UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008.

Commission file number 000-22150

LANDRY’S RESTAURANTS, INC.

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

DELAWARE

(State or other jurisdiction of

incorporation of organization)

76-0405386

(I.R.S. Employer

Identification No.)

1510 West Loop South, Houston, TX 77027

(Address of principal executive offices)

(713) 850-1010

(Registrants telephone number)

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

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

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨    Smaller reporting company  ¨

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

AS OF NOVEMBER 4, 2008 THERE WERE

16,142,834 SHARES OF $0.01 PAR VALUE

COMMON STOCK OUTSTANDING

INDEX

		Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets at September 30, 2008 (unaudited) and December 31, 2007	3
	Condensed Unaudited Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2008 and 2007	4
	Condensed Unaudited Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2008	5
	Condensed Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007	6
	Notes to Condensed Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 6.	Exhibits	38
Signatures		38

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LANDRY’S RESTAURANTS, INC.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

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

The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and related notes to financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. Operating results for the nine months ended September 30, 2008 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending December 31, 2008.

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:

• the merger agreement originally entered into by us and Fertitta Holdings, Inc., among others, on June 16, 2008, as amended on October 18, 2008 and whether it will be consummated;

• the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with Fertitta Holdings, Inc.;

• the outcome of any legal proceedings that have been, or may be, instituted against the Company related to the merger agreement;

• the inability to complete the merger due to the failure to obtain stockholder approval for the merger or the failure to satisfy other conditions to completion of the merger, including the receipt of all regulatory approvals related to the merger;

• the failure to obtain the necessary financing arrangements set forth in the debt and equity commitment letters delivered pursuant to the amended merger agreement;

• the effects of local and national economic, credit and capital market conditions on the economy in general, and on the gaming, restaurant and hotel industries, in particular;

• whether the final property and business interruption losses resulting from Hurricane Ike will be in accordance with our current estimates;

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

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

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

• business strategy and measures to implement such strategy;

• competitive strengths;

• goals;

• expansion and growth of our business and operations;

• future commodity prices;

• availability of food products, materials and employees;

• consumer perceptions of food safety;

• changes in local, regional and national economic conditions;

• the effectiveness of our marketing efforts;

• changing demographics surrounding our restaurants, hotels and casinos;

• the effect of changes in tax laws;

1

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

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

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

• same store sales;

• earnings guidance;

• our ability to obtain long-term financing and the cost of such financing, if available;

• 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” in our Annual Report on Form 10-K as such has been amended or supplemented in our quarterly reports on Form 10-Q (including this one).

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. We assume no obligation to modify or revise any forward looking statements to reflect any subsequent events or circumstances arising after the date that the statement was made.

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LANDRY’S RESTAURANTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2008			December 31, 2007
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	63,346,972		$	39,601,246
Accounts receivable - trade and other, net		17,603,185			24,196,406
Inventories		26,510,490			35,201,095
Deferred taxes		22,948,074			21,647,642
Assets related to discontinued operations		3,823,060			21,799,237
Other current assets		11,385,059			12,600,758
Total current assets		145,616,840			155,046,384
PROPERTY AND EQUIPMENT, net		1,234,100,810			1,238,552,287
GOODWILL		18,527,547			18,527,547
OTHER INTANGIBLE ASSETS, net		38,912,770			39,146,222
OTHER ASSETS, net		49,313,592			51,710,089
Total assets	$	1,486,471,559		$	1,502,982,529
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	52,249,747		$	74,557,108
Accrued liabilities		134,153,678			137,310,321
Income taxes payable		239,161			843,045
Current portion of long-term notes and other obligations		454,214,405			87,243,013
Liabilities related to discontinued operations		7,600,338			4,976,322
Total current liabilities		648,457,329			304,929,809
LONG-TERM NOTES, NET OF CURRENT PORTION		438,784,377			801,427,868
OTHER LIABILITIES		84,096,512			79,725,779
Total liabilities		1,171,338,218			1,186,083,456
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common stock, $0.01 par value, 60,000,000 shares authorized, 16,142,834 and 16,147,745, shares issued and outstanding, respectively		161,428			161,478
Additional paid-in capital		221,410,387			218,350,471
Retained earnings		111,684,273			114,965,728
Accumulated other comprehensive loss		(18,122,747	)		(16,578,604	)
Total stockholders’ equity		315,133,341			316,899,073
Total liabilities and stockholders’ equity	$	1,486,471,559		$	1,502,982,529

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

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LANDRY’S RESTAURANTS, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
REVENUES:
Restaurant and hospitality	$	229,133,487		$	233,063,969		$	693,245,506		$	682,521,915
Gaming:
Casino		34,891,090			37,968,201			117,971,096			124,533,914
Rooms		15,105,290			15,982,877			49,835,862			49,541,643
Food and beverage		12,499,577			11,511,646			37,064,255			34,239,251
Other		3,672,057			3,249,621			10,895,382			10,405,677
Promotional allowances		(5,565,271	)		(6,011,127	)		(18,852,289	)		(18,753,267	)
Net gaming revenue		60,602,743			62,701,218			196,914,306			199,967,218
Total revenue		289,736,230			295,765,187			890,159,812			882,489,133
OPERATING COSTS AND EXPENSES:
Restaurant and hospitality:
Cost of revenues		58,425,756			62,359,913			180,211,409			184,527,846
Labor		65,111,319			69,571,837			200,236,279			201,845,322
Other operating expenses		57,292,836			55,046,704			171,732,349			160,742,316
Gaming:
Casino		18,299,089			19,166,193			60,669,092			60,477,305
Rooms		6,286,725			6,294,954			18,735,499			17,753,527
Food and beverage		7,853,832			7,592,873			22,494,103			22,137,970
Other		15,503,489			16,671,338			46,529,487			49,087,044
General and administrative expense		11,732,473			14,403,271			36,875,860			43,911,732
Depreciation and amortization		17,745,002			16,465,738			53,120,526			48,635,576
Asset impairment expense		18,491,787			—			20,084,928			—
Pre-opening expenses		553,998			957,506			1,392,070			2,130,571
Loss (gain) on disposal of assets		—			39,402			9,128			(18,701,269	)
Total operating costs and expenses		277,296,306			268,569,729			812,090,730			772,547,940
OPERATING INCOME		12,439,924			27,195,458			78,069,082			109,941,193
OTHER EXPENSE (INCOME):
Interest expense, net		19,491,090			25,187,357			60,175,403			52,248,522
Other, net		2,657,707			8,368,852			3,867,320			14,982,858
Total other expense		22,148,797			33,556,209			64,042,723			67,231,380
Income (loss) from continuing operations before income taxes		(9,708,873	)		(6,360,751	)		14,026,359			42,709,813
Provision (benefit) for income taxes		(2,028,383	)		(3,294,928	)		5,151,799			13,380,312
Income (loss) from continuing operations		(7,680,490	)		(3,065,823	)		8,874,560			29,329,501
Loss from discontinued operations, net of taxes		(9,374,672	)		(1,266,837	)		(10,536,380	)		(4,603,272	)
Net income (loss)	$	(17,055,162	)	$	(4,332,660	)	$	(1,661,820	)	$	24,726,229
EARNINGS (LOSS) PER SHARE INFORMATION: BASIC
Income (loss) from continuing operations	$	(0.50	)	$	(0.17	)	$	0.58		$	1.48
Loss from discontinued operations		(0.62	)		(0.08	)		(0.69	)		(0.23	)
Net income (loss)	$	(1.12	)	$	(0.25	)	$	(0.11	)	$	1.25
Weighted average number of common shares outstanding		15,260,000			17,650,000			15,260,000			19,850,000
DILUTED
Income (loss) from continuing operations	$	(0.50	)	$	(0.17	)	$	0.57		$	1.44
Loss from discontinued operations		(0.62	)		(0.08	)		(0.68	)		(0.23	)
Net income (loss)	$	(1.12	)	$	(0.25	)	$	(0.11	)	$	1.21
Weighted average number of common and common share equivalents outstanding		15,260,000			17,650,000			15,515,000			20,400,000

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

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LANDRY’S RESTAURANTS, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive
	Shares		Amount			Capital			Earnings			Loss			Total
Balance, December 31, 2007	16,147,745		$	161,478		$	218,350,471		$	114,965,728		$	(16,578,604	)	$	316,899,073
Comprehensive loss:
Net loss	—			—			—			(1,661,820	)		—			(1,661,820	)
Loss on interest rate swaps, net of tax benefit of $832,462	—			—			—			—			(1,544,143	)		(1,544,143	)
Total comprehensive loss																(3,205,963	)
Exercise of stock options	806			8			6,353			—			—			6,361
Forfeiture of restricted stock	(4,911	)		(50	)		50			—			—			—
Purchase of common stock held for treasury	(806	)		(8	)		(10,000	)		(5,266	)		—			(15,274	)
Stock based compensation expense	—			—			3,063,513			—			—			3,063,513
Dividends paid	—			—			—			(1,614,369	)		—			(1,614,369	)
Balance, September 30, 2008	16,142,834		$	161,428		$	221,410,387		$	111,684,273		$	(18,122,747	)	$	315,133,341

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

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LANDRY’S RESTAURANTS, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(1,661,820	)	$	24,726,229
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		53,685,155			49,558,053
Asset impairment expense		30,423,771			3,318,295
Loss (gain) on disposition of assets		9,128			(18,701,269	)
Changes in assets and liabilities, net and other		4,170,469			32,316,129
Total adjustments		88,288,523			66,491,208
Net cash provided by operating activities		86,626,703			91,217,437
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and other		(81,020,397	)		(81,911,630	)
Proceeds from disposition of property and equipment		15,434,800			42,243,949
Purchase of marketable securities		—			(5,331,308	)
Proceeds from the sale of marketable securities		—			6,609,512
Net cash used in investing activities		(65,585,597	)		(38,389,477	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of common stock for treasury		(15,274	)		(154,103,310	)
Proceeds from exercise of stock options		6,361			2,720,863
Payments of debt and related expenses, net		(187,250	)		(193,153,214	)
Financing proceeds		39,515,152			375,000,000
Debt issuance costs		—			(14,144,375	)
Proceeds from credit facility		219,000,000			178,815,778
Payments on credit facility		(254,000,000	)		(183,390,091	)
Dividends paid		(1,614,369	)		(3,155,350	)
Net cash provided by financing activities		2,704,620			8,590,301
NET INCREASE IN CASH AND EQUIVALENTS		23,745,726			61,418,261
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		39,601,246			31,268,942
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	63,346,972		$	92,687,203
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest	$	50,295,310		$	41,146,618
Income taxes	$	(2,050,139	)	$	895,882
Non-cash transaction:
Unsettled treasury stock transactions	$	—		$	4,790,572

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

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LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The Merger

On October 18, 2008, we entered into a First Amendment to Agreement and Plan of Merger (First Amendment) with Fertitta Holdings, Inc., a Delaware corporation (Parent) and Fertitta Acquisition Co., a Delaware corporation and a wholly-owned subsidiary of Parent (Merger Sub) and for certain limited purposes, Tilman J. Fertitta (Mr. Fertitta). Pursuant to the terms of the First Amendment, the Agreement and Plan of Merger (Merger Agreement) previously entered into on June 16, 2008, between the foregoing parties was amended to provide that each of our outstanding shares of common stock, other than shares owned by us, Parent, Merger Sub or any other subsidiary of Parent and stockholders who perfected appraisal rights under applicable law, will be cancelled and converted into the right to receive $13.50 in cash, without interest.

Our Board of Directors, acting upon the unanimous recommendation of a special committee comprised entirely of independent directors (Special Committee), which had reviewed an opinion from Cowen and Company that the amended transaction is fair to Landry’s stockholders, other than Mr. Fertitta, from a financial point of view, has concluded that the First Amendment is fair, advisable and in the best interests of Landry’s stockholders and has approved the First Amendment and has recommended that the Landry’s stockholders vote in favor of the Merger Agreement as amended by the First Amendment.

