UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20459

                                    FORM 10-Q
(Mark one)

 [X ]              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended September 27, 1998   

                                       OR
[  ]               TRANSITION REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to                  

Commission file number 1-6150          

                              ALBA-WALDENSIAN, INC.
             (Exact name of registrant as specified in its Charter)
             Delaware                                 56-0359780             
(State or other jurisdiction            (I.R.S.Employer Identification No.)
of incorporation or organization)

                        P.O. Box 100, Valdese, N.C. 28690
               (Address of principal executive offices)(Zip code)

                                 (828) 879-6500
               Registrant's telephone number, including area code

                                      NONE
               Former name, former address and former fiscal year,
                         if changed since last report.

     Indicate  by check  mark  whether  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

As of October 26, 1998, the number of common shares outstanding was 1,559,053.


<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements
<TABLE>
<CAPTION>

                              ALBA-WALDENSIAN, INC.
                           Consolidated Balance Sheets
                                    ($000's)

                                                                   September 27,              December 31,
                                                                            1998                      1997
                                                                     (Unaudited)
<S>                                                                     <C>                        <C>  

ASSETS
CURRENT ASSETS:
Cash                                                                          $6                    $2,416
Accounts receivable, net of allowance for
 doubtful accounts of $384 and $260, respectively                         10,723                     7,823
Inventories:
  Materials and supplies                                                   2,959                     2,554
  Work-in-process                                                          5,997                     5,045
  Finished goods                                                           2,375                     3,710
                                                                           -----                     -----
Total Inventories                                                         11,331                    11,309
                                                                          ------                    ------

Deferred income taxes                                                        707                       707
Prepaid expenses and other                                                   379                       127
                                                                             ---                       ---
Total Current Assets                                                      23,146                    22,382
                                                                          ------                    ------

PROPERTY AND EQUIPMENT                                                    34,185                    31,111
Less: accumulated depreciation                                          (19,194)                  (17,857)
                                                                         -------                   ------
Net Property and Equipment                                                14,991                    13,254
                                                                          ------                    ------

OTHER ASSETS:
Notes receivable                                                              16                        17
Trademarks and patents                                                       443                       492
Excess of cost over net assets acquired                                    7,033                     7,474
                                                                           -----                     -----
                                                                           7,492                     7,983
                                                                           -----                     -----

TOTAL ASSETS                                                             $45,629                   $43,619
                                                                          ======                    ======
<FN>

See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>


                              ALBA-WALDENSIAN, INC.
                           Consolidated Balance Sheets
                          ($000's except share amounts)
<TABLE>
<CAPTION>

                                                                   September 27,              December 31,
                                                                            1998                      1997
                                                                            ----                      ----
                                                                     (Unaudited)
<S>                                                                     <C>                       <C>   

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt                                     $   665                  $  2,350
Accounts payable                                                          3,522                      3,118
Accrued expenses                                                           2,472                     1,542
                                                                           -----                     -----
Total Current Liabilities                                                  6,659                     7,010

LONG-TERM DEBT (Note 2)                                                    9,318                     7,452
CAPITAL LEASE OBLIGATION                                                     489                         -
OTHER DEFERRED LIABILITIES                                                     1                         -
DEFERRED INCOME TAX LIABILITY                                              1,746                     1,746
                                                                           -----                     -----
Total Liabilities                                                         18,213                    16,208
                                                                          ------                    ------

STOCKHOLDERS' EQUITY:
Common stock  - authorized 3,000,000 shares,
 $2.50 par value; issued: 1,886,580 shares in 1998
 and 1997; outstanding: 1,560,563 and 1,867,403
 in 1998 and 1997, respectively                                            4,716                     4,716
Additional paid-in capital                                                 9,182                     9,182
Retained earnings                                                         16,150                    13,650
                                                                          ------                    ------
                                                                          30,048                    27,548
Less treasury stock - at cost
  (326,077 and 19,177 shares in 1998 and 1997,
  respectively)                                                          (2,632)                     (137)
                                                                          -----                       ----
Total Stockholders' Equity                                                27,416                    27,411
                                                                          ------                    ------
TOTAL LIABILITIES AND
 STOCKHOLDERS' EQUITY                                                    $45,629                   $43,619
                                                                          ======                    ======
<FN>

