Page 1 of 32
                                               Index to Exhibits-Pages 21-27

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                   FORM 10-Q

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

For the quarterly period ended  September 27, 1998

                                     OR

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

For the Transition period from             to

Commission file number    1-3634


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

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

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

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

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

Number of shares of common stock outstanding as of October 23, 1998:
25,432,233 shares.

                                                    1

<PAGE>

                            CONE MILLS CORPORATION
 
                                   INDEX

                                                                         Page
                                                                        Number

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

          Consolidated Condensed Statements of Operations Thirteen and
          thirty-nine weeks ended September 27, 1998 and September 28,
          1997 (Unaudited)..................................................3

          Consolidated Condensed Balance Sheets
          September 27, 1998 and September 28, 1997
          (Unaudited) and December 28, 1997.................................4

          Consolidated Condensed Statements of Cash Flows
          Thirty-nine weeks ended September 27, 1998
          and September 28, 1997 (Unaudited)................................5

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

Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations....................11


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings................................................19
Item 5.   Other Information ...............................................20
Item 6.   Exhibits and Reports on Form 8-K.................................20

                                      2
<PAGE>
                                    PART I
Item 1.
                        CONE MILLS CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                         (in thousands, except per share data)
<TABLE>
<S>                                                <C>             <C>              <C>             <C>

                                                      Thirteen        Thirteen        Thirty-Nine      Thirty-Nine
                                                    Weeks Ended      Weeks Ended      Weeks Ended      Weeks Ended
                                                    Sept. 27, 1998  Sept. 28, 1997   Sept. 27, 1998  Sept. 28, 1997
                                                    -------------   --------------   -------------   --------------
                                                    (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)

Net Sales                                           $    187,359    $     185,501    $    574,834    $     546,007
                                                    -------------   --------------   -------------   --------------

Operating Costs and Expenses:
    Cost of sales                                        153,933          160,151         477,131          464,496
    Selling and administrative                            21,370           19,563          61,962           58,645
    Depreciation                                           7,110            6,658          21,333           19,962
    Restructuring                                              -            1,314               -            3,123
                                                    -------------   --------------   -------------   --------------

                                                         182,413          187,686         560,426          546,226
                                                    -------------   --------------   -------------   --------------

Income (Loss) from Operations                              4,946           (2,185)         14,408             (219)
                                                    -------------   --------------   -------------   --------------

Other Income (Expense):
    Interest income                                          837              834           2,199            1,653
    Interest expense                                      (3,534)          (3,365)        (11,255)         (10,772)
                                                    -------------   --------------   -------------   --------------

                                                          (2,697)          (2,531)         (9,056)          (9,119)
                                                    -------------   --------------   -------------   --------------

Income (Loss) before Income Taxes (Benefit) and
    Equity in Earnings of Unconsolidated Affiliate         2,249           (4,716)          5,352           (9,338)

Income Taxes (Benefit)                                       742           (1,797)          1,766           (3,469)
                                                    -------------   --------------   -------------   --------------

Income (Loss) before Equity in Earnings of
    Unconsolidated Affiliate                               1,507           (2,919)          3,586           (5,869)

Equity in Earnings of Unconsolidated Affiliate             1,285            1,553           3,801            1,437
                                                    -------------   --------------   -------------   --------------

Net Income (Loss)                                   $      2,792    $      (1,366)   $      7,387    $      (4,432)
                                                    =============   ==============   =============   ==============

Income (Loss) Available to Common Shareholders      $      2,072    $      (2,121)   $      5,194    $      (6,662)
                                                    =============   ==============   =============   ==============

Earnings (Loss) Per Share - Basic and Diluted       $        .08    $        (.08)   $        .20    $        (.25)
                                                    =============   ==============   =============   ==============



Weighted Average Common Shares Outstanding:
    Basic                                                 25,972           26,109          26,107           26,150
                                                    =============   ==============   =============   ==============
    Diluted                                               25,994           26,109          26,162           26,150
                                                    =============   ==============   =============   ==============
</TABLE>

See Notes to Consolidated Condensed Financial Statements.

