================================================================================
                                                                    Page 1 of 40
                                               Index to Exhibits - Pages 23 - 36
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended March 30, 2003

                                       OR

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

           For the Transition period from ___________ to ____________

                          Commission File Number 1-3634

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

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

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

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

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

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

Number of shares of common stock outstanding as of April 28, 2003: 25,772,344.


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

<PAGE>


                             CONE MILLS CORPORATION

                                      INDEX



PART I.       FINANCIAL INFORMATION
                                                                          Page
                                                                         Number

Item 1.       Financial Statements

              Consolidated Condensed Statements of Income
              Thirteen weeks ended March 30, 2003 and
              March 31, 2002 (Unaudited).....................................3

              Consolidated Condensed Balance Sheets
              March 30, 2003 and March 31, 2002 (Unaudited)
              and December 29, 2002..........................................4

              Consolidated  Condensed  Statements of Cash Flows
              Thirteen weeks ended March 30, 2003 and March 31, 2002
              (Unaudited) ...................................................5

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

Item 2.       Management's Discussion and Analysis of
              Financial Condition and Results of Operations.................14

Item 3.       Quantitative and Qualitative Disclosures about Market
              Risk  ........................................................21

Item 4.       Controls and Procedures.......................................21


PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings.............................................22
Item 6.       Exhibits and Reports on Form 8-K..............................22


<PAGE>


                                                       PART I
Item 1.
                                      CONE MILLS CORPORATION AND SUBSIDIARIES
                                    CONSOLIDATED CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                          Thirteen           Thirteen
                                                                        Weeks Ended        Weeks Ended
(in thousands, except per share data)                                  March 30, 2003     March 31, 2002
--------------------------------------------------------------------------------------------------------
                                                                        (Unaudited)        (Unaudited)
<S>                                                                    <C>                <C>
Net Sales                                                              $  102,264         $  105,820

Cost of Goods Sold                                                         88,465             91,515
                                                                       ---------------------------------
Gross Profit                                                               13,799             14,305

Selling and Administrative                                                  8,683              7,629
                                                                       ---------------------------------
Income from Operations                                                      5,116              6,676
                                                                       ---------------------------------
Other Income (Expense)
 Interest income                                                               79                 18
 Interest expense                                                         ( 3,649 )          ( 4,308 )
 Other                                                                      ( 318 )            ( 465 )
                                                                       ---------------------------------
                                                                          ( 3,888 )          ( 4,755 )
                                                                       ---------------------------------
Income from Operations before Income Tax Expense
 and Equity in Earnings (Losses) of Unconsolidated Affiliates               1,228              1,921
Income Tax Expense                                                            408                434
                                                                       ---------------------------------
Income from Operations before Equity in Earnings
 (Losses) of Unconsolidated Affiliates                                        820              1,487
Equity in Earnings (Losses) of Unconsolidated Affiliates                      981               ( 47 )
                                                                       ---------------------------------
Net Income                                                             $    1,801         $    1,440
                                                                       ---------------------------------

Income Available to Common Stockholders                                $      825         $      408
                                                                       ---------------------------------

Earnings Per Share - Basic and Diluted                                 $     0.03         $     0.02
                                                                       ---------------------------------

Weighted-Average Common Stock Outstanding
 Basic                                                                     25,758             25,667
                                                                       ---------------------------------
 Diluted                                                                   25,998             26,010
                                                                       ---------------------------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.


<PAGE>



                                       CONE MILLS CORPORATION AND SUBSIDIARIES
                                        CONSOLIDATED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        March 30,          March 31,       December 29,
(in thousands, except share and par value data)                           2003               2002              2002
-------------------------------------------------------------------------------------------------------------------------
                                                                       (Unaudited)        (Unaudited)       (Note)
<S>                                                                    <C>                <C>            <C>
ASSETS
 Current Assets
   Cash                                                                $    2,889         $      294     $       1,654
   Accounts receivable, less allowances: 2003, $3,400;
     2002, $5,700 and $3,400                                               31,659             41,166            33,017
   Inventories                                                             54,786             60,334            48,848
   Other current assets                                                     2,017              3,591             1,630
                                                                       --------------------------------------------------
     Total Current Assets                                                  91,351            105,385            85,149

 Investments in and Advances to Unconsolidated Affiliates                  54,594             51,358            53,613
 Other Assets                                                              30,254             24,215            30,423
 Property, Plant and Equipment                                            144,790            159,664           149,077
                                                                       --------------------------------------------------
                                                                       $  320,989         $  340,622     $     318,262
                                                                       --------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
 Current Liabilities
   Current maturities of long-term debt                                $   49,905         $   81,720     $      46,170
   Accounts payable                                                        28,404             28,551            25,589
   Sundry accounts payable and accrued liabilities                         20,229             19,889            25,448
                                                                       --------------------------------------------------

     Total Current Liabilities                                             98,538            130,160            97,207

 Long-Term Debt                                                            99,130             98,686            99,019
 Deferred Income Taxes                                                     15,246             10,849            14,884
 Other Liabilities                                                         13,925             14,077            13,699

 Stockholders' Equity
   Class A preferred stock - $100 par value; authorized
    1,500,000 shares; issued and outstanding: 2003, 319,741
    shares; 2002, 363,590 shares and 327,283 shares                        31,974             36,359            32,728
   Class B preferred stock - no par value; authorized
    5,000,000 shares                                                            -                  -                 -
   Common stock - $.10 par value; authorized 42,700,000
    shares; issued and outstanding: 2003, 25,757,544 shares;
    2002, 25,687,993 shares and 25,757,344 shares                           2,576              2,569             2,576
   Capital in excess of par                                                58,098             57,927            58,098
   Retained earnings (deficit)                                             11,013              ( 542 )           9,279
   Deferred compensation - restricted stock                                     -               ( 10 )               -
   Accumulated other comprehensive loss                                   ( 9,511 )          ( 9,453 )         ( 9,228 )
                                                                       --------------------------------------------------
     Total Stockholders' Equity                                            94,150             86,850            93,453
                                                                       --------------------------------------------------
                                                                       $  320,989         $  340,622     $     318,262
                                                                       --------------------------------------------------
</TABLE>
Note: The balance sheet at December 29, 2002, has been
      derived from the audited financial statements at that date.

See Notes to Consolidated Condensed Financial Statements.


