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, 1996
               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, 1996 was
            approximately $156,308,419.

                  The number of shares of the Registrant's common stock,
            $1.00 par value per share, outstanding at December 31, 1996
            was 14,464,175.
                   DOCUMENTS INCORPORATED BY REFERENCE

                  Portions of the Registrant's Proxy Statement for its
            1997 Annual Meeting have been incorporated by reference into
            Part III of this Form 10-K.
<PAGE>

                                 PART I

          Item 1.   Business.

          Overview

               Avondale is one of the largest shipbuilders
          in the United States, specializing in the design,
          construction, conversion, repair and modernization
          of various types of ocean-going vessels for the
          military and commercial markets.  A majority of
          Avondale's contracts in recent years has been for
          the construction of U.S. Navy surface ships,
          although it secured a large commercial contract in
          1995 for the construction and conversion of
          double-hulled product carriers.  Management
          believes the Company's low cost structure,
          experienced and skilled work force, technological
          capabilities, sophisticated construction processes
          and extensive experience gained 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, 1996, the
          Company's shipbuilding backlog (the "firm
          backlog") was approximately $1.8 billion
          (including estimated contract escalation),
          exclusive of unexercised options aggregating $1.1
          billion held by the U.S. Navy for additional ship
          orders (including estimated contract escalation).

               In December 1996, an alliance led by the
          Company was awarded a contract to construct the
          first of an anticipated 12 vessels under the U.S.
          Navy's LPD-17 program.  The contract award
          provides for options exercisable by the U.S. Navy
          for two additional LPD vessels to be built by the
          alliance.  Management believes that by securing
          the LPD-17 contract the Company has continued to
          demonstrate its ability to compete successfully
          for U.S. Navy contracts based on the high level of
          its technical, engineering and production skills,
          as well as its cost efficient production methods.
          In addition, the backlog created from the LPD-17
          contract is a strong foundation that will allow
          the Company to compete aggressively for other
          shipbuilding opportunities, particularly in the
          commercial markets.  Upon the announcement of the
          award the unsuccessful bidder filed a protest
          which is being reviewed by the GAO and the U.S.
          Navy issued a stop-work order pending the
          resolution of the protest.  Management expects the
          GAO decision by mid-April 1997 and anticipates
          beginning design work immediately if a favorable
          decision is received.  For additional information
          on the LPD-17 award, see "-U.S. Government."

               Historical Information.  Avondale is a
          versatile shipyard that has been the successful
<PAGE>
          bidder for a variety of marine construction
          projects. Organized in 1938, Avondale first began
          building ocean-going ships in the 1950s. From 1959
          to 1985, the Company was operated as a subsidiary
          of Ogden Corporation, a diversified New York Stock
          Exchange listed company headquartered in New York,
          New York. Prior to the 1980s, Avondale built both
          military and commercial vessels. In addition to
          the construction of 27 destroyer escorts for the
          U.S. Navy, Avondale successfully completed a
          variety of construction projects during that
          period, including general cargo and multi-product
          carriers, such as LASH vessels, container vessels,
          crude oil tankers and product carriers. In the
          early 1980s, however, several measures were
          implemented that changed the marine construction
          industry significantly. The 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 vessels
          previously built by Avondale.

               During the remainder of the 1980s and the
          first part of this decade, Avondale steadily
          expanded the range of vessels that it built for
          the U.S. Navy. The Company principally focused on
          those vessels that were related to, or natural
          extensions of, predecessor vessels constructed by
          Avondale, where Avondale could best capitalize on
          its prior experience and proven capabilities.
          Among the U.S. Navy vessels built or under
          construction during this period were 16 T-AOs,
          five LSDs, four LSD-CVs, five AOJs (which
          constituted conversions of AOs previously built by
          Avondale), one T-AGS 45, 15 LCACs, four MHCs and
          three SL 7 conversions.

               With the end of the Cold War, and the
          pressure of domestic budget constraints, spending
          for new vessel construction by the U.S. Navy has
          been substantially reduced, with the rate of new
          vessel construction reduced to approximately 50%
          of that in the 1980s. Despite the contraction in
          U.S. Navy shipbuilding activity, management
<PAGE>
          believes that Avondale's versatility has been a
          significant factor in its successful efforts to
          restore its backlog, which efforts have also been
          bolstered by Avondale's experience in building
          vessels comparable to those currently in demand.

               U.S. Government.  In addition to the contract
          award by the U.S. Navy to build the first LPD-17
          vessel, 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 12 vessels will be built under the LPD-17
          program.  The members of the alliance, Bath,
          Hughes 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 and Bath would construct
          the third of the three LPD-17 vessels.  Hughes
          will be responsible for total ship integration and
          the alliance will use Intergraph technology for
          the design and manufacture of the ship.

               The first three vessels of the LPD-17 program
          will be built pursuant to a cost-plus-award fee
          contract, with the Company, Hughes and Bath being
          entitled to reimbursement for their 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.  The maximum award fee to be
          earned is 10% of the bid cost for the LPD-17
          contract, and it is anticipated that any award fee
          granted will be paid incrementally upon completion
          of each periodic evaluation.  Pursuant to the
          subcontracting agreements entered into between the
          Company and each of Bath and Hughes, 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
          profit on the LPD-17 contract upon award of any
          incremental fee.  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
<PAGE>
          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 billing not only its own
          costs, but also any costs incurred by Bath and
          Hughes. Accordingly, all such amounts will be
          reflected in the Company's financial statements.

               The Company's backlog at December 31, 1996
          includes $641 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 other alliance members.  To the
          extent that the Company's revenues include costs
          incurred by and award fees paid to the other
          alliance members, the Company's profit margins
          will be reduced.

               If the U.S. Navy proceeds with its previously
          announced intention to construct additional LPD
          vessels beyond the first three, the Company
          expects that the contracts for such vessels will
          provide for a more traditional pricing
          arrangement, such as a fixed-price incentive
          contract or fixed-price contract.

               The U.S. Navy has stated that the LPD-17
          vessels will be important to its amphibious
          operations over the next three decades, and will
          replace a number of ships that will be
          decommissioned as they reach the end of their
          useful lives.  In 1995, Congress appropriated
          $974.0 million for the construction of the first
          of an anticipated 12 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.  If the U.S. Navy awards contracts to
          construct the 12 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 five
          Sealift ships with remaining contract billings of
          $875.1 million (including estimated contract
          escalation). The Sealift ships, which are designed
          to assist in the rapid transportation and
          deployment of military personnel, equipment and
          supplies, are comparable to other vessels, such as
          auxiliary and amphibious support ships, that have
          been previously constructed by Avondale for the
          military. In addition, the Navy holds an option to
          require the Company to construct an additional
<PAGE>
          Sealift vessel for an additional $240 million
          (including estimated contract escalation), which
          option is expected to be exercised by the end of
          1997.  The first Sealift ship is scheduled for
          delivery in 1998 with the final ship (assuming
          exercise by the U.S. Navy of the remaining Sealift
          option) scheduled for delivery in 2000.

               Although no new major U.S. Navy shipbuilding
          programs are anticipated 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 SC-21,
          which represents the next generation of surface
          combatant vessels, will become available
          thereafter.

               Commercial Shipbuilding. Two legislative
          enactments in the early 1990s have 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,
          has created a demand (that is expected to continue
          through the remainder of the decade) for the
          retro-fitting of existing tankers and the
          construction of new double-hulled tankers, as oil
          and energy companies and other ship operators
          upgrade their fleets to comply with the law.
          Industry analysts believe that other countries may
          pass laws comparable to the Oil Pollution Act of
          1990, which would further increase worldwide
          demand for double-hulled product carriers.

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

               Management believes these initiatives have
          assisted Avondale in attracting recent commercial
          shipbuilding opportunities. In May 1995, the
          Company finalized a $143.9 million contract to
<PAGE>
          construct four double-hulled forebodies for
          product carriers owned by a U.S. shipping company.
          These double-hulled product carriers are the first
          U.S.-flag product carriers built in the United
          States in eight years. The contract is supported
          by a Title XI guarantee by MARAD. The completed
          vessels incorporating the first two forebodies
          were delivered in October 1996 and January 1997,
          respectively, with the remaining two forebodies
          scheduled for completion by the third quarter of
          1997. Avondale believes its receipt of this
          contract was further assisted by its prior
          experience in constructing three double-hulled
          T-AOs on behalf of the U.S. Navy.

               In November 1995, the Company signed a
          contract for the construction of up to six (but
          not less than four) double-hulled product
          carriers. This contract is subject to the
          customer's ability to qualify for and receive a
          Title XI MARAD financing guarantee. The contract
          originally called for delivery of the vessels by
          the end of 1998. However, in April 1996 at the
          request of the customer a modification of the
          agreement was reached to extend the delivery from
          1998 to the year 2000. These U.S.-flag vessels
          will comply with all requirements of the Oil
          Pollution Act of 1990 and will engage in
          transportation of petroleum products between U.S.
          ports under the Jones Act.

               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 12
          years. During 1996, Congress adjourned without
          adopting or ratifying the OECD Agreement.
          Proponents of the OECD Agreement may seek to have
          it reconsidered in 1997 and, if such legislation
          were enacted by Congress in its current form, the
          Title XI guarantee program would be modified to be
<PAGE>
          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.

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

               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 will become
          available during the next five years.  Future
          commercial opportunities include constructing
          vessels with national defense features for the RRF
          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 which requires the
          phase-in transition of single-hulled tankers and
          product carriers to double-hulled vessels
          beginning January 1, 1995.  Although orders for
          new vessels have not been placed at the rate
          originally expected by the Company, management
          believes a significant volume of such work will
          begin to become available before 2000, with orders
<PAGE>
          being placed in the next two years.

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

               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
          has built a covered facility that houses two
          production lines dedicated to military vessels and
          two lines for commercial vessels.  Avondale
          believes that sheltering the production process
          and separating the unit lines will enhance
          production efficiencies and lower unit production
          costs.

               Because the construction of commercial
          vessels, particularly the product carriers that
          Avondale has traditionally built, places an
          emphasis on steel fabrication rather than the
          complex technological outfitting involved in U.S.
          naval construction, Avondale's ability to compete
          effectively for additional commercial work should
          be enhanced by the new assembly-line process.

<PAGE>
               An important element of the award to Avondale
          of the LPD-17 contract was its utilization of
          computer hardware and software provided by
          Intergraph that will permit the Company to engage
          in more advanced three-dimensional ship design and
          modeling than previously used by the Company.
          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 in a teaming approach, thus
          enhancing the efficiency of the design phase.  In
          connection with the LPD-17 program and future
          shipbuilding contracts, the Company will implement
          an IPDE which captures data in digital form at
          creation and then organizes, integrates, maintains
          and makes available such data to all program
          participants.

