##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For the Quarterly Period EndedFebruary 24, 2006
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934For the Transition Period
From 
to
 Commission file number 33-68412
 
 AVONDALE INCORPORATED
  Georgia
(State or other jurisdiction of
incorporation or organization)
    
    
    
    58-0477150
(I.R.S. employer
identification no.)506 South Broad Street
Monroe, Georgia
(Address of principal executive offices)
    
    
    
    30655
(Zip code)
 (770) 267-2226
 N/A
 þ o
 o o Non-accelerated þ
 o þ




---



##### 



INDEX TO FORM 10-Q
 AVONDALE INCORPORATED
  
 PagePART
I  FINANCIAL INFORMATION (Unaudited)
    

ReferenceItem 1:
    
    Financial StatementsCondensed Consolidated Balance Sheets at August 26, 2005 and February 24, 2006
    
    
    2Condensed Consolidated Statements of Operations for the Thirteen Weeks Ended
February 25, 2005 and February 24, 2006
    
    
    3Condensed Consolidated Statements of Operations for the Twenty-six Weeks Ended
February 25, 2005 and February 24, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the Twenty-six Weeks Ended
February 25, 2005 and February 24, 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2:
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    23Item 3:
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    39Item 4:
    
    Controls and Procedures
    
    
    40PART
II OTHER INFORMATIONItem 1:
    
    Legal Proceedings
    
    
    41Item 1A:
    
    Risk Factors
    
    
    41Item 2:
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 3:
    
    Defaults upon Senior Securities
    
    
    41Item 4:
    
    Submission of Matters to a Vote of Security Holders
    
    
    41Item 5:
    
    Other Information
    
    
    41Item 6:
    
    Exhibits
    
    
    42Signature
    
    
    
    
    44EX-31.1 SECTION 302, CERTIFICATION OF THE CEOEX-31.2 SECTION 302, CERTIFICATION OF THE CFO




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##### Table of Contents



PART I    FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 AVONDALE
INCORPORATED
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
 Feb. 24,Aug. 26,
    
    
    20062005
    
    
    (unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    4,933
    
    
    $
    2,077Accounts
receivable, less allowance for doubtful accounts of $809 at August 26, 2005 and $0 at February 24, 2006
    
    
    65,170
    
    
    
    23,876Inventories
    
    
    83,194
    
    
    
    83,646Prepaid expenses
    
    
    535
    
    
    
    1,867Insurance claims receivable
    
    
    5,266
    
    
    
    7,675Income taxes refundable
    
    
    144
    
    
    
    3Total current assets
    
    
    159,242
    
    
    
    119,144Assets held for sale
    
    
    700
    
    
    
    636Property, plant and equipmentLand
    
    
    6,262
    
    
    
    6,258Buildings
    
    
    76,068
    
    
    
    75,769Machinery and equipment
    
    
    461,931
    
    
    
    422,602544,261
    
    
    
    504,629Less accumulated depreciation
    
    
    (386,646
    )
    
    
    (359,989
    )157,615
    
    
    
    144,640Goodwill
    
    
    2,951
    
    
    
    2,951Other assets
    
    
    5,374
    
    
    
    5,036$
    325,882
    
    
    $
    272,407LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    31,588
    
    
    $
    21,901Accrued compensation, benefits and related expenses
    
    
    11,825
    
    
    
    9,520Accrued interest
    
    
    2,322
    
    
    
    2,224Other accrued expenses
    
    
    8,781
    
    
    
    7,678Long-term debt due in one year
    
    
    4,325
    
    
    
    4,325Total current liabilities
    
    
    58,841
    
    
    
    45,648Long-term debt
    
    
    136,539
    
    
    
    134,376Deferred income taxes and other long-term liabilities
    
    
    25,742
    
    
    
    10,697Shareholders equityPreferred
stock $.01 par value; 10,000 shares authorized
    
    
    
    
    
    
    Common stockClass A,
$.01 par value; 100,000 shares authorized; issued and outstanding  11,394 shares at August 26, 2005 and February 24, 2006
    
    
    114
    
    
    
    114Class B,
$.01 par value; 5,000 shares authorized; issued and outstanding  979 shares at August 26, 2005 and February 24, 2006
    
    
    10
    
    
    
    10Capital in excess of par value
    
    
    39,170
    
    
    
    39,170Retained earnings
    
    
    65,466
    
    
    
    42,392Total shareholders equity
    
    
    104,760
    
    
    
    81,686$
    325,882
    
    
    $
    272,407
  2




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##### Table of Contents



AVONDALE INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (In thousands, except per share data)
 Thirteen Weeks EndedFeb. 25,
    
    
    Feb. 24,2005
    
    
    2006Net sales
    
    $
    124,306
    
    
    $
    91,257Operating costs and expensesCost of goods sold
    
    
    110,962
    
    
    
    91,975Depreciation
    
    
    8,538
    
    
    
    6,958Selling and administrative expenses
    
    
    6,652
    
    
    
    6,884Facility restructuring charges
    
    
    
    
    
    
    (500
    )Operating loss
    
    
    (1,846
    )
    
    
    (14,060
    )Interest expense, net
    
    
    3,832
    
    
    
    4,095Discount and expenses on sales of receivables
    
    
    534
    
    
    
    568Other, net
    
    
    (578
    )
    
