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
                FileApril
                28,
                2007
            Number
                1-5674








**ANGELICA
      CORPORATION**


(Exact
      name of
      registrant as specified in its charter)








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








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
X No




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 filer    
Accelerated filer  X  
Non-accelerated
      filer


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




The
      number of
      shares outstanding of registrant's Common Stock, par value $1.00 per share,
      at June 1, 2007 was 9,590,694 shares.











ANGELICA
      CORPORATION AND SUBSIDIARIES





TABLE
      OF
      CONTENTS





APRIL
      28, 2007 FORM
      10-Q QUARTERLY REPORT




















Page
                NumberReference**Part
                I.   Financial Information:**Item
                1.  Condensed Financial Statements:Condensed
                Consolidated Statements of Income -
                First Quarter ended April 28, 2007 and April 29, 2006
                (Unaudited)
            2Condensed
                Consolidated Balance Sheets – April 28,
                2007 and January 27, 2007 (Unaudited)
            3Condensed
                Consolidated Statements of Cash Flows – First
                Quarter ended April 28, 2007 and April 29, 2006
                (Unaudited)
            4Notes
                to Unaudited Condensed Consolidated Financial
                Statements
            5-14Item
                2.  Management's Discussion and Analysis of
                Financial Condition and Results of Operations
            15-19Item
                3.  Quantitative and Qualitative Disclosures
                About Market Risk
            20Item
                4.  Controls and
                Procedures
            20-21**Part
                II.  Other Information:**Item
                2.  Unregistered Sales of Equity Securities
                and Use of Proceeds
            22Item
                6.  Exhibits
            22Signatures
            23Exhibit
                Index
            24





CONDENSED
      CONSOLIDATED STATEMENTS OF
      INCOME


*Angelica
      Corporation and Subsidiaries*


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





First
                Quarter
                EndedApril
                28,
                2007
            
            
            April
                29,
                2006Revenues
            
            $
            107,777
            
            
            $
            107,006Cost
                of
                services
            
            
            (93,496
            )
            
            
            (92,265
            )Gross
                profit
            
            
            14,281
            
            
            
            14,741Selling,
                general and administrative expenses
            
            
            (13,398
            )
            
            
            (14,412
            )Amortization
                of other acquired assets
            
            
            (1,063
            )
            
            
            (1,080
            )Other
                operating income, net
            
            
            198
            
            
            
            551Income
                (loss)
                from operations
            
            
            18
            
            
            
            (200
            )Interest
                expense
            
            
            (2,336
            )
            
            
            (2,220
            )Non-operating
                income (expense), net
            
            
            262
            
            
            
            (56
            )Loss
                before
                income taxes
            
            
            (2,056
            )
            
            
            (2,476
            )Income
                tax
                benefit
            
            
            915
            
            
            
            977**Net
                loss**
            
            $
            (1,141
            )
            
            $
            (1,499
            )**Basic
                loss per share**
            
            $
            (0.12
            )
            
            $
            (0.16
            )**Diluted
                loss per share**
            
            $
            (0.12
            )
            
            $
            (0.16
            )





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





2


CONDENSED
      CONSOLIDATED BALANCE SHEETS


*Angelica
      Corporation and Subsidiaries*


*Unaudited
      (Dollars in thousands)*





April
                28,
            
            
            January
                27,2007
            
            
            2007**ASSETS**Current
                Assets:Cash
                and cash
                equivalents
            
            $
            4,193
            
            
            $
            6,254Receivables,
                less reserves of $1,164 and $848
            
            
            59,784
            
            
            
            56,874Linens
                in
                service
            
            
            52,205
            
            
            
            50,902Prepaid
                expenses and other current assets
            
            
            2,389
            
            
            
            4,019Total
                Current
                Assets
            
            
            118,571
            
            
            
            118,049Property
                and
                Equipment
            
            
            205,032
            
            
            
            203,236Less
                --
                accumulated depreciation
            
            
            110,346
            
            
            
            106,780Total
                Property and Equipment
            
            
            94,686
            
            
            
            96,456Other:Goodwill
            
            
            49,259
            
            
            
            49,259Other
                acquired assets
            
            
            37,045
            
            
            
            38,108Cash
                surrender value of life insurance
            
            
            9,784
            
            
            
            9,664Deferred
                income taxes
            
            
            19,686
            
            
            
            19,035Miscellaneous
            
            
            5,684
            
            
            
            5,734Total
                Other
                Assets
            
            
            121,458
            
            
            
            121,800Total
                Assets
            
            $
            334,715
            
            
            $
            336,305**LIABILITIES
                AND SHAREHOLDERS' EQUITY**Current
                Liabilities:Current
                maturities of long-term debt
            
            $
            30
            
            
            $
            96Life
                insurance policy loans
            
            
            8,332
            
            
            
            8,298Accounts
                payable
            
            
            31,613
            
            
            
