LANDRYS SEAFOOD RESTAURANTS INC, 10-K, 2000-03-06

LANDRYS SEAFOOD RESTAURANTS INC
10-K, 2000-03-06
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

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

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

For the fiscal year ended December 31, 1999 Commission file number 000-22150

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

DELAWARE 76-0405386
(I.R.S. Employer Identification No.)
(State of incorporation)

1400 POST OAK BLVD.,
SUITE 1010
HOUSTON, TX 77056 (713) 850-1010
(Address of principal executive (Registrant's telephone number)
offices)

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON SHARES, PAR VALUE $.01 PER SHARE
(Title of Class)

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

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

The aggregate market value of the registrant's voting Common Stock held by
non-affiliates of the registrant was approximately $138,500,000 as of February
29, 2000, based on the New York Stock Exchange closing price on that date. For
this purpose, all shares held by officers and directors of the registrant are
considered to be held by affiliates, but neither the registrant nor such
persons concede that they are affiliates of the registrants.

The number of shares outstanding of the registrant's common stock is
24,824,121 as of February 29, 2000.

DOCUMENTS INCORPORATED BY REFERENCE

The Proxy Statement for the Registrant's 2000 Annual Meeting of
Stockholders, to be filed pursuant to regulation 14A under the Securities
Exchange Act of 1934, as amended, is incorporated by reference into Part III
of this Form 10-K. Although such Proxy Statement is not currently available,
it will be filed with the Commission within 120 days after December 31, 1999.

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LANDRY'S SEAFOOD RESTAURANTS, INC.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE NO.
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<C> <S> <C>
PART I.

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

Item 2. Properties............................................ 7

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

Item 4. Submission of Matters to a Vote of Security Holders... 8

PART II.

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

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

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

Item 7.A. Quantitative and Qualitative Disclosures about Market
Risk.................................................. 18

Item 8. Financial Statements and Supplementary Data........... 18

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 18

PART III.

Item 10. Directors and Executive Officers of the Registrant.... 19

Item 11. Executive Compensation................................ 19

Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................ 19

Item 13. Certain Relationships and Related Transactions........ 19

PART IV.

Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................... 19

SIGNATURES....................................................... 35
EXHIBIT INDEX.................................................... 36
EXHIBITS.........................................................
</TABLE>

This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act,
which are intended to be covered by safe harbors created thereby. Stockholders
are cautioned that all forward-looking statements involve risks and
uncertainty, including without limitation, the ability of the Company to
continue its expansion strategy, changes in costs of food, retail merchandise,
labor, employee turnover and employee benefits, the ability of the Company to
acquire prime locations at acceptable lease or purchase terms, seasonality of
results, ability to make projected capital expenditures, store unit sales and
the ability to achieve projected quarterly results, as well as general market
conditions, competition, and pricing. In addition, there is no assurance that
the proposed acquisition of Rainforest Cafe, Inc. will actually be
consummated, whether Landry's management will be able to smoothly integrate
Rainforest operations and business, or whether store sales declines of
Rainforest can be mitigated to maintain the Company's existing business and
achieve reasonable financial results. All statements, other than statements of
historical facts, included or incorporated by reference in this report that
address activities, events or developments that the Company expects or
anticipates will or may occur in the future, including such things as future
capital expenditures (including the amount and nature thereof), business
strategy and measures to implement such strategy, competitive strengths,
goals, expansion and growth of the Company's business and operations, plans,
references to future success as well as other statements which include words
such as "anticipate," "believe," "plan," "estimate," "expect," and "intend"
and other similar expressions constitute forward-looking statements. Although
the Company believes that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and
plans of the Company will be achieved.

1
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LANDRY'S SEAFOOD RESTAURANTS, INC.

PART I

ITEM 1. BUSINESS

GENERAL

The Company owns and operates full-service, mid-priced, casual dining,
seafood restaurants located in 26 states, under the restaurant divisional
names "Joe's Crab Shack," "Landry's Seafood House," and "Crab House." As of
February 29, 2000, the Company operated 152 full service restaurants,
including 98 Joe's Crab Shack restaurants, 39 Landry's Seafood House division
restaurants and 15 The Crab House restaurants. In addition, the Company
operates three limited-menu take-out service units. Management believes that
the Company's restaurants appeal to a broad range of customers by offering
generous portions of fresh seafood and excellent service in a high-energy
environment at an attractive price-value relationship. The first Landry's
Seafood House restaurant opened in 1980. In 1988, Mr. Tilman J. Fertitta
acquired sole ownership of the two existing Landry's restaurants. The first
Joe's Crab Shack was acquired by the Company in 1994. Following his 1988
acquisition, Mr. Fertitta instituted: (i) new financial, accounting and
reporting systems; (ii) financial incentives for employees; (iii) a system for
training, supervising and retaining employees; (iv) a program for hiring top
management personnel; (v) a site selection and growth strategy; and (vi) an
operating philosophy emphasizing customer service and quality control. As a
result of the implementation of these programs, profitability increased
substantially, and the Company commenced an expansion program which resulted
in the opening of approximately 150 restaurants from 1993 through the third
quarter of 1998. Beginning in the fourth quarter of 1998, the Company reduced
the pace of its expansion to 12 to 15 restaurants annually and closed eleven
underperforming restaurants. During 1999, the Company implemented a new menu
for the Joe's Crab Shack restaurants, a new manager bonus program and a new
advertising and marketing campaign resulting in positive revenue growth and
consistent improvement in restaurant level margins (see "Expansion Strategy").

On February 9, 2000, the Company announced it had entered into an agreement
to acquire all of the outstanding shares of Rainforest Cafe, Inc.
(Rainforest). Rainforest operates 28 restaurants in the United States and has
franchise agreements and/or ownership interests in ten restaurants outside the
United States. Consummation of the transaction is subject to a number of
conditions, including approval by the stockholders of Rainforest.

RESTAURANT CONCEPTS AND STRATEGY

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

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

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

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

2
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Distinctive Design and Decor and Casual Atmosphere. Each restaurant
concept has a distinctive appearance and a flexible design, which can
accommodate a wide variety of available sites. The Joe's Crab Shack
restaurants are designed to appear like an old fishing camp with a wood
facade, tin roof and a raised outside deck. Many of the Joe's Crab Shack
facilities incorporate a small playground area for children adjacent to
family dining areas. For Landry's Seafood House, the Company has developed
a prototype look that is readily identified by a large theater-style
marquee over the entrance and by a distinctive brick and wood facade
creating the feeling of a traditional old seafood house restaurant. The
Crab House restaurants feature a casual nautical theme, and many include a
fresh seafood salad bar. A casual, energetic dining atmosphere is created
for all of the Company's restaurants through the design and decor of the
dining areas, which generally display vibrant, colorful interiors. In many
locations, the Company's restaurants provide outdoor patio service for a
more casual, open-air dining experience and often feature waterfront views.

High Profile Restaurant Locations. The Company's site selection strategy
is to locate a substantial number of its restaurants in markets which
provide a balanced mix of tourist, convention, business, and residential
clientele. A variety of factors are analyzed in the site selection process,
including local market demographics, site visibility, aesthetics (including
waterfront views) and accessibility and proximity to significant generators
of potential customers such as major retail centers, office complexes,
hotel concentrations, convention and entertainment complexes, historical
areas and entertainment facilities (stadiums, arenas, theaters, etc.).
Management believes that this strategy results in a high volume of new and
repeat customers and provides the Company with increased name recognition
in new markets. The Company's current restaurants are located in areas that
satisfy the Company's site selection strategy.

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

EXPANSION STRATEGY

From 1990 through the latter half of 1998, the Company pursued an
accelerated expansion strategy through the opening of new restaurants or the
conversion of existing restaurants. The Company opened 38 units in 1998.
However, in the latter part of 1998, as a result of declining average weekly
sales and increases in restaurant management turnover, the Company's per unit
profitability decreased. In addition, in the fourth quarter of 1998, the
Company announced a loss of $23,200,000 and a program to close several
restaurants with marginal performance. In 1999, the Company opened 13
restaurants. The 1999 restaurant development was reduced from previous years'
strategy as the Company believed that an increased focus on the Company's
existing operations was prudent. In 2000, the Company plans to open up to 15
or 16 restaurants, of which five were opened by February 29, 2000. The number
of restaurants actually opened will vary depending upon, among other things,
the Company's ability to locate suitable restaurant sites, the Company's
ability to obtain satisfactory lease or purchase arrangements for its
restaurant locations, the availability of funds to construct and open such
restaurants, the Company's ability to obtain on a timely basis all necessary
governmental permits to construct and operate such restaurants, the Company's
ability to adequately manage the construction or conversion of such
restaurants, the Company's ability to hire, train and retain skilled
management and other restaurant personnel, general economic conditions and the
stability in per unit sales of the Company's existing restaurants. The Company
plans to continue its expansion principally through the opening of new
restaurants. From time-to-time, the Company will evaluate the strategic
acquisition of existing restaurants. The Company will also consider the
conversion of existing restaurants to another one of its restaurant concepts.

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Consummation of the transaction is subject to a number of conditions,
including approval by the stockholders of Rainforest.

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

RESTAURANT LOCATIONS

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

The following table provides information with respect to the states in which
the Company's existing full service restaurants were open as of February 29,
2000:

<TABLE>
<CAPTION>
NUMBER
OF
STATE UNITS
- ----- ------
<S> <C>
Alabama................. 4
Arizona................. 4
California.............. 4
Colorado................ 6
Florida................. 17
Georgia................. 3
Illinois................ 5
Indiana................. 5
Kansas.................. 1
Kentucky................ 2
Louisiana............... 4
Maryland................ 2
Michigan................ 4
Minnesota............... 2
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF
STATE UNITS
- ----- ------
<S> <C>
Mississippi............. 1
Missouri................ 3
Nevada.................. 3
New Jersey.............. 2
New Mexico.............. 1
North Carolina.......... 4
Ohio.................... 7
Oklahoma................ 2
South Carolina.......... 7
Tennessee............... 5
Texas................... 50
Virginia................ 4
---
Total................... 152
===
</TABLE>

The Company is also the developer and operator of the Kemah Boardwalk south of
Houston, Texas. The Kemah Boardwalk is a forty acre development, largely owned
fee simple by the Company, that includes eight restaurants, a hotel, retail
shops, amusement attractions, and a marina the majority of which are owner-
operated by Landry's Seafood Restaurants, Inc.

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

4
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on a daily basis at each location. Many of the Company's restaurants offer
complimentary salad and garlic bread with each entree, as well as certain
lunch specials and lower priced children's entrees.

The Company's restaurants emphasize a complete dining experience, and,
accordingly, full liquor service is available. Alcoholic beverages are
primarily served to complement meals, with sales of alcoholic beverages
accounting for approximately 15.4% of the Company's revenues in 1999. The
Company's restaurants generally serve both lunch and dinner. The average
dinner entree menu price for the Company's restaurants is between $11 and $13,
excluding menu entree items which are priced daily "at market," based on cost
and availability to the Company's restaurants. At certain of the Company's
restaurants there is a separate lunch menu with reduced prices on selected
entrees.