                                           3
<PAGE>
                                 CONE MILLS CORPORATION AND SUBSIDIARIES
                                  CONSOLIDATED CONDENSED BALANCE SHEETS
                             (in thousands, except share and par value data)
<TABLE>
<S>                                                        <C>             <C>            <C>


                                                            September 27,   September 28,  December 28,
                                                                1998            1997           1997
                                                            ------------    ------------   ------------
ASSETS                                                       (Unaudited)     (Unaudited)      (Note)
    Current Assets:
      Cash                                                   $      624      $    2,280     $      856
      Accounts receivable, less allowance of $1,500              29,237          20,910         19,958
      Subordinated note receivable                               28,515          35,909         23,842
      Inventories                                               118,200         121,622        115,663
      Other current assets                                       15,524          11,733         19,228
                                                            ------------    ------------   ------------

        Total CurrentCAssets Assets                             192,100         192,454        179,547

    Investments in Unconsolidated Affiliates                     40,582          35,581         36,781
    Other Assets                                                 35,848          39,110         38,431
    Property, Plant and Equipment                               250,104         240,033        251,887
                                                            ------------    ------------   ------------

                                                             $  518,634      $  507,178     $  506,646
                                                            ============    ============   ============


LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
      Notes payable                                          $    8,500      $        -     $    4,500
      Current maturities of long-term debt                       10,714          10,714         10,714
      Accounts payable                                           34,317          37,318         32,994
      Sundry accounts payable and accrued liabilities            48,233          44,439         49,588
      Deferred income taxes                                      20,230          24,695         23,370
                                                            ------------    ------------   ------------

        Total Current Liabilities                               121,994         117,166        121,166

    Long-Term Debt                                              146,274         139,545        139,656
    Deferred Income Taxes                                        42,949          38,211         38,523
    Other Liabilities                                            11,315          10,780         10,781

    Stockholders' Equity:
      Class A preferred stock - $100 par value; authorized
       1,500,000 shares;issued and outstanding 383,948 shares    38,395          38,395         38,395
      Class B preferred stock - no par value; authorized
       5,000,000oshares Plant and Equipment-Net                       -               -              -
      Common stock - $.10 par value; authorized 42,700,000
       shares; issued and outstanding 25,459,433 shares;
       1997, 26,112,133 shares and 26,201,633 shares              2,546           2,611          2,620
      Capital in excess of par                                   57,418          61,548         62,300
      Retained earnings                                         106,860         107,423        102,449
      Deferred compensation - restricted stock                     (617)              -           (740)
      Accumulated other comprehensive income                     (8,500)         (8,501)        (8,504)
                                                            ------------    ------------   ------------

        Total Stockholders' Equity                              196,102         201,476        196,520
                                                            ------------    ------------   ------------

                                                             $  518,634      $  507,178     $  506,646
                                                            ============    ============   ============
</TABLE>


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

See Notes to Consolidated Condensed Financial Statements.

                                                     4
<PAGE>


                          CONE MILLS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                       (in thousands)
<TABLE>
<S>                                                                <C>              <C>                
                                                                     Thirty-Nine      Thirty-Nine
                                                                     Weeks Ended      Weeks Ended
                                                                    Sept. 27, 1998   Sept 28, 1997
                                                                    --------------   -------------
                                                                     (Unaudited)      (Unaudited)

Cash Provided by Operations                                           $    19,636      $   19,033
                                                                       -----------      ---------
Investing
    Proceeds from divestitures                                                  -          19,529
    Proceeds from sale of property, plant and equipment                     5,495           4,154
    Capital expenditures                                                  (21,933)        (17,651)
    Other                                                                       -          (1,500)
                                                                       -----------      ---------

      Cash provided by (used in) investing                                (16,438)          4,532
                                                                       -----------      ---------
Financing
    Net borrowings (payments) under line of credit agreements               4,000          (5,267)
    Decrease in checks issued in excess of deposits                        (5,945)         (1,923)
    Principal payments - long term debt                                   (10,714)        (10,796)
    Proceeds from long-term debt borrowings                                17,000               -
    Purchase of outstanding common stock                                   (4,795)         (1,532)
    Dividends paid - Class A Preferred                                     (2,976)         (2,851)
    Other                                                                       -              66
                                                                       -----------      ---------

      Cash used in financing                                               (3,430)        (22,303)
                                                                       ----------       ---------

      Net change in cash                                                     (232)          1,262

Cash at Beginning of Period                                                   856           1,018
                                                                       -----------       ---------

Cash at End of Period                                                 $       624      $    2,280
                                                                       ===========       =========


Supplemental Disclosures of Additional Cash Flow Information:

Cash payments for:

    Interest, net of interest capitalized                             $    14,376  $       14,317
                                                                       ===========   =============
    Income taxes, net of refunds                                      $    (7,058) $       (3,017)
                                                                       ===========   =============

Supplemental Schedule of Noncash Investing and Financing Activities:

    Receivable recorded from divestitures                             $         -  $          811
                                                                       ===========   =============


    Purchase of outstanding common stock
      through incurrence of accounts payable                          $       153  $            -
                                                                       ===========   =============
</TABLE>


See Notes to Consolidated Condensed Financial Statements.

