Page 1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K
(Mark One)
   [X]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 29, 1996

                                       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, N. C.                    27408
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:  910-379-6220

Securities registered pursuant to Section 12(b) of the Act:
                                             Name of each exchange
       Title of each class                    on which registered
   Common Stock, $ .10 par value             New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Aggregate market value of voting stock held by nonaffiliates of the
registrant as of February 28, 1997: $199,014,504.

Number of shares of common stock outstanding as of February 28, 1997:
26,197,733 shares.

Documents incorporated by reference: Portions of 1996 Annual Report to
Shareholders, Part II, Items 6, 7 & 8; Proxy Statement for Annual Meeting to be
held May 13, 1997, Part III, Items 10, 11, 12 and 13 of this report.

Index to Exhibits - Pages 27-39.


<PAGE>


FORM 10-K                                                                 Page 2
                                     PART I

Item 1.  Business

                                   THE COMPANY

OVERVIEW

Founded in 1891, Cone Mills Corporation (the "Company" or "Cone") is a leading
textile manufacturer with net sales in 1996 of $745.9 million. The Company
conducts business in two segments, apparel fabrics and home furnishings
products, representing 84% and 16% of 1996 net sales respectively, and currently
operates nine modern manufacturing facilities located in North Carolina and
South Carolina. Cone is the largest producer of denim fabrics in the world, the
largest domestic producer of yarn-dyed and chamois flannel shirtings and the
largest domestic commission printer of home furnishings fabrics. Sales and
marketing activities are conducted through a worldwide distribution network.
With export sales of $190.6 million in 1996, primarily denim, the Company is the
largest domestic exporter of denim fabrics.

The Company is recognized internationally as a primary source of high-quality
fabrics for use in the production of upper-end, branded casual apparel. The
Company is a leader in denim styling and development, with denims accounting for
approximately 79% of apparel fabrics sales. Cone believes that it has the
largest and most versatile denim manufacturing capacity in the world and that it
produces a broader range of fashion denims than any of its competitors. In 1996,
Cone sold over 225 different styles of denim. The Company's denim products are
primarily designed for use in garments targeted for the upper-end market, where
styling and quality generally command premium fabric prices. The Company is the
largest supplier to Levi Strauss and the sole supplier of denim for Levi 501(R)
jeans. Other customers include V.F. Corporation (Wrangler), H.I.S. (Chic),
Calvin Klein, The Gap, Polo, Aalfs (Arizona), P.L. Industries (Hilfiger) and
Guess.

The Company has used its manufacturing versatility and styling capabilities to
position itself as a leader in other selected specialty apparel fabric niches.
These include yarn-dyed and chamois flannel shirtings, specialty-dyed and
printed fabrics. Customers for these specialty apparel fabrics include M. Fine,
OshKosh, Woolrich, L.L. Bean, J.C. Penney, Eddie Bauer and Levi Strauss.

The Company services the home furnishings markets through three divisions: Cone
Finishing, Cone Decorative Fabrics and Cone Jacquards. Cone Finishing consists
of the Company's Carlisle and Raytex plants and provides custom printing
services to leading home furnishings stylists and distributors. Cone Decorative
Fabrics is one of the country's leading designers and marketers of printed and
solid woven fabrics for use in upholstery, draperies and bedspreads. Cone
Jacquards began production in late 1995, providing jacquard woven fabrics to
furniture, drapery and other markets. The Company's home furnishings customers
include the Waverly Division of F. Schumacher & Co., P. Kaufmann, Covington,
Richloom, Crown


<PAGE>



FORM 10-K                                                                 Page 3

Item 1.  (continued)

Crafts and Croscill. The home furnishings segment also includes Cornwallis
Development Co., a wholly owned subsidiary that develops previously acquired
real estate not required for manufacturing operations.

Cone's business strategy is to focus on products and services that generate
attractive margins and in which it believes it is an industry leader. It
competes domestically and internationally on the basis of styling and
development, management experience, versatility and size of manufacturing
facilities and the Cone name and reputation.

The Company seeks growth of its core denim, specialty sportswear and decorative
fabric businesses through expansion into new geographic areas and markets,
product development and investment in value-added technology such as CAD/CAM. A
primary goal of this strategy is to reduce cyclical fluctuations in its core
businesses through improved market and product balance. As a means of new market
penetration and geographic expansion, Cone actively seeks acquisitions of,
investments in and alliances with businesses in which it can add value through
its manufacturing and marketing expertise.

In 1993, the Company invested in Compania Industrial de Parras, S.A. de C.V.
("CIPSA") and entered into a 50/50 joint venture with CIPSA to build a new denim
manufacturing facility in Mexico. This joint venture facility, Parras Cone de
Mexico, S.A. de C.V. ("Parras Cone") was completed and began production of basic
denims and yarn in late 1995. The Company believes that Parras Cone produces
high-quality basic denim at costs competitive with manufacturers anywhere in the
world. In December 1994, Cone Mills purchased the Raytex printing facility that
primarily prints wide fabrics used in home furnishings, including comforters and
bedspreads. The Raytex facility prints for many of the same customers as the
Company's narrow print operation, Carlisle, allowing it to realize marketing,
operating and administrative efficiencies. In 1995, the Company built a new
jacquard weaving facility and late in the year began production, further
diversifying its home furnishings fabrics businesses. In 1996, the Company
expanded capacity of the jacquard weaving facility. See "Item 7. Management's
Discussion and Analysis of Results of Operations and Financial Condition -
Strategic Initiatives."

Consistent with its business strategy to focus on core strengths and exit
businesses in which the Company was not a leader, in January 1996, the Company
sold its Olympic Products Division. Olympic produced polyurethane foam and
related products for the home furnishings and automotive markets. In addition,
in late 1996, the Company completed the sale of Greeff Fabrics, a distributor of
high end fashion fabrics. In early 1997, the Company sold its synthetic fabric
division, including its finished inventory, forward commitments and order book.
Also, the Company has entered into a contract with an international real estate
development firm for the sale of certain real estate assets including the assets
of Cornwallis Development Co. See "Item 7. Management's Discussion


<PAGE>



FORM 10-K                                                                 Page 4

Item 1.  (continued)

and Analysis of Results of Operations and Financial Condition -
Strategic Initiatives" and "Item 8.  Financial Statements and
Supplementary Data - Note 21 of the Notes to Consolidated Financial
Statements."

In December 1996, the Company adopted a plan to consolidate its specialty
sportswear finishing operation into its Carlisle finishing facility.
Consolidation of production will occur during 1997 and is expected to allow the
Company to utilize its finishing capacity more efficiently and reduce its cost
structure.

In addition to its acquisition strategy, the Company continues to invest in its
domestic facilities to improve productivity and product quality, expand its
product lines and increase customer satisfaction. Capital expenditures for the
last five years have totaled approximately $200 million. The Company expects to
spend approximately $44 million in 1997 for capital projects.

From 1992 to 1995, the Company's annual growth rate of sales averaged
approximately 9% per year. While sales in 1996 from new business ventures,
including Raytex, the Mexican J.V. and Jacquard operations, accounted for
approximately 10% of the Company's overall total revenues, these increases were
more than offset by weak market conditions and lower sales in the Company's
traditional denim, decorative prints and sportswear markets and by the sale of
Olympic which alone resulted in a $90 million sales reduction. Management
believes that these strategic initiatives have positioned the Company for
improved results in the long-term.

The Company, a North Carolina corporation, maintains its principal executive
offices at 3101 North Elm Street, Greensboro, North Carolina 27415-6540, and its
telephone number is (910)379-6220. Unless otherwise stated, references to "Cone"
or the "Company" include Cone Mills Corporation and its subsidiaries.



<PAGE>

FORM 10-K                                                                 Page 5

Item 1.
(continued)

   Business Segments

   The following table sets forth certain net sales and operating income (loss)
   information for each of the Company's two business segments as well as net
   sales of the principal product groups included therein, for fiscal years 1992
   through 1996.