MANAGEMENT AND EMPLOYEES

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

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

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

As of December 31, 1999, there were approximately 55 individuals involved in
regional management functions. As the Company grows, it plans to increase the
number of regional managers, and to have each regional manager responsible for
a limited number of restaurants within those geographic regions. The Company
plans to promote experienced restaurant level management personnel to serve as
future regional managers as well as hire needed personnel from outside the
Company.

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As of December 31, 1999, the Company employed approximately 10,530 persons,
of whom approximately 770 were restaurant managers or manager-trainees,
approximately 200 were salaried corporate and administrative employees,
approximately 55 were operations regional management employees, approximately
40 were development and construction employees and the rest were hourly
employees. Each restaurant employs an average of approximately 60 to 100
people, depending on seasonal needs. The Company believes that its management
level employee turnover for 1999 was within industry standards, and that its
general manager turnover was lower in 1999 in comparison to 1998. None of the
Company's employees are covered by a collective bargaining agreement. The
Company considers its relationship with employees to be satisfactory.

CUSTOMER SATISFACTION

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

PURCHASING

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

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

ADVERTISING AND MARKETING

The Company employs a marketing strategy that utilizes frequent, high
profile advertising in order to attract new customers and establish a high
level of name recognition. The Company has historically relied primarily on
word-of-mouth publicity, billboards with distinctive graphics, travel and
hospitality magazines and print advertising. However, during 1999, the Company
expanded its use of television and radio commercials. The Company uses
multiple billboards on highways leading to its restaurants to direct potential
customers from the highways to the restaurants, as well as to build name
recognition within each market. The Company's advertising expenditures for
1999 were approximately 2.0% of revenues. The Company expects that future
advertising and marketing expenses will increase as a percentage of revenues
and that the Company will utilize more television and radio advertising.

RESTAURANT REPORTING

Financial controls are maintained through management of an accounting and
management information system that is implemented at the restaurant level.
Administrative and management staff prepare daily reports of cash, deposits,
sales, sales mix, labor, and customer counts. Physical inventories of food,
beverage and supply items are taken weekly. Weekly and monthly costs of sales
and profit and loss statements are compiled by the Company's accounting
department and provided to the restaurant and regional managers for analysis
and

6
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comparison to the Company's budgets. The Company closely monitors sales, costs
of sales, labor and restaurant trends. Weekly sales data is used by management
to detect trends from location to location and negative trends are immediately
investigated and remedied where possible. The Company purchases food carefully
and, through tight controls, keeps food and beverage waste and theft to a
minimum. Management believes that its current systems are adequate for its
planned expansion strategy.

RESTAURANT SECURITY

The Company takes precautions to protect individual restaurant locations
against theft, robbery and other breaches of security through security
procedures and sophisticated alarm and surveillance systems. A component of
the Company's emphasis on restaurant security is the employment of a licensed
peace officer as Director of Security. The Director of Security, who reports
directly to the corporate office, supervises the installation and operation of
individual restaurant security systems and performs random security
inspections to monitor compliance with the Company's policies relating to
theft prevention, employee related security issues and restaurant facility
protection.

SERVICE MARKS

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

COMPETITION

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

INFORMATION AS TO CLASSES OF SIMILAR PRODUCTS OR SERVICES.

The Company operates in only one industry segment. All significant revenues
and pre-tax earnings relate to retail sales of food, beverages and
complementary retail goods to the general public through company-owned and
company-operated restaurants. The Company currently has no operations outside
the continental United States. However, Rainforest has franchise agreements
and/or ownership interests in ten restaurants outside the United States.

ITEM 2. PROPERTIES

RESTAURANT LOCATIONS

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

7
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

Class Action Litigation

Class action lawsuits were filed in June and July of 1999 against the
Company in the United States District Court for the Southern District of
Texas, Houston Division. These actions name the Company, all of its current
executive officers and directors, E.A. "Al" Jaksa, Jr. (a former executive
officer and director) and underwriters that participated in the Company's
offering of Common Stock in March 1998. Such lawsuits allege that the
defendants violated Federal securities laws during certain periods while
individually selling the Company's common stock. The plaintiffs in these
actions seek unspecified monetary damages. Although the ultimate outcome of
this matter cannot be determined at this time, the Company believes these
claims are without merit and intends to defend these claims vigorously.

General Litigation

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

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

There were no matters submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year ended December 31, 1999.

8
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PART II

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

PRICE RANGE OF COMMON STOCK

The Company effected its initial public offering of Common Stock on August
18, 1993, at a price to the public of $6.00 per share (adjusted for the
Company's 2-for-1 stock split effected in June 1995). The Common Stock traded
on the NASDAQ National Market from August 18, 1993 through December 13, 1999.
Effective December 14, 1999, the Company's common stock began trading on the
New York Stock Exchange under the symbol "LNY." As of February 28, 2000, there
were approximately 3,000 stockholders of record of the Common Stock.

The table below sets forth, for the periods indicated, the high and low sale
prices as reported on the NASDAQ National Market for the Common Stock from
January 1, 1998, through December 13, 1999, and as reported on the New York
Stock Exchange beginning December 14, 1999.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1998
First Quarter............................................... $31.69 $21.25
Second Quarter.............................................. 31.13 16.50
Third Quarter............................................... 19.00 6.56
Fourth Quarter.............................................. 9.50 5.19
1999
First Quarter............................................... $ 8.06 $ 4.66
Second Quarter.............................................. 10.88 6.06
Third Quarter............................................... 9.00 6.75
Fourth Quarter.............................................. 9.50 7.88
2000
First Quarter (through February 28, 2000)................... $10.13 $ 6.50
</TABLE>

DIVIDEND POLICY

During the fourth quarter of 1999, the Company's Board of Directors
authorized an annual $0.10 per share dividend, to be declared and paid
quarterly with anticipation that such dividends would be declared commencing
in 2000 and thereafter. The actual declaration and payment of cash dividends,
commencing in 2000, will depend upon the Company's actual earnings levels,
capital requirements, financial condition, and other factors deemed relevant
by the Board of Directors. Pursuant to the Company's revolving credit facility
with a group of banks headed by Bank of America, the Company is restricted
from paying cash dividends in an amount not to exceed 15% of the Company's net
income for the previous fiscal year.The Company's revolving credit facility is
being renegotiated.

STOCK REPURCHASE

On November 19, 1998, the Company announced the authorization of an open
market stock buy back program. This program, which continued until December
31, 1999, resulted in the Company repurchasing approximately 6,400,000 shares
of Common Stock for approximately $53,000,000.

9
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

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

SELECTED CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995(1) 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues:
Restaurant............. $149,737 $232,597 $311,673 $399,548 $438,986
Processing plant....... 7,883 3,510 -- -- --
-------- -------- -------- -------- --------
Total revenues....... $157,620 $236,107 $311,673 $399,548 $438,986
Operating costs and
expenses:
Cost of sales.......... 47,978 72,304 95,639 121,082 136,321
Restaurant labor....... 38,595 60,249 80,837 107,976 125,566
Other restaurant
operating expenses.... 31,662 51,077 66,227 86,319 101,563
General and
administrative
expenses.............. 8,437 9,447 10,517 15,222 21,354
Depreciation and
amortization.......... 7,817 12,978 17,080 18,687 22,230
Restaurant pre-opening
expenses.............. -- -- -- 10,439(3) 3,764
Store closings and
special charges....... -- -- -- 37,632(4) 2,945(5)
Merger costs........... -- 25,971(2) -- -- --
Processing plant cost
of sales and
operating expenses.... 7,686 3,857 -- -- --
-------- -------- -------- -------- --------
Total operating costs
and expenses........ 142,175 235,883 270,300 397,357 413,743
Operating income........ 15,445 224(2) 41,373 2,191 25,243
Other (income) expense:
Interest (income)
expense, net.......... (1,604) (2,379) (1,063) (1,625) 1,965
Other, net............. 55 318 (394) (843) (178)
-------- -------- -------- -------- --------
Total other (income)
expense............. (1,549) (2,061) (1,457) (2,468) 1,787
Income before income
taxes and cumulative
effect of accounting
change................. 16,994 2,285(2) 42,830 4,659 23,456
Provision for income
taxes.................. 5,946 779 15,400 1,607 8,080
-------- -------- -------- -------- --------
Income before cumulative
effect of accounting
change................. 11,048 1,506(2) 27,430 3,052 15,376
Cumulative effect of
accounting change, net
of tax................. -- -- -- 3,382(3) --
-------- -------- -------- -------- --------
Net income (loss)....... $ 11,048 $ 1,506(2) $ 27,430 $ (330) $ 15,376
======== ======== ======== ======== ========
Net income before
special charges, merger
costs and accounting
change................. 11,048 18,647 27,430 27,701 17,305
======== ======== ======== ======== ========
Earnings (loss) per
share information:
Basic
Net income before
cumulative effect of
accounting change..... $ 0.58 $ 0.06 $ 1.07 $ 0.10 $ 0.58
Cumulative effect of
accounting change,
net of tax............ -- -- -- (0.11) --
-------- -------- -------- -------- --------
Net income (loss)...... $ 0.58 $ 0.06(2) $ 1.07 $ (0.01) $ 0.58
======== ======== ======== ======== ========
Net income before
special charges, merger
costs and accounting
change................. 0.58 0.80 1.07 0.94 0.65
======== ======== ======== ======== ========
Weighted average
number of common
shares outstanding.... 19,051 23,360 25,518 29,400 26,675

Diluted
Net income before
cumulative effect of
accounting change..... $ 0.57 $ 0.06 $ 1.03 $ 0.10 $ 0.57
Cumulative effect of
accounting change,
net of tax............ -- -- -- (0.11) --
-------- -------- -------- -------- --------
Net income (loss)...... $ 0.57 $ 0.06(2) $ 1.03 $ (0.01) $ 0.57
======== ======== ======== ======== ========
Net income before
special charges, merger
costs and accounting
change................. 0.57 0.77 1.03 0.93 0.64
======== ======== ======== ======== ========
Weighted average
number of common
shares and
common share
equivalents
outstanding........... 19,300 24,100 26,600 29,900 27,025
BALANCE SHEET DATA (AT
END OF PERIOD)
Working capital......... $ 11,279 $ 64,377 $ 35,058 $ 43,960 $(50,570)(6)
Total assets............ 187,866 281,199 382,281 489,949 496,726
Short-term notes payable
and current portion of
long-term notes and
other obligations...... 2,677 492 72 82 68,093(6)
Long-term notes and
other obligations,
noncurrent............. 16,204 221 50,235 35,153 60
Stockholders' equity.... $144,791 $256,447 $296,738 $408,672 $377,348
</TABLE>

- --------
(1) On August 9, 1996, the Company acquired Bayport Restaurant Group, Inc.
("Bayport") pursuant to a merger transaction (the "Bayport Merger"). The
Bayport Merger was accounted for as a pooling of interests and,
accordingly, the consolidated financial statements of the Company include
the accounts and operations of Bayport for all periods represented.
(2) In connection with the Bayport Merger, the Company incurred certain merger
costs. Without giving effect to such merger costs, the Company's income
before income taxes, net income, and net income per share (diluted) would
have been approximately $28,257, $18,000 and $0.75, respectively.

