<PAGE>
                                UNITED STATES
                    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, 1997

               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
          incorporation or organization)      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.

               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, 1997 was
          approximately $301,016,311.

               The number of shares of the Registrant's common stock,
          $1.00 par value per share, outstanding at December 31, 1997
          was 14,493,211.

                      DOCUMENTS INCORPORATED BY REFERENCE

               Portions of the Registrant's Proxy Statement for its
          1998 Annual Meeting have been incorporated by reference into
          Part III of this Form 10-K.
<PAGE>
                                   PART I

          Item 1.   Business.

          Overview

               Avondale Industries, Inc. ("Avondale" or the
          "Company") 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 secured its largest ever commercial
          contract in 1997 for the construction of two
          125,000 Dead Weight Tons ("DWT") crude oil
          carriers for the Jones Act Trade.  Management
          believes the Company's low cost structure,
          experienced and skilled work force, technological
          capabilities, sophisticated construction processes
          and extensive experience 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, 1997, the Company's shipbuilding
          backlog (the "firm backlog") was approximately
          $1.8 billion (including estimated contract
          escalation), exclusive of unexercised options
          aggregating approximately $1.1 billion held by the
          U.S. Navy (including estimated contract
          escalation) and approximately $500 million held by
          a commercial customer for additional ship orders.
<PAGE>
               In December 1996, an alliance led by the
          Company was awarded a $641 million contract to
          construct the initial ship in the U.S. Navy's LPD-
          17 program (see glossary of selected industry
          terms).  In April 1997, the General Accounting
          Office denied a protest filed by a competing
          shipbuilding team and affirmed this contract
          award.  The contract award provides for options
          exercisable by the U.S. Navy for two additional
          LPD vessels to be built by the alliance.  For
          additional information on the LPD-17 award, see "-
          U.S. Government." Also, in June 1997, the Company
          announced that it had signed a $332 million
          contract with ARCO Marine, Inc.("ARCO") of Long
          Beach, California, for the construction of two
          125,000 DWT crude oil carriers for the Jones Act
          Trade.  These vessels are to be built with double
          hulls in compliance with the Oil Pollution Act of
          1990 (see "-Commercial Shipbuilding").  The
          contract, which represents the largest commercial
          contract in the Company's history, also provides
          for options valued at approximately $500 million
          that are exercisable by ARCO for three additional
          ships.  Management believes that securing the LPD-
          17 and ARCO contracts has conferred several
          immediate and substantial benefits upon the
          Company.  Among other things, the Company has
          substantially bolstered its visibility and
          competitive posture by demonstrating the ability
          to compete successfully for contracts based on the
          high level of its technical, engineering and
          production skills, as well as its competitive
          prices.  In addition, the backlog created from
          these contract awards provides a strong foundation
          that will allow the Company to compete
          aggressively for other shipbuilding opportunities.
<PAGE>
               Historical Information.  Avondale is a
          versatile shipyard that 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 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 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 ships, 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 ships
          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 were
          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 sixteen
          T-AOs, five LSDs, four LSD-CVs, five AOJs (which
          constituted conversions of AOs previously built by
          Avondale), one T-AGS 45, fifteen LCACs, four MHCs
          and three SL 7 conversions.
<PAGE>
               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
          reduced substantially, 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 obtain
          shipbuilding contracts, which efforts have also
          been bolstered by Avondale's experience in
          building vessels comparable to those currently in
          demand.

               U.S. Government.  In addition to the contract
          award by the U.S. Navy to build the first LPD-17
          ship, the alliance was awarded options,
          exercisable by the U.S. Navy, for two additional
          ships of the LPD-17 class.  It is expected that a
          total of  twelve ships will be built under the
          LPD-17 program.  The members of the alliance, Bath
          Iron Works ("Bath"), Raytheon Company ("Raytheon")
          (formerly Hughes Aircraft Company which later
          became a subsidiary of Raytheon Company) and the
          Company submitted a joint bid with the Company as
          the prime contractor.  Under the terms of an
          agreement between the alliance members, the
          Company will build the vessel covered by the
          December 1996 contract and, if the U.S. Navy
          exercises the two options, the Company would also
          construct the second while Bath would construct
          the third of the three LPD-17 vessels. Raytheon
          will be responsible for total ship integration and
          the alliance will use an advanced three-
          dimensional ship design and modeling technology
          for the design and manufacture of the ship.
<PAGE>
               The first three vessels of the LPD-17 program
          will be built pursuant to a cost-plus-award fee
          contract, with the Company, Raytheon and Bath each
          being entitled to reimbursement for its
          respective allowable costs in performing the
          contracts as such costs are incurred.  The
          contract provides for the payment of an award fee
          to the members of the alliance, the amount of
          which is dependent upon the results of periodic
          evaluations of contract performance and will be
          paid incrementally upon completion of each
          periodic evaluation.  Pursuant to the
          subcontracting agreements between the Company and
          each of Bath and Raytheon, any award fees earned
          by the alliance will be distributed to the
          alliance members in proportion to each member's
          performance and participation in the construction
          of the vessel for which the award was granted.
          Unlike the Company's other principal shipbuilding
          contracts where profits are recognized under the
          percentage-of-completion method of accounting, the
          Company will record profits on the LPD-17 contract
          upon determination of the incremental award.  In
          addition, although the LPD-17 contract is on a
          cost-plus-award fee basis, the ability of Avondale
          to realize any incremental award fee is dependent
          not only upon its ability to perform its
          contractual obligations but also the satisfactory
          performance by other members of the team.

               In accordance with the U.S. Navy's
          requirement of a streamlined contractual
          relationship, the alliance's agreement provides
          that the Company will act as the prime contractor
          for all three vessels, and as such, the Company
          will be responsible for submitting invoices for
          not only its own costs, but also any costs
          incurred by Bath and Raytheon.  Accordingly, all
          such amounts relating to contract performance by
          alliance members Bath and Raytheon will be
          reflected as sales and cost of sales in the
          Company's financial statements.

               The Company's backlog at December 31, 1997
          includes $609 million, which amount is the
          aggregate of the estimated cost to complete the
          first LPD-17 vessel and the maximum award fee that
          would be payable to Avondale and the alliance.
          However, a substantial portion of the reported
          backlog for the first vessel is related to work to
          be performed by the other alliance members.  To
          the extent that the Company's revenues include
          costs incurred by and award fees paid to the other
          alliance members, such revenues will be recorded
          with no operating profit margin.
<PAGE>
               If the U.S. Navy proceeds with its previously
          announced intention to construct additional LPD
          ships beyond the first three, the Company
          anticipates that the contracts for such vessels
          may provide for an alternative pricing
          arrangement, such as a fixed-price incentive
          contract or fixed- price contract (see "-
          Government Contracting").

               The U.S. Navy has stated its expectation that
          the LPD-17 vessels will be an important element in
          the U.S. Navy's amphibious operations over the
          next three decades, replacing more than 36 ships
          nearing the end of their useful lives and
          approaching decommissioning.  In 1995, Congress
          appropriated $974.0 million for the construction
          of the first of an anticipated twelve ships under
          the LPD-17 program.  The award to the Company-led
          alliance of the contract to construct the initial
          LPD-17 ship enhances the viability and
          competitiveness of the alliance in its pursuit of
          the remaining LPD-17 ships.  In 1997, Congress
          appropriated $96.1 million as advance procurement
          for LPD-18, the second ship in the program.  If
          the U.S. Navy awards contracts to the alliance to
          construct all twelve ships, the Company would
          construct eight ships and Bath would construct
          four ships.

               Also included in the current firm backlog for
          the military are contracts to construct six
          Sealift ships with a remaining backlog of $773
          million (including estimated contract escalation).
          The Sealift ships, which each contain more than
          400,000 square feet of cargo space and 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 Navy holds an option
          to require the Company to construct a seventh
          Sealift vessel for an additional $240 million
          (including estimated contract escalation).  In the
          first quarter of 1998, the Navy exercised a
          portion of this option relating to approximately
          $24 million for long lead time materials while the
          balance of the option is exercisable during the
          first quarter of 1999.  The first Sealift ship is
          scheduled for delivery in 1998 with the final ship
          (assuming exercise by the U.S. Navy of the balance
          of the remaining Sealift option) scheduled for
          delivery in 2001.
<PAGE>
               Although no significant new U.S. Navy
          shipbuilding programs are anticipated to be
          contracted before 2000, it is expected that
          additional U.S. Navy shipbuilding opportunities,
          including a series of ADC(X) vessels (a class of
          auxiliary vessels designed to deliver fuel,
          ammunition and other supplies to the U.S. Navy
          fleet with capabilities similar to the T-AOs
          constructed by Avondale), and the DD-21, which
          represents the next generation of surface
          combatant vessels, will become available shortly
          thereafter.  In addition, the Coast Guard Deep
          Water project, which calls for the replacement of
          133 vessels over the next fifteen years, is
          expected in the early 2000 timeframe.

               Commercial Shipbuilding. Two legislative
          enactments in the early 1990s significantly
          enhanced U.S. commercial shipbuilding
          opportunities.  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,
          created a demand 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 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 and domestic commercial
          shipbuilding opportunities for U.S. shipyards.
<PAGE>
               Management believes these initiatives have
          assisted Avondale in attracting recent commercial
          shipbuilding opportunities. In May 1995, the
          Company finalized a $143.9 million contract to
          retrofit four single hull tankers with double-
          hulled forebodies for a U.S. shipping company.
          These double-hulled product carriers were the
          first U.S.-flag product carriers built in the
          United States in the last eight years. The
          contract is supported by a Title XI guarantee by
          MARAD.  The contract was completed and the last of
          the vessels was delivered to the customer in
          September 1997.

               Also, in June 1997, the Company signed a $332
          million contract with ARCO for the construction of
          two double-hulled crude oil carriers.  This
          contract, the largest commercial contract ever
          signed by Avondale, also provides for options
          exercisable by the customer for three additional
          ships.  The Company believes that its receipt of
          these commercial contracts was assisted by its
          prior experience in constructing three double-
          hulled T-AOs on behalf of the U.S. Navy.

               Prior to 1997, legislation was 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
          twelve years. During 1997, Congress adjourned
          without adopting or ratifying the OECD Agreement.
          Proponents of the OECD Agreement may seek to have
          it reconsidered in 1998 and, if such legislation
          were enacted by Congress in its current form, the
          Title XI guarantee program would be modified to be
          in accord 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.
<PAGE>
               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 be further 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.

               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.

               The Company believes that significant
          commercial shipbuilding opportunities could become
          available during the next five years.  Future
          commercial opportunities include constructing
          vessels with national defense features for the
          Ready Reserve fleet and the retrofitting of
          existing tankers or product carriers and
          construction of new double-hulled tankers or
          product carriers in response to the Oil Pollution
          Act of 1990.  In addition, the Company is
          currently pursuing a contract with a U.S. owner to
          construct luxury cruise vessels for operation in
          the Jones Act market.  Management believes a
          significant volume of such work as described
          herein could become available before 2000, with
          orders being placed in the next two years.
<PAGE>
               Technological Innovations.  To assure that
          its shipyard remains among the most modern in the
          world, Avondale regularly reviews and assesses its
          construction and production processes. In this
          regard, Avondale often consults with other highly
          successful shipbuilding companies concerning
          advances in shipbuilding technology. In the early
          1980s, the Company was among the first of U.S.
          shipyards to successfully implement modular
          construction techniques that had been previously
          perfected by Japanese shipbuilders. Management
          believes these techniques were a major factor in
          Japan's dominance of the commercial shipbuilding
          market during the 1970s and 1980s. Avondale
          obtained its modular construction capabilities and
          "know-how" pursuant to an agreement with
          Ishikawajima-Harima Heavy Industries Co., Ltd.,
          one of Japan's largest shipbuilders, which worked
          with Avondale to change its manufacturing and
          design 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.

               In addition, 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
          built a covered facility that houses production
          lines dedicated to both military and commercial
          ships.  Avondale believes that sheltering the
          production process and the introduction of
          assembly line procedures have enhanced production
          efficiencies and lowered 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, Avondale's ability to compete
          effectively for additional commercial work has
          been enhanced by the new assembly-line process.
<PAGE>
               An important element in the Company's success
          in obtaining the LPD-17 contract award was the
          Company's enhanced  computer-aided design and
          product modeling capabilities.  The enhancement
          was made possible through a cooperative endeavor
          between the Company, the University of New Orleans
          (the "University" or "UNO"), the University of New
          Orleans Research and Technology Foundation, Inc.
          (the "Foundation") and the State of Louisiana.
          Pursuant to terms of various agreements, the
          Foundation is purchasing hardware and software
          required to implement the extensive three-
          dimensional ship design and Integrated Product
          Data Environment ("IPDE") technology.  This
          technology also provides for sophisticated data
          storage, management and retrieval for future
          projects.  Among its other features, the
          technology permits engineering, production and
          material procurement tasks to be performed
          cooperatively, thus enhancing the efficiency of
          the design phase.   The IPDE captures data in
          digital form at creation and then organizes,
          integrates, maintains and makes available such
          data to all program participants.  The Foundation
          is also constructing a 200,000 square foot
          building on property donated to the University by
          the Company, adjacent to the Company's main
          shipyard.  This facility, which will be known as
          the "UNO/Avondale Maritime Technology Center of
          Excellence", will house this new technology.
<PAGE>
          Shipbuilding

               The Company is predominantly engaged in the
          design, construction, conversion, repair and
          modernization of various types of military and
          commercial ships.