          Shipbuilding

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

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

               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, 1996 was comprised of new military
          construction. Commercial new construction
          increased in 1995 and 1996, principally due to the
          construction of the four forebodies and the
<PAGE>
          construction of the river hopper barges discussed
          in "-Other Operations - Boat Division."


          Distribution of Marine Construction and Repair Work
         <TABLE>
         <CAPTION>
                                           Years Ended
                                           December 31,

                               1992     1993    1994     1995   1996
          <S>                  <C>      <C>     <C>      <C>    <C> 
          U.S. MILITARY:
           New construction     87%      88%     81%      80%    81%
           Repair, overhaul
            and conversion       6%       2%     --        --    --

          COMMERCIAL:
           New construction      2%       6%     11%      16%    17%
           Repair, overhaul
            and conversion       5%       4%      8%       4%     2%
                               ---      ---     ---      ---    --- 
                    TOTAL      100%     100%    100%     100%   100%
                               ===      ===     ===      ===    ===
          </TABLE>
           The percentage of new construction for the U.S.
           Navy in 1996 was virtually unchanged since 1994.
           Commercial repair, overhaul and conversion
           decreased in 1995 as compared to 1994, as the
           Company's work on several contracts with a
           private contractor for the repair of Sealift
           ships approached completion. See "-Other
           Operations - Repair Operations."

               Government Contracting.  Avondale's principal
           U.S. government business is currently being
           performed under fixed-price and fixed-price
           incentive contracts, although the recent LPD-17
           contract is a cost-plus-award fee contract. Under
           fixed-price contracts, the contractor retains all
           cost savings on completed contracts but is also
           liable for the full amount of all cost overruns
           for which it is responsible. Fixed-price
           incentive contracts, on the other hand, provide
           for sharing between the government and the
           contractor of cost savings and cost overruns
           based primarily on a specified formula that
           compares the contract target cost with actual
           cost. In addition, such fixed-price incentive
           contracts generally provide for payment of
           escalation of costs based on published indices
           relating to the shipbuilding industry. Although
           all cost savings are shared under fixed-price
           incentive contracts, cost overruns in excess of a
           specified amount must be borne entirely by the
           contractor. Recent contract awards for the
           Sealift vessels, the fourth LSD-CV and the
           Icebreaker are each fixed-price incentive
           contracts.  The LPD-17 contract provides for the
<PAGE>
           payment of all costs that are reimbursable under
           government contracts.  The 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 "- Overview."

               All contracts for the construction and
           conversion of U.S. Navy vessels are subject to
           competitive bidding. As a safeguard to
           anti-competitive bidding practices, the U.S. Navy
           has recently employed the concept of "cost
           realism," which requires that each bidder submit
           information on pricing, estimated costs of
           completion and anticipated profit margins. The
           U.S. Navy uses this and other data to determine
           an estimated cost for each bidder. The U.S. Navy
           may then re-evaluate a bid by using the higher of
           the bidder's and the U.S. Navy's cost estimates.

               Under government regulations, certain costs,
           including certain financing costs, portions of
           research and development costs and certain
           marketing expenses, are not allowable costs under
           fixed-price incentive and cost contracts. The
           government also regulates the methods by which
           overhead costs are allocated to government
           contracts.

               U.S. government contracts are subject to
           termination by the government either for its
           convenience or upon default by the contractor. If
           the termination 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
<PAGE>
           together with options (exercisable by the U.S.
           Navy) to purchase additional vessels in the
           program. Generally, contracts to build vessels
           are not awarded until funds to pay the full
           contract have been appropriated. However, because
           Congress usually appropriates funds on a fiscal
           year basis, funds may never be appropriated to
           permit the U.S. Navy to exercise options that
           have been awarded. In addition, even if funds are
           appropriated, the U.S. Navy is not required to
           exercise the options.

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

               Due to the complexity of government contracts
           and applicable regulations, contract disputes
           with the government may occur in the ordinary
           course of the Company's business. Based upon
           management's analysis of each such dispute and
           advice of counsel, the Company records, if
           appropriate, an estimate of the amount
           recoverable upon resolution of such disputes.
           There are currently no such amounts recorded.
           Although management believes its estimates are
           based upon a reasonable analysis of such
           disputes, no assurance can be given that its
           estimates will be accurate, and variances between
           such estimates and actual results can be
           material. The Company believes that adequate
           provision has been made in its financial
           statements for this and other normal
           uncertainties incident to its government
           business.

               There is significant oversight of defense
           contractors to prevent waste in the defense
           procurement process. Areas of contract dispute
           are reviewed by the government for evidence of
           criminal misconduct such as mischarging, product
           substitution and false certification of pricing
           and other data. In the event the government
           alleges a violation of its procurement
           regulations, it may seek compensatory, treble or
           punitive damages in substantial amounts and
           indictments, fines, penalties and forfeitures. In
           addition, the government has the right to suspend
<PAGE>
           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, 1996, 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
           for additional ship orders (including estimated
           contract escalation)) compared with backlogs of
           $1.4 billion each at December 31, 1995 and 1994.
           The Company's firm backlog at December 31, 1996
           primarily consisted of $186 million to complete
           the Icebreaker, $875 million to complete the
           remaining five Sealift ships and $641 million
           related to the LPD-17 contract.

               Vessel deliveries in 1995 and 1996 included
           three T-AOs, two LSD-CVs, three MHCs,  one gaming
           vessel and one double-hulled forebody. The
           Company plans to continue to actively pursue
           other government construction and conversion
           opportunities, as well as commercial
           opportunities, when they become available.

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

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

           Other Operations

               Overview.  Although the Company has from time
           to time, on a limited basis, pursued
           opportunities to diversify its business,
           management strongly believes that the Company's
           resources are most profitably employed in marine
           construction. As noted in "Management's
           Discussion and Analysis of Financial Condition
           and Results of Operations," in order to focus on
           its core shipbuilding business and improve
           liquidity, the Company sold or discontinued
           certain of its non-core operations. The Company
<PAGE>
           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); and (iv) steel fabrication and other
           operations.

               Modular Construction.  The Company has been
           able to apply its modular construction methods to
           a variety of non-marine industrial fabrication
           projects, including a sulphur recovery plant that
           was shipped to Saudi Arabia for on-site assembly
           and installation, two cryogenic gas separation
           systems, two waste disposal units, six turbine
           compressors and turbine generators, six condenser
           modules for inclusion in a nuclear power plant
           and two sled and receiver modules for sub-sea
           pipeline connections. The Company has also
           fabricated steel bridges and a hydroelectric
           power plant that was floated up the Mississippi
           River and installed in Vidalia, Louisiana in
           1990. In 1992, the Company delivered to the City
           of New York an 800-bed floating detention
           facility that is 625 feet long, 125 feet wide and
           five stories high.   Sales to unrelated third
           parties for the years ended December 31, 1996,
           1995 and 1994 were $8.5 million, $9.8 million and
           $10.3 million, respectively.

               Avondale's modular construction division has
           not engaged in any significant projects since the
           floating detention center was delivered in the
           early 1990s. Although at present there is a
           minimal level of production activity in this
           division, Avondale will continue to pursue
           non-shipbuilding marine and industrial-commercial
           projects suitable for modular construction as
           attractive opportunities arise.

               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, the division was primarily engaged in
           the construction of river hopper barges under a
           contract signed in 1995 with the Ingram Ohio
<PAGE>
           Barge Company. The Boat Division is actively
           pursuing other projects, including the
           construction of additional gaming boats as well
           as passenger vessels and ferries, towboats and
           other vessels. The Boat Division's backlog at
           December 31, 1996, 1995, 1994 was approximately
           $11.9 million, $18.8 million and $18.3 million,
           respectively.  Sales to unrelated third parties
           for the years ended December 31, 1996, 1995 and
           1994 were $10.2 million, $29.4 million and $40.6
           million, respectively.

               Steel Operations. Through its Steel Sales
           operation, Avondale sells steel plate and
           structural steel to the marine and industrial
           markets in the Gulf Coast region of the United
           States. Net sales to other Avondale divisions are
           not significant. Sales to unrelated third parties
           for the years ended December 31, 1996, 1995 and
           1994 were approximately $40.1 million, $28.2
           million and $22.4 million, respectively.

               Repair Operations. At its main shipyard and
           the Algiers shipyard, Avondale engages in the
           repair, overhaul and conversion of ocean-going
           vessels. With the 900 and 650 foot drydocks
           located at the Company's main shipyard, the
           Company is capable of offering a complete range
           of vessel repairs and overhaul services. The
           Algiers shipyard is operated under a long-term
           lease and is designed primarily for the topside
           repair and overhaul of large ocean-going vessels.
           Although historically Avondale has engaged in the
           repair and overhaul of U.S. Navy vessels, these
           opportunities have been curtailed by the U.S.
           Navy's current policy of requiring such work to
           be conducted at or near the vessels' home ports.
           Sales to unrelated third parties for the years
           ended December 31, 1996, 1995 and 1994 were $13.5
           million, $27.3 million and $30.3 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.
<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 "-Overview -
           Commercial Shipbuilding."

               Substantially all military and commercial
           contracts awarded to U.S. shipyards are
           competitively bid. The Company believes that it
           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 believes that its recent securing of the
           LPD-17 award has continued to demonstrate
           Avondale's ability to compete successfully for
           U.S. Navy contracts based on the high level of
           its technical, engineering and production skills
           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.

           Materials and Supplies
<PAGE>
               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.

           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
<PAGE>
           several "strict liability" for remediation of
           spills and releases of oil and hazardous
           substances rendering a person liable for
           environmental damage, without regard to
           negligence or fault on the part of such person.
           Such laws and regulations may expose the Company
           to liability for the conduct of or conditions
           caused by others, or for acts of the Company
           which are or were in compliance with all
           applicable laws at the time such acts were
           performed. The Company is covered under its
           various insurance policies for some, but not all,
           potential environmental liabilities. See Note 10
           of the Notes to Consolidated Financial
           Statements.

               The Company is also subject to the federal
           Occupational Safety and Health Act ("OSHA") and
           similar state statutes. The Company has an
           extensive health and safety program and employs a
           staff of safety inspectors and industrial hygiene
           technicians, whose primary functions are to
           develop Company policies that meet or exceed the
           safety standards set by OSHA, train supervisors
           and make daily inspections of safety procedures
           to insure their compliance with Company policies
           on safety and industrial hygiene. All supervisors
           are required to attend safety training meetings
           at which the importance of full compliance with
           safety procedures is emphasized.