10
<PAGE>

(3) During 1998, the Company early adopted Statement of Position 98-5
"Reporting on the Costs of Start-Up Activities", requiring the expensing
of pre-opening costs as incurred. Additionally, net pre-opening costs
capitalized at December 31, 1997 were required to be expensed effective
January 1, 1998 as a cumulative effect of a change in accounting
principle. The Company had previously capitalized pre-opening costs and
amortized such costs over the first 12 months the applicable restaurants
were open. Pre-opening amortization expense was approximately $1,956,
$3,244 and $4,667 in 1995, 1996 and 1997, respectively.
(4) The Company incurred $37,632 in store closings and special charges in the
fourth quarter of 1998. These charges provided an estimated income tax
benefit of $13,000. These charges were the result of the Company's
decision during the fourth quarter of 1998 to close eleven underperforming
restaurants, the Company's decision not to renew a restaurant lease upon
option renewal and changes in the Company's strategic growth plan.
(5) The Company incurred $2,945 in store closings and special charges during
1999. The charges were the net result of $3,675 in transaction costs as
the result of a terminated merger agreement during the first quarter of
1999 and the reversal of an accrual (income) of $730,000 related to
favorably settling lease terminations during the second quarter of 1999.
(6) The Company's line of credit matures in June 2000 and is therefore
classified as a current liability. The Company is currently in the process
of negotiating a new credit facility. The negotiations are proceeding
according to schedule and the Company expects the new credit facility to
be in place during the second quarter of 2000.

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

INTRODUCTION

The Company owns and operates full-service, casual dining seafood
restaurants. As of February 29, 2000, the Company operated approximately 152
restaurants. In addition, the Company operates three limited menu take-out
service units.

On February 9, 2000, the Company announced it had entered into an agreement
to acquire all of the outstanding shares of Rainforest Cafe, Inc.
(Rainforest). Rainforest operates 28 restaurants in the United States and has
franchise agreements and/or ownership interest in 10 restaurants outside the
United States. Consummation of the transaction is subject to a number of
conditions, including approval by the shareholders of Rainforest.

In the fourth quarter of 1998, the Company decided to close eleven
underperforming restaurants, eight of which were closed in 1998, and three of
which were closed in 1999. Store closing costs related to the write-down of
associated property and equipment to estimated realizable value, and
anticipated costs to be incurred related to lease terminations and employee
severance were recorded during the fourth quarter of 1998. In addition, the
Company reevaluated its strategic growth plan which reduced future unit growth
and abandoned numerous potential restaurant sites. These strategic changes
resulted in a reduction in employees, the sale of a duplicate corporate asset
and the abandonment of a strategic corporate transaction. The Company incurred
a fourth quarter 1998 charge that aggregated $37,600,000 related to all such
activities. During the second quarter of 1999, the Company concluded its
negotiations on certain restaurants included in the fourth quarter special
charge on a favorable basis compared to amounts previously accrued. As a
result, the Company recognized a $730,000 special credit during the three
months ended June 30, 1999. The Company is in the process of selling its
leasehold interests and terminating associated lease obligations for the
remaining restaurants. In January 2000, an additional property was exited at
terms approximating estimated amounts.

Store closing and special charges and credits include management's estimate
of costs which will be incurred in future periods based on various factors.
Such factors could change, resulting in additional costs or credits in future
periods. The net realizable value of the property held for sale, of
approximately $2,758,000 is included in other current assets at December 31,
1999.

From time to time one or more of the Company's restaurants may be
temporarily closed for remodeling and conversion to one of the Company's other
restaurant concepts in order to improve the consumer appeal.

The Company's operations may be impacted by changes in federal and state
taxes and other federal and state governmental policies which include many
possible factors such as the level of minimum wages, the deductibility of
business and entertainment expenses, levels of disposable income and national
and regional economic growth.

11
<PAGE>

The restaurant industry is intensely competitive and is affected by changes
in consumer tastes and by national, regional, and local economic conditions
and demographic trends. The performance of individual restaurants may be
affected by factors such as traffic patterns, demographic considerations,
weather conditions, and the type, number, and location of competing
restaurants. The Company has many well established competitors with greater
financial resources and longer histories of operation than the Company,
including competitors already established in regions where the Company is
planning to expand, as well as competitors planning to expand in the same
regions. The Company faces significant competition from mid-priced, full-
service, casual dining restaurants offering seafood and other types and
varieties of cuisine. The Company's competitors include national, regional,
and local chains as well as local owner-operated restaurants. The Company also
competes with other restaurants and retail establishments for restaurant
sites.

RESULTS OF OPERATIONS

Restaurant Profitability

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

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Restaurant revenues.................................. 100.0% 100.0% 100.0%
Restaurant cost of sales............................. 30.7 30.3 31.1
Restaurant labor..................................... 25.9 27.0 28.6
Other restaurant operating expenses (1).............. 21.2 21.6 23.1
----- ----- -----
Restaurant level profit (1).......................... 22.2% 21.1% 17.2%
===== ===== =====
</TABLE>
- --------
(1) Excludes depreciation, amortization and pre-opening expenses.

12
<PAGE>

Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998

Revenues increased $39,438,160, or 9.9%, from $399,548,083 to $438,986,243
for the year ended December 31, 1999, compared to the year ended December 31,
1998. The increase in revenues was primarily attributable to revenues from new
restaurant openings and increases in the Company's unit average weekly sales.
During the first quarter of 1999, the Company implemented a new menu for the
Joe's Crab Shack restaurants, a new manager bonus plan, and a new advertising
and marketing campaign. These programs created positive revenue growth. Same
store sales for the twelve months ended December 31, 1999 were up
approximately 3.6% from the same period in 1998. Average weekly sales for all
stores for the twelve months ended December 31, 1999 increased 2.8%, with
increases recorded in the second, third and fourth quarters of 1999,
offsetting a decline in the first quarter of 1999.

As a primary result of increased revenues, cost of sales increased
$15,239,784, or 12.6%, from $121,081,247 to $136,321,031 in the year ended
December 31, 1999, compared to the prior year. Cost of sales as a percentage
of revenues for the year ended December 31, 1999 increased to 31.1%, from
30.3% in 1998. The increase in cost of sales as a percentage of revenues
primarily reflects menu changes, reduced menu pricing in certain markets, and
higher product costs in 1999 as compared to 1998.

Restaurant labor expenses increased $17,590,047, or 16.3%, from $107,976,294
to $125,566,341 in the year ended December 31, 1999, compared to the same
period in the prior year. Restaurant labor expenses as a percentage of
revenues for the twelve months ended December 31, 1999 increased to 28.6% from
27% in 1998. In connection with the new menu roll-out and a new advertising
and promotional campaign, the Company increased staffing levels and
implemented additional training programs. In addition, to counteract what the
Company believed to be higher general manager turnover than historically
experienced, the Company raised the base salary of substantially all of its
general managers by approximately $10,000 a person during the fourth quarter
of 1998.

Other restaurant operating expenses increased $15,243,653, or 17.7%, from
$86,319,234 to $101,562,887 in the year ended December 31, 1999, compared to
the same period in the prior year, principally as a result of increased
revenues. Such expenses increased as a percentage of revenues to 23.1% in 1999
from 21.6% in 1998, as a primary result of increased advertising, marketing,
insurance, customer relations expenses, and the costs of the new menu roll-
out. The Company anticipates advertising and marketing expenses to increase as
a percentage of revenues into 2000.

Depreciation and amortization expense increased $3,543,254, or 19%, from
$18,686,508 to $22,229,762 in the year ended December 31, 1999, compared to
the year ended December 31, 1998. The dollar increase was primarily due to the
addition of new restaurants and purchases of new equipment.

General and administrative expenses increased $6,131,226, or 40.3%, from
$15,222,384 to $21,353,610 in the year ended December 31, 1999, compared to
the prior year, and increased as a percentage of revenues to 4.9% from 3.8%.
The dollar increase resulted primarily from increased personnel, particularly
field operations support staff, salaries and travel to support the Company's
operations. The Company expects that the future rate of increase of general
and administrative expenses will moderate in comparison to revenue increases.

The increase in net interest expense in the twelve months ended December 31,
1999, as compared to the same period in the prior year, is primarily
attributable to increased borrowings for capital expenditures, working capital
and treasury stock purchases, and increases in the weighted average borrowing
rates under the Company's revolving credit facility. The change in other
income was not deemed significant.

Provision for income taxes increased by $6,472,978 from $1,607,254 in 1998
to $8,080,232 in 1999 primarily due to the change in the Company's income. The
provision for income taxes as a percentage of income before income taxes
remained consistent at 34.5%.

13
<PAGE>

For the twelve months ended December 31, 1999 store closings and special
charges of $2,945,000 represents the net of a $730,000 reversal (income) of
estimated costs relating to favorably settling lease obligations of certain
closed stores recorded during the second quarter of 1999 and $3,675,000 of
expenses incurred related to an abandoned merger transaction during the first
quarter of 1999.

Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997

Revenues increased $87,875,526, or 28.2%, from $311,672,557 to $399,548,083
for the year ended December 31, 1998, compared to the year ended December 31,
1997. The increase in revenues was attributable to revenues from new
restaurant openings. The Company believes than an unseasonably mild winter had
a positive impact on first quarter sales. However, the same store sales of
restaurants open 18 months or more, while relatively flat for the first
quarter, declined 6% in the second quarter, 9% in the third quarter, and 3% in
the fourth quarter. These declines were believed to be caused primarily by,
(i) the extreme heat throughout the South and Southwest, (ii) the Company's
decision to add new units (i.e. back fill) in existing markets, (iii) newer
units entering the same store sales base that are continuing to fall from
their initial or honeymoon sales amounts, and (iv) a relatively large number
of tropical storms affecting the Company's restaurant sales in the third
quarter.

As a primary result of increased revenues, cost of sales increased
$25,441,811, or 26.6%, from $95,639,436 to $121,081,247 in the year ended
December 31, 1998, compared to the prior year. Cost of sales as a percentage
of revenues for the year ended December 31, 1998 decreased to 30.3%, from
30.7% in 1997. The decrease in cost of sales as a percentage of revenues
reflects improved vendor pricing and good inventory management controls in
1998.

Restaurant labor expenses increased $27,139,240, or 33.6%, from $80,837,054
to $107,976,294 in the year ended December 31, 1998, compared to the same
period in the prior year. Restaurant labor expenses as a percentage of
revenues for the year ended December 31, 1998 increased 1.1% from 25.9% to
27.0%. The Company continues to experience labor cost pressures attributable
in part to increases in federally mandated minimum wages and the tightening of
the restaurant manager job market. In addition, to counteract what the Company
believed to be higher general manager turnover than normally experienced by
the Company, the Company raised the base salary of substantially all of its
general managers by approximately $10,000 a person during the fourth quarter
of 1998.

Other restaurant operating expenses increased $20,092,030, or 30.3%, from
$66,227,204 to $86,319,234 in the year ended December 31, 1998, compared to
the same period in the prior year, as a result of increased revenues and the
opening of new restaurants since December 31, 1997. Such expenses increased
0.4% as a percentage of revenues to 21.6% from 21.2% in 1997.

