          | 7,825   |   |                           |   | 8,532,681   |                  |  |   |           |   |  |   |            |   |  |   | 8,540,506   |  
|                                           |  |              |   |  |                          |         |   |                           |   |             |                  |  |   |            |   |  |   |             |   |  |   |             |  
|BALANCE, December 31, 2002 (Restated)      |  | 27,771,479   |   |  |                          | 277,715 |   |                           |   | 441,338,043 |                  |  |   |           |   |  |   | 121,790,044 |   |  |   | 563,405,802 |  
|Net income (Restated)                      |  |             |   |  |                          |        |   |                           |   |            |                  |  |   |           |   |  |   | 44,913,853  |   |  |   | 44,913,853  |  
|Dividends paid                             |  |             |   |  |                          |        |   |                           |   |            |                  |  |   |           |   |  |   | (2,768,997  | ) |  |   | (2,768,997  | )
|Purchase of common stock held for treasury |  | (468,823     | ) |  |                          | (4,688  | ) |                           |   | (6,347,881  | )                |  |   |           |   |  |   | (2,064,842  | ) |  |   | (8,417,411  | )
|Exercise of stock options and tax benefit  |  | 251,196      |   |  |                          | 2,512   |   |                           |   | 2,676,904   |                  |  |   |           |   |  |   |            |   |  |   | 2,679,416   |  
|Issuance of restricted stock               |  | 100,000      |   |  |                          | 1,000   |   |                           |   | 1,949,000   |                  |  |   | (1,950,000 | ) |  |   |            |   |  |   |            |  
|Amortization of deferred compensation      |  |             |   |  |                          |        |   |                           |   |            |                  |  |   | 81,250     |   |  |   |            |   |  |   | 81,250      |  
|                                           |  |              |   |  |                          |         |   |                           |   |             |                  |  |   |            |   |  |   |             |   |  |   |             |  
|BALANCE December 31, 2003 (Restated)       |  | 27,653,852   |   |  |                          | 276,539 |   |                           |   | 439,616,066 |                  |  |   | (1,868,750 | ) |  |   | 161,870,058 |   |  |   | 599,893,913 |  
|Net income                                 |  |             |   |  |                          |        |   |                           |   |            |                  |  |   |           |   |  |   | 66,521,728  |   |  |   | 66,521,728  |  
|Dividends paid                             |  |             |   |  |                          |        |   |                           |   |            |                  |  |   |           |   |  |   | (4,783,404  | ) |  |   | (4,783,404  | )
|Purchase of common stock held for treasury |  | (2,291,800   | ) |  |                          | (22,918 | ) |                           |   | (42,843,341 | )                |  |   |           |   |  |   | (19,914,558 | ) |  |   | (62,780,817 | )
|Exercise of stock options and tax benefit  |  | 145,521      |   |  |                          | 1,455   |   |                           |   | 1,612,011   |                  |  |   |           |   |  |   |            |   |  |   | 1,613,466   |  
|Issuance of restricted stock               |  | 100,000      |   |  |                          | 1,000   |   |                           |   | 2,844,000   |                  |  |   | (2,845,000 | ) |  |   |            |   |  |   |            |  
|Amortization of deferred compensation      |  |             |   |  |                          |        |   |                           |   |            |                  |  |   | 432,080    |   |  |   |            |   |  |   | 432,080     |  
|                                           |  |              |   |  |                          |         |   |                           |   |             |                  |  |   |            |   |  |   |             |   |  |   |             |  
|BALANCE December 31, 2004                  |  | 25,607,573   |   |  | $                        | 256,076 |   |                           | $ | 401,228,736 |                  |  | $ | (4,281,670 | ) |  | $ | 203,693,824 |   |  | $ | 600,896,966 |  
|                                           |  |              |   |  |                          |         |   |                           |   |             |                  |  |   |            |   |  |   |             |   |  |   |             |  



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



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LANDRYS RESTAURANTS, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                  |  |                         |              |   |               |   |              |               |  |   |              |  
|--------------------------------------------------------------------------------- |  | ----------------------- | ------------ | - | ------------- | - | ------------ | ------------- |  | - | ------------ | -
|                                                                                  |  | Year Ended December 31, |             
|                                                                                  |  | 2004                    |              |   | 2003 Restated |   |              | 2002 Restated | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                         |              |   |               |   |              |               |  |   |              |  
|Net income                                                                        |  | $                       | 66,521,728   |   |               | $ | 44,913,853   |               |  | $ | 40,490,817   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                         |              |   |               |   |              |               |  |   |              |  
|Depreciation and amortization                                                     |  |                         | 57,294,123   |   |               |   | 49,091,466   |               |  |   | 40,729,710   |  
|Asset impairment expense                                                          |  |                         | 1,708,654    |   |               |   | 13,144,365   |               |  |   | 2,200,000    |  
|Deferred provision (benefit)                                                      |  |                         | (3,937,176   | ) |               |   | 10,621,027   |               |  |   | 6,177,682    |  
|Deferred rent and other charges (income), net                                     |  |                         | 3,151,551    |   |               |   | 987,648      |               |  |   | 1,499,209    |  
|Financing prepayment expenses                                                     |  |                         | 16,649,009   |   |               |   |             |               |  |   |             |  
|Changes in assets and liabilities:                                                |  |                         |              |   |               |   |              |               |  |   |              |  
|(Increase) decrease in trade and other receivables                                |  |                         | 5,834,208    |   |               |   | (3,342,672   | )             |  |   | (3,826,716   | )
|(Increase) decrease in inventories                                                |  |                         | (7,231,855   | ) |               |   | (6,651,658   | )             |  |   | (4,044,169   | )
|(Increase) decrease in other assets                                               |  |                         | (4,377,660   | ) |               |   | 4,425,932    |               |  |   | (5,762,491   | )
|Increase (decrease) in accounts payable and accrued liabilities                   |  |                         | (23,999,700  | ) |               |   | 10,745,609   |               |  |   | 35,320,385   |  
|                                                                                  |  |                         |              |   |               |   |              |               |  |   |              |  
|Total adjustments                                                                 |  |                         | 45,091,154   |   |               |   | 79,021,717   |               |  |   | 72,293,610   |  
|                                                                                  |  |                         |              |   |               |   |              |               |  |   |              |  
|Net cash provided by operating activities                                         |  |                         | 111,612,882  |   |               |   | 123,935,570  |               |  |   | 112,784,427  |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                         |              |   |               |   |              |               |  |   |              |  
|Property and equipment additions                                                  |  |                         | (110,670,371 | ) |               |   | (163,376,622 | )             |  |   | (116,102,768 | )
|Proceeds from sale of property and equipment                                      |  |                         | 6,095,733    |   |               |   |             |               |  |   | 2,097,870    |  
|Business acquisitions, net of cash acquired                                       |  |                         | (12,930,565  | ) |               |   | (27,035,893  | )             |  |   | (161,108,095 | )
|                                                                                  |  |                         |              |   |               |   |              |               |  |   |              |  
|Net cash used in investing activities                                             |  |                         | (117,505,203 | ) |               |   | (190,412,515 | )             |  |   | (275,112,993 | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                         |              |   |               |   |              |               |  |   |              |  
|Proceeds from sale of common stock                                                |  |                         |             |   |               |   |             |               |  |   | 132,577,316  |  
|Purchases of common stock for treasury                                            |  |                         | (62,780,817  | ) |               |   | (8,417,411   | )             |  |   | (6,734,237   | )
|Proceeds from exercise of stock options                                           |  |                         | 1,349,771    |   |               |   | 1,826,816    |               |  |   | 7,134,631    |  
|Payments of debt and related expenses, net                                        |  |                         | (176,313,705 | ) |               |   | (1,906,503   | )             |  |   | (404,114     | )
|Proceeds (payments) on credit facility, net                                       |  |                         | (122,000,000 | ) |               |   | (49,000,000  | )             |  |   | 15,052,548   |  
|Financing proceeds, net                                                           |  |                         | 536,603,189  |   |               |   | 148,076,160  |               |  |   |             |  
|Dividends paid                                                                    |  |                         | (4,783,404   | ) |               |   | (2,768,997   | )             |  |   | (2,500,387   | )
|                                                                                  |  |                         |              |   |               |   |              |               |  |   |              |  
|Net cash provided by financing activities                                         |  |                         | 172,075,034  |   |               |   | 87,810,065   |               |  |   | 145,125,757  |  
|NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS                                   |  |                         | 166,182,713  |   |               |   | 21,333,120   |               |  |   | (17,202,809  | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                    |  |                         | 35,211,319   |   |               |   | 13,878,199   |               |  |   | 31,081,008   |  
|                                                                                  |  |                         |              |   |               |   |              |               |  |   |              |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                          |  | $                       | 201,394,032  |   |               | $ | 35,211,319   |               |  | $ | 13,878,199   |  
|                                                                                  |  |                         |              |   |               |   |              |               |  |   |              |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                |  |                         |              |   |               |   |              |               |  |   |              |  
|Cash paid during the year for:                                                    |  |                         |              |   |               |   |              |               |  |   |              |  
|Interest                                                                          |  | $                       | 15,988,418   |   |               | $ | 8,675,327    |               |  | $ | 5,567,196    |  
|Income taxes                                                                      |  | $                       | 9,949,203    |   |               | $ | 5,698,821    |               |  | $ | 8,689,374    |  



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





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##### Table of Contents

LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Nature of Business



Landrys Restaurants, Inc. (the Company) owns and operates primarily restaurants under the trade names of Landrys Seafood House, Joes Crab Shack, The Crab House, Charleys Crab, The Chart House and
Saltgrass Steak House. In addition the Company owns and operates domestic and licenses international rainforest themed restaurants under the trade name Rainforest Cafe.



Principles of Consolidation



The accompanying financial statements include the consolidated accounts of Landrys Restaurants, Inc., a Delaware holding company and its wholly and
majority owned subsidiaries and partnership.



Revenue Recognition



The Company records revenue from the sale of food,
beverage, alcohol, and retail as products are sold. Proceeds from the sale of gift cards are recorded as deferred revenue and recognized as revenue when redeemed by the holder.



Accounts Receivable



Accounts receivable is comprised primarily of amounts due from the Companys credit card processor and receivables from national storage and
distribution companies with which we contract to provide services. These sales transactions between the Company and the national storage and distribution companies do not have an impact on our consolidated statements of income. In connection with
these services, certain of our inventory items are conveyed to the storage and distribution companies at cost (including freight and holding charges but without any general overhead costs). These transactions do not impact the consolidated
statements of income as there is no profit recognition and no revenue or expenses are recognized in the financial statements since they are without economic substance other than drayage. We reacquire these items, although not obligated to, when
subsequently delivered to the restaurants at cost plus the distribution companys contractual mark-up. Also included in accounts receivable is income tax receivables of $4.6 million and $9.2 million in 2004 and 2003, respectively.



Inventories



Inventories consist of food and beverages used in restaurant operations and complementary retail goods and are recorded at
the lower of cost or market value as determined by the average cost for food and beverages and by the retail method on the first-in, first-out basis for retail goods. Inventories consist of the following:



|                  |  |              |            |      |   |           
|----------------- |  | ------------ | ---------- | ---- | - | ----------
|                  |  | December 31,
|                  |  | 2004         |            | 2003
|Food and beverage |  | $            | 41,676,925 |      | $ | 32,458,803
|Retail goods      |  |              | 13,327,228 |      |   | 15,313,495
|                  |  |              |            |      |   |           
|                  |  | $            | 55,004,153 |      | $ | 47,772,298
|                  |  |              |            |      |   |           



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.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company computes depreciation using the straight-line method. The estimated lives used in
computing depreciation are generally as follows: buildings and improvements5 to 40 years; furniture, fixtures and equipment5 to 15 years; and leasehold improvementsshorter of 40 years or lease term, including extensions where such
are reasonably assured of renewal.



Leasehold improvements are
depreciated over the shorter of the estimated life of the asset or the lease term plus option periods where failure to renew results in economic penalty. Any contributions made by landlords or tenant allowances with economic value are recorded as
deferred liabilities and amortized as a reduction to rent expense over the life of the lease plus option periods where failure to renew results in economic penalty.



Interest is capitalized in connection with restaurant construction and development activities, and other real estate
development projects. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the assets estimated useful life. During 2004, 2003 and 2002, the Company capitalized interest costs of approximately
$1.2 million, $2.1 million and $2.0 million, respectively.



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



Pre-Opening Costs



Pre-opening costs are expensed as incurred and include the direct and
incremental costs incurred in connection with the commencement of each restaurants operations, which are substantially comprised of training-related costs.



Development Costs



Certain direct costs are capitalized in conjunction with site selection for planned future restaurants, acquiring restaurant properties and other real
estate development projects. Direct and certain related indirect costs of the construction department, including rent and interest, are capitalized in conjunction with construction and development projects. 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, projects, and general site selection costs which cannot be
identified with specific restaurants are expensed.



Advertising



Advertising costs are expensed as incurred during such
year. Advertising expenses were $29.6 million, $33.6 million and $32.1 million in 2004, 2003 and 2002, respectively.



Goodwill and Intangible Assets



Goodwill is not amortized, but instead tested for impairment at least annually. Other intangible assets are amortized over the life of the related
agreement. These amounts are included in goodwill and other assets in the accompanying consolidated balance sheets, respectively.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Deferred Rent



Rent expense under operating leases is calculated using the straight line method whereby an equal amount of rent expense is attributed to each period
during the term of the lease, regardless of when actual payments are made. The lease term begins on the date the Company is obligated under the lease and includes option periods where failure to renew results in economic penalty. Generally, this
results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in the later years.



The difference between rent expense recognized and actual rental payments is recorded as a deferred rent liability and included in other long term
liabilities.



Insurance



The Company maintains a large deductible insurance policy related to general
liability and workers compensation coverage. Predetermined loss limits have been arranged with insurance companies to limit the Companys per occurrence cash outlay. Accrued expenses and other liabilities include the estimated costs to
settle unpaid claims and estimated incurred but not reported claims using actuarial methodologies.



Financial Instruments



The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate the carrying amounts due to their short maturities. The fair value of our long-term debt instruments are based on quoted
market values, where available, or on the amount of future cash flows associated with each instrument, discounted using our current borrowing rate for similar debt instruments of comparable maturity. The estimated fair values of our long-term debt
approximate their carrying values.



The Company utilizes
interest rate swap agreements to manage its exposure to interest rate risk. The Companys interest rate swap agreements qualify as fair value hedges and are recorded at fair value. As such, the gains or losses on the swaps are offset by
corresponding gains or losses on the related debt.



Earnings Per Share and
Stock Option Accounting



Basic earnings per share is
computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share reflects the potential dilution that could occur if contracts to issue common stock were exercised or
converted into common stock. For purposes of this calculation, outstanding stock options and restricted stock grants are considered common stock equivalents using the treasury stock method, and are the only such equivalents outstanding.



