--------------------------------------------------------------------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                           ---------------------------


                                   Form 10-K/A

(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, 1998
|_|     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
                         (State or other jurisdiction of
                         incorporation or organization)
                                   39-1097012
                      (I.R.S. Employer Identification No.)

        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  March  31,  1999  was
approximately $241,812,090.

         The number of shares of the Registrant's  common stock, $1.00 par value
per share, outstanding at March 31, 1999 was 13,260,867.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None.
<PAGE>
I.       Part  III  of the annual Report is amended and restated in its entirety
         to read as follows:
                                    PART III

Item 10.          Directors and Executive Officers of the Registrant.

         The  following  table sets forth  certain  information  relating to the
directors  of the Company  and certain  information  concerning  the  beneficial
ownership of shares of Common Stock by (i) each  director,  (ii) each  executive
officer  and (iii) all  directors  and  executive  officers  of the company as a
group,  all as of April 27, 1999, as  determined  in accordance  with Rule 13d-3
under the Securities Exchange Act of 1934 (the "Exchange Act"). Unless otherwise
indicated,  (i) each director has been engaged in the principal occupation shown
for  more  than  the  past  five  years  and  (ii)  the  shares  shown  as being
beneficially owned are held with sole voting and investment power.
<TABLE>
<CAPTION>
                                                                                                        Number of
                 Name, Age, Principal Occupation                                                          Shares
                      and Directorships in                            Serving Term       Director      Beneficially
                    Other Public Corporations                           Expiring          Since          Owned(1)
-----------------------------------------------------------           ------------       --------      ------------
<S>                                                                       <C>              <C>           <C>
Thomas M. Kitchen, 51                                                     2001             1987           73,877(4)
         Corporate Vice President, Chief Financial
         Officer, and Secretary of the Company(2)(3)
Francis R. Donovan, 64                                                    2001             1994              799(6)
         President, Designers and Planners, Inc.(5);
         Vice Admiral, U.S. Navy (retired)
Albert L. Bossier, Jr., 66                                                2000             1985          103,376(7)
         Chairman of the Board, Chief Executive
         Officer, and President of the Company(2)
Hugh A. Thompson, 64                                                      2000             1988            3,299(9)
         Retired(8)
Anthony J. Correro, III, 57                                               1999             1988            1,299(11)
         Partner, Correro Fishman Haygood Phelps
         Weiss Walmsley & Casteix, L.L.P. (Law
         firm)(10)
Kenneth B. Dupont, 60                                                     1999             1987           29,312(13)
         Corporate Vice President - Commercial and
         Offshore Programs of the Company(2)(12)
R. Dean Church, 56                                                        ---              ---             8,476(15)
         Corporate Vice President - Chief
         Administrative Officer of the Company (2)(14)
Edward C. Mortimer, 64                                                    ---              ---             8,322(17)
         Corporate Vice President - Government
         Programs of the Company(2)(16)

Thomas H. Doussan, 67                                                     ---              ---             8,915(19)
         Corporate Vice President - Chief Operating
         Officer of the Company(18)

Ronald J. McAlear, 51                                                     ---              ---             6,948(21)
         Corporate Vice President -Advanced Programs
         & Marketing of the Company;(20)

All directors and executive officers as a group (10                                                      244,623
persons)
</TABLE>
<PAGE>
----------------
(1)      None of the directors or executive officers beneficially owns in excess
         of one percent of the Common Stock.  The 244,623 shares of Common Stock
         beneficially  owned by all of the  Company's  directors  and  executive
         officers as a group  constitute  approximately  1.8% of the outstanding
         Common Stock.

(2)      Messrs.  Bossier,   Kitchen,  Dupont,  Church,  and  Mortimer  are  the
         executive officers of the Company for whom compensation  information is
         disclosed in this Form 10-K/A.

(3)      Mr. Kitchen has served as Corporate  Vice  President - Chief  Financial
         Officer of the Company  since  December 1, 1997.  He has served as Vice
         President,  Chief  Financial  Officer,  Secretary and a director of the
         Company since April 1, 1987.