14
<PAGE>

During 1998 the Company elected to adopt the American Institute of Certified
Public Accountants Statement of Position 98-5 "Reporting on the Costs of
Start-Up Activities (SOP 98-5)." This new accounting standard requires
companies to expense pre-opening costs as incurred and to expense previously
capitalized pre-opening costs as a cumulative effect of change in accounting
principle. As a result of the early adoption of SOP 98-5, the Company expensed
$5,162,500 of net pre-opening costs previously capitalized as of December 31,
1997, effective January 1, 1998. The expense of $5,162,500 is recorded net of
a tax benefit of $1,781,000 as a Cumulative Effect of Change in Accounting
Principle in the amount of $3,381,500. Additionally, in connection with the
adoption of SOP 98-5, the Company expensed $10,439,229 of restaurant pre-
opening costs as incurred during 1998. Prior to the adoption of SOP 98-5, the
Company capitalized pre-opening costs and amortized such costs over the first
twelve months the applicable restaurant was open. Following is a summary of
the results of operations as previously reported and as restated to reflect
the adoption of SOP 98-5. All numbers are in thousands, except per share data:

<TABLE>
<CAPTION>
PREVIOUSLY
3 months ended: REPORTED RESTATED
--------------- ---------- --------
<S> <C> <C>
March 31, 1998
Operating income...................................... $11,347 $11,507
Net income before cumulative effect of change in
accounting principle................................. 7,751 7,854
Net income............................................ 7,751 4,473
EPS
--Basic (before cumulative effect of accounting
change)............................................. $ 0.29 $ 0.29
--Basic (after cumulative effect of accounting
change)............................................. $ 0.29 $ 0.17
--Diluted (before cumulative effect of accounting
change)............................................. $ 0.28 $ 0.28
--Diluted (after cumulative effect of accounting
change)............................................. $ 0.28 $ 0.16
June 30, 1998
Operating income...................................... $17,060 $16,191
Net income............................................ 11,644 11,075
EPS--basic............................................ $ 0.38 $ 0.37
EPS--diluted.......................................... $ 0.38 $ 0.36
September 30, 1998
Operating income...................................... $11,463 $11,072
Net income............................................ 7,588 7,332
EPS--basic............................................ $ 0.25 $ 0.24
EPS--diluted.......................................... $ 0.25 $ 0.24
</TABLE>

Depreciation and amortization expense for amounts other than pre-opening
expense increased $6,274,204, or 50.5%, from $12,412,304 to $18,686,508 in the
year ended December 31, 1998, compared to the year ended December 31, 1997.
The dollar increase was primarily due to the addition of new restaurants and
purchases of new equipment. Depreciation and amortization as a percentage of
revenues for the year ended December 31, 1998 increased to 4.7% from 3.9%.

Pre-opening amortization expense in 1997 was $4,667,078. In 1998, the
Company expensed pre-opening expenses as incurred due to the adoption of
Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities."
The Company incurred $10,439,229 in pre-opening expenses in 1998 and
$3,764,000 during 1999.

15
<PAGE>

The Company incurred $37,632,000 in store closing and special charges in the
fourth quarter of 1998. These charges provided an estimated income tax benefit
of $13,000,000. These expenses were the result of the Company's decision in
the fourth quarter of 1998 to close eleven under-performing restaurants, eight
of which were closed in 1998 and three of which were closed in 1999, the
Company's decision not to renew a restaurant lease upon option renewal and
changes in the Company's strategic growth plan. The store closings and special
charges consist of the following items:

<TABLE>
<CAPTION>
CHARGE IN
4TH
QUARTER
1998
-----------
<S> <C>
Closure of restaurants and decision not to renew lease:
Write down of property, equipment, leasehold interests and other
assets to estimated net realizable value........................ $25,815,000
Estimated lease termination costs and employee severance on
closed restaurants.............................................. 7,634,000
Charges associated with the changes in the Company's strategic
growth plan:
Abandonment of restaurant development sites and Company plans to
build a stand- alone office complex in Houston, Texas........... 2,910,000
Employee severance and separation costs related to a reduction in
future restaurant unit growth................................... 303,000
Loss on sale of a duplicate corporate asset...................... 400,000
Costs associated with abandoned corporate transaction............ 570,000
-----------
Total.......................................................... $37,632,000
===========
</TABLE>

Store closing and special charges include management's estimate of costs
which will be incurred in future periods based on various factors. Such
factors could change resulting in additional costs in future periods. The
Company expects the majority of cash payments to occur through 1999. The net
realizable value of the property, equipment and leasehold interests held for
sale, of approximately $3,443,000, is included in other current assets at
December 31, 1998.

General and administrative expenses increased $4,705,891, or 44.7%, from
$10,516,493 to $15,222,384 in the year ended December 31, 1998, compared to
the prior year, and increased as a percentage of revenues to 3.8% from 3.4%.
The dollar increase resulted primarily from increased personnel, salaries and
travel to support the Company's expansion during 1998.

The increase in net interest income of $562,152 and the increase in other
income of $449,119 in the year ended December 31, 1998, as compared to the
prior year, was not deemed significant.

Provision for income taxes decreased by $13,792,377 from $15,399,631 in 1997
to $1,607,254 in 1998 primarily due to the change in the Company's income. The
provision for income taxes as a percentage of income before income taxes
decreased to 34.5% from 36% due to the effect of FICA tax tip credits on
reducing the Company's effective tax rate.

Liquidity and Capital Resources

For the year ended December 31, 1999, the capital expenditures of the
Company were approximately $55,000,000, and the Company purchased $53,000,000
of common stock funded out of existing cash balances, proceeds from stock
offerings, cash flow from operations and borrowings. All of the purchased
common stock have been accounted for as treasury shares.

The Company has a $110,000,000 line of credit from a syndicate of banks
which expires in June 2000. The line of credit is available for expansion,
acquisitions and general corporate purposes. At December 31, 1999, the Company
had $68,000,000 outstanding under this credit facility at an approximate
interest rate of 8.59% and had cash and cash equivalent balances aggregating
approximately $23,000,000. The Company is currently in the process of
negotiating a new credit facility. The negotiations are proceeding according
to schedule and the Company expects the new credit facility to be in place
during the second quarter of 2000.

16
<PAGE>

The Company's current development plans are to open up to 15 to 16
restaurants during each of 2000 and 2001.

During late 1998, the Company completed the majority of construction on a
development plan for a waterfront area south of Houston (the "Kemah
Boardwalk"). The Kemah Boardwalk includes restaurants, entertainment venues,
retail shops, a marina and a hotel. The Company may, from time to time, review
opportunities for investment in the hospitality, entertainment and food
service management industries, and may increase or expand its investment and
operations in the Kemah Boardwalk.

Due to the Company's growth and increasing office space needs, the Company
is in the process of constructing a multistory office building to house the
Company's corporate headquarters, meeting and training facilities and a
research and development test kitchen. Capital expenditures related to the
office building are anticipated to be $12,000,000.

Exclusive of any acquisitions or large real estate purchases, the Company
currently expects to incur capital expenditures of up to $50,000,000 in 2000
and 2001 (based upon approximately 12 to 15 new restaurants in each year),
depending upon the actual number and timing of restaurant construction, the
number of land purchases, the amount of expenditures spent on conversions,
remodels, and the mix of leased, owned or conversion type locations. The
Company expects that its average per unit investment, excluding real estate
costs, capitalized interest costs and pre-opening expenses, will approximate
$2.2 million. However, individual unit investment costs can vary from
management's expectations due to a variety of factors. Moreover, average unit
investment costs are dependent upon many factors, including competition for
sites, location, construction costs, unit size and the mix of conversions,
build-to-suit, leased and fee-owned locations.

During the fourth quarter of 1999, the Company's Board of Directors
authorized an annual $0.10 per share dividend, to be declared and paid
quarterly with anticipation that such dividends would be declared commencing
in 2000 and thereafter. The actual declaration and payment of cash dividends,
commencing in 2000, will depend upon the Company's actual earnings levels,
capital requirements, financial condition, and other factors deemed relevant
by the Board of Directors. Pursuant to the Company's revolving credit facility
with a group of banks headed by Bank of America, the Company is restricted
from paying cash dividends in an amount not to exceed 15% of the Company's net
income for the previous fiscal year. The Company's revolving credit facility
is being renegotiated.

In March 1998, the Company completed a public offering of 3,810,950 shares
of the Company's common stock. Net proceeds of the common stock offering of
approximately $102 million have been used to repay outstanding bank loans,
finance expansion and for general corporate purposes.

On February 9, 2000 the Company announced the signing of a definitive merger
agreement to acquire Rainforest Cafe, Inc. (Rainforest) for approximately
$125,000,000, to be paid in a combination of common stock (65%) and cash (35%)
funded by existing working capital of both Landry's and Rainforest and the
line of credit facility. The proposed acquisition will be subject to the
purchase method of accounting and is expected to close in May 2000.
Consummation of the transaction is subject to a number of conditions,
including approval by the stockholders of Rainforest.

Seasonality and Quarterly Results

The Company's business is seasonal in nature, with revenues and, to a
greater degree, operating profits being lower in the first and fourth quarters
than in other quarters due to the Company's reduced winter volumes. The
Company has and continues to open restaurants in highly seasonal tourist
markets and has further noted that the Joe's Crab Shack concept restaurants
tend to experience even greater seasonality and sensitivity to weather than
the Company's other restaurant concepts. During the Company's 1998 third
quarter, the Company's restaurant operations, revenues and profitability were
negatively affected by a series of four tropical storms in the Gulf Coast and
Mid-Atlantic areas of the United States. The timing of unit openings can and
will affect quarterly results. The Company anticipates a decline in revenues
from the initial ("honeymoon") volumes of new units.

17
<PAGE>

Impact of Inflation

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

Year 2000 Date Conversion

The Company has not experienced any significant Year 2000 software failures.
The amount charged to expense during the twelve months ended December 31,
1999, as well as the amounts anticipated to be charged to expense related to
the Year 2000 computer compliance modifications, have been negligible and are
not expected to be material to the Company's financial position, results of
operations or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk primarily related to potential adverse
changes in interest rates as discussed below. Management is actively involved
in monitoring exposure to market risk and continues to develop and utilize
appropriate risk management techniques. The Company is not exposed to any
other significant risks from the use of derivative financial instruments.
Management does not use derivative financial instruments for trading or to
speculate on changes in interest rates or commodity prices.

Interest Rate Risk

Total debt at December 31, 1999, included $68,000,000 of floating-rate debt
attributed to bank credit facility borrowings at an average interest rate of
8.59%. As a result, the Company's annual interest cost in 1999 will fluctuate
based on short-term interest rates. The impact on annual cash flow of a ten
percent change in the floating rate (approximately 85 basis points) would be
approximately $580,000 annually based on the floating-rate debt outstanding at
December 31, 1999.

