Page 1 of 80
                                                Index to Exhibits - Pages 27-42


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

                                    FORM 10-Q

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

               For the quarterly period ended September 30, 2001

                                       OR

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

             For the Transition period from ___________ to ____________

                          Commission File Number 1-3634

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

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

3101 North Elm Street, 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

Number of shares of common stock outstanding as of November 5, 2001:
25,622,816 shares




<PAGE>

                             CONE MILLS CORPORATION

                                      INDEX



                          PART I. FINANCIAL INFORMATION

                                                                         Page
                                                                        Number

Item 1.  Financial Statements

         Consolidated Condensed Statements of Operations
         Thirteen and Thirty-Nine weeks ended September 30, 2001 and
         October 1, 2000 (Unaudited) .........................................3

         Consolidated Condensed Balance Sheets
         September 30, 2001 and October 1, 2000 (Unaudited)
         and December 31, 2000................................................4

         Consolidated Condensed Statements of Cash Flows
         Thirty-Nine weeks ended September 30, 2001 and
         October 1, 2000 (Unaudited) .........................................5

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

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

Item 3.  Quantitative and Qualitative Disclosures about Market
         Risk  ..............................................................26


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings...................................................26
Item 6.  Exhibits and Reports on Form 8-K....................................26


<PAGE>
Item 1.
                                                     Part I

                                     CONE MILLS CORPORATION AND SUBSIDIARIES
                                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                      (in thousands, except per share data)
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                  Thirteen              Thirteen            Thirty-Nine           Thirty-Nine
                                                 Weeks Ended           Weeks Ended          Weeks Ended           Weeks Ended
                                              September 30, 2001     October 1, 2000     September 30, 2001     October 1, 2000
-------------------------------------------------------------------------------------------------------------------------------
                                                 (Unaudited)           (Unaudited)          (Unaudited)           (Unaudited)

Net Sales                                        $  113,034            $  158,702           $  384,162            $  449,514

Cost of Goods Sold                                  101,978               141,559              361,046               396,336
                                                 ----------------------------------------------------------------------------

Gross Profit                                         11,056                17,143               23,116                53,178

Selling and Administrative                            8,027                 9,709               28,624                33,432
Restructuring and Impairment of Assets                  200                     -               19,939                  (332)
                                                 ----------------------------------------------------------------------------

Income (Loss) from Operations                         2,829                 7,434              (25,447)               20,078
                                                 ----------------------------------------------------------------------------
Other Income (Expense)
   Interest income                                      137                   250                  350                   892
   Interest expense                                  (3,982)               (4,701)             (13,456)              (14,198)
   Other income (expense)                               893                (1,275)                (430)               (3,230)
                                                 ----------------------------------------------------------------------------
                                                     (2,952)               (5,726)             (13,536)              (16,536)
                                                 ----------------------------------------------------------------------------

Income (Loss) from Continuing Operations before
   Income Taxes (Benefit) and Equity in Earnings
   (Losses) of Unconsolidated Affiliates               (123)                1,708              (38,983)                3,542
Income Taxes (Benefit)                                  (43)                  581              (11,688)                1,204
                                                 ----------------------------------------------------------------------------
Income (Loss) from Continuing Operations before
    Equity in Earnings (Losses) of Unconsolidated
    Affiliates                                          (80)                1,127              (27,295)                2,338
Equity in Earnings (Losses) of Unconsolidated
    Affiliates                                          (88)                  932                  484                 2,157
                                                 ----------------------------------------------------------------------------
Income (Loss) from Continuing Operations               (168)                2,059              (26,811)                4,495
                                                 ----------------------------------------------------------------------------
Discontinued Operation
   Loss from discontinued operation                    (428)                 (944)              (4,620)               (2,742)
   Loss on sale of discontinued operation            (6,397)                    -               (6,397)                    -
   Income tax benefit                                 2,389                   321                3,856                   932
                                                 ----------------------------------------------------------------------------

                                                     (4,436)                 (623)              (7,161)               (1,810)
                                                 ----------------------------------------------------------------------------

Net Income (Loss)                                $   (4,604)           $    1,436           $  (33,972)           $    2,685
                                                 ----------------------------------------------------------------------------

Income (Loss) Available to Common Stockholders   $   (5,677)           $      389           $  (37,091)           $     (164)
                                                 ----------------------------------------------------------------------------

Earnings (Loss) per Share -
   Income (loss) from continuing operations      $    (0.05)           $     0.04           $    (1.17)           $     0.06
   Loss from discontinued operation                   (0.17)                (0.02)               (0.28)                (0.07)
                                                 ----------------------------------------------------------------------------

Earnings (Loss) per Share - Basic and Diluted    $    (0.22)           $     0.02           $    (1.45)           $    (0.01)
                                                 ----------------------------------------------------------------------------

Weighted-Average Common Shares Outstanding
   Basic                                             25,595                25,441               25,557                25,432
                                                 ----------------------------------------------------------------------------
   Diluted                                           25,595                25,649               25,557                25,432
                                                 ----------------------------------------------------------------------------

</TABLE>

See Notes to Consolidated Condensed Financial Statements.


<PAGE>


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

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

                                                                       September 30,        October 1,         December 31,
                                                                           2001                2000                2000
-------------------------------------------------------------------------------------------------------------------------------
                                                                        (Unaudited)         (Unaudited)           (Note)

ASSETS
   Current Assets
     Cash                                                               $      858          $    1,707         $     2,876
     Accounts receivable, less allowances of $5,350; 2000, $5,050           44,251              48,089              40,091
     Inventories                                                            64,499             109,849             106,308
     Other current assets                                                    6,414               9,925               6,270
                                                                        -------------------------------------------------------

       Total Current Assets                                                116,022             169,570             155,545

   Investments in and Advances to Unconsolidated Affiliates                 51,915              54,203              56,265
   Other Assets                                                             18,646              37,393              18,505
   Property, Plant and Equipment                                           167,968             206,703             192,901
                                                                        -------------------------------------------------------

                                                                        $  354,551          $  467,869         $   423,216
                                                                        -------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities
     Current maturities of long-term debt                               $    3,208          $   72,495         $    73,495
     Accounts payable                                                       29,511              45,924              37,420
     Sundry accounts payable and accrued liabilities                        23,948              26,691              33,282
     Deferred income taxes                                                       -              15,112               9,434
                                                                        -------------------------------------------------------

       Total Current Liabilities                                            56,667             160,222             153,631

   Long-Term Debt                                                          177,548             108,734             108,582
   Deferred Income Taxes                                                    14,922              30,780              20,338
   Other Liabilities                                                        14,567              11,876              14,246

   Stockholders' Equity
     Class A preferred stock - $100 par value; authorized
     1,500,000 shares; issued and outstanding 342,780 shares;
       2000, 343,546 shares and 335,340 shares                              34,278              34,355              33,534
     Class B preferred stock - no par value; authorized
       5,000,000 shares                                                          -                   -                   -
     Common stock - $.10 par value; authorized 42,700,000
       shares; issued and outstanding 25,622,816 shares;
       2000, 25,497,459 shares and 25,522,211 shares                         2,562               2,550               2,552
     Capital in excess of par                                               57,815              57,514              57,630
     Retained earnings                                                       4,564              70,513              42,512
     Deferred compensation - restricted stock                                  (17)               (158)                (40)
     Accumulated other comprehensive loss                                   (8,355)             (8,517)             (9,769)
                                                                        -------------------------------------------------------

       Total Stockholders' Equity                                           90,847             156,257             126,419
                                                                        -------------------------------------------------------

                                                                        $  354,551          $  467,869         $   423,216
                                                                        -------------------------------------------------------
</TABLE>

Note:  The balance sheet at December 31, 2000, has been derived from
       the audited financial statements at that date.

