SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C.  20549

                                Form 10-K

(Mark One)
[X]   Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934 for the fiscal year ended December 31, 1995

[ ]   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

                         Commission File Number 0-16572

                            Avondale Industries, Inc.
             (Exact name of registrant as specified in its charter)

                Louisiana                                39-1097012
     (State or other jurisdiction of       (I.R.S. Employer Identification No.)
       incorporation or organization)

      5100 River Road, Avondale, Louisiana                    70094
     (Address of principal executive offices)                (Zip Code)

                                    (504) 436-2121
                            (Registrant's telephone number,
                                    including area code)

              Securities registered pursuant to Section 12(b) of the Act:

                                           None

              Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, $1.00 par value per share
                                       (Title of Class)

     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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]
            
      The aggregate market value of the voting stock held by non-affiliates
(affiliates being directors, executive officers and holders of more than 5% of
the Company's common stock) of the Registrant at December 31, 1995 was
approximately $77,267,832.

       The number of shares of the Registrant's common stock, $1.00 par value
per share, outstanding at December 31, 1995 was 14,464,175.

                        DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Registrant's Proxy Statement for its 1996 Annual Meeting
have been incorporated by reference into Part III of this Form 10-K.
<PAGE>
				    PART I

Item 1.   Business.
 
Overview

     Avondale is one of the largest shipbuilders in the United States,
specializing in the design, construction, conversion, repair and modernization
of various types of ocean-going vessels for the military and commercial
markets. A majority of Avondale's contracts in recent years has been for the
construction of U.S. Navy surface ships, although it has secured two large
commercial contracts in the past year for the construction or conversion of
double-hulled product carriers. Management believes the Company's low cost
structure, experienced and skilled work force, sophisticated construction
processes and extensive experience gained over the past 25 years in building a
variety of military and commercial vessels, position the Company as one of the
most cost-efficient and versatile shipbuilders in the United States. At
December 31, 1995, the Company's firm backlog was approximately $1.4 billion
exclusive of unexercised options aggregating $485 million held by the U.S. Navy
for additional ship orders (including contract escalation) and a commercial
contract subject to financing. Of the firm backlog, approximately $1.3 billion
was attributable to contracts to build ships for the U.S. Navy.

     During the past 25 years, Avondale has built over 72 vessels for the U.S.
Navy and other branches of the military, ranging from vessels such as AOs and
T-AOs that principally require large-scale steel fabrication at a competitive
cost, to highly sophisticated vessels such as the T-AGS 45, the LSD-CVs and the
MHCs (with fiberglass hulls) that also require extensive outfitting of
electrical, command and control and weapons systems. U.S. Navy vessels
currently under construction include four Sealift ships, three MHCs, two LSD-
CVs, one T-AO and one Icebreaker. The Company anticipates that it will continue
to focus primarily on securing contracts to construct and convert military
vessels. See "Glossary of Selected Industry Terms." 

     Within the past year, Avondale has secured two commercial contracts that
should benefit from the Company's expertise and newly adopted construction
techniques. In May 1995, Avondale finalized a $143.9 million contract to
construct four double-hulled forebodies for product carriers owned by American
Heavylift Shipping Company. Construction of these forebodies has begun and is
expected to be completed by mid-1997. The Company has also signed a contract
with Maritrans Ocean Transport, Inc. ("Maritrans") for the construction of up
to six (but not less than four) double-hulled product carriers. This contract
is subject to Maritrans' ability to qualify for and receive a Title XI MARAD
financing guarantee. Assuming receipt of such guarantee, the contract calls for
delivery of the vessels by the end of 1998. 

     Background. Avondale has historically maintained a flexible, versatile
shipyard and has been the successful bidder for a variety of marine
construction projects. Organized in 1938, Avondale first began building ocean-
going ships in the 1950s. From 1959 to 1985, the Company was operated as a
subsidiary of Ogden Corporation, a diversified New York Stock Exchange listed
company headquartered in New York, New York. Prior to the 1980s, Avondale built
both military and commercial vessels. In addition to the construction of 27
destroyer escorts for the U.S. Navy, Avondale successfully completed a variety
of construction projects during that period, including general cargo and multi-
product carriers, such as LASH vessels, container vessels, crude oil tankers
and product carriers. In the early 1980s, however, several measures were
implemented that changed the marine construction industry significantly. The
<PAGE>
termination of the U.S. construction-differential subsidy program in 1981
significantly curtailed the ability of U.S. shipyards to compete successfully
for international commercial shipbuilding contracts with foreign shipyards,
many of which are heavily subsidized by their governments. The effects of the
elimination of these subsidies were largely offset, however, by the initiative
to expand the U.S. Navy fleet to 600 vessels, thereby significantly increasing
the U.S. Navy shipbuilding opportunities available to Avondale.
 
     Initially, Avondale capitalized on the U.S. Navy shipbuilding opportunities
through its construction of five AOs during the early 1980s. Since AOs are
essentially oil tankers modified to meet certain military requirements, they
were a natural extension of the product carrier vessels previously built by
Avondale.
 
     During the remainder of the 1980s and the first part of this decade,
Avondale steadily expanded the range of vessels that it built for the U.S. Navy.
The Company principally focused on those vessels that were related to, or
natural extensions of, predecessor vessels constructed by Avondale, where
Avondale could best capitalize on its prior experience and proven capabilities.
Among the U.S. Navy vessels built or under construction during this period were
16 T-AOs, five LSDs, four LSD-CVs, five AOJs (which constituted conversions of
AOs previously built by Avondale), one T-AGS 45, 15 LCACs, four MHCs and three
SL 7 conversions. 
 
     With the end of the Cold War, and the pressure of domestic budget
constraints, spending for new vessel construction by the U.S. Navy has been
substantially reduced, with the rate of new vessel construction reduced to
approximately 50% of that in the 1980s. Despite the contraction in U.S. Navy
shipbuilding activity, management believes that Avondale's versatility has been
a significant factor in its successful efforts to restore its backlog, which
efforts have also been bolstered by Avondale's experience in building vessels
comparable to those currently in demand.

     U.S. Military. Included in the current firm backlog for the military are
contracts to construct four Sealift ships at an original contract price of $880
million. The Sealift ships, which are designed to assist in the rapid
transportation and deployment of military personnel, equipment and supplies,
are comparable to other vessels, such as auxiliary and amphibious support
ships, that have been previously constructed by Avondale for the military. In
addition, the Company has been awarded options to construct two additional
Sealift vessels for an additional $485 million in the aggregate (including
contract escalation), which options have not yet been exercised by the U.S.
Navy. The first Sealift ship is scheduled for delivery in 1998 with the final
ship (assuming exercise by the U.S. Navy of the remaining Sealift options)
scheduled for delivery in 2001.

     The award of the Sealift contract was one of a series of significant
military contract awards received by the Company since the beginning of 1993.
In 1993, the Company was awarded a $232.5 million contract for the construction
of the Icebreaker for the U.S. Coast Guard (scheduled for delivery in 1998) and
a contract to build one LSD-CV for the U.S. Navy at a contract price of $257.5
million. The 1994 LSD-CV award brought the total number of LSD-CV contracts
awarded to the Company to four, with two of the vessels having been delivered
to date, and the final two vessels scheduled for delivery in 1996 and 1998,
respectively. See "Glossary of Selected Industry Terms" and "--Shipbuilding--
Vessel Deliveries and Backlog."

     In early 1994 Avondale was one of five U.S. shipyards awarded a contract
to undertake a preliminary design study on the U.S. Navy's LPD-17 (formerly LX)
<PAGE>
ship. The U.S. Navy has stated its expectation that the LPD-17 vessels will be
a mainstay of the U.S. Navy over the next two decades, replacing a number of
vessels nearing the end of their useful lives. In November 1995, Congress
appropriated $974.0 million for the construction of the first of an anticipated
12 vessels under the LPD-17 program. The LPD-17, which the U.S. Navy has
announced will be the next significant class of amphibious vessels, will be
outfitted with sophisticated command and control systems, as well as ship-based
weapon systems. The Company believes that the U.S. Navy will award a contract
for the first LPD-17, together with options for two additional vessels, in mid-
1996.

     In connection with its pursuit of the LPD-17 contract, Avondale has
announced an alliance with Bath Iron Works Corporation ("Bath") (recently
acquired by General Dynamics Corporation) and Hughes Aircraft Company ("Hughes
Aircraft"), a subsidiary of Hughes Electronics Corporation. Under the alliance,
which Avondale expects to finalize prior to submission of the LPD-17 contract
bid, Avondale would be the lead contractor, and the LPD-17 vessels would be
constructed in both the Avondale and Bath shipyards, with Hughes Aircraft being
responsible for integration of the ships' electronic and weapons systems. More
recently, Ingalls Shipbuilding, a subsidiary of Litton Industries, announced
that it had formed an alliance with Tenneco's Newport News Shipbuilding,
National Steel and Shipbuilding Company and Lockheed Martin Government
Electronic Systems to pursue the same contract. Avondale believes that the
formation of its alliance with Bath and Hughes Aircraft, coupled with the
Company's low cost structure and proven experience in building vessels
comparable to the LPD-17, such as the LSD-CVs, will enhance the viability and
competitiveness of the Company's bid for the LPD-17 contracts.

     If Avondale is the successful bidder for the first LPD-17 contract, in
order to satisfy the terms of the contract, it will be required to make a
significant capital investment, including, among others, the enhancement of its
computer-aided design capabilities and installation of sophisticated computer-
based data systems, which are necessary for completing the LPD-17. 

     Although funds for the construction of the first LPD-17 vessel have been
appropriated as part of the overall Department of Defense appropriations for
1996, the President vetoed the companion defense authorization bill. The veto
of the defense authorization bill has created some uncertainty as to the
obligation of the Department of Defense to spend appropriated funds, but it is
the Company's belief, based on public statements made by Department of Defense
representatives, that the veto will not have a negative impact on the
shipbuilding programs of the U.S. Navy, including the LPD-17.

     In addition to the LPD-17, there are several other anticipated U.S. Navy
programs that may offer shipbuilding opportunities to Avondale, including the
possible construction of two additional Sealift vessels, a class of
prepositioning vessels for the U.S. Marine Corps, up to 14 ADC(X) vessels, and
the SC-21, which represents the next generation of surface combatant vessels.

     Reemergence of Commercial Shipbuilding. The termination of the U.S.
construction-differential subsidy program in 1981 significantly curtailed the
ability of U.S. shipyards to compete successfully for international commercial
shipbuilding contracts with foreign shipyards, many of which are heavily
subsidized by their governments. Most of the commercial ships built in the
United States since 1981 have been constructed primarily due to the Jones Act
requirement that all vessels transporting products between U.S. ports be
constructed by U.S. shipyards. However, two recent legislative initiatives have
significantly enhanced U.S. commercial shipbuilding opportunities.

<PAGE>
     The Oil Pollution Act of 1990, which requires the phased-in transition of
single-hulled tankers and product carriers to double-hulled vessels beginning
January 1, 1995, has created a demand (that is expected to continue through the
remainder of the decade) for the retro-fitting of existing tankers and the
construction of new double-hulled tankers, as oil and energy companies and
other ship operators upgrade their fleets to comply with the law. Industry
analysts believe that other countries may pass laws comparable to the Oil
Pollution Act of 1990, which would further increase worldwide demand for
double-hulled product carriers.

     In late 1993, Congress amended the loan guarantee program under Title XI of
the Merchant Marine Act, 1936, to permit the U.S. government to guarantee loan
obligations of foreign vessel owners for foreign-flagged vessels that are built
in U.S. shipyards. Title XI authorizes MARAD to guarantee debt with a term of
up to 25 years in an amount up to 87.5% of the vessel cost, thereby enabling
shipowners to obtain construction financing on more favorable terms than those
currently offered by other countries having guarantee or subsidy programs for
foreign nationals similar to Title XI. These 1993 amendments expanded Title XI
in a manner that has attracted foreign owners and created foreign commercial
shipbuilding opportunities for U.S. shipyards.

     Management believes these initiatives have assisted Avondale in attracting
commercial shipbuilding opportunities during the past year. In May 1995, the
Company finalized a $143.9 million contract to construct four double-hulled
forebodies for product carriers owned by a U.S. shipping company. These double-
hulled product carriers are the first U.S.-flag product carriers built in the
United States in eight years. The contract is supported by a Title XI guarantee
by MARAD. Construction of the forebodies has already begun and is expected to
be completed by mid-1997. Avondale believes its receipt of this contract was
further assisted by its prior experience in constructing three double-hulled T-
AOs on behalf of the U.S. Navy.

     In November 1995, the Company signed a contract with Maritrans for the
construction of up to six (but not less than four) double-hulled product
carriers. This contract is subject to Maritrans' ability to qualify for and
receive a Title XI MARAD financing guarantee. Assuming receipt of such
guarantee, the contract calls for delivery of the vessels by the end of 1998.
These U.S.-flag vessels will comply with all requirements of the Oil Pollution
Act of 1990 and will engage in transportation of petroleum products between
U.S. ports under the Jones Act.

     Recently, bills have been introduced in the U.S. Congress that would
eliminate the competitive advantages afforded to U.S. shipyards under the 1993
amendments to the Title XI guarantee program. This legislation would implement
a December 1994 trade agreement among the United States, the European Union,
Finland, Japan, Korea, Norway and Sweden (which collectively control over 75%
of the market share for worldwide vessel construction) negotiated under the
auspices of the Organization for Economic Cooperation and Development (the
"OECD Agreement"). The OECD Agreement and related accords seek, among other
things, to eliminate government subsidies provided to commercial shipbuilders
and to adopt a uniform standard of government credit assistance for foreign
nationals. Under these multilateral accords, each participating nation agreed
not to provide credit assistance to foreign nationals in excess of 80% of the
vessel construction price, and to limit the term of any credit assistance to
not more than 12 years. In mid-December 1995, a subcommittee of the Ways and
Means Committee of the U.S. House of Representatives passed a bill seeking to
implement the OECD Agreement. If this bill is enacted by Congress in its
current form, the Title XI guarantee program would be modified to be in accord
<PAGE>
with the uniform credit assistance standards mandated under the OECD Agreement,
thereby eliminating the advantages available to U.S. shipyards under the 1993
Title XI amendments.

     Avondale is not able at this time to assess whether legislation
implementing the OECD Agreement will be enacted by Congress or the ultimate
impact that any such legislation may have. Although the OECD Agreement promotes
the goal of eliminating commercial shipbuilding subsidies by signatory nations,
there can be no assurance that certain safeguards in the agreement will not be
circumvented or will be adequately enforced, or that worldwide commercial
shipbuilding opportunities may continue to flow to foreign shipyards located in
signatory nations (which may have developed structural competitive advantages
as a result of their long histories of subsidization) or may be diverted to
non-signatory nations. If the competitive advantages of the current Title XI
guarantee program are eliminated and the OECD Agreement fails to achieve its
objectives, Avondale's ability to compete for international commercial
shipbuilding contracts will remain limited, notwithstanding the increased
opportunities that are expected to arise as vessels of the worldwide tanker and
product carrier fleet approach the end of their useful lives.

     The OECD Agreement is not expected to immediately diminish commercial
opportunities arising under the Oil Pollution Act of 1990 and the Jones Act.
Legislative bills seeking to rescind or substantially modify the provisions of
the Jones Act mandating the use of U.S.-built ships for coastwise trade are
introduced in Congress from time to time, and are expected to be introduced in
the future. Although management believes it is unlikely the Jones Act will be
rescinded or materially modified in the foreseeable future, there can be no
assurance to this effect with respect to the Jones Act or any other law or
regulation benefitting U.S. shipbuilders. 

     Technological Innovations. To assure that its shipyard remains among the
most modern in the world, Avondale regularly reviews and assesses its
construction and production process. In this regard, Avondale often consults
with other highly successful shipbuilding companies concerning advances in
shipbuilding technology. In the early 1980s, the Company was the first U.S.
shipyard to successfully implement modular construction techniques that had
previously been perfected by Japanese shipbuilders. Management believes these
techniques were a major factor in Japan's dominance of the commercial
shipbuilding market during the 1970s. Avondale obtained its modular construction
capabilities and "know-how" pursuant to an agreement with Ishikawajima-Harima
Heavy Industries Co., Ltd. ("IHI"), one of Japan's largest shipbuilders, which
worked with Avondale to change its manufacturing processes and to train
Avondale's employees. Modular construction afforded Avondale significant
production efficiencies in the installation of ship systems, largely due to the
greater ease with which such systems could be installed in open modules rather
than closed-in hulls. As a result of these efforts, Avondale realized
substantial increases in labor productivity.

