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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, 2005 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 if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.   Yes ̈No x



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 a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of
the Act).



Large accelerated filer ̈Accelerated filer  x Non-accelerated filer ̈



Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes ̈No x



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



Aggregate market value of voting stock held by non-affiliates of the
registrant as of June 30, 2005. $648,400,000



As of March
10, 2006, there were 21,698,608 shares of the registrants common stock outstanding.



DOCUMENTS INCORPORATED BY REFERENCE



The Proxy Statement for the Registrants 2006 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, 2005.



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LANDRYS RESTAURANTS, INC.



TABLE OF CONTENTS



|              |  |                                                                                                                  |  |         
|------------- |  | ---------------------------------------------------------------------------------------------------------------- |  | --------
|              |  |                                                                                                                  |  | Page No.
|PART I.       |  | 1                                                                                                               
|              |  |                                                                                                                 
|Item 1.       |  | Business                                                                                                         |  | 1       
|              |  |                                                                                                                 
|Item 1A.      |  | Risk Factors                                                                                                     |  | 10      
|              |  |                                                                                                                 
|Item 1B.      |  | Unresolved Staff Comments                                                                                        |  | 18      
|              |  |                                                                                                                 
|Item 2.       |  | Properties                                                                                                       |  | 18      
|              |  |                                                                                                                 
|Item 3.       |  | Legal Proceedings                                                                                                |  | 18      
|              |  |                                                                                                                 
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                                              |  | 18      
|              | 
|PART II.      |  | 19                                                                                                              
|              |  |                                                                                                                 
|Item 5.       |  | Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 19      
|              |  |                                                                                                                 
|Item 6.       |  | Selected Financial Data                                                                                          |  | 19      
|              |  |                                                                                                                 
|Item 7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 21      
|              |  |                                                                                                                 
|Item 7A.      |  | Quantitative and Qualitative Disclosures about Market Risk                                                       |  | 30      
|              |  |                                                                                                                 
|Item 8.       |  | Financial Statements and Supplementary Data                                                                      |  | 30      
|              |  |                                                                                                                 
|Item 9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                             |  | 30      
|              |  |                                                                                                                 
|Item 9A.      |  | Controls and Procedures                                                                                          |  | 30      
|              |  |                                                                                                                 
|Item 9B.      |  | Other Information                                                                                                |  | 31      
|              | 
|PART III.     |  | 32                                                                                                              
|              |  |                                                                                                                 
|Item 10.      |  | Directors and Executive Officers of the Registrant                                                               |  | 32      
|              |  |                                                                                                                 
|Item 11.      |  | Executive Compensation                                                                                           |  | 32      
|              |  |                                                                                                                 
|Item 12.      |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                   |  | 32      
|              |  |                                                                                                                 
|Item 13.      |  | Certain Relationships and Related Transactions                                                                   |  | 34      
|              |  |                                                                                                                 
|Item 14.      |  | Principal Accountant Fees and Services                                                                           |  | 34      
|              | 
|PART IV.      |  | 35                                                                                                              
|              |  |                                                                                                                 
|Item 15.      |  | Exhibits and Financial Statement Schedules                                                                       |  | 35      
|              | 
|SIGNATURES    |  | 71                                                                                                              
|              | 
|EXHIBIT INDEX |  | 72                                                                                                              



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FORWARD LOOKING STATEMENTS



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



| |  |  | potential acquisitions of other restaurants, restaurant concepts, gaming operations 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, hotels and casinos;
| | - |  | ----------------------------------------------------------------------



| |  |  | the effect of changes in tax laws;
| | - |  | ----------------------------------



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



| |  |  | our ability to maintain regulatory approvals for our existing businesses and our ability to receive regulatory approval for our new businesses;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectations of the continued availability and cost of capital resources;
| | - |  | -----------------------------------------------------------------------------



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



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



| |  |  | 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 Item 1A. 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 hospitality and entertainment 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, 2005, we owned and operated over 311 full-service and certain limited-service restaurants in 35 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 including hotel and casino resorts that 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. In September 2005, we acquired the Golden Nugget Hotels and Casinos in downtown Las Vegas and Laughlin, Nevada.



We will continue to add to our base of restaurants, opening primarily Saltgrass Steak House, Joes Crab Shack
restaurants and Signature Group restaurants (defined below). We expect to open the first Saltgrass units outside of Texas in 2006. The majority of our remaining new restaurant expansion will be in areas 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,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | beef and chicken specialties in a comfortable, casual atmosphere. The restaurants feature a prototype look that is readily identified by a large
theater-style marquee over the entrance and by a distinctive brick and wood facade, creating the feeling of a traditional old seafood house restaurant. 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, 2005, 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 $14.99 to $25.99, with certain items offered at market price. Lunch entrees range from $6.99 to $11.99. During the year ended December 31, 2005, 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 $15.99 to $37.99 with lunch entree prices ranging from $9.99 to $17.99. Charleys Crab dinner entree prices range from $17.00 to $29.99, with lunch entree
prices ranging from $7.00 to $25.00. During the year ending December 31, 2005, 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 $21.99. During the year ended
December 31, 2005, retail sales and alcoholic beverage sales accounted for approximately 23% 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 $8.99 to $18.99, with certain crab items available at market price. Lunch entree prices range from $5.99 to $12.99. During the year
ended December 31, 2005, 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, 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, 2005, 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.



Downtown Aquarium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 opened an up-scale Aquarium Restaurant in 2005, which transformed the aquarium into
a recreational destination, and renamed the facility, adding a second Downtown Aquarium to the Specialty Growth Division.



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 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. Upon expiration of the existing lease, we plan to transform the hotel into a 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. We expect the redevelopment to be completed in 2006.



Gaming Division



In 2005, we acquired the Golden Nugget Hotels and Casinos in Las Vegas and
Laughlin, Nevada. We believe that the Golden Nugget brand name is one of the most recognized in the gaming industry and we expect to continue to capitalize on the strong name recognition and high level of quality and value associated with it. With
our long-standing commitment to quality and service, the Golden NuggetLas Vegas has received the prestigious AAA Four Diamond Award, awarded by the American Automobile Association, a North American motoring and leisure travel organization,
since 1977. This award was given to only 18 Nevada hotels of the approximately 50,000 eligible lodging establishments in the United States evaluated by the AAA in 2005. According to the AAA, establishments that receive the AAA Four Diamond Award are
upscale in all areas and offer an extensive array of amenities and a high degree of hospitality, service and attention to detail.



Our business strategy is to create the best possible gaming and entertainment experience for our customers by providing a combination of comfortable and
attractive surroundings with attentive service from friendly, experienced employees. We target out-of-town customers at both of our properties while also catering to the local customer base. We believe that the Golden NuggetLas Vegas is the
leading downtown destination for our out-of-town customers. The property offers the same complement of services as our Las Vegas Strip competitors, but we believe that our customers prefer the boutique experience we offer and the downtown
environment. We emphasize the propertys wide selection of amenities to complement guests gaming experience and provide a luxury room product and personalized services at an attractive value. At the Golden NuggetLaughlin, we focus
on providing a high level of customer service, a quality dining experience at an appealing value, a slot product with highly competitive pay tables and a superior player rewards program.



Strategy



Our objective is to develop and operate a diversified restaurant, hospitality and entertainment 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, hospitality and gaming facilities provide customers an attractive
price-value relationship by serving generous portions with fresh ingredients in high-quality meals in comfortable and attractive surroundings with attentive service at reasonable prices.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Commitment to customer satisfaction.    We provide our customers prompt, friendly and efficient service, keeping table-to-wait staff ratios low, providing
a quality product, personalized service and staffing each operating unit 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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, 2005, we had 82 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 unit management and our
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
restaurant 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 as well as expanding into new markets. We intend to concentrate on development of the casual dining segment by building Saltgrass Steak House and Joes Crab Shack 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, 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 and the Golden Nugget Casinos and
Hotels in 2005. 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 2005.



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. The remodeling and menu changes have been met with favorable results as both of these concepts posted positive comparable
sales for 2005. No significant near-term expansion of these concepts is currently planned, and future growth will be dependent upon profitability and unit economics.



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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, four in 2004, and two in 2005. Further expansion of this concept into our existing markets and
development of new markets is planned in 2006.



Golden
Nugget (2005).    The Golden Nugget acquisition allowed us to enter the gaming business with one of the most recognized brands in the industry and in the preeminent gaming city, Las Vegas, Nevada. We also acquired the Golden
Nugget property in Laughlin, Nevada.



We have initiated a major
renovation and expansion of the Las Vegas property designed to create additional excitement, improved amenities and dining options while maintaining the warmth and high level of personalized service the Golden Nugget is known for. The Golden Nugget
Las Vegas occupies approximately eight acres in downtown Las Vegas with approximately 38,000 square feet of gaming area. The property also features three towers containing 1,907 rooms, the largest number of guestrooms in downtown Las Vegas,
approximately 1,300 slot machines and 52 table games. The Golden NuggetLaughlin has approximately 32,000 square feet of gaming space, 993 slot machines, 14 table games and 300 hotel rooms.



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 Steak House 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, 2005:



|              |  |                |  |  |  |                 |  |               
|------------- |  | -------------- |  |  |  | --------------- |  | --------------
|State         |  | Numberof Units |  |  |  | State           |  | Numberof Units
|Alabama       |  | 3              |  |  |  | Missouri        |  | 5             
|Arizona       |  | 5              |  |  |  | Nevada          |  | 7             
|California    |  | 26             |  |  |  | New Jersey      |  | 6             
|Colorado      |  | 10             |  |  |  | New Mexico      |  | 1             
|Connecticut   |  | 1              |  |  |  | New York        |  | 1             
|Delaware      |  | 1              |  |  |  | North Carolina  |  | 3             
|Florida       |  | 33             |  |  |  | Ohio            |  | 9             
|Georgia       |  | 8              |  |  |  | Oklahoma        |  | 4             
|Idaho         |  | 1              |  |  |  | Oregon          |  | 1             
|Illinois      |  | 10             |  |  |  | Pennsylvania    |  | 4             
|Indiana       |  | 5              |  |  |  | South Carolina  |  | 7             
|Iowa          |  | 1              |  |  |  | Tennessee       |  | 7             
|Kansas        |  | 2              |  |  |  | Texas           |  | 107           
|Kentucky      |  | 4              |  |  |  | Utah            |  | 3             
|Louisiana     |  | 5              |  |  |  | Virginia        |  | 7             
|Maryland      |  | 3              |  |  |  | Washington      |  | 2             
|Massachusetts |  | 2              |  |  |  | Toronto, Canada |  | 1             
|Michigan      |  | 13             |  |  |  |                 |  |               
|Minnesota     |  | 3              |  |  |  |                 |  |               
|              |  |                |  |  |  |                 |  |               
|              |  |                |  |  |  | Total           |  | 311           
|              |  |                |  |  |  |                 |  |               



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We own and operate the Golden Nugget Hotels and Casinos in Las Vegas and Laughlin, Nevada.



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 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 operating units with management that has
experience in the respective 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, wait staff, hotel staff and casino
employees to take great pride serving our customers in accordance with our high standards. Managers and staff are trained to be courteous and attentive to customer needs, and the managers, in particular, are instructed to regularly visit with
customers. Senior corporate management hosts weekly meetings with our general managers to discuss individual unit performance and customer comments. Moreover, we require general managers to hold weekly meetings at their individual operating units.
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



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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, 2005, there were
approximately 67 individuals involved in regional management functions generally performing on-site visits, formal inspections and similar responsibilities. As we grow, we 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,
2005, in the restaurant division, we employed approximately 28,000 persons, of whom 1,750 were restaurant managers or manager-trainees, 515 were salaried corporate and administrative employees, approximately 67 were operations regional management
employees, 41 were development and construction employees and the rest were hourly employees. In the Gaming Division, we employed approximately 3,245 persons, of whom 297 were management, 360 were salaried 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 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
2005 was within industry standards. Approximately 1,308 employees are covered by collective bargaining agreements at our Golden Nugget Hotel and Casino in Las Vegas, Nevada. 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 operating unit with an experienced management team to ensure attentive customer service and consistently high food quality as well as providing an excellent room and gaming experience. 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.



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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 one national
distributor 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 through television and radio commercials, billboards, travel and hospitality magazines, print advertising and newspaper drops. Our advertising expenditures
for 2005 were approximately 2.7% of revenues. We expect to cross market our restaurant, hospitality and gaming locations to leverage our advertising spend. 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, Saltgrass Steak House and Golden Nugget 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, hospitality and entertainment industries are intensely competitive with respect to price, service, the type
and quality of product offered, location and other factors. We compete with both locally owned facilities, as well as national and regional 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, hospitality and gaming, and retail establishments for real estate sites, personnel and acquisition opportunities.



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



We believe our business units 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.



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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, Mexico, Canada and Egypt. There are nine international units, including eight franchised units and one Company owned and operated unit in Toronto, Canada. The
Egyptian unit is currently under construction. 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 two reportable industry segments: restaurant and hospitality and gaming operations.



|ITEM 1A.    RISK | FACTORS
|---------------- | -------



The following are factors to be considered:



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, as many of our existing restaurants
are 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 property and business interruption insurance, we carry large deductibles, and
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, or that property and business
interruption insurance would adequately reimburse us for our losses.



Our
gaming activities rely heavily on certain markets, and changes adversely impacting those markets could have a material adverse effect on our gaming business.



The Golden Nugget properties are both located in Nevada and, as a result, our gaming business is subject to greater risks
than a more diversified gaming company. These risks include, but are not limited to, risks related to local economic and competitive conditions, changes in local and state governmental laws and regulations (including changes in laws and regulations
affecting gaming operations and taxes) and natural and other disasters. Any economic downturn in Nevada or any terrorist activities or disasters in or around Nevada could have a significant adverse effect on our business, financial condition and
results of operations. In addition, there can be no assurance that gaming industry revenues in, or leisure travel to and throughout, Nevada or the surrounding local markets will continue to grow.



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We also draw a substantial number of customers from other geographic areas, including southern
California, Hawaii and Texas. A recession or downturn in any region constituting a significant source of our customers could result in fewer customers visiting, or customers spending less at, the Golden Nugget properties, which would adversely
affect our results of operations. Additionally, there is one principal interstate highway between Las Vegas and southern California, where a large number of our customers reside. Capacity restraints of that highway or any other traffic disruptions
may affect the number of customers who visit our facilities.



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.



We use significant amounts of electricity, natural gas and other
forms of energy, and energy price increases may adversely affect our results of operations.



We use significant amounts of electricity, natural gas and other forms of energy. While no shortages of energy have been experienced, any substantial
increases in the cost of electricity and natural gas in the United States, such as those increases recently experienced, will increase our cost of operations, which would negatively affect our operating results. The extent of the impact is subject
to the magnitude and duration of the energy price increases, but this impact could be material. In addition, higher energy and gasoline prices affecting our customers may increase their cost of travel to our hotel-casinos and result in reduced
visits to our properties and a reduction in our revenues.



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



Restaurant Industry



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.



Gaming Industry



The United States gaming industry is intensely competitive and features many participants, including many world class
destination resorts with greater name recognition, different attractions, amenities and entertainment options than our facilities. In a broader sense, gaming operations face competition from all manner of leisure and entertainment activities.



Our competitors have more gaming industry experience, and many
are larger and have significantly greater financial, selling and marketing, technical and other resources. Our competitors include multinational corporations that enjoy widespread name recognition, established brand loyalty, decades of casino
operation experience and a diverse portfolio of gaming assets.



We 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.



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 a moderate and 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;
| | - |  | ---------------------------------



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| |  |  | 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 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 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.



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



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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.



We conduct licensed gaming operations in Nevada, and various regulatory authorities, including the Nevada State Gaming Control Board and the Nevada
Gaming Commission, require us to hold various licenses and registrations, findings of suitability, permits and approvals to engage in gaming operations and to meet requirements of suitability. These gaming authorities also control approval of
ownership interests in gaming operations. These gaming authorities may deny, limit, condition, suspend or revoke our gaming licenses, registrations, findings of suitability or the approval of any of our ownership interests in any of the licensed
gaming operations conducted in Nevada, any of which could have a significant adverse effect on our business, financial condition and results of operations, for any cause they may deem reasonable. If we violate gaming laws or regulations that are
applicable to us, we may have to pay substantial fines or forfeit assets. If, in the future, we operate or have an ownership interest in casino gaming facilities located outside of Nevada, we may also be subject to the gaming laws and regulations of
those other jurisdictions.