At December 31, 1999, the Company's floating-rate debt had a book value and
a fair market value of $68,000,000. The floating-rate debt will mature in June
2000 and the Company is currently in the process of negotiating a new
floating-rate debt facility.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements are set forth herein commencing on page 21.

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

During the fiscal years 1997, 1998, and 1999 and through the date of this
report, there have been no changes in the Company's independent public
accountants, nor have any disagreements with such accountants or reportable
events occurred.

18
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information relating to directors and executive officers of the
Company is incorporated by reference herein from the Company's definitive
Proxy Statement in connection with its Annual Meeting of Stockholders, which
proxy statement will be filed with the Securities and Exchange Commission not
later than 120 days after the close of the Company's fiscal year ended
December 31, 1999.

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

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

(a) 1.Financial Statements

The following financial statements of the Company are set forth herein
commencing on page 20:

--Report of Independent Public Accountants
--Consolidated Balance Sheets as of December 31, 1999 and 1998
--Consolidated Statements of Income (Loss) for the years ended
December 31, 1999, 1998 and 1997
--Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997
--Consolidated Statements of Cash Flows for the years ended December
31, 1999, 1998 and 1997
--Notes to Consolidated Financial Statements

2.Financial Statement Schedules--Not applicable.

(b)Reports on Form 8-K
--No reports on Form 8-K were filed during the fourth quarter of 1999.

(c)Exhibits

--All exhibits required by Item 601 of Regulation S-K are listed in
the accompanying "Exhibit Index" which immediately precedes such
exhibits, and is incorporated herein by reference.

19
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Landry's Seafood Restaurants, Inc.:

We have audited the accompanying consolidated balance sheets of Landry's
Seafood Restaurants, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of income
(loss), stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Landry's Seafood Restaurants,
Inc., and subsidiaries as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.

Arthur Andersen LLP

Houston, Texas
February 10, 2000

20
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 22,977,666 $ 35,183,405
Accounts receivable--trade and other............... 7,065,298 13,678,197
Deferred tax assets................................ 1,228,000 2,330,000
Inventory.......................................... 18,409,523 22,839,020
Other current assets............................... 9,030,086 10,816,686
------------ ------------
Total current assets............................. 58,710,573 84,847,308
------------ ------------
PROPERTY AND EQUIPMENT, net.......................... 431,378,855 398,568,419
GOODWILL, net of accumulated amortization of
$1,386,000 and $1,249,000, respectively............. 2,707,988 2,844,542
OTHER ASSETS, net.................................... 3,928,436 3,688,971
------------ ------------
Total assets..................................... $496,725,852 $489,949,240
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................... $ 21,416,112 $ 21,216,470
Accrued liabilities................................ 19,772,136 19,588,812
Current portion of long-term notes and other
obligations....................................... 68,092,714 81,672
------------ ------------
Total current liabilities........................ 109,280,962 40,886,954
------------ ------------
LONG-TERM NOTES AND OTHER OBLIGATIONS, NET OF CURRENT
PORTION............................................. 60,166 35,153,100
DEFERRED INCOME TAXES AND OTHER LIABILITIES.......... 10,036,686 5,237,111
------------ ------------
Total liabilities................................ 119,377,814 81,277,165
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $0.01 par value, 60,000,000 shares
authorized, 24,823,125 and 30,345,290 issued and
outstanding, respectively......................... 248,231 303,453
Additional paid-in capital......................... 322,605,100 363,156,349
Retained earnings.................................. 54,494,707 45,212,273
------------ ------------
Total stockholders' equity....................... 377,348,038 408,672,075
------------ ------------
Total liabilities and stockholders' equity....... $496,725,852 $489,949,240
============ ============
</TABLE>

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

21
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $438,986,243 $399,548,083 $311,672,557
OPERATING COSTS AND EXPENSES:
Cost of revenues................... 136,321,031 121,081,247 95,639,436
Restaurant labor................... 125,566,341 107,976,294 80,837,054
Other restaurant operating
expenses.......................... 101,562,887 86,319,234 66,227,204
General and administrative
expenses.......................... 21,353,610 15,222,384 10,516,493
Depreciation and amortization...... 22,229,762 18,686,508 17,079,382
Restaurant pre-opening expenses.... 3,764,389 10,439,229 --
Store closings and special
charges........................... 2,945,000 37,631,969 --
------------ ------------ ------------
Total operating costs and
expenses......................... 413,743,020 397,356,865 270,299,569
OPERATING INCOME..................... 25,243,223 2,191,218 41,372,988
OTHER (INCOME) EXPENSE:
Interest (income) expense, net..... 1,964,969 (1,624,569) (1,062,417)
Other, net......................... (177,711) (843,389) (394,270)
------------ ------------ ------------
1,787,258 (2,467,958) (1,456,687)
INCOME BEFORE INCOME TAXES &
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE ............... 23,455,965 4,659,176 42,829,675
PROVISION FOR INCOME TAXES........... 8,080,232 1,607,254 15,399,631
------------ ------------ ------------
NET INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE... 15,375,733 3,051,922 27,430,044
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAX.... -- 3,381,500 --
------------ ------------ ------------
NET INCOME (LOSS).................... $ 15,375,733 $ (329,578) $ 27,430,044
============ ============ ============

EARNINGS (LOSS) PER SHARE
INFORMATION:
BASIC
Net income before cumulative effect
of accounting change.............. $ 0.58 $ 0.10 $ 1.07
Cumulative effect of accounting
change............................ -- (0.11) --
------------ ------------ ------------
Net income (loss).................. $ 0.58 $ (0.01) $ 1.07
============ ============ ============
Weighted average number of common
shares outstanding................ 26,675,000 29,400,000 25,518,000
DILUTED
Net income before cumulative effect
of accounting change.............. $ 0.57 $ 0.10 $ 1.03
Cumulative effect of accounting
change............................ -- (0.11) --
------------ ------------ ------------
Net income (loss).................. $ 0.57 $ (0.01) $ 1.03
============ ============ ============
Weighted average number of common
and common share equivalents
outstanding....................... 27,025,000 29,900,000 26,600,000
</TABLE>

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

22
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Preferred
Stock Common Stock Additional
--------------- -------------------- Paid-In Retained
Shares Amount Shares Amount Capital Earnings Total
------- ------ ---------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1996................... 28,398 $ 284 25,225,356 $252,253 $238,083,067 $18,111,807 $256,447,411
------- ----- ---------- -------- ------------ ----------- ------------
Net income............. -- -- -- -- -- 27,430,044 27,430,044
Conversion of preferred
stock................. (25,696) (257) 25,696 257 -- -- --
Exercises of stock
options and income tax
benefit............... -- -- 753,397 7,534 12,852,738 -- 12,860,272
------- ----- ---------- -------- ------------ ----------- ------------
BALANCE, December 31,
1997................... 2,702 27 26,004,449 260,044 250,935,805 45,541,851 296,737,727
------- ----- ---------- -------- ------------ ----------- ------------
Net loss............... -- -- -- -- -- (329,578) (329,578)
Conversion of preferred
stock................. (2,702) (27) 2,702 27 -- -- --
Issuance of common
stock, net of offering
costs................. -- -- 3,810,950 38,110 102,273,091 -- 102,311,201
Exercises of stock
options and income tax
benefit............... -- -- 527,189 5,272 9,947,453 -- 9,952,725
------- ----- ---------- -------- ------------ ----------- ------------
BALANCE, December 31,
1998................... -- -- 30,345,290 303,453 363,156,349 45,212,273 408,672,075
------- ----- ---------- -------- ------------ ----------- ------------
Net income............. -- -- -- -- -- 15,375,733 15,375,733
Exercises of stock
options and income tax
benefit............... -- -- 900,000 9,000 6,294,105 -- 6,303,105
Purchase of common
stock held for
treasury.............. -- -- (6,422,165) (64,222) (46,845,354) (6,093,299) (53,002,875)
------- ----- ---------- -------- ------------ ----------- ------------
BALANCE, December 31,
1999................... -- -- 24,823,125 $248,231 $322,605,100 $54,494,707 $377,348,038
======= ===== ========== ======== ============ =========== ============
</TABLE>

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

23
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss).................. $ 15,375,733 $ (329,578) $ 27,430,044
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Store closings and special
charges.......................... (730,000) 25,362,773 --
Gain on sales of assets........... (287,894) -- --
Cumulative effect of change in
accounting principle............. -- 5,162,500 --
Gain on involuntary conversion of
assets........................... (491,477) (1,229,043) --
Depreciation and amortization..... 22,229,762 18,686,508 17,079,382
Changes in assets and liabilities:
(Increase) decrease in trade and
other receivables............... 6,612,899 (5,296,232) 2,193,909
(Increase) decrease in
inventory....................... 4,429,497 5,385,531 (16,158,657)
(Increase) decrease in other
assets.......................... 2,147,994 586,569 (7,619,919)
Increase (decrease) in accounts
payable and accrued
liabilities..................... 6,815,646 11,475,059 13,890,995
------------ ------------ -------------
Total adjustments................. 40,726,427 60,133,665 9,385,710
------------ ------------ -------------
Net cash provided by operating
activities........................ 56,102,160 59,804,087 36,815,754
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property and equipment additions... (55,123,127) (137,950,072) (135,890,725)
Proceeds from sale of property and
equipment......................... 1,499,995 1,850,000 --
Other.............................. -- 52,986 (976,153)
------------ ------------ -------------
Net cash used in investing
activities...................... (53,623,132) (136,047,086) (136,866,878)

CASH FLOWS FROM FINANCING
ACTIVITIES:
Purchases of common stock.......... (53,002,875) -- --
Sale of common stock............... -- 102,294,532 --
Proceeds from exercise of stock
options........................... 5,400,000 6,969,317 10,182,106
Borrowings under notes payable..... 98,000,000 33,000,000 50,000,000
Payments on notes payable and other
obligations....................... (65,081,892) (48,071,575) (164,838)
------------ ------------ -------------
Net cash provided by (used in)
financing activities............ (14,684,767) 94,192,274 60,017,268

NET INCREASE (DECREASE) IN CASH..... (12,205,739) 17,949,275 (40,033,856)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR.................. 35,183,405 17,234,130 57,267,986
------------ ------------ -------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR............................... $ 22,977,666 $ 35,183,405 $ 17,234,130
============ ============ =============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest.......................... $ 4,093,000 $ 1,834,000 $ 775,000
Income taxes...................... $ 491,837 $ 2,074,000 $ 3,409,000
</TABLE>

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

24
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. PRINCIPLES OF CONSOLIDATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

INVENTORIES

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

PROPERTY AND EQUIPMENT

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

Interest is capitalized in connection with the construction and development
of new and converted restaurants. The capitalized interest is recorded as part
of the asset to which it relates and amortized over the asset's estimated
useful life. During 1999 and 1998, the Company capitalized approximately
$1,285,000 and $1,172,000, respectively, of interest costs.