See Notes to Consolidated Condensed Financial Statements.


<PAGE>


                                     CONE MILLS CORPORATION AND SUBSIDIARIES
                                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                                (in thousands)
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                                         Thirty-Nine         Thirty-Nine
                                                                                         Weeks Ended         Weeks Ended
                                                                                      September 30, 2001   October 1, 2000
-----------------------------------------------------------------------------------------------------------------------------
                                                                                         (Unaudited)         (Unaudited)

CASH PROVIDED BY OPERATIONS                                                              $    2,779          $   32,033
                                                                                         ------------------------------------

INVESTING
   Investments in and advances to unconsolidated affiliates                                    (754)             (5,231)
   Proceeds from sale of property, plant and equipment                                        3,929               2,715
   Proceeds from sale of discontinued operation                                               5,375                   -
   Capital expenditures of continuing operations                                             (4,648)             (4,149)
   Capital expenditures of discontinued operation                                               (91)                (47)
                                                                                         ------------------------------------

     Cash provided by (used in) investing                                                     3,811              (6,712)
                                                                                         ------------------------------------

FINANCING
   Decrease in checks issued in excess of deposits                                           (6,119)             (2,892)
   Principal borrowings (payments) on long-term debt                                            548             (17,933)
   Proceeds from issuance of common stock                                                       195                 101
   Dividends paid - Class A Preferred                                                             -                 (62)
   Redemption of Class A Preferred stock                                                     (3,232)             (4,095)
                                                                                         ------------------------------------

     Cash used in financing                                                                  (8,608)            (24,881)
                                                                                         ------------------------------------

     Net change in cash                                                                      (2,018)                440

Cash at Beginning of Period                                                                   2,876               1,267
                                                                                         ------------------------------------

Cash at End of Period                                                                    $      858          $    1,707
                                                                                         ------------------------------------

Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
   Interest                                                                              $   15,997          $   16,905
                                                                                         ------------------------------------
   Income taxes, net of refunds                                                          $      239          $     (211)
                                                                                         ---------------------------------------

Supplemental Schedule of Noncash Financing Activities:
   Stock dividend - Class A Preferred Stock                                              $    3,881          $    2,845
                                                                                         ------------------------------------
</TABLE>

See Notes to Consolidated Condensed Financial Statements.


<PAGE>


                     CONE MILLS CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 1.  Basis of Financial Statement Preparation

The Cone Mills Corporation ("Cone") consolidated condensed financial statements
for September 30, 2001 and October 1, 2000 are unaudited, but in the opinion of
management reflect all adjustments necessary to present fairly the consolidated
condensed balance sheets of Cone Mills Corporation and Subsidiaries at September
30, 2001, October 1, 2000, and December 31, 2000, and the related consolidated
condensed statements of operations for the respective thirteen and thirty-nine
weeks ended September 30, 2001 and October 1, 2000 and cash flows for the
thirty-nine weeks then ended. All adjustments are of a normal recurring nature
with the exception of entries related to Cone's Reinvention Plan and its sale of
the John Wolf converted fabrics business (see Note 8, "Segment Information,"
Note 11, "Restructuring and Impairment of Assets" and Note 12, "Discontinued
Operation" to the Notes to Consolidated Condensed Financial Statements). The
results are not necessarily indicative of the results to be expected for the
full year.

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

Inventories are stated at the lower of cost or market. The last-in, first-out
(LIFO) method is used to determine cost of most domestically produced goods. The
first-in, first-out (FIFO) or average cost methods are used to determine cost of
all other inventories. Because amounts for inventories under the LIFO method are
based on an annual determination of quantities as of the year-end, the
inventories at September 30, 2001 and October 1, 2000 and related consolidated
condensed statements of operations for the thirteen and thirty-nine weeks then
ended are based on certain estimates relating to quantities and cost as of the
end of the fiscal year.


Note 2.  Securitization of Accounts Receivable

As of September 30, 2001 and October 1, 2000, the total amount outstanding under
the Accounts Receivable Facility was $45.3 million and $57.9 million,
respectively. The table below summarizes certain cash flows received and paid
under the securitization:


<PAGE>

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

                                           Thirteen            Thirteen           Thirty-Nine         Thirty-Nine
                                         Weeks Ended          Weeks Ended         Weeks Ended         Weeks Ended
(in thousands)                             9/30/01              10/1/00             9/30/01             10/1/00
                                           -------              -------             -------             -------
Proceeds from
  securitizations                        $    24,284          $     4,905         $    55,012         $    39,438
Repayments on
  securitizations                            (27,764)              (7,049)            (65,466)            (30,625)
Daily yield paid                                (685)              (1,278)             (2,494)             (3,214)
Servicing fees paid                             (186)                (248)               (589)               (641)
Servicing fees received                          186                  247                 665                 622


Note 3.  Inventories

(in thousands)                                                  9/30/01             10/1/00            12/31/00
                                                                -------             -------            --------
Greige and finished goods                                     $    34,939         $    70,686         $    69,991
Work in process                                                     6,611               5,571               6,463
Raw materials                                                      12,336              21,251              18,717
Supplies and other                                                 10,613              12,341              11,137
                                                               ----------          ----------          ----------
                                                              $    64,499         $   109,849         $   106,308
                                                               ----------          ----------          ----------


Note 4.  Long-Term Debt

(in thousands)                                                  9/30/01             10/1/00            12/31/00
                                                                -------             -------            --------
Senior Note                                                   $    27,494         $    29,209         $    28,946
Revolving Credit Agreement                                         57,000              54,000              55,000
8-1/8% Debentures                                                  96,262              98,020              98,131
                                                               ----------          ----------          ----------
                                                                  180,756             181,229             182,077
Less current maturities                                             3,208              72,495              73,495
                                                               ----------          ----------          ----------
                                                              $   177,548         $   108,734         $   108,582
                                                               ----------          ----------          ----------
</TABLE>

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

On November 9, 2001, Cone entered into agreements to refinance both its $68
million Revolver Credit Facility with its existing banks and its Senior Note.
Interest rates were increased and new covenant levels were established. The new
agreements provide for scheduled amortization or commitment reductions of $11
million through 2002 with a final maturity date of January 15, 2003, of which $1
million of debt amortization and commitment reduction coincided with the
November 9, 2001, refinancing. If Cone is


<PAGE>


unable to refinance this debt, in addition to the amounts owed, Cone will 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 the notice.

The Revolving Credit Agreement bears interest at the rate per annum equal to the
sum of (a) the higher of (i) the Federal Funds Rate (as defined) for such day
plus one-half of one percent (0.5%) and (ii) the Prime Rate (as defined) for
such day plus (b) 4.00%.

The interest rate on the Senior Note was increased to 13.7% on November 9, 2001,
from 11.7%.


