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 March 29, 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)

                                 (704) 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 May 18, 1998, the number of common shares outstanding was 1,572,403.


<PAGE>



PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

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


<TABLE>
<CAPTION>
                                                              March 29,                       December 31,
                                                                   1998                               1997
(Unaudited)

ASSETS
CURRENT ASSETS:
<S>                                                              <C>                                <C>
Cash                                                             $1,144                             $2,416
Accounts receivable, net of allowance
  for doubtful accounts of $300
  and $260, respectively                                         10,634                              7,823
Inventories:
  Materials and supplies                                          3,302                              2,554
  Work-in-process                                                 5,078                              5,045
  Finished goods                                                  1,875                              3,710
Total Inventories                                                10,255                             11,309

Deferred income taxes                                               707                                707
Prepaid expenses and other                                          141                                127
Total Current Assets                                             22,881                             22,382

PROPERTY AND EQUIPMENT                                           32,132                             31,111
Less: accumulated depreciation                                 (18,262)                           (17,857)
Net Property and Equipment                                       13,870                             13,254

OTHER ASSETS:
Notes receivable                                                     16                                 17
Trademarks and patents                                              476                                492
Excess of cost over net assets acquired                           7,327                              7,474
                                                                  7,819                              7,983

TOTAL ASSETS                                                    $44,570                            $43,619
</TABLE>

See notes to consolidated financial statements.


<PAGE>



                                               ALBA-WALDENSIAN, INC.
                                            Consolidated Balance Sheets
                                           ($000's except share amounts)
<TABLE>
<CAPTION>
                                                              March 29,                       December 31,
                                                                   1998                               1997
                                                            (Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings and lines
<S>             <C>                                    <C>                                 <C>
 of credit(Note 2)                                     $            -                      $             -
Current maturities of long-term debt                              2,350                              2,350
Accounts payable                                                 2,994                               3,118
Accrued expenses                                                  2,463                              1,542
Total Current Liabilities                                         7,807                              7,010

LONG-TERM DEBT (Note 2)                                           6,864                              7,452
DEFERRED INCOME TAX LIABILITY                                     1,746                              1,746
Total Liabilities                                                16,417                             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:
   1,867,403 in 1998 and 1997                                     4,716                              4,716
Additional paid-in capital                                        9,182                              9,182
Retained earnings                                                14,392                             13,650
                                                                 28,290                             27,548
Less treasury stock - at cost
   (19,177 shares)                                                (137)                              (137)
Total Stockholders' Equity                                       28,153                             27,411
TOTAL LIABILITIES AND
 STOCKHOLDERS' EQUITY                                           $44,570                            $43,619
</TABLE>

See notes to consolidated financial statements.


<PAGE>




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

<TABLE>
<CAPTION>
                                                                                  Three Months Ended
                                                                               March 29,         March 30,
                                                                                    1998              1997

<S>                                                                              <C>               <C>
Net sales                                                                        $18,296           $13,940
Cost of sales                                                                     13,826            10,936
Gross margin                                                                       4,470             3,004
Selling, general and
 administrative expense                                                            3,042             3,541
Operating income (loss)                                                            1,428             (537)

Interest expense                                                                   (216)             (289)
Interest income                                                                       32                20
Other                                                                               (49)             (299)
Total other income (expense)                                                       (233)             (568)

Income (loss) before income taxes                                                  1,195           (1,105)
Provision for (benefit from)
 income taxes                                                                        454             (420)

Net income (loss)                                                                 $  741            $(685)

Net income (loss) per
 common share                                                               $       .40      $       (.37)

Weighted average number of
shares
  of common stock outstanding                                                  1,867,403        1,867,403
</TABLE>

See notes to consolidated financial statements.