<TABLE>
<CAPTION>
                                                                    Fiscal Year (1)(2)
                                      1996                  1995                1994                  1993              1992
<S>                            <C>         <C>       <C>         <C>       <C>        <C>       <C>       <C>     <C>       <C>  
NET SALES                                                               (dollars in millions)
Apparel
   Denim                       $498.7      66.9%     $552.0      60.6%     $423.5     52.5%     $421.8    54.9%   $402.4    57.0%
   Specialty Sportswear(3)      129.4      17.3       148.1      16.3       177.0     22.0       154.0    20.0     117.6    16.7
      Total                     628.1      84.2       700.1      76.9       600.5     74.5       575.8    74.9     520.0    73.7

Home Furnishings
   Fabrics(3)                    95.7      12.9        98.4      10.8        93.7     11.6        94.4    12.3      93.0    13.2
   Foam Products(3)               4.7       0.6        94.7      10.4        93.9     11.6        84.6    11.0      84.1    11.9
   Real Estate and other(3)      17.4       2.3        17.0       1.9        18.1      2.3        14.4     1.8       8.3     1.2
      Total                     117.8      15.8       210.1      23.1       205.7     25.5       193.4    25.1     185.4    26.3

Total net sales                $745.9     100.0%     $910.2     100.0%     $806.2    100.0%     $769.2   100.0%   $705.4   100.0%

OPERATING INCOME (LOSS)(4)
   Apparel                      $31.0       4.9%      $39.9       5.7%      $47.5      7.9%      $68.8    12.0%    $67.4    13.0%
   Home Furnishings(5)           (8.5)     (7.2)       (0.6)     (0.3)       19.0      9.2        19.5    10.1      16.3     8.8
   Restructuring                 (5.2)        -           -         -           -        -           -       -         -       -
</TABLE>

(1) Results from continuing operations.

(2) Fiscal 1992 contained 53 weeks. The remainder of the years presented
    contained 52 weeks.

(3) Specialty Sportswear includes synthetic fabrics which was sold in January
    1997; Fabrics includes Greeff, which was sold in December 1996; Foam
    Products represents the Olympic Products Division which was sold in January
    1996; and in February 1997, the Company entered into a contract for the
    sale of substantially all of the assets of its real estate operations. See
    "Item 7. Management's Discussion and Analysis of Results of Operations and
    Financial Condition - Strategic Initiatives" and "Item 8. Financial
    Statements and Supplementary Data - Note 21 of Notes to Consolidated
    Financial Statements" for a description of the sales and operating results
    of these businesses.

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

(5) Operating income (loss) includes from Olympic a loss of $1.0 million in 1995
    and income of $1.6 million, $1.9 million and $1.2 million for years 1994,
    1993 and 1992 respectively.

<PAGE>




FORM 10-K                                                                 Page 6

Item 1.  (continued)

MARKET DEVELOPMENTS

Casual wear, including jeans, knit shirts, flannel shirts and similar apparel,
has been the fastest growing category within the apparel fabrics industry in
recent years. The Company believes that this growth is the result of several
factors, including (i) the adoption of casual lifestyles by the "baby-boom"
generation, born between 1946 and 1964, and their children, (ii) the enhanced
value of casual garments to consumers resulting from lower acquisition costs and
lower life cycle costs (elimination of alteration, dry cleaning and pressing
costs), (iii) enhanced styling of casual garments along with greater acceptance
of casual wear in the workplace and (iv) strong brands such as Levi, Wrangler
and The Gap which continue to create fashion interest for consumers.

The Company's domestic apparel fabrics markets have been affected by changing
demographics associated with the maturation of the baby-boom generation. As the
baby-boom generation has matured, product trends have evolved away from
commodity-type products to higher quality products with more diverse styling. As
a result, denim apparel manufacturers desire better fabric quality and styling
to meet consumer demand, as well as faster service to reduce the risk of
changing fashion trends. The size of the 15-to 24-year-old age category, which
accounts for the largest jeans consumption segment of the U.S. population, began
to expand in the mid-1990s when the children of baby boomers began to reach
these ages. Demand for denim apparel is expected to increase as this segment of
the U.S. population expands. By virtue of its styling expertise, manufacturing
versatility and service capabilities, the Company believes that it has
positioned itself to take advantage of the market opportunities presented by
these demographic changes.

Internationally, consumption of denims has increased in industrialized
countries, notwithstanding moderate population growth, as these countries
continue to adopt U.S. casual fashion trends. In less industrialized countries,
the potential market for denim jeans has continued to grow as youth populations
expand. The Company believes that these international market trends present
opportunities for long-term growth through the Company's international
distribution network. Apparel fabrics exports have increased in recent years
with 1996 apparel fabrics export sales at $187.0 million as compared with $175.7
million in 1995 and $135.9 million in 1994. The Company, in partnership with
CIPSA, formed Parras Cone, a new denim manufacturing facility located in Mexico,
to expand its manufacturing and market presence into Latin America.
See "Business - International Operations."

The Company believes that the demographic trends applicable to the U.S. markets
for its home furnishings fabrics indicate increases in demand as the baby
boomers reach ages traditionally associated with high levels of spending on home
furnishings. Additionally, there has been international demand for U.S. styled
home furnishings products. The Company's strategy is to continue to expand its
home furnishings businesses.


<PAGE>



FORM 10-K                                                                 Page 7

Item 1.  (continued)

PRODUCTS FOR APPAREL MARKETS

Denims. Cone markets and manufactures a wide variety of denim apparel fabrics.
Denims are generally "yarn-dyed", which means that the yarn is dyed before the
fabric is woven. The result is a fabric with variations in color that give denim
its distinctive appearance. Fabric styling of denims, which the Company believes
to be critical to this market, is supported by the Company's experienced
stylists and extensive use of computer-aided design and manufacturing systems.

The Company is a leader in denim styling and development and believes that it
produces a broader range of fashion denim than any of its competitors. In 1996,
Cone sold over 225 different styles of denim. The styling process involves the
creation of a wide array of fabric colors, shades and patterns in a variety of
both traditional and innovative weaves. After weaving, fabrics are processed
further in finishing operations that produce different textures and other
physical properties. During this process, the Company's product development
specialists and stylists generally work in collaboration with customers to
assure that fabrics meet customer requirements and can be manufactured
efficiently. This creates a strong working relationship that allows Cone to
react quickly to its customers' rapidly changing needs.

Although the markets and end uses for denim are very diverse, the Company
categorizes the market into heavyweight denims and specialty weight denims.
Heavyweight denim is used primarily in jeans and is by far the largest segment
of the denim market. Within the heavyweight market, the Company further
classifies its denims as "value-added" and "basic." Value-added denims are
distinguished by styling and customer service. Basic denims are less
differentiated by styling and customer service with competition being primarily
in the form of price and quality.

Cone's value-added denims are stylish and have broad market appeal. The
Company's largest customer in this category is Levi Strauss, whose 501(R) jeans
are produced solely from the Company's proprietary fabrics. Other customers
include V.F. Corporation (Wrangler), Calvin Klein, The Gap, Polo, Hilfiger,
Arizona and Guess.

Cone's basic denims, with mass market appeal, are used primarily in garments
sold through retail chains, department stores and catalogs. Customers for this
product include a majority of the same names as for value-added denims. Although
the Company's basic denims are designed for the upscale segment of these
markets, the Company also produces basic heavyweight blue denim, primarily at
Parras Cone, to service mass market needs of certain customers. Sales of this
product constituted approximately 20% of total denim sales in 1996.

Specialty weight denims include a variety of weave constructions, stripes,
colors and weights and are used primarily in women's and children's wear.
Although these fabrics constitute only a small



<PAGE>



FORM 10-K                                                                 Page 8

Item 1.  (continued)

portion of the denim market, they tend to establish market trends because of
their use in higher fashion garments. Cone's customers in this group include
OshKosh, The Gap, Ruff Hewn and Miller International.

As with all apparel fabrics, there is risk that fashion trends will change and
consumers will develop preferences for fabrics other than denims for casual
wear. However, the demand for denim jeans is growing, with a 7% increase in U.S.
unit sales in 1996, and the industry appears to believe that growth will
continue as evidenced by new garment manufacturers entering the market and
expansion of capacity worldwide.

Specialty Sportswear Fabrics. The Company is the largest domestic producer of
yarn-dyed plaid flannel and solid shade chamois flannel shirting fabrics. The
Company's manufacturing capability for producing fabrics with a soft texture is
essential to its success in this product group. These fabrics are primarily
manufactured for use in menswear sold through catalog stores and in
lighter-weight apparel products for women's and children's wear. Distribution
channels have expanded in recent years to include department stores and
discounters. Customers for these fabrics include M. Fine, Woolrich, L.L. Bean,
J.C. Penney, Eddie Bauer and Levi Strauss.