Note 5.  Class A Preferred Stock

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


Note 6.  Depreciation and Amortization

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

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

                          Thirteen              Thirteen             Thirty-Nine           Thirty-Nine
                         Weeks Ended           Weeks Ended           Weeks Ended           Weeks Ended
(in thousands)             9/30/01               10/1/00               9/30/01               10/1/00
                         -----------           -----------           -----------           -----------

Depreciation             $     4,862           $     5,265           $    15,744           $    16,848
Amortization                      26                   455                    87                 1,360
                          ----------            ----------            ----------            ----------
                         $     4,888           $     5,720           $    15,831           $    18,208
                          ----------            ----------            ----------            ----------
</TABLE>

Depreciation expense included in the pre-tax loss from discontinued operation
(See Note 12, "Discontinued Operation," to the Notes to Consolidated Condensed
Financial Statements) is as follows:

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

                          Thirteen              Thirteen             Thirty-Nine           Thirty-Nine
                         Weeks Ended           Weeks Ended           Weeks Ended           Weeks Ended
(in thousands)              9/30/01              10/1/00               9/30/01               10/1/00
                         -----------           -----------           -----------           -----------

Depreciation             $        23           $        48           $       134           $       152

</TABLE>


<PAGE>


Note 7. Earnings (Loss) per Share

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

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

                                                                     Thirteen                 Thirteen
                                                                   Weeks Ended              Weeks Ended
(in thousands, except per share data)                                 9/30/01                  10/1/00
                                                                  -------------            -------------

Income (loss) from continuing operations                          $       (168)            $      2,059
Preferred stock dividends                                               (1,073)                  (1,047)
                                                                  -------------            -------------

Income (loss) from continuing operations
  available to common stockholders                                      (1,241)                   1,012
Loss from discontinued operation                                        (4,436)                    (623)
                                                                  -------------            -------------

Basic EPS - income (loss) available to
  common stockholders                                                   (5,677)                     389
Effect of dilutive securities                                                -                        -
                                                                  -------------            -------------

Diluted EPS - income (loss) available to
  common stockholders after assumed conversions                   $     (5,677)            $        389
                                                                  -------------            --------------

Determination of shares:

Weighted-average shares                                                 25,610                   25,496
Contingently issuable (unvested restricted shares)                         (15)                     (55)
                                                                  -------------            -------------

Basic EPS - weighted-average shares                                     25,595                   25,441
Effect of dilutive securities                                                -                      208
                                                                  -------------            -------------

Diluted EPS - adjusted weighted-average
  shares after assumed conversions                                      25,595                   25,649
                                                                  -------------            -------------

Earnings (loss) per share -
Income (loss) from continuing operations
  available to common stockholders                                $      (0.05)            $       0.04
Loss from discontinued operation                                         (0.17)                   (0.02)
                                                                  -------------            -------------

Earnings (loss) per share - basic and diluted                     $      (0.22)            $       0.02
                                                                  -------------            -------------
</TABLE>

<PAGE>


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

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

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

                                                                   Thirty-Nine              Thirty-Nine
                                                                   Weeks Ended              Weeks Ended
(in thousands, except per share data)                                 9/30/01                  10/1/00
                                                                  -------------            -------------

Income (loss) from continuing operations                          $    (26,811)            $      4,495
Preferred stock dividends                                               (3,119)                  (2,849)
                                                                  -------------            -------------

Income (loss) from continuing operations
  available to common stockholders                                     (29,930)                   1,646
Loss from discontinued operation                                        (7,161)                  (1,810)
                                                                  -------------            -------------

Basic EPS - loss available to common stockholders                      (37,091)                    (164)
Effect of dilutive securities                                                -                        -
                                                                  -------------            -------------

Diluted EPS - loss available to
  common stockholders after assumed conversions                   $    (37,091)            $       (164)
                                                                  -------------            -------------

Determination of shares:

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

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

Diluted EPS - adjusted weighted-average
  shares after assumed conversions                                      25,557                   25,432
                                                                  -------------            -------------

Earnings (loss) per share -
Income (loss) from continuing operations
  available to common stockholders                                $      (1.17)            $       0.06
Loss from discontinued operation                                         (0.28)                   (0.07)
                                                                  -------------            -------------

Loss per share - basic and diluted                                $      (1.45)            $      (0.01)
                                                                  -------------            -------------
</TABLE>

The number of potentially dilutive common stock options outstanding using the
treasury stock method for the thirty-nine weeks ended September 30, 2001 and
October 1, 2000 were approximately 84,000 and 105,000, respectively, but were
not included in the computation of diluted loss per share because to do so would
have been antidilutive.


<PAGE>


Note 8.  Segment Information

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

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

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

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

                                                                     Thirteen                 Thirteen
                                                                   Weeks Ended              Weeks Ended
(in thousands)                                                       9/30/01                   10/1/00
                                                                  -------------            -------------
Net Sales
Denim                                                             $     82,747             $    120,258
Khaki                                                                    6,076                   12,039
Commission Finishing                                                    16,004                   17,556
Decorative Fabrics                                                      10,790                   13,102
Other                                                                       52                       83
                                                                  -------------            -------------
                                                                       115,669                  163,038
Less Intersegment Sales                                                  2,635                    4,336
                                                                  -------------            -------------
                                                                  $    113,034             $    158,702
                                                                  -------------            -------------
Income (Loss) from Operations
Denim                                                             $      2,460             $     10,324
Khaki                                                                     (462)                    (234)
Commission Finishing                                                     1,279                   (2,031)
Decorative Fabrics                                                         732                      766
Other                                                                     (182)                    (141)
Unallocated Expenses                                                      (736)                    (318)
                                                                  -------------            -------------
                                                                         3,091                    8,366
Reinvention Plan - Facility Consolidation Charges                         (150)                       -
Restructuring                                                             (200)                       -
                                                                  -------------            -------------
                                                                         2,741                    8,366
Less Equity in Earnings (Losses) of
  Unconsolidated Affiliates                                                (88)                     932
                                                                  -------------            -------------
                                                                         2,829                    7,434
Other Expense, Net                                                      (2,952)                  (5,726)
                                                                  -------------            -------------
Income (Loss) from Continuing Operations
  before Income Taxes (Benefit) and Equity in
  Earnings (Losses) of Unconsolidated Affiliates                  $       (123)            $      1,708
                                                                  -------------            -------------
</TABLE>

<PAGE>


Note 8. Segment Information (continued)

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                   Thirty-Nine              Thirty-Nine
                                                                   Weeks Ended              Weeks Ended
(in thousands)                                                       9/30/01                  10/1/00
                                                                  -------------            -------------
Net Sales
Denim                                                             $    286,372             $    325,736
Khaki                                                                   22,816                   32,818
Commission Finishing                                                    53,321                   62,005
Decorative Fabrics                                                      31,854                   40,210
Other                                                                      260                      737
                                                                  -------------            -------------
                                                                       394,623                  461,506
Less Intersegment Sales                                                 10,461                   11,992
                                                                  -------------            -------------
                                                                  $    384,162             $    449,514
                                                                  -------------            -------------

Income (Loss) from Operations
Denim                                                             $     10,910             $     27,002
Khaki                                                                   (2,905)                  (2,895)
Commission Finishing                                                     1,551                   (2,813)
Decorative Fabrics                                                         402                    2,056
Other                                                                     (249)                     471
Unallocated Expenses                                                    (2,606)                  (1,918)
                                                                  -------------            -------------
                                                                         7,103                   21,903
Reinvention Plan - Inventory Charges and
  Facility Consolidation Charges                                       (12,127)                       -
Restructuring and Impairment of Assets                                 (19,939)                     332
                                                                  -------------            -------------
                                                                       (24,963)                  22,235

