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 28, 1997
                                                    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:  336-379-6220

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 19, 1998: $200,319,346.

Number of shares of common stock outstanding as of February 19, 1998: 26,166,933
shares.

Documents  incorporated  by  reference:   Portions  of  1997  Annual  Report  to
Shareholders,  Part II, Items 5, 6, 7 and 8; Proxy  Statement for Annual Meeting
to be held May 12, 1998, Part III, Items 10, 11, 12 and 13 of this report.

Index to Exhibits - Pages 24 - 35


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                                                                               2

                                     PART I
Item 1.  Business

                                   THE COMPANY

Overview

Founded in 1891 Cone Mills  Corporation (the "Company" or "Cone"), incorporated
and  headquartered  in North Carolina,  is the world's largest producer of denim
fabrics and the largest commission printer of home furnishings in North America.
The Company competes  domestically and  internationally  on the basis of styling
and  product  development,   management  experience,  versatility  and  size  of
manufacturing  facilities  and  the  Cone  name  and  reputation.  Cone  employs
approximately  6,100 employees and operates nine  manufacturing  plants in North
and South Carolina. The Company also has a 50% interest in a denim manufacturing
facility in Mexico.

The Company operates in two business segments:  Apparel Fabrics,  which includes
denims and speciality sportswear;  and Home Furnishings Products, which includes
commission  printing and  finishing  services and print and jacquard  decorative
fabrics.

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.
Capital  expenditures  for the last five years have totaled  approximately  $210
million and the Company expects to spend  approximately  $37 million in 1998 for
capital projects.

The Company is engaged in denim  production  in Mexico  through a joint  venture
facility with Compania  Industrial de Parras,  S.A.,  ("CIPSA").  This facility,
Parras Cone de Mexico,  S.A.,  ("Parras  Cone"),  in which the Company has a 50%
ownership interest,  was completed and began production of basic denims and yarn
in late 1995.

During  1997 the Company  sold its  synthetic  fabric  division,  including  its
finished inventory, forward commitments and order book and substantially all the
assets of its real estate operations.  Throughout 1997, the Company consolidated
its  specialty  sportswear  finishing  operation  into  its  Carlisle  finishing
facility and expects to achieve improved capacity  utilization at Carlisle.  The
consolidation involved the closing of the Company's Granite finishing operations
and moving machinery,  equipment and manufacturing operations from that plant to
the Carlisle facility.


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                                                                               3

Manufacturing  efficiency was disrupted to a greater extent than planned,  which
materially  adversely  impacted  results of the sportswear  and home  furnishing
fabrics  product lines for the year.  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 22 of the Notes to
Consolidated Financial Statements."

Business Segments

Information  concerning  industry segments for the Company's 1997, 1996 and 1995
fiscal years are incorporated by reference. See "Item 7. Management's Discussion
and  Analysis  of  Results  of  Operations  and  Financial   Condition-Strategic
Initiatives" and "Item 8. Financial  Statement and  Supplementary  Data-Notes 19
and 22 of the Notes to Consolidated Financial Statements."

Market Developments

Within the apparel  fabrics  industry,  casualwear,  including denim and similar
apparel,  has been the fastest  growing  category 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.




<PAGE>


                                                                               4

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.  However,  the growth in denim  demand has been  countered  by increased
global supply  primarily in countries  with lower labor costs.  Apparel  fabrics
exports were $175.1 million, $187.0 million and $175.7 million in 1997, 1996 and
1995, respectively. See "Business International Operations."

Apparel Products

Denims.  The Company's  denim  products,  accounting  for  approximately  80% of
apparel fabrics sales, are primarily  designed for use in garments  targeted for
the upper-end market, where styling and quality generally command premium fabric
prices.  Fabric  styling of denims is  supported by the  Company's  stylists and
extensive use of  computer-aided  design and manufacturing  systems.  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.   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 sold principally to independent brand name apparel
manufacturers.  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


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                                                                               5

denim,  primarily  at Parras  Cone,  to  service  mass  market  needs of certain
customers.  Sales of this product constituted  approximately one-fourth of total
denim sales in 1997.

The  Company's  largest denim  customer is Levi Strauss,  whose 501(R) jeans are
produced solely from the Company's proprietary fabrics.  Other customers include
V.F.  Corporation  (Wrangler),  The Gap,  Calvin Klein,  Aalfs  (Arizona),  P.L.
Industries (Hilfiger) and H.I.S. (Chic).

