Page 1 of 206
                                                 Index to Exhibits - Pages 28-40

                                    FORM 10-Q

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



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

For the quarterly period ended July 1, 2001
                               ------------

                                    OR

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

For the Transition period from       to
                               ------   -------

Commission file number:   1-3634
                         ---------

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

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

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

                              336.379.6220
------------------------------------------------------------------------
           (Registrant's telephone number, including area code)

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

Number of shares of common stock outstanding as of July 24, 2001:
25,586,133 shares.


<PAGE>

                             CONE MILLS CORPORATION

                                      INDEX



PART I.       FINANCIAL INFORMATION
                                                                          Page
                                                                         Number

Item 1.       Financial Statements

              Consolidated Condensed Statements of Operations
              Thirteen and Twenty-Six weeks ended July 1, 2001
              and July 2, 2000 (Unaudited) .......................... ........3

              Consolidated Condensed Balance Sheets
              July 1, 2001 and July 2, 2000 (Unaudited)
              and December 31, 2000................................. .........4

              Consolidated Condensed Statements of Cash Flows
              Twenty-Six weeks ended July 1, 2001 and
              July 2, 2000 (Unaudited) ............................ ..........5

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

Item 2.       Management's Discussion and Analysis of
              Financial Condition and Results of Operations...... ...........17

Item 3.       Quantitative and Qualitative Disclosures about Market
              Risk  .........................................................25


PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings..............................................26
Item 4.       Submission of Matters to a Vote of Security Holders............26
Item 5.       Other Information..............................................26
Item 6.       Exhibits and Reports on Form 8-K...............................27

<PAGE>

Item 1.                                              Part I
                                     CONE MILLS CORPORATION AND SUBSIDIARIES
                                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                       (in thousands, except per share data)
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                             Thirteen         Thirteen        Twenty-Six      Twenty-Six
                                                           Weeks Ended      Weeks Ended      Weeks Ended      Weeks Ended
                                                           July 1, 2001     July 2, 2000     July 1, 2001    July 2, 2000
----------------------------------------------------------------------------------------------------------------------------
                                                           (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)

Net Sales                                                    $ 135,214        $ 161,549        $ 282,749        $ 303,226
Cost of Goods Sold                                             136,213          141,957          272,215          266,533
                                                          ------------------------------------------------------------------
Gross Profit (Loss)                                               (999)          19,592           10,534           36,693
Selling and Administrative                                      11,801           12,753           23,263           26,179
Restructuring and Impairment of Assets                          19,739                -           19,739             (332)
                                                          ------------------------------------------------------------------
Income (Loss) from Operations                                  (32,539)           6,839          (32,468)          10,846
                                                          ------------------------------------------------------------------
Other Income (Expense)
   Interest income                                                  89              272              213              642
   Interest expense                                             (4,836)          (4,826)          (9,474)          (9,497)
   Other expense                                                  (763)          (1,148)          (1,323)          (1,955)
                                                          ------------------------------------------------------------------
                                                                (5,510)          (5,702)         (10,584)         (10,810)
                                                          ------------------------------------------------------------------
Income (Loss) before Income Taxes (Benefit) and Equity
   in Earnings of Unconsolidated Affiliates                    (38,049)           1,137          (43,052)              36
Income Taxes (Benefit)                                         (11,361)             386          (13,112)              12
                                                          ------------------------------------------------------------------
Income (Loss) before Equity in Earnings of Unconsolidated
  Affiliates                                                   (26,688)             751          (29,940)              24
Equity in Earnings of Unconsolidated Affiliates                    223              775              572            1,225
                                                          ------------------------------------------------------------------
Net Income (Loss)                                            $ (26,465)       $   1,526        $ (29,368)       $   1,249
                                                          ------------------------------------------------------------------

Income (Loss) Available to Common Stockholders               $ (27,532)       $     431        $ (31,414)       $    (553)
                                                          ------------------------------------------------------------------

Earnings (Loss) per Share - Basic and Diluted                $   (1.08)       $    0.02        $   (1.23)       $   (0.02)
                                                          ------------------------------------------------------------------
Weighted-Average Common Shares Outstanding
   Basic                                                        25,557           25,432           25,537           25,428
                                                          ------------------------------------------------------------------
   Diluted                                                      25,557           25,648           25,537           25,428
                                                          ------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.


<PAGE>

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

<TABLE>
<S>                                                                                <C>              <C>               <C>
                                                                              July 1,          July 2,       December 31,
                                                                                2001             2000            2000
----------------------------------------------------------------------------------------------------------------------------
                                                                            (Unaudited)      (Unaudited)        (Note)

ASSETS
   Current Assets
     Cash                                                                     $   2,183        $   2,681        $   2,876
     Accounts receivable, less allowances of $5,000; 2000, $5,050                49,921           55,193           40,091
     Inventories                                                                 82,085          115,783          106,308
     Other current assets                                                         9,406            9,996            6,270
                                                                           -------------------------------------------------
      Total Current Asset Assets                                                143,595          183,653          155,545
   Investments in and Advances to Unconsolidated Affiliates                      52,989           50,277           56,265
   Other Assets                                                                  16,614           37,816           18,505
   Property, Plant and Equipment                                                172,600          210,483          192,901
                                                                           -------------------------------------------------
                                                                              $ 385,798        $ 482,229        $ 423,216
                                                                           -------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities
     Current maturities of long-term debt                                     $  83,495        $   2,932        $  73,495
     Accounts payable                                                            33,646           53,114           37,420
     Sundry accounts payable and accrued liabilities                             31,955           27,602           33,282
     Deferred income taxes                                                            -           12,406            9,434
                                                                           -------------------------------------------------
      Total Current Liabilities                                                 149,096           96,054          153,631
   Long-Term Debt                                                               106,357          185,120          108,582
   Deferred Income Taxes                                                         17,413           33,042           20,338
   Other Liabilities                                                             16,291           11,772           14,246

   Stockholders' Equity
     Class A preferred stock - $100 par value; authorized
      1,500,000 shares; issued and outstanding 353,941 shares;
      2000, 357,700 shares and 335,340 shares                                    35,394           35,770           33,534
     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 25,586,133 shares;
      2000, 25,490,660 shares and 25,522,211 shares                               2,559            2,549            2,552
     Capital in excess of par                                                    57,765           57,492           57,630
     Retained earnings                                                            9,205           69,118           42,512
     Deferred compensation - restricted stock                                       (26)            (171)             (40)
     Accumulated other comprehensive loss                                        (8,256)          (8,517)          (9,769)
                                                                           -------------------------------------------------
      Total Stockholders' Equity                                                 96,641          156,241          126,419
                                                                           -------------------------------------------------
                                                                              $ 385,798        $ 482,229        $ 423,216
                                                                           -------------------------------------------------
</TABLE>
Note:  The balance sheet at December 31, 2000, has been derived from
        the audited financial statements at that date.

See Notes to Consolidated Condensed Financial Statements.