See notes to consolidated financial statements.
</FN>
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                              ALBA-WALDENSIAN, INC.
                      Consolidated Statements of Operations
                                   (Unaudited)
                          ($000's except share amounts)

                                                  Three Months Ended             Nine Month Period Ended
                                            Sept. 27,         Sept. 28,        Sept. 27,         Sept. 28,
                                                 1998              1997             1998              1997
                                                 ----              ----             ----              ----
<S>                                           <C>               <C>              <C>               <C>  

Net sales                                     $18,904           $15,390          $54,914           $45,203
Cost of sales                                  13,239            12,205           40,261            35,514
                                               ------            ------           ------            ------
Gross margin                                    5,665             3,185           14,653             9,689
Selling, general and
 administrative expense                         3,368             2,686            9,633             9,227
                                                -----             -----            -----             -----
Operating income                                2,297               499            5,020               462

Interest expense                                (227)             (270)            (662)             (779)
Interest income                                     0                18               50                45
Other income (expense)                           (83)                14            (174)             (179)
                                                  --             ------            -----             -----
Total other expense                             (310)             (238)            (786)             (913)
                                                                      -

Income (loss) before income taxes               1,987               261            4,234             (451)
Provision for (benefit from)
 income taxes                                     755                99            1,609             (172)
                                                -----                --            -----             -----

Net income (loss)                            $  1,232              $162           $2,625            $(279)
                                            =========               ===           ======            ======

Net income (loss) per
 common share -
         Basic                           $       .78               $.09            $1.53            $(.15)
                                                 ===                ===            =====            ======

         Diluted                          $       .74              $.09            $1.48            $(.15)
                                                  ===              ====            =====            ======

<FN>


See notes to consolidated financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                         ALBA-WALDENSIAN, INC.
                                            Consolidated Statements of Stockholders' Equity
                                                              (Unaudited)
                                                     ($000's except share amounts)

                                                                 Additional
                                                   Common          Paid-In    Retained       Treasury Stock
                                             Shares      Amount    Capital    Earnings      Shares       Amount        Total
                                             ------      ------    -------    --------      ------       ------        -----
<S>                                       <C>            <C>        <C>        <C>         <C>            <C>         <C>

Balance at January 1, 1997                1,886,580      $4,716     $9,182     $14,027     (19,177)       $(137)      $27,788

Net Loss                                                                         (279)                                  (279)
                                                                                  ---                                    ---

Balance at Sept. 28, 1997                 1,886,580      $4,716     $9,182     $13,748     (19,177)       $(137)      $27,509
                                          =========       =====      =====      ======      ======          ===        ======


Balance at January 1, 1998                1,886,580      $4,716     $9,182     $13,651     (19,177)       $(137)      $27,412

Purchase of Treasury Stock                                                                (310,500)      (2,521)      (2,521)

Exercise of Stock Options                                                          (8)        3,600           26           18

Dividends Paid                                                                   (118)                                  (118)

Net Income                                                                       2,625                                  2,625
                                                                                 -----                                  -----

Balance at Sept. 27, 1998                 1,886,580      $4,716     $9,182     $16,150    (326,077)     $(2,632)      $27,416
                                          =========       =====      =====      ======     =======        =====        ======
<FN>

See notes to consolidated financial statements.
</FN>
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                         ALBA-WALDENSIAN, INC.
                                                 Consolidated Statements of Cash Flows
                                                              (Unaudited)
                                                               ($000's)
                                                                                  Nine Month Periods Ended
                                                                       Sept. 27,                 Sept. 28,
                                                                            1998                      1997
                                                                            ----                      ----
<S>                                                                      <C>                       <C>  
OPERATING ACTIVITIES:
 Net income (loss)                                                       $ 2,625                   $ (279)
  Adjustments to reconcile net income (loss)
   to net cash provided by operating activities:
    Depreciation and amortization                                          1,847                     1,735
    Provision for bad debts                                                  135                        92
    Loss on disposal of property                                               2                       138
    Provision for inventory obsolescence                                   1,161                       625
  Changes in operating assets and liabilities providing (using) cash:
     Accounts receivable                                                 (3,035)                     (829)
     Refundable income taxes                                                  --                      (23)
     Inventories                                                         (1,182)                       149
     Prepaid expenses and other                                            (252)                        24
    Accounts payable                                                        (93)                       533
    Accrued expenses and other liabilities                                   930                     1,065
    Income taxes payable                                                     496                     (169)
    Deferred compensation                                                      1                     (200)
                                                                               -                      ---
Net cash provided by operating activities                                  2,635                     2,861
                                                                           -----                     -----

