================================================================================
                                                                   Page 1 of 55
                                              Index to Exhibits - Pages 38 - 54
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended September 28, 2003

                                       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)               (I.R.S. Employer Identification No.)

804 Green Valley Road, Suite 300, Greensboro, N.C.       27408
--------------------------------------------------       -----
(Address of principal executive offices)                 (Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No__

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes __ No X

Number of shares of common stock outstanding as of November 12, 2003: 25,941,475


================================================================================


<PAGE>


                             CONE MILLS CORPORATION

                                      INDEX



PART I.   FINANCIAL INFORMATION
                                                                           Page
                                                                         Number

Item 1.   Financial Statements

          Consolidated Condensed Statements of Operations
          Thirteen and Thirty-Nine weeks ended September 28, 2003 and
          September 29, 2002 (Unaudited) .....................................3

          Consolidated Condensed Balance Sheets
          September 28, 2003 and September 29, 2002 (Unaudited)
          and December 29, 2002 ..............................................4

          Consolidated Condensed Statements of Cash Flows
          Thirty-Nine weeks ended September 28, 2003 and
          September 29, 2002 (Unaudited) .....................................5

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

Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operation ......................21

Item 3.   Quantitative and Qualitative Disclosures about Market
          Risk ..............................................................34

Item 4    Controls and Procedures ...........................................34

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings .................................................35
Item 3.   Defaults Upon Senior Securities....................................35
Item 4.   Submission of Matters to a Vote of Security Holders ...............35
Item 5.   Other Information .................................................36
Item 6.   Exhibits and Reports on Form 8-K ..................................36


<PAGE>


                                                   PART I
Item 1.
                                    CONE MILLS CORPORATION AND SUBSIDIARIES
                                (DEBTORS-IN-POSSESSION AS OF SEPTEMBER 24, 2003)
                                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                           Thirteen         Thirteen        Thirty-Nine      Thirty-Nine
                                                         Weeks Ended       Weeks Ended      Weeks Ended      Weeks Ended
                                                        September 28,     September 29,    September 28,    September 29,
(in thousands, except per share data)                        2003             2002              2003             2002
-----------------------------------------------------------------------------------------------------------------------------
                                                         (Unaudited)       (Unaudited)      (Unaudited)      (Unaudited)
<S>                                                        <C>               <C>              <C>              <C>
Net Sales                                                  $    82,829       $   111,688      $   281,429      $   343,345
Cost of Goods Sold                                              77,087            94,625          251,518          294,710
                                                        ---------------------------------------------------------------------
Gross Profit                                                     5,742            17,063           29,911           48,635
Selling and Administrative                                       6,493             8,620           22,944           25,715
Restructuring and Impairment of Assets                         123,431                 -          124,197                -
                                                        ---------------------------------------------------------------------
Income (Loss)from Operations                                 ( 124,182 )           8,443        ( 117,230 )         22,920
                                                        ---------------------------------------------------------------------
Other Income (Expense)
   Interest income                                                  54                77              184              206
   Interest expense (contractual interest of $4,222
    for the thirteen weeks ended September 28, 2003
    and $11,699 for the thirty-nine weeks ended
    September 28, 2003)                                        ( 4,042 )         ( 3,712 )       ( 11,519 )       ( 12,014 )
   Other                                                          ( 41 )           ( 433 )          ( 726 )        ( 1,439 )
   Equity appreciation rights                                        -                 -          ( 4,117 )              -
                                                        ---------------------------------------------------------------------
                                                               ( 4,029 )         ( 4,068 )       ( 16,178 )       ( 13,247 )
                                                        ---------------------------------------------------------------------
Income (Loss) From Operations Before Reorganization
   Items, Income Tax Expense (Benefit) and Equity In
   Earnings of Unconsolidated Affiliates                     ( 128,211 )           4,375        ( 133,408 )          9,673
Reorganization Items                                           ( 3,519 )               -          ( 3,519 )              -
                                                        ---------------------------------------------------------------------
Income (Loss) from Operations before
   Income Tax Expense (Benefit) and Equity in
   Earnings of Unconsolidated Affiliates                     ( 131,730 )           4,375        ( 136,927 )          9,673
Income Tax Expense (Benefit)                                  ( 13,877 )           1,455         ( 15,817 )          2,902
                                                        ---------------------------------------------------------------------
Income (Loss) from Operations before
   Equity in Earnings of Unconsolidated Affiliates           ( 117,853 )           2,920        ( 121,110 )          6,771
Equity in Earnings of Unconsolidated Affiliates                    548               923            2,035            1,605
                                                        ---------------------------------------------------------------------
Net Income (Loss)                                          $ ( 117,305 )     $     3,843      $ ( 119,075 )    $     8,376
                                                        ---------------------------------------------------------------------
Income (Loss) Available to Common Stockholders             $ ( 118,304 )     $     2,806      $ ( 122,072 )    $     5,229
                                                        ---------------------------------------------------------------------
Earnings (Loss) per Share - Basic and Diluted              $    ( 4.56 )     $      0.11      $    ( 4.72 )    $      0.20
                                                        ---------------------------------------------------------------------
Weighted-Average Common Shares Outstanding
   Basic                                                        25,941            25,739           25,844           25,704
                                                        ---------------------------------------------------------------------
   Diluted                                                      25,941            26,153           25,844           26,104
                                                        ---------------------------------------------------------------------
</TABLE>

See Notes to Consolidated Condensed Financial Statements.


                                       3
<PAGE>


                                    CONE MILLS CORPORATION AND SUBSIDIARIES
                                (DEBTORS-IN-POSSESSION AS OF SEPTEMBER 24, 2003)
                                     CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                             September 28,     September 29,       December 29,
(in thousands, except share and par value data)                  2003               2002               2002
---------------------------------------------------------------------------------------------------------------------
                                                              (Unaudited)       (Unaudited)           (Note)
<S>                                                             <C>               <C>               <C>
ASSETS
   Current Assets
     Cash                                                       $     7,540       $      1,573      $      1,654
     Accounts receivable, less allowances:
       2003, $3,400; 2002, $5,700 and $3,400                         30,608             43,327            33,017
     Inventories                                                     58,848             45,578            48,848
     Other current assets                                             2,211              2,656             1,630
                                                            ---------------------------------------------------------
       Total Current Assets                                          99,207             93,134            85,149

   Investments in and Advances to Unconsolidated
     Affiliates                                                      49,998             53,010            53,613
   Other Assets                                                       1,155             27,496            30,423
   Property, Plant and Equipment                                     17,790            152,198           149,077
                                                            ---------------------------------------------------------
                                                                $   168,150       $    325,838      $    318,262
                                                            ---------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities Not Subject to Compromise
   Current Liabilities
     Current maturities of long-term debt                       $         -       $     56,262      $     46,170
     Accounts payable                                                12,412             28,730            25,589
     Sundry accounts payable and accrued liabilities                 10,402             22,869            25,448
                                                            ---------------------------------------------------------
       Total Current Liabilities                                     22,814            107,861            97,207

   Long-Term Liabilities
     Long-term debt                                                       -             98,908            99,019
     Deferred income taxes                                                -             13,486            14,884
     Other liabilities                                                1,756             13,781            13,699
                                                            ---------------------------------------------------------
       Total Long-Term Liabilities                                    1,756            126,175           127,602
                                                            ---------------------------------------------------------
       Total Liabilities Not Subject to Compromise                   24,570            234,036           224,809
Liabilities Subject to Compromise                                   229,875                  -                 -
                                                            ---------------------------------------------------------
       Total Liabilities                                            254,445            234,036           224,809

Stockholders' Equity (Deficit)
   Class A  preferred  stock - $100 par value;  authorized
     1,500,000  shares; issued and outstanding:
     2003, 340,832 shares; 2002, 337,497 shares and
     327,283 shares                                                  34,083             33,750            32,728
   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:
     2003, 25,941,475 shares; 2002, 25,757,344
     shares and 25,757,344 shares                                     2,594              2,576             2,576
   Capital in excess of par                                          58,366             58,098            58,098
   Retained earnings (deficit)                                    ( 113,747 )            6,349             9,279
   Deferred compensation - restricted stock                               -                ( 2 )               -
   Accumulated other comprehensive loss                            ( 67,591 )          ( 8,969 )         ( 9,228 )
                                                            ---------------------------------------------------------
       Total Stockholders' Equity (Deficit)                        ( 86,295 )           91,802            93,453
                                                            ---------------------------------------------------------
                                                                $   168,150       $    325,838      $    318,262
                                                            ---------------------------------------------------------
</TABLE>

Note:  The balance sheet at December 29, 2002, 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
                                (DEBTORS-IN-POSSESSION AS OF SEPTEMBER 24, 2003)
                                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                 Thirty-Nine       Thirty-Nine
                                                                                 Weeks Ended       Weeks Ended
                                                                                September 28,     September 29,
(in thousands)                                                                      2003               2002
---------------------------------------------------------------------------------------------------------------------
                                                                                 (Unaudited)       (Unaudited)
<S>                                                                               <C>               <C>
CASH PROVIDED BY (USED IN) OPERATIONS                                             $   ( 13,709 )    $     30,080
                                                                                 ------------------------------------

INVESTING
   Proceeds from sale of property, plant and equipment                                   4,535             1,273
   Capital expenditures                                                                ( 3,480 )         ( 3,932 )
                                                                                 ------------------------------------
    Cash provided by (used in) investing                                                 1,055           ( 2,659 )
                                                                                 ------------------------------------

FINANCING
   Decrease in checks issued in excess of deposits                                     ( 2,548 )         ( 3,982 )
   Principal borrowings (payments) on long-term debt                                    23,668          ( 18,894 )
   Proceeds from issuance of common stock                                                   16               236
   Dividends paid - Class A Preferred                                                     ( 91 )           ( 136 )
   Redemption of Class A Preferred stock                                               ( 2,505 )         ( 3,601 )
                                                                                 ------------------------------------
    Cash provided by (used in) financing                                                18,540          ( 26,377 )
                                                                                 ------------------------------------

    Net change in cash                                                                   5,886             1,044

Cash at Beginning of Period                                                              1,654               529

Cash at End of Period                                                             $      7,540      $      1,573
                                                                                 ------------------------------------

Supplemental Disclosures of Additional Cash Flow Information:
Cash payments (receipts) for:
   Interest                                                                       $      9,235      $     14,019
                                                                                 ------------------------------------
   Income taxes, net of refunds                                                   $   ( 10,882 )    $         17
                                                                                 ------------------------------------

Supplemental Schedule of Noncash Financing Activities:
   Stock dividend - Class A Preferred Stock                                       $      3,860      $      3,920
                                                                                 ------------------------------------
</TABLE>

See Notes to Consolidated Condensed Financial Statements.


                                       5
<PAGE>


                     CONE MILLS CORPORATION AND SUBSIDIARIES
                (DEBTORS-IN-POSSESSION AS OF SEPTEMBER 24, 2003)
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 1.  Petition for Relief under Chapter 11

On September 24, 2003 (the "Petition Date"), Cone Mills Corporation ("Cone") and
certain  of  its  domestic  subsidiaries  (collectively,  the  "Debtors")  filed
voluntary  petitions for relief under Chapter 11 of the United States Bankruptcy
Code  (the  "Bankruptcy  Code")  in the  United  States  Bankruptcy  Court  (the
"Bankruptcy  Court") for the District of Delaware  (Case Nos.  03-12943  through
03-12946).  The  Chapter 11 cases for the Debtors  (the  "Chapter 11 Cases") are
being jointly  administered  for procedural  purposes only. The Debtors' foreign
subsidiaries,  foreign  joint  venture  entities  and  certain  of its  domestic
subsidiaries  were not included in the  petitions  for relief under  Chapter 11.
Cone has entered into a definitive  sale  agreement with WL Ross & Co., which is
subject to higher or better offers in accordance  with Section 363 of Chapter 11
of the  Bankruptcy  Code.  Under  the  agreement,  WL Ross & Co.  will  purchase
substantially  all of Cone's  assets  for $46  million  in cash and will  assume
Cone's  outstanding   Debtor-in-Possession  ("DIP")  loans  and  selected  other
liabilities,  positioning  the purchaser as the  "stalking  horse" - or original
bidder - in accordance with Section 363 of Chapter 11 of the Bankruptcy Code.

Cone and its  subsidiaries  remain in possession of their assets and  properties
and  continue  to operate  their  businesses  and  manage  their  properties  as
debtors-in-possession  pursuant to sections  1107(a) and 1108 of the  Bankruptcy
Code.  Since the Chapter 11 filing,  Cone has obtained  several  orders from the
Bankruptcy  Court which  included  authorization  of 1) payment of  pre-petition
employee salaries,  wages,  payroll taxes, certain employee benefits and related
expenses,  2) payment of certain  pre-petition  freight and  customs  claims and
amounts due in respect to Cone's  offshore  operations,  3) payment of a limited
amount of pre-petition claims of critical vendors, 4) the continuation of Cone's
Workers'  Compensation Program and Policies and Other Insurance Policies, 5) the
continuation of Cone's  centralized cash management system and bank accounts and
6) Cone to enter into securitization documents with and sell accounts receivable
up to $35 million to GE Capital Corporation  ("GECC").  On November 6, 2003, the
court entered final orders relating to the above items.

On November 10, 2003, the Bankruptcy  Court approved bid procedures  agreed upon
by Cone  and its  creditors  that  will  enable  Cone to move  forward  with its
proposed  sale of assets  to WL Ross & Co. in  accordance  with  Section  363 of
Chapter 11 of the Bankruptcy  Code. The Bankruptcy Court set a January 23, 2004,
deadline  for the  submission  of  initial  bids with an auction  scheduled  for
January  29,  2004.  The WL Ross & Co.  offer  sets a floor for other bids to be
submitted  during a Section  363  auction  process  approved by the court and is
subject to higher or better offers. In addition, the agreement calls for WL Ross
& Co. to receive a $1.8  million  breakup fee if a higher or better bid for Cone
is accepted.  The bidding procedures also allow parties interested in purchasing
only  selected  assets  of Cone to do so as long  as Cone  will  obtain  greater
aggregate value from such offers than under the offer submitted by WL Ross & Co.


                                       6
<PAGE>



Cone's  Receivables  Purchase and Servicing  Agreement (the "A/R  Securitization
Facility"),  as amended on September 23, 2003,  provides  Cone with  incremental
liquidity  during  the  initial  phase  of  the  bankruptcy  process.   The  A/R
Securitization Facility provides for $35 million in post-petition financing from
GECC and has a  maturity  date of May 29,  2004.  On  September  26,  2003,  the
Bankruptcy  Court approved Cone's entering into and implementing the amended A/R
Securitization  Facility  as part of the "first day  orders."  Amounts  borrowed
under the A/R Securitization Facility bear interest at the GECC Commercial Paper
Rate plus an applicable margin of 2.75%. In addition,  there is a commitment fee
of .0625% on unused capacity under the facility. The A/R Securitization Facility
contains  financial  covenants  requiring  Cone to  maintain  minimum  levels of
earnings before interest, taxes, depreciation, amortization,  restructuring, and
reorganization  items,  as defined in the  agreement.  It also  imposes  certain
limits on capital  expenditures and cash restructuring  charges. As of September
28, 2003,  Cone was in  compliance  with the terms under the A/R  Securitization
Facility.

On November 10, 2003,  Cone filed with the Bankruptcy  Court a proposal to enter
into a $45 million DIP financing  agreement with Bank of America and GECC.  This
facility  would provide Cone  additional  liquidity of  approximately  $10 - $12
million after paying off and eliminating the A/R  Securitization  Facility.  The
hearing date to consider  approval of the $45 million DIP  financing is November
25, 2003.

The accompanying  consolidated condensed financial statements have been prepared
on a going  concern basis in  accordance  with  American  Institute of Certified
Public Accountants  Statement of Position 90-7, "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code" ("SOP 90-7").  Cone's recent losses
and the Chapter 11 Cases raise  substantial  doubt about its ability to continue
as a going concern.  Currently, it is not possible to predict the outcome of the
Chapter 11 Cases or their effect on Cone's  business.  If it is determined  that
the  liabilities  subject to  compromise in the Chapter 11 Cases exceed the fair
value of the assets  available,  most secured and unsecured claims are likely to
be settled at less than 100% of their  face  value and the equity  interests  of
Cone's current shareholders will have no value.