Cone also serves niche markets for piece dyed fabrics based on unique dye,
finishing, and yarn formation technologies and provides fabrics such as
Splashdown(TM) dyed fabrics and its new wrinkle resistant fabric ProSpin(R).

Cone styles and distributes a line of specialty print fabrics for a wide range
of branded apparel customers. These fabrics are printed at the Company's
Carlisle plant. The markets for these products are primarily fashion women's and
children's wear, and Cone's customers for these fabrics include OshKosh, L.L.
Bean, Healthtex, Woolrich, J.C. Penney, H. D. Lee, No Fear and Guess.

Through its Carlisle plant, the Company also provides fabric printing services
to converters of fashion apparel fabrics. These converters purchase unfinished
fabrics from weaving mills, use outside sources such as Carlisle to dye the
fabrics and print their designs, and then market the finished fabrics to apparel
manufacturers. Carlisle is well known for its quality, service and technical
capabilities in screen printing.

In December 1996, the Company approved the closing of the Granite Finishing
plant. With this closing, the plant's dyeing and finishing production will be
moved to the Carlisle plant. The production phaseout at Granite is expected to
be substantially complete by the end of the third quarter of 1997.

Marketing and Sales. The Company's marketing focus is to serve upper-end and
brand name apparel manufacturers through the development of innovative products
that are recognized in the marketplace for their distinctive quality and
styling.


<PAGE>



FORM 10-K                                                                 Page 9

Item 1.  (continued)

Styles of the Company's denim and other fabrics vary in color, finish and
fabrication, depending upon fashion trends and the needs of the specific
customer. The Company's stylists monitor fashion trends by traveling throughout
the United States, Europe and the Far East to attend fashion and trade shows,
meet with garment manufacturers and retailers and conduct market research.
Together with the apparel marketing group, stylists work directly with Cone's
customers to create fabrics that respond to rapidly changing fashion trends and
customer needs.

The Company employs an apparel fabrics marketing and sales staff of more than
150 persons. Business management of apparel fabrics is organized into four
operating divisions: Cone Denim North America, Cone Sportswear, Cone
International Marketing and Cone Denim Europe. The Company believes that it has
been able to achieve more effective customer service and improved efficiency
through the integration of its styling, manufacturing, marketing and customer
service functions. Except for Cone Denim Europe, the Company's apparel fabrics
marketing groups are headquartered in Greensboro in proximity to apparel
manufacturing facilities so that customer requirements can be translated more
effectively into finished products. To provide a more direct working
relationship with its customers, the Company also maintains sales offices
located in New York, Los Angeles, San Francisco, Dallas, Brussels and Singapore.

The Company's marketing professionals, together with its stylists and product
development personnel, work as early as one year in advance of a retail selling
season to develop fabric styles, colors, constructions and finishes. There are
three annual retail selling seasons: spring, fall (back-to-school) and the
Christmas season. The Company's sales for a particular selling season generally
begin six months in advance of that season. The Company's sales force presents
each season's line to customers in its showrooms as well as in its customers'
offices.

Manufacturing. The Company is the largest manufacturer of denims in the world.
Cone bases this conclusion upon capacity and sales information obtained from
trade sources. The Company is aware that a large foreign-based competitor is a
substantial minority owner in a foreign manufacturing facility and, in reaching
its conclusion, the Company has attributed to such competitor only its pro rata
ownership in this facility.

Cone believes that it has the most versatile denim manufacturing capabilities in
the world. The Company's denim facilities are modern, flexible, vertically
integrated, and encompass all manufacturing processes necessary to convert raw
fiber into finished fabrics. The Company has extensive flexibility in its yarn
spinning operations, with open-end and ring spinning equipment. The Company's
denim weaving facilities, which include approximately 850 weaving machines,
utilize all major cotton weaving technologies, including double-width
projectile, air-jet and rapier machines. The Company's dyeing and finishing
facilities include a wide range of technologies, with seven indigo long-chain
dyeing machines, package


<PAGE>



FORM 10-K                                                                Page 10

Item 1.  (continued)

and beam dyeing, continuous overdye machinery and raw cotton dyeing equipment.
Specialty dyeing and printing processes for apparel fabrics are conducted at the
Company's Carlisle plant, which is one of the largest textile printing
facilities in the United States.

Cone is recognized internationally as a quality leader with its denim and
sportswear weaving plants being certified under the ISO 9002 process.

The Company also believes that it is a leader in customer service. The Company's
manufacturing facilities are continually scheduled and coordinated to maximize
versatility. Approximately 60% of Cone's denim volume is shipped under its
just-in-time quality assurance and delivery program.

Product and process development is supported by special manufacturing
development groups, which have specialists located in each facility. These
groups work with the Company's stylists and its customers' stylists to produce
new products for the marketplace. The Company uses on-line computer-aided design
systems to increase styling effectiveness.

Raw Materials. The primary raw material for the Company's fabric manufacturing
operations is cotton. The policies of the U.S. Government affect the cost and
supply of cotton in the U.S. and the policies of foreign governments have an
effect on worldwide prices and supplies as well. Prior to 1991, domestic cotton
prices generally exceeded world price levels, which created a competitive
disadvantage for U.S. textile manufacturers who were generally prohibited by
U.S. law from importing cotton. Since 1991, changes in U.S. law, allowing
limited imports or providing government payments to cotton purchasers, have
resulted in effective U.S. cotton costs being more competitive with world
levels. Congress has recently passed additional farm legislation that is aimed
at reducing farm subsidies and allowing farmers more versatility in planting
decisions. The long-term impact of this legislation on cotton supplies and
pricing is unclear. However, management believes that U.S. companies will
continue to be able to acquire adequate cotton supplies at prices competitive
with offshore manufacturers but there can be no assurance that these results
will always occur. To the extent that effective U.S. cotton prices exceed world
prices, the Company's competitiveness may be materially adversely affected.

Since cotton is an agricultural product, its supply and quality are subject to
the forces of nature. Although the Company has always been able to acquire
sufficient supplies of cotton for its operations in the past, any shortage in
the cotton supply by reason of weather, disease or other factors could adversely
affect the Company's operations.

In late 1993 and continuing through 1995, cotton prices increased throughout the
world. The Company believes that cotton prices were and are being affected by
three major trends: (i) an increase in


<PAGE>



FORM 10-K                                                                Page 11

Item 1.  (continued)

worldwide demand as major consuming countries have recovered from a cyclical
recession, (ii) disappointing cotton crops in China, India and Pakistan in 1993
and 1994 and in the U.S. in 1995 resulting from poor weather, disease and
insects and (iii) financial speculation in commodities markets which tend to
exacerbate price movements. Because the Company cannot always pass increased
cotton costs on to its customers, such increases have adversely affected its
profitability in the past and may do so in the future. See "Item 7. Management's
Discussion and Analysis of Results of Operations and Financial Condition."

The Company has an established cotton purchasing program, administered in
conformance with policies approved by the Board of Directors, to ensure an
uninterrupted supply of appropriate quality and quantities of cotton, to hedge
committed and anticipated fabric sales and to manage margin risks associated
with price fluctuations on anticipated cotton purchases. The Company primarily
uses forward purchase contracts and, to a lesser extent, futures and options
contracts. Management believes that its cotton purchasing program has resulted
in lower overall cotton prices than if cotton were purchased solely on a spot
market basis or by solely matching cotton purchases with product sales. Since
prices for forward purchase contracts are sometimes fixed in advance of
shipment, the Company may benefit from its fixed price purchases in cotton if
prices thereafter rise, or fail to benefit if prices subsequently fall. There
can be no assurance the forward purchase contracts and hedging transactions will
not result in higher cotton costs to the Company or will protect the Company
from price fluctuations.

Cone also purchases "greige goods" (fabrics that have not been dyed or
finished), yarn, synthetic fibers, and dyes and chemicals. These raw materials
have normally been available in adequate supplies through a number of suppliers.

Competition. The textile apparel fabrics business is highly competitive. No
single company dominates the industry and domestic and foreign competitors range
from large, integrated enterprises to small niche concerns. There are nine denim
manufacturers in the United States, of which Cone is the largest, and three
domestic producers comprise approximately 60 percent of the U.S. productive
capacity. Foreign competition in domestic markets is in the form of imported
garments. Primary competitive factors include price, product styling and
differentiation, customer service, quality and flexibility, with the
significance of each factor dependent upon the particular needs of the customer
and the product involved. Increased competition in the form of imported apparel
from Mexico and other countries, the migration of garment manufacturing
facilities to Mexico and Caribbean countries, additional worldwide capacity,
more aggressive pricing from domestic companies and the proliferation of newly
styled fabrics competing for fashion acceptance have been factors affecting the
Company's business


<PAGE>


FORM 10-K                                                                Page 12

Item 1.  (continued)

environment. Any failure of the Company to compete effectively in this
environment or to keep pace with changing markets could have a material adverse
effect on the Company's results of operations and financial position.

