Portions of 2000 Annual Report to Shareowners

Financial Highlights(1) (dollars in millions, except per share data)

|                                          |  | Years ended October 31 |        
|----------------------------------------- |  | ---------------------- | -------
|
|Results as Reported                       |  |                        |        
|Net Sales                                 |  | $                      | 3,287.9
|International Sales                       |  | $                      | 708.1  
|Gross Profit                              |  | $                      | 1,608.9
|Operating Income                          |  | $                      | 365.9  
|Net Income                                |  | $                      | 868.1  
|Earnings Per Share (Diluted)              |  | $                      | 1.13   
|Return on Average Shareowners' Investment |  |                        | 38.5   
|Research and Development Expense          |  | $                      | 338.0  
|Capital Expenditures                      |  | $                      | 375.3  
|Economic Value Added(2)                   |  | $                      | 260.8  
|Cash and Short-term Investments           |  | $                      | 1,354.2
|Total Assets                              |  | $                      | 3,970.5
|Shareowners' Investment                   |  | $                      | 2,912.7
|Number of Employees                       |  |                        | 22,452 
|                                          |  |                        |        
|Results (Pro Forma)(3)                    |  |                        |        
|Non-recurring Charges(3)                  |  | $                      | 158.0  
|Non-cash Stock Compensation(3)            |  | $                      | 47.1   
|Non-recurring, Non-operating Gains(3)     |  | $                      | 1,083.0
|Operating Income                          |  | $                      | 571.0  
|Net Income                                |  | $                      | 384.4  
|Earnings Per Share (Diluted)              |  | $                      | 0.50   
|EBITDA(4) Per Share (Diluted)             |  | $                      | 0.92   
|Return on Average Shareowners' Investment |  |                        | 17.9   
|                                          |  |                        |        
|Investment Information                    |  |                        |        
|Stock PriceClose                         |  | $                      | 21.38  
|Shares Outstanding at Year-end            |  |                        | 770.3  
|                                          |  |                        |        

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Management's Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

We are a leading global supplier of optical- and copper-connectivity systems, broadband access and network equipment, software and integration services
designed to improve the speed and performance of broadband, multiservice communications networks. Telephone companies, cable television operators, Internet and data service providers, wireless service
providers and other communications service providers are building and upgrading the broadband network infrastructure required to offer high-speed Internet access as well as data, video,
telephony and other interactive multimedia services to consumers and businesses. Our product offerings and development efforts are focused on increasing the speed and efficiency of the last
mile/kilometer portion of communications networksthat is, the network equipment that connects the service providers' offices to end users' homes and businesses, as well as wireless
communications devices.

Our
customers include local and long-distance telephone companies, cable television operators, wireless service providers, new competitive service providers, broadcasters,
governments, system integrators, enterprises, and communications equipment manufacturers and distributors. We offer optical- and copper-connectivity systems/components, broadband access and network
equipment, software and integration services to our customers through the following three business groups:



BROADBAND CONNECTIVITYproducts provide the physical contact points needed to connect different communications network elements and
gain access to communications system channels for the purposes of installing, testing, monitoring, accessing, managing, reconfiguring, splitting and multiplexing such channels within service
providers' serving offices and the last mile/kilometer portion of communications networks. These products include broadband connection and access devices for copper, coaxial cable, optical, wireless
and broadcast communications networks. The group also produces passive and active optical components, as well as wireless components. Broadband Connectivity's products are used throughout the world in
telephone, cable television, Internet, wireless, enterprise and broadcast communications networks.

BROADBAND ACCESS AND TRANSPORTproducts enable broadband, multiservice delivery capabilities within service provider networks, while
also introducing new service delivery functionality and cost effectiveness into these networks. The group's products include access and transport systems that deliver broadband, multiservice
communications to consumers and businesses over copper, coaxial cable, optical and wireless networks. Broadband Access and Transport's products are used throughout the world to deliver Internet, data,
video and voice services to consumers and businesses.

INTEGRATED SOLUTIONSproducts and services consist of systems integration services, operations support systems (OSS) software and
enhanced services software that aid service providers in their delivery of broadband, multiservice communications over wireline and wireless networks. Systems integration services are used to design,
equip and build communications networks and OSS applications that deliver Internet, data, video and voice services to consumers and businesses. OSS software includes communications billing, customer
care, network performance and service-level assurance software used by service providers to operate communications networks. Enhanced services software includes a range of wireline, wireless and
Internet applications used by service providers to help increase revenues.

We
believe that broadband, multiservice communications networks represent a key enabling capability for meeting the information needs of consumers and businesses around the world. The
rapid

2

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growth of the Internet has driven the need for broadband network infrastructure. Consumers increasingly find dial-up modem speeds unacceptable for current Internet and
Web-based applications. Further, we believe that new or future applications such as digital video and audio programs, wireless Internet access, video conferencing from personal computers,
video e-mail, video on demand, distance learning, telemedicine and high-speed imagining will drive even more people to use broadband communications services. We believe that
the global deregulation of communications markets is transforming traditional communications service providers into integrated communications providers. Traditional communications service providers
offer only a limited selection of Internet, data, video or voice services, each on a separate network connection and a separate customer bill. Integrated communications providers operate broadband,
multiservice networks that offer faster, cost-effective and integrated Internet, data, video and voice services over a single high-speed network connection and send one bill
for all of those services the customer uses. Due to deregulation, service providers now compete for customers by offering bundles of different communications services over cost-effective
networks. As a result of competition among communications service providers to win and retain customers with bundled services, there is a large potential global market for fiber optics, broadband
access and network equipment, software and integration services to build and upgrade broadband, multiservice networks.