<PAGE>

                                      CONE MILLS CORPORATION AND SUBSIDIARIES
                                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                               (in thousands)
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                                              Twenty-Six      Twenty-Six
                                                                                             Weeks Ended      Weeks Ended
                                                                                             July 1, 2001    July 2, 2000
----------------------------------------------------------------------------------------------------------------------------
                                                                                             (Unaudited)      (Unaudited)

CASH PROVIDED BY (USED IN) OPERATIONS                                                          $  (5,144)       $  21,487
                                                                                            --------------------------------

INVESTING
   Investments in and advances to unconsolidated affiliates                                       (1,740)          (2,237)
   Proceeds from sale of property, plant and equipment                                             3,034            2,306
   Capital expenditures                                                                           (2,980)          (2,128)
                                                                                            --------------------------------
     Cash used in investing                                                                       (1,686)          (2,059)
                                                                                            --------------------------------
FINANCING
   Decrease in checks issued in excess of deposits                                                (1,839)          (4,391)
   Principal borrowings (payments) on long-term debt                                               9,913          (11,000)
   Proceeds from issuance of common stock                                                            142               78
   Dividends paid - Class A Preferred                                                                  -              (62)
   Redemption of Class A Preferred stock                                                          (2,079)          (2,639)
                                                                                            --------------------------------
     Cash provided by (used in) financing                                                          6,137          (18,014)
                                                                                            --------------------------------
     Net change in cash                                                                             (693)           1,414

Cash at Beginning of Period                                                                        2,876            1,267
                                                                                            --------------------------------
Cash at End of Period                                                                          $   2,183        $   2,681
                                                                                            --------------------------------
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
   Interest                                                                                    $   9,132        $   9,514
                                                                                            --------------------------------
   Income taxes, net of refunds                                                                $     227        $    (220)
                                                                                            --------------------------------

Supplemental Schedule of Noncash Financing Activities:
   Stock dividend - Class A Preferred Stock                                                    $   3,881        $   2,845
                                                                                            --------------------------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.

<PAGE>

                     CONE MILLS CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 1.  Basis of Financial Statement Preparation

The Cone Mills Corporation ("Cone") consolidated condensed financial statements
for July 1, 2001 and July 2, 2000 are unaudited, but in the opinion of
management reflect all adjustments necessary to present fairly the consolidated
condensed balance sheets of Cone Mills Corporation and Subsidiaries at July l,
2001, July 2, 2000, and December 31, 2000, and the related consolidated
condensed statements of operations for the respective thirteen and twenty-six
weeks ended July 1, 2001 and July 2, 2000 and cash flows for the twenty-six
weeks then ended. All adjustments are of a normal recurring nature with the
exception of entries related to Cone's Reinvention Plan (see Note 8, "Segment
Information" and Note 11, "Restructuring and Impairment of Assets," to the Notes
to Consolidated Condensed Financial Statements). The results are not necessarily
indicative of the results to be expected for the full year.

These statements should be read in conjunction with the audited financial
statements and related notes included in Cone's annual report on Form 10-K for
fiscal year 2000.

Inventories are stated at the lower of cost or market. The last-in, first-out
(LIFO) method is used to determine cost of most domestically produced goods. The
first-in, first-out (FIFO) or average cost methods are used to determine cost of
all other inventories. Because amounts for inventories under the LIFO method are
based on an annual determination of quantities as of the year-end, the
inventories at July 1, 2001 and July 2, 2000 and related consolidated condensed
statements of operations for the thirteen and twenty-six weeks then ended are
based on certain estimates relating to quantities and cost as of the end of the
fiscal year.

Note 2.  Securitization of Accounts Receivable

As of July 1, 2001 and July 2, 2000, the total amount outstanding under the
Accounts Receivable Facility was $51.6 million and $60.0 million, respectively.
The table below summarizes certain cash flows received and paid under the
securitization: (in thousands)

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                          Thirteen          Thirteen         Twenty-Six        Twenty-Six
                                        Weeks Ended       Weeks Ended       Weeks Ended       Weeks Ended
                                           7/1/01            7/2/00            7/1/01            7/2/00
                                          --------          --------          --------          --------
Proceeds from
  securitizations                         $ 22,118          $ 25,210          $ 30,728          $ 34,533
Repayments on
  securitizations                          (23,549)          (23,576)          (37,702)          (36,490)
Daily yield paid                              (881)           (1,132)           (1,809)           (1,936)
Servicing fees paid                           (194)             (218)             (403)             (394)
Servicing fees received                        124               202               344               375

</TABLE>


<PAGE>

Note 3.  Inventories

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
(in thousands)                                                7/1/01          7/2/00            12/31/00
                                                             --------        --------           --------

Greige and finished goods                                   $  50,602       $  77,120          $  69,991
Work in process                                                 6,618           4,371              6,463
Raw materials                                                  14,648          22,199             18,717
Supplies and other                                             10,217          12,093             11,137
                                                              -------         -------            -------
                                                            $  82,085       $ 115,783          $ 106,308
                                                              -------         -------            -------

Note 4.  Long-Term Debt

(in thousands)                                                7/1/01          7/2/00            12/31/00
                                                             --------        --------           --------

Senior Note                                                 $  28,859       $  32,144          $  28,946
Revolving Credit Agreement                                     65,000          58,000             55,000
8-1/8% Debentures                                              95,993          97,908             98,131
                                                              -------         -------            -------
                                                              189,852         188,052            182,077
Less current maturities                                        83,495           2,932             73,495
                                                              -------         -------            -------
                                                            $ 106,357       $ 185,120          $ 108,582
                                                              -------         -------            -------
</TABLE>

Cone adopted  Statement  of Financial  Accounting  Standards  ("SFAS") No. 133,
"Accounting  for  Derivative  Instruments  and Hedging Activities," and SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities," as of January 1, 2001 (see Note 10, "Derivatives," to the Notes to
Consolidated Condensed Financial Statements).

On June 28, 2001, the Revolving Credit Agreement was amended to extend the
maturity date to November 7, 2001, and the Senior Note Agreement was amended to
defer the principal payment, originally due August 7, 2001, to November 7, 2001.

Note 5.  Class A Preferred Stock

On February 8, 2001, Cone declared a 11.75% stock dividend on Cone's Class A
Preferred Stock, which was paid on March 31, 2001. The dividend was charged to
retained earnings in the amount of approximately $3.9 million. The 2002 dividend
rate for Class A Preferred Stock is 12.0%, payable March 31, 2002.


<PAGE>

Note 6.  Depreciation and Amortization

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

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
(in thousands)         Thirteen              Thirteen             Twenty-Six            Twenty-Six
                      Weeks Ended           Weeks Ended           Weeks Ended           Weeks Ended
                        7/1/01                7/2/00                7/1/01                7/2/00
                      -----------           -----------           -----------           ------------

Depreciation          $    5,437            $    5,721            $   10,993            $    11,687
Amortization                  30                   451                    61                    905
                           -----                 -----                ------                 ------
                      $    5,467            $    6,172            $   11,054            $    12,592
                           -----                 -----                ------                 ------

Note 7. Earnings (Loss) per Share

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

(in thousands, except                                               Thirteen             Thirteen
  per share data)                                                 Weeks Ended           Weeks Ended
                                                                     7/1/01               7/2/00
                                                                  -----------           ------------
Net income (loss)                                                 $  (26,465)           $     1,526
Preferred stock dividends                                             (1,067)                (1,095)
                                                                     -------                -------

Basic EPS - income (loss) available to
  common stockholders                                                (27,532)                   431
Effect of dilutive securities                                              -                      -
                                                                     -------                 -------
Diluted EPS - income (loss) available to
  common stockholders after assumed
  conversions                                                     $  (27,532)           $       431
                                                                     -------                --------