(4)      Includes  2,769 shares  allocated to Mr.  Kitchen's  Avondale  Employee
         Stock Ownership Plan ("ESOP") account and 18,283 shares that he has the
         right to acquire  under stock  options that are  exercisable  within 60
         days.

(5)      Since September 1992, Mr. Donovan has served as a consultant to various
         companies on maritime  issues,  and from  November 1994 to June 1996 he
         was  employed  as  Strategic   Mobility   Coordinator,   PRC  Inc.,  an
         information  technology  company.  Since  July  1996 he has  served  as
         President of Designers and Planners, Inc., a marine engineering,  naval
         architecture and environmental planning firm.

(6)      Consists  of shares Mr.  Donovan  has the right to acquire  under stock
         options that are exercisable within 60 days.

(7)      Includes  5,470  shares  allocated  to Mr.  Bossier's  ESOP account and
         39,076 shares that he has the right to acquire under stock options that
         are exercisable within 60 days.

(8)      From 1963 to 1996, Dr. Thompson was on the engineering  faculty of, and
         from  1976  to  1991  Dr.  Thompson  was  the  Dean  of the  School  of
         Engineering at Tulane University, from which he retired in 1996.

(9)      Includes 799 shares Dr.  Thompson has the right to acquire  under stock
         options that are exercisable within 60 days.

(10)     For more than five years prior to June 1994,  Mr. Correro was a partner
         in the law  firm of  Jones,  Walker,  Waechter,  Poitevent,  Carrere  &
         Denegre, L.L.P.

(11)     Includes  799 shares Mr.  Correro has the right to acquire  under stock
         options that are exercisable within 60 days.

(12)     Mr.  Dupont has served as Corporate  Vice  President -  Commercial  and
         Offshore  Programs of the Company since December 1, 1997. He has served
         as Vice President  since April 1988 and a director of the Company since
         April 1, 1987.

(13)     Includes 2,400 shares allocated to Mr. Dupont's ESOP account and 13,708
         shares that he has the right to acquire  under stock  options  that are
         exercisable within 60 days.
<PAGE>
(14)     Mr.   Church  has  served  as  Corporate   Vice   President  and  Chief
         Administrative Officer of the Company since December 1, 1997. He served
         as the Company's  Vice President - Contracts,  Legal & Insurance  since
         1987 and the Company's Vice President - Contracts, Credit and Insurance
         from 1982 to 1987.

(15)     Includes 1,504 shares  allocated to Mr. Church's ESOP account and 6,972
         shares that he has the right to acquire  under stock  options  that are
         exercisable within 60 days.

(16)     Mr.  Mortimer  has served as  Corporate  Vice  President  -  Government
         Programs  of the  Company  since  December  1,  1997.  He served as the
         Company's Vice President of Program and Contract Management since 1991.

(17)     Includes 298 shares allocated to Mr.  Mortimer's ESOP account and 7,824
         shares that he has the right to acquire  under stock  options  that are
         exercisable within 60 days.

(18)     Mr.  Doussan has served as the Company's  Corporate  Vice President and
         Chief  Operating  Officer  since  December  1,  1997.  He served as the
         Company's Vice President of Commercial Ship  Construction  from 1994 to
         1997 and the  Company's  Vice  President  of the  Modular  Construction
         Division from 1991 to 1994.

(19)     Includes 1,973 shares allocated to Mr. Doussan's ESOP account and 6,942
         shares that he has the right to acquire  under stock  options  that are
         exercisable within 60 days.

(20)     Mr.  McAlear has served as the  Company's  Corporate  Vice  President -
         Advanced  Programs and Marketing  since  December 1, 1997. He served as
         the Company's  Vice  President  Advanced  Programs and Marketing  since
         1991.

(21)     Includes 392 shares  allocated to Mr.  McAlear's ESOP account and 6,556
         shares that he has the right to acquire  under stock  options  that are
         exercisable within 60 days.