As a result of substantial damage and other effects suffered by Landry’s and its subsidiaries as a result of Hurricane Ike, Jefferies & Company, Inc. indicated that absent a change to the debt financing commitment issued by Jefferies Funding LLC, Jefferies & Company, Inc., Jefferies Finance, LLC and Wells Fargo Foothill, LLC (Lenders) to Parent in connection with the Merger Agreement, the Lenders’ believed that Parent may be unable to satisfy the conditions precedent under the Lenders debt financing commitment. Parent believed that the Lenders were prepared to assert that a material adverse effect had occurred and therefore would not be obligated to provide the financing necessary for the consummation of the Merger, in which event Parent could terminate its obligations under the Merger Agreement. As part of a compromise that was reached among Landry’s, Parent and the Lenders, the Lenders agreed under their amended debt financing commitment, and Parent agreed under the First Amendment, that they would waive any claim that a material adverse effect had occurred as a result of the occurrence of any event known to them through the date of execution of the amended debt financing commitment and the First Amendment, respectively. Additionally, the Lenders’ agreed under the amended debt financing commitment to provide Mr. Fertitta with up to $500.0 million in debt financing for the Merger and to provide us with an alternative financing commitment of up to $420.0 million in the event the Merger is not consummated and certain other conditions are satisfied. The alternative financing would be sufficient to repay our existing indebtedness which is subject to the holders of our existing 9.5% Senior Exchange Notes (New Notes) exercising their right to require us to redeem the New Notes at 101% of the principal amount thereof beginning in February 2009.

The First Amendment contains provisions pursuant to which the Special Committee with the assistance of its independent advisors, will actively solicit superior acquisition proposals through November 17, 2008 (“the go-shop period”) and thereafter may receive unsolicited proposals. The First Amendment maintained the $3.4 million termination fees payable under the Merger Agreement as a result of specified terminations during the go-shop period and reduced the post go-shop termination fees from $24.0 million to $15.0 million. Finally, the First Amendment provides that if the Merger Agreement is terminated so that we may pursue a competing acquisition proposal, then the Special Committee may vote all shares of common stock acquired by Mr. Fertitta after June 16, 2008 in favor of such competing acquisition proposal at the stockholders meeting called for the purpose of considering such competing acquisition proposal.

Mr. Fertitta has committed to provide equity financing which, in addition to the amended debt financing commitment for the transaction contemplated by the Merger Agreement, as amended by the First Amendment, will be used by Parent to pay the aggregate merger consideration and related fees and expenses of the transaction. Consummation of the Merger is subject to a stockholder vote and other customary closing conditions and performance criteria, including (i) no material adverse effects on our results or operations prior to closing, although all known events through the date of execution of the amended debt financing commitment and First Amendment cannot be considered for purposes of determining whether a material adverse effect has occurred, and (ii) our achieving certain levels of EBITDA during certain pre-closing periods and having no greater than a certain amount of leverage as of the closing.

Approximately $395.7 million in Senior Exchange Notes allow the note holders to redeem the New Notes upon at least 30 but no more than 60 days notice at 101% of face value from February 28, 2009 to December 15, 2011. As a result, these

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LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

notes are presented as current liabilities at September 30, 2008. Furthermore, it is likely that our note holders will exercise their option to redeem the senior notes. In connection with the amended Merger Agreement, subject to certain conditions, we have committed financing sufficient to repay our existing indebtedness should the merger not be completed. The new financing will carry higher interest rates and more restrictive terms than our current agreements and will reduce our capital available for growth and the terms may restrict our ability to pursue acquisitions in the near term. Accordingly, we have reduced our planned new unit growth for 2008 and 2009.

Discontinued Operations

During 2006, as part of a strategic review of our operations, we initiated a plan to divest certain restaurants, including 136 Joe’s Crab Shack units (Note 3). During 2007 and 2008, several additional locations were added to our disposal plan. The results of operations, assets and liabilities for all units included in the disposal plan have been reclassified to discontinued operations in the statements of income, balance sheets and segment information for all periods presented.

Principles of Consolidation

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

Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by us without audit, except for the consolidated balance sheet as of December 31, 2007. The financial statements include all adjustments, consisting of normal, recurring adjustments and accruals, which we consider necessary for fair presentation of our financial position and results of operations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. This information is contained in our December 31, 2007, consolidated financial statements filed with the Securities and Exchange Commission on Form 10-K.

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

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

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

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LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Effective January 1, 2008, we adopted the provisions of SFAS No. 157, Fair Value Measurements, which among other things, requires enhanced disclosures about financial assets and liabilities carried at fair value. SFAS No. 157 establishes a hierarchy for fair value measurements, such that Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market, Level 2 measurements include quoted market prices for identical assets or liabilities in an active market which have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets, and Level 3 measurements include those that are unobservable and of a highly subjective measure.

Our financial assets and liabilities that are accounted for at fair value on a recurring basis as of September 30, 2008 consist of interest rate swaps (Note 5), for which the lowest level of input significant to their fair value measurement is Level 2. As of September 30, 2008 the fair value of the interest rate swap liabilities totaled $35.3 million.

Reclassifications

Certain prior year amounts have been reclassified within our Statement of Income to conform to the current year presentation.

Recent Accounting Pronouncements

On January 1, 2008 we adopted FASB Statement No. 157, Fair Value Measurements (SFAS 157), which defines fair value, and FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS 159), which permits entities to choose to measure many financial instruments and certain other items at fair value. Neither of these statements had an impact on our consolidated financial statements for the first nine months of 2008. In February 2008, the FASB issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS No. 157 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until January 1, 2009. We have not yet determined the impact that the implementation of SFAS 157, for non-financial assets and liabilities, will have on our consolidated financial statements.

In June 2007, the FASB issued Emerging Issues Task Force Issue 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (EITF 06-11). EITF 06-11 requires that the tax benefit related to dividend equivalents paid on restricted stock, which are expected to vest, be recorded as an increase to additional paid-in capital. We originally accounted for this tax benefit as a reduction to income tax expense. EITF 06-11 is to be applied prospectively for tax benefits on dividends declared in fiscal years beginning after December 15, 2007. We adopted the provisions of EITF 06-11 on January 1, 2008. EITF 06-11 did not have a material effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), Implementation Issue No. E23, Hedging – General: Issues Involving the Application of the Shortcut Method under Paragraph 68 (Issue E23). Issue E23 amends SFAS 133 to explicitly permit use of the shortcut method for hedging relationships in which interest rate swaps have nonzero fair value at the inception of the hedging relationship, provided certain conditions are met. Issue E23 was effective for hedging relationships designated on or after January 1, 2008. The implementation of this guidance did not have an impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R), which expands the use of the acquisition method of accounting used in business combinations to all transactions and other events in which one entity obtains control over one or more other businesses or assets. This statement replaces SFAS No. 141 by requiring measurement at the acquisition date of the fair value of assets acquired, liabilities assumed and any non-controlling interest. Additionally, SFAS 141R requires that acquisition-related costs, including restructuring costs, be recognized as expense separately from the acquisition. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the first fiscal period beginning on or after December 15, 2008. The implementation of this guidance will affect our consolidated financial statements after its effective date only to the extent we complete business combinations and therefore the impact cannot be determined at this time.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interest in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes the accounting and reporting standards for a non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests and applies prospectively to business combinations for fiscal years beginning after December 15, 2008. We will adopt SFAS 160 beginning January 1, 2009 and are currently evaluating the impact that this pronouncement may have on our consolidated financial statements.

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In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 expands quarterly disclosure requirements in SFAS 133 about an entity’s derivative instruments and hedging activities. SFAS 161 is effective for fiscal years beginning after November 15, 2008. We are currently evaluating the impact that this pronouncement may have on our consolidated financial statements.

In June 2008, the FASB issued Staff Position No. EITF 03-6-1 (EITF 03-6-1). EITF 03-6-1 addresses whether instruments granted in share-based payment arrangements are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in SFAS No. 128, Earnings per Share. The provisions of EITF 03-6-1 are effective for financial statements issued for fiscal years beginning after December 15, 2008. All prior period EPS data presented will be adjusted retrospectively to conform with the provisions of EITF 03-6-1. Early application is not permitted. We are currently evaluating the impact that EITF 03-6-1 may have on our consolidated financial statements.

2. HURRICANE IKE

On September 13, 2008, Hurricane Ike struck the Gulf Coast of the United States, causing considerable damage to the cities of Galveston, Kemah and Houston, Texas and surrounding areas. Several of our restaurants in Galveston and Kemah sustained significant damage, as did the amusement rides, the boardwalk itself and some infrastructure at the Kemah Boardwalk. Widespread power outages led to the closure of 31 Houston area restaurants for a varying amount of days until power was restored. All Houston restaurants have reopened, as well as nine restaurants in Galveston and Kemah, while seven restaurants remain closed. In addition, the amusement rides and much of the complementary businesses at the Kemah Boardwalk also remain closed. We expect additional business units to reopen each month with all business units reopening by March 2009.

Based on preliminary estimates of the damage sustained by our properties, an asset impairment charge of $24.4 million was recorded during the third quarter of 2008. This charge was reduced by $7.5 million as a result of insurance proceeds received under our various property and casualty insurance policies. While we expect to receive substantial additional insurance proceeds under these policies in the future, the ultimate amount that we will collect has yet to be determined. Any future recoveries under these policies will be recognized in the period in which all contingencies have been resolved.

We also maintain business interruption insurance coverage and have recorded approximately $2.5 million in recoveries related to lost profits at our affected locations in Galveston and the Kemah Boardwalk. This amount was recorded as revenue in our consolidated financial statements. We expect to receive additional amounts under our business interruption coverage for the restaurants and amusements that remain closed. Any future recoveries under this coverage will be recognized in the period in which all contingencies have been resolved.

All of the amounts reflected to date are estimates based on information currently available to us and the actual insurance proceeds that have been collected. The estimates of damage are preliminary and subject to change until we have finalized all claims with our insurance carriers. We are unable to estimate what the effect on our fourth-quarter results will be or what insurance recoveries may ultimately be received to offset any such impact. However, we believe that the majority of our property losses and cash flow will be covered by property and business interruption insurance.

3. DISCONTINUED OPERATIONS AND IMPAIRMENT OF LONG LIVED ASSETS

During the third quarter of 2006, as part of a strategic review of our operations, we initiated a plan to divest certain restaurants including 136 Joe’s Crab Shack (“Joe’s”) units. During 2007 and 2008, several additional locations were added to our disposal plan. The results of operations for all stores included in our disposal plan have been classified as discontinued operations in our statements of income, balance sheets and segment information for all periods presented.

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On November 17, 2006, we completed the sale of 120 Joe’s restaurants to an unaffiliated entity for approximately $192.0 million, including the assumption of certain working capital liabilities to be finalized in 2008. In connection with the sale, we recorded pre-tax impairment charges and a loss on disposal totaling $49.2 million.

We recorded additional pre-tax impairment charges totaling $10.0 million during the quarter ended September 30, 2008 to write down the carrying values of certain assets in our disposal plan based on deteriorating conditions in the real estate market as well as the economy. We also recorded pre-tax charges of $4.2 million for lease termination and other store closure costs. These charges are included in discontinued operations.

We expect to sell the land and improvements belonging to the remaining restaurants in the disposal plan, or abandon those locations, during the next twelve months.

The results of discontinued operations for the three and nine months ended September 30, 2008 and 2007 were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Revenues	$	3,185,872		$	7,109,807		$	10,752,673		$	17,959,961
Loss from discontinued operations before income taxes		(14,674,160	)		(2,043,286	)		(16,310,186	)		(7,351,571	)
Income tax benefit on discontinued operations		(5,299,488	)		(776,449	)		(5,773,806	)		(2,748,299	)
Net loss from discontinued operations	$	(9,374,672	)	$	(1,266,837	)	$	(10,536,380	)	$	(4,603,272	)

We continually monitor unfavorable cash flows, if any, relating to underperforming restaurants. Periodically, we may conclude certain properties have become impaired based on the existing and anticipated future economic outlook for such properties in their respective market areas. During the nine months ended September 30, 2008, we recorded impairment charges of $3.2 million to impair the leasehold improvements and equipment of three underperforming restaurants.

4. ACCRUED LIABILITIES

Accrued liabilities are comprised of the following:

	September 30, 2008		December 31, 2007
Payroll and related costs	$	26,704,732	$	32,788,521
Rent and insurance		29,481,982		30,009,761
Taxes, other than payroll and income taxes		16,967,981		18,907,786
Deferred revenue (gift cards and certificates)		14,680,511		17,872,319
Accrued interest		11,874,016		3,532,611
Casino deposits, outstanding chips and other gaming		9,400,572		10,126,231
Other		25,043,884		24,073,092
	$	134,153,678	$	137,310,321

5. DEBT

On August 29, 2007, we agreed to commence an exchange offering on or before October 1, 2007 to exchange our $400.0 million 7.5% Senior Notes (the “Notes”) for Senior Exchange Notes (the “New Notes”) with an interest rate of 9.5%, an option allowing us to redeem the New Notes at 1% above par from October 29, 2007 to February 28, 2009 and an option for the note holders to require us to redeem the New Notes at 1% above par from February 28, 2009 to December 15, 2011, both options requiring at least 30 but not more than 60 days notice. As a result, these notes are presented as current liabilities at September 30, 2008. The Exchange Offer was completed on October 31, 2007 with all but $4.3 million of the Notes being exchanged. In connection with issuing the New Notes, we amended our existing Bank Credit Facility to provide for an accelerated maturity should the New Notes maturity date change, revised certain financial covenants to reflect the impact of the Exchange Offer and redeemed our outstanding Term Loan balance.