Substantially all unsecured liabilities as of the date of the Chapter 11 filings
are  subject  to  compromise  or other  treatment  under  the  proposed  sale of
substantially  all of the assets of Cone.  In addition,  based upon the value of
the  "stalking  horse"  bid,  the  secured   liabilities  are  also  subject  to
compromise.  For financial  reporting purposes,  liabilities,  the settlement of
which is dependent on the outcome of the Chapter 11 Cases,  have been segregated
and  classified  as  liabilities  subject  to  compromise  in  the  accompanying
consolidated  condensed balance sheet.  These  liabilities  consist primarily of
amounts   outstanding  under  long-term  debt,  a  minimum  pension   liability,
pre-petition accounts payable that may be affected by the outcome of the Chapter
11  Cases,  accrued  interest,  other  accrued  expenses  and  certain  deferred
liabilities.  The accrued  interest  subject to  compromise  of $4.9  million is
primarily  comprised  of interest on Cone's  8-1/8%  Debentures.  As a result of
deteriorating liquidity,  Cone failed to make its semi-annual Debenture interest
payment of $4.1 million due on September 15, 2003. In addition,  Cone  concluded
as a result of the  Chapter 11 filing,  its  revised  long-term  outlook and the
value of the "stalking horse" bid that the Class A Preferred Stock was likely to
receive no recovery. This being the case, under the floor-offset  arrangement of
the pension plan, the  accumulated  benefit  obligation was greater than pension
plan assets,  resulting in the recording of a minimum  pension  liability with a
corresponding  charge to accumulated other  comprehensive loss (a contra account
to stockholders'  equity) in the amount of $56.8 million and a liability subject
to compromise of


                                       7
<PAGE>


$24.5 million for the unfunded  accumulated  benefit  obligation as of September
28,  2003  (See  Note  4  of  the  Notes  to  Consolidated  Condensed  Financial
Statements). The ultimate amount and settlement terms for liabilities subject to
compromise are subject to  negotiation  and court approval and are not presently
determinable.  The  principal  categories of claims  classified  as  liabilities
subject to  compromise  under the Chapter 11 Cases as of September  28, 2003 are
identified below:

          (in thousands)                                     9/28/03
                                                         -------------

          14.2% Senior Notes                                $  21,455
          12.0% Senior Notes                                   26,171
          Revolving Credit Agreement                           24,000
          8-1/8% Debentures                                   100,000
                                                         -------------
            Total Debt                                        171,626

          Interest accrued on above debt                        4,850
          Accounts payable                                     13,051
          Sundry payables and accrued interest                  5,035
          Minimum pension liability                            24,461
          Other liabilities                                    10,852
                                                         -------------
            Total Liabilities Subject to Compromise         $ 229,875
                                                         -------------

In accordance  with SOP 90-7,  professional  fees associated with the Chapter 11
Cases are  expensed as incurred  and  reported  as  reorganization  items in the
accompanying  consolidated  condensed financial statements.  Interest expense is
reported  only  to the  extent  that  it will be  paid  during  the  Chapter  11
proceeding or that it is probable that it will be an allowed  priority,  secured
or unsecured  claim.  During the third quarter of 2003, Cone recognized a charge
of $3.5 million in  reorganization  items  associated with the Chapter 11 Cases.
Approximately $2.2 million of the reorganization  charge related to the non-cash
write-offs of both the  unamortized  discount on the 8-1/8%  Debentures  and the
deferred  financing  fees  associated  with the debt  classified  as  subject to
compromise.  In  addition,  Cone  incurred  $1.3 million for  professional  fees
related to the Chapter 11 Cases.

Condensed  combined  financial  information  for the Debtors  are not  presented
because  such  financial   information   would  not  provide  relevant  material
additional  information  to the users of the  consolidated  condensed  financial
statements of Cone.


Note 2.  Basis of Financial Statement Preparation

Financial  Statement   Preparation.   Cone's  consolidated  condensed  financial
statements for September 28, 2003 and September 29, 2002 are  unaudited,  but in
the opinion of management  reflect all  adjustments  necessary to present fairly
the  consolidated  condensed  balance  sheets  of Cone  Mills  Corporations  and
Subsidiaries  at September  28, 2003,  September 29, 2002 and December 29, 2002,
and  the  related  consolidated  condensed  statements  of  operations  for  the
respective thirteen and thirty-nine weeks ended September 28, 2003 and September
29, 2002 and cash flows for the thirty-nine  weeks then ended.  The accompanying
consolidated  condensed  financial  statements  have  been  prepared  on a going
concern  basis in  accordance  with SOP 90-7.  The results  are not  necessarily
indicative of the results to be expected for the full year.


                                       8
<PAGE>


These  statements  should  be read in  conjunction  with the  audited  financial
statements  and related notes  included in Cone's annual report on Form 10-K for
fiscal year 2002.

Inventories. 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
year-end,  the  inventories  at September  28, 2003 and  September  29, 2002 and
related  consolidated  condensed  statements of operations  for the thirteen and
thirty-nine  weeks  then  ended  are  based on  certain  estimates  relating  to
quantities and cost as of the end of the fiscal year.

Stock-Based Employee  Compensation.  Cone has stock-based employee  compensation
plans.  Cone  accounts  for those plans under the  recognition  and  measurement
principles of Accounting  Principles  Board ("APB") Opinion No. 25,  "Accounting
for Stock Issued to  Employees,"  and related  Interpretations.  No  stock-based
employee  compensation  cost is reflected in net income,  as all options granted
under  those  plans  had an  exercise  price  equal to the  market  value of the
underlying  common stock on the date of grant.  The following table  illustrates
the  effect on net  income  (loss)  and  earnings  (loss)  per share if Cone had
applied  the fair  value  recognition  provisions  of the  Financial  Accounting
Standards Board ("FASB")  Statement of Financial  Accounting  Standards ("SFAS")
No. 123,  "Accounting for  Stock-Based  Compensation,"  to stock-based  employee
compensation.  SFAS No. 123  requires  pro forma  disclosures  only for  options
granted  after  December  31,  1994;  therefore,   the  pro  forma  amounts  for
compensation  expense may not be representative of the pro forma earnings impact
upon future years.

<TABLE>
<CAPTION>
                                               Thirteen          Thirteen        Thirty-Nine        Thirty-Nine
                                             Weeks Ended       Weeks Ended       Weeks Ended        Weeks Ended
(in thousands, except per share data)          9/28/03           9/29/02           9/28/03            9/29/02
                                            --------------------------------------------------------------------
<S>                                            <C>               <C>               <C>                <C>
Net income (loss), as reported                 $ ( 117,305 )     $   3,843         $ ( 119,075 )      $   8,376
Deduct: Total stock-based employee
  compensation expense determined
  under fair value based method for
  all awards, net of related tax effects             ( 125 )         ( 156 )             ( 376 )          ( 467 )
                                            --------------------------------------------------------------------
Pro forma net income (loss)                    $ ( 117,430 )     $   3,687         $ ( 119,451 )      $   7,909
                                            --------------------------------------------------------------------

Earnings (loss) per share - basic and diluted:
  Basic and diluted - as reported              $    ( 4.56 )     $    0.11         $    ( 4.72 )      $    0.20
  Basic - pro forma                            $    ( 4.57 )     $    0.10         $    ( 4.74 )      $    0.19
  Diluted - pro forma                          $    ( 4.57 )     $    0.10         $    ( 4.74 )      $    0.18

</TABLE>

Recent   Accounting   Pronouncements.   In  January   2003,   the  FASB   issued
Interpretation No. 46 (FIN 46),  "Consolidation of Variable Interest  Entities,"
which  clarifies  the  application  of  Accounting  Research  Bulletin  No.  51,
Consolidated   Financial  Statements,   relating  to  consolidation  of  certain
entities.  First, FIN 46 will require  identification of Cone's participation in
variable interests entities (VIE), which are defined as entities with a level of
invested equity that is not sufficient to fund future  activities to permit them
to  operate  on a  standalone  basis,  or  whose  equity  holders  lack  certain
characteristics of a controlling financial interest. Then


                                       9
<PAGE>


for entities  identified as VIE, FIN 46 sets forth a model to evaluate potential
consolidation  based on an assessment of which party to the VIE, if any, bears a
majority  of the  exposure  to its  expected  losses,  or  stands to gain from a
majority of its expected  returns.  FIN 46 also sets forth  certain  disclosures
regarding interests in VIE that are deemed significant, even if consolidation is
not required.  FIN 46 will become  effective for fourth quarter of 2003. Cone is
currently  assessing  the  application  of FIN 46 as it relates to its  variable
interests.


Note 3.  Securitization of Accounts Receivable

As of September 28, 2003 and September 29, 2002, the total amount of advances of
proceeds from the sale of receivables under the A/R Securitization  Facility was
$23.2  million and $28.5  million,  respectively.  As of September  28, 2003 and
September 29, 2002, included in accounts receivable were deferred purchase price
receivables  under the A/R  Securitization  Facility of $24.2  million and $34.6
million, respectively. Expenses incurred in connection with the sale of accounts
receivable  were $0.3  million  and $0.4  million for the  thirteen  weeks ended
September 28, 2003 and September  29, 2002,  respectively,  and $1.0 million and
$1.4 million for the  thirty-nine  weeks ended  September 28, 2003 and September
29,  2002,  respectively,  and were  included  in  "Other"  in the  Consolidated
Condensed  Statements of  Operations.  The table below  summarizes  certain cash
flows under the  securitization for the fiscal quarters ended September 28, 2003
and September 29, 2002:

<TABLE>
<CAPTION>
                                       Thirteen           Thirteen          Thirty-Nine        Thirty-Nine
                                     Weeks Ended        Weeks Ended         Weeks Ended        Weeks Ended
(in thousands)                         9/28/03            9/29/02             9/28/03            9/29/02
                                     -----------------------------------------------------------------------
<S>                                   <C>                <C>                 <C>                <C>
Proceeds from
  securitizations                     $  19,446          $  21,991           $  67,918          $  89,438
Reductions due to change
  in level of receivables sold         ( 26,520 )         ( 31,119 )          ( 72,562 )         ( 97,821 )
Daily yield paid                          ( 315 )            ( 437 )           ( 1,000 )          ( 1,427 )
Servicing fees paid                       ( 130 )            ( 140 )             ( 395 )            ( 451 )
Servicing fees received                     130                140                 395                451

</TABLE>

Cone's A/R Securitization  Facility,  as amended on September 23, 2003, provides
Cone with  incremental  liquidity  during the  initial  phase of the  bankruptcy
process.   The  A/R   Securitization   Facility  provides  for  $35  million  in
post-petition financing from GECC and has a maturity date of May 29, 2004.


Note 4.  Defined Benefit Pension Plan

Cone  has  a   noncontributory   defined   benefit   pension  plan  that  covers
substantially  all  employees.  In 2001,  as part of  Cone's  Reinvention  Plan,
benefits were frozen for salaried employees in the defined benefit pension plan.
Cone's funding policy has been to make annual contributions of


                                       10
<PAGE>

amounts that are  deductible  for income tax  purposes.  Cone  contributed  $4.5
million  to the  defined  benefit  pension  plan in July  2003,  prior to Cone's
Chapter 11 filing.

Additionally,  Cone has the Cone Mills Corporation 1983 Employee Stock Ownership
Plan ("ESOP") to which contributions were discontinued after the 1992 plan year.
The ESOP is subject to a floor-offset  arrangement  in  conjunction  with Cone's
defined  benefit plan with respect to pension  benefits earned for service after
1983. Under the floor-offset arrangement,  retirement benefits earned after 1983
under Cone's defined benefit plan are offset by the actuarial equivalent pension
value of a portion of the participants' ESOP accounts.

The ESOP assets consist  substantially of Cone Class A Preferred Stock.  Class A
Preferred Stock is nonvoting, except as otherwise required by law, and is senior
in dividend  preference to all other classes of capital stock. Class A Preferred
Stock has a liquidation preference senior to all other classes of capital stock;
however, given the events of the Chapter 11 filing, the illiquid market for such
stock  and the  inability  of Cone to redeem  outstanding  shares of the Class A
Preferred Stock, the market value of the Class A Preferred Stock has been deemed
to be $0 per share as of  September  28,  2003.  Accordingly,  the  floor-offset
arrangement is considered to have no value.

The  reduction  of the value of the  floor-offset  arrangement  with the defined
benefit  pension  plan has  resulted in an increase in the  accumulated  benefit
obligation of the defined benefit pension plan by  approximately  $25.7 million.
As of September  28,  2003,  Cone's  accumulated  benefit  obligation  under the
defined  benefit  pension plan was  approximately  $100.6  million with the fair
market value of the plan assets being  approximately  $76.1 million resulting in
an unfunded position of $24.5 million.

SFAS No. 87,  "Employers'  Accounting  for  Pensions"  ("SFAS  87"),  requires a
company with a plan that has an accumulated  benefit obligation in excess of the
fair value of plan assets to recognize an  additional  minimum  liability in its
balance  sheet in all cases except where the accrued  liability for pension cost
on the  company's  books  is equal  to or  greater  than  that  excess.  When an
additional  minimum liability is required to be recognized,  its amount is to be
equal to the excess referred to above less the company's accrued pension cost or
plus the company's prepaid pension cost. When it is recognized,  it may, in some
cases, be partially or fully offset by the recognition of an intangible asset on
the company's  balance sheet. If the additional  minimum  liability  exceeds the
allowed  intangible  asset,  the  excess is  recognized,  net of any  applicable
deferred  tax,  as an item  of  other  comprehensive  income  on the  employer's
statement of comprehensive  income. In accordance with SFAS 87 and SOP 90-7, the
consolidated  condensed  balance  sheet as of  September  28,  2003,  includes a
liability  subject to compromise  of $24.5 million for the unfunded  accumulated
benefit   obligation  and  an  additional   minimum  pension  liability  with  a
corresponding  charge to accumulated other  comprehensive loss (a contra account
to stockholders' equity) in the amount of $56.8 million.


                                       11
<PAGE>


Note 5.  Inventories

         (in thousands)                9/28/03          9/29/02       12/29/02
                                     ------------------------------------------

         Greige and finished goods    $ 34,705         $ 23,183       $ 24,401
         Work in process                 3,298            4,118          6,237
         Raw materials                  12,792            9,026          9,188
         Supplies and other              8,053            9,251          9,022
                                     ------------------------------------------
                                      $ 58,848         $ 45,578       $ 48,848
                                     ------------------------------------------


Note 6.  Long-Term Debt

On May 27, 2003, Cone amended agreements with its lenders extending the maturity
date of its existing  Revolving  Credit  Facility and its Senior Note obligation
through  March 15, 2004.  With the  amendments,  the interest rate on the senior
note  remained  14.2%.  The  revolving  credit  agreement  was  split  into  two
components.  The first  component  was a $25  million,  12% senior  note and the
second component was a $31 million revolving credit facility bearing interest at
the London Interbank Offering Rate ("LIBOR") plus 6.75%.

As part of the extension,  Cone settled the Equity Appreciation Rights Agreement
("EARS"),  which  were  contingent  rights  granted as a part of  agreements  in
November 2001, for $4.1 million. The rights entitled the lenders, upon giving of
notice within two years following  January 15, 2003, to receive a payment of the
greater of $1 million or 10% of the market  value of Cone's  outstanding  common
stock if Cone did not refinance the Revolving Credit Facility and Senior Note by
January 15, 2003,  which did not occur. The rights were settled for $2.1 million
in cash, $1.8 million in senior notes bearing interest at 12% and 14.2% maturing
on March 15, 2004 and approximately 169,000 shares of Cone common stock.

Excluding Cone's A/R  Securitization  Facility,  Cone is currently in default of
its senior  securities  as a result of the  Chapter 11 Cases.  Cone is making no
payments under its senior  securities and the payment of interest accruing under
its senior securities after September 24, 2003, is stayed in connection with the
Chapter 11 Cases.


Note 7.  Class A Preferred Stock

On February 12,  2003,  Cone  declared a 12.0% stock  dividend on Cone's Class A
Preferred  Stock,  which was paid on March 31, 2003. The dividend was charged to
retained  earnings in the amount of approximately  $3.9 million in Cone's fiscal
quarter ended June 29, 2003. The 2004 dividend rate for Class A Preferred  Stock
is 11.5%,  payable March 31, 2004;  however,  based on the default of the credit
agreements  in the third  quarter of 2003, it is unlikely that the 2004 dividend
will be paid.


                                       12
<PAGE>


Note 8.  Depreciation and Amortization

The  following  table  presents   depreciation  and  amortization   included  in
operations in the consolidated condensed statements of operations.

<TABLE>
<CAPTION>
                              Thirteen            Thirteen           Thirty-Nine         Thirty-Nine
                            Weeks Ended          Weeks Ended         Weeks Ended         Weeks Ended
(in thousands)                9/28/03              9/29/02             9/28/03             9/29/02
                         -----------------------------------------------------------------------------
<S>                          <C>                  <C>                 <C>                 <C>
Depreciation                 $    4,722           $    4,666          $   14,345          $   14,764
Amortization                        149                   22                 195                  68
                         ----------------------------------------------------------------------------
                             $    4,871           $    4,688          $   14,540          $   14,832
                         ----------------------------------------------------------------------------
</TABLE>


Note 9.  Earnings (Loss) Per Share

The following  table sets forth the  computation  of basic and diluted  earnings
(loss) per common share ("EPS").