Section 16(a) Beneficial Ownership Reporting Compliance.

         Section  16(a) of the Exchange Act  requires the  Company's  directors,
executive officers and 10% shareholders to file with the Securities and Exchange
Commission  initial reports of beneficial  ownership,  and changes in beneficial
ownership,  of the Common  Stock of the  Company.  During  1998,  the  Company's
directors  and  executive  officers  timely  filed all  required  reports to the
Securities  and Exchange  Commission  in  compliance  with Section  16(a) of the
Exchange Act.
<PAGE>
Item 11.          Executive Compensation.

         The  following  table  sets forth  certain  information  regarding  the
compensation  paid to the Company's Chief  Executive  Officer and to each of the
four most highly  compensated  executive  officers of the Company  whose  annual
compensation exceeded $100,000 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                                                                        Long Term                          
                                                                                       Compensation
                                                                                      -------------                        
                                                                                        Number of                  
                Name and                                         Annual                   Shares
          Principal Positions                                 Compensation              Underlying          All Other
                                             Year      Salary (2)        Bonus        Stock Options       Compensation
---------------------------------------      ----      ----------      ---------      -------------       ------------
<S>                                          <C>       <C>            <C>                 <C>               <C>
Albert L. Bossier, Jr.                       1998      $ 703,971      $ 308,439           45,000            $ 17,884(3)
    Chairman of the Board,                   1997        682,822        166,475                               10,342
    Chief Executive Officer and              1996        684,821        173,870                               10,702
    President

Thomas M. Kitchen                            1998        329,378        145,072           21,055              10,348(4)
    Corporate Vice President -               1997        319,480         77,891                                7,610
    Chief Financial Officer and              1996        320,415         81,351                                7,660
    Secretary

Kenneth B. Dupont                            1998        246,954        108,012           15,786               7,752(5)
     Corporate Vice President -              1997        239,530         58,399                                7,069
     Commercial and Offshore                 1996        240,231         60,993                                6,423
     Programs

R. Dean Church                               1998        153,685         67,454            7,000               6,426(6)
     Corporate Vice President -              1997        131,019         37,638                                4,630
     Chief Administrative
     Officer(1)
                                             1998        153,685         67,218            7,000               5,402(7)
Edmund C. Mortimer                           1997        149,051         36,339                                5,602
     Corporate Vice President -
     Government Programs(1)
</TABLE>
----------------
(1)      Named an Executive Officer effective December 1, 1997.
(2)      Includes lump sum payments of 2.0%, 2.5% and 2.8% of salary made to all
         employees in 1998, 1997 and 1996, respectively.
(3)      Consists  of  $6,384  in  medical  expense reimbursement and $11,500 in
         group life and disability insurance premiums.
(4)      Consists  of  $748 in medical expense reimbursement and $9,600 in group
         life and disability insurance premiums.
(5)      Consists  of  $752 in medical expense reimbursement and $7,000 in group
         life and disability insurance premiums.
(6)      Consists of $1,326 in medical expense reimbursement and $5,100 in group
         life and disability insurance premiums.
(7)      Consists  of  $602 in medical expense reimbursement and $4,800 in group
         life and disability insurance premiums.
<PAGE>
Stock Options and Stock Appreciation Rights

         The following table sets forth certain information concerning the grant
of stock options during 1998.
<TABLE>
<CAPTION>
                                         OPTION GRANTS IN FISCAL YEAR 1998

                                                                                                           Potential
                                               Percent of                                                  Realizable
                                                  Total                                                     Value at
                                Number of        Options                                                Assumed Rates of
                               Securities      Granted to                                                  Stock Price
                               Underlying       Employees                                               Appreciation for
                                 Options        in Fiscal       Exercise       Expiration                  Option Term
           Name                  Granted          Year            Price           Date                 5%              10%
------------------------       ----------      ----------       --------       ----------          ---------      -----------
<S>                               <C>             <C>            <C>            <C>                <C>            <C>
Albert L. Bossier, Jr.            45,000          20.66%         $ 26.88        02/02/08           $ 760,711      $ 1,927,791