<PAGE>



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

                                                                       Three Month Periods Ended
                                                              March 29,                          March 30,
                                                                   1998                               1997
OPERATING ACTIVITIES:
<S>                                                               <C>                              <C>
 Net income (loss)                                                $ 741                            $ (685)
  Adjustments  to  reconcile  net  income (loss)
  to net  cash  provided  by  operating
   activities:
    Depreciation and amortization                                   585                                567
    Provision for bad debts                                          45                                 58
    Loss on disposal of property                                      2                                231
    Provision for inventory obsolescence                            150                                209
  Changes in operating assets and liabilities providing (using) cash:
     Accounts receivable                                        (2,856)                                460
     Refundable income taxes                                         --                              (265)
     Inventories                                                    905                              (746)
     Prepaid expenses and other                                    (14)                               (70)
    Accounts payable                                              (124)                                644
    Accrued expenses and other liabilities                          467                                581
    Income taxes payable                                            454                              (169)
    Deferred compensation                                            --                              (142)
Net cash provided by operating activities                           355                                673

INVESTING
ACTIVITIES:
 Capital expenditures                                           (1,040)                              (408)
Proceeds from notes receivable                                        1                                  3
Net cash used in investing activities                           (1,039)                              (405)

FINANCING ACTIVITIES:
 Net borrowings under line
  of credit agreement                                                --                                 37
 Principal payments on long-term debt                             (588)                              (588)
Net cash used in financing activities                             (588)                              (551)

NET DECREASE IN CASH                                            (1,272)                              (283)
CASH AT BEGINNING OF PERIOD                                       2,416                                294
CASH AT END OF PERIOD                                           $ 1,144                              $ 11
</TABLE>


<PAGE>




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

                                                                       Three Month Periods Ended
                                                              March 29,                          March 30,
                                                                   1998                               1997

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

  Cash paid during the period for:
<S>                                                             <C>                                  <C>
    Interest                                                    $  216                              $ 238
    Income taxes                                               $    --                            $    16



</TABLE>

See notes to consolidated financial statements.


<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 March 29, 1998,  and the results of operations for the
three-month  periods ended March 29, 1998, and March 30, 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 three-month  period ended March 29, 1998,
are not necessarily indicative of the results to be expected for the full year.


2.   BANK DEBT

     The Company has both a  $3,000,000  seasonal  line of credit and  long-term
debt agreements  with a major bank. On March 28, 1997, the Company  renegotiated
the terms of these  agreements  wherein the interest rate was increased to LIBOR
plus 2.75%  (formerly  LIBOR plus 1.75% for the seasonal  line and LIBOR plus 2%
for the long-term  debt).  The seasonal line of credit matures on June 30, 1998,
and the long-term debt portion matures on January 5, 1999. There were no amounts
outstanding under the seasonal line of credit at March 29, 1998, or December 31,
1997.  Quarterly principal payments of $587,500 are due under the long-term debt
agreement.

     The loan  agreement  contains  various loan  covenants,  as defined,  which
include  maintaining  a minimum  tangible  net  worth,  a minimum  cash flow and
leverage  ratio and a limit on capital  spending.  The agreement  also maintains
that any cash  dividends  paid will not cause  default of any loan covenant as a
result of paying those dividends.  Substantially all of the Company's inventory,
property and equipment,  and accounts receivable are pledged as collateral under
the agreements with the bank.

     Although the loan  matures  within one year,  the Company has  continued to
classify  the  debt as  long-term  in the  accompanying  consolidated  financial
statements due to the Company's  successful  refinancing of this debt subsequent
to March 29, 1998 (see Note 4).


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.    SUBSEQUENT EVENTS

     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.

     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 the
Company's  affiliates  had with the bank. The Company  purchased  295,000 of the
shares at a cost of $2,212,500 plus other estimated  transaction  costs totaling
$150,000.  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.


<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 remained  substantially  unchanged from
December  31,  1997,  and  continues  to be adequate  to support  the  Company's
operations.  On March 29, 1998,  the Company had working  capital of $15,074,000
with a ratio of 2.93 to1.  This is  comparable  to  $15,372,000  or 3.19 to 1 at
December 31, 1997.  The decrease in the amount of working  capital  reflects the
Company's  concerted efforts to reduce inventory levels,  which have declined to
$10,255,000 at March 29, 1998, from $11,309,000 at December 31, 1997.