               The main shipyard facility, which is located
          on a 270-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, La. shipyard, which is used primarily
          for boat construction and repair, and its Algiers,
          La. shipyard, which is used primarily for the
          repair and overhaul of ocean-going vessels.  In
          addition, the Company operates a marine
          fabrication facility in Gulfport, Mississippi,
          which currently is being used to support marine
          construction activities.

               The Company 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, 1997 was comprised of new military
          construction. New commercial construction
          increased in 1995 and 1996, principally due to the
          construction of the four forebodies 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,

                                   1997     1996     1995     1994     1993
          <S>                      <C>      <C>      <C>      <C>      <C>
          U.S. MILITARY:
           New construction         86%      81%      80%      81%      88%
           Repair, overhaul and
             conversion             --       --       --       --        2%

          COMMERCIAL:
           New construction         12%      17%      16%      11%       6%
           Repair, overhaul and
             conversion              2%       2%       4%       8%       4%
                                   ----     ----     ----     ----     ----
                TOTAL              100%     100%     100%     100%     100%
                                   ====     ====     ====     ====     ====
</TABLE>

               The percentage of new construction for the
          U.S. Navy has remained relatively constant since
          1993. New commercial construction decreased in
          1997 as compared to 1996 and 1995 as the Company
          completed the double-hulled forebodies and the
          river hopper barges and did not begin construction
          of the ARCO crude oil carriers until late 1997.
          Also, the  percentage of commercial repair,
          overhaul and conversion work decreased in recent
          years as compared to 1994 as the Company's work on
          several contracts with a private contractor for
          the repair of existing Sealift ships approached
          completion. See "-Other Operations - Repair
          Operations."
<PAGE>
               Government Contracting.  Avondale's principal
          U.S. government business is currently being
          performed under fixed-price incentive contracts
          although the recent LPD-17 contract is a cost-
          plus-award fee contract.  Fixed-price incentive
          contracts 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, 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.  The Sealift vessels, the fourth
          LSD-CV and the Icebreaker are each being
          constructed under fixed-price incentive contracts.
          The LPD-17 contract provides for the payment of
          all costs that are reimbursable under government
          contracts.  In addition, an award fee is payable
          periodically after the Navy's evaluation of the
          alliance's performance in executing the contract's
          performance goals and objectives.  See "- U.S.
          Government."

               Contracts for the construction and conversion
          of U.S. Navy vessels are typically subject to
          competitive bidding. As a safeguard against
          anti-competitive bidding practices, the U.S. Navy
          has  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 may then
          re-evaluate a bid by using the greater of either
          the bidder's or 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 and cost reimbursable
          contracts. The government also regulates the
          methods by which overhead costs are allocated to
          government contracts.
<PAGE>
               U.S. government contracts are subject to
          termination by the government either for its
          convenience or upon default by the contractor. If
          the termination 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.
<PAGE>
               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 relating to such contract
          disputes. 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, 1997, the Company had a firm backlog of
          shipbuilding contracts of approximately $1.8
          billion (exclusive of unexercised options
          aggregating $1.1 billion held by the U.S. Navy
          (including estimated contract escalation) and $500
          million held by a commercial customer for
          additional ship orders ) compared with firm
          backlogs of $1.8 billion and $1.4 billion at
          December 31, 1996 and 1995, respectively.  The
          Company's firm backlog at December 31, 1997
          primarily consisted of $773 million to complete
          the remaining six Sealift ships, $609 million
          related to the LPD-17 contract, and $326 million
          to complete the 125,000 DWT double-hulled crude
          oil carriers.
<PAGE>
               Vessel deliveries in 1997 and 1996 included
          one T-AO, one LSD-CV, three MHCs, four double-
          hulled commercial tankers and the remainder of the
          river hopper barges. 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 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 -
          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.    In
          the past, the Company sold or discontinued certain
          of its non-core operations in order to focus on
          its core shipbuilding business and improve
          liquidity.  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 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 (v) other
          operations.
<PAGE>
               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 gas
          turbine-driven compressors, six gas turbine-driven
          salt water injection pumps, 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
          bridge components, a hydroelectric power plant,
          and an 800-bed floating detention facility that is
          625 feet long, 125 feet wide, and five stories
          high.   Sales by this division to unrelated third
          parties for the years ended December 31, 1997,
          1996 and 1995 were $10.5 million, $8.5 million and
          $9.8 million, respectively.

               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, as well as a
          facility in Gulfport, Mississippi.  In 1994 and
          1995, the Boat Division delivered three gaming
          vessels ranging from 210 to 350 feet in length.
          In 1996 and 1997, the division was primarily
          engaged in the construction of river hopper barges
          under a contract signed in 1995.  The Boat
          Division is actively pursuing other projects
          involving the construction of additional gaming
          boats as well as passenger vessels and ferries,
          towboats, offshore supply boats and other vessels.
          Sales by this division to unrelated third parties
          for the years ended December 31, 1997, 1996 and
          1995 were $6.0 million, $10.2 million and $29.4
          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.  Sales by this division to unrelated third
          parties for the years ended December 31, 1997,
          1996 and 1995 were approximately $42.8 million,
          $40.1 million, and $28.2 million, respectively.
<PAGE>
               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.
          Sales by this division to unrelated third parties
          for the years ended December 31, 1997, 1996 and
          1995 were $10.3 million, $13.5 million and $27.3
          million, respectively.

          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 intensified competition
          significantly. 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. Two of these companies are
          subsidiaries of much larger corporations that have
          substantially greater resources than Avondale.  A
          recent trend in certain government contracts is
          the concept of several shipbuilders and a weapon
          systems integrator forming an alliance to bid on
          major procurements.  This is evidenced by the
          bidding process for the recent LPD-17 program
          where a Company-led alliance which includes Bath
          Iron Works and Raytheon was awarded the contract
          against competition which included an alliance of
          other major shipbuilders and a weapon systems
          integrator.  This trend will likely continue on
          the DD-21, ADC (X) and Coast Guard Deep Water
          projects.  The Company's success in participating
          in these programs may be influenced by its ability
          to form a competitive bidding team.
<PAGE>
               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 "- 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. However, the Company also believes that
          its receipt of the LPD-17 and ARCO contract awards
          has demonstrated its ability to successfully bid
          for shipbuilding work based on its technical
          capabilities as well as its cost efficient
          production methods.  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 boat building 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.
<PAGE>
          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 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.
<PAGE>
          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 9 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.
<PAGE>
          Employees

               At December 31, 1997, Avondale had
          approximately 5,500 employees, many of whom have
          been employed by the Company for many years.  None
          of Avondale's employees is 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
          National Labor Relations Board ("NLRB") and union
          organizers on a variety of grounds.  The Company
          filed objections with the NLRB seeking to have the
          election set aside. In February 1997, the NLRB
          decided that certain of the disputed votes should
          be counted and that the Company's objections to
          the election should be rejected.  The NLRB then
          counted the disputed votes, resulting in a
          favorable outcome for the union, and certified the
          union.  The final vote count included 1,950 votes
          for forming a union, 1,632 votes against forming a
          union, 59  disputed votes, with 273 ballots
          remaining sealed.  The Company continues to
          believe that it has substantive and meritorious
          bases for overturning the decision of the NLRB and
          has taken steps to have the propriety of the
          election reviewed in court.   If the NLRB's
          certification of the union is enforced by
          subsequent judicial proceedings, the Company would
          be required under the federal labor laws to
          bargain in good faith with the union on matters
          such as wages, hours and working conditions.  Even
          though Avondale will agree only 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.
<PAGE>
               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.  In February 1998, an
          administrative law judge ordered the Company to
          reinstate twenty-six fired workers, and rescind
          disciplinary actions taken against another
          fifteen.  Although the Company disputes these
          claims and is currently appealing the decision, if
          the decision is upheld, the respective employees
          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 consolidated
          financial statements.
<PAGE>
          GLOSSARY OF SELECTED INDUSTRY TERMS
<TABLE>
          <S>        <C>
          ADC(X)     A class of auxiliary vessels designed to
                     deliver a steady stream 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
                     constructed by 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 AOs to AOJs.

          DD-21      "Surface Combatant 21st Century," the
                     next generation of surface combatant to
                     be built for the U.S. Navy.

          Icebreaker WAGB-20 Polar Icebreaker, currently
                     under construction at Avondale, was
                     ordered by the U.S. Coast Guard for its
                     polar operations.

          IPDE       An Integrated Product Data Environment
                     which captures data in digital format at
                     the point of creation and then
                     organizes, integrates, maintains and
                     makes the information available to all
                     program participants.

          Jones Act  Merchant Marine Act of 1920, as amended.
                     The principal requirements of the act
                     are that ships engaged in coastwise
                     trade must be owned by a U.S. company,
                     crewed by U.S. citizens and built by a
                     U.S. shipbuilder.

          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 previously-owned Gulfport
                     facility.  Avondale has built 15 LCACs.
<PAGE>
          LPD-17     The newest class of amphibious transport
                     ship for the U.S. Navy.  Avondale was
                     awarded a contract, with options for two
                     ships, for the design, construction and
                     support of the initial LPD-17 ships.

          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 more cargo and
                     only 2 LCACs.  Avondale has delivered
                     four LSD-CVs and will deliver a fifth
                     during 1998.

          MARAD      United States Maritime Administration,
                     Department of Transportation.

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

          SL 7       A "Roll on, Roll off" vessel operated by
                     the Military Sealift Command and crewed
                     by a civilian crew.  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 six Sealift vessels with an
                     option to build an additional vessel.

          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>
<PAGE>
          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 229 acres of
          Company-owned land with 174 buildings enclosing
          approximately 2.0 million square feet of space,
          approximately 41 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 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.
          These mortgage bonds were refinanced in February
          1995 with mortgage bonds of approximately $4.3
          million.  The 900-foot drydock is currently
          subject to a Title XI mortgage of approximately
          $2.3 million (see Note 4 of the Notes to
          Consolidated Financial Statements).

               The Company's 650-foot floating drydock and
          support facilities were constructed in 1982 and
          financed with $36.25 million of industrial revenue
          bonds.  The 650-foot drydock is currently subject
          to $35.36 million of these industrial revenue
          bonds (see Note 4 of the Notes to Consolidated
          Financial Statements).
<PAGE>
               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. The modernization
          program is currently subject to a Title XI
          mortgage of approximately $15.4 million (see Note
          4 of the Notes to Consolidated Financial
          Statements).   The modernization program included
          construction of a covered facility, which allows
          for 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.

               The Company is also in the process of making
          significant capital improvements, including
          enhancing its computer-aided design and product
          modeling capabilities.  In this effort, the
          Company teamed with the University of New Orleans
          (the "University" or "UNO"), the University of New
          Orleans Research and Technology Foundation, Inc.
          (the "Foundation") and the State of Louisiana in a
          cooperative effort.  Pursuant to the terms of
          various agreements, the Foundation is purchasing
          hardware and software required to implement the
          extensive three-dimensional ship design and
          Integrated Product Data Environment technology and
          is constructing a 200,000 square foot building on
          property donated to the University by the Company
          and located adjacent to the Company's main
          shipyard.  This facility is expected to be
          completed during the second quarter of 1998.  This
          investment in new technology and facility, which
          will be known as the "UNO/Avondale Maritime
          Technology Center of Excellence" (the "Center"),
          is being financed by the Foundation using third
          party debt and lease financing, both of which are
          guaranteed by the Company.  In 1997, the Company
          entered into a fifty-year lease for the Center
          requiring a nominal annual lease payment.  The
          Company will provide access to the University for
          its use in research and the development of
          educational curricula related to naval
          architecture and marine engineering.  During 1998,
          the Company expects to spend additional amounts in
          order to complete the customization of the design
          software to comply with the LPD-17 requirements.
<PAGE>
               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 land
          leased through July 1999 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 land leased through
          December 1999 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 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 Enterprises, Inc. ("AEI")
          facility is located on a Company-owned 121.5 acre
          site near Gulfport, Mississippi on an industrial
          seaway.  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
          Minehunters ("MHC") for the U.S. Navy.  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 (see Note 4
          of the Notes to Consolidated Financial
          Statements).  Upon the transfer of the final MHC
          hull to the main shipyard in December 1994, this
          facility became idle.  During 1996 and 1997, the
          Company utilized the facility for the completion
          of the river hopper barge contract.  The Company
          is currently utilizing  the facility to support
          marine construction activities.