<PAGE>


                                     CONE MILLS CORPORATION AND SUBSIDIARIES
                                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                          Thirteen           Thirteen
                                                                        Weeks Ended        Weeks Ended
(in thousands)                                                         March 30, 2003     March 31, 2002
---------------------------------------------------------------------------------------------------------
                                                                        (Unaudited)        (Unaudited)
<S>                                                                    <C>                <C>
CASH USED IN OPERATIONS                                                $  ( 3,191 )       $   ( 2,986 )
                                                                       ----------------------------------
INVESTING
 Proceeds from sale of property, plant and equipment                        1,065                 874
 Capital expenditures                                                       ( 779 )             ( 687 )
                                                                       ----------------------------------
   Cash provided by investing                                                 286                 187
                                                                       ----------------------------------

FINANCING
 Increase (decrease) in checks issued in excess of deposits                 1,226             ( 2,975 )
 Principal borrowings on long-term debt                                     3,735               6,564
 Proceeds from issuance of common stock                                         -                  58
 Dividends paid - Class A Preferred                                          ( 67 )              ( 91 )
 Redemption of Class A Preferred stock                                      ( 754 )             ( 992 )
                                                                       ----------------------------------
   Cash provided by financing                                               4,140               2,564
                                                                       ----------------------------------
   Net change in cash                                                       1,235               ( 235 )

Cash at Beginning of Period                                                 1,654                 529
                                                                       ----------------------------------

Cash at End of Period                                                  $    2,889         $       294
                                                                       ----------------------------------

Supplemental Disclosures of Additional Cash Flow Information:
Cash payments (receipts) for:
 Interest                                                              $    5,642         $     6,550
                                                                       ----------------------------------
 Income tax refunds                                                    $      ( 1 )       $         -
                                                                       ----------------------------------

Supplemental Schedule of Noncash Financing Activities:
 Stock dividend - Class A Preferred Stock                              $        -         $     3,920
                                                                       ----------------------------------
</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  and  Stock-Based  Employee
         Compensation

Financial   Statement   Preparation.   The  Cone  Mills   Corporation   ("Cone")
consolidated  condensed  financial  statements  for March 30, 2003 and March 31,
2002 are  unaudited,  but in the opinion of management  reflect all  adjustments
necessary to present fairly the  consolidated  condensed  balance sheets of Cone
Mills  Corporation  and  Subsidiaries  at March 30,  2003,  March  31,  2002 and
December 29, 2002, and the related  consolidated  condensed statements of income
and cash flows for the  thirteen  weeks ended March 30, 2003 and March 31, 2002.
All  adjustments  are  of  a  normal  recurring  nature.  The  results  are  not
necessarily indicative of the results to be expected for the full year.

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

Inventories  are stated at the lower of cost or market.  The last-in,  first-out
(LIFO) method is used to determine cost of most domestically produced goods. The
first-in, first-out (FIFO) or average cost methods are used to determine cost of
all other inventories. Because amounts for inventories under the LIFO method are
based  on an  annual  determination  of  quantities  as  of  the  year-end,  the
inventories  at March  30,  2003 and  March 31,  2002 and  related  consolidated
condensed  statements  of income for the thirteen  weeks then ended are based on
certain  estimates  relating to quantities  and cost as of the end of the fiscal
year.

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


<PAGE>


<TABLE>
<CAPTION>
                                                                         Thirteen           Thirteen
                                                                       Weeks Ended        Weeks Ended
(in thousands, except per share data)                                 March 30, 2003     March 31, 2002
                                                                   --------------------------------------
<S>                                                                   <C>                <C>
Net income, as reported                                               $     1,801        $     1,440
Deduct: Total stock-based employee compensation
 expense determined under fair value based
 method for all awards, net of related tax effects                          ( 125  )           ( 156  )
                                                                   --------------------------------------
Pro forma net income                                                  $     1,676        $     1,284
                                                                   --------------------------------------

Earnings per share - basic and diluted:
 Basic and diluted - as reported                                      $      0.03        $      0.02
 Basic and diluted - pro forma                                        $      0.03        $      0.01
</TABLE>


Note 2.  Securitization of Accounts Receivable

As of March 30,  2003 and March  31,  2002,  the  total  amount of  advances  of
proceeds   from  the  sale  of   receivables   under  the  Accounts   Receivable
Securitization  Facility ("A/R  Securitization  Facility") was $26.6 million and
$31.7 million,  respectively.  As of March 30, 2003 and March 31, 2002, included
in accounts  receivable were deferred  purchase price  receivables under the A/R
Securitization  Facility  of $26.1  million  and  $34.3  million,  respectively.
Expenses  incurred in connection with the sale of accounts  receivable were $0.3
million and $0.5 million for the  thirteen  weeks ended March 30, 2003 and March
31,  2002,  respectively,  and were  included  in  "Other"  in the  Consolidated
Condensed  Statements of Income.  The table below summarizes  certain cash flows
under the  securitization for the fiscal quarters ended March 30, 2003 and March
31, 2002:
<TABLE>
<CAPTION>

(in thousands)                                                           3/30/03            3/31/02
                                                                       ----------------------------------
<S>                                                                    <C>                <C>
Proceeds from securitizations                                          $  23,666          $  30,911
Reductions due to change in level of receivables sold                   ( 24,895 )         ( 36,140 )
Daily yield paid                                                           ( 319 )            ( 451 )
Servicing fees paid                                                        ( 126 )            ( 141 )
Servicing fees received                                                      126                141
</TABLE>


Note 3.  Inventories
<TABLE>
<CAPTION>
(in thousands)                                          3/30/03          3/31/02           12/29/02
                                                ---------------------------------------------------------
<S>                                                   <C>              <C>                <C>
Greige and finished goods                             $  30,431        $  37,384          $  24,401
Work in process                                           5,339            3,816              6,237
Raw materials                                            10,041            9,334              9,188
Supplies and other                                        8,975            9,800              9,022
                                                ---------------------------------------------------------
                                                      $  54,786        $  60,334          $  48,848
                                                ---------------------------------------------------------
</TABLE>


<PAGE>


Note 4.  Long-Term Debt and Recapitalization Plan
<TABLE>
<CAPTION>

(in thousands)                                          3/30/03          3/31/02           12/29/02
                                                ---------------------------------------------------------
<S>                                                   <C>              <C>                <C>
Senior Note                                           $  21,905        $  26,720          $  22,170
Revolving Credit Agreement                               28,000           55,000             24,000
8-1/8% Debentures                                        99,130           98,686             99,019
                                                ---------------------------------------------------------
                                                        149,035          180,406            145,189
Less current maturities                                  49,905           81,720             46,170
                                                ---------------------------------------------------------
                                                      $  99,130        $  98,686          $  99,019
                                                ---------------------------------------------------------
</TABLE>

On December 2, 2002,  Cone amended  agreements  with its lenders  extending  the
maturity  date of its  existing  Revolving  Credit  Facility and its Senior Note
obligation  through May 30, 2003,  which  subsequently was extended through June
27, 2003. The Revolving Credit Facility commitment was $56.4 million,  including
letters of credit, as of March 30, 2003. Cone's  obligations under its Revolving
Credit  Facility,  its Senior  Note and its  8-1/8%  Debentures  are  secured by
substantially all of the assets of Cone.