The Company follows the intrinsic value method of accounting for stock
options, and as such does not record compensation expense related to amounts outstanding.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The table below illustrates the effect on net income and earnings per share if compensation costs for
the Company had been determined using the alternative accounting method based on the fair value prescribed by SFAS No. 123.



|                                                                                           |  |      |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                           |  | 2004 |            |   | 2003 |   |            | 2002 | 
|Net income, as reported                                                                    |  | $    | 66,521,728 |   |      | $ | 44,913,853 |      |  | $ | 40,490,817 |  
|Less: stock based compensation expense using fair value method, net of related tax effects |  | $    | (1,200,000 | ) |      | $ | (2,100,000 | )    |  | $ | (1,800,000 | )
|                                                                                           |  |      |            |   |      |   |            |      |  |   |            |  
|Pro forma net income                                                                       |  | $    | 65,321,728 |   |      | $ | 42,813,853 |      |  | $ | 38,690,817 |  
|                                                                                           |  |      |            |   |      |   |            |      |  |   |            |  
|Earnings per share                                                                         |  |      |            |   |      |   |            |      |  |   |            |  
|Basic, as reported                                                                         |  | $    | 2.46       |   |      | $ | 1.63       |      |  | $ | 1.56       |  
|                                                                                           |  |      |           
|Basic, pro forma                                                                           |  | $    | 2.42       |   |      | $ | 1.55       |      |  | $ | 1.49       |  
|                                                                                           |  |      |           
|Diluted, as reported                                                                       |  | $    | 2.39       |   |      | $ | 1.59       |      |  | $ | 1.51       |  
|                                                                                           |  |      |           
|Diluted, pro forma                                                                         |  | $    | 2.35       |   |      | $ | 1.51       |      |  | $ | 1.44       |  



The fair value of each
option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: amortization over the respective vesting periods, expected lives of 6 years, and expected stock price volatility of
approximately 40% in all years, and dividend yield of 0.7% and 0.4% and an interest rate of approximately 3.9%, and 2.9% in 2004 and 2002, respectively. The weighted average fair value per share of options granted during 2004 and 2002 was $11.83,
and $7.83, respectively. Options for 16,000 shares were granted in 2003 and were not deemed material for the above calculations.



Cash Equivalents



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



Segment Reporting



As of December 31, 2004, the Company operated 297 full-service casual dining
restaurants which are a part of a single operating segment. The restaurants operate principally in the United States and provide similar products to similar customers. The restaurants generally possess similar pricing structures resulting in the
potential for similar long-term expected financial performance characteristics. Revenues are from the sale of food, beverages and complementary retail items.



The Specialty Growth Division is primarily engaged in operating complementary entertainment and hospitality activities, such as miscellaneous beverage
carts and various kiosks, amusement rides and games and some associated limited room and service hotel and motel type properties, generally at locations in conjunction with our core restaurant operations. The total assets, revenues, and operating
profits of these complementary specialty business activities are not considered material to the overall business and below the threshold of a separate reportable business segment under SFAS No. 131.



The Company is in the business of operating restaurants and the
above-mentioned complementary activities. The Company does not engage in real estate operations other than those associated with the ownership and operation/management of its business. The Company owns a fee interest (owns the land and building) in
a number of properties underlying its businesses, but it does not engage in real estate sales or real estate management in any significant fashion or format. The Chief Executive Officer, who is responsible for the



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Companys operations, reviews and evaluates both core and non-core business activities and results, and determines financial and management resource
allocations and investments for all business activities.



Use of Estimates



The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the 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 revenues and expenses during the reporting period. Actual results may differ from those estimates and services.



Recent Accounting Pronouncements



The Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 46(R), Consolidation of Variable
Interest Entities in January 2003. This interpretation provides guidance on the identification of, and financial reporting for, variable interest entities. Variable interest entities are entities that lack the characteristics of a controlling
financial interest or lack sufficient equity to finance its activities without additional subordinated financial support. FIN 46(R) requires a company to consolidate a variable interest entity if that company is obligated to absorb the majority of
the entitys expected losses or entitled to receive the majority of the entitys residual returns, or both. Adoption of FIN 46(R) did not have a material impact on the Companys consolidated financial statements.



In November 2004, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 151, Inventory Costs which amended ARB 43. The statement clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted materials should be recognized as current period charges, effective for
fiscal years beginning after June 15, 2005. Adoption of this standard is not expected to have a material impact on the Companys consolidated financial statements.



In December 2004, the FASB issued SFAS No. 153, Exchange of Non-Monetary Assets. This statement amends APB 29 to
require certain non-monetary exchange transactions to be recorded on a carry over cost basis if future cash flows are not expected to change significantly. The statement is effective for fiscal periods beginning after June 15, 2005. Adoption of SFAS
No. 153 is not expected to have a material impact on the Companys consolidated financial statements.



In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payments. This statement requires the expensing of stock options in
the financial statements for periods no later than the annual or interim periods beginning after June 15, 2005. The Company will implement the statement during the interim period ending September 30, 2005, but as of yet the Company has not made a
determination of the valuation methodology and, therefore, has not determined the impact to future periods. The Company may adopt this pronouncement on a modified prospective basis or by restating prior years. No decision has been made regarding the
implementation method at this time.



2.  RESTATEMENT



Following a review of our lease accounting and leasehold
depreciation policies, we determined that it was appropriate to adjust certain of our prior financial statements. As a result, we have restated our consolidated financial statements for years prior to 2004. Historically, unless otherwise deemed
immaterial, we recorded rent expense on a straight-line basis over the initial non-cancelable lease term, with the term commencing when actual rent payments began. We depreciated our buildings, leasehold improvements and other long-lived assets on
those properties over a period that included both the initial non-cancelable lease term and options, where the failure to renew would result in economic penalty (or the useful life of the assets, if shorter). We previously



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



believed that these longstanding accounting treatments were appropriate under generally accepted accounting principles. We now have restated our financial
statements to recognize rent expense on a straight-line basis over the expected lease term, including option periods where failure to exercise such options would result in an economic penalty. The lease term commences on the date when we become
legally obligated under the lease regardless of when actual rent payments begin.



The following is a summary of the impact of the restatement on (i) our consolidated balance sheet at December 31, 2003 and (ii) our consolidated statements of income for the fiscal years ended December 31, 2003 and
2002. The restatement did not impact cash flow.



|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|---------------------------------------------------------------------------------------------- |  | ------------ | ------------- | - | ----------- | - | ---------- | ------------- |  | - | ------------- | -
|                                                                                               |  | December 31, |               |   |             |  
|                                                                                               |  | 2003         |               |   | Adjustments |   |            | 2003 Restated | 
|ASSETS                                                                                         |  |              |               |   |             |   |            |               |  |   |               |  
|CURRENT ASSETS:                                                                                |  |              |               |   |             |   |            |               |  |   |               |  
|Cash and cash equivalents                                                                      |  | $            | 35,211,319    |   |             | $ |           |               |  | $ | 35,211,319    |  
|Accounts receivabletrade and other                                                            |  |              | 23,271,831    |   |             |   |           |               |  |   | 23,271,831    |  
|Inventories                                                                                    |  |              | 47,772,298    |   |             |   |           |               |  |   | 47,772,298    |  
|Deferred taxes                                                                                 |  |              | 6,858,350     |   |             |   |           |               |  |   | 6,858,350     |  
|Other current assets                                                                           |  |              | 7,490,383     |   |             |   |           |               |  |   | 7,490,383     |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|Total current assets                                                                           |  |              | 120,604,181   |   |             |   |           |               |  |   | 120,604,181   |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|PROPERTY AND EQUIPMENT, net                                                                    |  |              | 965,574,991   |   |             |   | 2,097,979  |               |  |   | 967,672,970   |  
|GOODWILL                                                                                       |  |              | 7,527,547     |   |             |   |           |               |  |   | 7,527,547     |  
|OTHER ASSETS, net                                                                              |  |              | 9,078,787     |   |             |   |           |               |  |   | 9,078,787     |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|Total assets                                                                                   |  | $            | 1,102,785,506 |   |             | $ | 2,097,979  |               |  | $ | 1,104,883,485 |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                           |  |              |               |   |             |   |            |               |  |   |               |  
|CURRENT LIABILITIES:                                                                           |  |              |               |   |             |   |            |               |  |   |               |  
|Accounts payable                                                                               |  | $            | 82,894,048    |   |             | $ |           |               |  | $ | 82,894,048    |  
|Accrued liabilities                                                                            |  |              | 74,512,641    |   |             |   | (210,000   | )             |  |   | 74,302,641    |  
|Income taxes payable                                                                           |  |              | 211,131       |   |             |   |           |               |  |   | 211,131       |  
|Current portion of long-term notes and other obligations                                       |  |              | 1,963,189     |   |             |   |           |               |  |   | 1,963,189     |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|Total current liabilities                                                                      |  |              | 159,581,009   |   |             |   | (210,000   | )             |  |   | 159,371,009   |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|LONG-TERM NOTES, NET OF CURRENT PORTION                                                        |  |              | 299,735,906   |   |             |   |           |               |  |   | 299,735,906   |  
|DEFERRED TAXES                                                                                 |  |              | 23,395,713    |   |             |   | (2,845,715 | )             |  |   | 20,549,998    |  
|OTHER LIABILITIES                                                                              |  |              | 15,522,129    |   |             |   | 9,810,530  |               |  |   | 25,332,659    |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|Total liabilities                                                                              |  |              | 498,234,757   |   |             |   | 6,754,815  |               |  |   | 504,989,572   |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|COMMITMENTS AND CONTINGENCIES                                                                  |  |              |               |   |             |   |            |               |  |   |               |  
|STOCKHOLDERS EQUITY:                                                                          |  |              |               |   |             |   |            |               |  |   |               |  
|Common Stock, $0.01 par value, 60,000,000 shares authorized, 27,653,852 issued and outstanding |  |              | 276,539       |   |             |   |           |               |  |   | 276,539       |  
|Additional paid-in capital                                                                     |  |              | 439,616,066   |   |             |   |           |               |  |   | 439,616,066   |  
|Deferred compensation                                                                          |  |              | (1,868,750    | ) |             |   |           |               |  |   | (1,868,750    | )
|Retained earnings                                                                              |  |              | 166,526,894   |   |             |   | (4,656,836 | )             |  |   | 161,870,058   |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|Total stockholders equity                                                                     |  |              | 604,550,749   |   |             |   | (4,656,836 | )             |  |   | 599,893,913   |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  
|Total liabilities and stockholders equity                                                     |  | $            | 1,102,785,506 |   |             | $ | 2,097,979  |               |  | $ | 1,104,883,485 |  
|                                                                                               |  |              |               |   |             |   |            |               |  |   |               |  



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Consolidated Statement of Income

Summary of Restatement Impacts

For the Year Ended December 31, 2003



|                                                                           |  |             |               |             |   |            |             |  |   |              
|-------------------------------------------------------------------------- |  | ----------- | ------------- | ----------- | - | ---------- | ----------- |  | - | -------------
|                                                                           |  | As Reported |               | Adjustments |   |            | As Restated
|REVENUES                                                                   |  | $           | 1,105,755,057 |             | $ |           |             |  | $ | 1,105,755,057
|OPERATING COSTS AND EXPENSES:                                              |  |             |               |             |   |            |             |  |   |              
|Cost of revenues                                                           |  |             | 321,783,377   |             |   |           |             |  |   | 321,783,377  
|Restaurant labor                                                           |  |             | 323,284,399   |             |   |           |             |  |   | 323,284,399  
|Other restaurant operating expenses                                        |  |             | 269,947,381   |             |   | 1,323,489  |             |  |   | 271,270,870  
|General and administrative expenses                                        |  |             | 51,704,100    |             |   |           |             |  |   | 51,704,100   
|Depreciation and amortization                                              |  |             | 48,824,493    |             |   | 266,973    |             |  |   | 49,091,466   
|Asset impairment expense                                                   |  |             | 13,144,365    |             |   |           |             |  |   | 13,144,365   
|Restaurant pre-opening expenses                                            |  |             | 8,650,178     |             |   |           |             |  |   | 8,650,178    
|                                                                           |  |             |               |             |   |            |             |  |   |              
|Total operating costs and expenses                                         |  |             | 1,037,338,293 |             |   | 1,590,462  |             |  |   | 1,038,928,755
|OPERATING INCOME                                                           |  |             | 68,416,764    |             |   | (1,590,462 | )           |  |   | 66,826,302   
|OTHER EXPENSE (INCOME):                                                    |  |             |               |             |   |            |             |  |   |              
|Interest expense, net                                                      |  |             | 9,561,482     |             |   |           |             |  |   | 9,561,482    
|Other, net                                                                 |  |             | 1,462,450     |             |   |           |             |  |   | 1,462,450    
|                                                                           |  |             |               |             |   |            |             |  |   |              
|Total other expense                                                        |  |             | 11,023,932    |             |   |           |             |  |   | 11,023,932   
|INCOME BEFORE INCOME TAXES                                                 |  |             | 57,392,832    |             |   | (1,590,462 | )           |  |   | 55,802,370   
|PROVISION FOR INCOME TAXES                                                 |  |             | 11,491,778    |             |   | (603,261   | )           |  |   | 10,888,517   
|                                                                           |  |             |               |             |   |            |             |  |   |              
|NET INCOME                                                                 |  | $           | 45,901,054    |             | $ | (987,201   | )           |  | $ | 44,913,853   
|                                                                           |  |             |               |             |   |            |             |  |   |              
|                                                                           |  |             |              
|EARNINGS PER SHARE INFORMATION:                                            |  |             |               |             |   |            |             |  |   |              
|                                                                           |  |             |              
|BASIC                                                                     |  |             |               |             |   |            |             |  |   |              
|Net Income                                                                 |  | $           | 1.66          |             | $ | (0.03      | )           |  | $ | 1.63         
|Weighted average number of common shares outstanding                       |  |             | 27,600,000    |             |   |           |             |  |   | 27,600,000   
|                                                                           |  |             |              
|DILUTED                                                                   |  |             |               |             |   |            |             |  |   |              
|Net Income                                                                 |  | $           | 1.62          |             | $ | (0.03      | )           |  | $ | 1.59         
|Weighted average number of common and common share equivalents outstanding |  |             | 28,325,000    |             |   |           |             |  |   | 28,325,000   



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Consolidated Statement of Income