    
    (661
    )Loss before income taxes
    
    
    (5,634
    )
    
    
    (18,062
    )Benefit of income taxes
    
    
    (2,125
    )
    
    
    (6,895
    )Net loss
    
    $
    (3,509
    )
    
    $
    (11,167
    )Per share data:Net loss-basic
    
    $
    (.28
    )
    
    $
    (.90
    )Net loss-diluted
    
    $
    (.28
    )
    
    $
    (.90
    )Dividends declared
    
    $
    
    
    
    $
    
  3




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##### Table of Contents



AVONDALE INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (In thousands, except per share data)
 Twenty-six Weeks EndedFeb. 25,
    
    
    Feb. 24,2005
    
    
    2006Net sales
    
    $
    275,396
    
    
    $
    190,147Operating costs and expensesCost of goods sold
    
    
    243,366
    
    
    
    186,733Depreciation
    
    
    17,155
    
    
    
    14,404Selling and administrative expenses
    
    
    12,794
    
    
    
    13,414Facility restructuring charges
    
    
    
    
    
    
    4,300Operating income (loss)
    
    
    2,081
    
    
    
    (28,704
    )Interest expense, net
    
    
    7,589
    
    
    
    7,869Discount and expenses on sales of receivables
    
    
    1,115
    
    
    
    1,060Gain on extinguishment of debt
    
    
    (162
    )
    
    
    Other, net
    
    
    (1,151
    )
    
    
    (529
    )Loss before income taxes
    
    
    (5,310
    )
    
    
    (37,104
    )Benefit of income taxes
    
    
    (2,000
    )
    
    
    (14,030
    )Net loss
    
    $
    (3,310
    )
    
    $
    (23,074
    )Per share data:Net loss-basic
    
    $
    (.27
    )
    
    $
    (1.86
    )Net loss-diluted
    
    $
    (.27
    )
    
    $
    (1.86
    )Dividends declared
    
    $
    
    
    
    $
    
  4




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##### Table of Contents



AVONDALE INCORPORATED
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 (In thousands)
 Twenty-six Weeks EndedFeb. 25,
    
    
    Feb. 24,2005
    
    
    2006Operating activitiesNet loss
    
    $
    (3,310
    )
    
    $
    (23,074
    )Adjustments
to reconcile net loss to net cash provided by (used in) operating activitiesDepreciation and amortization
    
    
    17,593
    
    
    
    14,768Benefit of deferred income taxes
    
    
    (1,983
    )
    
    
    (14,177
    )Loss (gain) on disposal of property, plant and
equipment, facility restructuring and assets held for sale
    
    
    (971
    )
    
    
    3,177Gain on extinguishment of debt
    
    
    (162
    )
    
    
    Sale of accounts receivable, net
    
    
    (11,072
    )
    
    
    18,420Changes in operating assets and liabilities
    
    
    4,156
    
    
    
    5,671Net cash provided by operating activities
    
    
    4,251
    
    
    
    4,785Investing activitiesPurchases of property, plant and equipment
    
    
    (4,188
    )
    
    
    (8,117
    )Proceeds
from sale of property, plant and equipment and assets held for sale
    
    
    1,430
    
    
    
    2,639Net cash used in investing activities
    
    
    (2,758
    )
    
    
    (5,478
    )Financing activitiesReduction in long-term debt
    
    
    (2,163
    )
    
    
    (2,163
    )Net cash used in financing activities
    
    
    (2,163
    )
    
    
    (2,163
    )Decrease in cash and cash equivalents
    
    
    (670
    )
    
    
    (2,856
    )Cash and cash equivalents at beginning of period
    
    
    5,481
    
    
    
    4,933Cash and cash equivalents at end of period
    
    $
    4,811
    
    
    $
    2,077
  5




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##### Table of Contents



AVONDALE INCORPORATED
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 February 24, 2006
 Basis of Presentation:
    January 6, 2005 Train Derailment
    6




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
       7




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 Inventories:
 Aug. 26,
    
    
    Feb. 24,2005
    
    
    2006Finished goods
    
    $
    34,891
    
    
    $
    35,405Work in process
    
    
    31,855
    
    
    
    31,563Raw materials
    
    
    6,702
    
    
    
    7,717Dyes and chemicals
    
    
    4,147
    
    
    
    3,886Inventories at FIFO
    
    
    77,595
    
    
    
    78,571Adjustment of carrying value to LIFO basis
    
    
    
    
    
    
    77,595
    
    
    
    78,571Supplies at average cost
    
    
    5,599
    
    
    
    5,075$
    83,194
    
    
    $
    83,646
  8




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 Earnings Per Share
 Thirteen Weeks Ended
    
    
    Twenty-six Weeks EndedFeb. 25,
    
    
    Feb. 24,
    
    
    Feb. 25,
    
    
    Feb. 24,2005
    
    
    2006
    
    
    2005
    
    
    2006Weighted average shares outstanding  basic
    
    
    12,373
    
    
    
    12,373
    
    
    
    12,373
    
    
    
    12,373Effect of employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average shares outstanding  diluted
    
    
    12,373
    
    
    
    12,373
    
    
    
    12,373
    
    
    
    12,373
  Thirteen Weeks Ended
    
    
    Twenty-six Weeks EndedFeb. 25,
    
    
    Feb. 24,
    
    
    Feb. 25,
    
    
    Feb. 24,2005
    
    
    2006
    
    
    2005
    
    
    2006Net loss as reported
    
    $
    (3,509
    )
    