Our
growth is dependent on our ability to successfully develop and commercially introduce new products in each of our product groups and on the growth of the communications equipment
and services market. The communications equipment industry is highly competitive and, accordingly, there can be no assurance that our new or enhanced products and services will meet with market
acceptance or be profitable. The growth in the market for broadband communications products and services is dependent on a number of factors, including the amount of capital expenditures by
communications service providers, regulatory and legal developments, changes in capital expenditures by communications service providers (which could result from the ongoing consolidation of customers
in the market as well as the addition of new customer entrants to the market) and end-user demands for integrated Internet, data, video, voice and other communications services.

Our
operating results may fluctuate significantly from quarter to quarter due to several factors. We are 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. Our expense levels are based in part on our management's expectations of future revenues. Although management has and
will continue to take measures to adjust expense levels, if revenue levels in a particular period fluctuate, operating results may be affected adversely. In addition, our results of operations are
subject to seasonal factors. We historically have experienced a stronger demand for our products in the fourth fiscal quarter ending October 31, primarily as a result of customer budget cycles
and our fiscal year-end incentives, and have experienced a weaker demand for our products in the first fiscal quarter ending January 31, primarily as a result of the number of
holidays in 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. A
more detailed description of these risk factors, as well as other risk factors associated with our business can be found in Exhibit 99-a to our Form 10-K for the
fiscal year
ended October 31, 2000. As used in this report, the years 1998, 1999 and 2000 refer to our fiscal years ended October 31, 1998, 1999 and 2000, respectively.

Results of Operations

On October 8, 1999, we completed the acquisition of Saville Systems, PLC ("Saville"). This acquisition was accounted for using the
pooling-of-interests method of accounting. Accordingly, all years have been restated to include the operations and balances of Saville as part of the Integrated Solutions
Group.

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On June 28, 2000, we completed the acquisition of PairGain Technologies, Inc. ("PairGain"). This acquisition was accounted for using the
pooling-of-interests method of accounting. Accordingly, all years have been restated to include the operations and balances of PairGain as part of the Broadband Access and
Transport Group.

On
September 29, 2000, we completed the acquisition of Broadband Access Systems, Inc. ("BAS"). This acquisition was accounted for using the
pooling-of-interests method of accounting. Accordingly, all years have been restated to include the operations and balances of BAS as part of the Broadband Access and Transport
Group.

The
percentage relationships to net sales of certain income and expense items for the three years ended October 31, 2000 and the percentage changes in these income and expense
items between years are contained in the following table:

|                             |                                  |                                   |       |       |       |       |       | Percentage
Increase (Decrease)
Between Periods |        
|---------------------------- | -------------------------------- | --------------------------------- | ----- | ----- | ----- | ----- | ----- | ---------------------------------------------- | -------
|
|
|
|Net Sales                    |                                  | 100.0                             | %     | 100.0 | %     | 100.0 | %     | 52.8                                           | %      
|Cost of Products Sold        |                                  | (51.1                             | )     | (53.4 | )     | (51.7 | )     | 46.2                                           |        
|                             |                                  |                                   |       |       |       |       |       |                                                |        
|Gross Profit                 |                                  | 48.9                              |       | 46.6  |       | 48.3  |       | 60.3                                           |        
|Expenses:                    |                                  |                                   |       |       |       |       |       |                                                |        
|                             | Research and development         |                                   | (10.3 | )     | (11.6 | )     | (10.9 | )                                              | 34.8   
|                             | Selling and administration       |                                   | (20.2 | )     | (20.7 | )     | (19.2 | )                                              | 49.5   
|                             | Goodwill amortization            |                                   | (1.1  | )     | (1.0  | )     | (0.7  | )                                              | 54.5   
|                             | Non-recurring charges            |                                   | (4.8  | )     | (6.9  | )     | (0.5  | )                                              | 6.0    
|                             | Non-cash stock compensation      |                                   | (1.4  | )     | (0.1  | )     |      |                                                | 3,825.0
|                             |                                  |                                   |       |       |       |       |       |                                                |        
|Operating Income             |                                  | 11.1                              |       | 6.3   |       | 17.0  |       | 171.0                                          |        
|                             |                                  |                                   |       |       |       |       |       |                                                |        
|Other Income (Expense), Net: |                                  |                                   |       |       |       |       |       |                                                |        
|                             | Interest                         |                                   | 0.6   |       | 0.6   |       | 1.0   |                                                | 40.3   
|                             | Gain on conversion of investment |                                   | 22.0  |       |      |       |      |                                                | N/A    
|                             | Gain on sale of a business       |                                   | 10.0  |       |      |       |      |                                                | N/A    
|                             | Other                            |                                   | 0.7   |       | (0.6  | )     | (0.4  | )                                              | N/A    
|                             |                                  |                                   |       |       |       |       |       |                                                |        
|                             |                                  | Total other income (expense), net |       | 33.3  |       |      |       | 0.6                                            |        
|                             |                                  |                                   |       |       |       |       |       |                                                |        
|Income Before Income Taxes   |                                  | 44.4                              |       | 6.3   |       | 17.6  |       | 982.6                                          |        
|Provision for Income Taxes   |                                  | (18.0                             | )     | (2.7  | )     | (6.1  | )     | 939.1                                          |        
|                             |                                  |                                   |       |       |       |       |       |                                                |        
|Net Income                   |                                  | 26.4                              | %     | 3.6   | %     | 11.5  | %     | 1,014.4                                        | %      
|                             |                                  |                                   |       |       |       |       |       |                                                |        

Net Sales:Net sales were $3.29 billion, $2.15 billion and $1.83 billion for 2000, 1999 and 1998,
respectively, reflecting 52.8%, 17.6% and 17.8% increases, respectively, over the prior years. International sales comprised 21.5%, 23.2% and 21.4% of our sales for 2000, 1999 and 1998, respectively.

