Page 1 of 60
Index to Exhibits-Pages 21-30

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

For the quarterly period ended March 31, 1996

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

For the Transition period from to

Commission file number 1-3634

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

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

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

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

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

Number of shares of common stock outstanding as of May 1,
1996: 27,383,933 shares.

Page 1

FORM 10-Q

CONE MILLS CORPORATION

INDEX

Page
Number

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Income
Thirteen weeks ended March 31, 1996 and
April 2, 1995 (Unaudited). . . . . . . . . . . . . . . .3

Consolidated Balance Sheets
March 31, 1996 and April 2, 1995
(Unaudited) and December 31, 1995. . . . . . . . . . . .4 & 5

Consolidated Statements of Stockholders' Equity
Thirteen weeks ended March 31, 1996
and April 2, 1995 (Unaudited). . . . . . . . . . . . . .6

Consolidated Statements of Cash Flows
Thirteen weeks ended March 31, 1996
and April 2, 1995 (Unaudited). . . . . . . . . . . . . .7

Notes to Consolidated Financial Statements
(Unaudited). . . . . . . . . . . . . . . . . . . . . . .8

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

PART II. OTHER INFORMATION

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

Page 2

FORM 10-Q
PART I
Item 1.

CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

Thirteen Thirteen
Weeks Ended Weeks Ended
March 31, 1996 April 2, 1995
(Unaudited) (Unaudited)

Net Sales $ 199,282 $ 226,205

Operating Costs and Expenses:
Cost of sales 161,236 185,948
Selling and administrative 21,116 20,827
Depreciation 7,136 7,201
Gain on sale of division (4,675) -

184,813 213,976

Income from Operations 14,469 12,229

Other Income (Expense):
Interest income 96 225
Interest expense (3,837) (3,001)

(3,741) (2,776)

Income before Income Taxes and Equity in
Earnings (Loss) of Unconsolidated Affiliates 10,728 9,453

Income Taxes 3,755 3,304

Income before Equity in Earnings (Loss) of
Unconsolidated Affiliates 6,973 6,149

Equity in Earnings (Loss) of Unconsolidated Affiliates 212 (2,515)

Net Income $ 7,185 $ 3,634

Income Available to Common Shareholders:
Net Income $ 6,465 $ 2,962

Earnings Per Share - Fully Diluted:
Net Income $ .24 $ .11

Weighted Average Common Shares and
Common Share Equivalents Outstanding -
Fully Diluted 27,462 27,465

See Notes to Consolidated Financial Statements.

Page 3

FORM 10-Q

Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and par value data)

March 31, April 2, December 31,
ASSETS 1996 1995 1995
(Unaudited) (Unaudited) (Note)
Current Assets:
Cash $ 1,447 $ 912 $ 336

Accounts receivable - trade, less provision for
doubtful accounts $3,000; $3,000; $3,200 78,747 95,833 60,955

Inventories:
Greige and finished goods 92,823 82,684 84,822
Work in process 13,143 15,995 14,786
Raw materials 11,794 23,026 29,274
Supplies and other 32,599 31,151 33,492

150,359 152,856 162,374

Other current assets 13,781 7,558 10,227

Total Current Assets 244,334 257,159 233,892

Investments in Unconsolidated Affiliates 37,087 32,148 37,680

Other Assets 41,815 39,718 45,540

Property, Plant and Equipment:
Land 18,398 20,090 19,615
Buildings 81,821 79,253 89,128
Machinery and equipment 304,024 293,101 322,361
Other 30,605 31,435 34,292

434,848 423,879 465,396

Less accumulated depreciation 191,243 184,073 198,188

Property, Plant and Equipment-Net 243,605 239,806 267,208

$ 566,841 $ 568,831 $ 584,320

Note: The balance sheet at December 31, 1995, has been
derived from the audited financial statements at that date.

See Notes to Consolidated Financial Statements.