    $
    (11,167
    )
    
    $
    (3,310
    )
    
    $
    (23,074
    )Pro forma stock-based compensation, net of
income taxes
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )
    
    
    Pro forma net loss
    
    $
    (3,518
    )
    
    $
    (11,167
    )
    
    $
    (3,319
    )
    
    $
    (23,074
    )Per share data:Net loss-basic as reported
    
    $
    (.28
    )
    
    $
    (.90
    )
    
    $
    (.27
    )
    
    $
    (1.86
    )Net loss-basic pro forma
    
    $
    (.28
    )
    
    $
    (.90
    )
    
    $
    (.27
    )
    
    $
    (1.86
    )Net loss-diluted as reported
    
    $
    (.28
    )
    
    $
    (.90
    )
    
    $
    (.27
    )
    
    $
    (1.86
    )Net loss-diluted pro forma
    
    $
    (.28
    )
    
    $
    (.90
    )
    
    $
    (.27
    )
    
    $
    (1.86
    )
 9




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 Segment Information
 Thirteen Weeks Ended
    
    
    Twenty-six Weeks EndedFeb. 25,
    
    
    Feb. 24,
    
    
    Feb. 25,
    
    
    Feb. 24,2005
    
    
    2006
    
    
    2005
    
    
    2006Revenues:Apparel fabrics
    
    $
    92,196
    
    
    $
    73,030
    
    
    $
    210,839
    
    
    $
    155,032Yarns
    
    
    44,197
    
    
    
    42,432
    
    
    
    91,106
    
    
    
    72,970Other
    
    
    6,366
    
    
    
    10,427
    
    
    
    14,793
    
    
    
    19,700142,759
    
    
    
    125,889
    
    
    
    316,738
    
    
    
    247,702Less inter-segment sales
    
    
    18,453
    
    
    
    34,632
    
    
    
    41,342
    
    
    
    57,555Total
    
    $
    124,306
    
    
    $
    91,257
    
    
    $
    275,396
    
    
    $
    190,147Income (loss):Apparel fabrics
    
    $
    (2,879
    )
    
    $
    (6,495
    )
    
    $
    (31
    )
    
    $
    (12,228
    )Yarns
    
    
    4,542
    
    
    
    (1,510
    )
    
    
    7,522
    
    
    
    (1,958
    )Other
    
    
    397
    
    
    
    1,113
    
    
    
    1,612
    
    
    
    1,751Unallocated
    
    
    (3,906
    )
    
    
    (7,168
    )
    
    
    (7,022
    )
    
    
    (16,269
    )Total operating income (loss)
    
    
    (1,846
    )
    
    
    (14,060
    )
    
    
    2,081
    
    
    
    (28,704
    )Interest expense, net
    
    
    3,832
    
    
    
    4,095
    
    
    
    7,589
    
    
    
    7,869Discount and expenses on sale of receivables
    
    
    534
    
    
    
    568
    
    
    
    1,115
    
    
    
    1,060Gain on extinguishments of debt
    
    
    
    
    
    
    
    
    
    
    (162
    )
    
    
    Other, net
    
    
    (578
    )
    
    
    (661
    )
    
    
    (1,151
    )
    
    
    (529
    )Loss before income taxes
    
    $
    (5,634
    )
    
    $
    (18,062
    )
    
    $
    (5,310
    )
    
    $
    (37,104
    )
 Post Retirement Benefits
 Thirteen Weeks Ended
    
    
    Twenty-six Weeks EndedFeb. 25,
    
    
    Feb. 24,
    
    
    Feb. 25,
    
    
    Feb. 24,2005
    
    
    2006
    
    
    2005
    
    
    2006Components of net periodic benefit cost (benefit):Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    53
    
    
    
    45
    
    
    
    106
    
    
    
    90Amortization of prior service cost
    
    
    (127
    )
    
    
    (127
    )
    
    
    (254
    )
    
    
    (254
    )Amortization of loss
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    20Net periodic benefit cost (benefit)
    
    $
    (74
    )
    
    $
    (72
    )
    
    $
    (148
    )
    
    $
    (144
    )
  10




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 New Accounting Pronouncements
     11




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 Facility Restructuring:
    Contingencies
  12




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 Amendments of Financing Agreements
     13




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
   Consolidating Guarantor and Non-guarantor Financial Information
 14




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 AVONDALE INCORPORATED
CONDENSED CONSOLIDATING BALANCE SHEETS
February 24, 2006
(In thousands)
 Non-GuarantorAvondaleMillsGuarantor
    
    
    GranitevilleAvondale
    
    
    Avondale
    
    
    Fabrics,Mills, Inc.
    