               The main facility of the Genco Industries
          Group ("Genco"), located on a Company-owned 8.7
          acre site 20 miles southeast of Beaumont, Texas,
          was sold in November 1997.  Genco also 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.  This
          facility has been idle since the completion of
          Genco's contracts in 1994 and is currently listed
          for sale by the Company.  The Company is also
          exploring alternative uses.
<PAGE>
               The Company believes that its core marine
          construction and repair facilities provide it with
          sufficient capacity to handle any business it
          reasonably 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 8,000 employees.  The Company's
          core business currently operates with
          approximately 5,500 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 ("PRP") 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 could be a PRP with respect to an oil
          reclamation site operated by an unaffiliated
          company in Walker, La. 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 Quality 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.
<PAGE>
               To date, the Company and certain of the other
          PRPs (the "Funding Group") for the site have
          funded the site's remediation expenses, PRP
          identification expenses and related costs for the
          participating parties.  As of December 31, 1997,
          such costs totaled approximately $19.0 million, of
          which the Company has funded approximately $4.0
          million.  Since 1988 the Funding Group filed
          petitions to add a number of companies as third-
          party defendants with regard to the remedial
          action.  The Funding Group has agreed to settle
          with the majority of these companies.  All funds
          collected through these settlements are placed in
          escrow to fund future expenses.  At December 31,
          1997, the balance of the escrow was approximately
          $8.5 million, which is to be used to fund any
          ongoing remediation expenses.  The Company will
          not owe any future assessments until the balance
          in escrow is depleted.  There are additional
          settlements being negotiated which should add to
          the balance in escrow.

               Additional remedial work scheduled for the
          site includes completion of studies 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 impact on the Company's financial
          statements. In addition, the members of the
          Funding Group have entered into a final cost
          sharing agreement under which all parties have
          agreed that there would be no re-allocation of
          previous remediation costs, but that future
          remediation costs would be established by a
          formula.  Under this agreement, the Company's
          share of future costs will not exceed 17.5% for
          any additional costs.
<PAGE>
               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 1996, the Company settled a class action
          lawsuit involving alleged personal injury and
          property damage arising from the Walker
          reclamation site.  Under the terms of the
          settlement, the Company paid approximately $6.0
          million into a settlement fund.  The Company could
          also have been responsible for payment to the
          plaintiffs of up to an additional $6.0 million
          (plus interest at 8% per annum) if the plaintiffs
          were unsuccessful in collecting certain claims
          under Avondale's insurance policies that were
          assigned to the plaintiff class under the
          settlement agreement.  During the first quarter of
          1997, the parties reached a settlement with the
          Company's insurers which does not require any
          further contribution by the Company.

               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, 1997.
<PAGE>

                                       PART II


          Item 5.   Market for Registrant's Common Equity
                    and Related Stockholder Matters.

               The Company's common stock trades on the
          Nasdaq National Market tier of the Nasdaq Stock
          Market 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>
                 Fiscal Year Ended December 31,   High       Low
                                                  ----       ----
               <S>                                <C>        <C>
               1996

                    First Quarter                 $18 1/8    $14

                    Second Quarter                $20 1/8    $16 7/8

                    Third Quarter                 $19 1/8    $13 7/8

                    Fourth Quarter                $22        $16 1/4

               1997

                    First Quarter                 $23 1/2    $17

                    Second Quarter                $21 3/8    $16 1/4

                    Third Quarter                 $29        $20 5/8

                    Fourth Quarter                $30        $24 3/4
</TABLE>


               At December 31, 1997, there were 681 holders
          of record of the Company's Common Stock.

               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, 1997.  As discussed in Note 4
          of the Notes to Consolidated Financial Statements,
          the terms of the Company's revolving credit
          agreement require bank approval for the payment of
          cash dividends over a specified amount.
<PAGE>
          Item 6.   Selected Consolidated 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, 1997.  The
          data for each of the fiscal years in the five-year
          period ended December 31, 1997 are derived from
          the consolidated financial statements of the
          Company and its subsidiaries.  The consolidated
          financial statements as of December 31, 1997 and
          1996, and for each of the years in the three-year
          period ended December 31, 1997, and the report of
          Deloitte & Touche LLP thereon, have been included
          in this Form 10-K.
<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                         ---------------------------------------------
                                             (in thousands, except per share data)
                                          1997(2)       1996(2)      1995(2)       1994         1993(1)
                                        ---------     ---------    ---------     --------     ---------
            <S>                         <C>           <C>           <C>          <C>           <C>
            INCOME STATEMENT DATA:
            Continuing operations:
              Net sales                 $  613,993    $  624,929    $ 576,308    $  475,810    $  456,724
              Gross profit                  75,478        81,827       58,671        47,485        33,180
              Income from operations        43,593        36,790       26,548        16,949         3,400
              Income (loss) from
                continuing operations       26,833        30,795       28,180        13,075        (5,233)
            Income (loss) from
              discontinued operations         --            --           --          (4,552)       (3,561)
            Net income (loss)(3)            26,833        30,795       28,180         8,523        (8,794)
            Income (loss) per share
              of Common stock
              - basic & diluted:
                Continuing operations         1.85          2.13         1.95          0.90         (0.36)
                Discontinued operations        --            --           --          (0.31)        (0.25)
                Total                         1.85          2.13         1.95          0.59         (0.61)

            BALANCE SHEET DATA:
            Working capital             $  145,224    $  119,475    $  80,988    $   34,836    $   24,565
            Total assets                   375,615       362,872      316,727       273,503       302,139
            Long-term debt                  51,819        54,866       60,593        45,875        43,848
            Shareholders' equity           208,977       181,853      151,058       122,878       114,355
            CASH FLOW DATA:
            Net cash provided by
              operating activities      $   50,848    $   26,701    $  27,995    $   69,128    $   16,866
            Net cash (used for)
              provided by investing
              activities                   (13,083)      (10,449)     (16,799)      (11,931)        6,604
            Net cash (used for)
              provided by financing
              activities                    (4,957)       (5,832)      11,914       (44,978)      (27,888)
            OTHER FINANCIAL DATA:
            EBITDA(4)                   $   54,052    $   47,599    $  36,367    $   28,501    $   15,210
            OPERATIONAL DATA:
            Firm backlog                $1,802,000    $1,766,000   $1,413,000    $1,424,000    $1,268,000

</TABLE>
            ____________________

          (1)    Income statement data for 1993 has been restated
                 to present Avondale's service contracting subsidiary
                 as discontinued operations.
          (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, the impact of revisions of estimated
                 profit on  previously completed shipbuilding contracts
                 in 1997, 1996 and 1995.
          (3)    Net income for the years ended December 31, 1996 and 1995
                 include deferred income tax benefits of $9.0 million
                 ($.62 per share - basic and diluted) and $13.0 million
                 ($.90 per share - basic and diluted) respectively,
                 attributable to certain net operating loss carry forwards
                 available to offset estimated future taxable earnings.
          (4)    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 (loss) as a measure of the
                 Company's operating performance or as an alternative
                 to cash flows as a measure of the Company's liquidity.
<PAGE>

          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 elswhere in this Form 10-K.


          Overview

               The improvement in the Company's operating
          results continued during fiscal 1997 with the
          Company reporting record income from operations
          for 1997.  Income from operations increased 18%
          above the level of the prior year while income
          before income taxes increased 22% compared to
          fiscal 1996.

               The Company's firm backlog at December 31,
          1997 was approximately $1.8 billion (including
          estimated contract escalation) exclusive of
          unexercised options aggregating approximately $1.1
          billion held by the U.S. Navy (the "Navy")
          (including estimated contract escalation) and
          approximately $500 million held by a commercial
          customer for additional ship orders.  The firm
          backlog includes two Navy contracts awarded in
          1997, the first of which was the exercise of a
          previously awarded option to construct an
          additional Sealift ship for approximately $240
          million (including estimated contract escalation).
          The exercise of this option represents the sixth
          ship which the Company has been awarded in the
          Sealift program.  The six Strategic Sealift ships
          have a remaining backlog of approximately $773
          million (including estimated contract escalation).
          In addition, the Navy holds an option to require
          the Company to construct a seventh Sealift vessel
          for an additional $240 million (including
          estimated contract escalation).  In the first
          quarter of 1998, the Navy exercised a portion of
          this option relating to approximately $24 million
          for long lead time materials while the balance of
          the option is exercisable during the first quarter
          of 1999.  Delivery of the first two Sealift ships
          is scheduled for 1998.
<PAGE>
               As previously disclosed, in December 1996 the
          U.S. Navy awarded, and in April 1997 the General
          Accounting Office affirmed, a $641 million
          contract to a Company-led alliance, which includes
          Bath Iron Works ("Bath") and Raytheon Company
          ("Raytheon") (formerly Hughes Aircraft Company
          which later became a subsidiary of Raytheon), to
          design and construct the first of an anticipated
          twelve ships under the Navy's LPD-17 program.  The
          contract award provides for options exercisable by
          the Navy for two additional LPD-17 ships to be
          built by the alliance.  Under the terms of an
          agreement between the alliance members, the
          Company will build the ship covered under the
          December 1996 contract, and, if the Navy exercises
          the two options, the Company would construct the
          second and Bath would construct the third of the
          three LPD-17 ships to be built under the initial
          contract.  Raytheon is responsible for total ship
          integration and the alliance is using an advanced
          three-dimensional ship design and modeling
          technology for the design and manufacture of the
          ship.  In order to fairly represent its role as
          the prime contractor under the LPD-17 contract,
          the Company is required to report in its financial
          statements as sales and cost of sales the entire
          contract amount for each vessel in the LPD-17
          program constructed by the alliance.  Under the
          subcontracting agreements entered into between the
          Company and each of Bath and Raytheon, the award
          fees that can be earned under the LPD-17 contract
          are distributable among the alliance members in
          proportion to each member's performance and
          participation in the construction of the vessel
          for which the award was granted.  To the extent
          that the Company's revenues include costs incurred
          and award fees paid to the other alliance members,
          such revenues will be recorded with no operating
          profit margin.  For additional information on the
          terms of the LPD-17 contract award, the
          relationship between the members of the alliance
          and certain accounting considerations, see
          "Business - Overview."

               Also included in the firm backlog is the
          largest commercial contract ever awarded to
          Avondale.  In June 1997, the Company was awarded a
          $332 million contract for the construction of two
          125,000 DWT crude oil carriers for the Jones Act
          Trade to be built with double hulls in compliance
          with the Oil Pollution Act of 1990.  The contract
          also provides options exercisable by the customer
          for three additional ships.  Delivery of the first
          ship is scheduled for the first quarter of 2000.
<PAGE>
               Vessel deliveries in fiscal 1997 include a
          MHC-51 Class Coastal Minehunter, representing the
          fourth and final Minehunter constructed by the
          Company for the Navy.  Additionally, during 1997,
          the Company delivered the final three vessels in a
          contract to retrofit four commercial tankers with
          double-hulled forebodies and the remaining river
          hopper barges.  Vessel deliveries expected in
          fiscal 1998 include the LSD-CV 52 and the first
          two Strategic Sealift vessels.

               The Company's operating results projected for
          1998 are expected to be principally related to the
          Strategic Sealift, the Icebreaker and the LPD-17
          contracts, while results projected for 1999 are
          expected to reflect primarily the Sealift, LPD-17
          and ARCO product tanker contracts.  Except for the
          LPD-17 contract, the Company records profits under
          the percentage-of-completion method of accounting
          based on direct labor charges.  See "Business -
          Overview".  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 affected if the Company is required in the
          future to revise its estimate of the cost to
          complete one or more of such contracts.

               As previously disclosed, certain of the
          Company's operations closed in 1994 with the
          completion of their respective contracts.  Two of
          these facilities were sold (one in December 1996
          and one in November 1997) and the one remaining
          facility is currently offered for sale.  With
          respect to the remaining property, 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.
<PAGE>
          Results of Operations

               1997 vs. 1996.  The Company recorded net
          income of $26.8 million, or $1.85 per share basic
          and diluted, for 1997 compared to $30.8 million,
          or $2.13 per share basic and diluted, for 1996.
          Net income for 1996 included an income tax benefit
          of $9.0 million, or $0.62 per share basic and
          diluted, which recognized, for financial reporting
          purposes, the benefit of certain net operating
          loss carry forwards available to offset estimated
          future earnings.  No similar benefit was recorded
          in 1997.

               Income from operations for 1997 increased
          $6.8 million, or 18%, compared with 1996.  This
          improvement is primarily reflected by operating
          profits recognized on the contracts to construct
          the six Strategic Sealift ships, the Icebreaker
          and the LSD-CV 52.  Profit recognition began in
          1996 for the Sealift and 1997 for the Icebreaker
          as contract progress was not sufficient to begin
          profit recognition until that time.  Also
          contributing to the improved operating results
          during 1997 were operating profits of $7.8 million
          generated by the Company's marine repair, modular
          construction and wholesale steel operations.