Thomas M. Kitchen                 21,055           9.67%           26.88        02/02/08             355,928          901,992

Kenneth B. Dupont                 15,786           7.25%           26.88        02/02/08             266,857          676,269

R. Dean Church                     7,000           3.21%           26.88        02/02/08             118,833          299,879

Edmund C. Mortimer                 7,000           3.21%           26.88        02/02/08             118,833          299,879
</TABLE>
         The  following  table sets forth  certain  information  concerning  the
exercise of options and stock  appreciation  rights during 1998 and  unexercised
options and stock appreciation rights on December 31, 1998.
<TABLE>
<CAPTION>
                              AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
                                         FISCAL YEAR-END OPTION/SAR VALUES

                                                        Number of securities              Value of Unexercised
                            Shares                     underlying unexercised           In-the-Money Options/SARs
                           acquired        Value      options/SARs at 12/31/98                at 12/31/98            
         Name             on exercise    realized   Exercisable     Unexercisable     Exercisable     Unexercisable
----------------------    -----------    --------   -----------     -------------     -----------     -------------
<S>                            <C>          <C>        <C>              <C>            <C>              <C>
Albert L. Bossier, Jr.         --           --         20,870           65,869         $ 146,921        $ 282,218

Thomas M. Kitchen              --           --          9,765           30,819            68,743          132,324

Kenneth B. Dupont              --           --          7,321           23,107            51,541           99,210

R. Dean Church                 --           --          3,916           10,916            27,570           50,186

Edmund C. Mortimer             --           --          4,556           11,555            32,071           56,103
</TABLE>
<PAGE>
Pension Plans

       Messrs. Bossier,  Kitchen, Dupont, Church, Mortimer,  Doussan and McAlear
participate in a qualified  defined-benefit pension plan (the "Qualified Pension
Plan"), a non-qualified  supplemental  pension plan (the  "Supplemental  Pension
Plan")  and a  non-qualified  executive  excess  retirement  plan  (the  "Excess
Retirement Plan").

       The following  table  reflects the aggregate  annual  benefits  under the
Qualified  Pension Plan,  Supplemental  Pension Plan and Excess  Retirement Plan
that an executive  officer with the years of service and average annual earnings
(as calculated in accordance  with the Qualified  Pension Plan and  Supplemental
Pension Plan) indicated can expect to receive under the plans upon retirement at
age 65. The benefits under the Qualified  Pension Plan and the Excess Retirement
Plan are not  subject to  reduction  for Social  Security  but are offset by the
actuarially  equivalent  value of the  shares of Common  Stock and other  assets
allocated to the ESOP account of each participant.  This offset is not reflected
in the table below.
<TABLE>
<CAPTION>
                                       Avondale Industries, Inc.
                                  Estimated Annual Retirement Benefits
                                  (Before Reduction for ESOP Benefits)

             
       
