10-Q

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 MARCH 31, 2009.

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    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 MAY 5, 2009 THERE WERE

16,141,691 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 March 31, 2009 (unaudited) and December 31, 2008	3
	Condensed Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 2009 and 2008	4
	Condensed Unaudited Consolidated Statement of Equity for the Three Months Ended March 31, 2009	6
	Condensed Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008	7
	Notes to Condensed Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 6.	Exhibits	35
Signatures		35

i

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, 2008. Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending December 31, 2009.

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.

This report includes certain forward-looking statements within the meaning of the federal securities laws. You can generally identify forward-looking statements by the appearance in such a statement of words like “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should” or “will” or other comparable words or the negative of these words. When you consider our forward-looking statements, you should keep in mind the risk factors we describe and other cautionary statements we make in this offering circular. Our forward-looking statements are only predictions based on expectations that we believe are reasonable. Our actual results could differ materially from those anticipated in, or implied by, these forward-looking statements as a result of known risks and uncertainties set forth below and elsewhere in this offering circular. These factors include or relate to the following:

• our ability to implement our business strategy;

• our ability to expand and grow our business and operations;

• the outcome of legal proceedings that have been, or may be, initiated against us related to the proposed merger with an affiliate in 2008 and its termination;

• the impact of future commodity prices;

• the availability of food products, materials and employees;

• consumer perceptions of food safety;

• changes in local, regional and national economic conditions;

• the effects of local and national economic, credit and capital market conditions on the economy in general and our businesses in particular;

• the effectiveness of our marketing efforts;

• changing demographics surrounding our restaurants, hotels and casinos;

• the effect of changes in tax laws;

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

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

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

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

• the seasonality and cyclical nature of our business;

• weather and acts of God;

• the ability to maintain existing management;

1

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

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

• food, labor, fuel and utilities costs; and

• the other factors discussed under “Risk Factors,” included in our Form 10-K for the year ended December 31, 2008.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. To the extent these risks, uncertainties and assumptions give rise to events that vary from our expectations, the forward-looking events discussed herein may not occur. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described under Item 1A. “Risk Factors” and elsewhere in this report, or in the documents incorporated by reference herein. We assume no obligation to modify or revise any forward looking statements to reflect any subsequent events or circumstances arising after the date that the statement was made.

2

LANDRY’S RESTAURANTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2009			December 31, 2008
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	73,048,705		$	51,066,805
Accounts receivable - trade and other, net		13,649,727			18,021,105
Inventories		25,169,546			26,161,092
Deferred taxes		25,682,940			28,001,267
Assets related to discontinued operations		2,975,674			2,973,593
Other current assets		11,456,000			9,102,029
Total current assets		151,982,592			135,325,891
PROPERTY AND EQUIPMENT, net		1,282,771,176			1,259,186,463
GOODWILL		18,527,547			18,527,547
OTHER INTANGIBLE ASSETS, net		38,824,454			38,872,873
OTHER ASSETS, net		74,695,309			63,411,316
Total assets	$	1,566,801,078		$	1,515,324,090
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	63,635,972		$	70,358,471
Accrued liabilities		129,283,430			134,316,329
Income taxes payable		226,391			2,784,703
Current portion of long-term notes and other obligations		13,807,255			8,752,906
Liabilities related to discontinued operations		4,755,568			5,149,365
Total current liabilities		211,708,616			221,361,774
LONG-TERM NOTES, NET OF CURRENT PORTION		921,593,067			862,375,429
OTHER LIABILITIES		128,585,609			136,109,782
Total liabilities		1,261,887,292			1,219,846,985
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common stock, $0.01 par value, 60,000,000 shares authorized, 16,141,691 and 16,142,263, shares issued and outstanding, respectively		161,417			161,423
Additional paid-in capital		223,355,259			222,410,106
Retained earnings		122,240,359			116,244,708
Accumulated other comprehensive loss		(41,843,249	)		(44,339,132	)
Total stockholders’ equity		303,913,786			294,477,105
Noncontrolling interests		1,000,000			1,000,000
Total equity		304,913,786			295,477,105
Total liabilities and equity	$	1,566,801,078		$	1,515,324,090

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

3

LANDRY’S RESTAURANTS, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended March 31,
	2009			2008
REVENUES:
Restaurant and hospitality	$	200,275,650		$	222,541,192
Gaming:
Casino		35,968,289			42,811,817
Rooms		12,405,816			18,182,380
Food and beverage		10,486,228			12,135,840
Other		3,612,364			3,622,905
Promotional allowances		(6,458,364	)		(6,972,826	)
Net gaming revenue		56,014,333			69,780,116
Total revenue		256,289,983			292,321,308
OPERATING COSTS AND EXPENSES:
Restaurant and hospitality:
Cost of revenues		49,663,525			58,868,968
Labor		57,995,708			66,345,706
Other operating expenses		40,873,669			55,274,122
Gaming:
Casino		19,620,490			22,059,279
Rooms		5,609,715			6,006,645
Food and beverage		5,701,286			7,171,799
Other		12,364,687			16,025,257
General and administrative expense		12,058,150			12,790,198
Depreciation and amortization		17,760,491			17,664,911
Gain on insurance claims		(3,482,897	)		—
Gain on disposal of assets		(622,299	)		—
Pre-opening expenses		256,164			467,926
Total operating costs and expenses		217,798,689			262,674,811
OPERATING INCOME		38,491,294			29,646,497
OTHER EXPENSE (INCOME):
Interest expense, net		24,614,574			20,759,582
Other, net		4,134,412			5,304,404
Total other expense		28,748,986			26,063,986
Income from continuing operations before income taxes		9,742,308			3,582,511
Provision for income taxes		2,387,581			1,061,136
Income from continuing operations		7,354,727			2,521,375
Loss from discontinued operations, net of taxes		(50,903	)		(928,802	)
Net income		7,303,824			1,592,573
Less: Net income attributable to noncontrolling interests		230,578			70,818
Net income attributable to Landry’s	$	7,073,246		$	1,521,755

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

4

LANDRY’S RESTAURANTS, INC.

EARNINGS (LOSS) PER SHARE INFORMATION

Amounts attributable to Landry’s:

BASIC
Income (loss) from continuing operations	$	0.44	$	0.15
Loss from discontinued operations		—		(0.06	)
Net income (loss)	$	0.44	$	0.09
Weighted average number of common shares outstanding		16,140,000		16,145,000
DILUTED
Income (loss) from continuing operations	$	0.44	$	0.15
Loss from discontinued operations		—		(0.06	)
Net income (loss)	$	0.44	$	0.09
Weighted average number of common and common share equivalents outstanding		16,155,000		16,395,000

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

5

LANDRY’S RESTAURANTS, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENT OF EQUITY

	Common Stock					Additional Paid-In Capital			Retained Earnings			Acculated Other Comprehensive Loss			Noncontrolling Interest		Total
	Shares		Amount
Balance, December 31, 2008	16,142,263		$	161,423		$	222,410,106		$	116,244,708		$	(44,339,132	)	$	1,000,000	$	295,477,105
Comprehensive income:
Net income (loss)	—			—			—			7,073,246			—					7,073,246
Gain on interest rate swaps, net of tax expense of $1,343,937	—			—			—			—			2,495,883			—		2,495,883
Total comprehensive income																		9,569,129
Redeemable minority interest in equity of subsidiaries	—			—			—			(1,064,763	)		—			—		(1,064,763	)
Exercise of stock options	2,500			25			21,225			—			—			—		21,250
Forfeiture of restricted stock	—			—			—			—			—			—		—
Purchase of common stock held for treasury	(3,072	)		(31	)		(24,553	)		(12,832	)		—			—		(37,416	)
Stock based compensation expense	—			—			948,481			—			—			—		948,481
Balance, March 31, 2009	16,141,691		$	161,417		$	223,355,259		$	122,240,359		$	(41,843,249	)	$	1,000,000	$	304,913,786

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

6

LANDRY’S RESTAURANTS, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income attributable to Landry’s	$	7,073,246		$	1,521,755
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		17,760,491			17,976,014
Gain on disposition of assets		(622,299	)		(19,350	)
Gain on insurance claims		(3,482,897	)		—
Changes in assets and liabilities, net and other		(6,861,570	)		10,415,295
Total adjustments		6,793,725			28,371,959
Net cash provided by operating activities		13,866,971			29,893,714
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and other		(42,494,299	)		(24,386,904	)
Proceeds from disposition of property and equipment		5,471,859			5,394,894
Net cash used in investing activities		(37,022,440	)		(18,992,010	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of common stock for treasury		(37,416	)		(15,274	)
Proceeds from exercise of stock options		21,250			6,361
Payments of debt and related expenses, net		(65,120	)		(59,024	)
Financing proceeds		390,040,000			—
Repayment of bonds		(398,362,000	)		—
Debt issuance costs		(17,350,710	)		—
Proceeds from credit facility		150,118,419			59,000,000
Payments on credit facility		(79,227,054	)		(63,000,000	)
Dividends paid		—			(807,242	)
Net cash provided by (used in) financing activities		45,137,369			(4,875,179	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		21,981,900			6,026,525
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		51,066,805			39,601,246
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	73,048,705		$	45,627,771
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest	$	19,274,951		$	10,423,693
Income taxes	$	(367,446	)	$	564,587

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

7

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, Saltgrass Steak House and Rainforest Cafe. In addition, we own and operate domestically and license internationally 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.