    
    Incorporated
    
    
    Inc.
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assetsCash and cash equivalents
    
    $
    2,077
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,077Accounts receivable
    
    
    23,873
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    23,876Inventories
    
    
    83,646
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,646Prepaid expenses
    
    
    1,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,867Insurance claims receivable
    
    
    7,675
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,675Income taxes refundable
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Total current assets
    
    
    119,141
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    119,144Assets held for sale
    
    
    636
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    636Property, plant and equipmentLand
    
    
    6,062
    
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    6,258Buildings
    
    
    64,019
    
    
    
    
    
    
    
    11,750
    
    
    
    
    
    
    
    75,769Machinery and equipment
    
    
    384,624
    
    
    
    
    
    
    
    37,978
    
    
    
    
    
    
    
    422,602454,705
    
    
    
    
    
    
    
    49,924
    
    
    
    
    
    
    
    504,629Less accumulated depreciation
    
    
    (325,248
    )
    
    
    
    
    
    
    (34,741
    )
    
    
    
    
    
    
    (359,989
    )129,457
    
    
    
    
    
    
    
    15,183
    
    
    
    
    
    
    
    144,640Goodwill
    
    
    2,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,951Investment in subsidiaries
    
    
    4,655
    
    
    
    71,186
    
    
    
    
    
    
    
    (75,841
    )
    
    
    Other assets
    
    
    5,036
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,036$
    261,876
    
    
    $
    71,186
    
    
    $
    15,186
    
    
    $
    (75,841
    )
    
    $
    272,407LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    20,810
    
    
    $
    
    
    
    $
    1,091
    
    
    $
    
    
    
    $
    21,901Accrued compensation, benefits and
related expenses
    
    
    9,433
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    9,520Accrued interest
    
    
    2,224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,224Other accrued expenses
    
    
    7,676
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    7,678Long-term debt due in one year
    
    
    4,325
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,325Total current liabilities
    
    
    44,468
    
    
    
    
    
    
    
    1,180
    
    
    
    
    
    
    
    45,648Long-term debt
    
    
    134,376
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134,376Deferred
income taxes and other long term liabilities
    
    
    10,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,697Due to (from) subsidiaries
    
    
    1,149
    
    
    
    (10,500
    )
    
    
    9,351
    
    
    
    
    
    
    
    Shareholders equity
    
    
    71,186
    
    
    
    81,686
    
    
    
    4,655
    
    
    
    (75,841
    )
    
    
    81,686$
    261,876
    
    
    $
    71,186
    
    
    $
    15,186
    
    
    $
    (75,841
    )
    
    $
    272,407
 15




---



##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 AVONDALE INCORPORATED
CONDENSED CONSOLIDATING BALANCE SHEETS
August 26, 2005
(In thousands)
 Non-GuarantorAvondaleMillsGuarantor
    
    
    GranitevilleAvondale
    
    
    Avondale
    
    
    Fabrics,Mills, Inc.
    
    
    Incorporated
    
    
    Inc.
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assetsCash and cash equivalents
    
    $
    4,933
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,933Accounts receivable
    
    
    65,167
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    65,170Inventories
    
    
    83,194
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,194Prepaid expenses
    
    
    535
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    535Insurance claims receivable
    
    
    5,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,266Income taxes refundable
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144Total current assets
    
    
    159,239
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    159,242Assets held for sale
    
    
    700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    700Property, plant and equipmentLand
    
    
    6,067
    
    
    
    
    
    
    
    195
    
    
    
    
    
    
    
    6,262Buildings
    
    
    64,318
    
    
    
    
    
    
    
    11,750
    
    
    
    
    
    
    
    76,068Machinery and equipment
    
    
    424,036
    
    
    
    
    
    
    
    37,895
    
    
    
    
    
    
    
    461,931494,421
    
    
    
    
    
    
    
    49,840
    
    
    
    
    
    
    
    544,261Less accumulated depreciation
    
    
    (353,727
    )
    
    
    
    
    
    
    (32,919
    )
    
    
    
    
    
    
    (386,646
    )140,694
    
    
    
    
    
    
    
    16,921
    
    
    
    
    
    
    
    157,615Goodwill
    
    
    2,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,951Investment in subsidiaries
    
    
    5,668
    
    
    
    94,299
    
    
    
    
    
    
    
    (99,967
    )
    
    
    Other assets
    
    
    5,374
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,374$
    314,626
    
    
    $
    94,299
    
    
    $
    16,924
    
    
    $
    (99,967
    )
    
    $
    325,882LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    30,662
    
    
    $
    
    
    
    $
    926
    
    
    $
    
    
    
    $
    31,588Accrued compensation, benefits and
related expenses
    
    
    11,720
    
    
    
    
    
    
    
    105
    
    
    
    
    
    
    
    11,825Accrued interest
    
    
    2,322
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,322Other accrued expenses
    
    
    8,779
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    8,781Long-term debt due in one year
    
    
    4,325
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,325Total current liabilities
    
    
    57,808
    
    
    
    
    
    
    
    1,033
    
    
    
    
    
    
    
    58,841Long-term debt
    
    
    136,539
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,539Deferred income taxes
and other long term liabilities
    
    
    25,742
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,742Due to (from) subsidiaries
    
    
    238
    
    
    
    (10,461
    )
    
    
    10,223
    
    
    
    
    
    
    
    Shareholders equity
    
    
    94,299
    
    
    
    104,760
    
    
    
    5,668
    
    
    
    (99,967
    )
    
    
    104,760$
    314,626
    
    
    $
    94,299
    
    
    $
    16,924
    
    
    $
    (99,967
    )
    
    $
    325,882
 16




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 AVONDALE INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Thirteen Weeks Ended February 24, 2006
(In thousands)
 Non-GuarantorAvondale MillsGuarantor
    
    
    GranitevilleAvondale
    
    
    Avondale
    
    
    Fabrics,Mills, Inc.
    