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The following table sets forth our net sales for the years ended October 31, 2000, 1999 and 1998 for each of our functional product groups described above (dollars in
millions):

|                               |       | 2000 |         | 1999    |      | 1998  |  
|------------------------------ | ----- | ---- | ------- | ------- | ---- | ----- | -
|
|Broadband Connectivity         |       | $    | 1,781.9 |         | 54.2 | %     | $
|Broadband Access and Transport |       |      | 992.1   |         | 30.2 |       |  
|Integrated Solutions           |       |      | 513.9   |         | 15.6 |       |  
|                               |       |      |         |         |      |       |  
|                               | Total |      | $       | 3,287.9 |      | 100.0 | %
|                               |       |      |         |         |      |       |  

During
2000, 1999 and 1998, net sales of Broadband Connectivity products increased by 95.3%, 40.4% and 19.8%, respectively. This growth reflects continued strong global demand for our
optical- and copper-connectivity systems and components. Broadband Connectivity's sales have grown rapidly in recent years and represented more than half of our net sales in 2000. We expect that
future sales of Broadband Connectivity products will continue to account for a substantial portion of our net sales,
although these products may decline as a percentage of total revenues due to the ongoing evolution of technologies in the marketplace.

During
2000, 1999 and 1998, net sales of Broadband Access and Transport products increased by 15.8%, 3.5% and 5.3%, respectively. The increased growth in 2000 is primarily the result
of record sales in all four major product groupstelephone transport and access systems, the international digital loop carrier business, cable systems and broadband wireless systems. The
lower sales growth in 1999 and 1998 was primarily due to lower sales in 1999 and flat sales growth in 1998 of PairGain telephone transport products, which offset higher sales of other telephone
transport systems and 1999 sales from the acquisition of Teledata.

During
2000, 1999 and 1998, net sales of Integrated Solutions products increased 34.3%, 8.4% and 56.6%, respectively. The increase in 2000 was generated primarily by record sales of
both systems integration services and software systems, plus sales from the acquisition of Centigram. Growth in 1999 primarily was due to increased sales of systems integration services, but partially
was offset by lower sales of Saville software products. Sales growth in 1998 primarily was driven by increased sales of systems integration services and software systems.

Gross Profit:During 2000, 1999 and 1998, gross profit percentages were 48.9%, 46.6% and 48.3%, respectively. The
increase in 2000 primarily is due to increased sales in the Broadband Connectivity Group. The decrease in 1999 was primarily the result of lower gross profit percentages of PairGain and Saville
products in that year. ADC anticipates that its future gross profit percentages will continue to be affected by many factors, including product mix, the timing of new product introductions and
manufacturing volume.

Operating Expenses:Total operating expenses for 2000, 1999 and 1998 were $1.24 billion, $868.4 million
and $573.4 million, respectively, representing 37.8%, 40.4% and 31.3% of net sales, respectively. Non-recurring charges and non-cash stock compensation expenses of
$205.1 million, $150.2 million and $9.2 million are included in the results of operations for 2000, 1999 and 1998, respectively. Excluding non-recurring charges and
non-cash stock compensation expenses, operating expenses would have represented 31.6%, 33.4% and 30.8% of net sales, respectively. The non-recurring charges in 2000 were
related to acquisition expenses associated with the Altitun, BAS, Centigram and PairGain transactions, restructuring charges within the Broadband Access and Transport Group and the
write-off of purchased in-process research and development expenses resulting from the acquisitions of Centigram and IBSEN. The non-recurring charges in 1999
represent the write-off of purchased in-process research and development expenses resulting from the acquisitions of Teledata, Spectracom,

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Pathway, Hadax and Phasor, along with costs for restructuring the Broadband Access and Transport Group and the former Wireless Systems Group. The non-recurring charges in 1998 represent
purchased in-process research and development expenses related to the acquisitions of BHA Pty Ltd. and certain interconnect billing software technology. The increase in operating
expenses primarily was driven by costs associated with acquired companies, as well as expanded operations necessary to support higher business volumes. Non-cash stock compensation expenses
of $47.1 million and $1.2 million were recognized in 2000 and 1999, respectively, as a result of stock options and restricted stock converted in connection with the BAS and Centigram
acquisitions.

Research
and development expenses were $338.0 million, $250.7 million and $199.8 million for 2000, 1999 and 1998, respectively, representing 10.3%, 11.6% and
10.9% of net sales, respectively. The dollar increases primarily are due to new product initiatives and business acquisitions. We believe that, given the competitive environment and rapidly changing
technology in the communications equipment industry, continued commitment to product development efforts will be required for us to remain competitive. Accordingly, we intend to continue to allocate
substantial resources to product development for each of our product groups. However, we recognize the need to balance the cost of product development with expense controls, and we remain committed to
managing carefully the rate of increase of such expenses.

Selling
and administration expenses were $665.6 million, $445.3 million and $351.9 million for 2000, 1999 and 1998, respectively, representing 20.2%, 20.7% and
19.2% of net sales, respectively. The dollar increases primarily reflect the activities of acquired companies, incentives associated with selling activities and additional personnel related to
expanded operations.

Several
of our acquisitions have been accounted for as purchase transactions in which the initial purchase price exceeded the fair value of the acquired assets. As a result of our
acquisitions, goodwill amortization increased to $34.3 million in 2000, compared to $22.2 million and $12.5 million for 1999 and 1998, respectively.