Determination of shares:
Weighted-average shares                                               25,572                 25,487
Contingently issuable (unvested
  restricted shares)                                                     (15)                   (55)
                                                                      -------                -------

Basic EPS - weighted-average shares                                   25,557                 25,432
Effect of dilutive securities                                              -                    216
                                                                      -------                --------

Diluted EPS - adjusted weighted-average
  shares after assumed conversions                                    25,557                 25,648
                                                                      -------                -------

Earnings (loss) per share -
  basic and diluted                                               $    (1.08)           $      0.02
                                                                      -------                -------
</TABLE>

<PAGE>

Note 7. Earnings (Loss) per Share (continued)

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

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
(in thousands, except                                               Twenty-Six             Twenty-Six
  per share data)                                                  Weeks Ended            Weeks Ended
                                                                      7/1/01                 7/2/00
                                                                   -----------            -----------

Net income (loss)                                                 $  (29,368)           $     1,249
Preferred stock dividends                                             (2,046)                (1,802)
                                                                      -------                -------

Basic EPS - loss available to
  common stockholders                                                (31,414)                  (553)
Effect of dilutive securities                                              -                      -
                                                                      -------                -------
Diluted EPS - loss available to
  common stockholders after assumed
  conversions                                                     $  (31,414)           $      (553)
                                                                      -------                -------

Determination of shares:
Weighted-average shares                                               25,552                 25,483
Contingently issuable (unvested
  restricted shares)                                                     (15)                   (55)
                                                                      -------                -------

Basic EPS - weighted-average shares                                   25,537                 25,428
Effect of dilutive securities                                              -                      -
                                                                      -------                -------

Diluted EPS - adjusted weighted-average
  shares after assumed conversions                                    25,537                 25,428
                                                                      -------                -------

Loss per share -
  basic and diluted                                               $    (1.23)           $     (0.02)
                                                                      -------                -------
</TABLE>

The number of potentially dilutive common stock options outstanding using the
treasury stock method for the twenty-six weeks ended July 1, 2001 and July 2,
2000 were approximately 23,000 and 80,000, respectively, but were not included
in the computation of diluted loss per share because to do so would have been
antidilutive.

<PAGE>

Note 8.  Segment Information

Cone has four principal business segments which are based upon organizational
structure: 1) denim; 2) khaki; 3) commission finishing; and 4) decorative
fabrics.

Operating income (loss) for each segment is total revenue less operating
expenses applicable to the segment. Intersegment revenue relates to the
commission finishing segment. Equity in earnings of unconsolidated affiliates is
included in the denim segment. Restructuring and impairment of asset expenses,
inventory charges and facility consolidation charges under Cone's Reinvention
Plan, unallocated expenses, interest and income taxes (benefit) are not included
in segment operating income (loss).

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

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
(in thousands)                                                        Thirteen                Thirteen
                                                                     Weeks Ended             Weeks Ended
                                                                       7/1/01                  7/2/00
                                                                     -----------             -----------
Net Sales
Denim                                                                 $  97,475               $ 110,346
Khaki                                                                     7,564                  11,649
Commission Finishing                                                     17,968                  23,646
Decorative Fabrics                                                       15,849                  19,973
Other                                                                        89                     361
                                                                        -------                 -------
                                                                        138,945                 165,975
Less Intersegment Sales                                                   3,731                   4,426
                                                                        -------                 -------
                                                                      $ 135,214               $ 161,549
                                                                        -------                 -------

Income (Loss) from Operations
Denim                                                                 $   3,402               $   9,782
Khaki                                                                      (604)                 (1,101)
Commission Finishing                                                        885                      57
Decorative Fabrics                                                       (1,256)                   (292)
Other                                                                        13                     (20)
Unallocated Expenses                                                     (1,137)                   (812)
                                                                        -------                 -------
                                                                          1,303                   7,614
Reinvention Plan - Inventory Charges and
  Facility Consolidation Charges                                        (13,880)                      -
Restructuring and Impairment of Assets                                  (19,739)                      -
                                                                        -------                 -------
                                                                        (32,316)                  7,614
Less Equity in Earnings of
  Unconsolidated Affiliates                                                 223                     775
                                                                        -------                 -------
                                                                        (32,539)                  6,839
Other Expense, Net                                                       (5,510)                 (5,702)
                                                                        -------                 -------

Income (Loss) before Income Taxes (Benefit)
  and Equity in Earnings of
  Unconsolidated Affiliates                                           $ (38,049)              $   1,137
                                                                        -------                 -------

</TABLE>

<PAGE>

Note 8. Segment Information (continued)

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
(in thousands)                                                        Twenty-Six              Twenty-Six
                                                                     Weeks Ended             Weeks Ended
                                                                       7/1/01                  7/2/00
                                                                     -----------             -----------
Net Sales
Denim                                                                 $ 203,625               $ 205,478
Khaki                                                                    16,740                  20,779
Commission Finishing                                                     37,317                  44,449
Decorative Fabrics                                                       32,685                  39,522
Other                                                                       208                     654
                                                                        -------                 -------
                                                                        290,575                 310,882
Less Intersegment Sales                                                   7,826                   7,656
                                                                        -------                 -------
                                                                      $ 282,749               $ 303,226
                                                                        -------                 -------

Income (Loss) from Operations
Denim                                                                 $   8,450               $  16,678
Khaki                                                                    (2,443)                 (2,661)
Commission Finishing                                                        272                    (782)
Decorative Fabrics                                                       (2,619)                   (508)
Other                                                                       (67)                    612
Unallocated Expenses                                                     (1,870)                 (1,600)
                                                                        -------                 -------
                                                                          1,723                  11,739
Reinvention Plan - Inventory Charges and
  Facility Consolidation Charges                                        (13,880)                      -
Restructuring and Impairment of Assets                                  (19,739)                    332
                                                                        -------                 -------
                                                                        (31,896)                 12,071
Less Equity in Earnings of
  Unconsolidated Affiliates                                                 572                   1,225
                                                                        -------                 -------
                                                                        (32,468)                 10,846
Other Expense, Net                                                      (10,584)                (10,810)
                                                                        -------                 -------

Income (Loss) before Income Taxes (Benefit)
  and Equity in Earnings of
  Unconsolidated Affiliates                                           $ (43,052)              $      36
                                                                        -------                 -------
</TABLE>

<PAGE>

Note 8. Segment Information (continued)

Inventory writedowns by segment recorded in the second quarter of 2001 in
connection with Cone's Reinvention Plan were as follows: (in thousands)

         Denim                                        $  3,770
         Khaki                                           4,238
         Decorative Fabrics                              2,957
         Other                                           1,915
                                                      --------
                                                      $ 12,880
                                                      --------

Cone previously reported Denim and Khaki as a single business segment. However,
based on the way management allocates resources and assesses performance and
after implementation of the Reinvention Plan, Cone determined that the Denim and
Khaki segments should be separately identified as operating segments for
reporting purposes and has presented them separately for the current quarter.
The following segment information is presented as if the "Denim and Khaki"
segment had been broken out separately into the "Denim" and "Khaki" components
in the prior year consolidated financial statements as filed on Form 10-K. In
addition, identifiable assets have been presented for the prior years to reflect
the separate presentation of the Denim and Khaki segments.

