<PAGE>

Exhibit 13-a


                   PORTIONS OF 1997 ANNUAL REPORT TO SHAREHOLDERS


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

OVERVIEW

     The Company offers a broad range of products and services that enable its
customers to construct and upgrade their telecommunications networks to support
increasing user demand for voice, data and video services. The local loop is the
portion of the public network from the central office, through the equipment
that connects the local central office to the subscriber's equipment, onto the
customer premise and across the enterprise or residential network. Telephone
companies, cable television operators, wireless network providers and other
public network providers are building the infrastructure required to offer
Internet access, higher speed data, video and telephony services, entertainment
and other interactive services to residential and business customers. Greater
and greater amounts of network bandwidth are required for these services and the
Company's development efforts and product offerings are focused on "unlocking
the capacity of the local loop," eliminating bottlenecks and increasing the
speed and efficiency of the network. Such product offerings include equipment,
services and integrated solutions within the following general functional
product groups: transmission, enterprise networking and broadband connectivity.
The Company's transmission products are designed for use in copper based, coax
based, fiber based or wireless transmission networks and are sold primarily to
public network providers in the United States and internationally. The Company's
enterprise networking products are designed for use in copper based, fiber optic
and wireless networks and are sold primarily to private voice, data and video
network providers around the world. The Company's broadband connectivity
products are designed for use in copper based, coax, fiber optic or wireless
transmission networks and are sold to both public and private global network
providers.

     Historically, the Company's principal product offerings generally consisted
of copper based and fiber based products designed to address the needs of its
customers for transmission, enterprise networking and connectivity on
traditional telephony networks. With the growth of multimedia applications and
the associated development of enhanced voice, data and video services, the
Company's more recent product offerings and research and development efforts
have increasingly focused on emerging technologies and applications relating to
the broadband telecommunications equipment market. The market for broadband
telecommunications equipment is evolving and rapidly changing. The Company's
future growth is dependent in part on its ability to successfully develop and
commercially introduce new products in each of its product groups addressing
this


<PAGE>

market, as well as the growth in this market. The growth in the market for such
broadband telecommunications products is dependent on a number of factors,
including the amount of capital expenditures by public network providers,
regulatory and legal developments, any adjustments to overall market capital
expenditure rates which could result from the ongoing consolidation of customers
in this market as well as the influx of new customer entrants to the market and
end-user demand for integrated voice, data video and other network services.
There can be no assurance that the Company's new or enhanced products will meet
with market acceptance or be profitable.

     The Company's operating results may fluctuate significantly from quarter to
quarter due to several factors. The Company is growing through acquisition and
expansion and results of operations described in this report may not be
indicative of results to be achieved in future periods. The Company's expense
levels are based in part on expectations of future revenues. If revenue levels
in a particular period do not meet expectations, operating results will be
adversely affected. In addition, the Company's results of operations are subject
to seasonal factors. The Company historically has experienced a stronger demand
for its products in the fourth fiscal quarter, primarily as a result of customer
budget cycles and Company year-end incentives, and has experienced a weaker
demand for its products in the first fiscal quarter, primarily as a result of
the number of holidays during late November, December and early January and a
general industry slowdown during that period. There can be no assurance that
these historical seasonal trends will continue in the future.


                                         -2-
<PAGE>

RESULTS OF OPERATIONS

     The percentage relationships to net sales of certain income and expense
items for the three years ended October 31, 1997, and the percentage changes in
these income and expense items between years are contained in the following
table:
<TABLE>
<CAPTION>

                                                                               Percentage Increase
                                 Percentage of Net Sales Years Ended              Between Years
                                 -----------------------------------         -----------------------
                                                                             1997 vs.       1996 vs.
                                   1997         1996         1995              1996           1995
                                  ------       ------       ------           --------       --------
<S>                               <C>          <C>          <C>              <C>            <C>

Net sales                          100.0%       100.0%       100.0%            40.6%          41.2%
Cost of product sold               (53.4)       (53.0)       (51.5)            41.7           45.3
Gross profit                        46.6         47.0         48.5             39.4           37.0
Expenses:
Development and
  product engineering              (10.5)       (10.9)       (11.3)            36.2           35.5
Selling and
  administration                   (19.0)       (19.4)       (22.2)            37.9           23.3
Goodwill amortization                (.9)         (.6)         (.6)            91.3           67.1
Non-recurring charges               (2.0)          --          (.7)              --             --
Operating income                    14.2         16.1         13.7             24.4           65.8
Other income (expense),
  net:
  Interest                           0.6          1.3          1.2            (33.6)          54.4
Other                                (.2)         (.9)         (.2)           (63.2)            --
Income before income
  taxes                             14.6         16.5         14.7             24.4           58.5
Provision for income
  taxes                             (5.3)        (5.9)        (5.3)            24.4           58.5
Net income                           9.3%        10.6%         9.4%            24.4           58.5
</TABLE>


NET SALES      The following table sets forth the Company's net sales for the
three years ended October 31, 1997, for each of the functional product groups
(dollars in thousands):
<TABLE>
<CAPTION>

                                                                                                          Percentage Increase
                                    Net Sales for the Years Ended October 31,                                Between Years
                         --------------------------------------------------------------                  ---------------------
                            1997                      1996                      1995
                         ----------                 ---------                 ---------
                             Net                       Net                       Net                     1997 vs.     1996 vs.
Product Group               Sales          %          Sales          %          Sales          %           1996         1995
                         ----------     ------      ---------     ------      ---------     ------       --------     --------
<S>                      <C>            <C>        <C>            <C>        <C>            <C>          <C>          <C>
Transmission             $  509,704      43.8%       $304,820      36.8%       $184,432      31.5%          67.2%        65.3%
Enterprise Networking       154,399      13.2         145,651      17.6         127,405      21.7            6.0         14.3
Broadband
  Connectivity              500,347      43.0         377,538      45.6         274,385      46.8           32.5         37.6
    Total                $1,164,450     100.0%       $828,009     100.0%       $586,222     100.0%          40.6         41.2
</TABLE>


Net sales were $1.16 billion and $828.0 million for the years ended October 31,
1997 and 1996, reflecting 40.6% and 41.2% annual increases, respectively, over
the prior years. The increases in net sales in both 1997 and 1996 predominantly
reflect


                                         -3-
<PAGE>

increases in sales of transmission products (67.2% in 1997 and 65.3% in 1996)
and broadband connectivity products (32.5% in 1997 and 37.6% in 1996). Within
these two product groups, net sales increased approximately $109 million in 1997
and $70.0 million in 1996 as a result of revenue contributions from acquired
companies.