     The Company has also embarked on a modernization program to enhance its
ability to build and deliver vessels at a lower cost. In 1994 the Company
entered into a technology sharing agreement with AESA of Spain, regarded as an
innovative and successful world-class shipyard. After an on-site review of
Avondale's shipyard by AESA, as well as a review by Avondale of current
shipbuilding technology in other countries, Avondale invested $20 million in
capital improvements designed to increase efficiency by improving production
flow. In particular, the Company integrated certain assembly-line techniques
with its modular construction processes. To that end, the Company has built a
covered facility that houses two production lines dedicated to military vessels
<PAGE>
and two lines for commercial vessels.  Avondale believes that sheltering the
production process and separating the unit lines will enhance production
efficiencies and lower unit production costs. 
 
     Because the construction of commercial vessels, particularly the product
carriers that Avondale has traditionally built, places an emphasis on steel
fabrication rather than the complex technological outfitting involved in U.S.
naval construction, the assembly-line process implemented by the Company's new
production facility should particularly benefit Avondale's efforts to remain an
efficient, low-cost commercial shipbuilder. In addition, the Company's recent
experience in constructing U.S. naval vessels that are primarily transport
vessels, such as the Sealift and the LSD-CV, can be beneficially applied to the
construction of large-scale commercial product carriers.
 
Shipbuilding
 
     The Company is predominantly engaged in the design, construction,
conversion, repair and modernization of various types of military and commercial
vessels.

     The main shipyard facility, which is located on a 257-acre site on the
Mississippi River near New Orleans, includes multiple building ways, side
launching facilities, a 900-foot floating dry dock/launch platform that permits
construction of vessels up to 1,000 feet in length, and a 650-foot floating dry
dock principally used for ship repair. The main shipyard is equipped to build
almost any type of vessel other than nuclear submarines and surface vessels of
the largest classes, such as ultra-large crude carriers. Avondale also operates
several other facilities in the vicinity of the main shipyard, including its
Westwego shipyard, which is used primarily for boat construction and repair,
and its Algiers shipyard, which is used primarily for the repair and overhaul
of ocean-going vessels.

     The Company has been and continues to be materially dependent on the U.S.
Navy's ship construction and conversion programs. The following table sets
forth the distribution of marine construction and repair activities during the
last five years based on contract billings. As the table indicates, a majority
of Avondale's work in the year ended December 31, 1995 was comprised of new
military construction. Commercial new construction increased in 1995,
principally due to the construction of the four forebodies for American
Heavylift Shipping Company and the construction of the river hopper barges
discussed in "--Other Operations--Boat Division."
<PAGE>
              Distribution of Marine Construction and Repair Work
 
<TABLE>
<CAPTION>
                                                   Years Ended December 31,
                                                   ----------------------------
                                                   1991  1992  1993  1994  1995
                                                   ----  ----  ----  ----  ----
<S>                                                <C>   <C>   <C>   <C>   <C>
U.S. MILITARY:
  New construction................................  72%   87%   88%   81%   80%
  Repair, overhaul and conversion.................  13%    6%    2%
COMMERCIAL:
  New construction................................  10%    2%    6%   11%   16%
  Repair, overhaul and conversion.................   5%    5%    4%    8%    4%
                                                   ---   ---   ---   ---   ---
TOTAL:                                             100%  100%  100%  100%  100%
                                                   ===   ===   ===   ===   ===
</TABLE>

The percentage of new construction for the U.S. Navy in 1995 was virtually
unchanged for 1994. Commercial repair, overhaul and conversion decreased in
1995 as compared to 1994 as the Company's work on several contracts with a
private contractor for the repair of Sealift ships approached completion.
See "--Other Operations--Repair Operations."

     Government Contracting. Avondale's principal U.S. government business is
currently being performed under fixed-price and fixed-price incentive
contracts. Under fixed-price contracts, the contractor retains all cost savings
on completed contracts but is also liable for the full amount of all cost
overruns for which it is responsible. Fixed-price incentive contracts, on the
other hand, provide for sharing between the government and the contractor of
cost savings and cost overruns based primarily on a specified formula that
compares the contract target cost with actual cost. In addition, such fixed-
price incentive contracts generally provide for payment of escalation of costs
based on published indices relating to the shipbuilding industry. Although all
cost savings are shared under fixed-price incentive contracts, cost overruns in
excess of a specified amount must be borne entirely by the contractor. Recent
contract awards for the Sealift vessels, the fourth LSD-CV and the Icebreaker
are each fixed-price incentive contracts.
 
     All contracts for the construction and conversion of U.S. Navy vessels are
subject to competitive bidding. As a safeguard to anti-competitive bidding
practices, the U.S. Navy has recently employed the concept of "cost realism,"
which requires that each bidder submit information on pricing, estimated costs
of completion and anticipated profit margins. The U.S. Navy uses this and other
data to determine an estimated cost for each bidder. The U.S. Navy then re-
evaluates the bids by using the higher of the bidder's and the U.S. Navy's cost
estimates.
 
     Under government regulations, certain costs, including certain financing
costs, portions of research and development costs and certain marketing
expenses, are not allowable costs under fixed-price incentive contracts. The
government also regulates the methods by which overhead costs are allocated to
government contracts.

     U.S. government contracts are subject to termination by the government
either for its convenience or upon default by the contractor. If the termination
<PAGE>
is for the government's convenience, contracts provide for payment upon
termination for items delivered to and accepted by the government, payment of
the contractor's costs incurred plus the costs of settling and paying claims by
terminated subcontractors, other settlement expenses and a reasonable profit.
However, if a contract termination results from the contractor's default, the
contractor is paid such amount as may be agreed upon for completed and
partially completed products and services accepted by the government. The
government is not liable for the contractor's costs with respect to unaccepted
items and is entitled to repayment of advance payments and progress payments,
if any, related to the terminated portions of the contract. In addition, the
contractor may be liable for excess costs incurred by the government in
procuring undelivered items from another source.
 
     The continuation of any U.S. Navy shipbuilding program is dependent upon
the continuing availability of Congressional appropriations for that program. It
is customary for the U.S. Navy to award contracts to build one or more vessels
of a program to a contractor together with options (exercisable by the U.S.
Navy) to purchase additional vessels in the program. Generally, contracts to
build vessels are not awarded until funds to pay the full contract have been
appropriated. However, because Congress usually appropriates funds on a fiscal
year basis, funds may never be appropriated to permit the U.S. Navy to exercise
options that have been awarded. In addition, even if funds are appropriated,
the U.S. Navy is not required to exercise the options.

     Because its U.S. Navy contracts require the Company to have access to
classified information, Avondale must maintain a security clearance for its
facility. Among other things, facilities with such clearances must restrict the
access of non-U.S. citizens to classified information. If in the future the
percentage of foreign ownership of the Company's Common Stock is increased to a
level that could result in foreign dominance or control of its activities, the
Company would be required to implement additional measures to insure that
classified material would not be compromised or risk the loss of its security
clearance.

     Due to the complexity of government contracts and applicable regulations,
contract disputes with the government may occur in the ordinary course of the
Company's business. Based upon management's analysis of each such dispute and
advice of counsel, the Company records, if appropriate, an estimate of the
amount recoverable upon resolution of such disputes. There are currently no
such amounts recorded. Although management believes its estimates are based
upon a reasonable analysis of such disputes, no assurance can be given that its
estimates will be accurate, and variances between such estimates and actual
results can be material. The Company believes that adequate provision has been
made in its financial statements for this and other normal uncertainties
incident to its government business.
 
     There is significant oversight of defense contractors to prevent waste in
the defense procurement process. Areas of contract dispute are reviewed by the
government for evidence of criminal misconduct such as mischarging, product
substitution and false certification of pricing and other data. In the event
the government alleges a violation of its procurement regulations, it may seek
compensatory, treble or punitive damages in substantial amounts and
indictments, fines, penalties and forfeitures. In addition, the government has
the right to suspend or debar a contractor from government contracting for
significant violations of government procurement regulations. Avondale has
never been subject to suspension or debarment.

     Vessel Deliveries and Backlog. At December 31, 1995, the Company had a
<PAGE>
firm backlog of shipbuilding contracts of approximately $1.4 billion (exclusive
of unexercised options aggregating $485.0 million held by the U.S. Navy for
additional ship orders (including contract escalation) and a commercial
contract subject to financing), compared with backlogs of $1.4 billion at
December 31, 1994 and $1.3 billion at December 31, 1993. The backlog at
December 31, 1995 included $40.0 million to complete the one remaining T-AO out
of the seven awarded in the initial contract; $140.0 million to complete two of
the four LSD-CV vessels that were awarded (two of which were delivered in
1995); $240.0 million related to the Icebreaker under a contract awarded in
1993; and $880.0 million related to four Sealift ships, under contracts awarded
in 1993, 1994 and 1995. Also included in the firm backlog at December 31, 1995
was $35.0 million to complete three MHCs out of the four contracted for by the
U.S. Navy. The first MHC has already been delivered. Currently two of the MHCs
are scheduled for delivery in 1996 and one in 1997. In addition, Avondale has
recently signed two commercial shipbuilding contracts, one of which is subject
to the shipping company's ability to qualify for and receive a Title XI MARAD
financing guarantee.

     All major U.S. Navy contracts in the backlog, except for the contract to
construct three LSD-CVs and the last three T-AOs, contain cost escalation
clauses that are intended to compensate the Company for increases in wage rates
and material costs based on industry indices. The contract to construct the
three LSD-CVs and the last three T-AOs, as originally awarded, contained a cost
escalation clause, but as part of the contract modifications the contracts were
converted to fixed-price contracts.

     Vessel deliveries in 1994 and 1995 included three T-AOs, two LSD-CVs, one
MHC and three gaming vessels. The Company plans to continue to actively pursue
other government construction and conversion opportunities, as well as
commercial opportunities, when they become available.

     The Company also has been actively pursuing commercial shipbuilding
opportunities, although international commercial shipbuilding opportunities
remain limited because shipbuilders in foreign countries are often subsidized
by their governments, which allows them to sell their ships for prices below
their construction costs. Domestic shipbuilding opportunities that are not
affected by foreign subsidies offer better possibilities for the Company. See
"--Overview--Reemergence of Commercial Shipbuilding."

     In connection with the bids and proposals that the Company has submitted
or plans to submit to various commercial and government customers, no assurance
can be given that the Company will be the successful bidder or that the vessels
bid on will actually be built.

Other Operations

     Overview. Although the Company has from time to time, on a limited basis,
pursued opportunities to diversify its business, management strongly believes
that the Company's resources are most profitably employed in marine
construction. As noted in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," in order to focus on its core
shipbuilding business and improve liquidity, the Company sold or discontinued
certain of its non-core operations. The Company will continue to evaluate
suitable diversification opportunities, principally those that would not
detract from Avondale's core business and that would utilize the Company's
existing facilities. Among possible diversification opportunities are: (i) the
construction of large industrial facilities utilizing modular shipbuilding
expertise and project management experience; (ii) the repair and overhaul of
<PAGE>
U.S. Navy and commercial vessels; (iii) the construction of semi-submersible
rigs, tension-leg platforms or similar structures used in the offshore oil and
gas industry (which the Company has constructed from time to time in the past);
(iv) steel fabrication and other operations.

     Modular Construction. The Company has been able to apply its modular
construction methods to a variety of non-marine industrial fabrication
projects, including a sulphur recovery plant that was shipped to Saudi Arabia
for on-site assembly and installation, two cryogenic gas separation systems,
two waste disposal units, six turbine compressors and turbine generators, six
condenser modules for inclusion in a nuclear power plant, and two sled and
receiver modules for sub-sea pipeline connections. The Company has also
fabricated steel bridges and a hydroelectric power plant that was floated up
the Mississippi River and installed in Vidalia, Louisiana in 1990. In January
1992, the Company delivered to the City of New York an 800-bed floating
detention facility that is 625 feet long, 125 feet wide, and five stories high.

     Avondale's modular construction division has not engaged in any
significant projects since the floating detention center was delivered in the
early 1990s.  Although at present there is a minimal level of production
activity in this division, Avondale will continue to pursue non-shipbuilding
marine and industrial-commercial projects suitable for modular construction as
attractive opportunities arise.
 
     Small Vessel Construction. The Company pursues available opportunities for
the construction of special purpose vessels, and relatively small, special
purpose military vessels, commercial fishing boats, dredges, barges, and
ferries.

     Boat Division. The Company has a facility equipped for boat construction at
its Westwego, Louisiana shipyard that is capable of building vessels up to 450
feet in length. In 1994, the Boat Division delivered two gaming vessels which
are 266 and 210 feet in length, and in mid-1995 the division delivered a third
gaming vessel which is 350 feet in length. The Boat Division has also recently
signed a $26 million contract to construct river hopper barges for Ingram Ohio
Barge Company. The Boat Division is actively pursuing other projects, involving
the construction of additional gaming boats as well as passenger vessels and
ferries, towboats and other vessels. The Boat Division's backlog at December
31, 1995, 1994 and 1993 was approximately $18.8 million, $18.3 million and
$13.0 million, respectively.

     Steel Operations. Through its Steel Sales operation, Avondale sells steel
plate and structural steel to the marine and industrial markets in the Gulf
Coast region of the United States. Net sales to other Avondale divisions are
not significant. Sales to unrelated parties for the years ended December 31,
1995, 1994 and 1993 were approximately $28.2 million, $22.4 million and $19.0
million, respectively.

     Repair Operations. At its main shipyard and the Algiers shipyard, Avondale
engages in the repair, overhaul and conversion of ocean-going vessels. With the
900 and 650 foot drydocks located at the Company's main shipyard, the Company
is capable of offering a complete range of vessel repairs and overhaul
services. The Algiers shipyard is operated under a long-term lease and is
designed primarily for the topside repair and overhaul of large ocean-going
vessels. Although historically Avondale has engaged in the repair and overhaul
of U.S. Navy vessels, these opportunities have been curtailed by the U.S.
Navy's current policy of requiring such work to be conducted at or near the
vessels' home ports.
<PAGE>
Competition

     The shipbuilding industry is divided into two distinct markets, U.S.
government contracts, which is dominated by contracts for the U.S. Navy, and
domestic and international shipbuilding contracts for commercial customers. The
reduced level of shipbuilding activity by the U.S. government during the past
decade has significantly intensified competition. With respect to the market
for U.S. military contracts, there are principally five private U.S. shipyards,
including Avondale, that compete for contracts to construct or convert surface
vessels. Three of these companies are subsidiaries of much larger corporations
that have substantially greater resources than Avondale.

     With respect to commercial vessels that must be constructed by a U.S.
shipyard under the Jones Act, there are approximately 20 private U.S. shipyards
that can accommodate the construction of vessels up to 400 feet in length, ten
of which Avondale considers to be its direct competitors for commercial
contracts. Because of the current overcapacity at U.S. shipyards, the current
small volume of commercial work available, and the fact that most contracts are
awarded on the basis of competitive bidding, price competition is particularly
intense. With respect to the international commercial shipbuilding market,
Avondale competes with numerous shipyards in several countries, many of which
are heavily subsidized by their governments. See "--Overview--Reemergence of
Commercial Shipbuilding."

     Substantially all military and commercial contracts awarded to U.S.
shipyards are competitively bid. The Company has been successful recently in
securing competitively bid contracts in large part because the Company
submitted the most cost-effective bids for the available contracts. The Company
believes that it will continue to be competitive in bidding for selected U.S.
Navy and commercial shipbuilding contracts in the future. However, no assurance
can be given that the Company will be the successful bidder on any future
contracts or that, if successful, it will realize profits on such contracts.
 
Marketing
 
     The Company's marketing effort is decentralized and conducted separately
by each division. Generally, the Company and its competitors are all aware of
the shipbuilding, repair and conversion plans of the U.S. Navy and most
prospective commercial customers, and are invited to bid on all major projects.
 
     The Company's boatbuilding and repair operations are marketed by the sales
and business development personnel of the appropriate divisions primarily
through direct, personal sales calls. The services of the Steel Sales operation
are marketed through industry advertising, personal sales calls and prior
business relationships.
 
Materials and Supplies

     The principal materials used by Avondale in its shipbuilding, conversion
and repair business are standard steel shapes, steel plate and paint. Other
materials used in large quantities include aluminum, copper-nickel and steel
pipe, electrical cable and fittings. The Company also purchases component parts
such as propulsion systems, boilers, generators and other equipment. All of
these materials and parts are currently available in adequate supply from
domestic and foreign sources. Generally, for all its long-term contracts, the
Company obtains price quotations for its materials requirements from multiple
suppliers to ensure competitive pricing. In addition, through the cost
escalation provisions contained in its U.S. military contracts, the Company is
<PAGE>
protected from increases in its materials costs to the extent that the
increases in the Company's costs are in line with industry indices.
 
     In connection with its government contracts, the Company is required to
procure certain materials and component parts from supply sources approved by
the U.S. Government. Although certain components and sub-assemblies are
manufactured by subcontractors, the Company's reliance on subcontractors has
been and is expected by management to continue to be limited. The Company is
not dependent upon any one supply source and believes that its supply sources
are adequate to meet its future needs.
 