In June 2007, our wholly owned unrestricted subsidiary, Golden Nugget, Inc. (the “Golden Nugget”), completed a new $545.0 million credit facility consisting of a $330.0 million first lien term loan, a $50.0 million revolving credit facility, and a $165.0 million second lien term loan. The $330.0 million first lien term loan includes a $120.0 million delayed draw component to finance the expansion at the Golden Nugget Hotel and Casino in Las Vegas, Nevada. The revolving credit

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NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

facility expires on June 30, 2013 and the first lien term loan matures on June 30, 2014. Both the first lien term loan and the revolving credit facility bear interest at Libor or the bank’s base rate, plus a financing spread, 2.0% and 0.75%, respectively, at September 30, 2008. In addition, the credit facility requires a commitment fee on the unfunded portion for both the $50.0 million revolving credit facility and the $120.0 million delayed draw component of the first lien term loan. The second lien term loan matures on December 31, 2014 and bears interest at Libor or the bank’s base rate, plus a financing spread, 3.25% and 2.0%, respectively, at September 30, 2008. The financing spreads and commitment fees for the revolving credit facility increase or decrease depending on the leverage ratio as defined in the credit facility. The first lien term loan requires one percent of the outstanding principal balance due annually to be paid in equal quarterly installments commencing on September 30, 2009, with the balance due on maturity. Principal of the second lien term loan is due at maturity. The Golden Nugget’s subsidiaries have granted liens on substantially all real property and personal property as collateral under the credit facility and are guarantors of the credit facility.

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

Consistent with our policy to manage our exposure to interest rate risk and in conformity with the requirements of the first and second lien facilities, we entered into interest rate swaps for all of the first and second lien borrowings of the Golden Nugget that fix the interest rates at between 5.4% and 5.5%, plus the applicable margin. We have designated $210.0 million of the first lien interest rate swaps and all of the second lien swaps as cash flow hedging transactions as set forth in SFAS 133. These swaps mirror the terms of the underlying debt and reset using the same index and terms. The remaining interest rate swaps associated with the $120.0 million of first lien borrowings reflecting the delayed draw construction loan have not been designated as hedges and the change in fair market value will be reflected as other income/expense in the consolidated financial statements. Accordingly, a non-cash expense of approximately $1.8 million and $2.1 million is reflected in the three and nine months ended September 30, 2008, respectively.

Our 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 September 30, 2008, we were in compliance with all such covenants. As of September 30, 2008, we had approximately $23.5 million in letters of credit outstanding, and our available borrowing capacity was $262.5 million.

Long-term debt is comprised of the following:

	September 30, 2008		December 31, 2007
$300.0 million Bank Syndicate Credit Facility, Libor + 1.50% interest only, due December 2009	$	54,000,000	$	87,000,000
Senior Exchange Notes, 9.5% interest only, due December 2014		395,662,000		395,662,000
Senior Notes, 7.5% interest only, due December 2014		4,338,000		4,338,000
$50.0 million revolving credit facility, Libor + 2.0%, due June 2013		10,000,000		12,000,000
$330.0 million First Lien Term Loan, Libor + 2.0%, 1% of principal paid quarterly beginning September 30, 2009, due June 2014		249,515,152		210,000,000
$165.0 million Second Lien Term Loan, Libor + 3.25%, interest only, due December 2014		165,000,000		165,000,000
Non-recourse long-term note payable, 9.39% interest, principal and interest aggregate $101,762 monthly, due May 2010		10,468,299		10,626,942
Other long-term notes payable with various interest rates, principal and interest paid monthly		15,331		43,939
$4.0 million seller note, 7.0%, interest paid monthly, due November 2010		4,000,000		4,000,000
Total debt		892,998,782		888,670,881
Less current portion		454,214,405		87,243,013
Long-term portion	$	438,784,377	$	801,427,868

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NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

6. EARNINGS PER SHARE

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
Income from continuing operations	$	(7,680,490	)	$	(3,065,823	)	$	8,874,560		$	29,329,501
Loss from discontinued operations, net of taxes		(9,374,672	)		(1,266,837	)		(10,536,380	)		(4,603,272	)
Net income	$	(17,055,162	)	$	(4,332,660	)	$	(1,661,820	)	$	24,726,229
Weighted average common shares outstanding—basic		15,260,000			17,650,000			15,260,000			19,850,000
Dilutive common stock equivalents:
Stock options		—			—			235,000			500,000
Restricted stock		—			—			20,000			50,000
Weighted average common and common share equivalents outstanding—diluted		15,260,000			17,650,000			15,515,000			20,400,000
Earnings (loss) per share—basic
Income from continuing operations	$	(0.50	)	$	(0.17	)	$	0.58		$	1.48
Loss from discontinued operations, net of taxes		(0.62	)		(0.08	)		(0.69	)		(0.23	)
Net income	$	(1.12	)	$	(0.25	)	$	(0.11	)	$	1.25
Earnings (loss) per share—diluted
Income from continuing operations	$	(0.50	)	$	(0.17	)	$	0.57		$	1.44
Loss from discontinued operations, net of taxes		(0.62	)		(0.08	)		(0.68	)		(0.23	)
Net income	$	(1.12	)	$	(0.25	)	$	(0.11	)	$	1.21

7. STOCK-BASED COMPENSATION

In December 2004, the FASB issued SFAS No. 123R, Share-Based Payments. SFAS No. 123R requires the recognition of the cost of employee services received in exchange for awards of equity instruments, such as stock options and restricted stock, based on the fair value of those awards at the date of grant. We adopted SFAS No. 123R effective January 1, 2006 using the modified-prospective method. We have several stock-based employee compensation plans, which are more fully described in our 2007 Annual Report on Form 10-K.

For the three months ended September 30, 2008 and 2007, total stock-based compensation expense, which includes both stock options and restricted stock, totaled $1.0 million and $1.1 million, respectively. For the nine months ended September 30, 2008 and 2007, total stock-based compensation expense totaled $3.1 million and $3.7 million, respectively. Stock-based compensation expense is not reported at the segment level as these amounts are not included in internal measurements of segment operating performance.

No restricted stock or stock options were granted during the nine months ended September 30, 2008.

8. INCOME TAXES

Effective January 1, 2007, we adopted the provisions of the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. As of December 31, 2007, we had approximately $14.1 million of unrecognized tax benefits, including $2.0 million of interest and penalties, which represents the amount of unrecognized tax benefits that, if recognized, would favorably impact our effective income tax rate in future periods. There were no material changes in unrecognized benefits for the nine months ended September 30, 2008. It is reasonably possible that the amount of unrecognized tax benefits with respect to our uncertain tax positions could significantly increase or decrease within 12 months. However, based on the current status of examinations, it is not possible to estimate the future impact, if any, to recorded uncertain tax positions at September 30, 2008. Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. We have substantially concluded all U.S. federal income tax matters for years through 2003. Substantially all material state and local income tax matters have been concluded for years through 2003. The Internal Revenue Service has begun an audit of our consolidated federal income tax returns for the year ended December 31, 2005. To date, no material issues have been identified.

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NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

9. COMMITMENTS AND CONTINGENCIES

Building Commitments

As of September 30, 2008, we had future development, land purchases and construction commitments anticipated to be expended within the next twelve months of approximately $106.6 million, including construction of certain new restaurants and the construction of a hotel tower at the Golden Nugget – Las Vegas estimated to cost an aggregate $160.0 million during the next eighteen months.

In connection with our purchase of an 80% interest in T-Rex Cafe, Inc. in February 2006, we committed to spend an estimated aggregate of $48.0 million during 2006, 2007 and 2008 to complete one T-Rex restaurant in Kansas City, Kansas, construct 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. Our remaining commitment as of September 30, 2008 amounts to approximately $0.7 million.

In 2003, we purchased the Flagship Hotel and Pier from the City of Galveston, Texas, subject to an existing lease. Under this agreement, we have committed to spend an additional $15.0 million to transform the hotel and pier into a 19^th century style inn and entertainment complex complete with rides and carnival type games. The property sustained significant damage from Hurricane Ike. We are evaluating our options with respect to the timing and extent of the renovation.

Other Commitments

Certain of our casino employees at the Golden Nugget in Las Vegas, Nevada are members of various unions and are covered by union-sponsored, collective bargained, multi-employer health and welfare and defined benefit pension plans. Under such plans, we recorded expenses of $2.4 million for both the three months ended September 30, 2008 and 2007, and expenses of $7.1 million and $6.8 million for the nine months ended September 30, 2008 and 2007, respectively. The plans’ sponsors have not provided sufficient information to permit us to determine its share of unfunded vested benefits, if any. However, based on available information, we do not believe that unfunded amounts attributable to our casino operations are material.

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

In connection with certain of our discontinued operations, we remain the guarantor or assignor of a number of leased locations. In the event of future default under any of such leased locations, we may be responsible for significant damages to existing landlords which may materially affect our financial condition, operating results and/or cash flows. We estimate that lessee rental payment obligations during the remaining terms of the assignments and subleases were $74.5 million at September 30, 2008. We have recorded a liability of $7.3 million with respect to these obligations.

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

Litigation and Claims

On April 4, 2006, a purported class action lawsuit was filed against Joe’s Crab Shack—San Diego, Inc. in the Superior Court of California in San Diego by Kyle Pietrzak and others similarly situated. The lawsuit alleges that the defendant violated wage and hour laws, including the failure to pay hourly and overtime wages, failure to provide meal periods and rest periods, failing to provide minimum reporting time pay, failing to compensate employees for required expenses, including the expense to maintain uniforms, and violations of the Unfair Competition Law. In June 2006, the lawsuit was amended to include Kristina Brask as a named plaintiff and named Crab Addison, Inc. and Landry’s Seafood House—Arlington, Inc. as additional defendants. We have reached a settlement agreement which has been approved by the Court and fully accrued the amount.

On February 18, 2005, and subsequently amended, a purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in San Bernardino by Michael D. Harrison, et. al. Subsequently, on September 20, 2005, another purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in Los Angeles by Dustin Steele, et. al. On January 26, 2006, both lawsuits were consolidated into one action by the state Superior

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Court in San Bernardino. The lawsuits allege that Rainforest Cafe violated wage and hour laws, including not providing meal and rest breaks, uniform violations and failure to pay overtime. We have reached a settlement agreement which has been approved by the Court and fully accrued the amount.

Following Mr. Fertitta’s initial proposal on January 27, 2008 to acquire all of our outstanding stock, five putative class action law suits were filed in state district courts in Harris County, Texas. On March 26, 2008, the five actions were consolidated for all purposes. The consolidated action is proceeding under Case No. 2008- 05211; Dennis Rice, on behalf of himself and all others similarly situated v. Landry’s Restaurants, Inc. et al.; in the 157^th Judicial District of Harris County, Texas (“Rice”). We are named as a defendant in Rice as are members of our board of directors. Plaintiffs allege that we and/or the members of our board of directors have breached or will breach fiduciary duties to our stockholders with regard to the presentation or consideration of Mr. Fertitta’s proposal to acquire all of our outstanding common stock. Plaintiffs also seek to enjoin in some form the consideration or acceptance of Mr. Fertitta’s proposal. The amount of damages initially sought is not indicated by any plaintiff.

James F. Stuart, individually and on behalf of all others similarly situated v. Landry’s Restaurants, Inc. et al., was filed on June 26, 2008 in the Court of Chancery of the State of Delaware (“Stuart”). We are named as a defendant along with our directors, Parent and Merger Sub. Stuart is a putative class action in which plaintiff alleges that the merger agreement unduly hinders obtaining the highest value for shares of our stock. Plaintiff also alleges that the merger is unfair. Plaintiff seeks to enjoin or rescind the merger, an accounting and damages along with costs and fees.

