Page 1 of 44
                                    Index to Exhibits-Pages 18-25

                   SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C.  20549

                                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    1-3634


                      CONE MILLS CORPORATION
         (Exact name of registrant as specified in its charter)

    North Carolina                                  56-0367025
(State or other jurisdiction of                   (I.R.S. Employer
 incorporation or organization)                    Identification No.)

3101 North Elm Street, Greensboro, North Carolina   27408
(Address of principal executive offices)          (Zip Code)

                           (336) 379-6220
          (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

Number of shares of common stock outstanding as of April 22, 1998:
26,165,933 shares.

                                   1

<PAGE>



                         CONE MILLS CORPORATION

                                  INDEX

                                                                      Page
                                                                      Number

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

            Consolidated Condensed Statements of Operations
              Thirteen weeks ended March 29, 1998
              and March 30, 1997 (Unaudited)............................3

            Consolidated Condensed Balance Sheets
              March 29, 1998 and March 30, 1997
              (Unaudited) and December 28, 1997.........................4

            Consolidated Condensed Statements of Cash Flows
              Thirteen weeks ended March 29, 1998
              and March 30, 1997 (Unaudited)............................5

            Notes to Consolidated Condensed Financial Statements
            (Unaudited).................................................6

Item 2.  Management's Discussion and Analysis of
            Financial Condition and Results of Operations...............10


PART II.    OTHER INFORMATION

Item 1.  Legal Proceedings..............................................16
Item 6.  Exhibits and Reports on Form 8-K...............................17


                                       2

<PAGE>

                                   PART I
Item 1.

                         CONE MILLS CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                          (in thousands, except per share data)
<TABLE>
<S>                                                      <C>               <C>
                                                            Thirteen          Thirteen
                                                           Weeks Ended       Weeks Ended
                                                          March 29, 1998    March 30, 1997
                                                           (Unaudited)        (Unaudited)

Net Sales                                                    $  190,171      $  174,714

Operating Costs and Expenses:
        Cost of sales                                           159,846         148,059
        Selling and administrative                               19,779          18,304
        Depreciation                                              7,174           6,671
        Restructuring                                                 -             655

                                                                186,799         173,689

Income from Operations                                            3,372           1,025

Other Income (Expense):
        Interest income                                             611             188
        Interest expense                                         (3,547)         (3,683)

                                                                 (2,936)         (3,495)

Income (Loss) before Income Taxes (Benefit) and Equity
        in Earnings (Losses) of Unconsolidated Affiliate            436          (2,470)

Income Taxes (Benefit)                                              144            (988)

Income (Loss) before Equity in Earnings (Losses)
        of Unconsolidated Affiliate                                 292          (1,482)

Equity in Earnings (Losses) of Unconsolidated Affiliate           1,252            (513)

Net Income (Loss)                                            $    1,544      $   (1,995)

Income (Loss) Available to Common Shareholders               $      791          (2,715)

Earnings (Loss) Per Share - Basic and Diluted                $      .03      $     (.10)

Weighted Average Common Shares Outstanding:
        Basic                                                    26,183          26,237
        Diluted                                                  26,210          26,237

</TABLE>

See Notes to Consolidated Condensed Financial Statements.


                                       3

<PAGE>

                        CONE MILLS CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED CONDENSED BALANCE SHEETS
                    (in thousands, except share and par value data)
<TABLE>
<S>                                                                            <C>           <C>            <C>


                                                                                 March 29,     March 30,     December 28,
                                                                                   1998          1997           1997
ASSETS                                                                          (Unaudited)   ((Unaudited)     (Note)
        Current Assets:
                Cash                                                             $     525     $   1,148      $     856
                Accounts receivable, less allowances of
                        $1,500, $1,250 and $1,500                                   25,063        27,862         19,958
                Subordinated note receivable                                        39,886        31,292         23,842
                Inventories                                                        122,287       145,491        115,663
                Other current assets                                                18,913        12,716         19,228

                         Total Current Assets                                      206,674       218,509        179,547

        Investments in Unconsolidated Affiliates                                    38,033        33,631         36,781
        Other Assets                                                                37,844        39,819         38,431
        Property, Plant and Equipment                                              250,017       249,689        251,887

                                                                                 $ 532,568     $ 541,648      $ 506,646


LIABILITIES AND STOCKHOLDERS' EQUITY
        Current Liabilities:
                Notes payable                                                    $   7,500     $  25,190      $   4,500
                Current maturities of long-term debt                                10,714        10,754         10,714
                Accounts payable                                                    39,962        33,055         32,994
                Sundry accounts payable and accrued liabilities                     45,465        44,121         49,588
                Deferred income taxes                                               20,436        23,594         23,370

                        Total Current Liabilities                                  124,077       136,714        121,166

        Long-Term Debt                                                             161,767       150,079        139,656
        Deferred Income Taxes                                                       40,913        40,598         38,523
        Other Liabilities                                                           10,936        10,229         10,781