Insurance
 
     The Company maintains insurance against property damage caused by fire,
explosion and similar catastrophic events that may result in physical damage or
destruction to the Company's premises and properties. The Company also
maintains general liability insurance in amounts it deems appropriate for its
business. The Company is self-insured for workers' compensation liability and
employees' health insurance except for losses in excess of $1.0 million per
occurrence, for which the Company maintains insurance in amounts it deems
appropriate.
 
Environmental and Safety Matters

     General. Avondale is subject to federal, state and local environmental
laws and regulations that impose limitations on the discharge of pollutants
into the environment and establish standards for the treatment, storage and
disposal of toxic and hazardous wastes. Stringent fines and penalties may be
imposed for non-compliance with these laws and regulations, and certain
environmental laws impose joint and several "strict liability" for remediation
of spills and releases of oil and hazardous substances rendering a person liable
for environmental damage, without regard to negligence or fault on the part of
such person. Such laws and regulations may expose the Company to liability for
the conduct of or conditions caused by others, or for acts of the Company which
are or were in compliance with all applicable laws at the time such acts were
performed. The Company is covered under its various insurance policies for
some, but not all, potential environmental liabilities. See Note 10 of the
Notes to Consolidated Financial Statements.
 
     The Company is also subject to the federal Occupational Safety and Health
Act ("OSHA") and similar state statutes. The Company has an extensive health and
safety program and employs a staff of safety inspectors and industrial hygiene
technicians, whose primary functions are to develop Company policies that meet
or exceed the safety standards set by OSHA, train supervisors and make daily
inspections of safety procedures to insure their compliance with Company
policies on safety and industrial hygiene. All supervisors are required to
attend safety training meetings at which the importance of full compliance with
safety procedures is emphasized.
 
     Waste Disposal. Avondale's operations produce a limited amount of
industrial waste products and certain hazardous materials. The Company's
industrial waste products, which consist principally of residual petroleum,
other combustibles and blasting abrasives, are shipped to third party disposal
sites that are licensed to handle such materials.
 
Employees

     Since September 1985, when all of its outstanding Common Stock was
<PAGE>
purchased by the ESOP from Ogden Corporation, Avondale has been owned
principally by its current and former employees. At December 31, 1995, Avondale
had approximately 5,300 employees, many of whom have been employed by the
Company for many years.  

     None of Avondale's employees are currently covered by any collective
bargaining agreement. However, on June 23, 1993 an election was conducted to
determine whether certain of the New Orleans area employees desired to have
union representation. A total of 3,914 workers cast votes, of which
approximately 850 votes were challenged by the NLRB and union organizers on a
variety of grounds. Although the union did receive a majority of the
unchallenged ballots, challenged ballots (which remain under seal) in numbers
sufficient to determine the outcome of the election remain uncounted awaiting
the NLRB's decision. The Company has filed objections with the NLRB seeking to
have the election set aside. The NLRB is currently reviewing the challenged
votes and evaluating the Company's objections to the election. The hearing
officer assigned to the case has recommended to the NLRB that certain of the
disputed votes be counted and that the Company's objections be rejected. If the
NLRB upholds the election and certifies the union, and that decision is not
overturned by subsequent judicial proceedings, the Company would be required
under federal labor laws to bargain in good faith with the union on matters such
as wages, hours and other working conditions.  Even though Avondale will only
agree to bargaining demands that can be economically justified, union
certification may result in an increased risk that the union will engage in
potentially disruptive activities such as strikes or picketing, or that the
Company may incur higher labor and operating costs.

     The union has also filed numerous unfair labor practice charges with the
NLRB alleging that Avondale has committed a variety of violations of the
National Labor Relations Act principally involving claims that employees were
wrongfully disciplined or discharged. Although the Company disputes these
claims and is waging a vigorous defense, if there is a finding against the
Company, depending on the facts of each case, the employee would be entitled to
back pay from the time of his or her claim until the resolution of the case.
However, even if there is a finding in favor of some of the claimants with
respect to one or more of the unfair labor practice claims, management believes
that any judgment would not have a material impact on Avondale's financial
condition, results of operations or cash flows.


                      Glossary of Selected Industry Terms
 
<TABLE>
 <C>        <S>
 ADC(X)     A class of auxiliary vessels designed to deliver a steady supply of
            fuel, ammunition and stores to the U.S. Navy fleet. It is currently
            envisioned that these vessels will have "Refuel at Sea"
            capabilities similar to the T-AOs currently under construction at
            Avondale.

 AO         An auxiliary oil tanker constructed for the U.S. Navy and crewed by
            U.S. Navy personnel. Avondale has built five AOs.

 AOJ        An AO which has been "jumboized" i.e., lengthened by the Company by
            inserting a 108 foot midbody. Avondale has converted five AOJs.

 Icebreaker WAGB-20 Polar Icebreaker, which has been ordered by the U.S. Coast
            Guard for its polar operations.
<PAGE>
 Jones Act  Merchant Marine Act of 1920, as amended.

 LASH       "Lighter aboard ship," a LASH vessel carries its cargo in pre-
            loaded barges (lighters). The Company constructed 21 such vessels
            in the late 1960s and early 1970s for five commercial customers.

 LCAC       "Landing craft air cushion," a surface effect vessel that was
            constructed at the Company's Gulfport facility. Avondale has built
            15 LCACs.

 LPD-17     The next class of amphibious assault ship proposed by the U.S.
            Navy.

 LSD        "Landing ship dock," designed to carry troops, materials and up to
            four LCACs. Avondale has built five LSDs.

 LSD-CV     An LSD with a "cargo variant" design allowing for carrying of more
            cargo and only 2 LCACs. Avondale has built four LSD-CVs.

 MARAD      United States Maritime Administration, Department of
            Transportation.

 MHC        MHC-51 class fiberglass coastal minehunter. Avondale has built four
            MHCs.

 REAs       Requests for Equitable Adjustments submitted by a government
            contractor to the U.S. government, as explained further under the
            heading "Risk Factors."

 SC-21      "Surface Combatant 21st Century," the next generation of surface
            combatant to be built for the U.S. Navy. As currently conceived,
            this vessel would most closely resemble the Aegis class destroyer.

 SL 7       A "Roll on Roll off" vessel operated by a private company for the
            Military Sealift Command. Avondale has converted three SL 7s.

 Sealift    As used herein, TAKR 300 Class Sealift vessels are transport
            vessels built for the U.S. Navy. Avondale has contracts to build
            four Sealift vessels with options to build an additional two
	    vessels.

 T-AGS 45   An oceanographic research vessel constructed by Avondale and
            delivered to the U.S. Navy in May 1993.

 T-AO       Same as an "AO" but operated by the military sealift command and
            crewed by a civilian crew. Avondale has built sixteen T-AOs.
</TABLE>


Item 2.   Properties

     The Company's corporate headquarters and main shipyard are located on the
west bank of the Mississippi River at Avondale, Louisiana, approximately 15
miles from downtown New Orleans. That facility includes approximately 226 acres
of Company-owned land with 174 buildings enclosing approximately 2.0 million
square feet of space, approximately 31 acres of leased land, a 900-foot floating
dry dock/launch platform that permits construction, conversion or repair of
vessels up to approximately 1,000 feet in length, and a 650-foot floating dry
<PAGE>
dock principally used for ship repair and multiple building ways and side
launching facilities.  The main shipyard includes approximately 6,500 feet of
wharves, 1,200 feet of launch ways and 2,900 feet of unimproved waterfront
along the Mississippi River.  The Company's shipyard facilities have the
capacity to build virtually any type of vessel other than submarines and
surface vessels of the largest classes, such as ultra-large crude carriers.

     The Company's 900-foot floating drydock was constructed in 1975 and
financed pursuant to Title XI of the Merchant Marine Act, 1936, as amended.  The
900 foot drydock is currently subject to a Title XI mortgage of approximately
$3.9 million.  As discussed further in Note 4 of the Notes to the Consolidated
Financial Statements, these mortgage bonds were refinanced in February 1995.

     The Company's 650-foot floating drydock and support facilities were
constructed in 1982 and financed with $36.25 million of industrial revenue bonds
(see Note 4 of the Notes to the Consolidated Financial Statements).  As part of
its program to significantly improve its efficiency, in 1995 the Company
completed an approximate $20 million capital expenditure program, financed
principally through $17.8 million of bonds issued in February 1995 utilizing a
Title XI guarantee (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources" and
Note 4 to the Notes to the Consolidated Financial Statements).  The
modernization program includes construction of a covered facility, which should
provide productivity gains by eliminating weather-related problems, and
adoption of a more automated process for building the various modules which are
assembled into a completed vessel.

     As part of its program to significantly improve its efficiency, in 1995 the
Company completed an approximate $20 million capital expenditure program, 
financed principally through $17.8 million of bonds issued in February 1995
utilizing a Title XI guarantee (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources"
and Note 4 of the Notes to Consolidated Financial Statements).  The
modernization program includes construction of a covered facility, which should
provide productivity gains by eliminating weather-related problems, and
adoption of a more automated process for building the various modules which are
assembled into a completed vessel.

     During February 1995, the Company established two additional entities for
the purpose of owning certain parcels of Avondale's real estate which underlie
the building and improvements funded with the proceeds of the debt guaranteed
under Title XI (as discussed above).  The first entity is Avondale Properties,
Inc., a Louisiana corporation, wholly owned by Avondale Industries, Inc.  The
second entity is Avondale Land Management Company, a Louisiana Partnership owned
99% by Avondale Properties, Inc.  The properties transferred represent
approximately 143 of the 210 acres which comprise the Company's main facility.
These parcels are leased back to Avondale Industries, Inc. pursuant to certain
lease agreements with a term coincident with the Title XI debt.

     The Company also operates several other facilities in the vicinity of the
main shipyard.  The Westwego Yard is located five miles down-river from the main
shipyard on 16.6 acres of leased land and includes facilities for the
construction or repair of boats and vessels up to 450 feet in length.  The
Algiers Yard is located 19 miles down-river from the main shipyard on 22 acres
of leased land and includes construction facilities used predominantly for the
repair and overhaul of large ocean-going vessels.  The Steel Sales operation is
located on 4.4 acres of property leased on a month-to-month basis in Harvey,
Louisiana, where a steel warehouse is located.  The location has direct access
<PAGE>
to the Mississippi River via the Harvey Canal.  The Modular Construction
operation, located in an approximately 70,000 square foot facility on a 58 acre
Company-owned site a few miles up-river from the main shipyard, consists of a
complete machine shop with steel fabricating facilities.

     The Avondale Gulfport Marine, Inc. ("AGM") facility is located on 24.5
acres of Company-owned land located six miles northeast of Gulfport, Mississippi
on an industrial seaway.  The site has a 98,800 square foot manufacturing
facility and a 25,000 square foot assembly building.  The site also includes a
test area, a craft storage area and a waterway access ramp.  This facility is
currently idle and has been listed for sale.  However, the Company continues to
seek alternative uses for this facility.

     The Avondale Enterprises, Inc. ("AEI") facility is located on a Company-
owned 121.5 acre site four miles north northeast of Gulfport, Mississippi on the
same industrial seaway as AGM.  The facility includes a 263,447 square foot
manufacturing facility and a 6,300 square foot administration building.  This
facility was acquired in 1989 for construction of the MHCs.  AEI has pledged a
portion of the facility to secure a $3 million loan it entered into in 1991 to
finance a portion of its 1989 acquisition debt.  Upon the transfer of the final
MHC hull to the main shipyard in December 1994, this facility became idle.  The
Company is currently utilizing a portion of the facility for the construction of
barge covers as part of the river hopper barge construction contract discussed
at "Business - Other Operations - Boat Division." 

      The main facility operated by the Genco Industries Group ("Genco") is
located on a Company-owned 8.7 acre site 20 miles southeast of Beaumont, Texas.
The facility includes five buildings utilized for manufacturing and
administration comprising approximately 66,800 square feet.  Genco has a smaller
facility that is located on a Company-owned 3.2 acre site approximately 80 miles
northwest of Beaumont.  This facility consists of three manufacturing-
administration buildings totaling approximately 26,500 square feet.  Genco's
facilities became idle in 1994 after completion of their contracts.  The Company
currently has these facilities listed for sale and is exploring alternative
uses.

     Except as otherwise noted above, the above-described facility leases are
for various terms extending through at least 1999, including renewal options.

     The Company believes that its core marine construction and repair
facilities provide it with sufficient capacity to handle any business it
reasonable expects to obtain in the foreseeable future.  In general, the
Company's productive capacity is limited less by physical facilities than by the
number of employees the Company can effectively supervise.  Management believes
that the Company would be operating at full capacity with approximately 10,000
employees.  The Company's core business currently operates with more than 5,200
employees.


Item 3.   Legal Proceedings

     Environmental Proceedings.  Various governmental and private parties have
from time to time alleged that the Company is a potentially responsible party
with respect to certain hazardous waste sites, including, among other things,
the site listed below.

     In January 1986, the Louisiana Department of Environmental Quality ("DEQ")
advised the Company that it may be a potentially responsible party ("PRP") with
<PAGE>
respect to an oil reclamation site operated by an unaffiliated company in
Walker, Louisiana. The Company sold to the operator a substantial portion of the
waste oil that was processed at the reclamation site during the period 1978
through 1982. The Company's potential liability, if any, for cleanup of this
site will be based on the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") or the Louisiana Environmental Affairs Act.
Under these statutes, such liability is presumptively joint and several, but is
typically apportioned among the responsible parties based on the volume of
material sent by each to the waste site. The Company has cooperated with other
PRPs to study the potential aggregate liability under these statutes. Moreover,
the Company believes it has substantial defenses against liability and defenses
that could mitigate the portion of liability, if any, that would otherwise be
attributable to it.

     To date, the Company and certain of the other PRPs for the site have funded
the site's remediation under a preliminary cost-sharing agreement. As of
December 31, 1995 clean-up costs totalled $17 million, of which the Company has
contributed $3.6 million. Additional work scheduled for the site includes
completion of studies in 1996, and if required by the results of these studies,
subsequent remediation.  Following completion of any such required additional
remediation, it will be necessary to obtain Environmental Protection Agency
approval to close the site, which consent may require subsequent post-closure
activities such as groundwater monitoring and site maintenance for many years.
The Company is not able to estimate the final costs for any such additional
remedial work or post-closure costs that may be required; however, the Company
believes that its proportionate share of expenditures for any additional work
will not have a material adverse effect on the Company's financial statements.
In addition, the Company believes that its proportionate responsibility for the
clean-up costs will not be materially changed.

     Since July 1986, a number of "toxic tort" suits have been filed against the
Company and numerous other defendants alleging claims for personal injury,
property damage, and "fear  of  cancer"  in connection with the reclamation site
discussed above. The plaintiffs also sought substantial punitive damages.  These
cases were consolidated and certified as a class action. In 1995, the Judge for
the Federal District Court for the Western District of Louisiana issued a ruling
from the bench approving the Company's settlement of the class action lawsuit.  
Based on the advice of its counsel, the Company believes that a written order
confirming its earlier bench ruling will be issued by the Federal District Court
in the near future.  Under the terms of the court approved settlement, which is
subject to appeal following the issuance of the final written order, the Company
paid $4.0 million cash into a settlement fund in the third quarter of 1995,
using cash from operations, and issued a $2.0 million unsecured note to the
plaintiff class.  The note bears interest at 8% per annum and is due on
January 28,1997.  The Company had previously recorded an accrual sufficient to 
provide for the $6.0 million settlement and has sufficient liquidity to fund the
note.  The Company could also be responsible for payment to the plaintiffs of up
to an additional $6.0 million (plus interest at 8% per annum) if the plaintiffs
are unsuccessful in collecting certain claims under Avondale's insurance
policies that have been assigned to the plaintiff class under the settlement
agreement.  With respect to the potential contingent liability of the Company to
pay additional sums under the settlement agreement, management believes that the
eventual resolution of this matter will not have a material adverse effect on
the Company's results of operations, financial position or cash flows.

     Furthermore, the Company has initiated litigation against its insurer for a
declaration of coverage of the liability, if any, that may arise in connection
with the remediation of the site referred to above. The court has ruled that the
<PAGE>
insurer has the duty to defend the Company, but has not yet ruled on whether
the carrier has a duty to indemnify the Company if any liability is ultimately
assessed against it. After consultation with counsel, the Company is unable to
predict the eventual outcome of this litigation or the degree to which such
potential liability would be indemnified by its insurance carrier.

     In addition to the above, the Company is also named as a defendant in other
lawsuits and proceedings arising in the ordinary course of business, some of
which involve substantial claims.