<TABLE>
<CAPTION>

                                                             Thirteen            Thirteen
                                                            Weeks Ended        Weeks Ended
(in thousands, except per share data)                         9/28/03            9/29/02
                                                         ------------------------------------
<S>                                                         <C>                 <C>
Net income (loss)                                           $  ( 117,305 )      $    3,843
Preferred dividends                                                ( 999 )         ( 1,037 )
                                                         ------------------------------------
Basic EPS - income (loss) available to common
  stockholders                                                 ( 118,304 )           2,806
Effect of dilutive securities                                          -                 -
                                                         ------------------------------------
Diluted EPS - income (loss) available to common
  stockholders after assumed conversions                    $  ( 118,304 )      $    2,806
                                                         ------------------------------------

Determination of shares:
Weighted-average shares                                           25,941            25,747
Contingently issuable (unvested restricted shares)                     -               ( 8 )
                                                         ------------------------------------
Basic EPS - weighted-average shares                               25,941            25,739
Effect of dilutive securities                                          -               414
                                                         ------------------------------------
Diluted EPS - adjusted weighted-average shares after
  assumed conversions                                             25,941            26,153
                                                         ------------------------------------

Earnings (loss) per share - basic and diluted:              $     ( 4.56 )      $     0.11
                                                         ------------------------------------

</TABLE>

The number of potentially  dilutive common stock options  outstanding  using the
treasury  stock method for the thirteen  weeks ended  September  28, 2003,  were
approximately  148,000 but were not included in the  computation of diluted loss
per share because to do so would have been antidilutive.


                                       13
<PAGE>


Note 9.  Earnings (Loss) Per Share (continued)

The  following  table sets forth the  computation  of basic and  diluted  income
(loss) per common share ("EPS").

<TABLE>
<CAPTION>
                                                            Thirty-Nine        Thirty-Nine
                                                            Weeks Ended        Weeks Ended
(in thousands, except per share data)                         9/28/03            9/29/02
                                                         ------------------------------------
<S>                                                         <C>                <C>
Net income (loss)                                           $  ( 119,075 )      $    8,376
Preferred dividends                                              ( 2,997 )         ( 3,147 )
                                                         ------------------------------------
Basic EPS - income (loss) available to common
  Stockholders                                                 ( 122,072 )           5,229
Effect of dilutive securities                                          -                 -
                                                         ------------------------------------
Diluted EPS - income (loss) available to common
  stockholders after assumed conversions                    $  ( 122,072 )      $    5,229
                                                         ------------------------------------
Determination of shares:
Weighted-average shares                                           25,844            25,712
Contingently issuable (unvested restricted shares)                     -               ( 8 )
                                                         ------------------------------------
Basic EPS - weighted-average shares                               25,844            25,704
Effect of dilutive securities                                          -               400
                                                         ------------------------------------
Diluted EPS - adjusted weighted-average shares after
  assumed conversions                                             25,844            26,104
                                                         ------------------------------------

Earnings (loss) per share - basic and diluted:               $    ( 4.72 )      $     0.20
                                                         ------------------------------------
</TABLE>


The number of potentially  dilutive common stock options  outstanding  using the
treasury stock method for the  thirty-nine  weeks ended September 28, 2003, were
approximately  209,000 but were not included in the  computation of diluted loss
per share because to do so would have been antidilutive.


Note 10.  Segment Information

Cone has three principal business segments based upon organizational  structure:
1) Denim; 2) Commission Finishing; and 3) Decorative Fabrics.

Operating  income  (loss)  for each  segment  is total  revenue  less  operating
expenses  applicable to the segment.  Intersegment  revenue  relates to both the
denim  and  commission  finishing  segments.  Equity  in  earnings  (losses)  of
unconsolidated  affiliates  is  included  in  the  denim  segment.   Unallocated
expenses,  interest and income tax expense (benefit) are not included in segment
operating  income (loss).  Unallocated  expenses include certain legal expenses,
bank fees and fees and discounts on the sale of accounts receivable.


                                       14
<PAGE>


Net sales and income (loss) from operations for Cone's operating segments are as
follows:

<TABLE>
<CAPTION>
                                                             Thirteen            Thirteen
                                                           Weeks Ended         Weeks Ended
(in thousands)                                               9/28/03             9/29/02
                                                           ----------------------------------
<S>                                                         <C>                 <C>
Net Sales
  Denim                                                     $   69,151          $   95,448
  Commission Finishing                                           8,766              11,233
  Decorative Fabrics                                             4,952               5,690
  Other                                                            127                  93
                                                          ----------------------------------
                                                                82,996             112,464
Less Intersegment Sales                                            167                 776
                                                          ----------------------------------
                                                            $   82,829          $  111,688
                                                          ----------------------------------
Income (Loss) from Operations
  Denim                                                     $     ( 89 )        $   11,697
  Commission Finishing                                           ( 535 )                 5
  Decorative Fabrics                                           ( 1,547 )           ( 1,584 )
  Other                                                          2,415               ( 408 )
  Unallocated Expenses                                           ( 447 )             ( 344 )
                                                          ----------------------------------
                                                                 ( 203 )             9,366
  Restructuring and Impairment of Assets                     ( 123,431 )                 -
                                                          ----------------------------------
                                                             ( 123,634 )             9,366
  Less Equity in Earnings of Unconsolidated Affiliates             548                 923
                                                          ----------------------------------
                                                             ( 124,182 )             8,443
Other Expense, Net                                             ( 4,029 )           ( 4,068 )
Reorganization Items                                           ( 3,519 )                 -
                                                          ----------------------------------
Income (Loss) from Operations before Income Tax Expense
  (Benefit) and Equity in Earnings of Unconsolidated
  Affiliates                                                $( 131,730 )        $    4,375
                                                          ----------------------------------
</TABLE>



                                       15
<PAGE>


Note 10.  Segment Information (continued)

<TABLE>
<CAPTION>
                                                           Thirty-Nine         Thirty-Nine
                                                           Weeks Ended         Weeks Ended
(in thousands)                                               9/28/03             9/29/02
                                                          ----------------------------------
<S>                                                         <C>                 <C>
Net Sales
  Denim                                                     $  232,576          $  279,288
  Commission Finishing                                          31,734              41,757
  Decorative Fabrics                                            18,570              25,500
  Other                                                            315                 236
                                                          -----------------------------------
                                                               283,195             346,781
Less Intersegment Sales                                          1,766               3,436
                                                          -----------------------------------
                                                            $  281,429          $  343,345
                                                          -----------------------------------
Income (Loss) from Operations
  Denim                                                     $   13,094          $   26,170
  Commission Finishing                                           ( 728 )             2,134
  Decorative Fabrics                                           ( 3,571 )           ( 1,213 )
  Other                                                          1,608             ( 1,402 )
  Unallocated Expenses                                         ( 1,401 )           ( 1,164 )
                                                          -----------------------------------
                                                                 9,002              24,525
  Restructuring and Impairment of Assets                     ( 124,197 )                 -
                                                          -----------------------------------
                                                             ( 115,195 )            24,525
  Less Equity in Earnings of Unconsolidated Affiliates           2,035               1,605
                                                          -----------------------------------
                                                             ( 117,230 )            22,920
Other Expense, Net                                            ( 12,061 )          ( 13,247 )
Equity Appreciation Rights                                     ( 4,117 )                 -
Reorganization Items                                           ( 3,519 )                 -
                                                          -----------------------------------
Income (Loss) from Operations before Income Tax Expense
  (Benefit) and Equity in Earnings of Unconsolidated
  Affiliates                                                $ (136,927 )        $    9,673
                                                          -----------------------------------
</TABLE>

Note 11.  Comprehensive Income (Loss)

Comprehensive  income (loss) is the total of net income (loss) and other changes
in equity,  except those resulting from investments by owners and  distributions
to owners not reflected in net income (loss).  Total comprehensive income (loss)
for the periods was as follows:

<TABLE>
<CAPTION>

                                         Thirteen           Thirteen           Thirty-Nine         Thirty-Nine
                                        Weeks Ended        Weeks Ended         Weeks Ended         Weeks Ended
(in thousands)                            9/28/03            9/29/02             9/28/03             9/29/02
                                     ---------------------------------------------------------------------------
<S>                                      <C>                <C>                 <C>                 <C>
Net income (loss)                        $ ( 117,305 )      $    3,843          $ ( 119,075 )       $    8,376
Other comprehensive
  income (loss):
    Minimum pension liability
      and SERP liability                    ( 57,503 )               -             ( 57,503 )                -
    Derivatives gains (losses)                     2             ( 359 )              ( 860 )              307
                                     ---------------------------------------------------------------------------
                                         $ ( 174,806 )      $    3,484          $ ( 177,438 )       $    8,683
                                     ---------------------------------------------------------------------------
</TABLE>


                                       16
<PAGE>

Derivatives  (primarily  cotton)  gains  (losses)  as  of  September  28,  2003,
reflected above in other comprehensive  income (loss) will be recognized in cost
of goods sold over the next twelve months.


Note 12.  Financial Instruments

Cone utilizes derivative  financial  instruments to manage risks associated with
changes  in cotton  prices,  natural  gas  prices,  interest  rates and  foreign
exchange rates. Cone accounts for derivative instruments in accordance with SFAS
No. 133, "Accounting for Derivative  Instruments and Hedging  Activities",  SFAS
No. 138,  "Accounting  for Certain  Derivative  Instruments  and Certain Hedging
Activities"  and  SFAS  No.  149,  "Amendment  of  Statement  133 on  Derivative
Instruments and Hedging Activities."

Cotton is the primary raw material for Cone's fabric  manufacturing  operations.
Cone has an established cotton purchasing  program,  administered in conformance
with  policies  approved by the Board of Directors,  to ensure an  uninterrupted
supply of appropriate  quality and quantities of cotton,  to cover committed and
anticipated  fabric  sales and to manage  margin  risks  associated  with  price
fluctuations  on  anticipated  cotton  purchases.  Cone  primarily  uses forward
purchase contracts and, to a lesser extent,  futures and option contracts.  Cone
considers its cotton derivatives to be primarily cash flow hedges of anticipated
future  transactions  under SFAS No. 133. The  effective  portion of  derivative
gains and losses for these hedges is initially  reported as a component of other
comprehensive  income  (loss)  outside  results of operations  and  subsequently
reclassified into results of operations when the forecasted  transactions  being
hedged affect  results of  operations.  At September 28, 2003,  Cone recorded in
accumulated other  comprehensive  income (loss)  derivatives  (primarily cotton)
losses of $0.4  million.  At September 29, 2002,  Cone  recorded in  accumulated
other  comprehensive  income  (loss)  cotton  derivative  gains of $1.0 million.
Losses of $0.1 million and gains of $0.6 million were  charged/credited  to cost
of goods sold during the  thirteen and  thirty-nine  weeks ended  September  28,
2003, respectively. Gains of $0.2 million and $0.8 million were credited to cost
of goods sold during the  thirteen and  thirty-nine  weeks ended  September  29,
2002,  respectively.  The ineffective  portion of derivative gains and losses is
reported in results of operations  immediately.  Hedge  ineffectiveness  for the
thirteen and thirty-nine  weeks ended September 28, 2003 and September 29, 2002,
was immaterial.


                                       17
<PAGE>


Note 13.  Restructuring and Impairment of Assets

Restructuring:

A roll-forward of the activity related to Cone's  restructuring  charges for the
thirty-nine weeks ended September 28, 2003 and September 29, 2002 follows:

                                                        Corporate &
                                                     Textile Products
        (in thousands)                                     Group
                                                    --------------------

        Balance, December 29, 2002                  $              58
        Deductions:
        Terminal leave and related benefits                      ( 37  )
                                                    ----------------------
         Balance, September 28, 2003                $              21
                                                    ----------------------

        Balance, December 30, 2001                  $             639
        Deductions:
        Terminal leave and related benefits                     ( 639  )
                                                    ----------------------
        Balance,  September 29, 2002                $               -
                                                    ----------------------

Impairment of Assets:

Cone  accounts  for  Impairment  of Assets  in  accordance  with  SFAS No.  144,
"Accounting  for the Impairment or Disposal of Long-Lived  Assets." Per SFAS No.
144, long-lived assets and certain identifiable  intangibles to be held and used
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be  recoverable.  In performing the
review for  recoverability,  Cone  estimates  the future cash flows  expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows,  undiscounted and without interest charges,  is less
than the  carrying  amount  of the  asset,  an  impairment  loss is  recognized.
Measurement  of an  impairment  loss  for  long-lived  assets  and  identifiable
intangibles  that  Cone  expects  to hold and use are  based  on the  difference
between  the  carrying  amount  and  fair  value  of the  asset.  Fair  value is
determined based on a present valuation technique,  which includes multiple cash
flow scenarios that reflect the range of possible outcomes (probability-weighted
approach) and an appropriate risk-free rate. Long-lived assets to be disposed of
are reported at the lower of carrying amount or fair value less cost to sell.

The facts and  circumstances  leading to the  impairment of asset charges in the
third   quarter   of  2003  was  that   management's   view  of  the   long-term
competitiveness of domestic  production began to change during the third quarter
of 2003.  Cone's downward  revision in outlook was driven by a number of factors
including:  1) the  completion of an extensive  market  research in which Cone's
customers  indicated that the North American  supply chain needed to continue to
reduce prices and improve  efficiency,  2) a meeting with a representative  from
the U.S.  Department of Commerce where Cone gained a greater  understanding that
the  present  administration  was  going to  continue  to press  for free  trade
agreements,  3) trade data  indicating  that  imports  from Vietnam were surging
since the enactment of the spring 2003 trade agreement, 4) information regarding
changing sourcing patterns and pricing expectations for 2004, which was obtained
during  meetings  with  Cone's  key  customers,  and  5)  cotton  future  prices
increasing by over 25% from mid-August to early November 2003.


                                       18
<PAGE>

Based upon the factors  discussed  above,  Cone prepared a cash flow analyses of
the value of its  long-lived  assets as of the end of the third quarter of 2003.
These  cash  flow  scenarios  were  based  upon the  forecasts  provided  to its
creditors in mid-September as modified for changes in the cotton market,  Cone's
expected  denim  configuration  and, as well as, key  negotiations  with certain
suppliers.  Multiple  forecast  scenarios  for each  business unit were prepared
depending upon different  outcomes of the bankruptcy  process with a probability
of occurrence  assigned to each  scenario.  Based upon the  continued  growth of
textile,  apparel  and  furniture  imports,  expectations  of future  cash flows
generated by the commission finishing and jacquards businesses were reduced.

Based upon the above  analyses,  Cone recognized an asset  impairment  charge of
$123.4 million in its third quarter 2003 statements of operations as follows:

     o    Non-cash  charges for the  impairment  of property  and  equipment  in
          Cone's denim segment totaling $82.8 million.

     o    Non-cash  charges for the  impairment  of property  and  equipment  in
          Cone's commission finishing segment totaling $24.2 million.

     o    Non-cash  charges for the  impairment  of property  and  equipment  in
          Cone's decorative fabrics segment totaling $9.1 million.

Additionally,  in the third quarter of 2003, Cone recorded  non-cash  impairment
losses on certain investments in unconsolidated foreign affiliates totaling $5.7
million and a $1.6 million charge to further write-down certain assets available
for sale.

The  impairment  charges  reflect  management's  best  estimate of the excess of
carrying amounts of long-lived  assets over their fair values.  It is reasonably
possible that those  estimates could change in the near term and that the effect
of those changes could be material.


Note 14.  Income Taxes

Excluding equity in earnings of  unconsolidated  affiliates,  upon which no U.S.
tax was provided, the effective tax benefit for the thirteen and the thirty-nine
weeks  ended  September  28,  2003,  was  10.5%  and  11.6%,  respectively.  The
difference between the effective tax rate and the corporate U.S. tax rate of 35%
is primarily  attributable to the fact that the tax benefit recorded was limited
to the  extent  that Cone had  deferred  tax  liabilities.  Excluding  equity in
earnings of unconsolidated affiliates,  upon which no U.S. tax was provided, the
effective tax rate for the thirteen and  thirty-nine  weeks ended  September 29,
2002, was 33% and 30%, respectively.


Note 15.  Subsequent Events

During the fourth  quarter of 2003,  Cone  announced the  downsizing of its U.S.
denim  manufacturing  capacity  to reflect  its revised  business  outlook.  The
downsizing has several components that will reduce overall  manufacturing costs,
require  minimal capital  expenditures to implement and should be  substantially
completed by December 2003. The initiative will downsize denim  manufacturing at


                                       19
<PAGE>

Cone's Cliffside Weave plant, eliminate certain denim manufacturing processes at
its  Haynes  and White Oak  plants,  and close its  Cliffside  Finishing  plant.
Domestic  denim  weaving  capacity  will be reduced by 10 - 25%  depending  upon
market demand. This will result in a reduction of workforce of approximately 800
employees during the fourth quarter of 2003.  Expenses related to the relocation
of  equipment  and run-out  costs will be expensed  as  incurred.  In the fourth
quarter of 2003,  Cone  expects to record a  restructuring  charge for  terminal
leave pay and benefits for salaried  employees of  approximately  $1.5  million.
Cone continues to assess its overall cost structure and manufacturing capacities
across all business segments;  however, no additional  restructuring charges, if
any, can be reasonably estimated at this time.


                                       20
<PAGE>


Item 2.
                             MANAGEMENT'S DISCUSSION
                       AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATION


OVERVIEW

On  September  24,  2003,  Cone filed for  protection  under the  United  States
Bankruptcy Code (the  "Bankruptcy  Code").  The events leading up to this filing
were  primarily  market and liquidity  driven.  In our second  quarter 2003 Form
10-Q,  we reported  that Cone's  business  outlook for the third quarter was for
continued  pressure  on margins  and  volumes as a result of weak U.S.  economic
conditions,  higher cotton costs,  higher than desired  customer and  competitor
inventory  levels,  continuation of retailers'  cautiousness  and imports.  Cone
believed  that longer term the monetary and fiscal  stimuli being applied to the
U.S.  economy,  along with the  inevitable end to inventory  liquidations  would
result in some  recovery in our markets.  Cone  expected,  however,  that in the
short term,  the continued  pressure on denim prices from retailers and imports,
coupled with higher  cotton  costs,  would reduce denim sales margins and Cone's
operating earnings in the second half of 2003.