Page 4

FORM 10-Q

Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and par value data)

March 31, April 2, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 1995
(Unaudited) (Unaudited) (Note)

Current Liabilities:
Notes payable $ 11,391 $ 8,210 $ 8,875
Current maturities of long-term debt 11,096 414 11,236
Accounts payable - trade 33,124 37,380 40,023
Sundry accounts payable and accrued expenses 43,655 41,891 64,800
Income taxes payable 1,124 3,756 -
Deferred income taxes 26,317 28,188 25,938

Total Current Liabilities 126,707 119,839 150,872

Long-Term Debt 161,420 172,629 161,782

Deferred Items:
Deferred income taxes 40,849 37,753 40,836
Other deferred items 9,934 6,215 8,705

50,783 43,968 49,541

Stockholders' Equity:
Class A Preferred Stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 383,948
shares - Employee Stock Ownership Plan 38,395 38,395 38,395
Class B Preferred Stock - no par value; authorized
5,000,000 shares - - -
Common Stock - $.10 par value; authorized 42,700,000
shares; issued and outstanding 27,383,933 shares;
1995, 27,380,409 shares 2,738 2,738 2,738
Capital in excess of par 71,100 71,090 71,090
Retained earnings 124,160 126,743 119,825
Currency translation adjustment (8,462) (6,571) (9,923)

Total Stockholders' Equity 227,931 232,395 222,125

$ 566,841 $ 568,831 $ 584,320

Note: The balance sheet at December 31, 1995, has been
derived from the audited financial statements at that date.

See Notes to Consolidated Financial Statements.

Page 5

FORM 10-Q

Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THIRTEEN WEEKS ENDED MARCH 31, 1996 AND APRIL 2, 1995
(amounts in thousands, except share data)
(Unaudited)

Class A Preferred
Stock Common Stock
Shares Amount Shares Amount

Balance, December 31, 1995 383,948 $ 38,395 27,380,409 $ 2,738
Net income - - - -
Currency translation adjustment -
Sale of stock of affiliate - - - -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - -
Common Stock:
Options exercised - - 6,000 -
Purchase of common shares - - (2,476) -

Balance, March 31, 1996 383,948 $ 38,395 27,383,933 $ 2,738

Class A Preferred
Stock Common Stock
Shares Amount Shares Amount

Balance, January 1, 1995 383,948 $ 38,395 27,403,621 $ 2,740
Net income - - - -
Currency translation loss (net
of income tax benefit of $3,262) - - - -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - -
Common Stock:
Options exercised - - 4,000 1
Purchase of common shares - - (27,212) (3)

Balance, April 2, 1995 383,948 $ 38,395 27,380,409 $ 2,738

See Notes to Consolidated Financial Statements.
Page 6

FORM 10-Q

Capital in Currency
Excess Retained Translation
of Par Earnings Adjustment

Balance, December 31, 1995 $ 71,090 $ 119,825 $ (9,923)
Net income - 7,185 -
Currency translation adjustment -
Sale of stock of affiliate - - 1,461
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - (2,850) -
Common Stock:
Options exercised 36 - -
Purchase of common shares (26) - -

Balance, March 31, 1996 $ 71,100 $ 124,160 $ (8,462)

Capital in Currency
Excess Retained Translation
of Par Earnings Adjustment

Balance, January 1, 1995 $ 71,354 $ 125,771 $ (1,380)
Net income - 3,634 -
Currency translation loss (net
of income tax benefit of $3,262) - - (5,191)
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - (2,662) -
Common Stock:
Options exercised 25 - -
Purchase of common shares (289) - -

Balance, April 2, 1995 $ 71,090 $ 126,743 $ (6,571)

See Notes to Consolidated Financial Statements.
Page 6a

FORM 10-Q

Item 1. (continued)

CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

Thirteen Thirteen
Weeks Ended Weeks Ended
March 31, 1996 April 2, 1995
(Unaudited) (Unaudited)

Cash Flows Used In Operating Activities $ (16,647) $ (24,312)

Cash Flows from Investing Activities:
Proceeds from sale of division (a) 40,053 -
Capital expenditures (5,341) (9,640)
Other 1,486 (6,464)

Net cash provided by (used in) investing activities 36,198 (16,104)

Cash Flows from Financing Activities:
Increase (decrease) in checks issued in excess of deposits (17,502) 865
Principal payments - long-term debt (614) (97,056)
Proceeds from long-term debt borrowings - 48,000
Proceeds from debentures issued - 99,831
Other (324) (11,470)

Net cash (used in) provided by financing activities (18,440) 40,170

Net increase (decrease) in cash 1,111 (246)

Cash at Beginning of Period 336 1,158

Cash at End of Period $ 1,447 $ 912

(a)Divestiture:
Inventories $ 14,926
Property, plant and equipment 21,516
Other (1,064)
Gain on sale 4,675

Proceeds from sale $ 40,053

Supplemental Disclosures of Additional Cash Flow Information:

Cash payments for:
Interest, net of interest capitalized $ 7,495 $ 4,817

Income taxes, net of refunds $ 103 $ (1,338)

Supplemental Schedule of Noncash Investing and Financing Activities:

Receivable recorded from sale of division $ 4,449 $ -

See Notes to Consolidated Financial Statements.