     The Company has established accruals as appropriate for certain of the
matters discussed above. While the ultimate outcome of lawsuits and proceedings
against the Company cannot be predicted with certainty, management believes,
based on current facts and circumstances and after review with counsel, that,
the eventual resolution of these matters is not expected to have a material
adverse effect on the Company's financial statements. 


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

     The Company did not submit any matters to a vote of security holders during
the fourth quarter of its fiscal year ended December 31, 1995.


 
				    PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.
                                      
     The Company's common stock has traded on The Nasdaq Stock Market ("NASDAQ")
under the symbol AVDL.  The following table sets forth the range of high and low
per share sales prices, as reported by NASDAQ, for the periods indicated.

<TABLE>
<CAPTION>
          
	                       High       Low
        		       ----	  ---	
	 <S>		      <C>	  <C>
	 1994
         ----
         First Quarter        $  8 1/2    $  6 5/8
         Second Quarter       $  8 1/2    $  6 1/4
         Third Quarter        $  8 1/4    $  6 1/8
         Fourth Quarter       $  8        $  6 5/8


         1995
         ----
         First Quarter        $  8 1/8    $  7 1/8
         Second Quarter       $  9 1/4    $  7
         Third Quarter        $ 15 7/8    $  8 1/8
         Fourth Quarter       $ 16 3/8    $ 12 3/4
</TABLE>       
     

     At December 31, 1995, there were 719 holders of record of the Company's
Common Stock.
<PAGE>
     The Company does not currently pay dividends on its Common Stock and no
dividends were paid on the Company's Common Stock during the two years ended
December 31, 1995.  As discussed in Note 4 of the Notes to Consolidated
Financial Statements, the terms of the Company's revolving credit agreement
limit or restrict, without bank approval, the payment of cash dividends.

<PAGE>
Item 6.   Selected Consolidated Financial Data.

                            SELECTED FINANCIAL DATA

     The following table contains selected consolidated financial data for the
Company and its subsidiaries for each of the fiscal years in the five-year
period ended December 31, 1995. The data for each of the fiscal years in the
five-year period ended December 31, 1995 are derived from the consolidated
financial statements of the Company and its subsidiaries. The consolidated
financial statements as of December 31, 1994 and 1995, and for each of the
years in the three-year period ended December 31, 1995, and the report of
Deloitte & Touche LLP thereon, have been included in this Form 10-K.
<PAGE>
<TABLE>
<CAPTION>
                                       Years Ended December 31,
                          ------------------------------------------------------
                                (In thousands, except per share data)
                            1991      1992      1993(2)     1994(2)    1995(2)
                          --------  --------  ----------  ----------  ----------
<S>                       <C>       <C>       <C>         <C>         <C>
INCOME STATEMENT
 DATA:(1)
Continuing operations:
 Net sales..............  $768,887  $576,384  $  456,724  $  475,810  $  576,308
 Gross profit (loss)....   (30,090)   37,796      33,180      47,485      58,671
 Income (loss) from
  operations............  (119,842)    7,281       3,400      16,949      26,548
 Net ESOP
  contribution(5).......    24,000     8,141          --          --          --
 Income (loss) from
  continuing operations.  (139,173)  (11,321)     (5,233)     13,075      28,180
Income (loss) from
 discontinued
 operations.............    (1,705)      104      (3,561)     (4,552)         --
Net income
 (loss)(3)(4)(6)........  (140,878)  (11,217)     (8,794)      8,523      28,180
Income (loss) per share
 of Common Stock:
 Continuing operations..     (9.64)    (0.78)      (0.36)       0.90        1.95
 Discontinued
  operations............     (0.12)       --       (0.25)      (0.31)         --
 Total..................     (9.76)    (0.78)      (0.61)       0.59        1.95
Cash dividends per share
 of Common Stock(7).....        --        --          --          --          --
BALANCE SHEET DATA:
Current assets..........  $199,815  $177,075  $  151,597  $  127,936  $  173,593
Current liabilities.....   127,522   113,917     127,032      93,100      92,605
Total assets............   383,670   346,196     302,139     273,503     316,727
Long-term debt..........   110,009    90,469      43,848      45,875      60,593
Total liabilities.......   257,528   223,047     187,784     150,625     165,669
Shareholders' equity....   126,142   123,149     114,355     122,878     151,058
OTHER FINANCIAL DATA:
EBITDA(8)...............  $(49,395) $ 19,599  $   15,210  $   28,501  $   36,367
OPERATIONAL DATA:
Firm backlog............  $921,400  $678,000  $1,268,000  $1,424,000  $1,413,000
</TABLE>
--------

(1) Income statement data for years 1991 through 1993 have been restated to
    present Avondale's service contracting subsidiary as discontinued
    operations (see Note 5 of the Notes to Consolidated Financial Statements).
    
(2) See "Management's Discussion and Analysis of Financial Condition and
    Results of Operations" and the Notes to Consolidated Financial Statements
    relating to, among other things, (i) proceeds received by the Company from
    the settlements of REAs in December 1993 and December 1995 and (ii) the
    impact of revisions of estimated profits on several previously completed
    shipbuilding contracts in 1994. 

(3) During 1991, the Company revised its estimated costs to complete certain
<PAGE>
    contracts which had the effect of decreasing net income by approximately
    $69.0 million, or $4.78 per share.

(4) During 1991, the Company revised its estimate of the continuing value and
    future benefits of goodwill. Accordingly, the Company reduced the carrying
    value of goodwill which had the effect of decreasing net income for 1991
    by $57.6 million, or $3.99 per share.

(5) The amounts reflected as Net ESOP contributions for 1991 and 1992 reflect
    contributions made by the Company to the ESOP, all of which were returned
    to the Company as repayments of indebtedness owed by the ESOP to the
    Company incurred in connection with the purchase by the ESOP of the Common
    Stock of the Company in 1985. Although these contributions were charged
    against income, they had no net effect on Shareholders' equity.

(6) Net income for the year ended December 31, 1995 includes a deferred income
    tax benefit of $13.0 million ($.90 per share) attributable to certain net
    operating loss carryforwards available to offset estimated future taxable
    earnings.

(7) The Company does not currently pay cash dividends on its Common Stock.
    
(8) As used herein, EBITDA is income (loss) from operations plus depreciation
    and amortization. EBITDA is frequently used by securities analysts and is
    presented here to provide additional information about the Company's
    operations. EBITDA should not be considered as an alternative to net
    income as a measure of the Company's operating performance or as an
    alternative to cash flows as a better measure of the Company's liquidity.
    For 1991, EBITDA does not include a $57.6 million write-down of goodwill.
    

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

     The following discussion should be read in conjunction with Avondale
Industries, Inc.'s (the "Company" or "Avondale") Consolidated Financial
Statements and Notes thereto included elsewhere in this Form 10-K.

Overview

     The Company's results of operations improved substantially during fiscal
1995 compared to the prior year. Net sales were 21% above the level recorded in
1994 while income from continuing operations before income taxes increased 78%
from the amount reported for fiscal year 1994. Further, 1995 net income more
than tripled that of 1994.

     The Company's firm backlog at December 31, 1995 was approximately $1.4
billion exclusive of unexercised options aggregating $485 million held by the
U.S. Navy for additional ship orders (including contract escalation) and a
commercial contract subject to financing. Firm backlog includes several
contracts awarded in 1995 with the most significant occurring in December 1995,
when the U.S. Navy exercised a previously awarded option to construct an
additional Sealift ship for approximately $206 million (or more than $235
million after considering certain additional components and cost escalation).
The exercise of this option represents the fourth ship which the Company has
been awarded in the Sealift program. The U.S. Navy holds options for two
additional Sealift ships that are exercisable over the next two years.

<PAGE>
     Other 1995 contract awards include a $143.9 million contract finalized in
May 1995 to construct four double-hulled forebodies for product carriers and a
$25.9 million contract to construct a series of river hopper barges.
Construction of the forebodies has begun and is expected to be completed by
mid-1997. In 1995 the Company also signed a contract with a U.S. shipping
company for the construction of up to six (but not less than four) double-
hulled product carriers. This contract is subject to the shipping company's
ability to qualify for and receive a Title XI MARAD financing guarantee.
Assuming receipt of such guarantee, the contract calls for delivery of the
vessels by the end of 1998. 

     The Company previously disclosed that it had filed a REA with the U.S.
Navy related to the four MHCs currently under contract with the Company (the
"Minehunter REA"). On December 29, 1995 the Company announced that it settled
the Minehunter REA for an amount that was consistent with the previously
recorded estimate of the amount recoverable under the Minehunter REA. The
settlement should enable the Company to complete the MHC program on a break-
even basis through the remainder of contract performance. The first of the four
MHCs was delivered to the U.S. Navy in August 1995, with the remaining three
ships scheduled for completion and delivery during 1996 and early 1997.

     With the exception of the contracts to construct the four MHCs and the
three LSD-CVs, which are projected to be completed on essentially a break-even
basis through the remainder of contract performance, the Company's committed
backlog is projected to be completed profitably. The operating profit projected
for 1996 will be related principally to the LSD-CV 52, the T-AO and the Sealift
ship contracts, while profits projected for 1997 and 1998 will reflect the LSD-
CV 52 as well as the Sealift, Icebreaker and double-hulled forebodies
contracts. The Company records profits under the percentage-of-completion
method of accounting based on direct labor charges. Although the Company
generally does not begin to record profits on its contracts until contract
performance is sufficient to estimate final results with reasonable accuracy,
actual profits taken with respect to such contracts may be diminished if the
Company is required in the future to revise its estimate of the cost to
complete one or more of such contracts.

     As discussed further in Note 10 of the Notes to Consolidated Financial
Statements, the Company was informed that it was a potentially responsible
party ("PRP") in connection with an oil reclamation site in Walker, Louisiana
operated by an unaffiliated company. The Company, along with other PRPs, has
fully funded its share of the clean-up costs incurred to date under a
preliminary cost-sharing agreement to fund the site's remediation.  As of
December 31, 1995, clean-up costs totaled $17 million, of which the Company has
contributed $3.6 million. Additional work scheduled for the site includes
completion of studies in 1996, and if required by the results of these studies,
subsequent remediation.  Following completion of any such required additional
remediation, it will be necessary to obtain Environmental Protection Agency
approval to close the site, which consent may require subsequent post-closure
activities such as groundwater monitoring and site maintenance for many years.
The Company is not able to estimate the final costs for any such additional
remedial work or post-closure costs that may be required; however, the Company
believes that its proportionate share of expenditures for any additional work
will not have a material adverse effect on the Company's financial statements.
In addition, the Company believes that its proportionate responsibility for the
clean-up costs will not be materially changed.

     Since July 1986, a number of "toxic tort" suits have been filed against the
Company and numerous other defendants alleging claims for personal injury,
<PAGE>
property damage, and "fear  of  cancer"  in connection with the reclamation site
discussed above. The plaintiffs also sought substantial punitive damages.  These
cases were consolidated and certified as a class action. In 1995, the Judge for
the Federal District Court for the Western District of Louisiana issued a ruling
from the bench approving the Company's settlement of the class action lawsuit.  
Based on the advice of its counsel, the Company believes that a written order
confirming its earlier bench ruling will be issued by the Federal District Court
in the near future.  Under the terms of the court approved settlement, which is
subject to appeal following the issuance of the final written order, the Company
paid $4.0 million cash into a settlement fund in the third quarter of 1995,
using cash from operations, and issued a $2.0 million unsecured note to the
plaintiff class.  The note bears interest at 8% per annum and is due on
January 28,1997.  The Company had previously recorded an accrual sufficient to 
provide for the $6.0 million settlement and has sufficient liquidity to fund the
note.  The Company could also be responsible for payment to the plaintiffs of up
to an additional $6.0 million (plus interest at 8% per annum) if the plaintiffs
are unsuccessful in collecting certain claims under Avondale's insurance
policies that have been assigned to the plaintiff class under the settlement
agreement.  With respect to the potential contingent liability of the Company to
pay additional sums under the settlement agreement, management believes that the
eventual resolution of this matter will not have a material adverse effect on
the Company's results of operations, financial position or cash flows.

     As previously disclosed, certain of the Company's operations closed in
1994 with the completion of their respective contracts. Two of these facilities
are currently offered for sale while the Company continues to seek alternative
uses for these facilities. With respect to these properties, the Company
currently is not aware of any material environmental liabilities to be incurred
for site restoration, post closure, monitoring commitments, or other exit costs.

Results of Operations

     1995 VS. 1994. The Company recorded net income of $28.2 million, or $1.95
per share, for 1995 compared to $8.5 million, or $0.59 per share, for 1994
representing a threefold increase in net income over the prior year. The 1995
net income includes a $4.4 million, or $0.30 per share, net income tax benefit
(discussed below). Also included in 1995 net income is $4.5 million, or $0.31
per share, which is a reduction of a previously recognized loss which was
recorded in prior years on the contract to construct three LSD-CVs. The
reduction was due primarily to a revision of the total estimated contract cost
as it nears completion. Included in net income for 1994 are a $3.5 million, or
$0.24 per share, net gain related to revisions of estimated contract profits on
several previously completed shipbuilding contracts and a loss from
discontinued operations of $4.6 million, or $0.31 per share, reflecting the
Company's decision in 1994 to discontinue its service contracting business.

     The significant increases in the Company's operating results in 1995
primarily reflect increased operating profits recognized on the LSD-CV 52
contract, as well as the reversal of part of a previously recognized loss on
the contract to construct three LSD-CVs, and the recognition of operating
profit on the T-AO contract. Also contributing to the increase in operating
results for 1995 were profits recorded by the Company's marine repair and
wholesale steel operations and an increase in interest income primarily
resulting from an increase in the Company's invested cash balances.

     The Company's net sales in 1995 increased $100.5 million, or 21%, as
compared to the prior year. The increase in 1995 net sales was due primarily to
increases in sales revenues recognized on the contracts to construct the first
<PAGE>
three Sealift ships, the forebodies for four double-hulled product tankers, the
LSD-CV 52 and the Icebreaker, which collectively accounted for 54% of the
Company's 1995 net sales revenue. The increase in net sales was partially
increase in net sales was partially offset by reductions in sales revenues
recognized on the contracts to construct the T-AOs (the fifth and sixth of
which were delivered in 1995), three LSD-CVs (the second of which was delivered
in 1995) and four MHCs (the first of which was delivered in 1995), as these
contracts approach completion. The contracts to construct the T-AOs, three LSD-
CVs, and four MHCs collectively accounted for 28% of the Company's 1995 net
sales revenue.

     Gross profit for 1995 increased $11.2 million, or 24%, compared to 1994.
The increase in 1995 gross profit was primarily due to profits recognized on
the contract to construct the LSD-CV 52 as the percentage of completion was
sufficient to begin profit recognition in 1995.

     Selling, general and administrative ("SG&A") expenses increased $1.6
million, or 5%, for 1995 compared to 1994. The overall increase in SG&A
expenses primarily reflected increased operating activity at the Company's main
shipyard and, in part, an increase in indirect labor and associated costs
resulting from a wage increase given in January 1995 to all employees. These
increases in SG&A expenses were partially offset by a decrease in SG&A expenses
resulting from the closing of certain subsidiary operations.

     Interest expense increased by $457,000, or 10%, in 1995 as compared to
1994. The increase was due principally to interest expense associated with the
$17.8 million Title XI financing completed in February 1995 (as discussed
below), $36.3 million of Series 1994 industrial revenue bonds (see Note 4 of
the Notes to Consolidated Financial Statements) and a note issued as part of a
litigation settlement (discussed in Note 10 of the Notes to Consolidated
Financial Statements). These increases were partially offset by an increase in
interest capitalized on assets under construction relating primarily to the
modernization project.

     The Company's 1995 operating results include a net income tax benefit of
$4.4 million, or $0.30 per share. As further discussed in Note 7 of the Notes
to Consolidated Financial Statements, the net income tax benefit is principally
the result of recognizing, for financial reporting purposes, a $13 million
income tax benefit from certain net operating loss carryforwards available to
offset estimated future taxable earnings. The $13 million tax benefit was
partially offset by an income tax provision of $8.6 million related to 1995
operating results. There was a minor provision for income taxes in the same
period in 1994 as an income tax benefit related to available net operating loss
carryforwards was recognized only to the extent of then current operating
results. The further recognition of any remaining available tax benefit
(approximately $9.5 million) will depend on future assessments of estimated
taxable income. 

     During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" and Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." These statements are effective for fiscal 1996. Management
believes that implementation of these new accounting standards will not have a
material impact on the Company's financial statements.