     In addition to the growth from acquisition, the Company's 67.2% and 65.3%
growth in net sales of transmission products during 1997 and 1996, respectively,
primarily reflects increased sales of transmission systems to public
telecommunications network providers such as telephone companies, cable TV
operators and wireless service providers. The very strong growth of transmission
product sales resulted in sales of transmission products increasing to 43.8% of
total net sales in 1997, from 36.8% of total net sales in 1996 and 31.5% of
total net sales in 1995. If the Company's transmission system products
internally developed or acquired within the last three years and continuing
enhancements to these products meet with reasonable market acceptance, the
Company anticipates that net sales of transmission products will continue to
grow as a percentage of the Company's total net sales.

     Besides the revenue growth from acquisitions, the Company's 32.5% and 37.6%
growth in net sales of broadband connectivity products in 1997 and 1996,
respectively, predominantly reflects the Company's success in selling these
products into new global broadband market applications (such as cable TV
companies and certain international customers). Within the broadband
connectivity product group, net sales of ADC's digital signaling cross-connect
(DSX) modules and bays have declined as a percentage of total net sales to 21.7%
from 22.7% in 1996 and 23.9% in 1995. The Company believes that future sales of
DSX and other copper connectivity products will continue to account for a
substantial portion of the Company's revenues, although these products may
continue to decline as a percentage of total net sales primarily due to changes
in the Company's product mix and the ongoing evolution of technologies in the
telecommunications marketplace.

     Net sales of enterprise networking products increased 6.0% and 14.3% during
1997 and 1996, respectively. These increases reflect growth in net sales of
public network access equipment, partially offset by decreases in net sales of
Local Area Network (LAN) equipment. Recognizing changes in the competitive
environment for LAN equipment and the industry trend toward integration of LAN
and Wide Area Network (WAN) technologies and products, the Company combined its
Kentrox and Fibermux subsidiaries into one enterprise networking group and
(during July 1997) transferred the Fibermux manufacturing operation to Kentrox.
This group combines LAN and WAN expertise in its development of advanced network
access and transport products.

     Net sales for 1997 and 1996 include $247.4 million and $172.2 million of
sales to customers outside of the U.S., representing 21.2% and 20.8%,
respectively, of total


                                         -4-
<PAGE>

net sales. If the Company's international marketing efforts continue to be
successful and if the Company's global products meet with reasonable market
acceptance, management anticipates that net sales outside the U.S. will continue
to grow as a percentage of the Company's total net sales.

     GROSS PROFIT  During 1997, 1996 and 1995, the gross profit percentages were
46.6%, 47.0% and 48.5% of net sales, respectively. The 1997 and 1996 declines in
gross profit percentages primarily resulted from the continuing change in
product sales mix toward sales of newer, lower margin products which address
emerging broadband applications. The Company anticipates that its future gross
profit percentages will continue to be affected by the mix of products the
Company sells, the timing of new product introductions and manufacturing volume,
among other factors.

     OPERATING EXPENSES  Total operating expenses for the years ended October
31, 1997, 1996 and 1995 were $377.0 million, $256.0 million and $203.8 million,
representing 32.4%, 30.9% and 34.8% of net sales, respectively. The increase in
operating expenses as a percentage of net sales during 1997 reflects the $22.7
million of non-recurring charges recorded during the quarter ended January 31,
1997. Such charges primarily represent the write-off of purchased research and
development resulting from the acquisition of the wireless infrastructure group
from PCSI, as well as expenses related to a consolidation of the Company's West
Coast operations. Operating expenses before non-recurring charges for 1997 were
$354.3 million, representing 30.4% of net sales. The 1997 decrease of .5% of net
sales (before non-recurring charges) compared to 1996 reflects the Company's
ability to leverage recurring operating expenses against revenue levels.

     The increases in absolute dollars of operating expenses during 1997 and
1996 were due primarily to expanded operations. In the year ended October 31,
1995, a non-recurring charge of $3.9 million related primarily to a personnel
reduction at the Fibermux facility resulting from the realignment of the
Company's enterprise networking operations. Operating expenses before this
charge for 1995 were $199.9, representing 34.1% of net sales. The 1996 decrease
of 3.2% of net sales compared to 1995 again reflects the Company's ability to
leverage operating expenses against revenue levels.

     Development and product engineering expenses were $122.6 million, $90.0
million and $66.5 million for the years ended October 31, 1997, 1996 and 1995,
respectively, reflecting increases of 36.2% during 1997 and 35.5% during 1996.
These increases resulted from substantial product development efforts in each of
the Company's three functional product groups and, in 1997 and 1996, newly
acquired businesses. The Company believes that, given the rapidly changing
technology and competitive environment in the telecommunications equipment
industry, continued commitment to product development efforts will be required
for the Company to remain competitive. Accordingly, the Company intends to
continue to


                                         -5-
<PAGE>

allocate substantial resources to product development for each of its three
functional product groups. However, the Company recognizes the need to balance
the cost of product development with expense control and remains committed to
carefully managing the rate of increase of such expenses.

     Selling and administration expenses were $221.6 million, $160.7 million and
$130.3 million for the years ended October 31, 1997, 1996 and 1995,
respectively, reflecting increases of 37.9% during 1997 and 23.3% during 1996.
These increases resulted from selling activities associated with new product
introductions, additional personnel costs related to expanded operations and, in
1997 and 1996, newly acquired businesses.

     Several of the Company's acquisitions have been accounted for as purchase
transactions in which the purchase prices exceeded the fair value of the
acquired assets. The amortization of these goodwill amounts over five to 25
years on a straight line basis resulted in increased goodwill amortization
expense for the years ended October 31, 1997 and 1996, to $10.0 million in 1997
and $5.2 million in 1996, from $3.1 million in the year ended October 31, 1995.
See Note 4 to the Consolidated Financial Statements included in this report for
a discussion of acquisitions made in 1997 and 1996.

     OTHER INCOME (Expense), Net  For the years ended October 31, 1997, 1996 and
1995, the net interest income category represented net interest income on cash
balances. See "Liquidity and Capital Resources" below for a discussion of cash
levels. Other expense for the years ended October 31, 1997 and 1996 primarily
represented the Company's share of net operating results of its venture
investments accounted for on an equity basis.

     INCOME TAXES  See Note 7 to the Consolidated Financial Statements included
in this report for a reconciliation of the federal statutory tax rate to an
effective tax rate of 36.0% in 1997, 1996 and 1995. This rate reflects the
varying amounts of non-deductible goodwill amortization included in operating
expenses in each of the three years, and the beneficial impact of tax credits.