                                       5
<PAGE>

                    CONE MILLS CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                               September 27, 1998

Note 1.  Basis of Financial Statement Preparation

         The Cone  Mills  Corporation  (the  "Company")  consolidated  condensed
         financial  statements for September 27, 1998 and September 28, 1997 are
         unaudited,  but in the opinion of  management  reflect all  adjustments
         necessary to present fairly the consolidated  condensed  balance sheets
         of Cone Mills  Corporation  and  Subsidiaries at September 27, 1998 and
         September 28, 1997, and the related  consolidated  condensed statements
         of operations for the respective  thirteen and thirty-nine  weeks ended
         September  27,  1998 and  September  28,  1997,  and cash flows for the
         thirty-nine weeks then ended. All adjustments are of a normal recurring
         nature. The results are not necessarily indicative of the results to be
         expected for the full year.

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

         Inventories  are  stated at the lower of cost or market.  The  last-in,
         first-out (LIFO) method is used to determine cost of most  domestically
         produced goods. The first-in,  first-out (FIFO) or average cost methods
         are used to determine cost of all other  inventories.  Because  amounts
         for  inventories   under  the  LIFO  method  are  based  on  an  annual
         determination  of  quantities as of the year-end,  the  inventories  at
         September  27, 1998 and  September  28,  1997 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

         During  July 1998,  the  Receivables  Purchase  Agreement  between  the
         subsidiary of a major financial institution and Cone Receivables,  LLC,
         was increased from $40 million to $50 million.


                                     6

<PAGE>


Note 3.  Inventories

(in thousands)                      9/27/98           9/28/97         12/28/97

Greige and finished goods         $  79,820         $  85,121        $  81,130
Work in process                      10,751            10,941           11,260
Raw materials                        15,403            12,639           11,122
Supplies and other                   12,226            12,921           12,151
                                    -------           -------          -------
                                  $ 118,200         $ 121,622        $ 115,663
                                    =======           =======          =======



Note 4.  Long-Term Debt

(in thousands)                      9/27/98           9/28/97         12/28/97

Senior Note                       $  42,858         $  53,573        $  53,572
Revolving Credit Agreement           17,000                 -                -
8 1/8% Debentures                    97,130            96,686           96,798
                                    -------           -------          -------
                                    156,988           150,259          150,370
Less current maturities              10,714            10,714           10,714
                                    -------           -------          -------
                                  $ 146,274         $ 139,545        $ 139,656
                                    =======           =======          =======

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

In July 1998,  the Company  entered into an interest rate swap  agreement with a
notional amount of $100 million and a term of seven years with a major financial
institution.  This  agreement  effectively  converts the 8 1/8%  Debentures to a
variable  interest  rate.  The interest  rate under the swap  agreement is reset
every six months and the effective  rate at September 27, 1998,  was 7.07%.  The
interest  rate swap  agreement  also provides an interest rate cap at 8.125% for
the first three years adjusting to 9.625% for the balance of its term.


Note 5.  Class A Preferred Stock

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

                                      7
<PAGE>

Note 6.  Earnings (Loss) Per Share

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

(in thousands, except                         Thirteen                Thirteen
  per share data)                           Weeks Ended             Weeks Ended
                                              9/27/98                 9/28/97

Net income (loss)                             $  2,792                $ (1,366)
Preferred stock dividend                          (720)                   (755)
                                                 -----                   -----

Basic EPS - income (loss)
  available to common shareholders               2,072                  (2,121)

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

Diluted EPS - income (loss)
  available to common shareholders
  after assumed conversions                   $  2,072                $ (2,121)
                                                 =====                   =====


Determination of shares:

Basic EPS - weighted average shares             25,972                  26,109

Effect of dilutive securities                       22                       -
                                                ------                  ------

Diluted EPS - adjusted weighted-
  average shares and assumed
  conversions                                   25,994                  26,109
                                                ======                  ======


Earnings (loss) per share:
  Basic                                       $    .08                $  ( .08)
                                                ======                  ======
  Diluted                                     $    .08                $  ( .08)
                                                ======                  ======


                                    8
<PAGE>


Note 6.  Earnings (Loss) Per Share

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

(in thousands, except                      Thirty-Nine             Thirty-Nine
  per share data)                          Weeks Ended             Weeks Ended
                                             9/27/98                 9/28/97