     1994 VS. 1993. The Company recorded income from continuing operations of
approximately $13.1 million, or $0.90 per share, for the year ended December
<PAGE>
31, 1994 compared to a loss of approximately $5.2 million, or $0.36 per share,
for 1993. The improvement in the Company's 1994 income from continuing
operations principally reflects net gains of approximately $3.5 million, or
$0.24 per share, related to revisions of estimated contract profits on several
previously completed shipbuilding contracts, increases in operating income at
the Company's marine repair, wholesale steel and boat building operations and a
reduction in interest expense. The decrease in interest expense was due
primarily to the Company's repayment in early 1994 of balances owed on its
previously outstanding revolving credit facilities and senior notes. The
repayment of these debt obligations was made possible by the successful
resolution and settlement of the Company's REAs in December 1993.

     In the third quarter of 1994 the Company decided to discontinue its
service contracting subsidiary formed in 1990 to pursue large-scale service
contracts with government and commercial operations. The Company concluded
that managerial and financial resources devoted to service contracting could be
more productively invested in the Company's core marine construction operations.
As a result, the operating results for 1994 and prior years are reported as
discontinued operations (see Note 5 of the Notes to Consolidated Financial
Statements). The Company recorded a loss from discontinued operations of
approximately $4.6 million (including estimated costs related to a contract
termination), or $0.31 per share, for the year ended December 31, 1994 and has
restated prior year results to reflect a loss from discontinued operations of
approximately $3.6 million, or $0.25 per share, for the year ended December 31,
1993.

     The Company's net sales from continuing operations in 1994 increased
approximately $19.1 million, or 4.2%, compared to the prior year. The increase
in 1994 net sales was due primarily to increases in sales revenues recognized
on the contracts to construct the fourth LSD-CV, the contracts to construct the
three gaming vessels (two of which were delivered in 1994) and the start-up of
the first Sealift ship. These increases in sales were partially offset by
reductions in sales revenues recognized on the contracts to construct the three
LSD-CVs (the first of which was delivered in 1994), the T-AOs (the fourth of
which was delivered in 1994) and the four MHCs, as these contracts approached
completion. Additionally, the Company experienced reduced sales revenues in
1994 associated with the T-AGS 45 contract, which was delivered in 1993, and at
its Avondale Gulfport Marine, Inc. ("AGM") and Genco Industries, Inc. ("Genco")
operations. AGM delivered its last LCAC in June 1993, and Genco completed its
remaining construction contracts in August 1994. The contracts to construct the
four LSD-CVs, the four MHCs and the seven T-AOs collectively accounted for
approximately 69% of the Company's 1994 net sales revenue.

     Gross profit for 1994 increased approximately $14.3 million, or 43%,
compared to 1993. The increase in 1994 gross profit was primarily due to
profits recognized on the contract to construct the seven T-AOs and revisions
of contract profits on several previously completed shipbuilding contracts.
Also contributing to the 1994 gross profit were profits recognized on the two
gaming vessels delivered in 1994 and profits recognized by the Company's marine
repair and wholesale steel operations.

     SG&A expenses increased by approximately $756,000, or 2.5%, for 1994 
compared to 1993. The overall increase in SG&A expenses primarily resulted from
increased operating activity at the Company's main shipyard and a wage increase
given in January 1994 to all employees. This increase in SG&A expenses was
partially offset by a decrease in SG&A expenses resulting from the closing of
the AGM and Genco operations.

<PAGE>
     Interest expense decreased by approximately $4.4 million, or 50%, in 1994
compared to 1993. The decrease was due to the reduction in the Company's
overall level of debt, which decreased by approximately $37 million, or 41.7%,
at December 31, 1994 as compared to December 31, 1993. See "--Liquidity and
Capital Resources."

     The Company recorded a $300,000 provision for income taxes in 1994 while
no provision was recorded in 1993 due to the loss from operations. See Note 7
of the Notes to Consolidated Financial Statements for further discussion.

Liquidity and Capital Resources

     The Company's cash and cash equivalents totaled $38.5 million at
December 31, 1995 compared to $15.4 million at December 31, 1994. The Company's
principal sources of cash in 1995 consisted of $28 million of funds provided by
operations, $3.2 million of proceeds from the sale of assets and $17.8 million
from long-term borrowings (both of which are discussed below). The Company's
primary uses of cash in 1995 consisted of $21.3 million of capital
expenditures, principally representing the plant modernization project, and
payment of long-term borrowings of $5.9 million.

     In February 1995 the Company completed financing of its approximately $20
million plant modernization effort by issuing $17.8 million of mortgage bonds
utilizing a Title XI MARAD financing guarantee. The terms of the Title XI
guarantee provide for the bond proceeds to be held in escrow and released to
the Company as allowable project costs are incurred by the Company and approved
by MARAD.  At December 31, 1995, $17.4 million of these bond proceeds had been 
released to the Company. The Company has recorded project costs to date of $20.1
million of which $17.3 million were incurred in 1995. Outstanding purchase
commitments on the project at December 31, 1995 were $741,000.

     In the second quarter of 1995 the Company obtained additional liquidity as
its improved financial condition enabled it to amend its revolving credit
agreement. The amendment, among other things, increased the amount available
under the credit agreement to $42.5 million and extended its term to May 1997.
Further, the amendment permitted the issuance of the Title XI mortgage bonds
and revised the level of permitted capital expenditures and certain coverage
ratios to take into consideration the plant modernization project. While there
have been no borrowings in 1995 under the revolving credit agreement, there are
$25.4 million of letters of credit outstanding under the facility at December
31, 1995. See Note 4 of the Notes to Consolidated Financial Statements.

     In connection with the year-end settlement of the Minehunter REA, the
Company submitted invoices totaling approximately $30.7 million to the U.S.
Navy. The Company expects that these invoiced amounts will be collected in full
during the first quarter of 1996.

     As previously disclosed, in May 1995 the Company sold substantially all of
the operating assets used in its foundry operations. The sale generated $3.2
million of cash proceeds and did not significantly affect the Company's results
of operations.

     The Company believes that its liquidity and capital resources will be
sufficient to finance current and projected operations.


Item 8.   Financial Statements and Supplementary Data.

<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
 of Avondale Industries, Inc.:

We have audited the accompanying consolidated balance sheets of Avondale
Industries, Inc. and subsidiaries as of December 31, 1994 and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Avondale Industries, Inc. and
subsidiaries at December 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
                                          
/s/ Deloitte & Touche LLP
    ---------------------
    DELOITTE & TOUCHE LLP

New Orleans, Louisiana
January 19, 1996

<PAGE>
                AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES                      
                        CONSOLIDATED BALANCE SHEETS                          
                          (dollars in thousands)
 
<TABLE>
<CAPTION>
                                                             December 31,
                                                           ------------------
ASSETS                                                       1994      1995
------                                                     --------  --------
<S>                                                        <C>       <C>
Current Assets:
Cash and cash equivalents................................. $ 15,414  $ 38,524
Receivables (Note 2)......................................   84,510    93,184
Inventories (Note 3)......................................   16,109    15,289
Deferred tax assets (Note 7)..............................    4,100    23,650
Prepaid expenses and other current assets.................    7,803     2,946
                                                           --------  --------
Total current assets......................................  127,936   173,593
                                                           --------  --------
Property, Plant and Equipment (Note 4):
Land......................................................    9,324     9,161
Buildings and improvements................................   47,979    59,991
Machinery and equipment...................................  174,694   182,547
                                                           --------  --------
Total.....................................................  231,997   251,699
Less accumulated depreciation............................. (112,836) (121,661)
                                                           --------  --------
Property, plant and equipment--net........................  119,161   130,038
                                                           --------  --------
Goodwill--net (Note 7)....................................   15,431     8,637
Deferred tax assets--net (Note 7).........................    7,000        --
Other assets..............................................    3,975     4,459
                                                           --------  --------
  TOTAL ASSETS............................................ $273,503  $316,727
                                                           ========  ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S>                                                        <C>       <C>
Current Liabilities:
Current maturities of long-term debt (Note 4)............. $  5,866  $  5,062
Accounts payable..........................................   60,917    65,517
Accrued employee compensation.............................   12,948    10,777
Other.....................................................   13,369    11,249
                                                           --------  --------
Total current liabilities.................................   93,100    92,605
Long-term debt (Note 4)...................................   45,875    60,593
Other liabilities and deferred credits....................   11,650    12,471
                                                           --------  --------
Total liabilities.........................................  150,625   165,669
                                                           --------  --------
Commitments and Contingencies (Notes 6 and 10)
SHAREHOLDERS' EQUITY (Note 9):
Common stock, $1.00 par value; authorized--30,000,000
 shares; issued--15,927,191 shares in 1995 and 1994.......   15,927    15,927
Additional paid-in capital................................  373,911   373,911
Accumulated deficit....................................... (255,104) (226,924)
                                                           --------  --------
Total.....................................................  134,734   162,914
Treasury stock (1,463,016 shares in 1995 and 1994) at
 cost.....................................................  (11,856)  (11,856)
                                                           --------  --------
Total shareholders' equity................................  122,878   151,058
                                                           --------  --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................ $273,503  $316,727
                                                           ========  ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
                 
                AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES                   
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per share data)
 
<TABLE>
<CAPTION>
                                                    Years ended December 31,
                                                   ----------------------------
                                                     1993      1994      1995
                                                   --------  --------  --------
<S>                                                <C>       <C>       <C>
Continuing Operations:
Net sales (Note 2)...............................  $456,724  $475,810  $576,308
Cost of sales....................................   423,544   428,325   517,637
                                                   --------  --------  --------
Gross profit.....................................    33,180    47,485    58,671
Selling, general and administrative expenses.....    29,780    30,536    32,123
                                                   --------  --------  --------
Income from operations...........................     3,400    16,949    26,548
Interest expense.................................    (8,769)   (4,385)   (4,842)
Other--net.......................................       136       811     2,074
                                                   --------  --------  --------
Income (Loss) from continuing operations before
 income taxes....................................    (5,233)   13,375    23,780
Income taxes (Note 7)............................        --       300    (4,400)
                                                   --------  --------  --------
Income (Loss) from continuing operations.........    (5,233)   13,075    28,180
                                                   --------  --------  --------
Discontinued Operations (Note 5):
Loss from discontinued operations................    (3,561)   (1,909)       --
Disposal costs...................................        --    (2,643)       --
                                                   --------  --------  --------
Loss from discontinued operations................    (3,561)   (4,552)       --
                                                   --------  --------  --------
NET INCOME (LOSS)................................  $ (8,794) $  8,523  $ 28,180
                                                   ========  ========  ========
Income (Loss) per share of common stock (Note 9):
Continuing operations............................  $  (0.36) $   0.90  $   1.95
Discontinued operations..........................     (0.25)    (0.31)       --
                                                   --------  --------  --------
INCOME (LOSS) PER SHARE OF COMMON STOCK..........  $  (0.61) $   0.59  $   1.95
                                                   ========  ========  ========
Weighted average number of shares outstanding....    14,464    14,464    14,464
                                                   ========  ========  ========
</TABLE>
    
See Notes to Consolidated Financial Statements.
<PAGE> 
 
                                      F-4
<PAGE>
 
                AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
               
               Years ended December 31, 1993, 1994 and 1995 
                             (in thousands)
 
<TABLE>
<CAPTION>
                                 Additional                           Total
                         Common   Paid-in   Accumulated Treasury  Shareholders'
                          Stock   Capital     Deficit    Stock       Equity
                         ------- ---------- ----------- --------  -------------
<S>                      <C>     <C>        <C>         <C>       <C>
BALANCE, JANUARY 1,
 1993................... $15,927  $373,911   $(254,833) $(11,856)   $123,149
Net (loss)..............                        (8,794)               (8,794)
                         -------  --------   ---------  --------    --------
BALANCE, DECEMBER 31,
 1993...................  15,927   373,911    (263,627)  (11,856)    114,355
Net income..............                         8,523                 8,523
                         -------  --------   ---------  --------    --------
BALANCE, DECEMBER 31,
 1994...................  15,927   373,911    (255,104)  (11,856)    122,878
Net income..............                        28,180                28,180
                         -------  --------   ---------  --------    --------
BALANCE, DECEMBER 31,
 1995................... $15,927  $373,911   $(226,924) $(11,856)   $151,058
                         =======  ========   =========  ========    ========
</TABLE>
        
See Notes to Consolidated Financial Statements.
<PAGE> 
 
                AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES                   
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                        
                              (in thousands)
 
<TABLE>
<CAPTION>
                                                     Years ended December
                                                              31,
                                                    -------------------------
                                                     1993     1994     1995
                                                    -------  -------  -------
<S>                                                 <C>      <C>      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................. $(8,794) $ 8,523  $28,180
Adjustments to reconcile net income (loss) to net
 cash provided by operating activities:
  Depreciation and amortization....................  11,810   11,552    9,819
  Deferred income tax benefit......................      --       --   (5,900)
  Gain on sale of assets...........................      --       --     (813)
  Change in operating assets and liabilities, net
   of dispositions:
    Receivables....................................  16,634   45,542   (9,674)
    Inventories....................................     189   (2,500)     296
    Prepaid expenses and other current assets......     653   (1,251)   3,429
    Accounts payable...............................  (4,476)   4,120    4,600
    Accrued employee compensation..................    (248)     596   (2,171)
    Other--net.....................................   1,098    2,546      229
                                                    -------  -------  -------
Net cash provided by operating activities..........  16,866   69,128   27,995
                                                    -------  -------  -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...............................  (2,863)  (5,120) (21,290)
Proceeds from sale of assets.......................   9,467       --    3,248
Change in restricted short-term investments--net...      --   (1,811)   1,243
Payment to former corporate parent (Note 4)........      --   (5,000)      --
                                                    -------  -------  -------
Net cash provided by (used for) investing
 activities........................................   6,604  (11,931) (16,799)
                                                    -------  -------  -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings.................... (27,888) (81,228)  (5,866)
Proceeds from issuance of long-term borrowings
 (Note 4)..........................................      --   36,250   17,780
                                                    -------  -------  -------
Net cash provided by (used for) financing
 activities........................................ (27,888) (44,978)  11,914
                                                    -------  -------  -------
NET INCREASE IN CASH AND CASH EQUIVALENTS..........  (4,418)  12,219   23,110
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.....   7,613    3,195   15,414
                                                    -------  -------  -------
CASH AND CASH EQUIVALENTS AT END OF YEAR........... $ 3,195  $15,414  $38,524
                                                    =======  =======  =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for:
Interest (net of amounts capitalized).............. $ 8,659  $ 4,537  $ 5,255
                                                    =======  =======  =======
Income taxes paid..................................                   $   945
                                                                      =======
Noncash investing and financing activities:
Note issued in litigation settlement (Note 10).....                   $ 2,000
                                                                      =======
Note issued to former corporate parent.............          $ 8,000
                                                             =======
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 

                AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

 Principles of Consolidation

  The consolidated financial statements include the accounts of Avondale
Industries, Inc. and its wholly-owned subsidiaries ("Avondale" or the
"Company") which are primarily engaged in marine construction and repair. All
significant intercompany transactions have been eliminated.

 Revenue Recognition

  Profits on long-term contracts are recorded on the basis of the Company's
estimates of the percentage of completion of individual contracts, commencing
when progress reaches a point where contract performance is sufficient to
estimate final results with reasonable accuracy. Estimates of the percentage of
completion are based on direct labor charges. Revisions in cost and profit
estimates during the course of the work are reflected in the accounting period
in which the facts requiring the revisions become known. Amounts in excess of
agreed upon contract price for customer caused delays, disruptions, unapproved
change orders or other causes of additional contract costs are recognized in
contract value if it is probable that the claim for such amounts will result in
additional revenue and the amount can be reasonably estimated (see Note 2).
Provisions for estimated losses, if any, on uncompleted contracts are made in
the period in which such losses are determined.

 Statements of Cash Flows

  For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.

 Fair Value Disclosures

  Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("SFAS 107"), requires the disclosure of the
fair value of all significant financial instruments. The estimated fair value
amounts have been developed by the Company based on available market
information and appropriate valuation methodologies. However, considerable
judgment is required in developing the estimates of fair value. Therefore, such
estimates are not necessarily indicative of the amounts that could be realized
in a current market exchange. After such analysis, management believes that the
carrying values of the Company's significant financial instruments (consisting
of cash and cash equivalents, short-term investments, receivables, payables,
certain accrued liabilities and long-term debt) approximate fair values.

 Inventories

  Inventories are recorded principally at the lower of cost (average or first-
in, first-out) or market. 

 Property, Plant and Equipment 

  Property, plant and equipment is stated at cost. Depreciation of property,
plant and equipment is computed in the financial statements on the straight-
<PAGE>
line method based on estimates of useful lives as follows: 
 
<TABLE>          
<CAPTION>
                          TYPE                  PERIOD
                          ----                -----------
            <S>                               <C>
            Machinery and equipment..........  3-20 years
            Buildings and improvements....... 15-40 years
</TABLE>
  Accelerated depreciation methods are generally used for income tax purposes.
Maintenance and repairs are charged directly to expense as incurred. Additions,
improvements and major renewals are capitalized. Interest costs for the
construction of certain long-term assets are capitalized as part of the cost of
property, plant and equipment and amortized over the related assets' useful
lives. Interest costs capitalized in fiscal 1993 and 1994 were not material.
Interest costs capitalized in fiscal 1995 approximated $1.2 million. 