            32,867Accrued
                wages
                and other compensation
            
            
            6,914
            
            
            
            8,961Deferred
                compensation and pension liabilities
            
            
            1,693
            
            
            
            1,693Deferred
                income taxes
            
            
            5,595
            
            
            
            4,961Other
                accrued
                liabilities
            
            
            28,469
            
            
            
            29,392Total
                Current
                Liabilities
            
            
            82,646
            
            
            
            86,268Long-Term
                Debt, less current maturities
            
            
            88,800
            
            
            
            85,300Other
                Long-Term Liabilities
            
            
            15,278
            
            
            
            17,191Shareholders'
                Equity:Common
                Stock,
                $1 par value, authorized 20,000,000shares,
                issued:  9,558,988 and 9,518,688 shares
            
            
            9,559
            
            
            
            9,519Capital
                surplus
            
            
            8,154
            
            
            
            7,174Retained
                earnings
            
            
            138,099
            
            
            
            140,277Accumulated
                other comprehensive loss
            
            
            (3,253
            )
            
            
            (4,839
            )Common
                Stock
                in treasury, at cost: 295,200 and 296,419 shares
            
            
            (4,568
            )
            
            
            (4,585
            )Total
                Shareholders' Equity
            
            
            147,991
            
            
            
            147,546Total
                Liabilities and Shareholders' Equity
            
            $
            334,715
            
            
            $
            336,305





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


3


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


*Angelica
      Corporation and Subsidiaries*


*Unaudited
      (Dollars in thousands)*





First
                Quarter
                EndedApril
                28,
                2007
            
            
            April
                29,
                2006Cash
                Flows
                from Operating Activities:Loss
                from
                continuing operations
            
            $
            (1,141
            )
            
            $
            (1,499
            )Non-cash
                items included in loss from continuing operations:Depreciation
            
            
            3,631
            
            
            
            3,697Amortization
            
            
            1,454
            
            
            
            1,400Deferred
                income taxes
            
            
            (1,065
            )
            
            
            (977
            )Cash
                surrender value of life insurance
            
            
            (302
            )
            
            
            (321
            )Gain
                on
                disposal of assets
            
            
            (29
            )
            
            
            (551
            )Change
                in
                working capital components of continuing operations
            
            
            (4,829
            )
            
            
            (1,402
            )Other,
                net
            
            
            (821
            )
            
            
            (10
            )Net
                cash
                (used in) provided by operating activities of continuing
                operations
            
            
            (3,102
            )
            
            
            337Cash
                Flows
                from Investing Activities:Expenditures
                for property and equipment, net
            
            
            (2,144
            )
            
            
            (2,735
            )Disposals
                of
                assets
            
            
            70
            
            
            
            853Life
                insurance premiums paid, net
            
            
            (144
            )
            
            
            382Net
                cash used
                in investing activities of continuing operations
            
            
            (2,218
            )
            
            
            (1,500
            )Cash
                Flows
                from Financing Activities:Repayments
                of
                long-term debt
            
            
            (32,866
            )
            
            
            (26,686
            )Borrowings
                of
                long-term debt
            
            
            36,300
            
            
            
            28,500Repayments
                of
                life insurance policy loans
            
            
            (8,298
            )
            
            
            -Borrowings
                from life insurance policy loans
            
            
            8,514
            
            
            
            -Debt
                issuance
                costs
            
            
            -
            
            
            
            (17
            )Dividends
                paid
            
            
            (1,037
            )
            
            
            (1,034
            )Exercise
                of
                stock options
            
            
            658
            
            
            
            82Net
                cash
                provided by financing activities of continuing operations
            
            
            3,271
            
            
            
            845Cash
                Flows
                from Discontinued Operations:Operating
                cash flows
            
            
            (12
            )
            
            
            (279
            )Net
                decrease
                in cash and cash equivalents
            
            
            (2,061
            )
            
            
            (597
            )Balance
                at
                beginning of year
            
            
            6,254
            
            
            
            4,377Balance
                at
                end of period
            
            $
            4,193
            
            
            $
            3,780Supplemental
                cash flow information:Purchases
                of
                property and equipment included in accounts payable
            
            $
            219
            
            
            $
            99





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


4





NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS





FIRST
      QUARTER ENDED
      APRIL 28, 2007


AND
      APRIL 29,
      2006














NOTE
      1.  BASIS OF PRESENTATION





The
                accompanying condensed consolidated financial statements are unaudited,
                and these consolidated financial 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 27, 2007 (fiscal 2006). 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 first quarter ended April 28, 2007 are not necessarily
                indicative of the results that will be achieved for the full fiscal
                year
                2007. Cash flows related to operations that were discontinued prior
                to
                fiscal year 2006 are segregated for reporting purposes in the Statement
                of
                Cash Flows.








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. 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
                periods ranging from six months to four years, and are exercisable
                not
                less than six months nor 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 retention awards granted in the third quarter
                of
                fiscal 2006 that vest over a ten year period upon the attainment
                of
                certain earnings performance goals.