David Barfield v. Landry’s Restaurants, Inc. et al., was filed on June 27, 2008 in the Court of Chancery of the State of Delaware (“Barfield”). We are named in this case along with our directors, Parent and Merger Sub. Barfield is a putative class action in which plaintiff alleges that our directors aided and abetted Parent and Merger Sub, and have breached their fiduciary duties by failing to engage in a fair and reliable sales process leading up to the merger agreement. Plaintiff seeks to enjoin or rescind the transaction, an accounting and damages along with costs and fees.

Stuart and Barfield were consolidated by court order. The consolidated action is proceeding under Consolidated C.A. No. 3856-VCL; In re: Landry’s Restaurants, Inc. Shareholder Litigation. In their consolidated complaint, plaintiffs allege that our directors breached fiduciary duties to our stockholders and that the preliminary proxy statement filed on July 17, 2008 fails to disclose what plaintiffs contend are material facts. Plaintiffs also alleged that we, Parent and Merger Sub aided and abetted the alleged breach of fiduciary duty.

We believe that these actions are without merit and intend to contest the above matters vigorously.

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.

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10. SEGMENT INFORMATION

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008		2007
Revenue:
Restaurant and Hospitality	$	229,133,487		$	233,063,969		$	693,245,506	$	682,521,915
Gaming		60,602,743			62,701,218			196,914,306		199,967,218
Total	$	289,736,230		$	295,765,187		$	890,159,812	$	882,489,133
Unit level profit:
Restaurant and Hospitality	$	48,303,576		$	46,085,515		$	141,065,469	$	135,406,431
Gaming		12,659,608			12,975,860			48,486,125		50,511,372
Total	$	60,963,184		$	59,061,375		$	189,551,594	$	185,917,803
Depreciation, amortization and impairment:
Restaurant and Hospitality	$	30,895,870		$	11,865,325		$	57,336,377	$	35,141,954
Gaming		5,340,919			4,600,413			15,869,077		13,493,622
Total	$	36,236,789		$	16,465,738		$	73,205,454	$	48,635,576
Income before taxes:
Unit level profit	$	60,963,184		$	59,061,375		$	189,551,594	$	185,917,803
Depreciation, amortization and impairment		36,236,789			16,465,738			73,205,454		48,635,576
General and administrative		11,732,473			14,403,271			36,875,860		43,911,732
Pre-opening		553,998			957,506			1,392,070		2,130,571
Loss (gain) on disposal of assets		—			39,402			9,128		(18,701,269	)
Interest expense, net		19,491,090			25,187,357			60,175,403		52,248,522
Other expenses (income)		2,657,707			8,368,852			3,867,320		14,982,858
Consolidated income from continuing operations before taxes	$	(9,708,873	)	$	(6,360,751	)	$	14,026,359	$	42,709,813
							September 30, 2008		December 31, 2007
Segment assets:
Restaurant and Hospitality							$	732,606,221	$	742,900,814
Gaming								585,223,758		564,686,113
Corporate and other (1)								168,641,580		195,395,602
							$	1,486,471,559	$	1,502,982,529

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

11. SUPPLEMENTAL GUARANTOR INFORMATION

In December 2004, we issued, in a private offering, $400.0 million of 7.5% senior notes due in 2014 (see Note 5 “Debt”). In June 2005, substantially all of these notes were exchanged for substantially identical notes in an exchange offering registered under the Securities Act of 1933. In October 2007, the notes were exchanged for new notes in substantially the same amount. These notes are fully and unconditionally guaranteed by us and certain of our 100% owned subsidiaries, “Guarantor Subsidiaries”.

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

16

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Unaudited Consolidating Financial Statements

Balance Sheet

September 30, 2008

	Parent		Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	22,873,803	$	22,736,180		$	17,736,989		$	—		$	63,346,972
Accounts receivable—trade and other, net		5,880,133		7,456,169			4,266,883			—			17,603,185
Inventories		10,993,977		12,383,295			3,133,218			—			26,510,490
Deferred taxes		18,258,557		371,510			4,318,007			—			22,948,074
Assets related to discontinued operations		3,270,932		552,128			—			—			3,823,060
Other current assets		3,581,921		2,475,403			5,327,735			—			11,385,059
Total current assets		64,859,323		45,974,685			34,782,832			—			145,616,840
PROPERTY AND EQUIPMENT, net		41,145,219		639,455,516			553,500,075			—			1,234,100,810
GOODWILL		—		18,527,547			—			—			18,527,547
OTHER INTANGIBLE ASSETS, net		1,823,922		8,492,626			28,596,222			—			38,912,770
INVESTMENT IN AND ADVANCES TO SUBSIDIARIES		722,391,154		(91,191,488	)		(90,330,907	)		(540,868,759	)		—
OTHER ASSETS, net		16,666,714		2,309,925			30,336,953			—			49,313,592
Total assets	$	846,886,332	$	623,568,811		$	556,885,175		$	(540,868,759	)	$	1,486,471,559
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	21,738,091	$	17,544,560		$	12,967,096		$	—		$	52,249,747
Accrued liabilities		30,576,035		66,099,091			37,478,552			—			134,153,678
Income taxes payable		239,126		35			—			—			239,161
Current portion of long-term debt and other obligations		454,015,332		—			199,073			—			454,214,405
Liabilities related to discontinued operations		—		7,600,338			—			—			7,600,338
Total current liabilities		506,568,584		91,244,024			50,644,721			—			648,457,329
LONG-TERM NOTES, NET OF CURRENT PORTION		—		—			438,784,377			—			438,784,377
DEFERRED TAXES		—		695,094			15,171,637			(15,866,731	)		—
OTHER LIABILITIES		25,184,407		21,655,166			37,256,939			—			84,096,512
Total liabilities		531,752,991		113,594,284			541,857,674			(15,866,731	)		1,171,338,218
COMMITMENTS AND CONTINGENCIES
TOTAL STOCKHOLDERS’ EQUITY		315,133,341		509,974,527			15,027,501			(525,002,028	)		315,133,341
Total liabilities and stockholders’ equity	$	846,886,332	$	623,568,811		$	556,885,175		$	(540,868,759	)	$	1,486,471,559

17

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Consolidating Financial Statements

Balance Sheet

December 31, 2007

	Parent		Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	4,265,460	$	9,249,286		$	26,086,500		$	—		$	39,601,246
Accounts receivable—trade and other, net		9,328,511		9,296,733			5,571,162			—			24,196,406
Inventories		16,868,200		14,091,690			4,241,205			—			35,201,095
Deferred taxes		17,812,916		439,191			3,395,535			—			21,647,642
Assets related to discontinued operations		7,099,380		14,699,398			459			—			21,799,237
Other current assets		3,813,548		3,490,855			5,296,355			—			12,600,758
Total current assets		59,188,015		51,267,153			44,591,216			—			155,046,384
PROPERTY AND EQUIPMENT, net		43,323,410		661,539,857			533,689,020			—			1,238,552,287
GOODWILL		—		18,527,547			—			—			18,527,547
OTHER INTANGIBLE ASSETS, net		1,501,733		58,195			37,586,294			—			39,146,222
INVESTMENT IN AND ADVANCES TO SUBSIDIARIES		761,917,690		(154,241,240	)		(118,527,534	)		(489,148,916	)		—
OTHER ASSETS, net		19,720,148		10,434,351			21,555,590			—			51,710,089
Total assets	$	885,650,996	$	587,585,863		$	518,894,586		$	(489,148,916	)	$	1,502,982,529
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	31,359,170	$	26,301,025		$	16,896,913		$	—		$	74,557,108
Accrued liabilities		25,118,966		71,382,173			40,809,182			—			137,310,321
Income taxes payable		843,045		—			—			—			843,045
Current portion of long-term debt and other obligations		87,043,940		—			199,073			—			87,243,013
Liabilities related to discontinued operations		—		4,909,863			66,459			—			4,976,322
Total current liabilities		144,365,121		102,593,061			57,971,627			—			304,929,809
LONG-TERM NOTES, NET OF CURRENT PORTION		400,000,000		—			401,427,868			—			801,427,868
DEFERRED TAXES		—		422,207			12,966,073			(13,388,280	)		—
OTHER LIABILITIES		24,386,802		22,730,740			32,608,237			—			79,725,779
Total liabilities		568,751,923		125,746,008			504,973,805			(13,388,280	)		1,186,083,456
COMMITMENTS AND CONTINGENCIES
TOTAL STOCKHOLDERS’ EQUITY		316,899,073		461,839,855			13,920,781			(475,760,636	)		316,899,073
Total liabilities and stockholders’ equity	$	885,650,996	$	587,585,863		$	518,894,586		$	(489,148,916	)	$	1,502,982,529

18

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Income

Three Months Ended September 30, 2008

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
REVENUES	$	1,357,246		$	222,710,052		$	66,484,053		$	(815,121	)	$	289,736,230
OPERATING COSTS AND EXPENSES:
Cost of Revenues		—			57,318,597			4,950,382			—			62,268,979
Labor		—			63,476,641			29,198,350			—			92,674,991
Other operating expenses		257,736			56,109,613			18,276,848			(815,121	)		73,829,076
General and administrative expenses		11,732,473			—			—			—			11,732,473
Depreciation and amortization		1,140,527			10,910,967			5,693,508			—			17,745,002
Asset impairment expense		—			18,491,787			—			—			18,491,787
Pre-opening expenses		—			553,998			—			—			553,998
Total operating costs and expenses		13,130,736			206,861,603			58,119,088			(815,121	)		277,296,306
OPERATING INCOME		(11,773,490	)		15,848,449			8,364,965			—			12,439,924
OTHER EXPENSES (INCOME):
Interest expense, net		10,486,985			(22,792	)		9,026,897			—			19,491,090
Other, net		540,802			3,452			2,113,453			—			2,657,707
		11,027,787			(19,340	)		11,140,350			—			22,148,797
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(22,801,277	)		15,867,789			(2,775,385	)		—			(9,708,873	)
PROVISION (BENEFIT) FOR INCOME TAXES		(4,657,492	)		3,585,497			(956,388	)		—			(2,028,383	)
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES		(18,143,785	)		12,282,292			(1,818,997	)		—			(7,680,490	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF INCOME TAXES		—			(9,374,672	)		—			—			(9,374,672	)
EQUITY IN EARNINGS OF SUBSIDIARIES		1,088,623			—			—			(1,088,623	)		—
NET INCOME (LOSS)	$	(17,055,162	)	$	2,907,620		$	(1,818,997	)	$	(1,088,623	)	$	(17,055,162	)

19

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Income

Three Months Ended September 30, 2007

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
REVENUES	$	340,437		$	223,660,154		$	71,764,596		$	—		$	295,765,187
OPERATING COSTS AND EXPENSES:
Cost of Revenues		—			60,406,873			5,605,118			—			66,011,991
Labor		—			67,097,788			30,311,536			—			97,409,324
Other operating expenses		(354,595	)		52,438,901			21,198,191						73,282,497
General and administrative expenses		14,403,271			—			—			—			14,403,271
Depreciation and amortization		1,130,309			10,080,067			5,255,362			—			16,465,738
Asset impairment expense		—			—			—			—			—
Pre-opening expenses		—			539,622			417,884			—			957,506
Loss (gain) on disposal of assets		—			39,402			—			—			39,402
Total operating costs and expenses		15,178,985			190,602,653			62,788,091			—			268,569,729
OPERATING INCOME (LOSS)		(14,838,548	)		33,057,501			8,976,505			—			27,195,458
OTHER EXPENSES (INCOME):
Interest (income) expense, net		17,791,850			—			7,395,507			—			25,187,357
Other, net		6,514,341			(34,533	)		1,889,044			—			8,368,852
		24,306,191			(34,533	)		9,284,551			—			33,556,209
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(39,144,739	)		33,092,034			(308,046	)		—			(6,360,751	)
PROVISION (BENEFIT) FOR INCOME TAXES		(14,506,679	)		11,334,824			(123,073	)		—			(3,294,928	)
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES		(24,638,060	)		21,757,210			(184,973	)		—			(3,065,823	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF INCOME TAXES		—			(1,383,927	)		117,090			—			(1,266,837	)
EQUITY IN EARNINGS OF SUBSIDIARIES		20,305,400			—			—			(20,305,400	)		—
NET INCOME (LOSS)	$	(4,332,660	)	$	20,373,283		$	(67,883	)	$	(20,305,400	)	$	(4,332,660	)

