UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**Form
      10-Q**





QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934








For
                The Quarterly Period Ended
            Commission
                FileOctober
                28, 2006
            Number
                1-5674








**ANGELICA
      CORPORATION**


(Exact
      name of Registrant as specified in its charter)








MISSOURI
            43-0905260(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)








424
                South Woods Mill RoadCHESTERFIELD,
                MISSOURI
            63017(Address
                of principal executive offices)
            (Zip
                Code)





(314)
      854-3800


(Registrant's
      telephone number, including area code)








Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes
xNo o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.


Large
                accelerated filero
            
            Accelerated
                filerx
            
            Non-accelerated
                filero





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





The
      number of shares outstanding of Registrant's Common Stock, par value $1.00
      per
      share, at  December
      1, 2006 was 9,493,073 shares.













ANGELICA
      CORPORATION AND SUBSIDIARIES





TABLE
      OF
      CONTENTS





OCTOBER
      28, 2006 FORM 10-Q QUARTERLY REPORT














Page
                NumberReference**Part
                I. Financial Information:**Item
                1. Condensed Financial Statements:Consolidated
                Statements of Income - Third Quarter and Nine Months Ended October
                28,
                2006 and October 29, 2005 (Unaudited)
            2Consolidated
                Balance Sheets - October 28, 2006 and January 28, 2006
                (Unaudited)
            3Consolidated
                Statements of Cash Flows - Nine Months Ended October 28, 2006 and
                October
                29, 2005 (Unaudited)
            4Notes
                to Unaudited Consolidated Financial Statements
            5-17Item
                2. Management's Discussion and Analysis of Financial Condition and
                Results
                of Operations
            18-25Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            26Item
                4. Controls and Procedures
            26-27**Part
                II. Other Information:**Item
                4. Submission of Matters to a Vote of Security Holders
            28Item
                6. Exhibits
            28Signatures
            29Exhibit
                Index
            30










**CONSOLIDATED
      STATEMENTS OF INCOME**


*Angelica
      Corporation and Subsidiaries*


*Unaudited
      (Dollars in thousands, except per share amounts)*


Third
                      Quarter Ended
                  
                  Nine
                      Months EndedOctober
                      28, 2006
                  
                  October
                      29, 2005
                  
                  October
                      28, 2006
                  
                  October
                      29, 2005**Continuing
                      Operations:**Revenues
                  
                  $
                  107,768
                  
                  $
                  107,582
                  
                  $
                  320,060
                  
                  $
                  313,281Cost
                      of services
                  
                  
                  (90,467
                  )
                  
                  (93,830
                  )
                  
                  (272,893
                  )
                  
                  (270,335
                  )Gross
                      profit
                  
                  
                  17,301
                  
                  
                  13,752
                  
                  
                  47,167
                  
                  
                  42,946Selling,
                      general and administrative expenses
                  
                  
                  (13,392
                  )
                  
                  (10,764
                  )
                  
                  (41,237
                  )
                  
                  (36,105
                  )Amortization
                      of other acquired assets
                  
                  
                  (1,061
                  )
                  
                  (1,111
                  )
                  
                  (3,221
                  )
                  
                  (2,952
                  )Other
                      operating income, net
                  
                  
                  2,415
                  
                  
                  210
                  
                  
                  2,912
                  
                  
                  840Income
                      from operations
                  
                  
                  5,263
                  
                  
                  2,087
                  
                  
                  5,621
                  
                  
                  4,729Interest
                      expense
                  
                  
                  (2,486
                  )
                  
                  (2,045
                  )
                  
                  (7,055
                  )
                  
                  (4,951
                  )Non-operating
                      income, net
                  
                  
                  185
                  
                  
                  382
                  
                  
                  567
                  
                  
                  1,179Income
                      (loss) from continuing operations before income taxes
                  
                  
                  2,962
                  
                  
                  424
                  
                  
                  (867
                  )
                  
                  957Income
                      tax (provision) benefit
                  
                  
                  (387
                  )
                  
                  387
                  
                  
                  1,228
                  
                  
                  270Income
                      from continuing operations
                  
                  
                  2,575
                  
                  
                  811
                  
                  
                  361
                  
                  
                  1,227**Discontinued
                      Operations:**Loss
                      from discontinued operations, net of tax benefit of $0, $708,
                      $0 and
                      $800
                  
                  
                  -
                  
                  
                  (838
                  )
                  
                  -
                  
                  
                  (1,168
                  )Loss
                      on disposal of discontinued operations, net of tax benefit
                      of $0, $243, $0
                      and $243
                  
                  
                  -
                  
                  
                  (354
                  )
                  
                  -
                  
                  
                  (354
                  )Loss
                      from discontinued operations
                  
                  
                  -
                  
                  
                  (1,192
                  )
                  
                  -
                  
                  
                  (1,522
                  )Net
                      income (loss)
                  
                  $
                  2,575
                  
                  $
                  (381
                  )
                  $
                  361
                  
                  $
                  (295
                  )**Basic
                      earnings (loss) per share:**Income
                      from continuing operations
                  
                  $
                  0.28
                  
                  $
                  0.09
                  
                  $
                  0.04
                  
                  $
                  0.14Loss
                      from discontinued operations
                  
                  
                  -
                  
                  
                  (0.13
                  )
                  
                  -
                  
                  
                  (0.17
                  )Net
                      income (loss)
                  
                  $
                  0.28
                  
                  $
                  (0.04
                  )
                  $
                  0.04
                  
                  $
                  (0.03
                  )**Diluted
                      earnings (loss) per share:**Income
                      from continuing operations
                  
                  $
                  0.28
                  
                  $
                  0.09
                  
                  $
                  0.04
                  
                  $
                  0.13Loss
                      from discontinued operations
                  
                  
                  -
                  
                  
                  (0.13
                  )
                  
                  -
                  
                  
                  (0.16
                  )Net
                      income (loss)
                  
                  $
                  0.28
                  
                  $
                  (0.04
                  )
                  $
                  0.04
                  
                  $
                  (0.03
                  )


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





2





**CONSOLIDATED
      BALANCE SHEETS**


*Angelica
      Corporation and Subsidiaries*


*Unaudited
      (Dollars in thousands)*


October
                    28,
                
                January
                    28,2006
                
                2006**ASSETS**Current
                    Assets:Cash
                
                $
                5,463
                
                $
                4,377Receivables,
                    less reserves of $2,089 and $994
                
                
                57,569
                
                
                58,151Linens
                    in service
                
                
                49,223
                
                
                43,785Prepaid
                    expenses and other current assets
                
                
                2,958
                
                
                3,602Total
                    Current Assets
                
                
                115,213
                
                
                109,915Property
                    and Equipment
                
                
                201,397
                
                
                202,927Less
                    -- accumulated depreciation
                
                
                103,623
                
                
                96,634Total
                    Property and Equipment
                
                
                97,774
                
                
                106,293Other:Goodwill
                
                
                49,259
                
                
                49,259Other
                    acquired assets
                
                
                38,879
                
                
                42,470Deferred
                    income taxes
                
                
                17,356
                
                
                15,389Cash
                    surrender value of life insurance
                
                
                1,650
                
                
                1,941Miscellaneous
                
                
                5,938
                
                
                6,161Total
                    Other Assets
                
                
                113,082
                
                
                115,220Total
                    Assets
                
                $
                326,069
                
                $
                331,428**LIABILITIES
                    AND SHAREHOLDERS' EQUITY**Current
                    Liabilities:Current
                    maturities of long-term debt
                
                $
                171
                
                $
                319Accounts
                    payable
                
                
                33,572
                
                
                37,229Accrued
                    wages and other compensation
                
                
                8,515
                
                
                7,037Deferred
                    compensation and pension liabilities
                
                
                3,894
                
                
                2,977Deferred
                    income taxes
                
                
                2,506
                
                
                3,321Other
                    accrued liabilities
                
                
                34,322
                
                
                30,535Total
                    Current Liabilities
                
                
                82,980
                
                
                81,418Long-Term
                    Debt, less current maturities
                
                
                82,600
                
                
                85,096Other
                    Long-Term Liabilities
                
                
                15,158
                
                
                15,366Shareholders'
                    Equity:Common
                    Stock, $1 par value, authorized 20,000,000 shares, issued: 9,610,859
                    and
                    9,471,538 shares
                
                
                9,611
                
                
                9,472Capital
                    surplus
                
                
                9,799
                
                
                7,189Retained
                    earnings
                
                
                138,050
                
                
                140,805Accumulated
                    other comprehensive loss
                
                
                (5,076
                )
                
                (2,553
                )Unamortized
                    restricted stock
                
                
                (4,630
                )
                
                (2,841
                )Common
                    Stock in treasury, at cost: 117,386 and 169,415 shares
                
                
                (2,423
                )
                
                (2,524
                )Total
                    Shareholders' Equity
                
                
                145,331
                
                
                149,548Total
                    Liabilities and Shareholders' Equity
                
                $
                326,069
                
                $
                331,428


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





3





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


*Angelica
      Corporation and Subsidiaries*


*Unaudited
      (Dollars in thousands)*




Nine
                  Months EndedOctober
                  28, 2006
              
              October
                  29, 2005Cash
                  Flows from Operating Activities:Income
                  from continuing operations
              
              $
              361
              
              $
              1,227Non-cash
                  items included in income from continuing operations:Depreciation
              
              
              11,371
              
              
              11,187Amortization
              
              
              4,024
              
              
              3,260Deferred
                  income taxes
              
              
              (1,228
              )
              