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
                quarter ended April 28, 2007 or April 29, 2006. A summary of the
                status of
                the Company’s stock option plans as of April 28, 2007, and changes for the
                quarter then ended is presented in the table
                below:


5





Shares
            
            
            Weighted
                Average Exercise Price
            
            Weighted
                Average Remaining Contractual Term (Years)
            
            Aggregate
                Intrinsic ValueOptions
                outstanding at January 28, 2007
            
            
            581,850
            
            
            $
            21.49
            
            
            
            6.4
            
            
            $
            3,496,000Granted
            
            
            -
            
            
            
            -Exercised
            
            
            (40,300
            )
            
            
            16.33Forfeited
            
            
            (3,000
            )
            
            
            32.88Expired
            
            
            -
            
            
            
            -Options
                outstanding at April 28, 2007
            
            
            538,550
            
            
            $
            21.81
            
            
            
            6.2
            
            
            $
            3,384,000Options
                exercisable at April 28, 2007
            
            
            462,050
            
            
            $
            21.56
            
            
            
            5.7
            
            
            $
            3,102,000





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 quarter ended April 28, 2007 was as follows:




Shares
            
            
            Weighted
                Average Grant Date
              Fair
                ValueNonvested
                at
                January 28, 2007
            
            
            296,269
            
            
            $
            19.70Granted
            
            
            70,811
            
            
            
            26.95Vested
            
            
            (1,668
            )
            
            
            19.18Forfeited
            
            
            (50,290
            )
            
            
            21.64Nonvested
                at
                April 28, 2007
            
            
            315,122
            
            
            $
            21.02








Total
      compensation
      expense charged to income for all stock option and stock bonus plans during
      the
      quarter ended April 28, 2007 was $243,000 (net of $148,000 related income tax
      benefit). During the quarter ended April 29, 2006, the Company recognized
      $229,000 of expense for restricted stock and performance-based awards, net
      of
      $144,000 related income tax benefit. The total compensation cost related to
      nonvested stock options and awards not yet recognized is currently expected
      to
      be a combined total of approximately $3,857,000. This cost is expected to be
      recognized over a weighted average period of 4.3 years.








NOTE
      3.  NON-OPERATING INCOME (EXPENSE), NET





In
      the first
      quarter of fiscal 2007, the Company recorded non-operating income of $262,000
      which consisted primarily of interest income earned on invested cash balances
      and notes receivable.





In
      the first
      quarter of fiscal 2006, the Company recorded non-operating expense of $56,000
      which included a $281,000 loss related to a natural gas derivative (see Note
      9)
      offset primarily by interest income.





6


NOTE
        4.  INCOME TAXES




On
                July 13,
                2006, the Financial Accounting Standards Board (FASB) issued
                Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An
                Interpretation of FASB Statement No. 109” (FIN 48). FIN 48 clarifies the
                accounting for uncertainty in income taxes recognized in an entity’s
                financial statements in accordance with FASB Statement No. 109,
                “Accounting for Income Taxes” and prescribes a recognition threshold and
                measurement attributes for financial statement disclosure of tax
                positions
                taken or expected to be taken on a tax return. Under FIN 48, the
                impact of
                an uncertain income tax position on the income tax return must be
                recognized at the largest amount that is more-likely-than-not to
                be
                sustained upon audit by the relevant taxing authority. An uncertain
                income
                tax position will not be recognized if it has less than a 50% likelihood
                of being sustained. Additionally, FIN 48 provides guidance on
                derecognition, classification, interest and penalties, accounting
                in
                interim periods, disclosure and transition. FIN 48 is effective for
                fiscal
                years beginning after December 15,
                2006.





The
                Company
                adopted the provisions of FIN 48 on January 28, 2007, the first day
                of its
                2007 fiscal year. The implementation of FIN 48 did not result in
                a
                cumulative adjustment to the Company’s previously recorded liability for
                unrecognized tax benefits, which amounted to $2,329,000 as of the
                date of
                adoption. If recognized, $2,217,000 of this amount would impact the
                Company’s effective tax rate.





The
                Company
                recognizes interest and penalties accrued related to unrecognized
                tax
                benefits in its tax provision. Due to its net operating loss and
                tax
                credit carryforward position, the Company recognized no penalties
                or
                interest during the quarters ended April 28, 2007 and April 29, 2006,
                and
                had no interest and penalties accrued as of April 28, 2007 or January
                27,
                2007.





The
                Company
                believes that it is reasonably possible that the total amount of
                unrecognized tax benefits will significantly change within 12 months
                of
                the date of adoption of FIN 48. The Company has certain tax return
                years subject to statutes of limitation which are anticipated to
                close within 12 months of the date of adoption. Unless challenged
                by tax
                authorities, the closure of those statutes of limitation is expected
                to
                result in the recognition of uncertain tax positions in the amount
                of
                $2,217,000.