Summary of Restatement Impacts

For the Year Ended December 31, 2002



|                                                                           |  |             |             |   |             |   |            |             |  |   |             |  
|-------------------------------------------------------------------------- |  | ----------- | ----------- | - | ----------- | - | ---------- | ----------- |  | - | ----------- | -
|                                                                           |  | As Reported |             |   | Adjustments |   |            | As Restated | 
|REVENUES                                                                   |  | $           | 894,794,621 |   |             | $ |           |             |  | $ | 894,794,621 |  
|OPERATING COSTS AND EXPENSES:                                              |  |             |             |   |             |   |            |             |  |   |             |  
|Cost of revenues                                                           |  |             | 257,944,741 |   |             |   |           |             |  |   | 257,944,741 |  
|Restaurant labor                                                           |  |             | 259,197,964 |   |             |   |           |             |  |   | 259,197,964 |  
|Other restaurant operating expenses                                        |  |             | 222,710,506 |   |             |   | 1,411,012  |             |  |   | 224,121,518 |  
|General and administrative expenses                                        |  |             | 43,383,799  |   |             |   |           |             |  |   | 43,383,799  |  
|Depreciation and amortization                                              |  |             | 40,480,020  |   |             |   | 249,690    |             |  |   | 40,729,710  |  
|Asset impairment expense                                                   |  |             | 2,200,000   |   |             |   |           |             |  |   | 2,200,000   |  
|Restaurant pre-opening expenses                                            |  |             | 4,590,972   |   |             |   |           |             |  |   | 4,590,972   |  
|                                                                           |  |             |             |   |             |   |            |             |  |   |             |  
|Total operating costs and expenses                                         |  |             | 830,508,002 |   |             |   | 1,660,702  |             |  |   | 832,168,704 |  
|OPERATING INCOME                                                           |  |             | 64,286,619  |   |             |   | (1,660,702 | )           |  |   | 62,625,917  |  
|OTHER EXPENSE (INCOME):                                                    |  |             |             |   |             |   |            |             |  |   |             |  
|Interest expense, net                                                      |  |             | 4,997,022   |   |             |   |           |             |  |   | 4,997,022   |  
|Other, net                                                                 |  |             | (886,657    | ) |             |   |           |             |  |   | (886,657    | )
|                                                                           |  |             |             |   |             |   |            |             |  |   |             |  
|Total other expense                                                        |  |             | 4,110,365   |   |             |   |           |             |  |   | 4,110,365   |  
|INCOME BEFORE INCOME TAXES                                                 |  |             | 60,176,254  |   |             |   | (1,660,702 | )           |  |   | 58,515,552  |  
|PROVISION FOR INCOME TAXES                                                 |  |             | 18,654,638  |   |             |   | (629,903   | )           |  |   | 18,024,735  |  
|                                                                           |  |             |             |   |             |   |            |             |  |   |             |  
|NET INCOME                                                                 |  | $           | 41,521,616  |   |             | $ | (1,030,799 | )           |  | $ | 40,490,817  |  
|                                                                           |  |             |             |   |             |   |            |             |  |   |             |  
|                                                                           |  |             |            
|EARNINGS PER SHARE INFORMATION:                                            |  |             |             |   |             |   |            |             |  |   |             |  
|                                                                           |  |             |            
|BASIC                                                                     |  |             |             |   |             |   |            |             |  |   |             |  
|Net Income                                                                 |  | $           | 1.60        |   |             | $ | (0.04      | )           |  | $ | 1.56        |  
|Weighted average number of common shares outstanding                       |  |             | 25,900,000  |   |             |   |           |             |  |   | 25,900,000  |  
|                                                                           |  |             |            
|DILUTED                                                                   |  |             |             |   |             |   |            |             |  |   |             |  
|Net Income                                                                 |  | $           | 1.54        |   |             | $ | (0.03      | )           |  | $ | 1.51        |  
|Weighted average number of common and common share equivalents outstanding |  |             | 26,900,000  |   |             |   |           |             |  |   | 26,900,000  |  



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3.  ACQUISITIONS



In February 2002, the Company acquired C.A. Muer, Inc., the owner and operator of 15 seafood restaurants (Muer
Acquisition), in a stock purchase transaction for approximately $28.5 million. In August 2002, the Company acquired, in an asset purchase transaction, 27 Chart House seafood restaurants located primarily on the east and west coasts of the
United States from Angelo and Maxies, Inc. for approximately $45.5 million, as well as assumption of selected trade payable related liabilities. In October 2002, the Company acquired 27 Saltgrass Steak House restaurants in a stock purchase
transaction for approximately $73.0 million which included a $20 million promissory note issued to the seller and contingent payments based on future financial performance. In 2004, the Company settled all future contingent payments resulting in
recording goodwill of approximately $11.0 million. The acquisitions noted above are accounted for under SFAS 141 and results of operations are included in the accompanying consolidated financial statements from the date of acquisition. The assets
acquired and liabilities assumed of the acquired businesses were recorded at estimated fair values using relevant comparables, appraisals, and records.



A summary of the assets acquired and liabilities assumed in the acquisitions follows (in 000s):



|                                        |  |      |         |   |             |   |        |           |  |   |         |  
|--------------------------------------- |  | ---- | ------- | - | ----------- | - | ------ | --------- |  | - | ------- | -
|                                        |  | Muer |         |   | Chart House |   |        | Saltgrass | 
|Estimated fair value of assets acquired |  | $    | 45,431  |   |             | $ | 57,385 |           |  | $ | 83,524  |  
|Liabilities assumed                     |  |      | (16,883 | ) |             |   | (5,945 | )         |  |   | (10,063 | )
|                                        |  |      |         |   |             |   |        |           |  |   |         |  
|Allocated purchase price                |  |      | 28,548  |   |             |   | 51,440 |           |  |   | 73,461  |  
|Less cash acquired and seller note      |  |      | (895    | ) |             |   | (163   | )         |  |   | (21,200 | )
|                                        |  |      |         |   |             |   |        |           |  |   |         |  
|Net cash paid                           |  | $    | 27,653  |   |             | $ | 51,277 |           |  | $ | 52,261  |  
|                                        |  |      |         |   |             |   |        |           |  |   |         |  



As a result of the
acquisitions, the Company recorded acquisition integration costs for the estimated incremental costs to exit and consolidate activities at various locations, to involuntarily terminate employees, and for other costs to integrate operating locations
and other activities of the acquired business with the Company. Accounting principles generally accepted in the United States provide that these acquisition integration expenses, which are not associated with the generation of future revenues and
have no future economic benefit, be reflected as assumed liabilities in the allocation of the purchase price. Acquisition integration for the 2002 acquisitions aggregated $6.9 million of which most liabilities were paid in 2002.



During 2003, the Company made several individual property acquisitions that
aggregated $27 million, plus $11.4 million of assumed debt, and included $5.1 million in goodwill.



4.  PROPERTY AND EQUIPMENT AND OTHER ASSETS



Property and equipment is comprised of the following:



|                                  |  |              |               |   |      |   |               |  
|--------------------------------- |  | ------------ | ------------- | - | ---- | - | ------------- | -
|                                  |  | December 31, |              
|                                  |  | 2004         |               |   | 2003 |  
|Land                              |  | $            | 178,365,122   |   |      | $ | 170,163,593   |  
|Buildings and improvements        |  |              | 272,152,965   |   |      |   | 222,842,330   |  
|Furniture, fixtures and equipment |  |              | 273,446,996   |   |      |   | 234,372,485   |  
|Leasehold improvements            |  |              | 545,402,565   |   |      |   | 500,784,658   |  
|Construction in progress          |  |              | 16,209,718    |   |      |   | 64,815,782    |  
|                                  |  |              |               |   |      |   |               |  
|                                  |  |              | 1,285,577,366 |   |      |   | 1,192,978,848 |  
|Lessaccumulated depreciation     |  |              | (278,280,430  | ) |      |   | (225,305,878  | )
|                                  |  |              |               |   |      |   |               |  
|Property and equipment, net       |  | $            | 1,007,296,936 |   |      | $ | 967,672,970   |  
|                                  |  |              |               |   |      |   |               |  



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company continually evaluates unfavorable cash flows, if any, related to underperforming
restaurants. Periodically it is concluded that certain properties have become impaired based on the existing and anticipated future economic outlook for such properties in their respective market areas. As a result, the Company recorded asset
impairment depreciation charges of approximately $1.7 million, $13.1 million, and $2.2 million in 2004, 2003, and 2002, respectively, representing the difference between the estimated fair value and carrying value for those restaurant properties.
Asset impairment expense of $1.7 million related to one under performing unit is included in the 2004 amount, asset impairment expense of $13.1 million relating to six underperforming and three closed restaurants is included in the 2003 amount, and
$2.2 million is included for 2002. Included in the 2003 amounts were four Landrys division, three Joes Crab Shack, and two Crab House restaurants.



These impairment charges resulted from sales declines, deterioration in the specific restaurants profitability, perceived continued deterioration
of the market area and/or specific location, and managements lowered outlook for further opportunity and/or improvement in forecasted sales and profitability trends for such specific property. Assets that were impaired are primarily leasehold
improvements and to a lesser extent equipment. The following is a summary of related charges and expenses:



|                                             |  |                          |           |      |   |            |  |   |          
|-------------------------------------------- |  | ------------------------ | --------- | ---- | - | ---------- |  | - | ---------
|                                             |  | Years ended December 31,
|                                             |  | 2004                     |           | 2003 |   | 2002      
|Asset Impairment                             |  | $                        | 1,700,000 |      | $ | 13,100,000 |  | $ | 2,200,000
|Accrued Estimated Lease Termination Payments |  | $                        |          |      | $ | 1,300,000  |  | $ |         
|                                             |  |                          |           |      |   |            |  |   |          
|                                             |  | $                        | 1,700,000 |      | $ | 14,400,000 |  | $ | 2,200,000
|                                             |  |                          |           |      |   |            |  |   |          



The Company considers
the asset impairment expense as additional depreciation and amortization, although shown as a separate line item in the Consolidated Statements of Income. Estimated fair values of impaired properties are based on comparable valuations, cash flows
and management judgement.



Other current assets are comprised
of the following:



|                                                           |  |              |            |      |   |          
|---------------------------------------------------------- |  | ------------ | ---------- | ---- | - | ---------
|                                                           |  | December 31,
|                                                           |  | 2004         |            | 2003
|Prepaid expenses                                           |  | $            | 4,673,319  |      | $ | 3,490,137
|Assets held for sale (expected to be sold within one year) |  |              | 5,390,648  |      |   | 3,384,925
|Deposits                                                   |  |              | 1,566,560  |      |   | 615,321  
|                                                           |  |              |            |      |   |          
|                                                           |  | $            | 11,630,527 |      | $ | 7,490,383
|                                                           |  |              |            |      |   |          



Other expense (income)
for 2004 is primarily make whole payments and related fees aggregating $14.6 million associated with the pre-payment of our $150 million in senior notes and Former Bank Credit Facility offset by $1.1 million business interruption recoveries related
to storm damage. Other expense (income) for 2003 is primarily expenses related to abandoned development projects.



60



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



5.  ACCRUED LIABILITIES



Accrued liabilities are comprised of the following:



|                                           |  |              |            |      |   |           
|------------------------------------------ |  | ------------ | ---------- | ---- | - | ----------
|                                           |  | December 31,
|                                           |  | 2004         |            | 2003
|Payroll and related costs                  |  | $            | 16,468,491 |      | $ | 15,533,279
|Rent and insurance                         |  |              | 25,753,353 |      |   | 19,074,892
|Taxes, other than payroll and income taxes |  |              | 19,064,713 |      |   | 17,743,989
|Deferred revenue (gift certificates)       |  |              | 12,751,757 |      |   | 10,455,869
|Other                                      |  |              | 10,917,174 |      |   | 11,494,612
|                                           |  |              |            |      |   |           
|                                           |  | $            | 84,955,488 |      | $ | 74,302,641
|                                           |  |              |            |      |   |           



6.  DEBT



In December 2004, the Company entered into a $450 million bank credit
facility consisting of a $300 million revolving credit facility and a $150 million term loan. The revolving credit facility matures in December 2009 and bears interest at Libor or the banks base rate plus a financing spread, 1.75% for Libor
and 0.75% for base rate borrowings at December 31, 2004. In addition, the revolving credit facility requires a commitment fee on the unfunded portion. The financing spread and commitment fee increases or decreases based on a financial leverage ratio
as defined in the credit agreement. The term loan matures in December 2010 and, at December 31, 2004, bears interest at Libor plus 1.75% or the banks base rate plus 0.75%. Quarterly principal payments of $375,000 are due through December 2009
with the remaining balance payable in equal quarterly installments of $35,625,000 in 2010. The Company and certain of its guarantor subsidiaries granted liens on substantially all real and personal property as security under the bank credit
facility. As of December 31, 2004 the Company had approximately $13.8 million in letters of credit outstanding and available borrowing capacity of $286.2 million.



Concurrently, the Company issued $400 million in 7.5% senior notes due in December 2014. The notes are general unsecured
obligations of the Company and require semi-annual interest payments in June and December.



Net proceeds from the $450 million bank credit facility and $400 million in 7.5% senior notes totaled $536.6 million and were used to repay all outstanding liabilities under the Former Bank Credit Facility and
$150 million in Senior Notes. These debt repayments resulted in a pre-tax charge of $16.6 million in the fourth quarter of 2004.



In connection with the 7.5% senior notes, the Company entered into an interest swap agreement with the objective of managing its exposure to interest rate
risk and lowering interest expense. The agreement was effective December 28, 2004 maturing in December 2014 for an aggregate notional amount of $50 million and interest at Libor plus 2.38%. The Companys interest rate swap agreement qualifies
as a fair value hedge and meets the criteria for the short cut method under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.



The Companys debt agreements contain various restrictive covenants including minimum fixed charge, net worth, and
financial leverage ratios as well as limitations on dividend payments, capital expenditures and other restricted payments as defined in the agreements. At December 31, 2004, the Company was in compliance with all such covenants.



Principal payments for all long-term debt aggregate $1,700,000 in 2005,
$1,720,000 in 2006, $1,741,000 in 2007, $1,762,000 in 2008, $1,740,000 in 2009 and $552,582,000 thereafter.



61



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On October 1, 2003, the Company issued senior notes totaling $150.0 million through a private
placement of debt. Proceeds from the senior notes were used to pay down amounts outstanding under the bank promissory notes and the bank syndicate credit facility. The debt offering consisted of four equal series of notes in the amount of $37.5
million, quarterly interest of 5.47%, 5.84%, 6.05% and 6.44%, with an average rate of 5.95%, and maturities on October 1, 2009, 2010, 2011 and 2013. At December 31, 2004, all outstanding amounts were repaid and the existing interest rate swap
agreements were terminated.



On October 14, 2003, the Company
entered into the Second Amended and Restated Credit Agreement whereby the existing bank credit facility was amended and extended to a four-year $200.0 million revolving credit facility. An additional $25.0 million of capacity was added to the bank
credit facility in September 2004. Interest on the bank credit facility was payable monthly or quarterly at Libor or the banks base rate plus a financing spread. Proceeds from the December 2004 refinancing were used to repay all liabilities
related to this bank credit facility relieving the Company of any further obligation.



In connection with the Saltgrass Steak House acquisition in October 2002, the Company financed a portion of the acquisition with a $20 million, 7 year, 5.5% note to the former owner of Saltgrass Steak House. In June
2004, the Company repaid all outstanding indebtedness under this note. Concurrently, the Company settled all contingent payments associated with the future financial performance of the Saltgrass restaurants resulting in recording goodwill of
approximately $11.0 million.