     NET INCOME  Net income was $108.8 million (or $.83 per share) for the year
ended October 31, 1997, an increase of 24.4% over $87.5 million (or $.68 per
share) for the year ended October 31, 1996. The non-recurring charges of $22.7
million reduced net income by $.11 per share during 1997. Net income for 1996
represented an increase of 58.5% over $55.2 million (or $.47 per share) for the
year ended October 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents (primarily short-term investments in commercial
paper with maturities of less than 90 days) decreased $73.4 million and $55.3
million


                                         -6-
<PAGE>

during the years ended October 31, 1997 and 1996, respectively. The major
elements of the 1997 decrease were net income before non-recurring charges,
depreciation and amortization of $181.4 million offset by a $95.7 million
increase in working capital (reflecting the growth in the Company's business),
property and equipment additions of $119.0 million and acquisition payments of
$33.9 million. The higher level of property and equipment additions in 1997
reflects the continuation of certain major facilities and systems upgrades begun
in 1996. The major elements of the 1996 decrease were net income before
depreciation and amortization of $121.3 million offset by the $55.2 million
increase in working capital (reflecting the growth in the Company's business),
property and equipment additions of $69.1 million and acquisition payments of
$49.3 million. See Note 4 to the Consolidated Financial Statements included in
this report for a discussion of acquisitions.

     At October 31, 1997, the Company had approximately $3.8 million of debt
outstanding. All such debt represents debt of companies acquired during 1997 and
1996.

     Management believes that current cash balances and cash generated from
operating activities will be adequate to fund working capital requirements and
capital expenditures (for which approximately $35 million had been committed at
October 31, 1997) for 1998. However, the Company may find it necessary to seek
additional sources of financing to support its capital needs, for additional
working capital, potential investments or acquisitions, or otherwise.


                                         -7-
<PAGE>

QUARTERLY STOCK PRICE

     The Company's Common Stock, $.20 par value, is traded on the Nasdaq
National Market under the symbol "ADCT." The following table sets forth the high
and low sale prices for each quarter during the years ended October 31, 1997 and
1996, as reported on that system.  All prices have been restated to reflect a
two-for-one stock split effected in the form of a 100% stock dividend paid in
October 1996.

Fiscal Year Ended October 31, 1997      Low            High
First Quarter                           30 1/8         40 1/4
Second Quarter                          21 1/4         37 3/4
Third Quarter                           26 1/4         45 1/4
Fourth Quarter                          29 5/16        40 1/4

Fiscal Year Ended October 31, 1996      Low            High
First Quarter                           14 1/4         24 1/8
Second Quarter                          16 1/4         22 1/8
Third Quarter                           19 1/2         25 3/8
Fourth Quarter                          21 5/16        35 1/8

No cash dividends have been declared or paid during the past five years.  The
Company currently anticipates that it will retain any future earnings for use in
its business and does not anticipate paying any cash dividends in the
foreseeable future.  As of October 31, 1997, there were approximately 4,446
holders of record of the Common Stock.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

     This Annual Report, including Management's Discussion and Analysis of
Financial Condition and Results of Operations as well as the Shareholders Letter
and the discussion of the Company's business, contains various "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements represent the Company's expectations or beliefs
concerning future events, including the following: any statements regarding
future sales and gross profit percentages, any statements regarding the
continuation of historical trends, and any statements regarding the sufficiency
of the Company's cash balances and cash generated from operating and financing
activities for the Company's future liquidity and capital resource needs, any
statements regarding the effect of regulatory changes and any statement
regarding the future of the telecommunications industry or the Company's
business. The Company cautions that any forward-looking statements made by the
Company in this report or in other announcements made by the Company are further
qualified by important factors


                                         -8-
<PAGE>

that could cause actual results to differ materially from those in the
forward-looking statements, including, without limitations, the factors set
forth on Exhibit 99 to the Company's Annual Report on Form 10-K for the year
ended October 31, 1997.


                                         -9-
<PAGE>

Report of Independent Public Accountants



To ADC Telecommunications, Inc.:

     We have audited the accompanying consolidated balance sheets of ADC
TELECOMMUNICATIONS, INC. AND SUBSIDIARIES as of October 31, 1997 and 1996, and
the related consolidated statements of income, stockholders' investment and cash
flows for each of the three years in the period ended October 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ADC Telecommunications, Inc.
and Subsidiaries as of October 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 1997, in conformity with generally accepted accounting principles.


ARTHUR ANDERSEN LLP

Minneapolis, Minnesota
November 25, 1997


                                         -10-
<PAGE>

CONSOLIDATED STATEMENTS OF INCOME
For The Years Ended October 31 (In Thousands, Except Per Share Amounts)

                                           1997          1996          1995
                                        ----------    ----------    ----------
Net Sales                               $1,164,450     $ 828,009     $ 586,222
Cost of Product Sold                       621,811       438,847       302,094

Gross Profit                               542,639       389,162       284,128

Gross profit percentage                       46.6%         47.0%         48.5%
Expenses:
Development and product engineering        122,638        90,038        66,460
Selling and administration                 221,624       160,705       130,297
Goodwill amortization                       10,013         5,235         3,133
Non-recurring charges                       22,700            --         3,914
     Total expenses                        376,975       255,978       203,804

Operating Income                           165,664       133,184        80,324
Other Income (Expense), Net                  4,393         3,479         5,905
Income before Income Taxes                 170,057       136,663        86,229
Provision for Income Taxes                  61,220        49,200        31,043
Net Income                              $  108,837     $  87,463     $  55,186
Average Common Shares Outstanding          131,673       128,314       117,094
Earnings per Share                      $     0.83     $    0.68     $    0.47


The accompanying notes are an integral part of these consolidated financial
statements.


                                         -11-
<PAGE>

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


October 31 (In Thousands)                                      1997           1996
                                                            ----------     ----------
<S>                                                         <C>            <C>
ASSETS
Current Assets:
Cash and cash equivalents                                   $  109,794     $  183,221
Accounts receivable, net of reserves of $4,803 and $3,921      246,241        163,219
Inventories, net of reserves of $20,961 and $14,603            168,379        130,582
Prepaid income taxes and other assets                           25,053         22,479
     Total current assets                                      549,467        499,501

Property and Equipment, net                                    215,677        131,080
Other Assets, Principally Goodwill                             171,159        135,881
                                                            $  936,303     $  766,462

LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current maturities of long-term debt                        $      650     $    2,247
Accounts payable                                                62,879         49,459
Accrued liabilities                                            118,870         90,373
     Total current liabilities                                 182,399        142,079
Long-Term Debt, Less Current Maturities                          3,109          6,913
     Total liabilities                                         185,508        148,992

Stockholders' Investment:
common stock, $0.20 par value; authorized 300,000
     shares; issued 133,508 and 65,177 shares                   26,702         13,035
Paid-in capital                                                243,743        232,266
Retained earnings                                              485,683        373,540
Cumulative translation adjustment                               (4,612)           232
Deferred compensation                                             (721)        (1,603)
     Total stockholders' investment                            750,795        617,470
                                                            $  936,303     $  766,462
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                         -12-
<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
****
<TABLE>
<CAPTION>