INVESTING ACTIVITIES:
Capital expenditures                                                     (2,383)                   (1,614)
Proceeds from sale of property                                                 -                       212
Proceeds from notes receivable                                                 1                         7
                                                                               -                         -
Net cash used in investing activities                                    (2,382)                   (1,395)
                                                                          -----                     -----

FINANCING ACTIVITIES:
 Net borrowings under line of credit agreement                             6,245                        --
 Principal payments on notes and Capital Leases                          (9,951)                   (1,175)
 Payment of Dividends                                                      (118)                        --
 Cash Proceeds from Exercise of Stock Options                                 18                        --
 Proceeds from Issuance of Long Term Debt                                  3,664                        --
 Repurchase of Capital Stock                                             (2,521)                        --
                                                                         -------                        --
Net cash used in financing activities                                    (2,663)                   (1,175)
                                                                         ---------------------------------

NET INCREASE (DECREASE) IN CASH                                          (2,410)                       291
CASH AT BEGINNING OF PERIOD                                                2,416                       294
                                                                           -----                       ---
CASH AT END OF PERIOD                                                        $ 6                    $ 585
                                                                               =                      ===
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                                         ALBA-WALDENSIAN, INC.
                                                 Consolidated Statements of Cash Flows
                                                              (Unaudited)
                                                               ($000's)

                                                                        Nine Month Periods Ended
                                                                        Sept 27,                 Sept. 28,
                                                                            1998                      1997
                                                                            ----                      ----
<S>                                                                     <C>                         <C>  

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

  Cash paid during the period for:
    Interest                                                             $   563                     $ 993
    Income taxes                                                       $   1,128                    $   20

<FN>

During the second quarter of 1998,  the Company  acquired  production  equipment
totaling $533,000 through the issuance of financing leases.



See notes to consolidated financial statements.
</FN>
</TABLE>


<PAGE>


                              ALBA-WALDENSIAN, INC.
                    Notes to Consolidated Financial Statement
                                   (Unaudited)


1. UNAUDITED FINANCIAL INFORMATION

         In the opinion of the Company, the accompanying  unaudited consolidated
financial  statements  contain all  adjustments  necessary to present fairly the
financial  position as of September 27, 1998,  and the results of operations for
the three-month  and nine-month  periods ended September 27, 1998, and September
28, 1997.  These unaudited  financial  statements  should be read in conjunction
with the Company's most recent audited financial statements.

         The results of operations for the interim  periods are not  necessarily
indicative of the results to be expected for the full year.


2.   FINANCING

         On December 31, 1997 the Company had both a $3,000,000 seasonal line of
credit and long-term  debt  agreements  with a major bank. The interest rate was
LIBOR plus 2.75%.  The seasonal  line of credit was  scheduled to mature on June
30, 1998, and the long-term debt portion matured on January 5, 1999.  There were
no amounts  outstanding  under the seasonal line of credit at December 31, 1997.
Quarterly  principal payments of $587,500 were required under the long-term debt
agreement.

         On May 14,  1998,  the  Company  entered  into  three-year  $21,000,000
financing  facility  with a major bank and  retired  both the  seasonal  line of
credit and long-term debt discussed above. The new facility is composed of up to
a  $15,000,000  revolving  loan,  based upon levels of accounts  receivable  and
inventories,  a $3,000,000 term loan and a $3,000,000 credit line to fund future
capital expenditures.  The new facility bears interest at Prime plus 0.5% (or at
the option of the Company,  portions of the facility may be priced at LIBOR plus
2.5%) and is secured by substantially all of the assets of the Company.

         The loan agreement requires that the Company maintain certain levels of
tangible  net worth and fixed  charge  coverage  ratios as well as limiting  the
level of  capital  expenditures  ($5.8  million in 1998) and  prohibiting  other
financing  (in excess of $1.5  million  per year).  At  September  27,  1998 the
Company was in compliance with the convenants contained in the loan agreement.

         On August 7, 1998,  the Company  secured a $1,500,000  financing  lease
facility  with  a  major  financial  institution  covering  the  acquisition  of
qualified  machinery  during the remainder of 1998.  This facility is secured by
only the  acquired  machinery,  bears  interest at 7.27% and  provides for level
monthly payments over its five-year term.