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



Long-term debt is comprised of the following:



|                                                                                                                                |  |              |             |   |      |   |             |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                |  | December 31, |            
|                                                                                                                                |  | 2004         |             |   | 2003 |  
|$300.0 million Bank Syndicate Credit Facility, Libor + 1.75% interest only, due December 2009                                   |  | $            |            |   |      | $ |            |  
|$150.0 million Term loan facility, Libor + 1.75%, interest paid quarterly, $375,000 principal paid quarterly, due December
2010 |  |              | 150,000,000 |   |      |   |            |  
|$400.0 million Senior Notes, 7.5% interest only, due December 2014                                                              |  |              | 400,000,000 |   |      |   |            |  
|Non-recourse long-term note payable, 9.39% interest, principal and interest aggregate $101,762 monthly, due May 2010            |  |              | 11,171,760  |   |      |   | 11,318,664  |  
|Other long-term notes payable with various interest rates, principal and interest paid monthly                                  |  |              | 163,057     |   |      |   | 325,110     |  
|$200.0 million Bank syndicate credit facility, Libor + 1.875%, interest only, due October 2007                                  |  |              |            |   |      |   | 122,000,000 |  
|$150.0 million Senior Notes, average 5.95%, interest only, maturities ranging from October 2009 to October 2013                 |  |              |            |   |      |   | 150,000,000 |  
|$20.0 million seller note, 5.5%, interest only, quarterly principal and interest payments of $653,386, due 2009                 |  |              |            |   |      |   | 18,055,321  |  
|Interest rate swap                                                                                                              |  |              | (89,229     | ) |      |   |            |  
|                                                                                                                                |  |              |             |   |      |   |             |  
|Total debt                                                                                                                      |  |              | 561,245,588 |   |      |   | 301,699,095 |  
|Less current portion                                                                                                            |  |              | (1,700,496  | ) |      |   | (1,963,189  | )
|                                                                                                                                |  |              |             |   |      |   |             |  
|Long-term portion                                                                                                               |  | $            | 559,545,092 |   |      | $ | 299,735,906 |  
|                                                                                                                                |  |              |             |   |      |   |             |  



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



7.  STOCKHOLDERS EQUITY



In April 2002, the Company completed a public offering of 5,297,500 shares of the Companys common stock. Net proceeds
of the offering to the Company were approximately $132.6 million and were used to repay outstanding borrowings.



In October 2002, the Companys Board of Directors authorized a $50.0 million open market stock buy back program. In September 2003, the Company
authorized an additional open market stock repurchase program for $60.0 million. In October 2004, the Company authorized an open market stock repurchase program for $50.0 million. In connection with the Companys stock buy back programs,
the Company repurchased into treasury approximately 2,292,000, 469,000 and 305,000 shares of common stock for approximately $62.8 million, $8.4 million and $6.7 million, in 2004, 2003 and 2002, respectively. Cumulative repurchases as of December 31,
2004 were 12.8 million shares at a cost of approximately $157 million. In early 2005, a $50 million open market stock repurchase program was approved.



Commencing in 2000, the Company began to pay an annual $0.10 per share dividend, declared and paid in quarterly installments of $0.025 per share. In April
2004, this was increased to $0.20 per share, paid in quarterly installments of $0.05 per share.



A reconciliation of the amounts used to compute net income per common sharediluted is as follows:



|                                                                         |  |                         |            |      |   |            |  |   |           
|------------------------------------------------------------------------ |  | ----------------------- | ---------- | ---- | - | ---------- |  | - | ----------
|                                                                         |  | Year Ended December 31,
|                                                                         |  | 2004                    |            | 2003 |   | 2002      
|Net Income                                                               |  | $                       | 66,521,728 |      | $ | 44,913,853 |  | $ | 40,490,817
|                                                                         |  |                         |            |      |   |            |  |   |           
|Weighted average common shares outstanding                               |  |                         | 27,000,000 |      |   | 27,600,000 |  |   | 25,900,000
|Dilutive common stock equivalentsstock options                          |  |                         | 800,000    |      |   | 725,000    |  |   | 1,000,000 
|                                                                         |  |                         |            |      |   |            |  |   |           
|Weighted average common and common share equivalents outstandingdiluted |  |                         | 27,800,000 |      |   | 28,325,000 |  |   | 26,900,000
|                                                                         |  |                         |            |      |   |            |  |   |           
|Net income per sharediluted                                             |  | $                       | 2.39       |      | $ | 1.59       |  | $ | 1.51      
|                                                                         |  |                         |            |      |   |            |  |   |           



The Company maintains
two stock option plans, which were originally adopted in 1993, (the Stock Option Plans), as amended, pursuant to which options may be granted to eligible employees and non-employee 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 Compensation 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 non-qualified stock options or incentive stock options, as defined by the Internal Revenue Code of 1986, as amended.



The Company also maintains the 1995 Flexible Incentive Plan, which was
adopted in 1995, (Flex Plan), as amended, 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 2,000,000 shares.



In March 2003, the Company established the 2002 Employee/Rainforest
Conversion Plan pursuant to which stock options of the Company may be granted to employees, non-employee directors and consultants of the



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Company for up to an aggregate of 2,162,500 shares of Common Stock of the Company. The Compensation Committee of the Board of Directors determines the number
of shares, prices and vesting schedule of individual grants.



In June 2003, the Company established an equity incentive plan pursuant to which stock options or restricted stock of the Company may be granted to eligible employees of the Company for an aggregate of 700,000 shares of common stock of the
Company. The Compensation Committee of the Board of Directors determines the number of shares, prices, and vesting schedule of individual grants. In addition, the Company will issue pursuant to an employment agreement, over its five year term,
500,000 shares of restricted stock, with a 10 year vest from grant date, and a minimum of 800,000 stock options. In August 2003, 100,000 restricted common shares were issued subject to vesting on the tenth anniversary. In February 2004, an
additional 100,000 restricted common shares were issued with similar vesting terms. The unamortized balance of non-vested restricted common stock grants is reflected as deferred compensation included in stockholders equity and the related
expense is amortized over the vesting periods.



In connection
with the acquisition of Rainforest Cafe, the Company issued approximately 500,000 vested stock options to employees of Rainforest Cafe as replacement for existing options outstanding at the date of the merger, as required by the merger agreement.
The fair value of these options was included in the purchase price of Rainforest Cafe.



At December 31, 2004, options for 2,638,323 shares were outstanding at prices ranging from $6.00 to $27.50 per share. As of December 31, 2004, 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 over three to five years.



The following table provides certain information with respect to stock options outstanding as of December 31:



|                                      |  |           |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      
|------------------------------------- |  | --------- | - | ---- | -------------------- | ----- | ------ | --------- | - | -------------------- | - | ------ |  | --------- | -------------------- |  | - | -----
|                                      |  | 2004      |   | 2003 |                      | 2002 
|                                      |  | Shares    |   |      | AverageExercisePrice |       | Shares |           |   | AverageExercisePrice |   | Shares |  |           | AverageExercisePrice
|Options outstanding beginning of year |  | 2,410,874 |   |      | $                    | 11.97 |        | 2,694,470 |   |                      | $ | 11.57  |  | 3,040,926 |                      |  | $ | 9.93 
|Granted                               |  | 501,500   |   |      | $                    | 27.50 |        | 16,000    |   |                      | $ | 20.26  |  | 464,135   |                      |  | $ | 17.71
|Exercised                             |  | (169,851  | ) |      | $                    | 10.30 |        | (251,196  | ) |                      | $ | 7.28   |  | (782,514  | )                    |  | $ | 9.12 
|Terminated                            |  | (104,200  | ) |      | $                    | 11.69 |        | (48,400   | ) |                      | $ | 14.36  |  | (28,077   | )                    |  | $ | 13.55
|                                      |  |           |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      
|Options outstanding end of year       |  | 2,638,323 |   |      | $                    | 15.12 |        | 2,410,874 |   |                      | $ | 11.97  |  | 2,694,470 |                      |  | $ | 11.57
|                                      |  |           |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      
|Options exercisable end of year       |  | 1,843,114 |   |      | $                    | 12.04 |        | 1,902,274 |   |                      | $ | 11.82  |  | 1,726,368 |                      |  | $ | 10.33
|                                      |  |           |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      



The following table
provides certain information with respect to stock options outstanding as of December 31, 2004:



|                         |  |                          |  |                                |       |                                           |    
|------------------------ |  | ------------------------ |  | ------------------------------ | ----- | ----------------------------------------- | ---
|Range of Exercise Prices |  | Stock OptionsOutstanding |  | Weighted AverageExercise Price |       | Weighted AverageRemaining LifeOutstanding
|< $9.00                  |  | 800,142                  |  | $                              | 7.62  |                                           | 5.4
|$9.00-$13.50             |  | 765,808                  |  | $                              | 13.09 |                                           | 1.2
|$13.51-$20.25            |  | 529,484                  |  | $                              | 17.04 |                                           | 7.3
|> $20.25                 |  | 542,889                  |  | $                              | 27.15 |                                           | 9.1
|                         |  |                          |  |                                |       |                                           |    
|                         |  | 2,638,323                |  | $                              | 15.12 |                                           | 5.3
|                         |  |                          |  |                                |       |                                           |    



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table provides certain information with respect to stock options exercisable at
December 31, 2004:



|                         |  |                          |  |                                |      
|------------------------ |  | ------------------------ |  | ------------------------------ | -----
|Range of Exercise Prices |  | Stock OptionsExercisable |  | Weighted AverageExercise Price
|< $9.00                  |  | 686,242                  |  | $                              | 7.54 
|$9.00-$13.50             |  | 761,726                  |  | $                              | 13.09
|$13.51-$20.25            |  | 360,311                  |  | $                              | 17.27
|> $20.25                 |  | 34,835                   |  | $                              | 23.56
|                         |  |                          |  |                                |      
|                         |  | 1,843,114                |  | $                              | 12.04
|                         |  |                          |  |                                |      



8.  INCOME TAXES



An analysis of the provision for income taxes for the
years ended December 31, 2004, 2003, and 2002 is as follows:



|                      |  |      |            |   |      |   |            |  |   |           
|--------------------- |  | ---- | ---------- | - | ---- | - | ---------- |  | - | ----------
|                      |  | 2004 |            |   | 2003 |   | 2002      
|Tax Provision:        |  |      |            |   |      |   |            |  |   |           
|Current income taxes  |  | $    | 7,481,954  |   |      | $ | 267,490    |  | $ | 9,939,231 
|Deferred income taxes |  |      | (3,937,176 | ) |      |   | 10,621,027 |  |   | 8,085,504 
|                      |  |      |            |   |      |   |            |  |   |           
|Total provision       |  | $    | 3,544,778  |   |      | $ | 10,888,517 |  | $ | 18,024,735
|                      |  |      |            |   |      |   |            |  |   |           



The Companys
effective tax rate, for the years ended December 31, 2004, 2003, and 2002, differs from the federal statutory rate as follows:



|                                                                |  |       |   |  |       |   |  |      |  
|--------------------------------------------------------------- |  | ----- | - |  | ----- | - |  | ---- | -
|                                                                |  | 2004  |   |  | 2003  |   |  | 2002 |  
|Statutory rate                                                  |  | 35.0  | % |  | 35.0  | % |  | 35.0 | %
|FICA tax credit                                                 |  | (8.2  | ) |  | (9.3  | ) |  | (6.8 | )
|State income tax, net of federal tax benefit                    |  | 2.5   |   |  | 3.7   |   |  | 1.2  |  
|Recognition of tax carryforward assets and other tax attributes |  | (26.4 | ) |  | (11.3 | ) |  |     |  
|Other                                                           |  | 2.2   |   |  | 1.4   |   |  | 1.4  |  
|                                                                |  |       |   |  |       |   |  |      |  
|                                                                |  | 5.1   | % |  | 19.5  | % |  | 30.8 | %
|                                                                |  |       |   |  |       |   |  |      |  



Deferred income tax
assets and liabilities as of December 31 are comprised of the following:



|                                                     |  |      |             |   |      |   |             |  
|---------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                     |  | 2004 |             |   | 2003 |  
|Deferred Income Taxes:                               |  |      |             |   |      |   |             |  
|Current assetsaccruals and other                    |  | $    | 10,859,000  |   |      | $ | 6,858,000   |  
|                                                     |  |      |             |   |      |   |             |  
|Non-current assets:                                  |  |      |             |   |      |   |             |  
|AMT credit, FICA credit carryforwards, and other     |  | $    | 32,488,000  |   |      | $ | 21,930,000  |  
|Net operating loss carryforwards                     |  |      | 28,317,000  |   |      |   | 28,951,000  |  
|Deferred rent and tenant allowance                   |  |      | 8,543,000   |   |      |   | 8,850,000   |  
|Valuation allowance for NOL and credit carryforwards |  |      | (7,220,000  | ) |      |   | (26,236,000 | )
|                                                     |  |      |             |   |      |   |             |  
|Non-current deferred tax asset                       |  |      | 62,128,000  |   |      |   | 33,495,000  |  
|Non-current liabilitiesproperty and other           |  |      | (75,471,000 | ) |      |   | (54,045,000 | )
|                                                     |  |      |             |   |      |   |             |  
|Net non-current tax asset (liability)                |  | $    | (13,343,000 | ) |      | $ | (20,550,000 | )
|                                                     |  |      |             |   |      |   |             |  
|Total net deferred tax asset (liability)             |  | $    | (2,484,000  | ) |      | $ | (13,692,000 | )
|                                                     |  |      |             |   |      |   |             |  



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



At December 31, 2004 and 2003, the Company had operating loss carryovers for Federal Income Tax
purposes of $76.3 million and $77.0 million, respectively, which expire in 2017 through 2024. These operating loss carryovers along with certain credits, and other deductible temporary differences, are related to the acquisitions of Rainforest Cafe
and Saltgrass Steak House, and their utilization is subject to Section 382 limits. Because of these limitations, the Company established a valuation allowance against a portion of these deferred tax assets to the extent it was more likely than not
that these tax benefits will not be realized. In 2004 and 2003, respectively, there was a revision to the valuation allowance and deferred tax liabilities aggregating a net benefit of $18.5 million and $6.3 million, respectively. The valuation
allowance and certain deferred tax liabilities were reduced for the following reasons: the strength of the 2004 earnings; the future forecasted taxable income of the Company; the approaching end to specific recognition limitations (i.e.
built-in-loss limitations) on allowable deductions; and the closing of audits with favorable results. Management believes that the combination of the above factors indicates that a portion of the deferred tax assets previously reserved would more
likely than not be realized.



At December 31, 2004 and 2003,
the Company has general business tax credit carryovers and minimum tax credit carryovers of $23.5 million and $21.3 million respectively. The general business carryover includes $1.5 million from Saltgrass which is fully reserved. The general
business credit carryovers expire in 2012 through 2024, while the minimum tax credit carryovers have no expiration date. The use of these credits is limited if the Company is subject to the alternative minimum tax. The Company believes it is more
likely than not that it will generate sufficient income in future years to utilize the non-reserved credits.



The Internal Revenue Service (IRS) has examined the Companys Federal Income Tax Returns and certain pre-acquisition returns for Rainforest Cafe for
years 1997 through 2001. These examinations have been completed and closed without adjustment. The IRS is currently examining a 2001 pre-acquisition return for Saltgrass.



9.  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 rent 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 $56.4 million, $55.2 million and $46.2 million, during the years ended December 31, 2004, 2003, and 2002, respectively. Percentage rent included in rent expense was $13.6 million, $12.3
million, and $10.2 million, for 2004, 2003 and 2002, respectively.



In 2004, the Company entered into an aggregate $25.5 million equipment operating lease agreement replacing the two existing agreements entered into in 2002 and 2001 (described below) and including additional equipment. The lease expires in
2014. The Company guarantees a minimum residual value related to the equipment of approximately 66% of the total amount funded under the agreement. The Company may purchase the leased equipment throughout the lease term for an amount equal to the
unamortized lease balance. The Company believes that the equipments fair value is sufficient such that no amounts will be due under the residual value guarantee.