              (2,355
              )Cash
                  surrender value of life insurance
              
              
              (1,029
              )
              
              (885
              )Gain
                  on sale of assets
              
              
              (1,473
              )
              
              (737
              )Change
                  in working capital components of continuing operations, net of
                  businesses
                  acquired/disposed
              
              
              (4,744
              )
              
              (611
              )Other,
                  net
              
              
              (1,768
              )
              
              1,340Net
                  cash provided by operating activities of continuing
                  operations
              
              
              5,514
              
              
              12,426Cash
                  Flows from Investing Activities:Expenditures
                  for property and equipment, net
              
              
              (5,631
              )
              
              (16,100
              )Cost
                  of businesses and assets acquired
              
              
              -
              
              
              (52,284
              )Disposals
                  of assets
              
              
              5,765
              
              
              969Life
                  insurance premiums paid, net of death benefits received
              
              
              158
              
              
              (370
              )Net
                  cash provided by (used in) investing activities of continuing
                  operations
              
              
              292
              
              
              (67,785
              )Cash
                  Flows from Financing Activities:Repayments
                  of long-term debt
              
              
              (80,144
              )
              
              (144,115
              )Borrowings
                  of long-term debt
              
              
              77,500
              
              
              170,000Repayments
                  of life insurance policy loans
              
              
              -
              
              
              (22,988
              )Borrowings
                  from life insurance policy loans
              
              
              1,101
              
              
              53,216Debt
                  issuance costs
              
              
              (48
              )
              
              (323
              )Dividends
                  paid
              
              
              (3,116
              )
              
              (3,041
              )Exercise
                  of stock options
              
              
              270
              
              
              1,449Net
                  cash (used in) provided by financing activities of continuing
                  operations
              
              
              (4,437
              )
              
              54,198Cash
                  Flows from Discontinued Operations:(Restated
                  - See Note 1)Operating
                  cash flows
              
              
              (283
              )
              
              995Investing
                  cash flows
              
              
              -
              
              
              1,035Net
                  increase in cash
              
              
              1,086
              
              
              869Balance
                  at beginning of year
              
              
              4,377
              
              
              926Balance
                  at end of period
              
              $
              5,463
              
              $
              1,795Supplemental
                  cash flow information:Life
                  insurance death benefit proceeds used to repay life insurance policy
                  loans
              
              $
              306
              
              $
              -




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





4





NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





THIRD
      QUARTER AND NINE MONTHS ENDED


OCTOBER
      28, 2006 AND OCTOBER 29, 2005














NOTE
      1.  SIGNIFICANT ACCOUNTING POLICIES





*Basis
      of Presentation*


The
      accompanying condensed consolidated financial statements are unaudited, and
      these consolidated statements should be read in conjunction with the Company’s
      audited consolidated financial statements and notes thereto contained in the
      Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2006
      (fiscal 2005). It is management’s opinion that all adjustments, consisting only
      of normal recurring adjustments, necessary for a fair statement of the results
      during the interim period have been included. All significant intercompany
      accounts and transactions have been eliminated. The results of operations and
      cash flows for the third quarter and nine months ended October 28, 2006 are
      not
      necessarily indicative of the results that will be achieved for the full fiscal
      year 2006.





*Restated
      Consolidated Statements of Cash Flows*


Subsequent
      to the issuance of its unaudited consolidated financial statements for the
      quarter and nine months ended October 29, 2005, management of the Company
      determined that the cash flows associated with discontinued operations should
      not have been presented as a single line item within the Consolidated Statements
      of Cash Flows. As a result, in the fourth quarter of fiscal 2005, the Company
      changed the presentation of cash flows from discontinued operations to present
      separate disclosure of the cash flows from operating, investing, and financing
      activities.





*Linens
      in Service*


The
      Company reviews the amortization period of its linens in service on an ongoing
      basis. In order to satisfy its initiative to provide customers with 100% order
      fill rates the Company has purchased a significant amount of additional linens,
      which results in linens being washed less often and therefore lasting longer.
      As
      a result, the Company determined that the actual useful life of its linens
      was
      longer than the estimated useful life previously used for amortization purposes
      in its financial statements. Effective April 30, 2006, the first day of its
      2006
      second fiscal quarter, the Company changed its estimate of the average useful
      life from 60 weeks to 63 weeks to reflect the estimated periods during which
      these linens will remain in service. The effect of this change was to reduce
      2006 third quarter and year to date linen amortization expense by $505,000
      and
      $804,000, respectively; increase 2006 third quarter and year to date net income
      by $312,000 and $497,000, respectively; and increase 2006 third quarter and
      year
      to date income per share (both basic and diluted) by $0.03 and $0.05,
      respectively.





5




NOTE
      2.  SHARE-BASED PAYMENTS





The
      Company has various stock option and stock bonus plans that provide for the
      granting of incentive stock options, non-qualified stock options, restricted
      stock and performance awards to certain employees and directors. A total of
      1,975,000 shares have been authorized to be issued under all such plans. In
      addition, on October 31, 2006, shareholders approved an amendment to one of
      these performance plans that increased the authorized number of shares to be
      issued by 250,000 shares. Options and awards have been granted at or above
      the
      fair market value at the date of grant, although certain plans allow for awards
      to be granted at a price below fair market value. Options vest over four years
      except for those granted in fiscal 2004 and 2005 which vest in six months,
      and
      are exercisable not less than six months or more than 10 years after the date
      of
      grant. Restricted shares granted to non-employee directors generally vest over
      one to three years. Restricted shares granted to employees generally represent
      performance-contingent awards that vest at the end of three years upon the
      attainment of certain earnings performance goals, with the exception of certain
      retainer awards granted in the third quarter of fiscal 2006 that vest over
      a ten
      year period upon the attainment of certain earnings performance
      goals.





Effective
      January 29, 2006, the first day of fiscal 2006, the Company adopted Statement
      of
      Financial Accounting Standards No. 123 (revised 2004) “Share-Based Payment”
(SFAS 123(R)) using the modified prospective method of adoption, which does
      not
      require restatement of prior periods. Under the modified prospective method,
      the
      Company is required to record compensation expense for all awards granted after
      the date of adoption and for the unvested portion of previously granted awards
      that remain outstanding at the date of adoption, net of an estimate of expected
      forfeitures. Under SFAS 123(R), compensation expense is based on the estimated
      fair values of stock options and restricted stock determined on the date of
      grant and is recognized over the related vesting period. For
      performance-contingent restricted stock, if it is determined that the
      performance contingency will not be satisfied, any previously recognized
      compensation expense is reversed in the period such determination is made.
      As of
      January 17, 2006, the Board of Directors approved the accelerated vesting of
      64,334 unvested stock options. The exercise price of these options was greater
      than the market price of the underlying stock on the date of modification.
      By
      accelerating the vesting of these options, approximately $173,000 and $43,000
      of
      compensation expense will not be incurred in fiscal years 2006 and 2007,
      respectively.  The
      adoption of SFAS No. 123(R) did not have a material impact on the consolidated
      financial statements.





The
      Company determines the fair value of its restricted stock awards based on the
      market price of its common stock on the date of grant. Restricted stock activity
      for the nine months ended October 28, 2006 was as follows:





Shares
            
            Weighted
                Average Grant Date Fair ValueNonvested
                at January 29, 2006
            
            
            141,972
            
            $
            25.64Granted
            
            
            227,238
            
            
            16.80Vested
            
            
            (13,878
            )
            
            21.22Forfeited
            
            
            (55,802
            )
            
            22.69Nonvested
                at October 28, 2006
            
            
            299,530
            
            $
            19.69




6




The
      Company estimates the fair value of its option awards on the date of grant
      using
      the Black-Scholes option pricing model. No options were granted in the third
      quarter or nine months ended October 28, 2006. For the nine months ended October
      29, 2005, the Company granted 106,500 options with a weighted average fair
      value
      of $6.94, using the Black-Scholes model and the following assumptions: risk-free
      interest rate of 4.04%; expected dividend yield of 3.8%; volatility of 31.4%
      and
      expected lives of nine to ten years. The risk-free interest rate was based
      on
      external data while all other assumptions were determined based on the Company’s
      historical experience with stock options. Activity in the Company’s stock option
      plans for the nine months ended October 28, 2006 was as follows:


Shares
              
              Weighted
                  Average Exercise Price
              
              Weighted
                  Average Remaining Contractual Term (Years)
              
              Aggregate
                  Intrinsic ValueOptions
                  outstanding at January 29, 2006
              
              
              813,675
              
              $
              21.77
              
              
              6.1Granted
              
              
              -
              
              
              -Exercised
              
              
              (21,325
              )
              
              13.46Forfeited
              
              
              (30,975
              )
              
              29.19Expired
              
              
              (127,000
              )
              
              20.38Options
                  outstanding at October 28, 2006
              
              
              634,375
              
              $
              21.96
              
              
              6.4
              
              $
              1,415,000Options
                  exercisable at October 28, 2006
              
              
              632,875
              
              $
              21.97
              
              
              6.4
              
              $
              1,410,000





Cash
      proceeds, tax benefits and intrinsic value related to total stock options
      exercised during the third quarter and first nine months of 2006 and 2005 were
      as follows:




Third
                  Quarter Ended
              
              Nine
                  Months EndedOctober
                  28,
              
              October
                  29,
              
              October
                  28,
              
              October
                  29,2006
              
              2005
              
              2006
              
              2005Proceeds
                  from stock options exercised
              
              $
              34,000
              
              $
              207,000
              
              $
              287,000
              
              $
              1,621,000Tax
                  benefits related to stock options exercised
              
              $
              -
              
              $
              98,000
              
              $
              -
              
              $
              763,000Intrinsic
                  value of stock options exercised
              
              $
              21,000
              
              $
              255,000
              
              $
              130,000
              
              $
              1,983,000





The
      Company did not realize a tax benefit related to the exercise of stock options
      in the third quarter or first nine months of fiscal 2006 as there was no taxable
      income for the benefit to offset due to net operating loss and tax credit
      carryovers.