 Goodwill 

  Goodwill represents the excess of the purchase price over the underlying fair
value of the net assets of acquired businesses and is being amortized on a
straight-line basis over its estimated useful life of twenty years. Management
evaluates the continuing value and future benefits of goodwill, including the
appropriateness of related amortization periods, on a current basis. 

  The recoverability of goodwill is assessed by determining whether the
unamortized balance can be recovered through projected cash flows and operating
results over its remaining life. Any impairment of the asset is recognized when
it is probable that such future undiscounted cash flows will be less than the
carrying value of the asset. 

  Accumulated amortization at December 31, 1994 and 1995 amounted to $73.7
million and $74.5 million, respectively. 

 Income Taxes 

  The Company and its subsidiaries file a consolidated Federal income tax
return. Deferred income taxes are provided in the financial statements, where
necessary, to account for the tax effect of temporary differences resulting
from reporting revenues and expenses for income tax purposes in periods
different from those used for financial reporting purposes. The temporary
differences result principally from the use of different methods of accounting
for depreciation, long-term contracts and certain employee benefits. 

 New Accounting Standards 

  During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS
121 establishes accounting standards for recording the impairment of long-lived
assets, certain identifiable intangibles, goodwill, and assets to be disposed
of. The Company is required to adopt SFAS 121 effective for fiscal 1996.
Management believes that the implementation of SFAS 121 will not have a
material impact on the Company's financial statements. 

  During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
<PAGE>
Compensation" ("SFAS 123"). SFAS 123, which the Company is required to adopt
effective for fiscal 1996, provides guidance relating to the recognition,
measurement and disclosure of stock-based compensation. Management believes
that the implementation of SFAS 123 will not have a material impact on the
Company's financial statements. 

 Reclassifications 

  Certain reclassifications of prior year amounts have been made to conform to
the current year presentation. These reclassifications were made for
comparative purposes only and have no effect on net income as previously
reported. 
 
2. Receivables 

  Receivables consisted of the following at December 31, 1994 and 1995 (in
thousands): 
 
<TABLE>
<CAPTION>
                                                                 1994    1995
                                                                ------- -------
<S>                                                             <C>     <C>
Long-term contracts:
  U.S. Government:
    Amounts billed............................................. $13,754 $30,151
    Unbilled costs, including retentions, and estimated profits
     on contracts in progress..................................  48,254  41,119
                                                                ------- -------
    Total......................................................  62,008  71,270
  Commercial:
    Amounts billed.............................................   7,568   4,364
    Unbilled costs, including retentions, and estimated profits
     on contracts in progress..................................  10,914  12,312
                                                                ------- -------
    Total from long-term contracts.............................  80,490  87,946
Trade and other current receivables............................   4,020   5,238
                                                                ------- -------
Total.......................................................... $84,510 $93,184
                                                                ======= =======
</TABLE>

  Unbilled costs, including retentions, and estimated profits on contracts in
progress were not billable to customers at the balance sheet dates under terms
of the respective contracts. Of the unbilled costs and estimated profits,
approximately $5.1 million is expected to be collected in 1996 with the balance
to be collected in subsequent years as contract deliveries are made and
warranty periods expire. Net sales to the United States Government in 1993,
1994 and 1995 account for approximately 79%, 77% and 74% of the net sales,
respectively. 

   Costs and estimated profits (losses) on contracts in progress at December
31, 1994 and 1995 were as follows (in thousands): 

<PAGE>
<TABLE>
<CAPTION>
                                                            1994        1995
                                                         ----------  ----------
<S>                                                      <C>         <C>
Costs incurred on contracts in progress................. $2,177,750  $2,668,388
Estimated profits recognized............................     25,634      49,287
Reserve for anticipated contract losses.................    (39,000)    (34,500)
                                                         ----------  ----------
Total...................................................  2,164,384   2,683,175
Less billings to date................................... (2,108,384) (2,643,912)
                                                         ----------  ----------
Net value of contracts in progress...................... $   56,000  $   39,263
                                                         ==========  ==========
</TABLE>

  Net value of contracts in progress was comprised of the following amounts (in
thousands): 
 
<TABLE>
<CAPTION>
                                                                1994     1995
                                                               -------  -------
<S>                                                            <C>      <C>
Unbilled costs and estimated profits on contracts in progress
 (included in receivables)...................................  $59,168  $53,431
Billings in excess of costs and estimated profits on
 contracts in progress (included in accounts payable)........   (3,168) (14,168)
                                                               -------  -------
Total........................................................  $56,000  $39,263
                                                               =======  =======
</TABLE>

  The reserve for anticipated contract losses of $39.0 million and $34.5
million included in the net value of contracts in progress at December 31, 1994
and 1995, respectively, is related to certain U.S. Navy contracts which are
presently scheduled for delivery at varying dates into 1997. The reserve
decreased in 1995 when the Company recorded a $4.5 million reduction of a
previously recognized loss due primarily to a revision of the total estimated
contract cost as it nears completion. 

  The Company filed a Request for Equitable Adjustment ("Minehunter REA") with
the U.S. Navy seeking substantial increases in the contract prices related to
four MHC-51 Class Minehunters currently under contract. The Company believes
that the additional costs addressed by the Minehunter REA resulted from
defective ship specifications provided to the Company that proved impossible to
perform at the original cost estimate developed by the Company. In December
1995, the Company settled the Minehunter REA for $23 million, which
approximates the previously recorded estimate of the amount recoverable. This
should enable the Company to complete the MHC program on a break-even basis
through the remainder of contract performance. In connection with the
settlement of the Minehunter REA in December 1995, the Company submitted
invoices totalling $30.7 million to the U.S. Navy, which includes certain
contractual cost sharing and cost escalation provisions which obligate the U.S.
Navy to bear a portion of the additional costs. The Company expects that these
amounts will be collected in full during the first quarter of 1996. 

3. Inventories 
<PAGE>
  Inventories consisted of the following at December 31, 1994 and 1995 (in
thousands): 
 
<TABLE>
<CAPTION>
                                                                  1994    1995
                                                                 ------- -------
<S>                                                              <C>     <C>
Goods held for sale............................................. $ 7,908 $ 7,409
Materials and supplies..........................................   8,201   7,880
                                                                 ------- -------
Total........................................................... $16,109 $15,289
                                                                 ======= =======
</TABLE>

4. Financing Arrangements 

 Revolving Credit Agreement 

  In 1994, the Company entered into a two-year revolving credit agreement with
various financial institutions, which established an available line of credit
equal to the lesser of $35 million or a specified borrowing base. Borrowings
under the facility bear interest at fluctuating rates. The credit facility is
collateralized by substantially all of the Company's working capital assets and
its 900-foot floating drydock and, among other things, (1) requires the Company
to meet certain financial covenants (relating to net worth, debt coverage,
interest coverage and backlog), (2) imposes limitations and restrictions
related to annual capital expenditures, the incurrence of new indebtedness and
the payment of dividends and (3) requires compliance with the terms and
conditions of all other debt agreements. 

  During 1995, the Company amended the revolving credit agreement. The
amendment, among other things, increased the amount available under the credit
agreement to $42.5 million and extended its term to May 1997. Further, the
amendment permitted the issuance of $17.8 million of mortgage bonds (as
discussed below) and revised the level of permitted capital expenditures and
certain coverage ratios to take into consideration the plant modernization
project. There were no borrowings in 1994 and 1995 under the revolving credit
agreement. 

  The credit facility also provides the Company with the right to require the
bank group to post letters of credit on the Company's behalf in support of its
operations (see Note 10). 
 
<PAGE>
 Long-Term Debt 

  Long-term debt consisted of the following at December 31, 1994 and 1995 (in
thousands): 
 
<TABLE>
<CAPTION>
                                                                1994     1995
                                                               -------  -------
<S>                                                            <C>      <C>
Industrial revenue bonds.....................................  $36,250  $36,250
Mortgage bonds, interest at 8.16%, payable in semi-annual
 principal installments to 2010..............................            17,780
Mortgage bonds, payable in semi-annual principal installments
 to 2000.....................................................    4,656    3,880
General obligation industrial bonds, interest at 7%, payable
 in annual installments to 2011..............................    2,835    2,745
Other long-term debt.........................................    8,000    5,000
                                                               -------  -------
Total........................................................   51,741   65,655
Less current maturities of long-term debt....................   (5,866)  (5,062)
                                                               -------  -------
Long-term debt...............................................  $45,875  $60,593
                                                               =======  =======
</TABLE>

  The $36.3 million of industrial revenue bonds represent Series 1994 bonds
which consist of (1) $6 million bearing interest at 8.25% and payable in annual
principal installments ranging from $550,000 in 1997 to final payment of
$985,000 in 2004 and (2) $30.3 million bearing interest at 8.50% and payable in
annual principal installments ranging from $340,000 in 1997 to final payment of
$3.8 million in 2014. The Series 1994 bonds are secured by certain property and
equipment. Among other things, the terms and conditions of the Series 1994
bonds (1) require the Company to meet certain financial covenants (relating to
net worth, debt and debt service coverage and liquidity), (2) impose
limitations and restrictions related to the incurrence of new indebtedness and
the payment of dividends, and (3) require compliance with the terms and
conditions of other specified debt agreements. 

  The $17.8 million of mortgage bonds were issued in February 1995 as part of
the financing of the Company's approximately $20 million plant modernization
effort. The bonds were issued utilizing a U.S. Government guarantee under Title
XI of the Merchant Marine Act, 1936, as amended ("Title XI"), bear interest at
the annual rate of 8.16% and are payable in equal semi-annual principal
payments of $593,000 over a 15 year period beginning in 1996. The terms of the
financing include various restrictive covenants including provisions relating
to the maintenance of working capital, incurrence of additional indebtedness,
and the maintenance of a minimum net worth. The plant modernization assets have
been pledged as collateral for these mortgage bonds. 

  The $3.9 million of mortgage bonds at December 31, 1995 represent the balance
of an earlier mortgage bond issue which also utilized a Title XI guarantee. The
Company refinanced these mortgage bonds in February 1995 (approximately $4.3
million) which reduced the annual interest rate from 9.30% to 7.86%. The
refinancing agreement contains various restrictive covenants similar to those
for the $17.8 million of Title XI mortgage bonds discussed above. These bonds
are payable in equal semi-annual principal payments of $388,000 and mature in
the year 2000. Property, plant and equipment having a net book value of
<PAGE>
approximately $13.5 million at December 31, 1995 has been pledged as collateral
for these mortgage bonds. 

  Included in other long-term debt at December 31, 1995 is the $3 million
balance of a two-year $8 million unsecured note issued to the Company's former
corporate parent as part of a settlement in 1994 which terminated certain
arrangements which had existed since 1985. The note bears interest at 10% per
annum with the $3 million balance payable on June 30, 1996. Also included in
other long-term debt at December 31, 1995 is a $2 million unsecured note issued
as part of the settlement of certain claims against the Company (as further
discussed in Note 10). The note bears interest at 8% per annum and is due in
January 1997. 
 
  Annual maturities of long-term debt for each of the next five years and in
total thereafter follow (in thousands): 
 
<TABLE>          
            <S>                                   <C>
            1996................................. $ 5,062
            1997.................................   4,957
            1998.................................   3,047
            1999.................................   3,137
            2000.................................   3,237
            Thereafter...........................  46,215
                                                  -------
            Total................................ $65,655
                                                  =======
</TABLE>

5. Discontinued Operations 

  During the third quarter of 1994 the Company decided to discontinue operation
of its service contracting subsidiary formed in 1990 to pursue large-scale
service contracts with government and commercial operations. The Company
concluded that managerial and financial resources could be more productively
invested in the Company's core marine construction operations. 

  The operating results for the prior-year periods are reported as discontinued
operations. Summarized results are as follows (in thousands): 
<TABLE>      
<CAPTION>
                                                               1993     1994
                                                              -------  -------
       <S>                                                    <C>      <C>
       Net sales............................................. $14,442  $13,520
       Costs and expenses....................................  18,003   15,429
                                                              -------  -------
       Income (Loss) from discontinued operations............  (3,561)  (1,909)
       Loss on disposal of discontinued operations...........      --   (2,643)
                                                              -------  -------
       Income (Loss) from discontinued operations............ $(3,561) $(4,552)
                                                              =======  =======
</TABLE>

6. Leases 

  The Company leases equipment and real property in the normal course of
business under various operating leases, including non-cancelable and month-to-
<PAGE>
month agreements. Certain of the leases provide for renewal privileges with
escalation of the lease payments based on changes in selected economic indices.

  Rental expense for operating leases was $5.3 million, $5.8 million and $6.3
million in 1993, 1994 and 1995, respectively. 

  Minimum rental commitments under leases having an initial or remaining
noncancelable term in excess of twelve months follow (in thousands): 
 
<TABLE>          
            <S>                                    <C>
            1996.................................. $3,243
            1997..................................  1,747
            1998..................................  1,260
            1999..................................    297
            2000..................................     52
                                                   ------
            Total................................. $6,599
                                                   ======
</TABLE>
 

7. Income Taxes 

  Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The
statement requires the use of the asset and liability approach for financial
accounting and reporting for income taxes. Financial statements for prior years
have not been restated and the cumulative effect of the accounting change was
not material. 

  The Company has provided for Federal income taxes as follows (in thousands):

<TABLE>
<CAPTION>
                                                          1993  1994    1995
                                                          ----- -----  -------
<S>                                                       <C>   <C>    <C>
Current provision........................................ $  -- $ 600  $ 1,500
Deferred provision (benefit).............................    --  (300)   7,100
Deferred benefit attributable to the realization of net
 operating loss carryforwards............................    --    --  (13,000)
                                                          ----- -----  -------
Provision (benefit) for income taxes..................... $  -- $ 300  $(4,400)
                                                          ===== =====  =======
</TABLE>
<PAGE>
  The provision (benefit) for income taxes varied from the Federal statutory
income tax rate due to the following (dollars in thousands): 
 
<TABLE>
<CAPTION>
                                           Years ended December 31,
                                      ----------------------------------------
                                         1993          1994          1995
                                      ------------  -----------  -------------
                                      Amount    %   Amount   %    Amount    %
                                      -------  ---  ------  ---  --------  ---
<S>                                   <C>      <C>  <C>     <C>  <C>       <C>
Taxes at Federal statutory rate...... $(3,078) (35) $3,088   35  $  8,323   35
Amortization of goodwill not
 deductible..........................     357    4     511    6       246    1
Net operating loss carryforwards
 utilized............................      --   --      --   --   (13,000) (55)
Settlement of prior year tax
 examinations........................      --   --  (3,200) (36)       --   --
Losses for which no tax benefit was
 provided............................   2,595   30      --   --        --   --
Other................................     126    1     (99)  (1)       31   --
                                      -------  ---  ------  ---  --------  ---
Total................................ $    --   --  $  300    4  $( 4,400) (19)
                                      =======  ===  ======  ===  ========  ===
</TABLE>

  At December 31, 1995 the Company has available for Federal income tax
purposes net operating loss carryforwards and tax credit carryforwards of $69.5
million and $5.3 million, respectively. The net operating loss carryforwards
expire in years 2004 through 2008 and the tax credit carryforwards expire in
the years 2000 through 2010. Additionally, the Company has $1.9 million of
minimum tax credits which may be carried forward indefinitely. 

  Deferred income taxes represent the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases, and (b) operating loss and
tax credit carryforwards. The tax effects of significant items comprising the
Company's net deferred tax balances at December 31, 1994 and 1995 are as
follows (in thousands): 
<PAGE>
<TABLE>
<CAPTION>
                                                                1994     1995
                                                               -------  -------
<S>                                                            <C>      <C>
Deferred Tax Liabilities:
Differences between book and tax basis of property, plant and
 equipment...................................................  $27,018  $26,266
Other........................................................    1,511      759
                                                               -------  -------
  Total......................................................   28,529   27,025
                                                               -------  -------
Deferred Tax Assets:
Reserves not currently deductible............................    6,020    5,174
Long-term contracts..........................................    5,252   18,557
Other temporary differences..................................    3,598    4,263
Operating loss carryforwards.................................   47,600   24,334
Tax credit carryforwards.....................................    5,800    7,200
                                                               -------  -------
                                                                68,270   59,528
Valuation Allowance..........................................  (28,641)  (9,703)
                                                               -------  -------
  Total......................................................   39,629   49,825
                                                               -------  -------
Net deferred tax assets......................................  $11,100  $22,800
                                                               =======  =======
</TABLE>

  The net deferred tax assets are included in the following balance sheet
captions (in thousands): 
 
<TABLE>
<CAPTION>
                                                                 1994    1995
                                                                ------- -------
<S>                                                             <C>     <C>
Current deferred tax assets.................................... $ 4,100 $23,650
Non-current deferred tax assets................................   7,000      --
Other non-current liabilities and deferred tax credits.........      --    (850)
                                                                ------- -------
  Net deferred tax assets...................................... $11,100 $22,800
                                                                ======= =======
</TABLE>

  During 1995, the deferred tax valuation allowance decreased approximately
$19.0 million as a result of the Company's current year operating results and a
re-evaluation of its expectations of the likelihood of future operating income
related to its existing backlog. Approximately $6.0 million of this decrease in
the valuation allowance was recorded as a reduction in goodwill in accordance
with SFAS 109, which requires that the realization of tax benefits first be
attributed to any acquired tax assets. In the event that additional tax
benefits are realized in future periods, all such benefits will be recorded as
a reduction of income tax expense. 