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

<TABLE>
<CAPTION>
Years
----------------------------
<S> <C>
Buildings and improvements...................... 5-40
Furniture, fixtures and equipment............... 4-10
Leasehold improvements.......................... Shorter of 30 years
or lease term, including
extensions where appropriate
</TABLE>

PRE-OPENING COSTS

Pre-opening costs include the direct and incremental costs incurred in
connection with the commencement of each restaurant's operations, which are
substantially comprised of training-related costs. Prior to January 1, 1998
pre-opening costs had historically been capitalized and amortized using the
straight-line method over 12 months. During the fourth quarter of 1998, the
Company elected to adopt the American Institute of Certified Public
Accountants Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" (SOP 98-5). SOP 98-5 requires companies to expense pre-opening
costs as incurred and to expense previously capitalized pre-opening costs as a
cumulative effect of change in accounting principle. In connection with
Landry's early adoption of SOP 98-5 and the related requirements of SOP 98-5,
Landry's expensed $5,162,500 of pre-opening costs capitalized as of December
31, 1997, effective January 1, 1998 . The expense of $5,162,500 is recorded
net of a tax benefit of $1,781,000 as a Cumulative Effect of Change in
Accounting Principle in the amount of $3,381,500. Additionally, in connection
with the adoption of SOP 98-5, the Company expensed $10,439,000 of restaurant
pre-opening costs as incurred during 1998 and $3,764,000 during 1999.

25
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

DEVELOPMENT COSTS

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

GOODWILL

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

EARNINGS PER SHARE

Net income per common share has been computed in accordance with Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." Basic
EPS is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the year. Diluted EPS reflects the
potential dilution that could occur if contracts to issue common stock were
exercised or converted into common stock. For purposes of this calculation,
outstanding stock options are considered common stock equivalents using the
treasury stock method. Options to purchase approximately 1,314,000 shares have
been excluded from the calculation of diluted EPS as they are anti-dilutive.

CASH FLOW REPORTING

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

USE OF ESTIMATES

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

2. ACCOUNTS RECEIVABLE TRADE AND OTHER

Accounts receivable at December 31, 1998 included an estimated $6,100,000
recoverable from an insurance company related to property damage and business
interruption claims during 1998. Revenues for the year ended December 31, 1998
include an estimated $1,200,000, related to business interruption claims
during 1998. The property damage and business interruption claims relate to a
restaurant destroyed by fire in February 1998, and partial damage to six of
the Company's restaurants caused by Tropical Storm Frances hitting the Texas
Gulf Coast in September 1998. Such amounts were substantially collected during
1999. Other income for the year ended December 31, 1999 and 1998 includes a
gain on the involuntary conversion of assets of $491,477 and $1,229,043,
respectively, as a result of the restaurant fire.

26
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3.PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
Land............................................. $ 73,763,606 $ 70,493,425
Buildings and improvements....................... 113,262,222 92,698,313
Furniture, fixtures and equipment................ 121,972,834 103,047,261
Leasehold improvements........................... 180,791,359 158,770,549
Construction in progress......................... 7,986,135 18,713,281
------------ ------------
$497,776,156 $443,722,829
Less--accumulated depreciation................... (66,397,301) (45,154,410)
------------ ------------
Property and equipment, net...................... $431,378,855 $398,568,419
============ ============
</TABLE>

Other current assets at December 31, 1999 and 1998 includes approximately
$5,667,000 and $4,661,000 of land held for sale (see Note 9 and 10),
respectively. At December 31, 1998 other current assets also included
$3,443,000 of property, equipment and leasehold interests held for sale as a
result of the Company's decision to close certain underperforming restaurants
(see Note 9).

4.ACCRUED LIABILITIES

Accrued liabilities are comprised of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------
1999 1998
----------- -----------
<S> <C> <C>
Payroll and related costs........................... $ 4,145,220 $ 3,024,139
Taxes, other than payroll and income taxes.......... 6,294,954 5,146,592
Federal and state income taxes...................... 1,198,998 442,275
Store closings and special charges (Note 9)......... 1,705,027 7,513,001
Other............................................... 6,427,937 3,462,805
----------- -----------
$19,772,136 $19,588,812
=========== ===========
</TABLE>

5.DEBT

The Company has a $110,000,000 unsecured line of credit from a syndicate of
banks which matures in June 2000, and is available for expansion,
acquisitions, and other general corporate purposes. Amounts outstanding at
December 31, 1999 under the credit facility are classified as a current
liability. Interest on the credit facility is payable quarterly at the
Eurodollar rate plus 2.0% or the bank's base rate. The credit facility is
subject to certain financial covenants, including minimum tangible net worth,
a maximum leverage ratio and a minimum fixed charge coverage ratio. At
December 31, 1999, the Company had $68,000,000 outstanding under this credit
facility at an average interest rate of 8.59%. The Company is currently in the
process of negotiating a new credit facility. The negotiations are proceeding
according to schedule and the Company expects the new credit facility to be in
place during the second quarter of 2000.

Interest (income) expense, net includes the following:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1999 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
Interest expense....................... $2,696,606 $ 40,924 $ 55,082
Interest income........................ (731,637) (1,665,493) (1,117,499)
---------- ----------- -----------
$1,964,969 $(1,624,569) $(1,062,417)
========== =========== ===========
</TABLE>

27
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6.INCOME TAXES

An analysis of the provision for income taxes for the years ended December
31, 1999, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
Tax Provision (Benefit) on Income
Before Cumulative Effect of Change in
Accounting Principle:
Current income taxes................ $2,184,218 $ 5,350,808 $ 8,558,391
Deferred income taxes............... 5,896,014 (3,743,554) 6,841,240
---------- ----------- -----------
Total............................. 8,080,232 1,607,254 15,399,631
Tax Provision (Benefit) on Cumulative
Effect of Change in Accounting
Principle:
Deferred income taxes............... -- (1,781,000) --
---------- ----------- -----------
Total provision (benefit)......... $8,080,232 $ (173,746) $15,399,631
========== =========== ===========
</TABLE>

The Company's effective tax rate, for the years ended December 31, 1999,
1998 and 1997, differs from the federal statutory rate as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---- ----- ----
<S> <C> <C> <C>
Statutory rate........................................... 35.0% 35.0% 35.0%
FICA credit on tips...................................... (5.5) (25.4) (2.3)
State income/franchise tax, net of federal tax benefit... 0.9 9.5 1.2
Other.................................................... 4.1 15.4 2.1
---- ----- ----
34.5% 34.5% 36.0%
==== ===== ====
</TABLE>

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

<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Deferred Liabilities:
Current:
Other current items................................ $ -- $ 350,000
Non-current:
Property and equipment and other assets............ 15,517,000 9,227,000
----------- ----------
$15,517,000 $9,577,000
=========== ==========
Deferred Assets:
Current:
Accrued liabilities and other...................... $ 1,228,000 $2,680,000
Non-current:
AMT credit, FICA credit carryforward and other..... 5,080,000 3,026,000
Net operating loss carryforward.................... 400,000 961,000
----------- ----------
6,708,000 6,667,000
=========== ==========
</TABLE>

Accounts receivable includes income tax receivables of $2,075,000 as of
December 31, 1998.

28
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7.COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company has entered into lease commitments for restaurant facilities as
well as certain fixtures, equipment and leasehold improvements. Under most of
the facility lease agreements, the Company pays taxes, insurance and
maintenance costs in addition to the lease payments. Certain facility leases
also provide for additional contingent rentals based on a percentage of sales
in excess of a minimum amount. Rental expense under operating leases was
approximately $17,423,000, $17,010,000 and $13,212,000 during the years ended
December 31, 1999, 1998, and 1997, respectively.

The aggregate amounts of minimum operating lease commitments maturing in
each of the five years and thereafter subsequent to December 31, 1999, are as
follows:

<TABLE>
<S> <C>
2000............................................................ $ 14,058,000
2001............................................................ 13,916,000
2002............................................................ 13,896,000
2003............................................................ 13,383,000
2004............................................................ 13,139,000
Thereafter...................................................... 143,721,000
------------
Total minimum rentals......................................... $212,113,000
============
</TABLE>

Minimum lease commitments of approximately $4,869,695 related to the closed
stores (see Note 9) have been excluded from the above table. Estimated lease
costs until disposition related to these closed stores have been included as
an accrual in connection with the store closing and special charges (see Note
9).

LITIGATION AND CLAIMS

Class Action Litigation

General Litigation

29
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8.STOCKHOLDERS' EQUITY

On November 19, 1998, the Company authorized an open market stock buy back
program. This program, which continued until December 31, 1999, resulted in
the Company repurchasing approximately 6,400,000 shares of Common Stock for
approximately $53,000,000.

During the fourth quarter of 1999, the Company's Board of Directors
authorized an annual $0.10 per share dividend, to be declared and paid
quarterly with anticipation that such dividends would be declared commencing
in 2000 and thereafter. The actual declaration and payment of cash dividends,
commencing in 2000, will depend upon the Company's actual earnings levels,
capital requirements, financial condition, and other factors deemed relevant
by the Board of Directors. Pursuant to the Company's revolving credit facility
with a group of banks headed by Bank of America, the Company is restricted
from paying cash dividends in an amount not to exceed 15% of the Company's net
income for the previous fiscal year. The Company's revolving credit facility
is being renegotiated.

In March 1998, the Company completed a public offering of 3,810,950 shares
of the Company's Common Stock. Net proceeds of the common stock offering were
approximately $102,300,000 and have been used to repay outstanding bank loans,
finance expansion, and for general corporate purposes.

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

The Company also maintains the 1995 Flexible Incentive Plan, which was
adopted in 1995, (Flex Plan), as amended, for key employees of the Company.
Under the Flex Plan eligible employees may receive stock options, stock
appreciation rights, restricted stock, performance awards, performance stock
and other awards, as defined by the Board of Directors or an appointed
committee. The aggregate number of shares of common stock which may be issued
under the Flex Plan (or with respect to which awards may be granted) may not
exceed 2,000,000 shares.

The stock option plans are accounted for using APB Opinion No. 25, under
which no compensation expense has been recorded. If compensation costs for the
Company had been determined using the alternative accounting method based on
the fair value prescribed by SFAS 123, the Company's proforma net income
(loss) for 1999, 1998 and 1997 would have been approximately $12,239,000,
$(4,385,618), and $24,055,000, respectively, and the Company's proforma
earnings (loss) per share--basic would have been $0.46, $(0.15), and $0.94,
and per share--diluted would have been $0.45, $(0.15), and $0.89,
respectively. The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model; amortization over the
respective vesting periods; no dividends; expected lives of 6, 4.7, and 6.8
years for 1999, 1998 and 1997, respectively; expected stock price volatility
of approximately 40% and an interest rate of approximately 6% in 1999 and 5%
in 1998 and 7% in 1997. The weighted average fair value of options granted
during 1999, 1998 and 1997 was $4.40, $6.37, and $7.40, respectively. These
proforma results exclude consideration of options granted prior to January 1,
1995, and may not be representative of that to be expected in future years.

In connection with the Company's stock options, certain stock options
aggregating approximately 800,000 and 650,000 shares, at a weighted average
price of $18.02 and $12.79 were repriced to $12.88 and $7.00 during 1997 and
1998, respectively. Approximately 1,645,000 and 2,212,000 options were granted
to management employees during 1997 and 1998, at approximately $12.88 and
$6.37 per share, respectively.