            Average                                           Years of Service
            Annual         -----------------------------------------------------------------------------------------------         
           Earnings         15 years         20 years          25 years         30 years          35 years         40 years
           --------        ---------        ---------         ---------        ---------         ---------        ---------
           <S>             <C>              <C>               <C>              <C>               <C>              <C>
           $ 150,000       $  56,250        $  67,500         $  70,750        $  90,000         $ 101,250        $ 112,500
             200,000          75,000           90,000           105,000          120,000           135,000          150,000
             250,000          93,750          112,500           131,250          150,000           168,750          187,500
             300,000         112,500          135,000           157,500          180,000           202,500          225,000
             350,000         131,250          157,500           183,750          210,000           236,250          262,500
             400,000         150,000          180,000           210,000          240,000           270,000          300,000
             450,000         168,750          202,500           236,250          270,000           303,750          337,500
             500,000         187,500          225,000           262,500          300,000           337,500          375,000
             550,000         206,250          247,500           288,750          330,000           371,250          412,500
             600,000         225,000          270,000           315,000          360,000           405,000          450,000
             650,000         243,750          292,500           341,250          390,000           438,750          487,500
             700,000         262,500          315,000           367,500          420,000           472,500          525,000
             750,000         281,250          337,500           393,750          450,000           506,250          562,500
             800,000         300,000          360,000           420,000          480,000           540,000          600,000
             850,000         318,750          382,500           446,250          510,000           573,750          637,500
             900,000         337,500          405,000           472,500          540,000           607,500          675,000
             950,000         356,250          427,500           498,750          570,000           641,250          712,500
</TABLE>
       Compensation  covered  by the  plans  consists  of  salary,  bonus and an
automobile allowance. Covered compensation for Messrs. Bossier, Kitchen, Dupont,
Church and Mortimer equals the amount reported in the Summary Compensation Table
under the heading "Annual Compensation" plus the automobile  allowance.  Messrs.
Bossier,  Kitchen,  Dupont, Church and Mortimer have 42, 21, 35, 32 and 10 years
of service, respectively, under each of the plans.
<PAGE>
Employment and Change of Control Agreements

       The Company has entered into Employment  Agreements and Change of Control
Agreements with each of the Named Executive Officers.  The Employment Agreements
provide  for  base  salaries  and  for  annual  bonuses  as  determined  by  the
Compensation  Committee  of  the  Board  of  Directors.   Under  the  Employment
Agreements,  base salaries may be increased but not decreased by the Board.  The
Employment  Agreements expire on December 31, 2001. After December 31, 2001, the
employment of each executive officer continues from year to year, subject to the
right of the Company or the employee to terminate such employment  without cause
at December  31, 2001 or on any  subsequent  December 31 (a "normal  termination
date"),  by  giving  at  least  60  days  prior  written  notice  to the  other.
Termination of employment that is properly effected by either party with respect
to a normal termination date is not a breach of the Employment Agreement.

       Under  the  Employment  Agreements,  if the  employment  of an  executive
officer is terminated by the executive  officer for certain specified reasons or
by the Company (at any time other than a normal termination date) for any reason
other than cause (as defined  therein),  the executive  officer is entitled to a
lump sum severance payment equal to three times the sum of his annual salary and
annual bonus, which amount is reduced if the executive  officer's  employment is
terminated  after age 62. The severance  benefits  payable under the  Employment
Agreements also include the continuation of health and insurance  benefits,  and
supplemental lump sum pension benefits.  These supplemental pension benefits are
based upon  compensation  and are reduced by benefits earned under the Qualified
Pension Plan. If supplemental  pension benefits are paid as part of an executive
officer's severance benefits under an Employment  Agreement,  benefits otherwise
payable to him under the Excess Retirement Plan are reduced.

       Each of the Named Executive Officers is also a beneficiary of a Change of
Control  Agreement with the Company.  The agreements  provide for the payment of
certain  benefits  upon  an  involuntary  or  constructive  termination  of  the
officers' employment, except for cause, within three years following a change of
control.  Benefits payable under the change in control  agreements include (i) a
cash payment in an amount equal to three times salary plus bonus, (ii) continued
health and life insurance  benefits for three years after  termination,  (iii) a
cash  payment in the  amount of the value of the  additional  benefits  that the
officer  would have become  entitled  to under the  Pension  Plan if he had been
employed for an  additional  three years,  (iv)  accelerated  vesting and payout
under the Company's  supplemental  retirement  plans and (v) a "tax gross-up" if
excise taxes are imposed upon certain payments received by the officers.  To the
extent payments are made under these change of control agreements,  no severance
payments will be made under the Employment Agreements.
<PAGE>
Compensation of Directors.