        Stockholders' Equity:
                Class A preferred stock - $100 par value; authorized
                1,500,000 shares; issued and outstanding 383,948 shares             38,395        38,395         38,395
                Class B preferred stock - no par value; authorized
                         5,000,000 shares                                                -             -              -
                Common stock - $.10 par value; authorized 42,700,000
                        shares; issued and outstanding 26,166,933 shares;
                        1997, 26,119,133 shares and 26,201,633 shares                2,617         2,612          2,620
                Capital in excess of par                                            62,057        61,625         62,300
                Retained earnings                                                  101,039       109,879        102,449
                Deferred compensation - restricted stock                              (702)            -           (740)
                Accumulated other comprehensive income                              (8,531)       (8,483)        (8,504)

                        Total Stockholders' Equity                                 194,875       204,028        196,520

                                                                                 $ 532,568     $ 541,648      $ 506,646
</TABLE>


Note:  The balance sheet at December 28, 1997, has been
derived from the audited financial statements at that date.

See Notes to Consolidated Condensed Financial Statements.

                                     4

<PAGE>

                     CONE MILLS CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<S>                                                             <C>               <C>

                                                                   Thirteen          Thirteen
                                                                  Weeks Ended       Weeks Ended
                                                                 March 29, 1998    March 30, 1997
                                                                  (Unaudited)       (Unaudited)

Cash Used in Operations                                            $  (14,461)       $ (8,044)

Investing
        Proceeds from sale of property, plant and equipment             2,566           1,225
        Capital expenditures                                           (6,790)         (6,556)
        Other                                                               -          (1,500)

                Cash used in investing                                 (4,224)         (6,831)

Financing
        Net borrowings under line of credit agreements                  3,000          19,923
        Decrease in checks issued in excess of deposits                (3,446)         (3,475)
        Proceeds from long-term debt borrowings                        22,000               -
        Dividends paid - Class A Preferred                             (2,954)            (55)
        Other                                                            (246)         (1,388)

                Cash provided by financing                             18,354          15,005

                Net change in cash                                       (331)            130

Cash at Beginning of Period                                               856           1,018

Cash at End of Period                                              $      525        $  1,148



Supplemental Disclosures of Additional Cash Flow Information:

Cash payments for:

        Interest, net of interest capitalized                      $    6,520        $  7,045

        Income taxes, net of refunds                               $      (17)       $ (3,714)

Supplemental Schedule of Noncash Investing and Financing Activities:

        Receivable recorded from sale of division                  $        -        $  2,703

        Liability incurred for dividend payable                    $        -        $  2,777

</TABLE>


See Notes to Consolidated Condensed Financial Statements.


                                       5

<PAGE>

                 CONE MILLS CORPORATION AND SUBSIDIARIES
          NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                             MARCH 29, 1998

Note 1.  Basis of Financial Statement Preparation

      The  Cone  Mills  Corporation  (the  "Company")   consolidated   condensed
      financial  statements for March 29, 1998 and March 30, 1997 are unaudited,
      but in the opinion of  management  reflect all  adjustments  necessary  to
      present  fairly the  consolidated  condensed  balance sheets of Cone Mills
      Corporation  and  Subsidiaries  at March 29,  1998,  March 30,  1997,  and
      December 28, 1997, and the related  consolidated  condensed  statements of
      operations  and cash flows for the thirteen weeks ended March 29, 1998 and
      March 30, 1997. All  adjustments  are of a normal  recurring  nature.  The
      results are not  necessarily  indicative of the results to be expected for
      the full year.

      These statements  should be read in conjunction with the audited financial
      statements  and related notes  included in the Company's  annual report on
      Form 10-K for fiscal 1997.

      Inventories  are  stated  at the  lower of cost or  market.  The  last-in,
      first-out  (LIFO)  method is used to determine  cost of most  domestically
      produced goods. The first-in, first-out (FIFO) or average cost methods are
      used to  determine  cost of all other  inventories.  Because  amounts  for
      inventories under the LIFO method are based on an annual  determination of
      quantities as of the year-end, the inventories at March 29, 1998 and March
      30, 1997 and related  consolidated  condensed statements of operations for
      the thirteen weeks then ended are based on certain  estimates  relating to
      quantities and cost as of the end of the fiscal year.

Note 2.     Inventories
<TABLE>
<S>                                <C>         <C>         <C>

(in thousands)                        3/29/98     3/30/97    12/28/97

Greige and finished goods           $  83,391   $  93,131   $  81,130
Work in process                        10,578      12,060      11,260
Raw materials                          16,057      14,300      11,122
Supplies and other                     12,261      26,000      12,151
                                      -------     -------     -------
                                    $ 122,287   $ 145,491   $ 115,663
                                      =======     =======     =======
</TABLE>

                                   6

<PAGE>


Note 3.     Long-Term Debt
<TABLE>
<S>                                <C>         <C>         <C>

(in thousands)                        3/29/98     3/30/97    12/28/97

Senior Note                         $  53,572   $  64,286   $  53,572
Revolving Credit Agreement             22,000           -           -
8 1/8% Debentures                      96,909      96,465      96,798
Other                                       -          82           -
                                      -------     -------     -------
                                      172,481     160,833     150,370
Less current maturities                10,714      10,754      10,714
                                      -------     -------     -------
                                    $ 161,767   $ 150,079   $ 139,656
                                      =======     =======     =======
</TABLE>

Effective  February  1998,  the  interest  rate  on the  Company's  Senior  Note
increased to 8.75%.  Interest  rates under the  Revolving  Credit  Agreement are
similar to the Company's unsecured short-term notes payable.