However,  during the third quarter of 2003,  Cone realized that it was operating
in a seriously changed business environment as denim shipments failed to rebound
or even  hold to second  quarter  2003  levels.  Cone  shipped  less than 75% of
domestic  capacity in seasonally  its strongest  quarter,  primarily  because of
larger than  expected  denim jeans  imports  from Asia.  This  reduced  level of
shipments  required  Cone to reduce plant  operating  schedules  throughout  the
quarter and furlough its smallest  U.S.  denim  weaving  facility for August and
September of 2003. This reduced level of sales during the third quarter 2003 and
the curtailment of plant operating schedules resulted in a contraction in Cone's
liquidity primarily because of the resulting reduction of availability under its
Receivables   Purchase  and  Servicing   Agreement   (the  "A/R   Securitization
Facility").  Its reduced  level of liquidity  led Cone to conclude that it could
not make its  semi-annual  interest  payment  on its  8-1/8%  Debentures  due on
September  15,  2003.  The  change in Cone's  outlook  regarding  the  long-term
competitiveness  of U.S. denim production,  lack of liquidity and the complexity
of Cone's capital  structure  consisting of multiple secured lenders led Cone to
conclude that a bankruptcy filing was necessary.

On September 24, 2003 (the  "Petition  Date"),  Cone and certain of its domestic
subsidiaries (collectively,  the "Debtors") filed voluntary petitions for relief
under Chapter 11 of the Bankruptcy  Code in the United States  Bankruptcy  Court
(the  "Bankruptcy  Court")  for the  District of  Delaware  (Case Nos.  03-12943
through 03-12946). The Chapter 11 cases for the Debtors (the "Chapter 11 Cases")
are being  jointly  administered  for  procedural  purposes  only.  The Debtors'
foreign subsidiaries, foreign joint venture entities and certain of its domestic
subsidiaries  were not included in the  petitions  for relief under  Chapter 11.
Cone has entered into a definitive  sale  agreement with WL Ross & Co., which is
subject to higher or better offers in accordance  with Section 363 of Chapter 11
of the  Bankruptcy  Code.  Under  the  agreement,  WL Ross & Co.  will  purchase
substantially  all of Cone's  assets  for $46  million  in cash and will  assume
Cone's  outstanding   Debtor-in-Possession  ("DIP")  loans  and  selected  other


                                       21
<PAGE>


liabilities,  positioning  the purchaser as the  "stalking  horse" - or original
bidder - in accordance with Section 363 of Chapter 11 of the Bankruptcy Code.

Cone and its  subsidiaries  remain in possession of their assets and  properties
and  continue  to operate  their  businesses  and  manage  their  properties  as
debtors-in-possession  pursuant to sections  1107(a) and 1108 of the  Bankruptcy
Code.  Since the Chapter 11 filing,  Cone has obtained  several  orders from the
Bankruptcy  Court which  included  authorization  of 1) payment of  pre-petition
employee salaries,  wages,  payroll taxes, certain employee benefits and related
expenses,  2) payment of certain  pre-petition  freight and  customs  claims and
amounts due in respect to Cone's  offshore  operations,  3) payment of a limited
amount of pre-petition claims of critical vendors, 4) the continuation of Cone's
Workers'  Compensation Program and Policies and Other Insurance Policies, 5) the
continuation of Cone's  centralized cash management system and bank accounts and
6) Cone to enter into securitization documents with and sell accounts receivable
up to $35 million to GE Capital Corporation  ("GECC").  On November 6, 2003, the
court entered final orders relating to the above items.

On November 10, 2003, the Bankruptcy  Court approved bid procedures  agreed upon
by Cone  and its  creditors  that  will  enable  Cone to move  forward  with its
proposed  sale of assets  to WL Ross & Co. in  accordance  with  Section  363 of
Chapter 11 of the Bankruptcy  Code. The Bankruptcy Court set a January 23, 2004,
deadline  for the  submission  of  initial  bids with an auction  scheduled  for
January  29,  2004.  The WL Ross & Co.  offer  sets a floor for other bids to be
submitted  during a Section  363  auction  process  approved by the court and is
subject to higher or better offers. In addition, the agreement calls for WL Ross
& Co. to receive a $1.8  million  breakup fee if a higher or better bid for Cone
is accepted.  The bidding procedures also allow parties interested in purchasing
only  selected  assets  of Cone to do so as long  as Cone  will  obtain  greater
aggregate value from such offers than under the offer submitted by WL Ross & Co.

Cone's A/R  Securitization  Facility as amended on September  23, 2003  provides
Cone with  incremental  liquidity  during the  initial  phase of the  bankruptcy
process.   The  A/R   Securitization   Facility  provides  for  $35  million  in
post-petition  financing  from GECC and has a maturity  date of May 29, 2004. On
September 26, 2003,  the  Bankruptcy  Court  approved  Cone's  entering into and
implementing the amended A/R  Securitization  Facility as part of the "first day
orders." Amounts borrowed under the A/R Securitization Facility bear interest at
the GECC Commerical Paper Rate plus an applicable  margin of 2.75%. In addition,
there is a commitment fee of .0625% on unused  capacity under the facility.  The
A/R  Securitization  Facility  contains  financial  covenants  requiring Cone to
maintain  minimum  levels of  earnings  before  interest,  taxes,  depreciation,
amortization,  restructuring,  and  reorganization  items,  as  defined  in  the
agreement.  It also  imposes  certain  limits on capital  expenditures  and cash
restructuring charges. As of September 28, 2003, Cone was in compliance with the
terms under the A/R Securitization Facility.

On November 10, 2003,  Cone filed with the Bankruptcy  Court a proposal to enter
into a $45 million DIP financing  agreement with Bank of America and GECC.  This
facility  would provide Cone  additional  liquidity of  approximately  $10 - $12
million after paying off and eliminating the A/R  Securitization  Facility.  The
hearing date to consider  approval of the $45 million DIP  financing is November
25, 2003.


                                       22
<PAGE>

The accompanying  consolidated condensed financial statements have been prepared
on a going  concern basis in  accordance  with  American  Institute of Certified
Public Accountants  Statement of Position 90-7, "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code" ("SOP 90-7").  Cone's recent losses
and the Chapter 11 Cases raise  substantial  doubt about its ability to continue
as a going concern.  Currently, it is not possible to predict the outcome of the
Chapter 11 Cases or their effect on Cone's  business.  If it is determined  that
the  liabilities  subject to  compromise in the Chapter 11 Cases exceed the fair
value of the assets  available,  most secured and unsecured claims are likely to
be settled at less than 100% of their  face  value and the equity  interests  of
Cone's current shareholders will have no value.

Substantially all unsecured liabilities as of the date of the Chapter 11 filings
are  subject  to  compromise  or other  treatment  under  the  proposed  sale of
substantially  all of the assets of Cone.  In addition,  based upon the value of
the  "stalking  horse"  bid,  the  secured   liabilities  are  also  subject  to
compromise.  For financial  reporting purposes,  liabilities,  the settlement of
which is dependent on the outcome of the Chapter 11 Cases,  have been segregated
and  classified  as  liabilities  subject  to  compromise  in  the  accompanying
consolidated  condensed balance sheet.  These  liabilities  consist primarily of
amounts   outstanding  under  long-term  debt,  a  minimum  pension   liability,
pre-petition accounts payable that may be affected by the outcome of the Chapter
11  Cases,  accrued  interest,  other  accrued  expenses  and  certain  deferred
liabilities. The ultimate amount and settlement terms for liabilities subject to
compromise are subject to  negotiation  and court approval and are not presently
determinable.

Long-Term Outlook, Asset Impairment and Subsequent Events

During  the  third  quarter  of  2003,   management's   view  of  the  long-term
competitiveness of domestic production began to change. Cone's downward revision
in outlook was driven by a number of factors including:

     o    Cone's CEO  commented  in July  (furnished  on Form 8-K dated July 30,
          2003) "that retailer caution and distraction by non-jeans  inventories
          have created a difficult  market to read because there could very well
          be a time when retailers  scramble to satisfy consumer demand for fall
          goods once their  near-term  summer  inventories  are  cleared  away."
          Because  of weak end of June and July  shipments,  that  Cone had felt
          were  initially  being  driven  by  cyclical   inventory   adjustments
          throughout the denim jeans pipeline, the Cone Denim marketing team did
          extensive market research in late July and August. The market research
          was focused on long-term sourcing  strategies for denim jeans and what
          the customers  felt the strengths and weaknesses of the North American
          supply chain were. The primary  observations from customers were that,
          while sourcing from Asia was perhaps not their  preference  because of
          difficulties in securing deliveries and replenishing inventories,  the
          North  American  supply chain needed to continue to reduce  prices and
          improve  efficiency.  A summary  of these  findings  and the  expected
          implications  upon U.S. denim mills was presented to senior management
          in mid-August.

     o    Also in  mid-August,  Cone's  senior  management  met with the  United
          States Department of Commerce Deputy Assistant  Secretary of Textiles,
          Apparel and Consumer Goods  Industries to discuss U.S. trade policy as
          it related to the U.S.  textile  industry,  the recently enacted trade
          legislation  with  Vietnam  and the  outlook  for the  CAFTA  (Central
          America Free Trade Act) negotiations. From these discussions a greater
          understanding was reached that the present administration was going to


                                       23
<PAGE>

          continue to press for free trade agreements,  even to the detriment of
          the U.S.  textile  industry,  and that the retailers  coalition was an
          aggressive force in pushing for this trade liberalization.

     o    Imports from Vietnam  were surging  since the  enactment of the spring
          2003 trade  agreement.  Denim apparel imports from Vietnam to the U.S.
          were up approximately  700% for May and June and almost 400% for July.
          As it  takes  approximately  45 days  after  the end of the  month  to
          receive and sort U.S. trade data, Cone only began to fully realize the
          impact of the Vietnam  trade  agreement  in  mid-third  quarter  2003.
          Vietnam's  rate of  growth  for  the  August/September  period  slowed
          significantly  as it reached in excess of 90% of its 2003 quota levels
          under the new trade agreement.

     o    Cone's revised market  outlook,  the likely  direction of future trade
          policy and sourcing patterns and the decline in Cone's denim shipments
          since June 2003, led senior  management to schedule  meetings with key
          customers in late August and early September. During these meetings it
          became clear that  retailers had been working with Chinese denim mills
          well in advance of the Vietnam  trade pact to  establish  Vietnam as a
          source of denim  jeans to U.S.  retail.  In  addition,  our  customers
          continued to drive home the point that they  expected  denim prices to
          continue  to  decline  even in the  face of  higher  cotton  costs  as
          compared with 2002 and 2003.

     o    Cotton futures prices  increased by over 25% from  mid-August to early
          November.

     o    In price negotiations with key customers, Cone, along with their other
          denim suppliers,  was demanded to reduce or hold the line on prices in
          2004 even in the face of  escalating  cotton  prices.  This stance has
          raised  serious  doubts  regarding  recovery of cotton cost  increases
          through increased pricing.

With the change in business  outlook,  Cone prepared a cash flow analyses of the
value of its long-lived assets as of the end of the third quarter of 2003. These
cash flow scenarios  were based upon the forecasts  provided to its creditors in
mid-September  as modified  for changes in the cotton  market,  Cone's  expected
denim  configuration  and, as well as, key negotiations with certain  suppliers.
Multiple forecast  scenarios for each business unit were prepared depending upon
different  outcomes of the  bankruptcy  process with a probability of occurrence
assigned to each  scenario.  As a result of the downward  revisions in long-term
business outlook, the forecast for Cone's denim business profitability from U.S.
facilities was substantially  lower than 2002 results and the first half of 2003
results.  In addition,  based upon the continued growth of textile,  apparel and
furniture imports, expectations of future cash flows generated by the commission
finishing and jacquards businesses were reduced.

Based upon these various  analyses,  prepared in  accordance  with the Financial
Accounting  Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS")  No. 144,  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets",  Cone  recognized an asset  impairment  charge of $123.4 million in its
third quarter 2003  statements  of  operations  to write-down  the value of U.S.
property,  plant and equipment as well as certain  investments in unconsolidated
foreign  affiliates  engaged  in the  denim  business  who are  facing  the same
competitive issues as Cone. (See Note 13 of the Notes to Consolidated  Condensed
Financial  Statements  included in Part I, Item 1.) In addition,  Cone concluded
that, as a result of the bankruptcy  filing,  our revised  long-term outlook and
the value of the "stalking horse" bid, the Class A Preferred Stock was likely to
receive no recovery. This being the case, under the floor-offset  arrangement of
the pension plan, the  accumulated  benefit  obligation was greater than pension
plan assets, resulting in the recording of a minimum pension liability with a


                                       24
<PAGE>

corresponding  charge to accumulated other  comprehensive loss (a contra account
to  stockholders'  equity)  in the amount of $56.8  million.  (See Note 4 of the
Notes to Consolidated  Condensed  Financial  Statements included in Part I, Item
1.)

During the fourth  quarter of 2003,  Cone  announced the  downsizing of its U.S.
denim  manufacturing  capacity  to reflect  its revised  business  outlook.  The
downsizing has several components that will reduce overall  manufacturing costs,
require  minimal capital  expenditures to implement and should be  substantially
completed by December 2003. The initiative will downsize denim  manufacturing at
Cone's Cliffside Weave plant, eliminate certain denim manufacturing processes at
its  Haynes  and White Oak  plants,  and close its  Cliffside  Finishing  plant.
Domestic  denim  weaving  capacity  will be reduced by 10 - 25%  depending  upon
market demand. This will result in a reduction of workforce of approximately 800
employees during the fourth quarter of 2003.  Expenses related to the relocation
of  equipment  and run-out  costs will be expensed  as  incurred.  In the fourth
quarter of 2003,  Cone  expects to record a  restructuring  charge for  terminal
leave pay and benefits for salaried  employees of  approximately  $1.5  million.
Cone continues to assess its overall cost structure and manufacturing capacities
across all business segments;  however, no additional  restructuring charges, if
any, can be reasonably estimated at this time.

For the foreseeable future, Cone continues to see margin pressure in each of its
businesses caused by deflationary pricing pressures at retail,  excess worldwide
capacity and rising cotton costs.  The January 1, 2005 scheduled  elimination of
import quota  restrictions  under  existing WTO  agreements  is also expected to
result in further pressure on U.S. textiles and will result in changes in global
sourcing patterns.  We believe that these extensive  pressures on profit margins
will result in continued  consolidation and  rationalization  of the entire U.S.
textile industry.


RESULTS OF OPERATIONS

Third  Quarter  Ended  September  28, 2003  Compared  with Third  Quarter  Ended
September 29, 2002.

For the third quarter of 2003,  Cone had sales of $82.8  million,  a decrease of
25.8%, as compared with sales of $111.7  million for the third  quarter of 2002.
The decrease in sales was  primarily  driven by denim unit  decreases as well as
weaknesses in the commission finishing and decorative fabrics business segments.

Gross profit margin decreased to 6.9% of sales for the third quarter of 2003, as
compared with 15.3% for the third  quarter of 2002.  The decline in gross profit
margin was  primarily  attributable  to higher raw material  costs  (cotton) and
unfavorable   manufacturing   variances   associated  with  curtailed  operating
schedules resulting from lower sales.

Cone operates in three principal business segments:  Denim, Commission Finishing
and  Decorative  Fabrics.  (See Note 10 of the Notes to  Consolidated  Condensed
Financial Statements included in Part I, Item 1.)


                                       25
<PAGE>


         Denim.  Outside sales (total segment sales less intercompany  sales) of
         the denim  segment were $69.0 million for the third quarter of 2003, as
         compared  with sales of $95.4  million for the third quarter of 2002, a
         decrease of 27.7%.  Denim sales yards decreased 27.8%, as compared with
         the prior year's third quarter results,  as a result of increased Asian
         imports, conservative buying and inventory adjustments by key customers
         and the comparison  against a strong prior year period.  Operating loss
         for the denim segment was $0.1 million,  or 0.1% of sales for the third
         quarter of 2003, as compared with operating income of $11.7 million, or
         12.3% of sales for the third quarter of 2002.  The decline in operating
         income   was   attributable   to  lower   sales   volume,   unfavorable
         manufacturing  variances,  and  higher  raw  material  costs  (cotton).
         Operating income for the segment includes the equity in earnings of the
         Parras  Cone  joint  venture  and the  Altamira  industrial  park joint
         venture.  Equity in earnings  of Parras  Cone was $0.3  million for the
         third quarter of 2003,  as compared  with $1.0 million  results for the
         third  quarter  of 2002.  The  decline  in  Parras  Cone's  results  is
         primarily attributable to the same factors that affected Cone's overall
         denim performance.