               These operating profits were offset, in part,
          by operating losses recorded on two commercial
          marine construction contracts.  During 1997,
          Avondale recorded additional losses of $4.3
          million on the contract to retrofit four single-
          hulled commercial tankers with new double-hulls
          (the last of which was delivered in September
          1997), and an additional $1.5 million loss on the
          contract to construct 100 river hopper barges (the
          last of which was delivered in November 1997).
          These losses resulted primarily from increases in
          the estimated labor needed to complete the
          contracts.
<PAGE>
               Net sales for 1997 decreased $10.9 million,
          or 2%, to $614.0 million compared to $624.9
          million for 1996.  The decrease in 1997 net sales
          was due primarily to a reduction in production
          activity associated with contracts that are at or
          near completion.  The Company recorded decreased
          net sales on the contract to retrofit four single-
          hulled commercial tankers with new double hulls
          and the contracts to construct the seven T-AOs
          (the last of which was delivered in May 1996), the
          four MHCs (the last of which was delivered in
          January 1997), the LSD-CV 52 (expected to be
          delivered in February 1998) and the three LSD-CVs
          (the last of which was delivered in March 1996).
          These decreases were partially offset by increased
          net sales recorded on the contracts to construct
          the six Strategic Sealift ships (the first of
          which is expected to be delivered in 1998), the
          LPD-17 (expected to be delivered in 2002), the
          Icebreaker (scheduled for delivery in 1999) and
          the two 125,000 DWT double-hulled crude oil
          carriers (the last of which is scheduled for
          delivery in 2000).  The contracts to construct the
          six Strategic Sealift ships, the LPD-17, the
          Icebreaker and the two double-hulled crude oil
          carriers collectively accounted for 75% of the
          Company's 1997 net sales.

               Gross profit for 1997 decreased $6.3 million,
          or 8% compared to 1996.  This decrease is
          primarily attributable to the early stages of
          construction of the majority of the Company's
          contracts in progress.  The Company does not begin
          profit recognition until final results can be
          estimated with reasonable accuracy.  Refer to Note
          1 of the Notes to Consolidated Financial
          Statements, contained elsewhere in this Form 10-K,
          for a discussion of the Company's policies and
          procedures for revenue recognition.  In addition,
          the LPD-17 and the two double-hulled crude oil
          carriers are in the initial stages of contract
          performance which result in significant
          engineering design and material acquisition costs
          recognized without any operating margins.  As a
          result of the factors discussed herein, contracts
          which account for a majority of the Company's 1997
          net sales have little or no operating margins
          recognized.
<PAGE>
               Selling, general and administrative ("SG&A")
          expenses decreased $13.2 million, or 29%, for 1997
          compared to 1996. The overall decrease in SG&A
          expenses was due primarily to a decrease in
          proposal preparation and related costs compared
          with those recorded in 1996 in connection with the
          preparation of the successful LPD-17 proposal.

               In June 1997, the Financial Accounting
          Standards Board ("FASB") issued Statement of
          Financial Accounting Standards No. 130, "Reporting
          Comprehensive Income" ("SFAS 130") and Statement
          of Financial Accounting Standards No. 131,
          "Disclosures about Segments of an Enterprise and
          Related Information" ("SFAS 131").  The Company is
          required to adopt both standards for fiscal 1998.
          Refer to Note 1 of the Notes to Consolidated
          Financial Statements, contained elsewhere in this
          Form 10-K, for a discussion of SFAS 130 and SFAS
          131.  Management believes that the implementation
          of SFAS 130 and SFAS 131 will not have a material
          impact on the presentation of the Company's
          financial statements but may require additional
          disclosure.

               In accordance with the U.S. Securities and
          Exchange Commission's Staff Legal Bulletin No. 5,
          the Company has assessed both the cost of
          addressing and the costs or the consequences of
          incomplete or untimely resolution of the Year 2000
          issue and has determined that it is not material
          to the Company's business, operations or financial
          condition.

               1996 vs. 1995.  The Company recorded net
          income of $30.8 million, or $2.13 per share basic
          and diluted, for 1996 compared to $28.2 million,
          or $1.95 per share basic and diluted, for 1995
          representing an increase of 9% in net income over
          the prior year. Net income for 1996 and 1995
          include income tax benefits of  $9 million, or
          $0.62 per share basic and diluted, and $13
          million, or $0.90 per share basic and diluted,
          respectively, as discussed below.  Also included
          in 1996 and 1995 net income are $4.4 million, or
          $0.30 per share, basic and diluted,and $4.5
          million, or $0.31 per share basic and diluted,
          respectively, reductions of a previously
          recognized loss which was recorded in prior years
          on the contract to construct three LSD-CVs. The
          reductions were due primarily to revisions of the
          total estimated contract cost as it neared
          completion.
<PAGE>
               In addition to the improvements on the three
          LSD-CV contract, the increases in the Company's
          operating results in 1996 reflect improved
          operating profits recognized on the seven T-AO
          contract, which was completed in 1996, and the
          LSD-CV 52 contract.  In addition, the Company
          began profit recognition on the contract to
          construct five Strategic Sealift vessels for the
          Navy.  Also contributing to the increase in
          operating results for 1996 were operating profits
          of $8.2 million recorded by the Company's marine
          repair, modular construction and wholesale steel
          operations.

               These profits were offset, in part, by losses
          recorded on two commercial marine construction
          contracts. The Company recognized an $8.5 million
          loss on the contract to construct river hopper
          barges, primarily representing costs incurred in
          connection with the Company's entry into this
          competitive market.  In addition, the Company
          recorded a $20 million loss with respect to the
          contract to retrofit four single-hulled commercial
          tankers with new double hulls. This loss resulted
          from several factors, the most important of which
          related to certain modifications to the hull
          design that were required in order to comply with
          American Bureau of Shipbuilding standards after
          construction had been commenced by the Company in
          order to respond to a significantly compressed
          construction schedule caused by the customer's
          delay in obtaining financing.  In addition, this
          project was commenced prior to the time that the
          Company's new automated production facility had
          become fully operational, and therefore did not
          benefit from the efficiencies which would have
          been realized from the completed factory.
          Finally, the pre-delivery testing of the first
          vessel revealed a condition which required certain
          modifications causing the Company to incur
          incremental costs.
<PAGE>
               The impact of these losses was mitigated by
          the fact that these contracts absorbed a
          substantial amount of operating expenses which, in
          the absence of these contracts, would have been
          allocated to other contracts.  In addition, these
          contracts have been important in the Company's
          reemergence in the competitive commercial marine
          construction markets.  The tanker contract has
          also enabled the Company to construct four
          forebodies which are patterned after the forebody
          of Avondale's standard tanker, providing
          experience in constructing this portion of the
          vessel, enabling the Company to refine the design
          and construction techniques, and furthering the
          Company's progress toward achieving its stated
          goal of a more balanced mix of military and
          commercial work.  The first double-hulled tanker
          was delivered on October 3, 1996 while the second
          hull was delivered January 16, 1997.  The
          remaining vessels are scheduled to be delivered in
          May and September 1997.

               The Company's net sales in 1996 increased
          $48.6 million, or 8%, as compared to the prior
          year. The increase in 1996 net sales was due
          primarily to increases in sales revenues
          recognized on the contracts to construct the first
          five Sealift ships, the Icebreaker and the
          forebodies for four double-hulled product tankers,
          which collectively accounted for 63% of the
          Company's 1996 net sales revenue.  The increase in
          net sales was partially offset by reductions in
          sales revenues recognized on the contracts to
          construct the three LSD-CVs (the last of which was
          delivered in March 1996), LSD-CV 52 (scheduled for
          completion in November 1997), the seven T-AOs (the
          last of which was delivered in May 1996) and four
          MHCs (the third of which was delivered in July
          1996 and the last vessel which was delivered in
          January 1997).  The increase in 1996 net sales was
          also partially offset by reduced net sales
          recorded on paddle-wheeled gaming vessels (the
          last of which was delivered in 1995).  The
          contracts to construct the three LSD-CVs, the LSD-
          CV 52, the seven T-AOs and four MHCs collectively
          accounted for 24% of the Company's 1996 net sales
          revenue.
<PAGE>
               Gross profit for 1996 increased $23.2
          million, or 39%, compared to 1995. The increase in
          1996 gross profit was due primarily to profits
          recognized on the contract to construct the LSD-CV
          52 and the seven T-AOs.  Also contributing to the
          increase in gross profit was the start of profit
          recognition on the contract to construct the
          Strategic Sealift vessels.  The increase in gross
          profit was partially offset by the losses recorded
          on the barge and forebody contracts discussed
          above.

               Selling, general and administrative ("SG&A")
          expenses increased $12.9 million, or 40%, for 1996
          compared to 1995.  The overall increase in SG&A
          expenses was due primarily to  increased labor
          costs, professional fees and related costs
          associated with the Company's successful LPD-17
          proposal.

               The Company's 1996 and 1995 operating results
          include income tax benefits of $9 million, or
          $0.62 per share basic and diluted, and $13
          million, or $0.90 per share basic and diluted,
          respectively.  As further discussed in Note 6 of
          the Notes to Consolidated Financial Statements,
          these amounts were principally the result of
          recognizing, for financial reporting purposes,
          income tax benefits from certain net operating
          loss carry forwards available to offset estimated
          future taxable earnings. In 1996 and 1995, the $9
          million and $13 million respective tax benefits
          were offset by income tax provisions of $12.7
          million and $8.6 million related to 1996 and 1995
          operating results, respectively.

               Statement of Financial Accounting Standards
          No. 123, "Accounting for Stock-Based Compensation"
          ("SFAS 123") encourages but does not require
          companies to record compensation cost for stock-
          based employee compensation plans at fair value.
          The Company has chosen to continue to account for
          stock-based compensation using the intrinsic value
          method prescribed in Accounting Principles Board
          Opinion No. 25, "Accounting for Stock Issued to
          Employees," and related Interpretations and has
          adopted the disclosure-only provisions of SFAS
          123.  Implementation of the provisions of SFAS 123
          had no material effect on the financial
          statements.
<PAGE>
          Liquidity and Capital Resources

               The Company's cash and cash equivalents
          totaled $81.8 million at December 31, 1997 as
          compared to $48.9 million at December 31, 1996.
          The Company's operating activities represented a
          significant source of cash during 1997, generating
          approximately $50.8 million.  The Company's
          primary uses of cash in the current year consisted
          of capital expenditures of $13.6 million and
          principal payments on long-term borrowing of $5.0
          million.

               The Company's $65 million revolving credit
          agreement ("the agreement") provides liquidity for
          working capital purposes, capital expenditures and
          letters of credit.  At December 31, 1997, there
          were approximately $11.3 million of letters of
          credit issued against the agreement leaving
          approximately $53.7 million of liquidity available
          to Avondale for operations and other purposes.
          There have been no borrowings under the agreement
          since its inception in 1994.  Continuing access to
          the agreement is conditioned upon the Company
          remaining in compliance with the covenants
          contained therein.  At December 31, 1997, the
          Company was in compliance with such covenants.
          The Company believes that its capital resources
          will be sufficient to finance current and
          projected operations.
<PAGE>
               In order to comply with the terms of the LPD-
          17 contract, the Company was required to make
          significant capital improvements, including
          enhancing its computer-aided design and product
          modeling capabilities.  As a result, the Company
          teamed with the University of New Orleans (the
          "University" or "UNO"), the University of New
          Orleans Research and Technology Foundation, Inc.
          (the "Foundation") and the State of Louisiana in a
          cooperative effort.  Pursuant to the terms of
          various agreements, the Foundation is purchasing
          hardware and software required to implement the
          extensive three-dimensional ship design and
          Integrated Product Data Environment teaming
          technology and is constructing a 200,000 square
          foot building on property donated to the
          University by the Company and located adjacent to
          the Company's main shipyard.  This facility is
          expected to be completed during the second quarter
          of 1998.  The initial $40 million investment in
          this new technology and facility, which will be
          known as the "UNO/Avondale Maritime Technology
          Center of Excellence" (the "Center"), is being
          financed by the Foundation using third party debt
          and lease financing, both of which are guaranteed
          by the Company.  The Company has entered into a
          long-term lease for the Center requiring a nominal
          annual lease payment.  The Company will provide
          access to the technology and a portion of the
          Center to the University for its use in research
          and the development of educational curricula
          related to naval architecture and marine
          engineering.  During 1998, the Company expects to
          spend additional amounts in order to complete the
          customization of the design software to comply
          with the LPD-17 requirements.
<PAGE>
               The Foundation is the borrower on all
          indebtedness incurred to construct and equip the
          Center.  Under the terms of a Cooperative Endeavor
          Agreement, the State of Louisiana made a non-
          binding commitment to appropriate $40 million,
          plus interest, in installments over a period from
          1997 through 2007 for donation to the Foundation
          for purposes of funding the Center.  Avondale and
          the Foundation anticipate that appropriations by
          the State will be sufficient for the Foundation to
          service its debt.  However, if the State's
          appropriations are insufficient, Avondale will
          ultimately be required to repay the debt.  The
          Company's guarantee is unsecured.  As of December
          31, 1997, the Foundation had incurred $15.3
          million of cost to construct and equip the Center.
          Also, as of December 31, 1997, the State had
          appropriated and paid $3.8 million, representing
          the first installment to the Foundation, pursuant
          to the terms of the Cooperative Endeavor
          Agreement.