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
(in thousands)                                                  Net Sales
                                       -------------------------------------------------------------
       For the Quarter Ending                 Denim                Khaki               Total
-------------------------------------- -------------------- -------------------- -------------------
April 2, 2000                               $  95,132            $   9,130           $ 104,262
July 2, 2000                                  110,346               11,649             121,995
October 1, 2000                               120,258               12,039             132,297
December 31, 2000                             108,873                8,032             116,905
                                            ---------            ---------           ---------
  Total 2000                                $ 434,609            $  40,850           $ 475,459
                                            ---------            ---------           ---------

April 4, 1999                               $ 104,849            $   7,786           $ 112,635
July 4, 1999                                  116,809               10,429             127,238
October 3, 1999                                99,382                9,111             108,493
January 2, 2000                                87,880               12,234             100,114
                                            ---------            ---------           ---------
  Total 1999                                $ 408,920            $  39,560           $ 448,480
                                            ---------            ---------           ---------

March 29, 1998                              $ 130,046            $  11,708           $ 141,754
June 28, 1998                                 134,232               12,127             146,359
September 27, 1998                            134,622               10,155             144,777
January 3, 1999                               103,483                8,640             112,123
                                            ---------            ---------           ---------
  Total 1998                                $ 502,383            $  42,630           $ 545,013
                                            ---------            ---------           ---------
</TABLE>

<PAGE>

Note 8. Segment Information (continued)

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
(in thousands)                                          Operating Income (Loss)
                                       -----------------------------------------------------------
       For the Quarter Ending                 Denim                Khaki               Total
-------------------------------------- ------------------- ------------------- -------------------
April 2, 2000                               $   6,896            $ (1,560)           $   5,336
July 2, 2000                                    9,782              (1,101)               8,681
October 1, 2000                                10,324                (234)              10,090
December 31, 2000                               8,179                (850)               7,329
                                            ---------            --------            ---------
  Total 2000                                $  35,181            $ (3,745)           $  31,436
                                            ---------            --------            ---------

April 4, 1999                               $   9,233            $     83            $   9,316
July 4, 1999                                   11,441              (4,190)               7,251
October 3, 1999                                 5,668              (3,288)               2,380
January 2, 2000                                   293              (1,632)              (1,339)
                                            ---------            --------            ---------
  Total 1999                                $  26,635            $ (9,027)           $  17,608
                                            ---------            --------            ---------

March 29, 1998                              $  15,445            $ (1,593)           $  13,852
June 28, 1998                                  16,287              (1,407)              14,880
September 27, 1998                             17,151              (1,228)              15,923
January 3, 1999                                10,688              (3,167)               7,521
                                            ---------            --------            ---------
  Total 1998                                $  59,571            $ (7,395)           $  52,176
                                            ---------            ---------           ---------


(in thousands)                             As of 7/1/01             2000                1999                1998
                                       ------------------- ------------------- ------------------- --------------------
Identifiable Assets
 Denim                                      $ 268,926            $ 274,584           $ 274,882           $ 283,759
 Khaki                                         11,037               26,760              20,125              18,412
 Commission Finishing                          51,905               53,949              95,213              99,433
 Decorative Fabrics                            37,650               49,941              49,741              42,164
 Yarn-Dyed Products                                 -                  288              16,533              29,902
 Other                                         16,280               17,694              16,303              14,847
                                            ---------             --------           ---------           ---------
                                            $ 385,798            $ 423,216           $ 472,797           $ 488,517
                                            ---------            ---------           ---------           ---------
</TABLE>

Note 9. 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>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
(in thousands)                Thirteen            Thirteen           Twenty-Six         Twenty-Six
                             Weeks Ended         Weeks Ended         Weeks Ended        Weeks Ended
                                7/1/01              7/2/00              7/1/01             7/2/00
                             -----------         -----------         -----------        ------------
Net income (loss)             $(26,465)           $  1,526            $(29,368)          $  1,249
Other comprehensive
  income, cotton
  derivatives gains                550                   -               1,513                  -
                               -------             -------             -------            -------
                              $(25,915)           $  1,526            $(27,855)          $  1,249
                               -------             -------             -------            -------
</TABLE>

<PAGE>

Cotton derivatives gains reflected above in other comprehensive income (loss)
will be recognized in results of operations over the next twelve months.

Note 10.  Derivatives

Cone adopted SFAS No. 133 and SFAS No. 138 as of January 1, 2001. Cone has
determined that its interest rate swap agreement is an ineffective hedge under
the new standards. Because of the transition provision of SFAS No. 133, Cone did
not recognize a cumulative effect of an accounting change affecting results of
operations related to its interest rate swap agreement at January 1, 2001. The
adjustment to the carrying value of debt in the amount of approximately $2.7
million on January 1, 2001, recorded under the transition provisions of the new
standards, will be amortized to results of operations over the period to debt
maturity. Cone recognized approximately $0.2 million and $0.4 million in expense
related to amortization of this adjustment to the carrying value of debt for the
thirteen and twenty-six weeks ended July 1, 2001, respectively, which is
reflected in the "Other expense" caption on the consolidated condensed
statements of operations. Changes in the fair value of the interest rate swap
agreement after transition will be recorded in the statements of operations in
the period of change. For the thirteen and twenty-six weeks ended July 1, 2001,
Cone recognized a gain on the change in the fair value of this derivative
instrument of $0.3 million and $0.8 million respectively, which is reflected in
the "Other expense" caption on the consolidated condensed statements of
operations. As of July 1, 2001, the interest rate swap had an estimated fair
market value of $1.9 million and was recorded in other long-term liabilities on
the Consolidated Condensed Balance Sheet.

Cash Flow Hedging Strategy

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 (outside results of operations) and subsequently
reclassified into results of operations when the forecasted transactions being
hedged affect results of operations. The ineffective portion of derivative gains
and losses is reported in results of operations immediately. Hedge
ineffectiveness for the thirteen and twenty-six weeks ended July 1, 2001, was
immaterial.

For the thirteen and twenty-six weeks ended July 1, 2001, Cone recorded in other
comprehensive income cotton derivative gains of approximately $0.8 million and


<PAGE>

$2.3 million, respectively, net of deferred taxes of $0.3 million and $0.8
million, respectively, (see Note 9, "Comprehensive Income (Loss)" to the Notes
to Consolidated Condensed Financial Statements).


Note 11.  Restructuring and Impairment of Assets

In recent years, Cone has undertaken a number of restructuring activities to
concentrate on businesses in which it has a leadership position, to redeploy
human and capital resources to those core businesses, and to lower manufacturing
costs.

During the second quarter of fiscal year 2001, Cone implemented its Reinvention
Plan that included the consolidation of two manufacturing facilities into one,
and the downsizing of sales and administrative staffs to reduce overhead
expenses. The Reinvention Plan was an entire reassessment of Cone's businesses,
and impairments related to certain inventory and property and equipment occurred
because these assets were determined to be non-core assets, which are to be
disposed of expeditiously to produce cash. Inventory was written down to its
estimated net realizable value. Property and equipment that have been sold, or
are held for sale at July 1, 2001, and are no longer in use, were written down
to their estimated fair values less costs to sell. Determination of fair market
value was based upon in-house engineering and purchasing appraisals, surveys
with used equipment dealers, current price for new equipment and analysis of
whether the equipment would be used internally, sold or abandoned. As of July 1,
2001, property and equipment held for sale by segment were: (in thousands)

         Denim                                                   $      1,539
         Commission Finishing                                           4,710
         Yarn-Dyed Products                                             5,852
         Other                                                             33
                                                                      -------
                                                                 $     12,134
                                                                      -------

Depreciation expense on property, plant and equipment classified as "held for
sale" prior to being classified as such was $0.4 million for the twenty-six
weeks ended July 1, 2001.