         Commission   Finishing.   Outside  sales  (total   segment  sales  less
         intercompany  sales) of the  commission  finishing  segment  (Carlisle)
         decreased by 16.5%, as compared with third  quarter 2002  results.  The
         decrease  in  outside  sales was the  result  of  overall  weak  market
         conditions in all of Carlisle's product lines. For the third quarter of
         2003,  Carlisle reported an operating loss of $0.5 million, as compared
         with  break-even  results  for the  third  quarter  of 2002.  Operating
         results were negatively impacted by lower sales volume,  which resulted
         in  curtailed  operating  schedules,  and higher  energy  costs.  Plant
         operating  efficiencies  continued  to improve in the third  quarter of
         2003,  as compared  with the third  quarter of 2002.  The home fashions
         industry continues to experience extremely difficult market conditions.

         Decorative Fabrics. Sales revenue in the third quarter of 2003 was $5.0
         million,  as compared with $5.7 million for third  quarter 2002.  Sales
         volume  decreased  by  8.7%.  Market  conditions  in  the  bedding  and
         furniture  segments  continued  to be  weak  and  were  exacerbated  by
         increased import penetration of furniture products and the low level of
         new product introductions  achieved by Cone Jacquards in 2001 and 2002.
         For the third quarter of 2003 the segment had an operating loss of $1.5
         million  versus an operating loss of $1.6 million for the third quarter
         of 2002.  Operating  results were  affected  negatively  by lower sales
         volume,  resulting in poor plant utilization  levels and unsatisfactory
         operating  efficiencies.  In addition, in an attempt to improve its new
         product introductions in 2003 the business unit increased  expenditures
         on design and sampling.

Selling and  administrative  expenses for the third quarter of 2003 were 7.8% of
sales, as compared to 7.7% for the third quarter of 2002.

In accordance  with SOP 90-7,  professional  fees associated with the Chapter 11
Cases are  expensed as incurred  and  reported  as  reorganization  items in the
accompanying  consolidated  condensed financial statements.  Interest expense is
reported  only  to the  extent  that  it will be  paid  during  the  Chapter  11
proceeding or that it is probable that it will be an allowed  priority,  secured
or  unsecured  claim.  Interest  expense for the third  quarter of 2003 was $4.0
million,  substantially  all of which is  pre-petition,  as  compared  with $3.7
million for the third quarter of 2002.

                                       26
<PAGE>

Other  expense of $0.04 million in the third quarter of 2003 include the ongoing
expenses of the accounts receivable  securitization program offset by a one-time
income of $0.3 million from an insurance policy demutualization,  as compared to
other expense of $0.4 million in the third quarter of 2002.

For the thirteen  weeks ended  September 28, 2003,  Cone  recognized a charge of
$3.5  million in  reorganization  items  associated  with the  Chapter 11 Cases.
Approximately $2.2 million of the reorganization  charge related to the non-cash
write-offs of both the  unamortized  discount on the 8-1/8%  Debentures  and the
deferred  financing  fees  associated  with the debt  classified  as  subject to
compromise.  In  addition,  Cone  incurred  $1.3 million for  professional  fees
related to the Chapter 11 Cases.

Excluding equity in earnings of  unconsolidated  affiliates,  upon which no U.S.
tax was  provided,  the  effective  tax  benefit  for the  thirteen  weeks ended
September 28, 2003, was 10.5%. The difference between the effective tax rate and
the corporate  U.S. tax rate of 35% is primarily  attributable  to the fact that
the tax benefit  recorded  was limited to the extent that Cone had  deferred tax
liabilities.  Excluding equity in earnings of  unconsolidated  affiliates,  upon
which no U.S. tax was provided,  the  effective tax rate for the thirteen  weeks
ended September 29, 2002, was 33%.

For the third quarter of 2003,  Cone sold a portion of its real estate  holdings
in  Altamira,  Tamaulipas,  Mexico  for gross  proceeds  of $2.5  million.  Cone
recognized an overall gain of $1.8  million,  of which $1.5 million is reflected
in income  (loss)  from  operations  and $0.3  million in equity in  earnings of
unconsolidated affiliates.

For the third  quarter of 2003,  Cone had a net loss of $117.3  million or $4.56
per share  after  preferred  dividends.  Included  in the net loss for 2003 were
charges of $123.4 million,  or $4.76 per share for  restructuring and impairment
of  assets  (See  Note  13 of the  Notes  to  Consolidated  Condensed  Financial
Statements  included in Part I, Item 1). For the third quarter of 2002, Cone had
a net profit of $3.8 million, or $.11 per share after preferred dividends.


Nine Months Ended  September 28, 2003 Compared with Nine Months Ended  September
29, 2002

For the first nine months of 2003, Cone had sales of $281.4 million,  a decrease
of 18.0%,  as compared with sales of $343.3 million for the first nine months of
2002. The decrease in sales dollars was across all business segments.

Gross  profit  margin  decreased  to 10.6% of sales for the first nine months of
2003, as compared  with 14.2% for the first nine months of 2002.  The decline in
gross profit  margin was primarily  attributable  to  unfavorable  manufacturing
variances  associated with curtailed  operating  schedules  resulting from lower
sales partially offset by the benefits of cost reduction programs.

Cone operates in three principal business segments:  Denim, Commission Finishing
and  Decorative  Fabrics.  (See Note 10 of the Notes to  Consolidated  Condensed
Financial Statements included in Part I, Item 1.)


                                       27
<PAGE>

         Denim. Outside sales (total segment sales less intercompany sales) were
         $232.1  million  for nine  months of 2003,  as  compared  with sales of
         $279.3 million for the comparable nine months of 2002, or a decrease of
         16.9%.  Sales yards for 2003 decreased from 2002 levels  primarily as a
         result of market  weaknesses  that began to  materialize  in the latter
         part of second  quarter  2003 and became more  evident  throughout  the
         third quarter.  Denim sales prices  declined slightly, as compared with
         the prior year.  Operating  income for the denim  segment  decreased to
         $13.1 million or 5.6% of sales for the nine months of 2003, as compared
         with $26.2  million or 9.4% of sales for the first nine months of 2002.
         The decline in operating  income was  primarily  attributable  to lower
         sales volume and unfavorable  manufacturing  variances  associated with
         curtailed  operating  schedules.   Operating  income  for  the  segment
         includes  the equity in  earnings  (losses)  of the  Parras  Cone joint
         venture  and the  Altamira  industrial  park joint  venture.  Equity in
         earnings  of Parras Cone was $1.9  million for nine months of 2003,  as
         compared with $1.9 million for nine months of 2002.

         Commission   Finishing.   Outside  sales  (total   segment  sales  less
         intercompany  sales) decreased by 20.6%, as compared with third quarter
         2002  results.  Total sales  decreased by 24%  primarily as a result of
         overall weak market conditions in all of Carlisle's  product lines. For
         the nine months of 2003,  Carlisle reported a loss of $0.7 million,  as
         compared  with a profit $2.1 million for the first nine months of 2002.
         Operating results were negatively impacted by lower sales volume, which
         resulted in curtailed  operating  schedules,  and higher  energy costs.
         Plant operating  efficiencies continued to improve in 2003, as compared
         with 2002.

         Decorative Fabrics. Sales revenue for the nine months of 2003 was $18.6
         million,  as compared with $25.5 million for the  comparable  period of
         2002. Sales volume decreased by 26.1%. Market conditions in the bedding
         and furniture  segments  continued to be weak and were  exacerbated  by
         increased import penetration of furniture products and the low level of
         new product introductions  achieved by Cone Jacquards in 2001 and 2002.
         The segment operating loss was $3.6 million for nine months of 2003, as
         compared  with a  segment  operating  loss  of  $1.2  million  for  the
         comparable   prior  year  period.   Operating   results  were  affected
         negatively by lower sales volume,  resulting in poor plant  utilization
         levels and unsatisfactory  operating  efficiencies.  In addition, in an
         attempt to improve its new product  introductions  in 2003 the business
         unit increased expenditures on design and sampling.

Selling and administrative  expenses for the first nine months of 2003 were 8.2%
of sales, as compared to 7.5% of sales for the first nine months of 2002.

In accordance  with SOP 90-7,  professional  fees associated with the Chapter 11
Cases are  expensed as incurred  and  reported  as  reorganization  items in the
accompanying  consolidated  condensed financial statements.  Interest expense is
reported  only  to the  extent  that  it will be  paid  during  the  Chapter  11
proceeding or that it is probable that it will be an allowed  priority,  secured
or  unsecured  claim.  Interest  expense  for the nine  months of 2003 was $11.5
million,  substantially  all of which is  pre-petition,  as compared  with $12.0
million for the nine months of 2002.  Benefits from lower  borrowing  levels and
lower market  interest rate levels were  partially  offset by increases in rates
under Cone's financing agreements.


                                       28
<PAGE>

Other  expenses  of $0.7  million in the first nine  months of 2003  include the
ongoing expense of the accounts  receivable  securitization  program offset by a
one-time  income of $0.3 million from an insurance  policy  demutualization,  as
compared to other expense of $1.4 million for the nine months of 2002.

For the thirty-nine  weeks ended September 28, 2003, Cone recognized a charge of
$3.5  million in  reorganization  items  associated  with the  Chapter 11 Cases.
Approximately $2.2 million of the reorganization  charge related to the non-cash
write-offs of both the  unamortized  discount on the 8-1/8%  Debentures  and the
deferred  financing  fees  associated  with the debt  classified  as  subject to
compromise.  In  addition,  Cone  incurred  $1.3 million for  professional  fees
related to the Chapter 11 Cases.

On May 27, 2003, Cone amended agreements with its lenders extending the maturity
date of its existing  Revolving  Credit  Facility and its Senior Note obligation
through  March 15, 2004.  With the  amendments,  the interest rate on the senior
note  remained  14.2%.  The  revolving  credit  agreement  was  split  into  two
components.  The first  component  was a $25  million,  12% senior  note and the
second component was a $31 million revolving credit facility bearing interest at
the London Interbank Offering Rate ("LIBOR") plus 6.75%.

As part of the extension,  Cone settled the Equity Appreciation Rights Agreement
("EARS"),  which were  contingent  rights granted as a part of the agreements in
November 2001, for $4.1 million. The rights entitled the lenders, upon giving of
notice within two years following  January 15, 2003, to receive a payment of the
greater of $1 million or 10% of the market  value of Cone's  outstanding  common
stock if Cone did not refinance the Revolving Credit Facility and Senior Note by
January 15, 2003,  which did not occur. The rights were settled for $2.1 million
in cash, $1.8 million in senior notes bearing interest at 12% and 14.2% maturing
on March 15, 2004 and approximately 169,000 shares of Cone common stock.

Excluding equity in earnings of  unconsolidated  affiliates,  upon which no U.S.
tax was  provided,  the effective  tax benefit for the  thirty-nine  weeks ended
September 28, 2003, was 11.6%. The difference between the effective tax rate and
the corporate  U.S. tax rate of 35% is primarily  attributable  to the fact that
the tax benefit  recorded  was limited to the extent that Cone had  deferred tax
liabilities.  Excluding equity in earnings of  unconsolidated  affiliates,  upon
which no U.S. tax was provided, the effective tax rate for the thirty-nine weeks
ended September 29, 2002, was 30%.

For the first  nine  months of 2003,  Cone  sold a  portion  of its real  estate
holdings in Altamira,  Tamaulipas,  Mexico for gross  proceeds of $2.5  million.
Cone  recognized  an overall  gain of $1.8  million,  of which  $1.5  million is
reflected  in  income  (loss)  from  operations  and $0.3  million  in equity in
earnings of unconsolidated affiliates.

For the first nine  months of 2003,  Cone had a net loss of $119.1  million,  or
$4.72 per share  after  preferred  dividends.  Included in the net loss for 2003
were  charges  of $124.2  million,  or $4.81 per  share  for  restructuring  and
impairment  of  assets  (See  Note 13 of the  Notes  to  Consolidated  Condensed
Financial  Statements  included in Part I, Item 1). For the nine months of 2002,
Cone had a net  profit  of $8.4  million,  or $.20  per  share  after  preferred
dividends.


                                       29
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

On  September  24,  2003,  Cone  filed for  protection  under  Chapter 11 of the
Bankruptcy  Code.  This will affect Cone's  liquidity  and capital  resources as
described below.

The  following is a summary of primary  financing  agreements as of the Petition
Date.
<TABLE>
<CAPTION>
                                                                            Interest/
      ($ Amounts in Millions)            Facility            Amount         Discount
        Financing Agreement             Commitment        Outstanding         Rate       Maturity Date
-------------------------------------------------------------------------------------------------------
                                                                                %
<C>                                     <C>               <C>                <C>         <C>
8-1/8% Debentures                       $   100.0         $    100.0          8.125      Mar 15, 2005
14.2% Senior Notes                           21.4               21.4         14.200      Mar 15, 2004
12.0% Senior Notes                           26.2               26.2         12.000      Mar 15, 2004
Revolving Credit Facility                    28.9               24.0          8.100      Mar 15, 2004
A/R Securitization Facility                  35.0               23.5          3.780      May 29, 2004

</TABLE>

On May 27, 2003, Cone amended agreements with its lenders extending the maturity
date of its existing  Revolving  Credit  Facility and its Senior Note obligation
through  March 15, 2004.  With the  amendments,  the interest rate on the senior
note  remained  14.2%.  The  revolving  credit  agreement  was  split  into  two
components.  The first  component  was a $25  million,  12% senior  note and the
second component was a $31 million revolving credit facility bearing interest at
LIBOR plus 6.75%.

As part of the extension,  Cone settled the EARS,  which were contingent  rights
granted as a part of the  agreements in November  2001,  for $4.1  million.  The
rights  entitled the lenders,  upon giving of notice within two years  following
January  15,  2003,  to receive a payment of the greater of $1 million or 10% of
the market value of Cone's  outstanding  common stock if Cone did not  refinance
the Revolving Credit Facility and Senior Note by January 15, 2003, which did not
occur.  The rights were settled for $2.1 million in cash, $1.8 million in senior
notes  bearing  interest  at 12% and  14.2%  maturing  on  March  15,  2004  and
approximately 169,000 shares of Cone common stock.

Excluding Cone's A/R  Securitization  Facility,  Cone is currently in default of
its senior  securities  as a result of the  Chapter 11 Cases.  Cone is making no
payments under its senior  securities and the payment of interest accruing under
its senior securities after September 24, 2003, is stayed in connection with the
Chapter 11 Cases.

Cone's A/R Securitization  Facility,  as amended on September 23, 2003, provides
Cone with  incremental  liquidity  during the  initial  phase of the  bankruptcy
process.   The  A/R   Securitization   Facility  provides  for  $35  million  in
post-petition  financing  from GECC and has a maturity  date of May 29, 2004. On
September 26, 2003,  the  Bankruptcy  Court  approved  Cone's  entering into and
implementing the amended A/R  Securitization  Facility as part of the "first day
orders." Amounts borrowed under the A/R Securitization Facility bear interest at
the GECC Commercial Paper Rate plus an applicable  margin of 2.75%. In addition,
there is a commitment fee of .0625% on unused  capacity under the facility.  The
A/R  Securitization  Facility  contains  financial  covenants  requiring Cone to
maintain  minimum  levels of  earnings  before  interest,  taxes,  depreciation,
amortization,  restructuring,  and  reorganization  items,  as  defined  in  the


                                       30
<PAGE>


agreement.  It also  imposes  certain  limits on capital  expenditures  and cash
restructuring charges. As of September 28, 2003, Cone was in compliance with the
terms under the A/R Securitization Facility.

At  September  28,  2003,  Cone had  availability  under its A/R  Securitization
Facility,  as  determined  by the  difference  between  the  borrowing  base and
outstanding advances, of $9.8 million. Availability under the A/R Securitization
Facility is based upon the level of domestic  receivables  within the  facility,
subject to certain concentration and eligibility restrictions, and is determined
by a daily  borrowing  base  calculation.  As of  November  12,  2003,  Cone had
availability  under  the  A/R  Securitization  Facility,  as  determined  by the
difference  between  the  borrowing  base  and  outstanding  advances,  of $16.8
million.  The  improvement in availability  reflects the continued  reduction of
inventories  and the  receipt of  post-petition  trade  terms from  certain  key
vendors.  Cone operates  within the boundaries of a  court-approved  weekly cash
expenditures budget.

On November 10, 2003,  Cone filed with the Bankruptcy  Court a proposal to enter
into a $45 million DIP financing  agreement with Bank of America and GECC.  This
facility  would provide Cone  additional  liquidity of  approximately  $10 - $12
million and will pay off the A/R  Securitization  Facility.  The hearing date to
consider approval of the $45 million DIP financing is November 25, 2003.

The proposed DIP financing would be a senior secured  revolving  facility of $45
million with  availability  subject to a borrowing  base formula  consisting  of
advances against eligible accounts receivables and inventories.  The DIP lenders
would have a valid, perfected and first priority security interest and lien upon
all real and personal  property of Cone. The security  interests and liens would
be priming liens under Section 364(d) of the Bankruptcy Code with respect to the
liens  and  security  interests  in favor  of the  pre-petition  senior  secured
creditors.  Loans  outstanding under the DIP facility would bear interest at the
LIBOR plus 2.75%.  The DIP  facility has  customary  affirmative  covenants  for
asset-based  transactions.  Cone will continue to be bound by the court-approved
cash budget as presented and approved by the Bankruptcy Court from time to time.