               The Company's estimated income tax credit
          carry forward was $5.3 million at December 31,
          1997.  This amount, plus $3.0 million of
          alternative minimum tax credits will be used to
          reduce the income tax liabilities for 1998 and
          later years.  The $1.95 million of cash paid in
          1997 for income taxes reflects payments for
          alternative minimum tax.  The income tax credit
          carry forward will expire in years 2000 through
          2012.  The alternative minimum tax credits may be
          carried forward indefinitely.
<PAGE>
          Cautionary Statement for Purposes of "Safe Harbor"
          Provisions of the Private Securities Litigation
          Reform Act of 1995

               Certain statements, other than statements of
          historical fact, contained in this Annual Report
          on Form 10-K are forward-looking statements as
          defined in the Private Securities Litigation
          Reform Act of 1995.  These forward-looking
          statements are generally accompanied by such terms
          and phrases as "anticipates," "estimates,"
          "expects," "believes," "should," "projects," or
          "scheduled," or similar statements.  Although the
          Company believes that the expectations reflected
          in such forward-looking statements are reasonable,
          it can give no assurance that such expectations
          will prove to have been correct.  Important
          factors that could cause the Company's results to
          differ materially from the results discussed in
          such forward-looking statements include the
          Company's reliance on U.S. Navy contracts, profit
          recognition on government contracts, the
          importance of obtaining commercial contracts, the
          Company's ability to complete its contracts within
          its cost estimates, intense competition for
          government and commercial contracts and labor,
          regulatory and other risks in the shipbuilding and
          marine construction industries.  All forward-
          looking statements in this Form 10-K are expressly
          qualified in their entirety by the cautionary
          statements in this paragraph.

          Item 8.    Financial Statements and Supplementary
          Data.
                      See next consecutive numbered page.
<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, 1997 and 1996, and
          the related consolidated statements of operations,
          shareholders' equity, and cash flows for each of
          the three years in the period ended December 31,
          1997.  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,
          1997 and 1996, and the results of their operations
          and their cash flows for each of the three years
          in the period ended December 31, 1997 in
          conformity with generally accepted accounting
          principles.



          /S/ DELOITTE & TOUCHE LLP
              New Orleans, Louisiana
              February 20, 1998
<PAGE>

                      AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
                              CONSOLIDATED BALANCE SHEETS
                                 (dollars in thousands)
<TABLE>
<CAPTION>
                                                                   December 31,
                                                               1997           1996
            ASSETS                                           --------       --------
            ------
            <S>                                              <C>            <C>
            Current Assets:
            Cash and cash equivalents                        $ 81,752       $ 48,944
            Receivables (Note 2)                              101,746        119,139
            Inventories (Note 3)                               23,226         21,785
            Deferred tax assets (Note 6)                       23,253         30,157
            Prepaid expenses and other current assets           2,891          2,465
                                                             --------       --------
            Total current assets                              232,868        222,490
                                                             --------       --------
            Property, Plant and Equipment (Note 4):
            Land                                                7,843          7,984
            Buildings and improvements                         55,917         55,251
            Machinery and equipment                           200,777        191,376
                                                             --------       --------
            Total                                             264,537        254,611
            Less accumulated depreciation                    (134,481)      (127,009)
                                                             --------       --------
            Property, plant and equipment - net               130,056        127,602
                                                             --------       --------
            Goodwill - net                                      5,357          8,073
            Other assets                                        7,334          4,707
                                                             --------       --------
            TOTAL ASSETS                                     $375,615       $362,872
                                                             ========       ========
<PAGE>
            LIABILITIES AND SHAREHOLDERS' EQUITY
            ------------------------------------
            Current Liabilities:
            Current maturities of long-term debt (Note 4)    $  3,047       $  4,957
            Accounts payable                                   59,548         73,589
            Accrued employee compensation                      13,198         11,919
            Other                                              11,851         12,550
                                                             --------       --------
            Total current liabilities                          87,644        103,015
            Long-term debt (Note 4)                            51,819         54,866
            Deferred income taxes (Note 6)                     13,400         10,300
            Other liabilities and deferred credits             13,775         12,838
                                                             --------       --------
            Total liabilities                                 166,638        181,019
                                                             --------       --------

            Commitments and Contingencies (Notes 5 and 9)

            Shareholders' equity (Note 8):
            Common stock, $1.00 par value; 
              authorized - 30,000,000 shares;
              issued - 15,956,227 shares in 1997
              and 15,927,191 shares in 1996                    15,956         15,927
            Additional paid-in capital                        374,173        373,911
            Accumulated deficit                              (169,296)      (196,129)
                                                             --------       --------
            Total                                             220,833        193,709
            Treasury stock (1,463,016 shares in 1997
              and 1996) at cost                               (11,856)       (11,856)
                                                             --------       --------
            Total shareholders' equity                        208,977        181,853
                                                             --------       --------
            TOTAL LIABILITIES AND
              SHAREHOLDERS' EQUITY                           $375,615       $362,872
                                                             ========       ========
</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,
                                                                       1997         1996         1995
                                                                     --------     --------     --------
            <S>                                                      <C>          <C>          <C>
            Net sales (Note 2)                                       $613,993     $624,929     $576,308
            Cost of sales                                             538,515      543,102      517,637
                                                                     --------     --------     --------
            Gross profit                                               75,478       81,827       58,671
            Selling, general and administrative expenses               31,885       45,037       32,123
                                                                     --------     --------     --------
            Income from operations                                     43,593       36,790       26,548
            Interest expense                                           (4,804)      (4,986)      (4,842)
            Other - net                                                 3,294        2,691        2,074
                                                                     --------     --------     --------
            Income before income taxes                                 42,083       34,495       23,780
            Income tax provision (benefit) (Note 6)                    15,250        3,700       (4,400)
                                                                     --------     --------     --------
            NET INCOME                                               $ 26,833     $ 30,795     $ 28,180
                                                                     ========     ========     ========

            Income per share of common stock (Note 8)
            INCOME PER SHARE OF COMMON STOCK-BASIC                   $   1.85     $   2.13     $   1.95
                                                                     ========     ========     ========
            INCOME PER SHARE OF COMMON STOCK-DILUTED                 $   1.85     $   2.13     $   1.95
                                                                     ========     ========     ======== 


            Weighted average number of shares outstanding - basic      14,491       14,464       14,464
                                                                     ========     ========     ========
            Weighted average number of shares outstanding - diluted    14,524       14,479       14,474
                                                                     ========     ========     ========
</TABLE>
           See Notes to Consolidated Financial Statements.
<PAGE>
                      AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                             Years ended December 31, 1995, 1996 and 1997
                                            (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, 1995     $ 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
             Net Income                                                 30,795                        30,795
                                          --------    ---------     ----------      ---------      ---------
             BALANCE, DECEMBER 31, 1996     15,927      373,911       (196,129)       (11,856)       181,853
             Net Income                                                 26,833                        26,833
             Other                              29          262                                          291
                                          --------    ---------     ----------      ---------      ---------
             BALANCE, DECEMBER 31, 1997   $ 15,956      374,173     $ (169,296)     $ (11,856)     $ 208,977
                                          ========    =========     ==========      =========      =========
</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,
                                                                        1997         1996        1995
                                                                      --------    --------    --------
            <S>                                                       <C>         <C>         <C>
            CASH FLOWS FROM OPERATING ACTIVITIES:
            Net income                                                $ 26,833    $ 30,795    $ 28,180
            Adjustments to reconcile net income to net
              cash provided by operating activities:
              Depreciation and amortization                             10,459      10,809       9,819
              Deferred income taxes                                     12,198       3,700      (5,900)
              (Gain) loss on sale of assets                                598       3,135        (813)
              Change in operating assets and liabilities,
                net of dispositions:
              Receivables                                               17,393     (25,955)     (9,674)
              Inventories                                               (1,441)     (6,496)        296
              Prepaid expenses and other assets                         (3,053)       (150)      2,952
              Accounts payable                                         (14,041)      8,072       4,600
              Accrued employee compensation and other liabilities        1,517       3,660      (3,470)
              Other - net                                                  385        (869)      2,005
                                                                      --------    --------    --------
            Net cash provided by operating activities                   50,848      26,701      27,995
                                                                      --------    --------    --------
            CASH FLOWS FROM INVESTING ACTIVITIES:
            Capital expenditures                                       (13,593)    (13,830)    (21,290)
            Proceeds from sale of assets                                   510       2,998       3,248
            Other - net                                                   --           383       1,243
                                                                      --------    --------    --------
            Net cash used for investing activities                     (13,083)    (10,449)    (16,799)
                                                                      --------    --------    --------
            CASH FLOWS FROM FINANCING ACTIVITIES:
            Payment of long-term borrowings                             (4,957)     (5,832)     (5,866)
            Proceeds from issuance of long-term borrowings (Note 4)       --          --        17,780
                                                                      --------    --------    --------
            Net cash (used for) provided by financing activities        (4,957)     (5,832)     11,914
                                                                      --------    --------    --------
            NET INCREASE IN CASH AND CASH EQUIVALENTS                   32,808      10,420      23,110
            CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR              48,944      38,524      15,414
                                                                      --------    --------    --------
            CASH AND CASH EQUIVALENTS AT END OF YEAR                  $ 81,752    $ 48,944    $ 38,524
                                                                      ========    ========    ========
            SUPPLEMENTAL CASH FLOW DISCLOSURES:
            Cash paid during the year for:
            Interest (net of amounts capitalized)                     $  5,093    $  5,207    $  5,255
                                                                      ========    ========    ========
            Income taxes paid                                         $  1,950    $  1,760    $    945
                                                                      ========    ========    ========
            Noncash investing and financing activities:
            Note issued in litigation settlement                                              $  2,000
                                                                                              ========
</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 generally 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.   Profits  on  long-term cost-plus-award
          fee contracts are recognized as the aggregate  of allowable costs
          reimbursed  and  award  fees earned exceed total costs  incurred.
          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.
<PAGE>
          Fair Value Disclosures

               Statement   of   Financial  Accounting  Standards  No.  107,
          "Disclosures about Fair Value of Financial Instruments", 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  including
          cash and cash equivalents,  short-term  investments, receivables,
          payables and certain accrued liabilities approximate fair values.
          The fair value of the Company's long-term  debt  at  December 31,
          1997   and   1996,   based  upon  available  market  information,
          approximated $60.9 million and $65.5 million, respectively.

          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-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  1997,
          1996  and  1995 approximated $519,000, $759,000 and $1.2 million,
          respectively.
<PAGE>
          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,  1997 and  1996
          amounted to $75.5 million and $75.0 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
          effects   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.

          Stock-Based Compensation

               Statement   of   Financial  Accounting  Standards  No.  123,
          "Accounting for Stock-Based Compensation" ("SFAS 123") encourages
          but does not require companies  to  record  compensation cost for
          stock-based  employee  compensation  plans  at fair  value.   The
          Company  has  chosen  to   continue  to  account for  stock-based
          compensation  using  the  intrinsic  value method  prescribed  in
          Accounting Principles Board Opinion No. 25, "Accounting for Stock
          Issued to Employees," and related Interpretations and has adopted
          the  disclosure-only  provisions  of  SFAS   123.    Accordingly,
          compensation cost for stock options is measured as the excess, if
          any,  of  the quoted market price of the Company's stock  at  the
          date of the grant over the amount an employee must pay to acquire
          the stock.  See Note 8.
<PAGE>
          Use of Estimates

               The preparation  of  financial statements in conformity with
          generally accepted accounting  principles  requires management to
          make estimates and assumptions that affect the  reported  amounts
          of assets and liabilities and disclosure of contingent assets and
          liabilities  at  the  date  of  the  financial statements and the
          reported amounts of revenues and expenses  during  the  reporting
          period.  Actual results could differ from those estimates.

          New Accounting Standards

               During 1997, the Financial Accounting Standards Board issued
          Statement  of  Financial  Accounting Standards No. 130 "Reporting
          Comprehensive Income" ("SFAS  130")  and  Statement  of Financial
          Accounting  Standards No. 131 "Disclosures about Segments  of  an
          Enterprise and  Related  Information"  ("SFAS  131").    SFAS 130
          provides   guidance   for   the   presentation   and  display  of
          comprehensive   income.   SFAS  131  establishes  standards   for
          disclosure of operating  segments, products, services, geographic
          areas and major customers.  The Company is required to adopt both
          standards  for  fiscal  1998.    Management   believes  that  the
          implementation of SFAS 130 and SFAS 131 will not  have a material
          impact on the presentation of the Company's financial  statements
          but may require additional disclosure.