In January 2003, Cone presented a recapitalization  plan to its lenders. Some of
the key elements of the  recapitalization  plan as presented include:

o    Cone had entered  into a letter of intent with WLR  Recovery  Fund II, L.P.
     ("WLR"),  a fund  managed  by W.L.  Ross and  Company,  in which  WLR would
     purchase up to $27.0 million of convertible notes;

o    Existing lenders and bondholders would be asked to extend maturities by two
     to three years and make other modifications to their agreements;

o    The  contingent  payment  rights  would be  satisfied by the issuance of $1
     million in common stock at the closing of the transaction;

o    Cone   would   distribute   to  present   holders   of  its  common   stock
     nontransferable  rights to  purchase  up to $27.0  million  of  convertible
     notes. Any notes not purchased in the offering by common stockholders would
     be available  for purchase by directors  and  employees,  and any remaining
     notes would then be purchased by WLR; and

o    The new notes would bear interest at 12% per annum and be convertible  into
     common stock at a $1.00 per share.

This  recapitalization  plan  is  subject  to  a  number  of  contingencies  and
conditions,  including  negotiation of a final agreement with WLR,  agreement to
the  proposed  changes by Cone's  lenders and  bondholders,  approval of certain
elements of the plan by Cone's common  stockholders,  and the  effectiveness  of
certain  registration  statements to be filed with the  Securities  and Exchange
Commission.

Based upon present economic  conditions and Cone's near-term  operating  outlook
along with an  evaluation  of  several  options  for  expanding  low-cost  denim
capacity,  we do not believe the recapitalization  plan outlined in January will
be our ultimate  recapitalization  proposal to our lenders and stockholders.  In
the interim,  until a more definitive  recapitalization plan can be proposed, we
are working with our lenders to extend the existing  Revolving  Credit  Facility
and


<PAGE>


Senior Note obligation.  Cone believes that the maturity of the Revolving Credit
Facility  and  Senior  Note  will be  extended  as  needed  to  support  ongoing
operations,  however,  there can be no assurance  that such an extension will be
available on acceptable terms and conditions.


Note 5.  Class A Preferred Stock

On February 12, 2003,  Cone  declared a 12.00% stock  dividend on Cone's Class A
Preferred Stock,  which was paid on March 31, 2003. The dividend,  in the amount
of $3.9 million,  will be charged to retained  earnings in Cone's fiscal quarter
ended June 29, 2003.


Note 6.  Depreciation and Amortization

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

                                                Thirteen            Thirteen
                                              Weeks Ended         Weeks Ended
(in thousands)                                  3/30/03             3/31/02
                                           -------------------------------------

Depreciation                                  $    4,790          $    5,049
Amortization                                          23                  23
                                           -------------------------------------
                                              $    4,813          $    5,072
                                           -------------------------------------


<PAGE>


Note 7.  Earnings Per Share

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

<TABLE>
<CAPTION>
                                                          Thirteen               Thirteen
                                                         Weeks Ended            Weeks Ended
(in thousands, except per share data)                      3/30/03                3/31/02
                                                      ---------------------------------------
<S>                                                      <C>                    <C>
Net income                                               $     1,801            $     1,440
Preferred stock dividends                                      ( 976 )              ( 1,032 )
                                                      ---------------------------------------
Basic EPS - income available to common
    stockholders                                                 825                    408
Effect of dilutive securities                                      -                      -
                                                      ---------------------------------------
Diluted EPS - income available to common
    stockholders after assumed conversions               $       825            $       408
                                                      ---------------------------------------


Determination of shares:
Weighted-average shares                                       25,758                 25,675
Contingently issuable (unvested restricted shares)                 -                    ( 8 )
                                                      ---------------------------------------
Basic EPS - weighted-average shares                           25,758                 25,667
Effect of dilutive securities                                    240                    343
                                                      ---------------------------------------
Diluted EPS - adjusted weighted-average shares after
    assumed conversions                                       25,998                 26,010
                                                      ---------------------------------------

Earnings per share - basic and diluted                   $      0.03            $      0.02
                                                      ---------------------------------------
</TABLE>


<PAGE>


Note 8.  Segment Information

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

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

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

<TABLE>
<CAPTION>
                                                           Thirteen               Thirteen
                                                         Weeks Ended            Weeks Ended
(in thousands)                                             3/30/03                3/31/02
                                                      ---------------------------------------
<S>                                                      <C>                    <C>
Net Sales
 Denim                                                   $    84,495            $   82,115
 Commission Finishing                                         11,620                15,159
 Decorative Fabrics                                            7,375                10,319
 Other                                                            74                    62
                                                      ---------------------------------------
                                                             103,564               107,655
Less Intersegment Sales                                        1,300                 1,835
                                                      ---------------------------------------
                                                         $   102,264            $  105,820
                                                      ---------------------------------------
Income (Loss) from Operations
 Denim                                                   $     7,656            $    5,781
 Commission Finishing                                              8                 1,056
 Decorative Fabrics                                            ( 905 )                 516
 Other                                                         ( 396 )               ( 368 )
 Unallocated Expenses                                          ( 266 )               ( 356 )
                                                      ---------------------------------------
                                                               6,097                 6,629
 Less Equity in Earnings (Losses) of
   Unconsolidated Affiliates                                     981                  ( 47 )
                                                      ---------------------------------------
                                                               5,116                 6,676
Other Expense, Net                                           ( 3,888 )             ( 4,755 )
                                                      ---------------------------------------
Income from Operations before Income
   Tax Expense and Equity in Earnings
   (Losses) of Unconsolidated Affiliates                 $     1,228            $    1,921
                                                      ---------------------------------------
</TABLE>


<PAGE>


Note 9.  Comprehensive Income

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

<TABLE>
<CAPTION>
                                                           Thirteen               Thirteen
                                                         Weeks Ended            Weeks Ended
(in thousands)                                             3/30/03                3/31/02
                                                      ---------------------------------------
<S>                                                      <C>                    <C>
Net income                                               $     1,801            $     1,440
Other comprehensive loss,
 cotton derivatives losses                                     ( 283 )                ( 177 )
                                                      ---------------------------------------
                                                         $     1,518            $     1,263
                                                      ---------------------------------------
</TABLE>

Cotton  derivatives  losses  as of  March  30,  2003,  reflected  above in other
comprehensive  income  will be  recognized  in cost of goods  sold over the next
twelve months.


Note 10.  Financial Instruments

Cone utilizes derivative  financial  instruments to manage risks associated with
changes in cotton prices.

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.  At March 30, 2003 and March 31, 2002,  Cone recorded in
accumulated other comprehensive  income cotton derivative gains, net of deferred
tax benefits,  of $0.1  million.  Gains of $0.7 million were credited to cost of
goods sold during the first quarter 2003, as compared to $0.4 million during the
first quarter 2002. The  ineffective  portion of derivative  gains and losses is
reported in results of operations  immediately.  Hedge  ineffectiveness  for the
fiscal quarters ended March 30, 2003 and March 31, 2002, was immaterial.