Page 7

FORM 10-Q

Item 1. (continued)

CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996

Note 1. Basis of Financial Statement Preparation

The Cone Mills Corporation (the "Company") condensed
consolidated financial statements for March 31, 1996 and
April 2, 1995 are unaudited, but in the opinion of
management reflect all adjustments necessary to present
fairly the consolidated balance sheets of Cone Mills
Corporation and Subsidiaries at March 31, 1996, April 2,
1995, and December 31, 1995 and the related consolidated
statements of income, stockholders' equity and cash flows
for the thirteen weeks ended March 31, 1996 and April 2,
1995. All adjustments are of a normal recurring nature.
The results are not necessarily indicative of the results
to be expected for the full year.

These statements should be read in conjunction with the
audited financial statements and related notes included
in the Company's annual report on Form 10-K for fiscal
1995.

Substantially all components of textile inventories are
valued at the lower of cost or market using the last-in,
first-out (LIFO) method. Nontextile inventories are
valued at the lower of average cost or market. Because
amounts for inventories under the LIFO method are based
on an annual determination of quantities as of the year-
end, the inventories at March 31, 1996 and April 2, 1995
and related consolidated statements of income for the
thirteen weeks then ended are based on certain estimates
relating to quantities and cost as of the end of the
fiscal year.

Page 8

FORM 10-Q

Item 1. (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Sale of Accounts Receivable

The Company has an agreement with the subsidiary of a
major financial institution which allows the sale without
recourse of up to $50 million of an undivided interest in
eligible trade receivables. This agreement is extendable
to August 1997. Accounts receivable is shown net of $25
million sold at March 31, 1996, net of $26 million sold
at April 2, 1995, and net of $40 million sold at December
31, 1995. As a result of the sale of the interest in
these receivables, cash flows provided by operating
activities include decreases of $15 million and $24
million for the thirteen weeks ended March 31, 1996 and
April 2, 1995, respectively.

Note 3. Investments in Unconsolidated Affiliates

Investments in unconsolidated affiliated companies are
accounted for by the equity or cost method depending upon
ownership and the Company's ability to exert influence.
In 1995, the Company accounted for the results of CIPSA
by the equity method. Based upon a reduction in
ownership to 18% and certain other factors, the Company
will account for its investment in CIPSA by the cost
method in 1996 and future periods.

In December 1994, the Mexican government devalued the
peso and allowed it to freely trade against the U.S.
dollar resulting in a substantial decline in value of the
peso versus the U.S. dollar. On January 1, 1995, the
peso was trading at 4.94 pesos per U.S. dollar versus an
exchange rate of approximately 3.45 prior to the
devaluation. The devaluation of the peso created foreign
currency transaction losses for the Company's Mexican
affiliates, primarily related to debt denominated in U.S.
dollars for Compania Industrial de Parras S.A.,
("CIPSA"). Primarily due to the devaluation of the peso,
the Company recognized $2.4 million loss as its pro rata
share of these losses in its first quarter 1995 income
statement.

Page 9

FORM 10-Q

Item 1. (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Long-Term Debt

March 31, 1996
Current
Total Maturity Long-Term
(amounts in thousands)

8% Senior Note $ 75,000 $ 10,714 $ 64,286
8-1/8% Debentures 96,021 - 96,021
Capital Lease Obligation 1,374 344 1,030
Other 121 38 83

Total $ 172,516 $ 11,096 $ 161,420

April 2, 1995
Current
Total Maturity Long-Term
(amounts in thousands)

8% Senior Note $ 75,000 $ - $ 75,000
8-1/8% Debentures 95,577 - 95,577
Capital Lease Obligation 1,610 155 1,455
Industrial Revenue Bonds 701 224 477
Other 155 35 120

Total $ 173,043 $ 414 $ 172,629

Note 5. Class A Preferred Stock

The dividend rate for Class A Preferred Stock is 7.50%,
which is payable March 31, 1997.