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). Subsequently, 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, 2008. 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, 2008, 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.

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

8

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 March 31, 2009, 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 March 31, 2009, the fair value of the interest rate swap liabilities totaled $83.6 million, of which $64.4 million are designated and qualify as hedges and the remaining $19.2 million do not qualify as hedges. These amounts, net of taxes, are recorded as other long term liabilities in our consolidated balance sheets.

Reclassifications

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

Recent Accounting Pronouncements

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 only to the extent we complete business combinations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160). SFAS 160 applies to the accounting for non-controlling interests (previously referred to as minority interest) in a subsidiary and for the deconsolidation of a subsidiary. We adopted SFAS 160 on January 1, 2009 and have retro-actively adjusted the presentation of our financial statements to reflect the effect of our non-controlling interests in a single restaurant operation. As further described in Note 9, we have minority interests that include redemption provisions that are not solely within our control, commonly referred to as redeemable minority interests. EITF Topic No. D-98, Classification and Measurement of Redeemable Securities (Topic D-98) requires that minority interests that are redeemable at the option of the holder be recorded outside of permanent equity at fair value, and the redeemable minority interests should be adjusted to their fair value at each balance sheet date through retained earnings. Upon our adoption of SFAS 160 and in conjunction with the provisions of Topic D-98, we recorded an adjustment to increase the carrying value of our redeemable minority interest with a corresponding charge retained earnings. The redeemable minority interest is recorded within accrued liabilities in the consolidated balance sheets.

In February 2008, the FASB issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2), which delayed the effective date of SFAS No. 157, Fair Value Measurements 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. The adoption of FSP FAS 157-2 did not have an impact 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 adopted SFAS 161 on January 1, 2009 and have included the required expanded disclosures within this report.

In April 2008, the FASB issued FASB FSP No. 142-3, Determination of the Useful Life of Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 removed the requirement of SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142), for an entity to consider, when determining the useful life of an acquired intangible asset, whether the intangible asset can be renewed without substantial cost or material modification to the existing terms and conditions associated with the intangible asset. FSP FAS 142-3 replaces the previous useful life assessment criteria with a requirement that an entity considers its own experience in renewing similar arrangements. If the entity has no relevant experience, it would consider market participant assumptions regarding renewal. FSP FAS 142-3 is being applied prospectively beginning January 1, 2009. The adoption of this Statement has not had a material impact on our consolidated financial statements.

9

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). SFAS 162 identifies a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. It establishes that the GAAP hierarchy should be directed to entities because it is the entity (not the auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. We do not believe that implementation of SFAS 162 will have any effect on our consolidated financial statements.

In June 2008, the FASB issued Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. In accordance with the FSP, unvested equity-based awards that contain non-forfeitable rights to dividends are considered to participate with common shareholders in undistributed earnings. As a result, the awards are required to be included in the calculation of basic earnings per common share pursuant to the “two-class” method. Our participating securities are composed of unvested restricted stock. These participating securities, prior to application of the FSP, were excluded from weighted-average common shares outstanding in the calculation of basic earnings per common share. We applied the provisions of the FSP beginning on January 1, 2009, and have calculated and presented basic earnings per common share on this basis for all periods presented. The impact of the inclusion of participating securities in the calculation of basic earnings per common share for prior periods was not material.

In April 2009, the FASB issued Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, which amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments (“SFAS No. 107”), and Accounting Principles Board Opinion No. 28, Interim Financial Reporting (“APB No. 28”). This pronouncement is effective for our reporting periods beginning with our June 30, 2009 interim financial statements. The amendments expand the disclosure requirements of SFAS No. 107 and APB No. 28 about how an entity reports on fair value to be included in the summarized, interim financial statements. We do not anticipate that this FASB Staff Position will impact our consolidated financial position, cash flows or results of operations, and we will include the required disclosures beginning with our June 30, 2009 interim financial statements.

In April 2009, the FASB issued Staff Position No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, which provides guidance for measuring and expands the presentation and disclosure requirements of other-than-temporary impairments on debt and equity securities in interim and annual financial statements. As we currently do not own any debt or equity securities, this Staff Position is not expected to impact our financial position, cash flows or results of operations. Should we own any such securities in the future, the provisions of this Staff Position will be applied.

In April 2009, the FASB issued FASB Staff Position No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4). FSP FAS 157-4, which will become effective for the interim and annual reporting beginning in the second quarter 2009, provides additional guidance related to the estimation of fair value when the volume and level of activity for the asset or liability have significantly decreased, the identification of transactions that are not orderly, and the use of judgment in evaluating the relevance of inputs such as transaction prices. We do not anticipate the implementation of this new accounting standard will significantly change our valuation or disclosure of financial and nonfinancial assets and liabilities under the scope of FAS 157.

In April 2009, the FASB issued FASB Staff Position FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination (FSP FAS 141(R)-1). FSP FAS 141(R)-1, which became effective for business combinations having an acquisition date on or after January 1, 2009, requires an asset or liability arising from a contingency in a business combination to be recognized at fair value if fair value can be reasonably determined. If it cannot, the asset or liability must be recognized in accordance with FASB Statement No. 5, Accounting for Contingencies, and FASB Interpretation No. 14, Reasonable Estimation of the Amount of the Loss. The implementation of this guidance will affect our consolidated financial statements only to the extent we complete business combinations.

10

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. The Kemah and Galveston properties had been a significant driver of our overall performance in 2008. All Houston, Galveston and Kemah restaurants have reopened. The difference between impairments of book value arising from Hurricane Ike damage and the associated insurance proceeds resulted in the recognition of a $3.5 million gain in the first quarter of 2009.

We also maintain business interruption insurance coverage and have recorded approximately $0.2 million in recoveries during the three months ended March 31, 2009 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.

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. Subsequently, 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.

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 2009. In connection with the sale, we recorded pre-tax impairment charges and a loss on disposal totaling $49.2 million.

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.

11

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The results of discontinued operations for the three months ended March 31, 2009 and 2008 were as follows:

	Three Months Ended March 31,
	2009			2008
Revenues	$	—		$	3,755,729
Loss from discontinued operations before income taxes		(81,575	)		(1,428,926	)
Income tax benefit on discontinued operations		(30,672	)		(500,124	)
Net loss from discontinued operations	$	(50,903	)	$	(928,802	)

We continually monitor unfavorable cash flows, if any, relating to under performing 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. No impairment charges were recorded during the three months ended March 31, 2009.

4. ACCRUED LIABILITIES

Accrued liabilities are comprised of the following:

	March 31, 2009		December 31, 2008
Payroll and related costs	$	26,597,335	$	22,345,794
Rent and insurance		30,055,943		29,384,290
Taxes, other than payroll and income taxes		15,207,425		20,214,428
Deferred revenue (gift cards and certificates)		15,789,611		25,091,978
Accrued interest		7,504,513		2,612,258
Casino deposits, outstanding chips and other gaming		8,922,626		10,237,310
Other		25,205,977		24,430,271
	$	129,283,430	$	134,316,329

5. DEBT

On December 22, 2008, we entered into an $81.0 million interim senior secured credit facility. The interim senior secured credit facility provides for a $31.0 million senior secured term loan facility and a $50.0 million senior secured revolving credit facility, the proceeds of which were used to refinance the remaining outstanding indebtedness under our previously issued and outstanding senior credit facility and to pay related transaction fees and expenses.

On February 13, 2009, we completed the offering of $295.5 million in aggregate principal amount of 14.0% senior secured notes due 2011 (the Notes). The gross proceeds from the offering and sale of the Notes were $260.0 million. The Notes are unconditionally guaranteed on a senior secured basis as to principal, premium, if any, and interest by all of our current and future domestic restricted subsidiaries (each individually a Guarantor and collectively, the Guarantors) and are secured by a second lien position on substantially all of our and the Guarantors’ assets. The Notes were issued pursuant to an indenture, dated as of February 13, 2009 (Indenture), among us, the Guarantors and Deutsche Bank Trust Company America, as Trustee and as Collateral Agent.

The Notes will mature on August 15, 2011. Interest on the Notes will accrue from February 13, 2009, at a fixed interest rate of 14.0% to be paid twice a year, on each February 15th and August 15th, beginning August 15, 2009. We may redeem the Notes any time at par, plus accrued interest. We are required to offer to purchase the Notes at 101% of their aggregate principal amount, plus accrued interest, if we experience a change in control as defined in the Indenture.

The Indenture under which the Notes have been issued contains a maximum leverage ratio covenant as well as restrictions that limit our ability and the ability of the Guarantors to, among other things: incur or guarantee additional indebtedness; create liens; pay dividends on or redeem or repurchase stock; make capital expenditures or certain types of investments; sell assets or merge with other companies.