    
    Incorporated
    
    
    Inc.
    
    
    Eliminations
    
    
    ConsolidatedNet sales, including intercompany
transfers and charges
    
    $
    91,257
    
    
    $
    
    
    
    $
    17,126
    
    
    $
    (17,126
    )
    
    $
    91,257Operating costs and expensesCost of goods sold
    
    
    92,310
    
    
    
    
    
    
    
    16,791
    
    
    
    (17,126
    )
    
    
    91,975Depreciation
    
    
    6,052
    
    
    
    
    
    
    
    906
    
    
    
    
    
    
    
    6,958Selling and
administrative expenses
    
    
    6,915
    
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    6,884Facility restructuring credits
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )Operating income (loss)
    
    
    (13,520
    )
    
    
    31
    
    
    
    (571
    )
    
    
    
    
    
    
    (14,060
    )Interest expense, net
    
    
    4,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,095Discount and expenses on sales
of receivables
    
    
    568
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    568Other, net
    
    
    (661
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (661
    )Income (loss) before income taxes
    
    
    (17,522
    )
    
    
    31
    
    
    
    (571
    )
    
    
    
    
    
    
    (18,062
    )Provision for (benefit of) income taxes
    
    
    (6,691
    )
    
    
    11
    
    
    
    (215
    )
    
    
    
    
    
    
    (6,895
    )Equity in loss of subsidiary
    
    
    (356
    )
    
    
    (11,187
    )
    
    
    
    
    
    
    11,543
    
    
    
    Net loss
    
    $
    (11,187
    )
    
    $
    (11,167
    )
    
    $
    (356
    )
    
    $
    11,543
    
    
    $
    (11,167
    )
 17




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 AVONDALE INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Thirteen Weeks Ended February 25, 2005
(In thousands)
 Non-GuarantorAvondale MillsGuarantor
    
    
    GranitevilleAvondale
    
    
    Avondale
    
    
    Fabrics,Mills, Inc.
    
    
    Incorporated
    
    
    Inc.
    
    
    Eliminations
    
    
    ConsolidatedNet sales, including intercompany
transfers and charges
    
    $
    124,306
    
    
    $
    28
    
    
    $
    22,661
    
    
    $
    (22,689
    )
    
    $
    124,306Operating costs and expensesCost of goods sold
    
    
    110,958
    
    
    
    
    
    
    
    22,667
    
    
    
    (22,663
    )
    
    
    110,962Depreciation
    
    
    7,607
    
    
    
    
    
    
    
    931
    
    
    
    
    
    
    
    8,538Selling and administrative expenses
    
    
    6,678
    
    
    
    
    
    
    
    
    
    
    
    (26
    )
    
    
    6,652Operating income (loss)
    
    
    (937
    )
    
    
    28
    
    
    
    (937
    )
    
    
    
    
    
    
    (1,846
    )Interest expense, net
    
    
    3,832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,832Discount and expenses on sales
of receivables
    
    
    534
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    534Other, net
    
    
    (578
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (578
    )Income (loss) before income taxes
    
    
    (4,725
    )
    
    
    28
    
    
    
    (937
    )
    
    
    
    
    
    
    (5,634
    )Provision for (benefit of) income taxes
    
    
    (1,784
    )
    
    
    10
    
    
    
    (351
    )
    
    
    
    
    
    
    (2,125
    )Equity in loss of subsidiary
    
    
    (586
    )
    
    
    (3,527
    )
    
    
    
    
    
    
    4,113
    
    
    
    Net loss
    
    $
    (3,527
    )
    
    $
    (3,509
    )
    
    $
    (586
    )
    
    $
    4,113
    
    
    $
    (3,509
    )
 18




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 AVONDALE INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Twenty-six Weeks Ended February 24, 2006
(In thousands)
 Non-GuarantorAvondale MillsGuarantor
    
    
    GranitevilleAvondale
    
    
    Avondale
    
    
    Fabrics,Mills, Inc.
    
    
    Incorporated
    
    
    Inc.
    
    
    Eliminations
    
    
    ConsolidatedNet sales, including intercompany
transfers and charges
    
    $
    190,147
    
    
    $
    
    
    
    $
    32,956
    
    
    $
    (32,956
    )
    
    $
    190,147Operating costs and expensesCost of goods sold
    
    
    186,922
    
    
    
    
    
    
    
    32,767
    
    
    
    (32,956
    )
    
    
    186,733Depreciation
    
    
    12,593
    
    
    
    
    
    
    
    1,811
    
    
    
    
    
    
    
    14,404Selling and administrative expenses.
    
    
    13,474
    
    
    
    (60
    )
    
    
    
    
    
    
    
    
    
    
    13,414Facility restructuring charges
    
    
    4,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,300Operating income (loss)
    
    
    (27,142
    )
    
    
    60
    
    
    
    (1,622
    )
    
    
    
    
    
    
    (28,704
    )Interest expense, net
    
    
    7,869
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,869Discount and expenses on sales
of receivables
    
    
    1,060
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,060Other, net
    
    
    (529
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (529
    )Income (loss) before income taxes
    
    
    (35,542
    )
    
    
    60
    
    
    
    (1,622
    )
    
    
    
    
    
    
    (37,104
    )Provision for (benefit of) income taxes.
    