The
                Company
                is subject to taxation in the United States, and its tax years for
                2003
                through 2006 are subject to examination by the tax authorities. With
                few
                exceptions, the Company is no longer subject to U.S. federal, state
                or
                local examinations by tax authorities for years before
                2003.





The
                Company
                recorded a tax benefit of $915,000 for the first quarter ended April
                28,
                2007. This benefit consisted of $780,000 based upon the Company’s
                estimated effective tax rate of 37.9% for the year and $135,000 from
                federal and state tax credits. The effective tax rate for the first
                quarter ended April 28, 2007, reflects the statutory tax rate adjusted
                for
                permanent items and state tax benefits, as
                applicable.





The
                Company
                has a federal net operating loss carryover of $36,551,000 which will
                expire beginning in 2025; $3,554,000 in federal tax credit carryovers
                which expire at various dates beginning in 2021 or have no expiration
                date; $8,897,000 of state tax
                credit


7


carryovers
                which expire 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.




NOTE
        5.  LOSS PER SHARE




Loss
      per share is
      computed by dividing net loss by the weighted average number of shares of Common
      Stock outstanding during the period. Diluted loss per share is computed by
      dividing net 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 loss per share for the first quarter ended April 28, 2007
      and
      April 29, 2006 (shares in thousands):





First
                Quarter
                EndedApril
                28,
            
            
            April
                29,2007
            
            
            2006Weighted
                Average Shares:Average
                shares outstanding
            
            
            9,239
            
            
            
            9,164Effect
                of
                dilutive securities
            
            
            -
            
            
            
            -Average
                shares outstanding,adjusted
                for dilutive effects
            
            
            9,239
            
            
            
            9,164








Potentially
      dilutive securities of 88,000 and 48,000 shares were not included in the
      calculation of weighted average shares outstanding for the quarters ended April
      28, 2007 and April 29, 2006, respectively, as their effect is antidilutive
      on
      loss per share for the respective periods.





NOTE
      6.  GOODWILL AND OTHER ACQUIRED ASSETS





In
      accordance with
      Statement of Financial Accounting Standards (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):




April
                28,
                2007
            
            
            January
                27,
                2007Gross
            
            
            
            
            
            Other
            
            
            Gross
            
            
            
            
            
            OtherCarrying
            
            
            Accumulated
            
            
            Acquired
            
            
            Carrying
            
            
            Accumulated
            
            
            AcquiredAmount
            
            
            Amortization
            
            
            Assets,
                net
            
            
            Amount
            
            
            Amortization
            
            
            Assets,
                netCustomer
                contracts
            
            $
            41,813
            
            
            $
            (11,700
            )
            
            $
            30,113
            
            
            $
            41,813
            
            
            $
            (10,984
            )
            
            $
            30,829Non-compete
                covenants
            
            
            11,089
            
            
            
            (4,157
            )
            
            
            6,932
            
            
            
            11,089
            
            
            
            (3,810
            )
            
            
            7,279Other
                acquired assets
            
            $
            52,902
            
            
            $
            (15,857
            )
            
            $
            37,045
            
            
            $
            52,902
            
            
            $
            (14,794
            )
            
            $
            38,108








8


Aggregate
      amortization expense for the first quarter ended April 28, 2007 and April 29,
      2006 amounted to $1,063,000 and $1,080,000, respectively. Other acquired assets
      are scheduled to be fully amortized by fiscal year 2021 with corresponding
      annual amortization expense estimated for each of the next five fiscal years
      as
      follows (dollars in thousands):





2007
            $4,1732008
            3,8202009
            3,5112010
            3,0452011
            3,039





NOTE
        7.  LONG TERM DEBT





The
      Company’s
      long-term bank borrowings are financed through a $125,000,000 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 1.5% to 2.0%. 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.





As
      of April 28,
      2007, there was $88,800,000 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 bears interest at a fixed
      rate of 3.58% pursuant to an interest rate swap agreement plus the LIBOR margin
      under the credit facility, which was 1.75% as of April 28, 2007. Of the
      remaining debt, $75,000,000 bore interest at 5.32% under LIBOR contracts, plus
      a
      margin (1.75% as of April 28, 2007), and $3,800,000 bore interest at 8.25%,
      the
      Prime Rate, as of April 28, 2007. Furthermore, the Company had $13,055,000
      outstanding in irrevocable letters of credit as of April 28, 2007, which reduced
      the amount available to borrow under the line of credit to $13,228,000. As
      of
      April 28, 2007, the fee on the outstanding letters of credit and unused funds
      was 1.75% and 0.25%, 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 1.15 to 1, and a maximum ratio of “Funded Indebtedness” to
“EBITDA” of no more than 3.5 to 1. The Company was in compliance with these loan
      covenants as of April 28, 2007.