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

Specialty  Sportswear  Fabrics.  The Company is the largest domestic producer of
yarn-dyed,  plaid flannel and solid shade,  chamois  flannel  shirting  fabrics.
These   fabrics  are  primarily   manufactured   for  use  in  menswear  and  in
lighter-weight apparel products for women's and children's wear and sold through
catalogs, department stores and discounters. Customers for these fabrics include
M. Fine, L.L. Bean, J.C. Penney, Woolrich, Eddie Bauer and Levi Strauss.

Cone also serves niche markets for  piece-dyed  fabrics based on dye,  finishing
and yarn  formation  technologies  and provides  fabrics such as fade  resistant
Deepdown(TM) fabric and its 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,  printed at the Company's Carlisle
plant, are products  primarily for fashion women's and children's  wear.  Cone's
customers for these fabrics include OshKosh, L.L. Bean,  Healthtex,  J.C. Penney
and William Carter.

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.

Marketing and Sales.  The Company's  marketing  focus is to serve  upper-end and
brand name apparel manufacturers through the


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                                                                               6

development  of  products  that are  recognized  in the  marketplace  for  their
distinctive quality and styling.

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.

The Company  employs an apparel  fabrics  marketing and sales staff of more than
140 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. Except for Cone Denim Europe, the
Company's  apparel fabrics  marketing  groups are  headquartered  in Greensboro,
North  Carolina,  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 offices in New York, Los Angeles, San Francisco, Dallas, Brussels
and Singapore.

Manufacturing.  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  flexibility in its yarn spinning
operations,  with open-end and ring  spinning  equipment.  The  Company's  denim
weaving  facilities  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,  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.

Product  and process  development  is  supported  by  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.



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                                                                               7

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.  Since 1991,  U.S.  law has
allowed  limited  imports of cotton or  related  government  payments  to cotton
purchasers  which have  resulted  in  effective  U.S.  cotton  costs  being more
competitive  with  world  levels.  In  1996,  Congress  passed  additional  farm
legislation   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.  Although  management believes that U.S.
companies will continue to be able to acquire adequate cotton supplies at prices
competitive  with offshore  manufacturers,  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
materially adversely affect the Company's operations.

In late 1993 and continuing through 1995, cotton prices increased throughout the
world.  Major trends that  affected the rise in cotton  prices  during this time
frame were (i) an increase in worldwide demand, (ii) disappointing  cotton crops
and (iii)  financial  speculation  in the  commodities  markets.  Mill-delivered
cotton  prices per pound for the  industry  rose from the lower $.60s in 1993 to
the upper $.70s in 1994,  into the $.90s  during  1995.  Cotton  prices  trended
downward  into the mid $.70s to lower $.80s for 1996 and from the upper $.70s to
upper $.60s for 1997.  Significant  factors that affected the decrease in cotton
prices were (i) successful cotton crops in 1996 and 1997 especially in the U.S.,
(ii) decision by the Chinese  government to encourage  consumption of internally
produced  and stored  cotton  rather than  imports and (iii) the Asian  economic
crisis that began in 1997  reducing  consumption  by mills in Asia.  The Company
cannot always fully pass increased  cotton costs on to its customers.  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


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                                                                               8

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 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. Primary
competitive factors include price, product styling and differentiation, customer
service, quality and flexbility,  with the significance of each factor dependent
upon the particular needs of the customer and the product involved.

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% of the U.S.  productive
capacity.  Increased  foreign  competition in domestic markets is in the form of
imported  apparel  garments  and fabrics  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  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


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                                                                               9

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  that  are  roughly  equivalent  to those
applicable to Mexico under NAFTA.  The Company's  Mexican joint venture,  Parras
Cone,  benefits from its access to U.S. markets.  There can be no assurance that
NAFTA, or the possible adoption of any proposed legislation,  will not adversely
affect the Company.

The Company has focused its operations on the  manufacture of fabrics for use in
garments that are less vulnerable to import penetration. Management believes the
location of the Company's U.S. manufacturing facilities, its 50% interest in the
Parras  Cone plant in Mexico  and its  emphasis  on  shortening  production  and
delivery  times allows Cone 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.  There are three retail selling seasons:
spring, fall  (back-to-school) and the holiday season. The Company's sales for a
particular selling season


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                                                                              10

generally begin six months in advance of that season.

Home Furnishings Products

The Company services the home furnishings markets through three divisions:  Cone
Finishing, Cone Jacquards and Cone Decorative Fabrics.