3.  NON-RECURRING CHARGES

         During the first  quarter  of 1997,  severance  costs of  approximately
$401,000  were recorded in connection  with the Company's  former  President and
CEO.


4.       ACQUISITION OF COMMON STOCK

     On May 15, 1998, investors,  including the Company and Mr. Clyde Wm. Engle,
the Company's Chairman and beneficial holder (through Sunstates  Corporation) of
a majority of the Company's  common stock,  purchased  from a major bank 938,700
shares of the Company's  common stock  formerly  held by Sunstates  Corporation,
pursuant  to a private  sale of  collateral  held under a  defaulted  loan which
Sunstates  Corporation's  affiliates  had with the bank.  The Company  purchased
295,000  of the shares at a cost of  $2,212,500  plus  other  transaction  costs
totaling  approximately  $115,000.  The Company  utilized its existing cash plus
funds obtained from the new $21,000,000  financing  facility  discussed above to
purchase the stock.  The Company  intends to hold the 295,000 shares as treasury
stock and currently has no plans for future utilization of those shares.

     As a result of these transactions, the Company is no longer a subsidiary of
Sunstates Corporation. Mr. Engle now controls approximately 35% of the Company's
outstanding common stock.

     On August  12,  1998,  the  Company's  Board of  Directors  authorized  the
Corporation  to acquire up to 40,000 shares of the  outstanding  Common Stock of
the Corporation for an aggregate  purchase price not to exceed  $550,000.  As of
September  27, 1998,  the Company had  purchased a total of 15,500  shares at an
aggregate cost of approximately $193,000.


5.       DIVIDENDS

     On August 4, 1998 the Company declared a semi-annual cash dividend of $.075
per  share  ($117,930)  on its  common  stock  payable  on  August  24,  1998 to
shareholders  of record on August 14, 1998.  Under the Company's  loan agreement
with a bank (see Note 2),  dividends  and  repurchases  of Company stock may not
exceed $3,000,000 during the three-year term of the loan.





6.       EARNINGS PER SHARE
<TABLE>
<CAPTION>

                                                             For the Quarter Ended September 27, 1998
                                                                 Income           Shares         Per-Share
                                                            (Numerator)    (Denominator)            Amount
<S>                                                          <C>               <C>                    <C>  

Basic EPS
  Net Income                                                 $1,231,636        1,569,778              $.78

Effect of Dilutive Securities
  Stock Options                                                      --           92,981

Diluted EPS
  Net Income                                                 $1,231,636        1,662,759              $.74
</TABLE>
<TABLE>
<CAPTION>


                  For the Nine Months Ended September 27, 1998
                                                                 Income           Shares         Per-Share
                                                            (Numerator)    (Denominator)            Amount
<S>                                                          <C>               <C>                   <C>   

Basic EPS
  Net Income                                                 $2,625,112        1,719,018             $1.53

Effect of Dilutive Securities
  Stock Options                                                      --           53,577

Diluted EPS
  Net Income                                                 $2,625,112        1,772,595             $1.48

<FN>

             There were no dilutive securities outstanding during 1997.
</FN>
</TABLE>


<PAGE>



     Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations

                         Liquidity and Capital Resources

         The Company's working capital has improved since December 31, 1997, and
continues to be adequate to support the Company's  operations.  On September 27,
1998, the Company had working  capital of $16,487,000  with a ratio of 3.48 to1.
This is  comparable  to  $15,372,000  or 3.19 to 1 at  December  31,  1997.  The
increase  in  the  amount  of  working  capital  primarily   reflects  increased
receivables  associated  with the increased  business  volume in 1998.  Accounts
receivable  have  increased to  $10,723,000 at September 27, 1998 as compared to
$7,823,000 at December 31, 1997,  while the number of days sales in  receivables
has decreased from 49.75 to 45.92 during the same period.  Inventory levels have
not  significantly  increased in the face of the  increased  business due to the
Company's efforts to reduce excess  inventories  (inventory turns have increased
from 3.55 at December 31, 1997 to 4.04 at September 27, 1998). Furthermore,  the
Company's  annual  debt  amortization  requirements  are  significantly  reduced
(current  maturities of $665,000 at September 1998 versus $2,350,000 at December
1997) as a result of the refinancing of its bank debt.