We and the Guarantors entered into a registration rights agreement, dated as of February 13, 2009 (the “Registration Rights Agreement”) with Jefferies & Company, Inc. Under the Registration Rights Agreement, we and the Guarantors have agreed to use our best efforts to file and cause to become effective a registration statement with respect to an offer to

12

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

exchange the Notes for notes registered under the Securities Act of 1933, as amended (the “Securities Act”), having substantially identical terms as the Notes (except that additional interest provisions and transfer restrictions pertaining to the Notes will be deleted). If we fail to cause the registration statement relating to the exchange offer to become effective within the time periods specified in the Registration Rights Agreement, we will be required to pay additional interest on the Notes until the registration statement is declared effective.

We also entered into a $215.6 million Amended and Restated Credit Agreement dated as of February 13, 2009 (the Credit Agreement) which replaced the interim senior secured credit facility. The Credit Agreement provides for a term loan of $165.6 million and a revolving credit line of $50.0 million. The obligations under the Credit Agreement are unconditionally guaranteed by the Guarantors and are secured by a first lien position on substantially all of our assets and the Guarantors.

Interest on the Credit Agreement accrues at a base rate (which is the greater of 5.50%, the Federal Funds Rate plus .50%, or Wells Fargo’s prime rate) plus a credit spread of 5.0%, or at our option, at the Eurodollar base rate of at least 3.5% plus a credit spread of 6.0%, and matures on May 13, 2011.

The Credit Agreement contains covenants that limit our ability and the Guarantors to, among other things, incur or guarantee additional indebtedness; create liens; make capital expenditures; pay dividends on or repurchase stock; make certain types of investments; sell assets or merge with other companies. The Credit Agreement contains financial covenants, including a maximum leverage ratio, a maximum senior leverage ratio, and a minimum fixed charge coverage ratio.

We used the proceeds from the Notes offering, together with borrowings under the Credit Agreement to refinance our existing $395.7 million aggregate principal amount of 9.5% senior notes due 2014 (the “9.5% Notes”) and $4.3 million aggregate principal amount of 7.5% senior notes due 2014 (the “7.5% Notes” and, together with the 9.5% Notes, the “Existing Notes”). As of March 31, 2009, $0.8 million of our 7.5% Notes and $.9 million of our 9.5% Notes remained outstanding. In addition, we paid a redemption premium of approximately $4.0 million in connection with the repurchase of the Existing Notes.

In connection with the refinancing of our Existing Notes, on December 23, 2008, we commenced separate cash tender offers (each a “tender offer” and together, the “tender offers”) to purchase any and all of our outstanding 9.5% Notes and 7.5% Notes for a purchase price of 101% of the principal amount thereof. In conjunction with the tender offers, we solicited consents of at least a majority of the aggregate principal amount of each of the outstanding 9.5% Notes and 7.5% Notes to certain proposed amendments to each of the indentures governing such 9.5% Notes and 7.5% Notes to eliminate most of the restrictive covenants and certain events of default and to amend certain other provisions contained in the indentures and notes related thereto. We executed supplemental indentures with U.S. Bank National Association, as trustee, to effectuate the proposed amendments to the indentures governing the Existing Notes, which became operative upon the consummation of the Notes offering.

With respect to any Existing Notes that were not tendered, we may, at our option, either (i) pay such Existing Notes in accordance with their terms through maturity, (ii) repurchase any 9.5% Notes if the holders exercise their option to require us to do so, at 101% of the principal amount plus accrued but unpaid interest, if any, through the payment date or (iii) defease any or all of the remaining Existing Notes.

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 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 of 2.0% and 0.75%, respectively, at March 31, 2009. 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 of 3.25% and 2.0%, respectively, at March 31, 2009. 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.

13

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The proceeds from the $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. In 2008, the revolver commitment was reduced to $47.0 million and the delayed draw term loan commitment was reduced to $117.5 million as a result of the failure of one of the lending banks.

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. At March 31, 2009 these swaps were determined to be highly effective, and no ineffective portion was recognized in income. Included in Accumulated other comprehensive loss at March 31, 2009 and December 31, 2008 are unrealized losses, net of income taxes, totaling $41.8 million and $44.3 million, respectively, related to these hedges. For the three months ended March 31, 2009 and 2008, the impact of these interest rate swaps increased interest expense by $5.4 million and $1.6 million, respectively. 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 is reflected as other income/expense in the consolidated financial statements. Accordingly, a non-cash gain of approximately $0.4 million was recorded for the three months ended March 31, 2009, while a non-cash expense of $4.7 million associated with these swaps was recorded for the three months ended March 31, 2008.

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. In addition, the Golden Nugget debt agreement requires a parent contribution if the leverage ratio, as defined, falls below a predetermined level through December 31, 2009. The contribution is required to be made within 10 days of reporting the Golden Nugget quarterly results to the lenders. As a result of reduced operating results combined with additional borrowings for construction of the new tower, we expect to contribute approximately $13.0 million in cash to the Golden Nugget in May 2009. As of March 31, 2009, we were in compliance with all such covenants. As of March 31, 2009, we had approximately $20.8 million in letters of credit outstanding, and our available borrowing capacity was $51.7 million.

14

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Long-term debt is comprised of the following:

	March 31, 2009		December 31, 2008
$50.0 million revolving credit facility, Libor + 6.0% with Libor no less than 3.5%, due March 2011	$	14,528,714	$	4,182,803
$165.6 million Term loan, Libor + 6.0% with Libor no less than 3.5% principal paid quarterly beginning June 30, 2009, due March 2011		160,333,959		30,015,514
Senior Notes, 14.0% interest only, due August 2011		261,489,297		—
Senior Notes, 9.5% interest only, due December 2014		855,000		395,662,000
Senior Notes, 7.5% interest only, due December 2014		783,000		4,338,000
$47.0 million revolving credit facility, Libor + 2.0%, due June 2013		10,000,000		8,000,000
$327.0 million First Lien Term Loan, Libor + 2.0%, 1% of principal paid quarterly beginning September 30, 2009, due June 2014		308,060,606		249,515,152
$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		10,349,746		10,411,034
Other long-term notes payable with various interest rates, principal and interest paid monthly		—		3,832
$4.0 million seller note, 7.0%, interest paid monthly, due November 2010		4,000,000		4,000,000
Total debt		935,400,322		871,128,335
Less current portion		13,807,255		8,752,906
Long-term portion	$	921,593,067	$	862,375,429

6. EARNINGS PER SHARE

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

	Three Months Ended March 31,
	2009			2008
Amounts attributable to Landry’s:
Income (loss) from continuing operations	$	7,124,149		$	2,450,557
Loss from discontinued operations, net of taxes		(50,903	)		(928,802	)
Net income (loss)	$	7,073,246		$	1,521,755
Weighted average common shares outstanding—basic		16,140,000			16,145,000
Dilutive common stock equivalents:
Stock options		15,000			250,000
Weighted average common and common share equivalents outstanding—diluted		16,155,000			16,395,000
Earnings (loss) per share—basic
Income from continuing operations	$	0.44		$	0.15
Loss from discontinued operations, net of taxes		—			(0.06	)
Net income	$	0.44		$	0.09
Earnings (loss) per share—diluted
Income from continuing operations	$	0.44		$	0.15
Loss from discontinued operations, net of taxes		—			(0.06	)
Net income	$	0.44		$	0.09

15

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In June 2008, the FASB issued Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities . In accordance with the FSP, unvested equity-based awards that contain non-forfeitable rights to dividends are considered to participate with common shareholders in undistributed earnings. As a result, the awards are required to be included in the calculation of basic earnings per common share pursuant to the “two-class” method. For Landry’s, participating securities are comprised of unvested restricted stock. These participating securities, prior to application of the FSP, were excluded from weighted-average common shares outstanding in the calculation of basic earnings per common share. The basic and diluted earnings per share amounts have been retroactively adjusted for all periods presented.

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 2008 Annual Report on Form 10-K.

For the three months ended March 31, 2009 and 2008, total stock-based compensation expense, which includes both stock options and restricted stock, totaled $0.9 million and $1.0 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 three months ended March 31, 2009.

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 January 1, 2009, we had approximately $15.7 million of unrecognized tax benefits, including $2.3 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 three months ended March 31, 2009. 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 March 31, 2009. 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 2005. Substantially all material state and local income tax matters have been concluded for years through 2004. The Internal Revenue Service has substantially completed its audit of tax years ended December 31, 2004 and December 31, 2005 with no material issues identified to date.

9. COMMITMENTS AND CONTINGENCIES

Building Commitments

As of March 31, 2009, we had future development, land purchases and construction commitments anticipated to be expended within the next twelve months of approximately $61.8 million, including construction of certain new restaurants and the construction of a hotel tower at the Golden Nugget – Las Vegas. We estimate aggregate capital expenditures for the remainder of the year to be $86.0 million, most of which relates to the tower.