As
      of April 28,
      2007, there was $30,867,000 of life insurance policy loans outstanding. The
      loans bore interest at a fixed rate of 8.0% or variable rates ranging from
      5.7%
      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. Of the total amount outstanding at April 28, 2007, approximately
      $8,332,000 is considered a current liability


9


and
      presented as
      such in the Consolidated Balance Sheet. The remainder is netted against cash
      surrender value of life insurance in the Consolidated Balance Sheet as of April
      28, 2007.





NOTE
        8.  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 first quarter ended April 28, 2007 and April
      29, 2006 was as follows:




First
                Quarter
                EndedApril
                28,
            
            
            April
                29,(Dollars
                in
                thousands)
            
            2007
            
            
            2006Pension
                expense:Service
                cost
            
            $
            86
            
            
            $
            113Interest
                cost
            
            
            331
            
            
            
            312Expected
                return on plan assets
            
            
            (333
            )
            
            
            (322
            )Unrecognized
                loss
            
            
            17
            
            
            
            17Net
                periodic
                pension expense
            
            $
            101
            
            
            $
            120








NOTE
      9.  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 other comprehensive income. The (loss) gain on the derivative included in
      other comprehensive income (loss) in the first quarter ended April 28, 2007
      and
      April 29, 2006 amounted to $(26,000) and $7,000, respectively, net of tax.
      The
      Company has recorded a current asset of $25,000 and $67,000 for the fair value
      of the derivative as of April 28, 2007 and January 27, 2007,
      respectively.





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). For
      fiscal years 2007, 2008 and 2009,


10


these
      futures
      contracts are expected to hedge approximately 66%, 49% and 22%, respectively,
      of
      the Company’s total requirements for natural gas (measured at current usage
      rates). As of April 28, 2007, the weighted-average cost of natural gas under
      these contracts is $9.38 per decatherm. The Company has elected to apply cash
      flow hedge accounting for these derivatives in accordance with SFAS No. 133.
      Accordingly, the net gain (loss) on the derivatives included in other
      comprehensive income (loss) for the quarter ended April 28, 2007, amounted
      to
      $1,611,000, net of tax, and $(336,000), net of tax, for the quarter ended April
      29, 2006. 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 value for these derivatives was included in
      non-operating income for the quarter ended April 29, 2006, and amounted to
      a
      loss of $281,000. The Company has recorded a current liability of $1,271,000
      and
      $2,863,000 as of April 28, 2007 and January 27, 2007, respectively, and a
      long-term liability of $883,000 and $1,968,000 as of April 28, 2007 and January
      27, 2007, respectively, for the fair value of the derivatives. The Company
      estimates that $1,271,000 of unrealized losses included in accumulated other
      comprehensive loss before taxes as of April 28, 2007 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 April 28, 2007
      for
      the physical delivery of natural gas that fix the NYMEX cost of gas for
      approximately 4% of its estimated natural gas purchase requirements in the
      next
      12 months, and that fix the basis cost of gas for approximately 87% 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
      10.  COMPREHENSIVE INCOME (LOSS)





Comprehensive
      income (loss), consisting primarily of net loss and changes in the fair value
      of
      derivatives (see Note 9), net of taxes, totaled $444,000 and $(1,828,000) for
      the first quarter ended April 28, 2007 and April 29, 2006,
      respectively.





NOTE
      11.  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 April 28, 2007, the
      Company is secondarily obligated as a guarantor for 46 store lease agreements
      and the estimated maximum potential amount of future payments the Company could
      be required to make under these guarantees is $7,503,000. Although these
      guarantees expire


11


at
      various dates
      through fiscal year 2014, approximately 73% of the estimated maximum potential
      future payments expires by the end of fiscal year 2009.





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 acquisition of Royal Institutional Services, Inc. and its
      affiliate, The Surgi-Pack Corporation, 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 April 28, 2007,
      $1,000,000 remained in escrow and is due the sellers in March 2015 upon
      compliance with the restrictive covenants.





The
      Company carries
      insurance policies on insurable risks with coverage and other terms that it
      believes to be appropriate. The Company generally has self-insured retention
      limits and has obtained fully-insured layers of coverage above such self-insured
      retention limits. Accruals for self-insurance losses are made based on claims
      experience. Liabilities for existing and unreported claims are accrued for
      when
      it is probable that future costs will be incurred.





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 $827,000 as of April 28,
      2007.





A
      significant
      portion of the Company’s revenues is derived from operations in a limited number
      of markets. Revenues generated from operations in California and Arizona
      accounted for approximately 39% of revenues for the quarter ended April 28,
      2007. The Company also 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. Collective bargaining agreements covering drivers associated
      with seven service centers will expire in fiscal 2007. A collective bargaining
      agreement covering recently organized drivers at the Company’s Turlock,
      California service center is in the process of being ratified and finalized.
      Collectively, these new and renewal agreements apply to approximately 2% of
      the
      Company’s total workforce. Any work interruptions or shortages 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.