         Liquidity  needs are  primarily  affected  by and  related  to  capital
expenditures and changes in the Company's business volume.  Capital expenditures
through the first nine months of 1998 have totaled  $2,916,000,  reflecting  the
acquisition  of new  seamless  knitting  machines in  response to the  increased
demand for the Company's new seamless intimate apparel  products.  This level of
capital  expenditures  compares to $1,614,000  for the same nine months of 1997.
The Company  anticipates  that capital  expenditures for the entire year of 1998
may approximate $8,000,000.

         The Company's  liquidity needs,  including the stock  repurchase,  have
been more than  adequately  provided for with the  securing of a new  three-year
$21,000,000  financing  facility  with a major  bank  (see  Note 4 of  Notes  to
Consolidated  Financial  Statements).  The new  financing  facility  provides  a
revolving  loan  of  up  to  $15,000,000,  depending  upon  levels  of  accounts
receivable  and  inventories,  a term loan of  $3,000,000  and a future  capital
expenditure  line of  $3,000,000.  In  addition,  the Company  may secure  other
outside  financing  of  capital  expenditures  of  up  to  $4,500,000  over  the
three-year  term of the  facility.  On August 7,  1998,  the  Company  secured a
$1,500,000 financing lease facility with a major financial  institution covering
the acquisition of qualified machinery during the remainder of 1998.

         The purchase on May 15, 1998 of 295,000 shares of the Company's  common
stock  for  approximately  $2,328,000  (see  Note  4 of  Notes  to  Consolidated
Financial  Statements) reduced the company's net worth. However, the acquisition
price per share of $7.50 (plus transaction  costs) was  significantly  less than
the Company's  book value per share  ($15.08 at March 29, 1998) and  accordingly
the net book value of the remaining outstanding shares was increased.

         On August 12, 1998,  the Company's  Board of Directors  authorized  the
Corporation  to acquire up to 40,000 shares of the  outstanding  Common Stock of
the Corporation for an aggregate  purchase price not to exceed  $550,000.  As of
September  27, 1998,  the Company had  purchased a total of 15,500  shares at an
aggregate cost of $193,000.

     At September 27, 1998, the book value per share of the Company's  remaining
outstanding common stock was $17.57 per share.

         On August 4, 1998 the Company  declared a semi-annual  cash dividend of
$.075 per share  ($117,930)  on its common  stock  payable on August 24, 1998 to
shareholders  of record on August 14, 1998.  Under the Company's  loan agreement
with a bank, dividends may not exceed $787,500 during the three-year term of the
loan.





<PAGE>
<TABLE>
<CAPTION>


                                                         Results of Operations

Items as a percentage of sales are reflected in the following table:

                                                     Three Months Ended              Nine Months Ended    
                                            Sept. 27,         Sept. 28,        Sept. 27,         Sept. 28,
                                                 1998              1997             1998              1997
                                                 ----              ----             ----              ----
<S>                                             <C>               <C>              <C>               <C>  

(%)
Net sales                                       100.0             100.0            100.0             100.0
Cost of sales                                    70.0              79.3             73.3              78.6
                                                 ----              ----             ----              ----
Gross margin                                     30.0              20.7             26.7              21.4
Selling, general and
 administrative expenses                         17.8              17.5             17.6              20.4
                                                 ----              ----             ----              ----
Operating income (loss)                          12.2               3.2              9.1             (1.0)
Other income (expense), net                     (1.7)             (1.5)            (1.4)             (2.0)
                                                 ---               ---              ---               ---
Income before income taxes                       10.5               1.7            (7.7)             (1.0)
Provision for income taxes                        4.0               0.6              2.9             (0.4)
                                                  ---               ---              ---              ---
Net income (loss)                                 6.5               1.1              4.8             (0.6)

</TABLE>

Three Months Ended September 27, 1998 and September 28, 1997

         During the third quarter of 1998 the Company  reached  record levels of
revenues and earnings. Third quarter earnings of $1,232,000 compared to $162,000
in the third quarter of 1997.  The quarterly  earnings per share of 78 cents (74
cents fully  diluted)  was a record for the Company and  compared to 9 cents per
share in the third  quarter of 1997.  Revenues  for the 1998  quarter  increased
22.8% reaching a record level of $18,904,000 as compared to $15,390,000  for the
prior year.