Cone is actively marketing the affected property and equipment currently
available for sale and will pursue the most expedient manner of effecting the
sale or disposition of such assets. However, the actual timing of the
disposition of these assets may vary due to market conditions. No depreciation
expense for these impaired assets subsequent to classification as held for sale
is included in the operating results for the periods presented.

The restructuring and impairment charges, before income taxes, were $19.1
million for the second quarter 2001, and related primarily to the Denim and
Khaki segments. Included in these restructuring and impairment charges were
non-cash charges for the impairment of property and equipment totaling $9.3
million. Restructuring charges related to terminal leave pay and benefits for
salaried employees totaled $3.3 million. The restructuring initiatives resulted


<PAGE>

in the reduction of the workforce by approximately 575 employees, primarily at
Cone's corporate office and the Rutherford County facilities. Cone's salaried
defined benefit pension plans were frozen as of July 1, 2001, in regards to the
accrual for future benefits. Cone recognized a net pension curtailment loss of
$0.9 million related to its defined benefit pension plans for salaried
employees.

In addition, Cone recognized non-cash impairment charges related to certain of
its unconsolidated affiliates, Ashima and CIPSA, totaling $2.4 million and $3.2
million, respectively.

A roll-forward of the activity related to Cone's restructuring charges for the
twenty-six weeks ended July 1, 2001 and July 2, 2000 follows:

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                              Corporate &
                                                Textile        Salisbury &
                                                Products       Yarn Dyed
                                                 Group          Products        Carlisle       Raytex     Total
                                              -----------     -----------       --------       ------   ---------

Balance, December 31, 2000                      $      -        $      -        $     -       $   964    $    964

Additions:
Terminal leave and related benefits                3,335               -              -             -       3,335
Consulting and legal fees                            600               -              -             -         600
Pension curtailment*                                 888               -              -             -         888
                                                  ------           -----          -----         -----      ------
                                                   4,823               -              -             -       4,823
                                                  ------           -----          -----         -----      ------

Deductions:
Terminal leave and related benefits                 (216)              -              -          (735)       (951)
Consulting and legal fees                           (233)              -              -             -        (233)
Pension curtailment*                                (888)              -              -             -        (888)
                                                  ------           -----          -----         -----      ------
                                                  (1,337)              -              -          (735)     (2,072)
                                                  ------           -----          -----         -----      ------

Balance, July 1, 2001                           $  3,486         $     -       $      -       $   229    $  3,715
                                                  ------           -----          -----         -----      ------


Balance, January 2, 2000                        $    718         $   191       $    939       $     -    $  1,848

Deductions:
Terminal leave and related benefits                 (718)           (191)          (849)            -      (1,758)
                                                   ------          -----          -----         -----      ------

Balance, July 2, 2000                           $      -         $     -       $     90       $     -    $     90
                                                  ------           -----          -----         -----      ------

*Items expensed as incurred.
</TABLE>

Note 12. Income Tax Benefits

The effective tax rate used for the twenty-six weeks ended July 1, 2001,
differs from 35% because Cone recorded a valuation allowance on the deferred tax
assets that resulted from the non-cash impairment charges totaling $5.6 million
related to Cone's investments in certain of its unconsolidated affiliates,
Ashima and CIPSA. The impairment charges will result in future tax deductible
capital losses; however, Cone does not expect to have taxable capital gains in
the future to realize these tax deductible losses. As such, Cone has established
the valuation allowance on the resulting deferred tax assets. The effective tax
rate used for the twenty-six weeks ended July 2, 2000 was 34%.

<PAGE>

Item 2.

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

OVERVIEW (REINVENTION PLAN)

The market environment in which Cone operates is extremely difficult. The
relative strength of the U.S. dollar, weakness in consumer spending and pullback
in business investment has pushed the U.S. manufacturing sector into a
recession. Textiles in particular have been affected adversely by the relative
strength of the U.S. dollar in comparison to the currencies of many Asian
countries. The currency effect, global oversupply of apparel and textiles and
the slowing in consumer spending have resulted in extreme volume and pricing
pressures for Cone's products. These conditions are expected to continue well
into the third quarter of 2001. Demand for Cone's products may improve later in
2001 if efforts by the U.S. government to stimulate the economy are successful.
In 2001, the Federal Reserve has reduced interest rates by 275 basis points and
Congress has passed a tax reduction act that will produce refund checks of $300
- $600 to be distributed July through September of 2001. However, there is no
guarantee that these actions will stimulate the demand for Cone's products.

In response to these economic conditions, on May 24, 2001, Cone announced the
initiation of its "Reinvention Plan". The objectives of the Reinvention Plan are
to 1) produce $30 - $40 million in annual cost savings or improvement in
operating results of under-performing businesses, and 2) actively market
non-core assets including idle plants, property, equipment and excess
inventories with a cash generation target of $15 - $25 million over eighteen
months.

The Reinvention Plan has four components: 1) workforce reductions; 2) employee
pay and benefit practices; 3) streamlining of Cone's business practices, which
includes a broad range of items from maintenance scheduling to vendor sourcing
practices, to the consolidation of denim operations to efficiently reduce U.S.
capacity; and 4) improving the performance of the khaki and decorative fabric
businesses.

To date the implementation of the Reinvention Plan has resulted in the
reduction of the workforce by approximately 575 employees, primarily at Cone's
corporate office and the Rutherford County facilities, curtailment in salaried
defined benefit pension plans, changes in business practices and the
announced consolidation of the Haynes and Florence denim facilities. Cone has
enacted initiatives to date that are expected to yield $25 - $28 million per
year in cost reductions or loss avoidance. For 2002, Cone has targeted
additional initiatives that are expected to yield an additional $2 - $4
million in savings. The balance of the targeted savings relates to improving the
results of the khaki and decorative fabrics segments. To date, no top-line
improvement in the khaki and home decorative segments can be quantified;
however, management will continue to focus its attention on these operations.



<PAGE>

In conjunction with the Reinvention Plan, Cone recorded a pre-tax charge of
$33.6 million. The charge was primarily non-cash in nature relating to
writedowns of inventories and impairment charges for noncurrent assets.
Approximately $5 million of the charge will require the use of cash primarily
for termination benefits and operating variances during the consolidation of the
Haynes and Florence facilities. During the second quarter of 2001, Cone
recognized actual savings of less than $0.3 million from the Reinvention Plan
initiatives. Cone expects to realize greater benefits in future fiscal quarters.


RESULTS OF OPERATIONS

Second Quarter Ended July 1, 2001 Compared with Second Quarter Ended July 2,
2000
--------------------------------------------------------------------------------

For the second quarter of 2001, Cone had sales of $135.2 million, a decrease of
16.3% over sales of $161.5 million for the second quarter of 2000. The decrease
was due to lower sales across all segments. Excluding the Raytex finishing
operation, which was closed in the first quarter of 2001, sales from ongoing
operations were down 13.3% in the second quarter of 2001, as compared to the
second quarter of 2000.