If additional gaming regulations
are adopted or existing ones are modified in Nevada, those regulations could impose significant restrictions or costs that could have a significant adverse effect on us. From time to time, various proposals are introduced in the federal and Nevada
state and local legislatures that, if enacted, could adversely affect the tax, regulatory, operational or other aspects of the gaming industry and our business. Legislation of this type may be enacted in the future. If there is a material increase
in federal, state or local taxes and fees, our business, financial condition and results of operations could be adversely affected.



Our officers, directors and key employees are required to be licensed or found suitable by gaming authorities and the loss of, or inability to obtain, any licenses or
findings of suitability may have a material adverse effect on us.



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Our officers, directors and key employees are required to file applications with the gaming authorities
in the State of Nevada, Clark County, Nevada and the City of Las Vegas and are required to be licensed or found suitable by these gaming authorities. If any of these 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. Furthermore, the gaming authorities may require us to terminate the employment of any person who refuses to file the
appropriate applications. Either result could significantly impair our gaming operations.



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,
Canada and Egypt. These agreements include a per unit development fee and restaurant royalties ranging from 3% to 7% of revenues. There are nine international units; one 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, Chart House and Golden Nugget 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.



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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, 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, executive chefs and casino employees, 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, beef or chicken. In addition, negative publicity concerning food quality or possible illness and injury
resulting 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, avian flu related to poultry 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 for 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.



16



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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 and class action lawsuits alleging violations, among other things, of minimum wage and overtime provisions of federal and state 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 for any claims could materially adversely affect our financial
condition or results of operations (especially if there is no insurance coverage), 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.



The capital costs of our specialty growth and gaming divisions 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 our specialty growth
and gaming divisions, we incur significant capital expenditures. As a result, the failure of 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



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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.



|ITEM 1B.    UNRESOLVED | STAFF COMMENTS
|---------------------- | --------------



None



|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.



The Golden NuggetLas Vegas (GNLV) occupies approximately
eight acres and GNLV owns the buildings and approximately 90% of the land. GNLV leases the remaining land under three ground leases that expire (given effect to their options to renew) on dates ranging from 2025 to 2102. The Golden
NuggetLaughlin (GNL) occupies approximately 13.5 acres, all of which is owned by GNL.



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



One February 18, 2005, and subsequently amended, a purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of
California in San Bernardino by Michael D. Harrison, et. al. Subsequently, on September 20, 2005, another purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in Los Angeles by Dustin
Steele, et. al. On January 26, 2006, both lawsuits were consolidated into one action by the state Superior Court in San Bernardino. The lawsuits allege that Rainforest Cafe violated wage and hour laws, including not providing meal and rest
breaks, uniform violations and failure to pay overtime. The Plaintiffs seek to recover damages, including unpaid wages, reimbursement for uniform expenses and penalties imposed by state law. We deny the Plaintiffs claims and intend to
vigorously defend this matter.



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, 2005.



18



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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 March 7, 2006, there were approximately 1,036 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
|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
|2005           |  |      |       |     |   |      
|First Quarter  |  | $    | 33.00 |     | $ | 26.47
|Second Quarter |  |      | 31.60 |     |   | 25.39
|Third Quarter  |  |      | 32.90 |     |   | 26.82
|Fourth Quarter |  |      | 29.78 |     |   | 25.80



Dividend Policy



Commencing in 2000, we began paying 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 increases in dividends on our common stock to specified levels.



Stock Repurchase



In November 1998, we announced the authorization of an open market stock buy back program, which was renewed in April 2000, for an additional $36.0
million. In October 2002, we authorized a $50.0 million open market stock buy back program and in September 2003, we authorized another $60.0 million open market stock repurchase program. In October 2004, we authorized a $50.0 million open market
stock repurchase program. In March 2005, we announced a $50.0 million authorization to repurchase common stock. In May 2005, we announced a $50.0 million authorization to repurchase common stock. These programs have resulted in our aggregate
repurchasing of approximately 17.6 million shares of common stock for approximately $290.5 million through December 31, 2005.



We made no purchases of our common stock during the fourth quarter of 2005 and have approximately $55.5 million that may yet be purchased under existing
programs.



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------



The following table sets forth our selected consolidated financial data as of and for the years ended December 31, 2005, 2004, 2003, 2002 and 2001.
The financial data as of and for the years ended December 31, 2005, 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 years ended December 31, 2005



19



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and 2004 and Ernst & Young LLP for the years ended December 31, 2003 and 2002. The financial data as of and for the year ended
December 31, 2001 has been derived from our consolidated financial statements which were previously audited by Arthur Andersen, LLP independent public accountants. 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.



SELECTED CONSOLIDATED FINANCIAL INFORMATION



|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|--------------------------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | --------- |  | - | --------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                            |  | Year Ended December 31, |          
|                                                                            |  | 2005                    |           |   | 2004 |   | 2003      |  |   | 2002      |   |  | 2001 |        
|INCOME STATEMENT DATA                                                       |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Revenues                                                                    |  | $                       | 1,254,806 |   |      | $ | 1,167,475 |  | $ | 1,105,755 |   |  | $    | 894,795 |   |  | $ | 746,642 |  
|Operating costs and expenses:                                               |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Cost of revenues                                                            |  |                         | 333,028   |   |      |   | 326,108   |  |   | 321,783   |   |  |      | 257,945 |   |  |   | 219,684 |  
|Labor                                                                       |  |                         | 377,215   |   |      |   | 337,633   |  |   | 323,284   |   |  |      | 259,198 |   |  |   | 215,662 |  
|Other operating expenses                                                    |  |                         | 311,648   |   |      |   | 282,412   |  |   | 271,271   |   |  |      | 224,122 |   |  |   | 186,529 |  
|General and administrative expenses                                         |  |                         | 57,694    |   |      |   | 58,320    |  |   | 51,704    |   |  |      | 43,384  |   |  |   | 38,004  |  
|Depreciation and amortization                                               |  |                         | 63,493    |   |      |   | 57,294    |  |   | 49,092    |   |  |      | 40,729  |   |  |   | 34,975  |  
|Asset impairment expense(1)                                                 |  |                         |          |   |      |   | 1,709     |  |   | 13,144    |   |  |      | 2,200   |   |  |   | 2,394   |  
|Pre-opening expenses                                                        |  |                         | 4,772     |   |      |   | 5,203     |  |   | 8,650     |   |  |      | 4,591   |   |  |   | 2,598   |  
|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Total operating costs and expenses                                          |  |                         | 1,147,850 |   |      |   | 1,068,679 |  |   | 1,038,928 |   |  |      | 832,169 |   |  |   | 699,846 |  
|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Operating income                                                            |  |                         | 106,956   |   |      |   | 98,796    |  |   | 66,827    |   |  |      | 62,626  |   |  |   | 46,796  |  
|Other (income) expense:                                                     |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Interest (income) expense, net                                              |  |                         | 41,438    |   |      |   | 15,185    |  |   | 9,561     |   |  |      | 4,997   |   |  |   | 9,402   |  
|Other, net                                                                  |  |                         | 95        |   |      |   | 13,544    |  |   | 1,463     |   |  |      | (887    | ) |  |   | (56     | )
|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Total other (income) expense(2)                                             |  |                         | 41,533    |   |      |   | 28,729    |  |   | 11,024    |   |  |      | 4,110   |   |  |   | 9,346   |  
|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Income before taxes                                                         |  |                         | 65,423    |   |      |   | 70,067    |  |   | 55,803    |   |  |      | 58,516  |   |  |   | 37,450  |  
|Provision for income taxes(3)                                               |  |                         | 20,608    |   |      |   | 3,545     |  |   | 10,889    |   |  |      | 18,025  |   |  |   | 11,502  |  
|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Net income                                                                  |  | $                       | 44,815    |   |      | $ | 66,522    |  | $ | 44,914    |   |  | $    | 40,491  |   |  | $ | 25,948  |  
|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Earnings per share information:                                             |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Basic                                                                       |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Net income (loss)                                                           |  | $                       | 2.01      |   |      | $ | 2.46      |  | $ | 1.63      |   |  | $    | 1.56    |   |  | $ | 1.19    |  
|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Weighted average number of common shares outstanding                        |  |                         | 22,300    |   |      |   | 27,000    |  |   | 27,600    |   |  |      | 25,900  |   |  |   | 21,750  |  
|Diluted                                                                     |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Net income (loss)                                                           |  | $                       | 1.95      |   |      | $ | 2.39      |  | $ | 1.59      |   |  | $    | 1.51    |   |  | $ | 1.15    |  
|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Weighted average number of common and common share equivalents outstanding  |  |                         | 23,000    |   |      |   | 27,800    |  |   | 28,325    |   |  |      | 26,900  |   |  |   | 22,535  |  
|OTHER DATA                                                                  |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|EBITDA (Earnings before interest, taxes, depreciation, and amortization):   |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Operating Income                                                            |  | $                       | 106,956   |   |      | $ | 98,796    |  | $ | 66,827    |   |  | $    | 62,626  |   |  | $ | 46,796  |  
|Add back:                                                                   |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Depreciation and amortization                                               |  |                         | 63,493    |   |      |   | 57,294    |  |   | 49,092    |   |  |      | 40,729  |   |  |   | 34,975  |  
|Asset impairment expense                                                    |  |                         |          |   |      |   | 1,709     |  |   | 13,144    |   |  |      | 2,200   |   |  |   | 2,394   |  
|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|EBITDA                                                                      |  | $                       | 170,449   |   |      | $ | 157,799   |  | $ | 129,063   |   |  | $    | 105,555 |   |  | $ | 84,165  |  
|                                                                            |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|BALANCE SHEET DATA (AT END OF PERIOD)                                       |  |                         |           |   |      |   |           |  |   |           |   |  |      |         |   |  |   |         |  
|Working capital (deficit)                                                   |  | $                       | (74,062   | ) |      | $ | 161,515   |  | $ | (38,767   | ) |  | $    | (55,475 | ) |  | $ | (6,017  | )
|Total assets                                                                |  | $                       | 1,612,579 |   |      | $ | 1,344,952 |  | $ | 1,104,883 |   |  | $    | 934,898 |   |  | $ | 692,105 |  
|Short-term notes payable and current portion of notes and other obligations |  | $                       | 1,852     |   |      | $ | 1,700     |  | $ | 1,963     |   |  | $    | 1,783   |   |  | $ |        |  
|Long-term notes and other obligations, net of current portion               |  | $                       | 816,044   |   |      | $ | 559,545   |  | $ | 299,736   |   |  | $    | 189,404 |   |  | $ | 175,000 |  
|Stockholders equity                                                        |  | $                       | 516,770   |   |      | $ | 600,897   |  | $ | 599,894   |   |  | $    | 563,406 |   |  | $ | 391,032 |  

---

|(1) | In 2004, 2003, 2002, and 2001, 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) and $2.4 million ($1.6 million
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | 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).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



EBITDA is not a
generally accepted accounting principles (GAAP) measurement and is presented solely as a supplemental disclosure because we believe that it is a widely used measure of operating performance. 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 primarily own and operate full-service, casual dining restaurants and two casinos. As of December 31, 2005, we operated 311 full service
restaurants. In addition to these units, there were several limited menu restaurants and other properties (as described in Item 1. Business), and the Golden Nugget Hotels and Casinos in Las Vegas and Laughlin, Nevada as more fully described below.



On September 27, 2005, Landrys Gaming, Inc., an
unrestricted subsidiary, purchased the Golden Nugget Hotels and Casinos in downtown Las Vegas and Laughlin, Nevada (GN) for $163.0 million in cash, the assumption of $155.0 million of Senior Secured Notes due 2011 and the assumption of
approximately $27.0 million under an existing senior revolving credit facility and the further assumption of certain working capital including $27.5 million in cash. Under the terms of the purchase agreement, the currently outstanding Senior Secured
Notes due 2011 remain outstanding obligations of GN following the closing. The Golden NuggetLas Vegas occupies approximately eight acres in downtown Las Vegas with approximately 38,000 square feet of gaming area. The property also features
three towers containing 1,907 rooms, the largest number of guestrooms in downtown Las Vegas. The Golden NuggetLaughlin is located on 13 acres on the Colorado River with 32,000 square feet of gaming space and 300 rooms. The results of
operations for these properties are included in our financial statements from the date of acquisition.



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.



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.



21



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We are in the business of operating restaurants, two casinos and the above-mentioned complementary
activities. We do not engage in real estate operations other than those associated with the ownership and operation of our business. We own a fee interest (own the land and building) in a number of properties underlying our businesses, but do not
engage in real estate sales or real estate management in any significant fashion or format. The Chief Executive Officer, who is responsible for our 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 and gaming industries are intensely competitive and affected by changes in consumer tastes and by national, regional, and local economic
conditions and demographic trends. The performance of individual restaurants or casinos may be affected by factors such as: traffic patterns, demographic considerations, marketing, weather conditions, and the type, number, and location of competing
restaurants and casinos.



We have many well established
competitors with greater financial resources, larger marketing and advertising budgets, and longer histories of operation than ours, including competitors already established in regions where we are planning to expand, as well as competitors
planning to expand in the same regions. We face significant competition from other casinos in the markets in which we operate and from other mid-priced, full-service, casual dining restaurants offering or promoting seafood and other types and
varieties of cuisine. Our competitors include national, regional, and local restaurant chains and casinos as well as local owner-operated restaurants and casinos. We also compete with other restaurants, retail establishments and gaming companies for
restaurant and casino 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, gaming operations 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, hotels and casinos; the effect of changes in tax laws; actions of regulatory, legislative, executive or judicial decisions at the federal, state or local
level with regard to our business and the impact of any such actions; our ability to maintain regulatory approvals for our existing businesses and our ability to receive regulatory approval for our new businesses; our expectations of the continued
availability and costs of capital resources; 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.



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Results of Operations



Profitability



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



|                         |  |                         |   |  |       |   |  |       |  
|------------------------ |  | ----------------------- | - |  | ----- | - |  | ----- | -
|                         |  | Year Ended December 31, |  
|                         |  | 2005                    |   |  | 2004  |   |  | 2003  |  
|Revenues                 |  | 100.0                   | % |  | 100.0 | % |  | 100.0 | %
|Cost of revenues         |  | 26.5                    | % |  | 27.9  | % |  | 29.1  | %
|Labor                    |  | 30.1                    | % |  | 28.9  | % |  | 29.2  | %
|Other operating expenses |  | 24.8                    | % |  | 24.2  | % |  | 24.5  | %
|                         |  |                         |   |  |       |   |  |       |  
|Unit level profit        |  | 18.6                    | % |  | 19.0  | % |  | 17.2  | %
|                         |  |                         |   |  |       |   |  |       |  



Year ended
December 31, 2005 Compared to the Year ended December 31, 2004



Restaurant and hospitality revenues increased $21,689,779, or 1.9%, from $1,167,475,165 to $1,189,164,944 for the year ended December 31, 2005 compared to the year ended December 31, 2004. The total
increase/change in revenue is comprised of the following approximate amounts: 2005 restaurant openings$30.5 million; restaurant closings decreased 2005 revenues$8.2 million; locations open 2005 and 2004 including honeymoon
periodsdecreased $4.0 million; day lost due to leap yeardecreased $3.4 million; units closed for an extended period as a result of the hurricanedecreased $2.2 million; and the remainder of the difference is attributable to the
change in sales for stores not open a full comparable period. The total number of units open as of December 31, 2005 and 2004 were 311 and 297, respectively.



Gaming revenues increased $65,640,727 for the year ended December 31, 2005 as a result of the acquisition of GN. The
results of GN are included from the September 27, 2005 acquisition date.



As a primary result of increased revenues, cost of revenues increased $6,919,686, or 2.1%, from $326,108,007 to $333,027,693 in the year ended December 31, 2005, compared to the same period in the prior year.
Cost of revenues as a percentage of revenues for the year ended December 31, 2005, decreased to 26.5% from 27.9% in 2004. The decrease in cost of revenues as a percentage of revenues primarily reflects a moderate menu price increase, stable
commodities prices, a shift in product mix and the acquisition of the Golden Nugget.



Labor expenses increased $39,581,759, or 11.7%, from $337,633,530 to $377,215,289 in the year ended December 31, 2005, compared to the same period in the prior year, principally as a result of increased revenues.
Labor expenses as a percentage of revenues for the year ended December 31, 2005 increased to 30.1% from 28.9% in 2004, principally due to increased hourly wage rates and higher overtime and the acquisition of the Golden Nugget.