    
    (13,442
    )
    
    
    22
    
    
    
    (610
    )
    
    
    
    
    
    
    (14,030
    )Equity in loss of subsidiary
    
    
    (1,012
    )
    
    
    (23,112
    )
    
    
    
    
    
    
    24,124
    
    
    
    Net income (loss)
    
    $
    (23,112
    )
    
    $
    (23,074
    )
    
    $
    (1,012
    )
    
    $
    24,124
    
    
    $
    (23,074
    )
 19




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 AVONDALE INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Twenty-six Weeks Ended February 25, 2005
(In thousands)
 Non-GuarantorAvondale MillsGuarantor
    
    
    GranitevilleAvondale
    
    
    Avondale
    
    
    Fabrics,Mills, Inc.
    
    
    Incorporated
    
    
    Inc.
    
    
    Eliminations
    
    
    ConsolidatedNet sales, including intercompany
transfers and charges
    
    $
    275,396
    
    
    $
    59
    
    
    $
    50,097
    
    
    $
    (50,156
    )
    
    $
    275,396Operating costs and expensesCost of goods sold
    
    
    243,707
    
    
    
    
    
    
    
    49,756
    
    
    
    (50,097
    )
    
    
    243,366Depreciation
    
    
    15,293
    
    
    
    
    
    
    
    1,862
    
    
    
    
    
    
    
    17,155Selling and administrative expenses
    
    
    12,853
    
    
    
    
    
    
    
    
    
    
    
    (59
    )
    
    
    12,794Operating income (loss)
    
    
    3,543
    
    
    
    59
    
    
    
    (1,521
    )
    
    
    
    
    
    
    2,081Interest expense, net
    
    
    7,589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,589Discount and expenses on sales
of receivables
    
    
    1,115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,115Gain on extinguishment of debt
    
    
    (162
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162
    )Other, net
    
    
    (1,151
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,151
    )Income (loss) before income taxes
    
    
    (3,848
    )
    
    
    59
    
    
    
    (1,521
    )
    
    
    
    
    
    
    (5,310
    )Provision for (benefit of) income taxes
    
    
    (1,452
    )
    
    
    22
    
    
    
    (570
    )
    
    
    
    
    
    
    (2,000
    )Equity in earnings (loss) of subsidiary
    
    
    (951
    )
    
    
    (3,347
    )
    
    
    
    
    
    
    4,298
    
    
    
    Net income (loss)
    
    $
    (3,347
    )
    
    $
    (3,310
    )
    
    $
    (951
    )
    
    $
    4,298
    
    
    $
    (3,310
    )
 20




---



##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 AVONDALE INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Twenty-six Weeks Ended February 24, 2006
(In thousands)
 Non-GuarantorAvondale MillsGuarantor
    
    
    GranitevilleAvondale
    
    
    Avondale
    
    
    Fabrics,Mills, Inc.
    
    
    Incorporated
    
    
    Inc.
    
    
    Eliminations
    
    
    ConsolidatedOperating activitiesNet income (loss)
    
    $
    (23,112
    )
    
    $
    (23,074
    )
    
    $
    (1,012
    )
    
    $
    24,124
    
    
    $
    (23,074
    )Adjustments to reconcile net loss to net cash
provided by operating activities:Depreciation and amortization
    
    
    12,957
    
    
    
    
    
    
    
    1,811
    
    
    
    
    
    
    
    14,768Benefit of deferred income taxes
    
    
    (14,177
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,177
    )Loss on disposal of property, plant and equipment,
facility restructuring and assets held for sale
    
    
    3,177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,177Sale of accounts receivable, net
    
    
    18,420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,420Changes in operating assets and liabilities
    
    
    6,508
    
    
    
    (38
    )
    
    
    (799
    )
    
    
    
    
    
    
    5,671Equity in loss of subsidiary
    
    
    1,012
    
    
    
    23,112
    
    
    
    
    
    
    
    (24,124
    )
    
    
    Net cash provided by operating activities
    
    
    4,785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,785Investing activitiesPurchase of property, plant and equipment
    
    
    (8,117
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,117
    )Proceeds from sale of property, plant and
equipment and assets held for sale
    
    
    2,639
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,639Net cash used in investing activities
    
    
    (5,478
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,478
    )Financing activitiesReductions in long term debt
    
    
    (2,163
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,163
    )Net cash used in financing activities
    
    
    (2,163
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,163
    )Decrease in cash and cash equivalents
    
    
    (2,856
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,856
    )Cash and cash equivalents at beginning of period
    
    
    4,933
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,933Cash and cash equivalents at end of period
    
    $
    2,077
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,077
 21




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##### Table of Contents



AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
February 24, 2006
 AVONDALE INCORPORATED
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Twenty-six Weeks Ended February 25, 2005
(In thousands)
 Non-GuarantorAvondale MillsGuarantor
    
    
    GranitevilleAvondale
    
    
    Avondale
    
    
    Fabrics,Mills, Inc.
    
    
    Incorporated
    
    
    Inc.
    