In 2002, the Company entered into a $6.9 million equipment operating lease agreement expiring in 2012. The Company
guarantees a minimum residual value related to the equipment of approximately 66% of the total amount funded under the agreement. The Company may purchase the leased equipment throughout the lease



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



term for an amount equal to the unamortized lease balance. The Company believes that the equipments fair value is sufficient that no amounts will be
due under the residual value guarantee.



In 2001, the Company
entered into a $15.3 million equipment operating lease agreement expiring in 2011. The Company guarantees a minimum residual value related to the equipment of approximately 66% of the total amount funded under the agreement. The Company may purchase
the leased equipment throughout the lease term for an amount equal to the unamortized lease balance. The Company believes that the equipments fair value is sufficient that no amounts will be due under the residual value guarantee.



In connection with substantially all of the Rainforest Cafe leases,
amounts are provided for unfavorable leases, rent abatements, and scheduled increases in rent. Such amounts are recorded as other long-term liabilities on the Companys consolidated balance sheets, and amortized or accrued as an adjustment to
rent expense, included in other restaurant operating expenses, on a straight-line basis over the lease term, including options where failure to exercise such options would result in economic penalty.



The aggregate amounts of minimum operating lease commitments maturing in each
of the five years and thereafter subsequent to December 31, 2004, are as follows:



|                      |  |   |            
|--------------------- |  | - | -----------
|2005                  |  | $ | 44,040,000 
|2006                  |  |   | 41,005,000 
|2007                  |  |   | 38,403,000 
|2008                  |  |   | 33,392,000 
|2009                  |  |   | 29,906,000 
|Thereafter            |  |   | 248,197,000
|                      |  |   |            
|Total minimum rentals |  | $ | 434,943,000
|                      |  |   |            



Building Commitments



As of December 31, 2004, the Company had future
development, land purchases and construction commitments expected to be expended within the next twelve months of approximately $7.2 million, including completion of construction on certain new restaurants. In addition, the Company has committed
$9.2 million through 2006 for the renovation of the Tower of the Americas in San Antonio, Texas which the Company will operate for at least the next 15 years.



In 2003, the Company purchased from the City of Galveston the Flagship Hotel and Pier, subject to an existing lease. Under this agreement, upon
termination of the existing lease, the Company has committed to spend an additional $15 million to transform the hotel and pier into a 19thcentury style Inn and entertainment complex complete with rides and carnival type games. The property is currently occupied by a tenant.



During November 2003, the Company purchased two casual Italian restaurants. Under the purchase agreement, the Company is
committed to building an additional five casual Italian restaurants over the next 5 years, or make certain payments in lieu of development. In conjunction with the agreement to develop additional restaurants, the seller agrees to provide consulting
services to ensure the consistency and the quality of the food and service are maintained through this transition period.



Other



The Company sponsors a qualified defined contribution retirement plan (401(k) Plan) covering eligible salaried employees. The 401(k) Plan allows eligible employees to contribute, subject to Internal Revenue Service



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



limitations on total annual contributions, up to 100% of their base compensation as defined in the 401(k) Plan, to various investment funds. The Company
matches in cash at a discretionary rate. Employee contributions vest immediately while Company contributions vest 20% annually beginning in the participants second year of eligibility.



The Company initiated a non-qualified defined contribution retirement plan
(the Plan) in 2004 covering certain management employees not eligible to participate in the Companys 401(k) defined contribution plan. The Plan allows eligible employees to defer receipt of up to 90% of their base compensation and 100% of
their eligible bonuses, as defined in the Plan. The Company matches in cash at a discretionary rate. Employee contributions vest immediately while Company contributions vest 20% annually. The Company established a Rabbi Trust to fund the Plan
obligations. The market value of the trust assets is included in other assets, and the liability to the Plan participants is included in other liabilities.



Rainforest Cafe, the Companys wholly-owned subsidiary, had guaranteed a portion of the bank borrowings of one of its foreign affiliates in which the
Company owns a 20% interest. The loan balance was paid in full in July 2004 relieving the Company of any future obligation.



In connection with the Galveston convention center management contract, the Company agreed to fund operating losses, if any, subject to certain rights of
reimbursement. Under the agreements, the Company has the right to one-half of any profits generated by the operation of the convention center.



Litigation and Claims



On July 31, 2002, and subsequently amended, a purported collective action lawsuit against the Company entitled Meaghan Bollenberg, et. al. v.
Landrys Restaurants, Inc. was filed in the United States District Court for the Northern District of Illinois and subsequently moved to a Court in the Southern District of Texas. The lawsuit was filed by six plaintiffs who were servers on
behalf of themselves and others similarly situated. The lawsuit alleges that the Company violated certain minimum wage laws under the federal Fair Labor Standards Act and seeks damages and costs. The Company is vigorously defending this litigation.
Because the case is in its early stages, the financial impact to the Company, if any, cannot be predicted.



General Litigation



The Company is subject to other legal proceedings and claims that arise in the ordinary course of business. Management does not believe that the outcome
of any of these matters will have a material adverse effect on the Companys financial position, results of operations or cash flows.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



10.  SUPPLEMENTAL GUARANTOR INFORMATION



In December 2004, the Company issued, in a private offering, $400 million of
7.5% senior notes due in 2014 (see Debt). These notes are to be exchanged for substantially identical notes in an exchange offer registered under the Securities Act of 1933. These notes are fully and unconditionally guaranteed by the
Company and certain of its subsidiaries, Guarantor Subsidiaries.



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



Condensed
Consolidating Financial Statements

Balance Sheet

December 31, 2004



|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|------------------------------------------ |  | ------ | ------------ | - | --------------------- | - | ----------- | ------------------------- |  | ------------ | ---------- |  | ------------------ | ------------ | - |  | - | ------------- | -
|                                           |  | Parent |              |   | GuarantorSubsidiaries |   |             | Non-guarantorSubsidiaries |  | Eliminations |            |  | ConsolidatedEntity |             
|ASSETS                                     |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             
|CURRENT ASSETS:                            |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|Cash and cash equivalents                  |  | $      | 192,679,301  |   |                       | $ | 5,923,478   |                           |  | $            | 2,791,253  |  | $                  |             |   |  | $ | 201,394,032   |  
|Accounts receivabletrade and other        |  |        | 10,256,627   |   |                       |   | 8,114,520   |                           |  |              | 224,384    |  |                    |             |   |  |   | 18,595,531    |  
|Inventories                                |  |        | 37,824,160   |   |                       |   | 16,878,980  |                           |  |              | 301,013    |  |                    |             |   |  |   | 55,004,153    |  
|Deferred taxes                             |  |        | 10,859,160   |   |                       |   |            |                           |  |              |           |  |                    |             |   |  |   | 10,859,160    |  
|Other current assets                       |  |        | 2,855,754    |   |                       |   | 3,329,122   |                           |  |              | 5,445,651  |  |                    |             |   |  |   | 11,630,527    |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|Total current assets                       |  |        | 254,475,002  |   |                       |   | 34,246,100  |                           |  |              | 8,762,301  |  |                    |             |   |  |   | 297,483,403   |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|PROPERTY AND EQUIPMENT, net                |  |        | 73,767,370   |   |                       |   | 887,811,651 |                           |  |              | 45,717,915 |  |                    |             |   |  |   | 1,007,296,936 |  
|GOODWILL                                   |  |        |             |   |                       |   | 18,527,547  |                           |  |              |           |  |                    |             |   |  |   | 18,527,547    |  
|INVESTMENT IN SUBSIDIARIES                 |  |        | 214,333,902  |   |                       |   |            |                           |  |              |           |  |                    | (214,333,902 | ) |  |   |              |  
|OTHER ASSETS, net                          |  |        | 19,236,582   |   |                       |   | 2,407,803   |                           |  |              |           |  |                    |             |   |  |   | 21,644,385    |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|Total assets                               |  | $      | 561,812,856  |   |                       | $ | 942,993,101 |                           |  | $            | 54,480,216 |  | $                  | (214,333,902 | ) |  | $ | 1,344,952,271 |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             
|CURRENT LIABILITIES:                       |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|Accounts payable                           |  | $      | 23,160,088   |   |                       | $ | 24,544,797  |                           |  | $            | 636,433    |  | $                  |             |   |  | $ | 48,341,318    |  
|Accrued liabilities                        |  |        | 12,925,743   |   |                       |   | 70,441,426  |                           |  |              | 1,588,319  |  |                    |             |   |  |   | 84,955,488    |  
|Income taxes payable                       |  |        | 971,175      |   |                       |   |            |                           |  |              |           |  |                    |             |   |  |   | 971,175       |  
|Payable to affiliates                      |  |        | (650,412,063 | ) |                       |   | 610,127,864 |                           |  |              | 40,284,199 |  |                    |             |   |  |   |              |  
|Current portion of long-term debt          |  |        | 1,535,814    |   |                       |   |            |                           |  |              | 164,682    |  |                    |             |   |  |   | 1,700,496     |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|Total current liabilities                  |  |        | (611,819,243 | ) |                       |   | 705,114,087 |                           |  |              | 42,673,633 |  |                    |             |   |  |   | 135,968,477   |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|LONG-TERM DEBT, NET OF CURRENT PORTION     |  |        | 548,538,015  |   |                       |   |            |                           |  |              | 11,007,077 |  |                    |             |   |  |   | 559,545,092   |  
|DEFERRED TAXES                             |  |        | 13,343,631   |   |                       |   |            |                           |  |              |           |  |                    |             |   |  |   | 13,343,631    |  
|OTHER LIABILITIES                          |  |        | 10,853,487   |   |                       |   | 24,344,618  |                           |  |              |           |  |                    |             |   |  |   | 35,198,105    |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|Total liabilities                          |  |        | (39,084,110  | ) |                       |   | 729,458,705 |                           |  |              | 53,680,710 |  |                    |             |   |  |   | 744,055,305   |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|COMMITMENTS AND CONTINGENCIES              |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|STOCKHOLDERS EQUITY:                      |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|Common stock                               |  |        | 256,076      |   |                       |   | 13,000      |                           |  |              | 1          |  |                    | (13,001      | ) |  |   | 256,076       |  
|Additional paid-in capital                 |  |        | 401,228,736  |   |                       |   | (5,000      | )                         |  |              |           |  |                    | 5,000        |   |  |   | 401,228,736   |  
|Deferred compensation                      |  |        | (4,281,670   | ) |                       |   |            |                           |  |              |           |  |                    |             |   |  |   | (4,281,670    | )
|Retained earnings                          |  |        | 203,693,824  |   |                       |   | 213,526,396 |                           |  |              | 799,505    |  |                    | (214,325,901 | ) |  |   | 203,693,824   |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|Total stockholders equity                 |  |        | 600,896,966  |   |                       |   | 213,534,396 |                           |  |              | 799,506    |  |                    | (214,333,902 | ) |  |   | 600,896,966   |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  
|Total liabilities and stockholders equity |  | $      | 561,812,856  |   |                       | $ | 942,993,101 |                           |  | $            | 54,480,216 |  | $                  | (214,333,902 | ) |  | $ | 1,344,952,271 |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |              |   |  |   |               |  



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Financial Statements

Balance Sheet

December 31, 2003



|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|------------------------------------------ |  | ------ | ------------ | - | --------------------- | - | ----------- | ------------------------- |  | ------------ | ---------- |  | ------------------ | ----------- | - |  | - | ------------- | -
|                                           |  | Parent |              |   | GuarantorSubsidiaries |   |             | Non-guarantorSubsidiaries |  | Eliminations |            |  | ConsolidatedEntity |            
|ASSETS                                     |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |            
|CURRENT ASSETS:                            |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|Cash and cash equivalents                  |  | $      | 30,656,642   |   |                       | $ | 4,430,245   |                           |  | $            | 124,432    |  | $                  |            |   |  | $ | 35,211,319    |  
|Accounts receivabletrade and other        |  |        | 16,511,955   |   |                       |   | 6,613,839   |                           |  |              | 146,037    |  |                    |            |   |  |   | 23,271,831    |  
|Inventories                                |  |        | 33,027,973   |   |                       |   | 14,472,720  |                           |  |              | 271,605    |  |                    |            |   |  |   | 47,772,298    |  
|Deferred taxes                             |  |        | 6,858,350    |   |                       |   |            |                           |  |              |           |  |                    |            |   |  |   | 6,858,350     |  
|Other current assets                       |  |        | 3,821,309    |   |                       |   | 3,272,182   |                           |  |              | 396,892    |  |                    |            |   |  |   | 7,490,383     |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|Total current assets                       |  |        | 90,876,229   |   |                       |   | 28,788,986  |                           |  |              | 938,966    |  |                    |            |   |  |   | 120,604,181   |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|PROPERTY AND EQUIPMENT, net                |  |        | 133,700,382  |   |                       |   | 804,231,979 |                           |  |              | 29,740,609 |  |                    |            |   |  |   | 967,672,970   |  
|GOODWILL                                   |  |        |             |   |                       |   | 7,527,547   |                           |  |              |           |  |                    |            |   |  |   | 7,527,547     |  
|INVESTMENT IN SUBSIDIARIES                 |  |        | 64,430,584   |   |                       |   |            |                           |  |              |           |  |                    | (64,430,584 | ) |  |   |              |  
|OTHER ASSETS, net                          |  |        | 6,573,259    |   |                       |   | 2,504,728   |                           |  |              | 800        |  |                    |            |   |  |   | 9,078,787     |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|Total assets                               |  | $      | 295,580,454  |   |                       | $ | 843,053,240 |                           |  | $            | 30,680,375 |  | $                  | (64,430,584 | ) |  | $ | 1,104,883,485 |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|LIABILITIES ANDSTOCKHOLDERS EQUITY        |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |            
|CURRENT LIABILITIES:                       |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|Accounts payable                           |  | $      | 47,201,135   |   |                       | $ | 34,971,536  |                           |  | $            | 721,377    |  | $                  |            |   |  | $ | 82,894,048    |  
|Accrued liabilities                        |  |        | 10,545,783   |   |                       |   | 62,258,649  |                           |  |              | 1,498,209  |  |                    |            |   |  |   | 74,302,641    |  
|Income taxes payable                       |  |        | 211,131      |   |                       |   |            |                           |  |              |           |  |                    |            |   |  |   | 211,131       |  
|(Receivable) Payable to affiliates         |  |        | (673,285,951 | ) |                       |   | 656,656,552 |                           |  |              | 16,629,399 |  |                    |            |   |  |   |              |  
|Current portion of long-term debt          |  |        | 1,816,285    |   |                       |   |            |                           |  |              | 146,904    |  |                    |            |   |  |   | 1,963,189     |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|Total current liabilities                  |  |        | (613,511,617 | ) |                       |   | 753,886,737 |                           |  |              | 18,995,889 |  |                    |            |   |  |   | 159,371,009   |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|LONG-TERM DEBT, NET OF CURRENT PORTION     |  |        | 288,564,146  |   |                       |   |            |                           |  |              | 11,171,760 |  |                    |            |   |  |   | 299,735,906   |  
|DEFERRED TAXES                             |  |        | 20,549,998   |   |                       |   |            |                           |  |              |           |  |                    |            |   |  |   | 20,549,998    |  
|OTHER LIABILITIES                          |  |        | 84,014       |   |                       |   | 25,248,645  |                           |  |              |           |  |                    |            |   |  |   | 25,332,659    |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|Total liabilities                          |  |        | (304,313,459 | ) |                       |   | 779,135,382 |                           |  |              | 30,167,649 |  |                    |            |   |  |   | 504,989,572   |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|COMMITMENTS AND CONTINGENCIES              |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   | 
|STOCKHOLDERS EQUITY: Common stock         |  |        | 276,539      |   |                       |   | 13,000      |                           |  |              | 1          |  |                    | (13,001     | ) |  |   | 276,539       |  
|Additional paid-in capital                 |  |        | 439,616,066  |   |                       |   | (5,000      | )                         |  |              |           |  |                    | 5,000       |   |  |   | 439,616,066   |  
|Deferred compensation                      |  |        | (1,868,750   | ) |                       |   |             |                           |  |              |           |  |                    |            |   |  |   | (1,868,750    | )
|Retained earnings                          |  |        | 161,870,058  |   |                       |   | 63,909,858  |                           |  |              | 512,725    |  |                    | (64,422,583 | ) |  |   | 161,870,058   |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|Total stockholders equity                 |  |        | 599,893,913  |   |                       |   | 63,917,858  |                           |  |              | 512,726    |  |                    | (64,430,584 | ) |  |   | 599,893,913   |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  
|Total liabilities and stockholders equity |  | $      | 295,580,454  |   |                       | $ | 843,053,240 |                           |  | $            | 30,680,375 |  | $                  | (64,430,584 | ) |  | $ | 1,104,883,485 |  
|                                           |  |        |              |   |                       |   |             |                           |  |              |            |  |                    |             |   |  |   |               |  