The level of import protection in the U.S. for domestic producers of textiles is
subject to both domestic political and foreign policy considerations. The World
Trade Organization ("WTO") was formed in January 1995 and is the successor to
the General Agreement on Trade and Tariffs ("GATT") approved by Congress in
December 1994. This new multilateral trade organization has set forth mechanisms
by which world trade in textiles and clothing is being progressively liberalized
by phasing-out quotas and reducing duties over a ten-year period which began in
January of 1995. Although the Company's export business should benefit from
reduced tariffs, there can be no assurance that the significant reduction in
import protection for domestic textile manufacturers will not have a material
adverse effect on the Company's results of operations and financial condition.

The North American Free Trade Agreement ("NAFTA"), which became effective on
January 1, 1994, has created a free-trade zone among Canada, Mexico and the U.S.
NAFTA contains safeguards which were sought by the U.S. textile industry,
including a rule of origin requirement that products be processed in one of the
three countries in order to benefit from the agreement. NAFTA will phase out all
trade restrictions and tariffs on textiles and apparel among the three
countries. In addition, legislation has been proposed that would grant benefits
to other countries in the Caribbean and Central and South America that are
roughly equivalent to those applicable to Mexico under NAFTA. The Company
believes that the removal of tariffs on denim and denim jeans in the
participating countries presents opportunities for growth. Cone's domestic
operations may benefit from the improved access to Mexico's consumer markets and
from access to garment manufacturers in Mexico and the Caribbean Basin who are
competitive with traditional import sources from the Far East. The Company's
Mexican joint venture, Parras Cone, benefits from its access to U.S. markets.
However, there can be no assurance that NAFTA, or the possible adoption of
proposed legislation, will not adversely affect the Company.

The Company's domestic strategy is to compete primarily on the basis of quality,
styling and service. The Company believes that the historically high quality of
its products and manufacturing processes has created a competitive advantage,
which it has enhanced by the extensive use of statistical quality control and
investment in modern equipment, including manufacturing process controls. The
Company also believes that its experienced stylists and product development
specialists, its use of computer-aided design systems and its manufacturing
versatility have created a competitive advantage in styling.


<PAGE>


FORM 10-K                                                                Page 13

Item 1.  (continued)

The Company has focused its operations on the manufacture of fabrics for use in
garments that are less vulnerable to import penetration. The location of the
Company's U.S. manufacturing facilities, its joint venture in Mexico and its
emphasis on shortening production and delivery times allows the Company to
respond more quickly than foreign producers to changing fashion trends and to
its domestic customers' demands for precise production schedules and rapid
delivery. The Company has invested in technological and process improvements to
meet demand for quality and styling. Its emphasis on customer service is
supported by its just-in-time and quick response programs and by electronic data
interchange (EDI) with customers. These efforts have improved communication,
planning and processing time in manufacturing.

The Company believes it effectively competes in foreign markets through export
sales. See "Business - International Operations."

Seasonality. Demand for the Company's apparel products and the level of the
Company's sales fluctuate moderately during the year. Generally, there is
increased consumer demand for garments made of denim and the Company's specialty
apparel fabrics during the fall (back-to-school) and the Christmas season. As a
result, demand for the Company's apparel fabrics is generally higher during the
first half of the calendar year when apparel fabrics are produced for these
selling seasons.

HOME FURNISHINGS PRODUCTS

Textile Fabrics. The Cone Finishing Division, consisting of the Company's
Carlisle and Raytex plants, is the largest commission printer of decorative
fabrics in the U.S. As commission printers, Carlisle and Raytex prints fabrics
owned by customers on a fee basis. Customers for Carlisle's printing services
include Waverly Division of F. Schumacher & Co., Western Textiles, P. Kaufman,
Anju/Woodridge, Covington, Ametex and Spectrum. The home furnishings fabrics
processed at Carlisle are generally used for upper-end upholstery and drapery
prints. Customers for Raytex include Beco, Galey & Lord, Croscill, Magic
Textiles, Revman, Perfect Fit and Whiting.

The Carlisle plant is a modern, one-million square foot facility specializing in
rotary screen printing. In recent years, the Company has invested heavily in
computerized color-mixing systems and automated process controls in order to
support its competitive strategy of focusing on quality and service.

The Raytex plant is a modern 260,000 square foot facility with six printing
machines specializing in wide rotary screen printing. In 1996, a new preparation
range was installed providing additional finishing capabilities. Raytex is one
of the largest wide-fabric commission printers in the U.S.


<PAGE>


FORM 10-K                                                                Page 14

Item 1.  (continued)

Cone Finishing Division's marketing headquarters are located in New York City.
Marketing efforts of the New York sales staff are augmented by close working
relationships between Carlisle's and Raytex's production and technical staff and
customers' designers and stylists. Cone Finishing also maintains a customer
service center that utilizes electronic data interchange (EDI) with major
customers.

Cone Decorative Fabrics is a "converter" of printed and solid woven fabrics for
upholstery, draperies and bedspreads. A converter designs and markets fabrics,
which are manufactured and printed for the converter by others. The Decorative
Fabrics division's lines are printed primarily at the Carlisle plant under the
name "John Wolf Decorative Fabrics."

Cone Decorative Fabrics are marketed domestically and internationally through
the division's sales staff and sales agents. The division's sales staff handles
sales to large customers such as hotels, institutions and furniture
manufacturers, as well as "jobbers," who resell to decorators, fabric retailers
and certain smaller quantity users. International sales and sales to other
smaller customers are made primarily through agents.

The Cone Finishing Division competes directly with two large commission
printers, the Cherokee division of Spartan Mills and Santee Print Works, as well
as the Brookneal plant of the Bibb Company. Cone Decorative Fabrics competes
with a large number of domestic and foreign suppliers of decorative fabrics.
Both divisions compete primarily on the basis of quality and service.

The Cone Finishing Division also competes indirectly with other suppliers of
products used in the home furnishing industry including jacquard woven fabrics,
velvets and plain shade fabrics. Consumer fashion preference is based upon
coloration, texture and value. As with all home furnishing fabrics, there is a
risk that consumer fashion preference will shift away from prints. The Company
has experienced a shift in preference away from printed fabrics.

In order to dampen the effects of these shifts in consumer preference, the
Company formed the Cone Jacquards Division and entered the jacquard weaving
business with the start up in late 1995 of a new weaving facility. The Cone
Jacquards plant is a modern 88,000 square foot facility with approximately 20
wide weaving machines. Cone Jacquards produces broadloom jacquard fabrics for
furniture manufacturers, fabric distributors, retailers, converters and
specialty products manufacturers. Competitors of Cone Jacquards include
Mastercraft, Burlington, Culp, Quaker and Blumenthal. Customers for Cone
Jacquards include Barrow Industries, Kravet, Klaussner Furniture, Thomasville
Upholstery and Drexel Heritage.

Foam Products. In first quarter of 1996, the Company completed the sale of its
Olympic Products Division to British Vita PLC. Proceeds of the sale were in
excess of $50 million associated with the sale of fixed assets, inventories and
the liquidation of receivables.


<PAGE>



FORM 10-K                                                                Page 15

Item 1.  (continued)

Olympic Products supplied polyurethane foam and related products to the home
furnishings and automotive markets.

The Company sold Olympic because management did not believe it was appropriate
to invest substantial amounts of capital in order to grow the business to the
size required to be an effective competitor in the business. Taking this action
allows the Company to focus on its core strengths for the long-term.

Real Estate Activities. The Company owns approximately 750 acres of real estate
in the Greensboro area, substantially all of which were purchased originally to
support the Company's manufacturing operations. The Company determined that the
land was no longer needed for this purpose and has systematically developed and
liquidated these properties. These activities are conducted through a wholly
owned subsidiary, Cornwallis Development Co. Net sales from real estate
activities generally account for less than two percent of the Company's total
net revenues.