Less Equity in Earnings of Unconsolidated Affiliates                       484                    2,157
                                                                  -------------            -------------
                                                                       (25,447)                  20,078
Other Expense, Net                                                     (13,536)                 (16,536)
                                                                  -------------            -------------

Income (Loss) from Continuing Operations
  before Income Taxes (Benefit) and Equity in
  Earnings of Unconsolidated Affiliates                           $    (38,983)            $      3,542
                                                                  -------------            -------------
</TABLE>

Note 9. Comprehensive Income (Loss)

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


<PAGE>

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

                                    Thirteen            Thirteen           Thirty-Nine        Thirty-Nine
                                   Weeks Ended         Weeks Ended         Weeks Ended        Weeks Ended
(in thousands)                       9/30/01             10/1/00             9/30/01            10/1/00
                                   ------------        ------------        ------------       ------------
Net income (loss)                  $    (4,604)        $     1,436         $   (33,972)       $     2,685
Other comprehensive
  income (losses), cotton
  derivatives gains (losses)               (99)                  -               1,414                  -
                                   ------------        ------------        ------------       ------------
                                   $    (4,703)        $     1,436         $   (32,558)       $     2,685
                                   ------------        ------------        ------------       ------------
</TABLE>

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


Note 10.  Derivatives

Cone adopted SFAS No. 133 and SFAS No. 138 as of January 1, 2001. Cone has
determined that its interest rate swap agreement is an ineffective hedge under
the new standards. Because of the transition provision of SFAS No. 133, Cone did
not recognize a cumulative effect of an accounting change affecting results of
operations related to its interest rate swap agreement at January 1, 2001. The
adjustment to the carrying value of debt in the amount of approximately $2.7
million on January 1, 2001, recorded under the transition provisions of the new
standards, was amortized to results of operations over the period to swap
termination. Cone recognized approximately $0.1 million and $0.5 million in
expense related to amortization of this adjustment to the carrying value of debt
for the thirteen and thirty-nine weeks ended September 30, 2001, respectively,
which is reflected in the "Other income (expense)" caption on the consolidated
condensed statements of operations. Changes in the fair value of the interest
rate swap agreement after transition will be recorded in the statements of
operations in the period of change. For the thirteen and thirty-nine weeks ended
September 30, 2001, Cone recognized a gain on the change in the fair value of
this derivative instrument of $1.7 million and $2.5 million respectively, which
is reflected in the "Other income (expense)" caption on the consolidated
condensed statements of operations. As of September 30, 2001, the interest rate
swap had an estimated fair market value of $0.2 million and was recorded in
other long-term liabilities on the Consolidated Condensed Balance Sheet.
Effective October 4, 2001, the interest rate swap agreement was terminated for a
total cost of $50,000. In the course of terminating this derivative instrument,
Cone will recognize a charge of $2.2 million in the fourth quarter of 2001 for
the write off of the swap's unamortized transition liability that resulted from
the adoption of SFAS No. 133.

Cash Flow Hedging Strategy

Cotton is the primary raw material for Cone's fabric manufacturing operations.
Cone has an established cotton purchasing program, administered in conformance
with policies approved by the Board of Directors, to ensure an uninterrupted
supply of appropriate


<PAGE>


quality and quantities of cotton, to cover committed and anticipated fabric
sales and to manage margin risks associated with price fluctuations on
anticipated cotton purchases. Cone primarily uses forward purchase contracts
and, to a lesser extent, futures and option contracts. Cone considers its cotton
derivatives to be primarily cash flow hedges of anticipated future transactions
under SFAS No. 133. The effective portion of derivative gains and losses for
these hedges is initially reported as a component of other comprehensive income
(outside results of operations) and subsequently reclassified into results of
operations when the forecasted transactions being hedged affect results of
operations. The ineffective portion of derivative gains and losses is reported
in results of operations immediately. Hedge ineffectiveness for the thirteen and
thirty-nine weeks ended September 30, 2001, was immaterial.

For the thirteen and thirty-nine weeks ended September 30, 2001, Cone recorded
in other comprehensive income (loss) cotton derivative losses of approximately
$0.2 million and cotton derivative gains of approximately $2.2 million,
respectively, net of deferred tax benefit of $0.1 million and deferred taxes of
$0.8 million, respectively, (see Note 9, "Comprehensive Income (Loss)" to the
Notes to Consolidated Condensed Financial Statements).


Note 11.  Restructuring and Impairment of Assets

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

During the third quarter of fiscal year 2001, Cone recognized an additional
charge of $0.2 million for terminal leave pay and benefits related to its
Reinvention Plan announced in May 2001.

Property and equipment that have been sold, or are held for sale at September
30, 2001, and are no longer in use, were written down to their estimated fair
values less costs to sell. Determination of fair market value was based upon
in-house engineering and purchasing appraisals, surveys with used equipment
dealers, current price for new equipment and analysis of whether the equipment
would be used internally, sold or abandoned. As of September 30, 2001, property
and equipment held for sale by segment were: (in thousands)

         Denim                                   $  1,535
         Commission Finishing                       4,075
         Yarn-Dyed Products                         1,310
         Other                                         46
                                                  -------
                                                 $  6,966
                                                  -------


<PAGE>


Depreciation expense on property, plant and equipment classified as "held for
sale" prior to being classified as such was $0.4 million for the thirty-nine
weeks ended September 30, 2001.

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

A roll-forward of the activity related to Cone's restructuring charges for the
thirty-nine weeks ended September 30, 2001 and October 1, 2000, follows:

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

Balance, December 31, 2000         $        -      $        -      $      -        $  964       $      964
                                   -----------     -----------     ---------       -------      -----------
Additions:
Terminal leave and related
  benefits                              3,535               -             -             -            3,535
Consulting and legal fees                 600               -             -             -              600
Pension curtailment*                      888               -             -             -              888
                                   -----------     -----------     ---------       -------      -----------

                                        5,023               -             -             -            5,023
                                   -----------     -----------     ---------       -------      -----------
Deductions:
Terminal leave and related
  benefits                             (1,701)              -             -          (925)          (2,626)
Consulting and legal fees                (600)              -             -             -             (600)
Pension curtailment*                     (888)              -             -             -             (888)
                                   -----------     -----------     ---------       -------      -----------

                                       (3,189)              -             -          (925)          (4,114)
                                   -----------     -----------     ---------       -------      -----------
Balance, September 30, 2001        $    1,834      $        -      $      -        $   39       $    1,873
                                   -----------     -----------     ---------       -------      -----------

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

Deductions:
Terminal leave and related
  benefits                               (718)           (191)         (939)            -           (1,848)
                                   -----------     -----------     ---------       -------      -----------
Balance, October 1, 2000           $        -      $        -      $      -        $    -       $        -
                                   -----------     -----------     ---------       -------      -----------
</TABLE>

*Items expensed as incurred.


Note 12. Discontinued Operation

Cone adopted SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," in the third quarter of fiscal year 2001. SFAS No. 144
broadens the applicable generally accepted accounting principles related to
discontinued operations to include a component of an entity (rather than a
segment of a business). A component of an entity comprises operations and cash
flows that can be clearly distinguished, operationally and for financial
reporting purposes, from the rest of the entity.