30
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

At December 31, 1999, options for 2,810,575 shares were outstanding
(1,087,839 of which were exercisable) at prices ranging from $6.00 to $24.25
per share. As of December 31, 1999, all options have been granted at the stock
price on the grant date and are generally exercisable beginning one year from
the date of grant with annual vesting periods, and generally vest over five
years.

<TABLE>
<CAPTION>
1999 1998 1997
------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Price Price Price
Per Per Per
Shares Share Shares Share Shares Share
--------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year...... 3,646,741 $ 9.22 3,095,619 $13.30 3,262,812 $15.13
Granted................. 105,500 7.01 2,211,951 6.37 1,644,600 12.96
Exercised............... (900,000) 6.00 (564,223) 12.57 (753,397) 14.78
Terminated.............. (41,666) 21.79 (1,096,606) 13.28 (1,058,396) 18.40
--------- ---------- ----------
Options outstanding, end
of year................ 2,810,575 $ 9.97 3,646,741 $ 9.22 3,095,619 $13.30
========= ====== ========== ====== ========== ======
Options exercisable, end
of year................ 1,087,839 $12.58 883,151 $14.10 813,622 $14.86
========= ====== ========== ====== ========== ======
</TABLE>

9.STORE CLOSINGS AND SPECIAL CHARGES

During the fourth quarter of 1998, the Company recorded approximately
$37,632,000 in estimated store closings and special charges. These special
charges provided an estimated income tax benefit of $13,000,000. These
expenses were the result of the Company's decision in the fourth quarter of
1998 to close eleven underperforming restaurants, eight of which were closed
in 1998 and three of which were closed in 1999, the Company's decision not to
renew a restaurant lease upon option renewal and changes in the Company's
strategic growth plan. As a result of changes in the Company's strategic
growth plan, the Company reduced planned future unit growth, abandoned
potential restaurant sites, and abandoned efforts to build a stand-alone
office complex in Houston, Texas. These strategic changes resulted in a
reduction in employees, the sale of a duplicate corporate asset and the
abandonment of a strategic corporate transaction. The store closing and
special charges consist of the following items:

<TABLE>
<CAPTION>
CHARGE IN
4TH QUARTER
1998
-----------
<S> <C>
Restaurant closures and lease terminations:
Write down of property, equipment, leasehold interests and other
assets to estimated net realizable value........................ $25,815,000
Estimated lease termination costs and employee severance on
closed restaurants.............................................. 7,634,000
Charges associated with the changes in the Company's strategic
growth plan:
Abandonment of restaurant development sites and Company plans to
build a stand-alone office complex in Houston, Texas............ 2,910,000
Employee severance and separation costs related to a reduction in
planned future restaurant unit growth........................... 303,000
Loss on sale of a duplicate corporate asset...................... 400,000
Costs associated with abandoned corporate transaction............ 570,000
-----------
Total.......................................................... $37,632,000
===========
</TABLE>

31
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Significant estimates included in the special charge relate to estimated
lease exit costs such as rent and lease buyout costs through final
disposition, and estimated proceeds associated with certain owned properties.
These costs were estimated by management based upon information from internal
and external real estate advisors and discussions and negotiations with third
parties. To the extent the actual costs differ from these estimates the
special charge will be adjusted accordingly in future periods.

For the twelve months ended December 31, 1999, the Company incurred
$2,945,000 of store closings and special charges. On March 2, 1999, the
Company announced the signing of a definitive merger agreement. The merger
agreement was subsequently terminated on March 8, 1999 with no further
discussions. The Company incurred $3,675,000 in transaction costs in
connection with the definitive merger agreement which were expensed in the
first quarter of 1999. Additionally, the Company successfully exited seven of
the underperforming restaurants included in the 1998 special charge and
recorded a special credit of $730,000, during the second quarter of 1999, due
to the reversal of amounts originally recorded, since five lease terminations
were resolved favorably relative to amounts accrued at December 31, 1998. In
January 2000, an additional property was exited at terms approximating
estimated amounts.

The remaining accrued expenses for store closings and special charges at
December 31, 1999 in the amount of approximately $1,700,000 relate primarily
to anticipated lease termination costs and other expenses associated with
exiting the remaining three properties. During 1999, the estimated expenses
accrued in the fourth quarter of 1998 decreased from approximately $7,500,000
to approximately $1,700,000 as a result of payments for costs, lease rentals
and other expenses related to exiting the properties and the special credit
noted above. The Company expects remaining cash payments to occur during 2000.
The net realizable value of the property, equipment and leasehold interests
held for sale totaled approximately $2,758,000 and is included in other
current assets at December 31, 1999.

10.RELATED PARTY TRANSACTIONS

Effective January 1, 1996, the Company entered into a Consulting Service
Agreement (the "Agreement") with Fertitta Hospitality, LLC ("Fertitta
Hospitality"), which is jointly owned by Mr. Fertitta and his wife. Pursuant
to the Agreement, the Company provides limited consulting services to Fertitta
Hospitality with respect to management and operational matters, administrative
and personnel matters. The Company receives a consulting fee of $2,500 per
month under the Agreement plus the reimbursement of all out-of-pocket expenses
and such additional compensation as may be agreed upon. The Agreement provides
for a one-year term, was renewed in 1999, and is automatically renewed unless
either party terminates the Agreement upon 30 days' written notice to the
other party. The Consulting Services Agreement was entered into between
related parties and was not the result of arm's-length negotiations.
Accordingly, the terms of this transaction may have been more or less
favorable to the Company than might have been obtained from unaffiliated third
parties. The Company believes that the terms of the transaction were at least
as favorable to the Company as that which could have been obtained in arm's-
length transactions with an unaffiliated party.

In 1998, the Company entered into an agreement with 610 Loop Venture, LLC, a
company wholly owned by the Chairman and Chief Executive Officer of Landry's,
whereby, the Company would sell to 610 Loop Venture, a 4-acre undeveloped land
tract at a third-party appraised value of $5,400,000 (approximately $700,000
more than the original purchase price paid by the Company), and 610 Loop
Venture would construct a condominium hotel/office project on the land. In
1999, 610 Loop Venture and the Company executed an amendment to the agreement.
The amendment provided that the Company enter into a ground lease agreement
with 610 Loop Venture for approximately one-third of the undeveloped tract.
The ground lease is for a term of five years with one option renewal period.
Under the terms of the ground lease, 610 Loop Venture will pay the

32
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Company base rent, pro-rata real property taxes and insurance in the amount of
approximately $16,000 per month. Subsequently, at the request of the Company,
610 Loop Venture and the Company have reached a tentative agreement
terminating the office building contract in order that the Company may build
its own office building. 610 Loop Venture has retained the option to purchase
certain property based upon an appraised value.

11.SUBSEQUENT EVENTS

On February 9, 2000 the Company announced the signing of a definitive merger
agreement to acquire Rainforest Cafe, Inc. for approximately $125,000,000, to
be paid in a combination of common stock (65%) and cash (35%). Rainforest is a
publicly-traded restaurant company (NASDAQ: "RAIN") that operates 28
restaurants in the United States and licenses and/or has ownership interests
in 10 restaurants outside the United States. The proposed acquisition will be
subject to the purchase method of accounting and is expected to close in May
2000. Consummation of the transaction is subject to a number of conditions,
including approval by the stockholders of Rainforest. The following table
reflects, on an unaudited pro forma basis, the combined operations of the
Company and Rainforest Cafe, Inc. as if such acquisition had taken place at
the beginning of fiscal 1999. Pro forma adjustments are based on preliminary
estimates, available information and certain assumptions and may be revised as
additional information becomes available. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
the results of operations that would have resulted had the combination been in
effect on the date indicated or that may result in the future:

<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
(Unaudited)
<S> <C>
Revenues, net.................................................. $696,780,000
Net income..................................................... $ 28,316,000
Net income per share--diluted.................................. $ 0.77
</TABLE>

12.QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited quarterly consolidated results of
operations (in thousands, except per share data) for 1999, 1998 and 1997.

<TABLE>
<CAPTION>
March 31, June 30, September 30, December 31,
1999 1999 1999 1999
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Quarter Ended:
Restaurant revenues............ $101,266 $123,607 $116,510 $97,603
Store closings and special
charges (credit).............. $ 3,675 $ (730) $ -- $ --
Operating income............... $ 482 $ 10,945 $ 10,822 $ 2,994
Net income..................... $ 238 $ 7,068 $ 6,592 $ 1,478
Net income per share (basic)... $ 0.01 $ 0.25 $ 0.26 $ 0.06
Net income per share
(diluted)..................... $ 0.01 $ 0.25 $ 0.25 $ 0.06
Net income per share before
special charges (credit)
(diluted)..................... $ 0.09 $ 0.24 $ 0.25 $ 0.06
</TABLE>

33
<PAGE>

LANDRY'S SEAFOOD RESTAURANTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1999 amounts rounded where applicable so that the sum of the quarters equals
the year to date information.

<TABLE>
<CAPTION>
March 31, June 30, September 30, December 31,
1998 1998 1998 1998
--------- -------- -------------- -------------
<S> <C> <C> <C> <C>
Quarter Ended:
Restaurant revenues........... $90,045 $111,039 $109,353 $ 89,112
Store closings and special
charges...................... $ -- $ -- $ -- $ 37,632
Operating income (loss)....... $11,507 $ 16,191 $ 11,073 $(36,579)
Net income (loss) before
cumulative effect of change
in accounting principle...... $ 7,854 $ 11,075 $ 7,332 $(23,211)
Net income (loss)............. $ 4,473 $ 11,075 $ 7,332 $(23,211)
Net income (loss) per share
--Basic (before cumulative
effect of accounting change)
............................. $ 0.29 $ 0.37 $ 0.24 $ (0.76)
--Basic (after cumulative
effect of accounting
change)...................... $ 0.17 $ 0.37 $ 0.24 $ (0.76)
--Diluted (before cumulative
effect of accounting change)
............................. $ 0.28 $ 0.36 $ 0.24 $ (0.76)
--Diluted (after cumulative
effect of accounting
change)...................... $ 0.16 $ 0.36 $ 0.24 $ (0.76)
Net income per share before
special charges and
accounting change (diluted).. $ 0.16 $ 0.36 $ 0.24 $ 0.06

<CAPTION>
March 31, June 30, September 30, December 31,
1997 1997 1997 1997
--------- -------- -------------- -------------
<S> <C> <C> <C> <C>
Quarter Ended:
Restaurant revenues........... $64,301 $ 81,182 $ 89,808 $ 76,382
Operating income.............. $ 8,578 $ 12,204 $ 13,037 $ 7,554
Net income.................... $ 5,794 $ 8,002 $ 8,574 $ 5,060
Net income per share (basic).. $ 0.23 $ 0.31 $ 0.33 $ 0.20
Net income per share
(diluted).................... $ 0.22 $ 0.30 $ 0.32 $ 0.19
</TABLE>

34
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized in the City of Houston, State of Texas, on the 3rd
day of March 2000.

Landry's Seafood Restaurants, Inc.