Consistent with its strategy to concentrate on its core business, in late 1996
the Company announced its plan to sell Cornwallis Development Co. Several bids
were received and the Company has entered into a contract with an international
real estate development firm to sell certain real estate assets including those
of Cornwallis. See "Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition - Strategic Initiatives."

INTERNATIONAL OPERATIONS

The Company has a long history of distributing its products internationally and
exported approximately 35% of the Company's denim sales in 1996. The Company has
sales agents in Europe, Japan, Korea, Hong Kong, Africa, and throughout Central
and South America, and it maintains extensive support services in trade
financing, traffic and transportation in order to support its international
presence. The Company's strategy is to service its international customers with
the same degree of commitment to quality, service and fabric development as its
domestic customers. The Company believes this philosophy is responsible for
Cone's position as the largest U.S. exporter of denims. The Company's
international customers include: Levi International, Joker Jeans and Big Star in
Europe; Edwin in Japan; Wellsum and Talbots in Hong Kong; and Ellis, Custer,
Jeans and Jackets and UFO brands in South America.

Principal competitive factors in the international markets for denims are
quality, price and styling. The Company believes it has competitive advantages
in the upper-end segment of the market in quality, service and fabric
development as compared with foreign manufacturers, as a result of the economies
of scale resulting from manufacturing experience and the versatility of its
manufacturing facilities. In addition, denim jeans have an image of being
uniquely American products, which complements the Company's strategy of serving
the upper-end "genuine" jeans market.


<PAGE>


FORM 10-K                                                                Page 16

Item 1.  (continued)

The Company's competitiveness in international market segments is influenced by
tariffs and shipping costs. The Company is assessing the feasibility of
manufacturing within certain trade blocs in order to compete more effectively in
these markets.

In 1993, the Company purchased an ownership in CIPSA, the largest Mexican denim
manufacturer and entered into a 50/50 joint venture arrangement with CIPSA to
build and operate a world class denim manufacturing plant in Mexico. The joint
venture, Parras Cone, was financed with approximately $74 million in debt,
non-recourse to the partners, and a total equity investment of $60 million split
equally between the two partners. Construction of the joint venture facility was
completed in 1995 and it began production of basic denims and yarn in the fourth
quarter of 1995.

The Company has several objectives in pursuing its Mexican initiatives. The
Company is seeking access to the Mexican distribution system to sell the
Company's products and access to lower cost cut and sew facilities in order to
increase market share with private label customers and large branded customers
migrating to Mexico. The Company also is seeking to gain from lower labor and
other cost advantages, while benefiting from its technological expertise. The
Company plans to export basic denims made by Parras Cone throughout the world by
taking advantage of Cone's distribution network.

Cone Decorative Fabrics and Cone Jacquards export approximately 10% of their
sales volume. Styling and service are the principal competitive factors
affecting its position in these markets. The Company believes that there is an
international demand for U.S.
styling and design.

TRADEMARKS AND PATENTS

The Company owns several registered trademarks containing the "Cone" name and
pine cone design. In addition, the Company holds various other trademarks and
trade names used in connection with its business and products, both domestically
and internationally. The Company believes that the name recognition of Cone
Mills and its reputation for quality, service and product development have value
in both domestic and international markets.

CUSTOMERS

The Company has one unaffiliated customer, Levi Strauss ("Levi"), which accounts
for more than 10% of consolidated sales. Sales to this customer accounted for
approximately 49%, 39% and 34% of sales from continuing operations in 1996, 1995
and 1994, respectively. In 1996, Levi repurchased common shares in a leveraged
transaction that may or may not affect purchasing practices. The loss of Levi as
a customer, or a significant reduction in its purchases from the Company, would
have a material adverse effect on the Company's results of operations.



<PAGE>



FORM 10-K                                                                Page 17

Item 1.  (continued)

Levi has been a customer of the Company for more than 75 years and a close,
cooperative supplier/customer relationship has evolved through the development
of the Company's proprietary fabrics for use in Levi's 501(R) family of jeans.
In addition to supplying fabrics for Levi's 501(R) family of jeans, the Company
sells other denim fabrics to Levi. Because the Company is Levi's major denim
supplier, Levi initiated discussions with the Company in 1989 concerning ways to
assure the continuity of this relationship. As a result of these discussions,
Cone and Levi entered into an exclusive Supply Agreement as of March 30, 1992,
which confirms that Levi will continue to use only Cone's proprietary denim
fabrics in manufacturing Levi's 501(R) family of jeans and that Cone will
continue to supply such fabrics solely to Levi. The volume of purchases by Levi
and the prices charged by Cone will continue to be subject to customary
negotiations between the parties.

The Supply Agreement expires on March 30, 2002 and is automatically extended,
unless either party gives notice otherwise, for an additional year so that the
remaining term is five years. Following a change in control, the Supply
Agreement would terminate at the end of the three-year supply arrangement or of
the lease term, as the case may be. Additionally, Levi may terminate the Supply
Agreement upon 30 days' written notice and either party may terminate the Supply
Agreement in the event of the other party's insolvency, bankruptcy or occurrence
of a similar event.

BACKLOG

The Company's apparel and home furnishings order backlog was approximately $132
million, or 39 million yards, at December 29, 1996, as compared to approximately
$186 million or 54 million yards at December 31, 1995. Physical deliveries for
accepted fabric orders in the apparel industry vary in that some products are
ordered for immediate delivery only, while others are ordered for delivery
several months in the future. In addition, the Company has an ongoing
proprietary program for which orders are issued only for nearby delivery.
Therefore, orders on hand are not necessarily indicative of total future
revenues. It is expected that substantially all of the orders outstanding at
December 29, 1996, will be filled within the first quarter of 1997.

RESEARCH AND DEVELOPMENT

The research and development activities of the Company are directed primarily
toward improving the quality, styling and performance of its apparel fabrics and
other products and services. The Company also is engaged in the development of
computer-aided design and manufacturing systems and other methods of improving
the interaction between the Company's stylists and its customers. These
activities are conducted at various facilities, and expenses related to these
activities are an immaterial portion of the Company's overall operating costs.




<PAGE>



FORM 10-K                                                                Page 18

Item 1.  (continued)

GOVERNMENTAL REGULATION

Federal, state and local regulations relating to the workplace and the discharge
of materials into the environment are continually changing; therefore, it is
difficult to gauge the total future impact of such regulations on the Company.
However, existing government regulations are not expected to have a material
effect on the Company's financial position, operating results or planned capital
expenditures. The Company currently has an active environmental protection
committee and an active workplace safety organization.

EMPLOYEES

At January 31, 1997, the Company employed approximately 6,600 persons, of whom
approximately 1,300 were salaried and approximately 5,300 were hourly employees.
Of such hourly employees, approximately 2,200 are represented by collective
bargaining units and are employed under collective bargaining agreements that
provide for annual wage negotiations in the spring of each year. Based upon its
records relating to the withholding of union dues from employee compensation,
the Company believes that approximately 1,100 of its employees are dues-paying
union members. The Company has not suffered any major disruptions in its
operations from strikes or similar events for more than a decade and considers
its relationship with its employees to be satisfactory.

Item 2.  Property

The Company operates nine manufacturing plants - seven in North Carolina and two
in South Carolina. There are six apparel fabric and three home furnishings
plants. The Company also operates several distribution centers and warehouses.
All significant manufacturing facilities are held in fee and are substantially
free of any significant liens or other encumbrances. The Company's manufacturing
facilities total approximately 4.3 million square feet of floor space, with
buildings generally constructed of brick, steel, concrete or concrete block. All
such facilities are maintained in good condition and are suitable for their
respective purposes. Even when such facilities are substantially fully utilized,
the Company believes that it is in a position to respond to opportunities to
produce additional higher margin fabrics through changes in product mix and
through acquisition of yarn and greige goods from outside sources for further
processing and finishing by the Company. The Company leases office buildings in
Greensboro where its executive and administrative offices are located. All of
the Company's sales offices are leased from unrelated parties.

Parras Cone, the Company's joint venture with CIPSA, owns 20 acres of land and a
575,000 square-foot building completed in 1995, which provides manufacturing
space and raw materials and finished goods warehouses.




<PAGE>



FORM 10-K                                                                Page 19

Item 3.  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 tothe 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.

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.



<PAGE>



FORM 10-K                                                                Page 20

Item 3. (continued)

The Company is a party to various other legal claims and actions incidental to
its business. 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 or results of operations.


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

Not applicable.

