Landry's Restaurants, Inc. ('LNY'/NYSE) Reports Third Quarter 2008 Results

Landry's Restaurants, Inc. (NYSE:LNY), today announced its results for the third quarter ended September 30, 2008.

Revenues from continuing operations for the three months ended September 30, 2008, totaled $289.7 million, as compared to $295.8 million a year earlier, including $60.6 million and $62.7 million, respectively from the Golden Nugget properties.

Loss from continuing operations for the quarter was $7.7 million or $0.50 per share-diluted, compared to $3.1 million or $0.17 per share-diluted reported last year. Included in the current quarter amount are non-cash impairment charges of $12.0 million after-tax, primarily related to Hurricane Ike, for a total of $0.79 per share. The prior comparable period includes $8.5 million after-tax expense related to issuing our Senior Exchange Notes. Excluding the impact of these items, earnings per share-diluted from continuing operations were $0.29 for the quarter compared to $0.31 for the prior year. During the third quarter of 2008, consolidated pre-tax interest expense was $19.5 million compared to $17.1 million in the comparable period last year primarily due to additional borrowings associated with the Golden Nugget expansion. Excluding the effect of the storms, same store sales for the Company's restaurants were negative 2.0% for the quarter.

Revenues were adversely impacted by an estimated $7.8 million due to four named storms during the third quarter, Eduard, Gustav, Hannah and Ike. On September 13, 2008, Hurricane Ike struck the Gulf Coast of the United States, causing considerable damage to the cities of Galveston, Kemah and Houston, Texas and surrounding areas. Several of our restaurants in Galveston and Kemah sustained significant damage, as did the amusement rides, the boardwalk itself and some infrastructure at the Kemah Boardwalk. Widespread power outages led to the closure of 31 Houston area restaurants for a varying amount of days until power was restored. All Houston restaurants have reopened, as well as nine restaurants in Galveston and Kemah, while seven restaurants remain closed. In addition, the amusement rides and much of the complementary businesses at the Kemah Boardwalk also remain closed. We expect additional business units to reopen each month and to be fully reopened with all business units by March 2009.

Based on preliminary estimates of the damage sustained by our properties, a pre-tax asset impairment charge of $24.4 million was recorded during the third quarter of 2008 reduced by $7.5 million as a result of insurance proceeds received under our various property and casualty insurance policies. While we expect to receive substantial additional insurance proceeds under these policies in the future, the ultimate amount that we will collect has not yet been determined. Any future recoveries under these policies will be recognized in the period in which all contingencies have been resolved.

Revenues from continuing operations for the nine months ended September 30, 2008, totaled $890.2 million, as compared to $882.5 million a year earlier. Net earnings from continuing operations for the nine months were $8.9 million, compared to $29.3 million reported last year. Earnings per share-diluted from continuing operations for the nine months were $0.57, compared to $1.44 in the prior year.

As a result of our 2006 sale of the Joe's Crab Shack concept and closure of certain additional locations, the results of operations for these restaurants are reflected as discontinued operations in the Company's financial statements. The loss from discontinued operations, net of taxes, for the quarter was $9.4 million or $0.62 per share-diluted compared to a loss of $1.3 million or $0.08 per share-diluted in the prior year primarily due to impairment and lease termination costs reflecting the difficult real estate market. For the nine months ended September 30, 2008, the loss for discontinued operations, net of tax was $10.5 million or $0.68 per share-diluted as compared to a loss of $4.6 million or $0.23 per share-diluted in the prior year. Therefore, the consolidated net loss for the quarter was $17.1 million or $1.12 per share-diluted, compared to net loss of $4.3 million or $0.25 per share-diluted in the comparable period in 2007. Consolidated net loss for the nine months ended September 30, 2008 was $0.11 per share-diluted compared to net income of $1.21 per share-diluted for the comparable period in the prior year.

The Senior Note holders have an option to require the Company to redeem the Notes beginning February 28, 2009 at 101% of face value. As a result, the Notes are reflected as current liabilities in the Company's financial statements.

In connection with the previously announced merger, subject to certain conditions, the Company has committed financing sufficient to repay existing indebtness should the merger not be completed. The new financing will carry higher interest rates and more restrictive terms than our current agreements.

The Company's continuing operations include restaurants primarily under the trade names Landry's Seafood House, Chart House, Rainforest Cafe, Saltgrass Steak House and the Signature Group as well as other businesses including hotels, marinas, amusements, retail and the Golden Nugget Hotels and Casinos in Las Vegas and Laughlin, Nevada.

Proposed Merger

On June 16, 2008, the Company entered into a definitive merger agreement with Fertitta Holdings, Inc., Fertitta Acquisition Co. and, for limited purposes, Tilman J. Fertitta, pursuant to which Fertitta Holdings agreed to acquire all of the Company's outstanding common stock. Fertitta Holdings and Fertitta Acquisition are new companies formed by Tilman J. Fertitta, Chairman of the Board, President and Chief Executive Officer of the Company. On October 18, 2008, the merger agreement was amended and now provides for an acquisition price of $13.50 per share in cash. In connection with the amended merger agreement, there is a new "go-shop" process being conducted by Cowen and Company ("Cowen"), the independent financial advisor to the special committee of independent directors of the Company which ends on November 17, 2008. The Company filed, on November 7, 2008, a revised preliminary proxy statement and related materials with the Securities and Exchange Commission that provides details about the amended merger agreement.

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