Cone had a gross loss of $1.0 million for the second quarter of 2001, as
compared to a gross profit of $19.6 million for the second quarter of 2000. The
decline was primarily due to inventory writedowns and facility consolidation
charges related to Cone's Reinvention Plan. Excluding these charges, Cone had a
gross profit for the second quarter of 2001 of $12.9 million or 9.5% of net
sales. The decline from the second quarter of 2000 to the same period of 2001
before charges related to Cone's Reinvention Plan was primarily due to lower
sales volume, pricing pressures and curtailed manufacturing operating schedules.

Segment Information. Cone has four principal business segments: 1) denim; 2)
khaki; 3) commission finishing; and 4) decorative fabrics. (See Note 8 to Notes
to Consolidated Condensed Financial Statements included in Part I, Item 1.) Cone
has formerly reported three principal business segments: 1) denim and khaki; 2)
commission finishing; and 3) decorative fabrics. Based upon the way Cone
allocates resources and assesses performance and after implementation of the
Reinvention Plan, Cone will now report denim and khaki as separate business
segments.

         Denim. Denim segment sales revenues for the second quarter of 2001 were
         $97.5 million, down 11.7% from the second quarter of 2000 sales of
         $110.3 million. Sales yards were 12.4% lower, as compared with the
         second quarter of 2000. Revenues were affected negatively by lower
         volume for the second quarter of 2001, as compared to the 2000 quarter.
         Operating income for the denim segment was $3.4 million, or 3.5% of
         sales for the most recent quarter, as compared with $9.8 million, or
         8.9% of sales for the second quarter of 2000. Futures for cotton,
         Cone's major raw material, have declined throughout the year from $.60
         per pound on January 2, 2001 to $.43 per pound on June 29, 2001, but,


<PAGE>

         because of Cone's practices of buying cotton forward, Cone does not
         expect to benefit from reduced cotton costs before the first quarter of
         2002. Cone had previously expected to realize these benefits in the
         fourth quarter of 2001, but the benefits have been delayed due to lower
         than expected production volumes. Operating income for the segment
         includes the equity in earnings from the Parras Cone joint venture
         plant, which was down from the second quarter of 2000 because of lower
         sales at Parras Cone in the second quarter of 2001.

         Khaki. Khaki segment sales revenues for the second quarter of 2001 were
         $7.6 million, down 35.1% from the second quarter of 2000 sales of $11.6
         million. Sales yards were 43.5% lower, as compared with the second
         quarter of 2000. Revenues were negatively affected due to streamlining
         Cone's product offering, as compared to the 2000 quarter. The khaki
         segment had an operating loss of $0.6 million or 8.0% of sales for the
         most recent quarter, as compared with a loss of $1.1 million or 9.5% of
         sales for the second quarter of 2000.

         Commission Finishing. Outside sales of the commission finishing segment
         were $14.2 million for the second quarter of 2001, down 25.9% from the
         second quarter of 2000. Outside sales of the commission finishing
         segment, excluding Raytex, increased 3.6% for the second quarter of
         2001, as compared with the prior year, primarily driven by market
         consolidation. For the second quarter of 2001, the segment had
         operating income of $0.9 million, as compared with income of $0.1
         million for the second quarter of 2000.

         Decorative Fabrics. For the second quarter of 2001, sales of the
         decorative fabrics segment were $15.8 million, down 20.6% from sales of
         $20.0 million for the same quarter of the previous year because of weak
         furniture market conditions. Both the jacquard and converting
         operations were negatively impacted. The decorative fabrics segment had
         an operating loss of $1.3 million in the second quarter of 2001, as
         compared with a loss of $0.3 million for the second quarter of 2000.

Selling and administrative expenses for the second quarter of 2001 were $11.8
million, as compared with $12.8 million, in the second quarter of 2000. The
lower expenses in the second quarter of 2001 were because of lower staffing
levels and lower headquarters rental expense.

Interest expense for the second quarter of 2001 was $4.8 million, as compared
with $4.8 million for the second quarter of 2000. Other expenses of $0.8 million
in the second quarter of 2001 included the ongoing expense of the accounts
receivable securitization program, amortization of the transition amount related
to recording the interest rate swap and the valuation adjustment of the interest
rate swap derivative instrument.

In the second quarter of 2001, the income tax benefit as a percent of taxable
loss was 30%. The effective tax rate used for the thirteen weeks ended July 1,
2001, differs from 35% because Cone recorded a valuation allowance on the
deferred tax assets that resulted from the non-cash impairment charges totaling
$5.6 million related to Cone's investments in certain of its unconsolidated
affiliates, Ashima and CIPSA. The impairment charges will result in future tax


<PAGE>

deductible capital losses; however, Cone does not expect to have taxable capital
gains in the future to realize these tax deductible losses. As such, Cone has
established the valuation allowance on the resulting deferred tax assets. The
effective tax rate used for the thirteen weeks ended July 2, 2000 was 34%.

Equity in earnings of Parras Cone, Cone's joint venture plant in Mexico, was
$0.2 million for the second quarter of 2001, as compared with $0.8 million for
the second quarter of 2000, primarily due to decreased sales volume.

For the second quarter of 2001, Cone had a net loss of $26.5 million, or $1.08
per share after preferred dividends. Included in the net loss were after-tax
charges of $23.8 million of impairment and restructuring charges and inventory
writedowns and facility consolidation charges related to the Reinvention Plan,
or $0.93 per share. For comparison, for the second quarter of 2000, Cone
reported net income of $1.5 million, or $0.02 per share after preferred
dividends.


Six Months Ended July 1, 2001 Compared with Six Months Ended July 2, 2000
-------------------------------------------------------------------------

For the first six months of 2001, Cone had sales of $282.7 million, a decrease
of 6.8% over sales of $303.2 million for the first six months of 2000. The
decrease was due to lower sales across all segments. Excluding the Raytex
finishing operation, which was closed in the first quarter of 2001, sales from
ongoing operations were down 4.2% in the first six months of 2001, as compared
to the year-ago period.

Gross profit for the first six months of 2001 was $10.5 million or 3.7% of
sales, as compared to $36.7 million or 12.1% for the first six months of 2000.
The decline was primarily due to inventory writedowns and facility consolidation
charges related to Cone's Reinvention Plan. Excluding these charges, Cone had a
gross profit in the first six months of 2001 of $24.4 million or 8.6% compared
with year-ago levels. The decline from the six months ended of 2000 to the same
period of 2001 before charges related to Cone's Reinvention Plan was primarily
due to lower sales volume, pricing pressures and curtailed manufacturing
operating schedules.

This decline was primarily due to lower sales volume, pricing pressures and
curtailed manufacturing operating schedules.

Segment Information. Cone has four principal business segments: 1) denim; 2)
khaki; 3) commission finishing; and 4) decorative fabrics. (See Note 8 to Notes
to Consolidated Condensed Financial Statements included in Part I, Item 1.) Cone
has formerly reported three principal business segments: 1) denim and khaki; 2)
commission finishing; and 3) decorative fabrics. Based upon the way Cone
allocates resources and assesses performance and after implementation of the
Reinvention Plan, Cone will now report denim and khaki as separate business
segments.