Note 4.     Class A Preferred Stock

The 1999 dividend rate for Class A Preferred  Stock is 7.50%,  payable March 31,
1999.

                                   7

<PAGE>


Note 5.  Earnings (Loss) Per Share

The following  table sets forth the  computation  of basic and diluted  earnings
(loss) per share ("EPS").
<TABLE>
<S>                                       <C>               <C>

(in thousands, except                        Thirteen          Thirteen
  per share data)                          Weeks Ended       Weeks Ended
                                             3/29/98           3/30/97

Net income (loss)                            $  1,544         $ (1,995)
Preferred stock dividends                        (753)            (720)
                                                -----            -----

Basic EPS - income (loss)
  available to common shareholders                791           (2,715)

Effect of dilutive securities                       -                -
                                                -----            -----

Diluted EPS - income (loss)
  available to common shareholders
  after assumed conversions                   $   791         $ (2,715)
                                                =====            =====


Determination of shares:

Basic EPS - weighted average shares            26,183           26,237

Effect of dilutive securities                      27                -
                                                -----            -----

Diluted EPS - adjusted weighted-
  average shares and assumed
  conversions                                  26,210           26,237
                                               ======           ======


Earnings (loss) per share:
  Basic                                      $    .03         $  ( .10)
                                               ======           ======
  Diluted                                    $    .03         $  ( .10)
                                               ======           ======
</TABLE>

Common  stock  options  outstanding  at March 30, 1997 were not  included in the
computation  of  diluted  earnings  per share  because  to do so would have been
antidilutive.

                                   8

<PAGE>

Note 6.     Recent Account Pronouncements

Beginning  in fiscal  year  1998,  the  Company  adopted  SFAS  130,  "Reporting
Comprehensive Income." Comprehensive income is the total of net income and other
changes  in  equity,  except  those  resulting  from  investments  by owners and
distribution to owners not reflected in net income.  Total comprehensive  income
for the periods was as follows: <TABLE> <S> <C> <C>

(in thousands)                                Thirteen          Thirteen
                                            Weeks Ended       Weeks Ended
                                              3/29/98           3/30/97

Net income (loss)                             $ 1,544          $ (1,995)
Other comprehensive income (loss),
  currency translation adjustment                 (27)              ( 8)
                                                -----             -----
                                              $ 1,517          $ (2,003)
                                                =====             =====
</TABLE>

                                         9

<PAGE>

Item 2.

                         MANAGEMENT'S DISCUSSION
                   AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

First  Quarter  Ended March 29, 1998 Compared with First Quarter Ended March 30,
1997.

In the first  quarter of 1998,  Cone Mills  experienced  strong denim demand and
began to  experience  better  market  conditions  in  decorative  print  fabrics
markets.  For the quarter,  Cone Mills had sales of $190.2 million,  up 8.8%, as
compared  with sales of $174.7  million  for the first  quarter  of 1997.  After
eliminating the sales of businesses  which were divested in 1997,  sales were up
approximately  11%.  Higher  sales of denim  products,  finishing  services  and
jacquard fabrics accounted for the increase.  Lower specialty  sportswear sales,
primarily shirting fabrics, partially offset the sales increases.  International
sales were $50.9 million, or 27% of total sales, as compared with $43.9 million,
or 25% of sales, for the first quarter of 1997.

Cone Mills had net income for the first quarter of 1998 of $1.5 million, or $.03
per share after preferred  dividends.  For comparison,  first quarter 1997 had a
net loss of $2.0 million,  or $.10 per share,  including a pre-tax charge of $.7
million  related to the  consolidation  of the  Granite and  Carlisle  finishing
operations.

Gross  profit  for the first  quarter  of 1998 (net sales less cost of sales and
depreciation)  was 12.2% of sales, as compared with 11.4% for the previous year.
The increase was  primarily the result of the improved  sales volume,  lower raw
material costs and higher capacity  utilization  partially  offset by additional
expense at the Carlisle Finishing plant.

                                   10

<PAGE>

Business Segments.  Cone operates in two principal  business  segments,  apparel
fabrics and home  furnishings  products.  The following table sets forth certain
net sales and operating income (loss) information.
<TABLE>
<S>                        <C>         <C>         <C>         <C>

                                            First Quarter
                                    1998                    1997
                                    (Dollar amounts in millions)
NET SALES
   Apparel(1)               $  158.2     83.2%      $  148.4     84.9%
   Home Furnishings(2)          32.0     16.8           26.3     15.1
                               -----     ----          -----    -----
      Total                 $  190.2    100.0%      $  174.7    100.0%
                               =====    =====          =====    =====

OPERATING INCOME (LOSS)(3)
   Apparel                  $    6.8      4.3%      $    6.1      4.1%
   Home Furnishings             (2.2)    (7.0)          (3.5)   (13.4)
   Restructuring                   -        -            (.7)       -
</TABLE>

(1)   Apparel includes synthetic fabrics net sales of $2.7 million in 1997.
(2)   Home  furnishings  includes  Greeff's and real  estate's net sales of $1.4
      million in 1997.
(3)   Operating income (loss) excludes general corporate  expenses.  Percentages
      reflect operating income (loss) as a percentage of segment net sales.