Prior
      to
      March 24, 2006, the Company generally issued shares from treasury stock to
      satisfy restricted stock awards and stock option exercises. Effective on that
      date, the Company began issuing new shares to satisfy such awards and
      exercises.





Total
      compensation expense charged to income for all stock option and stock bonus
      plans during the third quarter and nine months ended October 28, 2006 was
      $130,000 and $500,000, respectively (net of $81,000 and $309,000 related income
      taxes). During the third quarter and nine months ended October 29, 2005, the
      Company recognized (income) expense of $(384,000) and $152,000 for restricted
      stock and performance-based awards, respectively (net of $27,000 and $178,000
      related income taxes). The total compensation expense related to nonvested
      stock
      options and awards not yet recognized is currently expected to be a combined
      total of approximately $2,906,000. This cost is expected to be recognized over
      a
      weighted average period of 4.9 years. Substantially all of the Company’s current
      quarter and expected future stock-based compensation expense is related to
      restricted stock awards.





7




Prior
      to
      the adoption of SFAS 123(R), the Company measured compensation expense for
      stock-based compensation plans using the intrinsic value-based method of
      accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting
      for Stock Issued to Employees” (APB 25), and followed the disclosure-only
      provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as
      amended by SFAS No. 148, “Accounting for Stock-Based Compensation - Transition
      and Disclosure.” Accordingly, no compensation expense was recognized for
      stock-based compensation plans other than for restricted stock and
      performance-based awards. Had compensation expense for stock-based compensation
      plans for the third quarter and nine months ended October 29, 2005 been
      determined consistent with SFAS No. 123, the Company’s net income and earnings
      per share would approximate the following pro forma amounts:


Third
              
              Nine
                  MonthsQuarter
                  Ended
              
              EndedOctober
                  29,
              
              October
                  29,(Dollars
                  in thousands, except per share amounts)
              
              2005
              
              2005Net
                  loss:As
                  reported
              
              $
              (381
              )
              $
              (295
              )Add:
                  stock-based employee compensation (credit) expense included in
                  net loss,
                  net of tax
              
              
              (384
              )
              
              152Deduct:
                  stock-based employee compensation credit (expense) determined under
                  fair-value based method for all awards, net of tax
              
              
              543
              
              
              (788
              )Pro
                  forma net loss
              
              $
              (222
              )
              $
              (931
              )Basic
                  loss per share:As
                  reported
              
              $
              (0.04
              )
              $
              (0.03
              )Pro
                  forma
              
              
              (0.02
              )
              
              (0.10
              )Diluted
                  loss per share:As
                  reported
              
              $
              (0.04
              )
              $
              (0.03
              )Pro
                  forma
              
              
              (0.02
              )
              
              (0.10
              )





NOTE
      3.  ACQUISITIONS





On
      March
      21, 2005, the Company acquired one hundred percent of the issued and outstanding
      shares of common stock and warrants of Royal Institutional Services, Inc. and
      its affiliate, The Surgi-Pack Corporation (together “Royal”). The total purchase
      price of $45,179,000, plus an additional $713,000 of related acquisition costs,
      was paid in cash and was funded through long-term borrowings. The net assets
      acquired consisted primarily of working capital, leasehold interests in two
      operating facilities and the related equipment, customer contracts and
      goodwill.





8





The
      results of operations of Royal are included in the Company’s Consolidated
      Statements of Income since the date of acquisition on March 21, 2005. Unaudited
      pro forma consolidated revenues for the nine months ended October 29, 2005,
      assuming the Royal acquisition had been completed as of the beginning of the
      period, totaled $320,072,000, and unaudited pro forma consolidated income from
      continuing operations amounted to $1,076,000 or $0.12 per diluted share. These
      pro forma amounts are not necessarily indicative of the consolidated results
      of
      operations that would have occurred had this acquisition been made at the
      beginning of fiscal 2005.





NOTE
      4.  NON-OPERATING INCOME, NET





In
      the
      first nine months of fiscal 2006, the Company recorded non-operating income
      of
      $567,000 which included a $281,000 loss related to a natural gas derivative
      (see
      Note 11) offset by interest income and a gain of $184,000 from the death benefit
      of a Company-owned life insurance policy.





In
      the
      first nine months of fiscal 2005, the Company recorded non-operating income
      of
      $1,179,000 which included $158,000 income related to a natural gas derivative
      and $360,000 from the second cash distribution received in connection with
      the
      liquidation of the parent company of an issuer of life insurance policies owned
      by the Company following its demutualization in 2000. These distributions did
      not affect the life insurance policies or their cash surrender value. The
      Company does not anticipate any further significant distributions from this
      liquidation.





Non-operating
      income, net, also includes interest earned on invested cash balances and notes
      receivable.





NOTE
      5.  INCOME TAXES





The
      Company recorded a tax benefit of $1,228,000 from continuing operations for
      the
      nine months ended October 28, 2006. This benefit consisted of $249,000 based
      upon the Company’s estimated effective tax rate of 28.8% for the year, $479,000
      from federal and state credits, and $500,000 from the release of certain tax
      contingency reserves and other discrete adjustments including the impact of
      state tax law changes and true-ups following the filing of the fiscal 2005
      tax
      return. The effective tax rate of 28.8% on income from continuing operations
      for
      the nine months ended October 28, 2006, reflects the statutory tax rate adjusted
      for permanent items and state tax benefits, as applicable.





Management
      has established accruals for tax contingencies for exposures associated with
      tax
      deductions and return filing positions which may be challenged. The ultimate
      disposition of any of these items is not expected to have a material impact
      on
      the Company’s financial condition, but may be material to the period of
      resolution. The tax contingency accruals are reviewed quarterly and adjusted
      as
      necessary in light of changing circumstances. During the third quarter of fiscal
      2006, tax contingency reserves of $308,000 were released as a discrete item
      following this review due to the expiration of the tax statute.





The
      Company has a federal net operating loss carryover of $26,370,000 which will
      expire beginning in 2025; $3,734,000 of federal tax credit carryover which
      expires at various dates beginning in 2022 or have no expiration date;
      $8,659,000 of state tax credit carryover which expires at various dates
      beginning in 2012 or have no expiration date; and various other charitable
      contribution carryovers, tax credits and state net operating loss
      carryovers.





9





In
      assessing the adequacy of the deferred tax assets, the Company considers whether
      it is more likely than not that some portion or all of the deferred tax assets
      will not be realized. The Company considers projected future taxable income
      and
      tax planning strategies in making this assessment.





NOTE
      6.  COMMITMENTS AND CONTINGENCIES





Prior
      to
      its sale of the Life Uniform retail business segment to Healthcare Uniform
      Company, Inc. in fiscal 2004, the Company was a guarantor under certain Life
      Uniform store lease agreements. These guarantees obligated the Company to make
      all payments due under the leases until their expiration in the event of default
      of Life Uniform. In connection with the sale of Life Uniform, the Company
      requested consents, as required, from landlords to assign the store leases
      to
      Healthcare Uniform Company. As a condition to such consents, certain landlords
      required that the Company continue as a guarantor of the leases. Under the
      Company’s agreement with Healthcare Uniform Company, these guarantees will only
      extend until the end of each lease’s then current term. As of October 28, 2006,
      the Company is secondarily obligated as a guarantor for 54 store lease
      agreements and the estimated maximum potential amount of future payments the
      Company could be required to make under these guarantees is $9,079,000. Although
      these guarantees expire at various dates through fiscal year 2014, approximately
      62% of the estimated maximum potential future payments expire by the end of
      fiscal year 2008.





The
      Company has provided certain indemnities to the buyer in connection with the
      sale of Life Uniform. Although indemnification claims are generally subject
      to
      an aggregate limit of $6,000,000, the Company believes the likelihood of making
      any payments for indemnification claims is remote and has reserved
      accordingly.





In
      connection with the March 2005 Royal acquisition (see Note 3), a portion of
      the
      purchase price was placed into escrow, with payment to the sellers contingent
      upon the occurrence of certain events as specified in the purchase agreement.
      As
      of October 28, 2006, $2,000,000 remained in escrow. Of this amount, $1,000,000
      is due the sellers in March 2015 upon compliance with the restrictive covenants.
      The sellers are also scheduled to receive $1,000,000 in March 2007 absent
      indemnification claims.





The
      Company faces a possible exposure to outstanding workers’ compensation claims
      incurred prior to fiscal 1999 that were sold to a former insurance carrier,
      in
      addition to exposure for deposits with that carrier for claims incurred in
      fiscal years 1999, 2000 and 2001 that have not yet been resolved and for claims
      in excess of the deductible for fiscal years 1999, 2000, 2001 and 2002. This
      carrier is experiencing financial difficulties and may be unable to fulfill
      its
      obligation to pay these claims, which could have a material unfavorable impact
      on the Company’s results of operations and financial condition if it is forced
      to assume these liabilities. The Company estimates its possible exposure from
      these outstanding claims and deposits to be approximately $940,000 as of October
      28, 2006.