               Waste Disposal.  Avondale's operations
           produce a limited amount of industrial waste
           products and certain hazardous materials. The
           Company's industrial waste products, which
           consist principally of residual petroleum, other
           combustibles and blasting abrasives, are shipped
           to third party disposal sites that are licensed
           to handle such materials.

           Employees

               At December 31, 1996, Avondale had
           approximately 5,200 employees, many of whom have
           been employed by the Company for many years.  In
           February 1997 the National Labor Relations Board
           ("NLRB") confirmed the results of a 1993
           election.  The Company continues to believe that
           it has substantive and meritorious bases for
           overturning the decision of the NLRB and intends
           to take steps to have the propriety of the
           election reviewed in court.   If the NLRB
           certifies the union and that decision is upheld,
           the Company will be required under the federal
           labor laws to bargain in good faith with the
           union on matters such as wages, hours and other
           working conditions.  Even though Avondale will
           only agree to bargaining demands that can be
           economically justified, union certification may
<PAGE>
           result in an increased risk that the union will
           engage in potentially disruptive activities such
           as strikes or picketing, or that the Company may
           incur higher labor and operating costs.

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


           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
                      currently under construction at
                      Avondale.

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

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

          Icebreaker  WAGB-20 Polar Icebreaker, which has been
                      ordered by the U.S. Coast Guard for its
                      polar operations.

          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.

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

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

          LPD-17    The next class of amphibious transport
                    ship for the U.S. Navy.  Avondale was
                    awarded a contract, with two options,
                    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 of more cargo and
                    only 2 LCACs.  Avondale has built four
                    LSD-CVs.

          MARAD     United States Maritime Administration,
                    Department of Transportation.

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

          REAs      Requests for Equitable Adjustments
                    submitted by a government contractor to the
                    U.S. government.

          RRF       Ready Reserve Fleet, an inactive reserve
                    of merchant ships and naval auxiliaries
                    maintained by MARAD which can be activated to
                    meet U.S. shipping requirements during
                    national emergencies.

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

          SL7       A "Roll on Roll off" vessel operated by
                    the Military Sealift Command and crewed by a
                    civilian crew.  Avondale has converted three
                    SL7s.

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

<PAGE>
          TAGS-45   An oceanographic research vessel
                    constructed by Avondale and delivered to
                    the U.S. Navy in May 1993.

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

         Item 2.   Properties

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

               The Company's 900-foot floating drydock was
          constructed in 1975 and financed pursuant to Title
          XI of the Merchant Marine Act, 1936, as amended.
          The 900 foot drydock is currently subject to a
          Title XI mortgage of approximately $3.1 million.
          As discussed further in Note 4 of the Notes to the
          Consolidated Financial Statements, these mortgage
          bonds were refinanced in February 1995.

               The Company's 650-foot floating drydock and
          support facilities were constructed in 1982 and
          financed with $36.25 million of industrial revenue
          bonds (see Note 4 of the Notes to the Consolidated
          Financial Statements).

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

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

               The Avondale Gulfport Marine, Inc. ("AGM")
          facility, which is located six miles northeast of
          Gulfport, Mississippi on an industrial seaway, was
          sold in December 1996.

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

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

               Except as otherwise noted above, the above-
          described facility leases are for various terms
          extending through at least 2000, including renewal
          options.

               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 more than
          5,200 employees.

          Item 3.   Legal Proceedings

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

               In January 1986, the Louisiana Department of
          Environmental Quality ("DEQ") advised the Company
          that it could be a potentially responsible party
          ("PRP") with respect to an oil reclamation site
          operated by an unaffiliated company in Walker,
          Louisiana. The Company sold to the operator a
          substantial portion of the waste oil that was
          processed at the reclamation site during the
          period 1978 through 1982. The Company's potential
          liability, if any, for cleanup of this site will
          be based on the Comprehensive Environmental
          Response, Compensation and Liability Act of 1980
          ("CERCLA") or the Louisiana Environmental Affairs
          Act. Under these statutes, such liability is
          presumptively joint and several, but is typically
          apportioned among the responsible parties based on
          the volume 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, 1996
          such costs totaled $18.8 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, 1996, the
          balance of the escrow was $6.2 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 is 17.5%.

               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 has paid approximately
          $6.0 million into a settlement fund.  The Company
          also agreed to pay up to an additional $6.0
          million (plus interest at 8% per annum) if the
          plaintiffs are unsuccessful in collecting certain
          claims under Avondale's insurance policies that
          have been assigned to the plaintiff class under
          the settlement agreement. During the first quarter
          of 1997, certain remaining parties to the
<PAGE>
          litigation, including Avondale's insurers, reached
          a tentative settlement, pursuant to which
          Avondale's insurers agreed to pay the plaintiffs
          an amount in excess of the $6.0 million (plus
          interest) for which Avondale was responsible in
          full and final satisfaction of the plaintiff's
          claims against Avondale and Avondale would be
          released from liability.  The tentative settlement
          agreement is subject to a fairness review by the
          trial court. With respect to the potential
          contingent liability of the Company to pay
          additional sums if the tentative settlement is not
          approved by the court, management believes that
          the eventual resolution of this matter will not
          have a material adverse effect on the Company's
          results of operations, financial position or cash
          flows.

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

               In addition to the above, the Company is also
          named as a defendant in other lawsuits and
          proceedings arising in the ordinary course of
          business, some of 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, 1996.


<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 the Nasdaq National
          Market, for the periods indicated.
          <TABLE>
          <CAPTION>
          Fiscal Year Ended December 31,   High         Low
                                           ----         --- 
           <S>                          <C>           <C>   
           1995
  
             First Quarter              $  8 1/8      $   7  1/8

             Second Quarter             $  9 1/4      $   7
                          
             Third Quarter              $ 15 7/8      $   8  1/8

             Fourth Quarter             $ 16 3/8      $  12  3/4

           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
           </TABLE>

           At December 31,  1996, there were 760 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,  1996.   As
           discussed  in  Note  4  of   the   Notes   to
           Consolidated  Financial Statements, the terms
           of the Company's  revolving  credit agreement
           limit or restrict, without bank approval, the
           payment of cash dividends.










<PAGE>
           Item 6.Selected Consolidated Financial Data.

           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, 1996.  The  data  for  each  of the fiscal
           years in the five-year period ended December  31,  1996
           are  derived from the consolidated financial statements
           of the  Company and its subsidiaries.  The consolidated
           financial  statements as of December 31, 1995 and 1996,
           and for each  of  the  years  in  the three-year period
           ended December 31, 1996, 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)
                                    1992       1993      1994(2)    1995(2)   1996(2)
                                   -------    -------    -------    -------   ------
      <S>                         <C>        <C>        <C>        <C>        <C> 
      INCOME STATEMENT DATA:(1)
      Continuing operations:
        Net sales                 $576,384   $456,724   $475,810   $576,308  $624,929
        Gross profit                37,796     33,180     47,485     58,671    81,827
        Income from operations       7,281      3,400     16,949     26,548    36,790
        Net ESOP contribution(3)     8,141        ---        ---        ---       ---
        Income (loss) from
          continuing operations    (11,321)    (5,233)    13,075     28,180    30,795
      Income (loss) from
        discontinued operations      104     (3,561)    (4,552)       ---        ---
      Net income (loss)(4)       (11,217)    (8,794)     8,523     28,180     30,795
      Income (loss) per share of
         Common Stock:
         Continuing operations     (0.78)     (0.36)      0.90       1.95       2.13
         Discontinued operations      NM      (0.25)     (0.31)       ---        ---
         Total                     (0.78)     (0.61)      0.59       1.95       2.13

       BALANCE SHEET DATA:
       Working capital           $63,158    $24,565    $34,836    $80,988   $119,475
       Total assets              346,196    302,139    273,503    316,727    362,872
       Long-term debt             90,469     43,848     45,875     60,593     54,866
       Shareholders' equity      123,149    114,355    122,878    151,058    181,853
       OTHER FINANCIAL DATA:
       EBITDA(5)                 $19,599    $15,210    $28,501    $36,367   $ 47,599
       OPERATIONAL DATA:
       Firm backlog             $678,000 $1,268,000 $1,424,000 $1,413,000 $1,766,000
       </TABLE>
                    ____________________
              NM    Not Meaningful
             (1)    Income statement  data for the years ended December 31, 1992
                    and 1993 have been  restated  to  present Avondale's service
                    contracting subsidiary as discontinued  operations (see Note
                    5 of the Notes to Consolidated Financial Statements).
             (2)    See  "Management's  Discussion  and  Analysis  of  Financial
                    Condition  and  Results  of  Operations" and  the  Notes  to
                    Consolidated Financial Statements  relating  to, among other
                    things,  (i)  proceeds  received  by  the  Company from  the
                    settlements of REAs in December 1995 and (ii)  the impact of
                    revisions  of  estimated  profit  on  a previously completed

<PAGE>
                    shipbuilding contract in 1994, 1995 and 1996.
             (3)    The  amounts  reflected as Net ESOP contributions  for  1992
                    reflect contributions  made  by the Company to the ESOP, all
                    of  which  were returned to the  Company  as  repayments  of
                    indebtedness  owed  by  the  ESOP to the Company incurred in
                    connection with the purchase by the ESOP of the Common Stock
                    of the Company in 1985.  Although  these  contributions were
                    charged against income, they had no effect  on shareholders'
                    equity.
             (4)    Net  income for the years ended December 31, 1995  and  1996
                    include  deferred income tax benefits of $13.0 million ($.90
                    per share)  and $9.0 million ($.62 per share), respectively,
                    attributable  to  certain  net operating loss carry forwards
                    available to offset estimated  future taxable earnings.  See
                    "Management's Discussion and Analysis of Financial Condition
                    and Results of Operations."
             (5)    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  is  not   a  calculation  under  generally  accepted
                    accounting principles  and  should  not  be considered as an
                    alternative  to  net  income as a measure of  the  Company's
                    operating performance or  as an alternative to cash flows as
                    a measure of the Company's liquidity.

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

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

          Overview

               The  improvement  in the Company's  operating
          results  continued during  fiscal  1996  with  the
          Company reporting  record  financial  results  for
          1996.  Net  sales  were  8% above the prior year's
          level,  income from continuing  operations  before
          income  taxes   increased   45%   and  net  income
          increased by 9% compared to fiscal 1995.