         Net sales by  division  for the third  quarter of 1998  compared to the
third quarter of 1997 are set forth in the following table ($000's):
<TABLE>
<CAPTION>

                                          Three Month      Period Ended
                                            Sept. 27,         Sept. 28,        Increase/       % Increase/
                                                 1998              1997       (Decrease)        (Decrease)
                                                 ----              ----       ----------        ----------
<S>                                            <C>               <C>            <C>                <C>  

Health Products                                $8,158            $7,660             $498              6.5%
Consumer Products                              10,743             6,123            4,620             75.5%
Byford                                              3             1,607         ($1,604)           (99.8%)
                                                    -             -----         --------
         Total                                $18,904           $15,390           $3,514             22.8%
</TABLE>

         Sales of  Consumer  Products  increased  $4,620,000  during  the  third
quarter,  or 75.5% over the comparable  quarter of 1997.  This increase  results
primarily from continuing  acceptance of the Company's seamless intimate apparel
as consumers continued to respond positively to the unsurpassed fit, comfort and
style of seamless  intimates.  Sales in the Consumer  Products  Division in 1997
were  down due to the loss of  circular  knit  panty  business  to lower  priced
imports and the decision to eliminate the full fashion panty line.

         Sales of Health  Products  increased  $498,000 or 6.5% due to growth in
all major product lines partially offset by slower than  anticipated  acceptance
of the Company's redesigned PulStar system.

         The decline in Byford  sales  reflects  the  Company's  decision in the
third  quarter  of 1997 to no  longer  distribute  the line of men's  socks  and
sweaters due to poor profitability.

         Gross  margins  increased in 1998 to 30.0% of net sales (20.7% in 1997)
as the result of increased  volume,  higher  margins on new seamless  styles and
cost controls.

         Interest expense decreased as a result of lower long-term debt and less
borrowing under the line of credit agreement.


Nine Months Ended September 27, 1998 and September 28, 1997

         During the nine months of 1998 the Company also reached  record  levels
of revenues and  earnings.  1998  earnings of  $2,625,000  compared to a loss of
$279,000 in 1997.  The  year-to-date  earnings  per share of $1.53  ($1.48 fully
diluted)  was a record for the Company and  compared to a loss of $.15 per share
in the prior year.  Revenues for 1998  year-to-date  increased  21.5% reaching a
record level of $54,914,000 as compared to $45,203,000 for the prior year.

         Net sales by division for the nine months of 1998  compared to 1997 are
set forth in the following table ($000's):
<TABLE>
<CAPTION>

                                           Nine Month      Period Ended
                                            Sept. 27,         Sept. 28,        Increase/       % Increase/
                                                 1998              1997       (Decrease)        (Decrease)
                                                 ----              ----       ----------        ----------
<S>                                           <C>               <C>             <C>                <C> 

Health Products                               $24,531           $23,451           $1,080              4.6%
Consumer Products                              30,285            18,135           12,150             67.0%
Byford                                             98             3,617         ($3,519)           (97.3%)
                                                   --             -----         --------
         Total                                $54,914           $45,203           $9,711             21.5%
</TABLE>

         Sales of Consumer Products increased $12,150,000 during 1998, or 67.0%,
over 1997. This increase  results  primarily from  continuing  acceptance of the
Company's seamless intimate apparel as consumers continued to respond positively
to the unsurpassed  fit, comfort and style of seamless  intimates.  Sales in the
Consumer  Products  Division in 1997 were down due to the loss of circular  knit
panty  business to lower priced  imports and the decision to eliminate  the full
fashion panty line.

         Sales of Health  Products  increased  $1,080,000  or 4.6% due to strong
sales  of  treads  and  cuffs  partially   offset  by  shortfalls  in  sales  of
stockinette, dressings and the PulStar system.

         The decline in Byford  sales  reflects  the  Company's  decision in the
third  quarter  of 1997 to no  longer  distribute  the line of men's  socks  and
sweaters due to poor profitability.

         Gross  margins  increased in 1998 to 26.7% of net sales (21.4% in 1997)
as the result of increased  volume,  higher  margins on new seamless  styles and
cost controls.