         Denim. Denim segment sales revenues for the first six months of 2001
         were $203.6 million, down 0.9% from the first six months of 2000 sales
         of $205.5 million. Sales yards were 3.4% lower, as compared with the


<PAGE>

         first six months of 2000. Revenues were negatively affected by lower
         volume, as compared to the 2000 period. Operating income for the denim
         segment was $8.5 million, or 4.1% of sales for the most recent six
         months, as compared with $16.7 million, or 8.1% of sales for the first
         six months of 2000. Futures for cotton, Cone's major raw material, have
         declined throughout the year from $.60 per pound on January 2, 2001 to
         $.43 per pound on June 29, 2001, but, because of Cone's practices of
         buying cotton forward, Cone does not expect to benefit from reduced
         cotton costs before the first quarter of 2002. Cone had previously
         expected to realize these benefits in the fourth quarter of 2001, but
         the benefits have been delayed due to lower than expected production
         volumes. Operating income for the segment includes the equity in
         earnings from the Parras Cone joint venture plant, which were down from
         the first six months of 2000 because of lower sales at Parras Cone in
         the first six months of 2001.

         Khaki. Khaki segment sales revenues for the first six months of 2001
         were $16.7 million, down 19.4% from the first six months of 2000 sales
         of $20.8 million. Sales yards were 26.3% lower, as compared with the
         first six months of 2000. Revenues were negatively affected due to
         streamlining Cone's product offering, as compared to the 2000 period.
         The khaki segment had an operating loss of $2.4 million or 14.6% of
         sales for the most recent six months, as compared with a loss of $2.7
         million or 12.8% of sales for the first six months of 2000.

         Commission Finishing. Outside sales of the commission finishing segment
         were $29.5 million for the first six months of 2001, down 19.8% from
         the first six months of 2000. Outside sales of the commission finishing
         segment, excluding Raytex, increased for the first six months of 2001,
         as compared with the prior year-ago period and was primarily driven by
         market consolidation. For the first six months of 2001, the segment had
         operating income of $0.3 million, as compared with a loss of $0.8
         million for the first six months of 2000.

         Decorative Fabrics. For the first six months of 2001, sales of the
         decorative fabrics segment were $32.7 million, down 17.3% from sales of
         $39.5 million for the same period of the previous year because of weak
         furniture market conditions. Both the jacquard and converting
         operations were negatively impacted. The decorative fabrics segment had
         an operating loss of $2.6 million in the first six months of 2001, as
         compared with a loss of $0.5 million for the first six months of 2000.

Selling and administrative expenses for the first six months of 2001 were $23.3
million, as compared with $26.2 million, in the first six months of 2000. The
lower expenses in the first six months of 2001 were because of lower staffing
levels, lower headquarters rental expense and a reduction in related expenses as
a result of Cone's exit from its Ashima alliance.



<PAGE>

Interest expense for the first six months of 2001 was $9.5 million, as compared
with $9.5 million for the first six months of 2000. Other expenses of $1.3
million in the first six months of 2001 included the ongoing expense of the
accounts receivable securitization program, amortization of the transition
amount related to recording the interest rate swap and the valuation adjustment
of the interest rate swap derivative instrument.

In the first six months of 2001, the income tax benefit as a percent of taxable
loss was 30%. The effective tax rate used for the six months ended July 1, 2001,
differs from 35% because Cone recorded a valuation allowance on the deferred tax
assets that resulted from the non-cash impairment charges totaling $5.6 million
related to Cone's investments in certain of its unconsolidated affiliates,
Ashima and CIPSA. The impairment charges will result in future tax deductible
capital losses; however, Cone does not expect to have taxable capital gains in
the future to realize these tax deductible losses. As such, Cone has established
the valuation allowance on the resulting deferred tax assets. The effective tax
rate used for the six months ended July 2, 2000 was 34%.

Equity in earnings of Parras Cone, Cone's joint venture plant in Mexico, was
$0.8 million for the first six months of 2001, as compared with $1.2 million for
the first six months of 2000, primarily due to decreased sales.

For the first six months of 2001, Cone had a net loss of $29.4 million, or $1.23
per share after preferred dividends. Included in the net loss were after-tax
charges of $23.8 million of impairment and restructuring charges and inventory
writedowns and facility consolidation charges related to the Reinvention Plan,
or $0.93 per share. For comparison, for the first six months of 2000, Cone
reported net income of $1.2 million, or a loss of $0.02 per share after
preferred dividends.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Cone's principal long-term capital components consist of debt outstanding under
its Senior Note, its 8-1/8% Debentures and stockholders' equity. Primary sources
of liquidity are internally generated funds, a $73 million Revolving Credit
Facility ("Revolving Credit Facility") of which $8 million was available on July
1, 2001, and a $60 million Receivables Purchase and Servicing Agreement (the
"Receivables Agreement").

During the first six months of 2001, Cone used cash in operations of $5.1
million, as compared with cash provided by operations of $21.5 million in the
first six months of 2000. Other sources of cash flow included $3.0 million in
proceeds from sales of property and equipment for the first six months of 2001,
as compared with $2.3 million in the first six months of 2000. Uses of cash in
the first six months of 2001 included $3.0 million for capital expenditures and
$1.7 million of advances to the joint venture industrial park in Tamaulipas,
Mexico.

Financing agreements of Cone prohibit Cone from paying dividends on its Common
Stock.

The following is a summary of the Company's primary financing agreements as of
July 1, 2001.

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

($ Amounts in Millions)               Facility             Amount            Interest/           Maturity
  Financing Agreement                Commitment         Outstanding        Discount Rate           Date
-----------------------              ----------         -----------        -------------         --------

8-1/8% Debenture                      $100.0              $100.0              8.125%          Mar 15, 2005
Senior Note                             28.9                28.9             11.700           Aug 13, 2002
Revolving Credit                        72.8                65.0              8.271           Nov  7, 2001
Receivables Agreement                   60.0                51.6              6.270           Sept 1, 2004

</TABLE>

Cone believes that internally generated operating funds and funds available
under its Revolving Credit Facility currently in effect are sufficient to meet
its needs for working capital and domestic capital spending permitted under the
terms of the Revolving Credit Facility. However, by November 2001, Cone must
either refinance or replace the Revolving Credit Facility and make a scheduled
principal reduction of $18.5 million on its Senior Note. Cone has received a
90-day extension on the original maturity date of August 7, 2001 for its
Revolving Credit Facility and the scheduled payment under its Senior Note
Agreement. While management believes that it will be able to obtain the
appropriate financing, there is no assurance that Cone will be able to replace
its Revolving Credit Facility and defer its Senior Note payment or otherwise
obtain financing on terms and conditions acceptable to Cone and make the
scheduled November 7, 2001 Senior Note principal payment. Along with its
strategic advisor, J.P. Morgan, Cone is in the process of exploring its
alternatives related to financing its business in both the U.S. and Mexico. Cone
is currently assisting to raise financing for the planned Parras Cone expansion,
which will increase production capacity by approximately 10 million yards and
will require approximately $18 million in financing. Cone believes that Parras


<PAGE>

Cone will be able to raise these funds during 2001 based upon the strength of
Parras Cone's financial position.