<PAGE>


Note 11.  Restructuring and Impairment of Assets

A roll-forward of the activity related to Cone's  restructuring  charges for the
quarters ended March 30, 2003 and March 31, 2002 follows:

                                                            Corporate
                                                            & Textile
                                                            Products
(in thousands)                                                Group
                                                         ----------------
Balance, December 29, 2002                               $        58
Deductions, terminal leave and related benefits                    -
                                                         ----------------
Balance, March 30, 2003                                  $        58
                                                         ----------------

Balance, December 30, 2001                               $       639
Deductions, terminal leave and related benefits                ( 426  )
                                                         ----------------
Balance, March 31, 2002                                  $       213
                                                         ----------------


Note 12.  Income Tax Expense

The effective tax rate for the first quarter of 2003 was 33% versus an effective
tax rate of 23% for the first  quarter of 2002.  Tax  benefits  of export  sales
significantly reduced the effective tax rate for the first quarter of 2002.


Note 13.  Contingencies

The November 9, 2001,  amendment of Cone's  Revolving Credit Facility and Senior
Note contained  certain  contingent  payment rights that were exercisable by the
lenders if Cone were unable to  refinance  its debt prior to January  15,  2003.
These rights stipulated that Cone would be required to pay to the lenders within
two years  thereafter,  upon notice  from the  lenders,  an amount  equal to the
greater of $1 million or 10% of the market  value of Cone's  outstanding  common
stock at the time of notice.  Cone was unable to refinance  this debt by January
15, 2003.

On December 2, 2002,  Cone amended  agreements  with its lenders  extending  the
maturity  date of its  existing  Revolving  Credit  Facility and its Senior Note
obligation  through May 30, 2003,  which  subsequently was extended through June
27,  2003.  As a part of  Cone's  discussions  with  its  lenders  regarding  an
extension of its lending  agreements  into 2004, we have been unable to reach an
agreement  with our  lenders to defer the  exercise  date of certain  contingent
payment rights.  In April 2003, our lenders  verbally  indicated that they would
exercise their rights as part of a credit extension.  As part of our discussions
regarding an  extension,  we have been  working to achieve a mutually  agreeable
resolution to the ultimate  valuation and payment of these rights  including the
possibility  of  paying  all or a portion  in  common  stock.  Cone  expects  to
recognize a charge in its second quarter 2003 consolidated  financial statements
for these contingent  payment rights.  Based upon the common stock price for the
past 45 days  through  May 8,  2003,  the  indicated  payment  would  have  been
approximately  $4.6  million.  Cone will  continue to discuss with its lenders a
reduction in the valuation of these rights.


<PAGE>


Item 2.

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



OVERVIEW

The U.S. economy continued to grow slowly in the first quarter of 2003. The U.S.
Commerce  Department  reported  that the economy grew at an annual rate of 1.6%,
slightly up from the 1.4% rate of growth in the fourth quarter of 2002. Economic
growth was  negatively  impacted  by several  one-time  factors,  including  war
worries and bad winter  weather.  During the first three months of 2003 consumer
spending  slowed and  businesses  continued  to cut both  capital  spending  and
inventory investment. In the face of these economic conditions, Cone experienced
a 3.4% sales  decline,  as compared  with the prior year period and reported net
income of $1.8 million or $.03 per share after preferred dividends for the first
quarter of 2003.  For  comparison,  Cone  reported net income of $1.4 million or
$.02 per share after preferred dividends for the first quarter of 2002.

The textile  business is an extremely  competitive  business on a global  basis.
Overall  apparel  and  textile  imports  into  the  U.S.  continued  to  grow at
double-digit  rates with the bulk of the growth  coming from the Far East.  Many
Asian countries,  including China, have artificially  pegged their currencies to
the U.S.  dollar,  which has helped to keep their goods cheaper thereby boosting
their exports.  This currency effect,  the general global  oversupply of apparel
and textiles,  U.S. retail  consolidation  and the slowing in consumer  spending
have  resulted  in volume and  deflationary  pricing  pressures  throughout  the
apparel and home furnishings  markets.  On an aggregate basis the North American
Free Trade  Agreement  ("NAFTA")  and the  Caribbean  Basin  Initiative  ("CBI")
countries  currently  provide  approximately  60% of the denim  jeans and fabric
imports into the U.S. For the twelve-month  period ended February 2003,  imports
of denim apparel from Mexico and CBI grew at an annual rate of 1.2%, as compared
with a 5.5% rate of growth for imports from the Far East. Denim apparel produced
in CBI is made  principally  from U.S.  fabrics while denim apparel  produced in
Mexico is made typically from U.S. or Mexican produced fabrics.

Cone's business  strategy is to invest and grow in its core franchises  where it
is  recognized  as a  market  leader.  As a  result  of  economic  and  industry
conditions,  Cone is focused on four  initiatives:  (1) engage in  businesses in
which Cone believes it is an industry leader; (2) retain, attract,  motivate and
focus  a  talented  and  capable   management  team;  (3)  migrate  to  low-cost
manufacturing  platforms for commodity products; and (4) attract and efficiently
invest  capital.  Our  long-term  migration  strategy is focused on the Americas
where free trade  agreements,  such as NAFTA,  CAFTA (Central America Free Trade
Act) and FTAA (Free Trade of the  Americas),  are in place or are expected to be
enacted in the future.  We believe  that denim jeans  produced in these  regions
will maintain a significant  market share of the U.S.  retail market  because of
certain  unique  product  characteristics.  Among the  characteristics  of denim
fabric  and jeans that make them more  likely to be sourced  closer to or in the
U.S. are the  significant  fashion  element,  especially in women's  jeans,  the
overall  low labor  content as  compared  to other  textiles  and  apparel,  the
availability of U.S. cotton and certain other supply chain factors.


<PAGE>


Cone's  strategy  is to grow its denim  business  by  expanding  its  production
capacity in Mexico or other low-cost  countries in this hemisphere.  The options
to expand Cone's denim capacity in low cost countries include acquiring existing
operations, acquiring existing buildings and retrofitting into a denim operation
or building a greenfield  facility.  We believe that the capital  investment for
such a denim expansion is approximately  $60-$90 million.  The  capital cost for
such a facility will be dependent  upon its size, age and  flexibility.  Funding
the  denim  facility  will  require  debt  and  equity   financing  and  certain
modifications to Cone's current debt structure and lending agreements.  Cone has
not arranged  financing or modified its debt structure or lending  agreements to
date,  and there can be no assurance  that such  financing  will be available on
acceptable  terms and  conditions or that its present  lenders will agree to the
required modifications.