   Apparel Fabrics.  Apparel fabrics segment sales for the first quarter of 1998
   were  $158.2  million,  up 6.6% from  first  quarter  of 1997 sales of $148.4
   million.  Excluding sales of the synthetic  fabric business which was sold in
   January 1997,  first quarter 1998 sales were up  approximately  9%. Increased
   sales of  denims,  partially  offset  by lower  specialty  sportswear  sales,
   accounted for the increase.  Average denim prices were  essentially flat year
   over year.  Cotton costs were down in the first  quarter of 1998,  reflecting
   more favorable world cotton prices.  Denim manufacturing  facilities operated
   at capacity during the first quarter of the 1998 period.

   For the first  quarter of 1998,  the apparel  fabric  segment  had  operating
   income of $6.8 million,  or 4.3% of sales, as compared with $6.1 million,  or
   4.1% of sales,  in the first  quarter of 1997.  Improved  profits  from denim
   operations  in the  first  quarter  of  1998  were  substantially  offset  by
   unfavorable specialty sportswear results.


                                   11

<PAGE>

   Home  Furnishings.  For the first quarter of 1998, home  furnishings  segment
   sales were $32.0  million,  up 21.8% as compared  with $26.3  million for the
   first quarter of 1997.  Excluding operating units sold in 1997, first quarter
   1998 sales were up  approximately  28%.  Stronger  commission  finishing  and
   jacquard  fabric sales  accounted for the increase.  John Wolf sales were off
   slightly from year-ago levels. Home furnishings had an operating loss of $2.2
   million,  as compared  with a loss of $3.5  million for the first  quarter of
   1997. With the exception of the Carlisle  Finishing  plant,  home furnishings
   units substantially improved operating results in 1998 as compared with 1997.

Total Company selling and  administrative  expenses increased from $18.3 million
for the first  quarter of 1997 to $19.8  million  in the first  quarter of 1998,
which included the expenses  associated with the Company's  increased  marketing
and merchandising  efforts.  Selling and  administrative  expenses were 10.4% of
sales in the first  quarter of 1998, as compared with 10.5% in the first quarter
of 1997.

Income taxes as a  percentage  of pre-tax  income for the first  quarter of 1998
were 33.0% reflecting the tax benefit  resulting from operation of the Company's
foreign sales corporation.

Equity in earnings of Parras Cone,  the joint venture plant in Mexico,  was $1.3
million for the first  quarter of 1998,  as compared with a loss of $0.5 million
for the first quarter of 1997. The 1998 results reflect full operating schedules
compared with partially curtailed operations for the 1997 period.

The Company  continues to experience  strong denim sales and sales  increases in
home furnishings  operations as the second quarter of 1998 begins. The Company's
short-term   operating   imperatives  are  effective   marketing  for  specialty
sportswear,  satisfactory  manufacturing  results from  Carlisle  Finishing  and
successful  execution of the restructuring plan for John Wolf. New management is
in place at each of these units.  As the Company  continues to make  progress on
marketing initiatives and cost control,  improved operating effectiveness should
follow.

Liquidity and Capital Resources

The Company's principal long-term capital components consist of debt
outstanding under its Senior Note, its 8 1/8% Debentures and
stockholders' equity. Primary sources of liquidity are internally
generated funds, the $80 million Revolving Credit Facility and the
$40 million Receivables Purchase Agreement. The Receivables Purchase

                                   12

<PAGE>

Agreement,  a one-year  facility,  was renewed in March 1998. On March 29, 1998,
the Company had funds  available of $58.0  million  under its  Revolving  Credit
Facility.

During the first  quarter of 1998,  the Company  generated  cash from  operating
activities  before changes in working capital of $6.7 million,  as compared with
$6.1 million for the first quarter of 1997.  Working capital  increases in 1998,
primarily accounts receivable and inventories, were $21.2 million. Other sources
of cash  included  proceeds  of  $2.6  million  realized  from  the  sale of old
manufacturing  equipment.  Uses  of  cash  included  $6.8  million  for  capital
expenditures, and $3.0 million for preferred stock dividends.

The  Company  believes  that  internally  generated  operating  funds  and funds
available  under its credit  facilities will be sufficient to meet its needs for
working capital, capital spending, potential stock repurchases and financing for
the foreseeable future.

On March 29, 1998, the Company's long-term capital structure consisted of $161.8
million of  long-term  debt and  $194.9  million of  stockholders'  equity.  For
comparison,  on March 30, 1997, the Company had $150.1 million of long-term debt
and $204.0 million of stockholders'  equity.  Long-term debt (including  current
maturities  of  long-term   debt)  as  a  percentage   of  long-term   debt  and
stockholders'  equity was 47% at March 29, 1998,  as compared  with 44% at March
30, 1997.