Cone  Finishing.  The  Cone  Finishing  Division,  consisting  of the  Company's
Carlisle and Raytex  plants,  is the largest  commission  printer of  decorative
fabrics in the United States and provides  custom  printing  services to leading
home furnishings stylists and distributors. As commission printers, Carlisle and
Raytex prints  fabrics owned by customers on a fee basis.  The home  furnishings
fabrics  processed at Carlisle are  generally  used for  upholstery  and drapery
prints.

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.  Customers
for Carlisle's home furnishings printing services include Waverly Division of F.
Schumacher & Co., P. Kaufman and Covington.

The Raytex plant is a modern,  260,000 square foot facility specializing in wide
rotary screen printing. In 1996, a new preparation range was installed providing
additional  product  capabilities.  Raytex  is one of  the  largest  wide-fabric
commission printers in the United States. Customers for Raytex include Croscill,
Beco, Springs Industries and Revman.

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.

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 which took place in recent years.

Cone Jacquards. In 1995, the Company built a new jacquard weaving plant in order
to dampen the effects of shifts in consumer


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                                                                              11

preference from printed fabrics.  The Cone Jacquards plant is a modern,  138,000
square  foot  facility  with wide  weaving  machines.  Cone  Jacquards  produces
broadloom  jacquard fabrics for furniture  manufacturers,  fabric  distributors,
retailers,  converters and specialty products manufacturers.  Customers for Cone
Jacquards include Richloom,  Klaussner Furniture,  Barrow Industries,  Flexsteel
Industries and Schnadig Corporation.

Cone Decorative Fabrics. 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 names "John Wolf  Decorative  Fabrics"
and "David and Dash."

Cone  Decorative  Fabrics is a well known  designer  and marketer of printed and
solid woven fabrics for use in upholstery, draperies and bedspreads.

Cone Decorative Fabrics are marketed  domestically and  internationally  through
the  division's  sales staff and sales agents.  The  division's  sales staff and
sales agents handle 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.  Due to continuing
unsatisfactory  operating  results,  in late 1997 the  Company  reorganized  the
operations  of John Wolf  Decorative  Fabrics to reduce  costs and compete  more
effectively.

Other Business Units. In 1997, the Company sold  substantially all the assets of
its real  estate  operations,  including  most of the  assets of its  subsidiary
Cornwallis  Development  Co.,  for $19.5  million.  Net sales  from real  estate
activities  were  historically  less than two percent of the Company's total net
revenues.  See "Item 7.  Management's  Discussion  and  Analysis  of  Results of
Operations and Financial Condition-Strategic Initiatives."

Competition.  The home furnishings  products business is highly  competitive and
the Company  competes  primarily on the basis of quality and  service.  The Cone
Finishing  Division competes directly with several large commission  printers as
well as a number of smaller  competitors.  The Cone Finishing  Division competes
indirectly with other suppliers of products used in the home furnishing industry
including  jacquard  woven  fabrics,  velvets  and  plain  shade  fabrics.  Cone
Decorative  Fabrics  competes  with a  large  number  of  domestic  and  foreign
suppliers of decorative fabrics.


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                                                                              12

Seasonality.  Demand for the Company's home furnishing products and the level of
the Company's sales fluctuate moderately during the year.

International Operations

The Company has a long history of distributing its products  internationally and
exported approximately 35% of the Company's denim sales in 1997. The Company has
sales agents in Europe,  Japan, Korea, Hong Kong, Africa, and throughout Central
and South America, and it maintains 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's international  customers include: Levi International,  Joker Jeans
and Big Star in Europe;  Edwin in Japan;  Wellsum in Hong Kong; and  Americanino
brand, Custer, Jeans and Jackets, UFO brand and Wrangler in South America.

Principal  competitive  factors  in the  international  markets  for  denims are
quality, price and styling. Denim jeans have an image of being uniquely American
products,  which  complements  the  Company's  strategy of serving the upper-end
"genuine" jeans market.

The Company's  competitiveness in international market segments is influenced by
tariffs and  transportation  costs.  The  Company has a 50%  interest in a denim
manufacturing  facility in Mexico and is assessing the feasibility of additional
manufacturing  platforms  within  certain  trade blocs in order to compete  more
effectively in these markets.

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  is also  seeking  to gain  production  cost
advantages  while  benefiting  from its  technological  expertise.  The  Company
exports  basic  denims  made by Parras  Cone by  utilizing  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.