               The  Company's firm backlog at  December  31,
          1996  was approximately  $1.8  billion  (including
          estimated   contract   escalation)   exclusive  of
          unexercised options aggregating $1.1 billion  held
          by  the U.S. Navy (the "Navy") for additional ship
          orders  (including estimated contract escalation).
          Firm backlog  includes  two Navy contracts awarded
          in 1996, the first of which  was the exercise of a
          previously   awarded   option   to  construct   an
          additional  Sealift ship for approximately  $211.1
          million  (or  more   than   $240   million   after
          considering   certain  additional  components  and
          reimbursable escalation).  The  exercise  of  this
          option represents the fifth ship which the Company

<PAGE>
          has  been awarded in the Sealift program. The Navy
          holds  an  option  for  an additional Sealift ship
          which is exercisable in 1997.

               In December 1996, the  U.S.  Navy  awarded  a
          contract  to build the first ship of its new class
          of  LPD-17 vessels  to  an  alliance  led  by  the
          Company.   In  addition,  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 12 vessels will be built
          under the LPD-17  program.   The  members  of  the
          alliance, Bath, Hughes 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 and Bath would construct the third  of  the
          three  LPD-17 vessels.  Hughes will be responsible
          for total  ship  integration and the alliance will
          use  Intergraph  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  the entire
          contract  amount  for  each  vessel  in the LPD-17
          program  constructed  by the alliance as  revenue.
          Under the subcontracting  agreements  entered into
          between  the Company and each of Bath and  Hughes,
          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  by  and  award  fees  paid to the  other
          alliance  members,  the  Company's profit  margins
          will  be reduced.  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."

               Vessel deliveries in fiscal 1996 included the
          third  of  three LSD-CVs and a double-hulled  T-AO
          representing  the 16th vessel built by the Company
          since  the program's  inception  in  1982.   These
          deliveries    represent    the    completion    of
          construction  on  two  multi-ship  programs  which
          provided  a  significant  portion of the Company's
          workload    over    the   past   several    years.
          Additionally, the Company  delivered  the third of
          four MHC-51 vessels in 1996, and in January  1997,
          the  Company delivered the fourth and final vessel
          under the contract.

               The Company's operating results projected for
          1997 are expected to be related principally to the
          LSD-CV  52,  the  Sealift  ship  contracts and the

<PAGE>
          Icebreaker, while results projected  for  1998 are
          expected  to  reflect  primarily  the  Sealift and
          Icebreaker   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. One of
          these facilities was sold  in  December  1996, and
          the  other  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.

          Results of Operations

               1996  vs. 1995.   The  Company  recorded  net
          income of $30.8  million,  or $2.13 per share, for
          1996  compared  to  $28.2 million,  or  $1.95  per
          share, 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  $9.0
          million, or $0.62 per share, and $13.0 million, or
          $0.90 per share, respectively, as discussed below.
          Also included in 1996 and 1995 net income are $4.4
          million,  or $0.30 per share, and $4.5 million, or
          $0.31 per share,  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.

               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

<PAGE>
          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-hull 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.

               The impact of these losses was  mitigated  by
          the   fact   that   these   contracts  absorbed  a
          substantial  amount  of  operating  expenses  that
          would  otherwise  have  been  allocated  to  other
          contracts.  In addition, these contracts have been
          important  in  the Company's  reemergence  in  the
          competitive commercial  tanker  and barge 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 production 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-hull 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

<PAGE>
          last of which was delivered in May 1996)  and four
          MHCs  (the  third  of  which was delivered in July
          1996  and  the  last  of 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.

               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 forebodies 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 computer equipment
          rental   costs  associated  with   the   Company's
          successful   LPD-17   proposal.   These  increases
          represent  76%  of  the  increase   in  1996  SG&A
          expenses.

               The Company's 1996 and 1995 operating results
          include  income  tax benefits of $9.0 million,  or
          $0.62 per share, and  $13.0  million, or $0.90 per
          share, respectively.  As further discussed in Note
          7   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   $9.0   million   and  $13.0  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.     As   of   December   31,   1996,
          substantially all of  the  Company's net operating
          loss  carry  forwards  have  been  recognized  for
          financial reporting purposes.

               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

<PAGE>
          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.

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

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

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

<PAGE>
          1995)  and  four MHCs (the  first  of  which   was
          delivered in  1995),  as  these contracts approach
          completion. The contracts to  construct the T-AOs,
          three   LSD-CVs,   and   four   MHCs  collectively
          accounted for 28% of the Company's  1995 net sales
          revenue.

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

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

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

               The  Company's 1995 operating results include
          a net income tax benefit of $4.4 million, or $0.30
          per share.  As  further discussed in Note 7 of the
          Notes to Consolidated  Financial  Statements,  the
          net  income  tax benefit is principally the result
          of recognizing,  for financial reporting purposes,
          a $13.0 million income  tax  benefit  from certain
          net  operating  loss  carry forwards available  to
          offset  estimated  future  taxable  earnings.  The
          $13.0 million tax benefit  was partially offset by
          an income tax provision of $8.6 million related to
          1995  operating  results.  There   was   a   minor
          provision  for income taxes in the same period  in
          1994 as an income tax benefit related to available
          net operating  loss  carry forwards was recognized
          only  to  the  extent of  then  current  operating
          results.

          Liquidity and Capital Resources

<PAGE>
               The  Company's   cash  and  cash  equivalents
          totaled  $48.9 million at  December  31,  1996  as
          compared to  $38.5  million  at December 31, 1995.
          Contributing  to  the  improved  cash  balance  at
          December  31,  1996  were amounts collected  as  a
          result of the settlement  of the Company's Request
          for Equitable Adjustment ("Minehunter  REA") filed
          with  the  U.S.  Navy  related  to  the  four MHCs
          currently under contract (as discussed in  further
          detail  in  Note  2  of  the Notes to Consolidated
          Financial  Statements).  The  Company's  operating
          activities represented  a  significant  source  of
          cash   in  1996,  generating  approximately  $26.7
          million.   The  Company's  primary uses of cash in
          the current year consisted of capital expenditures
          of $13.8 million and principal  payments  on long-
          term borrowings of $5.8 million.

               The Company's $42.5 million revolving  credit
          agreement  ("the  agreement")  provides  available
          liquidity  for  working  capital purposes, capital
          expenditures and letters of  credit.   At December
          31, 1996, there were approximately $11.3   million
          of  letters of credit issued against the agreement
          leaving  approximately  $31.2 million of liquidity
          available  to Avondale for  operations  and  other
          purposes. Continuing  access  to  the agreement is
          conditioned   upon   the   Company  remaining   in
          compliance  with  the  covenants   which   include
          certain  financial  ratios.   At December 31, 1996
          the Company was in compliance with  the  covenants
          contained therein.  The Company believes that  its
          capital  resources  will  be sufficient to finance
          current and projected operations.

               In order to comply with the terms of the LPD-
          17  contract,  the Company will  make  significant
          capital expenditures,  particularly to enhance its
          computer-aided   design   and   product   modeling
          capabilities.    The   Company    currently    has
          sufficient  cash  and available lines of credit to
          fund  these capital  expenditures.   Nevertheless,
          the Company  and  its banks agreed to increase the
          size of its revolving  credit agreement from $42.5
          million  to  $85  million  conditioned   upon  the
          favorable resolution of the protest of the  LPD-17
          contract (which resolution is anticipated in early
          April  1997).   The  increase  in  the size of the
          agreement  is sufficient to allow the  Company  to
          fund the expenditures  on  an  interim  basis with
          borrowings  under  the  agreement while preserving
          the  current  level of available  liquidity.   The
          amended  agreement  provides  that  the  available
          credit under  the  agreement  will  be  reduced to
          approximately   $50   million   once  a  long-term
          financing for the LPD-17 expenditures  is in place
          (as  discussed  below) and, at the same time,  the
          banks  have agreed  to  eliminate  all  collateral
          except their second mortgage on the Company's 900-
          foot floating  drydock.   In addition, the amended
          agreement would extend the  expiration  date until
          April 2000.

<PAGE>
               Under  planned  long-term  financing for  the
          LPD-17 expenditures, the Company,  in  conjunction
          with   the   University   of   New   Orleans  (the
          "University"),  and the University of New  Orleans
          Research    and   Technology    Foundation    (the
          "Foundation"),  intends  to  construct  a  200,000
          square  foot  building  on  property  owned by the
          Company  adjacent to the Company's main  shipyard.
          In addition, the plan includes the purchase of the
          hardware and  software required to comply with the
          LPD-17   contract    terms    related    to    the
          implementation  of the extensive three-dimensional
          ship  design  and IPDE  teaming  technology.   The
          initial investment  in  this  new  facility, which
          will   be  known  as  the  "UNO/Avondale  Maritime
          Technology  Center of Excellence," is estimated at
          $40  million,   and   will   be  financed  by  the
          Foundation   using  third-party  debt   or   lease
          financing   to   be    repaid    through    annual
          appropriations  from  the state and guaranteed  by
          the Company.  The Company  will enter into a long-
          term lease for the Center requiring only a nominal
          lease  payment.  The Company  will  guarantee  the
          debt and  provide  access  to the technology and a
          portion of the Center to the  University for their
          use in research and the development of educational
          curricula.  The Company and the  University are in
          the  process  of securing the required  approvals.
          Development of  the Center and the requisite state
          support   are   contingent   on   the   successful
          resolution of the LPD-17 protest.

               The Company's  estimated  net  operating loss
          carry  forward  for  income tax purposes  was  $29
          million at December 31,  1996.   This amount, plus
          available income tax credits from  prior  years of
          $5.4  million,  and  $2.7  million  of alternative
          minimum  tax credits will  be used to  reduce  the
          income tax  liabilities  for 1997 and later years.
          The $1.76 million cash paid  in  1996  for  income
          taxes  reflects  payments  for alternative minimum
          tax.  The net operating loss carry forwards expire
          in  years  2006 through 2008 and  the  tax  credit
          carry forwards  expire in years 2000 through 2011.
          The alternative minimum tax credits may be carried
          forward indefinitely.   The  Company  expects that
          a  "change  of  control"  of  the  Company for tax
          purposes  is  likely  to  occur  in 1997 which may
          limit the timing  of  the Company's use of its net
          operating loss carry forwards  in  1997  and later
          years.

          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, 1995 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,
          1996.    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,
          1995 and 1996, and the results of their operations
          and their cash flows for  each  of the three years
          in   the  period  ended  December  31,   1996   in
          conformity   with  generally  accepted  accounting
          principles.