Item 4A. Executive Officers of the Registrant.

<TABLE>
<CAPTION>

Name                                     Age                  Position with the Company

<S>                                       <C>                 <C>
J. Patrick Danahy                         53                  Director, President, and
                                                                Chief Executive Officer

John L. Bakane                            46                  Director,
                                                                Executive Vice President
                                                                  and Chief Financial
                                                                  Officer

James S. Butner                           51                  Vice President

Neil W. Koonce                            49                  Vice President and
                                                                General Counsel

Terry L. Weatherford                      54                  Vice President and
                                                                Secretary

David E. Bray                             58                  Treasurer

Gary L. Smith                             38                  Controller
</TABLE>

All officers of the Registrant are elected or reelected each year at the Annual
Meeting of the Board of Directors or at other times as necessary. All officers
serve at the pleasure of the Board of Directors and until their successors are
elected and qualified.

J. Patrick Danahy joined the Company in 1971;  he was named General
Manager of the Carlisle Plant in 1978 and President of the Cone
Finishing Division in September 1984.  He was elected corporate Vice
President in May 1986 and director in May 1989.  He was named
President and Chief Operating Officer in August 1989 and President
and Chief Executive Officer in August 1990.

John L. Bakane joined the Company in 1975 and has served in various
administrative and staff positions involving planning, financial
management and customer service.  He was named corporate Vice
President in May 1986, became Chief Financial Officer in November


<PAGE>



FORM 10-K                                                                Page 21

Item 4A.  (continued)

1988 and was elected to the Board of Directors in May 1989. On February 17,
1995, he was elected Executive Vice President of the Company. On November 8,
1996, he assumed responsibility for management of the Denim Group of the
Company.

James S. Butner was employed by Celanese Corporation, a synthetic fibers and
chemical company, from 1979 to 1984, at which time he became Director of
Industrial and Public Relations for the Company. Effective August 1, 1988, he
was named corporate Vice President for Industrial and Public Relations.

Neil W. Koonce was employed by the Company in January 1974 as a staff attorney.
He was elected Assistant General Counsel in 1985, General Counsel in August 1987
and Vice President in May 1989.

Terry L. Weatherford was Secretary and General Counsel of Blue Bell, Inc., a
manufacturer and distributor of wearing apparel, from 1981 to 1987. From 1987 to
1993, he was self-employed as an attorney except for a thirteen-month period
from June 1988 when he was employed by Manufactured Homes, Inc., a manufacturer
and retailer of mobile homes, as its General Counsel. He was employed by the
Company and elected Assistant Secretary in May 1993, and effective December
1993, was elected Secretary. In May 1995 he was elected Vice President and
Secretary.

David E. Bray was employed in 1977 as Director of Treasury Services. He was
elected Assistant Treasurer of the Company in May 1984 and Treasurer in November
1988.

Gary L. Smith was employed by the Company in 1981 and has served in various
accounting, planning and financial management positions. In 1990, he was named
Manager of Business Analysis. He was elected Assistant Controller in 1994 and
was named Controller of the Company on December 16, 1996.


                                     PART II

Item 5.           Market for the Registrant's Common Equity and Related
                  Stockholder Matters

The Company's Common Stock has traded on the New York Stock Exchange under the
ticker symbol "COE" since June 18, 1992, the date of its public offering. The
following table sets forth the high and low sales prices of the Common Stock as
reported on the NYSE Composite Tape for the periods indicated.


<PAGE>



FORM 10-K                                                                Page 22

Item 5

<TABLE>
<CAPTION>

                                          Quarter Ended
                     Mar.31,1996          Jun. 30,1996          Sept.29,1996          Dec.29,1996

<S>                  <C>                  <C>                   <C>                   <C>
Common stock
  prices
High                    11 3/4                 12 3/8               11 3/8                 9 1/8
Low                      9 7/8                 10 7/8                8                     7 1/4
</TABLE>

<TABLE>
<CAPTION>
                                          Quarter Ended
                     Apr.2,1995           Jul. 2,1995           Oct.1,1995            Dec.31,1995

<S>                  <C>                  <C>                   <C>                   <C>
Common stock
  prices
High                    12 1/4                 13 1/2               14 3/8                13 1/4
Low                     10 5/8                 11                   12 1/2                10 3/4
</TABLE>


The Company has not declared any dividends on its Common Stock since it became a
privately held company in 1984 and anticipates that its earnings for the
foreseeable future will be retained for use in its business and to finance
growth. Payment of cash dividends in the future will depend upon the Company's
financial condition, results of operations, current and anticipated capital
requirements, and other factors deemed relevant by the Company's Board of
Directors. See "Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition."

The approximate number of holders of record of the Company's Common Stock as of
February 28, 1997 was 484.


Item 6.           Selected Financial Data

The information appearing under the heading "Historical Financial Data" on page
38 of the Registrant's 1996 Annual Report to Shareholders is incorporated herein
by reference.


Item 7.           Management's Discussion and Analysis of Results of
                  Operations and Financial Condition

The information appearing under the heading "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 12 thru 16
of the Registrant's 1996 Annual Report to Shareholders is incorporated herein by
reference.


Item 8.           Financial Statements and Supplementary Data

The consolidated financial statements and notes thereto, appearing on pages 18
through 37 of the Registrant's 1996 Annual Report to Shareholders, are
incorporated herein by reference.


<PAGE>



FORM 10-K                                                                Page 23

Item 9.           Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure.

None.


                                    PART III

Item 10.          Directors and Executive Officers of the Registrant.

Information relating to directors of the Company is presented under the heading
"Election of Directors" in the Company's definitive Proxy Statement prepared for
the Annual Meeting of Shareholders to be held on May 13, 1997, and is hereby
incorporated by reference. Information regarding executive officers is included
as Item 4A in Part I.


Item 11.          Executive Compensation.

Information relating to executive compensation is presented under the heading
"Executive Compensation" in the Company's definitive Proxy Statement prepared
for the Annual Meeting of Shareholders to be held on May 13, 1997, and is hereby
incorporated by reference.


Item 12.          Security Ownership of Certain Beneficial Owners and
                  Management.

Information with respect to beneficial ownership of the Company's voting
securities by each director and all officers and directors as a group, and by
any person known to beneficially own more than 5% of any class of voting
security of the Company, is presented under the heading "Security Ownership of
Directors, Nominees and Named Executive Officers" and "Security Ownership of
Certain Beneficial Owners" in the Company's definitive Proxy Statement prepared
for the Annual Meeting of Shareholders to be held on May 13, 1997, and is hereby
incorporated by reference.


Item 13.          Certain Relationships and Related Transactions.

Information with respect to certain relationships and related transactions is
presented under the headings "Compensation of Directors" and "Certain
Relationships and Related Transactions" in the Company's definitive Proxy
Statement prepared for the Annual Meeting of Shareholders to be held on May 13,
1997, and is hereby incorporated by reference.



<PAGE>



FORM 10-K                                                                Page 24

                                     PART IV

Item 14.          Exhibits, Financial Statement Schedules, and Reports on
                  Form 8-K

(a)(1)            The following financial statements of the Registrant are
                  incorporated by reference in Item 8 hereof:

                        Report of Independent Auditor

                        Consolidated Statements of Operations for the Years
                        Ended December 29, 1996, December 31, 1995 and
                        January 1, 1995

                        Consolidated Balance Sheets as of December 29, 1996
                        and December 31, 1995

                        Consolidated Statements of Stockholders' Equity for the
                        Years Ended December 29, 1996, December 31, 1995 and
                        January 1, 1995

                        Consolidated Statements of Cash Flows for the Years
                        Ended December 29, 1996, December 31, 1995 and January
                        1, 1995

                        Notes to Consolidated Financial Statements

(a)(2)            The following Financial Statement Schedules are presented
                  on pages 25 through 26 hereto.

                        Report of Independent Auditor relating to Schedule II

                        Schedule II - Valuation and Qualifying Accounts

                        All other schedules specified under Regulation S-X are
                        omitted because they are not applicable, not required or
                        the information required appears in the Consolidated
                        Financial Statements or Notes thereto.

(a)(3)            Exhibits.  Exhibits to this report are listed on the
                  accompanying Index to Exhibits.

(b)               Reports on Form 8-K

                        No report on 8-K was filed during the fourth quarter of
                        1996.