8. Retirement Plans 

 ESOP 

<PAGE>
  In 1985, the Company established the Avondale Industries, Inc. Employee Stock
Ownership Plan (the "ESOP"). The ESOP is a qualified, defined contribution plan
designed primarily to invest in equity securities of the Company and is
specifically authorized to leverage its acquisition of these securities. The
ESOP is intended to cover all employees of the Company upon completion of one
year of service, except certain employees who are covered by collective
bargaining agreements, unless, by the terms of such agreements, the employees
are to participate in the ESOP. The ESOP owned approximately 7,096,000 and
6,822,000 shares of the Company's Common Stock at December 31, 1994 and 1995,
respectively. 

 401(k) Savings Plan 

  Beginning in 1996 the Company will sponsor a 401(k) Savings Plan.
Participation in this defined contribution plan is available to substantially
all employees of the Company. The Company may elect to make contributions to
the Plan; however, the timing and amount of such contributions is at the
discretion of the Company's Board of Directors. 

 Pension Plan 

  The Company also sponsors a defined benefit pension plan, which is
coordinated with the benefits payable to participating employees in the ESOP.
At retirement, a person's benefit is based upon the greater of (i) the market
value of the shares of common stock allocated to his ESOP account or (ii) the
benefit calculated under the pension plan formula. The pension plan formula
benefits are based on a defined dollar amount multiplied by a fraction related
to a participant's credited service. 

  The net periodic pension cost for the years ended December 31, 1993, 1994 and
1995 included the following components (in thousands): 
<TABLE>
<CAPTION>
                                                        1993     1994     1995
                                                       -------  -------  ------
<S>                                                    <C>      <C>      <C>
Service costs of the current period..................  $ 3,700  $ 3,400  $3,300
Interest cost on the projected benefit obligation....    4,400    3,800   4,200
Actual return on plan assets.........................   (7,000)  (2,700) (3,600)
Net amortization of transition liability and deferred
 investment gain (loss)..............................    5,000     (200)    300
                                                       -------  -------  ------
Net periodic pension cost............................  $ 6,100  $ 4,300  $4,200
                                                       =======  =======  ======
</TABLE>
<PAGE>
  The following table sets forth the pension plan's estimated funded status as
of December 31, 1994 and 1995 (in thousands): 
<TABLE>
<CAPTION>
                                                               1994     1995
                                                              -------  -------
<S>                                                           <C>      <C>
Projected benefit obligation:
  Vested benefits............................................ $40,800  $49,100
  Nonvested benefits.........................................     600      400
                                                              -------  -------
  Accumulated benefit obligation.............................  41,400   49,500
  Effect of projected future compensation levels.............   4,200   12,700
                                                              -------  -------
Projected benefit obligation.................................  45,600   62,200
Plan assets at market value..................................  44,200   50,400
                                                              -------  -------
Plan assets less than projected benefit obligation...........  (1,400) (11,800)
Unrecognized net transition obligation.......................     200      100
Unrecognized prior service costs.............................  (3,000)  (2,500)
Unrecognized net loss........................................   6,800   12,600
                                                              -------  -------
Prepaid pension costs (pension liability).................... $ 2,600  $(1,600)
                                                              =======  =======
</TABLE>

  The Company's funding policy is to contribute each year an amount equal to
the minimum required contribution under the Employee Retirement Income Security
Act of 1974. However, the contribution for any year will not be greater than
the maximum tax deductible contribution. Plan assets consist primarily of
United States Government and Agency securities, corporate bonds and notes,
corporate stocks, and an unallocated insurance contract. The weighted-average
discount rate used in determining the actuarial present value of the projected
benefit obligation was 8.5% for 1994 and 7.25% for 1995. The rate of increase
in future compensation levels used was 3.5% for 1994 and 4.0% for 1995 and
thereafter. The expected long-term rate of return on the assets was 9.0% for
1994 and 1995. 
 

9. Shareholders' Equity 

 Preferred Stock 

  The Company is authorized to issue 5,000,000 shares of preferred stock, $1.00
par value, none of which was outstanding at December 31, 1994 and 1995. 

 Income (Loss) Per Share 

  The weighted average number of shares used in the computation of income
(loss) per share was 14,464,000, for each of the years ended December 31, 1993,
1994 and 1995, respectively. The assumed exercise of stock options would not
result in dilution in any of such periods. 

 Performance Share Plan 

  The Company's Performance Share Plan provided for the award of shares of
common stock to senior executives of the Company, as designated by a committee
of the Board of Directors, which were earned upon the attainment of specified
<PAGE>
performance objectives. These performance objectives have been attained and
therefore no further awards will be made. Transactions relating to the plan
during 1993, 1994 and 1995 were not material. 

  The plan provided for a cash distribution in an amount equal to the
Participant's income tax liability resulting from the settlement of an award.
To the extent that a Participant received cash in lieu of common stock as
payment of an award, options were granted to the participant to purchase an
equivalent number of such shares. There were 303,159 stock options outstanding
at December 31, 1993, 279,155 stock options outstanding at December 31, 1994
and 240,971 stock options outstanding at December 31, 1995 . The stock options
are exercisable at prices of $3.875 to $19.00 per share, the majority of which
contain a stock appreciation right feature and expire on various dates to
February 2002. 

 Stock Appreciation Plan 

  The Company maintains a Stock Appreciation Plan for key management employees
which contains a stock appreciation right feature. There are 500,000 shares of
common stock of the Company reserved for award under the plan. Transactions of
the Stock Appreciation Plan during 1993, 1994 and 1995 were as follows: 
 
<TABLE>
<CAPTION>
                                                         Number of Shares
                                                      -------------------------
                                                       1993     1994     1995
                                                      -------  -------  -------
<S>                                                   <C>      <C>      <C>
Outstanding, January 1...............................  60,000   50,000   40,000
Canceled............................................. (10,000) (10,000) (40,000)
                                                      -------  -------  -------
Outstanding, December 31.............................  50,000   40,000       --
                                                      =======  =======  =======
Exercisable at end of year...........................   2,000       --       --
                                                      =======  =======  =======
Available for grant at end of year................... 387,000  397,000  437,000
                                                      =======  =======  =======
</TABLE>

  Options were outstanding at prices ranging from $11.25 to $18.375 per share
at December 31, 1993 and $11.25 per share at December 31, 1994. Under the terms
of the plan, options expired on March 31, 1995. 

10. Commitments and Contingencies 

 Litigation 

  In January 1986, the Louisiana Department of Environmental Quality ("DEQ")
advised the Company that it may be a potentially responsible party ("PRP") with
respect to an oil reclamation site operated by an unaffiliated company in
Walker, Louisiana. The Company sold to the operator a substantial portion of
the waste oil that was processed at the reclamation site during the period 1978
through 1982. The Company's potential liability, if any, for cleanup of this
site will be based on the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA") or the Louisiana Environmental Affairs
Act. Under these statutes, such liability is presumptively joint and several,
but is typically apportioned among the responsible parties based on the volume
<PAGE>
of material sent by each to the waste site. The Company has cooperated with
other PRPs to study the potential aggregate liability under these statutes.
Moreover, the Company believes it has substantial defenses against liability
and defenses that could mitigate the portion of liability, if any, that would
otherwise be attributable to it. 

  To date, the Company and certain of the other PRPs for the site have funded
the site's remediation under a preliminary cost-sharing agreement. As of
December 31, 1995 clean-up costs totalled $17 million, of which the Company has
contributed $3.6 million. Additional work scheduled for the site includes
completion of studies in 1996, and if required by the results of these studies,
subsequent remediation.  Following completion of any such required additional
remediation, it will be necessary to obtain Environmental Protection Agency
approval to close the site, which consent may require subsequent post-closure
activities such as groundwater monitoring and site maintenance for many years.
The Company is not able to estimate the final costs for any such additional
remedial work or post-closure costs that may be required; however, the Company
believes that its proportionate share of expenditures for any additional work
will not have a material adverse effect on the Company's financial statements.
In addition, the Company believes that its proportionate responsibility for the
clean-up costs will not be materially changed.

     Since July 1986, a number of "toxic tort" suits have been filed against the
Company and numerous other defendants alleging claims for personal injury,
property damage, and "fear  of  cancer"  in connection with the reclamation site
discussed above. The plaintiffs also sought substantial punitive damages.  These
cases were consolidated and certified as a class action. In 1995, the Judge for
the Federal District Court for the Western District of Louisiana issued a ruling
from the bench approving the Company's settlement of the class action lawsuit.  
Based on the advice of its counsel, the Company believes that a written order
confirming its earlier bench ruling will be issued by the Federal District Court
in the near future.  Under the terms of the court approved settlement, which is
subject to appeal following the issuance of the final written order, the Company
paid $4.0 million cash into a settlement fund in the third quarter of 1995,
using cash from operations, and issued a $2.0 million unsecured note to the
plaintiff class.  The note bears interest at 8% per annum and is due on
January 28,1997.  The Company had previously recorded an accrual sufficient to 
provide for the $6.0 million settlement and has sufficient liquidity to fund the
note.  The Company could also be responsible for payment to the plaintiffs of up
to an additional $6.0 million (plus interest at 8% per annum) if the plaintiffs
are unsuccessful in collecting certain claims under Avondale's insurance
policies that have been assigned to the plaintiff class under the settlement
agreement.  With respect to the potential contingent liability of the Company to
pay additional sums under the settlement agreement, management believes that the
eventual resolution of this matter will not have a material adverse effect on
the Company's results of operations, financial position or cash flows.

  Furthermore, the Company has initiated litigation against its insurer for a
declaration of coverage of the liability, if any, that may arise in connection
with the remediation of the site referred to above. The court has ruled that
the insurer has the duty to defend the Company, but has not yet ruled on
whether the carrier has a duty to indemnify the Company if any liability is
ultimately assessed against it. After consultation with counsel, the Company is
unable to predict the eventual outcome of this litigation or the degree to
which such potential liability would be indemnified by its insurance carrier.

  In addition to the above, the Company is also named as a defendant in other
lawsuits and proceedings arising in the ordinary course of business, some of
<PAGE>
which involve substantial claims. 

  The Company has established accruals as appropriate for certain of the
matters discussed above. While the ultimate outcome of lawsuits and proceedings
against the Company cannot be predicted with certainty, management believes,
based on current facts and circumstances and after review with counsel, that,
the eventual resolution of these matters is not expected to have a material
adverse effect on the Company's financial statements. 
 
 Letters of Credit 

  In the normal course of its business activities, the Company is required to
provide letters of credit to secure the payment of workers' compensation
obligations. Additionally, under certain contracts, the Company may be required
to provide letters of credit to secure certain performance obligations of the
Company thereunder. At December 31, 1995, outstanding letters of credit
relating to these business activities amounted to approximately $25.4 million.

11. Quarterly Results (Unaudited) 

  Consolidated operating results for the four quarters of 1994 and 1995 were as
follows (in thousands, except per share data): 
 
<TABLE>
<CAPTION>
                                         1994                                  1995
                          ------------------------------------- -----------------------------------
                            (1)      (1)       (2)                         (3)      (3)      (3)
                           First   Second    Third     Fourth   First    Second   Third    Fourth
                          Quarter  Quarter   Quarter   Quarter  Quarter  Quarter  Quarter  Quarter
                          -------- --------  --------  -------- -------- -------- -------- --------
<S>                       <C>      <C>       <C>       <C>      <C>      <C>      <C>      <C>      
Net Sales...............  $101,329 $118,437  $125,487  $130,557 $133,575 $152,788 $148,785 $141,160
Gross Profit............     9,506   11,283    14,943    11,753   13,404   13,820   14,793   16,654
Income (Loss) from
 Continuing Operations..     1,918    2,470     6,323     2,364    3,044    8,493   12,054    4,589
Income (Loss) from
 Discontinued
 Operations.............       116     (396)   (4,272)       --       --       --       --       --
Net Income..............     2,034    2,074     2,051     2,364    3,044    8,493   12,054    4,589
Net Income (Loss) per
 Share:
Continuing Operations...  $   0.13 $   0.17  $   0.44  $   0.16 $   0.21 $   0.59 $   0.83 $   0.32
Discontinued Operations.      0.01    (0.03)    (0.30)       --       --       --       --       --
                          -------- --------  --------  -------- -------- -------- -------- --------
Net Income per Share....  $   0.14 $   0.14  $   0.14  $   0.16 $   0.21 $   0.59 $   0.83 $   0.32
                          ======== ========  ========  ======== ======== ======== ======== ========
</TABLE>
--------

(1) Income statement data for these periods have been restated to present
    discontinued operations (See Note 5). 

(2) During the third quarter of 1994, the Company revised its estimated profits
    on several previously-completed shipbuilding contracts which had the effect
    of increasing net income for the third quarter of 1994 by approximately
    $3.5 million, or $0.24 per share. 

<PAGE>
(3) During 1995, the Company recorded a reduction of a previously recorded loss
    on a shipbuilding contract which had the effect of increasing net income
    for the second, third and fourth quarters of 1995 by approximately $2.3
    million (or $0.16 per share), $750,000 (or $0.05 per share) and $1.5
    million (or $0.10 per share), respectively.  


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

          None


                                       PART III

Item 10.  Directors and Executive Officers of the Registrant.

     Information concerning the Company's directors and officers called for by
this item will be included in the Company's definitive Proxy Statement prepared
in connection with the 1996 Annual Meeting of shareholders and is incorporated
herein by reference.


Item 11.  Executive Compensation.

     Information concerning the executive compensation called for by this item
will be included in the Company's definitive Proxy Statement prepared in
connection with the 1996 Annual Meeting of shareholders and is incorporated
herein by reference.


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

     Information concerning security ownership of certain beneficial owners and
management called for by this item will be included in the Company's definitive
Proxy Statement prepared in connection with the 1996 Annual Meeting of
shareholders and is incorporated herein by reference.


Item 13.  Certain Relationships and Related Transactions.

     Information concerning certain relationships and related transactions
called for by this item will be included in the Company's definitive Proxy
Statement prepared in connection with the 1996 Annual Meeting of shareholders
and is incorporated herein by reference.


                                       PART IV

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

      (a)(1)Financial Statements

            Independent Auditors' Report.

            Consolidated Balance Sheets as of December 31, 1994 and 1995.

            Consolidated Statements of Operations for the years ended
<PAGE>
            December 31, 1993, 1994 and 1995.

            Consolidated Statements of Shareholders' Equity for the years
            ended December 31, 1993, 1994 and 1995.

            Consolidated Statements of Cash Flows for the years ended
            December 31, 1993, 1994 and 1995.

            Notes to Consolidated Financial Statements.

      (a)(2)Financial Statement Schedules

            Not applicable

      (a)(3)Exhibits

       3.1     Articles of Incorporation of the Company.(1)

       3.2     By-laws of the Company.(2)

       4.1     See Exhibits 3.1 and 3.2 for provisions of the Company's
               Articles of Incorporation and By-laws defining the rights of
               holders of Common Stock.

       4.2     Specimen of Common Stock Certificate.(3)

       4.3     Instruments Relating to Title XI Vessel Financing

               (a)  Trust Indenture dated October 21, 1975, by and between
                    the Company and Manufacturers Hanover Trust Company, as
                    Indenture Trustee, relating to $19,012,000 of United
                    States Government Guaranteed Ship Financing Bonds, as
                    amended by an Assumption Agreement and Supplemental
                    Indenture dated September 16, 1985(4), as further
                    amended by a Master Assumption Agreement, Supplemental
                    Indenture No. 2 and Amendment to Title XI Finance
                    Agreements dated March 13, 1991 (the "Master Assumption
                    Agreement"),(5) which has been further amended by a
                    Third Supplemental Indenture dated February 9, 1995.(6)

               (b)  Title XI Reserve Fund and Financial Agreement dated
                    October 21, 1975, by and between the Company and the
                    United States of America, as amended by Amendments Nos.
                    1 and 2(4), as further amended by the Master Assumption
                    Agreement (filed as Exhibit 4.3(a) hereto).  The
                    Reserve Fund and Financial Agreement has been further
                    amended, including the most recent Amendment No. 5 to
                    the Title XI Reserve Fund and Financial Agreement dated
                    February 9, 1995.(6)

               (c)  Form of 8.80% Sinking Fund Bond, Series A (included in
                    Exhibit 4.3(a)).