          /s/ Deloitte & Touche LLP
          DELOITTE & TOUCHE LLP
          New Orleans, Louisiana
          February 17, 1997















<PAGE>
                                  AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
                                           CONSOLIDATED BALANCE SHEETS
                                              (dollars in thousands)
            <TABLE>
            <CAPTION> 
                                                           December 31,
                                                       ------------------
            ASSETS                                       1995       1996        
                                                       --------   ------- 
            <S>                                        <C>        <C>
            Current Assets:
            Cash and cash equivalents                  $ 38,524   $ 48,944
            Receivables (Note 2)                         93,184    119,139
            Inventories (Note 3)                         15,289     21,785
            Deferred tax assets (Note 7)                 23,650     30,157
            Prepaid expenses and other current assets     2,946      2,465
                                                        -------    ------- 
            Total current assets                        173,593    222,490
                                                        -------    -------
            Property, Plant and Equipment (Note 4):
            Land                                          9,161      7,984
            Buildings and improvements                   59,991     59,598
            Machinery and equipment                     182,547    187,029
                                                        -------    -------
            Total                                       251,699    254,611
            Less accumulated depreciation              (121,661)  (127,009)
                                                        -------    ------- 
            Property, plant and equipment - net         130,038    127,602
                                                        -------    -------
            Goodwill - net                                8,637      8,073
            Other assets                                  4,459      4,707
                                                        -------    ------- 
            TOTAL ASSETS                               $316,727   $362,872
                                                        =======    =======
            <CAPTION>
            LIABILITIES AND SHAREHOLDERS' EQUITY
            ------------------------------------
            <S>                                        <C>        <C>   
            Current Liabilities:
            Current maturities of
              long-term debt (Note 4)                  $  5,062  $  4,957
            Accounts payable                             65,517    73,589
            Accrued employee compensation                10,777    11,630
            Other                                        11,249    12,839
                                                        -------   -------
            Total current liabilities                    92,605   103,015
            Long-term debt (Note 4)                      60,593    54,866
            Deferred income taxes (Note 7)                  850    10,300
            Other liabilities and deferred credits       11,621    12,838
                                                        -------   ------- 
            Total liabilities                           165,669   181,019
                                                        -------   -------
            Commitments and Contingencies (Notes 6 and 10)

            SHAREHOLDERS' EQUITY (Note 9):
            Common  stock,  $1.00  par  value;
              authorized - 30,000,000 shares;
              issued - 5,927,191 shares in 1995
              and 1996                                  15,927    15,927
            Additional paid-in capital                 373,911   373,911
            Accumulated deficit                       (226,924) (196,129)
                                                       -------   -------
            Total                                      162,914   193,709
            Treasury stock (1,463,016 shares in 1995
              and 1996) at cost                        (11,856)  (11,856)
                                                       -------   -------
            Total shareholders' equity                 151,058   181,853
                                                       -------   -------
            TOTAL LIABILITIES AND
              SHAREHOLDERS' EQUITY                    $316,727  $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,
                                                        --------------------------------   
                                                          1994        1995        1996
                                                         -------     -------     -------
            <S>                                         <C>         <C>         <C> 
            Continuing operations:
            Net sales (Note 2)                          $475,810    $576,308    $624,929
            Cost of sales                                428,325     517,637     543,102
                                                         -------     -------     -------
            Gross profit                                  47,485      58,671      81,827
            Selling, general and administrative
              expenses                                    30,536      32,123      45,037
                                                         -------     -------     -------
            Income from operations                        16,949      26,548      36,790
            Interest expense                              (4,385)     (4,842)     (4,986)
            Other - net                                      811       2,074       2,691
                                                         -------     -------     ------- 
            Income from continuing operations
              before income taxes                         13,375      23,780      34,495
            Income taxes (Note 7)                            300      (4,400)      3,700
                                                         -------     -------     -------
            Income from continuing operations             13,075      28,180      30,795
                                                         -------     -------     -------
            Discontinued operations (Note 5):
            Loss from discontinued operations             (1,909)        --          --
            Disposal costs                                (2,643)        --          --
                                                         -------     -------     -------  
            Loss from discontinued operations             (4,552)        --          --
                                                         -------     -------     -------
            NET INCOME                                  $  8,523    $ 28,180    $ 30,795
                                                         =======     =======     =======

            Income (Loss) per share of
              common stock (Note 9):
            Continuing operations                       $   0.90    $   1.95    $   2.13
            Discontinued operations                        (0.31)        --          --
                                                         -------     -------     ------- 
            INCOME PER SHARE OF COMMON STOCK            $   0.59    $   1.95    $   2.13
                                                         =======     =======     =======
            Weighted average number of
              shares outstanding                          14,464      14,464      14,464
                                                         =======     =======     =======
            </TABLE>
            See Notes to Consolidated Financial Statements.













<PAGE>
                                   AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED   STATEMENTS   OF  SHAREHOLDERS' EQUITY


                                    Years ended December 31, 1994, 1995 and 1996
                                                     (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, 1994      $ 15,927    $373,911    $(263,627)    $(11,856)    $114,355
      Net income                                                8,523                     8,523
                                    -------------------------------------------------------------- 
      BALANCE, DECEMBER 31, 1994      15,927     373,911     (255,104)     (11,856)     122,878
      Net income                                               28,180                    28,180
                                    --------------------------------------------------------------
      BALANCE, DECEMBER 31, 1995      15,927     373,911     (226,924)     (11,856)     151,058
      Net Income                                               30,795                    30,795
                                    --------------------------------------------------------------
      BALANCE, DECEMBER 31, 1996    $ 15,927    $373,911    $(196,129)    $(11,856)    $181,853
                                    ==============================================================
      </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,
                                                                   ---------------------------- 
                                                                    1994       1995      1996
                                                                  -------    -------    -------
            <S>                                                   <C>        <C>        <C>
            CASH FLOWS FROM OPERATING ACTIVITIES:
            Net income                                            $ 8,523    $28,180    $30,795
            Adjustments to reconcile net income to net
              cash provided by operating activities:
               Depreciation and amortization                       11,552      9,819     10,809
               Deferred income taxes                                  --      (5,900)     3,700
               (Gain) loss on sale of assets                          --        (813)     3,135
               Change in operating assets and liabilities,
                net of dispositions:
                 Receivables                                       45,542     (9,674)   (25,955)
                 Inventories                                       (2,500)       296     (6,496)
                 Prepaid expenses and other current assets         (1,251)     3,429         98
                 Accounts payable                                   4,120      4,600      8,072
                 Accrued employee compensation                        596     (2,171)       853
                 Other - net                                        2,546        229      1,690
                                                                  -------    -------    ------- 
             Net cash provided by operating activities             69,128     27,995     26,701
                                                                  -------    -------    -------
             CASH FLOWS FROM INVESTING ACTIVITIES:
             Capital expenditures                                  (5,120)   (21,290)   (13,830)
             Proceeds from sale of assets                             --       3,248      2,998
             Change in restricted short-term investments - net     (1,811)     1,243        383
             Payment to former corporate parent                    (5,000)       --         --
                                                                  -------    -------    -------
             Net cash used for investing activities               (11,931)   (16,799)   (10,449)
                                                                  -------    -------    -------
             CASH FLOWS FROM FINANCING ACTIVITIES:
             Payment of long-term borrowings                      (81,228)    (5,866)    (5,832)
             Proceeds from issuance of
               long-term borrowings (Note 4)                       36,250     17,780        --
                                                                  -------    -------    -------
             Net cash (used for) provided by
                financing activities                              (44,978)    11,914     (5,832)
                                                                  -------    -------    ------- 
             NET INCREASE IN CASH AND CASH
                EQUIVALENTS                                        12,219     23,110     10,420
             CASH AND CASH EQUIVALENTS AT
                BEGINNING OF YEAR                                   3,195     15,414     38,524
                                                                  -------    -------    -------
             CASH AND CASH EQUIVALENTS AT
                END OF YEAR                                       $15,414    $38,524    $48,944
                                                                  =======    =======    =======
             SUPPLEMENTAL CASH FLOW DISCLOSURES:
             Cash paid during the year for:
             Interest (net of amounts capitalized)                $ 4,537    $ 5,255    $ 5,207
                                                                  =======    =======    ======= 
             Income taxes paid                                               $   945    $ 1,760
                                                                             =======    =======
             Noncash investing and financing activities:
             Note issued in litigation settlement                            $ 2,000
                                                                             =======
             Note issued to former corporate parent               $ 8,000
                                                                  =======
             </TABLE>

              See Notes to Consolidated Financial Statements.
<PAGE>
                AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            1.  Summary of Significant Accounting Policies

            Principles of Consolidation

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

            Revenue Recognition

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

            Statements of Cash Flows

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

            Fair Value Disclosures

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

            Inventories

               Inventories are recorded principally at the  lower  of  cost

<PAGE>
            (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 1994 were  not material. Interest
             costs capitalized in fiscal 1995 and  1996 approximated
             $1.2 million and $759,000, respectively.

             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,  1995  and  1996
             amounted   to   $74.5   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  effect of temporary differences
             resulting  from reporting  revenues  and  expenses  for
             income tax purposes  in  periods  different  from those
             used  for  financial  reporting purposes. The temporary
             differences  result  principally   from   the   use  of

<PAGE>
             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 9.

             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.

             Reclassifications

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

             2.  Receivables

                Receivables consisted of the following at December  31,
             1995 and 1996 (in thousands):
             <TABLE>
             <CAPTION>  
                                                              1995        1996
                                                            -------     -------
             <S>                                           <C>         <C>
             Long-term contracts:
                 U.S. Government:
                    Amounts billed                         $ 30,151    $    859
                    Unbilled costs, including retentions,
                      and estimated profits on contracts
                      in progress                            41,119      90,325
                                                            -------     -------       
                    Total                                    71,270      91,184

                 Commercial:
                    Amounts billed                            4,364       7,274
                    Unbilled costs, including retentions,
                      and estimated profits on contracts
                      in progress                            12,312      14,681
                                                            -------     -------
                 Total from long-term contracts              87,946     113,139
             Trade and other current receivables              5,238       6,000
                                                            -------     -------
                 Total                                     $ 93,184    $119,139
                                                            =======     =======
             </TABLE> 

<PAGE>
             Unbilled  costs, including retentions, and estimated profits
             on contracts  in  progress were not billable to customers at
             the  balance  sheet dates  under  terms  of  the  respective
             contracts. Of the  unbilled  costs  and  estimated  profits,
             approximately  $36.3 million is expected to be collected  in
             1997 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 1994, 1995, and
             1996 account for approximately 77%,  74%  and 77% of the net
             sales, respectively.