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Financial Statements

Income Statement

Year Ended December
31, 2004



|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|------------------------------------ |  | ------ | ----------- | - | --------------------- | - | ------------------------- |  | - | ------------ | - |  | ------------------ | ------------ | - |  | - | -------------
|                                     |  | Parent |             |   | GuarantorSubsidiaries |   | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedEntity
|REVENUES                             |  | $      | 3,548,026   |   |                       | $ | 1,143,113,243             |  | $ | 20,813,896   |   |  | $                  |             |   |  | $ | 1,167,475,165
|OPERATING COSTS AND EXPENSES:        |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|Cost of revenues                     |  |        |            |   |                       |   | 321,120,939               |  |   | 4,987,068    |   |  |                    |             |   |  |   | 326,108,007  
|Restaurant labor                     |  |        |            |   |                       |   | 331,204,729               |  |   | 6,428,801    |   |  |                    |             |   |  |   | 337,633,530  
|Other operating expenses             |  |        | 2,218,765   |   |                       |   | 272,634,068               |  |   | 7,559,121    |   |  |                    |             |   |  |   | 282,411,954  
|General and administrative expenses  |  |        | 58,319,642  |   |                       |   |                          |  |   |             |   |  |                    |             |   |  |   | 58,319,642   
|Depreciation and amortization        |  |        | 3,162,150   |   |                       |   | 53,635,891                |  |   | 496,082      |   |  |                    |             |   |  |   | 57,294,123   
|Asset impairment expense             |  |        |            |   |                       |   | 1,708,654                 |  |   |             |   |  |                    |             |   |  |   | 1,708,654    
|Restaurant pre-opening expenses      |  |        |            |   |                       |   | 5,203,518                 |  |   |             |   |  |                    |             |   |  |   | 5,203,518    
|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|Total operating costs and expenses   |  |        | 63,700,557  |   |                       |   | 985,507,799               |  |   | 19,471,072   |   |  |                    |             |   |  |   | 1,068,679,428
|OPERATING INCOME                     |  |        | (60,152,531 | ) |                       |   | 157,605,444               |  |   | 1,342,824    |   |  |                    |             |   |  |   | 98,795,737   
|OTHER EXPENSES (INCOME):             |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|Interest expense, net                |  |        | 14,144,556  |   |                       |   |                          |  |   | 1,041,049    |   |  |                    |             |   |  |   | 15,185,605   
|Other, net                           |  |        | 13,527,432  |   |                       |   | 16,480                    |  |   | (286         | ) |  |                    |             |   |  |   | 13,543,626   
|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|                                     |  |        | 27,671,988  |   |                       |   | 16,480                    |  |   | 1,040,763    |   |  |                    |             |   |  |   | 28,729,231   
|INCOME (LOSS) BEFORE INCOME TAXES    |  |        | (87,824,519 | ) |                       |   | 157,588,964               |  |   | 302,061      |   |  |                    |             |   |  |   | 70,066,506   
|PROVISION (BENEFIT) FOR INCOME TAXES |  |        | (4,442,929  | ) |                       |   | 7,972,426                 |  |   | 15,281       |   |  |                    |             |   |  |   | 3,544,778    
|EQUITY IN EARNINGS OF SUBSIDIARIES   |  |        | 149,903,318 |   |                       |   |                          |  |   |             |   |  |                    | (149,903,318 | ) |  |   |             
|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|NET INCOME                           |  | $      | 66,521,728  |   |                       | $ | 149,616,538               |  | $ | 286,780      |   |  | $                  | (149,903,318 | ) |  | $ | 66,521,728   
|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Financial Statements

Income Statement

Year Ended December
31, 2003



|                                     |  |        |             |   |                       |   |               |                           |  |              |            |  |                    |             |   |  |   |              
|------------------------------------ |  | ------ | ----------- | - | --------------------- | - | ------------- | ------------------------- |  | ------------ | ---------- |  | ------------------ | ----------- | - |  | - | -------------
|                                     |  | Parent |             |   | GuarantorSubsidiaries |   |               | Non-guarantorSubsidiaries |  | Eliminations |            |  | ConsolidatedEntity
|REVENUES                             |  | $      | 2,020,909   |   |                       | $ | 1,081,136,281 |                           |  | $            | 22,597,867 |  | $                  |            |   |  | $ | 1,105,755,057
|OPERATING COSTS AND EXPENSES:        |  |        |             |   |                       |   |               |                           |  |              |            |  |                    |             |   |  |   |              
|Cost of revenues                     |  |        |            |   |                       |   | 316,138,033   |                           |  |              | 5,645,344  |  |                    |            |   |  |   | 321,783,377  
|Restaurant labor                     |  |        |            |   |                       |   | 316,564,648   |                           |  |              | 6,719,751  |  |                    |            |   |  |   | 323,284,399  
|Other operating expenses             |  |        | (132,347    | ) |                       |   | 263,645,309   |                           |  |              | 7,757,908  |  |                    |            |   |  |   | 271,270,870  
|General and administrative expenses  |  |        | 51,704,100  |   |                       |   |              |                           |  |              |           |  |                    |            |   |  |   | 51,704,100   
|Depreciation and amortization        |  |        | 3,485,665   |   |                       |   | 44,630,494    |                           |  |              | 975,307    |  |                    |            |   |  |   | 49,091,466   
|Asset impairment expense             |  |        |            |   |                       |   | 13,144,365    |                           |  |              |           |  |                    |            |   |  |   | 13,144,365   
|Restaurant pre-opening expenses      |  |        |            |   |                       |   | 8,650,178     |                           |  |              |           |  |                    |            |   |  |   | 8,650,178    
|                                     |  |        |             |   |                       |   |               |                           |  |              |            |  |                    |             |   |  |   |              
|Total operating costs and expenses   |  |        | 55,057,418  |   |                       |   | 962,773,027   |                           |  |              | 21,098,310 |  |                    |            |   |  |   | 1,038,928,755
|OPERATING INCOME                     |  |        | (53,036,509 | ) |                       |   | 118,363,254   |                           |  |              | 1,499,557  |  |                    |            |   |  |   | 66,826,302   
|OTHER EXPENSES (INCOME):             |  |        |             |   |                       |   |               |                           |  |              |            |  |                    |             |   |  |   |              
|Interest expense, net                |  |        | 8,693,222   |   |                       |   | (756          | )                         |  |              | 869,016    |  |                    |            |   |  |   | 9,561,482    
|Other, net                           |  |        | 1,328,757   |   |                       |   | 128,755       |                           |  |              | 4,938      |  |                    |            |   |  |   | 1,462,450    
|                                     |  |        |             |   |                       |   |               |                           |  |              |            |  |                    |             |   |  |   |              
|                                     |  |        | 10,021,979  |   |                       |   | 127,999       |                           |  |              | 873,954    |  |                    |            |   |  |   | 11,023,932   
|INCOME (LOSS) BEFORE INCOME TAXES    |  |        | (63,058,488 | ) |                       |   | 118,235,255   |                           |  |              | 625,603    |  |                    |            |   |  |   | 55,802,370   
|PROVISION (BENEFIT) FOR INCOME TAXES |  |        | (12,289,351 | ) |                       |   | 23,055,875    |                           |  |              | 121,993    |  |                    |            |   |  |   | 10,888,517   
|EQUITY IN EARNINGS OF SUBSIDIARIES   |  |        | 95,682,990  |   |                       |   |              |                           |  |              |           |  |                    | (95,682,990 | ) |  |   |             
|                                     |  |        |             |   |                       |   |               |                           |  |              |            |  |                    |             |   |  |   |              
|NET INCOME                           |  | $      | 44,913,853  |   |                       | $ | 95,179,380    |                           |  | $            | 503,610    |  | $                  | (95,682,990 | ) |  | $ | 44,913,853   
|                                     |  |        |             |   |                       |   |               |                           |  |              |            |  |                    |             |   |  |   |              



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Financial Statements

Income Statement

Year Ended December
31, 2002



|                                     |  |        |             |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |             |  
|------------------------------------ |  | ------ | ----------- | - | --------------------- | - | ----------- | ------------------------- |  | - | ------------ | - |  | ------------------ | ----------- | - |  | - | ----------- | -
|                                     |  | Parent |             |   | GuarantorSubsidiaries |   |             | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedEntity |            
|REVENUES                             |  | $      | 2,184,604   |   |                       | $ | 880,577,946 |                           |  | $ | 12,032,071   |   |  | $                  |            |   |  | $ | 894,794,621 |  
|OPERATING COSTS AND EXPENSES:        |  |        |             |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |             |  
|Cost of revenues                     |  |        |            |   |                       |   | 254,349,573 |                           |  |   | 3,595,168    |   |  |                    |            |   |  |   | 257,944,741 |  
|Restaurant labor                     |  |        |            |   |                       |   | 255,462,187 |                           |  |   | 3,735,777    |   |  |                    |            |   |  |   | 259,197,964 |  
|Other operating expenses             |  |        |            |   |                       |   | 220,407,637 |                           |  |   | 3,713,881    |   |  |                    |            |   |  |   | 224,121,518 |  
|General and administrative expenses  |  |        | 43,383,799  |   |                       |   |            |                           |  |   |             |   |  |                    |            |   |  |   | 43,383,799  |  
|Depreciation and amortization        |  |        | 3,074,930   |   |                       |   | 37,519,567  |                           |  |   | 135,213      |   |  |                    |            |   |  |   | 40,729,710  |  
|Asset impairment expense             |  |        |            |   |                       |   | 2,200,000   |                           |  |   |             |   |  |                    |            |   |  |   | 2,200,000   |  
|Restaurant pre-opening expenses      |  |        |            |   |                       |   | 4,590,972   |                           |  |   |             |   |  |                    |            |   |  |   | 4,590,972   |  
|                                     |  |        |             |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |             |  
|Total operating costs and expenses   |  |        | 46,458,729  |   |                       |   | 774,529,936 |                           |  |   | 11,180,039   |   |  |                    |            |   |  |   | 832,168,704 |  
|OPERATING INCOME                     |  |        | (44,274,125 | ) |                       |   | 106,048,010 |                           |  |   | 852,032      |   |  |                    |            |   |  |   | 62,625,917  |  
|OTHER EXPENSES (INCOME):             |  |        |             |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |             |  
|Interest expense, net                |  |        | 4,997,868   |   |                       |   | (846        | )                         |  |   |             |   |  |                    |            |   |  |   | 4,997,022   |  
|Other, net                           |  |        | (885,712    | ) |                       |   | (270        | )                         |  |   | (675         | ) |  |                    |            |   |  |   | (886,657    | )
|                                     |  |        |             |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |             |  
|                                     |  |        | 4,112,156   |   |                       |   | (1,116      | )                         |  |   | (675         | ) |  |                    |            |   |  |   | 4,110,365   |  
|INCOME (LOSS) BEFORE INCOME TAXES    |  |        | (48,386,281 | ) |                       |   | 106,049,126 |                           |  |   | 852,707      |   |  |                    |            |   |  |   | 58,515,552  |  
|PROVISION (BENEFIT) FOR INCOME TAXES |  |        | (15,114,833 | ) |                       |   | 32,875,229  |                           |  |   | 264,339      |   |  |                    |            |   |  |   | 18,024,735  |  
|EQUITY IN EARNINGS OF SUBSIDIARIES   |  |        | 73,762,265  |   |                       |   |            |                           |  |   |             |   |  |                    | (73,762,265 | ) |  |   |            |  
|                                     |  |        |             |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |             |  
|NET INCOME                           |  | $      | 40,490,817  |   |                       | $ | 73,173,897  |                           |  | $ | 588,368      |   |  | $                  | (73,762,265 | ) |  | $ | 40,490,817  |  
|                                     |  |        |             |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |             |  