               (d)  Form of 9.30% Sinking Fund Bond, Series B (included in
                    Exhibit 4.3(a)).

               (e)  Form of 7.86% Sinking Bond Fund, 2000 Series.(6)

<PAGE>   
       4.4     Instruments relating to AEI's and the Company's obligations
               arising in connection with the issuance of General Obligation
               Bonds by Harrison County, Mississippi.

                (a) Loan Agreement dated April 1, 1991 between Harrison
                    County, Mississippi and AEI, pursuant to which AEI is
                    obligated to repay $3 million in order to fund the
                    County's bond payment obligations.(3)

                (b) Guaranty Agreement dated April 1, 1991 between the
                    Company, Harrison County, Mississippi and the State of
                    Mississippi.(3)

       4.5     Instruments relating to the Company's $36.25 million
               Industrial Revenue Refunding Bond Series 1994 Financing.

               (a)  Refunding Agreement dated April 1, 1994 between the
                    Company and the Board of Commissioners of the Port of
                    New Orleans, Exhibit A and First Preferred Vessel
                    Mortgage thereto.(7)

               (b)  Trust Indenture dated April 1, 1994 between the Board
                    of Commissioners of the Port of New Orleans and First
                    National Bank of Commerce.(7)

               (c)  Form of Industrial Revenue Refunding Bond Series
                    1994.(7)

       4.6    Instruments Relating to February 1995 Title XI Vessel
              Financing.

              (a)   Trust Indenture dated February 9, 1995 by and between
                    the Company and Chemical Bank, as Indenture Trustee,
                    relating to $17,780,000.00 of United States Government
                    Guaranteed Ship Financing Bonds.(6)

              (b)   Title XI Reserve Fund and Financial Agreement dated
                    February 9, 1995, by and between the Company and the
                    United States of America.(6)

              (c)   Form of 8.16% Sinking Bond Fund, 2010 Series.(6)

      10.1    Contracts With The United States Navy

              (a)   Agreement dated June 28, 1985, by and between the
                    Company and the United States of America (Contract No.
                    N00024-85-C-2131) for the construction of T-AO 187
                    Class Oiler Ships and various modifications thereto(4)
                    including modification P00005 thereto entered into on
                    June 16, 1988, and the related Acknowledgement of
                    Transfer and Transfer Agreement relating to the
                    Company's agreement to assume certain of the rights and
                    obligations to build two such vessels under an
                    Agreement dated May 6, 1985, by and between
                    Pennsylvania Shipbuilding Co. and the United States of
                    America.(8)

              (b)   Agreement dated June 20, 1988, by and between the
<PAGE>
                    Company and the United States of America (Contract No.
                    N00024-88-C-2050) for the construction of T-AO 187
                    Class Oiler Ships and various modifications thereto(8)
                    and  modification P00036 thereto.(5)

              (c)   Agreement dated November 21, 1983, by and between the
                    Company and the United States of America (Contract No.
                    N00024-84-C-2027) for the construction of LSD-41 Class
                    Landing Ship Dock vessels and various modifications
                    thereto.(4)

              (d)   Agreement dated June 17, 1988, by and between the
                    Company and the United States of America (Contract No.
                    N00024-88-C-2048) for the construction of LSD-41 Class
                    Landing Ship Dock vessels and modification nos. P00001
                    and P00002(8), modification nos. P00008 and P00013
                    thereto(3) and modification P00029 thereto.(5)

              (e)   Agreement dated July 15, 1988, by and between the
                    Company and the United States of America (Contract No.
                    N00024-88-C-2221) for the conversion of AO-177 Class
                    Oilers to AO-177 Jumbo Class and various modifications
                    thereto.(8)

              (f)   Agreement dated December 13, 1988, by and between AGM
                    and the United States of America (Contract No. N00024-
                    89-C-2110) for the construction of three LCACs.(8)

              (g)   Agreement dated July 1, 1987, by and between Lockheed
                    Shipbuilding Company and the United States of America
                    (Contract No. N00024-87-C-2089) for the construction of
                    seven LCACs (assumed by AGM in 1988).(8)

              (h)   Agreement dated October 3, 1989, by and between the
                    Company and the United States of America (Contract No.
                    N00024-89-C-2162) for the construction of one MHC Class
                    51 ship and various modifications thereto(9),
                    modification no. P00020(5) and modification no. P00027
                    thereto.

              (i)   Agreement dated August 2, 1990, by and between the
                    Company and the United States of America (Contract
                    N00024-90-C-2304) for the construction of one MHC Class
                    51 ship,(3) and modification nos. P00002(5),
                    P00013(5) and modification no. P00020 thereto.

              (j)   Agreement dated November 30, 1990, by and between the
                    Company and the United States of America (Contract No.
                    N00024-90-C-2307) for the construction of one T-AGS 45
                    ship and various modifications thereto.(3)

              (k)   Agreement dated July 15, 1993, by and between the
                    Company and the United States of America (Contract No.
                    N00024-93-C-2300) for the construction of one WAGB 20
                    Coast Guard Polar Icebreaker ship, amendment 0001 and
                    modification nos. P0001 and P00013 thereto.(1)

              (l)   Agreement dated September 3, 1993, by and between the
<PAGE>
                    Company and the United States of America (Contract No.
                    N00024-93-C-2205) for the construction of one T-AKR 300
                    Class Strategic Sealift ship, various amendments and
                    modifications nos. P00001, and P00003 and P00004
                    thereto(5) and modification P00007 thereto.(7)

              (m)   Agreement dated October 12, 1993, by and between the
                    Company and the United States of America (Contract No.,
                    N00024-94-C-2200) for the construction of one LSD 41
                    Class Landing Ship Dock.(5)

      10.2    Other Operating Contracts

              (a)   Agreement dated July 10, 1991 by and between Crawford
                    Technical Services, Inc. and the Dallas Area Rapid
                    Transit Authority, and the supplement thereto, relating
                    to providing operational and maintenance services for
                    paratransit van services for the Dallas, Texas
                    metropolitan area.(5)

              (b)   Agreement dated January 28, 1991, by and between
                    Crawford Technical Services, Inc. and the United States
                    of America and various modifications thereto (Contract
                    No. FO3602-91-C0007) relating to providing maintenance
                    services with respect to family housing units located
                    in a Little Rock, Arkansas air force base.(5)

              (c)   Agreement dated January 12, 1994 by and between the
                    Company and Belle of Orleans, L.L.C. for the
                    construction of a 350-foot-long paddlewheel gaming
                    vessel, various exhibits and Amendment nos. 1, 2 and 3
                    thereto.(7)

              (d)   Agreement dated May 12, 1995 by and between the Company
                    and American Heavy Lift Shipping Company for the
                    construction of one ocean-going product tanker, S/S
                    King.(2)

              (e)   Agreement dated May 12, 1995 by and between the Company
                    and American Heavy Lift Shipping Company for the
                    construction of one ocean-going product tanker, S/S
                    Knight.(2)

              (f)   Agreement dated May 12, 1995 by and between the Company
                    and American Heavy Lift Shipping Company for the
                    construction of one ocean-going product tanker, S/S
                    Solar.(2)

              (g)   Agreement dated May 12, 1995 by and between the Company
                    and American Heavy Lift Shipping Company for the
                    construction of one ocean-going product tanker, S/S
                    Spray.(2)

      10.3    Employee Benefit Plans

              (a)   The Company's Amended and Restated Performance Share
                    Plan dated April 24, 1989(10), as amended by Amendment
                    No. 1 adopted December 5, 1994.(7)

              (b)   The Company's  Amended and Restated Stock Appreciation
                    Plan and attachments thereto dated April 24, 1989(10),
                    as amended by Amendment No. 1 adopted December 5,
                    1994.(7)

<PAGE>
              (c)   The Company's Amended and Restated Employee Stock
                    Ownership Plan and the Related Trust Agreement(4), as
                    amended and restated on December 5, 1994(7), as further
                    amended by Amendment No. 1 adopted April 5, 1995(6) and
                    as further amended by Amendment No. 2 adopted June 16,
                    1995.(2)

              (d)   The Company's Pension Plan as Amended and Restated(7)
                    as further amended by Amendment No. 1 adopted June 16,
                    1995.(2)

              (e)   The Company's Amended and Restated Supplemental Pension
                    Plan(4), as amended by Amendment Nos. 1 and 2
                    thereto(3).

              (f)   The Company's Excess Retirement Plan.(3)

              (g)   Executive Group Insurance Benefits Plan specifying the
                    excess insurance benefits provided to the Company's
                    executive officers and certain other key personnel, and
                    a summary description of health, accidental death and
                    dismemberment, disability and life insurance benefits
                    made available to employees of Avondale Services
                    Corporation(3), as amended on March 25, 1994.(7)

              (h)   The Company's Directors' Deferred Compensation Plan.(3)

              (i)   Avondale Industries, Inc. Management Incentive Plan.(6)

              (j)   Form of the Company's 401(k) Plan and related Trust
                    effective January 1, 1996.
 
      10.4    Employment Agreements

              (a)   Employment Agreement dated September 27, 1985, by and
                    between the Company and Albert L. Bossier, Jr.(4) the
                    term of which has been extended such that its current
                    term extends through December 31, 1997.(7)

              (b)   Employment Agreement dated June 18, 1987, by and
                    between the Company and Thomas M. Kitchen(4) the term
                    of which has been extended such that its current term
                    extends through December 31, 1997.(7)

              (c)   Employment Agreement dated June 18, 1987, by and
                    between the Company and Kenneth B. Dupont(4) the term
                    of which has been extended such that its current term
                    extends through December 31, 1997.(7)

      10.5    Avondale/Ogden Letter Agreement.(11)

      10.6    Acquisition and Disposition Agreements
<PAGE>
              (a)   Asset Purchase Agreement dated January 27, 1987 by and
                    between the Company and Connell Industries, L.P.(4)

              (b)   Purchase Agreement dated June 22, 1988, by and between
                    AGM, Lockheed Shipbuilding Company and Lockheed
                    Corporation.(8)

              (c)   Stock Purchase Agreement dated February 15, 1991, by
                    and between Avondale Technical Services, Inc. and
                    Oliver R. Crawford relating to the purchase of Crawford
                    Technical Services, Inc.(3)

              (d)   Asset Purchase Agreement dated November 20, 1992
                    between the Company and Bollinger Machine Shop &
                    Shipyard, Inc., a Louisiana corporation (without
                    exhibits).(5)

      10.7    Lease Agreements

              (a)   Lease Agreement dated June 24, 1988, by and between the
                    Company and the Board of Commissioners of the Port of
                    New Orleans.(8)

              (b)   Lease Agreement dated June 4, 1979, by and between the
                    Company and Marrero Land and Improvement Association,
                    Ltd.(8)

              (c)   Adoption Agreement dated July 22, 1988, by and between
                    the Company and Missouri Pacific Railroad Company, as
                    supplemented on the date thereof.(8)

              (d)   Lease of Commercial Property dated July 1, 1970 by and
                    between the Company and Metal Building Products Co.,
                    Inc.(3)
 
      10.8    Other Material Agreements

              (a)   Registration Rights Agreement between the Company and
                    the ESOP  as Annex I of the Common Stock Purchase
                    Agreement dated as of September 27, 1985, by and
                    between Ogden American Corporation and the trustees of
                    the Avondale Industries, Inc., Employee Stock Ownership
                    Trust.(4)

              (b)   Registration Rights Agreement between the Company and
                    the participants in the Amended and Restated
                    Performance Share Plan (included in Exhibit 10.3(a)).

              (c)   License dated October 13, 1989 by and between the
                    Company and Intermarine S.p.A. relating to the license
                    of molded, glass-reinforced polyester hull construction
                    technology.(3)

              (d)   Stockholder Protection Rights Agreement dated as of
                    September 26, 1994 between Avondale Industries, Inc.
                    and Boatmen's Trust Company, as Rights Agent.(12)

      10.9    Revolving Credit Agreement dated as of May 10, 1994 among
<PAGE>
              Avondale Industries, Inc., various financial institutions
              signatory thereto (the "Banks") and Continental Bank N.A. as
              the Agent for the Banks, and Amendment Nos. 1 and 2
              thereto.(7)

              (a)   Third Amendment, Waiver and Consent to Revolving Credit
                    Agreement, dated May 10, 1995.

              (b)   Fourth Amendment and Consent to Revolving Credit
                    Agreement, dated September 1, 1995.

              (c)   Fifth Amendment to Revolving Credit Agreement, dated
                    November 17, 1995.

      21      List of subsidiaries of the Company

      23      Consent of Deloitte & Touche LLP

      27      Financial Data Schedule

      99      Additional Exhibits

              (a)   Subscription to Combustion, Inc. litigation preliminary
                    settlement agreement setting forth specific terms of
                    the settlement between Avondale and the Plaintiff
                    Class.

     __________
     (1)  Incorporated by reference from the Company's Quarterly Report on Form
          10-Q for the fiscal quarter ended June 30, 1993.

     (2)  Incorporated by reference from the Company's Quarterly Report on Form
          10-Q for the fiscal quarter ended June 30, 1995.

     (3)  Incorporated by reference from the Company's Annual Report on Form 10-
          K for the fiscal year ended December 31, 1991, as amended by Form 10-
          K/A.

     (4)  Incorporated by reference from the Company's Registration Statement on
          Form S-1 (Registration No. 33-20145) filed with the Commission on
          February 16, 1988.

     (5)  Incorporated by reference from the Company's Annual Report on Form 10-
          K for the fiscal year ended December 31, 1993.

     (6)  Incorporated by reference from the Company's Quarterly Report on Form
          10-Q for the fiscal quarter ended March 31, 1995.

     (7)  Incorporated by reference from the Company's Annual Report on Form 10-
          K for the fiscal year ended December 31, 1994.

     (8)  Incorporated by reference from the Company's Registration Statement on
          Form S-1 (Registration No. 33-27342) filed with the Commission on
          March 6, 1989.

     (9)  Incorporated by reference from the Company's Annual Report on Form 10-
          K for the fiscal year ended December 31, 1990.

<PAGE>
     (10) Incorporated by reference from the Company's Registration Statement on
          Form S-8 and Form S-3 (Registration No. 33-31984) filed with the
          Commission on November 8, 1989.

     (11) Incorporated by reference from the Company's Quarterly Report on Form
          10-Q for the fiscal quarter ended March 31, 1994.

     (12) Incorporated by reference from the Company's Current Report on Form 8-
          K filed with the Commission on September 30, 1994.


      (b) Reports on Form 8-K

          There were no reports on Form 8-K filed during the three month period
          ended December 31, 1995.


                                    
                                      SIGNATURES

          Pursuant to the requirements of Section 13 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, on January 19,1996.

                                        AVONDALE INDUSTRIES, INC.



                                        By:    /s/Albert L. Bossier, Jr.
					       -------------------------
                                               Albert L. Bossier, Jr.
                                                 Chairman of the Board,
                                                  President and Chief
                                                   Executive Officer

          Pursuant to the requirements of the Securities Exchange Act of 1934,
     this report has been signed by the following persons on behalf of the
     Registrant and on the dates indicated.

             Signature                   Title                  Date
     ----------------------------------------------------------------------
     
      /s/Albert L. Bossier, Jr.  Chairman of the Board,       January 19, 1996
      -------------------------  President and Chief
        Albert L. Bossier, Jr.   Executive Officer


      /s/Thomas M. Kitchen       Vice President, Chief        January 19, 1996
      -------------------------- Financial Officer
        Thomas M. Kitchen        Corporate Secretary and
                                 a Director

      /s/Kenneth B. Dupont       Vice President and a         January 19, 1996
      -------------------------- Director 
        Kenneth B. Dupont        

<PAGE>
      /s/Anthony J. Correro, III Director                     January 19, 1996
      --------------------------                                              
        Anthony J. Correro, III


      /s/Francis R. Donovan      Director                     January 19, 1996
      --------------------------
        Francis R. Donovan   


      /s/William A. Harmeyer     Director                     January 19, 1996
      --------------------------
        William A. Harmeyer 


      /s/Hugh A. Thompson        Director                     January 19, 1996
      --------------------------
        Hugh A. Thompson  


      /s/Bruce L. Hicks          Vice President &             January 19, 1996
      -------------------------- Controller
        Bruce L. Hicks