Income (loss)                                $  7,387                $ (4,432)
Preferred stock dividends                      (2,193)                 (2,230)
                                                -----                   -----

Basic EPS - income (loss)
  available to common shareholders              5,194                  (6,662)

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

Diluted EPS - income (loss)
  available to common shareholders
  after assumed conversions                  $  5,194                $ (6,662)
                                                =====                   =====


Determination of shares:

Basic EPS - weighted average shares            26,107                  26,150

Effect of dilutive securities                      55                       -
                                               ------                  ------

Diluted EPS - adjusted weighted-
  average shares and assumed
  conversions                                  26,162                  26,150
                                               ======                  ======


Earnings (loss) per share:
  Basic                                      $    .20                $  ( .25)
                                               ======                  ======
  Diluted                                    $    .20                $  ( .25)
                                               ======                  ======

Common stock options outstanding at September 28, 1997 were not included in the
computation  of  diluted  earnings  per share  because  to do so would have been
antidilutive.


                                     9
<PAGE>


Note 7.   Recent Accounting Pronouncements

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

(in thousands)                             Thirteen                  Thirteen
                                          Weeks Ended               Weeks Ended
                                            9/27/98                   9/28/97

Net income (loss)                           $ 2,792                  $ (1,366)
Other comprehensive income (loss),
  currency translation adjustment                38                       ( 3)
                                              -----                     -----
                                            $ 2,830                  $ (1,369)
                                              =====                     =====

                                          Thirty-Nine               Thirty-Nine
                                          Weeks Ended               Weeks Ended
                                            9/27/98                   9/28/97

Net income (loss)                           $ 7,387                  $ (4,432)
Other comprehensive income (loss),
  currency translation adjustment                 4                       (26)
                                              -----                     -----
                                            $ 7,391                  $ (4,458)
                                              =====                     =====


                                      10
<PAGE>
Item 2.
                            MANAGEMENT'S DISCUSSION
                     AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Third Quarter Ended September 27, 1998 Compared with Third Quarter
Ended September 28, 1997.

For the third  quarter  of 1998,  Cone  Mills had  sales of $187.4  million,  as
compared  with sales of $185.5  million  for the third  quarter of 1997.  Higher
sales  of  denim,  decorative  and  jacquard  woven  fabrics  accounted  for the
increase.  Lower specialty  sportswear  sales  partially  offset the other sales
increases.  International  sales were $49.1 million,  or 26% of total sales,  as
compared with $48.2 million, or 26% of sales, for the third quarter of 1997.

Gross  profit  for the third  quarter  of 1998 (net sales less cost of sales and
depreciation)  was 14.0% of sales, as compared with 10.1% for the previous year.
The  improvement in gross profit was primarily due to lower raw material  costs,
improved  average denim prices  resulting from mix changes,  and higher capacity
utilization.

Segment Information.  Cone operates in two principal business segments,  apparel
fabrics and home  furnishings  products.  The following table sets forth certain
net sales and operating income (loss) information.

                                             Third Quarter
                                   1998                       1997
                                    (Dollar amounts in millions)
NET SALES
     Apparel               $  156.1    83.3%          $  157.7     85.0%
     Home Furnishings          31.3    16.7               27.8     15.0
                              -----    ----              -----    -----
         Total             $  187.4   100.0%          $  185.5    100.0%
                              =====   =====              =====    =====

OPERATING INCOME (LOSS)(1)
     Apparel               $    7.1     4.5%          $    4.4      2.8%
     Home Furnishings          (1.3)   (4.2)              (4.4)   (15.9)
     Restructuring                -       -               (1.3)       -

(1) Operating   income  (loss)   excludes   general   corporate   expenses.
    Percentages  reflect operating income (loss) as a percentage of segment
    net sales.

    Apparel Fabrics. Apparel fabrics segment sales for the third
    quarter of 1998 were $156.1 million, down 1.0% from third quarter

                                     11

<PAGE>

     1997  sales of $157.7  million.  Increased  sales of denims  were more than
     offset by lower specialty  sportswear  sales.  Average denim prices were up
     year over year as a result of mix  changes.  Cotton  costs were down in the
     third quarter of 1998,  reflecting  more favorable  world cotton prices and
     the U.S. government cotton program. Denim manufacturing facilities operated
     at capacity during the third quarter of 1998.

     For the third  quarter of 1998,  the apparel  fabric  segment had operating
     income of $7.1 million, or 4.5% of sales, as compared with $4.4 million, or
     2.8% of sales,  in the third quarter of 1997.  Improved  profits from denim
     operations  in the  third  quarter  of 1998  were  substantially  offset by
     unfavorable specialty sportswear results.