                In December 1995, the Company settled the Minehunter Request
             for Equitable Adjustment ("Minehunter REA") for $23 million,
             which approximated the previously recorded  estimate  of the
             amount recoverable. In connection with the settlement of the
             Minehunter  REA  in  December  1995,  the  Company submitted
             invoices  totaling  $30.7  million to the U.S.  Navy,  which
             included  certain  contractual   cost   sharing   and   cost
             escalation provisions which obligate the U.S. Navy to bear a
             portion of the additional costs. The Company collected these
             amounts in full during the first quarter of 1996.

                Costs   and  estimated  profits  (losses)  on  contracts  in
             progress  at  December 31, 1995 and 1996 were as follows (in
             thousands):
             <TABLE> 
             <CAPTION>
                                                           1995          1996
                                                         ---------     ---------
             <S>                                       <C>           <C> 
             Costs incurred on contracts in progress   $ 2,668,388   $ 3,026,965
             Estimated profits recognized                   49,287        92,080
             Reserve for anticipated contract losses       (34,500)      (58,600)
                                                         ---------     ---------
             Total                                       2,683,175     3,060,445
             Less billings to date                      (2,643,912)   (2,956,710)
                                                         ---------     ---------
             Net value of contracts in progress        $    39,263   $   103,735
                                                         =========     =========
             </TABLE>
 
                Net  value  of  contracts  in progress was comprised of  the
             following amounts (in thousands):
             <TABLE>
             <CAPTION> 
                                                           1995         1996
                                                          -------      -------
             <S>                                         <C>          <C> 
             Unbilled costs and estimated
                profits on contracts in progress
                (included in receivables)                $ 53,431     $105,006
             Billings in excess of costs and estimated
                profits on contracts in progress
                (included in accounts payable)            (14,168)      (1,271)
                                                          -------      ------- 
             Total                                       $ 39,263     $103,735
                                                          =======      =======
             </TABLE>  
             

<PAGE>
                The reserve for anticipated contract losses of $34.5 million
             and  $58.6  million  included in the net value of contracts in
             progress  at December 31,  1995  and  1996,  respectively,  is
             related to certain contracts which are presently scheduled for
             delivery through  September 1997. In 1995 and 1996 the Company
             recorded  reductions   of   $4.5  million  and  $4.4  million,
             respectively, of a previously recognized loss due primarily to
             a revision of the total estimated  contract  cost  as it nears
             completion.  Additionally, during 1996 the Company recorded  a
             $28.5 million increase in the reserve related to the contracts
             to construct the four double-hulled forebodies and a series of
             river hopper barges.

             3.  Inventories

             Inventories  consisted  of  the following at December 31, 1995
             and 1996 (in thousands):
             <TABLE> 
             <CAPTION> 
                                                     1995       1996
                                                    ------     ------
             <S>                                   <C>        <C> 
             Goods held for sale                   $ 7,409    $13,184
             Materials and supplies                  7,880      8,601
                                                    ------     ------
             Total                                 $15,289    $21,785
                                                    ======     ====== 
             </TABLE> 
             4.  Financing Arrangements

             Revolving Credit Agreement

                The  Company  has  available  a  two-year  revolving  credit
             agreement   ("the   agreement")   with    various    financial
             institutions.  The agreement provides for an available line of
             credit  equal  to  the  lesser of $42.5 million or a specified
             borrowing base with a term  which  in 1996 was extended to May
             1998. A commitment 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 is collateralized by substantially all of
             the Company's working capital assets and its 900-foot floating
             drydock and, among other things, (1) requires the  Company  to
             meet  certain financial covenants (relating to net worth, debt
             coverage,   interest   coverage   and  backlog),  (2)  imposes
             limitations  and  restrictions  related   to   annual  capital
             expenditures,  the  incurrence  of  new indebtedness  and  the
             payment  of  dividends and (3) requires  compliance  with  the
             terms  and conditions  of  all  other  debt  agreements.   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 10).  There
             were no borrowings in 1995 and 1996 under the revolving credit
             agreement.

                As a result of the award  of the LPD-17 contract the Company
             will  be  required to make significant  capital  expenditures.
             The Company  and  its banks agreed to increase the size of the

<PAGE>
             revolving  credit  agreement   up  to  $85  million  upon  the
             favorable resolution of a protest  filed  by  the unsuccessful
             bidder   for  the  LPD-17  contract.   The  amended  agreement
             provides  that   the  available  credit  will  be  reduced  to
             approximately $50  million  once a long-term financing for the
             LPD-17 expenditures is in place.   The  banks have also agreed
             to eliminate all collateral except the second  mortgage on the
             900-foot  floating  drydock  and  to  extend  the  agreement's
             expiration until April 2000.

             Long-Term Debt

             Long-term debt consisted of the following at December 31, 1995
             and 1996 (in thousands):
             <TABLE>
             <CAPTION>
                                                              1995        1996
                                                             ------      ------  
             <S>                                            <C>         <C>
             Industrial revenue bonds                       $36,250     $36,250
             Mortgage bonds, interest at 8.16%,
               payable in semi-annual principal
               installments to 2010                          17,780      16,594
             Mortgage bonds, payable in semi-annual
               principal installments to 2000                 3,880       3,104
             General obligation industrial bonds,
               interest at 7%, payable in annual
               installments to 2008                           2,745       1,875
             Other long-term debt                             5,000       2,000
                                                             ------      ------
             Total                                           65,655      59,823
             Less current maturities of long-term debt       (5,062)     (4,957)
                                                             ------      ------
             Long-term debt                                 $60,593     $54,866
                                                             ======      ======
             </TABLE>
 
                The  $36.3  million  of  industrial  revenue bonds represent
             Series  1994  bonds  which consist of (1) $6  million  bearing
             interest at 8.25% and payable in annual principal installments
             ranging from $550,000  in 1997 to final payment of $985,000 in
             2004  and (2) $30.3 million  bearing  interest  at  8.50%  and
             payable in annual principal installments ranging from $340,000
             in 1997  to  final payment of $3.8 million in 2014. The Series
             1994 bonds are secured by certain property and equipment which
             had  a  net book  value  of  approximately  $21.2  million  at
             December   31,  1996.   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 $16.6 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

<PAGE>
             million  plant modernization effort.  The  bonds  were  issued
             utilizing  a  U.S.  Government guarantee under Title XI of the
             Merchant Marine Act,  1936,  as  amended  ("Title  XI"),  bear
             interest  at the annual rate of 8.16% and are payable in equal
             semi-annual  principal  payments  of  $593,000  over a 15 year
             period  beginning in 1996. The terms of the financing  include
             various restrictive covenants including provisions relating to
             the maintenance  of  working capital, incurrence of additional
             indebtedness, and the  maintenance of a minimum net worth. The
             plant  modernization  assets   having  a  net  book  value  of
             approximately $20.7 million at December  31,  1996  have  been
             pledged as collateral for these mortgage bonds.

               The  $3.1  million  of  mortgage  bonds at December 31, 1996
             represent the balance of an earlier mortgage  bond issue which
             also  utilized  a  Title XI guarantee. The Company  refinanced
             these mortgage bonds  in  February  1995  (approximately  $4.3
             million) which reduced the annual interest rate from 9.30%  to
             7.86%.  The refinancing agreement contains various restrictive
             covenants  similar  to those for the $17.8 million of Title XI
             mortgage bonds discussed  above.  These  bonds  are payable in
             equal semi-annual principal payments of $388,000 and mature in
             the year 2000. Property, plant and equipment having a net book
             value of approximately $12.9 million at December  31, 1996 has
             been pledged as collateral for these mortgage bonds.

               Other  long-term debt at December 31, 1996 represents  a  $2
             million unsecured  note  issued  as  part of the settlement of
             certain claims against the Company (as  further  discussed  in
             Note  10).  The note bears interest at 8% per annum and is due
             in January 1997.

             Annual maturities  of long-term debt for each of the next five
             years and in total thereafter follow (in thousands):

             <TABLE>
                             <S>                  <C>  
                             1997                 $ 4,957
                             1998                   3,047
                             1999                   3,137
                             2000                   3,237
                             2001                   2,571
                             Thereafter            42,874
                                                   ------
                             Total                $59,823
                                                   ======
             </TABLE> 

             5.  Discontinued Operations

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

<PAGE>
                The operating results for 1994  are reported as discontinued
             operations. Summarized  results are as follows (in thousands):
             <TABLE>             
             <S>                                         <C>             
             Net sales                                   $13,520
             Costs and expenses                           15,429
                                                          ------   
             Loss from discontinued operations            (1,909)
             Loss on disposal of discontinued operations  (2,643)
                                                          ------
             Loss from discontinued operations           $(4,552)
                                                          ====== 
             </TABLE> 

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

                Rental  expense  for operating leases was $5.8 million, $6.3
             million and $9.0 million in 1994, 1995 and 1996, respectively.

                Minimum rental commitments under leases having an initial or
             remaining noncancelable  term in excess of twelve months follow
             (in thousands):
             <TABLE>
                             <S>                   <C>
                             1997                  $2,811
                             1998                   2,268
                             1999                   1,240
                             2000                     929
                             2001                      92
                                                   ------
                             Total                 $7,340
                                                   ======
             </TABLE> 

             7.  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.












<PAGE>
                The Company has provided for Federal income taxes as follows
             (in thousands):
             <TABLE>
             <CAPTION>
                                                         1994         1995         1996
                                                       -------      -------      -------
             <S>                                       <C>         <C>          <C> 
             Current provision                         $   600     $  1,500     $  1,100
             Deferred provision (benefit)                 (300)       7,100       11,600
             Deferred benefit attributable to the
               realization of net operating loss
               carry forwards                              --       (13,000)      (9,000)
                                                         ------      -------      -------
             Provision (benefit) for income taxes      $   300     $ (4,400)    $  3,700
                                                         ======      =======      =======
             </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,
                                                 -------------------------------------------- 
                                                    1994              1995           1996
                                                 -----------      -----------     -----------
                                                 Amount    %      Amount    %     Amount    %
                                                 ------   --      ------   --     ------   --
             <S>                                <C>              <C>             <C>
             Taxes at Federal statutory rate    $ 3,088   35     $ 8,323   35    $12,409   35
             Amortization of goodwill
               not deductible                       511    6         246    1        197    1
             Net operating loss
               carry forwards utilized               --   --     (13,000) (55)    (9,000) (25)
             Settlement of prior year
               tax examinations                  (3,200) (36)         --   --         --   --
             Other                                  (99) ( 1)         31   --         94   --
                                                 ------- ---     -------  ---    -------  ---
             Total                              $   300    4    $ (4,400) (19)   $ 3,700   11
                                                 ======= ===     =======  ===    =======  ===
             </TABLE>

                At  December  31, 1996 the Company has available for Federal
             income tax purposes  net  operating loss carry forwards and tax
             credit  carry  forwards  of $29.0  million  and  $5.4  million,
             respectively. The net operating  loss  carry forwards expire in
             years  2006  through  2008  and the tax credit  carry  forwards
             expire  in  the  years  2000 through  2011.  Additionally,  the
             Company has $2.7 million  of  minimum  tax credits which may be
             carried forward indefinitely.