12





NOTE
        12.  NEW ACCOUNTING PRONOUNCEMENTS





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
      EITF reached a consensus on Issue No. 06-5, “Accounting for Purchases of Life
      Insurance – Determining the Amount that Could Be Realized in Accordance with
      FASB Technical Bulletin 85-4.” EITF 06-5 stipulates that the cash surrender
      value and any additional amounts provided by the contractual terms of the
      insurance policy that are realizable at the balance sheet date should be
      considered in determining the amount that could be realized under the life
      insurance policy. The consensus also provides additional guidance for
      determining the amount to be realized, including the policy level for which
      the
      analysis should be performed, amounts excluded and measurement criteria.
      Entities will have the option of applying the provisions of EITF 06-5 as a
      cumulative effect adjustment to the opening balance of retained earnings or
      retrospectively to all prior periods. EITF 06-5 is effective for the Company’s
      fiscal year ending January 26, 2008. The Company does not expect that the
      adoption of EITF 06-5 will have a material impact 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 is
      currently evaluating the impact SFAS No. 157 will have 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 Pension,” 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
      Pension” and SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pension
      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


13


credits
      that arise
      during the period but are not recognized as components of net periodic benefit
      cost. On January 27, 2007, the Company adopted the recognition and disclosure
      provisions of SFAS No. 158, and included the related cumulative effect
      adjustment in its consolidated balance sheet for fiscal 2006. 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 currently measures its plan assets and
      obligations as of January 1. The Company has not yet determined the impact
      that
      adopting this portion of SFAS No. 158 will have on its consolidated balance
      sheets.





In
      February 2007,
      the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and
      Liabilities.” SFAS No. 159 provides companies with an option to report selected
      financial assets and liabilities at fair value, with the objective to reduce
      both the complexity in accounting for financial instruments and the volatility
      in earnings caused by measuring related assets and liabilities differently.
      SFAS
      No. 159 is effective for the Company’s fiscal year ending January 31, 2009. The
      Company has not yet determined the impact that adoption of SFAS No. 159 will
      have on its consolidated financial statements.





14


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


**and
      Results
      of Operations**





FIRST
      QUARTER ENDED
      APRIL 28, 2007


COMPARED
      WITH


FIRST
      QUARTER ENDED
      APRIL 29, 2006








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, 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 29 laundry service centers and
      serve
      customers in 23 states.





Results
      of
      Operations





First
      quarter
      fiscal 2007 revenues were $107.8 million, an increase of $0.8 million compared
      with the same period in fiscal 2006. Organic growth contributed $1.1 million
      of
      the increase, representing an organic growth rate of 1.0%. The current year
      organic growth rate resulted from an approximate 4.0% improvement in pricing,
      partially offset by a volume decline primarily related to a large customer
      contract that was not renewed. The revenue growth was partially offset by a
      net reduction in revenues of $0.3 million related to acquisitions and
      divestitures, primarily due to the sale of non-healthcare customer accounts
      in
      fiscal 2006. Total healthcare revenues increased 1.9% compared with the same
      period in fiscal 2006.





Cost
      of services of
      $93.5 million in the first quarter of fiscal 2007 increased by $1.2 million,
      or
      1.3%, from the same period last year. The principal factors for this increase
      were operational difficulties at our Edison, New Jersey facility, which
      negatively impacted the operations in the New York City/New Jersey area, as
      well
      as increased linen costs. While total company direct and indirect production
      labor and fringe benefit costs decreased $0.2 million in first quarter fiscal
      2007 from first quarter fiscal 2006, the same costs for the service centers
      in
      the New York City/New Jersey area increased $1.3 million year over year due
      to
      inefficiencies caused by equipment failures and management turnover. The $1.5
      million favorable variance in these costs for all other service centers
      (excluding the service centers in the New York City/New Jersey area) was a
      result of increased operating efficiencies and lower operating volumes. In
      addition, linen amortization expense increased $1.0 million as a result of
      increased linen purchases to satisfy our 100% fill initiative and higher quality
      linen.





Gross
      margin was
      13.3% in the first quarter of fiscal 2007, a decrease from the 14.0% reported
      in
      the fourth quarter of fiscal 2006 and 13.8% reported in the same period
      a


15


year
      ago for the
      reasons noted above. Gross profit from the service centers in the New York
      City/New Jersey area declined $1.9 million in the first quarter of fiscal 2007
      from the same period in fiscal 2006 due to the factors mentioned above. In
      the
      balance of the country, gross profit increased $1.4 million year over
      year.





In
      the first
      quarter fiscal 2007, selling, general and administrative (SG&A) expenses
      decreased by $1.0 million from first quarter fiscal 2006 to $13.4 million,
      or
      12.4% of revenues, compared to 13.5% of revenues a year ago. The decrease in
      SG&A expenses resulted primarily from $0.6 million of consulting fees
      incurred in prior year related to our operations process improvement
      implementation and $0.3 million of legal expenses incurred in prior year
      associated with the Board of Directors’ Special Committee.