                                                     Common Stock                                       Cumulative
                                                ----------------------       Paid-In       Retained     Translation     Deferred
                                                 Shares        Amount        Capital       Earnings     Adjustment    Compensation
                                                -------       --------       --------      ---------    -----------   ------------
<S>                                             <C>           <C>            <C>           <C>          <C>           <C>
BALANCE, OCTOBER 31, 1994                        27,888       $  5,577       $ 34,851       $225,476     $     --      $ (1,146)

Stock split effected in the form of a
stock dividend                                   28,044          5,609         (5,609)            --           --            --
Stock issued for secondary public offering        6,325          1,265        180,489             --           --            --
Stock issued for employee benefit plans             480             96          9,535             --           --          (714)
Reduction of deferred compensation                   --             --             --             --           --           966
Translation adjustments                              --             --             --             --         (715)           --
Net income                                           --             --             --         55,186           --            --
BALANCE, OCTOBER 31, 1995                        62,737         12,547        219,266        280,662         (715)         (894)

Stock issued for business acquisitions            1,911            382            198          5,415           --            --
Stock issued for employee benefit plans             529            106         12,802             --           --        (1,490)
Reduction of deferred compensation                   --             --             --             --           --           781
Translation adjustments                              --             --             --             --          947            --
Net income                                           --             --             --         87,463           --            --
BALANCE, OCTOBER 31, 1996                        65,177         13,035        232,266        373,540          232        (1,603)

Stock split effected in the form of a
stock dividend                                   65,177         13,035        (13,035)            --           --            --
Stock issued for business acquisitions            2,239            448         15,066          3,306           --            --
Stock issued for employee benefit plans             915            184          9,446             --           --           (80)
Reduction of deferred compensation                   --             --             --             --           --           962
Translation adjustments                              --             --             --             --       (4,844)           --
Net income                                           --             --             --        108,837           --            --
BALANCE, OCTOBER 31, 1997                       133,508       $ 26,702       $243,743       $485,683     $ (4,612)     $   (721)
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                         -13-
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended October 31 (In Thousands)
<TABLE>
<CAPTION>


                                                               1997           1996           1995
                                                             ---------      ---------      ---------
<S>                                                          <C>            <C>            <C>
OPERATING ACTIVITIES:
Net income                                                   $ 108,837      $  87,463      $  55,186
Adjustments to reconcile net income to net cash
from operating activities:
   Non-recurring charges                                        22,700             --          3,914
   Depreciation and amortization                                49,843         33,794         26,341
   Reduction in deferred compensation                              962            781            966
   Decrease in deferred income taxes                            (6,789)        (3,448)        (4,652)
   Other                                                           (93)            28            455
   Changes in assets and liabilities
       Accounts receivable                                     (72,693)       (45,767)       (31,130)
       Inventories                                             (34,441)       (35,100)       (21,466)
       Prepaids and other assets                                (7,863)        (3,048)        (2,455)
       Accounts payable                                          5,921         15,104          6,559
       Accrued liabilities                                      13,329         13,650         10,541
           Total cash from operating activities                 79,713         63,457         44,259

INVESTING ACTIVITIES:
Property and equipment additions, net                         (119,030)       (69,057)       (32,456)
Acquisition payments                                           (33,917)       (49,291)        (4,676)
Long-term investments                                           (3,523)        (7,268)        (8,139)
           Total cash used for investing activities           (156,470)      (125,616)       (45,271)

FINANCING ACTIVITIES:
Decrease in long-term debt                                      (5,279)        (4,897)          (400)
Common stock sold                                                9,534         11,696        190,671
           Total cash from financing activities                  4,255          6,799        190,271

EFFECT OF EXCHANGE RATE CHANGES ON CASH                           (925)            90           (280)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS               (73,427)       (55,270)       188,979
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                 183,221        238,491         49,512
CASH AND CASH EQUIVALENTS, END OF PERIOD                     $ 109,794      $ 183,221      $ 238,491
SUPPLEMENTAL DISCLOSURES:
   Income taxes paid                                         $  55,209      $  46,129      $  27,549
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                         -14-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION  The consolidated financial statements include the
accounts of ADC Telecommunications, Inc. (a Minnesota corporation) and all
significant subsidiaries in which ADC has more than a 50% equity ownership
(collectively, the "Company"). All significant intercompany transactions and
balances have been eliminated in consolidation.

CASH EQUIVALENTS  Cash equivalents primarily represent short-term investments in
commercial paper with original maturities of three months or less. The carrying
amounts of these investments approximate their fair value due to their short
maturities.

INVENTORIES  Inventories include material, labor and overhead and are stated at
the lower of first-in, first-out cost or market.

PROPERTY AND EQUIPMENT  Property and equipment are recorded at cost and
depreciated using the straight-line method over estimated useful lives of three
to thirty years or, in the case of leasehold improvements, over the term of the
lease, if shorter. Both straight-line and accelerated methods of depreciation
are used for income tax purposes.

GOODWILL  The excess of the cost of acquired businesses over the fair value of
the net assets acquired is amortized on a straight-line basis ranging from five
to twenty-five years. Management periodically assesses the amortization period
and recoverability of the carrying amount of goodwill based upon an estimate of
future cash flows from related operations.

RESEARCH AND DEVELOPMENT COSTS  The Company's policy is to expense all research
and development costs in the period incurred.

INCOME TAXES  The Company utilizes the liability method of accounting for income
taxes. Deferred tax liabilities or assets are recognized for the expected future
tax consequences of temporary differences between the book and tax bases of
assets and liabilities.

EARNINGS PER SHARE  Earnings per share is computed using the weighted average
number of common shares outstanding during the year, after consideration of the
dilutive effect of stock options and restricted stock awards.


                                         -15-
<PAGE>

FOREIGN CURRENCY TRANSLATION  The Company accounts for translation of foreign
currency in accordance with the provisions of SFAS No. 52. The resulting
translation adjustments are recorded directly to a separate component of
stockholders' investment. Use of Estimates  The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Although these estimates are
based on management's knowledge of current events and actions it may undertake
in the future, they may ultimately differ from actual results.

NEW ACCOUNTING PRONOUNCEMENTS  SFAS No. 128 - Earnings Per Share was issued
during February 1997 and simplifies the standards for calculating and presenting
earnings per share. This pronouncement is effective for periods ending after
December 15, 1997; earlier application is not permitted. The adoption of SFAS
No. 128 will not have a material impact on the calculation of earnings per share
given the Company's present capital structure.


                                         -16-
<PAGE>

NOTE 2: CONSOLIDATED INCOME STATEMENT INFORMATION

International Sales

International sales were $247,409,000, $172,212,000 and $106,416,000 during
1997, 1996 and 1995, respectively.