Other operating expenses increased $29,235,924, or 10.4%, from $282,411,954
to $311,647,878 in the year ended December 31, 2005, compared to the same period in the prior year, principally as a result of increased revenues. Such expenses increased as a percentage of revenues to 24.8% in 2005 from 24.2% in 2004, as a
primary result of higher utilities, increased rent expense and the acquisition of the Golden Nugget.



General and administrative expenses decreased $626,169, or 1.1%, from $58,319,642 to $57,693,473 in the year ended December 31, 2005, compared to the
same period in the prior year, and decreased as a percentage of revenues to 4.6% in 2005 from 5.0% in 2004. The decrease is due to lower professional fees related to Sarbanes-Oxley and leverage associated with the acquisition of the Golden Nugget.



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Combined depreciation and amortization expense and asset impairment expense increased an aggregate of
$4,489,970, or 7.6%, from an aggregate of $59,002,777 to $63,492,747 in the year ended December 31, 2005, compared to the same period in the prior year. The increase for 2005 was primarily due to an increase in depreciation related to the
addition of new restaurants and equipment and the acquisition of the Golden Nugget offset by a decrease in impairment charges.



The $1.7 million 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.



Restaurant pre-opening expenses were $4,772,425 for the year ended
December 31, 2005, compared to $5,203,518 for the same period in the prior year. The decrease for the 2005 period was attributable to a decrease in units opened in 2005 as compared to 2004.



The increase in net interest expense for the year ended December 31,
2005 as compared to the prior year is primarily due to higher borrowings, as well as an increase in our average borrowing rate.



Other expense, net for 2005 was immaterial. Other expense, net for 2004 was comprised primarily of $14.6 million in pre-payment penalties, and related
fees associated with the pay down of our $150.0 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.



Provision for income taxes increased by $17,063,366 to $20,608,144 in the
year ended December 31, 2005 from $3,544,778 in 2004 primarily due to a net $18.5 million income tax benefit in 2004 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, 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.



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.



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.



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Other 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 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
|Asset Impairment                             |  | $                        | 1,700,000 |      | $ | 13,100,000
|Accrued Estimated Lease Termination Payments |  |                          |          |      |   | 1,300,000 
|                                             |  |                          |           |      |   |           
|                                             |  | $                        | 1,700,000 |      | $ | 14,400,000
|                                             |  |                          |           |      |   |           



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, 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



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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.



Liquidity and Capital
Resources



In December 2004, we refinanced our 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 financing spread under the
Bank Credit Facility and the Term Loan is currently 1.50% and 1.75%, respectively, for Libor borrowings and 0.50% and 0.75% for base rate borrowings. As of December 31, 2005, we had approximately $215.9 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, we also issued $400.0 million in senior notes through a private placement offering. The senior notes are general unsecured obligations of the Company
and mature December 2014. Interest is payable semi-annually at 7.5%. On June 16, 2005, we completed an exchange offering whereby substantially all of the senior notes issued under the private placement were exchanged for senior notes registered
under the Securities Act of 1933.



Net proceeds from the Bank
Credit Facility and 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 and governed by certain financial covenants, including minimum fixed charge, net worth, and our financial leverage ratios as well as limitations on dividend payments, capital expenditures
and other restricted payments as defined in the agreements.



In
October 2003, we 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 $225.0 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, 2005, we repurchased $133.8 million of common stock. In September 2003, we authorized an open market stock repurchase program for $60.0 million. In October 2004, we authorized a
$50.0 million stock repurchase program. In 2005, we authorized a $100.0 million stock repurchase program. We expect to make opportunistic repurchases of our common stock.



Working capital decreased from a surplus of $161.5 million as of December 31, 2004 to $74.1 million deficit as of
December 31, 2005 primarily due to the purchase of the Golden Nugget Hotels and Casinos and repurchase of our common stock during 2005. Cash flow to fund future operations, new restaurant development, and acquisitions will be generated from
operations, available capacity under the current Bank Credit Facility and additional financing, if appropriate.



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In 2005, we spent $163.0 million to acquire GN and $118.5 million on capital expenditures including
opening 13 new units and acquiring $23.7 million in land for future development. In 2006, we expect to spend approximately $180.0 million, including opening 12 units and spending $85.0 million in 2006 to renovate the Golden Nugget Hotel and Casino
in downtown Las Vegas, Nevada followed by a casino expansion and new hotel tower in 2007.



As of December 31, 2005, we 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. Our obligations include off balance sheet arrangements whereby the liabilities associated with non cancelable operating leases, unconditional purchase obligations
and standby letters of credit are not fully reflected in our balance sheets.



|                                            |  |      |             |            |   |             |  |            |             |  |   |            
|------------------------------------------- |  | ---- | ----------- | ---------- | - | ----------- |  | ---------- | ----------- |  | - | -----------
|Contractual Obligations (in thousands)      |  | 2006 |             | 2007- 2008 |   | 2009- 2010  |  | Thereafter
|Long-Term Debt                              |  | $    | 1,851,741   |            | $ | 3,645,025   |  | $          | 158,411,035 |  | $ | 555,000,000
|Operating Leases                            |  | $    | 47,758,691  |            | $ | 86,987,095  |  | $          | 71,510,862  |  | $ | 290,208,754
|Unconditional Purchase Obligations          |  | $    | 73,222,438  |            | $ | 7,030,718   |  | $          | 2,231,015   |  | $ | 641,982    
|Other Long-Term Obligations                 |  | $    | 4,185,413   |            | $ | 2,650,000   |  | $          | 18,000,000  |  | $ |           
|                                            |  |      |             |            |   |             |  |            |             |  |   |            
|Total Cash Obligations                      |  | $    | 127,018,283 |            | $ | 100,312,838 |  | $          | 250,152,912 |  | $ | 845,850,736
|                                            |  |      |             |           
|Other Commercial Commitments (in thousands) |  | 2006 |             | 2007-2008  |   | 2009-2010   |  | Thereafter
|Line of Credit                              |  | $    |            |            | $ |            |  | $          | 96,000,000  |  | $ |           
|Standby Letters of Credit                   |  | $    | 12,592,451  |            | $ |            |  | $          |            |  | $ |           
|                                            |  |      |             |            |   |             |  |            |             |  |   |            
|Total Commercial Commitments                |  | $    | 12,592,451  |            | $ |            |  | $          | 96,000,000  |  | $ |           



In connection with our
purchase of an 80% interest in the restaurant concept T-Rex in February 2006, we have committed to spend an estimated $48.0 million during 2006, 2007 and 2008 to complete one T-Rex restaurant in Kansas City, Kansas, construct one T-Rex restaurant as
well as an Asian themed restaurant in Walt Disney Worlds Florida theme parks and construct one additional T-Rex restaurant in the northeast.



From time to time, we review opportunities for restaurant acquisitions and investments in the hospitality, entertainment (including gaming), 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, 2006.



As a primary result
of establishing long-term borrowings, we will incur higher interest expense in the future. However, we have mitigated a portion of the higher interest expense by entering into fair value hedges with a notional amount of $100.0 million, whereby we
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 2.34% to 2.38%.



Since April 2000, we have paid an annual $0.10 per share dividend, declared and paid in quarterly amounts. We 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.



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Critical Accounting Policies



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



We operate approximately 311 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 $2.0 million, such amounts could be significant
when and if they occur. However, such asset impairment expense does not affect our financial liquidity, and is usually excluded from many valuation model calculations.



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



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



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



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 March 31, 2006, we will expense compensation related to stock options in accordance with SFAS 123(R).



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



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Recent Accounting Pronouncements



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. 123R, Share-Based Payments. This statement requires the expensing of stock options in the
financial statements for periods no later than annual periods beginning after June 15, 2005. SFAS No. 123R requires companies to use either the modified-prospective or modified-retrospective transition method. The Company will implement the
statement during the first quarter of 2006 using the modified-prospective transition method and we expect that the recognition requirements under SFAS No. 123 will be reasonably similar to the fair value results included in our pro forma
disclosures assuming similar assumptions, stock prices and number of grants. Additional grants would increase compensation expense.



In March 2005, the SEC issued Staff Accounting Bulletin 107 (SAB 107) to simplify some of the implementation challenges of SFAS 123R. In particular, SAB
107 provides supplemental implementation guidance on SFAS 123R including guidance on valuation methods, classification of compensation expense, inventory capitalization of share-based compensation costs, income tax effects, disclosures in
Managements Discussion and Analysis and several other issues. We will apply the principles of SAB 107 in conjunction with the adoption of SFAS 123R.



In May 2005, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 154, Accounting Changes and Error Corrections, which
replaces Accounting Principles Board (APB) No. 20, Accounting Changes, and Statement of Financial Accounting Standards No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 applies to all
voluntary changes in accounting principle, and changes the requirements for accounting and reporting a change in accounting principles. SFAS 154 requires retroactive application to prior periods financial statements of a voluntary change in
accounting principle unless it is impracticable to do so. APB 20 previously required that most voluntary changes in accounting principle be recognized with a cumulative effect adjustment in net income of the period of the change. SFAS 154 is
effective for accounting changes made in annual periods beginning after December 15, 2005.



In October 2005, the FASB issued FASB Staff Position (FSP) 13-1 Accounting for Rental Costs Incurred During a Construction Period. The FSP
requires rental costs associated with both ground and building operating leases that are incurred during a construction period be expensed on a straight line basis starting from the beginning of the lease term. The statement is effective for periods
beginning after December 15, 2005. Adoption of FSP 13-1 is not expected to have a material impact on the Companys consolidated financial statements.



Impact of Inflation



We do not believe that inflation has had a significant effect on our operations during the past several years. We believe we have historically been able
to pass on increased costs through menu price increases, but there can be no assurance that we will be able to do so in the future. Future increases in labor costs, including expected future increases in federal minimum wages, energy costs, and 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, 2005 included $344.5 million of
floating-rate debt attributed to borrowings at an average interest rate of 6.3%. 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, we entered into two interest swap agreements with the objective of
managing our exposure to interest rate risk and lowering interest expense. The agreements were effective December 2004 and March 2005, and mature in December 2014 for an aggregate notional amount of $100.0 million.



The impact on annual cash flow of a ten percent change in the floating-rate
(approximately 0.6%) would be approximately $2.2 million annually based on the floating-rate debt and other obligations outstanding at December 31, 2005, 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 41.



|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
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.



|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, 2005. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2005, 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.



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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, 2005 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, 2005.



Our evaluation did not include the internal control over financial reporting relating to Golden Nugget, Inc. (formerly
Poster Financial Group, Inc.) which we acquired on September 27, 2005 (see Note 2 to the consolidated financial statements). Total assets and revenues for the acquisition represent approximately $388 million and $65 million, respectively, of the
related consolidated financial statement amounts as of and for the year ended December 31, 2005.



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, 2005, as stated in their report which is included herein.



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 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 2005 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,
2005 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, 2005. 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, 2005.



|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, 2005.



Equity Compensation Plan Information



The following table provides information as of December 31, 2005
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)     |  | 346,102                                                                                  |  | $                                                                        | 8.41  |                                                                                                                                       | 800,000  
|Equity compensation plans not approved by the stockholders(2) |  | 1,551,150                                                                                |  |                                                                          | 17.96 |                                                                                                                                       | 700,000  
|                                                              |  |                                                                                          |  |                                                                          |       |                                                                                                                                       |          
|Total                                                         |  | 1,897,252                                                                                |  | $                                                                        | 16.22 |                                                                                                                                       | 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-
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | qualified stock options, which may include stock appreciation rights, to our consultants, employees and 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 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.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (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, we issued options to purchase an aggregate of 600,000 shares under an individual stock option agreement with our 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.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (g) | In addition, we 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. 300,000 restricted common shares have been issued subject to vesting on the tenth anniversary and 250,000 stock options have been granted.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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, 2005.



|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, 2005.



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PART IV

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



|    |  |                                                                                |  |                                                                                                      
|--- |  | ------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------
|(a) |  | 1.                                                                             |  | Financial Statements                                                                                 
|    | 
|    |  | The following financial statements are set forth herein commencing on page 38:
|    |  |                                                                                |  | Report of Independent Registered Public Accounting Firm                                             
|    |  |                                                                                |  | Grant Thornton LLP                                                                                   
|    |  |                                                                                |  | Ernst & Young LLP                                                                                    
|    |  |                                                                                |  | Consolidated Balance Sheets as of December 31, 2005 and 2004                                        
|    |  |                                                                                |  | Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003              
|    |  |                                                                                |  | Consolidated Statements of Stockholders Equity for the years ended December 31, 2005, 2004 and 2003
|    |  |                                                                                |  | Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003.         
|    |  |                                                                                |  | 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 (incorporated by
reference to Exhibit 2.1 of the Companys Form 10-K for the year ended December 31, 2004, File No. 000-22150)
|            | 
|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 (incorporated by reference to Exhibit 3.3 of the Companys Form 10-K for the year ended December 31, 2004, File No.
000-22150)                                                                                                             
|            | 
|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).                                                                                          



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|            |  |                                                                                                                                                                                                                                                                                                       
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                                                                                               
|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 (incorporated by reference to Exhibit 10.10 of the Companys Form 10-K for the year ended
December 31, 2004, File No. 000-22150)                                                                            
|            | 
|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).                                                                                                                            



36



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|            |  |                                                                                                                                                                                                                                                                           
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                                                                   
|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. (incorporated by reference to Exhibit 10.26 of the Companys Form 10-K for the year ended
December 31, 2004, File No. 000-22150)                                                 
|            | 
|10.27       |  | Second Amendment to Contract of Sale and Development Agreement between Landrys Management, L.P. and 610 Loop Venture, LLC (incorporated by reference to Exhibit 10.27 of the
Companys Form 10-K for the year ended December 31, 2004, File No. 000-22150)               
|            | 
|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 (incorporated by reference to Exhibit 10.29 of the Companys Form 10-K for the year
ended December 31, 2004, File No. 000-22150)                                       
|            | 
|10.30       |  | Form of Restricted Stock Agreement between Landrys Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.30 of the Companys Form 10-K for the year
ended December 31, 2004, File No. 000-22150)                                             
|            | 
|*10.31      |  | First Amendment to Personal Service and Employment Agreement between Landrys Restaurants, Inc. and Tilman J. Fertitta                                                                                                                                                    
|            | 
|*10.32      |  | 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.                                                                                                                                                                                                                                
|            | 
|*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s Report on Internal Control Over Financial Reporting,appearing under Item 9A, that Landrys Restaurants, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established inInternal 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.



As described in Managements Report on Internal Control Over Financial Reporting, management excluded from its assessment of Landrys
Restaurants, Inc. and subsidiaries internal control over financial reporting as of December 31, 2005, the internal control over financial reporting related to Golden Nugget, Inc. (formerly Poster Financial Group, Inc.), which was acquired by
the company during September 2005. Our audit of internal control over financial reporting of Landrys Restaurants, Inc. and subsidiaries also excluded Golden Nugget, Inc. Assets of approximately $388 million and total revenues of approximately
$65 million of Golden Nugget, Inc. are included in the consolidated financial statements of Landrys Restaurants, Inc. and subsidiaries as of and for the year ended December 31, 2005.



In our opinion, managements assessment that Landrys Restaurants,
Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established inInternal 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, in all material respects, effective internal control over financial reporting as of
December 31, 2005, based on criteria established inInternal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).



We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of Landrys Restaurants, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders equity, and
cash flows for each of the years then ended, and our report dated March 9, 2006 expressed an unqualified opinion on those consolidated financial statements.



GRANT THORNTON LLP



Houston, Texas

March 9, 2006



38



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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 sheets of Landrys Restaurants, Inc. and subsidiaries as of December 31, 2005 and 2004, and
the related consolidated statements of income, stockholders equity, and cash flows for the years 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 audits.



We conducted
our audits 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 audits provide 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, 2005 and 2004, and the results of their operations and their cash flows for the years 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, 2005, 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 9, 2006, expressed an unqualified opinion on managements assessment of the effectiveness of
internal control over financial reporting and an unqualified opinion on the effectiveness of internal control over financial reporting.



GRANT THORNTON LLP



Houston, Texas

March 9, 2006



39



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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 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 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 audit provides a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Landrys Restaurants, Inc., and subsidiaries at December 31, 2003 and the results of their operations and their cash flows for the year then ended, in conformity with U.S.
generally accepted accounting principles.



ERNST & YOUNG LLP



Houston, Texas

February 11, 2004

except for Note 10

as to which the date is March 14, 2005



40



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LANDRYS RESTAURANTS, INC.