     Home Furnishings.  For the third quarter of 1998, home furnishings  segment
     sales were $31.3  million,  up 12.7% as compared with $27.8 million for the
     third  quarter  of 1997.  Stronger  jacquard  fabric  and John  Wolf  sales
     accounted for the increase.  Home furnishings had an operating loss of $1.3
     million,  as compared  with a loss of $4.4 million for the third quarter of
     1997. All home furnishings units  substantially  improved operating results
     in 1998 as compared with 1997.

Total  Company  selling and  administrative  expenses were $21.4 million for the
third  quarter of 1998,  up $1.8  million,  as compared to the third  quarter of
1997.  During the 1998 period,  the Company incurred  consulting fees associated
with cost savings efforts and increases in merchandising and marketing expenses.
Selling and administrative  expenses were 11.4% of sales in the third quarter of
1998, as compared with 10.5% in the third quarter of 1997.

Interest expense for the third quarter of 1998 was up $0.2 million,  as compared
to the third quarter of 1997,  primarily  the result of additional  borrowing to
support increases in working capital.

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

Equity in earnings of Parras Cone,  the joint venture plant in Mexico,  was $1.3
million for the third  quarter of 1998,  as compared  with $1.6  million for the
third  quarter of 1997.  The 1998  results  reflect the benefit of lower  cotton
costs and the  capacity  expansion.  In addition,  the 1998  results  include an
income tax accrual  whereas the Company  accrued no income  taxes in 1997 due to
the availability of tax loss carryovers.

                                   12
<PAGE>

Cone Mills had net income for the third quarter of 1998 of $2.8 million, or $.08
per share after preferred  dividends.  For comparison,  third quarter 1997 had a
net loss of $1.4 million, or $.08 per share,  including a pre-tax charge of $1.3
million  ($.03 per  share)  related  to the  consolidation  of the  Granite  and
Carlisle finishing operations.

The outlook for the fourth quarter is clouded by weakening  apparel sales at the
retail  level.  The Company's  sales and  operating  results will be affected by
slowing consumer demand and, as a result, operating schedules will be reduced to
keep  inventories in line. The Company's  short-term  operating  imperatives are
effective   marketing  for  specialty   sportswear   fabrics  and   satisfactory
manufacturing results from its Carlisle and Salisbury facilities.

Nine Months Ended September 27, 1998 Compared with Nine Months Ended
September 28, 1997

For the first nine months of 1998,  Cone Mills  experienced  strong denim demand
and better market conditions in decorative print fabrics. However, for the first
nine  months of 1997,  Cone Mills ran  reduced  operating  schedules  as certain
customers   adjusted   value-added   denim  inventory  levels  and  the  Company
experienced weak fashion demand for decorative prints.

For the first nine months of 1998,  Cone Mills had sales of $574.8  million,  up
5.3%,  as  compared  with sales of $546.0  million  for the first nine months of
1997.  After  eliminating the sales of businesses which were sold in 1997, sales
were up approximately 6%. Higher sales of denim products, finishing services and
jacquard and  decorative  fabrics  accounted for the increase.  Lower  specialty
sportswear  sales,  primarily  shirting  fabrics,  partially  offset  the  sales
increases.  International sales were 26% of total sales, as compared with 25% of
sales for the first nine months of 1997.

Gross profit for the first nine months of 1998 (net sales less cost of sales and
depreciation)  was 13.3% of sales, as compared with 11.3% for the previous year.
The increase was  primarily the result of the improved  sales volume,  lower raw
material costs and higher  capacity  utilization  partially  offset by operating
performance of the Carlisle Finishing plant.

Segment Information.  Cone operates in two principal business segments,  apparel
fabrics and home  furnishings  products.  The following table sets forth certain
net sales and operating income (loss) information.


                                     13
<PAGE>

                                                Nine Months
                                        1998                    1997
                                        (Dollar amounts in millions)
NET SALES
     Apparel(1)                 $  479.5     83.4%      $  465.1     85.2%
     Home Furnishings(2)            95.3     16.6           80.9     14.8
                                   -----    -----          -----    -----
         Total                  $  574.8    100.0%      $  546.0    100.0%
                                   =====    =====          =====    =====

OPERATING INCOME (LOSS)(3)
     Apparel                    $   21.0      4.4%      $   16.7      3.6%
     Home Furnishings               (3.7)    (3.9)         (11.2)   (13.8)
     Restructuring                     -        -           (3.1)       -

(1)  Apparel includes net sales of $2.5 million for a business unit
     sold in 1997.
(2)  Home furnishings  includes net sales of $2.2 million for business units
     sold in 1997.
(3)  Operating   income  (loss)   excludes   general   corporate   expenses.
     Percentages  reflect operating income (loss) as a percentage of segment
     net sales.