Other Income (Expense), Net:
(In Thousands)                              1997          1996          1995
                                          --------      --------      --------

Interest income                           $  7,369      $ 10,906      $  7,078
Interest expense                              (393)         (402)         (275)
Other income (expense), net                 (2,583)       (7,025)         (898)
                                          $  4,393      $  3,479      $  5,905

NON-RECURRING CHARGES  During the first quarter of 1997, the Company recorded a
non-recurring charge of $22.7 million. This charge primarily represented the
write-off of purchased research and development from the acquisition of the
Wireless Infrastructure Group of Pacific Communications Sciences, Inc. ("PCSI"),
as well as expenses related to the consolidation of the Company's West Coast
operations.

     During the second quarter of 1995, the Company initiated a realignment of
its Kentrox and Fibermux subsidiaries into one business unit. The Company
recorded a charge of $3,914,000 in conjunction with the realignment, related
primarily to a personnel reduction. As a result of the realignment,
approximately 100 Fibermux employees, primarily in sales, administration and
engineering, were separated from the Company.


                                         -17-
<PAGE>

NOTE 3: CONSOLIDATED BALANCE SHEET INFORMATION

(In Thousands)                                        1997             1996
                                                    --------       --------
Inventories:
Purchased materials and manufactured products       $154,403       $119,006
Work-in-process                                       13,976         11,576
                                                    $168,379       $130,582

Property and equipment:
Land and buildings                                  $ 66,441       $ 43,965
Machinery and equipment                              304,797        209,347
Furniture and fixtures                                30,687         22,319
                                                     401,925        275,631

Less accumulated depreciation and amortization      (186,248)      (144,551)
                                                    $215,677       $131,080

Goodwill:
Goodwill                                            $151,104       $136,940
Less accumulated amortization                        (30,169)       (20,156)
                                                    $120,935       $116,784

Accrued liabilities:
Accrued compensation and benefits                   $ 54,881       $ 42,968
Accrued income taxes                                  27,684         14,566
Other accrued liabilities                             36,305         32,839
                                                    $118,870       $ 90,373


                                         -18-
<PAGE>

NOTE 4: ACQUISITIONS

     During the first quarter of 1997, the Company acquired substantially all
the assets and liabilities of the Wireless Infrastructure Group of PCSI, a
wholly-owned subsidiary of Cirrus Logic, Inc., for $23 million in cash. The
Wireless Infrastructure Group designs and manufactures equipment for wireless
data and advanced paging communications. The acquisition was accounted for as a
purchase, and resulted in a non-recurring charge for the write-off of purchased
research and development described in Note 2. The inclusion of the Wireless
Infrastructure Group operating results for periods prior to the date of
acquisition would not have materially affected results of operations.

     During 1997, the Company exchanged a total of 2,239,356 shares of its
common stock in two separate business combinations for all of the outstanding
common stock of The Apex Group, Inc. ("Apex") and NewNet, Inc. ("NewNet"). Both
transactions were accounted for as poolings of interests. Apex, acquired during
April, provides information management and consulting services. NewNet, acquired
during October, develops intelligent network telecommunications software. During
1996, the Company exchanged a total of 1,910,965 shares of its common stock in
three separate business combinations for all the outstanding shares of Da Tel
Fibernet, Inc. ("Da Tel"), Information Transmission Systems Corp. ("ITS"), and
Metrica Systems Limited ("Metrica"). These transactions were accounted for as
poolings of interests. Da Tel was acquired during March and provides
engineering, design and installation services for telecommunications companies.
ITS also was acquired during March and designs and manufactures wireless
television transmission products for the cable and broadcast industries.
Metrica, a United Kingdom based company, was acquired during May and designs and
manufactures management software for wireless networks.

     Financial data for periods prior to the closing of these five pooling
transactions have not been restated because neither the net assets nor operating
results were material, individually or in the aggregate, to the Company's
consolidated financial statements.

     During the second quarter of 1996, the Company purchased all of the
outstanding stock of Skyline Technology, Inc. ("Skyline") for an initial cash
payment of $12 million and additional consideration not to exceed $20 million.
The purchase price exceeded the fair value of the acquired assets by
approximately $11 million. Additional consideration may be payable over a three
year period beginning November 1, 1996, subject to the achievement of certain
financial results. No additional consideration was earned during 1997. Skyline
designs and manufactures ISDN/Frame Relay access products.


                                         -19-
<PAGE>

     During the third quarter of 1996, the Company purchased 80% of the
outstanding common stock of Solitra Oy ("Solitra"), based in Kempele, Finland,
and agreed to acquire the remaining 20% over a three-year period. The stock was
acquired for an initial cash payment of $41 million plus additional
consideration which is payable subject to the achievement of certain financial
results. The initial purchase price exceeded the fair value of the acquired
assets by approximately $38.5 million. Additional consideration, if any, will be
payable over a three-year period beginning November 1, 1996. During 1997,
approximately $3 million of additional consideration was earned and will be
payable during 1998. Solitra designs and manufactures components for cellular
network base stations as well as high specification filters for mobile phones.

     The acquisitions of Skyline and Solitra were accounted for as purchases.
Accordingly, the results of operations of the acquired entities have been
included in the Company's consolidated financial statements since the respective
dates of acquisition. Goodwill associated with these acquisitions is being
amortized using the straight line method over periods ranging from ten to
fifteen years. The inclusion of Skyline and Solitra financial data prior to the
dates of acquisition would not have materially affected reported results.


                                         -20-
<PAGE>

NOTE 5: EMPLOYEE BENEFIT PLANS

PENSION PLAN  The Company maintains a defined benefit plan covering a majority
of its employees. The plan is funded in accordance with the requirements of
Federal laws and regulations. Plan assets consist of fixed income securities and
a managed portfolio of equity securities.
<TABLE>
<CAPTION>


Pension expense included the following components:
(In Thousands)                                             1997           1996           1995
                                                         --------       --------       --------
<S>                                                      <C>            <C>            <C>
Service cost for benefits earned during the period       $  2,856       $  2,368       $  1,766
Interest cost on the projected benefit obligation           2,453          1,944          1,682
Return on assets                                           (6,250)        (4,614)        (3,627)
Net amortization and deferral                               3,745          2,891          2,240
                                                         $  2,804       $  2,589       $  2,061
Discount rate used to determine actuarial present
value of benefits at October 31                               8.0%           8.0%           7.5%
</TABLE>


     The rate of compensation increase used to measure the projected benefit
obligation was 5% for all three years. The expected long-term rate of return on
plan assets was 9%.