<PAGE>



FORM 10-K                                                                Page 25

                             MCGLADREY & PULLEN, LLP

                  CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS



          INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULE




To the Board of Directors
Cone Mills Corporation
Greensboro, North Carolina

                  Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. The consolidated
supplemental schedule II is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not a part of the basic
consolidated financial statements. This schedule has been subject to the
auditing procedures applied in our audits of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.





                                                   /s/ McGLADREY & PULLEN, LLP
                                                       MCGLADREY & PULLEN, LLP





Greensboro, North Carolina
February 14, 1997




<PAGE>


FORM 10-K                                                                Page 26

                    CONE MILLS CORPORATION AND SUBSIDIARIES
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
      Years Ended December 29, 1996, December 31, 1995 and January 1, 1995
                             (amounts in thousands)


<TABLE>
<CAPTION>
Column A                                          Column B         Column C             Column D     Column E
                                                                    Additions
                                                   Balance      (1)          (2)
                                                      at      Charged to   Charged to                  Balance
                                                  beginning   costs and     other                     at end
Description                                       of period   expenses    accounts     Deductions    of period
<S>                                              <C>         <C>         <C>          <C>           <C>
December 29, 1996
   Valuation accounts deducted
      from the assets to which
      they apply:
         Provision for doubtful
            accounts                             $3,200       $  127      $   -        $  327(a)     $3,000
   Reserve for loss on real estate disposal (c)       -        4,500          -             -         4,500
   Reserve for future losses (c)                  2,644        1,522          -         2,441         1,725
   Reserve for fixed asset writedowns (c)             -        2,638          -             -         2,638
December 31, 1995
   Valuation accounts deducted
      from the assets to which
      they apply:
         Provision for doubtful
            accounts                             $3,000       $  411     $    -        $  211(a)     $3,200
   Inventory reserves                                45            -          -            45(c)          -
   Reserve for future losses                          -        2,644          -             -         2,644
January 1, 1995
   Valuation accounts deducted
      from the assets to which
      they apply:
         Provision for doubtful
            accounts                            $3,000       $  232      $    -       $  232(a)      $3,000
   Inventory reserves                              393(b)         -           -          348(b)(c)       45
   Reserve for future losses(b)                  1,227            -           -        1,227(c)           -
</TABLE>

(a) Represents bad debts charged off.
(b) Represents reserves for discontinued operations (Note 18).
(c) Represents reserves charged to costs and expenses.


<PAGE>


FORM 10-K              INDEX TO EXHIBITS                                 Page 27

Exhibit                                                               Sequential
  No.                Description                                        Page No.

* 2.1                Receivables Purchase Agreement dated
                     as of August 11, 1992, between the
                     Registrant and Delaware Funding
                     Corporation filed as Exhibit 2.01 to
                     the Registrant's report on Form 8-K
                     dated August 13, 1992.

* 2.1(a)             Amendment to Receivables Purchase
                     Agreement dated April 4, 1994, between
                     the Registrant and Delaware Funding
                     Corporation filed as Exhibit 2.1 to
                     the Registrant's report on Form 8-K
                     dated March 1, 1995.

* 2.1(b)             Amendment to Receivables Purchase
                     Agreement dated June 7, 1994, between
                     the Registrant and Delaware Funding
                     Corporation filed as Exhibit 2.2 to
                     the Registrant's report on Form 8-K
                     dated March 1, 1995.

* 2.1(c)             Amendment to Receivables Purchase
                     Agreement dated as of June 30, 1994,
                     between the Registrant and Delaware
                     Funding Corporation filed as Exhibit
                     2.1 to the Registrant's report on
                     Form 10-Q for the quarter ended
                     July 3, 1994.

* 2.1(d)             Amendment to Receivables Purchase
                     Agreement dated as of November 15, 1994,
                     between the Registrant and Delaware
                     Funding Corporation filed as Exhibit
                     2.4 to the Registrant's report on
                     Form 8-K dated March 1, 1995.

* 2.1(e)             Amendment to Receivables Purchase
                     Agreement dated as of June 30, 1995,
                     between the Registrant and Delaware
                     Funding Corporation filed as Exhibit
                     2.1(e) to the Registrant's report on
                     Form 10-Q for the quarter ended
                     July 2, 1995.

* 2.1(f)             Amendment to Receivables Purchase
                     Agreement dated as of December 31,
                     1995, between the Registrant and
                     Delaware Funding Corporation,
                     filed as Exhibit 2.1(f) to the
                     Registrant's report on Form 10-K
                     for the year ended December 31, 1995.


<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 28

Exhibit                                                               Sequential
  No.                Description                                       Page No.

* 2.1(g)             Amendment to Receivables Purchase
                     Agreement and Letter Agreement
                     referred to therein dated as of
                     June 24, 1996, between the Registrant
                     and Delaware Funding Corporation filed
                     as Exhibit 2.1(g) to Registrant's report
                     on Form 10-K for the quarter ended
                     June 30, 1996.

* 2.1(h)             Amendment to Receivables Purchase
                     Agreement dated as of June 30, 1996,
                     between the Registrant and Delaware
                     Funding Corporation filed as Exhibit
                     2.1(h)to the Registrant's report on
                     Form 10-Q for the quarter ended
                     September 29, 1996.

* 2.1(i)             Amendment to Receivables Purchase
                     Agreement dated as of August 26, 1996,
                     between the Registrant and Delaware
                     Funding Corporation filed as Exhibit
                     2.1(i) to the Registrant's report on
                     Form 10-Q for the quarter ended
                     September 29, 1996.

* 2.1(j)             Amendment to Receivables Purchase
                     Agreement dated as of September 29,
                     1996, between the Registrant and
                     Delaware Funding Corporation filed
                     as Exhibit 2.1(j) to the Registrant's
                     report on Form 10-Q for the quarter
                     ended September 29, 1996.

* 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
                     quarter ended July 4, 1993.


<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 29

Exhibit                                                               Sequential
  No.                Description                                       Page No.

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


<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 30

Exhibit                                                               Sequential
  No.                Description                                       Page No.

* 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.

* 2.3                Asset Purchase Agreement dated as
                     of December 2, 1994 between the
                     Registrant, Lancer Industries, Inc.
                     and M.P.M. Transportation, Inc.,
                     filed as Exhibit 2 to the Registrant's
                     Current Report on Form 8-K dated
                     December 2, 1994.



<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 31

Exhibit                                                               Sequential
  No.                Description                                       Page No.

* 2.4                Olympic Division Acquisition Agreement
                     by and among Vitafoam Incorporated,
                     British Vita PLC, and Registrant
                     dated January 19, 1996 with related
                     Lease Agreement, Lease Agreement and
                     Option to Purchase, Sublease Agreement,
                     Services Agreement, License Agreement
                     And Hold Back Escrow Agreement, each
                     dated January 22, 1996.  The Acquisition
                     Agreement and related agreements were
                     filed as Exhibit 2.4 to the Registrant's
                     report on Form 10-K for the year ended
                     December 31, 1995. The following
                     exhibits and schedules to the Acquisition
                     Agreement have been omitted.  The
                     Registrant hereby undertakes to furnish
                     supplementally a copy of such omitted
                     exhibit or schedule to the Commission upon
                     request.

                     Exhibits
                     Exhibit A1                  Form of Buyer Lease
                     Exhibit A2                  Form of Buyer Lease
                     Exhibit B                   Form of Holdback Escrow
                                                   Agreement
                     Exhibit C1                  Facility 1
                     Exhibit C2                  Facility 2
                     Exhibit C3                  Facility 3
                     Exhibit C4                  Facility 4
                     Exhibit C5                  Facility 5
                     Exhibit C6                  Facility 6
                     Exhibit D                   Form of Sublease Agreement
                     Exhibit E                   Form of Opinion of Buyer's
                                                   Counsel
                     Exhibit F                   Form of Opinion of Seller's
                                                   Counsel
                     Exhibit G                   Form of Assumption Agreement
                     Exhibit H                   Form of Services Agreement
                     Exhibit I                   Inventory Valuation Principles
                     Exhibit J                   Form of License Agreement

                     Schedules
                     Schedule 1.1(a)             Excluded Assets
                     Schedule 1.1(b)             Tangible Fixed Assets
                     Schedule 2.8                Assigned Contracts
                     Schedule 2.10               Allocation of Purchase
                                                   Price
                     Schedule 4.3                Consents and
                                                   Authorizations
                     Schedule 4.7                Contracts by Category
                     Schedule 4.9                Litigation


<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 32

Exhibit                                                               Sequential
  No.                Description                                        Page No.