       Members  of the  Board who are not  officers  receive  an  annual  fee of
$12,000  and an  additional  fee of  $1,500  for each  meeting  of the  Board or
committee  thereof  attended,  all or a portion of which they are  permitted  to
defer under a Directors' Deferred Compensation Plan. Deferred fees earn interest
at a rate of 8.5% per annum compounded  annually,  and are payable in five equal
installments  or a lump sum upon the  earliest  of the  director's  resignation,
removal,  attainment of age 65, or death. The provisions of the plan,  including
the interest  rate payable on deferred  fees,  may be amended at any time by the
Board of Directors.  In addition to the foregoing directors' fees, each director
is reimbursed  for expenses  incurred in attending  meetings,  and also receives
options to acquire  1,065 shares of Common Stock on the day following the annual
meeting for each year that the 1997 Stock  Incentive  Plan remains in effect and
shares of Common Stock are available for grant under such plan on such date.

Compensation Committee Interlocks and Insider Participation.

       The members of the  Compensation  Committee of the Board of Directors are
Dr. Thompson and Mr. Donovan, neither of whom is, or was formerly, an officer or
employee of the Company or any of its subsidiaries, nor has or has had any other
significant  relationship with the Company.  No executive officer of the Company
served in the last  fiscal  year as a  director  or  member of the  compensation
committee  of  another  entity,  one of whose  executive  officers  served  as a
director or on the Compensation Committee of the Company.

Compensation Committee Report on Executive Compensation.

       The  Compensation  Committee (the  "Committee") of the Board of Directors
furnished  the  following  report  with  respect  to  compensation  paid  to the
executive officers of the Company in 1998:

       Under the By-laws of the Company, the Committee,  which is required to be
made up of outside independent  directors,  determines the general  compensation
policies of the Company, determines the compensation to be paid to the executive
officers and other  employees of the Company and administers the Company's Stock
Appreciation Plan and 1997 Stock Incentive Plan.

       As disclosed under the heading  "Executive  Compensation - Employment and
Change of Control  Agreements," each of the Company's  executive officers has an
employment  agreement  with  the  Company  that may not be  terminated  prior to
December  31,  2001 and that  provides  among  other  things,  that the Board of
Directors has only the authority to increase,  and not decrease,  each executive
officer's  base salary as  compared  to the amount  paid during the  immediately
preceding  year.  The decision by the  Committee in December  1998 to extend the
contracts with Messrs. Bossier,  Kitchen and Dupont and to enter into Employment
Agreements   with  the  other  executive   officers   recognized  such  persons'
significant contributions to the improvement in the Company's financial position
and  performance  during 1998,  evidenced by the  Company's  expansion  into the
commercial shipbuilding business,  continued strong earnings and the substantial
increase in shareholder  value during 1998. The Committee also believes that the
extension  of the  Employment  Agreements  will  assure  that the  Company  will
continue to benefit from this  management  group's  experience  in order to meet
future challenges and opportunities in the shipbuilding industry.
<PAGE>
       Compensation  paid to the  executive  officers  during  1998  essentially
consisted  of five  components,  annual  salary,  a lump sum  payment of 2.0% of
salary made to all employees, a performance-based cash bonus payable pursuant to
a Management  Incentive Plan adopted by the Committee in early 1995 in which the
executive officers participate,  a performance-based cash bonus payable pursuant
to an Executive  Officer  Incentive  Plan adopted by the Committee and effective
January 1, 1998, and stock option grants. The performance-based  bonuses paid to
the  executive  officers  were  calculated  as a  percentage  of base  salary in
accordance with a formula established by the Committee at the beginning of 1998.
The formula for 1998 for the Management  Incentive Plan was based on the Company
achieving  certain  targets with respect to the following  criteria (in order of
weight given by the Committee):  operating profit less interest  charges,  major
contract  profit   estimates  at  completion,   direct  man  hour  estimates  at
completion,  and operating costs incurred in completing the major contracts. The
formula  called  for  the  bonus  to be  earned  by the  executive  officers  in
increments  of 1% of their  base  salary  based on their  degree of  success  in
achieving these goals. It was anticipated that if all of the targets established
at the beginning of 1998 were achieved that the bonuses payable to the executive
officers would have been 25% of their  respective base salaries.  Application of
the formula resulted in a bonus paid of 19.78% of their respective base salaries
related to the Management Incentive Plan. The formula for 1998 for the Executive
Officer  Incentive  Plan was based on the  achievement  of both  individual  and
Company goals.  The individual  goals for each of the Corporate Vice  Presidents
are based upon goals  recommended by the Chief Executive Officer and approved by
the  Committee.  The  individual  performance  portion  of the  Chief  Executive
Officer's bonus shall be based upon the average  percentage  achieved by each of
the Corporate Vice Presidents for their respective executive officer incentives.
The  Company  perfromance  goals were based upon the Company  achieving  certain
targets  related to the  Company's  stock price and earnings  per share.  It was
anticipated that if all of the targets established at the beginning of 1998 were
achieved that the bonuses payable to the executive  officers would have been 25%
of  their  respective  base  salaries.  At the end of 1998,  application  of the
formula  resulted in each executive  officer earning  approximately  100% of the
bonus  available under the Executive  Officer  Incentive Plan. For future years,
the Committee may establish different  performance goals,  criteria and formulas
for calculation of each of the bonuses.