    
    Eliminations
    
    
    ConsolidatedOperating activitiesNet income (loss)
    
    $
    (3,347
    )
    
    $
    (3,310
    )
    
    $
    (951
    )
    
    $
    4,298
    
    
    $
    (3,310
    )Adjustments to reconcile net loss to net cash
provided by operating activities:Depreciation and amortization
    
    
    15,731
    
    
    
    
    
    
    
    1,862
    
    
    
    
    
    
    
    17,593Benefit of deferred income taxes
    
    
    (1,983
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,983
    )Gain on disposal of property, plant and
equipment and assets held for sale
    
    
    (971
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (971
    )Gain on extinguishment of debt
    
    
    (162
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162
    )Sale of accounts receivable, net
    
    
    (11,072
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,072
    )Changes in operating assets and liabilities
    
    
    5,009
    
    
    
    (37
    )
    
    
    (816
    )
    
    
    
    
    
    
    4,156Equity in earnings of subsidiary
    
    
    951
    
    
    
    3,347
    
    
    
    
    
    
    
    (4,298
    )
    
    
    Net cash provided by operating activities
    
    
    4,156
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    4,251Investing activitiesPurchase of property, plant and equipment
    
    
    (4,093
    )
    
    
    
    
    
    
    (95
    )
    
    
    
    
    
    
    (4,188
    )Proceeds from sale of property, plant and
equipment and assets held for sale
    
    
    1,430
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,430Net cash used in investing activities
    
    
    (2,663
    )
    
    
    
    
    
    
    (95
    )
    
    
    
    
    
    
    (2,758
    )Financing activitiesNet payments on long-term debt
    
    
    (2,163
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,163
    )Net cash used in financing activities
    
    
    (2,163
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,163
    )Decrease in cash and cash equivalents
    
    
    (670
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (670
    )Cash and cash equivalents at beginning of period
    
    
    5,481
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,481Cash and cash equivalents at end of period
    
    $
    4,811
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,811
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 CRITICAL ACCOUNTING POLICIES
  Significant estimates:
  Accounts Receivable and Credit Risks:
  Derailment related expenditures and insurance claims receivable:
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Inventories:
 Government Cotton Support Programs:
   Long-Lived Assets:
 Revenue Recognition:
 Income Taxes:
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Contingencies:
  25




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RESULTS OF OPERATIONS
 Thirteen Weeks Ended February 24, 2006 Compared to Thirteen Weeks Ended February 25, 2005
 Net Sales.
   Operating Income (Loss).
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Segment Performance.
     Facility Restructuring:
   27




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Interest Expense, Net.
 Discount and Expenses on Sale of Receivables.
 Provision for (Benefit of) Income Taxes.
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Twenty-six Weeks Ended February 24, 2006 Compared to Twenty-six Weeks Ended February 25, 2005
 Net Sales.
   Operating Income (Loss).
   29




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Segment Performance.
     Facility Restructuring:
   30




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Interest Expense, Net.
 Discount and Expenses on Sale of Receivables.
 Provision for (Benefit of) Income Taxes.
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LIQUIDITY AND CAPITAL RESOURCES
    Receivables Securitization Facility
  32




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Revolving Credit Facility
  Equipment Note
   2013 Notes and 2012 Floating Rate Notes
  33




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34




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JANUARY 6, 2005 TRAIN DERAILMENT
        35




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36




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FORWARD LOOKING STATEMENTS
   
    
    cyclical and competitive nature of the textile industry;
    
    pressures on selling prices due to competitive and economic conditions;
    
    deterioration of relationships with, or loss of, significant customers;
    
    strength of the U.S. dollar versus the currencies of other textile producing countries;
    
    changes in trade policies, including textile quotas and tariffs, and the
elimination of import quotas under the World Trade Organization effective December 31,
2004;
    
    ability to identify and respond to fashion trends;
    
    availability and pricing of cotton and other raw materials;
    
    changes in government policies affecting raw material costs, including the
impact of World Trade Organization rulings against the U.S. agricultural support
programs;
    
    availability and desirability of technological advancements;
    
    retention of key management personnel;
    
    continued availability of financial resources;
    
    changes in environmental, health and safety regulations;
    
    political or military responses to terrorist activities; and
    
    our ability to recover claims from insurance and third parties related to
the January 6, 2005 train derailment in amounts sufficient to compensate our losses and
to timely reimburse our clean up, restoration and replacement expenditures without
negatively impacting our liquidity; and
    
    our ability to obtain requested waivers or amendments to our equipment
note.
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OTHER DATA    NON-GAAP FINANCIAL MEASURE
 Form 10-Q
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Twenty-six Weeks EndedFeb. 25,
    
    
    Feb. 24,2005
    
    
    2006Net loss
    
    $
    (3,310
    )
    
    $
    (23,074
    )Interest expense, net
    
    
    7,589
    
    
    
    7,869Benefit of income taxes
    
    
    (2,000
    )
    
    
    (14,030
    )Depreciation and amortization
    
    
    17,593
    
    
    
    14,768EBITDA
    
    
    19,872
    
    
    
    (14,467
    )Discount and expenses on sale of receivables
    
    
    1,115
    
    
    
    1,060Gain on extinguishment of debt
    
    
    (162
    )
    
    
    Facility restructuring non-cash charges
    
    
    
    
    
    
    4,002Adjustment of carrying value of inventories
to LIFO basis
    
    
    (1,000
    )
    
    
    Adjusted EBITDA
    
    $
    19,825
    
    
    $
    (9,405
    )Net cash provided by operating activities
    
    $
    4,251
    
    
    $
    4,785Net cash used in investing activities
    
    $
    (2,758
    )
    
    $
    (5,478
    )Net cash used in financing activities
    
    $
    (2,163
    )
    