On July 1, 2001, Cone's long-term capital structure consisted of $189.9 million
of long-term debt (including current maturities) and $96.6 million of
stockholders' equity. For comparison, on July 2, 2000, Cone had $188.1 million
of long-term debt (including current maturities) and $156.2 million of
stockholders' equity.

Accounts receivable on July 1, 2001, were $49.9 million, as compared with $55.2
million at July 2, 2000. Receivables, including those sold pursuant to the
Receivables Agreement, represented 69 days of sales outstanding at July 1, 2001
and 67 days at July 2, 2000.

Inventories on July 1, 2001, were $82.1 million, down $33.7 million from $115.8
million at July 2, 2000. This reduction is due primarily to lower inventory
quantities and to writedowns taken as part of Cone's Reinvention Plan.

For the first six months of 2001, domestic capital spending was $3.0 million
compared to $2.1 million for the 2000 period. Domestic capital spending in 2001
is expected to be approximately $7-8 million.



OTHER MATTERS

EBITDA, which is presented not as an alternative measure of operating results or
cash flow from operations (as determined in accordance with accounting
principles generally accepted in the United States of America) but because it is
a widely accepted financial indicator of the ability to incur and service debt,
is calculated by Cone as follows (in thousands):


                                                     Twenty-Six Weeks Ended
                                                   7/1/01              7/2/00
                                                   ------              ------
         Income (loss) from operations           $ (32,468)           $ 10,846
         Depreciation and amortization              11,054              12,592
         Reinvention Plan - inventory charges
          and facility consolidation charges)      (13,880)                  -
         Restructuring and impairment charges       19,739                (332)
                                                  --------            --------
         EBITDA                                  $  12,205            $ 23,106
                                                  --------            --------

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 active environmental committee, which fosters protection of the
environment and compliance with laws.

From time to time, Cone is a party to various legal claims and actions.
Management believes that none of these claims or actions, either individually or
in the aggregate, will have a material adverse effect on the financial condition
and liquidity of Cone. Due to Cone's recent operating results, management
believes that the effects of any litigation, no matter how small or
insignificant, could be considered material to Cone's future results of
operations. As of July 1, 2001, no significant litigation existed.

"Safe Harbor" Statement under Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

         Except for the historical information presented, the matters disclosed
         in the foregoing discussion and analysis and other parts of this report
         include forward-looking statements. These statements represent Cone's
         current judgment on the future and are subject to risks and
         uncertainties that could cause actual results to differ materially.
         Such factors include, without limitation: (i) the demand for textile


<PAGE>

         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, (ii) the
         highly competitive nature of the textile industry and the possible
         effects of reduced import protection and free-trade initiatives, (iii)
         the unpredictability of the cost and availability of cotton, Cone's
         principal raw material, and other manufacturing costs, (iv) Cone's
         relationships with Levi Strauss as its major customer, (v) Cone's
         ability to attract and maintain adequate capital to fund operations and
         strategic initiatives, (vi) increases in prevailing interest rates, and
         (vii) Cone's inability to continue the cost savings associated with its
         Reinvention Plan. For a further description of these risks see Cone's
         2000 Form 10-K, "Item 1. Business -Competition, -Raw Materials and
         -Customers" and "Item 7. Management's Discussion and Analysis of
         Results of Operations and Financial Condition -- Overview" of the 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.


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 31, 2000.



<PAGE>


                                     PART II

Item 1.  Legal Proceedings

From time to time, Cone is a party to various legal claims and actions.
Management believes that none of these claims or actions, either individually or
in the aggregate, will have a material adverse effect on the financial condition
and liquidity of Cone. Due to Cone's recent operating results, management
believes that the effects of any litigation, no matter how small or
insignificant, could be considered material to Cone's future results of
operations. As of July 1, 2001, no significant litigation exists.


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

Cone Mills Corporation's Annual Meeting of Shareholders was held May 8, 2001.
The proposals voted upon and the results of the voting were as follows:

                                                                  Abstentions
                                                   Against/     (Includes Broker
                                     For           Withheld         Non-Votes)
                                  ---------        ----------    ---------------

1.       Election of four class III directors for a three-year term:

         Doris R. Bray           21,058,167        2,571,806              0
         Marc H. Kozberg         21,147,880        2,482,092              0
         Dewey L. Trogdon        21,061,264        2,568,708              0
         Cyrus C. Wilson         21,190,050        2,439,922              0

2.       Approval of 2001 Stock Incentive Plan

                                 10,341,577        4,139,826      9,148,569

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

                                 23,477,757           49,474        102,741


Item 5.  Other Information

Notice of a matter to be presented by a shareholder for consideration at the
2002 annual meeting other than pursuant to Rule 14a-8 of the Securities Exchange
Act of 1934 must be received by the Company prior to February 13, 2002. 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.

<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

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

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                          -----------

*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 will 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

<PAGE>

Exhibit                                                               Sequential
 No.            Description                                            Page No.
------          -----------                                           ----------

                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 the 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).

*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 the 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.

2.3.8           Eighth Amendment to Securitization Agreement dated
                as of July 10, 2001 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.

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

*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 the Registrant's Registration Statement
                on Form S-4 (File No. 333-43014).

*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 the
                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 the 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

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

                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 the Registrant's Registration
                Statement on Form S-1 (File No. 33-46907).

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

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

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

*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 the 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 the 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 the

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

                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) 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
                the 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 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 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).

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.

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

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.

*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 the 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 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 the 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

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

*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,

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

                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 the 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 the 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 the
                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
                the 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 the 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

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

                Collateral Subagent, together with all exhibits
                thereto, filed as Exhibit 7 to the 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 the Registrant's report on Form 8-K dated
                February 11, 2000.

*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 the 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 the
                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 the 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
                the 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 the Registrant's report on Form 10-K for year
                ended December 31, 1995.

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

*4.14.3         Third Amendment to the Cone Mills Corporation 1983
                ESOP dated August 7, 1997, filed as Exhibit 4.8(c)
                to the 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 the 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 the Registrant's report on
                Form 10-K for the year ended January 1, 1995.

*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 the 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 the 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 the 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
                the 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,

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

                1997, filed as Exhibit 10.1(e) to the 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.

*10.7           Cone Mills Corporation SERP as amended and restated
                as of December 5, 1995, filed as Exhibit 10.2 to the
                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.

*10.8           Excess Benefit Plan of Cone Mills Corporation as
                amended and restated as of December 5, 1995, filed
                as Exhibit 10.3 to the 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.

*10.9           1984 Stock Option Plan of Registrant filed as
                Exhibit 10.7 to the 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 the 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 the 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 the 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

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

                the 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
                the 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 the 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 the 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.

*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.

*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 the 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.

<PAGE>

Exhibit                                                               Sequential
  No.           Description                                            Page No.
-------         -----------                                           ----------

*10.22          Form of Agreement between the Registrant and
                Levi Strauss dated as of March 30, 1992, filed as
                Exhibit 10.14 to the 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).

*10.24          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.

*10.25          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.

*10.26          2001 Stock Incentive Plan

10.26.1         Form of Incentive Stock Option Agreement
                under 2001 Stock Incentive Plan.
------------------------------------------------------------------
*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, 3101
North Elm Street, Greensboro, NC 27408.



<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: August 8, 2001              /s/ Gary L. Smith
     ---------------------        -----------------
                                  Gary L. Smith
                                  Executive Vice President and
                                  Chief Financial Officer