                Deferred income taxes represent the  net  tax  effects  of (a)
             temporary differences  between  the  carrying  amounts  of assets
             and liabilities  for financial reporting purposes and their tax
             bases, and (b) operating loss and tax credit carry forwards. The
             tax effects of significant  items  comprising the Company's net
             deferred tax balances at December 31, 1995 and 1996 are as
             follows (in thousands):




<PAGE>
             <TABLE>
             <CAPTION> 
                                                                    1995            1996
                                                                  -------         -------
             <S>                                                  <C>             <C>
             Deferred Tax Liabilities:
             Differences between book
               and tax basis of property, plant and equipment     $26,266         $24,753
             Other                                                    759             976
                                                                  -------         -------
                Total                                              27,025          25,729
                                                                  -------         -------
             Deferred Tax Assets:
             Reserves not currently deductible                      5,174           4,417
             Long-term contracts                                   18,557          18,844
             Other temporary differences                            4,263           4,761
             Operating loss carry forwards                         24,334          10,211
             Tax credit carry forwards                              7,200           8,036
                                                                  -------         -------
                                                                   59,528          46,269
             Valuation Allowance                                   (9,703)           (683)
                                                                  -------         -------
                  Total                                            49,825          45,586
                                                                  -------         ------- 
             Net deferred tax assets                              $22,800         $19,857
                                                                  =======         =======
             </TABLE> 

                The  net deferred tax assets are included in the following
             balance sheet captions (in thousands):
             <TABLE>
             <CAPTION> 
                                                                    1995           1996
                                                                  -------        -------
             <S>                                                  <C>            <C>
             Current deferred tax assets                          $23,650        $30,157
             Non-current deferred income tax liabilities             (850)       (10,300)
                                                                  -------        -------
             Net deferred tax assets                              $22,800        $19,857
                                                                  =======        =======
             </TABLE>

                During   1996,   the   deferred   tax   valuation   allowance 
             decreased approximately $9.0 million as a result of the Company's
             current year operating results  and a re-evaluation of its
             expectations of the likelihood  of  future operating income related
             to its existing backlog.

             8.  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

<PAGE>
             ESOP. The ESOP owned approximately 6,822,000 and 2,980,000 shares
             of  the Company's Common Stock at December  31,  1995  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, 1994, 1995 and 1996 included  the  following  components  (in
             thousands):
             <TABLE>
             <CAPTION>  
                                                                      1994      1995      1996
                                                                    -------   -------   -------
             <S>                                                    <C>       <C>       <C>     
             Service costs of the current period                    $ 3,400   $ 3,300   $ 3,700
             Interest cost on the projected benefit obligation        3,800     4,200     3,700
             Actual return on plan assets                            (2,700)   (3,600)   (4,600)
             Net amortization of transition liability and
               deferred investment (loss) gain                         (200)      300      (400)
                                                                    -------   -------   -------
             Net periodic pension cost                              $ 4,300   $ 4,200   $ 2,400
                                                                    =======   =======   =======
             </TABLE>

                The  following  table  sets  forth  the pension plan's estimated
             funded status as of December 31, 1995 and 1996 (in thousands):
             <TABLE>
             <CAPTION> 
                                                                      1995      1996
                                                                    -------   -------
             <S>                                                    <C>       <C>
             Projected benefit obligation:
             Vested benefits                                        $49,100   $38,800
             Nonvested benefits                                         400       400
                                                                    -------   -------
             Accumulated benefit obligation                          49,500    39,200
             Effect of projected future compensation levels          12,700     2,600
                                                                    -------   -------
             Projected benefit obligation                            62,200    41,800
             Plan assets at market value                             50,400    58,800
                                                                    -------   -------  
             Plan assets (less than) in excess of
               projected benefit obligation                         (11,800)   17,000
             Unrecognized net transition obligation                     100       100
             Unrecognized prior service costs                        (2,500)   (2,100)
             Unrecognized net loss (gain)                            12,600   (14,500)
                                                                    -------   -------
             (Pension liability) Prepaid pension costs              $(1,600)  $   500
                                                                    =======   =======
             </TABLE> 

<PAGE>
                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 1995 and 7.75% for 1996.  The
             rate of increase in future  compensation levels used was 4.0% for
             1995 and 1996 and thereafter. The expected  long-term  rate  of
             return on the assets was 9.0% for 1995 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 of the Company. The
             Company may elect to make contributions  to  the Plan; however,
             the  timing  and  amount  of  such  contributions  is   at  the
             discretion  of the Company's Board of Directors. There were  no
             contributions made in 1996.

             9.  Shareholders' Equity

             Preferred Stock

                The Company  is  authorized  to  issue  5,000,000  shares of
             preferred stock, $1.00 par value, none of which was outstanding
             at December 31, 1995 and 1996.

             Income (Loss) Per Share

                The   weighted   average   number  of  shares  used  in  the
             computation of income (loss) per share was 14,464,000, for each
             of  the  years  ended  December  31,   1994,   1995  and  1996,
             respectively. The assumed exercise of stock options  would  not
             result in dilution in any of such periods.

             Stock-Based Compensation Plans

                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.

                A summary of the status of the Performance Share  Plan as of
             December  31, 1994, 1995 and 1996 and changes during the  three
             years ended December 31, 1996 are presented below:










<PAGE>
<TABLE>
<CAPTION>
                         1994                1995                1996
                   -----------------   -----------------   ----------------- 
                            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 exercisble      
  January 1        303,159   $15.975   279,155   $15.885   240,971   $17.463

Forfeited/expired   23,834    17.122     2,280    15.965     1,360    19.000 

Exercised              170     4.150    35,904     5.285    13,207    12.940
                   -------             -------             -------      
Options outstanding
  and exercisable,               
  December 31      279,155   $15.885   240,971   $17.463   226,404   $17.718
                   =======             =======             =======           
</TABLE>
 
                The  range  of  exercise  prices  for options outstanding at
             December  31,  1996  (the  majority  of  which  contain  a  stock
             appreciation  right  feature)  was  $3.875  to   $19.00  and  the
             weighted-average remaining contractual life for such  options was
             2.6 years.

                The  Company  provided  a  Stock  Appreciation Plan for  key
             management  employees which contains a stock  appreciation  right
             feature.  This plan has expired, no further award will be made.

                There were  no  transactions  relating  to this plan for the
             year ended December 31, 1996.  A summary of changes  in the Stock
             Appreciation  Plan during the years ended December 31,  1994  and
             1995 are presented below:
             <TABLE>               
             <CAPTION>
                                                    1994                 1995
                                              -----------------    -----------------
                                                       Weighted             Weighted
                                                        Average              Average
                                                       Exercise             Exercise
                                               Shares     Price     Shares     Price
                                              -------  --------    -------  --------
             <S>                              <C>       <C>        <C>       <C>
             Options outstanding, January 1    50,000   $12.675     40,000   $11.250

             Forfeited/expired                (10,000)  $18.375    (40,000)  $11.250
                                              -------              -------
             Options outstanding, December 31  40,000   $11.250        --    $  --
                                              =======              =======
             </TABLE>

                There were no options exercisable at December 31, 1994, 1995
             and 1996.  Shares available for grant under the plan at December
             31, 1994 and 1995 totaled 397,000, 437,000 shares, respectively,

<PAGE>
             and no shares were available for grant at December 31, 1996.
             Options were outstanding at $11.25 per share at December 31,
             1994.  Under the terms of the plan, options expired on March 31,
             1995.

                Compensation expense for the years ended December 31, 1994,
             1995 and 1996 was not material.

                The Company applies Accounting Principles Board Opinion No.
             25, "Accounting for Stock Issued to Employees," 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.
             Since no options were granted under the Company's stock-based
             compensation plans during 1995 and 1996, there would have been no
             effect on net income and income per common share had compensation
             cost for the Company's stock option plans been determined based
             upon the fair value at the grant date for awards under these
             plans consistent with the methodology prescribed under Statement
             of Financial Accounting Standards No. 123, "Accounting for Stock-
             Based Compensation."

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

                To date, the Company and certain of the other PRPs (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, 1996 such costs

<PAGE>
             totaled $18.8 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, 1996, the balance of the escrow
             was $6.2 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 is 17.5%.

                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 has paid approximately $6.0 million into 
             a settlement fund.  The Company also agreed to pay up to an
             additional $6.0 million (plus interest at 8% per annum) if the
             plaintiffs are unsuccessful in collecting certain claims under
             Avondale's insurance policies that have been assigned to the
             plaintiff class under the settlement agreement. During the first 
             quarter of 1997, certain remaining parties to the litigation, 
             including Avondale's insurers, reached a tentative settlement, 
             pursuant to which Avondale's insurers agreed to pay the
             plaintiffs an amount in excess of the $6.0 million (plus
             interest) for which Avondale was responsible in full and final
             satisfaction of the plaintiff's claims against Avondale and
             Avondale would be released from liability.  The tentative
             settlement agreement is subject to a fairness review by the trial
             court. With respect to the potential contingent liability of the
             Company to pay additional sums if the tentative settlement is not
             approved by the court, management believes that the eventual
             resolution of this matter will not have a material adverse effect
             on the Company's results of operations, financial position or
             cash flows.

                Furthermore, the Company has initiated litigation against
             its insurer for a declaration of coverage of the liability, if
             any, that may arise in connection with the remediation of the

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

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

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

             Letters of Credit

                In the normal course of its business activities, the Company
             is required to provide letters of credit to secure the payment of
             workers' compensation obligations, other insurance obligations
             and to provide a debt service reserve fund related to $36.3
             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 $25.4 million
             at December 31, 1995 and $11.3 million at December 31, 1996.