     Apparel Fabrics. Apparel fabrics segment sales for the first nine months of
     1998 were $479.5 million,  up 3.1% from the first nine months of 1997 sales
     of $465.1  million.  Increased sales of denims,  partially  offset by lower
     specialty  sportswear  sales,  accounted  for the  increase.  Average denim
     prices were essentially flat year over year. Cotton costs were lower in the
     first nine months of 1998,  reflecting  more favorable  world cotton prices
     and the U.S.  government  cotton program.  Denim  manufacturing  facilities
     operated at capacity during the 1998 period.

     For the  first  nine  months  of 1998,  the  apparel  fabrics  segment  had
     operating income of $21.0 million, or 4.4% of sales, as compared with $16.7
     million,  or 3.6% of sales,  in the  first  nine  months of 1997.  Improved
     profits  from  denim  operations  in the  first  nine  months  of 1998 were
     substantially offset by unfavorable specialty sportswear results.

     Home  Furnishings.  For the first  nine  months of 1998,  home  furnishings
     segment sales were $95.3  million,  up 17.8% as compared with $80.9 million
     for the first nine months of 1997.  Excluding operating units sold in 1997,
     nine  months  1998 sales were up  approximately  21%.  Stronger  commission
     finishing,   decorative  and  jacquard  fabrics  sales  accounted  for  the
     increase.  Home  furnishings  had an  operating  loss of $3.7  million,  as
     compared  with a loss of $11.2  million  for the first nine months of 1997.
     With the exception of the Carlisle Finishing plant, home

                                    14
<PAGE>

     furnishings  units  substantially  improved  operating  results  in 1998 as
     compared with 1997.

Total Company selling and  administrative  expenses  increased $3.4 million from
$58.6  million for the first nine months of 1997 to $62.0  million for the first
nine months of 1998,  which included the expenses  associated with the Company's
increased  marketing  and  merchandising  efforts.  Selling  and  administrative
expenses  were 10.8% of sales in the first nine months of 1998, as compared with
10.7% in the first nine months of 1997.

Cone Mills had net income for the first nine months of 1998 of $7.4 million,  or
$.20 per share after preferred dividends. For comparison,  the first nine months
of 1997 had a net loss of $4.4 million,  or $.25 per share,  including a pre-tax
charge  of  $3.1  million   (approximately   $.08  per  share)  related  to  the
consolidation of the Granite and Carlisle finishing operations.

Equity in earnings of Parras Cone,  the joint venture plant in Mexico,  was $3.8
million for the first nine months of 1998, as compared with $1.4 million for the
first nine months of 1997. The 1998 results reflect a fuller operating  schedule
compared with the 1997 period,  improved operating efficiencies and lower cotton
costs.  In addition,  the 1998 results include an income tax accrual whereas the
Company  accrued  no income  taxes in 1997 due to the  availability  of tax loss
carryovers.

Liquidity and Capital Resources

The Company's principal long-term capital components consist of debt outstanding
under its Senior Note, its 8 1/8% Debentures and stockholders'  equity.  Primary
sources of liquidity are internally  generated  funds, an $80 million  Revolving
Credit  Facility  and  the  $50  million  Receivables   Purchase  Agreement.   A
Receivables Purchase Agreement,  a one-year facility,  was renewed in March 1998
and increased from $40.0 million to $50.0 million in July 1998. On September 27,
1998,  the Company had funds  available  of $63.0  million  under its  Revolving
Credit Facility.

During the first nine months of 1998, the Company  generated cash from operating
activities before changes in working capital of $25.7 million,  as compared with
$13.7 million for the first nine months of 1997.  Working  capital  increases in
1998,  primarily accounts receivable,  were $6.1 million.  Other sources of cash
included  proceeds of $5.4 million  realized from the sale of old  manufacturing
equipment.  Uses of cash included $21.9 million for capital  expenditures,  $4.8
million for the repurchase of common stock, and

                                       15
<PAGE>

$3.0 million for preferred stock dividends.