In
      the first
      quarter fiscal 2007, we reported other operating income of $0.2 million
      consisting primarily of insurance proceeds from a property insurance claim.
      Other operating income of $0.6 million in the first quarter of fiscal 2006
      reflected gains from the sale of two parcels of real estate.





Interest
      expense in
      first quarter fiscal 2007 increased by $0.1 million to $2.3 million resulting
      from higher interest rates. Interest rates increased from an average 7.1% in
      first quarter fiscal 2006 to an average 7.4% in first quarter fiscal 2007.
      At
      April 28, 2007, we had $88.8 million in total debt outstanding under our bank
      credit facility. In addition, there was $30.9 million of life insurance policy
      loans outstanding against the cash surrender value of life insurance policies
      we
      own. Interest from bank and insurance debt is included in our interest
      expense.





We
      recorded $0.3
      million non-operating income during the first quarter of fiscal 2007 which
      consisted primarily of interest income from a note receivable. During the first
      quarter of fiscal 2006, we recorded non-operating expense of $0.1 million which
      included a $0.3 million loss related to a natural gas derivative, mostly offset
      by interest income.





For
      the first
      quarter of fiscal 2007, we recorded a tax benefit of $0.9 million compared
      to
      $1.0 million in the first quarter of fiscal 2006. The lower income tax benefit
      in the current year quarter resulted primarily from the decline in pretax loss
      for the first quarter of fiscal 2007.





We
      reported a net
      loss of $1.1 million in the first quarter of fiscal 2007 compared with a net
      loss of $1.5 million in the prior year quarter. The variance resulted primarily
      from the decrease in selling, general and administrative expenses and increase
      in non-operating income discussed above.





Financial
      Condition





As
      of April 28,
      2007, working capital totaled $35.9 million and the current ratio
      (*i.e.*, the ratio of current assets to current liabilities) was 1.4 to
      1, compared with $31.8 million and 1.4 to 1, respectively, at January 27, 2007.
      The increase in working capital is


16


primarily
      due to
      higher balances in accounts receivable and linens in service and a lower balance
      in accrued wages and other compensation, as explained below.





Accounts
      receivable
      increased by $2.9 million in the first quarter fiscal 2007 due to a combination
      of higher revenue and the timing of cash receipts around the quarter end. Linens
      in service increased by $1.3 million as we continue to support our 100% customer
      order fill initiative and add higher quality linen. Prepaid expenses and other
      current assets decreased $1.6 million in the first quarter due to the collection
      of a miscellaneous receivable and the normal amortization of prepaid
      items.





Accounts
      payable
      decreased by $1.3 million due to the timing of invoice payments near the fiscal
      2006 year end. Accrued wages and other compensation decreased $2.0 million
      from
      January 27, 2007, as incentive compensation accrued at year end was paid out
      in
      the first quarter of fiscal 2007. Long-term debt of $88.8 million as of April
      28, 2007 was $3.5 million greater than at January 27, 2007, reflecting
      additional borrowings from our credit facility to fund the higher working
      capital balances discussed above. The $0.9 million and $1.9 million decrease
      in
      other accrued liabilities and other long-term liabilities, respectively,
      resulted from a decrease in liabilities related to our natural gas hedges and
      first quarter contributions to our defined benefit pension plan. Our ratio
      of
      total debt to total capitalization as of April 28, 2007 was 37.5% compared
      to
      36.7% as of January 27, 2007. Book value per share at the end of first quarter
      fiscal 2007 was $15.98, a slight decline from $16.00 as of January 27,
      2007.





Liquidity
      and
      Capital Resources





Cash
      flow provided
      by operating activities of continuing operations decreased $3.4 million for
      the
      quarter ended April 28, 2007 compared with the same period a year ago. The
      current year decline resulted primarily from the increase in working capital
      and
      pension plan contributions discussed above.





Cash
      flows from
      investing activities for the quarter ended April 28, 2007 included capital
      expenditures of $2.1 million. Cash flows from investing activities for the
      quarter ended April 29, 2006 included $2.7 million of capital expenditures,
      net
      proceeds of $0.8 million from the disposal of certain real estate, 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. We expect
      capital expenditures to be approximately $15.0 million for fiscal
      2007.





Cash
      provided by
      financing activities was $3.3 million in the first quarter of fiscal 2007
      reflecting additional borrowings of $3.5 million under our loan agreement and
      $0.2 million from life insurance policy loans, partially offset by dividend
      payments of $1.0 million. In the first quarter of fiscal 2006, cash provided
      by
      financing activities of $0.8 million reflected additional borrowings of $1.9
      million under our loan agreement. In addition, proceeds from stock option
      exercises increased to $0.7 million in the first quarter of fiscal 2007 from
      $0.1 million in the first quarter of fiscal 2006.