10





The
      Company faces some significant risk and uncertainty to its business operations
      related to the status of labor relations at its service centers. Approximately
      75% of the Company’s workforce is represented by one of several unions. In May
      2006, the Company and UNITE HERE reached agreement on and renewed collective
      bargaining agreements covering service centers in Colton and San Diego,
      California, and covering several service centers in the Los Angeles, California
      area. In addition, the Company and UNITE HERE reached agreement on collective
      bargaining agreements at seven service centers that were organized in the last
      half of fiscal 2005; these agreements were ratified by the membership and
      finalized as of the end of the second quarter of fiscal 2006. Late in the second
      quarter of fiscal 2006, the Company and UNITE HERE negotiated a renewal
      agreement for the Company’s service center in Rockmart, Georgia that has been
      ratified and finalized. Collectively, these new and renewal agreements apply
      to
      approximately 34% of the Company’s workforce. At four other service centers,
      collective bargaining agreements covering production employees are scheduled
      to
      expire in late fiscal 2006; the process of renegotiating these agreements has
      been initiated. These contracts apply to approximately 20% of the Company’s
      workforce. Any work interruptions or stoppages that may result from the
      inability to reach ratified agreements at any, some or all of these locations
      could have a material adverse impact on the Company’s results of operations and
      financial condition.





The
      Company is a party to various claims and legal proceedings which arose in the
      ordinary course of its business. Although the ultimate disposition of these
      proceedings is not presently determinable, management does not believe that
      an
      adverse determination in any or all of such proceedings will have a material
      adverse effect upon the consolidated financial condition or operating results
      of
      the Company.




NOTE
      7.  DISCONTINUED OPERATIONS





During
      the third quarter of fiscal 2005, the Company made the decision to close its
      Columbia, Illinois service center and exit the St. Louis market. The service
      center’s customer contracts, personal property and real estate were sold prior
      to the end of fiscal 2005. The results of operations and cash flows for the
      service center are segregated and reported as discontinued operations for all
      periods presented in this report.





NOTE
      8.  EARNINGS (LOSS) PER SHARE





Basic
      earnings (loss) per share is computed by dividing net income (loss) by the
      weighted average number of shares of Common Stock outstanding during the period.
      Diluted earnings (loss) per share is computed by dividing net income (loss)
      by
      the weighted average number of Common and Common equivalent shares
      outstanding.





The
      following table reconciles weighted average shares outstanding to amounts used
      to calculate basic and diluted earnings (loss) per share for the third quarter
      and nine months ended October 28, 2006 and October 29, 2005 (shares in
      thousands):





11


Third
                  Quarter Ended
              
              Nine
                  Months EndedOctober
                  28,
              
              October
                  29,
              
              October
                  28,
              
              October
                  29,2006
              
              2005
              
              2006
              
              2005Weighted
                  Average Shares:Average
                  shares outstanding
              
              
              9,191
              
              
              9,132
              
              
              9,179
              
              
              9,079Effect
                  of dilutive securities
              
              
              31
              
              
              217
              
              
              38
              
              
              268Average
                  shares outstanding, adjusted for dilutive effects
              
              
              9,222
              
              
              9,349
              
              
              9,217
              
              
              9,347




NOTE
      9.  GOODWILL AND OTHER ACQUIRED ASSETS




In
      accordance with SFAS No. 142, "Goodwill and Other Intangible Assets,” the
      Company performed its annual goodwill impairment test at the end of the third
      quarter of fiscal 2006 which resulted in no indication of
      impairment.





Other
      acquired assets consisted of the following (dollars in thousands):





October
                  28, 2006
              
              January
                  28, 2006Gross
              
              
              
              Other
              
              Gross
              
              
              
              OtherCarrying
              
              Accumulated
              
              Acquired
              
              Carrying
              
              Accumulated
              
              AcquiredAmount
              
              Amortization
              
              Assets,
                  net
              
              Amount
              
              Amortization
              
              Assets,
                  netCustomer
                  contracts
              
              $
              41,724
              
              $
              (10,471
              )
              $
              31,253
              
              $
              42,094
              
              $
              (8,290
              )
              $
              33,804Non-compete
                  covenants
              
              
              11,089
              
              
              (3,463
              )
              
              7,626
              
              
              11,089
              
              
              (2,423
              )
              
              8,666Other
                  acquired assets
              
              $
              52,813
              
              $
              (13,934
              )
              $
              38,879
              
              $
              53,183
              
              $
              (10,713
              )
              $
              42,470





Aggregate
      amortization expense for the nine months ended October 28, 2006 and October
      29,
      2005 amounted to $3,221,000 and $2,952,000, respectively. Other acquired assets
      are scheduled to be fully amortized by fiscal year 2020 with corresponding
      annual amortization expense estimated for each of the next five fiscal years
      as
      follows (dollars in thousands):





2006
            
            $
            4,2812007
            
            
            4,1662008
            
            
            3,8132009
            
            
            3,5042010
            
            
            3,038





NOTE
      10.  LONG TERM DEBT





The
      Company’s long-term bank borrowings are financed through a $150,000,000
      revolving credit facility under a loan agreement that matures on November 30,
      2010. Amounts borrowed under the credit facility bear interest at a floating
      rate equal to either (i) LIBOR plus a margin, or (ii) a Base Rate, defined
      as
      the higher of either (a) the Federal Funds Rate plus 0.50% or (b) the Prime
      Rate. The margin for the LIBOR rate option is based on the Company’s ratio of
“Funded Indebtedness” to “EBITDA,” as each is defined in the loan agreement, and
      may range from 2.0% to 2.75%. The LIBOR interest rate option may be selected
      for
      periods of 1 to 3 months, 6 months or 12 months. The Company has fixed the
      interest rate on $10,000,000 of the credit facility borrowings with an interest
      rate swap agreement that extends through May 2007.





12





As
      of
      October 28, 2006, there was $82,600,000 of outstanding debt under the credit
      facility, secured by a first lien on all equipment, inventory, and accounts
      receivable, and certain real estate. Of this amount, $10,000,000 bore interest
      at a fixed rate of 3.58% pursuant to the interest rate swap agreement plus
      the
      LIBOR margin under the credit facility, which was 2.75% as of October 28, 2006.
      Of the remaining debt, $72,500,000 bore interest at rates ranging from 5.32%
      to
      5.56% under LIBOR contracts, plus a margin (2.75% as of October 28, 2006),
      and
      $100,000 bore interest at 8.25%, the Prime Rate, as of October 28, 2006.
      Furthermore, the Company had $13,702,000 outstanding in irrevocable letters
      of
      credit as of October 28, 2006, which reduced the amount available to borrow
      under the line of credit to $23,382,000. As of October 28, 2006, the fee on
      the
      outstanding letters of credit and unused funds was 2.75% and 0.375%,
      respectively.





The
      Company is subject to certain financial covenants under its loan agreement.
      One
      of these covenants requires that the Company maintain a minimum consolidated
      net
      worth of $120,920,000 plus an aggregate amount equal to 50% of quarterly net
      income beginning with the fourth quarter of fiscal 2005 (with no reduction
      for
      net losses), and an asset coverage ratio of no less than 1 to 1. Other covenants
      require the Company to maintain a minimum ratio of “EBITDA” to “Fixed Charges”
of no less than 1.05 to 1, increasing to 1.15 to 1 effective October 31, 2006,
      and a maximum ratio of “Funded Indebtedness” to “EBITDA” of no more than 4.0 to
      1, decreasing to 3.5 to 1 effective January 31, 2010. An amendment to the loan
      agreement was executed on July 28, 2006 that modified certain definitions
      related to the financial covenants. The Company was in compliance with these
      loan covenants as of October 28, 2006.





As
      of
      October 28, 2006, there were $29,972,000 of life insurance policy loans
      outstanding. The loans bear interest at a fixed rate of 8.0% or variable rates
      ranging from 5.4% to 6.3%. The proceeds upon surrender of the policies will
      be
      reduced by the amount of any loans outstanding, unless repaid by the Company
      prior to that time. The total amount borrowed is netted against cash surrender
      value of life insurance in the Consolidated Balance Sheets as of October 28,
      2006 and January 28, 2006.




NOTE
      11.  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES




The
      Company entered into an interest rate swap agreement with one of its lenders
      effective September 9, 2002. The swap agreement fixes the variable portion
      of
      the interest rate (excluding a margin) at 3.58% on $10,000,000 of the
      outstanding debt under the Company’s revolving credit facility until the swap’s
      termination on May 30, 2007. The Company has elected to apply cash flow hedge
      accounting for the interest rate swap agreement in accordance with SFAS No.
      133,
“Accounting for Derivative Instruments and Hedging Activities.” Accordingly, the
      derivative is recorded as an asset or liability at its fair value and the
      effective portion of changes in the fair value of the derivative, as measured
      quarterly, is reported in accumulated other comprehensive income. The (loss)
      gain on the derivative included in accumulated other comprehensive loss in
      the
      third quarter ended October 28, 2006 and October 29, 2005 amounted to $(31,000)
      and $32,000, respectively, net of tax; and $(33,000) and $121,000 for the nine
      months ended October 28, 2006 and October 29, 2005, respectively, net of tax.
      The Company has recorded a long-term asset of $110,000 and $165,000 for the
      fair
      value of the derivative as of October 28, 2006 and January 28, 2006,
      respectively.