    $
    (2,163
    )
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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Item 4. Controls and Procedures.
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AVONDALE INCORPORATED
 
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
   
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
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Exhibits.
 3.1
    
    Restated and Amended Articles of Incorporation of Avondale
Incorporated (incorporated by reference to Exhibit 3.1 to Avondale
Incorporateds Registration Statement on Form S-4, filed June 7, 1996, File No.
333-05455-01).3.3
    
    Amended and Restated Bylaws of Avondale Incorporated, adopted as
of January 17, 2000 (incorporated by reference to Exhibit 3.3 to Avondale
Incorporateds Quarterly Report on Form 10-Q for the period ended February 25,
2000, File No. 33-68412).4.3
    
    Indenture dated as of June 30, 2003 for the 101/4% Senior
Subordinated Notes due 2013 among Avondale Incorporated, Avondale Mills, Inc.
and Wachovia Bank, National Association, as Trustee (incorporated by reference
to Exhibit 4.3 to Avondale Incorporateds Registration Statement on Form S-4,
filed August 29, 2003, File No. 333-108353-01).4.10
    
    Exchange Agreement, dated as of May 27, 2004, by and among
Avondale Mills, Inc., Avondale Incorporated and Cohanzick Management, L.L.C., as
agent for Cohanzick Credit Opportunities Master Fund, Ltd., Gabriel Capital,
L.P. and Ariel Fund Limited (incorporated by reference to Exhibit 4.10 to
Avondale Incorporateds Current Report on Form 8-K, dated August 26, 2004, File
No. 33-68412).4.11
    
    Exchange Agreement, dated as of July 1, 2004, by and among
Avondale Mills, Inc., Avondale Incorporated and Allstate Life Insurance Company,
Allstate Insurance Company, Allstate Plans Master Trust and Allstate
Investments, LLC (incorporated by reference to Exhibit 4.11 to Avondale
Incorporateds Current Report on Form 8-K, dated August 26, 2004, File No.
33-68412).4.12
    
    Exchange Agreement, dated as of July 30, 2004, by and among
Avondale Mills, Inc., Avondale Incorporated and Cohanzick Management, L.L.C., as
agent for Cohanzick Credit Opportunities Master Fund, Ltd., and Gabriel Capital,
L.P. (incorporated by reference to Exhibit 4.12 to Avondale Incorporateds
Current Report on Form 8-K, dated August 26, 2004, File
No. 33-68412).4.13
    
    Exchange Agreement, dated as of August 26, 2004, by and among
Avondale Mills, Inc., Avondale Incorporated and 3V Capital Master Fund Ltd.
(incorporated by reference to Exhibit 4.13 to Avondale Incorporateds Current
Report on Form 8-K, dated August 26, 2004, File No. 33-68412).4.14
    
    Exchange Agreement, dated as of August 26, 2004, by and among
Avondale Mills, Inc., Avondale Incorporated and Deutsche Asset Management Inc.
and Deutsche Investment Management Americas, Inc. (incorporated by reference to
Exhibit 4.14 to Avondale Incorporateds Current Report on Form 8-K, dated August
26, 2004, File No. 33-68412).4.15
    
    Exchange Agreement, dated as of August 26, 2004, by and among
Avondale Mills, Inc., Avondale Incorporated and T. Rowe Price Associates, Inc.
(incorporated by reference to Exhibit 4.15 to Avondale Incorporateds Current
Report on Form 8-K, dated August 26, 2004, File No. 33-68412).4.18
    
    Form of Registration Rights Agreement among Avondale Mills, Inc.,
Avondale Incorporated and each of the holders from time to time of the Senior
Floating Rate Notes due 2012 (incorporated by reference to Exhibit 4.18 to
Avondale Incorporateds Quarterly Report on Form 10-Q for the period ended
November 26, 2004, File No. 33-68412).10.1
    
    Amendment No. 3 to Master Security Agreement, dated as of
December 28, 2005, between Avondale Mills, Inc. and The CIT Group/Equipment
Financing, Inc. (incorporated by reference to Exhibit 10.1 to Avondale
Incorporateds Current Report on Form 8-K, dated January 4, 2006, File No.
033-68412).10.2
    
    Amendment No. 5 to Receivables Purchase and Servicing Agreement,
dated as of January 25, 2006, by and among Avondale Funding LLC, Avondale Mills,
Inc. and General Electric Capital Corporation (incorporated by reference to
Exhibit 10.1 to Avondale Incorporateds Current Report on Form 8-K, dated
January 25, 2006, File No. 033-68412).
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10.3
    
    Amendment No. 4 to Credit Agreement, dated as of January 25,
2005, by and among Avondale Mills, Inc., Avondale Mills Graniteville Fabrics,
Inc., Avondale Incorporated and General Electric Capital Corporation
(incorporated by reference to Exhibit 10.2 to Avondale Incorporateds Current
Report on Form 8-K, dated January 25, 2006, File No. 033-68412).31.1
    
    Certificate of Chief Executive Officer, pursuant to Rule 13a 
14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certificate of Chief Financial Officer, pursuant to Rule 13a 
14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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##### Table of Contents



SIGNATURE
  AVONDALE INCORPORATEDBy:
    
    /S/ JACK R. ALTHERR, JR.Jack R. Altherr, Jr.Vice Chairman and Chief Financial Officer
  44