Regarding the  near-term  operating  outlook,  we expect  continued  pressure on
margins as a result of weak U.S. economic  conditions,  higher cotton prices and
the impact of high competitor  inventory  levels and imports.  Cone is unable to
determine what impact SARS (severe acute respiratory  syndrome) will have on its
business  other than to note that its markets  and  operations  are  principally
U.S., Europe, Mexico and Central America.


RESULTS OF OPERATIONS

First  Quarter  Ended March 30, 2003 Compared with First Quarter Ended March 31,
2002

For the first  quarter of 2003,  Cone had sales of $102.3  million,  as compared
with sales of $105.8  million for the first quarter of 2002 or a 3.4%  decrease.
The  decrease  in sales  was  attributable  to lower  sales  volume  in both the
commission finishing and decorative fabrics segments.

Gross profit for the first quarters of both 2003 and 2002 was 13.5% of sales. In
the first quarter of 2003,  the gross profit  margin was  favorably  impacted by
lower raw  material  costs that were offset by lower denim sales  prices,  lower
capacity   utilization  in  the  commission  finishing  and  decorative  fabrics
operations and higher energy costs.

Cone operates in three principal business segments:  Denim, Commission Finishing
and  Decorative  Fabrics.  (See  Note 8 of the Notes to  Consolidated  Condensed
Financial Statements included in Part I, Item 1.)

     Denim. Denim sales revenues of $84.5 million increased by 2.9% in the first
     quarter 2003, as compared to the first quarter of 2002. Sales yards were up
     approximately  1%, as compared with first quarter of 2002.  The increase in
     denim sales was primarily the result of a more  profitable  product mix and
     reduced  closeouts.  Denim sales prices continued to decline  slightly,  as
     compared with the first quarter of 2002.  Operating income was $7.7 million
     for the first  quarter,  as compared  with $5.8  million for the prior year
     quarter. The improvement in operating income on marginally higher volume is
     primarily  attributable  to lower raw material costs and savings related to
     cost reduction  initiatives.  These savings were partially  offset by lower
     sales  prices,  higher  employee  benefit  costs,  additional  freight cost
     associated with the start-up of the Turkish joint venture and higher energy
     costs.  Operating  income for the segment  includes  the equity in earnings
     (losses) of the Parras Cone joint venture and the Altamira  industrial park
     joint  venture.  Equity in earnings of Parras Cone,  Cone's  joint  venture
     plant in Mexico, was $1.0 million for the


<PAGE>


     first  quarter of 2003, as compared with $0.1 million for the first quarter
     of 2002. Parras Cone results were favorably  impacted by lower raw material
     prices and the decline in value of the Mexican peso versus the U.S. dollar.

     Commission Finishing. The commission finishing segment consists only of the
     Carlisle plant. Outside sales (total segment sales less intercompany sales)
     of the  commission  finishing  segment  for the first  quarter of 2003 were
     $10.5 million, down 21.3%, as compared with the first quarter of 2002 sales
     revenue.  Sales volume declined  significantly  as a result of overall weak
     market  conditions  in all of  Carlisle's  market  segments.  For the first
     quarter of 2003 the segment reported breakeven operating income results, as
     compared with $1.1 million  operating  income in the first quarter of 2002.
     Operating  results were  negatively  impacted by lower sales volume,  which
     resulted in curtailed operating  schedules,  and higher energy costs. Plant
     operating  efficiencies  continued to improve in the first quarter of 2003,
     as compared  with the first  quarter of 2002.  The home  fashions  industry
     continues to experience  extremely difficult market conditions as retailers
     have reduced future order commitments and inventory positions.

     Decorative  Fabrics.  The decorative  fabrics segment consists only of Cone
     Jacquards.  For the first quarter of 2003,  sales revenue of the decorative
     fabrics  segment was $7.4 million,  down 28.5%,  as compared with the first
     quarter  of 2002  sales  revenue.  Market  conditions  in the  bedding  and
     furniture  segments  continued to be weak and were exacerbated by increased
     import  penetration of furniture  products and the low level of new product
     introductions  achieved  by Cone  Jacquards  in 2001  and  2002.  Operating
     results were affected  negatively by lower sales volume,  resulting in poor
     plant utilization  levels and  unsatisfactory  operating  efficiencies.  In
     addition,  in order to improve  its new product  introductions  in 2003 the
     business unit increased  expenditures on design and sampling.  In the first
     quarter of 2002, Cone Jacquards operated a normal operating schedule versus
     a  curtailed  schedule  in the first  quarter of 2003.  Decorative  fabrics
     operating loss for the first quarter of 2003 was $0.9 million,  as compared
     with operating income of $0.5 million in the first quarter of 2002.

Selling  and  administrative  expenses  for the first  quarter of 2003 were $8.7
million, as compared with $7.6 million for the prior year first quarter. Selling
and administrative  expenses were 8.5% of sales in the first quarter of 2003, as
compared to 7.2% for the  comparable  2002 quarter.  Selling and  administrative
expenses  for the first  quarter of 2003 were  higher as a  percentage  of sales
primarily as a result of increased pension costs related to a negative return on
assets as contrasted  with an assumed  positive rate of return in 2002 and other
welfare benefit items.

Interest  expense for the first  quarter of 2003 was $3.6  million,  as compared
with $4.3  million for the first  quarter of 2002.  Benefits  from lower  market
interest  rates and lower  borrowings  outstanding  were  partially  reduced  by
increased rates under the lending agreements.  Other expenses of $0.3 million in
the first  quarter  of 2003  consist of the  ongoing  expenses  of the  accounts
receivable  securitization program, as compared to other expense of $0.5 million
in the first quarter of 2002.

The effective tax rate for the first quarter of 2003 was 33% versus an effective
tax rate of 23% for the first  quarter of 2002.  Tax  benefits  of export  sales
significantly reduced the effective tax rate for the first quarter of 2002.


<PAGE>


As discussed  under "Denim" above,  equity in earnings of Parras Cone and ASISA,
Cone's joint ventures in Mexico, was $1.0 million for the first quarter 2003, as
compared with a loss of less than $0.1 million for the first quarter of 2002.

For the first quarter of 2003,  Cone had a net profit $1.8 million,  or $.03 per
share after preferred dividends. For comparison,  for the first quarter of 2002,
Cone  reported a net profit of $1.4 million,  or $.02 per share after  preferred
dividends.