13





Since
      October 2005, the Company has entered into natural gas futures contracts to
      fix
      the price for a portion of its future purchases of natural gas and reduce its
      exposure to volatility in the cost of natural gas consumed by its service
      centers due to fluctuations in the price on the New York Mercantile Exchange
      (NYMEX). These futures contracts combined are expected to hedge approximately
      62% of the Company’s total requirements for natural gas (measured at current
      usage rates) for 2006 and 2007 fiscal years, and approximately 40% and 15%
      of
      the Company’s natural gas requirements, respectively, in 2008 and 2009. As of
      October 28, 2006, the weighted-average cost of natural gas under these contracts
      for the remainder of their term is $9.55 per decatherm. The Company has elected
      to apply cash flow hedge accounting for these derivatives in accordance with
      SFAS No. 133. Accordingly, the net (loss) gain on the derivatives included
      in
      accumulated other comprehensive loss for the third quarter and nine months
      ended
      October 28, 2006, amounted to $(1,587,000) and $(2,489,000), respectively,
      net
      of tax, and $302,000, net of tax, for the third quarter and nine months ended
      October 29, 2005. Prior to the second quarter of fiscal 2006, a portion of
      the
      Company’s natural gas derivatives were not considered a cash flow hedge for
      accounting purposes. The change in fair market value for these derivatives
      was
      included in non-operating income, net for the nine months ended October 28,
      2006, and amounted to a loss of $281,000. The Company has recorded a current
      liability of $2,887,000 and $914,000 as of October 28, 2006 and January 28,
      2006, respectively, and a long-term liability of $2,140,000 and $340,000 as
      of
      October 28, 2006 and January 28, 2006, respectively, for the fair value of
      the
      derivatives. The Company estimates that $2,894,000 of unrealized losses included
      in accumulated other comprehensive loss before taxes as of October 28, 2006
      will
      be reclassified to cost of services within the next 12 months as natural gas
      is
      purchased for consumption in the service centers.





In
      addition to the futures contracts, the Company has existing contracts as of
      October 28, 2006 for the physical delivery of natural gas that fix the NYMEX
      cost of gas for approximately 3% of its estimated natural gas purchase
      requirements in the next 12 months, and that fix the basis cost of gas for
      approximately 81% of its estimated natural gas purchase requirements in the
      next
      12 months. Although these contracts are considered derivative instruments,
      they
      meet the normal purchases exclusion contained in SFAS No. 133, as amended by
      SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging
      Activities,” and SFAS No. 149, “Amendment of Statement 133 on Derivative
      Instruments and Hedging Activities,” and are therefore exempted from the related
      accounting requirements.





NOTE
      12.  COMPREHENSIVE INCOME (LOSS)





Comprehensive
      income (loss), consisting primarily of net income (loss) and changes in the
      fair
      value of derivatives (see Note 11), net of taxes, totaled $956,000 and $(47,000)
      for the third quarter ended October 28, 2006 and October 29, 2005, respectively;
      and $(2,162,000) and $128,000 for the nine months ended October 28, 2006 and
      October 29, 2005, respectively.





14




NOTE
      1 3. 
      RETIREMENT BENEFITS





The
      Company has a non-contributory defined benefit pension plan covering primarily
      all salaried and hourly administrative non-union personnel who had met
      participation requirements prior to September 1, 2004. The benefit formula
      is
      based on years of service and compensation during employment. The funding policy
      of the pension plan is in accordance with the requirements of the Employee
      Retirement Income Security Act of 1974. The Company amended the pension plan,
      effective September 1, 2004, to freeze participation in the plan. No employee
      shall become a participant in the pension plan on or after that
      date.





The
      net
      periodic pension expense recognized in the third quarter and nine months ended
      October 28, 2006 and October 29, 2005 was as follows:


Third
                  Quarter Ended
              
              Nine
                  Months EndedOctober
                  28,
              
              October
                  29,
              
              October
                  28,
              
              October
                  29,(Dollars
                  in thousands)
              
              2006
              
              2005
              
              2006
              
              2005Pension
                  expense:Service
                  cost
              
              $
              (3
              )
              $
              105
              
              $
              223
              
              $
              315Interest
                  cost
              
              
              308
              
              
              316
              
              
              932
              
              
              950Expected
                  return on plan assets
              
              
              (322
              )
              
              (333
              )
              
              (966
              )
              
              (999
              )Amortization
                  of prior service cost
              
              
              -
              
              
              5
              
              
              -
              
              
              15Recognized
                  actuarial loss
              
              
              17
              
              
              -
              
              
              51
              
              
              -Net
                  periodic pension expense
              
              $
              -
              
              $
              93
              
              $
              240
              
              $
              281





An
      adjustment was made in the third quarter of fiscal 2006 to reflect final
      actuarial calculations for the pension plan’s 2006 plan year. The decrease in
      expense is reflective of the reduced number of active plan participants as
      of
      January 1, 2006. Total expense for fiscal 2006 is expected to be approximately
      $320,000. In addition, the Company currently expects to contribute $1,988,000
      to
      the pension plan in fiscal 2006.





NOTE
      14.  NEW ACCOUNTING PRONOUNCEMENTS





In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154,
“Accounting Changes and Error Corrections.” SFAS No. 154 replaces APB Opinion
      No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in
      Interim Financial Statements,” and changes the requirements for the accounting
      for and reporting of a voluntary change in accounting principle. This statement
      requires retrospective application to prior periods’ financial statements of
      changes in accounting principle, unless it is impracticable to determine either
      the period-specific effects or the cumulative effect of the change, instead
      of
      including in net income of the period of the change the cumulative effect of
      changing to the new accounting principle. SFAS No. 154 is effective for the
      Company’s fiscal year ending January 27, 2007.





15





In
      February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments” which amends SFAS No. 133, “Accounting for Derivative
      Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers
      and Servicing of Financial Assets and Extinguishment of Liabilities.” SFAS No.
      155 simplifies the accounting for certain derivatives embedded in other
      financial instruments by allowing them to be accounted for as a whole if the
      holder elects to account for the whole instrument on a fair value basis. SFAS
      No. 155 also clarifies and amends certain other provisions of SFAS No. 133
      and
      SFAS No. 140. SFAS No. 155 is effective for the Company’s fiscal year ending
      January 26, 2008. Earlier adoption is permitted, provided the Company has not
      yet issued financial statements, including for interim periods, for that fiscal
      year. The Company does not expect the adoption of SFAS No. 155 to have a
      material impact on its consolidated financial statements.





In
      June
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes” (FIN 48), which clarifies the accounting for uncertainty in income
      taxes recognized in the financial statements in accordance with SFAS No. 109,
      “Accounting for Income Taxes.” FIN 48 provides guidance on the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. FIN 48 also provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosures, and transition. FIN 48 is effective for the Company’s fiscal year
      ending January 26, 2008. The Company is currently evaluating the impact of
      this
      standard on its consolidated financial statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
      establishes a framework for measuring the fair value of assets and liabilities.
      This framework is intended to provide increased consistency in how fair value
      determinations are made under various existing accounting standards which
      permit, or in some cases require, estimates of fair market value. SFAS No.
      157
      also expands financial statement disclosure requirements about a company’s use
      of fair value measurements, including the effect of such measures on earnings.
      SFAS No. 157 is effective for the Company’s fiscal year ending January 31, 2009.
      The Company does not expect the adoption of SFAS No. 157 to have a material
      impact on its consolidated financial statements.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans,” which amends SFAS No. 87,
“Employers’ Accounting for Pensions,” SFAS No. 88, “Employers’ Accounting for
      Settlements and Curtailments of Defined Benefit Pension Plans and for
      Termination Benefits,” SFAS No. 106, “Employers’ Accounting for Postretirement
      Benefits Other than Pensions” and SFAS No. 132 (revised 2003), “Employers’
Disclosures about Pensions and Other Postretirement Benefits.” SFAS No. 158
      requires that employers recognize on a prospective basis the funded status
      of
      their defined benefit pension and other postretirement plans on their
      consolidated balance sheet and recognize as a component of other comprehensive
      income, net of tax, the gains or losses and prior service costs or credits
      that
      arise during the period but are not recognized as components of net periodic
      benefit cost. Based on the funded status of the Company’s defined benefit
      postretirement plan as of January 1, 2006, the Company would be required to
      recognize an additional pension obligation of approximately $1,200,000,
      resulting in a charge to accumulated other comprehensive loss. This aspect
      of
      SFAS No. 158 is effective for the Company’s current fiscal year ending January
      27, 2007. The statement also requires that employers measure plan assets and
      obligations as of the date of their year-end financial statements beginning
      with
      the Company’s fiscal year ending January 31, 2009. The Company has not yet
      determined the impact that this portion of SFAS No. 158 will have on its
      consolidated balance sheets.





16





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB
      108 provides interpretive guidance on how the effects of prior year uncorrected
      misstatements should be considered when quantifying misstatements in the current
      year financial statements. SAB 108 requires registrants to quantify
      misstatements using both an income statement (“rollover”) and balance sheet
      (“iron curtain”) approach and evaluate whether either approach results in a
      misstatement that, when all relevant quantitative and qualitative factors are
      considered, is material. If prior year errors that had been previously
      considered immaterial now are considered material based on either approach,
      no
      restatement is required so long as management properly applied its previous
      approach and all relevant facts and circumstances were considered. If prior
      years are not restated, the cumulative effect adjustment is recorded in opening
      retained earnings as of the beginning of the fiscal year of adoption. SAB 108
      is
      effective for the Company’s fiscal year ending January 27, 2007, with earlier
      adoption encouraged. The Company does not expect the adoption of SAB 108 to
      have
      a material impact on its consolidated financial statements.