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 was significantly damaged by Hurricane Ike in 2008. We are currently in litigation with the former tenant due to its failure to purchase adequate insurance and are evaluating our options concerning the property.

Other Commitments

On February 24, 2006, we acquired 80% of T-Rex Cafe, Inc. from Schussler Creative, Inc. (SCI). The agreement with SCI provides that we can acquire SCI’s 20% interest for up to $35.0 million or that SCI can put its interest to us at a calculated amount as determined in the agreement no earlier than January 2010. We are recording the estimated amount as an increase to non-controlling interests liability and a decrease to retained earnings in our consolidated balance sheets as of March 31, 2009.

16

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 $3.5 million for both the three months ended March 31, 2009 and 2008. 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 approximate $69.7 million at March 31, 2009. We have recorded a liability of $5.7 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

Following Mr. Fertitta’s proposal to acquire all of our outstanding stock, two putative class action lawsuits were filed as follows:

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, among others. 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, among others. 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 this action is without merit and intend to contest the above matter vigorously.

On February 5, 2009, a purported class action and derivative lawsuit entitled Louisiana Municipal Police Employee’s Retirement System on behalf of itself and all other similarly situated shareholders of Landry’s Restaurant’s, Inc. and derivatively on behalf of minimal defendant Landry’s Restaurant’s, Inc. was brought against all members of our Board of Directors, Fertitta Holdings, Inc., and Fertitta Acquisition Co. in the Court at Chancery of the State of Delaware. The lawsuit alleges, among other things, a breach of a fiduciary duty by the directors for renegotiating the Merger Agreement with the Fertitta entities, allowing Mr. Fertitta to acquire shares of stock in the Company and gain majority control thereof, and terminating the Merger Agreement without requiring payment of the reverse termination fee. The suit seeks consummation of the merger buyout at $21.00 a share or damages representing the difference between $21.00 per share and the price at which class members sold their stock in the open market, or damages for allowing Mr. Fertitta to acquire control of the Company without paying a control premium, or alternately requiring payment of the reverse termination fee or damages for the devaluation of the Company’s stock. We intend to contest this matter vigorously.

17

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

General Litigation

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

10. SEGMENT INFORMATION

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

	Three Months Ended March 31,
	2009			2008
Revenue:
Restaurant and Hospitality	$	200,275,650		$	222,541,192
Gaming		56,014,333			69,780,116
Total	$	256,289,983		$	292,321,308
Unit level profit:
Restaurant and Hospitality	$	51,742,748		$	42,052,396
Gaming		12,718,155			18,517,136
Total	$	64,460,903		$	60,569,532
Depreciation, amortization and impairment:
Restaurant and Hospitality	$	12,424,861		$	12,423,373
Gaming		5,335,630			5,241,538
Total	$	17,760,491		$	17,664,911
Income before taxes:
Unit level profit	$	64,460,903		$	60,569,532
Depreciation, amortization and impairment		17,760,491			17,664,911
General and administrative		12,058,150			12,790,198
Gain on insurance claims		(3,482,897	)		—
Loss (gain) on disposal of assets		(622,299	)		—
Pre-opening expense		256,164			467,926
Interest expense, net		24,614,574			20,759,582
Other expenses (income)		4,134,412			5,304,404
Consolidated income from continuing operations before taxes	$	9,742,308		$	3,582,511

	March 31, 2009		December 31, 2008
Segment assets:
Restaurant and Hospitality	$	775,916,276	$	720,728,486
Gaming		620,239,961		601,475,227
Corporate and other (1)		170,644,841		193,120,377
	$	1,566,801,078	$	1,515,324,090

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

11. SUPPLEMENTAL GUARANTOR INFORMATION

In February 2009, we issued, in a private offering, $295.5 million of 14% senior secured notes due in 2011 (see Note 5 “Debt”). These notes are fully and unconditionally guaranteed by us and certain of our 100% owned subsidiaries, “Guarantor Subsidiaries”.

18

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

19

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Unaudited Consolidating Financial Statements

Balance Sheet

March 31, 2009

	Parent		Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	7,290,467	$	3,922,498		$	61,835,740		$	—		$	73,048,705
Accounts receivable—trade and other, net		—		7,687,175			9,781,111			(3,818,559	)		13,649,727
Inventories		9,773,120		12,769,349			2,627,077			—			25,169,546
Deferred taxes		21,769,944		791,004			3,121,992			—			25,682,940
Assets related to discontinued operations		2,511,330		464,344			—			—			2,975,674
Other current assets		3,886,354		2,672,821			4,896,825			—			11,456,000
Total current assets		45,231,215		28,307,191			82,262,745			(3,818,559	)		151,982,592
PROPERTY AND EQUIPMENT, net		10,012,485		660,190,604			612,568,087			—			1,282,771,176
GOODWILL		—		18,527,547			—			—			18,527,547
OTHER INTANGIBLE ASSETS, net		1,928,106		8,470,126			28,426,222			—			38,824,454
INVESTMENT IN AND ADVANCES TO SUBSIDIARIES		755,298,439		(55,299,927	)		(132,334,539	)		(567,663,973	)		—
OTHER ASSETS, net		24,135,545		1,982,158			48,577,606			—			74,695,309
Total assets	$	836,605,790	$	662,177,699		$	639,500,121		$	(571,482,532	)	$	1,566,801,078
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	22,305,361	$	20,459,234		$	20,871,377		$	—		$	63,635,972
Accrued liabilities		49,036,757		45,119,002			35,127,671			—			129,283,430
Income taxes payable		226,391		—			—			—			226,391
Current portion of long-term debt and other obligations		10,855,000		—			2,952,255			—			13,807,255
Liabilities related to discontinued operations		—		4,755,568			—			—			4,755,568
Total current liabilities		82,423,509		70,333,804			58,951,303			—			211,708,616
LONG-TERM NOTES, NET OF CURRENT PORTION		427,134,970		—			494,458,097			—			921,593,067
DEFERRED TAXES		—		—			17,008,066			(17,008,066	)		—
OTHER LIABILITIES		22,133,525		21,777,652			84,674,432			—			128,585,609
Total liabilities		531,692,004		92,111,456			655,091,898			(17,008,066	)		1,261,887,292
COMMITMENTS AND CONTINGENCIES
TOTAL EQUITY		304,913,786		570,066,243			(15,591,777	)		(554,474,466	)		304,913,786
Total liabilities and equity	$	836,605,790	$	662,177,699		$	639,500,121		$	(571,482,532	)	$	1,566,801,078

20

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Financial Statements

Balance Sheet

December 31, 2008

	Parent		Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—	$	5,705,232		$	46,595,810		$	(1,234,237	)	$	51,066,805
Accounts receivable—trade and other, net		1,101,730		11,888,296			5,031,079			—			18,021,105
Inventories		9,704,247		13,308,701			3,148,144			—			26,161,092
Deferred taxes		23,786,393		1,107,582			3,107,292			—			28,001,267
Assets related to discontinued operations		2,509,248		464,345			—			—			2,973,593
Other current assets		2,482,521		2,348,472			4,271,036			—			9,102,029
Total current assets		39,584,139		34,822,628			62,153,361			(1,234,237	)		135,325,891
PROPERTY AND EQUIPMENT, net		12,363,905		654,061,082			592,761,476			—			1,259,186,463
GOODWILL		—		18,527,547			—			—			18,527,547
OTHER INTANGIBLE ASSETS, net		1,880,275		8,481,376			28,511,222			—			38,872,873
INVESTMENT IN AND ADVANCES TO SUBSIDIARIES		748,698,257		(75,162,135	)		(148,438,505	)		(525,097,617	)		—
OTHER ASSETS, net		27,929,684		1,969,121			33,512,511			—			63,411,316
Total assets	$	830,456,260	$	642,699,619		$	568,500,065		$	(526,331,854	)	$	1,515,324,090
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	25,079,676	$	20,756,949		$	24,521,846		$	—		$	70,358,471
Accrued liabilities		48,074,063		50,450,283			37,026,220			(1,234,237	)		134,316,329
Income taxes payable		2,784,703		—			—			—			2,784,703
Current portion of long-term debt and other obligations		7,503,833		—			1,249,073			—			8,752,906
Liabilities related to discontinued operations		—		5,149,365			—			—			5,149,365
Total current liabilities		83,442,275		76,356,597			62,797,139			(1,234,237	)		221,361,774
LONG-TERM NOTES, NET OF CURRENT PORTION		426,698,317		—			435,677,112			—			862,375,429
DEFERRED TAXES		—		2,089,261			—			(2,089,261	)		—
OTHER LIABILITIES		24,838,563		22,405,413			88,865,806			—			136,109,782
Total liabilities		534,979,155		100,851,271			587,340,057			(3,323,498	)		1,219,846,985
COMMITMENTS AND CONTINGENCIES
TOTAL EQUITY		295,477,105		541,848,348			(18,839,992	)		(523,008,356	)		295,477,105
Total liabilities and equity	$	830,456,260	$	642,699,619		$	568,500,065		$	(526,331,854	)	$	1,515,324,090