We
identify projects that do not have technological feasibility or other uses at the time of acquisition and record expense at the time of acquisition for these in-process
research and development projects. Purchased in-process research and development expenses aggregating $22.8 million in 2000 were associated with the purchase acquisitions of IBSEN
and Centigram as described in Note 5 to the Consolidated Financial Statements. Appraisals for each purchased in-process technology were determined using the income approach,
discounted based on the estimated likelihood that the project ultimately will succeed. Purchased in-process research and development expenses of $88.6 million in 1999 were
associated with the acquisitions of Pathway, Teledata, Phasor, Hadax and Spectracom. Non-recurring charges of $9.2 million in 1998 were associated with the acquisitions of BHA
Pty Ltd. and interconnect billing software technology.

Other Income (Expense), Net:For 2000, 1999 and 1998, interest income was $23.6 million, $21.6 million
and $18.3 million, respectively. For 2000, 1999 and 1998, interest expense was $4.1 million, $7.7 million and $0.8 million, respectively. See "Liquidity and Capital
Resources" below for a discussion of cash levels.

The
remaining other income (expense) represents the gain or loss on foreign-exchange transactions and cash and non-cash gains from various investing activities in 2000.
The investing gains relate to the sale of PairGain's microelectronics business (non-cash $328.6 million), the conversion of our investment in Siara Systems into Redback Networks
shares (non-cash $722.6 million), an equity change in ownership percentage stock transaction (non-cash $8.1 million), and other miscellaneous investment sales and
other items (cash and non-cash $15.7 million).

Income Taxes:The effective income tax rates for 2000, 1999 and 1998 were affected significantly by non-tax
deductible acquisition costs and purchased in-process research and development expenses.

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These charges are associated with the acquisitions made during the current year. In addition, a marginal rate of 37% was applied to restructuring expenses and the gain on the conversion of the Siara
Systems investment, while a marginal rate of 40% was applied to the gain on sale of PairGain's microelectronics business. Excluding the impact of purchased in-process research and
development expenses, as well as the higher rates used for restructuring charges, the gain on the conversion of the Siara Systems investment, and the gain on sale of PairGain's microelectronics
business, the effective income tax rates were 34%, 31% and 34% for 2000, 1999 and 1998, respectively.

Net Income:Net income was $868.1 million (or $1.13 per diluted share) for 2000, compared to
$77.9 million (or $0.11 per diluted share) for 1999 and $209.9 million (or $0.31 per diluted share) for 1998. Excluding ($483.7) million, $119.1 million and $8.4 million
net-of-tax, non-recurring (credits)/charges in 2000, 1999 and 1998, respectively, net income would have been $384.4 million, $197.0 million and
$218.3 million, respectively, and diluted earnings per common share would have been $0.50, $0.29 and $0.33, respectively. Non-recurring charges are discussed in Note 9 to the
Consolidated Financial Statements.

Segment Disclosures

Broadband Connectivity Segment

Broadband Connectivity products provide the physical contact points needed to connect different communications network elements and gain access to
communications system channels within service providers' serving offices and the last mile/kilometer portion of communications networks. These products are used in copper, coaxial cable, optical,
wireless and broadcast communications networks. The group also produces passive and active optical components, as well as wireless components. Broadband Connectivity's products are used throughout the
world in telephone, cable television, Internet, wireless, enterprise and broadcast communications networks (in millions).

|                              |  | For the years ended October 31,
|----------------------------- |  | -------------------------------
|
|External Sales                |  | $                              
|Operating Income(1)           |  |                                
|Depreciation and Amortization |  |                                
|Capital Expenditures          |  |                                
|                              |  |                                

|       |  | At October 31,
|------ |  | --------------
|
|Assets |  | $             
|       |  |               

---

Broadband
Connectivity sales increased $869.5 million, or 95.3%, in 2000 compared to 1999, primarily due to increased demand for optical- and copper-connectivity systems and
components. In 1999, sales increased $262.7 million, or 40.4%, compared to 1998. Strong worldwide growth of Broadband Connectivity sales in 2000 and 1999 was primarily a result of the following
factors: (1) rapid growth in Internet and data traffic and digital services, which is creating demand for broader bandwidth connections; (2) increased competition among communications
service providers, which is creating demand to deploy connections for new broadband services using DSL and cable modem technologies in the last mile/kilometer of the communications network; and
(3) increased globalization, which pulls our products into new locations as multinational communications service providers expand into international markets.

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During 2000, operating income for the Broadband Connectivity segment increased $437.1 million, or 130.0%, compared to 1999. Expenses were controlled despite the growth in
business volume. Efficiencies have been gained through improvements made in cost structures and operating processes.

For
2000 and 1999, depreciation and amortization increased $17.9 million and $2.2 million, respectively, over the previous year. These increases are due to the
significant expansion of our global production capacities in North America, Latin America, Europe and the Asia/Pacific region as a result of increases in product demand.

Capital
expenditures increased $233.7 million, or 462.8%, and $5.6 million, or 12.5%, in 2000 and 1999, respectively. Capital spending increased in 2000 due to the
significant expansion of global production capacities in North America, Latin America, Europe and the Asia/Pacific region as a result of increases in product demand.