17





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





THIRD
      QUARTER AND NINE MONTHS ENDED OCTOBER 28, 2006


COMPARED
      WITH


THIRD
      QUARTER AND NINE MONTHS ENDED OCTOBER 29, 2005








General




Angelica
      Corporation is a leading provider of outsourced linen management services to
      the
      healthcare industry in the United States. We offer comprehensive linen
      management services to the U.S. healthcare industry, including hospitals,
      long-term care facilities, surgery centers, medical clinics, dental offices,
      and
      other medical providers. Among the items that we clean and provide, on either
      a
      rental or customer-owned basis, are bed linens, towels, gowns, scrubs, surgical
      linens and surgical packs, as well as mops, mats and other dust control
      products. To a more limited extent, we also provide linen management services
      to
      customers in the hospitality business. Currently, we operate 30 laundry service
      centers and serve customers in 23 states.





Critical
      Accounting Policy - Linens in Service





We
      review
      our policy for amortizing linens in service on an ongoing basis. In order to
      satisfy our initiative to provide customers with 100% order fill rates we have
      purchased a significant amount of additional linens, which results in linens
      being washed less often and therefore lasting longer. As a result, we determined
      that the actual useful life of our linens was longer than the estimated useful
      life previously used for amortization purposes in our financial statements
      and,
      effective April 30, 2006, the first day of our 2006 second fiscal quarter,
      changed the estimate of the average useful life from 60 weeks to 63 weeks to
      reflect the estimated periods during which these linens will remain in service.
      The effect of this change was to reduce 2006 third quarter and year to date
      linen amortization expense by $0.5 million and $0.8 million, respectively;
      increase 2006 third quarter and year to date net income by $0.3 million and
      $0.5
      million, respectively; and increase 2006 third quarter and year to date income
      per share (both basic and diluted) by $0.03 and $0.05,
      respectively.





Results
      of Operations





*Third* *Quarter Ended October 28, 2006 Compared to Third Quarter Ended October 29,
      2005*





Third
      quarter fiscal 2006 revenues were $107.8 million, a slight increase of $0.2
      million, or 0.2%, compared with the same period in fiscal 2005. Organic growth
      from net new business additions and price increases contributed $3.8 million
      of
      the third quarter increase, representing an organic growth rate of 4.2%, while
      fiscal 2005 acquisitions contributed $1.1 million of the increase. These
      increases were substantially offset by the loss of $4.7 million of revenues
      due
      to the sale of non-healthcare customer accounts in fiscal 2005 and 2006.





18





Cost
      of
      services of $90.5 million in the third quarter of fiscal 2006 decreased $3.4
      million, or 3.6%, from the same year ago period. As a result of this $3.4
      million decrease and revenue pricing improvements, cost of services decreased
      to
      83.9% of revenues in the third quarter of fiscal 2006 from 87.2% in the prior
      year period. The current quarter decline consisted primarily of the
      following:


·
            Merchandise
                cost decreased from 17.7% of revenues in the third quarter of fiscal
                2005
                to 16.2% in the third quarter of fiscal 2006, or $1.5 million.
                Amortization expense related to higher targeted inventory ratios
                and
                increased linen purchases was more than offset by the revised useful
                life
                of new linens discussed above and higher revenue per pound, decreasing
                total merchandise costs as a percent of revenues. We also recognized
                in
                the third quarter fiscal 2006 a $0.2 million cumulative benefit of
                a
                vendor rebate program, as it became probable that current year purchases
                would exceed the threshold for earning the
                rebate.


·
            Production
                labor and fringe benefit costs decreased $0.6 million to 34.0% of
                revenues
                in the third quarter fiscal 2006 versus 34.6% in the prior year
                quarter.


·
            Utility
                expenses decreased $0.6 million to 9.2% of revenues in the third
                quarter
                fiscal 2006 versus 9.9% in the prior year quarter.


·
            Delivery
                expenses decreased $0.6 million from the third quarter of fiscal
                2005 to
                the third quarter of fiscal 2006. The transfer of certain customer
                contracts between service centers also helped reduce delivery
                expenses.





Gross
      margin has increased sequentially to 16.1% in the third quarter fiscal 2006
      from
      14.4%, 13.8% and 10.6% in the second quarter fiscal 2006, first quarter fiscal
      2006 and the fourth quarter fiscal 2005, respectively. The current quarter
      gross
      margin of 16.1% is up from 12.8% in the 2005 third quarter, reflecting our
      revenue pricing improvements combined with the favorable expense variances
      discussed above.





In
      the
      third quarter fiscal 2006, selling, general and administrative expenses
      increased by $2.6 million over third quarter fiscal 2005 to $13.4 million,
      or
      12.4% of revenues, compared to 10.0% of revenues a year ago. The increase in
      SG&A expenses resulted primarily from higher incentive compensation, bad
      debt and sales tax accruals of $0.9 million, a $0.7 million reversal of
      amortization expense related to our long-term incentive plan during the third
      quarter fiscal 2005, consulting fees of $0.4 million related to our operations
      process improvement (“OPI”) implementation, higher travel costs of $0.3 million
      related to the OPI implementation and increased sales initiatives, and legal
      and
      shareholder relation expenses of $0.2 million associated with the Board of
      Directors’ Special Committee. On August 30, 2006, we entered into settlement
      agreements with certain major shareholders with respect to the issues for which
      the Special Committee was organized. As part of the settlements, the Special
      Committee was disbanded.





19





In
      the
      third quarter of fiscal 2006, we reported other operating income of $2.4 million
      related primarily to the sale of certain real estate and the settlement received
      from the lawsuit that was initiated in connection with the Vallejo eminent
      domain proceedings in fiscal 2005, compared with income of $0.2 million in
      the
      third quarter fiscal 2005 primarily from a gain on the divestiture of
      non-healthcare business.





Interest
      expense in third quarter fiscal 2006 increased by $0.4 million to $2.5 million.
      The increase resulted primarily from higher interest rates, which increased
      from
      an average 6.2% per annum in the third quarter fiscal 2005 to an average 7.7%
      per annum in the third quarter fiscal 2006.





We
      recorded $0.2 million non-operating income in the third quarter of fiscal 2006,
      consisting primarily of interest income. During the third quarter of fiscal
      2005, we recorded $0.4 million non-operating income, which included $0.2 million
      income related to a natural gas derivative.





For
      the
      third quarter of fiscal 2006, we recorded an income tax provision of $0.4
      million compared to a benefit of $0.4 million in the third quarter of fiscal
      2005. The provision in the current fiscal quarter as compared to the benefit in
      prior fiscal quarter is due primarily to higher pretax income for the third
      quarter of fiscal 2006.





Income
      from continuing operations was $2.6 million in the third quarter of fiscal
      2006,
      up from $0.8 million in the prior year quarter. The increase was due primarily
      to the gross margin improvement and other operating income items explained
      above, partially offset by higher SG&A and interest costs.





Net
      loss
      for the third quarter of fiscal 2005 included a loss from discontinued
      operations of $1.2 million related to our Columbia, Illinois service center
      which was sold in the prior year.





*Nine
      Months Ended October 28, 2006 Compared to Nine Months Ended October 29,
      2005*





Revenues
      for the first nine months of fiscal 2006 of $320.1 million represented an
      increase of 2.2%, or $6.8 million, from $313.3 million in the first nine months
      fiscal 2005. Organic growth from net new business additions and price increases
      contributed $10.1 million of the increase, representing an organic growth rate
      of 3.7%, while fiscal 2005 acquisitions contributed $10.6 million of the
      increase. These increases were offset by the loss of $13.9 million of revenues
      due to the sale of non-healthcare customer accounts in fiscal 2005 and
      2006.





In
      the
      first nine months of fiscal 2006, cost of services increased from the same
      period in fiscal 2005 by $2.6 million, or 0.9%, to $272.9 million. The increase
      primarily reflected the year over year increase in operating volumes and higher
      energy prices for natural gas and delivery fuel. Because of revenue pricing
      improvements, cost of services declined to 85.3% of revenues from 86.3% in
      fiscal 2005, allowing gross margin to increase to 14.7% for the first nine
      months of fiscal 2006 from 13.7% in the prior year period.





20





For
      the
      first nine months of fiscal 2006, selling, general and administrative expenses
      increased $5.1 million to 12.9% of revenues from 11.5% of revenues in the same
      period a year ago. The increase in SG&A expenses resulted primarily from an
      increase in incentive compensation and bad debt accruals of $2.5 million,
      professional fees of $2.1 million related to our operations process improvement
      implementation and financial consulting projects, and legal and shareholder
      relation expenses of $0.8 million associated with the Board of Directors’
Special Committee. The first nine months fiscal 2005 also included $0.8 million
      associated with our evaluation of alternatives to our then existing debt
      structure and changes in our senior management, offset by a $0.7 million
      reversal of amortization expense related to our long-term incentive plan. On
      August 30, 2006, we entered into settlement agreements with certain major
      shareholders with respect to the issues for which the Special Committee was
      organized. As part of the settlements, the Special Committee was
      disbanded.





Amortization
      expense increased by $0.3 million to $3.2 million in the first nine months
      of
      fiscal 2006, reflecting the impact of intangible assets acquired during fiscal
      2005.