/s/ Tilman J. Fertitta
_____________________________________
Tilman J. Fertitta
Chairman of the Board/President
and Chief Executive Officer

Each person whose signature appears below constitutes and appoints Tilman J.
Fertitta, Steven L. Scheinthal and Paul S. West, and each of them (with full
power to each of them to act alone), his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign on his behalf
individually and in each capacity stated below any amendment to this Annual
Report on Form 10-K and any amendment thereto and to file the same, with all
exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents and either of them, or their substitutes, may lawfully do or cause to
be done by virtue hereof. Pursuant to the requirements of the Securities Act
of 1934, this report has been signed by the following persons on behalf of the
registrants and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Tilman J. Fertitta Chairman, President and March 3, 2000
____________________________________ Chief Executive Officer,
Tilman J. Fertitta Principal Executive Officer
and Director

/s/ Paul S. West Vice President, Principal March 3, 2000
____________________________________ Financial Officer, Principal
Paul S. West Accounting Officer and
Director

/s/ Steven L. Scheinthal Vice President, Secretary, March 3, 2000
____________________________________ General Counsel and Director
Steven L. Scheinthal

/s/ James E. Masucci Director March 3, 2000
____________________________________
James E. Masucci

/s/ Joe Max Taylor Director March 3, 2000
____________________________________
Joe Max Taylor

</TABLE>

35
<PAGE>

EXHIBIT INDEX

Certain of the exhibits to this report on Form 10-K are hereby incorporated
by reference to the Company's Registration Statement on Form S-1 No. 33-65498
and all amendments thereto ("A") and the Company's Form 10-Q for the quarterly
period ended June 30, 1995 ("B"), May 9, 1995 Proxy Statement ("C"), the June
25, 1997 Form 8-K ("D"), the 1995 Form 10-K ("E"), the May 1996 Form S-4
("F"), the Form 10-Q for the quarterly period ended September 30, 1999 ("G"),
and the March 9, 1999 Form 8-K as filed with the Securities and Exchange
Commission ("H"). Such exhibits are denoted with the letter. Exhibits denoted
by * are filed herewith.

<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<C> <S>
3.1 Certificate of Incorporation of Landry's Seafood Restaurants, Inc. as
filed with the Delaware Secretary of State on June 23, 1993, as
amended -A-(See Exhibit 3.1) and -B-
3.2 Amendment to Certificate of Incorporation -A-
3.3 Bylaws of Landry's Seafood Restaurants, Inc. -A- (See Exhibit 3.2)
4 Specimen Common Stock Certificate, $.01 par value of Landry's Seafood
Restaurants, Inc. -A-
10.1 1993 Stock Option Plan ("Plan") -C-
10.2 Form of Incentive Stock Option Agreement under the Plan -A- (See
Exhibit 10.61)
10.3 Form of Non-Qualified Stock Option Agreement under the Plan -A- (See
Exhibit 10.62)
10.4 Non-Qualified Formula Stock Option Plan for Non-Employee Directors
("Directors' Plan") -A-
10.5 First Amendment to Non-Qualified Formula Stock Option Plan for Non-
Employee Directors -C-
10.6 Form of Stock Option Agreement for Directors' Plan -A- (See Exhibit
10.64)
10.7 Form of Personal Service and Employment Agreement of Tilman J.
Fertitta -A- (See Exhibit 10.65)
10.8 1995 Flexible Incentive Plan -C-
10.9 Form of Consulting Services Agreement between Landry's Management,
L.P. and Fertitta
Hospitality -E-
10.10 Form of Stock Option Agreement between Landry's Seafood Restaurants,
Inc. and Tilman J.
Fertitta -E-
10.11 Business Loan Agreement dated June 19, 1997 between Landry's Seafood
Restaurants, Inc. and Bank of America, Texas, N.A., as Agent, Issuing
Bank and a Bank -D-
*11 Statement regarding computation of per share earnings--fully diluted -
10.12 Contract of Sale and Development Agreement -G-
10.13 Executive Employment Agreements -G-
10.14 First Amendment to Credit Agreement -G-
10.15 Termination Agreement by and among Landry's Seafood Restaurants, Inc.
and Consolidated Restaurant Corporation the Cracken Trust, the Katemcy
Trust, Street, and Hartnett -H-
*21 Subsidiaries of Landry's Seafood Restaurants, Inc.
*23 Consent of Arthur Andersen LLP
*24 Power of Attorney--(See page 32)
*27 Financial Data Schedule
</TABLE>

<PAGE>

EXHIBIT 11

LANDRY'S SEAFOOD RESTAURANTS, INC.

STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE--DILUTED

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1999 1998 1997
----------- ---------- -----------
<S> <C> <C> <C>
Net Income (Loss)......................... $15,375,733 $ (329,578) $27,430,044
=========== ========== ===========
Weighted Average Common Shares
Outstanding.............................. 26,675,000 29,400,000 25,518,000
Common Stock Equivalents--Stock Options... 350,000 500,000 1,082,000
----------- ---------- -----------
Weighted Average Common and Common
Equivalent Shares Outstanding--
(Diluted)................................ 27,025,000 29,900,000 26,600,000
=========== ========== ===========
Net Income (Loss) Per Share--(Diluted).... $ 0.57 $ (0.01) $ 1.03
=========== ========== ===========
</TABLE>

<PAGE>

EXHIBIT 21

LANDRY'S SEAFOOD RESTAURANTS, INC.

LIST OF SUBSIDIARIES

<TABLE>
<S> <C>
. Captain Crab's Take-Away of 79th . Landry's Seafood House--Maryland, Inc.
Street, Inc. . Landry's Seafood House--Memphis, Inc.
. Crab Addison, Inc. . Landry's Seafood House--Michigan, Inc.
. Crab House, Inc. . Landry's Seafood House--Minnesota, Inc.
. Cryo Realty, Corp. . Landry's Seafood House--Missouri, Inc.
. CryoTech Industries of North . Landry's Seafood House--Nevada, Inc.
Carolina, Inc. . Landry's Seafood House--New Jersey,
. Joe's Crab Shack--Alabama Private Inc.
Club, Inc. . Landry's Seafood House--New Mexico,
. Joe's Crab Shack--San Diego, Inc. Inc.
. Landry's Crab Shack, Inc. . Landry's Seafood House--New Orleans,
. Landry's Development, Inc. Inc.
. Landry's G.P., Inc. . Landry's Seafood House--Norfolk,
. Landry's Limited, Inc. Virginia, Inc.
. Landry's Trademark, Inc. . Landry's Seafood House--North Carolina,
. Landry's Management, L.P. Inc.
. Landry's Private Club--Amarillo, . Landry's Seafood House--Ohio, Inc.
Inc. . Landry's Seafood House--Oklahoma, Inc.
. Landry's Private Club--Mesquite, . Landry's Seafood House--Pennsylvania,
Inc. Inc.
. Landry's Private Club--Plano, Inc. . Landry's Seafood House--San Luis, Inc.
. Landry's Seafood House--Addison, . Landry's Seafood House--Redondo Beach,
Inc. Inc.
. Landry's Seafood House--Alabama, . Landry's Seafood House--South Carolina,
Inc. Inc.
. Landry's Seafood House--Arizona, . Landry's Seafood House--Virginia, Inc.
Inc. . Landry's Seafood Inn & Oyster Bar, Inc.
. Landry's Seafood House--Arlington, . Landry's Seafood Inn & Oyster Bar--
Inc. Galveston, Inc.
. Landry's Seafood House--Austin, . Landry's Seafood Inn & Oyster Bar--
Inc. Kemah, Inc.
. Landry's Seafood House--Bellevue, . Landry's Seafood Inn & Oyster Bar--San
Inc. Antonio, Inc.
. Landry's Seafood House--Biloxi, . Landry's Seafood Inn & Oyster Bar--
Inc. Sugar Creek, Inc.
. Landry's Seafood House--Colorado, . Landry's Seafood Galveston, Inc.
Inc. . Landry's Seafood Kemah, Inc.
. Landry's Seafood House--Florida, . Landry's Seafood & Steak House--Corpus
Inc. Christi, Inc.
. Landry's Seafood House--Georgia, . LSRI Holdings, Inc.
Inc. . LSR Acquisition Corp.
. Landry's Seafood House--Illinois, . Marina Acquisition Corporation of
Inc. Florida, Inc.
. Landry's Seafood House--Indiana, . Summit Seafood Supply, Inc.
Inc. . Take-Away/King Shopping Plaza, Inc.
. Landry's Seafood House--Kansas, . West End Seafood, Inc.
Inc. . Willie G's Galveston, Inc.
. Landry's Seafood House--Kentucky, . Willie G's Post Oak, Inc.
Inc.
. Landry's Seafood House--Lafayette,
Inc.
. Landry's Seafood House--Little
Rock, Inc.
</TABLE>

<PAGE>

EXHIBIT 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K into the Company's previously filed Form
S-8 Registration Statement File Nos. 333-2862 and 333-2854.

ARTHUR ANDERSEN LLP

Houston, Texas
February 29, 2000

<PAGE>
<ARTICLE> 5

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 22,977,666 35,183,405
<SECURITIES> 0 0
<RECEIVABLES> 7,065,298 13,678,197
<ALLOWANCES> 0 0
<INVENTORY> 18,409,523 22,839,020
<CURRENT-ASSETS> 58,710,573 84,847,308
<PP&E> 497,776,156 443,722,829
<DEPRECIATION> (66,397,301) (45,154,410)
<TOTAL-ASSETS> 496,725,852 489,949,240
<CURRENT-LIABILITIES> 109,280,962<F1> 40,886,954
<BONDS> 60,166 35,153,100
0 0
0 0
<COMMON> 248,231 303,453
<OTHER-SE> 377,099,807 408,368,622
<TOTAL-LIABILITY-AND-EQUITY> 496,725,852 489,949,240
<SALES> 438,986,243 399,548,083
<TOTAL-REVENUES> 438,986,243 399,986,243
<CGS> 136,321,031 121,081,247
<TOTAL-COSTS> 413,743,020<F2> 397,356,865<F2>
<OTHER-EXPENSES> (177,711) (843,389)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,964,969 (1,624,569)
<INCOME-PRETAX> 23,455,965 4,659,176
<INCOME-TAX> 8,080,232 1,607,254
<INCOME-CONTINUING> 15,375,733 3,051,922
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 3,381,500<F3>
<NET-INCOME> 15,375,733 (329,578)
<EPS-BASIC> 0.58 (0.01)
<EPS-DILUTED> 0.57 (0.01)
<FN>
<F1>CURRENT LIABILITIES AT DECEMBER 31, 1999 INCLUDES $68,000,000 OUTSTANDING
UNDER THE COMPANY'S LINE OF CREDIT AGREEMENT
<F2>TOTAL COSTS INCLUDE STORE CLOSINGS AND SPECIAL CHARGES OF $2,945,000 AND
37,631,969 FOR THE YEARS ENDED DECEMBER 31, 1999 & 1998, RESPECTIVELY
<F3>CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE NET OF TAX IS DUE TO THE
ADOPTION OF THE "AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS STATEMENT OF
POSITION 98-5, REPORTING ON THE COSTS OF START UP ACTIVITIES"
</FN>

</TABLE>