     During 1997, the Board approved the termination of the defined benefit
plan. The termination of the defined benefit plan will be effective January 5,
1998, with the actual settlement of the plan scheduled for 1998. The effect of
the termination and subsequent settlement are not material to the Company's
operations. The following table sets forth the funded status of the plan as of
October 31:
<TABLE>
<CAPTION>


(In Thousands)                                                           1997           1996
                                                                       ---------      ---------
<S>                                                                    <C>            <C>
Accumulated benefit obligation:
   Vested                                                              $ (28,080)     $ (21,926)
   Nonvested                                                              (2,178)        (1,376)
       Total                                                             (30,258)       (23,302)
Excess of projected benefit obligation over accumulated
benefit obligation                                                        (6,805)        (7,366)
Projected benefit obligation                                             (37,063)       (30,668)
Market value of plan assets                                               34,895         29,011
Unfunded projected benefit obligation                                     (2,168)        (1,657)
Unrecognized net gain                                                     (6,447)        (4,769)
Unrecognized prior service cost                                            1,592          1,717
Unrecognized transition liability                                            709            780
       Total accrued pension liability                                 $  (6,314)     $  (3,929)
</TABLE>


RETIREMENT SAVINGS PLAN  The Company maintains a Retirement Savings Plan for
employees who have completed one year of service. The Company contributes 1% of
wages and, depending on Company performance, partially matches employee
contributions to the Plan up to 6% of wages. Employees are fully vested in all
contributions. The Company's contributions to the plan totaled $8,232,000,
$7,394,000


                                         -21-
<PAGE>

and $6,141,000 during 1997, 1996, and 1995, respectively. A portion of the
Company's cash contributions is invested in the Company's stock by the Plan's
trustee.

STOCK AWARD PLANS  The Company maintains a Stock Incentive Plan to grant certain
stock awards, including stock options at fair market value and restricted
shares, to key employees of the Company. A maximum of 22,419,008 stock awards
can be granted under this plan; 8,711,011 shares were available for stock awards
as of October 31, 1997. The Company also maintains a Nonemployee Director Stock
Option Plan in order to enhance the ability to attract and retain the services
of experienced and knowledgeable outside directors. This plan provides for
granting of a maximum of 840,000 non-qualified stock options at fair market
value.  As of October 31, 1997, 384,500 shares were available for option grants
under this plan. In addition, a total of 427,422 shares have been reserved under
plans adopted in conjunction with certain acquisitions.

The following schedule summarizes activity in the plans:

                                      Stock       Restricted        Grant
                                     Options         Stock          Price
                                    ---------     ----------      ---------
Outstanding at October 31, 1995     5,319,394        165,140       $1 - $21
   Granted                          1,206,116         70,378       $1 - $33
   Exercised                         (963,514)            --       $1 - $21
   Restrictions Lapsed                     --       (104,932)      $6 - $23
   Canceled                          (353,920)       (22,000)      $5 - $23
Outstanding at October 31, 1996     5,208,076        108,586       $1 - $32
   Granted                          6,803,318          2,466       $1 - $51
   Exercised                         (821,761)            --       $1 - $22
   Restrictions Lapsed                     --        (15,891)      $9 - $24
   Canceled                          (525,146)        (2,600)     $11 - $47
Outstanding at October 31, 1997    10,664,487         92,561       $1 - $51
Exercisable at October 31, 1997     4,094,521             --       $1 - $38

     During 1995, options for 1,273,476 shares were exercised at prices ranging
from $1 to $13 per share.

     During 1997, the Company adopted SFAS No. 123 "Accounting for Stock-Based
Compensation" which encourages, but does not require, a fair value based method
of accounting for employee stock options or similar equity instruments. As
permitted under the new standard, the Company has continued to account for
employee stock options using the intrinsic value method outlined in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense has been recognized by the company for its
Stock Incentive Plan or its Non-employee Director Stock Option Plan. If
compensation expense for the Company's stock-based compensation plans had been
determined based on the fair value at the grant dates consistent with the


                                         -22-
<PAGE>

method of SFAS No. 123, the Company's net income and earnings per share would
have decreased to the pro forma amounts indicated below:

(In Thousands, Except Per Share Amounts)                1997           1996
                                                      ---------      ---------
Net Income
   As reported                                        $ 108,837      $  87,463
   Pro forma                                          $  89,681      $  85,793
Earnings Per Share
   As reported                                        $    0.83      $    0.68
   Pro forma                                          $    0.68      $    0.67

     Pro forma net income reflects only options and other stock based awards
granted during 1997 and 1996. Therefore, the full impact of calculating
compensation costs for stock options under SFAS No. 123 is not reflected in the
pro forma net income amounts presented because compensation cost is reflected
over the options' vesting period, which is normally three years, and
compensation cost for options granted prior to fiscal year 1996 is not
considered.

     The weighted-average fair value per option at the date of grant for options
granted in 1997 and 1996 was $17.34 and $11.24, respectively. The fair value was
estimated using the Black-Scholes option pricing model with the following
weighted average assumptions for 1997 and 1996:

                                                        1997           1996
                                                      ---------      ---------
Risk-free interest rate                                  6.41%          6.27%
Expected dividend yield                                     --             --
Expected volatility factor                               44.7%          38.7%
Expected option term                                   7 years        7 years

NOTE 6: CAPITAL STOCK

AUTHORIZED STOCK  The Company is authorized to issue 300,000,000 shares of $0.20
par value common stock and 10,000,000 shares of no par value preferred stock.
There are no preferred shares issued.

STOCK SPLIT  On September 24, 1996, the Company declared a two-for-one stock
split effected in the form of a 100% stock dividend paid November 1, 1996. All
references in the accompanying financial statements and notes to earnings per
share, average common shares outstanding, Stock Award Plan data and related
share prices have been adjusted to reflect the split.

STOCK OFFERING  On June 14, 1995, the Company completed a secondary public
offering of 6,325,000 shares of its common stock at $30 per share. The net
proceeds from the offering were $181,754,000, which are used for general
corporate purposes,


                                         -23-
<PAGE>

including working capital, capital expenditures and possible acquisitions or
strategic alliances.

SHAREHOLDER RIGHTS PLAN  The Company has adopted a Shareholder Rights Plan which
provides that if any person or group acquires 15% or more of the Company's
common stock, each right not owned by such person or group will entitle its
holder to purchase, at the Right's then current purchase price ($62.50 for each
one-half share of the Company's common stock at October 31, 1997) common stock
of the Company having a value of twice the Right's purchase price. The Rights
would not be triggered, however, if the acquisition of 15% or more of the
Company's common stock is pursuant to a tender offer or exchange for all
outstanding shares of the Company's common stock which is determined by the
board of directors to be fair and in the best interests of the Company and its
stockholders. The Rights are redeemable at $0.01 per share any time prior to the
time they become exercisable. The Rights will expire on November 28, 2005, if
not previously redeemed or exercised.

NOTE 7: INCOME TAXES

The components of the provision for income taxes are as follows:

(In Thousands)                              1997          1996          1995
                                          --------      --------      --------
Current taxes payable:
   Federal                                $ 53,890      $ 44,483      $ 30,666
   Foreign                                   7,523         2,078           573
   State                                     6,596         6,087         4,456
                                            68,009        52,648        35,695
Deferred                                    (6,789)       (3,448)       (4,652)
   Total provision                        $ 61,220      $ 49,200      $ 31,043

     The provision for foreign income taxes is based upon foreign pretax
earnings of approximately $18,980,000, $8,260,000 and $1,547,000 during 1997,
1996 and 1995, respectively.