Accounts and note receivable on March 29, 1998, were $64.9 million,  an increase
of $5.8 million,  as compared with March 30, 1997. This increase in accounts and
note receivable was primarily due to increases in sales. Receivables,  including
those sold pursuant to the Receivables  Purchase Agreement,  represented 51 days
of sales outstanding at March 29, 1998 and 49 days at March 30, 1997.

Inventories  on March 29, 1998,  were $122.3  million,  down $23.2  million from
March 30, 1997.  The decrease was primarily  due to the sale of operating  units
and lower  denim  finished  goods  inventories  which were  partially  offset by
increases in raw material levels.

Capital spending in the first quarter of 1998 was $6.8 million, as compared with
$6.6 million for the first quarter of 1997. Capital spending in 1998 is expected
to be approximately $37 million.  Projects include new weaving machines and link
ring  spinning  for the  White  Oak denim  plant  and  additional  looms for the
jacquard facility.


                                   13

<PAGE>

The Company recognizes the business  implications  regarding the Year 2000 as it
relates to computer  programs  and  software  systems.  The Company is currently
adopting new software and  modifying  existing  software to ensure that business
operations are not negatively  impacted by the millennium change. The Company is
coordinating  Year 2000  readiness  with other entities with which it interacts,
both  domestically and globally,  including  suppliers,  customers and financial
service organizations.

Federal, state and local regulations relating to the workplace and the discharge
of materials into the environment  continue to change and,  consequently,  it is
difficult to gauge the total future impact of such  regulations  on the Company.
Existing  government  regulations are not expected to cause a material change in
the  Company's  competitive  position,  operating  results  or  planned  capital
expenditures.  The Company has an active  environmental  committee which fosters
protection of the environment and compliance with laws.

The Company is a party to various legal claims and actions.  Management believes
that none of these claims or actions,  either  individually or in the aggregate,
will have a material adverse effect on the financial condition of the Company.

"Safe  Harbor"  Statement  under Section 27A of the  Securities  Act of 1993, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

   Except for the historical information presented, the matters disclosed in the
   foregoing  discussion  and  analysis  and other parts of this report  include
   forward-looking statements.  These statements represent the Company's current
   judgment on the future and are subject to risks and uncertainties  that could
   cause actual  results to differ  materially.  Such factors  include,  without
   limitation:  (i) the demand for textile  products,  including  the  Company's
   products,  will vary  with the U.S.  and world  business  cycles,  imbalances
   between  consumer demand and inventories of retailers and  manufacturers  and
   changes in fashion trends,  (ii) the highly competitive nature of the textile
   industry and the possible effects of reduced import protection and free-trade
   initiatives,  (iii)  the  unpredictability  of the cost and  availability  of
   cotton,  the  Company's  principal  raw  material,  and  (iv)  the  Company's
   relationships  with  Levi  Strauss  as  its  major  customer.  For a  further
   description  of these  risks  see the  Company's  1997  Form  10-K,  "Item 1.
   Business  -Competition,  -Raw  Materials  and  Customers"  and  "Management's
   Discussion and Analysis of

                                   14

<PAGE>

   Results of Operations  and Financial  Condition -- Overview" of the Company's
   1997 Annual Report to Shareholders  incorporated by reference into Item 7. of
   the Form 10-K.  Other risks and  uncertainties  may be described from time to
   time in the  Company's  other  reports and filings  with the  Securities  and
   Exchange Commission.


                                   15

<PAGE>

                                 PART II

Item 1.  Legal Proceedings

In November 1988,  William J. Elmore and Wayne Comer (the  "Plaintiffs")  former
employees of the Company, instituted a class action suit against the Company and
certain other  defendants in which the  Plaintiffs  asserted a variety of claims
related to the Cone Mills  Corporation  1983 ESOP (the "1983  ESOP") and certain
other  employee  benefit  plans  maintained by the Company.  In March 1992,  the
United States District Court in Greenville, South Carolina entered a judgment in
the amount of $15.5  million  (including an  attorneys'  fee award)  against the
Company  with  respect  to  an  alleged  promise  to  make  additional   Company
contributions  to the 1983 ESOP and all claims  unrelated to the alleged promise
were dismissed.  The Company,  certain individual  defendants and the Plaintiffs
appealed.

On May 6, 1994,  the United  States  Court of  Appeals  for the Fourth  Circuit,
sitting en banc, affirmed the prior conclusion of a panel of three of its judges
and unanimously reversed the $15.5 million judgment and unanimously affirmed all
of the District Court's rulings in favor of the Company.  However,  the Court of
Appeals affirmed, by an equally divided court, the District Court's holding that
Plaintiffs  should be  allowed  to proceed  on an  alternative  theory  whether,
subject to proof of  detrimental  reliance,  Plaintiffs  could  establish that a
letter to  salaried  employees  on  December  15,  1983  created an  enforceable
obligation  that  could  allow  recovery  on a  theory  of  equitable  estoppel.
Accordingly,  the case was remanded to the District Court for a determination of
whether the Plaintiffs could establish detrimental reliance creating estoppel of
the Company.