<PAGE>



On August 10, 2001, Cone sold substantially all of the assets, with the
exception of outstanding accounts receivable, of the John Wolf converted fabrics
business, a component of its Decorative Fabrics segment, to an unrelated third
party and exited the decorative fabrics converting business. Cone will not have
any significant continuing involvement in the operations of the John Wolf
division. Thus, the results of the John Wolf division have been reflected as a
discontinued operation and prior periods have been restated accordingly.

In connection with the sale and discontinuance of the converted fabrics
business, Cone recognized a loss of $6.4 million. This loss includes a charge
for terminal leave pay and benefits for salaried employees of $1.1 million and
lease termination charges of $0.2 million related to its leased office space in
New York. The discontinuance of the converted fabrics business resulted in the
reduction of Cone's workforce by 18 employees.

Net sales and losses from the discontinued operation were as follows:

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

                                        Thirteen          Thirteen         Thirty-Nine      Thirty-Nine
                                       Weeks Ended       Weeks Ended       Weeks Ended      Weeks Ended
(in thousands)                           9/30/01           10/1/00           9/30/01          10/1/00
                                       -----------       -----------       -----------      -----------

Net sales                              $     2,794       $     6,571       $    14,415      $    18,985
                                        -----------       -----------       -----------      -----------

Pretax loss from discontinued
  operation                            $      (428)      $      (944)      $    (4,620)     $    (2,742)
Pretax loss on sale of
  business component                        (6,397)                -            (6,397)               -
Income tax benefit                           2,389               321             3,856              932
                                        -----------       -----------       -----------      -----------

Net loss from discontinued
  operation                            $    (4,436)      $      (623)      $    (7,161)     $    (1,810)
                                        -----------       -----------       -----------      -----------
</TABLE>

Note 13. Income Tax Benefits

The effective tax rate for the thirty-nine weeks ended September 30, 2001, is
lower than the statutory rate of 35% because Cone recorded a valuation allowance
in the second quarter of 2001 on the deferred tax assets that resulted from the
non-cash impairment charges totaling $5.6 million related to Cone's investments
in certain of its unconsolidated affiliates, Ashima and CIPSA. The impairment
charges will result in future tax deductible capital losses; however, Cone does
not expect to have taxable capital gains in the future to realize these tax
deductible losses. Thus, Cone has established the valuation allowance on the
resulting deferred tax assets. The effective tax rate for the thirty-nine weeks
ended October 1, 2000, was 34%.


<PAGE>


Item 2.

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

UPDATE (REINVENTION PLAN)

On May 24, 2001, Cone announced the initiation of its "Reinvention Plan". The
objectives of the Reinvention Plan are 1) to produce $30 - $40 million in annual
cost savings or improvement in operating results of under-performing businesses,
and 2) to actively market non-core assets including idle plants, property,
equipment and excess inventories with a cash generation target of $15 to $25
million over 18 months.

The Reinvention Plan initially had four components: 1) workforce reductions; 2)
changes in employee pay and benefit practices; 3) streamlining of Cone's
business practices, which includes a broad range of items from maintenance
scheduling to vendor sourcing practices, to the consolidation of denim
operations to reduce efficiently U.S. capacity; and 4) improvement of the
performance of the khaki and John Wolf converting fabrics businesses.
Subsequently, Cone decided to exit the khaki business and sell its John Wolf
converted fabrics business.

To date the implementation of the Reinvention Plan has resulted in the reduction
of the workforce by approximately 617 employees, primarily at Cone's corporate
office and the Rutherford County facilities, curtailment in salaried defined
benefit pension plans, changes in business practices, and the announced
consolidation of the Haynes and Florence denim facilities.

Pursuant to the Reinvention Plan, Cone finalized the sale of its John Wolf
converted fabrics business on August 10, 2001. Cone will continue to compete in
the woven home fabrics business with its Jacquard mill located in Cliffside,
North Carolina. On October 30, 2001 Cone announced its decision to exit the
khaki business segment because Cone was not a leader in this category and Cone
believes the long-term outlook for khaki fabrics produced in North America
is negative. Management expects to complete the disposal of the khaki business
by the first quarter of 2002.

Cone has enacted initiatives to date that are expected to yield in excess of $30
million in annualized cost reductions, loss avoidance or business improvements.
For 2002, Cone has targeted additional initiatives that are expected to yield $2
to $4 million in additional savings per year.

During the third quarter of 2001, Cone recognized actual savings of
approximately $5.0 million from the Reinvention Plan initiatives. Cone expects
to realize greater benefits in future fiscal quarters.


<PAGE>


RESULTS OF OPERATIONS

Third Quarter Ended September 30, 2001 Compared with Third Quarter Ended
October 1, 2000

For the third quarter of 2001, Cone had sales from continuing operations of
$113.0 million, a decrease of 28.8% over sales of $158.7 million for the third
quarter of 2000. The decrease was due to lower sales across all segments except
commission finishing.

Cone had a gross profit of $11.1 million for the third quarter of 2001, as
compared to a gross profit of $17.1 million for the third quarter of 2000. The
decline was primarily due to lower sales volume, increased cotton costs in cost
of sales, curtailed manufacturing operating schedules and continued pressure on
prices.

Segment Information.  Cone has four principal business segments:  1) denim;
2) khaki; 3) commission  finishing;  and 4) decorative  fabrics.  (See Note 8 to
Notes to Consolidated  Condensed  Financial  Statements included in Part I, Item
1.)
         Denim. Denim segment sales revenues for the third quarter of 2001 were
         $82.7 million, down 31.2% from the third quarter of 2000 sales of
         $120.3 million. Sales yards were 31.4% lower, as compared with the
         third quarter of 2000. Operating income for the denim segment was $2.5
         million, or 3.0% of sales for the most recent quarter, as compared with
         $10.3 million, or 8.6% of sales for the third quarter of 2000. Futures
         for cotton, Cone's major raw material, declined throughout the year
         from $.60 per pound on January 2, 2001 to $.37 per pound on September
         30, 2001, but, because of Cone's practices of buying cotton forward,
         Cone does not expect to benefit from reduced cotton costs before the
         first quarter of 2002. Operating income for the segment includes the
         equity in earnings from the Parras Cone joint venture plant, which was
         down from the third quarter of 2000 because of lower sales and
         curtailed operating schedules at Parras Cone in the third quarter of
         2001.

         Khaki. Khaki segment sales revenues for the third quarter of 2001 were
         $6.1 million, down 49.5% from the third quarter of 2000 sales of $12.0
         million. Sales yards were flat, as compared with the third quarter of
         2000. Revenues were negatively affected as a result of the weakness in
         the market for khaki fabrics, as compared to the third quarter of 2000.
         The khaki segment had an operating loss of $0.5 million or 7.6% of
         sales for the most recent quarter, as compared with a loss of $0.2
         million or 1.9% of sales for the third quarter of 2000.

         Based upon the weakness of the domestic khaki business, Cone's market
         position in khaki and Cone's long-term outlook for khaki fabrics
         produced in North America, Cone announced its plan to exit the khaki
         segment in the fourth quarter of 2001.


<PAGE>


         Commission Finishing. Outside sales of the commission finishing segment
         were $13.4 million for the third quarter of 2001, up 1.1% from the
         third quarter of 2000. Outside sales of the commission finishing
         segment, excluding sales of the Raytex finishing operation closed in
         the first quarter of 2001, increased 49.1% for the third quarter of
         2001, as compared with the prior year, primarily driven by market
         consolidation. In addition, sales related to the John Wolf product line
         are now reported as outside sales as a result of the sale of John Wolf
         to Richloom Fabrics. For the third quarter of 2001, the segment had
         operating income of $1.3 million, as compared with a loss of $2.0
         million for the third quarter of 2000. The operating income improvement
         in the third quarter was primarily attributable to improved sales
         volume, sales mix and operating efficiencies at the Carlisle commission
         finishing facility and the closing of Raytex.