73



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Financial Statements

Statement of Cash Flows

Year Ended
December 31, 2004



|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|---------------------------------------------------- |  | ------ | ------------ | - | --------------------- | - | ------------ | ------------------------- |  | - | ------------ | - |  | ------------------ | ------------ | - |  | - | ------------ | -
|                                                     |  | Parent |              |   | GuarantorSubsidiaries |   |              | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedEntity |             
|CASH FLOWS FROM OPERATING ACTIVITIES:                |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Net income                                           |  | $      | 66,521,728   |   |                       | $ | 149,616,538  |                           |  | $ | 286,780      |   |  | $                  | (149,903,318 | ) |  | $ | 66,521,728   |  
|Adjustments to reconcile net income to net cash      |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Depreciation and amortization                        |  |        | 3,162,151    |   |                       |   | 53,635,890   |                           |  |   | 496,082      |   |  |                    |             |   |  |   | 57,294,123   |  
|Asset impairment expense                             |  |        |             |   |                       |   | 1,708,654    |                           |  |   |             |   |  |                    |             |   |  |   | 1,708,654    |  
|Deferred provision (benefit)                         |  |        | (3,937,176   | ) |                       |   |             |                           |  |   |             |   |  |                    |             |   |  |   | (3,937,176   | )
|Deferred rent and other charges (income), net        |  |        | 1,540,225    |   |                       |   | 1,611,326    |                           |  |   |             |   |  |                    |             |   |  |   | 3,151,551    |  
|Financing prepayment expenses                        |  |        | 16,649,009   |   |                       |   |             |                           |  |   |             |   |  |                    |             |   |  |   | 16,649,009   |  
|Change in assets and liabilities, net and other      |  |        | (137,439,971 | ) |                       |   | (65,754,095  | )                         |  |   | 23,515,741   |   |  |                    | 149,903,318  |   |  |   | (29,775,007  | )
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Total adjustments                                    |  |        | (120,025,762 | ) |                       |   | (8,798,225   | )                         |  |   | 24,011,823   |   |  |                    | 149,903,318  |   |  |   | 45,091,154   |  
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Net cash provided (used) by operating activities     |  |        | (53,504,034  | ) |                       |   | 140,818,313  |                           |  |   | 24,298,603   |   |  |                    |             |   |  |   | 111,612,882  |  
|                                                     |  |        |              |   |                      
|CASH FLOWS FROM INVESTING ACTIVITIES:                |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Property and equipment additions and/or transfers    |  |        | 52,291,808   |   |                       |   | (141,495,080 | )                         |  |   | (21,467,099  | ) |  |                    |             |   |  |   | (110,670,371 | )
|Proceeds from sale of property and equipment         |  |        | 3,925,733    |   |                       |   | 2,170,000    |                           |  |   |             |   |  |                    |             |   |  |   | 6,095,733    |  
|Business acquisitions, net of cash acquired          |  |        | (12,930,565  | ) |                       |   |             |                           |  |   |             |   |  |                    |             |   |  |   | (12,930,565  | )
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Net cash provided (used) in investing activities     |  |        | 43,286,976   |   |                       |   | (139,325,080 | )                         |  |   | (21,467,099  | ) |  |                    |             |   |  |   | (117,505,203 | )
|                                                     |  |        |              |   |                      
|CASH FLOWS FROM FINANCING ACTIVITIES:                |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Purchase of common stock for treasury                |  |        | (62,780,817  | ) |                       |   |             |                           |  |   |             |   |  |                    |             |   |  |   | (62,780,817  | )
|Proceeds from exercise of stock options              |  |        | 1,349,771    |   |                       |   |             |                           |  |   |             |   |  |                    |             |   |  |   | 1,349,771    |  
|Payments of debt and related expenses, net           |  |        | (176,149,022 | ) |                       |   |             |                           |  |   | (164,683     | ) |  |                    |             |   |  |   | (176,313,705 | )
|Proceeds (payments) on credit facility, net          |  |        | (122,000,000 | ) |                       |   |             |                           |  |   |             |   |  |                    |             |   |  |   | (122,000,000 | )
|Financing proceeds, net                              |  |        | 536,603,189  |   |                       |   |             |                           |  |   |             |   |  |                    |             |   |  |   | 536,603,189  |  
|Dividends paid                                       |  |        | (4,783,404   | ) |                       |   |             |                           |  |   |             |   |  |                    |             |   |  |   | (4,783,404   | )
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Net cash provided (used) in financing activities     |  |        | 172,239,717  |   |                       |   |             |                           |  |   | (164,683     | ) |  |                    |             |   |  |   | 172,075,034  |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |  |        | 162,022,659  |   |                       |   | 1,493,233    |                           |  |   | 2,666,821    |   |  |                    |             |   |  |   | 166,182,713  |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR       |  |        | 30,656,642   |   |                       |   | 4,430,245    |                           |  |   | 124,432      |   |  |                    |             |   |  |   | 35,211,319   |  
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR             |  | $      | 192,679,301  |   |                       | $ | 5,923,478    |                           |  | $ | 2,791,253    |   |  | $                  |             |   |  | $ | 201,394,032  |  
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  



74



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Financial Statements

Statement of Cash Flows

Year Ended
December 31, 2003



|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|---------------------------------------------------- |  | ------ | ------------ | - | --------------------- | - | ------------ | ------------------------- |  | - | ------------ | - |  | ------------------ | ----------- | - |  | - | ------------ | -
|                                                     |  | Parent |              |   | GuarantorSubsidiaries |   |              | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedEntity |            
|CASH FLOWS FROM OPERATING ACTIVITIES:                |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Net income                                           |  | $      | 44,913,853   |   |                       | $ | 95,179,380   |                           |  | $ | 503,610      |   |  | $                  | (95,682,990 | ) |  | $ | 44,913,853   |  
|Adjustments to reconcile net income to net cash      |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Depreciation and amortization                        |  |        | 3,485,665    |   |                       |   | 44,630,494   |                           |  |   | 975,307      |   |  |                    |            |   |  |   | 49,091,466   |  
|Asset impairment expense                             |  |        |             |   |                       |   | 13,144,365   |                           |  |   |             |   |  |                    |            |   |  |   | 13,144,365   |  
|Deferred provision (benefit)                         |  |        | 10,621,027   |   |                       |   |             |                           |  |   |             |   |  |                    |            |   |  |   | 10,621,027   |  
|Deferred rent and other charges (income), net        |  |        | 1,776,991    |   |                       |   | (789,343     | )                         |  |   |             |   |  |                    |            |   |  |   | 987,648      |  
|Change in assets and liabilities, net and other      |  |        | (121,070,081 | ) |                       |   | 19,725,523   |                           |  |   | 10,838,779   |   |  |                    | 95,682,990  |   |  |   | 5,177,211    |  
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Total adjustments                                    |  |        | (105,186,398 | ) |                       |   | 76,711,039   |                           |  |   | 11,814,086   |   |  |                    | 95,682,990  |   |  |   | 79,021,717   |  
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Net cash provided (used) by operating activities     |  |        | (60,272,545  | ) |                       |   | 171,890,419  |                           |  |   | 12,317,696   |   |  |                    |            |   |  |   | 123,935,570  |  
|                                                     |  |        |              |   |                      
|CASH FLOWS FROM INVESTING ACTIVITIES:                |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Property and equipment additionsand/or transfers     |  |        | 15,641,256   |   |                       |   | (166,818,219 | )                         |  |   | (12,199,659  | ) |  |                    |            |   |  |   | (163,376,622 | )
|Proceeds from sale of property and equipment         |  |        |             |   |                       |   |             |                           |  |   |             |   |  |                    |            |   |  |   |             |  
|Business acquisitions, net of cash acquired          |  |        | (27,035,893  | ) |                       |   |             |                           |  |   |             |   |  |                    |            |   |  |   | (27,035,893  | )
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Net cash provided (used) in investing activities     |  |        | (11,394,637  | ) |                       |   | (166,818,219 | )                         |  |   | (12,199,659  | ) |  |                    |            |   |  |   | (190,412,515 | )
|                                                     |  |        |              |   |                      
|CASH FLOWS FROM FINANCING ACTIVITIES:                |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Purchase of common stock for treasury                |  |        | (8,417,411   | ) |                       |   |             |                           |  |   |             |   |  |                    |            |   |  |   | (8,417,411   | )
|Proceeds from exercise of stock options              |  |        | 1,826,816    |   |                       |   |             |                           |  |   |             |   |  |                    |            |   |  |   | 1,826,816    |  
|Payment of debt and related expenses, net            |  |        | (1,806,595   | ) |                       |   |             |                           |  |   | (99,908      | ) |  |                    |            |   |  |   | (1,906,503   | )
|Proceeds (payments) on credit facility, net          |  |        | (49,000,000  | ) |                       |   |             |                           |  |   |             |   |  |                    |            |   |  |   | (49,000,000  | )
|Financing proceeds, net                              |  |        | 148,076,160  |   |                       |   |             |                           |  |   |             |   |  |                    |            |   |  |   | 148,076,160  |  
|Dividends paid                                       |  |        | (2,768,997   | ) |                       |   |             |                           |  |   |             |   |  |                    |            |   |  |   | (2,768,997   | )
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Net cash provided (used) in financing activities     |  |        | 87,909,973   |   |                       |   |             |                           |  |   | (99,908      | ) |  |                    |            |   |  |   | 87,810,065   |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |  |        | 16,242,791   |   |                       |   | 5,072,200    |                           |  |   | 18,129       |   |  |                    |            |   |  |   | 21,333,120   |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR       |  |        | 14,413,851   |   |                       |   | (641,955     | )                         |  |   | 106,303      |   |  |                    |            |   |  |   | 13,878,199   |  
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR             |  | $      | 30,656,642   |   |                       | $ | 4,430,245    |                           |  | $ | 124,432      |   |  | $                  |            |   |  | $ | 35,211,319   |  
|                                                     |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  



75



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Financial Statements

Statement of Cash Flows

Year Ended
December 31, 2002



|                                                     |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|---------------------------------------------------- |  | ------ | ------------ | - | --------------------- | - | ----------- | ------------------------- |  | - | ------------ | - |  | ------------------ | ----------- | - |  | - | ------------ | -
|                                                     |  | Parent |              |   | GuarantorSubsidiaries |   |             | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedEntity |            
|CASH FLOWS FROM OPERATING ACTIVITIES:                |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Net income                                           |  | $      | 40,490,817   |   |                       | $ | 73,173,897  |                           |  | $ | 588,368      |   |  | $                  | (73,762,265 | ) |  | $ | 40,490,817   |  
|Adjustments to reconcile net income to net cash      |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Depreciation and amortization                        |  |        | 3,074,930    |   |                       |   | 37,519,567  |                           |  |   | 135,213      |   |  |                    |            |   |  |   | 40,729,710   |  
|Asset impairment expense                             |  |        |             |   |                       |   | 2,200,000   |                           |  |   |             |   |  |                    |            |   |  |   | 2,200,000    |  
|Deferred provision (benefit)                         |  |        | 6,177,682    |   |                       |   |            |                           |  |   |             |   |  |                    |            |   |  |   | 6,177,682    |  
|Deferred rent and other charges (income), net        |  |        | 2,177,028    |   |                       |   | (677,819    | )                         |  |   |             |   |  |                    |            |   |  |   | 1,499,209    |  
|Change in assets and liabilities, net and other      |  |        | 21,613,158   |   |                       |   | (73,097,965 | )                         |  |   | (590,449     | ) |  |                    | 73,762,265  |   |  |   | 21,687,009   |  
|                                                     |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Total adjustments                                    |  |        | 33,042,798   |   |                       |   | (34,056,217 | )                         |  |   | (455,236     | ) |  |                    | 73,762,265  |   |  |   | 72,293,610   |  
|                                                     |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Net cash provided (used) by operating activities     |  |        | 73,533,615   |   |                       |   | 39,117,680  |                           |  |   | 133,132      |   |  |                    |            |   |  |   | 112,784,427  |  
|                                                     |  |        |              |   |                      
|CASH FLOWS FROM INVESTING ACTIVITIES:                |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Property and equipment additionsand/or transfers     |  |        | (74,632,102  | ) |                       |   | (41,291,327 | )                         |  |   | (179,339     | ) |  |                    |            |   |  |   | (116,102,768 | )
|Proceeds from sale of property and equipment         |  |        | 2,097,870    |   |                       |   |            |                           |  |   |             |   |  |                    |            |   |  |   | 2,097,870    |  
|Business acquisitions, net of cash acquired          |  |        | (161,108,095 | ) |                       |   |            |                           |  |   |             |   |  |                    |            |   |  |   | (161,108,095 | )
|                                                     |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Net cash provided (used) in investing activities     |  |        | (233,642,327 | ) |                       |   | (41,291,327 | )                         |  |   | (179,339     | ) |  |                    |            |   |  |   | (275,112,993 | )
|                                                     |  |        |              |   |                      
|CASH FLOWS FROM FINANCING ACTIVITIES:                |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Proceeds from sale of common stock                   |  |        | 132,577,316  |   |                       |   |            |                           |  |   |             |   |  |                    |            |   |  |   | 132,577,316  |  
|Purchase of common stock for treasury                |  |        | (6,734,237   | ) |                       |   |            |                           |  |   |             |   |  |                    |            |   |  |   | (6,734,237   | )
|Proceeds from exercise of stock options              |  |        | 7,134,631    |   |                       |   |            |                           |  |   |             |   |  |                    |            |   |  |   | 7,134,631    |  
|Payments of debt and related expenses, net           |  |        | (404,114     | ) |                       |   |            |                           |  |   |             |   |  |                    |            |   |  |   | (404,114     | )
|Proceeds (payments) on credit facility, net          |  |        | 15,052,548   |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   | 15,052,548   |  
|Dividends paid                                       |  |        | (2,500,387   | ) |                       |   |            |                           |  |   |             |   |  |                    |            |   |  |   | (2,500,387   | )
|                                                     |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Net cash provided (used) in financing activities     |  |        | 145,125,757  |   |                       |   |            |                           |  |   |             |   |  |                    |            |   |  |   | 145,125,757  |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |  |        | (14,982,955  | ) |                       |   | (2,173,647  | )                         |  |   | (46,207      | ) |  |                    |            |   |  |   | (17,202,809  | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR       |  |        | 29,396,806   |   |                       |   | 1,531,692   |                           |  |   | 152,510      |   |  |                    |            |   |  |   | 31,081,008   |  
|                                                     |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR             |  | $      | 14,413,851   |   |                       | $ | (641,955    | )                         |  | $ | 106,303      |   |  | $                  |            |   |  | $ | 13,878,199   |  
|                                                     |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |             |   |  |   |              |  



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



11.  CERTAIN TRANSACTIONS



In 1996, the Company entered into a Consulting Service Agreement (the Agreement) with Fertitta Hospitality, LLC
(Fertitta Hospitality), which is jointly owned by the Chairman and Chief Executive Officer of the Company and his wife. Pursuant to the Agreement, the Company provided to Fertitta Hospitality management and administrative services. Under
the Agreement, the Company received a fee of $2,500 per month plus the reimbursement of all out-of-pocket expenses and such additional compensation as agreed upon. In 2003, a new agreement was signed (Management Agreement). Pursuant to
the Management Agreement, the Company receives a monthly fee of $7,500 plus reimbursement of expenses. The Management Agreement provides for a renewable three-year term.



In 1999, the Company entered into a ground lease with 610 Loop Venture, LLC, a company wholly owned by the Chairman and
Chief Executive Officer of the Company, on land owned by the Company adjacent to the Companys corporate headquarters. Under the terms of the ground lease, 610 Loop Venture pays the Company base rent of $12,000 per month plus pro-rata real
property taxes and insurance. 610 Loop Venture also has the option to purchase certain property based upon a contractual agreement. In 2004, the ground lease was extended for a 5 year term.



In 2002, the Company entered into an $8,000 per month, 20 year, with option
renewals, ground lease agreement with Fertitta Hospitality for a new Rainforest Cafe on prime waterfront land in Galveston, Texas. The annual rent is equal to the greater of the base rent or percentage rent up to six percent, plus taxes and
insurance. In 2004 and 2003, the Company paid base and percentage rent aggregating $514,000 and $602,000, respectively.



As permitted by the employment contract between the Company and the Chief Executive Officer, charitable contributions were made by the Company to a
charitable Foundation that the Chief Executive Officer served as Trustee in the amount of $146,000, $170,000 and $198,000 in 2004, 2003 and 2002, respectively. The contribution was made in addition to the normal salary and bonus permitted under the
employment contract.



The Company, on a routine basis, holds or
hosts promotional events, training seminars and conferences for its personnel. In connection therewith, the Company incurred in 2004, 2003 and 2002 expenses in the amount of $68,000, $138,000 and $230,000, respectively, at resort hotel properties
owned by the Companys Chief Executive Officer and managed by the Company.



The Company and Fertitta Hospitality jointly sponsored events and promotional activities in 2004, 2003 and 2002 which resulted in shared costs and use of Company personnel or Fertitta Hospitality employees and assets.



The foregoing agreements were entered into between related
parties and were not the result of arms-length negotiations. Accordingly, the terms of the transactions may have been more or less favorable to the Company than might have been obtained from unaffiliated third parties.