On April 19,  1995,  the  District  Court  granted a motion by the  Company  for
summary judgment on the issues of equitable estoppel and third-party beneficiary
of contract  which had been  remanded  to it by the Court of Appeals.  The Court
ruled that the  Plaintiffs  could not forecast  necessary  proof of  detrimental
reliance.  The District Court,  however,  granted Plaintiffs motion to amend the
complaint insofar as they sought to pursue a "new" claim for unjust  enrichment,
but  denied  their  motion  to amend so far as they  sought  to add  claims  for
promissory  estoppel  and  unilateral  contract.  The court  further  denied the
Company's motion to decertify the class.

The  District  Court  held a hearing  on July 24,  1995 to decide on the  merits
Plaintiffs' lone remaining claim of unjust  enrichment,  and in an order entered
September 25, 1995, the District Court dismissed that claim with  prejudice.  On
October 20, 1995, the Plaintiffs

                                   16

<PAGE>

appealed to the Court of Appeals from the April 19, 1995 and  September 25, 1995
orders of the District  Court.  Oral argument on Plaintiffs'  appeal was held in
the Court of Appeals on October 31, 1996. Due to the  uncertainties  inherent in
the litigation  process,  it is not possible to predict the ultimate  outcome of
this lawsuit.  However, the Company has defended this matter vigorously,  and it
is the opinion of the Company's  management  that the probability is remote that
this lawsuit, when finally concluded, will have a material adverse effect on the
Company's financial condition or results of operations.

The Company and its  subsidiaries  are involved in legal  proceedings and claims
arising in the ordinary  course of business.  Although there can be no assurance
as to the ultimate  disposition of these matters,  management  believes that the
probable  resolution  of such  contingencies  will not have a  material  adverse
effect on the financial condition of the Company.


Item 6.  Exhibits and Reports on Form 8-K

      (a)   The exhibits to this Form 10-Q are listed in the accompanying  Index
            to Exhibits.
      (b)   Reports on Form 8-K.
            None


                                   17

<PAGE>

Exhibit                                                   Sequential
  No.       Description                                    Page No.

*2.1(a)     Purchase Agreement between Registrant and Cone Receivables LLC dated
            as of March 25, 1997, filed as Exhibit 2.1(l) to Registrant's report
            on Form 10-Q for the quarter ended March 30, 1997.

*2.1(b)     Receivables Purchase Agreement dated
            as of March 25, 1997, among Cone
            Receivables LLC, as Seller, the
            Registrant, as Servicer, and
            Delaware Funding Corporation, as
            buyer, filed as Exhibit 2.1(m) to
            Registrant's report on Form 10-Q
            for the quarter ended March 30, 1997.

 2.1(c)     Amendment to Receivables Purchase
            Agreement dated March 24, 1998,
            between the Registrant and Delaware
            Funding Corporation.                               27

*2.2(a)     Investment Agreement dated as of
            June 18, 1993, among Compania Industrial
            de Parras, S.A. de C.V., Sr. Rodolfo
            Garcia Muriel, and Cone Mills
            Corporation, filed as Exhibit 2.2(a)
            to Registrant's report on Form 10-Q for
            the quarter ended July 4, 1993, with
            exhibits herein numbered 2.2(b),(c),
            (d), (f), (g), and (j) attached.

*2.2(b)     Commercial  Agreement  dated as of June  25,  1993,  among  Compania
            Industrial de Parras, S.A.de C.V., Cone Mills Corporation and Parras
            Cone de Mexico, S.A., filed as Exhibit 2.2(b) to Registrant's report
            on Form 10-Q for the quarter ended July 4, 1993.

*2.2(c)     Guaranty  Agreement  dated as of June 25,  1993,  between Cone Mills
            Corporation and Compania  Industrial de Parras,  S.A. de C.V., filed
            as  Exhibit  2.2(c)  to  Registrant's  report  on Form  10-Q for the
            quarter ended July 4, 1993.

                                   18

<PAGE>

Exhibit                                                   Sequential
  No.       Description                                    Page No.

*2.2(d)     Joint Venture Agreement dated as of
            June 25, 1993, between Compania
            Industrial de Parras, S.A. de C.V.,
            and Cone Mills (Mexico), S.A. de C.V.
            filed as Exhibit 2.2(d) to
            Registrant's report on Form 10-Q for
            the quarter ended July 4, 1993.

*2.2(e)     First  Amendment  to Joint  Venture  Agreement  dated as of June 14,
            1995, between Compania  Industrial de Parras, S.A. de C.V., and Cone
            Mills  (Mexico),  S.A.  de C.V.,  filed  as  Exhibit  2.2(e)  to the
            Registrant's report on Form 10-Q for the quarter ended July 2, 1995.