         Decorative Fabrics. The Decorative Fabrics segment now consists only of
         the jacquards operation. For the third quarter of 2001, sales of the
         decorative fabrics segment were $10.8 million, down 17.6% from sales of
         $13.1 million for the same quarter of the previous year because of
         weakening sales to furniture manufacturers. The decorative fabrics
         segment had operating income of $0.7 million in the third quarter of
         2001, as compared with operating income of $0.8 million for the third
         quarter of 2000. Operating income in the third quarter was enhanced by
         improved operating efficiencies and better cost management.

Cone's selling and administrative expenses are primarily fixed expenses and
therefore do not vary directly with sales. Selling and administrative expenses
from continuing operations were $8.0 million for the third quarter of 2001, as
compared with $9.7 million in the third quarter of 2000. The lower expenses in
the third quarter of 2001 were primarily due to savings related to the
Reinvention Plan.

Interest expense for the third quarter of 2001 was $4.0 million, as compared
with $4.7 million for the third quarter of 2000. Other income consisted of the
ongoing expense of the accounts receivable securitization program, amortization
of the transition amount related to recording the interest rate swap and the
valuation adjustment of the interest rate swap derivative instrument. In the
third quarter of 2001, Cone recognized income of $1.7 million related to marking
to market the fair value of its interest rate swap as a result of the decline in
worldwide interest rates following the events of September 11, 2001. As a result
of the decline in the fair market value of the swap, on October 4, 2001, Cone
terminated the swap for $50,000. The termination of the swap will result in a
fourth quarter 2001 charge of $2.2 million for the write off of the swap's
unamortized transition liability that resulted from the adoption of SFAS No.
133.

In the third quarters of 2001 and 2000, the income tax benefit as a percent of
income (loss) before tax excluding equity in earnings (losses) of unconsolidated
affiliates was 35% and 34%, respectively.


<PAGE>


Equity in earnings of Parras Cone, Cone's joint venture plant in Mexico, was
insignificant as Parras Cone operated near breakeven for the third quarter of
2001, as compared with income of $0.9 million for the third quarter of 2000. The
decline in operating results for Parras Cone was primarily due to decreased
sales volume and expenses related to curtailed operating schedules. In addition,
Cone recognized $0.1 million as its pro rata share of the net loss in its joint
venture investment in the Mexican industrial park in Tamaulipas, Mexico.

For the third quarter of 2001, Cone had a net loss from continuing operations of
$0.2 million, or $0.05 per share after preferred dividends as compared with net
income from continuing operations of $2.1 million, or $0.04 per share after
preferred dividends.

On August 10, 2001, Cone sold substantially all of the assets of the John Wolf
converted fabrics business and has reflected the operating results of this unit
as a discontinued operation. Proceeds from the sale, including collection of
outstanding receivables, were approximately $9 million. Cone recognized a
pre-tax loss of $6.4 million in the third quarter of 2001 on the sale.


Nine Months Ended September 30, 2001 Compared with Nine Months Ended
October 1, 2000

For the first nine months of 2001, Cone had sales from continuing operations of
$384.2 million, a decrease of 14.5% over sales of $449.5 million for the first
nine months of 2000. The decrease was due to lower sales across all segments.

Gross profit for the first nine months of 2001 was $23.1 million or 6.0% of
sales, as compared to $53.2 million or 11.8% for the first nine months of 2000.
The decline was primarily due to inventory writedowns and facility consolidation
charges related to Cone's Reinvention Plan. Excluding these charges, Cone had a
gross profit in the first nine months of 2001 of $35.1 million or 9.1% of sales.
The decline from the nine months ended 2000 to the same period of 2001 before
charges related to Cone's Reinvention Plan was primarily due to lower sales
volume, curtailed manufacturing operating schedules, increased cotton cost in
cost of sales and continued pressure on prices. This decline was partially
offset by benefits related to the Reinvention Plan, which Cone began to realize
in the third quarter of 2001.

Segment Information.  Cone has four principal business segments:  1) denim;
2) khaki; 3) commission  finishing;  and 4) decorative  fabrics.  (See Note 8 to
Notes to Consolidated  Condensed  Financial  Statements included in Part I, Item
1.)


<PAGE>


         Denim. Denim segment sales revenues for the first nine months of 2001
         were $286.4 million, down 12.1% from the first nine months of 2000
         sales of $325.7 million. Sales yards were 13.8% lower, as compared with
         the first nine months of 2000. Operating income for the denim segment
         was $10.9 million, or 3.8% of sales for the most recent nine months, as
         compared with $27.0 million, or 8.3% of sales for the first nine months
         of 2000. Futures for cotton, Cone's major raw material, declined
         throughout the year from $.60 per pound on January 2, 2001 to $.37 per
         pound on September 30, 2001, but, because of Cone's practices of buying
         cotton forward, Cone does not expect to benefit from reduced cotton
         costs before the first quarter of 2002. Operating income for the
         segment includes the equity in earnings from the Parras Cone joint
         venture plant, which were down from the first nine months of 2000
         because of lower sales at Parras Cone in the first nine months of 2001.

         Khaki. Khaki segment sales revenues for the first nine months of 2001
         were $22.8 million, down 30.5% from the first nine months of 2000 sales
         of $32.8 million. Sales yards were 20.6% lower, as compared with the
         first nine months of 2000. Revenues were lower as a result of Cone's
         decision to streamline its product offering and the weakness in the
         khaki market, as compared to the 2000 period. The khaki segment had an
         operating loss of $2.9 million or 12.7% of sales for the most recent
         nine months, as compared with a loss of $2.9 million or 8.8% of sales
         for the first nine months of 2000.

         Commission Finishing. Outside sales of the commission finishing segment
         were $42.9 million for the first nine months of 2001, down 14.3% from
         the first nine months of 2000. Outside sales of the commission
         finishing segment, excluding Raytex, increased 15.0% for the first nine
         months of 2001, as compared with the prior year-ago period and was
         primarily driven by market consolidation and market development
         efforts. For the first nine months of 2001, the segment had operating
         income of $1.6 million, as compared with a loss of $2.8 million for the
         first nine months of 2000. The operating income improvement for the
         first nine months of 2001 was primarily attributable to the closing of
         the Raytex operation in first quarter of 2001, and improved sales
         volume, sales mix and operating efficiencies at the Carlisle facility.

         Decorative Fabrics. For the first nine months of 2001, sales from
         continuing operations of the decorative fabrics segment were $31.9
         million, down 20.8% from sales of $40.2 million for the same period of
         the previous year because of weak sales to furniture manufacturers. The
         decorative fabrics segment had operating income of $0.4 million in the
         first nine months of 2001, as compared with income of $2.1 million for
         the first nine months of 2000. The decrease in operating income is a
         result of lower sales volumes and inventory writedowns taken as a part
         of the Reinvention Plan.


<PAGE>


Selling and administrative expenses for the first nine months of 2001 were $28.6
million, as compared with $33.4 million in the first nine months of 2000. The
lower expenses in the first nine months of 2001 were primarily due to savings
related to the Reinvention Plan and a reduction in related expenses as a result
of Cone's exit from its Ashima alliance.