20

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Income

Nine Months Ended September 30, 2008

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
REVENUES	$	3,292,457		$	673,671,628		$	215,907,136		$	(2,711,409	)	$	890,159,812
OPERATING COSTS AND EXPENSES:
Cost of Revenues		—			176,412,056			15,229,695			—			191,641,751
Labor		—			195,054,092			89,820,132			—			284,874,224
Other operating expenses		968,561			167,123,724			58,711,367			(2,711,409	)		224,092,243
General and administrative expenses		36,875,860			—			—			—			36,875,860
Depreciation and amortization		3,450,995			32,791,337			16,878,194			—			53,120,526
Asset impairment expense		—			18,491,787			1,593,141			—			20,084,928
Pre-opening expenses		—			1,392,070			—			—			1,392,070
Loss (gain) on disposal of assets		—			9,128			—			—			9,128
Total operating costs and expenses		41,295,416			591,274,194			182,232,529			(2,711,409	)		812,090,730
OPERATING INCOME		(38,002,959	)		82,397,434			33,674,607			—			78,069,082
OTHER EXPENSES (INCOME):
Interest expense, net		33,061,995			(22,792	)		27,136,200			—			60,175,403
Other, net		979,224			(4,595	)		2,892,691			—			3,867,320
		34,041,219			(27,387	)		30,028,891			—			64,042,723
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(72,044,178	)		82,424,821			3,645,716			—			14,026,359
PROVISION (BENEFIT) FOR INCOME TAXES		(19,596,823	)		23,758,189			990,433			—			5,151,799
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES		(52,447,355	)		58,666,632			2,655,283			—			8,874,560
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF INCOME TAXES		—			(10,531,960	)		(4,420	)		—			(10,536,380	)
EQUITY IN EARNINGS OF SUBSIDIARIES		50,785,535			—			—			(50,785,535	)		—
NET INCOME (LOSS)	$	(1,661,820	)	$	48,134,672		$	2,650,863		$	(50,785,535	)	$	(1,661,820	)

21

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Income

Nine Months Ended September 30, 2007

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries		Eliminations			Consolidated Entity
REVENUES	$	1,294,830		$	656,953,807		$	224,240,496	$	—		$	882,489,133
OPERATING COSTS AND EXPENSES:
Cost of Revenues		—			178,952,228			16,380,235		—			195,332,463
Labor		—			194,681,393			87,998,228		—			282,679,621
Other operating expenses		182,164			153,264,461			65,112,621					218,559,246
General and administrative expenses		43,911,732			—			—		—			43,911,732
Depreciation and amortization		3,472,357			29,711,877			15,451,342		—			48,635,576
Asset impairment expense		—			—			—		—			—
Pre-opening expenses		—			1,228,028			902,543		—			2,130,571
Loss (gain) on disposal of assets		—			(18,701,269	)		—		—			(18,701,269	)
Total operating costs and expenses		47,566,253			539,136,718			185,844,969		—			772,547,940
OPERATING INCOME (LOSS)		(46,271,423	)		117,817,089			38,395,527		—			109,941,193
OTHER EXPENSES (INCOME):
Interest (income) expense, net		36,676,731			(506	)		15,572,297		—			52,248,522
Other, net		6,587,691			3,358,032			5,037,135		—			14,982,858
		43,264,422			3,357,526			20,609,432		—			67,231,380
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(89,535,845	)		114,459,563			17,786,095		—			42,709,813
PROVISION (BENEFIT) FOR INCOME TAXES		(32,257,118	)		39,504,153			6,133,277		—			13,380,312
INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES		(57,278,727	)		74,955,410			11,652,818		—			29,329,501
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF INCOME TAXES		(119,204	)		(4,578,887	)		94,819		—			(4,603,272	)
EQUITY IN EARNINGS OF SUBSIDIARIES		82,124,160			—			—		(82,124,160	)		—
NET INCOME (LOSS)	$	24,726,229		$	70,376,523		$	11,747,637	$	(82,124,160	)	$	24,726,229

22

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Cash Flows

Nine months ended September 30, 2008

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	(1,661,820	)	$	48,134,672		$	2,650,863		$	(50,785,535	)	$	(1,661,820	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,450,996			31,728,623			18,505,536			—			53,685,155
Asset impairment expense		—			30,423,771			—			—			30,423,771
Loss on disposition of assets		—			9,128			—			—			9,128
Change in assets and liabilities, net and other		53,312,348			(71,126,585	)		(28,800,829	)		50,785,535			4,170,469
Total adjustments		56,763,344			(8,965,063	)		(10,295,293	)		50,785,535			88,288,523
Net cash provided (used) by operating activities		55,101,524			39,169,609			(7,644,430	)		—			86,626,703
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and/or transfers		(1,841,291	)		(41,117,515	)		(38,061,591	)		—			(81,020,397	)
Proceeds from disposition of property and equipment		—			15,434,800			—			—			15,434,800
Purchase of marketable securities		—			—			—			—			—
Proceeds from the sale of securities		—			—			—			—			—
Net cash provided by (used in) investing activities		(1,841,291	)		(25,682,715	)		(38,061,591	)		—			(65,585,597	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of common stock for treasury		(15,274	)		—			—			—			(15,274	)
Proceeds from exercise of stock options		6,361			—			—			—			6,361
Payments of debt and related expenses, net		(28,608	)		—			(158,642	)		—			(187,250	)
Financing proceeds		—			—			39,515,152			—			39,515,152
Debt issuance costs		—			—			—			—			—
Proceeds from credit facility		142,000,000			—			77,000,000			—			219,000,000
Payments on credit facility		(175,000,000	)		—			(79,000,000	)		—			(254,000,000	)
Dividends paid		(1,614,369	)		—			—			—			(1,614,369	)
Net cash provided (used) in financing activities		(34,651,890	)		—			37,356,510			—			2,704,620
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		18,608,343			13,486,894			(8,349,511	)		—			23,745,726
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		4,265,460			9,249,286			26,086,500			—			39,601,246
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	22,873,803		$	22,736,180		$	17,736,989		$	—		$	63,346,972

23

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Cash Flows

Nine Months Ended September 30, 2007

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

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

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

We are a national, diversified, restaurant, hospitality and entertainment company principally engaged in the ownership and operation of full service, casual dining restaurants. As of September 30, 2008, we operated 174 such restaurants, as well as several limited menu restaurants and other properties, including the Golden Nugget Hotels and Casinos (Golden Nugget) in Las Vegas and Laughlin, Nevada.

We are in the business of operating restaurants and other hospitality and entertainment activities. We do not engage in real estate operations other than those associated with the ownership and operation of our businesses. 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. Our 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.

On September 13, 2008, Hurricane Ike struck the Gulf Coast of the United States, causing considerable damage to the cities of Galveston, Kemah and Houston, Texas and surrounding areas. Several of our restaurants in Galveston and Kemah sustained significant damage, as did the amusement rides, the boardwalk itself and some infrastructure at the Kemah Boardwalk. The Kemah and Galveston properties have been a significant driver of our overall performance in 2008. The damage to the Kemah and Galveston properties may adversely affect both our business and near- and long-term prospects. Widespread power outages led to the closure of 31 Houston area restaurants until power was restored. All Houston restaurants have reopened, as well as nine restaurants in Galveston and Kemah, while seven restaurants, the amusement rides and much of the complementary businesses at the Kemah Boardwalk remain closed. We expect additional business units to reopen each month, with all business units reopening by March 2009.

Based on preliminary estimates of the damage sustained by our properties, an asset impairment charge of $24.4 million was recorded during the third quarter of 2008. This charge was reduced by $7.5 million as a result of insurance proceeds received under our various property and casualty insurance policies. While we expect to receive substantial additional insurance proceeds under these policies in the future, the ultimate amount that we will collect has yet to be determined. Any future recoveries under these policies will be recognized in the period in which all contingencies have been resolved.

We also maintain business interruption insurance coverage and have recorded approximately $2.5 million in recoveries related to lost profits at our affected locations in Galveston and the Kemah Boardwalk. This amount was recorded as revenue in our consolidated financial statements. We expect to receive additional amounts under our business interruption coverage for the restaurants and amusements that remain closed. Any future recoveries under this coverage will be recognized in the period in which all contingencies have been resolved.

All of the amounts reflected to date are estimates based on information currently available to us and the actual insurance proceeds that have been collected. The estimates of damage are preliminary and subject to change until we have finalized all claims with our insurance carriers. We are unable to estimate what the effect on our fourth-quarter results will be or what insurance recoveries may ultimately be received to offset any such impact. However, we believe that the majority of our property losses and cash flow will be covered by property and business interruption insurance.

On October 18, 2008, we entered into a First Amendment to Agreement and Plan of Merger (First Amendment) with Fertitta Holdings, Inc., a Delaware corporation (Parent) and Fertitta Acquisition Co., a Delaware corporation and a wholly-owned subsidiary of Parent (Merger Sub) and for certain limited purposes, Tilman J. Fertitta (Mr. Fertitta). Pursuant to the terms of the First Amendment, the Agreement and Plan of Merger (Merger Agreement) previously entered into on June 16, 2008, between the foregoing parties was amended to provide that each of our outstanding shares of common stock, other than shares owned by us, Parent, Merger Sub or any other subsidiary of Parent and stockholders who perfected appraisal rights under applicable law, will be cancelled and converted into the right to receive $13.50 in cash, without interest.

Our Board of Directors, acting upon the unanimous recommendation of a special committee comprised entirely of independent directors (Special Committee), which had reviewed an opinion from Cowen and Company that the amended transaction is fair to Landry’s stockholders, other than Mr. Fertitta, from a financial point of view, has concluded that the First Amendment is fair, advisable and in the best interests of Landry’s stockholders and has approved the First Amendment and has recommended that the Landry’s stockholders vote in favor of the Merger Agreement as amended by the First Amendment.

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As a result of substantial damage and other effects suffered by Landry’s and its subsidiaries as a result of Hurricane Ike, Jefferies & Company, Inc. indicated that absent a change to the debt financing commitment issued by Jefferies Funding LLC, Jefferies & Company, Inc., Jefferies Finance, LLC and Wells Fargo Foothill, LLC (Lenders) to Parent in connection with the Merger Agreement, the Lenders’ believed that Parent may be unable to satisfy the conditions precedent under the Lenders debt financing commitment. Parent believed that the Lenders were prepared to assert that a material adverse effect had occurred and therefore would not be obligated to provide the financing necessary for the consummation of the Merger, in which event Parent could terminate its obligations under the Merger Agreement. As part of a compromise that was reached among Landry’s, Parent and the Lenders, the Lenders agreed under their amended debt financing commitment, and Parent agreed under the First Amendment, that they would waive any claim that a material adverse effect had occurred as a result of the occurrence of any event known to them through the date of execution of the amended debt financing commitment and the First Amendment, respectively. Additionally, the Lenders’ agreed under the amended debt financing commitment to provide Mr. Fertitta with up to $500.0 million in debt financing for the Merger and to provide us with an alternative financing commitment of up to $420.0 million in the event the Merger is not consummated and certain other conditions are satisfied. The alternative financing would be sufficient to repay our existing indebtedness which is subject to the holders of our existing 9.5% Senior Exchange Notes (New Notes) exercising their right to require us to redeem the New Notes at 101% of the principal amount thereof beginning in February 2009.

The First Amendment contains provisions pursuant to which the Special Committee with the assistance of its independent advisors, will actively solicit superior acquisition proposals through November 17, 2008 (“the go-shop period”) and thereafter may receive unsolicited proposals. The First Amendment maintained the $3.4 million termination fees payable under the Merger Agreement as a result of specified terminations during the go-shop period and reduced the post go-shop termination fees from $24.0 million to $15.0 million. Finally, the First Amendment provides that if the Merger Agreement is terminated so that we may pursue a competing acquisition proposal, then the Special Committee may vote all shares of common stock acquired by Mr. Fertitta after June 16, 2008 in favor of such competing acquisition proposal at the stockholders meeting called for the purpose of considering such competing acquisition proposal.

Mr. Fertitta has committed to provide equity financing which, in addition to the amended debt financing commitment for the transaction contemplated by the Merger Agreement, as amended by the First Amendment, will be used by Parent to pay the aggregate merger consideration and related fees and expenses of the transaction. Consummation of the Merger is subject to a stockholder vote and other customary closing conditions and performance criteria, including (i) no material adverse effects on our results or operations prior to closing, although all known events through the date of execution of the amended debt financing commitment and First Amendment cannot be considered for purposes of determining whether a material adverse effect has occurred, and (ii) our achieving certain levels of EBITDA during certain pre-closing periods and having no greater than a certain amount of leverage as of the closing.