As
      of April 28,
      2007, there was $88.8 million outstanding debt under our credit facility. Of
      this amount, $10.0 million bears interest at a fixed rate of 3.58% pursuant
      to
      an


17


interest
      rate swap
      agreement plus a margin under the credit facility (1.75% as of April 28, 2007).
      Of the remaining debt, $75.0 million bore interest at 5.32% under LIBOR
      contracts, plus a margin (1.75% at April 28, 2007), and $3.8 million bore
      interest at 8.25%, the Prime Rate, as of April 28, 2007.





In
      addition to
      amounts due under our loan agreement, at the end of the first quarter there
      was
      $30.9 million of life insurance policy loans outstanding bearing interest at
      a
      fixed rate of 8.0% or variable rates ranging from 5.7% to 6.3%. On April 28,
      2007, we also had $13.1 million in irrevocable letters of credit outstanding,
      which reduced the amount available to borrow under the loan agreement to $13.2
      million.





We
      are subject to
      certain financial covenants under our loan agreement. One of the covenants
      requires 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 1.15 to 1, and a
      maximum ratio of “Funded Indebtedness” to “EBITDA” of no more than 3.5 to 1. We
      were in compliance with these debt covenants as of April 28, 2007.





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, incur significant
      expenditures for new facilities, 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





On
      July 13, 2006,
      the Financial Accounting Standards Board (FASB) issued Interpretation No. 48,
      “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB
      Statement No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in
      income taxes recognized in an entity’s financial statements in accordance with
      FASB Statement No. 109, “Accounting for Income Taxes” and prescribes a
      recognition threshold and measurement attributes for financial statement
      disclosure of tax positions taken or expected to be taken on a tax return.
      Under
      FIN 48, the impact of an uncertain income tax position on the income tax return
      must be recognized at the largest amount that is more-likely-than-not to be
      sustained upon audit by the relevant taxing authority. An uncertain income
      tax
      position will not be recognized if it has less than a 50% likelihood of being
      sustained. Additionally, FIN 48 provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition. FIN 48 is effective for fiscal years beginning after
      December 15, 2006. We adopted the provisions of FIN 48 on January 28, 2007,
      the
      first day of our 2007 fiscal year. The implementation of FIN 48 had no impact
      on
      our consolidated financial statements.







18


**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.








19


**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 first quarter ended April
      28, 2007, was approximately $6.9 million. To reduce the uncertainty of
      fluctuating energy prices, the Company has entered into fixed-price contracts
      as
      of April 28, 2007, for approximately 65% 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 $0.9 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 first
      quarter ended April 28, 2007, was approximately $2.1 million. A hypothetical
      10%
      increase in the cost of delivery fuel would result in a decrease of
      approximately $0.8 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 April 28, 2007, there
      was
      $88.8 million of outstanding debt under the credit facility that bear 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 April 28, 2007, the margin was
      1.75%. Of the $30.9 million in life insurance policy loans outstanding as of
      April 28, 2007, a total of $25.1 million of these loans bore interest at
      variable rates ranging from 5.7% to 6.3%. A hypothetical increase of 100 basis
      points in short-term interest rates applicable to the outstanding variable-rate
      debt would result in a reduction of approximately $1.1 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.





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.


20





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.





21


**PART
      II.  OTHER INFORMATION**





**Item
        2.  Unregistered Sales of Equity Securities and
        Use of Proceeds**




The
      following table
      sets forth information with respect to shares of our common stock that we
      purchased during the three fiscal months ended April 28, 2007.




Period
            Total
              Number
              of
                Shares
              Purchased
              (a)
            
            Average
              Price
              Paid
              Per
              Share
            
            
            Total
                Number
              of
                Shares
              Purchased
                as
              Part
                of
              Publicly
              Announced
              Programs
            
            Maximum
              Number
              of
                Shares
              That
              May
                Yet
                Be
              Purchased
              Under
                the
              ProgramsJan.
                28, 2007
                – Feb. 24, 2007
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            —Feb.
                25, 2007
                – Mar. 24, 2007
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            —Mar.
                25, 2007
                – Apr. 28, 2007
            
            
            449
            
            
            
            $26.485
            
            
            
            —
            
            
            —Total
            
            
            449
            
            
            
            $26.485
            
            
            
            —
            
            
            —




(a)
            The
                shares
                purchased were restricted stock withheld for the payment of withholding
                taxes upon vesting of restricted
                stock.




**Item
        6.  Exhibits**





(a)
            See
                Exhibit
                Index on page 24.





22





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:  June
                7, 2007
            /s/
                Stephen M. O’HaraStephen
                M.
                O’HaraChairman,
                President andChief
                Executive Officer/s/
                James
                W. ShafferJames
                W.
                ShafferVice
                President and ChiefFinancial
                Officer(Principal
                Financial Officer)(Principal
                Accounting Officer)





23


**EXHIBIT
      INDEX**







Exhibit
              Number
            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
                3.2 to
                the Form 10-K for fiscal year ended January 27, 2007.**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.**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.*


24