LIQUIDITY AND CAPITAL RESOURCES

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

The following is a summary of primary financing agreements as of March 30, 2003:

<TABLE>
<CAPTION>
($ amounts in millions)                                                      Interest/
                                        Facility             Amount          Discount
Financing Agreement                    Commitment          Outstanding         Rate          Maturity Date
-----------------------------------------------------------------------------------------------------------
<C> <C>                                <C>                 <C>                <C>                <C>
8-1/8% Debentures                      $    100.0          $   100.0          8.125%         Mar 15, 2005
Senior Note                                  21.9               21.9         14.200          June 27, 2003
Revolving Credit Facility                    56.4               28.0          8.750          June 27, 2003
A/R Securitization Facility                  60.0               26.6          4.740          Sept 1, 2004
</TABLE>


On December 2, 2002,  Cone amended  agreements  with its lenders  extending  the
maturity  date of its  existing  Revolving  Credit  Facility and its Senior Note
obligation  through May 30, 2003,  which  subsequently was extended through June
27, 2003. The amended  agreements  provided that Cone present a recapitalization
proposal  to its  lenders by  January  22,  2003.  A  recapitalization  plan was
presented  to our lenders  prior to the  required  date.  We have been unable to
reach an  agreement  with our  lenders  to defer the  exercise  date of  certain
contingent payment rights (Equity  Appreciation Rights) that were issued as part
of our November 2001 credit  extension  agreements.  In April 2003,  our lenders
verbally  indicated  that they would  exercise  their rights as part of a credit
extension.  These rights  entitle the lenders,  upon giving of notice within two
years of January 15, 2003,  to receive a payment of the greater of $1 million or
10% of the  market  value  of  Cone's  outstanding  common  stock  if we did not
refinance  the  Revolving  Credit  Facility and Senior Note by January 15, 2003,
which did not occur.  Cone has  requested an extension of the maturity  dates of
both  debts  to  March  2004,  and as  part  of our  discussions  regarding  the
extension,  we have been working to achieve a mutually  agreeable  resolution to
the ultimate valuation and payment of the Equity Appreciation Rights,  including
the  possibility  of paying all or a portion in common  stock.  Cone  expects to
recognize  a  charge  relating  to  these  rights  in its  second  quarter  2003
consolidated  financial  statements.  Based upon the common  stock price for the
past 45 days  through  April 25, 2003,  the  indicated  payment  would have been
approximately  $4.8  million.  Cone will  continue to discuss with its lenders a
reduction in the valuation of these rights.


<PAGE>


At March 30, 2003, Cone had availability under its financing agreements of $26.6
million.   Availability   under  the  Revolving  Credit  Facility  and  the  A/R
Securitization  Facility is determined by overall facility commitment levels and
borrowing base calculations, as defined in the respective agreements. During the
first  quarter  of  2003,  cash  used in  operations  was $3.2  million  as cash
generated was offset by an increase of $5.9 million in  inventories.  During the
first quarter of 2003, Cone invested in capital expenditures of $0.8 million and
received  proceeds of $1.1  million  from the sale of  non-essential  equipment.
Cone's domestic capital budget is $10.0 million for 2003.  Cone's capital budget
is based upon project requests to maintain its manufacturing  facilities in good
condition and to provide the flexibility and capability necessary to meet market
demands.  Cone expects to finance capital expenditures with internally generated
funds.

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,  its Revolving Credit Facility
and its Senior Note  obligation  mature on June 27, 2003.  There is no assurance
that Cone will be able to obtain the requested extension on its Revolving Credit
Facility  and its  Senior  Note or  otherwise  obtain  financing  on  terms  and
conditions  acceptable  to  Cone.  Cone  has not yet been  able to  finance  its
proposed  denim  expansion  strategy,  and its current debt  structure  will not
permit that  financing.  Cone is in the process of  exploring  its  alternatives
related to financing its businesses.

On January 16, 2003 Cone entered into a letter of intent with WLR Recovery  Fund
II, L.P.  ("WLR"),  a fund managed by W.L. Ross and Company,  in which WLR would
purchase up to $27.0 million of convertible notes to support a  recapitalization
of Cone's  balance  sheet that would  provide funds to allow Cone to execute its
Mexican  expansion  strategy.  Funds managed by W.L. Ross and Company  currently
hold 50% of Cone's  Revolving  Credit  Facility and a portion of its bonds.  The
recapitalization  plan  contemplated  by  the  letter  of  intent  contains  the
following elements:

o    Existing lenders and bondholders would be asked to extend maturities by two
     to three years and make other modifications to their agreements;

o    The  contingent  payment  rights  would be  satisfied by the issuance of $1
     million in common stock at the closing of the transaction;

o    Cone   would   distribute   to  present   holders   of  its  common   stock
     nontransferable  rights to  purchase  up to $27.0  million  of  convertible
     notes. Any notes not purchased in the offering by common stockholders would
     be available  for purchase by directors  and  employees,  and any remaining
     notes would then be purchased by WLR; and

o    The new notes would bear interest at 12% per annum and be convertible  into
     common stock at a $1.00 per share.

This  recapitalization  plan  is  subject  to  a  number  of  contingencies  and
conditions,  including  negotiation of a final agreement with WLR,  agreement to
the  proposed  changes by Cone's  lenders and  bondholders,  approval of certain
elements of the plan by Cone's common  stockholders,  and the  effectiveness  of
certain  registration  statements to be filed with the  Securities  and Exchange
Commission.


<PAGE>


Based upon present economic  conditions and Cone's near-term  operating  outlook
along with an  evaluation  of  several  options  for  expanding  low-cost  denim
capacity we do not believe the recapitalization plan described above will be our
ultimate recapitalization proposal to our lenders and stockholders.

We  are  unable  to  predict  whether  our  lenders  will  accept  our  ultimate
recapitalization  proposal or  modifications  thereof.  Cone  believes  that the
maturity of its Revolving  Credit  Facility and its Senior Note will be extended
to August 2004. However,  given the lack of liquidity in the capital markets and
the negative perception by lenders regarding the U.S. textile industry, there is
no assurance that Cone will be able to refinance or replace its Revolving Credit
Facility  and its  Senior  Note or  otherwise  obtain  financing  on  terms  and
conditions  acceptable to Cone. We will continue to explore alternatives related
to  financing  our  business  and the  expansion  of denim  capacity in low-cost
countries.

On March 30,  2003,  Cone's  long-term  capital  structure  consisted  of $149.0
million of long-term debt  (including  current  maturities) and $94.2 million of
stockholders' equity. For comparison,  Cone had $180.4 million of long-term debt
(including  current  maturities)  and $86.9 million of  stockholders'  equity at
March 31, 2002.

Accounts  receivable  on March 30, 2003,  were $31.7  million,  as compared with
$41.2 million at March 31, 2002.  Receivables,  including those sold pursuant to
the A/R  Securitization  Facility,  represented 52 days of sales  outstanding at
March 30, 2003 and 65 days at March 31, 2002. Advances outstanding under the A/R
Securitization  Facility  were $26.6 million at March 30, 2003 and $31.7 million
at March 31,2002.  The decrease in days  outstanding was primarily the result of
certain denim customers  paying in advance of the due date and the exit from the
khaki  business in late 2001. In the future we would expect days  outstanding to
increase from first quarter 2003 levels as our business  evolves to an increased
level of shipments to countries under the CBI trade initiative.