          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.
<PAGE>
          2.  Receivables

          Receivables consisted of the following  at  December 31, 1997 and
          1996 (in thousands):
<TABLE>
<CAPTION>
                                                                    1997           1996
                                                                  --------       --------
  
          <S>                                                     <C>            <C>
          Long-term contracts:
             U.S. Government:
               Amounts billed                                     $    967       $    859
               Unbilled costs, including retentions, and
                 estimated profits on contracts in progress         80,041         90,325
                                                                  --------       --------
               Total                                                81,008         91,184

             Commercial:
               Amounts billed                                        4,180          7,274
               Unbilled costs, including retentions, and
                 estimated profits on contracts in progress          8,543         14,681
                                                                  --------       --------
             Total from long-term contracts                         93,731        113,139
          Trade and other current receivables                        8,015          6,000
                                                                  --------       --------
             Total                                                $101,746       $119,139
                                                                  ========       ========
</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 at December 31, 1997,
          approximately $20.2 million is expected  to  be collected in 1998
          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 1997, 1996, and 1995  account  for
          approximately 83%, 77% and 74% of the net sales, respectively.
<PAGE>
               Costs  and  estimated  profits   (losses)  on  contracts  in
          progress  at  December  31, 1997 and 1996  were  as  follows  (in
          thousands):
<TABLE>
<CAPTION>
                                                                   1997           1996
                                                                ----------     ----------
          <S>                                                   <C>            <C>
          Costs incurred on contracts in progress               $2,786,024     $3,026,965
          Estimated profits recognized on contracts in progress    135,701         92,080
          Estimated losses recognized on contracts in progress     (34,323)       (58,600)
                                                                ----------     ----------  
          Total                                                  2,887,402      3,060,445
          Less billings to date                                 (2,801,829)    (2,956,710)
                                                                ----------     ----------
          Net value of contracts in progress                    $   85,573     $  103,735
                                                                ==========     ==========
</TABLE>

          Net value of contracts in progress was comprised of the following
          amounts (in thousands):
<TABLE>
<CAPTION>
                                                                    1997           1996
                                                                  --------       --------
          <S>                                                     <C>            <C>
          Unbilled costs and estimated profits
            on contracts in progress
            (included in receivables)                             $ 88,584       $105,006
          Billings in excess of costs and estimated
            profits on contracts in progress
            (included in accounts payable)                          (3,011)        (1,271)
                                                                  --------       --------
          Total                                                   $ 85,573       $103,735
                                                                  ========       ========
</TABLE>

               The estimated losses  on  contracts  in  progress  of  $34.3
          million  and $58.6 million included in the net value of contracts
          in progress  at  December  31,  1997  and 1996, respectively, are
          related to certain contracts which were  delivered  through 1997.
          During  1997  and  1996, the Company recorded increases  of  $5.8
          million and $28.5 million,  respectively  in the reserves related
          to  the  contracts to retrofit the four single-hulled  forebodies
          with new double hulls and to construct the series of river hopper
          barges.  The  losses  resulted  primarily  from  increases in the
          estimated    labor    needed   to   complete   these   contracts.
          Additionally, in 1996,  the  Company recorded a reduction of $4.4
          million  of  a previously recognized  loss  due  primarily  to  a
          revision of the  total  estimated  contract  cost  as  it  neared
          completion.
<PAGE>
          3.  Inventories

          Inventories  consisted of the following at December 31, 1997  and
          1996 (in thousands):
<TABLE>
<CAPTION>
                                                                    1997           1996
                                                                  --------       --------
          <S>                                                     <C>            <C>
          Goods held for sale                                     $ 14,915       $ 13,184
          Materials and supplies                                     8,311          8,601
                                                                  --------       --------
          Total                                                   $ 23,226       $ 21,785
                                                                  ========       ========
</TABLE>
          4.  Financing Arrangements

          Revolving Credit Agreement

               The Company  has  available  an  unsecured  revolving credit
          agreement ("the agreement") with various financial  institutions.
          The agreement provides for an available line of credit  equal  to
          the  lesser  of  $65 million or a specified borrowing base with a
          term expiring in April  2000.   A  committment  fee  based on the
          average daily amount of the unused line of credit is payable on a
          quarterly basis.  Borrowings under the agreement bear interest at
          fluctuating rates. The agreement (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,  the payment of dividends and the
          repurchase  of  common stock and (3) requires compliance with the
          terms and conditions of all other debt agreements.  The agreement
          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 which  letters  of  credit  reduce  the
          remaining   available   credit  (see  Note  9).   There  were  no
          borrowings in 1997 and 1996 under the revolving credit agreement.
<PAGE>
          Long-Term Debt

          Long-term debt consisted  of  the  following at December 31, 1997
          and 1996 (in thousands):
<TABLE>
<CAPTION>
                                                                  1997           1996
                                                                --------       --------
          <S>                                                   <C>            <C>
          Industrial revenue bonds                              $ 35,360       $ 36,250
          Mortgage bonds, interest at 8.16%, payable
            in semi-annual principal installments to 2010         15,408         16,594
          Mortgage bonds,interest at 7.86%, payable in
            semi-annual principal installments to 2000             2,328          3,104
          General obligation industrial bonds, interest at
            7%, payable in annual installments to 2008             1,770          1,875
          Other long-term debt                                       --           2,000
                                                                --------       --------
          Total                                                   54,866         59,823
          Less current maturities of long-term debt               (3,047)        (4,957)
                                                                --------       --------
          Long-term debt                                        $ 51,819       $ 54,866
                                                                ========       ========
</TABLE>

               The  $35.4  million  of industrial  revenue  bonds  represent
          Series  1994  bonds which consist  of  (1)  $5.5  million  bearing
          interest at 8.25%  and  payable  in  annual principal installments
          ranging from $600,000 in 1998 to final payment of $985,000 in 2004
          and (2) $29.9 million bearing interest  at  8.50%  and  payable in
          annual principal installments ranging from $370,000 in 1998  to  a
          final  payment  of $3.8 million in 2014. The Series 1994 bonds are
          secured by certain  property  and  equipment  which had a net book
          value of approximately $20.4 million at December  31, 1997.  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 $15.4 million of mortgage bonds represent  the  remaining
          balance of $17.8 million of bonds 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  with  the final payment  in  2010.   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  having  a  net
          book  value  of  approximately  $19.5 million at December 31, 1997
          have been pledged as collateral for these mortgage bonds.
<PAGE>
               The  $2.3 million of mortgage  bonds  at  December  31,  1997
          represent the balance of an earlier mortgage bond issue which also
          utilized a  Title XI guarantee. The terms of the financing provide
          for  an  annual  interest  rate  of   7.86%  and  contain  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 approximately $12.5 million at December 31, 1997 has been
          pledged as collateral for these mortgage bonds.

          Annual maturities  of  long-term  debt  for  each of the next five
          years and in total thereafter follow (in thousands):
<TABLE>
                             <S>                 <C>
                             1998                $  3,047
                             1999                   3,137
                             2000                   3,237
                             2001                   2,571
                             2002                   2,686
                             Thereafter            40,188
                                                 --------
                             Total               $ 54,866
                                                 ========
</TABLE>
          5.  Leases

               The Company leases equipment and real property  in the normal
          course  of  business  under  various  operating  leases, including
          non-cancelable  and  month-to-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 $6.1 million,  $9.0
          million and $6.3 million in 1997, 1996 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>
                             1998                $  3,111
                             1999                   2,191
                             2000                   1,118
                             2001                      94
                             2002                     --
                                                 --------
                             Total               $  6,514
                                                 ========
</TABLE>
<PAGE>
          6.  Income Taxes

               Income taxes are accounted for  under  Statement of Financial
          Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
          109") which requires the use of the asset and  liability  approach
          for financial accounting and reporting for income taxes.

                  The  Company  has  provided  for  Federal  income  taxes as
          follows  (in thousands):
<TABLE>
<CAPTION>
                                                                       YEARS ENDED DECEMBER 31,
                                                                   1997          1996          1995
                                                                --------      --------      --------
            <S>                                                 <C>           <C>           <C>
            Current provision                                   $  3,052      $  1,100      $  1,500
            Deferred provision                                    12,198        11,600         7,100
            Deferred benefit attributable to the realization
              of net operating loss carryforwards                    --         (9,000)      (13,000)
                                                                --------      --------      --------
            Provision (benefit) for income taxes                $ 15,250      $  3,700      $ (4,400)
                                                                ========      ========      ========
</TABLE>

                  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,
                                                     1997                   1996                    1995
                                                 Amount     %          Amount      %           Amount     %
                                                --------   ---        --------    ---         --------   ---
            <S>                                 <C>         <C>       <C>         <C>         <S>        <C> 
            Taxes at Federal statutory rate     $ 14,729    35        $ 12,073     35         $  8,323    35
            Net operating loss
              carry forwards utilized                --     --          (9,000)   (26)         (13,000)  (55)
            Other                                    521     1             627      2              277     1
                                                --------   ---        --------    ---         --------   ---
            Total                               $ 15,250    36         $ 3,700     11         $ (4,400)  (19)
                                                ========   ===        ========    ===         ========   ===
</TABLE>


               At  December  31,  1997 the Company has available for Federal
          income tax purposes a tax  credit  carry  forward of $5.3 million.
          The  income tax credit carry forward expires  in  the  years  2000
          through  2012.  Additionally,  the  Company  has  $3.0  million of
          alternative  minimum  tax  credits  which  may  be carried forward
          indefinitely.
<PAGE>
               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  carry  forwards.  The  tax
          effects of significant items comprising the Company's net deferred
          tax  balances  at  December  31,  1997 and 1996 are as follows (in
          thousands):
<TABLE>
<CAPTION>
                                                                           1997           1996
                                                                         --------       --------
                <S>                                                      <C>            <C>
                Deferred Tax Liabilities:
                Differences between book
                  and tax basis of property, plant and equipment         $ 25,566       $ 24,753
                Other                                                         818            976
                                                                         --------       --------
                  Total                                                    26,384         25,729
                                                                         --------       --------
                Deferred Tax Assets:
                Reserves not currently deductible                           3,795          4,417
                Long-term contracts                                        18,710         18,844
                Other temporary differences                                 6,126          4,761
                Operating loss carry forwards                                 --          10,211
                Tax credit carry forwards                                   8,289          8,036
                                                                         --------       --------
                                                                           36,920         46,269
                Valuation Allowance                                          (683)          (683)
                                                                         --------       --------
                  Total                                                    36,237         45,586
                                                                         --------       --------
                Net deferred tax assets                                  $  9,853       $ 19,857
                                                                         ========       ========
</TABLE>
               The net deferred tax assets are  included  in  the  following
          balance sheet captions (in thousands):
<TABLE>
<CAPTION>
                                                                           1997           1996
                                                                         --------       --------

                <S>                                                      <C>            <C>
                Current deferred tax assets                              $ 23,253       $ 30,157
                Non-current deferred income tax liabilities               (13,400)       (10,300)
                                                                         --------       --------
                Net deferred tax assets                                  $  9,853       $ 19,857
                                                                         ========       ========
</TABLE>
<PAGE>
            7.  Retirement Plans

          ESOP

             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  2,835,000  and  2,980,000  shares   of   the
          Company's   Common   Stock   at   December   31,  1997  and  1996,
          respectively.  In February 1996, the ESOP sold 3,581,100 shares of
          the Company's common stock.  The Company did not  receive  any  of
          the proceeds from this public offering.

          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 the participant's 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,
          1997,  1996  and  1995  included   the  following  components  (in
          thousands):
<TABLE>
<CAPTION>
                                                                  1997         1996         1995
                                                                 -------      -------      -------
            <S>                                                  <C>          <C>          <C>
            Service costs of the current period                  $ 2,800      $ 3,700      $ 3,300
            Interest cost on the projected benefit obligation      3,500        3,700        4,200
            Actual return on plan assets                          (5,100)      (4,600)      (3,600)
            Net amortization of transition liability and
              deferred investment (loss) gain                       (900)        (400)         300
                                                                 -------      -------      -------
            Net periodic pension cost                            $   300      $ 2,400      $ 4,200
                                                                 =======      =======      =======
</TABLE>
<PAGE>
                  The following table sets forth the pension plan's estimated
            funded status as of December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
                                                                    1997         1996
                                                                  --------     --------
            <S>                                                   <C>          <C>
            Projected benefit obligation:
              Vested benefits                                     $ 40,800     $ 38,800
              Nonvested benefits                                       500          400
                                                                  --------     --------
              Accumulated benefit obligation                        41,300       39,200
              Effect of projected future compensation levels         4,700        2,600
                                                                  --------     --------
            Projected benefit obligation                            46,000       41,800
            Plan assets at market value                             66,800       58,800
                                                                  --------     --------
            Plan assets in excess of projected benefit obligation   20,800       17,000
            Unrecognized net transition obligation                     100          100
            Unrecognized prior service costs                        (1,800)      (2,100)
            Unrecognized net gain                                  (18,900)     (14,500)
                                                                  --------     --------
            Prepaid pension costs                                 $    200     $    500
                                                                  ========     ========
</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 stocks
          and  corporate  bonds  and notes.  The  weighted-average  discount
          rate  used  in  determining  the  actuarial  present  value of the
          projected  benefit  obligation  was 7.25%  for 1997 and  7.75% for
          1996.   The  rate of  increase in future compensation  levels used
          was  4.0% for 1997 and 1996 and thereafter. The expected long-term
          rate of return on the assets was 9.0% for 1997 and 1996.

          401(k) Savings Plan

               Beginning in 1996,  the  Company  sponsored  a 401(k) Savings
          Plan. Participation in this defined contribution plan is available
          to  substantially all employees with one year of credited  service
          to 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.  The Company
          paid approximately $500,000 in matching contributions for the 1997
          Plan Year.  There was no similar contribution in 1996.
<PAGE>
          8.  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, 1997 and 1996.