Page 10

FORM 10-Q

Item 1. (continued)

Note 6. Stock Option Plans

1995 Exercise 1996 Exercise
Number Price Number Price
Of Weighted Of Weighted
Options Average Options Average
Outstanding -
beginning
of year 1,086,000 $ 12.66 1,047,000 $ 12.55
Granted - - - -
Exercised (4,000) 6.50 (6,000) 6.08
Forfeited (35,000) 15.63 (4,000) 13.81

Outstanding -
end of period 1,047,000 $ 12.58 1,037,000 $ 12.59

Exercisable at
end of period 335,850 568,600

The following table summarizes information about stock options
outstanding at March 31, 1996:

Number Number
Exercise Outstanding Exercisable Expiration
Price at 3/31/96 at 3/31/96 Date

$ 5.250 76,200 76,200 June, 1999
$ 6.500 91,800 91,800 February, 2002
$11.625 7,000 7,000 May, 2002
$12.000 408,000 104,800 November, 2004
$12.875 6,000 6,000 May, 2001
$15.625 448,000 282,800 February, 2003

1,037,000 568,600

Page 11

FORM 10-Q

Item 1. (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Earnings Per Share

Thirteen Thirteen
Weeks Ended Weeks Ended
March 31, 1996 April 2, 1995
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands,
except per share data)
Income from
continuing operations $ 7,185 $ 7,185 $ 3,634 $ 3,634
Less: Class A Preferred
dividends (720) (720) ( 672) ( 672)

Adjusted net income $ 6,465 $ 6,465 $ 2,962 $ 2,962

Weighted average common
shares outstanding 27,381 27,381 27,380 27,380
Common share equivalents
from assumed exercise
of outstanding options,
less shares assumed
repurchased 75 81 85 85

Weighted average common
shares and common share
equivalents outstanding 27,456 27,462 27,465 27,465

Earnings per common
share and common share
equivalent $ .24 $ .24 $ .11 $ .11

Page 12

FORM 10-Q

Item 1. (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8. Sale of Division

On January 22, 1996, the Company completed the sale of
its Olympic Products Division to British Vita PLC. The
Company sold all inventory and substantially all of the
property, plant and equipment of this division and will
collect the trade accounts receivable as they become due.
Proceeds of $40,053,000 had been realized at March 31,
1996. Total proceeds to be realized from the sale of
this division, including collection of receivables, will
be in excess of $50 million. Gain from disposal of this
division has been recognized in the Company's first
quarter 1996 financial statements.

Sales revenues of the Olympic Products Division for 1995
were $94.7 million.

Page 13

FORM 10-Q

Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OPERATING RESULTS

First Quarter Ended March 31, 1996 Compared with First Quarter
Ended April 2, 1995.

While U.S. consumer spending in apparel and home furnishings
continued to grow sluggishly in the first quarter of 1996,
manufacturers were adversely affected by reductions in
softgoods inventories, which were in response to retail sales
being less than expected. These inventory liquidations have
been disruptive to textile industry operating schedules and
pricing particularly in the apparel fabrics industry. In
addition, weak consumer preference for printed home
furnishings fabrics have adversely affected the decorative
print business.

Cone Mills had first quarter 1996 sales of $199.3 million,
down 11.9%, as compared with sales of $226.2 million for the
first quarter of 1995. After eliminating the sales of the
Olympic Products Division, which was sold in January 1996,
sales decreased 4.1%. Lower sales in specialty sportswear
products and decorative prints more than offset increased
denim and export sales. Export sales were $52.6 million, or
26.4% of total sales, as compared with $38.2 million, or 16.9%
of sales, for the first quarter of 1995.

The Company had net income of $7.2 million, or $.24 per share
after preferred dividends, for the first quarter of 1996,
including an after-tax gain on the sale of the Olympic
Division of $3.0 million or $.11 per share. For comparison,
first quarter 1995 net income was $3.6 million or $.11 per
share, which included a $2.5 million after-tax charge, or $.09
per share, arising primarily from losses associated with the
effect of the peso devaluation on Cone's minority investment
in Compania Industrial de Parras S.A. de C.V. (CIPSA).

Excess inventories throughout the apparel softgoods pipeline
and weak consumer demand for home furnishings prints are
expected to continue to depress earnings for the near term.

Gross profit for first quarter 1996 (net sales less cost of
sales and depreciation) was 15.5% of sales as compared with
14.6% for the previous year. The increase was primarily the
result of improved margins in denims and the elimination of
Olympic operations which had low gross profits.