*2.2(f)     Joint Venture Registration Rights
            Agreement dated as of June 25, 1993,
            among Parras Cone de Mexico, S.A.,
            Compania Industrial de Parras, S.A. de
            C.V. and Cone Mills (Mexico),
            S.A. de C.V. filed as Exhibit 2.2(e)
            to Registrant's report on Form 10-Q
            for the quarter ended July 4, 1993.

*2.2(g)     Parras Registration Rights Agreement
            dated as of June 25, 1993, between Compania
            Industrial de Parras, S.A. de C.V. and
            Cone Mills Corporation filed as Exhibit
            2.2(f) to the Registrant's report on Form
            10-Q for the quarter ended July 4, 1993.

*2.2(h)     Guaranty Agreement dated as of June 14,
            1995, between Compania Industrial de
            Parras, S.A. de C.V. and Cone Mills
            Corporation filed as Exhibit 2.2(h) to
            the Registrant's report on Form 10-Q
            for the quarter ended July 2, 1995.

*2.2(i)     Guaranty  Agreement  dated as of June 15,  1995,  between Cone Mills
            Corporation  and Morgan  Guaranty Trust Company of New York filed as
            Exhibit  2.2(i)  to the  Registrant's  report  on Form  10-Q for the
            quarter ended July 2, 1995.

                                   19

<PAGE>

Exhibit                                                 Sequential
  No.       Description                                   Page No.

*2.2(j)     Support Agreement dated as of June 25,
            1993, among Cone Mills Corporation, Sr.
            Rodolfo L. Garcia, Sr. Rodolfo Garcia
            Muriel and certain other person listed
            herein ("private stockholders") filed
            as Exhibit 2.2(g) to Registrant's
            report on Form 10-Q for the quarter
            ended July 4, 1993.

*2.2(k)     Call Option dated  September 25, 1995,  between  Registrant  and SMM
            Trust, 1995 - M, a Delaware business trust,  filed as Exhibit 2.2(k)
            to the  Registrant's  report  on Form  10-Q  for the  quarter  ended
            October
            1, 1995.

*2.2(l)     Put Option dated  September  25, 1995,  between  Registrant  and SMM
            Trust,1995 - M, a Delaware business trust, filed as Exhibit 2.2(l)to
            the  Registrant's  report on Form 10-Q for the quarter ended October
            1, 1995.

*2.2(m)     Letter Agreement dated January 11, 1996
            among Registrant, Rodolfo Garcia Muriel,
            and Compania Industrial de Parras, S.A. de
            C.V.,filed as Exhibit 2.2(m) to the
            Registrant's  report on Form 10-K for
            the year ended December 31, 1995.

*4.1        Restated  Articles  of  Incorporation  of the  Registrant  effective
            August 25, 1993, filed as Exhibit 4.1 to Registrant's report on Form
            10-Q for the quarter ended October 3, 1993.

*4.2        Amended and Restated Bylaws of Registrant,
            Effective June 18, 1992, filed as Exhibit
            3.5 to the Registrant's Registration
            Statement on Form S-1 (File No. 33-46907).

*4.3        Note Agreement dated as of August 13, 1992,
            between Cone Mills Corporation and The
            Prudential Insurance Company of America,

                                   20

<PAGE>

Exhibit                                                   Sequential
  No.       Description                                     Page No.

            with form of 8% promissory  note attached,  filed as Exhibit 4.01 to
            the Registrant's report on Form 8-K dated August 13, 1992.

*4.3(a)     Letter  Agreement  dated  September  11,  1992,  amending  the  Note
            Agreement  dated August 13,  1992,  between the  Registrant  and The
            Prudential  Insurance Company of America filed as Exhibit 4.2 to the
            Registrant's report on Form 8-K dated March 1, 1995.

*4.3(b)     Letter  Agreement  dated July 19, 1993,  amending the Note Agreement
            dated August 13, 1992,  between the  Registrant  and The  Prudential
            Insurance   Company  of  America   filed  as  Exhibit   4.3  to  the
            Registrant's report on Form 8-K dated March 1, 1995.

*4.3(c)     Letter  Agreement  dated June 30, 1994,  amending the Note Agreement
            dated August 13, 1992,  between the  Registrant  and The  Prudential
            Insurance   Company  of  America   filed  as  Exhibit   4.4  to  the
            Registrant's report on Form 8-K dated March 1, 1995.

*4.3(d)     Letter  Agreement  dated  November  14,  1994,   amending  the  Note
            Agreement  dated August 13,  1992,  between the  Registrant  and The
            Prudential  Insurance Company of America filed as Exhibit 4.5 to the
            Registrant's report on Form 8-K dated March 1, 1995.

*4.3(e)     Letter  Agreement  dated  as of June  30,  1995,  amending  the Note
            Agreement  dated August 13,  1992,  between the  Registrant  and The
            Prudential  Insurance  Company of America filed as Exhibit 4.3(e) to
            the  Registrant's  report on Form 10-Q for the quarter ended July 2,
            1995.

                                   21

<PAGE>

Exhibit                                                    Sequential
  No.       Description                                     Page No.

*4.3(f)     Letter  Agreement dated as of June 30, 1995,  between the Registrant
            and The Prudential  Insurance Company of America  superseding Letter
            Agreement filed as Exhibit 4.3(e) to the Registrant's report on Form
            10-Q for the quarter ended July 2, 1995.