          Earnings Per Share

               In  accordance  with   Statement   of   Financial  Accounting
          Standards  Number  128,  "Earnings  Per Share" ("SFAS  128"),  the
          Company  changed  its  method of calculating  earnings  per  share
          ("EPS") during the fourth quarter of 1997.  The number of weighted
          average  shares  outstanding   for  "basic"  EPS  was  14,490,644,
          14,464,175 and 14,464,175 for the  years  ended December 31, 1997,
          1996  and  1995,  respectively.   The number of  weighted  average
          shares outstanding for "diluted" EPS  was  14,523,838,  14,479,364
          and  14,473,613  for  the years ended December 31, 1997, 1996  and
          1995,   respectively.    In   accordance   with   the   disclosure
          requirements  of SFAS 128, the reconciliation of the numerator and
          denominator for  calculating  earnings per share is as follows (in
          thousands except per share data):
<TABLE>
<CAPTION>
                                                            FOR THE YEARS ENDED DECEMBER 31,
                         ------------------------------------------------------------------------------------------------------
                                         1997                                 1996                                1995
                         --------------------------------- --------------------------------- ----------------------------------
                            Income      Shares   Per Share    Income     Shares    Per Share    Income      Shares    Per Share
                         (Numerator)(Denominator) Amount   (Numerator)(Denominator) Amount   (Numerator)(Denominator)  Amount
                         ---------- ------------ --------- ---------- ------------ --------  ---------- ------------  ---------
   <S>                     <C>         <C>        <C>        <C>         <C>       <C>         <C>         <C>         <C>
                               

   BASIC EPS
   Income available to
     common shareholders   $26,833     14,491     $ 1.85     $30,795     14,464    $ 2.13      $28,180     14,464      $ 1.95
                                                  ======                           ======                              ======   
   EFFECT OF DILUTIVE
     SECURITIES
   Stock appreciation
     rights/options                        33                                15                                10
                                       ------                            ------                            ------
   DILUTED EPS
   Income available to
     common shareholders
     plus assumed
     conversions           $26,833     14,524     $ 1.85     $30,795     14,479    $ 2.13      $28,180     14,474      $ 1.95
                           =======     ======     ======     =======     ======    ======      =======     ======      ======
</TABLE>
<PAGE>
          Stock-Based Compensation Plans

               At  December  31,  1997,  the  Company  had  two  stock-based
          compensation plans which are described below.  The Company applies
          Accounting Principles Board Opinion  No. 25, "Accounting for Stock
          Issued  to  Employees" ("APB 25") and related  Interpretations  in
          accounting for its plans.  Accordingly, no compensation expense is
          recognized for  its  stock-based compensation plans other than for
          performance-based awards  as  the  exercise  price  of  all  stock
          options  granted  thereunder  is  equal  to  the fair value of the
          Company's  common stock at the date of grant.   Since  no  options
          were granted  under  the  Company's stock-based compensation plans
          during 1996, there would have  been  no  effect  on net income and
          income  per  common  share.  Had 1997 compensation costs  for  the
          Company's stock-based  compensation  plans  been  determined based
          upon the fair value at the grant date for awards under these plans
          consistent  with  the  methodology  presented  under Statement  of
          Financial  Accounting  Standards No. 123, "Accounting  for  Stock-
          Based Compensation" ("SFAS  123"),  the  Company's  net income and
          earnings  per  share  would  have  been  reduced to the pro  forma
          amounts indicated below (in thousands, except per share data):
<TABLE>
          <S>                          <C>            <C>
          Net Income                   As reported    $26,833
                                       Pro forma      $25,413

          Earnings per share-basic     As reported      $1.85
                                       Pro forma        $1.75

          Earnings per share-diluted   As reported      $1.85
                                       Pro forma        $1.75
</TABLE>
               The weighted average fair value of the options granted during
          1997 was $15.4542.  The fair value of each  option granted in 1997
          is  estimated on the date of grant using the Black-Scholes  option
          pricing  model  with the following assumptions: no dividend yield;
          expected  volatility  of  85.0581%;  risk-free  interest  rate  of
          5.772%; an expected life of 5.86 years.
<PAGE>
               During   1997,   the  Board  of  Directors  adopted  and  the
          shareholders approved the  Avondale  Industries,  Inc.  1997 Stock
          Incentive  Plan (the "1997 Plan") which provides for the award  of
          various  economic  incentives  to  key  employees  and  directors.
          Incentives granted under the 1997 Plan may be in the form of stock
          options,  stock   appreciation   rights,   restricted   stock  and
          performance  shares  or  any  combination  thereof.   A  total  of
          1,430,000  shares  of common stock of the Company are reserved for
          issuance under the 1997  Plan.   Incentives granted under the Plan
          have a maximum term of ten years and  are  exercisable, subject to
          various  terms  and  conditions as set forth by  the  Compensation
          Committee of the Board  of  Directors.   Transactions  of the 1997
          Plan during 1997 were as follows:
<TABLE>
<CAPTION>
                                              Options Outstanding                             Options Exercisable
                                   ----------------------------------------------      -------------------------------
                                               Weighted Average
                                                   Remaining
                                     Number    Contractual Life  Weighted Average         Number      Weighted Average
                                   Outstanding      (Years)       Exercise Price       Exercisable     Exercise Price
                                   ----------- ----------------  ----------------      -----------    ----------------
             <S>                   <C>                <C>           <C>                   <C>             <C>
             Beginning of year          --             --               --                  --                --
             Granted                 274,904          9.47          $ 20.723              90,219          $ 22.940
             Exercised                  --             --               --                  --                --
             Forfeited/expired          --             --               --                  --                --
                                   ---------                                              ------  
             End of year             274,904          9.47          $ 20.723              90,219          $ 22.940
                                   =========                                              ======
             Available for grant,
               end of year         1,155,096
                                   =========
</TABLE>
               The  range  of  exercise  prices  for  options outstanding at
          December 31, 1997, under the 1997 Plan was $19.625 to $22.940.  Of
          the  274,904  options  granted  under  the Plan in  1997,  184,685
          options vest 25% on the second, third and  fourth anniversary date
          of  the grant, while the remaining 90,219 options  vested  on  the
          grant date.

               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 performance  objectives.
          These performance  objectives  have been attained and therefore no
          further awards will be made.
<PAGE>

               A summary of the status of  the  Performance Share Plan as of
          December 31,  1997,  1996  and  1995  and changes during the three
          years ended December 31, 1997 are presented below:
<TABLE>
<CAPTION>

                                      1997                  1996                    1995
                                -----------------     -----------------     -------------------
                                         Weighted              Weighted                Weighted
                                         Average               Average                 Average
                                         Exercise              Exercise                Exercise
                                Shares    Price        Shares   Price        Shares     Price
                                ------   --------      ------  --------      -------   --------
          <S>                   <C>       <C>          <C>      <C>           <C>       <C>        
          Options outstanding   
          and exercisable,
          January 1             226,404   $17.718      240,971  $17.463       279,155   $15.885
      
          Forfeited/expired        --        --          1,360   19.000         2,280    15.965

          Exercised             221,508    17.537       13,207   12.940        35,904     5.285
                                -------                -------                ------- 
  
          Options outstanding 
          and exercisable,
          December 31             4,896   $16.994      226,404  $17.718       240,971   $17.463
                                =======                =======                =======

               The  range  of  exercise  prices  for  options  outstanding  at
          December 31, 1997 under the Performance Share Plan  (which contain a
          stock appreciation right feature)  was  $3.875  to  $19.00  and  the
          weighted-average  remaining  contractual  life for  such options was
          1.77 years.

               The  Company  provided  a  Stock  Appreciation   Plan  for  key
          management  employees which  contains  a  stock  appreciation  right
          feature.  As this plan has expired, no further award will be made.
<PAGE>
               There were no transactions relating  to  this  plan  during the
          years ended December 31, 1997 and 1996.  A summary of changes in the
          Stock  Appreciation  Plan  for  the year  ended December 31, 1995 is
          presented below:

</TABLE>
<TABLE>
<CAPTION>
                                                               1995
                                                       -----------------------
                                                                     Weighted
                                                                      Average
                                                                     Exercise
                                                        Shares         Price
                                                       --------      ---------
            <S>                                        <C>           <C>
            Options outstanding, January 1              40,000       $ 11.250

            Forfeited/expired                          (40,000)      $ 11.250
                                                       -------

            Options outstanding, December 31              --         $   --
                                                       =======
</TABLE>
      
               There were no options exercisable at December 31, 1997, 1996
          and 1995.  There were no shares available for grant at December 31,
          1997 and 1996, and 437,000 shares were available for grant at
          December 31, 1995.  Under the terms of the plan, options expired
          on March 31, 1995.

               Compensation expense for the years ended December 31, 1997,
          1996 and 1995 was not material.
<PAGE>
          9.  Commitments and Contingencies

          Litigation

               In January 1986, the Louisiana Department of Environmental
          Quality ("DEQ") advised the Company that it could be a potentially
          responsible party ("PRP") with respect to an oil reclamation site
          operated by an unaffiliated company in Walker, Louisiana.  To
          date, the Company and certain of the other PRPs (the "Funding
          Group") for the site have funded the site's remediation expenses,
          PRP identification expenses and related costs for the
          participating parties.  As of December 31, 1997 such costs totaled
          approximately $19.0 million, of which the Company has funded
          approximately $4.0 million.  Since 1998, the Funding Group filed
          petitions to add a number of companies as third-party defendants
          with regard to the remedial action.  The Funding Group has agreed
          to settle with the majority of these companies.  All funds
          collected are placed in escrow to fund future expenses.  At
          December 31, 1997, the balance of the escrow was $8.5 million,
          which is to be used to fund any ongoing remediation expenses.  The
          Company will not owe any future assessments until the balance in
          escrow is depleted.  There are additional settlements being
          negotiated which should add to the balance in escrow.

               Additional remedial work scheduled for the site includes
          completion of studies 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 impact on the Company's financial statements. In
          addition, the Company and other members of the Funding Group have
          entered into a final cost sharing agreement under which all
          parties have agreed that there would be no re-allocation of
          previous remediation costs, but that future remediation costs
          would be established by a formula.  Under this agreement, the
          Company's share of future costs will not exceed 17.5% for any
          additional costs.

               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.
<PAGE>
               In 1996, the Company settled a class action lawsuit involving
          alleged personal injury and property damage arising from the
          Walker, La. reclamation site.  Under the terms of the settlement,
          the Company paid approximately $6.0 million into a settlement
          fund.  The Company could also have been responsible for payment to
          the plaintiffs of up to an additional $6.0 million (plus interest
          at 8% per annum) if the plaintiffs were unsuccessful in collecting
          certain claims under Avondale's insurance policies that were
          assigned to the plaintiff class under the settlement agreement.
          During the first quarter of 1997, the parties reached a settlement
          with the Company's insurers which does not require any further
          contribution by the Company.

               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.

          Guarantee

               Pursuant to agreements related to the University of New
          Orleans ("UNO")/Avondale Maritime Technology Center of Excellence
          ("the Center"), the Company has agreed to guarantee indebtedness
          with a principal amount not to exceed $40 million expected to be
          incurred by the UNO Research and Technology Foundation, Inc. (the
          "Foundation") for construction of the facility and the acquisition
          of technology.  Under the terms of a Cooperative Endeavor
          Agreement, the State of Louisiana made a non-binding commitment to
          appropriate $40 million, plus interest, in installments over a
          period from 1997 through 2007 for donation to the Foundation for
          purposes of funding the Center.  Avondale and the Foundation
          anticipate that appropriations by the State will be sufficient for
          the Foundation to service its debt.  However, if the State's
          appropriations are insufficient, Avondale will ultimately be
          required to repay the debt.  The Company's guarantee is unsecured.
          As of December 31, 1997, the Foundation had incurred $15.3 million
          of cost to construct and equip the Center.  In connection with its
          non-binding commitment, the State appropriated and paid $3.8
          million during 1997, representing the first installment to the
          Foundation.
<PAGE>
          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, other insurance obligations and
          to provide a debt service reserve fund related to $35.4 million of
          Series 1994 industrial revenue bonds.  Additionally, under certain
          contracts the Company may be required to provide letters of credit
          to secure certain performance obligations of the Company
          thereunder. Outstanding letters of credit relating to these
          business activities amounted to approximately $11.3 million at
          December 31, 1997 and 1996.

          10.  Quarterly Results (Unaudited)

          Consolidated operating results for the four quarters of 1997 and
          1996 were as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
                                                     1997                                           1996
                                  ------------------------------------------     ------------------------------------------
                                    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               $ 139,513  $ 145,792  $ 159,217  $ 169,471     $ 156,496  $ 152,577  $ 148,384  $ 167,472

          Gross Profit               18,633     19,501     19,670     17,674        17,286     18,166     19,048     27,327

          Income from Operations     10,299     10,866     10,950     11,478         8,253      8,874      9,237     10,426

          Net Income                  6,291      6,380      6,920      7,242         4,736     14,290      5,612      6,157

          Net Income per Share
            - Basic               $    0.43  $    0.44  $    0.48  $    0.50     $    0.33  $    0.99  $    0.39  $    0.43
                                  =========  =========  =========  =========     =========  =========  =========  ========= 
          Net Income per Share
            - Diluted             $    0.43  $    0.44  $    0.48  $    0.50     $    0.33  $    0.99  $    0.39  $    0.43
                                  =========  =========  =========  =========     =========  =========  =========  =========
</TABLE>
<PAGE>

     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 1998 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 1998 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 1998 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 1998 Annual Meeting of
     shareholders and is incorporated herein by reference.
<PAGE>
                                       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, 1997 and 1996.