CONSOLIDATED BALANCE SHEETS



|                                                                                                                            |  |              |               |   |      |   |               |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------------- | - | ---- | - | ------------- | -
|                                                                                                                            |  | December 31, |              
|                                                                                                                            |  | 2005         |               |   | 2004 |  
|ASSETS                                                                                                                      |  |              |               |   |      |   |               |  
|CURRENT ASSETS:                                                                                                             |  |              |               |   |      |   |               |  
|Cash and cash equivalents                                                                                                   |  | $            | 39,215,562    |   |      | $ | 201,394,032   |  
|Accounts receivabletrade and other, net                                                                                    |  |              | 21,973,228    |   |      |   | 18,595,531    |  
|Inventories                                                                                                                 |  |              | 59,716,920    |   |      |   | 55,004,153    |  
|Deferred taxes                                                                                                              |  |              | 12,763,948    |   |      |   | 10,859,160    |  
|Other current assets                                                                                                        |  |              | 12,768,611    |   |      |   | 11,630,527    |  
|                                                                                                                            |  |              |               |   |      |   |               |  
|Total current assets                                                                                                        |  |              | 146,438,269   |   |      |   | 297,483,403   |  
|                                                                                                                            |  |              |               |   |      |   |               |  
|PROPERTY AND EQUIPMENT, net                                                                                                 |  |              | 1,380,258,684 |   |      |   | 1,007,296,936 |  
|GOODWILL AND TRADEMARKS                                                                                                     |  |              | 46,716,151    |   |      |   | 20,225,297    |  
|OTHER INTANGIBLE ASSETS, net                                                                                                |  |              | 3,459,417     |   |      |   | 216,806       |  
|OTHER ASSETS, net                                                                                                           |  |              | 35,706,292    |   |      |   | 19,729,829    |  
|                                                                                                                            |  |              |               |   |      |   |               |  
|Total assets                                                                                                                |  | $            | 1,612,578,813 |   |      | $ | 1,344,952,271 |  
|                                                                                                                            |  |              |               |   |      |   |               |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                        |  |              |               |   |      |   |               |  
|CURRENT LIABILITIES:                                                                                                        |  |              |               |   |      |   |               |  
|Accounts payable                                                                                                            |  | $            | 90,489,190    |   |      | $ | 48,341,318    |  
|Accrued liabilities                                                                                                         |  |              | 123,098,491   |   |      |   | 84,955,488    |  
|Income taxes payable                                                                                                        |  |              | 5,060,885     |   |      |   | 971,175       |  
|Current portion of long-term notes and other obligations                                                                    |  |              | 1,851,741     |   |      |   | 1,700,496     |  
|                                                                                                                            |  |              |               |   |      |   |               |  
|Total current liabilities                                                                                                   |  |              | 220,500,307   |   |      |   | 135,968,477   |  
|                                                                                                                            |  |              |               |   |      |   |               |  
|LONG-TERM NOTES, NET OF CURRENT PORTION                                                                                     |  |              | 816,043,799   |   |      |   | 559,545,092   |  
|DEFERRED TAXES                                                                                                              |  |              | 21,635,903    |   |      |   | 13,343,631    |  
|OTHER LIABILITIES                                                                                                           |  |              | 37,628,343    |   |      |   | 35,198,105    |  
|                                                                                                                            |  |              |               |   |      |   |               |  
|Total liabilities                                                                                                           |  |              | 1,095,808,352 |   |      |   | 744,055,305   |  
|                                                                                                                            |  |              |               |   |      |   |               |  
|COMMITMENTS AND CONTINGENCIES                                                                                               |  |              |               |   |      |   |               |  
|STOCKHOLDERS EQUITY:                                                                                                       |  |              |               |   |      |   |               |  
|Common stock, $0.01 par value, 60,000,000 shares authorized, 21,593,823 and 25,607,573 issued and outstanding, respectively |  |              | 215,938       |   |      |   | 256,076       |  
|Additional paid-in capital                                                                                                  |  |              | 324,570,406   |   |      |   | 401,228,736   |  
|Deferred stock compensation                                                                                                 |  |              | (6,392,177    | ) |      |   | (4,281,670    | )
|Retained earnings                                                                                                           |  |              | 198,376,294   |   |      |   | 203,693,824   |  
|                                                                                                                            |  |              |               |   |      |   |               |  
|Total stockholders equity                                                                                                  |  |              | 516,770,461   |   |      |   | 600,896,966   |  
|                                                                                                                            |  |              |               |   |      |   |               |  
|Total liabilities and stockholders equity                                                                                  |  | $            | 1,612,578,813 |   |      | $ | 1,344,952,271 |  
|                                                                                                                            |  |              |               |   |      |   |               |  



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



41



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LANDRYS RESTAURANTS, INC.



CONSOLIDATED STATEMENTS OF INCOME



|                                                                           |  |                         |               |      |   |               |  |   |              
|-------------------------------------------------------------------------- |  | ----------------------- | ------------- | ---- | - | ------------- |  | - | -------------
|                                                                           |  | Year Ended December 31,
|                                                                           |  | 2005                    |               | 2004 |   | 2003         
|REVENUES                                                                   |  | $                       | 1,254,805,671 |      | $ | 1,167,475,165 |  | $ | 1,105,755,057
|OPERATING COSTS AND EXPENSES:                                              |  |                         |               |      |   |               |  |   |              
|Cost of revenues                                                           |  |                         | 333,027,693   |      |   | 326,108,007   |  |   | 321,783,377  
|Labor                                                                      |  |                         | 377,215,289   |      |   | 337,633,530   |  |   | 323,284,399  
|Other operating expenses                                                   |  |                         | 311,647,878   |      |   | 282,411,954   |  |   | 271,270,870  
|General and administrative expenses                                        |  |                         | 57,693,473    |      |   | 58,319,642    |  |   | 51,704,100   
|Depreciation and amortization                                              |  |                         | 63,492,747    |      |   | 57,294,123    |  |   | 49,091,466   
|Asset impairment expense                                                   |  |                         |              |      |   | 1,708,654     |  |   | 13,144,365   
|Pre-opening expenses                                                       |  |                         | 4,772,425     |      |   | 5,203,518     |  |   | 8,650,178    
|                                                                           |  |                         |               |      |   |               |  |   |              
|Total operating costs and expenses                                         |  |                         | 1,147,849,505 |      |   | 1,068,679,428 |  |   | 1,038,928,755
|OPERATING INCOME                                                           |  |                         | 106,956,166   |      |   | 98,795,737    |  |   | 66,826,302   
|OTHER EXPENSE (INCOME):                                                    |  |                         |               |      |   |               |  |   |              
|Interest expense, net                                                      |  |                         | 41,437,790    |      |   | 15,185,605    |  |   | 9,561,482    
|Other, net                                                                 |  |                         | 95,196        |      |   | 13,543,626    |  |   | 1,462,450    
|                                                                           |  |                         |               |      |   |               |  |   |              
|                                                                           |  |                         | 41,532,986    |      |   | 28,729,231    |  |   | 11,023,932   
|INCOME BEFORE INCOME TAXES                                                 |  |                         | 65,423,180    |      |   | 70,066,506    |  |   | 55,802,370   
|PROVISION FOR INCOME TAXES                                                 |  |                         | 20,608,144    |      |   | 3,544,778     |  |   | 10,888,517   
|                                                                           |  |                         |               |      |   |               |  |   |              
|NET INCOME                                                                 |  | $                       | 44,815,036    |      | $ | 66,521,728    |  | $ | 44,913,853   
|                                                                           |  |                         |               |      |   |               |  |   |              
|EARNINGS PER SHARE INFORMATION:                                            |  |                         |               |      |   |               |  |   |              
|                                                                           |  |                         |              
|BASIC                                                                      |  |                         |               |      |   |               |  |   |              
|Net income                                                                 |  | $                       | 2.01          |      | $ | 2.46          |  | $ | 1.63         
|Weighted average number of common shares outstanding                       |  |                         | 22,300,000    |      |   | 27,000,000    |  |   | 27,600,000   
|                                                                           |  |                         |              
|DILUTED                                                                    |  |                         |               |      |   |               |  |   |              
|Net income                                                                 |  | $                       | 1.95          |      | $ | 2.39          |  | $ | 1.59         
|Weighted average number of common and common share equivalents outstanding |  |                         | 23,000,000    |      |   | 27,800,000    |  |   | 28,325,000   



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



42



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LANDRYS RESTAURANTS, INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



|                                           |  |              |   |  |                          |         |   |                           |   |             |                  |  |   |            |   |  |   |             |   |  |   |              |  
|------------------------------------------ |  | ------------ | - |  | ------------------------ | ------- | - | ------------------------- | - | ----------- | ---------------- |  | - | ---------- | - |  | - | ----------- | - |  | - | ------------ | -
|                                           |  | Common Stock |   |  | AdditionalPaid-InCapital |         |   | DeferredStockCompensation |   |             | RetainedEarnings |  |   | Total      |  
|                                           |  | Shares       |   |  | Amount                   |         |   |                           |   |            
|BALANCE, December 31, 2002                 |  | 27,771,479   |   |  | $                        | 277,715 |   |                           | $ | 441,338,043 |                  |  | $ |           |   |  | $ | 121,790,044 |   |  | $ | 563,405,802  |  
|Net income                                 |  |             |   |  |                          |        |   |                           |   |            |                  |  |   |           |   |  |   | 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                  |  | 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  |  
|Net income                                 |  |             |   |  |                          |        |   |                           |   |            |                  |  |   |           |   |  |   | 44,815,036  |   |  |   | 44,815,036   |  
|Dividends paid                             |  |             |   |  |                          |        |   |                           |   |            |                  |  |   |           |   |  |   | (4,611,364  | ) |  |   | (4,611,364   | )
|Purchase of common stock held for treasury |  | (4,823,986   | ) |  |                          | (48,240 | ) |                           |   | (88,209,338 | )                |  |   |           |   |  |   | (45,521,202 | ) |  |   | (133,778,780 | )
|Exercise of stock options and tax benefit  |  | 710,236      |   |  |                          | 7,102   |   |                           |   | 8,752,008   |                  |  |   |           |   |  |   |            |   |  |   | 8,759,110    |  
|Issuance of restricted stock               |  | 100,000      |   |  |                          | 1,000   |   |                           |   | 2,799,000   |                  |  |   | (2,800,000 | ) |  |   |            |   |  |   |             |  
|Amortization of deferred compensation      |  |             |   |  |                          |        |   |                           |   |            |                  |  |   | 689,493    |   |  |   |            |   |  |   | 689,493      |  
|                                           |  |              |   |  |                          |         |   |                           |   |             |                  |  |   |            |   |  |   |             |   |  |   |              |  
|BALANCE December 31, 2005                  |  | 21,593,823   |   |  | $                        | 215,938 |   |                           | $ | 324,570,406 |                  |  | $ | (6,392,177 | ) |  | $ | 198,376,294 |   |  | $ | 516,770,461  |  
|                                           |  |              |   |  |                          |         |   |                           |   |             |                  |  |   |            |   |  |   |             |   |  |   |              |  



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



43



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##### Table of Contents

LANDRYS RESTAURANTS, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                  |  |                         |              |   |      |   |              |      |  |   |              |  
|--------------------------------------------------------------------------------- |  | ----------------------- | ------------ | - | ---- | - | ------------ | ---- |  | - | ------------ | -
|                                                                                  |  | Year Ended December 31, |             
|                                                                                  |  | 2005                    |              |   | 2004 |   |              | 2003 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                         |              |   |      |   |              |      |  |   |              |  
|Net income                                                                        |  | $                       | 44,815,036   |   |      | $ | 66,521,728   |      |  | $ | 44,913,853   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                         |              |   |      |   |              |      |  |   |              |  
|Depreciation and amortization                                                     |  |                         | 63,492,747   |   |      |   | 57,294,123   |      |  |   | 49,091,466   |  
|Asset impairment expense                                                          |  |                         |             |   |      |   | 1,708,654    |      |  |   | 13,144,365   |  
|Deferred tax provision (benefit)                                                  |  |                         | 9,698,299    |   |      |   | (3,937,176   | )    |  |   | 10,621,027   |  
|Deferred rent and other charges (income), net                                     |  |                         | 528,291      |   |      |   | 3,151,551    |      |  |   | 987,648      |  
|Financing prepayment expenses                                                     |  |                         |             |   |      |   | 16,649,009   |      |  |   |             |  
|Changes in assets and liabilities, net of acquisitions:                           |  |                         |              |   |      |   |              |      |  |   |              |  
|(Increase) decrease in trade and other receivables                                |  |                         | 2,136,302    |   |      |   | 5,834,208    |      |  |   | (3,342,672   | )
|(Increase) decrease in inventories                                                |  |                         | (1,862,207   | ) |      |   | (7,231,855   | )    |  |   | (6,651,658   | )
|(Increase) decrease in other assets                                               |  |                         | 434,688      |   |      |   | (4,377,660   | )    |  |   | 4,425,932    |  
|Increase (decrease) in accounts payable and accrued liabilities                   |  |                         | 31,812,862   |   |      |   | (23,999,700  | )    |  |   | 10,745,609   |  
|                                                                                  |  |                         |              |   |      |   |              |      |  |   |              |  
|Total adjustments                                                                 |  |                         | 106,240,982  |   |      |   | 45,091,154   |      |  |   | 79,021,717   |  
|                                                                                  |  |                         |              |   |      |   |              |      |  |   |              |  
|Net cash provided by operating activities                                         |  |                         | 151,056,018  |   |      |   | 111,612,882  |      |  |   | 123,935,570  |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                         |              |   |      |   |              |      |  |   |              |  
|Property and equipment additions and other                                        |  |                         | (118,487,055 | ) |      |   | (110,670,371 | )    |  |   | (163,376,622 | )
|Proceeds from disposition of property and equipment                               |  |                         | 4,049,764    |   |      |   | 6,095,733    |      |  |   |             |  
|Business acquisitions, net of cash acquired                                       |  |                         | (135,487,498 | ) |      |   | (12,930,565  | )    |  |   | (27,035,893  | )
|                                                                                  |  |                         |              |   |      |   |              |      |  |   |              |  
|Net cash used in investing activities                                             |  |                         | (249,924,789 | ) |      |   | (117,505,203 | )    |  |   | (190,412,515 | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                         |              |   |      |   |              |      |  |   |              |  
|Purchases of common stock for treasury                                            |  |                         | (125,651,865 | ) |      |   | (62,780,817  | )    |  |   | (8,417,411   | )
|Proceeds from exercise of stock options                                           |  |                         | 451,775      |   |      |   | 1,349,771    |      |  |   | 1,826,816    |  
|(Payments) borrowings of debt and related expenses, net                           |  |                         | (19,010,143  | ) |      |   | (176,313,705 | )    |  |   | (1,906,503   | )
|Proceeds (payments) on credit facility, net                                       |  |                         | 85,511,898   |   |      |   | (122,000,000 | )    |  |   | (49,000,000  | )
|Financing proceeds, net                                                           |  |                         |             |   |      |   | 536,603,189  |      |  |   | 148,076,160  |  
|Dividends paid                                                                    |  |                         | (4,611,364   | ) |      |   | (4,783,404   | )    |  |   | (2,768,997   | )
|                                                                                  |  |                         |              |   |      |   |              |      |  |   |              |  
|Net cash (used in) provided by financing activities                               |  |                         | (63,309,699  | ) |      |   | 172,075,034  |      |  |   | 87,810,065   |  
|NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS                                   |  |                         | (162,178,470 | ) |      |   | 166,182,713  |      |  |   | 21,333,120   |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                    |  |                         | 201,394,032  |   |      |   | 35,211,319   |      |  |   | 13,878,199   |  
|                                                                                  |  |                         |              |   |      |   |              |      |  |   |              |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                          |  | $                       | 39,215,562   |   |      | $ | 201,394,032  |      |  | $ | 35,211,319   |  
|                                                                                  |  |                         |              |   |      |   |              |      |  |   |              |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                |  |                         |              |   |      |   |              |      |  |   |              |  
|Cash paid during the year for:                                                    |  |                         |              |   |      |   |              |      |  |   |              |  
|Interest                                                                          |  | $                       | 45,297,362   |   |      | $ | 15,988,418   |      |  | $ | 8,675,327    |  
|Income taxes                                                                      |  | $                       | 4,838,396    |   |      | $ | 9,949,203    |      |  | $ | 5,698,821    |  



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



44



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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. is a national, diversified restaurant, hospitality and entertainment company principally
engaged in the ownership and operation of full service, casual dining restaurants, primarily under the names Landrys Seafood House, Joes Crab Shack, The Crab House, Charleys Crab, The Chart House and Saltgrass Steak House. In
addition, we own and operate domestic and license international rainforest themed restaurants under the trade name Rainforest Cafe.