21

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Income

Three Months Ended March 31, 2009

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
REVENUES
Restaurant and hospitality	$	476,465		$	196,242,422		$	4,470,938		$	(914,175	)	$	200,275,650
Gaming:
Casino		—			—			35,968,289			—			35,968,289
Rooms		—			—			12,405,816			—			12,405,816
Food and beverage		—			—			10,486,228			—			10,486,228
Other		—			—			3,612,364			—			3,612,364
Promotional allowances		—			—			(6,458,364	)		—			(6,458,364	)
Net gaming revenue		—			—			56,014,333			—			56,014,333
Total revenue		476,465			196,242,422			60,485,271			(914,175	)		256,289,983
OPERATING COSTS AND EXPENSES:
Restaurant and hospitality:
Cost of revenues		—			49,144,994			518,531			—			49,663,525
Labor		—			57,178,363			817,345			—			57,995,708
Other operating expenses		(394,229	)		40,912,151			1,269,922			(914,175	)		40,873,669
Gaming:
Casino		—			—			19,620,490			—			19,620,490
Rooms		—			—			5,609,715			—			5,609,715
Food and beverage		—			—			5,701,286			—			5,701,286
Other		—			—			12,364,687			—			12,364,687
General and administrative expense		12,058,150			—			—			—			12,058,150
Depreciation and amortization		1,023,215			11,045,436			5,691,840			—			17,760,491
Gain on insurance claims		(3,482,897	)		—			—			—			(3,482,897	)
Loss (gain) on disposal of assets		(4,931	)		—			(617,368	)		—			(622,299	)
Pre-opening expenses		—			256,164			—			—			256,164
Total operating costs and expenses		9,199,308			158,537,108			50,976,448			(914,175	)		217,798,689
OPERATING INCOME		(8,722,843	)		37,705,314			9,508,823			—			38,491,294
OTHER EXPENSES (INCOME):
Interest expense, net		15,968,323			—			8,646,251			—			24,614,574
Other, net		4,275,137			(121	)		(140,604	)		—			4,134,412
Total other expense		20,243,460			(121	)		8,505,647			—			28,748,986
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(28,966,303	)		37,705,435			1,003,176			—			9,742,308
PROVISION (BENEFIT) FOR INCOME TAXES		(7,299,833	)		9,436,637			250,777			—			2,387,581
INCOME (LOSS) FROM CONTINUING OPERATIONS		(21,666,470	)		28,268,798			752,399			—			7,354,727
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF TAXES		—			(50,903	)					—			(50,903	)
EQUITY IN EARNINGS OF SUBSIDIARIES		28,970,294			—			—			(28,970,294	)		—
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		230,578			—			—			—			230,578
NET INCOME (LOSS) ATTRIBUTABLE TO LANDRY’S	$	7,073,246		$	28,217,895		$	752,399		$	(28,970,294	)	$	7,073,246

22

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Income

Three Months Ended March 31, 2008

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
REVENUES
Restaurant and hospitality	$	1,370,535		$	218,012,607		$	4,191,479		$	(1,033,429	)	$	222,541,192
Gaming:
Casino		—			—			42,811,817			—			42,811,817
Rooms		—			—			18,182,380			—			18,182,380
Food and beverage		—			—			12,135,840			—			12,135,840
Other		—			—			3,622,905			—			3,622,905
Promotional allowances		—			—			(6,972,826	)		—			(6,972,826	)
Net gaming revenue		—			—			69,780,116			—			69,780,116
Total revenue		1,370,535			218,012,607			73,971,595			(1,033,429	)		292,321,308
OPERATING COSTS AND EXPENSES:
Restaurant and hospitality:
Cost of revenues		—			58,109,955			759,013			—			58,868,968
Labor		—			65,257,971			1,087,735			—			66,345,706
Other operating expenses		733,155			53,764,557			1,809,839			(1,033,429	)		55,274,122
Gaming:
Casino		—			—			22,059,279			—			22,059,279
Rooms		—			—			6,006,645			—			6,006,645
Food and beverage		—			—			7,171,799			—			7,171,799
Other		—			—			16,025,257			—			16,025,257
General and administrative expense		12,790,198			—			—			—			12,790,198
Depreciation and amortization		1,162,566			11,043,226			5,459,119			—			17,664,911
Pre-opening expenses		—			467,926			—			—			467,926
Total operating costs and expenses		14,685,919			188,643,635			60,378,686			(1,033,429	)		262,674,811
OPERATING INCOME		(13,315,384	)		29,368,972			13,592,909			—			29,646,497
OTHER EXPENSES (INCOME):
Interest expense, net		11,720,183			—			9,039,399			—			20,759,582
Other, net		220,725			450			5,083,229			—			5,304,404
Total other expense		11,940,908			450			14,122,628			—			26,063,986
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(25,256,292	)		29,368,522			(529,719	)		—			3,582,511
PROVISION (BENEFIT) FOR INCOME TAXES		(6,812,245	)		8,015,875			(142,494	)		—			1,061,136
INCOME (LOSS) FROM CONTINUING OPERATIONS		(18,444,047	)		21,352,647			(387,225	)		—			2,521,375
INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET OF TAXES		—			(928,802	)		—			—			(928,802	)
EQUITY IN EARNINGS OF SUBSIDIARIES		20,036,620			—			—			(20,036,620	)		—
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS		70,818			—			—			—			70,818
NET INCOME (LOSS) ATTRIBUTABLE TO LANDRY’S	$	1,521,755		$	20,423,845		$	(387,225	)	$	(20,036,620	)	$	1,521,755

23

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Cash Flows

Three months ended March 31, 2009

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,073,246		$	28,217,895		$	752,399		$	(28,970,294	)	$	7,073,246
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,036,084			11,032,566			5,691,841			—			17,760,491
Gain on disposition of assets		(4,931	)		—			(617,368	)		—			(622,299	)
Gain on insurance claims		(3,482,897	)		—			—			—			(3,482,897	)
Change in assets and liabilities, net and other		16,567,860			(27,354,006	)		(26,279,955	)		30,204,531			(6,861,570	)
Total adjustments		14,116,116			(16,321,440	)		(21,205,482	)		30,204,531			6,793,725
Net cash provided (used) by operating activities		21,189,362			11,896,455			(20,453,083	)		1,234,237			13,866,971
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and/or transfers		(2,034,995	)		(13,679,189	)		(26,780,115	)		—			(42,494,299	)
Proceeds from disposition of property and equipment		3,482,897			—			1,988,962			—			5,471,859
Net cash provided by (used in) investing activities		1,447,902			(13,679,189	)		(24,791,153	)		—			(37,022,440	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of common stock for treasury		(37,416	)		—			—			—			(37,416	)
Proceeds from exercise of stock options		21,250			—			—			—			21,250
Payments of debt and related expenses, net		(3,832	)		—			(61,288	)		—			(65,120	)
Financing proceeds		390,040,000			—			—			—			390,040,000
Repayment of bonds		(398,362,000	)		—			—						(398,362,000	)
Debt issuance costs		(17,350,710	)		—			—			—			(17,350,710	)
Proceeds from credit facility		56,572,965			—			93,545,454			—			150,118,419
Payments on credit facility		(46,227,054	)		—			(33,000,000	)		—			(79,227,054	)
Net cash provided (used) in financing activities		(15,346,797	)		—			60,484,166			—			45,137,369
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		7,290,467			(1,782,734	)		15,239,930			1,234,237			21,981,900
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		—			5,705,232			46,595,810			(1,234,237	)		51,066,805
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	7,290,467		$	3,922,498		$	61,835,740		$	—		$	73,048,705

24

LANDRY’S RESTAURANTS, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Unaudited Consolidating Financial Statements

Statement of Cash Flows

Three Months Ended March 31, 2008

	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Consolidated Entity
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,521,755		$	20,423,845		$	(387,225	)	$	(20,036,620	)	$	1,521,755
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,010,630			11,358,346			5,607,038			—			17,976,014
Gain on disposition of assets		—			(19,350	)		—			—			(19,350	)
Change in assets and liabilities, net and other		20,526,911			(23,470,615	)		(6,677,621	)		20,036,620			10,415,295
Total adjustments		21,537,541			(12,131,619	)		(1,070,583	)		20,036,620			28,371,959
Net cash provided (used) by operating activities		23,059,296			8,292,226			(1,457,808	)		—			29,893,714
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions and/or transfers		(907,880	)		(14,019,864	)		(9,459,160	)		—			(24,386,904	)
Proceeds from disposition of property and equipment		—			5,394,894			—			—			5,394,894
Net cash provided by (used in) investing activities		(907,880	)		(8,624,970	)		(9,459,160	)		—			(18,992,010	)
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		(5,608	)		—			(53,416	)		—			(59,024	)
Financing proceeds		—			—			—			—			—
Debt issuance costs		—			—			—			—			—
Proceeds from credit facility		38,000,000			—			21,000,000			—			59,000,000
Payments on credit facility		(48,000,000	)		—			(15,000,000	)		—			(63,000,000	)
Dividends paid		(807,242	)		—			—			—			(807,242	)
Net cash provided by (used in) financing activities		(10,821,763	)		—			5,946,584			—			(4,875,179	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		11,329,653			(332,744	)		(4,970,384	)		—			6,026,525
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		4,265,460			11,691,100			23,644,686			—			39,601,246
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	15,595,113		$	11,358,356		$	18,674,302		$	—		$	45,627,771

25

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 are 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 and gaming facilities. We locate our restaurants in high-profile, specialty locations in markets that provide a balanced mix of tourist, convention, business and residential clientele. We focus on providing quality food at reasonable prices while offering a memorable atmosphere for our guests. As of March 31, 2009, we operated 173 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.