Page 14

FORM 10-Q

Item 2. (continued)

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

First Quarter
1996 1995
(Dollar amounts in millions)
NET SALES
Apparel $ 165.7 83.2% $ 170.3 75.3%
Home Furnishings(1) 33.6 16.8 55.9 24.7
Total $ 199.3 100.0% $ 226.2 100.0%

OPERATING INCOME(2)
Apparel $ 13.0 7.8% $ 8.9 5.3%
Home Furnishings(3) 2.8 8.2 3.8 6.8

(1) Net sales include the Olympic Products Division's net
sales of $4.8 million and $23.4 million in 1996 and 1995,
respectively.
(2) Operating income excludes general corporate expenses.
Percentages reflect operating income as a percentage of
segment net sales.
(3) Operating income includes the Olympic Products Division's
operating income of $4.7 million and $.1 million in 1996
and 1995, respectively.

Apparel Fabrics. Apparel fabric segment sales for the first
quarter of 1996 were $165.7 million, down 2.7% from 1995
amounts. Higher denim sales, which resulted from price
increases and improved mix, were more than offset by lower
specialty sportswear sales. First quarter 1996 operating
margins for the apparel segment were 7.8% of sales as
compared with 5.3% in 1995. Improved denim margins were
partially offset by lower operating results in specialty
sportswear fabrics product lines. Export sales, primarily
denims, were up 37.5% compared with the previous year
amounts.

Home Furnishings. Excluding the Olympic Products Division,
first quarter 1996 home furnishings segment sales were
$28.8 million, down 11.3% from 1995. Both the Cone
Finishing and Cone Decorative Fabrics Divisions had lower
sales in 1996 resulting from weak furniture markets and

Page 15

FORM 10-Q

Item 2. (continued)

customer preference for fabrics other than prints. The home
furnishings segment, excluding the Olympic Products
Division, had an operating loss of $1.9 million compared
with income of $3.7 million for the 1995 period. The loss
was primarily the result of the lower sales volume and
operating levels substantially less than capacity.

Total Company selling and administrative expenses were up
marginally to $21.1 million, 10.6% of sales, as compared with
$20.8 million, or 9.2% of sales, for the 1995 period.
Consistent with the Company's growth initiatives, selling and
administrative expenses have been increased to support an
infrastructure for substantially higher levels of business.

Interest expense was up $.8 million in the period resulting
primarily from the Company's issuing $100 million of
investment grade bonds in the last month of the first quarter
of 1995.

Income taxes as a percent of taxable income were 35.0% for
both the first quarters of 1996 and 1995. Both periods reflect
tax benefits resulting from operation of the Company's foreign
sales corporation.

Liquidity and Capital Resources

The Company's principal long-term capital sources are a $75
million Note Agreement with The Prudential Insurance Company
of America (the "Term Loan"), its 8 1/8% Debentures issued on
March 15, 1995 and due March 15, 2005 (the "Debentures"), and
stockholders' equity. Primary sources of liquidity are
internally generated funds, an $80 million Credit Agreement
with a group of banks with Morgan Guaranty Trust Company of
New York ("Morgan Guaranty") as Agent Bank (the "Revolving
Credit Facility"), and a $50 million Receivables Purchase
Agreement (the "Receivables Purchase Agreement") with Delaware
Funding Corporation, an affiliate of Morgan Guaranty. On March
31, 1996, the Company had funds available of $105.0 million
under its Revolving Credit Facility and Receivables Purchase
Agreement.

For the first quarter of 1996, the Company generated $14.9
million from earnings before noncash charges from
depreciation, amortization and unconsolidated Mexican
affiliate results as compared with $14.0 million for the first

Page 16

FORM 10-Q

Item 2. (continued)

quarter of 1995. For the 1996 period, the Company increased
its investments in working capital which resulted in net cash
used in operations of $16.6 million. During the quarter, the
Company sold the Olympic Products Division which provided in
excess of $50 million of cash proceeds including the
collection of accounts receivable. Additional uses of cash
during the quarter included capital spending of $5.3 million,
and the preferred stock dividend of $2.9 million.

The Company believes that the proceeds from the sale of the
Olympic Products Division, together with Cone's internally
generated operating funds and funds available under its
existing credit facilities, will be sufficient to meet its
working capital, capital spending, possible stock repurchases,
and financing commitment needs for the foreseeable future.

On March 31, 1996, the Company's long-term capital structure
consisted of $161.4 million of long-term debt and $227.9
million of stockholders' equity. For comparison, at April 2,
1995, the Company had $172.6 million of long-term debt and
$232.4 million of stockholders' equity. Long-term debt
(including current maturities of long-term debt) as a
percentage of long-term debt and stockholders' equity was 43%
at the end of both the first quarter 1996 and first quarter
1995.