On September 27, 2005, Landrys Gaming Inc., an unrestricted subsidiary of Landrys Restaurants, Inc., completed the acquisition of Golden
Nugget, Inc. (GN, formerly Poster Financial Group, Inc.), owner of the Golden Nugget Hotels and Casinos in downtown Las Vegas and Laughlin, Nevada as further described in Note 2.



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



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



Accounts Receivable



Accounts receivable is comprised primarily of amounts due from our credit card processor, receivables from national storage
and distribution companies and at December 31, 2005, casino and hotel receivables. The receivables from national storage and distribution companies arise when certain of our inventory items are conveyed to these companies at cost (including
freight and holding charges but without any general overhead costs). These conveyance transactions do not impact the consolidated statements of income as there is no 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. Accounts
receivable are reduced to reflect estimated fair values by an allowance for doubtful accounts based on historical collection experience and specific review of individual accounts. Receivables are written off when they are deemed to be uncollectible.
Also included in accounts receivable is income tax receivables of $1.1 million and $4.6 million in 2005 and 2004, respectively.



Inventories



Inventories consist primarily 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,
|                  |  | 2005         |            | 2004
|Food and beverage |  | $            | 43,004,866 |      | $ | 41,676,925
|Retail goods      |  |              | 16,712,054 |      |   | 13,327,228
|                  |  |              |            |      |   |           
|                  |  | $            | 59,716,920 |      | $ | 55,004,153
|                  |  |              |            |      |   |           



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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.



We compute 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 a long-term liability 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 2005, 2004 and 2003, we capitalized interest expense of approximately $1.6 million, $1.2 million and $2.1 million, respectively.



Our properties are reviewed for impairment on a property by property basis whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recovered. The recoverability of properties that are to be held and used is measured by comparison of the estimated future undiscounted cash flows associated with the asset to the carrying
amount of the asset. If such assets are considered to be impaired, an impairment charge is recorded in the amount by which the carrying amount of the assets exceeds their fair value. Properties to be disposed of are reported at the lower of their
carrying amount or fair value, reduced for estimated disposal costs, and are included in 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 $33.5 million, $29.6 million and $33.6 million in 2005, 2004 and
2003, respectively.



Goodwill and Other Intangible Assets



Goodwill and trademarks are not amortized, but instead tested for impairment
at least annually. Other intangible assets are amortized over their expected useful life or the life of the related agreement.



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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 we are 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 deferred rent and included in other long term liabilities.



Insurance



We maintain large deductible insurance policies related to property, general
liability and workers compensation coverage. Predetermined loss limits have been arranged with insurance companies to limit our per occurrence cash outlay. Accrued 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 fixed rate long-term debt instruments are estimated based on quoted market prices, where available,
or on the amount of future cash flows associated with each instrument, discounted using our current borrowing rate for comparable debt instruments. The estimated fair values of our long-term debt, including the current portions, are as follows:



|                                             |  |                |             |            |   |                |  |            |             |  |   |            
|-------------------------------------------- |  | -------------- | ----------- | ---------- | - | -------------- |  | ---------- | ----------- |  | - | -----------
|                                             |  | December 31,  
|                                             |  | 2005           |             | 2004      
|                                             |  | Carrying Value |             | Fair Value |   | Carrying Value |  | Fair Value
|7.5% Senior Notes due December 2014          |  | $              | 400,000,000 |            | $ | 376,000,000    |  | $          | 400,000,000 |  | $ | 400,000,000
|8.75% senior secured notes due December 2011 |  |                | 159,081,197 |            |   | 161,393,750    |  |            |            |  |   |           
|7.0% Seller note due November 2010           |  |                | 4,000,000   |            |   | 4,000,000      |  |            |            |  |   |           
|9.39% non-recourse note payable due May 2010 |  |                | 11,007,078  |            |   | 11,294,720     |  |            | 11,171,760  |  |   | 11,294,921 
|                                             |  |                |             |            |   |                |  |            |             |  |   |            
|                                             |  | $              | 574,088,275 |            | $ | 552,688,470    |  | $          | 411,171,760 |  | $ | 411,294,921
|                                             |  |                |             |            |   |                |  |            |             |  |   |            



We utilize interest
rate swap agreements to manage our exposure to interest rate risk. Our 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.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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



|                                                                         |  |                         |            |      |   |            |  |   |           
|------------------------------------------------------------------------ |  | ----------------------- | ---------- | ---- | - | ---------- |  | - | ----------
|                                                                         |  | Year Ended December 31,
|                                                                         |  | 2005                    |            | 2004 |   | 2003      
|Net income                                                               |  | $                       | 44,815,036 |      | $ | 66,521,728 |  | $ | 44,913,853
|                                                                         |  |                         |            |      |   |            |  |   |           
|Weighted average common shares outstandingbasic                         |  |                         | 22,300,000 |      |   | 27,000,000 |  |   | 27,600,000
|Dilutive common stock equivalents:                                       |  |                         |            |      |   |            |  |   |           
|Stock options                                                            |  |                         | 685,000    |      |   | 800,000    |  |   | 725,000   
|Restricted stock                                                         |  |                         | 15,000     |      |   |           |  |   |          
|                                                                         |  |                         |            |      |   |            |  |   |           
|Weighted average common and common share equivalents outstandingdiluted |  |                         | 23,000,000 |      |   | 27,800,000 |  |   | 28,325,000
|                                                                         |  |                         |            |      |   |            |  |   |           
|Net income per sharebasic                                               |  | $                       | 2.01       |      | $ | 2.46       |  | $ | 1.63      
|                                                                         |  |                         |            |      |   |            |  |   |           
|Net income per sharediluted                                             |  | $                       | 1.95       |      | $ | 2.39       |  | $ | 1.59      
|                                                                         |  |                         |            |      |   |            |  |   |           



We follow the
intrinsic value method of accounting for stock options, and as such do not record compensation expense related to grants where the exercise price is at or above our share price on the date of grant.



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



|                                                                                           |  |      |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                           |  | 2005 |            |   | 2004 |   |            | 2003 | 
|Net income, as reported                                                                    |  | $    | 44,815,036 |   |      | $ | 66,521,728 |      |  | $ | 44,913,853 |  
|Less: stock based compensation expense using fair value method, net of related tax effects |  |      | (1,625,000 | ) |      |   | (1,200,000 | )    |  |   | (2,100,000 | )
|                                                                                           |  |      |            |   |      |   |            |      |  |   |            |  
|Pro forma net income                                                                       |  | $    | 43,190,036 |   |      | $ | 65,321,728 |      |  | $ | 42,813,853 |  
|                                                                                           |  |      |            |   |      |   |            |      |  |   |            |  
|Earnings per share                                                                         |  |      |            |   |      |   |            |      |  |   |            |  
|Basic, as reported                                                                         |  | $    | 2.01       |   |      | $ | 2.46       |      |  | $ | 1.63       |  
|Basic, pro forma                                                                           |  | $    | 1.94       |   |      | $ | 2.42       |      |  | $ | 1.55       |  
|Diluted, as reported                                                                       |  | $    | 1.95       |   |      | $ | 2.39       |      |  | $ | 1.59       |  
|Diluted, pro forma                                                                         |  | $    | 1.88       |   |      | $ | 2.35       |      |  | $ | 1.51       |  



The fair value of each
option grant in 2004 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: expected lives of 6 years, expected stock price volatility of approximately 40%, dividend yield of
0.7% and a risk-free interest rate of approximately 3.9%. The weighted average fair value per share of options granted during 2004 was $11.83. There were no stock options granted during 2005 and only 16,000 options were granted in 2003 which were
not deemed material for the above calculations.



Cash Equivalents



We consider investments with a maturity of three months
or less when purchased to be cash equivalents.



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



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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



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 our
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. 123R, Share-Based
Payments. This statement requires the expensing of stock options in the financial statements for periods no later than annual periods beginning after June 15, 2005. SFAS No. 123R requires companies to use either the modified-prospective
or modified-retrospective transition method. We will implement the statement during the first quarter of 2006 using the modified-prospective transition method and we expect that the recognition requirements under SFAS No. 123 will be reasonably
similar to the fair value results included in our pro forma disclosures assuming similar assumptions, stock prices and number of grants. Additional grants would increase compensation expense.



In March 2005, the SEC issued Staff Accounting Bulletin 107 (SAB 107) to
simplify some of the implementation challenges of SFAS 123R. In particular, SAB 107 provides supplemental implementation guidance on SFAS 123R including guidance on valuation methods, classification of compensation expense, inventory capitalization
of share-based compensation costs, income tax effects, disclosures in Managements Discussion and Analysis and several other issues. We will apply the principles of SAB 107 in conjunction with the adoption of SFAS 123R.



In May 2005, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 154, Accounting Changes and Error Corrections, which replaces Accounting Principles Board (APB) No. 20, Accounting Changes, and Statement of Financial Accounting Standards No. 3, Reporting
Accounting Changes in Interim Financial Statements. SFAS 154 applies to all voluntary changes in accounting principle, and changes the requirements for accounting and reporting a change in accounting principles. FAS 154 requires retroactive
application to prior periods financial statements of a voluntary change in accounting principle unless it is impracticable to do so. APB 20 previously required that most voluntary changes in accounting principle be recognized with a cumulative
effect adjustment in net income of the period of the change. FAS 154 is effective for accounting changes made in annual periods beginning after December 15, 2005.



In October 2005, the FASB issued FASB Staff Position (FSP) 13-1 Accounting for Rental Costs Incurred During a
Construction Period. The FSP requires rental costs associated with both ground and building operating leases that are incurred during a construction period be expensed on a straight line basis starting from the beginning of the lease term. The
statement is effective for periods beginning after December 15, 2005. Adoption of FSP 13-1 is not expected to have a material impact on the Companys consolidated financial statements.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2.  ACQUISITIONS



On September 27, 2005, we completed the acquisition of 100 percent of the capital stock of GN, owner of the Golden
Nugget Hotels and Casinos in downtown Las Vegas and Laughlin, Nevada, for approximately $163.0 million in cash, the assumption of $155.0 million of 8.75% Senior Secured Notes due 2011 and $27.0 million under an existing Senior Revolving Credit
facility and the further assumption of certain working capital, including $27.5 million in cash. The results of GNs operations have been included in our consolidated financial statements since the acquisition date. The assets acquired and
liabilities assumed are included in the accompanying balance sheet as of December 31, 2005 at estimated fair values as determined by third party appraisals and management estimates based on currently available information and preliminary plans
for future operations. The allocation of purchase price is preliminary and is subject to revision based on the final determination of fair values. A summary of the assets acquired and liabilities assumed in the acquisition follows:



|                                     |  |   |              |  
|------------------------------------ |  | - | ------------ | -
|Current assets                       |  | $ | 42,597,414   |  
|Property and equipment               |  |   | 319,770,221  |  
|Intangible assets                    |  |   | 29,620,000   |  
|Other long-term assets               |  |   | 11,156,347   |  
|                                     |  |   |              |  
|Total assets acquired                |  |   | 403,143,982  |  
|Current liabilities                  |  |   | (54,239,750  | )
|Long-term debt                       |  |   | (185,904,232 | )
|                                     |  |   |              |  
|Total liabilities assumed or created |  |   | (240,143,982 | )
|Net assets acquired                  |  |   | 163,000,000  |  
|Less: Cash acquired                  |  |   | (27,512,502  | )
|                                     |  |   |              |  
|Net cash paid                        |  | $ | 135,487,498  |  
|                                     |  |   |              |  



Acquired intangible
assets include $26.2 million assigned to the trademark Golden Nugget, which has been in use for more than 50 years and is one of the most recognizable names in the casino industry. Also included is $3.4 million assigned to customer lists
underlying the slot player clubs at each of the casinos. There was no goodwill recorded in connection with the transaction.



As a result of the acquisition, we have recorded direct acquisition costs for the estimated incremental costs to rationalize activities at the two
locations and for associated employee contract terminations and severance costs. Accounting principles generally accepted in the United States, provide that these direct acquisition 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. The acquisition liabilities included in the purchase price allocation aggregate approximately $4.9 million.



The following unaudited pro forma financial information presents the
consolidated results of operations as if the acquisition occurred on January 1, 2005, after including certain pro forma adjustments for interest expense, depreciation and amortization, and income taxes.



|                           |  |                         |               |      |   |              
|-------------------------- |  | ----------------------- | ------------- | ---- | - | -------------
|                           |  | Year ended December 31,
|                           |  | 2005                    |               | 2004
|Revenue                    |  | $                       | 1,441,586,485 |      | $ | 1,424,936,787
|Net income                 |  | $                       | 43,588,282    |      | $ | 62,186,411   
|Basic earnings per share   |  | $                       | 1.95          |      | $ | 2.30         
|Diluted earnings per share |  | $                       | 1.90          |      | $ | 2.24         



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The pro forma financial information is not necessarily indicative of the combined results of
operations had the transaction occurred on January 1, 2005 or the results of operations that may be obtained in the future.



During 2003, we made several individual property acquisitions that aggregated $27.0 million, plus $11.4 million of assumed debt, and included $5.1 million
in goodwill.



3. PROPERTY AND EQUIPMENT AND OTHER ASSETS



Property and equipment is comprised of the following:



|                                  |  |              |               |   |      |   |               |  
|--------------------------------- |  | ------------ | ------------- | - | ---- | - | ------------- | -
|                                  |  | December 31, |              
|                                  |  | 2005         |               |   | 2004 |  
|Land                              |  | $            | 304,029,054   |   |      | $ | 178,365,122   |  
|Buildings and improvements        |  |              | 476,878,646   |   |      |   | 272,152,965   |  
|Furniture, fixtures and equipment |  |              | 334,459,193   |   |      |   | 273,446,996   |  
|Leasehold improvements            |  |              | 563,172,902   |   |      |   | 545,402,565   |  
|Construction in progress          |  |              | 33,975,852    |   |      |   | 16,209,718    |  
|                                  |  |              |               |   |      |   |               |  
|                                  |  |              | 1,712,515,647 |   |      |   | 1,285,577,366 |  
|Lessaccumulated depreciation     |  |              | (332,256,963  | ) |      |   | (278,280,430  | )
|                                  |  |              |               |   |      |   |               |  
|Property and equipment, net       |  | $            | 1,380,258,684 |   |      | $ | 1,007,296,936 |  
|                                  |  |              |               |   |      |   |               |  



We continually
evaluate 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. We recorded asset impairment depreciation charges of approximately $1.7 million and $13.1 million in 2004 and 2003, respectively, representing the difference between the estimated fair value and carrying value for those
restaurant properties. The impairment in 2004 related to one under performing unit and the 2003 impairment related to six underperforming and three closed 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:



|                                             |  |                         |   |      |   |           |  |   |           
|-------------------------------------------- |  | ----------------------- | - | ---- | - | --------- |  | - | ----------
|                                             |  | Year ended December 31,
|                                             |  | 2005                    |   | 2004 |   | 2003     
|Asset Impairment                             |  | $                       |  |      | $ | 1,700,000 |  | $ | 13,100,000
|Accrued Estimated Lease Termination Payments |  | $                       |  |      | $ |          |  | $ | 1,300,000 
|                                             |  |                         |   |      |   |           |  |   |           
|                                             |  | $                       |  |      | $ | 1,700,000 |  | $ | 14,400,000
|                                             |  |                         |   |      |   |           |  |   |           



We consider 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.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Other current assets are comprised of the following:



|                                                           |  |              |            |      |   |           
|---------------------------------------------------------- |  | ------------ | ---------- | ---- | - | ----------
|                                                           |  | December 31,
|                                                           |  | 2005         |            | 2004
|Prepaid expenses                                           |  | $            | 5,847,792  |      | $ | 4,673,319 
|Assets held for sale (expected to be sold within one year) |  |              | 2,941,507  |      |   | 5,390,648 
|Deposits                                                   |  |              | 3,979,312  |      |   | 1,566,560 
|                                                           |  |              |            |      |   |           
|                                                           |  | $            | 12,768,611 |      | $ | 11,630,527
|                                                           |  |              |            |      |   |           



Other expense (income)
for 2005 is not material. Other expense (income) for 2004 is primarily make whole payments and related fees aggregating $14.6 million associated with the pre-payment of our $150.0 million in senior notes and Former Bank Credit Facility offset by
$1.1 million in business interruption recoveries related to storm damage. Other expense (income) for 2003 is primarily expenses related to abandoned development projects.