Accounts  receivable on September 28, 2003 were $30.6 million,  as compared with
$43.3 million at September 29, 2002. Receivables,  including those sold pursuant
to the A/R Securitization Facility,  represented 62 days of sales outstanding at
both September 28, 2003 and at September 29, 2002.  Advances  outstanding  under
the A/R  Securitization  Facility  were $23.2  million at September 28, 2003 and
$28.5 million at September 29, 2002.

Inventories  on September  28, 2003 were $58.8  million,  as compared with $48.8
million at December  29, 2002  reflecting  an increase in denim  finished  goods
inventories and raw materials, partially offset by a decrease in work in process
inventory. For comparison purposes, inventories at September 29, 2002 were $45.6
million.  The year-over-year  increase in inventories is primarily the result of
increased denim finished goods inventory levels and higher cotton prices.

During the first nine months of 2003,  cash used in operations was $13.7 million
as cash  generated  was offset by an  increase  of $10  million in  inventories.
During the first nine months of 2003, capital expenditures were $3.5 million, as


                                       31
<PAGE>


compared to $3.9 million for the first nine months of 2002.  Cone's  amended A/R
Securitization  Facility  prohibits 2003 capital  expenditures in excess of $6.0
million.


FORWARD-LOOKING STATEMENTS AND RISK FACTORS

Except for the historical  information  presented,  the matters disclosed in the
foregoing  discussion  and analysis  and other parts of this report,  as well as
oral  statements  made from  time to time by  representatives  of Cone,  include
forward-looking  statements  within the meaning of the Federal  Securities laws.
These statements represent Cone's current judgment on the future and are subject
to risks and uncertainties that could cause actual results to differ materially.
These forward-looking  statements include statements relating to our anticipated
financial  performance and business prospects.  Statements preceded by, followed
by or that include words such as "believe," "anticipate,"  "estimate," "expect,"
"could," and other similar expressions are to be considered such forward-looking
statements.  These  forward-looking  statements speak only as of the date stated
and we do not  undertake  any  obligation  to  update  or  revise  publicly  any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise,  even if experience or future events make it clear that any
expected results expressed or implied by these  forward-looking  statements will
not be realized.  Although we believe that the  expectations  reflected in these
forward-looking  statements are reasonable,  these expectations may not prove to
be  correct  or we may not  achieve  the  financial  results,  savings  or other
benefits anticipated in the forward-looking  statements.  These  forward-looking
statements are necessarily  estimates reflecting the best judgment of our senior
management and involve a number of risks and uncertainties, some of which may be
beyond our control,  that could cause actual results to differ  materially  from
those suggested by the forward-looking statements. Such factors include, without
limitation:

     o    the demand for textile products,  including Cone'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,

     o    the  highly  competitive  nature  of  the  textile  industry  and  the
          continuing   effects  of   reduced   import   protection,   free-trade
          initiatives and retaliatory measures in trade disputes,

     o    the  unpredictability  of the cost and availability of cotton,  Cone's
          principal raw material, and other manufacturing costs,

     o    Cone's relationships with Levi Strauss as its major customer including
          its sourcing practices,

     o    Cone's  ability to attract  and  maintain  adequate  capital,  to fund
          operations, and expand its denim manufacturing in low-cost countries,

     o    increases in prevailing interest rates,

     o    Cone's ability to exit successfully from the Chapter 11 Cases, and

     o    the effect on Cone's sales and markets of events such as the events of
          September 11, 2001.


                                       32
<PAGE>


For a further  description  of these risks see "Item 1.  Business  -Competition,
-Raw Materials and -Customers" and "Item 7. Management's Discussion and Analysis
of Results of  Operations  and  Financial  Condition --  Overview"  contained in
Cone's 2002 Form 10-K. Other risks and  uncertainties may be described from time
to time in Cone's  other  reports and filings with the  Securities  and Exchange
Commission.


OTHER MATTERS

The Securities and Exchange  Commission by Order dated October 29, 2003, granted
the application of the New York Stock  Exchange,  Inc. for removal of the Common
Stock of Cone from listing and registration on the Exchange under the Securities
Exchange Act of 1934. The removal from listing and  registration on the Exchange
of the above  issue of Cone  became  effective  at the  opening  of the  trading
session on October 30, 2003 pursuant to the Order of the Commission.

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 Cone. Existing
government  regulations  are not  expected to cause a material  change in Cone's
competitive position,  operating results or planned capital  expenditures.  Cone
has an environmental committee,  which fosters protection of the environment and
compliance with laws.

Cone 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
results of operations,  financial  condition and liquidity of the Debtors.  As a
result of the  Chapter 11 Cases,  litigation  relating  to  pre-petition  claims
against  the  Debtors is stayed;  however,  certain  pre-petition  claims by the
government or  governmental  agencies  seeking  equitable or other  non-monetary
relief  against  the  Debtors  may  not  be  subject  to  the  automatic   stay.
Furthermore,  litigants may seek to obtain relief from the  Bankruptcy  Court to
preserve  their  claims.  As of September 28, 2003,  no  significant  litigation
existed.


NON-GAAP FINANCIAL MEASURES

From  time  to  time  management   discloses   Operating  Income  (Loss)  before
Depreciation,  Amortization,  Restructuring  and Impairment of Assets as well as
Earnings Per Share, excluding selected items. These non-GAAP (generally accepted
accounting  principles in the United States) financial measure  calculations may
be  presented  in  earnings  releases  of  Cone,  furnished  in Form  8-K to the
Securities  and  Exchange  Commission,  along with  reconciliations  to the most
comparable GAAP financial measure for the period. Operating Income (Loss) before
Depreciation,  Amortization, Restructuring and Impairment of Assets is presented
based on  management's  belief  that this  non-GAAP  measure  is  considered  an
important  indicator of the operational  strength of the business and is used in
Cone's  current  financing  agreements  for covenant  compliance  as well as its
incentive  compensation  plans.  Operating  Income (Loss)  before  Depreciation,
Amortization, Restructuring  and  Impairment  of  Assets  is  not a  measure  of
financial  performance under GAAP and should not be considered as an alternative


                                       33
<PAGE>

to cash flows from operating activities,  as defined by GAAP, or as a measure of
liquidity, or an alternative to Net Income (Loss).

<TABLE>
<CAPTION>

                                                      Thirteen Weeks Ended               Thirty-Nine Weeks Ended
                                                 ----------------------------------------------------------------------
(in thousands)                                        9/28/03          9/29/02             9/28/03           9/29/02
                                                 ----------------------------------------------------------------------
<S>                                                <C>              <C>                 <C>               <C>
Income (loss) from operations                      $ (124,182 )     $    8,443          $ (117,230 )      $   22,920
Depreciation and amortization                           4,871            4,688              14,540            14,832
Restructuring and Impairment of Assets                123,431                -             124,197                 -
                                                 ----------------------------------------------------------------------
Operating Income before Depreciation,
  Amortization, Restructuring and
  Impairment of Assets                             $    4,120       $   13,131          $   21,507        $   37,752
                                                 ----------------------------------------------------------------------
</TABLE>


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Cone is exposed to market risks relating to  fluctuations  in interest rates and
commodity prices.  There has been no material change in Cone's market risks that
would  significantly  affect the disclosures  made in the Form 10-K for the year
ended December 29, 2002.


Item 4.  Controls and Procedures

Based on their evaluation of Cone's  disclosure  controls and procedures,  which
was completed as of the end of the period  covered by the report,  the Chairman,
President and Chief Executive  Officer  ("CEO") and the Chief Financial  Officer
("CFO")  have  concluded  that Cone's  disclosure  controls and  procedures  are
effective  to ensure that  information  required to be  disclosed by Cone in the
reports that it files or submits under the  Securities  Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time periods
specified  in the  Securities  and  Exchange  Commission's  rules and forms.  In
reaching this  conclusion,  the CEO and CFO  determined  that Cone's  disclosure
controls and  procedures  are  effective in ensuring  that such  information  is
accumulated  and  communicated  to Cone's  management to allow timely  decisions
regarding required disclosure.

There  were no  significant  changes  in Cone's  internal  controls  or in other
factors that could significantly affect these controls subsequent to the date of
their evaluations.


                                       34
<PAGE>


                                     PART II

Item 1.  Legal Proceedings

Cone 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
results of operations,  financial  condition and liquidity of the Debtors.  As a
result of the  Chapter 11 Cases,  litigation  relating  to  pre-petition  claims
against  the  Debtors is stayed;  however,  certain  pre-petition  claims by the
government or  governmental  agencies  seeking  equitable or other  non-monetary
relief  against  the  Debtors  may  not  be  subject  to  the  automatic   stay.
Furthermore,  litigants may seek to obtain relief from the  Bankruptcy  Court to
preserve  their  claims.  As of September 28, 2003,  no  significant  litigation
existed.


Item 3.  Defaults Upon Senior Securities

Excluding Cone's A/R  Securitization  Facility,  Cone is currently in default of
its senior  securities  as a result of the  Chapter 11 Cases.  Cone is making no
payments under its senior  securities and the payment of interest accruing under
its senior securities after September 24, 2003, is stayed in connection with the
Chapter 11 Cases (See Item 2. Management's  Discussion and Analysis of Financial
Condition and Results of Operation - Liquidity").


Item 4.  Submission of Matters to a Vote of Security Holders

Cone Mills  Corporation's  Annual Meeting of Shareholders was held September 25,
2003.  The proposals  voted upon and the results of the voting,  as certified by
IVS Associates Inc., were as follows:

1.   Election of three Class II directors for a three-year term:

                                           In Favor          Withheld
                                       ----------------------------------

     Charles L. Barry                      13,405,181        1,754,380
     Randall G. Kominsky                   13,405,154        1,754,407
     Jess M. Ravich                        13,405,039        1,754,522
     David T. Kollat                        4,628,022           26,892
     John W. Rosenblum                      4,621,210           33,704
     Jeanette Cone Kimmel                   4,620,871           34,043

Directors whose terms of office as a director continued after the meeting: Doris
R. Bray, Marc H. Kozberg,  Dewey L. Trogdon,  John L. Bakane, Haynes G. Griffin,
Charles M. Reid and Cyrus C. Wilson.


                                       35
<PAGE>


2.   Ratification of the appointment of McGladrey & Pullen,  LLP, as independent
     auditors for the Corporation for the current year:

                                           For        Against          Abstain
                                       -----------------------------------------
                                        11,528,574    466,815         7,473,086


Item 5.  Other Information

Notice of a matter to be presented by a  shareholder  for  consideration  at the
2004 annual meeting other than pursuant to Rule 14a-8 of the Securities Exchange
Act of 1934 must be received by Cone prior to February 14, 2004. Failure to give
timely  notice  will result in the proxy  statement  relating to the meeting not
including  information on the matter or the manner in which management's proxies
will  vote on the  matter  and the  proxies  received  by  management  will have
discretionary authority to vote on such matter.


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.

     Cone filed or furnished  the following  current  reports on Form 8-K during
     the period June 29, 2003, to the date of the filing of this report.

     o    Current  report on Form 8-K,  furnished on July 30,  2003,  disclosing
          Cone's second quarter 2003 earnings  release and conference  call. The
          Form 8-K contained one exhibit, the earnings release issued by Cone on
          July 30, 2003

     o    Current  report on Form 8-K,  furnished on July 30,  2003,  disclosing
          statements  made by  officials  of Cone on July 30,  2003  during  the
          quarterly  conference  call.  The Form 8-K contained one exhibit,  the
          statements  made by the chief  executive  officer and chief  financial
          officer.

     o    Current report on Form 8-K,  furnished on August 11, 2003,  disclosing
          Cone's press  release.  The Form 8-K contained one exhibit,  the press
          release issued by Cone on August 11, 2003.

     o    Current  report  on  Form  8-K,   furnished  on  September  16,  2003,
          disclosing  Cone's press release.  The Form 8-K contained one exhibit,
          the press release issued by Cone on September 16, 2003.

     o    Current  report on Form 8-K,  filed on September 18, 2003,  disclosing
          Cone's offered employment  agreements to twenty-four  executives.  The
          Form 8-K  contained 9 exhibits of the executive  officers'  employment
          agreements.

     o    Current  report  on  Form  8-K,  furnished  on  September  24,  2003,
          disclosing  Cone's press release.  The Form 8-K contained one exhibit,
          the press release issued by Cone on September 24, 2003.


                                       36
<PAGE>


     o    Current  report  on  Form  8-K,   furnished  on  September  29,  2003,
          disclosing  Cone's press release.  The Form 8-K contained one exhibit,
          the press release issued by Cone on September 29, 2003.

     o    Current  report on Form 8-K,  filed on  October  3,  2003,  disclosing
          Chapter 11 filing and the assignment of financing and Bankruptcy Court
          approval.  The Form 8-K contained two exhibits,  press releases issued
          by Cone on September 24, 2003 and September 29, 2003.

     o    Current report on Form 8-K,  furnished on October 8, 2003,  disclosing
          Cone's press  release.  The Form 8-K contained one exhibit,  the press
          release issued by Cone on October 8, 2003.

     o    Current report on Form 8-K, furnished on October 22, 2003,  disclosing
          Cone's press  release.  The Form 8-K contained one exhibit,  the press
          release issued by Cone on October 22, 2003.

     o    Current  report on Form 8-K,  filed on November 10,  2003,  disclosing
          Cone's press release.  The Form 8-K contained  three  exhibits;  court
          approved  Bid  Procedures,  the Amended and  Restated  Asset  Purchase
          Agreement and the press release issued by Cone on November 10, 2003.



                                       37
<PAGE>


Exhibit
  No.     Description

*2.1      Receivables  Purchase and Servicing Agreement dated as of September 1,
          1999,  by and  among  Cone  Receivables  II LLC,  as  Seller,  Redwood
          Receivables Corporation,  as Purchaser,  the Registrant,  as Servicer,
          and General  Electric  Capital  Corporation,  as  Operating  Agent and
          Collateral  Agent,  filed as Exhibit 2.1(h) to Registrant's  report on
          Form 10-Q for the quarter ended October 3, 1999.

*2.2      Receivables  Transfer  Agreement dated as of September 1, 1999, by and
          among the  Registrant,  any other  Originator  Party hereto,  and Cone
          Receivables II LLC, filed as Exhibit 2.1(i) to Registrant's  report on
          Form 10-Q for the quarter ended October 3, 1999.

*2.3.1    First Amendment and Waiver to  Securitization  Agreements  dated as of
          November  16,  1999,  by and  between  Cone  Receivables  II LLC,  the
          Registrant,  Redwood  Receivables  Corporation  and  General  Electric
          Capital  Corporation,  together  with all exhibits  thereto,  filed as
          Exhibit 2.1(c) to Registrant's report on Form 10-K for the fiscal year
          ending January 2, 2000.

*2.3.2    Second Amendment to Securitization  Agreements dated as of January 28,
          2000, by and between Cone Receivables II LLC, the Registrant,  Redwood
          Receivables  Corporation,  and General Electric  Capital  Corporation,
          together  with all  exhibits  thereto,  filed  as  Exhibit  2.1(d)  to
          Registrant's report on Form 10-K for the fiscal year ending January 2,
          2000.

*2.3.3    Third  Amendment to  Securitization  Agreements  dated as of March 31,
          2000, by and between Cone Receivables II LLC, the Registrant,  Redwood
          Receivables  Corporation,  and General Electric  Capital  Corporation,
          together  with all  Exhibits  thereto,  filed  as  Exhibit  2.1(e)  to
          Registrant's report on Form 10-Q for the quarter ended April 2, 2000.

*2.3.4    Fourth  Amendment to  Securitization  Agreements dated as of April 24,
          2000 by and between  Cone  Receivables  II LLC, the  Registrant,  Cone
          Foreign  Trading LLC,  Redwood  Receivables  Corporation,  and General
          Electric  Capital  Corporation,  together  with all exhibits  thereto,
          filed as Exhibit  2.1(f) to  Registrant's  report on Form 10-Q for the
          quarter ended April 2, 2000,  filed as Exhibit  2.3.4 to  Registrant's
          Registration Statement on Form S-4 (File No. 333-43014).

*2.3.5    Fifth Amendment to Securitization Agreements dated as of June 30, 2000
          by and between Cone  Receivables II LLC, the Registrant,  Cone Foreign
          Trading LLC,  Redwood  Receivables  Corporation,  and General Electric
          Capital   Corporation,   filed  as  Exhibit   2.3.5  to   Registrant's
          Registration Statement on Form S-4 (File No. 333-43014).


                                       38
<PAGE>


Exhibit
  No.     Description

*2.3.6    Sixth Amendment to Securitization  Agreements dated as of December 12,
          2000 by and between  Cone  Receivables  II LLC, the  Registrant,  Cone
          Foreign  Trading  LLC,  Redwood  Receivables  Corporation  and General
          Electric Capital  Corporation,  filed as Exhibit 2.3.6 to Registrant's
          Registration Statement on Form S-4 (File No. 333-43014).