*4.3(g)     Letter  Agreement dated as of March 30,1996,  between the Registrant
            and The  Prudential  Insurance  Company of America  filed as Exhibit
            4.3(g) to the Registrant's report on Form 10-Q for the quarter ended
            March 31, 1996.

*4.3(h)     Letter  Agreement  dated  as  of  January  31,  1997,   between  the
            Registrant and The Prudential  Insurance Company of America filed as
            Exhibit 4.3(h) to the Registrant's  report on Form 10-K for the year
            ended December 29, 1996.

*4.3(i)     Letter  Agreement dated as of July 31, 1997,  between the Registrant
            and The Prudential  Insurance  Company of America,  filed as Exhibit
            4.3(i) to the Registrant's report on Form 10-Q for the quarter ended
            September 28, 1997.

 4.3(j)     Modification to Note Agreement dated
            as of February 14, 1998, between the
            Registrant and The Prudential Insurance
            Company of America.                                30


*4.4        Credit Agreement dated August 7, 1997, among the Registrant, various
            banks and Morgan Guaranty Trust Company of New York as agent,  filed
            as  Exhibit  4.4 to the  Registrant's  report  on Form  10-Q for the
            quarter ended September 28, 1997.


                                   22

<PAGE>

Exhibit                                                  Sequential
  No.       Description                                   Page No.

*4.5        Specimen Class A Preferred Stock
            Certificate, filed as Exhibit 4.5
            to the Registrant's Registration
            Statement on Form S-1(File No. 33-46907).

*4.6        Specimen Common Stock Certificate, effective June 18, 1992, filed as
            Exhibit 4.7 to the Registrant's Registration Statement on Form S-1
            (File No. 33-46907).

*4.7        The  401(k)Program of Cone Mills  Corporation,  amended and restated
            effective December 1, 1994, filed as Exhibit 4.8 to the Registrant's
            report on Form 10-K for year ended January 1, 1995.

*4.7(a)     First  Amendment  to the 401(k)  Program  of Cone Mills  Corporation
            dated May 9,  1995,  filed as  Exhibit  4.8(a)  to the  Registrant's
            report on Form 10-K for year ended December 31, 1995.

*4.7(b)     Second  Amendment  to the 401(k)  Program of Cone Mills  Corporation
            dated December 5, 1995,  filed as Exhibit 4.8(b) to the Registrant's
            report on Form 10-K for year ended December 31, 1995.

*4.7(c)     Third Amendment to the 401(k)Program of Cone Mills Corporation dated
            August 7, 1997, filed as Exhibit 4.7(c) to the  Registrant's  report
            on Form 10-Q for the quarter ended September 28, 1997.

*4.7(d)     Fourth  Amendment  to the 401(k)  Program of Cone Mills  Corporation
            dated December 4, 1997,  filed as Exhibit 4.7(d) to the Registrant's
            report on Form 10-K for the year

                                   23

<PAGE>

Exhibit                                                    Sequential
  No.       Description                                     Page No.

            ended December 28, 1998.

*4.8        Cone Mills  Corporation 1983 ESOP as amended and restated  effective
            December 1, 1994, filed as Exhibit 4.9 to the Registrant's report on
            Form 10-K for year ended January 1, 1995.

*4.8(a)     First  Amendment to the Cone Mills  Corporation  1983 ESOP dated May
            9,1995,  filed as Exhibit 4.9(a) to the Registrant's  report on Form
            10-K for year ended December 31, 1995.

*4.8(b)     Second  Amendment  to the Cone  Mills  Corporation  1983 ESOP  dated
            December 5, 1995, filed as Exhibit 4.9(b) to the Registrant's report
            on Form 10-K for year ended December 31, 1995.

*4.8(c)     Third Amendment to the Cone Mills Corporation 1983 ESOP dated August
            7, 1997, filed as Exhibit 4.(c) to the  Registrant's  report on Form
            10-Q for the quarter ended September 28, 1997.

*4.8(d)     Fourth  Amendment  to the Cone  Mills  Corporation  1983 ESOP  dated
            December 4, 1997, filed as Exhibit 4.8(d) to the Registrant's report
            on Form 10-K for the year ended December 28, 1997.

*4.9        Indenture dated as of February 14,
            1995, between Cone Mills Corporation
            and Wachovia Bank of North Carolina,
            N.A. as Trustee, filed as Exhibit 4.1
            to Registrant's Registration Statement
            on Form S-3 (File No. 33-57713).

                                   24

<PAGE>

Exhibit                                                  Sequential
  No.       Description                                   Page No.


 27         Financial Data Schedule                          44


* Incorporated by reference to the statement or report indicated.




                                   25

<PAGE>


                               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 thereunto duly authorized.



                                    CONE MILLS CORPORATION
                                    (Registrant)





Date  May 8, 1998                   /s/ Anthony L. Furr
     -------------------            -------------------
                                    Anthony L. Furr
                                    Vice President and
                                    Chief Financial Officer



                                      26