The effective income tax rate differs from the Federal statutory rate as
follows:

                                            1997          1996          1995
                                            ----          ----          ----
Federal statutory rate                       35%           35%           35%
Research and development tax credits         (2)           (1)           (2)
Goodwill amortization                         1             1             1
State income taxes, net                       2             3             3
FSC exempt income                            (1)           --            --
Other, net                                    1            (2)           (1)
   Effective income tax rate                 36%           36%           36%


                                         -24-
<PAGE>

Deferred tax assets (liabilities) as of October 31 are comprised of the
following:

(In Thousands)                                            1997        1996
                                                        ---------   ---------
Current deferred tax assets:
   Asset valuation reserves                             $   5,320   $   5,225
   Accrued liabilities                                     11,895      10,989
   Other                                                      179           3
       Total                                            $  17,394   $  16,217

Non-current deferred tax assets (liabilities):
   Intangibles                                          $  21,394   $      --
   Depreciation                                            (1,731)     (2,698)
   Other                                                     (271)        395
       Total                                            $  19,392   $  (2,303)


NOTE 8: COMMITMENTS AND CONTINGENCIES

OPERATING LEASES  A portion of the Company's operations are conducted using
leased equipment and facilities. These leases are noncancelable and renewable
with expiration dates ranging through the year 2006. The rental expense included
in the accompanying consolidated statements of income was $11,749,000,
$7,281,000, and $5,676,000 for 1997, 1996, and 1995 respectively.

     The following is a schedule of future minimum rental payments required
under all noncancelable operating leases as of October 31, 1997:

(In Thousands)
1998                                                                   $10,354
1999                                                                     9,443
2000                                                                     7,943
2001                                                                     5,364
2002 and thereafter                                                      7,794
                                                                         -----
                                                                       $40,898

CONTINGENCIES  There are no legal proceedings pending against or involving the
Company which, in the opinion of management, will have a material adverse effect
on the Company's financial position or results of operations.

CHANGE OF CONTROL  The board of directors has approved the extension of certain
employee benefits, including salary continuation to key employees, in the event
of a change of control of the Company. The board has retained the flexibility to
cancel such provisions under certain circumstances.


                                         -25-
<PAGE>

NOTE 9: QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>

1997                                  First         Second          Third         Fourth
(Unaudited, in Thousands,            Quarter        Quarter        Quarter        Quarter        Total
except Earnings Per Share)          ----------     ----------     ----------     ----------    -----------

<S>                                <C>            <C>            <C>            <C>           <C>
Net Sales                          $  256,777     $  279,199     $  293,312     $  335,162    $ 1,164,450
Gross Profit                          117,669        129,323        137,046        158,601        542,639
Income Before Income Taxes             16,243         45,096         51,182         57,536        170,057
Provision for Income Taxes              5,848         16,235         18,425         20,712         61,220
Net Income                         $   10,395     $   28,861     $   32,757     $   36,824    $   108,837
Average Common Shares
Outstanding                           130,445        131,009        131,820        133,405        131,673
Earnings Per Share                 $     0.08     $     0.22     $     0.25     $     0.28    $      0.83

<CAPTION>

1996                                  First         Second          Third         Fourth
(Unaudited, in Thousands,            Quarter        Quarter        Quarter        Quarter        Total
except Earnings Per Share)           ----------     ----------     ----------     ----------    -----------
<S>                                <C>            <C>            <C>            <C>           <C>

Net Sales                          $  162,591     $  193,053     $  217,313     $  255,052    $   828,009
Gross Profit                           77,910         89,417        101,746        120,089        389,162
Income Before Income Taxes             25,487         31,094         36,206         43,876        136,663
Provision for Income Taxes              9,174         11,195         13,034         15,797         49,200
Net Income                         $   16,313     $   19,899     $   23,172     $   28,079    $    87,463
Average Common Shares
Outstanding                           125,516        128,048        129,704        130,098        128,314
Earnings Per Share                 $     0.13     $     0.15     $     0.18     $     0.22    $      0.68
</TABLE>


                                      -26-
<PAGE>

SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>

For the Years Ended October 31 (Dollars
in Thousands, Except Per Share Amounts)              1987           1988           1989           1990           1991
                                                   ---------      ---------      ---------      ---------      ---------
<S>                                                <C>            <C>            <C>            <C>            <C>
NET SALES                                          $ 166,863      $ 179,852      $ 196,388      $ 259,802      $ 293,839
Cost of Product Sold                                  87,981         97,427        107,764        133,802        148,614
Gross Profit                                          78,882         82,425         88,624        126,000        145,225
Expenses:
   Development and product engineering                15,473         17,401         17,360         25,462         32,315
   Selling and administration                         38,927         40,921         48,580         62,793         74,369
   Goodwill amortization                                  --             --            267            920          1,953
   Non-recurring charges                                  --             --             --             --             --
   Total expenses                                     54,400         58,322         66,207         89,175        108,637

OPERATING INCOME                                      24,482         24,103         22,417         36,825         36,588
Interest Expense                                        (460)          (450)          (493)          (615)        (1,803)
Interest Income                                        1,223          2,306          3,324          1,870          1,695
Other Income (Expense), Net                              193         (1,028)           997             92            (75)
Income before Income Taxes and
   Extraordinary Item                                 25,438         24,931         26,245         38,172         36,405
Provision for Income Taxes                            10,175          7,978          9,842         15,269         14,380
Income before Extraordinary Item                      15,263         16,953         16,403         22,903         22,025
Extraordinary Item, Net of Income Taxes                   --             --             --             --             --
NET INCOME                                         $  15,263      $  16,953      $  16,403      $  22,903      $  22,025
Average Common Shares Outstanding                    103,552        104,376        105,336        106,120        106,952
EARNINGS PER SHARE
Income before Extraordinary Item                   $     .15      $     .16      $     .16      $     .22      $     .21
NET INCOME                                         $     .15      $     .16      $     .16      $     .22      $     .21

RETURN ON SALES INDICES
Gross Profit                                              47%            46%            45%            48%            49%
Operating Income                                          15%            13%            11%            14%            12%
Net Income                                                 9%             9%             8%             9%             7%
INTERNATIONAL SALES                                $  20,659      $  26,116      $  31,277      $  41,623      $  37,960
</TABLE>