4.  ACCRUED LIABILITIES



Accrued liabilities are comprised of the following:



|                                                    |  |      |             |      |   |           
|--------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------
|                                                    |  | 2005 |             | 2004
|Payroll and related costs                           |  | $    | 27,174,355  |      | $ | 16,468,491
|Rent and insurance                                  |  |      | 30,112,058  |      |   | 25,753,353
|Taxes, other than payroll and income taxes          |  |      | 22,250,385  |      |   | 19,064,713
|Deferred revenue (gift cards and certificates)      |  |      | 15,308,080  |      |   | 12,751,757
|Accrued interest                                    |  |      | 2,805,847   |      |   | 507,532   
|Casino deposits, outstanding chips and other gaming |  |      | 9,851,072   |      |   |          
|Other                                               |  |      | 15,596,694  |      |   | 10,409,642
|                                                    |  |      |             |      |   |           
|                                                    |  | $    | 123,098,491 |      | $ | 84,955,488
|                                                    |  |      |             |      |   |           



5.  DEBT



In connection with the acquisition of GN, one of our unrestricted
subsidiaries assumed $155.0 million in 8.75% senior secured notes due December 2011 with a fair value of $159.3 million. The notes pay interest on a semi-annual basis in June and December. The notes are guaranteed, jointly and severally, by all of
GNs current and future restricted subsidiaries on a senior secured basis. The notes are collateralized by a pledge of capital stock of GNs future restricted subsidiaries and a security interest in substantially all of GNs and the
guarantors current and future assets that is junior to the security interest granted to the lenders under GNs senior revolving credit facility. We are filing the results of operations of GN in a separate report on Form 10-K in order to
comply with the reporting requirements set forth in the indenture governing these notes.



Also, as a result of the acquisition of GN, we assumed $27.0 million in debt under a $43.0 million bank senior secured revolving credit facility. The revolving credit facility bears interest at Libor or at banks
base rate plus a financing spread, 2.0% for Libor and 1.0% for base rate borrowings at December 31, 2005 and matures in January 2009. The financing spread and commitment fee increase or decrease based on a financial leverage ratio as defined in
the credit agreement. As of December 31, 2005, $2.5 million in letters of credit were outstanding with $18.5 million of available borrowing capacity.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The GN debt agreements contain various restrictive covenants including minimum EBITDA, fixed charge
and financial leverage ratios, limitations on capital expenditures, and other restricted payments as defined in the agreements. As of December 31, 2005, GN was in compliance with all such covenants.



In December 2004, we entered into a $450.0 million Bank Credit
Facility and Term Loan consisting of a $300.0 million revolving credit facility and a $150.0 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, 1.50% for Libor and 0.50% for base rate borrowings at December 31, 2005. 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, 2005, 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. We and certain of our guarantor subsidiaries granted liens on substantially all real and personal property
as security under the Bank Credit Facility and Term Loan. As of December 31, 2005 our average interest rate or floating-rate debt was 6.3%, we had approximately $10.1 million in letters of credit outstanding and available borrowing capacity of
$215.9 million.



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



Net proceeds from the $450.0 million Bank Credit Facility and Term Loan 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, we entered into two interest swap
agreements with the objective of managing our exposure to interest rate risk and lowering interest expense. The first agreement was effective December 28, 2004, maturing in December 2014, for a notional amount of $50.0 million and interest at
Libor plus 2.38%. The second agreement was effective March 10, 2005, also maturing December 2014, for a notional amount of $50.0 million and interest at Libor plus 2.34%. Our interest rate swap agreements qualify as fair value hedges and meet
the criteria for the short cut method under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The aggregate estimated fair value of these swaps at December 31, 2005 was a liability of $1.1
million, which is included in other liabilities with an offsetting adjustment to the carrying value of the debt on our consolidated balance sheet.



Our debt agreements contain various restrictive covenants including minimum fixed charge, net worth, and financial leverage ratios as well as limitations
on dividend payments, capital expenditures and other restricted payments as defined in the agreements. At December 31, 2005, we were in compliance with all such covenants.



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



Principal payments for all long-term debt aggregate $1,852,000 in 2006, $1,883,000 in 2007, $1,762,000 in 2008, $97,740,000 in 2009, $156,671,000 in 2010 and $555,000,000 thereafter.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Long-term debt is comprised of the following:



|                                                                                                                                |  |              |             |   |      |   |             |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                |  | December 31, |            
|                                                                                                                                |  | 2005         |             |   | 2004 |  
|$300.0 million Bank Syndicate Credit Facility, Libor + 1.50% interest only, due December 2009                                   |  | $            | 74,000,000  |   |      | $ |            |  
|$150.0 million Term loan facility, Libor + 1.75%, interest paid quarterly, $375,000 principal paid quarterly, due December
2010 |  |              | 148,500,000 |   |      |   | 150,000,000 |  
|$400.0 million Senior Notes, 7.5% interest only, due December 2014                                                              |  |              | 400,000,000 |   |      |   | 400,000,000 |  
|Non-recourse long-term note payable, 9.39% interest, principal and interest aggregate $101,762 monthly, due May 2010            |  |              | 11,007,078  |   |      |   | 11,171,760  |  
|Other long-term notes payable with various interest rates, principal and interest paid monthly                                  |  |              | 399,004     |   |      |   | 163,057     |  
|$155.0 million GN senior secured notes, 8.75% interest only, due December 2011                                                  |  |              | 159,081,197 |   |      |   |            |  
|$43.0 million GN senior secured revolving credit facility, Libor + 2.0%, interest only, due January 2009                        |  |              | 22,001,719  |   |      |   |            |  
|$4.0 million seller note, 7.0%, interest paid monthly, due November 2010                                                        |  |              | 4,000,000   |   |      |   |            |  
|Interest rate swap                                                                                                              |  |              | (1,093,458  | ) |      |   | (89,229     | )
|                                                                                                                                |  |              |             |   |      |   |             |  
|Total debt                                                                                                                      |  |              | 817,895,540 |   |      |   | 561,245,588 |  
|Less current portion                                                                                                            |  |              | (1,851,741  | ) |      |   | (1,700,496  | )
|                                                                                                                                |  |              |             |   |      |   |             |  
|Long-term portion                                                                                                               |  | $            | 816,043,799 |   |      | $ | 559,545,092 |  
|                                                                                                                                |  |              |             |   |      |   |             |  



6.  STOCKHOLDERS
EQUITY



In connection with our stock buy back programs, we
repurchased into treasury approximately 4,824,000, 2,292,000, and 469,000 shares of common stock for approximately $133.8 million, $62.8 million and $8.4 million in 2005, 2004 and 2003, respectively. Cumulative repurchases as of December 31,
2005 were 17.6 million shares at a cost of approximately $290.5 million.



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, this was increased to $0.20 per share, paid in quarterly
installments of $0.05 per share.



We maintain two stock option
plans, which were originally adopted in 1993, (the Stock Option Plans), as amended, pursuant to which options may be granted to our eligible employees and non-employee directors for the purchase of an aggregate of 2,750,000 shares of our common
stock. 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.



We also maintain the 1995 Flexible Incentive Plan, which was adopted in 1995, (Flex Plan), as amended, for our key
employees. 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 the Compensation 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.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In March 2003, we established the 2002 Employee/Rainforest Conversion Plan pursuant to which stock
options may be granted to employees, non-employee directors and consultants for up to an aggregate of 2,162,500 shares of common stock. The Compensation Committee of the Board of Directors determines the number of shares, prices and vesting schedule
of individual grants.



In June 2003, we established an Equity
Incentive Plan pursuant to which stock options or restricted stock may be granted to eligible employees for an aggregate of 700,000 shares. The Compensation Committee of the Board of Directors determines the number of shares, prices, and vesting
schedule of individual grants. In addition, we 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 2004,
100,000 restricted common shares were issued subject to vesting on the tenth anniversary. In February 2005, an additional 100,000 restricted common shares were issued with similar vesting terms. In February 2006, an additional 100,000 restricted
common shares were also 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, we issued approximately 500,000 vested stock options to employees of Rainforest Cafe as replacement for existing options outstanding at the date of the merger. The fair value of these options was included in the purchase price of
Rainforest Cafe.



At December 31, 2005, options for
1,897,252 shares were outstanding at prices ranging from $6.00 to $27.50 per share. As of December 31, 2005, 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:



|                                      |  |           |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      
|------------------------------------- |  | --------- | - | ---- | -------------------- | ----- | ------ | --------- | - | -------------------- | - | ------ |  | --------- | -------------------- |  | - | -----
|                                      |  | 2005      |   | 2004 |                      | 2003 
|                                      |  | Shares    |   |      | AverageExercisePrice |       | Shares |           |   | AverageExercisePrice |   | Shares |  |           | AverageExercisePrice
|Options outstanding beginning of year |  | 2,638,323 |   |      | $                    | 15.12 |        | 2,410,874 |   |                      | $ | 11.97  |  | 2,694,470 |                      |  | $ | 11.57
|Granted                               |  |          |   |      | $                    |      |        | 501,500   |   |                      | $ | 27.50  |  | 16,000    |                      |  | $ | 20.26
|Exercised                             |  | (710,236  | ) |      | $                    | 12.11 |        | (169,851  | ) |                      | $ | 10.30  |  | (251,196  | )                    |  | $ | 7.28 
|Terminated                            |  | (30,835   | ) |      | $                    | 16.29 |        | (104,200  | ) |                      | $ | 11.69  |  | (48,400   | )                    |  | $ | 14.36
|                                      |  |           |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      
|Options outstanding end of year       |  | 1,897,252 |   |      | $                    | 16.22 |        | 2,638,323 |   |                      | $ | 15.12  |  | 2,410,874 |                      |  | $ | 11.97
|                                      |  |           |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      
|Options exercisable end of year       |  | 1,356,852 |   |      | $                    | 13.44 |        | 1,843,114 |   |                      | $ | 12.04  |  | 1,902,274 |                      |  | $ | 11.82
|                                      |  |           |   |      |                      |       |        |           |   |                      |   |        |  |           |                      |  |   |      



The following table
provides certain information with respect to stock options outstanding as of December 31, 2005:



|                         |  |                          |  |                                |       |                                           |    
|------------------------ |  | ------------------------ |  | ------------------------------ | ----- | ----------------------------------------- | ---
|Range of Exercise Prices |  | Stock OptionsOutstanding |  | Weighted AverageExercise Price |       | Weighted AverageRemaining LifeOutstanding
|< $9.00                  |  | 688,682                  |  | $                              | 7.73  |                                           | 4.5
|$9.00-$13.50             |  | 164,996                  |  | $                              | 13.53 |                                           | 1.7
|$13.51-$20.25            |  | 519,949                  |  | $                              | 17.19 |                                           | 6.6
|> $20.25                 |  | 523,625                  |  | $                              | 27.26 |                                           | 8.3
|                         |  |                          |  |                                |       |                                           |    
|                         |  | 1,897,252                |  | $                              | 16.22 |                                           | 5.9
|                         |  |                          |  |                                |       |                                           |    



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



7.  INCOME TAXES



An analysis of the provision for income taxes for the years ended December 31, 2005, 2004, and 2003 is as follows:



|                      |  |      |            |      |   |            |      |  |   |           
|--------------------- |  | ---- | ---------- | ---- | - | ---------- | ---- |  | - | ----------
|                      |  | 2005 |            | 2004 |   |            | 2003
|Tax Provision:        |  |      |            |      |   |            |      |  |   |           
|Current income taxes  |  | $    | 10,909,845 |      | $ | 7,481,954  |      |  | $ | 267,490   
|Deferred income taxes |  |      | 9,698,299  |      |   | (3,937,176 | )    |  |   | 10,621,027
|                      |  |      |            |      |   |            |      |  |   |           
|Total provision       |  | $    | 20,608,144 |      | $ | 3,544,778  |      |  | $ | 10,888,517
|                      |  |      |            |      |   |            |      |  |   |           



Our effective tax
rate, for the years ended December 31, 2005, 2004, and 2003, differs from the federal statutory rate as follows:



|                                                                |  |      |   |  |       |   |  |       |  
|--------------------------------------------------------------- |  | ---- | - |  | ----- | - |  | ----- | -
|                                                                |  | 2005 |   |  | 2004  |   |  | 2003  |  
|Statutory rate                                                  |  | 35.0 | % |  | 35.0  | % |  | 35.0  | %
|FICA tax credit                                                 |  | (9.8 | ) |  | (8.2  | ) |  | (9.3  | )
|State income tax, net of federal tax benefit                    |  | 4.5  |   |  | 2.5   |   |  | 3.7   |  
|Recognition of tax carryforward assets and other tax attributes |  | (0.8 | ) |  | (26.4 | ) |  | (11.3 | )
|Other                                                           |  | 2.6  |   |  | 2.2   |   |  | 1.4   |  
|                                                                |  |      |   |  |       |   |  |       |  
|                                                                |  | 31.5 | % |  | 5.1   | % |  | 19.5  | %
|                                                                |  |      |   |  |       |   |  |       |  



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



|                                                     |  |      |             |   |      |   |             |  
|---------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                     |  | 2005 |             |   | 2004 |  
|Deferred Income Taxes:                               |  |      |             |   |      |   |             |  
|Current assetsaccruals and other                    |  | $    | 12,764,000  |   |      | $ | 10,859,000  |  
|                                                     |  |      |             |   |      |   |             |  
|Non-current assets:                                  |  |      |             |   |      |   |             |  
|AMT credit, FICA credit carryforwards, and other     |  | $    | 32,870,000  |   |      | $ | 32,488,000  |  
|Net operating loss carryforwards                     |  |      | 27,777,000  |   |      |   | 28,317,000  |  
|Deferred rent and unfavorable leases                 |  |      | 8,123,000   |   |      |   | 8,543,000   |  
|Valuation allowance for NOL and credit carryforwards |  |      | (8,713,000  | ) |      |   | (7,220,000  | )
|                                                     |  |      |             |   |      |   |             |  
|Non-current deferred tax asset                       |  |      | 60,057,000  |   |      |   | 62,128,000  |  
|Non-current liabilitiesproperty and other           |  |      | (81,693,000 | ) |      |   | (75,471,000 | )
|                                                     |  |      |             |   |      |   |             |  
|Net non-current tax asset (liability)                |  | $    | (21,636,000 | ) |      | $ | (13,343,000 | )
|                                                     |  |      |             |   |      |   |             |  
|Total net deferred tax asset (liability)             |  | $    | (8,872,000  | ) |      | $ | (2,484,000  | )
|                                                     |  |      |             |   |      |   |             |  



At December 31,
2005 and 2004, we had operating loss carryovers for Federal Income Tax purposes of $75.2 million and $76.3 million, respectively, which expire in 2018 through 2025. These operating loss carryovers, credits, and certain 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, we 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 2005 and 2004, there was a reduction of the valuation allowance and deferred tax liabilities aggregating $1.1 million and $18.5 million,
respectively. The valuation allowance and certain deferred tax liabilities were reduced for the following reasons: NOL utilizations; the strength of the 2004 earnings; our future forecasted taxable income profitability; the completion of a
successful integration of Rainforest Café from a stand-alone loss entity to a profitable wholly-owned subsidiary



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



of the Company; the approaching end-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 will more likely than not be realized.



The 2005 state rate increased over prior year due to certain state income tax
filing positions. This increase in the state rate was partially offset by a reduction in our overall state effective tax rate realized primarily due to the acquisition of GN in Nevada, a jurisdiction with no income tax. We are currently being
audited by several states with regard to state income and franchise tax for periods prior to 2005.



At December 31, 2005 and 2004, we have general business tax credit carryovers and minimum tax credit carryovers of $28.0 million and $31.0 million,
respectively. The general business carryover includes $1.5 million from Saltgrass Steak House, which is fully reserved. The general business credit carryovers expire in 2012 through 2025, while the minimum tax credit carryovers have no expiration
date. The use of these credits is limited if we are subject to the alternative minimum tax. We believe it is more likely than not that we will generate sufficient income in future years to utilize the non-reserved credits.



The Internal Revenue Service (IRS) has examined our Federal Income Tax
Returns and certain pre-acquisition returns for Rainforest Cafe for years 1997 through 2001. In 2004, these examinations were completed and closed without adjustment. The IRS has examined the Federal Income Tax Return of a 2001 pre-acquisition
return for Saltgrass Steak House. The examination has been completed and closed with no material adjustment.



8.  COMMITMENTS AND CONTINGENCIES



Lease Commitments



We have entered into lease
commitments for restaurant facilities as well as certain fixtures, equipment and leasehold improvements. Under most of the facility lease agreements, we 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 $57.5 million, $56.4 million and $55.2 million, during the years ended
December 31, 2005, 2004, and 2003, respectively. Percentage rent included in rent expense was $13.8 million, $13.6 million, and $12.3 million, for 2005, 2004 and 2003, respectively.