In
      the
      first nine months fiscal 2006, we reported other operating income of
      $ 2.9
      million, reflecting gains from the sale of three parcels of real estate and
      a
      settlement received from the lawsuit that was initiated in connection with
      the
      Vallejo eminent domain proceedings in fiscal 2005, compared to other operating
      income of $0.8 million in the first nine months of fiscal 2005, primarily from
      the divestiture of non-healthcare business.





Interest
      expense for the first nine months of fiscal 2006 increased $2.1 million to
      $7.1
      million. The increase resulted from a combination of higher interest rates
      and
      higher average borrowings. Interest rates increased from an average 5.4% per
      annum in the first nine months of fiscal 2005 to an average 7.4% per annum
      in
      the first nine months of fiscal 2006. Higher average debt levels for the first
      nine months of fiscal 2006 reflected the impact of March 2005 acquisition
      borrowings.





We
      recorded $0.6 million non-operating income in the first nine months of fiscal
      2006, which included interest income and a $0.2 million gain from the death
      benefit of a Company-owned life insurance policy, partially offset by a $0.3
      million loss related to a natural gas derivative. During the first nine months
      of fiscal 2005, we recorded non-operating income of $1.2 million, which included
      a $0.4 million distribution from the liquidation of the parent company of the
      issuer of life insurance policies we own, $0.2 million income related to a
      natural gas derivative, and interest income.





For
      the
      first nine months of fiscal 2006, we recorded a tax benefit of $1.2 million
      compared to a benefit of $0.3 million in the first nine months of fiscal 2005.
      The higher tax benefit is due primarily to a pretax loss in the first nine
      months of fiscal 2006 as compared to pretax income in the same period a year
      ago.





We
      reported income from continuing operations of $0.4 million in the first nine
      months of fiscal 2006, compared to income of $1.2 million in the first nine
      months of fiscal 2005. The decrease resulted primarily from higher professional
      fees and higher interest expense, as discussed above. These increases were
      partially offset by the increase in revenues resulting from prior year
      acquisitions and current year organic growth.





21





Net
      loss
      for the first nine months of fiscal 2005 included a loss from discontinued
      operations of $1.5 million related to our Columbia, Illinois service center
      which was sold in the prior year.





Financial
      Condition





As
      of
      October 28, 2006, working capital totaled $32.2 million and the current ratio
      ( *i.e.* ,
      the
      ratio of current assets to current liabilities) was 1.4 to 1, compared with
      $28.5 million and 1.4 to 1, respectively, at January 28, 2006. The increase
      in
      working capital reflects primarily a higher balance of linens in service as
      discussed below.





Accounts
      receivable decreased by $0.6 million in the first nine months fiscal 2006,
      due
      primarily to the collection of a miscellaneous receivable in the first quarter
      of fiscal 2006. Linens in service increased by $5.4 million as a result of
      a
      significant injection of linens into the system to increase our customer order
      fill rates and the related change in estimated useful life from 60 to 63 weeks,
      as explained above under “Critical Accounting Policy - Linens in
      Service”.





Accounts
      payable decreased by $3.7 million as higher payable balances at the beginning
      of
      the year were paid down to more normal levels. The higher balances at January
      28, 2006 were attributable to higher in-transit payments and the timing of
      certain invoices. The decline in accounts payable was offset by a $3.8 million
      increase in other accrued liabilities reflecting changes in the fair value
      of
      our natural gas derivatives as well as higher accrued interest and insurance
      reserves. Long-term debt of $82.6 million as of October 28, 2006 was $2.5
      million less than at January 28, 2006. Cash received near the end of the quarter
      related to a real estate sale and a lawsuit settlement provided funds to reduce
      our outstanding debt. Our ratio of total debt to total capitalization as of
      October 28, 2006 was 36.3% compared to 36.4% as of January 28, 2006. Book value
      per share at the end of third quarter fiscal 2006 was $15.31, a decline from
      $16.08 as of January 28, 2006.





Liquidity
      and Capital Resources





Cash
      flow
      provided by operating activities of continuing operations decreased $6.9 million
      for the first nine months ended October 28, 2006 compared with the same period
      a
      year ago. The current year decline resulted primarily from an unfavorable change
      in working capital components of $4.7 million, reflecting our increased linen
      purchases and paying down beginning of year accounts payable balances to more
      normal levels.




Cash
      flows from investing activities for the first nine months ended October 28,
      2006, included capital expenditures of $5.6 million, down from $16.1 million
      in
      the prior year period as we implement best practices systemwide before incurring
      discretionary capital expenditures. In the first nine months of fiscal 2006,
      we
      received net proceeds of $5.8 million from the disposal of assets and $0.5
      million from the death benefit of a Company-owned life insurance policy, the
      gain on which was recognized in the fourth quarter of fiscal 2005. Cash flows
      from investing activities for the first nine months ended October 29, 2005
      included $52.3 million of cost of businesses acquired, including cash paid
      for
      Royal Institutional Services, Inc. (“Royal”) and the final payment of $3.6
      million for the fiscal year 2004 acquisition of the Duke University Health
      System laundry.





22





Cash
      used
      in financing activities was $4.4 million in the first nine months of fiscal
      2006
      reflecting net debt repayments of $2.6 million under our loan agreement and
      dividend payments of $3.1 million, offset partially by borrowings of $1.1
      million from life insurance policy loans. In the first nine months of fiscal
      2005, cash provided by financing activities of $54.2 million reflected the
      net
      proceeds of $56.1 million from bank debt and life insurance policy loans, used
      primarily to fund the prior year acquisition of Royal and capital expenditures.
      In addition, proceeds from stock option exercises decreased from $1.4 million
      in
      the first nine months of fiscal 2005 to $0.3 million in the first nine months
      of
      fiscal 2006.





As
      of
      October 28, 2006, there was $82.6 million of debt outstanding under our credit
      facility. Of this amount, $10.0 million bore interest at a fixed rate of 3.58%
      pursuant to an interest rate swap agreement plus a margin under the credit
      facility (2.75% as of October 28, 2006). Of the remaining debt, $72.5 million
      bore interest at rates ranging from 5.32% to 5.56% under LIBOR contracts, plus
      a
      margin (2.75% at October 28, 2006), and $0.1 million bore interest at 8.25%,
      the
      Prime Rate, as of October 28, 2006.





In
      addition to amounts due under our loan agreement, at the end of the third
      quarter fiscal 2006 there were $30.0 million of life insurance policy loans
      outstanding. The proceeds of these loans, bearing interest at a fixed rate
      of
      8.0% or variable rates ranging from 5.4% to 6.3%, were used to pay down our
      revolving line of credit in fiscal 2005 and 2006. On October 28, 2006, we also
      had $13.7 million in irrevocable letters of credit outstanding, which reduced
      the amount available to borrow under the loan agreement to $23.4
      million.





We
      are
      subject to certain financial covenants under our loan agreement. The covenants
      require us to maintain a minimum consolidated net worth of $120.9 million plus
      an aggregate amount equal to 50% of quarterly net income beginning with the
      fourth quarter of fiscal 2005 (with no reductions for net losses), and an asset
      coverage ratio of no less than 1 to 1. We are also required to maintain a
      minimum ratio of “EBITDA” to “Fixed Charges” of no less than 1.05 to 1,
      increasing to 1.15 to 1 effective October 31, 2006, and a maximum ratio of
      “Funded Indebtedness” to “EBITDA” of no more than 4.0 to 1, decreasing to 3.5 to
      1 effective January 31, 2010. An amendment to the loan agreement was executed
      on
      July 28, 2006 that modified certain definitions related to the financial
      covenants. We were in compliance with these loan covenants as of October 28,
      2006.





23




Management
      believes that our financial condition, operating cash flow and available sources
      of external funds are sufficient to satisfy our requirements for debt service,
      capital expenditures, dividends and working capital over the course of the
      next
      12 months. However, if we pursue a large acquisition or are unable to achieve
      our forecasted operating results during the next twelve months, our forecasted
      cash flows could be negatively impacted requiring that we consider alternative
      funding sources in order to avoid violations of our loan covenants.





Recent
      Accounting Pronouncements





Effective
      January 29, 2006, the first day of fiscal 2006, we adopted Statement of
      Financial Accounting Standards No. 123 (revised 2004) “Share-Based Payment”
(SFAS 123(R)) using the modified prospective method of adoption, which does
      not
      require restatement of prior periods. Under the modified prospective method,
      we
      are required to record compensation expense for all awards granted after the
      date of adoption and for the unvested portion of previously granted awards
      that
      remain outstanding at the date of adoption, net of an estimate of expected
      forfeitures. Under SFAS 123(R), compensation expense is based on the estimated
      fair values of stock options and restricted stock determined on the date of
      grant and is recognized over the related vesting period. For
      performance-contingent restricted stock, if it is determined that the
      performance contingency will not be satisfied, any previously recognized
      compensation expense is reversed in the period such determination is made.
      As of
      January 17, 2006, the Board of Directors approved the accelerated vesting of
      64,334 unvested stock options. The exercise price of these options was greater
      than the market price of the underlying stock on the date of modification.
      By
      accelerating the vesting of these options, approximately $0.2 million and $0.1
      million of compensation expense will not be incurred in fiscal years 2006 and
      2007, respectively. Substantially all of our current quarter and expected future
      stock-based compensation expense is related to restricted stock awards. The
      total compensation expense related to nonvested stock options and awards not
      yet
      recognized is currently expected to be a combined total of approximately $2.9
      million. This cost is expected to be recognized over a weighted average period
      of 4.9 years. The adoption of SFAS No. 123(R) did not have a material impact
      on
      our consolidated financial statements.