               Consolidated Statements of Operations for the years ended
               December 31, 1997, 1996 and 1995.

               Consolidated Statements of Shareholders' Equity for the years
               ended December 31, 1995, 1996 and 1997.

               Consolidated Statements of Cash Flows for the years ended
               December 31, 1997, 1996 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, as amended on November 3, 1997.

          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.(2)
<PAGE>
          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(3), 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"),(4) which has been further amended by a
                         Third Supplemental Indenture dated February 9, 1995.(5)

                  (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(3), 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 by Amendment No. 5 dated February 9, 1995(5)
                         and Amendment No. 6 dated August 22, 1996.(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.(5)

          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.(2)

                  (b)    Guaranty Agreement dated April 1, 1991 between the
                         Company, Harrison County, Mississippi and the State of
                         Mississippi.(2)
<PAGE>
          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.(5)

                  (b)    Title XI Reserve Fund and Financial Agreement dated
                         February 9, 1995, by and between the Company and the
                         United States of America,(5) as amended by Amendment
                         No. 1 dated August 22, 1996.(6)

                  (c)    Form of 8.16% Sinking Bond Fund, 2010 Series.(5)

          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(3)
                         including modification P00005 thereto entered into on
                         June 16, 1988, and the related Acknowledgment 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
                         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.(4)
<PAGE>
                  (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.(3)

                  (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(2) and modification P00029 thereto.(4)

                  (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(4) and modification no. P00027
                         thereto.(10)

                  (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,(2) and modification nos. P00002(4),
                         P00013(4)and  modification no. P00020  thereto.(10)

                  (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.(2)

                  (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)
<PAGE>
                  (l)    Agreement dated September 3, 1993, by and between the
                         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, P00003 and P00004(4), P00007
                         (7), P00019 (6) and modifications P00025 and P00028
                         thereto.

                  (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.(4)

                  (n)    Agreement dated December 17, 1996 by and between the
                         Company and the UnitedStates of America (Contract No.
                         N00024-97-C-2202) for the design and construction of
                         one LPD-17 ship.(6)

          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.(4)

                  (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.(4)

                  (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.(11)

                  (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.(11)

                  (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.(11)
<PAGE>
                  (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.(11)

          10.3    Employee Benefit Plans

                  (a)    The Company's Amended and Restated Performance Share
                         Plan dated April 24, 1989(12), 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(12),
                         as amended by Amendment No. 1 adopted December 5,
                         1994.(7)

                  (c)    The Company's Amended and Restated Employee Stock
                         Ownership Plan(7) and the related Amended and Retated
                         Trust Agreement(13) as further amended by: Amendment
                         No. 1 adopted April 5, 1995(5), Amendment No. 2 adopted
                         June 16, 1995(11), Amendment No. 3 adopted February 5,
                         1996(13), Amendment No. 4 adopted December 31, 1996(6),
                         and Amendment No. 5 adopted December 30, 1997.

                  (d)    The Company's Pension Plan as Amended and Restated
                         dated December 30, 1997.

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

                  (f)    The Company's Excess Retirement Plan.(2)

                  (g)    The Amended and Restated Avondale Services Corporation
                         Executive Group Insurance Benefits Plan and Summary
                         Plan Description 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  dated October 14, 1997.

                  (h)    The Company's Directors' Deferred Compensation Plan.(2)

                  (i)    Avondale Industries, Inc. Management Incentive Plan.(5)

                  (j)    The Company's 401(k) Plan as restated effective
                         September 20, 1996(6), as amended by Amendment No. 1
                         dated December 31, 1996(6) and Amendment No. 2 dated
                         December 30, 1997.

                  (k)    The Company's Executive Retirement Plan.(13)

                  (l)    Avondale Industries, Inc. 1997 Stock Incentive Plan
                         adopted May 23, 1997.(15)
<PAGE>
          10.4    Employment Agreements

                  (a)    Employment Agreement dated September 27, 1985, by and
                         between the Company and Albert L. Bossier, Jr.(3) the
                         term of which has been extended such that its current
                         term extends through December 31, 1999.(7)

                  (b)    Employment Agreement dated June 18, 1987, by and
                         between the Company and Thomas M. Kitchen(3) the term
                         of which has been extended such that its current term
                         extends through December 31, 1999.(7)

                  (c)    Employment Agreement dated June 18, 1987, by and
                         between the Company and Kenneth B. Dupont(3) the term
                         of which has been extended such that its current term
                         extends through December 31, 1999.(7)

                  (d)    Amended and Restated Change Control Agreement dated
                         January 19, 1996, by and between the Company and Albert
                         L. Bossier, Jr.(13).

                  (e)    Amended and Restated Change Control Agreement dated
                         January 19, 1996, by and between the Company and Thomas
                         M. Kitchen(13).

                  (f)    Amended and Restated Change Control Agreement dated
                         January 19, 1996, by and between the Company and
                         Kenneth B. Dupont(13).

                  (g)    The Company's Severance Pay Plan and Summary Plan
                         Description adopted March 1, 1996.(13)

          10.5    Avondale/Ogden Letter Agreement.(14)

          10.6    Acquisition and Disposition Agreements

                  (a)    Asset Purchase Agreement dated January 27, 1987, by and
                         between the Company and Connell Industries, L.P.(3)

                  (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.(2)

                  (d)    Asset Purchase Agreement dated November 20, 1992, by
                         and between the Company and Bollinger Machine Shop &
                         Shipyard, Inc., a Louisiana corporation (without
                         exhibits).(4)
<PAGE>
          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.(2)

                  (e)    Sub-lease agreement dated May 16, 1997, by and between
                         the Company and the University of New Orleans Research
                         and Technology Foundation, Inc. (Without exhibits).(15)

          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.(3)

                  (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.(2)

                  (d)    Stockholder Protection Rights Agreement dated as of
                         September 26, 1994, by and  between Avondale
                         Industries, Inc. and Boatmen's Trust Company, as Rights
                         Agent.(16)

                  (e)    Agreement by and between the Company and Bath Iron
                         Works Corporation,  Subcontract for LPD-17 Class Work
                         dated June 23, 1996.(6)

                  (f)    Agreement by and between the Company and Hughes
                         Aircraft Co.,  Subcontract for LPD-17 Class Work dated
                         June 23, 1996.(6)
<PAGE>
                  (g)    Cooperative Endeavor Agreement dated May 16, 1997, by
                         and among the Company, the State of Louisiana, Board of
                         Supervisors of Louisiana State University and
                         Agricultural and Mechanical College acting on behalf of
                         the University of New Orleans, and the University of
                         New Orleans Research and Technology Foundation,
                         Inc.(15)

          10.9    Revolving Credit Agreement dated as of May 10, 1994 among
                  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(10).

                  (b)    Fourth Amendment and Consent to Revolving Credit
                         Agreement, dated September 1, 1995(10).

                  (c)    Fifth Amendment to Revolving Credit Agreement, dated
                         November 17, 1995  (10)

                  (d)    Sixth Amendment to Revolving Credit Agreement, dated
                         October 22, 1996.(6)


          10.10   Amended and Restated Revolving Credit Agreement dated January
                  29, 1997, effective April 30, 1997, among Avondale Industries,
                  Inc., various financial institutions signatory thereto ("the
                  Banks") and Bank of America National Trust and Savings
                  Association as the Agent for the Banks, (without exhibits and
                  schedules).(15)

                  (a)    First Amendment to Amended and Restated Revolving
                         Credit Agreement, dated March 14, 1997.

                  (b)    Second Amendment to Amended and Restated Revolving
                         Credit Agreement, dated April 30, 1997.

                  (c)    Third Amendment to Amended and Restated Revolving
                         Credit Agreement and Request for Release of Collateral,
                         dated October 24, 1997.

          21      List of subsidiaries of the Company

          23      Consent of Deloitte & Touche LLP

          27      Financial Data Schedule

<PAGE>
     __________
     (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 Annual Report on Form 10-
          K for the fiscal year ended December 31, 1991, as amended by Form 10-
          K/A.

     (3)  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.

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

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

     (6)  Incorporated by reference from the Company's Annual Report on Form 10-
          K for the fiscal year ended December 31, 1996.

     (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.

     (10) Incorporated by reference from the Company's Annual Report on Form 10-
          K for the fiscal year ended December 31, 1995.

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

     (12) 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.

     (13) Incorporated by reference from the Company's Quarterly Report on Form
          10-Q for the fiscal quarter ended March 31, 1996.

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

     (15) Incorporated by reference from the Company's Quarterly Report on Form
          10-Q for the fiscal quarter ended June 30, 1997.

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

<PAGE>
          (b)  Reports on Form 8-K

          There were no reports on Form 8-K filed during the three month period
     ended December 31, 1997.

<PAGE>

                                      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 March 23, 1998.

                                        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,     March 23, 1998
      -------------------------   President and Chief
         Albert L. Bossier, Jr.   Executive Officer

      /s/Thomas M. Kitchen        Vice President, Chief      March 23, 1998
      -------------------------   Financial Officer,
         Thomas M. Kitchen        Corporate Secretary and
                                  a Director
  
      /s/Kenneth B. Dupont        Vice President and a       March 23, 1998
      -------------------------   Director
         Kenneth B. Dupont      
   
      /s/Anthony J. Correro, III  Director                   March 23, 1998
      --------------------------
         Anthony J. Correro, III

      /s/Francis R. Donovan       Director                   March 23, 1998
      --------------------------
         Francis R. Donovan
     
      /s/Hugh A. Thompson         Director                   March 23, 1998
      --------------------------
         Hugh A. Thompson

      /s/Eugene K. Simon          Vice President of          March 23, 1998
      --------------------------  Finance
         Eugene K. Simon          

<PAGE>
                                    EXHIBIT INDEX

          Number                             Description

          3.2       By-laws of the Company, as amended on November 3, 1997.

          10.1      Contracts With The United States Navy

                    (l)  Agreement dated September 3, 1993, by and between the
                         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,  P00003 and
                         P00004(4),  P00007  (7), P00019 (6) and modifications
                         P00025 and P00028 thereto.

          10.3      Employee Benefit Plans

                    (c)  The Company's Amended  and  Restated  Employee Stock
                         Ownership  Plan(7)  and  the  related  Amended   and
                         Retated  Trust  Agreement(13) as further amended by:
                         Amendment No. 1 adopted  April 5, 1995(5), Amendment
                         No.  2 adopted June 16, 1995(11),  Amendment  No.  3
                         adopted   February 5,   1996(13), Amendment   No.  4
                         adopted  December  31, 1996(6), and Amendment No.  5
                         adopted December 30, 1997.

                    (d)  The Company's Pension  Plan  as Amended and Restated
                         dated December 30, 1997.

                    (g)  The   Amended   and   Restated   Avondale   Services
                         Corporation Executive Group Insurance  Benefits Plan
                         and Summary Plan Description 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
                         dated October 14, 1997.

                    (j)  The Company's  401(k)  Plan  as  restated  effective
                         September 20, 1996(6), as amended by Amendment No. 1
                         dated December 31, 1996(6) and Amendment No. 2 dated
                         December 30, 1997.
<PAGE>
          10.10     Amended  and  Restated  Revolving  Credit Agreement dated
                    January  29,  1997,  effective  April  30,   1997,  among
                    Avondale Industries, Inc., various financial institutions
                    signatory  thereto  ("the  Banks")  and  Bank  of America
                    National  Trust and Savings Association as the Agent  for
                    the Banks, (without exhibits and schedules).(15)

                    (a)  First  Amendment  to  Amended and Restated Revolving
                         Credit Agreement, dated March 14, 1997.

                    (b)  Second Amendment to Amended  and  Restated Revolving
                         Credit Agreement, dated April 30, 1997.

                    (c)  Third  Amendment  to Amended and Restated  Revolving
                         Credit  Agreement  and   Request   for   Release  of
                         Collateral, dated October 24, 1997.

          21        List of subsidiaries of the Company

          23        Consent of Deloitte & Touche LLP

          27        Financial Data Schedule

<PAGE>
          __________
          (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 Annual Report  on
               Form  10-K  for  the  fiscal  year ended December 31, 1991, as
               amended by Form 10-K/A.

          (3)  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.

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

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

          (6)  Incorporated by reference from the Company's Annual Report  on
               Form 10-K for the fiscal year ended December 31, 1996.

          (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.

          (10) Incorporated by  reference from the Company's Annual Report on
               Form 10-K for the fiscal year ended December 31, 1995.

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

          (12) 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.

          (13) Incorporated by reference  from the Company's Quarterly Report
               on Form 10-Q for the fiscal quarter endedMarch 31, 1996.

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

          (15) Incorporated by reference from the  Company's Quarterly Report
               on Form 10-Q for the fiscal quarterended June 30, 1997.

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