Approximately $395.7 million in Senior Exchange Notes allow the note holders to redeem the New Notes upon at least 30 but no more than 60 days notice at 101% of face value from February 28, 2009 to December 15, 2011. As a result, these notes are presented as current liabilities at September 30, 2008. Furthermore, it is likely that our note holders will exercise their option to redeem the senior notes. In connection with the amended Merger Agreement, subject to certain conditions, we have committed financing sufficient to repay our existing indebtedness should the merger not be completed. The new financing will carry higher interest rates and more restrictive terms than our current agreements and will reduce our capital available for growth and the terms may restrict our ability to pursue acquisitions in the near term. Accordingly, we have reduced our planned new unit growth for 2008 and 2009.

During 2006, as part of a strategic review of our operations, we initiated a plan to divest certain restaurants, including 136 Joe’s Crab Shack units. During 2007 and 2008, several additional locations were added to our disposal plan. The results of operations for all units included in the disposal plan have been reclassified to discontinued operations in the statements of income, balance sheets and segment information for all periods presented.

On November 17, 2006, we completed the sale of 120 Joe’s Crab Shack restaurants for approximately $192.0 million, including the assumption of certain working capital liabilities. In connection with the sale, we recorded pre-tax impairment charges and other losses totaling $49.2 million.

The restaurant and gaming industries are intensely competitive and affected by changes in consumer tastes and by national, regional, and local economic conditions and demographic trends. The performance of individual restaurants or casinos may be affected by factors such as: traffic patterns, demographic considerations, marketing, weather conditions, and the type, number, and location of competing operations. Furthermore, the current economic downturn has adversely affected overall consumer spending in both the restaurant and gaming industries. The extent and length of this downturn is unknown at this time.

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We have many well established competitors with greater financial resources, larger marketing and advertising budgets, and longer histories of operation than ours, including competitors already established in regions where we are planning to expand, as well as competitors planning to expand in the same regions. We face significant competition from other casinos in the markets in which we operate and from other mid-priced, full-service, casual dining restaurants offering or promoting seafood and other types and varieties of cuisine. Our competitors include national, regional, and local chains as well as local owner-operated restaurants. We also compete with other restaurants and retail establishments for restaurant sites. We intend to pursue an acquisition strategy should we be successful in obtaining permanent financing to replace our Senior Notes and the merger agreement is not consummated.

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Results of Operations

	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2007		2008		2007
Revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenues	21.5	%	22.3	%	21.5	%	22.1	%
Labor	32.0	%	32.9	%	32.0	%	32.0	%
Other operating expenses(1)	25.5	%	24.8	%	25.2	%	24.8	%
Unit Level Profit(1)	21.0	%	20.0	%	21.3	%	21.1	%

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

Three Months Ended September 30, 2008 Compared to the Three Months Ended September 30, 2007

Revenues decreased $6,028,957, or 2.0%, to $289,736,230 million from $295,765,187 million for the three months ended September 30, 2008 compared to the three months ended September 30, 2007.

Restaurant and hospitality

Revenues decreased $3,930,482, or 1.7%, from $233,063,969 to $229,133,487 as result of the following approximate amounts: new restaurant openings—increase $8.1 million; same store sales (restaurants open all of the third quarter of 2008 and 2007) – decrease $2.7 million; hurricane closures – decrease $7.8 million; restaurant closings – decrease $1.6 million; and the remainder of the difference is attributable to the change in sales for stores not open a full comparable period. The total number of units open as of September 30, 2008 and 2007 was 174 and 170, respectively.

Cost of revenues decreased $3,934,157, or 6.3%, from $62,359,913 to $58,425,756 for the three months ended September 30, 2008 as compared to the same period in the prior year. Cost of revenues as a percentage of revenues for the three months ended September 30, 2008 decreased to 25.5% from 26.8% in 2007. This decrease is primarily the result of a shift in mix to higher margin hotel and amusement revenues with minimal cost of revenues, restaurant price increases and cost control measures implemented in 2008.

Labor expense decreased $4,460,518, or 6.4%, from $69,571,837 to $65,111,319 for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007. Labor expenses as a percentage of revenues for the three months ended September 30, 2008 decreased to 28.4% from 29.9% in 2007. The decrease in labor resulted in part from by cost control measures implemented in 2008, partially offset by increases in the minimum wage.

Other operating expenses increased $2,246,132, or 4.1%, from $55,046,704 to $57,292,836 for the three months ended September 30, 2008, as compared to the three months ended September 30, 2007 and such expenses increased as a percentage of revenues to 25.0% in 2008 from 23.6% in 2007. These increases primarily relate to increased energy costs in 2008 and increased spoilage associated with Hurricane Ike.

Gaming

Casino revenues decreased $3,077,111, or 8.1%, from $37,968,201 to $34,891,090 for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007. This decrease is primarily the result of reduced slot activity in both Las Vegas and Laughlin.

Room revenues decreased $877,587, or 5.5%, from $15,982,877 to $15,105,290 for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007. This decrease is primarily the result of reduced occupancy and average daily room rates in both Las Vegas and Laughlin. The decreases in casino revenues and room revenues were partially offset during the quarter by higher food and beverage revenues, which increased $987,931, or 8.6%, from $11,511,646 to $12,499,577 as result of the addition of Gold Diggers and Red Sushi and increased other revenues of $422,436, or 13.0%, associated primarily with the renovation and expansion of the South Tower gift shop in Las Vegas.

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Promotional allowances decreased $445,856, or 7.4%, from $6,011,127 to $5,565,271 for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007. This decrease is primarily the result of the decrease in casino revenues as compared to the comparable prior year period.

Casino expenses and other expenses decreased $867,104, or 4.5%, and $1,167,849, or 7.0%, respectively, for the three months ended September 30, 2008. These decreases are primarily the result of reduced payroll costs for both Las Vegas and Laughlin.

Consolidated

General and administrative expenses decreased $2,670,798 or 18.5%, from $14,403,271 to $11,732,473 for the three months ended September 30, 2008 as compared to the prior year, and decreased as a percentage of revenues to 4.0% in 2008 from 4.9% in 2007. This decrease relates primarily to lower legal and other professional fees, as well as a decrease in corporate payroll.

Depreciation and amortization expense increased by $1,279,264, or 7.8%, from $16,465,738 to $17,745,002 for the three months ended September 30, 2008 as compared to three months ended September 30, 2007. The increase for 2008 was due to the renovation of the Golden Nugget and the addition of new restaurants and equipment.

Asset impairment expense was $18,491,787 for the three months ended September 30, 2008. Based on preliminary estimates of the damage sustained by our properties, an asset impairment charge of $24.4 million was recorded during the third quarter of 2008 as a result of Hurricane Ike. This charge was reduced by $7.5 million as a result of insurance proceeds received under our various property and casualty insurance policies. In addition, we continually monitor unfavorable cash flows, if any, related to underperforming restaurants. Periodically we may conclude that certain properties have become impaired based on the existing and anticipated future economic outlook for such properties in their respective market areas. During the three months ended September 30, 2008, we impaired the leasehold improvements and equipment of two underperforming restaurants.

Pre-opening expenses decreased by $403,508, or 42.1%, from $957,506 to $553,998 for the three months ended September 30, 2008. This decrease relates to the reduced number of openings undertaken in 2008 compared with the prior year.

Net interest expense for the three months ended September 30, 2008 decreased by $5,696,267, or 22.6%, from $25,187,357 to $19,491,090. This decrease is primarily due to a 2007 charge of $8.0 million for deferred loan costs previously being amortized over the term of the 7.5% Senior Notes. The 7.5% Senior Notes were exchanged for 9.5% Senior Notes as a result of a settlement with the note holders in the third quarter of 2007. This decrease was partially offset by higher average borrowing rates and increased borrowings in 2008.

Other expense decreased $5,711,145, from $8,368,852 to $2,657,707 for the three months ended September 30, 2008 primarily as a result of reduced expenses associated with exchanging the 7.5% Senior Notes for 9.5% Senior Notes during the third quarter of 2007, and lower non-cash charges related to interest rate swaps not considered hedges.

An income tax benefit of $2,028,383 was recorded for the three months ended September 30, 2008 compared with a benefit of $3,294,928 for the three months ended September 30, 2007. The effective tax rate for the three months ended September 30, 2008 was 20.9% compared to 51.8% for the prior year period. The decrease in the effective tax benefit rate is primarily attributable to a reduction in tax credits.

The after tax loss from discontinued operations was $9,374,672 for the three months ended September 30, 2008. The loss related primarily to impairments on assets held for sale or abandoned and operating losses.

Nine Months Ended September 30, 2008 Compared to the Nine Months Ended September 30, 2007

Revenues increased $7,670,679, or 0.9%, from $882,489,133 to $890,159,812 for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007.

Restaurant and hospitality

Revenues increased $10,723,591, or 1.6%, from $682,521,915 to $693,245,506 as result of the following approximate amounts: new restaurant openings—increase $27.8 million; additional day due to leap year – increase $2.9 million; same store sales (restaurants open all of the first nine months of 2008 and 2007) – decrease $9.3 million; hurricane closures – decrease $7.8 million; restaurant closings – decrease $5.3 million; and the remainder of the difference is attributable to the change in sales for stores not open a full comparable period. The total number of units open as of September 30, 2008 and 2007 was 174 and 170, respectively.

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Cost of revenues decreased $4,316,437, or 2.3%, from $184,527,846 to $180,211,409 for the nine months ended September 30, 2008 as compared to the same period in the prior year. Cost of revenues as a percentage of revenues for the nine months ended September 30, 2008 decreased to 26.0% from 27.0% in 2007. This decrease is primarily the result of a shift in mix to higher margin hotel and amusement revenues with minimal cost of revenues, restaurant price increases and cost control measures implemented in 2008.

Labor expense decreased $1,609,043, or 0.8%, from $201,845,322 to $200,236,279 for the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007. Labor expenses as a percentage of revenues for the three months ended September 30, 2008 decreased to 28.9% from 29.6% in 2007. The decrease in labor resulted in part from cost control measures implemented in 2008, partially offset by increases in the minimum wage.

Other operating expenses increased $10,990,033, or 6.8%, from $160,742,316 to $171,732,349 for the nine months ended September 30, 2008 and such expenses increased as a percentage of revenues to 24.8% in 2008 from 23.6% in 2007. These increases primarily relate to increased energy costs, advertising expense and rent as compared to the comparable prior year period.

Gaming

Casino revenues decreased $6,562,818, or 5.3%, from $124,533,914 to $117,971,096 for the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007. This decrease is primarily the result of reduced slot activity in both Las Vegas and Laughlin.

Food and beverage revenues increased $2,825,004, or 8.3%, from $34,239,251 to $37,064,255 and other revenues increased $489,705, or 4.7%, from $10,405,677 to $10,895,382 for the nine months ended September 30, 2008, respectively. These increases resulted from the addition of Gold Diggers and Red Sushi, as well as the renovation and expansion of the South Tower gift shop in Las Vegas.

Promotional allowances were flat for the nine months ended September 30, 2008 as compared to the comparable prior year period.

Other expenses decreased $2,557,557, or 5.2%, from $49,087,044 to $46,529,487 for the nine months ended September 30, 2008. These decreases were primarily the result of reduced marketing and payroll costs for both Las Vegas and Laughlin.

Consolidated

General and administrative expenses decreased $7,035,872 or 16.0%, from $43,911,732 to $36,875,860 for the nine months ended September 30, 2008 and decreased as a percentage of revenues to 4.1% in 2008 from 5.0% in 2007. This decrease relates primarily to reduced legal and other professional fees as compared to amounts incurred in the prior year and reduced corporate payroll costs in 2008.

Depreciation and amortization expense increased by $4,484,950, or 9.2%, from $48,635,576 to $53,120,526 for the nine months ended September 30, 2008 as compared to the prior year period. The increase for 2008 was due to the renovation of the Golden Nugget and the addition of new restaurants and equipment.

Asset impairment expense was $20,084,928 for the nine months ended September 30, 2008 compared with no impairment expense for the same period in 2007. Based on preliminary estimates of the damage sustained by our properties, as a result of Hurricane Ike, an asset impairment charge of $24.4 million was recorded during the third quarter of 2008. This charge was reduced by $7.5 million as a result of insurance proceeds received under our various property and casualty insurance policies. In addition, we continually monitor unfavorable cash flows, if any, related to underperforming restaurants. Periodically we may conclude that certain properties have become impaired based on the existing and anticipated future economic outlook for such properties in their respective market areas. During the nine months ended September 30, 2008, we impaired the leasehold improvements and equipment of three underperforming restaurants.