Interest expense for the first nine months of 2001 was $13.5 million, as
compared with $14.2 million for the first nine months of 2000. Interest expense
for the first nine months of 2001, as compared with the 2000 period, was
primarily the result of lower interest rates. Other expense consisted of the
ongoing expense of the accounts receivable securitization program, amortization
of the transition amount related to recording the interest rate swap and the
valuation adjustment of the interest rate swap derivative instrument. In 2001,
Cone has recognized income of $2.5 million related to marking to market the fair
value of its interest rate swap as a result of the decline in worldwide interest
rates.

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

Equity in earnings of Parras Cone, Cone's joint venture plant in Mexico, was
$0.6 million for the first nine months of 2001, as compared with $2.2 million
for the first nine months of 2000. The decline in operating results for Parras
Cone was primarily due to decreased sales volume and expenses related to
curtailed operating schedules. In addition, Cone recognized $0.1 million as its
pro rata share of the net loss in its joint venture investment in the Mexican
industrial park in Tamaulipas, Mexico.

For the first nine months of 2001, Cone had a net loss from continuing
operations of $26.8 million, or $1.17 per share after preferred dividends, as
compared with net income from continuing operations of $4.5 million, or $0.06
per share after preferred dividends for the same period of 2000. Included in the
net loss for the first nine months of 2001 were after-tax charges of $24.5
million of impairment and restructuring charges and inventory writedowns and
facility consolidation charges related to the Reinvention Plan, or $0.96 per
share. For comparison, for the first nine months of 2000, Cone reported net
income of $2.7 million, or a loss of $0.01 per share after preferred dividends.


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Cone's principal long-term capital components consist of debt outstanding under
its $68 million Revolving Credit Facility ("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 "Receivables Agreement").

During the first nine months of 2001, Cone generated cash from operations of
$2.8 million, as compared with cash from operations of $32.0 million in the
first nine months of 2000. Other sources of cash flow included $3.9 million in
proceeds from sales of property and equipment for the first nine months of 2001,
as compared with $2.7 million in the first nine months of 2000. Uses of cash in
the first nine months of 2001 included $4.7 million for capital expenditures and
$0.8 million of net advances to the joint venture industrial park in Tamaulipas,
Mexico.

On November 9, 2001, Cone entered into agreements to refinance both its $68
million Revolver Credit Facility with its existing banks and its Senior Note.
The new agreements provide for scheduled amortization or commitment reductions
of $11 million through 2002 with a final maturity date of January 15, 2003, of
which $1 million of debt amortization and commitment reduction coincided with
the November 9, 2001 refinancing. Interest rates were increased and new covenant
levels were established.

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

The following is a summary of the Company's primary financing agreements as of
November 9, 2001.

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

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

8-1/8% Debenture                       $100.0              $100.0              8.125%         Mar 15, 2005
Senior Note                              27.2                27.2             13.700          Jan 15, 2003
Revolving Credit                         68.0                57.0              9.000          Jan 15, 2003
Receivables Agreement                    60.0                45.3              5.480          Sept 1, 2004

</TABLE>

Cone believes that internally generated operating funds and funds available
under its Revolving Credit Facility currently in effect are sufficient to meet
its needs for working capital and domestic capital spending permitted under the
terms of the Revolving Credit Facility. However, by January 2003, Cone must
either refinance or replace the Revolving Credit Facility and Senior Note. If
Cone is unable to finance this debt, in addition to the amounts owed, Cone will
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 the notice. While


<PAGE>


management believes that it will be able to obtain the appropriate financing,
there is no assurance that Cone will be able to replace its Revolving Credit
Facility and its Senior Note or otherwise obtain financing on terms and
conditions acceptable to Cone. Along with its strategic advisor, J.P. Morgan,
Cone is in the process of exploring its alternatives related to financing its
business in both the U.S. and Mexico.

On September 30, 2001, Cone's long-term capital structure consisted of $180.8
million of long-term debt (including current maturities) and $90.8 million of
stockholders' equity. For comparison, on October 1, 2000, Cone had $181.2
million of long-term debt (including current maturities) and $156.3 million of
stockholders' equity. In 1998, Cone entered into a $100 million notional
interest rate swap, which converted its 8-1/8% Debentures to a floating interest
rate. As a result of a sharp decline in market interest rates during 2001, which
would allow Cone to terminate the swap and convert the interest expense
associated with the 8-1/8% Debentures back to a fixed rate, and Cone's desire to
remove the volatility of the swap on its statement of operations due to the
provisions of SFAS No. 133, Cone terminated the swap on October 4, 2001, for a
cash payment of $50,000.

Accounts receivable on September 30, 2001, were $44.3 million, as compared with
$48.1 million at October 1, 2000. Receivables, including those sold pursuant to
the Receivables Agreement, represented 73 days of sales outstanding at September
30, 2001 and 62 days at October 1, 2000. The increase in days outstanding was
primarily the result of slower pay practices by certain customers.

Inventories on September 30, 2001, were $64.5 million, down $45.3 million from
$109.8 million at October 1, 2000. From April 1, 2001 to September 30, 2001,
Cone reduced balance sheet inventories by $39.2 million as part of Cone's
Reinvention Plan. This reduction is due to the liquidation of inventories of
$19.8 million and to writedowns taken as part of Cone's Reinvention Plan, the
sale of the John Wolf business and lower cotton and other raw material prices.

For the first nine months of 2001, domestic capital spending was $4.7 million
compared to $4.2 million for the 2000 period. Domestic capital spending in 2001
is expected to be approximately $7-8 million.


OTHER MATTERS

Recent events beginning September 11, 2001 have created a disruption to normal
business activities in the U.S. economy. Consumer confidence has fallen sharply
since the event and retailers are anticipating a difficult holiday season.
Cautiousness by our customers and retailers has resulted in reduced near-term
business activity, primarily in denim. In addition, as consumers continue to be
cautious in their spending, Cone's ability to forecast and predict its business
has been diminished.


<PAGE>


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

                                                       Thirty-Nine Weeks Ended
                                                    ----------------------------
                                                      9/30/01           10/1/00
                                                    ----------------------------
         Income (loss) from operations              $ (25,447)        $  20,078
         Depreciation and amortization                 15,831            18,208
         Reinvention Plan - inventory charges
          and facility consolidation charges           12,127                 -
         Restructuring and impairment charges          19,939              (332)
                                                      --------         ---------
         EBITDA                                     $  22,450         $  37,954
                                                      --------         ---------

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

From time to time, Cone is a party to various legal claims and actions.
Management believes that none of these claims or actions, either individually or
in the aggregate, will have a material adverse effect on the financial condition
and liquidity of Cone. Due to Cone's recent operating results, management
believes that the effects of any litigation, no matter how small or
insignificant, could be considered material to Cone's future results of
operations. As of September 30, 2001, no significant litigation existed.