Broadband Access and Transport Segment

Broadband Access and Transport products enable broadband, multiservice delivery capabilities within service provider networks, while also introducing new
service delivery functionality and cost effectiveness into these networks. This group's products include access and transport systems that deliver broadband, multiservice communications to consumers
and businesses over copper, coaxial cable, optical and wireless networks. Broadband Access and Transport's products are used throughout the world to deliver Internet, data, video and voice services to
consumers and businesses. This segment also includes the results of PairGain and BAS, which were acquired in June 2000 and September 2000, respectively, and were both accounted for using
the pooling-of-interests method, resulting in the restatement of financial results for all years.

|                              |  | For the years ended October 31,
|----------------------------- |  | -------------------------------
|
|External Sales                |  | $                              
|Operating Income (Loss)(1)    |  |                                
|Depreciation and Amortization |  |                                
|Capital Expenditures          |  |                                
|                              |  |                                

|       |  | At October 31,
|------ |  | --------------
|
|Assets |  | $             
|       |  |               

---

Broadband
Access and Transport sales increased $135.3 million, or 15.8%, in 2000 compared to 1999 due primarily to record sales in all four major product
groupstelephone transport and access systems, the international digital loop carrier business, cable systems and broadband wireless systems. In 1999, sales increased $29.0 million,
or 3.5%, primarily as a result of lower sales of PairGain telephone transport products, partially offsetting higher sales of other telephone transport systems and 1999 sales from the acquisition of
Teledata.

In
2000, the Broadband Access and Transport segment reported an operating loss of $147.4 million, after reporting an operating loss of $47.3 million in 1999. The segment
experienced declining profitability due to increased research and development and selling/marketing expenses for the development and marketing of new products.

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Depreciation and amortization in 2000 decreased $1.9 million, or 4.3%, compared to 1999, primarily due to the consolidation of manufacturing facilities. For 1999, depreciation
and amortization increased $10.3 million, or 30.4%, compared to 1998.

This
segment's capital additions for 2000 were $35.8 million, representing a decrease of $2.3 million, or 6.0%, compared to 1999. The decrease in capital expenditures
was related to the consolidation of manufacturing operations within this segment.

Integrated Solutions Segment

Integrated Solutions products and services consist of systems integration services, operations support systems (OSS) software and enhanced services software
that aid service providers in their delivery of broadband, multiservice communications over wireline and wireless networks. Systems integration services are used to design, equip and build
communications networks and OSS applications that deliver Internet, data, video and voice services to consumers and businesses. OSS software includes communications billing, customer care, network
performance and service level assurance software used by service providers to operate communications networks. Enhanced services software includes a range of wireline, wireless and Internet
applications used by service providers to help increase revenues. Service providers also are purchasing OSS software and enhanced services software to generate, deliver and manage multiple
communications services delivered to consumers and businesses. This segment includes the financial results of Saville for all periods presented. Saville was acquired in October 1999 in a
transaction accounted for using the pooling-of-interests method.

|                              |  | For the years ended October 31,
|----------------------------- |  | -------------------------------
|
|External Sales                |  | $                              
|Operating Income(1)           |  |                                
|Depreciation and Amortization |  |                                
|Capital Expenditures          |  |                                
|                              |  |                                

|       |  | At October 31,
|------ |  | --------------
|
|Assets |  | $             
|       |  |               

---

Integrated
Solutions sales increased $131.3 million, or 34.3%, in 2000 compared to 1999, primarily due to record sales of both systems integration services and software
systems, plus sales from the acquisition
of Centigram in July 2000. The 8.4% increase in 1999 sales over 1998 sales primarily was attributable to increased sales of systems integration services partially offset by lower sales of
Saville's software products. The growth in systems integration services is a result of a broad range of service providers building and upgrading networks that offer integrated Internet, data, video
and voice services. In the fourth quarter of 2000 and the first quarter of 2001, we expanded our broadband integration service capabilities into Europe with the acquisitions of Computer Telecom
Installations Ltd. and France Electronique's telecom systems integration business in September 2000 and November 2000, respectively.

During
2000, operating income for the Integrated Solutions segment decreased $4.1 million, or 16.6%, compared to 1999. The decrease primarily was due to (1) increasing
the sales force and systems integration work force to facilitate future growth and (2) lower operating income in the software

9

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business as a result of a product transition to the Singularit.e suite of software products and services from the historic Saville product and service offerings.

Depreciation
and amortization increased to $16.9 million in 2000 from $11.0 million in 1999. Expansion of systems integration facilities and the acquisition of Centigram
in July 2000 contributed to this overall increase.

During
2000, capital expenditures increased by $3.6 million, or 18.8%, compared to 1999. This increase was due to the expansion of operations.

Liquidity and Capital Resources

Cash and cash equivalents, primarily short-term investments in commercial paper with maturities of less than 90 days, had a balance of
$217.3 million as of October 31, 2000, representing a decrease of $61.7 million compared to the balance at October 31, 1999. The major use of cash in 2000 was for increased
working capital requirements and capital expenditures to support the growth of our business, which partially was offset by increased earnings and investment sale proceeds. During 1999, cash decreased
by $181.8 million compared to 1998, primarily due to the acquisition of Teledata in November 1998. In 1998, cash increased by $183.6 million primarily as a result of a
short-term loan of $200 million, which was done in preparation for the acquisition of Teledata and resulted in a temporary increase in cash at October 31, 1998.