*2.3.7    Seventh  Amendment to  Securitization  Agreement dated as of April 23,
          2001 by and between  Cone  Receivables  II LLC, the  Registrant,  Cone
          Foreign Trading LLC, and General Electric Capital  Corporation,  filed
          as Exhibit 2.3.7 to  Registrant's  report on Form 10-Q for the quarter
          ended July 1, 2001.

*2.3.8    Eighth Amendment to Securitization Agreement dated as of July 20, 2001
          by and between Cone  Receivables II LLC, the Registrant,  Cone Foreign
          Trading  LLC,  and  General  Electric  Capital  Corporation,  filed as
          Exhibit  2.3.8 to  Registrant's  report on Form  10-Q for the  quarter
          ended July 1, 2001.

*2.3.9    Ninth  Amendment to  Securitization  Agreement dated as of November 9,
          2001 by and between  Cone  Receivables  II LLC, the  Registrant,  Cone
          Foreign Trading LLC, and General Electric Capital  Corporation,  filed
          as Exhibit 2.3.9 to the Registrant's  report on Form 10-K for the year
          ended December 30, 2001.

2.3.10    Tenth Amendment to  Securitization  Agreement dated as of September 5,
          2003 by and between  Cone  Receivables  II LLC, the  Registrant,  Cone
          Foreign Trading LLC, and General Electric Capital Corporation.

2.3.11    Eleventh  Amendment to Securitization  Agreement dated as of September
          23, 2003 by and between Cone Receivables II LLC, the Registrant,  Cone
          Foreign Trading LLC, and General Electric Capital Corporation.

*2.4      Investment  Agreement  dated  as of  June  18,  1993,  among  Compania
          Industrial de Parras, S.A. de C.V., Sr. Rodolfo Garcia Muriel, and the
          Registrant,  filed as Exhibit  2.2(a) to  Registrant's  report on Form
          10-Q for the quarter ended July 4, 1993.

*2.5      Commercial  Agreement  dated  as  of  July  1,  1999,  among  Compania
          Industrial de Parras, S.A. de C.V., the Registrant, and Parras Cone de
          Mexico,  S.A., filed as Exhibit 2.2(b) to Registrant's  report on Form
          10-K for the fiscal year ending January 2, 2000.

*2.5.1    Amended and Restated  Commercial  Agreement,  dated as of December 12,
          2000,  among  Compania   Industrial  de  Parras,  S.A.  de  C.V.,  the
          Registrant and Parras Cone de Mexico,  S.A., filed as Exhibit 2.5.1 to
          Registrant's Registration Statement on Form S-4 (File No. 333-43014).


                                       39
<PAGE>


Exhibit
  No.     Description

*2.6      Guaranty  Agreement dated as of June 25, 1993,  between the Registrant
          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.

*2.7      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.

*2.7.1    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 Registrant's report
          on Form 10-Q for the quarter ended July 2, 1995.

*2.8      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.

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

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

*3.1      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.

*3.1.1    Articles  of  Amendment  of  the  Articles  of  Incorporation  of  the
          Registrant  effective  October  22,  1999,  to  fix  the  designation,
          preferences, limitations, and relative rights of a series of its Class
          B Preferred Stock,  filed as Exhibit 4.1(a) to Registrant's  report on
          Form 10-Q for the quarter ended October 3, 1999.

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


                                       40
<PAGE>


Exhibit
  No.     Description

*4.1      Rights Agreement dated as of October 14, 1999,  between the Registrant
          and First Union National Bank, as Rights Agent,  with Form of Articles
          of Amendment  with respect to the Class B Preferred  Stock (Series A),
          the Form of Rights Certificate,  and Summary of Rights attached, filed
          as  Exhibit 1 to  Registrant's  report on Form 8-A dated  October  29,
          1999.

*4.2      Note Agreement dated as of August 13, 1992, between the Registrant and
          The  Prudential  Insurance  Company  of  America,   with  form  of  8%
          promissory note attached, filed as Exhibit 4.01 to Registrant's report
          on Form 8-K dated August 13, 1992.

*4.2.1    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  Registrant's
          report on Form 8-K dated March 1, 1995.

*4.2.2    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  Registrant's
          report on Form 8-K dated March 1, 1995.

*4.2.3    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  Registrant's
          report on Form 8-K dated March 1, 1995.

*4.2.4    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  Registrant's
          report on Form 8-K dated March 1, 1995.

*4.2.5    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
          Registrant's report on Form 10-Q for the quarter ended July 2, 1995.

*4.2.6    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 Registrant's report on Form 10-Q
          for the  quarter  ended  July 2,  1995,  filed as  Exhibit  4.3(f)  to
          Registrant's report on Form 10-K for year ended December 31, 1995.


                                       41
<PAGE>


Exhibit
  No.     Description

*4.2.7    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 Registrant's report on Form 10-Q for the quarter ended March
          31, 1996.

*4.2.8    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 Registrant's report on Form 10-K for the year ended December
          29, 1996.

*4.2.9    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  Registrant's  report on Form 10-Q for the quarter ended  September
          28, 1997.

*4.2.10   Modification to Note Agreement dated as of February 14, 1998,  between
          the Registrant and The Prudential Insurance Company of America,  filed
          as Exhibit 4.3(j) to Registrant's  report on Form 10-Q for the quarter
          ended March 29, 1998.

*4.2.11   Letter  Agreement  dated as of  September  1, 1999,  amending the Note
          Agreement  dated  August 13,  1992,  between  the  Registrant  and The
          Prudential  Insurance  Company of America,  filed as Exhibit 4.3(i) to
          Registrant's  report on Form 10-Q for the  quarter  ended  October  3,
          1999.

*4.2.12   Amendment of 1992 Note Agreement  dated as of January 28, 2000, by and
          among the Registrant and The Prudential  Insurance Company of America,
          together with all exhibits thereto, filed as Exhibit 9 to Registrant's
          report on Form 8-K dated February 11, 2000.

*4.2.13   Waiver under Note Agreement dated as of July 3, 2000, by and among the
          Registrant and The Prudential  Insurance Company of America,  filed as
          Exhibit  4.2.13 to  Registrant's  Registration  Statement  on Form S-4
          (File No. 333-43014).

*4.2.14   Amendment of 1992 Note  Agreement  dated as of July 14,  2000,  by and
          among the Registrant and The Prudential  Insurance Company of America,
          filed as Exhibit 4.2.14 to Registrant's Registration Statement on Form
          S-4 (File No. 333-43014).

*4.2.15   Amendment of 1992 Note Agreement dated as of December 12, 2000, by and
          among the Registrant and The Prudential  Insurance Company of America,
          filed as Exhibit 4.2.15 to the Registrant's  Registration Statement on
          Form S-4 (File No. 333-43014).


                                       42
<PAGE>


Exhibit
  No.     Description

*4.2.16   Amendment  of 1992 Note  Agreement  and  Waiver  dated as of April 23,
          2001, by and among the Registrant and The Prudential Insurance Company
          of America,  filed as Exhibit  4.2.16 to  Registrant's  report on Form
          10-Q for quarter ended July 1, 2001.

*4.2.17   Amendment of 1992 Note  Agreement  dated as of June 28,  2001,  by and
          among the Registrant and The Prudential  Insurance Company of America,
          filed as Exhibit  4.2.17 to  Registrant's  report on Form 10-Q for the
          quarter ended July 1, 2001.

*4.2.18   Waiver Under 1992 Note  Agreement  dated as of August 10, 2001, by and
          among the Registrant and The Prudential  Insurance Company of America,
          filed as Exhibit  4.2.18 to  Registrant's  report on Form 10-Q for the
          quarter ended September 30, 2001.

*4.2.19   Amendment of 1992 Note  Agreement  dated as of September  25, 2001, by
          and among the  Registrant  and The  Prudential  Insurance  Company  of
          America,  filed as Exhibit 4.2.19 to Registrant's  report on Form 10-Q
          for the quarter ended September 30, 2001.

*4.2.20   Amendment of 1992 Note Agreement  dated as of October 25, 2001, by and
          among the Registrant and The Prudential  Insurance Company of America,
          filed as Exhibit  4.2.20 to  Registrant's  report on Form 10-Q for the
          quarter ended September 30, 2001.

*4.2.21   Amendment of 1992 Note Agreement  dated as of November 9, 2001, by and
          among the Registrant and The Prudential  Insurance Company of America,
          filed as Exhibit  4.2.21 to the  Registrant's  report on Form 10-K for
          the year ended December 30, 2001.

*4.2.22   Amendment of 1992 Note  Agreement  dated as of March 22, 2002,  by and
          among the Registrant and The Prudential  Insurance Company of America,
          filed as Exhibit  4.2.22 to the  Registrant's  report on Form 10-K for
          the year ended December 30, 2001.

*4.2.23   Amendment of 1992 Note Agreement  dated as of December 2, 2002, by and
          among the Registrant and The Prudential  Insurance Company of America,
          filed as Exhibit 4.2.23 to the  Registrant's  report on Form 8-K dated
          December 6, 2002.


                                       43
<PAGE>


Exhibit
  No.     Description

*4.2.24   Amendment of 1992 Note  Agreement  dated as of April 30, 2003,  by and
          among the Registrant and The Prudential  Insurance Company of America,
          filed as Exhibit  4.2.24 to the  Registrant's  report on Form 10-Q for
          the quarter ended March 30, 2003.

*4.2.25   Amendment  of 1992 Note  Agreement  dated as of May 27,  2003,  by and
          among the Registrant and The Prudential  Insurance Company of America,
          filed as Exhibit 4.2.25 to the  Registrant's  report on Form 8-K dated
          May 29, 2003.

*4.3      Credit  Agreement  dated as of  January  28,  2000,  by and  among the
          Registrant, as Borrower, Bank of America, N.A., as Agent and as Lender
          and the Lenders  party  thereto from time to time,  together  with all
          exhibits  thereto,  filed as Exhibit 1 to Registrant's  report on Form
          8-K dated February 11, 2000.

*4.3.1    Amendment No. 1 to Credit  Agreement dated as of July 14, 2000, by and
          among the Registrant,  as Borrower,  Cone Global Finance Corp.,  CIPCO
          S.C.  Inc.  and Cone  Foreign  Trading  LLC,  as  Guarantors,  Bank of
          America,  N.A., as Agent and as Lender,  and the Lenders party thereto
          from time to time, filed as Exhibit 4.3.1 to Registrant's Registration
          Statement on Form S-4 (File No. 333-43014).

*4.3.2    Amendment No. 2 to Credit  Agreement dated as of December 12, 2000, by
          and among the  Registrant,  as Borrower,  Cone Global  Finance  Corp.,
          CIPCO S.C. Inc. and Cone Foreign  Trading LLC, as Guarantors,  Bank of
          America,  N.A., as Agent and as Lender,  and the Lenders party thereto
          from time to time, filed as Exhibit 4.3.2 to Registrant's Registration
          Statement on Form S-4 (File No. 333-43014).

*4.3.3    Waiver and Amendment No. 3 to Credit  Agreement  dated as of April 23,
          2001, by and among the Registrant, as Borrower, Bank of America, N.A.,
          as Agent and as Lender,  and the Lenders Signatory  Thereto,  filed as
          Exhibit  4.3.3 to  Registrant's  report on Form  10-Q for the  quarter
          ended July 1, 2001.

*4.3.4    Amendment No. 4 to Credit  Agreement dated as of June 28, 2001, by and
          among the Registrant, as Borrower, Bank of America, N.A., as Agent and
          Lender, and the Lenders Signatory  Thereto,  filed as Exhibit 4.3.4 to
          Registrant's report on Form 10-Q for the quarter ended July 1, 2001.

*4.3.5    Amendment  No. 5 to Credit  Agreement  dated as of August 10, 2001, by
          and among the Registrant, as Borrower, Bank of America, N.A., as Agent
          and Lender, and the Lenders Signatory Thereto,  filed as Exhibit 4.3.5
          to  Registrant's  report on Form 10-Q for the quarter ended  September
          30, 2001.


                                       44
<PAGE>


Exhibit
  No.     Description

*4.3.6    Amendment No. 6 to Credit Agreement dated as of September 25, 2001, by
          and among the Registrant, as Borrower, Bank of America, N.A., as Agent
          and Lender, and the Lenders Signatory Thereto,  filed as Exhibit 4.3.6
          to  Registrant's  report on Form 10-Q for the quarter ended  September
          30, 2001.

*4.3.7    Amendment No. 7 to Credit  Agreement  dated as of October 25, 2001, by
          and among the Registrant, as Borrower, Bank of America, N.A., as Agent
          and Lender, and the Lenders Signatory Thereto,  filed as Exhibit 4.3.7
          to  Registrant's  report on Form 10-Q for the quarter ended  September
          30, 2001.

*4.3.8    Amendment No. 8 to Credit  Agreement  dated as of November 9, 2001, by
          and among the Registrant, as Borrower, Bank of America, N.A., as Agent
          and Lender, and the Lenders Signatory Thereto,  filed as Exhibit 4.3.8
          to the  Registrant's  report on Form 10-K for the year ended  December
          30, 2001.

*4.3.9    Amendment No. 9 to Credit  Agreement dated as of February 27, 2002, by
          and among the Registrant, as Borrower, Bank of America, N.A., as Agent
          and Lender, and the Lenders Signatory Thereto,  filed as Exhibit 4.3.9
          to the  Registrant's  report on Form 10-K for the year ended  December
          30, 2001.

*4.3.10   Amendment No. 10 to Credit  Agreement dated as of December 2, 2002, by
          and among the Registrant,  as Borrower, Bank of America, N.A., Each of
          the Lenders Signatory  Thereto,  and Bank of America,  N.A., as Agent,
          filed as Exhibit 4.3.10 to the  Registrant's  report on Form 8-K dated
          December 6, 2002.

*4.3.11   Amendment  No. 11 to Credit  Agreement  dated as of April 30, 2003, by
          and among the Registrant,  as Borrower,  Each of the Lenders Signatory
          Thereto, and Bank of America,  N.A., as Agent, filed as Exhibit 4.3.11
          to the  Registrant's  report on Form 10-Q for the quarter  ended March
          30, 2003.

*4.3.12   Amendment No. 12 to Credit  Agreement  dates as of May 27, 2003 by and
          among the  Registrant,  as  Borrower,  Each of the  Lenders  Signatory
          Hereto and Bank of America, N.A., as Agent, filed as Exhibit 4.3.12 to
          the Registrant's report on Form 8-K dated May 29, 2003.


                                       45
<PAGE>


Exhibit
  No.             Description

*4.4      Guaranty  Agreement  dated as of January 28, 2000, made by Cone Global
          Finance Corporation,  CIPCO S.C., Inc. and Cone Foreign Trading LLC in
          favor of Bank of  America,  N.A.  as  Revolving  Credit  Agent for the
          Lenders, The Prudential  Insurance Company of America,  SunTrust Bank,
          Morgan Guaranty Trust Company of New York,  Wilmington  Trust Company,
          as General  Collateral  Agent,  Bank of  America,  N.A.,  as  Priority
          Collateral Agent, and Atlantic  Financial Group,  Ltd.,  together with
          all exhibits  thereto,  filed as Exhibit 2 to  Registrant's  report on
          Form 8-K dated February 11, 2000.

*4.5      Priority  Security  Agreement  dated as of January  28,  2000,  by the
          Registrant and certain of its subsidiaries,  as Grantors,  and Bank of
          America,  N.A.,  as  Priority  Collateral  Agent,  together  with  all
          exhibits  thereto,  filed as Exhibit 3 to Registrant's  report on Form
          8-K dated February 11, 2000.

*4.6      General  Security  Agreement  dated as of  January  28,  2000,  by the
          Registrant  and  certain  of  its  subsidiaries,   as  Grantors,   and
          Wilmington Trust Company,  as General Collateral Agent,  together with
          all exhibits  thereto,  filed as Exhibit 4 to  Registrant's  report on
          Form 8-K dated February 11, 2000.

*4.7      Securities  Pledge  Agreement  dated as of January  28,  2000,  by the
          Registrant in favor of Wilmington Trust Company, as General Collateral
          Agent,  together  with all  exhibits  thereto,  filed as  Exhibit 5 to
          Registrant's report on Form 8-K dated February 11, 2000.

*4.8      CMM Pledge  Agreement  dated as of January 28, 2000, by the Registrant
          in favor of Wilmington  Trust Company,  as General  Collateral  Agent,
          together with all exhibits thereto, filed as Exhibit 6 to Registrant's
          Report on Form 8-K dated February 11, 2000.

*4.9      Deed of Trust,  Security  Agreement,  Fixture  Filing,  Assignment  of
          Leases and Rents and Financing Statement dated as of January 28, 2000,
          between the Registrant, as Grantor, TIM, Inc., as Trustee,  Wilmington
          Trust Company, as General Collateral Agent, and Bank of America, N.A.,
          as Designated Collateral Subagent, together with all exhibits thereto,
          filed as Exhibit 7 to  Registrant's  report on Form 8-K dated February
          11, 2000.

*4.10     Deed of Trust,  Security  Agreement,  Fixture  Filing,  Assignment  of
          Leases and Rents and Financing Statement dated as of January 28, 2000,
          between the Registrant, as Grantor, TIM, Inc., as Trustee, and Bank of
          America,  N.A.,  as  Priority  Collateral  Agent,  together  with  all
          exhibits  thereto,  filed as Exhibit 8 to Registrant's  report on Form
          8-K dated February 11, 2000.