12.  SUBSEQUENT EVENT



On February 4, 2005, the Company entered into an agreement to acquire the
assets of the Golden Nugget Hotel and Casino in downtown Las Vegas, Nevada from Poster Financial Group. The purchase price of the acquisition, was $140 million in cash and the assumption of $155 million of Senior Secured Notes due 2011 and certain
working capital liabilities to be calculated at closing. In connection with the acquisition, the Company deposited $25 million in escrow which may be forfeited if the Company fails to consummate the transaction. The agreement is subject to various
contingencies, including the approval of Nevada Gaming authorities, which could take up to a year to obtain.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



13.  QUARTERLY FINANCIAL DATA (UNAUDITED)



The following is a summary of unaudited quarterly consolidated results of
operations (in thousands, except per share data) including the effects of the restatement discussed in Note 2. The Company will revise its reported quarterly results in prospective filings as Form 10-Q as applicable.





|                   |  |          |         |                 |   |                        |  |   |           |   |                           |   |                             |  |   |      |  |   |     
|------------------ |  | -------- | ------- | --------------- | - | ---------------------- |  | - | --------- | - | ------------------------- | - | --------------------------- |  | - | ---- |  | - | ----
|                   |  | Revenues |         | Cost ofRevenues |   | OperatingIncome/(Loss) |  |   | NetIncome |   | Earnings PerShare (basic) |   | Earnings PerShare (diluted)
|Quarter Ended:     |  |          |         |                 |   |                        |  |   |           |   |                           |   |                             |  |   |      |  |   |     
|March 31, 2004     |  |          |         |                 |   |                        |  |   |           |   |                           |   |                             |  |   |      |  |   |     
|As Reported        |  | $        | 275,676 |                 | $ | 77,720                 |  | $ | 19,704    |   |                           | $ | 11,363                      |  | $ | 0.41 |  | $ | 0.40
|Restated           |  | $        | 275,676 |                 | $ | 77,720                 |  | $ | 19,326    |   |                           | $ | 11,102                      |  | $ | 0.40 |  | $ | 0.39
|June 30, 2004      |  |          |         |                 |   |                        |  |   |           |   |                           |   |                             |  |   |      |  |   |     
|As Reported        |  | $        | 317,616 |                 | $ | 89,109                 |  | $ | 34,401    |   |                           | $ | 21,799                      |  | $ | 0.79 |  | $ | 0.77
|Restated           |  | $        | 317,616 |                 | $ | 89,109                 |  | $ | 34,108    |   |                           | $ | 21,596                      |  | $ | 0.78 |  | $ | 0.76
|September 30, 2004 |  |          |         |                 |   |                        |  |   |           |   |                           |   |                             |  |   |      |  |   |     
|As Reported        |  | $        | 314,378 |                 | $ | 86,747                 |  | $ | 33,030    |   |                           | $ | 21,016                      |  | $ | 0.77 |  | $ | 0.75
|Restated           |  | $        | 314,378 |                 | $ | 86,747                 |  | $ | 32,686    |   |                           | $ | 20,782                      |  | $ | 0.76 |  | $ | 0.74
|December 31, 2004  |  |          |         |                 |   |                        |  |   |           |   |                           |   |                             |  |   |      |  |   |     
|As Reported        |  | $        | 259,805 |                 | $ | 72,533                 |  | $ | 12,676    |   |                           | $ | 13,042                      |  | $ | 0.51 |  | $ | 0.49
|March 31, 2003     |  |          |         |                 |   |                        |  |   |           |   |                           |   |                             |  |   |      |  |   |     
|As Reported        |  | $        | 249,582 |                 | $ | 73,322                 |  | $ | 13,979    |   |                           | $ | 8,121                       |  | $ | 0.29 |  | $ | 0.29
|Restated           |  | $        | 249,582 |                 | $ | 73,322                 |  | $ | 13,520    |   |                           | $ | 7,804                       |  | $ | 0.28 |  | $ | 0.28
|June 30, 2003      |  |          |         |                 |   |                        |  |   |           |   |                           |   |                             |  |   |      |  |   |     
|As Reported        |  | $        | 299,890 |                 | $ | 87,447                 |  | $ | 27,150    |   |                           | $ | 16,906                      |  | $ | 0.61 |  | $ | 0.60
|Restated           |  | $        | 299,890 |                 | $ | 87,447                 |  | $ | 26,763    |   |                           | $ | 16,639                      |  | $ | 0.60 |  | $ | 0.59
|September 30, 2003 |  |          |         |                 |   |                        |  |   |           |   |                           |   |                             |  |   |      |  |   |     
|As Reported        |  | $        | 302,162 |                 | $ | 88,168                 |  | $ | 29,546    |   |                           | $ | 18,382                      |  | $ | 0.67 |  | $ | 0.65
|Restated           |  | $        | 302,162 |                 | $ | 88,168                 |  | $ | 29,156    |   |                           | $ | 18,113                      |  | $ | 0.66 |  | $ | 0.64
|December 31, 2003  |  |          |         |                 |   |                        |  |   |           |   |                           |   |                             |  |   |      |  |   |     
|As Reported        |  | $        | 254,121 |                 | $ | 72,846                 |  | $ | (2,258    | ) |                           | $ | 2,492                       |  | $ | 0.09 |  | $ | 0.09
|Restated           |  | $        | 254,121 |                 | $ | 72,846                 |  | $ | (2,612    | ) |                           | $ | 2,359                       |  | $ | 0.09 |  | $ | 0.08



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LANDRYS RESTAURANTS, INC.



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 hereunto duly authorized in the City of Houston, State of Texas, on the 16th day of March, 2005.



LANDRYS RESTAURANTS, INC./s/    Tilman J. FertittaTilman J. Fertitta Chairman of the
Board, President and Chief Executive Officer




Each person
whose signature appears below constitutes and appoints Tilman J. Fertitta, Rick Liem and Steven L. Scheinthal, 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 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 on behalf of the registrants and in the capacities and on the dates
indicated.



|                                                |  |                                                                                         |  |               
|----------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | --------------
|Name                                            |  | Title                                                                                   |  | Date          
|                                                |  |                                                                                        
|/s/    Tilman J. FertittaTilman J. Fertitta     |  | Chairman, President, Chief Executive Officer and Director (Principal Executive Officer) |  | March 16, 2005
|                                                |  |                                                                                        
|/s/    Rick LiemRick Liem                       |  | Senior Vice President, Chief Financial Officer (Principal Financial Officer)            |  | March 16, 2005
|                                                |  |                                                                                        
|/s/    Steven L. ScheinthalSteven L. Scheinthal |  | Executive Vice President, Secretary, General Counsel and Director                       |  | March 16, 2005
|                                                |  |                                                                                        
|/s/    Michael S. ChadwickMichael S. Chadwick   |  | Director                                                                                |  | March 16, 2005
|                                                |  |                                                                                        
|/s/    Michael RichmondMichael Richmond         |  | Director                                                                                |  | March 16, 2005
|                                                |  |                                                                                        
|/s/    Joe Max TaylorJoe Max Taylor             |  | Director                                                                                |  | March 16, 2005
|                                                |  |                                                                                        
|/s/    Kenneth BrimmerKenneth Brimmer           |  | Director                                                                                |  | March 16, 2005



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|            |  |                                                                                                                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                                                                           
|            | 
|*2.1        |  | Stock Purchase Agreement dated February 3, 2005 between Landrys Restaurants, Inc. and Poster Financial Group, Inc. regarding the acquisition of Golden Nugget Casino.                                                                                                            
|            | 
|3.1         |  | Certificate of Incorporation of Landrys Seafood Restaurants, Inc., as amended (incorporated by reference to Exhibit 3.1 of the Companys Registration Statement of Form S-1, filed
on July 2, 1993, File No. 33-65498).                                                          
|            | 
|3.2         |  | Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Companys Registration Statement of Form S-1, filed on July 2, 1993, File No.
33-65498).                                                                                               
|            | 
|*3.3        |  | Certificate of Amendment to Certificate of Incorporation                                                                                                                                                                                                                          
|            | 
|3.4         |  | Bylaws of Landrys Restaurants, Inc. (incorporated by reference to Exhibit 3.2 of the Companys Registration Statement of Form S-1, filed on July 2, 1993, File No.
33-65498).                                                                                                    
|            | 
|3.5         |  | Amendment to Bylaws (incorporated by reference to Exhibit 3.1 of the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2004, File No. 001-15531).                                                                                                             
|            | 
|10.1        |  | 1993 Stock Option Plan (Plan) (incorporated by reference to Exhibit 10.60 of the Companys Registration Statement of Form S-1, filed on July 2, 1993, File No.
33-65498).                                                                                                       
|            | 
|10.2        |  | Form of Incentive Stock Option Agreement under the Plan (incorporated by reference to Exhibit 10.61 of the Companys Registration Statement of Form S-1, filed on July 2, 1993, File No.
33-65498).                                                                               
|            | 
|10.3        |  | Form of Non-Qualified Stock Option Agreement under the Plan (incorporated by reference to Exhibit 10.62 of the Companys Registration Statement of Form S-1, filed on July 2, 1993,
File No. 33-65498).                                                                           
|            | 
|10.4        |  | Non-Qualified Formula Stock Option Plan for Non-Employee Directors (Directors Plan) (incorporated by reference to Exhibit 10.63 of the Companys Registration Statement
of Form S-1, filed on July 2, 1993, File No. 33-65498).                                                
|            | 
|10.5        |  | First Amendment to Non-Qualified Formula Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit C of the Companys Proxy Statement, filed on May 8, 1995, File
No. 000-22150).                                                                        
|            | 
|10.6        |  | Form of Stock Option Agreement for Directors Plan (incorporated by reference to Exhibit 10.64 of the Companys Registration Statement of Form S-1, filed on July 2, 1993, File No.
33-65498).                                                                                    
|            | 
|10.7        |  | 1995 Flexible Incentive Plan (incorporated by reference to Exhibit B of the Companys Proxy Statement, filed May 8, 1995, File No. 000-22150).                                                                                                                                    
|            | 
|10.8        |  | 2003 Equity Incentive Plan (incorporated by reference to Exhibit 10.9 of the Companys Form 10-K for the year ended December 31, 2003, filed March 9, 2004, File No.
001-15531).                                                                                                  
|            | 
|10.9        |  | Form of Stock Option Agreement between Landrys Seafood Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.11 of the Companys Form 10-K for the year
ended December 31, 1995, File No. 000-22150).                                                
|            | 
|*10.10      |  | Purchase Agreement dated December 15, 2004 between the Company and the initial purchasers.                                                                                                                                                                                        
|            | 
|10.11       |  | Indenture Agreement dated as of December 28, 2004 by and among the Company, the Guarantors and Wachovia Securities, National Association (incorporated by reference to Exhibit 10.1 of the
Companys Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).    
|            | 
|10.12       |  | Registration Rights Agreement date as of December 28, 2004 by and among the Company, the Guarantors and the initial purchasers party thereto (incorporated by reference to Exhibit 10.2 of the
Companys Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).



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|            |  |                                                                                                                                                                                                                                                                                                       
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                                                                                               
|            | 
|10.13       |  | Credit Agreement dated as of December 28, 2004 by and among the Company, Wachovia Bank, National Association, and the other financial institutions party thereto (incorporated by reference to
Exhibit 10.3 of the Companys Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).
|            | 
|10.14       |  | Security Agreement dated as of December 28, 2004 by and among the Company, the additional grantors named therein and Wachovia Bank, National Association (incorporated by reference to Exhibit
10.4 of the Companys Current Report on Form 8-K, filed December 28, 2004, File No. 000-22150).        
|            | 
|10.15       |  | Guaranty Agreement dated as of December 28, 2004 between the Company and the Guarantors (incorporated by reference to Exhibit 10.5 of the Companys Current Report on Form 8-K, filed
December 28, 2004, File No. 000-22150).                                                                         
|            | 
|10.16       |  | Employment Agreement between Landrys Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q for the
period ended June 30, 2003, filed August 12, 2003, File No. 001-15531).                                              
|            | 
|10.17       |  | Landrys Restaurants, Inc. 2002 Employee/Rainforest Conversion Plan (incorporated by reference to Exhibit 99.1 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                 
|            | 
|10.18       |  | Landrys Restaurants, Inc. 2002 Employee Agreement No. 1 (incorporated by reference to Exhibit 99.2 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.19       |  | Landrys Restaurants, Inc. 2002 Employee Agreement No. 2 (incorporated by reference to Exhibit 99.3 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.20       |  | Landrys Restaurants, Inc. 2002 Employee Agreement No. 4 (incorporated by reference to Exhibit 99.5 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.21       |  | Landrys Restaurants, Inc. 2001 Employee Agreement No. 1 (incorporated by reference to Exhibit 99.6 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.22       |  | Landrys Restaurants, Inc. 2001 Employee Agreement No. 2 (incorporated by reference to Exhibit 99.7 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.23       |  | Landrys Restaurants, Inc. 2001 Employee Agreement No. 4 (incorporated by reference to Exhibit 99.9 of the Companys Form S-8, filed March 31, 2003, File No.
333-104175).                                                                                                                            
|            | 
|10.24       |  | Form of Management Agreement between Landrys Management, L.P. and Fertitta Hospitality (incorporated by reference to Exhibit 10.34 of the Companys Form 10-K for the year ended
December 31, 2003, File No. 001-15531).                                                                             
|            | 
|10.25       |  | Ground Lease between Landrys Management, L.P. and 610 Loop Venture, L.L.C. (incorporated by reference to Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q for the period
ended March 31, 1999, File No. 000-22150).                                                                       
|            | 
|*10.26      |  | Amendment to Ground Lease between Landrys Management, L.P. and 610 Loop Venture, L.L.C.                                                                                                                                                                                                              
|            | 
|*10.27      |  | Second Amendment to Contract of Sale and Development Agreement between Landrys Management, L.P. and 610 Loop Venture, LLC                                                                                                                                                                            
|            | 
|10.28       |  | Form of Landrys Restaurants, Inc. Nonqualified Stock Option Agreement for use in Landrys Restaurants, Inc. 2001 Individual Stock Option Agreements (incorporated by reference to
Exhibit 99.10 of the Companys Form S-8, filed on March 31, 2003, File No. 333-104175).                            
|            | 
|*10.29      |  | Lease Agreement dated December 1, 2001 between Rainforest Cafe, Inc. and Fertitta Hospitality, LLC                                                                                                                                                                                                    



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|            |  |                                                                                                                                                     
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                             
|            | 
|*10.30      |  | Form of Restricted Stock Agreement between Landrys Restaurants, Inc. and Tilman J. Fertitta                                                        
|            | 
|14          |  | Code of Ethics (incorporated by reference to Exhibit 14 of the Companys Form 10-K for the year ended December 31, 2003)                            
|            | 
|*21         |  | Subsidiaries of Landrys Restaurants, Inc. (incorporated by reference to Exhibit 21 of the Companys Form 10-K for the year ended December 31, 2003)
|            | 
|*23.1       |  | Consent of Grant Thornton LLP                                                                                                                       
|            | 
|*23.2       |  | Consent of Ernst & Young LLP                                                                                                                        
|            | 
|*31.1       |  | Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a)                                                                               
|            | 
|*31.2       |  | Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a)                                                                               
|            | 
|*32         |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13(a)-14(b)                                                   

---

|* | Filed herewith
|- | --------------



82