       At the Company's 1997 annual  meeting,  the  shareholders  overwhelmingly
approved a new stock  incentive plan under which stock options and various other
stock based  incentives may be granted to key personnel.  In 1998, the Committee
granted  stock  options  to  each  of the  executive  officers,  reflecting  the
Committee's  goal  of   strengthening   the   relationship   between   executive
compensation  and  increases  in the market price of the Common  Stock,  thereby
better aligning the executive  officers'  financial  interests with those of the
Company's shareholders. The size of the option grant to each officer was tied to
salary level, with the intention being to create greater opportunities for stock
ownership  for  those  officers  with  greater responsibilities and duties.  The
<PAGE>
Committee also considered  information  furnished by its  consultants  regarding
stock  option   practices  among   comparable   companies  and  overall  Company
performance.

       Under  Section  162(m)  of  the  Internal  Revenue  Code,  publicly  held
companies may be prohibited from deducting as  compensation  expense for federal
income  tax  purposes  total  compensation  paid in a  single  year  to  certain
executive officers that is in excess of $1 million.  Although Mr. Bossier's 1998
compensation  exceeded  the $1 million  limit,  he elected to defer a portion of
this  compensation.  As a result,  the Company was not prohibited from deducting
any of Mr.  Bossier's  compensation  for federal  income tax purposes.  No other
executive  officer  was paid  compensation  in 1998 that  reached the $1 million
threshold. Compensation that qualifies as "performance-based" compensation under
Section 162(m) is excluded from the $1 million limit.  The stock options granted
to executive officers have been structured to be "performance-based,"  such that
any gains  realized upon the exercise of such options will not be counted toward
the $1  million  limit.  When  making  its future  compensation  decisions,  the
Compensation  Committee intends to consider the effects of Section 162(m) on the
Company.



      Hugh A. Thompson                               Francis R. Donovan
<PAGE>
Performance Graph

          The graph and  corresponding  table below compare the cumulative total
shareholder  return on the  Company's  Common  Stock from  December  31, 1993 to
December 31, 1998 with the cumulative  total return on a NASDAQ index and a peer
group index,  in each case assuming the  investment of $100 on December 31, 1993
at the  closing  price  on that  date and  reinvestment  of  dividends.  Through
December 31, 1996,  the peer group index  consisted of General  Dynamics  Corp.,
Litton Industries, Inc., McDermott International Inc., Tenneco Inc., and Trinity
Industries  Inc., and the returns of each issuer were weighted  according to its
stock market  capitalization  at the beginning of each period for which a return
is indicated.  For 1997 and 1998,  Halter  Marine  Group,  Inc. and Newport News
Shipbuilding   Inc.  have  been  added  as  they  represent  the  newly  created
shipbuilding  operations which have been spun off by Trinity Industries Inc. and
Tenneco, Inc. respectively.