Inventories on March 30, 2003 were $54.8 million, as compared with $48.8 million
at  December  29,  2002,   reflecting  an  increase  in  denim   finished  goods
inventories.  For comparison purposes,  inventories at March 31, 2002 were $60.3
million.  The year over year reduction in inventories is primarily the result of
reduced denim  finished  goods  inventory  levels and lower cotton and other raw
material prices.

Cone's  financing  agreements  prohibit it from paying  dividends  on its Common
Stock.


FORWARD-LOOKING STATEMENTS AND RISK FACTORS

Except for the historical  information  presented,  the matters disclosed in the
following  discussion  and analysis  and other parts of this report,  as well as
oral  statements  made from  time to time by  representatives  of Cone,  include
forward-looking  statements  within the meaning of the Federal  Securities laws.
These statements represent Cone's current judgment on the future and are subject
to risks and uncertainties that could cause actual results to differ materially.
These forward-looking  statements include statements relating to our anticipated
financial  performance and business prospects.  Statements preceded by, followed
by or that include words such as "believe," "anticipate,"  "estimate," "expect,"
"could," and other similar expressions are to be considered such forward-looking
statements. These forward-looking statements speak only as of the date


<PAGE>


stated and we do not undertake any  obligation to update or revise  publicly any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise,  even if experience or future events make it clear that any
expected results expressed or implied by these  forward-looking  statements will
not be realized.  Although we believe that the  expectations  reflected in these
forward-looking  statements are reasonable,  these expectations may not prove to
be  correct  or we may not  achieve  the  financial  results,  savings  or other
benefits anticipated in the forward-looking  statements.  These  forward-looking
statements are necessarily  estimates reflecting the best judgment of our senior
management and involve a number of risks and uncertainties, some of which may be
beyond our control,  that could cause actual results to differ  materially  from
those suggested by the forward-looking statements. Such factors include, without
limitation:

o    the demand for textile products,  including Cone's products, will vary with
     the U.S. and world business cycles,  imbalances between consumer demand and
     inventories of retailers and manufacturers and changes in fashion trends,

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

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

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

o    Cone's ability to attract and maintain  adequate capital to fund operations
     and strategic initiatives,

o    increases in prevailing interest rates,

o    Cone's ability to complete an acceptable recapitalization  transaction that
     will enable it to expand its denim manufacturing in low-cost countries,

o    Cone's ability to extend its present credit arrangements, and

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

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


OTHER MATTERS

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.

Cone and its subsidiaries  are involved in legal  proceedings and claims arising
in the ordinary course of business. Although there can be no assurance as to the
ultimate  disposition  of these matters,  management  believes that the probable
resolution of such  contingencies will not have a material adverse effect on the
results of  operations,  financial  condition and liquidity of Cone. As of March
30, 2003, no significant litigation existed.



<PAGE>


NON-GAAP FINANCIAL MEASURE

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 used as the basis for certain  financial  covenants  in Cone's  current  debt
agreements as well as for its incentive compensation plans, and is calculated by
Cone as follows:

                                                         Thirteen Weeks Ended
                                                      --------------------------
(in thousands)                                           3/30/03        3/31/02
                                                      --------------------------
Income from operations                                   $ 5,116        $ 6,676
Depreciation and amortization                              4,813          5,072
                                                      --------------------------
EBITDA                                                   $ 9,929        $11,748
                                                      --------------------------


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

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


Item 4.  Controls and Procedures

Based on their evaluation of Cone's  disclosure  controls and procedures,  which
was  completed  within 90 days  prior to the  filing of this  report,  the Chief
Executive Officer ("CEO") and the Chief Financial Officer ("CFO") have concluded
that Cone's  disclosure  controls and  procedures  are  effective to ensure that
information  required to be  disclosed  by Cone in the reports  that it files or
submits  under the  Securities  Exchange Act of 1934,  as amended,  is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Securities  and  Exchange   Commission's  rules  and  forms.  In  reaching  this
conclusion,  the CEO and CFO  determined  that Cone's  disclosure  controls  and
procedures are effective in ensuring that such  information  is accumulated  and
communicated to Cone's management to allow timely decisions  regarding  required
disclosure.

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


<PAGE>


                                     PART II

Item 1.  Legal Proceedings

Cone and its subsidiaries  are involved in legal  proceedings and claims arising
in the ordinary course of business. Although there can be no assurance as to the
ultimate  disposition  of these matters,  management  believes that the probable
resolution of such  contingencies will not have a material adverse effect on the
results of  operations,  financial  condition and liquidity of Cone. As of March
30, 2003, no significant litigation existed.


Item 6.  Exhibits and Reports on Form 8-K

(a)  The  exhibits  to this Form 10-Q are  listed in the  accompanying  Index to
     Exhibits.

(b)  Reports on Form 8-K.

     Cone  filed the  following  current  reports  on Form 8-K during the period
     December 30, 2002, to the date of the filing of this report:

o    Current  report on Form 8-K, filed on January 17, 2003,  disclosing  Cone's
     entering  into a letter of intent with WLR  Recovery  Fund II, L.P., a fund
     managed  by W.L.  Ross and  Company,  to  purchase  up to $27.0  million of
     convertible  notes to support a  recapitalization  of Cone's balance sheet.
     The Form 8-K  contained one exhibit,  the press  release  issued by Cone on
     January 17, 2003.

o    Current  report on Form 8-K,  filed on April 24,  2003,  disclosing  Cone's
     first  quarter 2003  earnings  release and  conference  call.  The Form 8-K
     contained  one exhibit,  the earnings  release  issued by Cone on April 24,
     2003.

o    Current report on Form 8-K, filed on May 6, 2003, disclosing John L. Bakane
     elected by the Board of Directors to the position of Chairman of the Board.
     The Form 8-K contained one exhibit, the press release issued by Cone on May
     6, 2003.


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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

*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.


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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

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

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


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

*4.2.6    Letter Agreement dated as of June 30, 1995, between the Registrant and
          The  Prudential   Insurance  Company  of  America  superseding  Letter
          Agreement, filed as Exhibit 4.3(e) to Registrant's report on Form 10-Q
          for the  quarter  ended  July 2,  1995,  filed as  Exhibit  4.3(f)  to
          Registrant's report on Form 10-K for year ended December 31, 1995.

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


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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

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

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


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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

 4.2.24   Amendment of 1992 Note  Agreement  dated as of April 30, 2003,  by and
          among the Registrant and The Prudential Insurance Company of America.