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

         Except for the historical information presented, the matters disclosed
         in the foregoing discussion and analysis and other parts of this report
         include forward-looking statements. These statements represent Cone's
         current judgment on the future and are subject to risks and
         uncertainties that could cause actual results to differ materially.
         Such factors include, without limitation: (i) the demand for textile
         products, including Cone's products, will vary with the U.S. and world
         business cycles, imbalances between consumer demand and inventories of
         retailers and manufacturers and changes in fashion trends, (ii) the
         highly competitive nature of the textile industry and the possible
         effects of reduced import protection and free-trade initiatives, (iii)
         the unpredictability of the cost and availability of cotton, Cone's
         principal raw material, and other manufacturing costs, (iv) Cone's
         relationships with Levi Strauss as its major customer, (v) Cone's
         ability to attract and maintain adequate capital to fund operations and
         strategic initiatives, (vi) increases in prevailing interest rates,
         (vii) Cone's inability to continue the cost savings associated with its
         Reinvention Plan, and (viii) the effect on Cone's sales and markets of
         events such as the events of September 11, 2001. For a further
         description of these risks see Cone's 2000



<PAGE>


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


Item 3. Quantitative and Qualitative Disclosures about Market Risk

Cone is exposed to market risks relating to fluctuations in interest rates and
commodity prices. There has been no material change in Cone's market risk other
than an increase in its fixed-rate debt as a result of the termination of its
interest rate swap instrument on October 4, 2001 (see Note 10, "Derivatives,"
to the Notes to Consolidated Condensed Financial Statements) that would
significantly affect the disclosures made in the form 10-K for the year ended
December 31, 2000.




                                     PART II

Item 1.  Legal Proceedings

From time to time, Cone is a party to various legal claims and actions.
Management believes that none of these claims or actions, either individually or
in the aggregate, will have a material adverse effect on the financial condition
and liquidity of Cone. Due to Cone's recent operating results, management
believes that the effects of any litigation, no matter how small or
insignificant, could be considered material to Cone's future results of
operations. As of September 30, 2001, no significant litigation exists.


Item 6.  Exhibits and Reports on Form 8-K

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


<PAGE>


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

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

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

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

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

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


<PAGE>


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

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

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

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

*2.3.7          Seventh Amendment to Securitization Agreement dated
                as of April 23, 2001 by and between Cone Receivables
                II LLC, the Registrant, Cone Foreign Trading LLC,
                and General Electric Capital Corporation.

*2.3.8          Eighth Amendment to Securitization Agreement dated
                as of July 10, 2001 by and between Cone Receivables
                 II LLC, The Registrant, Cone Foreign Trading LLC,
                and General Electric Capital Corporation.



<PAGE>


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

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

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

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

*2.8            Joint Venture Registration Rights Agreement dated
                as of  June 25, 1993, among Parras Cone de Mexico,
                S.A., Compania Industrial de Parras, S.A. de
                C.V. and Cone Mills (Mexico), S.A. de C.V.,


<PAGE>




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

                filed as Exhibit 2.2(e) to Registrant's report
                on Form 10-Q for the quarter ended July 4, 1993.

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

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

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

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

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

*4.1            Rights Agreement dated as of October 14, 1999,
                between the Registrant and First Union National
                Bank, as Rights Agent, with Form of Articles of
                Amendment with respect to the Class B Preferred Stock


<PAGE>


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

                (Series A), the Form of Rights Certificate,
                and Summary of Rights attached, filed as
                Exhibit 1 to the Registrant's report on
                Form 8-A dated October 29, 1999.

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

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

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

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

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


<PAGE>


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

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

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

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

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

*4.2.9          Letter Agreement dated as of July 31, 1997,
                between the Registrant and The Prudential Insurance
                Company of America, filed as Exhibit 4.3(i) to the
                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.


<PAGE>


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

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

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

*4.2.13         Waiver under Note Agreement dated as of July 3, 2000,
                by and among the Registrant and The Prudential
                Insurance Company of America, filed as Exhibit
                4.2.13 to Registrant's Registration
                Statement on Form S-4 (File 333-43014)

*4.2.14         Amendment of 1992 Note Agreement dated as of
                July 14, 2000, by and among the Registrant and
                The Prudential Insurance Company of America,
                filed as Exhibit 4.2.14 to Registrant's Registration
                Statement on Form S-4 (File 333-43014)

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

*4.2.16         Amendment of 1992 Note Agreement and Waiver
                dated as of April 23, 2001, by and among the
                Registrant and The Prudential Insurance Company
                of America.


<PAGE>


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

*4.2.17         Amendment of 1992 Note Agreement dated as of
                June 28, 2001, by and among the Registrant and
                The Prudential Insurance Company of America.

4.2.18          Waiver Under 1992 Note Agreement dated as of
                August 10, 2001, by and among the Registrant and
                The Prudential Insurance Company of America.             44

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.         50

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.             56

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

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

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


<PAGE>


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

*4.3.3          Waiver and Amendment No. 3 to Credit Agreement
                dated as of April 23, 2001, by and among the
                Registrant, as Borrower, Bank of America, N.A.,
                as Agent and as Lender, and the Lenders
                Signatory Thereto

*4.3.4          Amendment No. 4 to Credit Agreement dated as
                of June 28, 2001, by and among the Registrant,
                as Borrower, Bank of America, N.A., as Agent
                and Lender, and the Lenders Signatory Thereto

4.3.5           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            62

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            71

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            76

*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 the
                Registrant's report on Form 8-K dated
                February 11, 2000.


<PAGE>


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

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

*4.6            General Security Agreement dated as of January
                28,2000, by the Registrant and certain of its
                subsidiaries, as Grantors, and Wilmington Trust

                Company, as General Collateral Agent, together
                with all exhibits thereto, filed as Exhibit 4 to
                the Registrant's report on Form 8-K dated
                February 11, 2000.

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

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

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


<PAGE>


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

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

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

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

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

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

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

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


<PAGE>


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

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

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

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

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

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

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

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


<PAGE>


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

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

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

*10.1.6         Employees Retirement Plan of Cone Mills
                Corporation as amended and restated as of
                June 30, 2001.

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

*10.7.1         Cone Mills Corporation SERP as amended and
                restated effective June 30, 2001.

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

*10.8.1         Excess Benefit Plan of Cone Mills Corporation as
                amended and restated effective June 30, 2001.

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

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


<PAGE>


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

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

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

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

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

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

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

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

*10.15.1        Form of Incentive Stock Option Agreement under
                1992 Amended and Restated Stock Plan.

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


<PAGE>


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

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

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

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

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

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

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

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

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

*10.25          Tenth Amendment to Master Lease dated as
                of January 28, 2000, between Atlantic
                Financial Group, Ltd. and the Registrant,


<PAGE>


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

                together with all exhibits thereto, filed
                as Exhibit 10 to Registrant's report on Form
                8-K dated February 11, 2000.

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

*10.25.2        Assignment and Termination Agreement dated
                as of August 31, 2000, among Atlantic
                Financial Group, Ltd., SunTrust Bank, and
                the Registrant.

*10.26          2001 Stock Incentive Plan

*10.26.1        Form of Incentive Stock Option Agreement
                under 2001 Stock Incentive Plan.

------------------------------------------------------------------
*Incorporated by reference to the statement or report indicated.


     The Registrant will provide any Shareholder or participant in the Company
Stock Fund in the 401(k) Programs copies of any of the foregoing exhibits upon
written request addressed to Corporate Secretary, Cone Mills Corporation, 3101
North Elm Street, Greensboro, NC 27408.


<PAGE>




SIGNATURES




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


                             CONE MILLS CORPORATION
                                  (Registrant)




Date:    November 13, 2001    /s/Gary L. Smith
         -----------------    -----------------
                                  Gary L. Smith
                                  Executive Vice President and
                                  Chief Financial Officer