<PAGE>


                                                                              13

Trademarks, Copyrights and Patents

The Company owns several  registered  trademarks  containing the "Cone" name and
pine cone design. In addition, the Company holds various other trademarks, trade
names, copyrights and patents 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 customer,  Levi Strauss  ("Levi"),  which  accounts for more
than 10% of net sales.  Sales to this customer  accounted for approximately 37%,
49% and 39% of sales in 1997, 1996 and 1995, respectively. 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  financial  position and results
of operations.

Levi has been a customer  of the  Company  since  1915 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, 2003 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  at any  time  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.




<PAGE>


                                                                              14

Backlog

The Company's order backlog was approximately $157 million at December 28, 1997,
as  compared  to  approximately  $132  million at December  29,  1996.  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 28, 1997, will be filled within the first quarter of 1998.

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.

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, 1998, the Company employed  approximately  6,100 persons, of whom
approximately 1,200 were salaried and approximately 4,900 were hourly employees.
Of such hourly  employees,  approximately  1,900 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


<PAGE>


                                                                              15

compensation,  the Company believes that  approximately 950 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

Cone's U.S.  manufacturing  facilities consist of nine plants,  seven located in
North Carolina and two in South Carolina,  with approximately 4.4 million square
feet of floor space. The apparel fabrics and home furnishings  products segments
operate six and three plants,  respectively.  The Company also maintains several
distribution  centers  and  warehouses.  Internationally,  the Company has a 50%
interest  in a 575,000  square  foot  denim  manufacturing  facility  in Parras,
Mexico.

All such  facilities  are maintained in good condition and are both adequate and
suitable  for  their  respective   purposes.   Even  when  such  facilities  are
substantially  fully  utilized,   the  Company  believes  that  it  is  properly
positioned to expand productive  capacity.  Additional higher margin fabrics can
be produced  through  changes in product mix and  acquisition of yarn and greige
goods from outside sources for further processing and finishing.

All U.S. manufacturing  facilities are held in fee and are substantially free of
any significant liens or other  encumbrances.  The Mexican denim facility serves
as collateral for a portion of the debt of the joint venture company.

The  Company  leases  its  executive  and  administrative  offices,  located  in
Greensboro,  North  Carolina.  Other  offices,  located in various U.S.  cities,
Brussels, and Singapore, are leased from unrelated parties.

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


<PAGE>


                                                                              16

and all claims  unrelated to the alleged  promise were  dismissed.  The Company,
certain individual defendants and the Plaintiffs appealed.

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

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

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

The Company and its  subsidiaries  are involved in legal  proceedings and claims
arising in the ordinary  course of business.  Although there can be no assurance
as to the ultimate disposition of these


<PAGE>


                                                                              17

matters,  management believes that the probable resolution of such contingencies
will not have a  material  adverse  effect  on the  financial  condition  of the
Company.

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

Not applicable.

Item 4A. Executive Officers of the Registrant

Name                                  Age      Position with the Company
----                                  ---      -------------------------

J. Patrick Danahy                     54      Director, President, and
                                                Chief Executive Officer

John L. Bakane                        47      Director,
                                                Executive Vice President and
                                                President Apparel Products Group

Anthony L. Furr                       54      Vice President and
                                                Chief Financial Officer

Marvin A. Woolen, Jr.                 57      Vice President-Cotton Purchasing

James S. Butner                       52      Vice President

Neil W. Koonce                        50      Vice President and
                                                General Counsel

Terry L. Weatherford                  55      Vice President and Secretary

David E. Bray                         59      Treasurer

Gary L. Smith                         39      Controller

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 has been a Director since 1989
and President and Chief Executive Officer since 1990.

John L. Bakane joined the Company in 1975. He was named Chief Financial  Officer
in 1988 and was  elected  to the  Board of  Directors  in 1989.  He was  elected
Executive Vice  President in 1995. In November  1996, he assumed  responsibility
for management of the Denim


<PAGE>


                                                                              18

Group  of the  Company  and in April  1997 he was  appointed  President  of Cone
Apparel Products Group.

Anthony L. Furr  joined  the  Company  in May 1997 as Vice  President  and Chief
Financial  Officer.  From  1992 to 1995 he was  Chairman,  President  and  Chief
Executive  Officer of Wachovia Bank of South  Carolina,  N.A. and Executive Vice
President  of the parent  Wachovia  Corporation  for whom he served as Executive
Vice President and Chief Financial Officer from 1990 to 1992.