In 2004, we entered into an aggregate $25.5 million equipment operating lease agreement replacing two existing agreements
and including additional equipment. The lease expires in 2014. We guarantee a minimum residual value related to the equipment of approximately 66% of the total amount funded under the agreement. We may purchase the leased equipment throughout the
lease term for an amount equal to the unamortized lease balance. We believe that the equipments fair value is sufficient such 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 in our 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.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The aggregate amounts of minimum operating lease commitments maturing in each of the five years and
thereafter subsequent to December 31, 2005 are as follows:



|                      |  |   |            
|--------------------- |  | - | -----------
|2006                  |  | $ | 47,758,691 
|2007                  |  |   | 46,172,751 
|2008                  |  |   | 40,814,345 
|2009                  |  |   | 37,320,509 
|2010                  |  |   | 34,190,353 
|Thereafter            |  |   | 290,208,754
|                      |  |   |            
|Total minimum rentals |  | $ | 496,465,403
|                      |  |   |            



Building Commitments



As of December 31, 2005, we had future development,
land purchases and construction commitments expected to be expended within the next twelve months of approximately $21.6 million, including completion of construction of certain new restaurants. In addition, we have committed $4.9 million through
2006 for the renovation of the Tower of the Americas in San Antonio, Texas which we will operate for at least the next 15 years.



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



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



During November 2003, we
purchased two casual Italian restaurants. Under the purchase agreement, we are committed to building an additional four casual Italian restaurants by the end of 2008, 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 expansion period.



Employee Benefits and Other



We sponsor qualified defined contribution retirement plans
(401(k) Plan) covering eligible salaried employees. The 401(k) Plans allows eligible employees to contribute, subject to Internal Revenue Service limitations on total annual contributions, up to 100% of their base compensation as defined in the
401(k) Plans, to various investment funds. We match in cash at a discretionary rate which totalled $.3 million in 2005. Employee contributions vest immediately while our contributions vest 20% annually beginning in the participants second year
of eligibility for restaurant and hospitality employees and in the participants first year of eligibility for casino employees.



We also initiated non-qualified defined contribution retirement plans (the Plans) covering certain management employees. The Plans allow
eligible employees to defer receipt of their base compensation and of their eligible bonuses, as defined in the Plans. We match in cash at a discretionary rate which totalled $.3 million in 2005. Employee contributions vest immediately while our
contributions vest 20% annually. We established a Rabbi Trust to fund the Plans obligation for the restaurant and hospitality employees. The market value of the trust assets is included in other assets, and the liability to the Plans
participants is included in other liabilities.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Our casino employees at the Golden Nugget in Las Vegas, Nevada that are members of various unions are
covered by union-sponsored, collective bargained, multi-employer health and welfare and defined benefit pension plans. We recorded an expense of $2.2 million for our obligation to these plans since the September 27, 2005 acquisition date of GN
(Note 2). The plans sponsors have not provided sufficient information to permit us to determine its share of unfunded vested benefits, if any. However, based on available information, we do not believe that unfunded amounts attributable to our
casino operations are material.



We are self-insured for most
health care benefits for our non-union casino employees. The liability for claims filed and estimates of claims incurred but not reported is included in accrued liabilities in the accompanying consolidated balance sheet as of
December 31, 2005.



In connection with the Galveston
Convention Center Management Contract, we agreed to fund operating losses, if any, subject to certain rights of reimbursement. Under the agreements, we have the right to one-half of any profits generated by the operation of the Convention Center.



Litigation and Claims



One February 18, 2005, and subsequently amended, a purported class
action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in San Bernardino by Michael D. Harrison, et. al. Subsequently, on September 20, 2005, another purported class action lawsuit against Rainforest Cafe,
Inc. was filed in the Superior Court of California in Los Angeles by Dustin Steele, et. al. On January 26, 2006, both lawsuits were consolidated into one action by the state Superior Court in San Bernardino. The lawsuits allege that Rainforest
Cafe violated wage and hour laws, including not providing meal and rest breaks, uniform violations and failure to pay overtime. The Plaintiffs seek to recover damages, including unpaid wages, reimbursement for uniform expenses and penalties imposed
by state law. The Company denies Plaintiffs claims and intends to vigorously defend this matter.



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



9.  SEGMENT INFORMATION



Our operating segments are aggregated into reportable business segments based primarily on the similarity of their economic characteristics, products, services, and delivery methods. Following the acquisition of the
Golden Nugget Hotels and Casinos on September 27, 2005 (Note 2), it was determined that we operate two reportable business segments as follows:



Restaurant and Hospitality



Our restaurants operate 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, 2005, we owned and operated 311 full-service and limited-service restaurants in 35 states and were the second largest full-service seafood restaurant operator in the United
States. We are also engaged in the ownership and operation of select hospitality and entertainment businesses that complement our restaurant operations and provide our customers with unique dining, leisure and entertainment experiences.



Gaming



We operate the Golden Nugget Hotels and Casinos in Las Vegas and Laughlin,
Nevada. These locations emphasize the creation of the best possible gaming and entertainment experience for their customers by providing a combination of comfortable and attractive surroundings. This is accomplished through luxury rooms and
amenities coupled with competitive gaming tables and superior player rewards programs.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The accounting policies of the segments are the same as described in Note 1. We evaluate segment
performance based on unit level profit, which excludes general and administrative expense, depreciation expense, net interest expense and other non-operating income or expense. Financial information by reportable business segment is as follows:



|                                           |  |      |               |      |   |               |  |   |              
|------------------------------------------ |  | ---- | ------------- | ---- | - | ------------- |  | - | -------------
|                                           |  | 2005 |               | 2004 |   | 2003         
|Revenue:                                   |  |      |               |      |   |               |  |   |              
|Restaurant and Hospitality                 |  | $    | 1,189,164,944 |      | $ | 1,167,475,165 |  | $ | 1,105,755,057
|Gaming                                     |  |      | 65,640,727    |      |   |              |  |   |             
|                                           |  |      |               |      |   |               |  |   |              
|Consolidated revenue                       |  | $    | 1,254,805,671 |      | $ | 1,167,475,165 |  | $ | 1,105,755,057
|                                           |  |      |               |      |   |               |  |   |              
|Unit level profit:                         |  |      |               |      |   |               |  |   |              
|Restaurant and Hospitality                 |  | $    | 221,099,886   |      | $ | 221,321,674   |  | $ | 189,416,411  
|Gaming                                     |  |      | 11,814,925    |      |   |              |  |   |             
|                                           |  |      |               |      |   |               |  |   |              
|Total unit level profit                    |  | $    | 232,914,811   |      | $ | 221,321,674   |  | $ | 189,416,411  
|                                           |  |      |               |      |   |               |  |   |              
|Depreciation, amortization and impairment: |  |      |               |      |   |               |  |   |              
|Restaurant and Hospitality                 |  | $    | 60,737,897    |      | $ | 59,002,777    |  | $ | 62,235,831   
|Gaming                                     |  |      | 2,754,850     |      |   |              |  |   |             
|                                           |  |      |               |      |   |               |  |   |              
|                                           |  | $    | 63,492,747    |      | $ | 59,002,777    |  | $ | 62,235,831   
|                                           |  |      |               |      |   |               |  |   |              
|Segment assets:                            |  |      |               |      |   |               |  |   |              
|Restaurant and Hospitality                 |  | $    | 1,018,786,122 |      | $ | 977,299,092   |  | $ | 939,427,297  
|Gaming                                     |  |      | 399,255,216   |      |   |              |  |   |             
|Corporate and other(1)                     |  |      | 194,537,475   |      |   | 367,653,179   |  |   | 165,456,188  
|                                           |  |      |               |      |   |               |  |   |              
|                                           |  | $    | 1,612,578,813 |      | $ | 1,344,952,271 |  | $ | 1,104,883,485
|                                           |  |      |               |      |   |               |  |   |              
|Capital expenditures:                      |  |      |               |      |   |               |  |   |              
|Restaurant and Hospitality                 |  |      | 85,033,748    |      |   | 105,331,189   |  |   | 140,837,348  
|Gaming                                     |  |      | 11,391,309    |      |   |              |  |   |             
|Corporate and other                        |  |      | 22,061,998    |      |   | 5,339,182     |  |   | 22,539,274   
|                                           |  |      |               |      |   |               |  |   |              
|                                           |  |      | 118,487,055   |      |   | 110,670,371   |  |   | 163,376,622  
|                                           |  |      |               |      |   |               |  |   |              
|Income before taxes:                       |  |      |               |      |   |               |  |   |              
|Unit level profit                          |  | $    | 232,914,811   |      | $ | 221,321,674   |  | $ | 189,416,411  
|Depreciation, amortization and impairment  |  |      | 63,492,747    |      |   | 59,002,777    |  |   | 62,235,831   
|General and administrative                 |  |      | 62,465,898    |      |   | 63,523,160    |  |   | 60,354,278   
|Interest expense, net                      |  |      | 41,437,790    |      |   | 15,185,605    |  |   | 9,561,482    
|Other expenses (income)                    |  |      | 95,196        |      |   | 13,543,626    |  |   | 1,462,450    
|                                           |  |      |               |      |   |               |  |   |              
|Consolidated income before taxes           |  | $    | 65,423,180    |      | $ | 70,066,506    |  | $ | 55,802,370   
|                                           |  |      |               |      |   |               |  |   |              

---

|(1) | Includes intersegment eliminations
|--- | ----------------------------------



10.  SUPPLEMENTAL GUARANTOR INFORMATION



In December 2004, we issued, in a private offering, $400.0 million of 7.5% senior notes due in 2014 (see Debt). In June 2005, substantially
all of these notes were exchanged for substantially identical notes in an exchange offer registered under the Securities Act of 1933. These notes are fully and unconditionally guaranteed by us and certain of our subsidiaries, Guarantor
Subsidiaries.



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



60



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Consolidating Financial Statements

Balance Sheet

December 31, 2005



|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|------------------------------------------------------- |  | ------ | ------------- | --------------------- | - | ------------ | ------------------------- |  | - | ------------ | - |  | ------------------ | ------------ | - |  | - | -------------
|                                                        |  | Parent |               | GuarantorSubsidiaries |   |              | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedEntity
|ASSETS                                                  |  |        |               |                       |   |              |                           |  |   |              |   |  |                   
|CURRENT ASSETS:                                         |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|Cash and cash equivalents                               |  | $      | 3,655,367     |                       | $ | 10,372,914   |                           |  | $ | 25,187,281   |   |  | $                  |             |   |  | $ | 39,215,562   
|Accounts receivabletrade and other, net                |  |        | 7,339,839     |                       |   | 9,334,310    |                           |  |   | 5,299,079    |   |  |                    |             |   |  |   | 21,973,228   
|Inventories                                             |  |        | 38,668,993    |                       |   | 17,346,920   |                           |  |   | 3,701,007    |   |  |                    |             |   |  |   | 59,716,920   
|Deferred taxes                                          |  |        | 12,763,948    |                       |   |             |                           |  |   |             |   |  |                    |             |   |  |   | 12,763,948   
|Other current assets                                    |  |        | 1,384,892     |                       |   | 3,704,169    |                           |  |   | 7,679,550    |   |  |                    |             |   |  |   | 12,768,611   
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|Total current assets                                    |  |        | 63,813,039    |                       |   | 40,758,313   |                           |  |   | 41,866,917   |   |  |                    |             |   |  |   | 146,438,269  
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|PROPERTY AND EQUIPMENT, net                             |  |        | 74,902,018    |                       |   | 902,795,708  |                           |  |   | 402,560,958  |   |  |                    |             |   |  |   | 1,380,258,684
|GOODWILL AND TRADEMARKS                                 |  |        | 1,968,604     |                       |   | 18,527,547   |                           |  |   | 26,220,000   |   |  |                    |             |   |  |   | 46,716,151   
|INVESTMENT IN AND ADVANCES TO SUBSIDIARIES              |  |        | 1,077,872,314 |                       |   | (515,463,662 | )                         |  |   | (236,587,317 | ) |  |                    | (325,821,335 | ) |  |   |             
|OTHER INTANGIBLE ASSETS, net                            |  |        |              |                       |   | 148,195      |                           |  |   | 3,311,222    |   |  |                    |             |   |  |   | 3,459,417    
|OTHER ASSETS, net                                       |  |        | 22,274,045    |                       |   | 1,963,384    |                           |  |   | 11,468,863   |   |  |                    |             |   |  |   | 35,706,292   
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|Total assets                                            |  | $      | 1,240,830,020 |                       | $ | 448,729,485  |                           |  | $ | 248,840,643  |   |  | $                  | (325,821,335 | ) |  | $ | 1,612,578,813
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|LIABILITIESAND STOCKHOLDERS EQUITY                     |  |        |               |                       |   |              |                           |  |   |              |   |  |                   
|CURRENT LIABILITIES:                                    |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|Accounts payable                                        |  | $      | 48,264,012    |                       | $ | 31,848,310   |                           |  | $ | 10,376,868   |   |  | $                  |             |   |  | $ | 90,489,190   
|Accrued liabilities                                     |  |        | 15,240,460    |                       |   | 74,142,174   |                           |  |   | 33,715,857   |   |  |                    |             |   |  |   | 123,098,491  
|Income taxes payable                                    |  |        | 3,294,035     |                       |   |             |                           |  |   | 1,766,850    |   |  |                    |             |   |  |   | 5,060,885    
|Current portion of long-term notes and other obligation |  |        | 1,538,930     |                       |   |             |                           |  |   | 312,811      |   |  |                    |             |   |  |   | 1,851,741    
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|Total current liabilities                               |  |        | 68,337,437    |                       |   | 105,990,484  |                           |  |   | 46,172,386   |   |  |                    |             |   |  |   | 220,500,307  
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|LONG-TERM NOTES, NET OF CURRENT PORTION                 |  |        | 619,994,855   |                       |   |             |                           |  |   | 196,048,944  |   |  |                    |             |   |  |   | 816,043,799  
|DEFERRED TAXES                                          |  |        | 21,635,903    |                       |   |             |                           |  |   |             |   |  |                    |             |   |  |   | 21,635,903   
|OTHER LIABILITIES                                       |  |        | 14,091,364    |                       |   | 21,858,169   |                           |  |   | 1,678,810    |   |  |                    |             |   |  |   | 37,628,343   
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|Total liabilities                                       |  |        | 724,059,559   |                       |   | 127,848,653  |                           |  |   | 243,900,140  |   |  |                    |             |   |  |   | 1,095,808,352
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|COMMITMENTS AND CONTINGENCIES:                          |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|TOTAL STOCKHOLDERS EQUITY                              |  |        | 516,770,461   |                       |   | 320,880,832  |                           |  |   | 4,940,503    |   |  |                    | (325,821,335 | ) |  |   | 516,770,461  
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|Total liabilities and stockholders equity              |  | $      | 1,240,830,020 |                       | $ | 448,729,485  |                           |  | $ | 248,840,643  |   |  | $                  | (325,821,335 | ) |  | $ | 1,612,578,813
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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, net                |  |        | 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 AND TRADEMARKS                                 |  |        | 1,697,750     |                       |   | 18,527,547   |                           |  |   |             |   |  |                    |             |   |  |   | 20,225,297   
|INVESTMENT IN AND ADVANCES TO SUBSIDIARIES              |  |        | 864,745,965   |                       |   | (610,127,864 | )                         |  |   | (40,284,199  | ) |  |                    | (214,333,902 | ) |  |   |             
|OTHER INTANGIBLE ASSETS, net                            |  |        |              |                       |   | 216,806      |                           |  |   |              |   |  |                    |              |   |  |   | 216,806      
|OTHER ASSETS, net                                       |  |        | 17,538,832    |                       |   | 2,190,997    |                           |  |   |             |   |  |                    |             |   |  |   | 19,729,829   
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|Total assets                                            |  | $      | 1,212,224,919 |                       | $ | 332,865,237  |                           |  | $ | 14,196,017   |   |  | $                  | (214,333,902 | ) |  | $ | 1,344,952,271
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|LIABILITIESAND 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      
|Current portion of long-term notes and other obligation |  |        | 1,535,814     |                       |   |             |                           |  |   | 164,682      |   |  |                    |             |   |  |   | 1,700,496    
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|Total current liabilities                               |  |        | 38,592,820    |                       |   | 94,986,223   |                           |  |   | 2,389,434    |   |  |                    |             |   |  |   | 135,968,477  
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|LONG-TERM NOTES, 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                                       |  |        | 611,327,953   |                       |   | 119,330,841  |                           |  |   | 13,396,511   |   |  |                    |             |   |  |   | 744,055,305  
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|COMMITMENTS AND CONTINGENCIES                           |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|TOTAL STOCKHOLDERS EQUITY                              |  |        | 600,896,966   |                       |   | 213,534,396  |                           |  |   | 799,506      |   |  |                    | (214,333,902 | ) |  |   | 600,896,966  
|                                                        |  |        |               |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              
|Total liabilities and stockholders equity              |  | $      | 1,212,224,919 |                       | $ | 332,865,237  |                           |  | $ | 14,196,017   |   |  | $                  | (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