In August  1998,  the  Company  announced  an alliance  with a related  group of
companies  known as the Ashima  Group of India.  The Ashima  Group  produces and
markets  a broad  product  line of denim  and  sportswear  fabrics.  The  Indian
government approved the alliance on September 12, 1998. The alliance consists of
four elements: 1) the purchase by Cone of approximately 8% of outstanding shares
of Ashima Syntex Limited completed on October 23, 1998 for $3.5 million; 2) Cone
providing  technology and technical services to the Ashima companies,  receiving
fees as  compensation;  3)Cone  certification,  after full  process  and product
conformance  to Cone  standards,  of certain  Ashima  products for  distribution
throughout  the  world;  and 4) the  exclusive  right of Cone to market  certain
Ashima products outside the Indian sub-continent under the name Ashima-Cone.

At a special  meeting of the board of directors on October 19, 1998, the Company
was  authorized to repurchase  from time to time up to 1.5 million shares of its
common stock.  Since the beginning of the third quarter of 1998, the Company has
repurchased  733,700  shares  of  common  stock  which  completed  the  previous
authorization.

The  Company  believes  that  internally  generated  operating  funds  and funds
available  under its credit  facilities will be sufficient to meet its needs for
working  capital,  capital  spending and stock  repurchases  for the foreseeable
future.  Potential  international  investments may require additional  long-term
financing.

On September 27, 1998, the Company's  long-term capital  structure  consisted of
$146.3 million of long-term debt and $196.1 million of stockholders' equity. For
comparison,  on September 28, 1997,  the Company had $139.5 million of long-term
debt and $201.5  million of  stockholders'  equity.  Long-term  debt  (including
current  maturities  of long-term  debt) as a percentage  of long-term  debt and
stockholders'  equity was 44% at  September  27, 1998,  as compared  with 43% at
September 28, 1997.

Accounts and note  receivable  on September  27, 1998,  were $57.8  million,  as
compared with $56.8 million at September 28, 1997. Receivables,  including those
sold pursuant to the  Receivables  Purchase  Agreement,  represented  53 days of
sales  outstanding  at September 27, 1998 and 48 days at September 28, 1997. The
increase in days of sales  outstanding  primarily  reflects a change in customer
sales mix.

Inventories on September 27, 1998, were $118.2  million,  down $3.4 million from
September 28, 1997. The decrease was primarily due to

                                       16

<PAGE>

lower finished goods inventories which were partially offset by increases in raw
material levels.

Capital spending in the first nine months of 1998 was $21.9 million, as compared
with $17.7 million for the first nine months of 1997.  Capital  spending in 1998
is  expected  to be  approximately  $37  million.  Projects  include new weaving
machines  and link ring  spinning  for the White Oak denim plant and  additional
looms for the jacquard facility.

The Company recognizes the business  implications  regarding the Year 2000 as it
relates to computer programs and software systems. A comprehensive plan has been
developed to address possible exposures to Year 2000 issues. Critical financial,
operational,  and  manufacturing  systems have been inventoried and assessed and
detail  plans  are  in  place  for  the  necessary   system   modifications   or
replacements. Implementation of required changes for all systems is targeted for
completion during fiscal year 1999.  Testing and certification is expected to be
substantially completed by June 1999.

Executive management periodically reviews the status of its Year 2000 compliance
efforts.  At  present  the  Company  estimates  it is  approximately  one-fourth
complete with  implementation  of new systems or remediation of existing systems
as its relates to core business systems and  approximately  two-thirds  complete
with its efforts as it relates to manufacturing, operating and control systems.

The Company is  coordinating  Year 2000 readiness with other entities with which
it interacts, both domestically and globally, including suppliers, customers and
financial  service  organizations.  Risk  assessments and action plans have been
substantially   completed.  The  majority  of  necessary  system  modifications,
including  testing and  certification,  should be completed  in early 1999.  All
required changes are targeted for completion by third quarter 1999.

The Company has made  significant  investments  to modernize  its core  business
systems  over  the  past  several  years.  With  each  system   modification  or
replacement,  Cone has  addressed  the Year 2000 issue.  Therefore,  remediation
costs to address the  Company's  Year 2000  issues are  expected to be less than
$1.0 million.

The Company  currently  has  contingency  plans  which  address  system  related
interruptions  and will further  develop such plans to protect the business from
potential Year 2000  interruptions.  These plans will be completed during fiscal
year 1999. The Company is taking reasonable steps to prevent major interruptions
related to the Year

                                    17
<PAGE>

2000 issue;  however,  the effect on the Company's  results of operations if the
Company, its suppliers or its customers are not fully Year 2000 compliant is not
reasonably estimable.