                                       46
<PAGE>


Exhibit
  No.     Description

*4.11     Termination  Agreement  dated as of  January  28,  2000,  between  the
          Registrant and Morgan Guaranty Trust Company of New York, as Agent for
          various banks terminating the Credit Agent dated August 7, 1997, filed
          as Exhibit 4.4(h) to  Registrant's  report on Form 10-K for the fiscal
          year ending January 2, 2000.

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

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

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

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

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

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

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

*4.15     Indenture  dated as of February 14, 1995,  between the  Registrant and
          Wachovia Bank of North Carolina, N.A. as Trustee (The Bank of New York
          is  successor   Trustee),   filed  as  Exhibit  4.1  to   Registrant's
          Registration Statement on Form S-3 (File No. 33-57713).

*10.1     Employees'  Retirement  Plan of Cone Mills  Corporation as amended and
          restated  effective  December  1,  1994,  filed  as  Exhibit  10.1  to
          Registrant's report on Form 10-K for the year ended January 1, 1995.


                                       47
<PAGE>


Exhibit
  No.     Description

*10.1.1   First  Amendment  to the  Employees'  Retirement  Plan of  Cone  Mills
          Corporation   dated  May  9,  1995,   filed  as  Exhibit   10.1(a)  to
          Registrant's report on Form 10-K for the year ended December 31, 1995.

*10.1.2   Second  Amendment  to the  Employees'  Retirement  Plan of Cone  Mills
          Corporation  dated  December  5,  1995,  filed as  Exhibit  10.1(b) to
          Registrant's report on Form 10-K for the year ended December 31, 1995.

*10.1.3   Third  Amendment  to the  Employees'  Retirement  Plan of  Cone  Mills
          Corporation  dated  August  16,  1996,  filed as  Exhibit  10.1(c)  to
          Registrant's report on Form 10-K for the year ended December 29, 1996.

*10.1.4   Fourth  Amendment  to the  Employees'  Retirement  Plan of Cone  Mills
          Corporation,  filed as Exhibit 10 to Registrant's  report on Form 10-Q
          for the quarter ended September 28, 1997.

*10.1.5   Fifth   Amendment  to  Employees'   Retirement   Plan  of  Cone  Mills
          Corporation  dated  December  4,  1997,  filed as  Exhibit  10.1(e) to
          Registrant's report on Form 10-K for the year ended December 28, 1997.

*10.1.6   Employees  Retirement  Plan of Cone Mills  Corporation  as amended and
          restated as of June 30, 2001,  filed as Exhibit 10.1.6 to Registrant's
          report on Form 10-Q for the quarter ended July 1, 2001.

*10.7     Cone Mills  Corporation SERP as amended and restated as of December 5,
          1995,  filed as Exhibit 10.2 to  Registrant's  report on Form 10-K for
          the year ended December 31, 1995.

*10.7.1   Cone Mills Corporation SERP as amended and restated effective June 30,
          2001, filed as Exhibit 10.7.1 to Registrant's  report on Form 10-Q for
          the quarter ended July 1, 2001.

*10.8     Excess Benefit Plan of Cone Mills  Corporation as amended and restated
          as of December 5, 1995,  filed as Exhibit 10.3 to Registrant's  report
          on Form 10-K for the year ended December 31, 1995.

*10.8.1   Excess Benefit Plan of Cone Mills  Corporation as amended and restated
          effective  June 30,  2001,  filed as  Exhibit  10.8.1 to  Registrant's
          report on form 10-Q for the quarter ended July 1, 2001.


                                       48
<PAGE>


Exhibit
  No.     Description

*10.9     1984  Stock  Option  Plan  of  Registrant  filed  as  Exhibit  10.7 to
          Registrant's Registration Statement on Form S-1 (File No. 33-28040).

*10.10    Form of  Nonqualified  Stock Option  Agreement under 1984 Stock Option
          Plan of Registrant, filed as Exhibit 10.8 to Registrant's Registration
          Statement on Form S-1 (File No. 33-28040).

*10.11    Form of Incentive Stock Option  Agreement under 1984 Stock Option Plan
          of  Registrant,  filed as Exhibit  10.9 to  Registrant's  Registration
          Statement on Form S-1 (File No. 33-28040).

*10.12    1992  Stock  Option  Plan of  Registrant,  filed  as  Exhibit  10.9 to
          Registrant's Report on Form 10-K for the year ended December 29, 1991.

*10.12.1  Amended  and  Restated  1992  Stock  Plan,  filed as  Exhibit  10.1 to
          Registrant's report on Form 10-Q for the quarter ended March 31, 1996.

*10.13    Form of Incentive Stock Option Agreement under 1992 Stock Option Plan,
          filed as  Exhibit  10.10 to  Registrant's  report on Form 10-K for the
          year ended January 3, 1993.

*10.14    Form of  Nonqualified  Stock Option  Agreement under 1992 Stock Option
          Plan, filed as Exhibit 10.8(a) to Registrant's report on Form 10-K for
          the year ended December 29, 1996.

*10.14.1  Form of  Nonqualified  Stock Option  Agreement  under 1992 Amended and
          Restated Stock Plan,  filed as Exhibit 10.8(b) to Registrant's  report
          on Form 10-K for the year ended December 29, 1996.

*10.15    Form of  Restricted  Stock  Award  Agreement  under 1992  Amended  and
          Restated Stock Plan,  filed as Exhibit 10.8(c) to Registrant's  report
          on Form 10-K for the year ended December 28, 1997.

*10.15.1  Form of  Incentive  Stock  Option  Agreement  under 1992  Amended  and
          Restated Stock Plan,  filed as Exhibit 10.8(d) to Registrant's  report
          on Form 10-K for the year ended December 28, 1997.

*10.16    1994 Stock Option Plan for Non-Employee Directors of Registrant, filed
          as Exhibit 10.9 to Registrant's report on Form 10-K for the year ended
          January 2, 1994.


                                       49
<PAGE>


Exhibit
  No.     Description

*10.17    Form of  Non-Qualified  Stock Option Agreement under 1994 Stock Option
          Plan for Non-Employee Directors of Registrant,  filed as Exhibit 10.10
          to  Registrant's  report on Form 10-K for the year  ended  January  2,
          1994.

*10.18    Management Incentive Plan of the Registrant, filed as Exhibit 10.11(b)
          to  Registrant's  report on Form 10-K for the year  ended  January  3,
          1993.

*10.19    1997 Senior Management  Incentive  Compensation Plan, filed as Exhibit
          10.2 to  Registrant's  report on Form 10-Q for the quarter ended March
          31, 1996.

*10.20    1997 Senior  Management  Discretionary  Bonus  Plan,  filed as Exhibit
          10.13 to Registrant's  report on Form 10-K for the year ended December
          29, 1996.

*10.21    2000 Stock Compensation Plan for Non-Employee  Directors of Registrant
          dated as of May 9, 2000, filed as Exhibit 10.18 to Registrant's report
          on Form 10-Q for the quarter ended April 7, 2000.

*10.22    Form of Agreement  between the Registrant and Levi Strauss dated as of
          March 30, 1992,  filed as Exhibit 10.14 to  Registrant's  Registration
          Statement on Form S-1 (File No. 33-46907).

*10.23    First  Amendment  to  Supply  Agreement  dated as of April  15,  1992,
          between the  Registrant  and Levi Strauss  dated as of March 30, 1992,
          filed as Exhibit 10.15 to Registrant's  Registration Statement on Form
          S-1 (No. 33-46907).

*10.23.1  Second Amendment to Supply Agreement dated as of May 13, 2002, between
          the Registrant  and Levi Strauss dated as of March 30, 1992,  filed as
          Exhibit  10.23.1 to  Registrant's  report on Form 10-Q for the quarter
          ended March 31, 2003.

*10.24    Agreement  dated January 1, 1999,  between the Registrant and Parkdale
          Mills,  Inc.,  filed as Exhibit 10.17 to  Registrant's  report on Form
          10-K for the year ended January 2, 2000.

*10.24.1  Amendment  and  Restatement  of Yarn  Purchase  Agreement  as  amended
          December 31, 2001,  between the Registrant and Parkdale America,  LLC,
          Parkdale  Mills,  Incorporated,  and Magnolia  Manufacturing  Co. Inc.
          effective  as of  February  15,  2002,  filed as  Exhibit  10.24.1  to
          Registrant's report on Form 10-K for the year ended December 29, 2002.


                                       50
<PAGE>


Exhibit
  No.     Description

10.24.2   Amendment of November 12, 2003 of Amendment  and  Restatement  of Yarn
          Purchase  Agreement as of January 1, 1999 as amended by an Amended and
          Restated Yarn Purchase Agreement dated as of February 15, 2002.

*10.25    Tenth Amendment to Master Lease dated as of January 28, 2000,  between
          Atlantic  Financial Group, Ltd. and the Registrant,  together with all
          exhibits thereto,  filed as Exhibit 10 to Registrant's  report on Form
          8-K dated February 11, 2000.

*10.25.1  Eleventh  Amendment  to Master Lease dated as of July 14, 2000 between
          Atlantic  Financial Group,  Ltd. and the Registrant,  filed as Exhibit
          10.25.1 to Registrant's  Registration  Statement on Form S-4 (File No.
          333-43014).

*10.25.2  Assignment  and  Termination  Agreement  dated as of August 31,  2000,
          among  Atlantic  Financial  Group,   Ltd.,   Suntrust  Bank,  and  the
          Registrant,  filed as Exhibit 10.25.2 to  Registrant's  report on Form
          10-Q for the quarter ended October 1, 2000.

*10.26    2001 Stock  Incentive  Plan,  filed as Exhibit  10.26 to  Registrant's
          report on Form 10-Q for the quarter ended April 1, 2001.

*10.26.1  Form of Incentive  Stock Option  Agreement  under 2001 Stock Incentive
          Plan, filed as Exhibit 10.26.1 to Registrant's report on Form 10-Q for
          the quarter ended April 1, 2001.

*10.26.2  2002 Executive Incentive Compensation Plan filed as Exhibit 10.26.2 to
          Registrant's report on Form 10-K for the year ended December 30, 2001.

*10.27.1  Joint  Venture  Agreement  between Isko Dokuma  Isletmeleri  Sanayi ve
          Ticaret A.S. and Cone Mills  Corporation  and Zekeriye  Konukoglu  and
          Fatih Konukoglu and Oguzhan  Gurdogan dated as of June 17, 2002, filed
          as Exhibit 10.27.1 to Registrant's report on Form 10-Q for the quarter
          ended September 29, 2002.

*10.27.2  Commercial  Agreement among Isko Dokuma  Isletmeleri Sanayi ve Ticaret
          A.S., Cone Mills  Corporation and IsKone Denim Pazarlama A.S. dated as
          of October 3, 2002, filed as Exhibit 10.27.2 to Registrant's report on
          Form 10-Q for the quarter ended September 29, 2002.

*10.27.3  Transfer  Price  Agreement  among Isko  Dokuma  Isletmeleri  Sanayi ve
          Ticaret A.S.,  Cone Mills  Corporation and IsKone Denim Pazarlama A.S.
          dated as of October 3, 2002,  filed as Exhibit 10.27.3 to Registrant's
          report on Form 10-Q for the quarter ended September 29, 2002.


                                       51
<PAGE>


Exhibit
  No.     Description

*10.27.4  License  Agreement  among Isko  Dokuma  Isletmeleri  Sanayi ve Ticaret
          A.S., Cone Mills  Corporation and IsKone Denim Pazarlama A.S. dated as
          of October 3, 2002, filed as Exhibit 10.27.4 to Registrant's report on
          Form 10-Q for the quarter ended September 29, 2002.

*10.27.5  Administrative  Services  Agreement  between  Isko Dokuma  Isletmeleri
          Sanayi ve Ticaret  A.S. and IsKone Denim  Pazarlama  A.S.  dated as of
          October 3, 2002,  filed as Exhibit 10.27.5 to  Registrant's  report on
          Form 10-Q for the quarter ended September 29, 2002.

*10.27.6  Employment  Agreement  between  Cone  Mills  Corporation  and  John L.
          Bakane,  dated as of September 10, 2003,  filed as Exhibit  10.27.6 to
          Registrant's report on Form 8-K dated September 19, 2003.

*10.27.7  Employment Agreement between Cone Mills Corporation and Gary L. Smith,
          dated  as  of  September  10,  2003,   filed  as  Exhibit  10.27.7  to
          Registrant's report on Form 8-K dated September 19, 2003.

*10.27.8  Employment  Agreement  between  Cone Mills  Corporation  and Thomas E.
          McKenna,  dated as of September 10, 2003,  filed as Exhibit 10.27.8 to
          Registrant's report on Form 8-K dated September 19, 2003.

*10.27.9  Employment  Agreement  between Cone Mills  Corporation  and Michael J.
          Whisenant, dated as of September 10, 2003, filed as Exhibit 10.27.9 to
          Registrant's report on Form 8-K dated September 19, 2003.

*10.27.10 Employment  Agreement  between  Cone Mills  Corporation  and Marvin A.
          Woolen,  Jr. dated as of September 10, 2003, filed as Exhibit 10.27.10
          to Registrant's report on Form 8-K dated September 19, 2003.

*10.28.1  Employment  Agreement  between  Cone  Mills  Corporation  and  Neil W.
          Koonce,  dated as of September 10, 2003,  filed as Exhibit  10.28.1 to
          Registrant's report on Form 8-K dated September 19, 2003.

*10.28.2  Employment  Agreement  between  Cone  Mills  Corporation  and Terry L.
          Weatherford,  dated as of September 10, 2003, filed as Exhibit 10.28.2
          to Registrant's report on Form 8-K dated September 19, 2003.

*10.28.3  Employment  Agreement  between  Cone  Mills  Corporation  and W. Scott
          Wenhold,  dated as of September 10, 2003,  filed as Exhibit 10.28.3 to
          Registrant's report on Form 8-K dated September 19, 2003.


                                       52
<PAGE>


Exhibit
  No.     Description

*10.28.4  Employment  Agreement  between  Cone  Mills  Corporation  and Samir M.
          Gabriel,  dated as of September 10, 2003,  filed as Exhibit 10.28.4 to
          Registrant's report on Form 8-K dated September 19, 2003.

*10.28.5  Bidding  Procedures,  filed as Exhibit 2.1 to  Registrant's  report on
          Form 8-K dated November 10, 2003.

*10.28.6  Amended and Restated Asset Purchase Agreement, dated as of November 6,
          2003,  by and  among  WLR  Recovery  Fund  II  L.P.,  WLR  Cone  Mills
          Acquisition  LLC,  Cone Mills  Corporation;  CIPCO,  S.C.,  Inc.  Cone
          Foreign Trading, LLC and Cornwallis  Development Co., filed as Exhibit
          2.2 to Registrant's report on Form 8-K dated November 10, 2003.

*21       Subsidiaries of the Registrant.

*23.1     Consent of McGladrey & Pullen, LLP, independent auditor,  with respect
          to the  incorporation  by reference in the  Registrant's  Registration
          Statements on Form S-8 (Nos. 33-31977;  33-31979;  33-51951; 33-51953;
          33-53705; 33-67800;  333-37054; and 333-60954) of their reports on the
          consolidated   financial   statements   and   schedules   included  in
          Registrant's report on Form 10-K for the year ended December 29, 2002.

*23.2     Consent of  Auditors  of Parras  Cone de  Mexico,  S.A.  de C.V.  with
          respect  to  the   incorporation  by  reference  in  the  Registrant's
          Registration   Statements  on  Form  S-8  (Nos.  33-31977;   33-31979;
          33-51951;  33-51953;  333-37054;  333-60954;  and  33-67800;) of their
          reports  on  the  financial   statements  and  schedules  included  in
          Registrant's  report on Form  10-K/A for the year ended  December  29,
          2002.

31.1      Certification of the Chairman,  President and Chief Executive  Officer
          Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2      Certification  of the Chief Financial  Officer Pursuant to Section 302
          of the Sarbanes-Oxley Act of 2002.

32        Certifications of the Chairman,  President and Chief Executive Officer
          and  the  Chief  Financial  Officer  Pursuant  to  Section  906 of the
          Sarbanes-Oxley Act of 2002.

*99.1     Financial  Statements of Parras Cone de Mexico, S.A. de C.V. as of and
          for the year ended  December  29,  2002,  as filed as Exhibit  99.1 to
          Registrant's  report on Form  10-K/A for the year ended  December  29,
          2002.

                                       53
<PAGE>

   --------------------------------------------------------------------------

*Incorporated by reference to the statement or report indicated.

The Registrant  will provide any Shareholder or participant in the Company Stock
Fund in the 401(k) Programs copies of any of the foregoing exhibits upon written
request  addressed to Corporate  Secretary,  Cone Mills  Corporation,  804 Green
Valley Road, Suite 300, Greensboro NC 27408.


                                       54
<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:    November 17, 2003        /s/ Gary L. Smith
                                  Gary L. Smith
                                  Executive Vice President and
                                  Chief Financial Officer


                                       55