24





**FORWARD-LOOKING
      STATEMENTS**





Any
      forward-looking statements made in this document reflect the Company's current
      views with respect to future events and financial performance and are made
      pursuant to the safe harbor provisions of the Private Securities Litigation
      Reform Act of 1995. Such statements are subject to certain risks and
      uncertainties that may cause actual results to differ materially from those
      set
      forth in these statements. These potential risks and uncertainties include,
      but
      are not limited to, competitive and general economic conditions, the ability
      to
      retain current customers and to add new customers in competitive market
      environments, competitive pricing in the marketplace, delays in the shipment
      of
      orders, availability of labor at appropriate rates, availability and cost of
      energy and water supplies, the cost of workers' compensation and healthcare
      benefits, the ability to attract and retain key personnel, the ability of the
      Company to recover its seller note and avoid future lease obligations as part
      of
      its sale of its former Life Uniform division, the ability of the Company to
      execute its operational strategies, unusual or unexpected cash needs for
      operations or capital transactions, the effectiveness of the Company’s
      initiatives to reduce key operating costs as a percent of revenues, the ability
      to obtain financing in required amounts and at appropriate rates and terms,
      the
      ability to identify, negotiate, fund, consummate and integrate acquisitions,
      and
      other factors which may be identified in the Company's filings with the
      Securities and Exchange Commission.





25





**Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk**





The
      Company is exposed to commodity price risk related to the use of natural gas
      in
      its laundry service centers. The total cost of natural gas in the third quarter
      and nine months ended October 28, 2006 was approximately $5.7 million and $18.4
      million, respectively. To reduce the uncertainty of fluctuating energy prices,
      the Company has entered into fixed-price contracts as of October 28, 2006 for
      approximately 68% of its estimated natural gas purchase requirements in the
      next
      12 months. A hypothetical 10% increase in the cost of natural gas not covered
      by
      these contracts would result in a reduction of approximately $0.8 million in
      annual pretax earnings.





The
      Company is also exposed to commodity price risk resulting from the consumption
      of gasoline and diesel fuel for delivery trucks. The total cost of delivery
      fuel
      in the third quarter and nine months ended October 28, 2006 was approximately
      $2.4 million and $6.8 million, respectively. A hypothetical 10% increase in
      the
      cost of delivery fuel would result in a decrease of approximately $0.9 million
      in annual pretax earnings.





The
      Company’s exposure to interest rate risk relates primarily to its variable-rate
      revolving debt agreement and life insurance policy loans. As of October 28,
      2006, there was $82.6 million of outstanding debt under the credit facility,
      of
      which $10.0 million bore interest at a fixed rate of 3.58% (plus a margin)
      under
      an interest rate swap agreement entered into by the Company with one of its
      lenders to moderate the exposure. Amounts borrowed under the credit facility
      in
      excess of the $10.0 million covered by the interest rate swap agreement bore
      interest at a rate equal to either (i) LIBOR plus a margin, or (ii) a Base
      Rate,
      defined as the higher of (a) the Federal Funds Rate plus .50% or (b) the Prime
      Rate. The margin is based on the Company’s ratio of “Funded Indebtedness” to
“EBITDA,” as each is defined in the Loan Agreement. As of October 28, 2006, the
      margin was 2.75%. Of the $30.0 million in life insurance policy loans
      outstanding as of October 28, 2006, a total of $24.1 million of these loans
      bore
      interest at variable rates ranging from 5.4% to 6.3%. A hypothetical increase
      of
      100 basis points in short-term interest rates applicable to the outstanding
      variable-rate debt not covered by the interest rate swap agreement would result
      in a reduction of approximately $1.0 million in annual pretax
      earnings.





**Item
      4.  Controls and Procedures**




The
      Company maintains a system of internal controls and procedures designed to
      provide reasonable assurance as to the reliability of the unaudited consolidated
      financial statements and other disclosures included in this report. The
      Company’s Board of Directors, operating through its Audit Committee which is
      composed entirely of independent Directors, provides oversight to the financial
      reporting process.





26








As
      of the
      end of the period covered by this report, the Company’s Chief Executive Officer
      and Chief Financial Officer evaluated the effectiveness of the design and
      operation of the Company’s disclosure controls and procedures (as defined in
      Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
      amended). Based upon their evaluation, the Chief Executive Officer and Chief
      Financial Officer concluded that the Company’s disclosure controls and
      procedures are effective in ensuring that material information relating to
      the
      Company, including its consolidated subsidiaries, is made known to them by
      others within those entities in a timely manner, particularly during the period
      for which this quarterly report is being prepared. The Chief Executive Officer
      and Chief Financial Officer also concluded based upon their evaluation that
      the
      Company’s disclosure controls and procedures are effective in ensuring that the
      information required to be disclosed by the Company in the reports that it
      files
      or submits under the Securities Exchange Act of 1934 is recorded, processed,
      summarized and reported, within the time periods specified in the Securities
      and
      Exchange Commission’s rules and forms.





There
      were no changes in the Company’s internal control over financial reporting
      during the Company’s most recent fiscal quarter that have materially affected,
      or are reasonably likely to materially affect, the Company’s internal control
      over financial reporting.





27





**PART
      II. OTHER INFORMATION**





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





At
      the
      October 31, 2006 Annual Meeting of Shareholders, each of the two nominees for
      directors of the Company was elected based on the following votes:





**Votes**
            
            **Votes****Name**
            
            **“For”**
            
            **“Withheld”**For
                terms expiring at the****2009
                Annual Meeting:Ronald
                J. Kruszewski
            
            
            8,618,971
            
            
            351,675Stephen
                M. O’Hara
            
            
            8,571,264
            
            
            399,382





Don
      W.
      Hubble, John J. Quicke and Ronald N. Riner, with terms ending in 2007, and
      James
      R. Henderson, Charles W. Mueller and Kelvin R. Westbrook, with terms ending
      in
      2008, all continue as directors of the Company.





The
      shareholders approved the amendment and restatement of the Angelica Corporation
      1999 Performance Plan. The tabulation was as follows: 5,995,027 voting for,
      1,891,178 voting against, 10,968 abstaining, and 1,073,473 broker
      non-votes.





The
      shareholders also approved the ratification of the appointment of Deloitte
&
Touche LLP as Angelica’s independent registered public accounting firm for the
      fiscal year 2006. The tabulation was as follows: 8,945,894 voting for, 5,823
      voting against, and 18,929 abstaining.





**Item
      6.  Exhibits**





(a)
            See
                Exhibit Index on page30.





28





SIGNATURES





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








Angelica
                Corporation(Registrant)Date:
                December 7, 2006
            /s/
                Stephen M. O’HaraStephen
                M. O’HaraChairman,
                President andChief
              Executive Officer/s/
                James W. ShafferJames
                W. ShafferVice
                President andChief
              Financial Officer(Principal
                Financial Officer)(Principal
                Accounting Officer)




29





**EXHIBIT
      INDEX**








ExhibitNumber
            Description*Asterisk
                indicates exhibits filed herewith.**Incorporated
                by reference from the document listed.3.1
            Restated
                Articles of Incorporation of the Company, as currently in effect.
                Filed as
                Exhibit 3.1 to the Form 10-K for the fiscal year ended January 26,
                1991.**3.2
            Amendment
                to Certificate of Designation, Preferences and Rights of Class B
                Series 2
                Junior Participating Preferred Stock. Filed as Exhibit 3.1 to a current
                report on Form 8-K on September 5, 2006.**3.3
            Current
                By-Laws of the Company, as amended and restated. Filed as Exhibit
                3.3 to
                the Form 10-Q for fiscal quarter ended July 29, 2006.**4.1
            Shareholder
                Rights Plan dated August 25, 1998. Filed as Exhibit 1 to Registration
                Statement on Form 8-A on August 28, 1998.**4.2
            Form
                of Amendment No. 1 to Rights Agreement, dated as of August 29, 2006,
                between Angelica Corporation and UMB Bank, N.A. Filed as Exhibit
                4.1 to a
                current report on Form 8-K on September 5, 2006.**4.3
            Form
                of Amendment No. 2 to Rights Agreement, dated September 19, 2006,
                by and
                between Angelica Corporation and UMB Bank, N.A. Filed as Exhibit
                4.1 to a
                current report on Form 8-K on September 22, 2006.**10.1
            Angelica
                Corporation 1999 Performance Plan, as amended and restated August
                29, 2006
                and approved by the shareholders of the Company on October 31, 2006.
                Filed
                as Appendix B to the Company’s Proxy Statement for the Annual Meeting of
                Shareholders held October 31, 2006, and reported on a current report
                on
                Form 8-K filed November 13, 2006.**10.2
            Letter
                agreements dated September 19, 2006 relating to cash compensation
                for
                retainer and board fees for Steel directors.*10.3
            Form
                of Special Restricted Stock Agreement under the 1999 Performance
                Plan.*10.4
            Employment
                Offer Letter by and between the Company and John Olbrych, dated November
                22, 2006.*31.1
            Section
                302 Certification of Chief Executive Officer.*31.2
            Section
                302 Certification of Chief Financial Officer.*32.1
            Section
                906 Certification of Chief Executive Officer.*32.2
            Section
                906 Certification of Chief Financial
                Officer.*





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