         Selling,  general and administrative expenses declined (as a percentage
of net sales)  from  20.4% in 1997 to 17.6% in 1998,  primarily  reflecting  the
impact of  increased  volumes.  Also,  included in 1997  expenses was a one-time
charge of  approximately  $401,000 to record the severance  arrangement with the
Company's former President and CEO.

         Interest expense decreased as a result of lower long-term debt and less
borrowing under the line of credit agreement during the period.

         Other expense in 1997 included  one-time  charges to write-off the full
fashion  equipment  ($143,000)  and to write down the carrying value of the idle
Alba plant that is being held for sale ($48,000).  Other income in 1997 included
several minor non-recurring gains,  including a gain from the sale of certain of
the  Company's  yarn  covering  equipment,  reflective of a decision to purchase
covered yarn from outside vendors at a lower cost.



THIS  QUARTERLY  REPORT ON FORM 1O-Q,  INCLUDING ANY  INFORMATION  INCORPORTATED
THEREIN BY  REFERENCE,  MAY  CONTAIN,  IN  ADDITION TO  HISTORICAL  INFORMATION,
CERTAIN   FORWARD-LOOKING   STATEMENTS  THAT  INVOLVE   SIGNIFICANT   RISKS  AND
UNCERTAINTIES.  SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENT'S BELIEF
AS  WELL AS  ASSUMPTIONS  MADE  BY,  AND  INFORMATION  CURRENTLY  AVAILABLE  TO,
MANAGEMENT  PURSUANT TO THE SAFE  HARBOR  PROVISIONS  OF THE PRIVATE  SECURITIES
LITIGATION  REFORM ACT OF 1995.  FORWARD-LOOKING  STATEMENTS  CAN  GENERALLY  BE
IDENTIFIED  AS SUCH  BECAUSE THE CONTEXT OF THE  STATEMENT  USUALLY WILL INCLUDE
WORDS SUCH AS "THE COMPANY BELIEVES";  OR "ANTICIPATES",  OR "EXPECTS"; OR WORDS
OF SIMILAR  IMPORT.  SIMILARLY,  STATEMENTS  THAT DESCRIBE THE COMPANY'S  FUTURE
PLANS, OBJECTIVES,  ESTIMATES OR GOALS ARE ALSO FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS ADDRESS FUTURE EVENTS AND CONDITIONS CONCERNING CAPITAL EXPENDITURES,
EARNINGS, SALES, LIQUIDITY AND CAPITAL RESOURCES, AND ACCOUNTING MATTERS.

THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN, OR
IMPLIED BY, THE FORWARD-LOOKING  STATEMENTS CONTAINED HEREIN. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES  INCLUDE,  BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN ITEM 1  DESCRIPTION  OF BUSINESS;  AND  ELSEWHERE IN THE  COMPANY'S
ANNUAL  REPORT  ON FORM  1O-K  FOR THE  YEAR  ENDED  DECEMBER  31,  1997,  OR IN
INFORMATION  INCORPORATED THERIN BY REFERENCE, AS WELL AS FACTORS SUCH AS FUTURE
ECONOMIC CONDITIONS,  ACCEPTANCE BY CUSTOMERS OF THE COMPANY'S PRODUCTS, CHANGES
IN CUSTOMER  DEMAND,  LEGISLATIVE,  REGULATORY AND  COMPETITIVE  DEVELOPMENTS IN
MARKETS  IN  WHICH  THE  COMPANY  OPERATES  AND  OTHER  CIRCUMSTANCES  AFFECTING
ANTICIPATED  REVENUES AND COSTS. THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE
PUBLICLY THE RESULT OF ANY REVISIONS TO THESE FORWARD  LOOKING  STATEMENTS  THAT
MAY BE MADE TO REFLECT  EVENTS OR  CIRCUMSTANCES  AFTER THE DATE OF THIS  ANNUAL
REPORT ON FORM 1O-K OR TO REFLECT THE OCCURRENCE OF OTHER ANTICIPATED EVENTS.


<PAGE>


PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on FORM 8-K

 a.   Exhibits
         27.   Financial Data Schedule (filed in electronic format only)

 b.   Form 8-K
                 None


SIGNATURES
Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned there unto duly authorized.

                              ALBA-WALDENSIAN, INC.


Date: October 27, 1998               /s/ Glenn J. Kennedy
                                     --------------------
                                     Vice President and Treasurer
                                     (Chief Financial Officer and
                                      Principal Accounting Officer)