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

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

"Safe  Harbor"  Statement  under Section 27A of the  Securities  Act of 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 the
         Company's  current  judgment on the future and are subject to risks and
         uncertainties  that could cause  actual  results to differ  materially.
         Such factors include,  without  limitation:  (i) the demand for textile
         products, including the Company's products, will vary with the U.S. and
         world  business   cycles,   imbalances   between  consumer  demand  and
         inventories  of  retailers  and  manufacturers  and  changes in fashion
         trends,  (ii) the highly competitive nature of the textile industry and
         the  possible  effects  of reduced  import  protection  and  free-trade
         initiatives, (iii) the unpredictability of the cost and availability of
         cotton,  the Company's  principal raw material,  and (iv) the Company's
         relationships  with Levi Strauss as its major  customer.  For a further
         description of these risks see the Company's  1997 Form 10-K,  "Item 1.
         Business Competition,  -Raw Materials and -Customers" and "Management's
         Discussion   and  Analysis  of  Results  of  Operations  and  Financial
         Condition  --  Overview"  of  the  Company's   1997  Annual  Report  to
         Shareholders incorporated by reference into Item 7. of the Form 10-K.

                                     18
<PAGE>

         Other risks and uncertainties may be described from time to time in the
         Company's  other reports and filings with the  Securities  and Exchange
         Commission.


                                    PART II

Item 1.  Legal Proceedings

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

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

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

                                        19
<PAGE>


The  District  Court  held a hearing  on July 24,  1995 to decide on the  merits
Plaintiffs' lone remaining claim of unjust  enrichment,  and in an order entered
September 25, 1995, the District Court dismissed that claim with  prejudice.  On
October 20, 1995, the Plaintiffs appealed to the Court of Appeals from the April
19, 1995 and September 25, 1995 orders of the District  Court.  Oral argument on
Plaintiffs'  appeal was held in the Court of Appeals on October 31, 1996. Due to
the  uncertainties  inherent in the  litigation  process,  it is not possible to
predict the ultimate outcome of this lawsuit.  However, the Company has defended
this matter vigorously,  and it is the opinion of the Company's  management that
the probability is remote that this lawsuit, when finally concluded, will have a
material  adverse  effect on the  Company's  financial  condition  or results of
operations.

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

Item 5.  Other Information

On November 10, 1998, J. Patrick Danahy, President and Chief Executive Officer
and member of the Board of Directors of Cone Mills Corporation, announced his
retirement from the Company and his resignation from the Board of Directors.
Mr. Danahy is succeeded as President and Chief Executive Officer by John L.
Bakane.

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



                                    20

<PAGE>
Exhibit                                                           Sequential
  No.            Description                                        Page No.

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

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

*2.1(c)          Amendment to Receivables Purchase
                 Agreement dated March 24, 1998,
                 between the Registrant and Delaware
                 Funding Corporation, filed as Exhibit
                 2.1(c) to Registrant's report on
                 Form 10-Q for the quarter ending
                 March 29, 1998.

 2.1(d)          Second Amendment to Receivables
                 Purchase Agreement dated as of
                 July 16, 1998, between the Registrant
                 and Delaware Funding Corporation.                     29

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

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

                                     21

<PAGE>



Exhibit                                                           Sequential
  No.            Description                                       Page No.

                 quarter ended July 4, 1993.

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

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

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

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

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

*2.2(h)          Guaranty Agreement dated as of June 14,
                 1995, between Compania Industrial de
                 Parras, S.A. de C.V. and Cone Mills

                                   22

<PAGE>
Exhibit                                                            Sequential
  No.            Description                                        Page No.

                 Corporation filed as Exhibit 2.2(h) to the
                 Registrant's report on Form 10-Q for the
                 quarter ended July 2, 1995.

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

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

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

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

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

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

                                      23

<PAGE>
Exhibit                                                            Sequential
  No.            Description                                        Page No.

                 October 3, 1993.

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

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

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

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

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

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

                              24

<PAGE>



Exhibit                                                            Sequential
  No.            Description                                         Page No.

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

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

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

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

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

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


                                     25
<PAGE>
Exhibit                                                             Sequential
  No.            Description                                         Page No.

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

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

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

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

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

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

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


                                     26

<PAGE>

Exhibit                                                           Sequential
  No.            Description                                        Page No.

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

*4.9             Indenture dated as of February 14,
                 1995, between Cone Mills Corporation
                 and Wachovia Bank of North Carolina,
                 N.A. as Trustee, (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).

 27              Financial Data Schedule                              32


* Incorporated by reference to the statement or report indicated.



                                     27

<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 10, 1998                              /s/ Anthony L. Furr
     ------------------                              -------------------
                                                     Anthony L. Furr
                                                     Vice President and
                                                     Chief Financial Officer



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