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


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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

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


<PAGE>


Exhibit
  No.     Description

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

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

 4.3.11   Amendment  No. 11 to Credit  Agreement  dated as of April 30, 2003, by
          and among the Registrant,  as Borrower,  Each of the Lenders Signatory
          Thereto, and Bank of America, N.A., as Agent.

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

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

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

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

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


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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

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

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


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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

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

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

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


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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

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

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

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

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


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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

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

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

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

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


<PAGE>


Exhibit
  No.     Description

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

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

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

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

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

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

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

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

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

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


<PAGE>


Exhibit
  No.     Description

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

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

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

*21       Subsidiaries of the Registrant.

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

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

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

*99.2     Certification  Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of
          2002,  filed as Exhibit 99.2 to  Registrant's  report on Form 10-Q for
          the quarter ended June 30, 2002.

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

*Incorporated by reference to the statement or report indicated.

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


<PAGE>



                                   SIGNATURES




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


                                   CONE MILLS CORPORATION
                                   (Registrant)




Date:    May 14, 2003              /s/Gary L. Smith
         ------------              -----------------
                                   Gary L. Smith
                                   Executive Vice President and
                                   Chief Financial Officer


<PAGE>


                                                                        Annex A
                            Quarterly Certifications
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John L.Bakane, chairman, president and chief executive officer, certify that:

1.  I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  Cone  Mills
    Corporation;

2.  Based on my  knowledge,  this  quarterly  report does not contain any untrue
    statement of a material fact or omit to state a material  fact  necessary to
    make the  statements  made, in light of the  circumstances  under which such
    statements  were made, not misleading  with respect to the period covered by
    this quarterly report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
    information  included  in  this  quarterly  report,  fairly  present  in all
    material  respects the financial  condition,  results of operations and cash
    flows of the  registrant  as of,  and for,  the  periods  presented  in this
    quarterly report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
    establishing and maintaining  disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

    a)  designed such disclosure controls and procedures to ensure that material
        information  relating  to the  registrant,  including  its  consolidated
        subsidiaries,  is made  known to us by  others  within  those  entities,
        particularly  during the period in which this quarterly  report is being
        prepared;

    b)  evaluated the effectiveness of the registrant's  disclosure controls and
        procedures  as of a date within 90 days prior to the filing date of this
        quarterly report (the "Evaluation Date"); and

    c)  presented  in  this   quarterly   report  our   conclusions   about  the
        effectiveness  of the disclosure  controls and  procedures  based on our
        evaluation as of the Evaluation Date;

5.  The registrant's other certifying officer and I have disclosed, based on our
    most recent evaluation, to the registrant's auditors and the audit committee
    of  registrant's  board of directors (or persons  performing  the equivalent
    functions):

    a)  All  significant  deficiencies  in the design or  operation  of internal
        controls  which  could  adversely  affect  the  registrant's  ability to
        record, process, summarize and report financial data and have identified
        for the  registrant's  auditors  any  material  weaknesses  in  internal
        controls; and

    b)  Any fraud,  whether or not material,  that involves  management or other
        employees  who  have a  significant  role in the  registrant's  internal
        controls; and

6.  The  registrant's  other  certifying  officer and I have  indicated  in this
    quarterly report whether there were significant changes in internal controls
    or in other  factors  that  could  significantly  affect  internal  controls
    subsequent  to the  date  of  our  most  recent  evaluation,  including  any
    corrective  actions  with regard to  significant  deficiencies  and material
    weaknesses.

Date:  May 14, 2003      /s/ John L. Bakane
                         Title: Chairman, President and Chief Executive Officer


<PAGE>



                                                                        Annex A
                            Quarterly Certifications
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Gary L. Smith, chief financial officer, certify that:

1.  I have reviewed this report on Form 10-Q of Cone Mills Corporation;

2.  Based on my  knowledge,  this  quarterly  report does not contain any untrue
    statement of a material fact or omit to state a material  fact  necessary to
    make the  statements  made, in light of the  circumstances  under which such
    statements  were made, not misleading  with respect to the period covered by
    this quarterly report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
    information  included  in  this  quarterly  report,  fairly  present  in all
    material  respects the financial  condition,  results of operations and cash
    flows of the  registrant  as of,  and for,  the  periods  presented  in this
    quarterly report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
    establishing and maintaining  disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

    a)  designed such disclosure controls and procedures to ensure that material
        information  relating  to the  registrant,  including  its  consolidated
        subsidiaries,  is made  known to us by  others  within  those  entities,
        particularly  during the period in which this quarterly  report is being
        prepared;

    b)  evaluated the effectiveness of the registrant's  disclosure controls and
        procedures  as of a date within 90 days prior to the filing date of this
        quarterly report (the "Evaluation Date"); and

    c)  presented  in  this   quarterly   report  our   conclusions   about  the
        effectiveness  of the disclosure  controls and  procedures  based on our
        evaluation as of the Evaluation Date;

5.  The registrant's other certifying officer and I have disclosed, based on our
    most recent evaluation, to the registrant's auditors and the audit committee
    of  registrant's  board of directors (or persons  performing  the equivalent
    functions):

    a)  all  significant  deficiencies  in the design or  operation  of internal
        controls  which  could  adversely  affect  the  registrant's  ability to
        record, process, summarize and report financial data and have identified
        for the  registrant's  auditors  any  material  weaknesses  in  internal
        controls; and

    b)  Any fraud,  whether or not material,  that involves  management or other
        employees  who  have a  significant  role in the  registrant's  internal
        controls; and

6.  The  registrant's  other  certifying  officer and I have  indicated  in this
    quarterly report whether there were significant changes in internal controls
    or in other  factors  that  could  significantly  affect  internal  controls
    subsequent  to the  date  of  our  most  recent  evaluation,  including  any
    corrective  actions  with regard to  significant  deficiencies  and material
    weaknesses.

Date:  May 14, 2003                /s/ Gary L. Smith
                                   Title: Chief Financial Officer


<PAGE>


                                                                        Annex B
                            Quarterly Certifications
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to section 906 of the  Sarbanes-Oxley  Act of 2002 (subsections (a) and
(b) of Section 1350,  Chapter 63 of Title 18,  United States Code),  each of the
undersigned officers of Cone Mills Corporation ("Cone"), does hereby certify, to
such officer's knowledge, that:

The Quarterly  Report on Form 10-Q for the fiscal  quarter ended March 30, 2003,
of Cone fully  complies with the  requirements  of section 13(a) or 15(d) of the
Securities  Exchange  Act of 1934 and  information  contained  in the Form  10-Q
fairly presents,  in all material respects,  the financial condition and results
of operations of Cone.

Dated: May 14, 2003      /s/ John L. Bakane
                         Name: John L. Bakane
                         Title: Chairman, President and Chief Executive Officer

Dated: May 14, 2003      /s/ Gary L. Smith
                         Name: Gary L. Smith
                         Title: Chief Financial Officer