We
maintain an investment portfolio of several publicly held companies. These investments are classified as available-for-sale securities and, consequently,
are recorded on the balance sheet at fair value with unrealized gains and losses reported as a separate component of shareowners' investment in accumulated other comprehensive income (loss). As of
October 31, 2000 and 1999, our short-term investments consisted of the following (in millions):

|                              |      | Cash Basis |       | Adjusted Basis |   | Unrealized Gain |  | Market Value
|----------------------------- | ---- | ---------- | ----- | -------------- | - | --------------- |  | ------------
|                              | 2000 |            |       |                |   |                 |  |             
|Available-for-sale securities |      | $          | 218.1 |                | $ | 950.4           |  | $           
|                              | 1999 |            |       |                |   |                 |  |             
|Available-for-sale securities |      | $          | 168.5 |                | $ | 168.5           |  | $           

In
2000, we sold common stock in certain investments for a pre-tax gain of $23.8 million. In 1999, there were no such sales. In the first quarter of 2000, Siara
Systems, in which we had a 7.3% ownership interest, agreed to be acquired by Redback Networks in a stock-for-stock transaction valued at approximately $4.3 billion. Our
initial investment in Siara Systems was $3.5 million. Upon consummation of the acquisition of Siara Systems by Redback Networks, our investment was marked-to-market
through earnings in the second quarter of 2000 and reflected on the balance sheet at the market value of the Redback Networks shares. The pre-tax gain recognized on the conversion of these
shares was $722.6 million. This gain increased the basis of investments by $722.6 million.

We
have worked with customers and third-party financiers to find a means of financing projects by negotiating financing arrangements. As of October 31, 2000, we had commitments
to extend credit of $380.0 million for such arrangements. The total amount drawn and outstanding as of October 31, 2000 was $35.0 million. We intend to sell all or a portion of
these commitments and outstanding receivables to third parties, but have not yet made any such sales. These commitments to extend credit are conditional agreements generally having fixed expiration or
termination dates and specific interest rates, conditions and purposes. These commitments may exist and expire without being drawn. Therefore, the amounts committed but not drawn will not necessarily
impact future cash flows. We regularly review all outstanding commitments, and the results of these reviews are considered in assessing the overall risk
for possible credit losses. At October 31, 2000, there was no significant risk of loss in the event of non-performance related to these financing arrangements.

10

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We have a $340 million unsecured revolving credit facility for general corporate purposes. Under this five-year credit facility, borrowings carry an initial
interest rate equal to the commercial paper rate plus 25 basis points. There was no outstanding balance at October 31, 2000. At October 31, 1999, the balance outstanding under this
arrangement was $25.0 million. The revolving credit facility expires on November 24, 2003. The facility requires us to maintain certain financial ratios. At October 31, 2000, we
were in compliance with these requirements.

We
believe that our current cash and investments, cash generated from operating activities, and available credit facilities will be adequate to fund our working capital requirements
and planned capital expenditures for 2001. However, we may find it necessary to seek additional sources of financing to support our capital needs and for additional working capital, potential
investments, acquisitions or other business purposes.

Euro Conversion

On January 1, 1999, several member countries of the European Union established fixed conversion rates and adopted the Euro as their new common legal
currency. Beginning on this date, the Euro began trading on currency exchanges while the legacy currencies remain legal tender in the participating countries for a transition period between
January 1, 1999 and January 1, 2002. During this transition period, parties can elect to pay for goods and services and transact business using either the Euro or a legacy currency.
Between January 1, 2002 and July 1, 2002, the participating countries will introduce Euro hard currency and withdraw all legacy currencies.

The
Euro conversion may affect cross-border competition by creating cross-border price transparency. We are assessing our pricing and marketing strategy in order to ensure that we
remain competitive in a broader European market. We also are modifying our information technology systems to permit transactions to take place in both the legacy currencies and the Euro and provide
for the eventual elimination of the legacy currencies. In addition, we are reviewing whether certain existing contracts will need to be modified. Our currency risks and risk management for operations
in participating countries may be reduced as the legacy currencies are converted to the Euro. We will continue to evaluate issues involving introduction of the Euro. Based on current information and
assessments, we do not expect that the Euro conversion will have a material adverse effect on our business, results of operations or financial condition.

Risk Management

We are exposed to market risk from changes in security prices, foreign-exchange rates and interest rates. Market fluctuations could impact our results of
operations and financial condition. We hedge a portion of this risk through the use of derivative financial instruments. We do not enter into derivative financial instruments for the purpose of
speculation.

Investments:We maintain an investment portfolio of various holdings, types and maturities. Excess cash is invested in
short-term low-risk vehicles, such as short-term municipal bonds and money market investments. Changes in interest rates are not expected to have a material effect
on our financial condition or results of operations.

We
maintain an investment portfolio of several publicly held companies. The investments are classified as available-for-sale securities and, consequently, are
recorded on the balance sheet at fair value with unrealized gains and losses reported as a separate component of shareowners' investment in accumulated other comprehensive income (loss). The values
recorded for the publicly traded companies are subject to market price volatility. Assuming an immediate decrease of 20% in our publicly traded investments, the hypothetical reduction in shareowners'
investment related to these holdings is estimated to be $230.0 million as of October 31, 2000. We also have certain other minority investments in companies not publicly traded. These
investments are included in other assets and are carried at

11

---

cost. We monitor these investments for impairment and make appropriate reductions in carrying value when necessary. In 2000, we entered into an equity collar arrangement that locks in a price range
for the sale of certain shares held as investments, thus guaranteeing a minimum selling price. Such derivatives are treated as trading derivatives. Changes in the value of these derivatives are
reported in current-period earnings.

Foreign Exchange:We primarily use foreign-exchange forward contracts to hedge identified exposures to adverse changes in
foreign-exchange rates (see Note 10 to the Consolidated Financial Statements). Such exposures have resulted from cross-border transactions principally in the Euro, Great Britain Pound,
Australian Dollar and Canadian Dollar. Foreign-exchange contracts reduce our overall exposure as gains and losses on these contracts offset losses and gains on the underlying exposures. Transactions
that are hedged include foreign-currency net-asset and net-liability exposures on the balance sheet, anticipated transactions and forecasted cash flows. As of
October 31, 2000, the total notional amount of outstanding foreign-exchange contracts was $158.5 million.