                     Schedule 4.11               Tax Matters
                     Schedule 4.12               Licenses and Permits
                     Schedule 4.14               Tangible Personal
                                                    Property
                     Schedule 4.15               Employees and Wage Rates
                     Schedule 4.16               Insurance Policies
                     Schedule 4.17               Intellectual Property
                     Schedule 4.18               Licenses to Intellectual
                                                    Property; Third-party
                                                    Patents
                     Schedule 4.19               Purchases from One Party
                     Schedule 4.22               Real Property
                     Schedule 4.23               Business Names
                     Schedule 4.24               Environmental Matters
                     Schedule 9.4                Facility 5 Remediation Plan

* 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
                     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.


<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 33

Exhibit                                                               Sequential
  No.                Description                                       Page No.

* 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.

* 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. 

* 4.4                Credit Agreement dated as of August 13,
                     1992, among Cone Mills Corporation,
                     the banks listed therein and Morgan
                     Guaranty Trust Company of New York,
                     as Agent, with form of note attached
                     filed as Exhibit 4.02 to the Registrant's
                     report on Form 8-K dated August 13, 1992.


<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 34

Exhibit                                                               Sequential
  No.                Description                                       Page No.

* 4.4(a)             Amended and Restated Credit Agreement
                     dated November 18, 1994, among the
                     Registrant, various banks and Morgan
                     Guaranty Trust Company of New York,
                     as Agent, filed as Exhibit 4.1
                     to the Registrant's report on Form 8-K
                     dated March 1, 1995.

* 4.4(b)             Amendment to Credit Agreement dated as of
                     June 30, 1995, amending the Amended and
                     Restated Credit Agreement dated
                     November 18, 1994, among the Registrant,
                     various banks and Morgan Guaranty Trust
                     Company of New York, as Agent filed as
                     Exhibit 4.4(b) to the Registrant's
                     report on Form 10-Q for the quarter
                     ended July 2, 1995.

* 4.4(c)             Amendment No. 2 to Credit Agreement
                     dated as of December 31, 1995, amending
                     the Amended and Restated Credit
                     Agreement dated November 18, 1994,
                     among the Registrant, various banks
                     and Morgan Guaranty Trust Company
                     of New York, as Agent, filed as
                     Exhibit 4.4(c) to the Registrant's
                     report on Form 10-K for year ended
                     December 31, 1995.

* 4.4(d)             Amendment No. 3 to Credit Agreement
                     dated as of June 30, 1996 to the
                     Amended and Restated Credit
                     Agreement dated as of November 18,
                     1994, among the Registrant, various
                     banks and Morgan Guaranty Trust
                     Company of New York, as Agent, filed
                     as Exhibit 4.4(d) to the Registrant's
                     report on Form 10-Q for the quarter
                     ended September 29, 1996.

* 4.4 (e)            Amendment No. 4 to Credit Agreement
                     dated as of September 29, 1996 to
                     the Amended and Restated Credit
                     Agreement dated as of November 18,
                     1994, among the Registrant, various
                     banks and Morgan Guaranty Trust
                     Company of New York, as Agent, filed
                     as Exhibit 4.4(e) to the Registrant's
                     report on Form 10-Q for the quarter
                     ended September 29, 1996.



<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 35

Exhibit                                                               Sequential
  No.                Description                                        Page No.

* 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).

* 4.7                The 401(k) Program of Cone Mills
                     Corporation, amended and restated
                     effective December 1, 1994, filed as
                     Exhibit 4.8 to the Registrant's
                     report on Form 10-K for year ended
                     January 1, 1995.

* 4.7(a)             First Amendment to the 401(k)
                     Program of Cone Mills Corporation
                     dated May 9, 1995, filed as
                     Exhibit 4.8(a) to the Registrant's
                     report on Form 10-K for year ended
                     December 31, 1995.

* 4.7(b)             Second Amendment to the 401(k)
                     Program of Cone Mills Corporation
                     dated December 5, 1995, filed as
                     Exhibit 4.8(b) to the Registrant's
                     report on Form 10-K for year ended
                     December 31, 1995.

* 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.



<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 36

Exhibit                                                               Sequential
  No.                Description                                        Page No.

* 4.9                Indenture dated as of February 14,
                     1995, between Cone Mills Corporation
                     and Wachovia Bank of North Carolina,
                     N.A. as Trustee, filed as Exhibit 4.1
                     to Registrant's Registration Statement
                     on Form S-3 (File No. 33-57713).

Management contract or compensatory plan or arrangement
(Exhibits 10.1 - 10.13)

*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(a)             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(b)             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(c)             Third Amendment to the Employees' Retirement
                     Plan of Cone Mills Corporation dated August 16,
                     1996.                                                    41

*10.2                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.

*10.3                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.

*10.4                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).

<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 37

Exhibit                                                               Sequential
  No.                Description                                       Page No.

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

*10.6                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).

*10.7                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.

*10.7(a)             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.

*10.8                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.

 10.8(a)             Form of Nonqualified Stock Option
                     Agreement under 1992 Stock Option Plan.                  42

 10.8(b)             Form of Nonqualified Stock Option
                     Agreement under 1992 Amended and
                     Restated Stock Plan.                                     46

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

*10.10               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.

*10.11               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.


<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 38

Exhibit                                                               Sequential
  No.                Description                                       Page No.

*10.12               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.

 10.13               1997 Senior Management Discretionary
                     Bonus Plan.                                              50

 10.14               Consulting Agreement between Dewey L.
                     Trogdon and the Registrant dated
                     December 5, 1996.                                        54

*10.15               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).

*10.16               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).

 21                  Subsidiaries of the Registrant.                          58

 23.l                Consent of McGladrey & Pullen, LLP,
                     independent auditor, with respect to
                     the incorporation by reference in the
                     Registrant's Registration Statements
                     on Form S-8 (Nos. 33-31977; 33-31979;
                     33-51951; 33-51953; 33-53705 and
                     33-67800) of their reports on the
                     consolidated financial statements
                     and schedules included in this
                     Annual Report on Form 10-K.                              59

 23.2                Consent of McGladrey & Pullen, LLP,
                     independent auditor, with respect to
                     the incorporation by reference in the
                     Registrant's Registration Statements
                     on Form S-8 (Nos. 33-31979; 33-51951
                     and 33-51953) of their report on the
                     financial statements included in the
                     Form 11-K Annual Report of Cone Mills
                     Corporation Employee Equity Plan
                     (to be filed by amendment).

 27                  Financial Data Schedule                                  60



<PAGE>



FORM 10-K              INDEX TO EXHIBITS                                 Page 39

Exhibit                                                               Sequential
  No.                Description                                       Page No.

 99.1                Form 11-K Annual Report of Cone Mills
                     Corporation Employee Equity Plan
                     (to be filed by amendment)



* Incorporated by reference to the statement or report indicated.



<PAGE>

FORM 10-K                                                                Page 61

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant had duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                CONE MILLS CORPORATION

Date: March 27, 1997                            By:  /s/ J. Patrick Danahy
                                                         J.Patrick Danahy
                                                         President and Chief
                                                         Executive Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

     Signature                         Title                   Date

/s/ Dewey L. Trogdon             Chairman of the             March 27, 1997
(Dewey L. Trogdon)               Board


/s/ J. Patrick Danahy            Director, President         March 27, 1997
(J. Patrick Danahy)              and Chief Executive
                                 Officer (Principal
                                 Executive Officer)


/s/ John L. Bakane               Director,                   March 27, 1997
(John L. Bakane)                 Executive Vice
                                 President and Chief
                                 Financial Officer
                                 (Principal Financial
                                  Officer)


/s/ Doris R. Bray                Director                    March 27, 1997
(Doris R. Bray)


/s/ Leslie W. Gaulden            Director                    March 27, 1997
(Leslie W. Gaulden)




<PAGE>


FORM 10-K                                                                Page 62


    Signature                     Title                        Date



/s/ Jeanette C. Kimmel           Director                    March 27, 1997
(Jeanette C. Kimmel)



/s/ Charles M. Reid              Director                    March 27, 1997
(Charles M. Reid)



/s/ John W. Rosenblum            Director                    March 27, 1997
(John W. Rosenblum)



/s/ Gary L. Smith                Controller                  March 27, 1997
(Gary L. Smith)                  (Principal Accounting
                                  Officer)




<PAGE>