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. Subsequently, 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.

The restaurant and gaming industries are intensely competitive and affected by changes in consumer tastes and by national, regional, and local economic conditions and demographic trends. The performance of individual restaurants or casinos may be affected by factors such as: traffic patterns, demographic considerations, marketing, weather conditions, and the type, number, and location of competing operations. We have many well established competitors with greater financial resources, larger marketing and advertising budgets, and longer histories of operation than ours, including competitors already established in regions where we are planning to expand, as well as competitors planning to expand in the same regions. We face significant competition from other casinos in the markets in which we operate and from other mid-priced, full-service, casual dining restaurants offering or promoting seafood and other types and varieties of cuisine. Our competitors include national, regional, and local chains as well as local owner-operated restaurants. We also compete with other restaurants and retail establishments for restaurant sites.

The current economic conditions in the United States have continued to have a negative impact on our results of operations during 2009. A decline in discretionary spending attributable to tighter credit markets, increased unemployment, increased home foreclosures, the decline in the financial markets and other factors have impacted our customer’s level of spending on dining out, gaming, and tourism in general. It is difficult to predict how long the current economic conditions will persist, whether they will deteriorate further, and the extent to which our operations will be adversely affected.

Results of Operations

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

	Three Months Ended March 31,
	2009		2008
Restaurant and hospitality:
Revenues	100.0	%	100.0	%
Cost of revenues	24.8	%	26.5	%
Labor	29.0	%	29.8	%
Other operating expenses (1)	20.4	%	24.8	%
Unit Level Profit (1)	25.8	%	18.9	%
Gaming:
Revenues	100.0	%	100.0	%
Casino costs	35.0	%	31.6	%
Rooms costs	10.0	%	8.6	%
Food and beverage costs	10.2	%	10.3	%
Other operating expenses (1)	22.1	%	23.0	%
Unit Level Profit (1)	22.7	%	26.5	%

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

26

Three months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008

Restaurant and Hospitality

Restaurant and hospitality revenues decreased $22,265,542, or 10%, from $222,541,192 to $200,275,650 for the three months ended March 31, 2009 compared to the prior year comparable period. The change in revenue is the result of the following approximate amounts: new restaurant openings—increase $6.9 million; same store sales (restaurants open all of the first quarter 2009 and 2008)—decrease $20.3 million; closed or sold restaurants—decrease $2.3 million and the remainder of the difference is attributable to the change in sales; hurricane closures – decrease $3.9 million for stores not open a full comparable period or other sales. The total number of units open as of March 31, 2009 and 2008 was 173 and 174, respectively.

Cost of revenues decreased $9,205,443, or 15.6%, from $58,868,968 to $49,663,525 for the three months ended March 31, 2009 as compared to the prior year period due in large part to the decline in revenues. Cost of revenues as a percentage of revenues for the three months ended March 31, 2009 decreased to 24.8% from 26.5% in 2008. This decrease is primarily the result of favorable commodity prices and cost control measures implemented during the latter part of 2008.

Labor expense decreased $8,349,998, or 12.6%, from $66,345,706 to $57,995,708 for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 due in large part to the decline in revenues. Labor expenses as a percentage of revenues for 2009 decreased to 29.0% from 29.8% in 2008. The decrease in labor resulted in part from cost control measures implemented during the latter part of 2008, partially offset by increases in the minimum wage.

Other operating expenses decreased $14,400,453 or 26.1%, from $55,274,122 to $40,873,669 for the three months ended March 31, 2009 as compared to the prior year period and such expenses decreased as a percentage of revenues to 20.4% in 2009 from 24.8% in 2008. These decreases primarily relate to decreased rent expense associated with a $7.5 million lease termination payment received from a landlord, decreased advertising and lower energy costs as compared to the comparable prior year period.

Gaming

Casino revenues decreased $6,843,528, or 16.0%, from $42,811,817 to $35,968,289 for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. This decrease is primarily the result of reduced slot and table game activity in both Las Vegas and Laughlin.

Room revenues decreased $5,776,564, or 31.8%, from $18,182,380 to $12,405,816 for the three months ended March 31, 2009 as compared to the prior year period. This decrease is the result of reduced occupancy and average daily room rates in Las Vegas as compared to the prior year period.

Food and beverage revenues decreased $1,649,612, or 13.6%, from $12,135,840 to $10,486,228 for the three months ended March 31, 2009 as compared to the comparable prior year period. This decrease resulted from reduced visitor traffic and the temporary closure of certain outlets as a cost saving measure during the three months ended March 31, 2009.

Casino expenses decreased $2,438,789, or 11.1%, from $22,059,279 to $19,620,490 for the three months ended March 31, 2009 as compared to the comparable prior year period. This decrease is primarily the result of reduced payroll costs and promotional and complimentary expenses for both Las Vegas and Laughlin.

Food and beverage expenses decreased $1,470,513, or 20.5%, from $7,171,799 to $5,701,286 for the three months ended March 31, 2009 as compared to the comparable prior year period. This decrease resulted from reduced visitor traffic and the temporary closure of certain outlets as a cost saving measure during the three months ended March 31, 2009.

Other expenses decreased $3,660,570, or 22.8%, from $16,025,257 to $12,364,687 for the three months ended March 31, 2009 as compared to the comparable period in the prior year. This decrease resulted primarily from reduced payroll costs, entertainment expenses, operating supplies and utilities.

Consolidated

General and administrative expenses decreased $732,048 or 5.7%, from $12,790,198 to $12,058,150 for the three months ended March 31, 2009 as reduced corporate payroll costs were partially offset by increased legal and other professional fees associated with the terminated going private transaction. General and administrative expenses increased as a percentage of revenues to 4.7% in 2009 from 4.4% in 2008 as a result of the decline in revenues for the three month period ended March 31, 2009.

27

We recorded $3,482,697 as income representing insurance proceeds associated with Hurricane Ike that exceeded the recorded book value of the assets which were damaged.

Gains on disposals of fixed assets amounted to $622,299 for the three months ended March 31, 2009 as a result of a gain on the disposition of property in Galveston, Texas.

Pre-opening expenses decreased by $211,762, or 45.3%, from $467,926 to $256,164 for the three months ended March 31, 2009 as compared to the comparable prior year period. This decrease relates to the size of the units opening undertaken in 2009 compared with the prior year.

Net interest expense for the three months ended March 31, 2009 increased by $3,854,992, or 18.6%, from $20,759,582 to $24,614,574 as compared to the comparable prior year period. This increase is primarily due to higher effective borrowing rates and increased borrowings in 2009 associated with our refinancing and construction of the Golden Nugget tower, respectively.

Other expense decreased $1,169,992, or 22.1%, from $5,304,404 to $4,134,412 for the three months ended March 31, 2009 as compared to the comparable prior year period. The 2009 amount is primarily comprised of $4.0 million in call premiums associated with refinancing our 7.5% and 9.5% senior notes, whereas the prior year amount is primarily comprised of $4.7 million in non-cash charges related to interest rate swaps not considered hedges.

A provision for income taxes of $2,387,581 was recorded for three months ended March 31, 2009 compared with a provision of $1,061,136 for the three months ended March 31, 2008. The effective tax rate for 2009 was 24.5% compared to 29.6% for the prior year period as a result of lower expected earnings in 2009.

The after tax loss from discontinued operations decreased $877,899 from $928,802 to $50,903 for the three months ended March 31, 2009 as compared to the comparable prior year period. The losses in both periods consisted primarily of operating losses.

Liquidity and Capital Resources

On December 22, 2008, we entered into an $81.0 million interim senior secured credit facility. The interim senior secured credit facility provided for a $31.0 million senior secured term loan facility and a $50.0 million senior secured revolving credit facility, the proceeds of which were used to refinance the remaining outstanding indebtedness under our previously issued and outstanding senior credit facility and to pay related transaction fees and expenses.

On February 13, 2009, we completed the offering of $295.5 million in aggregate principal amount of 14.0% senior secured notes due 2011 (the “Notes”). The gross proceeds from the offering and sale of the Notes were $260.0 million. The Notes are unconditionally guaranteed on a senior secured basis as to principal, premium, if any, and interest by all of our current and future domestic restricted subsidiaries (each individually a Guarantor and collectively, the Guarantors) and are secured by a second lien position on substantially all of our and the Guarantors’ assets. The Notes were issued pursuant to an indenture, dated as of February 13, 2009 (Indenture), among us, the Guarantors and Deutsche Bank Trust Company America, as Trustee and as Collateral Agent.