The
foreign-exchange forward contracts we enter into generally have maturities of less than one year. A sensitivity analysis to changes in the value of the U.S. Dollar on
foreign-currency denominated derivatives indicates, that if the U.S. Dollar were to strengthen by 10% against all of our currency exposures at October 31, 2000, we would realize a potential
cash flow loss of $4.3 million. Because our derivative position is net short the U.S. Dollar, a stronger U.S. Dollar would yield the largest overall potential cash flow loss due to foreign
exchange. This measurement assumes that a change in one foreign currency relative to the U.S. Dollar would not affect other foreign currencies relative to the U.S. Dollar. Although the
foreign-exchange market is unpredictable, we believe that a 10% sensitivity reflects reasonable near-term possible changes in foreign-exchange rates.

The
sensitivity analysis presented above for foreign-exchange rates does not consider the potential effect of favorable movements in foreign-exchange rates relative to our
foreign-exchange forward contracts, nor does the analysis include the underlying exposures that the hedges are designed to protect. Since we utilize foreign-exchange contracts to hedge
foreign-currency transactions, a loss in fair value on these instruments generally is offset by increases in the value of the underlying transactions.

Quarterly Stock Price

Our common stock, $0.20 par value, is traded on The Nasdaq Stock Market under the symbol "ADCT." The following table sets forth the high and low sales prices
of our common stock for each quarter during the years ended October 31, 2000 and 1999, as reported on that market.

|               |  | 2000 |       | 1999
|-------------- |  | ---- | ----- | ----
|
|First Quarter  |  | $    | 19.09 |     
|Second Quarter |  |      | 32.25 |     
|Third Quarter  |  |      | 49.00 |     
|Fourth Quarter |  |      | 47.25 |     

As
of October 31, 2000, there were approximately 7,001 holders of record of our common stock.

Dividends

No cash dividends have been declared or paid during the past five years. We currently anticipate that we will retain any future earnings for use in business,
and we do not anticipate paying any cash dividends in the foreseeable future.

12

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Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995.

The foregoing Management's Discussion and Analysis of Financial Condition and Results of Operations 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 our
expectations or beliefs concerning future events, including the following: any statements regarding future sales, profit percentages, earnings per share and other results of operations, any statements
regarding the continuation of historical trends, any statements regarding the sufficiency of our cash balances and cash generated from operating and financing activities for our future liquidity and
capital resource needs, any statements regarding the effect of regulatory changes and any statements regarding the future of the communications equipment industry and communications services on our
business. We caution that any forward-looking statements made by us in this report or in other announcements made by us are further qualified by important factors that could cause actual results to
differ materially from those in the forward-looking statements. These include, without limitation, demand for our products or services, availability of materials to make products, changing market
conditions within our industry or generally within the economy, new competition and technologies, increased costs associated with protecting intellectual property rights, fluctuations in our operating
results, pressures on the pricing of the products and services we offer, and the factors set forth on Exhibit 99-a to our Form 10-K for the fiscal year ended
October 31, 2000.

13

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Management's Responsibility for Financial Reporting

The management of ADC Telecommunications, Inc. is responsible for the preparation, integrity and objectivity of all financial statements and other
information contained in this Annual Report. To ensure reliability of financial data, ADC has established and maintains an internal control system, which provides reasonable assurance that financial
reports do not contain any material misstatement.

The
Audit Committee of the board of directors is responsible for reviewing and evaluating the overall performance of ADC's financial reporting and accounting practices. The Committee
meets periodically and independently with management, internal auditors and the independent public accountants to discuss ADC's internal accounting controls, auditing and financial matters. The
internal auditors and independent public accountants have unrestricted access to the Audit Committee.

We
believe that the financial statements and related notes in this report are presented fairly in all material respects, and that they were prepared according to accounting principles
generally accepted in the United States.

William
J. Cadogan
Chairman, President and Chief Executive Officer

November 22,
2000

Robert
E. Switz
Senior Vice President, Chief Financial Officer

14

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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, 2000 and 1999, and the related
consolidated statements of operations, shareowners' investment and cash flows for each of the three years in the period ended October 31, 2000. These financial statements are the responsibility
of ADC's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. 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, 2000 and 1999, and the results of their operations and their cash flows for the three years then ended October 31, 2000 in conformity with accounting principles generally
accepted in the United States.



Minneapolis,
Minnesota 
November 22, 2000

15

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Consolidated Statements of Operations
(in millions, except earnings per share)

|                                          |                             | For the years ended October 31
|----------------------------------------- | --------------------------- | ------------------------------
|
|Net Sales                                 |                             | $                             
|Cost of Products Sold                     |                             |                               
|                                          |                             |                               
|Gross Profit                              |                             |                               
|                                          |                             |                               
|Expenses:                                 |                             |                               
|                                          | Research and development    |                               
|                                          | Selling and administration  |                               
|                                          | Goodwill amortization       |                               
|                                          | Non-recurring charges       |                               
|                                          | Non-cash stock compensation |                               
|                                          |                             |                               
|                                          |                             | Total expenses                
|                                          |                             |                               
|Operating Income                          |                             |                               
|                                          |                             |                               
|Gain on Conversion of Investment          |                             |                               
|Gain on Sale of a Business                |                             |                               
|Other Income (Expense), Net               |                             |                               
|                                          |                             |                               
|Income before Income Taxes                |                             |                               
|Provision for Income Taxes                |                             |                               
|                                          |                             |                               
|Net Income                                |                             | $                             
|                                          |                             |                               
|Earnings Per ShareBasic                  |                             | $                             
|                                          |                             |                               
|Earnings Per ShareDiluted                |                             | $                             
|                                          |                             |                               
|Average Common Shares OutstandingBasic   |                             |                               
|                                          |                             |                               
|Average Common Shares OutstandingDiluted |                             |                               
|                                          |                             |                               