                                      -27-


<PAGE>

<TABLE>
<CAPTION>

                                                                                                   10-Year          5-Year
                                                                                                  Compound         Compound
                                                                                                  Growth Rate      Growth Rate
         1992            1993           1994         1995            1996           1997          1987-1997        1992-1997
     ----------     ----------     ----------     ----------     ----------   ------------        -----------      -----------
<S>  <C>            <C>            <C>            <C>            <C>            <C>                <C>             <C>
     $  316,496     $  366,118     $  448,735     $  586,222     $  828,009   $  1,164,450            21%            30%
        155,074        178,572        221,448        302,094        438,847        621,811            22             32
        161,422        187,546        227,287        284,128        389,162        542,639            21             27

         36,063         40,988         48,974         66,460         90,038        122,638            23             28
         82,966         93,311        110,799        130,297        160,705        221,624            19             22
          2,720          2,798          3,135          3,133          5,235         10,013            --             --
          3,800             --             --          3,914             --         22,700            --             --
        125,549        137,097        162,908        203,804        255,978        376,975            21             25
         35,873         50,449         64,379         80,324        133,184        165,664            21             36
         (1,912)          (285)          (151)          (275)          (402)          (393)           --             --
            970            468          1,309          7,078         10,906          7,369            --             --
           (205)          (895)        (1,216)          (898)        (7,025)        (2,583)           --             --

         34,726         49,737         64,321         86,229        136,663        170,057            21             37
         13,700         18,101         23,800         31,043         49,200         61,220            20             35
         21,026         31,636         40,521         55,186         87,463        108,837            22             39
             --             --         (1,450)            --             --             --            --             --
      $  21,026      $  31,636     $   39,071     $   55,186     $   87,463     $  108,837            22             39
        108,352        109,996        111,220        117,094        128,314        131,673            --             --

      $     .19      $     .29     $      .36     $      .47     $      .68     $      .83            19             34
      $     .19      $     .29     $      .35     $      .47     $      .68     $      .83            19             34


             51%            51%            51%            48%            47%            47%
             11%            14%            14%            14%            16%            14%
              7%             9%             9%             9%            11%             9%
      $  49,347      $  58,919     $   67,113     $  106,416     $  172,212     $  247,409            28%            38%

</TABLE>


                                         -28-
<PAGE>


SUMMARY OF BALANCE SHEETS
<TABLE>
<CAPTION>

(Dollars in Thousands)                     1987           1988           1989           1990
                                        ----------     ----------     ----------     ----------
<S>                                     <C>            <C>            <C>            <C>
Assets
Current Assets:
     Cash and cash equivalents          $   26,184     $   39,875     $   17,576     $   25,978
     Accounts receivable                    21,719         19,338         29,918         37,338
     Inventories                            19,972         19,439         24,723         33,845
     Prepaid income taxes and
     other assets                            3,811          3,498          3,697          5,364
          Total current assets              71,686         82,150         75,914        102,525
Property and Equipment:
     Plant, property and
     equipment, at cost                     59,247         70,045         81,246         94,965
     Less: accumulated depreciation        (26,936)       (33,118)       (38,701)       (49,581)
          Property and equipment, net       32,311         36,927         42,545         45,384
Other Assets                                   824            617         25,372         33,756
                                        $  104,821     $  119,694     $  143,831     $  181,665

Liabilities
Current Liabilities:
     Current maturities of
     long-term debt                     $      229     $      236     $      444     $    1,257
     Accounts payable                        5,875          4,999          6,996         10,140
     Accrued liabilities                    16,029         13,498         16,424         25,938
          Total current liabilities         22,133         18,733         23,864         37,335
Deferred Income Taxes                        3,645          4,391          4,806          5,476
Long-Term Debt                               3,161          2,925          4,691          4,841
Stockholders' Investment
Common Stock                                 2,595          2,620          2,644          2,658
Paid-In Capital                             17,828         18,613         19,617         20,093
Retained Earnings                           55,459         72,412         88,815        111,718
Deferred Compensation                           --             --           (606)          (456)
Cumulative Translation Adjustment               --             --             --             --
          Total stockholders'
           investment                       75,882         93,645        110,470        134,013
                                        $  104,821     $  119,694     $  143,831     $  181,665

Other Statistics and Ratios
Working Capital                         $   49,553     $   63,417     $   52,050     $   65,190
Current Ratio                                 3.24           4.39           3.18           2.75
Long-Term Debt/Total
     Capitalization                              4%             3%             4%             3%
Return on Average Assets                        16%            15%            12%            14%
Return on Average Equity                        22%            20%            16%            19%

</TABLE>


                                         -29-
<PAGE>

<TABLE>
<CAPTION>

        1991           1992           1993           1994           1995           1996           1997
     ----------     ----------     ----------     ----------     ----------     ----------     ----------
<S>  <C>            <C>            <C>            <C>            <C>            <C>            <C>
     $   30,109     $   20,484     $   16,324     $   49,512     $  238,491     $  183,221     $  109,794
         41,373         47,414         66,830         75,348        107,255        163,219        246,241
         40,427         39,063         48,278         64,203         86,559        130,582        168,379
          7,621          8,394         11,099         10,305         15,442         22,479         25,053
        119,530        115,355        142,531        199,368        447,747        499,501        549,467

        116,779        127,441        146,528        162,189        191,537        275,631        401,925
        (58,971)       (69,496)       (83,652)       (96,057)      (112,851)      (144,551)      (186,248)
         57,808         57,945         62,876         66,132         78,686        131,080        215,677
         69,831         67,462         74,647         69,184         74,650        138,184        171,159
     $  247,169     $  240,762     $  280,054     $  334,684     $  601,083     $  768,765     $  936,303

     $    1,412     $      324     $      300     $      400     $      410     $    2,247     $      650
         10,167         12,445         21,194         22,132         28,820         49,459         62,879
         28,946         27,302         33,407         44,821         59,731         90,373        118,870
         40,525         40,071         54,901         67,353         88,961        142,079        182,399
          4,636          4,393          3,949          2,163          1,256          2,303             --
         43,634         14,110            810            410             --          6,913          3,109

          2,686          2,722          5,539          5,577         12,547         13,035         26,702
         22,285         25,745         29,465         34,851        219,266        232,266        243,743
        133,743        154,769        186,405        225,476        280,662        373,540        485,683
           (340)        (1,048)        (1,015)        (1,146)          (894)        (1,603)          (721)
             --             --             --             --           (715)           232         (4,612)
        158,374        182,188        220,394        264,758        510,866        617,470        750,795
     $  247,169     $  240,762     $  280,054     $  334,684     $  601,083     $  768,765     $  936,303

     $   79,005     $   75,284     $   87,630     $  132,015     $  358,786     $  357,422     $  367,068
           2.95           2.88           2.60           2.96           5.03           3.52           3.01
             21%             7%            --             --             --              1%            --
             10%             9%            12%            13%            12%            13%            13%
             15%            12%            16%            16%            14%            16%            16%

</TABLE>


                                         -30-