The Notes will mature on August 15, 2011. Interest on the Notes will accrue from February 13, 2009, at a fixed interest rate of 14.0% to be paid twice a year, on each February 15th and August 15th, beginning August 15, 2009. We may redeem the Notes any time at par, plus accrued interest. We are required to offer to purchase the Notes at 101% of their aggregate principal amount, plus accrued interest, if we experience a change in control as defined in the Indenture.

The Indenture under which the Notes have been issued contains a maximum leverage ratio covenant as well as restrictions that limit our ability and the Guarantors to, among other things: incur or guarantee additional indebtedness; create liens; pay dividends on or redeem or repurchase stock; make capital expenditures or certain types of investments; sell assets or merge with other companies.

We and the Guarantors entered into a registration rights agreement, dated as of February 13, 2009 (Registration Rights Agreement) with Jefferies & Company, Inc. On May 8, 2009, we filed the registration statement with the SEC. Under the Registration Rights Agreement, we and the Guarantors have agreed to use our best efforts to file and cause to become effective a registration statement with respect to an offer to exchange the Notes for notes registered under the Securities Act of 1933, as amended (the Securities Act), having substantially identical terms as the Notes (except that additional interest provisions and transfer restrictions pertaining to the Notes will be deleted). If we fail to cause the registration statement relating to the exchange offer to become effective within the time periods specified in the Registration Rights Agreement, we will be required to pay additional interest on the Notes until the registration statement is declared effective.

28

We also entered into a $215.6 million Amended and Restated Credit Agreement dated as of February 13, 2009 (the Credit Agreement) which replaced the interim senior secured credit facility. The Credit Agreement provides for a term loan of $165.6 million and a revolving credit line of $50.0 million. The obligations under the Credit Agreement are unconditionally guaranteed by the Guarantors and are secured by a first lien position on substantially all of our assets and the Guarantors.

Interest on the Credit Agreement accrues at a base rate (which is the greater of 5.50%, the Federal Funds Rate plus .50%, or Wells Fargo’s prime rate) plus a credit spread of 5.0%, or at our option, at the Eurodollar base rate of at least 3.5% plus a credit spread of 6.0%, and matures on May 13, 2011.

The Credit Agreement contains covenants that limit our ability and the Guarantors to, among other things, incur or guarantee additional indebtedness; create liens; make capital expenditures; pay dividends on or repurchase stock; make certain types of investments; sell assets or merge with other companies. The Credit Agreement contains financial covenants, including a maximum leverage ratio, a maximum senior leverage ratio, and a minimum fixed charge coverage ratio.

We used the proceeds from the Notes offering, together with borrowings under the Credit Agreement to refinance our existing $395.7 million aggregate principal amount of 9.5% senior notes due 2014 (the “9.5% Notes”) and $4.3 million aggregate principal amount of 7.5% senior notes due 2014 (the “7.5% Notes” and, together with the 9.5% Notes, the “Existing Notes”). As of March 31, 2009, $0.8 million of our 7.5% Notes and $0.9 million of our 9.5% Notes remained outstanding. In addition, we paid a redemption premium of approximately $4.0 million in connection with the repurchase of the Existing Notes.

In connection with the planned refinancing of our Existing Notes, on December 23, 2008, we commenced separate cash tender offers (each a “tender offer” and together, the “tender offers”) to purchase any and all of our outstanding 9.5% Notes and 7.5% Notes for a purchase price of 101% of the principal amount thereof. In conjunction with the tender offers, we solicited consents of at least a majority of the aggregate principal amount of each of the outstanding 9.5% Notes and 7.5% Notes to certain proposed amendments to each of the indentures governing such 9.5% Notes and 7.5% Notes to eliminate most of the restrictive covenants and certain events of default and to amend certain other provisions contained in the indentures and notes related thereto. We executed supplemental indentures with U.S. Bank National Association, as trustee, to effectuate the proposed amendments to the indentures governing the Existing Notes, which became operative upon the consummation of the Notes offering.

With respect to any Existing Notes that were not tendered, we may, at our option, either (i) pay such Existing Notes in accordance with their terms through maturity, (ii) repurchase any 9.5% Notes if the holders exercise their option to require us to do so, at 101% of the principal amount plus accrued but unpaid interest, if any, through the payment date or (iii) defease any or all of the remaining Existing Notes.

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 March 31, 2009. 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 March 31, 2009. 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, LLC. 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.

29

Consistent with our policy to manage our exposure to interest rate risk and in conformity with the requirements of the first and second lien facilities, we entered into interest rate swaps for all of the first and second lien borrowings of the Golden Nugget that fix the interest rates at between 5.4% and 5.5%, plus the applicable margin. 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 is reflected as other income/expense in the consolidated financial statements. Accordingly, a non-cash gain of approximately $0.4 million was recorded for the three months ended March 31, 2009, while a non-cash expense of $4.7 million associated with these swaps was recorded for the three months ended March 31, 2008.

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 March 31, 2009, we were in compliance with all such covenants. As of March 31, 2009, our average interest rate on floating-rate debt was 10.9%, we had approximately $20.8 million in letters of credit outstanding, and our available borrowing capacity was $51.7 million.

As a primary result of the Golden Nugget refinancing and the Notes, we have incurred higher interest expense. We expect to incur additional interest expense in the future as we continue the Golden Nugget expansion and due to higher interest costs arising from our refinancing. We are constructing a hotel tower at the Golden Nugget—Las Vegas which we expect to complete by 2009 at an estimated cost of $140.0 million, funded primarily by the delayed draw term loan and operating cash flow.

Working capital, excluding discontinued operations, increased from a deficit of $83.9 million as of December 31, 2008 to a deficit of $57.9 million as of March 31, 2009 primarily due to an increase in cash and a reduction in accounts payable and accrued liabilities. These increases were partially offset by an increase in the current portion of long-term notes and other obligations. Cash flow to fund future operations, new restaurant development and acquisitions will be generated from operations, available capacity under our credit facilities and additional financing, if appropriate.

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.

Capital expenditures for the three months ended March 31, 2009 were $42.5 million, including $25.8 million for the Golden Nugget renovation. We expect capital expenditures to be approximately $86.0 million for the remainder of the year, primarily for the renovation of the Golden Nugget and new restaurants.

Seasonality and Quarterly Results

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

Critical Accounting Policies

Restaurant and other properties are reviewed on a property by property basis for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The recoverability of properties that are to be held and used is measured by comparison of the estimated future undiscounted cash flows associated with the asset to the carrying amount of the asset. Goodwill and other non-amortizing intangible assets are reviewed for impairment at least annually. Significant estimates used in these reviews include projected operating results and cash flows, discount rates, terminal value growth rates, capital expenditures, changes in future working capital requirements, cash flow multiples, control premiums and assumed royalty rates. 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.

We operate approximately 173 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

30

determination is made. Due to our average restaurant net investment cost, such amounts could be significant when and if they occur. However, such asset impairment expense does not affect our financial liquidity, and is usually excluded from many valuation model calculations.

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

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

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

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

Recent Accounting Pronouncements

In 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 only to the extent we complete business combinations.

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 applies to the accounting for non-controlling interests (currently referred to as minority interest) in a subsidiary and for the deconsolidation of a subsidiary. We adopted SFAS 160 on January 1, 2009 and have adjusted the presentation of our financial statements to reflect the effect of our non-controlling interests. As further described in Note 9, we have minority interests that include redemption provisions that are not solely within our control, commonly referred to as redeemable minority interests. EITF Topic No. D-98, Classification and Measurement of Redeemable Securities (Topic D-98) requires that minority interests that are redeemable at the option of the holder be recorded outside of permanent equity at fair value, and the redeemable minority interests should be adjusted to their fair value at each balance sheet date through retained earnings. Upon our adoption of SFAS 160 and in conjunction with the provisions of Topic D-98, we recorded an adjustment to increase the carrying value of our redeemable minority interest with a corresponding charge retained earnings. The redeemable minority interest is recorded within accrued liabilities in the consolidated balance sheets.

In February 2008, the FASB issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2), which delayed the effective date of SFAS No. 157, Fair Value Measurements 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. The adoption of FSP FAS 157-2 did not have an impact 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

31

about an entity’s derivative instruments and hedging activities. SFAS 161 is effective for fiscal years beginning after November 15, 2008. We adopted SFAS 161 on January 1, 2009 and have included the required expanded disclosures within this report.