Pre-opening expenses decreased by $738,501, or 34.7%, from $2,130,571 to $1,392,070 for the nine months ended September 30, 2008. This decrease relates to the reduced number of openings undertaken in 2008 compared with the prior year.

30

Net interest expense for the nine months ended September 30, 2008 increased by $7,926,881, or 15.2%, from $52,248,522 to $60,175,403. This increase is primarily due to higher average borrowing rates and increased borrowings in 2008 primarily associated with the Golden Nugget, partially offset by a 2007 charge of $8.0 million for deferred loan costs previously being amortized over the term of the 7.5% Senior Notes. The 7.5% Senior Notes were exchanged for 9.5% Senior Notes as a result of a settlement with the note holders in the third quarter of 2007.

Other expense decreased $11,115,538, or 74.2%, from $14,982,858 to $3,867,320 for the nine months ended September 30, 2008 as a result of call premiums and expenses in the prior year associated with refinancing the Golden Nugget.

A provision for income taxes of $5,151,799 was recorded for the nine months September 30, 2008 compared with a provision of $13,380,312 for the nine months ended September 30, 2007. The effective tax rate for the nine months ended September 30, 2008 was 36.7% compared to 31.3% for the prior year period. The increase in the effective tax rate is primarily attributable to a reduction in tax credits.

The after tax loss from discontinued operations increased $5,933,108, from $4,603,272 to $10,536,380 for the nine months ended September 30, 2008. The losses in both periods related primarily to impairments on assets held for sale or abandoned and lease terminations.

Liquidity and Capital Resources

On August 29, 2007, we agreed to commence an exchange offering on or before October 1, 2007 to exchange our $400.0 million 7.5% Senior Notes (the Notes) for New Notes with an interest rate of 9.5%, an option for us to redeem the New Notes at 1% above par from October 29, 2007 to February 28, 2009 and an option for the note holders to redeem the New Notes at 1% above par from February 28, 2009 to December 15, 2011, both options requiring at least 30 but not more than 60 days notice. The Exchange Offer was completed on October 31, 2007 with all but $4.3 million of the Notes being exchanged. In connection with issuing the New Notes, we amended our existing Bank Credit Facility to provide for an accelerated maturity should the New Notes maturity date change, revised certain financial covenants to reflect the impact of the Exchange Offer and redeemed our outstanding Term Loan balance.

As a result of the settlement described above and the associated risk that our note holders will exercise their option to have us redeem the approximately $395.7 million in New Notes, in connection with the amended merger agreement we have obtained a financial commitment from Jeffries and Wells Fargo Foothill for alternative long-term financing sufficient to repay this indebtedness. However, the new financing will carry higher interest rates and more restrictive terms than our current agreements. Higher interest rates would reduce our capital available for growth and the terms may restrict our availability to pursue acquisitions in the near term. Accordingly, we have reduced our planned new unit growth for 2008 and 2009 until new financing is obtained.

In June 2007, our wholly owned unrestricted subsidiary, the Golden Nugget, completed a new $545.0 million credit facility consisting of a $330.0 million first lien term loan, a $50.0 million revolving credit facility, and a $165.0 million second lien term loan. The $330.0 million first lien term loan includes a $120.0 million delayed draw component to finance the expansion at the Golden Nugget Hotel and Casino in Las Vegas, Nevada. The revolving credit facility expires on June 30, 2013 and the first lien term loan matures on June 30, 2014. Both the first lien term loan and the revolving credit facility bear interest at Libor or the bank’s base rate, plus a financing spread, 2.0% and 0.75%, respectively, at September 30, 2008. In addition, the credit facility requires a commitment fee on the unfunded portion for both the $50.0 million revolving credit facility and the $120.0 million delayed draw component of the first lien term loan. The second lien term loan matures on December 31, 2014 and bears interest at Libor or the bank’s base rate, plus a financing spread, 3.25% and 2.0%, respectively, at September 30, 2008. The financing spreads and commitment fees for the revolving credit facility increase or decrease depending on the leverage ratio as defined in the credit facility. The first lien term loan requires one percent of the outstanding principal balance due annually to be paid in equal quarterly installments commencing on September 30, 2009 with the balance due on maturity. Principal of the second lien term loan is due at maturity. The Golden Nugget’s subsidiaries have granted liens on substantially all real property and personal property as collateral under the credit facility and are guarantors of the credit facility.

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

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Consistent with our policy to manage our exposure to interest rate risk and in conformity with the requirements of the first and second lien facilities, we entered into interest rate swaps for all of the first and second lien borrowings of the Golden Nugget that fix the interest rates at between 5.4% and 5.5%, plus the applicable margin. We have designated $210.0 million of the first lien interest rate swaps and all of the second lien swaps as cash flow hedging transactions as set forth in SFAS 133. These swaps mirror the terms of the underlying debt and reset using the same index and terms. The remaining interest rate swaps associated with the $120.0 million of first lien borrowings reflecting the delayed draw construction loan have not been designated as hedges and the change in fair market value will be reflected as other income/expense in the consolidated financial statements. Accordingly, a non-cash expense of approximately $1.8 million and $2.1 million is reflected in the three and nine months ended September 30, 2008, respectively.

Our 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 September 30, 2008, we were in compliance with all such covenants. As of September 30, 2008, we had approximately $23.5 million in letters of credit outstanding, and our available borrowing capacity was $262.5 million.

As a primary result of the Golden Nugget refinancing and the New Notes, we have incurred higher interest expense. We expect to incur additional interest expense in the future as we continue the Golden Nugget expansion. We plan on constructing a hotel tower at the Golden Nugget – Las Vegas which we expect to complete by 2010 at an estimated cost of $160.0 million, funded primarily by the delayed draw term loan and operating cash flow.

Working capital, excluding discontinued operations, decreased from a deficit of $166.7 million as of December 31, 2007 to a deficit of $499.1 million as of September 30, 2008 primarily due to the change in the classification of our credit facility and New Notes to current. Cash flow to fund future operations, new restaurant development, stock repurchases, and acquisitions will be generated from operations, available capacity under our credit facilities and additional financing, if appropriate.

Capital expenditures for the nine months ended September 30, 2008 were $81.0 million, including $39.4 million for the Golden Nugget renovation. We expect capital expenditures, excluding amounts funded by insurance proceeds, to be approximately $26.1 million for the remainder of the year, primarily for the renovation and expansion of the Golden Nugget and new restaurants.

From time to time, we review opportunities for restaurant acquisitions and investments in the hospitality, gaming, entertainment, amusement, food service and facilities management and other industries. Our exercise of any such investment opportunity may impact our development plans and capital expenditures. We believe that adequate sources of capital are available to fund our business activities for the next twelve months, subject to obtaining long term financing as noted above.

Since April 2000, we have paid an annual $0.10 per share dividend, declared and paid in quarterly amounts. In April 2004, the annual dividend amount was increased to $0.20 per share, declared and paid in quarterly amounts. We paid dividends totaling $1.6 million during the nine months ended September 30, 2008. On June 16, 2008, we announced we were discontinuing dividend payments due to the pending merger with Fertitta Holdings, Inc.

Seasonality and Quarterly Results

Our business is seasonal in nature. Our reduced winter restaurant and hospitality volumes cause revenues and, to a greater degree, restaurant and hospitality operating profits to be lower in the first and fourth quarters than in other quarters. We have and will continue to open restaurants in highly seasonal tourist markets. Periodically, our sales and profitability may be negatively affected by adverse weather. The timing of unit openings can and will affect quarterly results. As a result of Hurricane Ike, a number of our restaurants in the Gulf Coast area of Texas were closed for a substantial period of time.

Critical Accounting Policies

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

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We operate approximately 174 full services restaurants and periodically we expect to experience unanticipated individual unit deterioration in revenues and profitability, on a short-term and occasionally longer-term basis. When such events occur and we determine that the associated assets are impaired, we will record an asset impairment expense in the quarter such determination is made. Due to our average restaurant net investment cost, excluding the owned land component, of approximately $2.0 million, such amounts could be significant when and if they occur. However, such asset impairment expense does not affect our financial liquidity, and is usually excluded from many valuation model calculations.

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

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

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

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

Recent Accounting Pronouncements

On January 1, 2008 we adopted FASB Statement No. 157, Fair Value Measurements (SFAS 157), which defines fair value, and FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS 159), which permits entities to choose to measure many financial instruments and certain other items at fair value. Neither of these statements had an impact on our consolidated financial statements for the first nine months of 2008. In February 2008, the FASB issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS No. 157 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until January 1, 2009. We have not yet determined the impact that the implementation of SFAS 157, for non-financial assets and liabilities, will have on our consolidated financial statements.

In June 2007, the FASB issued Emerging Issues Task Force Issue 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (EITF 06-11). EITF 06-11 requires that the tax benefit related to dividend equivalents paid on restricted stock, which are expected to vest, be recorded as an increase to additional paid-in capital. We originally accounted for this tax benefit as a reduction to income tax expense. EITF 06-11 is to be applied prospectively for tax benefits on dividends declared in fiscal years beginning after December 15, 2007. We adopted the provisions of EITF 06-11 on January 1, 2008. EITF 06-11 did not have a material effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), Implementation Issue No. E23, Hedging – General: Issues Involving the Application of the Shortcut Method under Paragraph 68 (Issue E23). Issue E23 amends SFAS 133 to explicitly permit use of the shortcut method for hedging relationships in which interest rate swaps have nonzero fair value at the inception of the hedging relationship, provided certain conditions are met. Issue E23 was effective for hedging relationships designated on or after January 1, 2008. The implementation of this guidance did not have an impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R), which expands the use of the acquisition method of accounting used in business combinations to all transactions and other events in which one entity obtains control over one or more other businesses or assets. This statement replaces SFAS No. 141 by

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requiring measurement at the acquisition date of the fair value of assets acquired, liabilities assumed and any non-controlling interest. Additionally, SFAS 141R requires that acquisition-related costs, including restructuring costs, be recognized as expense separately from the acquisition. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the first fiscal period beginning on or after December 15, 2008. The implementation of this guidance will affect our consolidated financial statements after its effective date only to the extent we complete business combinations and therefore the impact cannot be determined at this time.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interest in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes the accounting and reporting standards for a non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests and applies prospectively to business combinations for fiscal years beginning after December 15, 2008. We will adopt SFAS 160 beginning January 1, 2009 and are currently evaluating the impact that this pronouncement may have on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 expands quarterly disclosure requirements in SFAS 133 about an entity’s derivative instruments and hedging activities. SFAS 161 is effective for fiscal years beginning after November 15, 2008. We are currently evaluating the impact that this pronouncement may have on our consolidated financial statements.

In June 2008, the FASB issued Staff Position No. EITF 03-6-1 (EITF 03-6-1). EITF 03-6-1 addresses whether instruments granted in share-based payment arrangements are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in SFAS No. 128, Earnings per Share . The provisions of EITF 03-6-1 are effective for financial statements issued for fiscal years beginning after December 15, 2008. All prior period EPS data presented will be adjusted retrospectively to conform with the provisions of EITF 03-6-1. Early application is not permitted. We are currently evaluating the impact that EITF 03-6-1 may have on our consolidated financial statements.

Impact of Inflation

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

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

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

Interest Rate Risk

Total debt at September 30, 2008 included $64.0 million of floating-rate debt attributed to borrowings at an average interest rate of 5.0%. As a result, our annual interest cost in 2008 will fluctuate based on short-term interest rates.

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Consistent with our policy to manage our exposure to interest rate risk, and in conformity with the requirements of our first and second lien facilities, we entered into interest rate swaps with notional amounts covering all of the first and second lien borrowings of the Golden Nugget. The hedges are designed to convert the lien facilities’ floating interest rates to fixed rates at between 5.4% and 5.5%, plus the applicable margin.

The impact on annual cash flow of a ten percent change in the floating-rate (approximately 0.5%) would be approximately $0.3 million annually based on the floating-rate debt and other obligations outstanding at September 30, 2008; however, there are no assurances that possible rate changes would be limited to such amounts.