                        [Performance Graph Appears Here]








<TABLE>
<CAPTION>
                                        Cumulative Total Shareholder Return
                                                   December 31,

Index              1993             1994             1995              1996             1997              1998
-----             ------           ------           ------            ------           ------            ------
<S>               <C>              <C>              <C>               <C>              <C>               <C>
The Company       100.00           105.08           196.61            291.53           402.54            393.22

Peer Group        100.00            86.99           104.85            116.80           136.87            139.77

NASDAQ            100.00           104.99           136.18            169.23           207.00            291.96
</TABLE>
<PAGE>
Item 12.         Security Ownership of Certain Beneficial Owners and Management.

       See  Item  10.   Directors  and  Executive Officers of the Registrant for
information on security ownership of management.

                             PRINCIPAL SHAREHOLDERS

       The  following  persons are, to the  knowledge  of the Company,  the only
persons that beneficially owned, as of March 31, 1999, more than five percent of
the Common Stock,  calculated  in accordance  with Rule 13d-3 under the Exchange
Act. Unless otherwise indicated,  all shares indicated as beneficially owned are
held with sole voting and investment power.
<TABLE>
<CAPTION>
                                                            Number of Shares
        Name and Address                                   Beneficially Owned              Percent of Class
-----------------------------------------                  ------------------              ----------------
<S>                                                             <C>                               <C>
Blanche S. Barlotta                                             1,685,836(1)                      12.7%
      R. Dean Church and Rodney J.
      Duhon, Jr.,
      as Trustees of the Avondale
      Employee Stock Ownership Trust
      P. O. Box 50280
      New Orleans, Louisiana  70150

FMR Corporation                                                 1,276,552(2)                       9.6%
      82 Devonshire Streeet
      Boston, Massachusetts 02109

Perry Corporation                                                 993,300(3)                       7.5%
      599 Lexington Avenue 36th Floor
      New York, New York 10022

Boston Partners Asset Management L. P.                            980,100(4)                       7.4%
      One Financial Center 43rd Floor
      Boston, Massachusetts 02111
</TABLE>
<PAGE>
------------
(1)   The right to vote shares  allocated  to an ESOP  participant's  account is
      passed  through to the  participant.  There are  currently no  unallocated
      shares other than a nominal  number of shares that have been  forfeited by
      participants  since January 1, 1999.  Voting rights of unallocated  shares
      are  exercised  by  the  ESOP  Trustees  at  the  direction  of  the  ESOP
      Administrative Committee, the members of which are the three ESOP Trustees
      and two other officers of the Company,  Ernest F. Griffin,  Jr. and Eugene
      E. Blanchard,  Jr.  Investment  power over the ESOP shares is exercised by
      the ESOP Trustees at the direction of the ESOP  Administrative  Committee,
      provided the ESOP Trustees  determine such direction to be consistent with
      their fiduciary duties.

(2)   Based solely upon information  contained in Schedule 13G filed on February
      11, 1999 by FMR Corporation. FMR Corporation shares dispositive power with
      respect to all of the shares reported.

(3)   Based solely upon information  contained in Schedule 13G filed on March 1,
      1999 by Perry  Corporation.  Perry  Corporation has sole dispositive power
      with respect to all of the shares reported

(4)   Based solely upon information  contained in Schedule 13G filed on February
      16, 1999 by Boston Partners Asset Management,  L. P. Boston Partners Asset
      Management,  L. P.  shares  dispositive  power with  respect to all of the
      shares reported.

Item 13.          Certain Relationships and Related Transactions.

                  The law firm of Blue Williams,  L.L.P.,  of which a son of Mr.
Albert L.  Bossier,  Jr.,  a  director  and the chief  executive  officer of the
Company, is one of the partners,  was paid approximately $937,250 in 1998 by the
Company for legal services rendered.
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements of Section 13 of the Securities  Exchange
Act of 1934,  the  Registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized, on April 30, 1999.

                                         AVONDALE INDUSTRIES, INC.



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