     Liquidity   needs  are  primarily   affected  by  and  related  to  capital
expenditures and changes in the Company's business volume.  Capital expenditures
through the first three months of 1998 have totaled  $1,040,000,  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 $408,000 for the same three months of 1997. The
Company  anticipates  that capital  expenditures for the entire year of 1998 may
exceed $4,000,000.

     The  purchase  of  295,000  shares  of  the  Company's   common  stock  for
approximately  $2,362,500  (see  Note  4  of  Notes  to  Consolidated  Financial
Statements) reduced the company's net worth.  However, the acquisition price per
share of $7.50 was significantly less than the Company's book value per share at
March 29, 1998  ($15.08)  and  accordingly  the net book value of the  remaining
outstanding shares has been increased.

     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 will provide 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 capital expenditure
line of $3,000,000.  In addition, the Company may secure other outside financing
of capital l expenditures  of up to $4,500,000  over the three-year  term of the
facility.expenditures  of up to  $4,500,000  over  the  three-year  term  of the
facility.



<PAGE>



                              Results of Operations

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

                                          Three Month     Periods Ended
                                            March 29,         March 30,
                                                 1998              1997

Net sales                                      100.0%            100.0%
Cost of sales                                   75.6%             78.5%
Gross margin                                    24.4%             21.5%
Selling, general and
 Administrative expenses                        16.6%             25.3%
Operating income (loss)                          7.8%            (3.8%)
Other income (expense), net                    (1.3%)            (4.1%)
Income before income taxes                       6.5%            (7.9%)
Provision for income taxes                     (2.4%)              3.0%
Net income (loss)                                4.1%            (4.9%)


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

                                          Three Month      Period Ended
                                            March 29,         March 30,        Increase/       % Increase/
                                                 1998              1997       (Decrease)        (Decrease)

<S>                                            <C>               <C>                <C>               <C>
Health Products                                $8,423            $7,662             $761              9.9%
Consumer Products                               9,800             5,285            4,515             85.4%
Byford                                             73               993            (920)           (92.6%)
         Total                                $18,296           $13,940           $4,356             31.2%
</TABLE>

     The 9.9% increase in Health Products sales was lead by increases in treads,
cuffs and anti-embolism stockings, partially offset by declines in dressings and
the Company's pulStar system. The Consumer Products' increased sales reflect the
acceptance of the Company's  seamless  intimate  apparel,  led by a new seamless
bodysuit  introduced in the first quarter.  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.  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.

     Gross  margins  increased  in 1998 to 24.4% of net sales (21.5% in 1997) as
the result of increased volume, higher margins on new styles and cost controls.

     Selling,  general and administrative  expenses declined (as a percentage of
net sales) from 25.3% in 1997 to 16.6% in 1998.  Although the  percentage to net
sales decreased as the result of increased  volume,  actual  expenses  decreased
$499,000 due  primarily  to a one-time  charge of $401,000 in 1997 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 partially offset
by higher (1%) interest rate in 1998.

     Other  expenses in the first  quarter of 1997 included the write-off of the
full  fashion  knitting  machines  ($143,000),  the  write-off of a deposit on a
canceled  machinery  order ($80,000) and the write-down to the carrying value of
the Alba Plant being held for sale ($48,000).

     As a result of the foregoing,  the Company  recorded net income of $741,000
or $0.40 per share in 1998 as  compared to a loss of $685,000 or $0.37 per share
in 1997.

     Although the Company anticipates that its seamless intimate products,  will
in 1998 continue to outperform their year ago levels, the unusual  profitability
attained in the first  quarter may not continue  for the  remainder of the year.
The  Company  believes  earnings  for  the  second  quarter  are  likely  to  be
substantially  lower than those reported for the first quarter,  but higher than
1997's second quarter.

     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 MANAGEMENTS 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 COMPANYS  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  COMPANYS  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  COMPANYS  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 COMPANYS
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: May 18, 1998        /s/ Glenn J. Kennedy
                          Vice President and Treasurer
                          (Chief Financial Officer and
                          Principal Accounting Officer)