ITEM 4. Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13e-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, 2008, the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2008, our disclosure controls and procedures were effective to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. During the nine months ended September 30, 2008, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

General Litigation

On April 4, 2006, a purported class action lawsuit was filed against Joe’s Crab Shack—San Diego, Inc. in the Superior Court of California in San Diego by Kyle Pietrzak and others similarly situated. The lawsuit alleges that the defendant violated wage and hour laws, including the failure to pay hourly and overtime wages, failure to provide meal periods and rest periods, failing to provide minimum reporting time pay, failing to compensate employees for required expenses, including the expense to maintain uniforms, and violations of the Unfair Competition Law. In June 2006, the lawsuit was amended to include Kristina Brask as a named plaintiff and named Crab Addison, Inc. and Landry’s Seafood House—Arlington, Inc. as additional defendants. We have reached a settlement agreement which has been approved by the Court and fully accrued the amount.

On February 18, 2005, and subsequently amended, a purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in San Bernardino by Michael D. Harrison, et. al. Subsequently, on September 20, 2005, another purported class action lawsuit against Rainforest Cafe, Inc. was filed in the Superior Court of California in Los Angeles by Dustin Steele, et. al. On January 26, 2006, both lawsuits were consolidated into one action by the state Superior Court in San Bernardino. The lawsuits allege that Rainforest Cafe violated wage and hour laws, including not providing meal and rest breaks, uniform violations and failure to pay overtime. We have reached a settlement agreement which has been approved by the Court and fully accrued the amount.

Following Mr. Fertitta’s initial proposal on January 27, 2008 to acquire all of our outstanding stock, five putative class action law suits were filed in state district courts in Harris County, Texas. On March 26, 2008, the five actions were consolidated for all purposes. The consolidated action is proceeding under Case No. 2008- 05211; Dennis Rice, on behalf of himself and all others similarly situated v. Landry’s Restaurants, Inc. et al.; in the 157^th Judicial District of Harris County, Texas (“Rice”). We are named as a defendant in Rice as are members of our board of directors. Plaintiffs allege that we and/or the members of our board of directors have breached or will breach fiduciary duties to our stockholders with regard to the presentation or consideration of Mr. Fertitta’s proposal to acquire all of our outstanding common stock. Plaintiffs also seek to enjoin in some form the consideration or acceptance of Mr. Fertitta’s proposal. The amount of damages initially sought is not indicated by any plaintiff.

James F. Stuart, individually and on behalf of all others similarly situated v. Landry’s Restaurants, Inc. et al., was filed on June 26, 2008 in the Court of Chancery of the State of Delaware (“Stuart”). We are named as a defendant along with our directors, Parent and Merger Sub. Stuart is a putative class action in which plaintiff alleges that the merger agreement unduly hinders obtaining the highest value for shares of our stock. Plaintiff also alleges that the merger is unfair. Plaintiff seeks to enjoin or rescind the merger, an accounting and damages along with costs and fees.

David Barfield v. Landry’s Restaurants, Inc. et al., was filed on June 27, 2008 in the Court of Chancery of the State of Delaware (“Barfield”). We are named in this case along with our directors, Parent and Merger Sub. Barfield is a putative

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class action in which plaintiff alleges that our directors aided and abetted Parent and Merger Sub, and have breached their fiduciary duties by failing to engage in a fair and reliable sales process leading up to the merger agreement. Plaintiff seeks to enjoin or rescind the transaction, an accounting and damages along with costs and fees.

Stuart and Barfield were consolidated by court order. The consolidated action is proceeding under Consolidated C.A. No. 3856-VCL; In re: Landry’s Restaurants, Inc. Shareholder Litigation. In their consolidated complaint, plaintiffs allege that our directors breached fiduciary duties to our stockholders and that the preliminary proxy statement filed on July 17, 2008 fails to disclose what plaintiffs contend are material facts. Plaintiffs also alleged that we, Parent and Merger Sub aided and abetted the alleged breach of fiduciary duty.

We believe that these actions are without merit and intend to contest the above matters vigorously.

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 1A. Risk Factors

The following are risk factors that were not discussed in our Form 10-K for the year ended December 31, 2007:

Risks Relating to the Pending Merger

The failure to complete the merger could adversely affect our share price.

There is no assurance that the merger will occur by the February 28, 2009 deadline set forth in the merger agreement or that any other transaction will occur. For example, an injunction could be granted in one of the two pending stockholder lawsuits against us (as described elsewhere in this Form 10-Q) preventing the proposed merger from closing, we could fail to satisfy the conditions to the financing for the merger or the requisite number of holders of our common stock may not approve the proposed merger at the special meeting of our stockholders.

Therefore, if the proposed merger or similar transaction is not completed, the share price of our common stock will likely fall to the extent that the current market price of our common stock reflects an assumption that a transaction will be completed. Further, a failed transaction may result in negative publicity and/or a negative impression of us in the investment community and may affect our relationship with employees, vendors, creditors and other business partners.

We are subject to litigation related to the pending merger.

We are actively defending two stockholder lawsuits related to the proposed merger, one filed in Texas and one filed Delaware. Following Mr. Fertitta’s initial proposal on January 27, 2008 to acquire all of our outstanding stock, five putative class action law suits were filed in state district courts in Harris County, Texas. On March 26, 2008, the five actions were consolidated for all purposes. We are named as a defendant in the consolidated case, as are members of our board of directors. Plaintiffs allege that we and/or the members of our board of directors have breached or will breach fiduciary duties to our stockholders with regard to the consideration of Mr. Fertitta’s proposal to acquire all of our outstanding common stock. Plaintiffs also seek to enjoin in some form the consideration or acceptance of Mr. Fertitta’s proposal. The amount of damages initially sought is not indicated by any plaintiff.

On June 26 and June 27, 2008, two putative class actions were filed in the Delaware Chancery Court in which we are named as a defendant along with our directors, Parent and Merger Sub. The two class actions were consolidated by court order. In the consolidated action, the plaintiffs allege that our directors breached fiduciary duties to our stockholders and that the Preliminary Proxy filed on July 17, 2008 fails to disclose what plaintiffs contend are material facts. Plaintiffs also allege that we, Parent and Merger Sub aided and abetted the alleged breach of fiduciary duty by our directors.

While we believe that the claims made in the above actions are without merit and intend to defend such claims vigorously, there can be no assurance that we will prevail in our defense. Further, it is possible that additional claims beyond those that have already been filed will be brought by the current plaintiffs or by others in an effort to enjoin the proposed merger or seek monetary relief from us. An unfavorable resolution of any such litigation surrounding the proposed merger could delay or prevent the consummation of the proposed merger. In addition, the cost to us of defending the litigation, even if resolved in our favor, could be substantial. Such litigation could also divert the attention of our management and our resources in general from day-to-day operations.

Risks Relating to the Ownership of Our Common Stock

Tilman J. Fertitta beneficially owns approximately 46.8% of our outstanding shares of common stock, which may limit your ability to influence or control certain of our corporate actions.

As of October 31, 2008, Mr. Fertitta owned 46.8% of our common stock. Although Mr. Fertitta does not own a majority of our outstanding shares, he is able to exercise significant influence over our management and operations. If Mr. Fertitta acquires additional shares of our common stock sufficient to give him ownership of more than 50% of our outstanding common stock, he will be able to elect our entire board of directors and control all matters that require a stockholder vote (such as mergers, acquisitions and other business combinations). In addition, Mr. Fertitta’s ownership of more than 50% of our common stock would result in our becoming a “controlled company” within the meaning of the rules of the New York Stock Exchange and, as a result, we may elect not to comply with certain corporate governance requirements, including (a) the requirement that a majority of the board of directors consist of independent directors, (b) the requirement that the compensation of our executive officers, including Mr. Fertitta, be determined, or recommended to the board of directors for determination, by a compensation committee comprised solely of independent directors and (c) the requirement that director nominees be selected, or recommended for the board of directors’ selection, by a nominating committee comprised solely of independent directors. Accordingly, if we become a controlled company, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the New York Stock Exchange.

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The acquisition of additional shares of our common stock by Mr. Fertitta could adversely effect our share price and make future equity offerings more difficult.

Mr. Fertitta’s acquisition of additional shares of our common stock will reduce the amount of shares held by unaffiliated stockholders and, as a result, our common stock may be more susceptible to market volatility. This acquisition of additional shares could also adversely affect prevailing market prices for our common stock, and limit our ability to raise capital through equity securities offerings due to the lower number of institutional investors a reduced public float generally attracts.

Risks Relating to Our Business

Our operations were impacted by Hurricane Ike and we have and may continue to incur significant expenses related to the recovery of our temporarily damaged operations.

Due to extensive damage caused by Hurricane Ike in September 2008, we were forced to close the entire Kemah Boardwalk. In addition, three of our seven Galveston-area restaurants remain closed. We have and will continue to incur significant expenses related to the reopening of the Kemah Boardwalk and the three Galveston-area restaurants. The damage to those properties, which have been a significant driver of our overall performance in 2008, is likely to exceed our insurance recovery. Furthermore, there is a risk that Kemah and Galveston may face a permanent loss of population as a result of Hurricane Ike. These factors are expected to adversely affect both revenue and earnings from our restaurant division.

Current difficult conditions in the global financial markets and the economy generally may materially adversely affect our business and results of operations.

Our results of operations are materially affected by conditions in the global financial markets and the economy generally, both in the U.S. and elsewhere around the world. The stress experienced by global financial markets that began in the second half of 2007 continued and substantially increased during the third quarter of 2008. The volatility and disruption in the global financial markets have reached unprecedented levels. The availability and cost of credit has been materially affected. These factors, combined with volatile oil prices, depressed home prices and increasing foreclosures, falling equity market values, declining business and consumer confidence, declines in consumer spending, and the risks of increased inflation and unemployment, have precipitated an economic slowdown and fears of a severe recession, which could adversely affect the demand for our products and, as a result, lead to declining revenues and profit margins.

Continuing adverse financial market conditions may significantly affect our ability to meet liquidity needs, our access to capital and our cost of capital.

Adverse capital market conditions have affected and may continue to affect the availability and cost of borrowed funds and could impact our ability to refinance existing indebtedness, thereby ultimately impacting our profitability and ability to support or grow our businesses. We need liquidity to pay our operating expenses, interest on our indebtedness and to refinance certain maturing debt obligations. Without sufficient liquidity, we could be forced to curtail certain of our operations, and our business could suffer.

Disruptions, uncertainty or volatility in the financial markets may limit our access to capital required to operate our business. These market conditions may limit our ability to replace, in a timely manner, maturing debt obligations and access the capital necessary to grow our business. As a result, we may be forced to delay raising capital, issue shorter tenor securities than would be optimal, bear an unattractive cost of capital or be unable to raise capital at any price, which could decrease our profitability and significantly reduce our financial flexibility. Actions we might take to access financing may in turn cause rating agencies to further reevaluate our ratings.

In the event current resources do not satisfy our needs, we may have to seek additional financing. The availability of additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to the financial services industry, and our credit ratings and credit capacity. Our internal sources of liquidity may prove to be insufficient, and in such case, we may not be able to successfully obtain additional financing on favorable terms, or at all.

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

In November 1998, we announced the authorization of an open market stock buy back program, which was renewed in April 2000, for an additional $36.0 million. In October 2002, we authorized a $50.0 million open market stock buy back program and in September 2003, we authorized another $60.0 million open market stock repurchase program. In October 2004, we authorized a $50.0 million open market stock repurchase program. In March 2005, we announced a $50.0 million authorization to repurchase common stock. In May 2005, we announced a $50.0 million authorization to repurchase common stock. In March, July and November 2007, we authorized an additional $50.0 million, $75.0 million and $1.5 million, respectively, of open market stock repurchases. These programs have resulted in our aggregate repurchasing of approximately 24.0 million shares of common stock for approximately $472.4 million through September 30, 2008.

Tilman J. Fertitta, our Chairman, President and C.E.O. purchased 400,000 shares of our common stock at an average price of $12.31. There were no repurchases of our common stock by us during the quarter ended September 30, 2008.

ITEM 6. Exhibits

The following Exhibits are set forth herein:

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

SIGNATURES

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

LANDRY’S RESTAURANTS, INC.

(Registrant)

/s/ TILMAN J. FERTITTA

Tilman J. Fertitta

Chairman of the Board of Directors,

President and Chief Executive Officer

(Principal Executive Officer)

/s/ RICK H. LIEM

Rick H. Liem

Executive Vice President and

Chief Financial Officer

(Principal Financial and Accounting Officer)

Date: November 10, 2008

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