             11.  Quarterly Results (Unaudited)

             Consolidated operating results for the four quarters of 1995 and
             1996 were as follows (in thousands, except per share data):
      <TABLE>        
      <CAPTION>
                                 1995                              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   $133,575  $152,788  $148,785  $141,160    $156,496  $152,577  $148,384  $167,472

      Gross Profit  13,404    13,820    14,793    16,654      17,286    18,166    19,048    27,327

      Income from
       Operations    5,741     6,222     6,835     7,750       8,253     8,874     9,237    10,426

      Net Income     3,044     8,493    12,054     4,589       4,736    14,290     5,612     6,157
  
      Net Income
       per Share   $  0.21   $  0.59   $  0.83   $  0.32     $  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 1997 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 1997 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 1997 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 1997 Annual Meeting of
     shareholders and is incorporated herein by reference.


                                       PART IV

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

              (a)(1)       Financial Statements

               Independent Auditors' Report.

               Consolidated Balance Sheets as of December 31, 1995 and 1996.

               Consolidated Statements of Operations for the years ended
               December 31, 1994, 1995 and 1996.

               Consolidated Statements of Shareholders' Equity for the years
               ended December 31, 1994, 1995 and 1996.

               Consolidated Statements of Cash Flows for the years ended
               December 31, 1994, 1995 and 1996.

               Notes to Consolidated Financial Statements.

              (a)(2) Financial Statement Schedules

<PAGE>
                          Not applicable

              (a)(3)   Exhibits

          3.1     Articles of Incorporation of the Company.(1)

          3.2     By-laws of the Company.(2)

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

          4.2     Specimen of Common Stock Certificate.(3)

          4.3     Instruments Relating to Title XI Vessel Financing

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

                  (b)    Title XI Reserve Fund and Financial Agreement dated
                         October 21, 1975, by and between the Company and the
                         United States of America, as amended by Amendments Nos.
                         1 and 2(4), as further amended by the Master Assumption
                         Agreement (filed as Exhibit 4.3(a) hereto).  The
                         Reserve Fund and Financial Agreement has been further
                         amended by Amendment No. 5 dated February 9, 1995(6)
                         and Amendment No. 6 dated August 22, 1996.

                  (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 Fund Bond, 2000 Series.(6)

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

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

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

          4.5     Instruments relating to the Company's $36.25 million

<PAGE>
                  Industrial Revenue Refunding Bond Series 1994 Financing.

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

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

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

           4.6    Instruments Relating to February 1995 Title XI Vessel
                  Financing.

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

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

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

          10.1    Contracts With The United States Navy

                  (a)    Agreement dated June 28, 1985, by and between the
                         Company and the United States of America (Contract No.
                         N00024-85-C-2131) for the construction of T-AO 187
                         Class Oiler Ships and various modifications thereto(4)
                         including modification P00005 thereto entered into on
                         June 16, 1988, and the related 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.(5)

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

                  (d)    Agreement dated June 17, 1988, by and between the
                         Company and the United States of America (Contract No.
                         N00024-88-C-2048) for the construction of LSD-41 Class

<PAGE>
                         Landing Ship Dock vessels and modification nos. P00001
                         and P00002(8), modification nos. P00008 and P00013
                         thereto(3) and modification P00029 thereto.(5)

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

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

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

                  (h)    Agreement dated October 3, 1989, by and between the
                         Company and the United States of America (Contract No.
                         N00024-89-C-2162) for the construction of one MHC Class
                         51 ship and various modifications thereto(9),
                         modification no. P00020(5) and modification no. P00027
                         thereto(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,(3) and modification nos. P00002(5),
                         P00013(5)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.(3)

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

                  (l)    Agreement dated September 3, 1993, by and between the
                         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(5),
                         P00007(7) and modification P00019 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.(5)

                  (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.

<PAGE>
          10.2    Other Operating Contracts

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

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

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

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

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

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

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

          10.3    Employee Benefit Plans

                  (a)    The Company's Amended and Restated Performance Share
                         Plan dated April 24, 1989(11), 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(11),
                         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 Restated
                         Trust Agreement(12) as further amended by: Amendment
                         No. 1 adopted April 5, 1995(6), Amendment No. 2 adopted
                         June 16, 1995(2), Amendment No. 3 adopted February 5,
                         1996(12) and Amendment No. 4 adopted December 31, 1996.

<PAGE>
                  (d)    The Company's Pension Plan as Amended and Restated(7)
                         as further amended by: Amendment No. 1 adopted June 16,
                         1995(2), Amendment No. 2 adopted April 19, 1996(13) and
                         Amendment No. 3 adopted December 31, 1996.

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

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

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

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

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

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

                  (k)    The Company's Executive Retirement Plan(12).

          10.4    Employment Agreements

                  (a)    Employment Agreement dated September 27, 1985, by and
                         between the Company and Albert L. Bossier, Jr.(4) the
                         term of which has been extended such that its current
                         term extends through December 31, 1999.(7)

                  (b)    Employment Agreement dated June 18, 1987, by and
                         between the Company and Thomas M. Kitchen(4) the term
                         of which has been extended such that its current term
                         extends through December 31, 1999.(7)

                  (c)    Employment Agreement dated June 18, 1987, by and
                         between the Company and Kenneth B. Dupont(4) the term
                         of which has been extended such that its current term
                         extends through December 31, 1999.(7)

                  (d)    Amended and Restated Change of Control Agreement dated
                         January 19, 1996 by and between the Company and
                         Albert L. Bossier, Jr(12).

                  (e)    Amended and Restated Change of Control Agreement dated
                         January 19, 1996 by and between the Company and
                         Thomas M. Kitchen(12).

                  (f)    Amended and Restated Change of Control Agreement dated
                         January 19, 1996 by and between the Company and
                         Kenneth B. Dupont(12).

                  (g)    The Company's Severance Pay Plan and Summary Plan

<PAGE>
                         Description adopted March 1, 1996(12).

          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.(4)

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

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

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

          10.7    Lease Agreements

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

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

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

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

          10.8    Other Material Agreements

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

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

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


<PAGE>
                  (d)    Stockholder Protection Rights Agreement dated as of
                         September 26, 1994 between Avondale Industries, Inc.
                         and Boatmen's Trust Company, as Rights Agent.(15)

                  (e)    Agreement by and between the Company and Bath Iron
                         Works Corporation,  Subcontract for LPD-17 Class Work
                         dated June 23, 1996 (without attachments).

                  (f)    Agreement by and between the Company and Hughes
                         Aircraft Co.,  Subcontract for LPD-17 Class Work dated
                         June 23, 1996 (without attachments).

          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.

          21      List of subsidiaries of the Company

          23      Consent of Deloitte & Touche LLP

          27      Financial Data Schedule

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

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

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

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

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

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

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

     (8)  Incorporated by reference from the Company's Registration Statement on

<PAGE>
          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 Registration Statement on
          Form S-8 and Form S-3 (Registration No. 33-31984) filed with the
          Commission on November 8, 1989.

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

     (13) Incorporated by reference from the Company's Quarterly Report on Form
          10-Q for the fiscal quarter ended June 30, 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 Current Report on Form 8-
          K filed with the Commission on September 30, 1994.

          (b)  Reports on Form 8-K

          There were no reports on Form 8-K filed during the three month period
          ended December 31, 1996.































<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
          14, 1997.

                                        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 14, 1997
          --------------------------  President and Chief
              Albert L. Bossier, Jr.  Executive Officer    

          /s/ Thomas M. Kitchen       Vice President, Chief     March 14, 1997
          ---------------------       Financial Officer,
          Thomas M. Kitchen           Corporate Secretary and
                                      a Director

          /s/ Kenneth B. Dupont       Vice President and a      March 14, 1997
          ---------------------       Director
          Kenneth B. Dupont           

          /s/ Anthony J. Correro, III Director                  March 14, 1997
          ---------------------------
          Anthony J. Correro, III

          /s/ Francis R. Donovan      Director                  March 14, 1997
          ----------------------
          Francis R. Donovan

          /s/ William A. Harmeyer     Director                  March 14, 1997
          -----------------------
          William A. Harmeyer

          /s/ Hugh A. Thompson        Director                  March 14, 1997
          --------------------
          Hugh A. Thompson

          /s/ Bruce L. Hicks         Vice President &           March 14, 1997
          ------------------         Controller
          Bruce L. Hicks           



<PAGE>
                                    EXHIBIT INDEX

          Number                             Description

          4.3       Instruments Relating to Title XI Vessel Financing 10.1

                    (b)  Title  XI  Reserve  Fund  and Financial  Agreement
                         dated October 21, 1975, by and between the Company
                         and the United States of America,  as  amended  by
                         Amendments  Nos. 1 and 2(4), as further amended by
                         the Master Assumption  Agreement (filed as Exhibit
                         4.3(a) hereto).  The Reserve  Fund  and  Financial
                         Agreement  has  been  further amended by Amendment
                         No. 5 dated February 9, 1995(6)  and Amendment No.
                         6 dated August 22, 1996.

          4.6       Instruments Relating to February 1995 Title  XI  Vessel
                    Financing.

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

          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(5), P00007(7) and
                         modification P00019 thereto.

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

          10.3      Employee Benefit Plans

                    (c)  The  Company's Amended and Restated Employee Stock
                         Ownership  Plan(7)  and  the  related  Amended and
                         Restated  Trust  Agreement(12) as further  amended
                         by: Amendment No.  1  adopted  April  5,  1995(6),
                         Amendment   No.   2   adopted  June  16,  1995(2),
                         Amendment No. 3 adopted  February  5, 1996(12) and
                         Amendment No. 4 adopted December 31, 1996.

                    (d)  The   Company's   Pension  Plan  as  Amended   and
                         Restated(7) as further amended by: Amendment No. 1
                         adopted June 16, 1995(2),  Amendment No. 2 adopted
                         April  19, 1996(13) and Amendment  No.  3  adopted
                         December 31, 1996.

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


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          10.8      Other Material Agreements

                    (e)  Agreement by and between the Company and Bath Iron
                         Works  Corporation, Subcontract for  LPD-17  Class
                         Work dated June 23, 1996 (without attachments).

                    (f)  Agreement  by  and  between the Company and Hughes
                         Aircraft Co.,  Subcontract  for  LPD-17 Class Work
                         dated June 23, 1996 (without attachments).

          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)

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

          21        List of subsidiaries of the Company

          23        Consent of Deloitte & Touche LLP

          27        Financial Data Schedule

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

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

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

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

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

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

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

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

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

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

          (11) 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.

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

          (13) Incorporated  by  reference  from  the  Company's  Quarterly
               Report on Form 10-Q for thefiscal quarter ended June 30, 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 Current Report
               on Form 8-K filed with the Commission on September 30, 1994.


<PAGE>