Marvin A. Woolen was  employed by the Company in July 1995 as director of cotton
purchasing. He has been in the cotton sales, merchandising, purchasing, classing
and shipping  business since 1971. From 1988 to 1995 he was president of Rollins
Company, a cotton shipping firm. He was elected Vice President in 1997.

James S.  Butner has been  employed  by the  Company  since  1984.  He was named
corporate Vice President for Industrial and Public Relations in 1988.

Neil W. Koonce was employed by the Company in 1974. He has been General  Counsel
since 1987 and Vice President since 1989.

Terry L. Weatherford was employed by the Company and elected Assistant Secretary
in May 1993.  He was elected  Secretary  in December  1993.  In 1995 he also was
elected Vice President.

David E. Bray has been employed by the Company since 1977 and has been Treasurer
since 1988.

Gary L. Smith was  employed by the Company in 1981 and was serving as Manager of
Business Analysis when he was elected Assistant Controller in 1994. He was named
Controller in December 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
approximate  number of holders  of record of the  Company's  Common  Stock as of
February 27, 1998 was 449.

Information  required  by this Item on the sales  prices  and  dividends  of the
Common Stock of the Company  appearing  under the heading  "Quarterly  Financial
Data (Unaudited)" on page 38 of the


<PAGE>


                                                                              19

Registrant's 1997 Annual Report is incorporated herein by reference.

Item 6.  Selected Financial Data

The information  appearing under the heading  "Historical  Financial  Review" on
page 40 of the  Registrant's  1997 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 14 thru 18
of the Registrant's 1997 Annual Report to Shareholders is incorporated herein by
reference.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Not required for the Company in 1997.

Item 8.   Financial Statements and Supplementary Data

The consolidated  financial statements and notes thereto,  appearing on pages 20
through  38  of  the  Registrant's  1997  Annual  Report  to  Shareholders,  are
incorporated herein by reference.

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 12, 1998,  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


<PAGE>


                                                                              20

Proxy  Statement  prepared for the Annual Meeting of  Shareholders to be held on
May 12, 1998, 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 12, 1998, 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"  in the  Company's
definitive Proxy Statement prepared for the Annual Meeting of Shareholders to be
held on May 12, 1998 and is hereby incorporated by reference.

                                     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 28, 1997, December 29, 1996 and
                        December 31, 1995

                        Consolidated Balance Sheets as of December 28, 1997
                        and December 29, 1996

                        Consolidated  Statements of Stockholders' Equity for the
                        Years Ended  December  28,  1997,  December 29, 1996 and
                        December 31, 1995

                        Consolidated Statements of Cash Flows for the Years
                        Ended December 28, 1997, December 29, 1996 and


<PAGE>


                                                                              21

                        December 31, 1995

                        Notes to Consolidated Financial Statements

(a)(2)            The following Financial Statement Schedules are
                  presented on pages 22 through 23 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
                        1997.



<PAGE>


                                                                              22

                             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  subjected 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

[zz]



Greensboro, North Carolina
February 13, 1998



<PAGE>


                                                                              23

                    CONE MILLS CORPORATION AND SUBSIDIARIES
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
     Years Ended December 28, 1997, December 29, 1996 and December 31, 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 28, 1997
     Valuation accounts deducted
       from the assets to which
       they apply:
          Provision for doubtful Accounts                             $3,000       $  624       $ --       $2,124(a)(c)       $1,500
                                                                      ------       ------       ----       ------             ------

          Reserve for inventory (b)                                       --        5,075         --           --              5,075
                                                                      ------       ------       ----       ------             ------
          Reserve for fixed asset writedowns                           2,638           --         --        1,000              1,638
                                                                      ------       ------       ----       ------             ------
     Reserve for loss on real estate disposal                          4,500           --         --        4,500                 --
                                                                      ------       ------       ----       ------             ------
     Reserve for future losses(b)                                      1,725          950         --        1,318              1,357
                                                                      ------       ------       ----       ------             ------

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 fixed asset writedowns (b)                          --        2,638         --           --              2,638
                                                                      ------       ------       ----       ------             ------
     Reserve for loss on real estate disposal (b)                         --        4,500         --           --              4,500
                                                                      ------       ------       ----       ------             ------
     Reserve for future losses (b)                                     2,644        1,522         --        2,441              1,725
                                                                      ------       ------       ----       ------             ------

December 31, 1995
     Valuation accounts deducted
       from the assets to which
       they apply:
          Provision for doubtful Accounts                             $3,000       $  411       $ --       $  211(a)          $3,200
                                                                      ------       ------       ----       ------             ------

          Reserve for inventory                                           45           --         --           45                 --
                                                                      ------       ------       ----       ------             ------
     Reserve for future losses (b)                                        --        2,644         --           --              2,644
                                                                      ------       ------       ----       ------             ------
</TABLE>

(a)  Represents bad debts charged off.
(b)  Represents reserves charged to costs and expenses.
(c)  Includes  reduction of $1,750  related to sale of  receivables  to Cone
     Receivables, LLC.