Accounts receivable on March 31, 1996, were $78.7 million,
down from $95.8 million at April 2, 1995. At the end of the
first quarter of 1996, the Company had sold $25 million of
accounts receivable, a decrease of $1 million from the amount
sold at the end of the first quarter of 1995. The decrease in
accounts receivable is primarily due to the lower sales level
in 1996 and the collection of Olympic Products Division
receivables. Receivables, including those sold pursuant to the
Receivables Purchase Agreement, represented 49 days of sales
outstanding at March 31, 1996 compared with 50 days at April
2, 1995.

Inventories on March 31, 1996, were $150.4 million, up
approximately $12 million from first quarter 1995 levels when
adjusted for the sale of Olympic Products Division
inventories. The Company's additional finished goods
inventories were the result of a decline in unit sales.

Capital spending in 1996 is expected to be $52 million.
Projects include new weaving machines that replace 1970s

Page 17

FORM 10-Q

Item 2. (continued)

vintage weaving machines and approximately $4 million for
computers, software and information systems. First quarter
1996 spending was $5.3 million. The Company has agreements
with CIPSA to purchase up to an additional 33% of the
outstanding common stock of Parras Cone for an amount of $20
million or the August 1995 book value, if CIPSA does not meet
certain financial obligations.

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

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

Page 18

FORM 10-Q
PART II

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 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.

Page 19

FORM 10-Q

Item 1. (continued)

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. 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
affect on the Company's financial condition or results of
operations.

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 6. Exhibits and Reports on Form 8-K

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

(b) Reports on Form 8-K

None

Page 20

FORM 10-Q INDEX TO EXHIBITS

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.

Page 21

FORM 10-Q INDEX TO EXHIBITS

Exhibit Sequential
No. Description Page No.

* 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.

* 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.

* 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.
Page 22

FORM 10-Q INDEX TO EXHIBITS

Exhibit Sequential
No. Description Page No.

* 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.

* 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.

Page 23

FORM 10-Q INDEX TO EXHIBITS

Exhibit Sequential
No. Description Page No.

* 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.

* 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, filed as Exhibit
2.4 to the Registrant's report on Form
10-K for 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

Page 24

FORM 10-Q INDEX TO EXHIBITS

Exhibit Sequential
No. Description Page No.

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
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.
Page 25

FORM 10-Q INDEX TO EXHIBITS

Exhibit Sequential
No. Description Page No.

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

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

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

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

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

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

Page 26

FORM 10-Q INDEX TO EXHIBITS

Exhibit Sequential
No. Description Page No.

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

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

4.3(g) Letter Agreement dated as of March 30,
1996, between the Registrant and The
Prudential Insurance Company of
America. 32

* 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.

* 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.

Page 27

FORM 10-Q INDEX TO EXHIBITS

Exhibit Sequential
No. Description Page No.

* 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.

* 4.5 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 Registration rights agreement dated
as of March 30, 1992, among the
Registrant and the shareholders listed
therein, filed as Exhibit 4.8 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).

* 4.8 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.

* 4.8(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.

Page 28

FORM 10-Q INDEX TO EXHIBITS

Exhibit Sequential
No. Description Page No.

* 4.8(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.

* 4.9 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.

* 4.9(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.

* 4.9(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.

* 4.10 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).

* 4.11 Form of 8 1/8% Debenture in aggregate
principal amount of $100,000,000 due
March 15, 2005, filed as Exhibit 4.11
to the Registrant's report on Form 10-K
for the year ended January 1, 1995.

Page 29

FORM 10-Q INDEX TO EXHIBITS

Exhibit Sequential
No. Description Page No.

Management contract or compensatory plan or arrangement
(Exhibits 10.1 and 10.2)

10.1 1992 Stock Plan as amended and
restated and as approved as amended
and restated as of February 15, 1996. 34

10.2 1997 Senior Management Incentive
Compensation Plan adopted on
February 16, 1996 subject to share-
holder approval on May 14, 1996. 53

27 Financial Data Schedule 60

* Incorporated by reference to the statement or report
indicated.

Page 30

FORM 10-Q

SIGNATURES

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

CONE MILLS CORPORATION
(Registrant)

Date May 13, 1996 /s/ John L. Bakane
John L. Bakane
Executive Vice President and
Chief Financial Officer

Page 31