In April 2008, the FASB issued FASB FSP No. 142-3, Determination of the Useful Life of Intangible Assets (FSP FAS 142-3). FSP FAS 142-3 removed the requirement of SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142), for an entity to consider, when determining the useful life of an acquired intangible asset, whether the intangible asset can be renewed without substantial cost or material modification to the existing terms and conditions associated with the intangible asset. FSP FAS 142-3 replaces the previous useful life assessment criteria with a requirement that an entity considers its own experience in renewing similar arrangements. If the entity has no relevant experience, it would consider market participant assumptions regarding renewal. FSP FAS 142-3 is being applied prospectively beginning January 1, 2009. The adoption of this Statement has not had a material impact on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). SFAS 162 identifies a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. It establishes that the GAAP hierarchy should be directed to entities because it is the entity (not the auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. We do not believe that implementation of SFAS.162 will have any effect on our consolidated financial statements.

In June 2008, the FASB issued Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. In accordance with the FSP, unvested equity-based awards that contain non-forfeitable rights to dividends are considered to participate with common shareholders in undistributed earnings. As a result, the awards are required to be included in the calculation of basic earnings per common share pursuant to the “two-class” method. Our participating securities are composed of unvested restricted stock. These participating securities, prior to application of the FSP, were excluded from weighted-average common shares outstanding in the calculation of basic earnings per common share. We applied the provisions of the FSP beginning on January 1, 2009, and have calculated and presented basic earnings per common share on this basis for all periods presented. The impact of the inclusion of participating securities in the calculation of basic earnings per common share for prior periods was not material.

In April 2009, the FASB issued Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, which amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments (“SFAS No. 107”), and Accounting Principles Board Opinion No. 28, Interim Financial Reporting (“APB No. 28”). This pronouncement is effective for our reporting periods beginning with our June 30, 2009 interim financial statements. The amendments expand the disclosure requirements of SFAS No. 107 and APB No. 28 about how an entity reports on fair value to be included in the summarized, interim financial statements. We do not anticipate that this FASB Staff Position will impact our consolidated financial position, cash flows or results of operations, and we will include the required disclosures beginning with our June 30, 2009 interim financial statements.

In April 2009, the FASB issued Staff Position No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, which provides guidance for measuring and expands the presentation and disclosure requirements of other-than-temporary impairments on debt and equity securities in interim and annual financial statements. As we currently do not own any debt or equity securities, this Staff Position is not expected to impact our financial position, cash flows or results of operations. Should we own any such securities in the future, the provisions of this Staff Position will be applied.

In April 2009, the FASB issued FASB Staff Position No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4). FSP FAS 157-4, which will become effective for the interim and annual reporting beginning in the second quarter 2009, provides additional guidance related to the estimation of fair value when the volume and level of activity for the asset or liability have significantly decreased, the identification of transactions that are not orderly, and the use of judgment in evaluating the relevance of inputs such as transaction prices. We do not anticipate the implementation of this new accounting standard will significantly change our valuation or disclosure of financial and nonfinancial assets and liabilities under the scope of FAS 157.

32

In April 2009, the FASB issued FASB Staff Position FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination (FSP FAS 141(R)-1). FSP FAS 141(R)-1, which became effective for business combinations having an acquisition date on or after January 1, 2009, requires an asset or liability arising from a contingency in a business combination to be recognized at fair value if fair value can be reasonably determined. If it cannot, the asset or liability must be recognized in accordance with FASB Statement No. 5, Accounting for Contingencies, and FASB Interpretation No. 14, Reasonable Estimation of the Amount of the Loss. The implementation of this guidance will affect our consolidated financial statements only to the extent we complete business combinations.

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 March 31, 2009 included $184.9 million of floating-rate debt attributed to borrowings at an average interest rate of 10.9%. As a result, our annual interest cost in 2009 will fluctuate based on short-term interest rates.

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 1.1%) would be approximately $2.0 million annually based on the floating-rate debt and other obligations outstanding at March 31, 2009; 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 March 31, 2009, 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 March 31, 2009, 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 three months ended March 31, 2009, 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

Following Mr. Fertitta’s proposal to acquire all of our outstanding stock, two putative class action lawsuits were filed as follows:

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, among others. 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.

33

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, among others. 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 this action is without merit and intend to contest the above matter vigorously.

On February 5, 2009, a purported class action and derivative lawsuit entitled Louisiana Municipal Police Employee’s Retirement System on behalf of itself and all other similarly situated shareholders of Landry’s Restaurant’s, Inc. and derivatively on behalf of minimal defendant Landry’s Restaurant’s, Inc. was brought against all members of our Board of Directors, Fertitta Holdings, Inc., and Fertitta Acquisition Co. in the Court at Chancery of the State of Delaware. The lawsuit alleges, among other things, a breach of a fiduciary duty by the directors for renegotiating the Merger Agreement with the Fertitta entities, allowing Mr. Fertitta to acquire shares of stock in the Company and gain majority control thereof, and terminating the Merger Agreement without requiring payment of the reverse termination fee. The suit seeks consummation of the merger buyout at $21.00 a share or damages representing the difference between $21.00 per share and the price at which class members sold their stock in the open market, or damages for allowing Mr. Fertitta to acquire control of the Company without paying a control premium, or alternately requiring payment of the reverse termination fee or damages for the devaluation of the Company’s stock. We intend to contest this matter vigorously.

General Litigation

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

ITEM 1A. Risk Factors

There have been no material changes to the Risk Factors disclosed in our 2008 Annual Report on Form 10-K.

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 March 31, 2009.

All repurchases of our common stock during the quarter ended Marc 31, 2009 were made pursuant to our open market stock repurchase program. We have exhausted substantially all funds authorized for purchases under previously existing programs. The following table summarizes repurchases of our common stock during the quarter ended March 31, 2009 pursuant to our open market stock purchase program.

34

Period	(a) Total Number of Shares (or Units Purchased)	(b) Average Price paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1 - 31, 2009	3,072	$	12.18	3,072	$	63,932
February 1 - 28, 2009	—	$	—	—	$	63,932
March 1 - 31, 2009	—	$	—	—	$	63,932
Total shares purchased	3,072	$	12.18	3,072	$	63,932

ITEM 6. Exhibits

The following Exhibits are set forth herein:

10.1	—Indenture, dated February 13, 2009, among the Company, the Guarantors and Deutsche Bank Trust America, as trustee (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K of Landry’s Restaurants, Inc. filed with the Commission on February 17, 2009.)
10.2	—Registration Rights Agreement, dated February 13, 2009, among the Company, the Guarantors, and the initial purchases party thereto (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K of Landry’s Restaurants, Inc. filed with the commission on February 17, 2009)
10.3	— Amended and Restated Credit Agreement, dated February 13, 2009, among the Company, Wells Fargo Foothill, LLC, as the Administrative Agent, Wells Fargo Foothill, LLC and Jefferies Finance LLC, as Co-Lead Arrangers and Co-Bookrunners, and Wells Fargo Foothill, LLC and Jefferies Finance LLC as Co-Syndication Agents (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Landry’s Restaurants, Inc. filed with the commission on February 17, 2009)
10.4	—Purchase Agreement, dated February 14, 2009 between the company, the Guarantors and Jefferies & Company, Inc. (incorporated by reference to Exhibit 10.3 to the current report on Form 8-K of Landry’s Restaurants, Inc. filed with the commission on February 17, 2009)
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: May 11, 2009

35

EX-12.1

Exhibit 12.1

LANDRY’S RESTAURANTS, INC

RATIO OF EARNINGS TO FIXED CHARGES

	Three Months Ended March 31,
	2009			2008
Income from continuing operations, before taxes	$	9,742,308		$	3,582,511
Fixed charges, as adjusted		29,008,246			25,436,055
	$	38,750,554		$	29,018,566
Fixed charges:
Interest expense including amortization of debt costs	$	24,708,105		$	20,847,244
Capitalized interest		1,695,534			268,855
Interest factor on rent ( 1/3 rent expense)		4,300,141			4,588,811
Total fixed charges		30,703,780			25,704,910
Less capitalized interest		(1,695,534	)		(268,855	)
Fixed charges, as adjusted	$	29,008,246		$	25,436,055
Ratio of earnings to fixed charges		1.3			1.1

EX-31.1

Exhibit 31.1

CERTIFICATION WITH RESPECT TO QUARTERLY REPORT OF

LANDRY’S RESTAURANTS, INC.

I, Tilman J. Fertitta, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Landry’s Restaurants, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2009

/s/ Tilman J. Fertitta

Tilman J. Fertitta

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION WITH RESPECT TO QUARTERLY REPORT OF

LANDRY’S RESTAURANTS, INC.

I, Rick H. Liem, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Landry’s Restaurants, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 11, 2009

/s/ Rick H. Liem

Rick H. Liem

Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION WITH RESPECT TO QUARTERLY REPORT OF

LANDRY’S RESTAURANTS, INC.

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of title 18, United States Code), each of the undersigned officers of Landry’s Restaurants, Inc. (the “Company”), does hereby certify to such officer’s knowledge that:

The Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-Q.

Date: May 11, 2009

/s/ Tilman J. Fertitta

Tilman J. Fertitta

Chairman of the Board, President and

Chief Executive Officer

/s/ Rick H. Liem

Rick H. Liem

Executive Vice President and

Chief Financial Officer

[The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601 (b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Sections 1350, Chapter 63 of the Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.]