<PAGE>


                                                                              24

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

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

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

*2.2(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.

*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.



<PAGE>


                                                                              25

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

*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.

*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.


<PAGE>


                                                                              26

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

*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             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


<PAGE>


                                                                             27

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

                 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
                     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



<PAGE>


                                                                              28

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

                 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.

*4.3(c)          Letter Agreement dated June 30, 1994,
                 amending the Note Agreement dated


<PAGE>


                                                                              29

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

                 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 filed as Exhibit 4.3(h) to the
                 Registrant's report on Form 10-K for
                 the year ended December 29, 1996.



<PAGE>


                                                                              30

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

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

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

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

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

*4.7             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



<PAGE>


                                                                              31

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

                 Report on Form 10-K for year ended
                 December 31, 1995.

*4.7(c)          Third Amendment to the 401(k) Program
                 of Cone Mills Corporation dated August
                 7, 1997, filed as Exhibit 4.7(c) to the
                 Registrant's report on Form 10-Q for
                 the quarter ended September 28, 1997.

4.7(d)           Fourth Amendment to the 401(k)
                 Program of Cone Mills Corporation
                 dated December 4, 1997.                                  38


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

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

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

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

4.8(d)           Fourth Amendment to the Cone Mills
                 Corporation 1983 ESOP dated
                 December 4, 1997.                                        40



<PAGE>


                                                                              32

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,
                 filed as Exhibit 10.1(c) to the
                 Registrant's report on Form 10-K for
                 the year ended December 29, 1996.

*10.1(d)         Fourth Amendment to the Employees'
                 Retirement Plan of Cone Mills
                 Corporation, filed as Exhibit 10 to the
                 Registrant's report on Form 10-Q for
                 the quarter ended


<PAGE>


                                                                              33

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

                 September 28, 1997.

 10.1(e)         Fifth Amendment to Employees'
                 Retirement Plan of Cone Mills
                 Corporation dated December 4, 1997.                      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).

*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


<PAGE>


                                                                              34

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

                 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,
                 filed as Exhibit 10.8(a) to the
                 Registrant's report on Form 10-K for
                 the year ended December 29, 1996.

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

 10.8(c)         Form of Restricted Stock Award
                 Agreement under 1992 Amended and
                 Restated Stock Plan.                                     44

*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>


                                                                              35

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, filed as Exhibit 10.13 to
                 the Registrant's report on Form 10-K
                 for the year ended December 29, 1996.

 10.14           Consulting Agreement between Dewey L.
                 Trogdon and the Registrant dated
                 December 19, 1997.                                       48

*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.                          50

 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.                              51

 27              Financial Data Schedule                                  52

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



<PAGE>

                                                                         Page 36
                                   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 26, 1998               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 Board            March 26, 1998
---------------------
(Dewey L. Trogdon)


/s/ J. Patrick Danahy            Director, President              March 26, 1998
---------------------            and Chief Executive
(J. Patrick Danahy)              Officer (Principal 
                                 Executive Officer)


/s/ Anthony L. Furr              Vice President and               March 26, 1998
---------------------            Chief Financial Officer
(Anthony L. Furr)

/s/ Gary L. Smith                Controller                       March 26, 1998
---------------------            (Principal Accounting
(Gary L. Smith)                   Officer)            
                     


/s/ John L. Bakane               Director                         March 26, 1998
---------------------
(John L. Bakane)


/s/ Doris R. Bray                Director                         March 26, 1998
---------------------
(Doris R. Bray)


<PAGE>


                                                                         Page 37

      Signature                         Title                         Date
      ---------                         -----                         ----

/s/ Jeanette C. Kimmel           Director                         March 26, 1998
----------------------
(Jeanette C. Kimmel)


/s/ Charles M. Reid              Director                         March 26, 1998
----------------------
(Charles M. Reid)


/s/ John W. Rosenblum            Director                         March 26, 1998
---------------------
(John W. Rosenblum)


                                 Director                         March 26, 1998
(Cyrus C. Wilson)