Income Statement

Year Ended
December 31, 2005



|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|------------------------------------ |  | ------ | ----------- | - | --------------------- | - | ------------------------- |  | - | ------------ | - |  | ------------------ | ------------ | - |  | - | -------------
|                                     |  | Parent |             |   | GuarantorSubsidiaries |   | Non-guarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedEntity
|REVENUES                             |  | $      | 4,703,194   |   |                       | $ | 1,155,158,002             |  | $ | 94,944,475   |   |  | $                  |             |   |  | $ | 1,254,805,671
|OPERATING COSTS AND EXPENSES:        |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|Cost of revenues                     |  |        |            |   |                       |   | 322,306,751               |  |   | 10,720,942   |   |  |                    |             |   |  |   | 333,027,693  
|Labor                                |  |        |            |   |                       |   | 340,091,882               |  |   | 37,123,407   |   |  |                    |             |   |  |   | 377,215,289  
|Other operating expenses             |  |        | 2,875,014   |   |                       |   | 277,459,378               |  |   | 31,313,486   |   |  |                    |             |   |  |   | 311,647,878  
|General and administrative expenses  |  |        | 57,693,473  |   |                       |   |                          |  |   |             |   |  |                    |             |   |  |   | 57,693,473   
|Depreciation and amortization        |  |        | 3,224,100   |   |                       |   | 56,532,940                |  |   | 3,735,707    |   |  |                    |             |   |  |   | 63,492,747   
|Asset impairment expense             |  |        |            |   |                       |   |                          |  |   |             |   |  |                    |             |   |  |   |             
|Pre-opening expenses                 |  |        |            |   |                       |   | 4,089,683                 |  |   | 682,742      |   |  |                    |             |   |  |   | 4,772,425    
|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|Total operating costs and expenses   |  |        | 63,792,587  |   |                       |   | 1,000,480,634             |  |   | 83,576,284   |   |  |                    |             |   |  |   | 1,147,849,505
|OPERATING INCOME                     |  |        | (59,089,393 | ) |                       |   | 154,677,368               |  |   | 11,368,191   |   |  |                    |             |   |  |   | 106,956,166  
|OTHER EXPENSES (INCOME):             |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|Interest expense, net                |  |        | 36,568,825  |   |                       |   |                          |  |   | 4,868,965    |   |  |                    |             |   |  |   | 41,437,790   
|Other, net                           |  |        | 58,421      |   |                       |   | 124,135                   |  |   | (87,360      | ) |  |                    |             |   |  |   | 95,196       
|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|                                     |  |        | 36,627,246  |   |                       |   | 124,135                   |  |   | 4,781,605    |   |  |                    |             |   |  |   | 41,532,986   
|INCOME (LOSS) BEFORE INCOME TAXES    |  |        | (95,716,639 | ) |                       |   | 154,553,233               |  |   | 6,586,586    |   |  |                    |             |   |  |   | 65,423,180   
|PROVISION (BENEFIT) FOR INCOME TAXES |  |        | (29,044,243 | ) |                       |   | 47,880,392                |  |   | 1,771,995    |   |  |                    |             |   |  |   | 20,608,144   
|EQUITY IN EARNINGS OF SUBSIDIARIES   |  |        | 111,487,432 |   |                       |   |                          |  |   |             |   |  |                    | (111,487,432 | ) |  |   |             
|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              
|NET INCOME                           |  | $      | 44,815,036  |   |                       | $ | 106,672,841               |  | $ | 4,814,591    |   |  | $                  | (111,487,432 | ) |  | $ | 44,815,036   
|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              



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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  
|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    
|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   
|                                     |  |        |             |   |                       |   |                           |  |   |              |   |  |                    |              |   |  |   |              



64



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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  
|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   
|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   
|                                     |  |        |             |   |                       |   |               |                           |  |              |            |  |                    |             |   |  |   |              



65



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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, 2005



|                                                                                  |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|--------------------------------------------------------------------------------- |  | ------ | ------------ | - | --------------------- | - | ----------- | ------------------------- |  | - | ------------ | - |  | ------------------ | ------------ | - |  | - | ------------ | -
|                                                                                  |  | Parent |              |   | GuarantorSubsidiaries |   |             | Non GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedEntity |             
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Net income                                                                        |  | $      | 44,815,036   |   |                       | $ | 106,672,841 |                           |  | $ | 4,814,591    |   |  | $                  | (111,487,432 | ) |  | $ | 44,815,036   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Depreciation and amortization                                                     |  |        | 3,224,100    |   |                       |   | 56,532,940  |                           |  |   | 3,735,707    |   |  |                    |             |   |  |   | 63,492,747   |  
|Impairment                                                                        |  |        |             |   |                       |   |            |                           |  |   |             |   |  |                    |             |   |  |   |             |  
|Deferred tax provision (benefit)                                                  |  |        | 9,698,299    |   |                       |   |            |                           |  |   |             |   |  |                    |             |   |  |   | 9,698,299    |  
|Deferred rent and other charges (income)                                          |  |        | 2,935,245    |   |                       |   | (2,620,941  | )                         |  |   | 213,987      |   |  |                    |             |   |  |   | 528,291      |  
|Changes in assets and liabilities, net and other, net of acquisitions             |  |        | (183,144,942 | ) |                       |   | (84,699,317 | )                         |  |   | 188,878,472  |   |  |                    | 111,487,432  |   |  |   | 32,521,645   |  
|                                                                                  |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Total adjustments                                                                 |  |        | (167,287,298 | ) |                       |   | (30,787,318 | )                         |  |   | 192,828,166  |   |  |                    | 111,487,432  |   |  |   | 106,240,982  |  
|                                                                                  |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Net cash provided by (used in) operating activities                               |  |        | (122,472,262 | ) |                       |   | 75,885,523  |                           |  |   | 197,642,757  |   |  |                    |             |   |  |   | 151,056,018  |  
|                                                                                  |  |        |              |   |                      
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Property and equipment additions and / or transfers                               |  |        | (8,759,223   | ) |                       |   | (73,436,087 | )                         |  |   | (36,291,745  | ) |  |                    |             |   |  |   | (118,487,055 | )
|Proceeds from disposition of property and equipment                               |  |        | 364,466      |   |                       |   | 2,000,000   |                           |  |   | 1,685,298    |   |  |                    |             |   |  |   | 4,049,764    |  
|Business acquisitions, net of cash acquired                                       |  |        |             |   |                       |   |            |                           |  |   | (135,487,498 | ) |  |                    |             |   |  |   | (135,487,498 | )
|                                                                                  |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Net cash used in investing activities                                             |  |        | (8,394,757   | ) |                       |   | (71,436,087 | )                         |  |   | (170,093,945 | ) |  |                    |             |   |  |   | (249,924,789 | )
|                                                                                  |  |        |              |   |                      
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Purchase of common stock                                                          |  |        | (125,651,865 | ) |                       |   |            |                           |  |   |             |   |  |                    |             |   |  |   | (125,651,865 | )
|Proceeds from exercise of stock options                                           |  |        | 451,775      |   |                       |   |            |                           |  |   |             |   |  |                    |             |   |  |   | 451,775      |  
|Payments on other debt and related expenses, net                                  |  |        | (2,345,461   | ) |                       |   |            |                           |  |   | (16,664,682  | ) |  |                    |             |   |  |   | (19,010,143  | )
|Proceeds from credit facility, net                                                |  |        | 74,000,000   |   |                       |   |            |                           |  |   | 11,511,898   |   |  |                    |             |   |  |   | 85,511,898   |  
|Dividends paid                                                                    |  |        | (4,611,364   | ) |                       |   |            |                           |  |   |             |   |  |                    |             |   |  |   | (4,611,364   | )
|                                                                                  |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Net cash used in financing activities                                             |  |        | (58,156,915  | ) |                       |   |            |                           |  |   | (5,152,784   | ) |  |                    |             |   |  |   | (63,309,699  | )
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              |  |        | (189,023,934 | ) |                       |   | 4,449,436   |                           |  |   | 22,396,028   |   |  |                    |             |   |  |   | (162,178,470 | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                    |  |        | 192,679,301  |   |                       |   | 5,923,478   |                           |  |   | 2,791,253    |   |  |                    |             |   |  |   | 201,394,032  |  
|                                                                                  |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                          |  | $      | 3,655,367    |   |                       | $ | 10,372,914  |                           |  | $ | 25,187,281   |   |  | $                  |             |   |  | $ | 39,215,562   |  
|                                                                                  |  |        |              |   |                       |   |             |                           |  |   |              |   |  |                    |              |   |  |   |              |  



66



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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 provided by operating activities: |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  
|Depreciation and amortization                                                     |  |        | 3,162,151    |   |                       |   | 53,635,890   |                           |  |   | 496,082      |   |  |                    |             |   |  |   | 57,294,123   |  
|Asset impairment expense                                                          |  |        |             |   |                       |   | 1,708,654    |                           |  |   |             |   |  |                    |             |   |  |   | 1,708,654    |  
|Deferred tax 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, net of acquisitions              |  |        | (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 disposition 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 | )
|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 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  |  
|                                                                                  |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |              |   |  |   |              |  



67



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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 provided by operating activities: |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  
|Depreciation and amortization                                                     |  |        | 3,485,665    |   |                       |   | 44,630,494   |                           |  |   | 975,307      |   |  |                    |            |   |  |   | 49,091,466   |  
|Asset impairment expense                                                          |  |        |             |   |                       |   | 13,144,365   |                           |  |   |             |   |  |                    |            |   |  |   | 13,144,365   |  
|Deferred tax 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, net of acquisitions              |  |        | (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 additions and/or transfers                                 |  |        | 15,641,256   |   |                       |   | (166,818,219 | )                         |  |   | (12,199,659  | ) |  |                    |            |   |  |   | (163,376,622 | )
|Proceeds from disposition 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    |  
|Payments of debt and related expenses, net                                        |  |        | (1,806,595   | ) |                       |   |             |                           |  |   | (99,908      | ) |  |                    |            |   |  |   | (1,906,503   | )
|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   |  
|                                                                                  |  |        |              |   |                       |   |              |                           |  |   |              |   |  |                    |             |   |  |   |              |  



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



11.  CERTAIN TRANSACTIONS



In 1996, we 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, we 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 2005 and 2004, the Company paid base and percentage rent aggregating $507,000 and $514,000, 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 $135,000, $146,000 and $170,000 in 2005, 2004 and 2003, respectively. The contributions were 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 2005, 2004 and 2003 expenses in the amount of $279,000, $68,000 and $138,000, 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 2005, 2004 and 2003 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.



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LANDRYS RESTAURANTS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



12.  QUARTERLY FINANCIAL DATA (UNAUDITED)



The following is a summary of unaudited quarterly consolidated results of
operations (in thousands, except per share data).



|                               |  |               |         |              |   |                   |  |                  |         |  |   |        
|------------------------------ |  | ------------- | ------- | ------------ | - | ----------------- |  | ---------------- | ------- |  | - | -------
|                               |  | March 31,2005 |         | June 30,2005 |   | September 30,2005 |  | December 31,2005
|Quarter Ended:                 |  |               |         |              |   |                   |  |                  |         |  |   |        
|Revenues                       |  | $             | 281,345 |              | $ | 325,152           |  | $                | 319,511 |  | $ | 328,798
|Cost of revenues               |  | $             | 78,584  |              | $ | 89,915            |  | $                | 86,604  |  | $ | 77,924 
|Operating income               |  | $             | 19,871  |              | $ | 34,414            |  | $                | 32,698  |  | $ | 19,973 
|Net income                     |  | $             | 7,378   |              | $ | 17,543            |  | $                | 15,978  |  | $ | 3,917  
|Net income per share (basic)   |  | $             | 0.30    |              | $ | 0.80              |  | $                | 0.75    |  | $ | 0.18   
|Net income per share (diluted) |  | $             | 0.29    |              | $ | 0.78              |  | $                | 0.73    |  | $ | 0.18   
|                               |  |               |         |             
|                               |  | March 31,2004 |         | June 30,2004 |   | September 30,2004 |  | December 31,2004
|Quarter Ended:                 |  |               |         |              |   |                   |  |                  |         |  |   |        
|Revenues                       |  | $             | 275,676 |              | $ | 317,616           |  | $                | 314,378 |  | $ | 259,805
|Cost of revenues               |  | $             | 77,720  |              | $ | 89,109            |  | $                | 86,747  |  | $ | 72,533 
|Operating income               |  | $             | 19,326  |              | $ | 34,108            |  | $                | 32,686  |  | $ | 12,676 
|Net income                     |  | $             | 11,102  |              | $ | 21,596            |  | $                | 20,782  |  | $ | 13,042 
|Net income per share (basic)   |  | $             | 0.40    |              | $ | 0.78              |  | $                | 0.76    |  | $ | 0.51   
|Net income per share (diluted) |  | $             | 0.39    |              | $ | 0.76              |  | $                | 0.74    |  | $ | 0.49   



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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, 2006.



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, 2006
|                                                |  |                                                                                        
|/s/    Rick H. LiemRick H. Liem                 |  | Senior Vice President, Chief Financial Officer (Principal Financial Officer)            |  | March 16, 2006
|                                                |  |                                                                                        
|/s/    Steven L. ScheinthalSteven L. Scheinthal |  | Executive Vice President, Secretary, General Counsel and Director                       |  | March 16, 2006
|                                                |  |                                                                                        
|/s/    Michael S. ChadwickMichael S. Chadwick   |  | Director                                                                                |  | March 16, 2006
|                                                |  |                                                                                        
|/s/    Michael RichmondMichael Richmond         |  | Director                                                                                |  | March 16, 2006
|                                                |  |                                                                                        
|/s/    Joe Max TaylorJoe Max Taylor             |  | Director                                                                                |  | March 16, 2006
|                                                |  |                                                                                        
|/s/    Kenneth BrimmerKenneth Brimmer           |  | Director                                                                                |  | March 16, 2006



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|           |  |                                                                                                                                                                                                                                                                                                      
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | 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. (incorporated by
reference to Exhibit 2.1 of the Companys Form 10-K for the year ended December 31, 2004, File No. 000-22150)
|           | 
|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 (incorporated by reference to Exhibit 3.3 of the Companys Form 10-K for the year ended December 31, 2004, File No.
000-22150)                                                                                                              
|           | 
|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. (incorporated by reference to Exhibit 10.10 of the Companys Form 10-K for the year ended
December 31, 2004, File No. 000-22150)                                                                          



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|           |  |                                                                                                                                                                                                                                                                                                       
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Exhibit                                                                                                                                                                                                                                                                                               
|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).                                                                                                                            
|           | 
|10.2       |  | 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. (incorporated by reference to Exhibit 10.26 of the Companys Form 10-K for the year ended
December 31, 2004, File No. 000-22150)                                                                             



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|           |  |                                                                                                                                                                                                                                                                           
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Exhibit                                                                                                                                                                                                                                                                   
|           | 
|10.27      |  | Second Amendment to Contract of Sale and Development Agreement between Landrys Management, L.P. and 610 Loop Venture, LLC (incorporated by reference to Exhibit 10.27 of the
Companys Form 10-K for the year ended December 31, 2004, File No. 000-22150)               
|           | 
|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 (incorporated by reference to Exhibit 10.29 of the Companys Form 10-K for the year
ended December 31, 2004, File No. 000-22150)                                       
|           | 
|10.30      |  | Form of Restricted Stock Agreement between Landrys Restaurants, Inc. and Tilman J. Fertitta (incorporated by reference to Exhibit 10.30 of the Companys Form 10-K for the year
ended December 31, 2004, File No. 000-22150)                                             
|           | 
|*10.31     |  | First Amendment to Personal Service and Employment Agreement between Landrys Restaurants, Inc. and Tilman J. Feritta                                                                                                                                                     
|           | 
|*10.32     |  | 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.                                                                                                                                                                                                                                
|           | 
|*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(a)                                                                                                                                                                         

---

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



74