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

16

---

Consolidated Balance Sheets
(in millions)

|                                        |                                                                                                         | As of October 31              |        
|--------------------------------------- | ------------------------------------------------------------------------------------------------------- | ----------------------------- | -------
|
|Assets                                  |                                                                                                         |                               |        
|Current Assets:                         |                                                                                                         |                               |        
|                                        | Cash and cash equivalents                                                                               |                               | $      
|                                        | Short-term investments                                                                                  |                               |        
|                                        | Accounts receivable, net of reserves of $18.9 and $9.2                                                  |                               |        
|                                        | Inventories, net of reserves of $50.2 and $48.7                                                         |                               |        
|                                        | Prepaid and other current assets                                                                        |                               |        
|                                        |                                                                                                         |                               |        
|                                        |                                                                                                         | Total current assets          |        
|                                        |                                                                                                         |                               |        
|Property and Equipment, Net             |                                                                                                         |                               | 608.6  
|Other Assets:                           |                                                                                                         |                               |        
|                                        | Goodwill and other intangible assets, net of amortization of $97.6 and $64.1                            |                               |        
|                                        | Other assets, primarily investments at cost                                                             |                               |        
|                                        |                                                                                                         |                               |        
|                                        |                                                                                                         | $                             | 3,970.5
|                                        |                                                                                                         |                               |        
|Liabilities and Shareowners' Investment |                                                                                                         |                               |        
|Current Liabilities:                    |                                                                                                         |                               |        
|                                        | Accounts payable                                                                                        |                               | $      
|                                        | Accrued compensation and benefits                                                                       |                               |        
|                                        | Other accrued liabilities                                                                               |                               |        
|                                        | Accrued and deferred income taxes                                                                       |                               |        
|                                        | Note payable and current maturities of long-term debt                                                   |                               |        
|                                        |                                                                                                         |                               |        
|                                        |                                                                                                         | Total current liabilities     |        
|                                        |                                                                                                         |                               |        
|Long-Term Debt, Less Current Maturities |                                                                                                         |                               | 16.5   
|                                        |                                                                                                         |                               |        
|                                        |                                                                                                         | Total liabilities             |        
|                                        |                                                                                                         |                               |        
|Commitments and Contingencies           |                                                                                                         |                               |        
|Shareowners' Investment:                |                                                                                                         |                               |        
|                                        | Common stock, $0.20 par value; authorized 1,200.0 shares; issued and outstanding 770.3 and 678.6 shares |                               |        
|                                        | Paid-in capital                                                                                         |                               |        
|                                        | Retained earnings                                                                                       |                               |        
|                                        | Accumulated other comprehensive income                                                                  |                               |        
|                                        | Deferred compensation                                                                                   |                               |        
|                                        |                                                                                                         |                               |        
|                                        |                                                                                                         | Total shareowners' investment |        
|                                        |                                                                                                         |                               |        
|                                        |                                                                                                         | $                             | 3,970.5
|                                        |                                                                                                         |                               |        

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

17

---

Consolidated Statements of Shareowners' Investment
(in millions)

| |                                                               | Common Stock |       |   |   |       |   |   |       |   |   |         |  
| | ------------------------------------------------------------- | ------------ | ----- | - | - | ----- | - | - | ----- | - | - | ------- | -
|
|
| | Balance, October 31, 1997                                     |              | 647.1 |   | $ | 129.4 |   | $ | 325.5 |   | $ | 617.7   |  
| | Net income                                                    |              |      |   |   |      |   |   |      |   |   | 209.9   |  
| | Exercise of common stock options and warrants                 |              | 1.7   |   |   | 0.3   |   |   | 4.2   |   |   |        |  
| | Stock issued for business acquisitions                        |              | 14.2  |   |   | 2.8   |   |   | 21.0  |   |   |        |  
| | Stock issued for employee benefit plans                       |              | 7.0   |   |   | 1.4   |   |   | 32.7  |   |   |        |  
| | Reduction of deferred compensation                            |              |      |   |   |      |   |   |      |   |   |        |  
| | Tax benefits from exercise of common stock options            |              |      |   |   |      |   |   | 5.3   |   |   |        |  
| | Shares acquired through share repurchase plan                 |              | (0.9  | ) |   | (0.1  | ) |   | (7.8  | ) |   |        |  
| | Translation adjustments                                       |              |      |   |   |      |   |   |      |   |   |        |  
| | Unrealized gain on securities, net of deferred taxes of $0.2  |              |      |   |   |      |   |   |      |   |   |        |  
| |                                                               |              |       |   |   |       |   |   |       |   |   |         |  
| | Balance, October 31, 1998                                     |              | 669.1 |   | $ | 133.8 |   | $ | 380.9 |   | $ | 827.6   |  
| |                                                               |              |       |   |   |       |   |   |       |   |   |         |  
| | Net income                                                    |              |      |   |   |      |   |   |      |   |   | 77.9    |  
| | Exercise of common stock options and warrants                 |              | 2.7   |   |   | 0.5   |   |   | 65.6  |   |   |        |  
| | Adjustment to conform year-end of acquired company            |              |      |   |   |      |   |   | 1.2   |   |   | (6.3    | )
| | Stock issued for business acquisition                         |              | 3.3   |   |   | 0.7   |   |   | 11.2  |   |   |        |  
| | Stock issued for employee benefit plans                       |              | 8.3   |   |   | 1.7   |   |   | 56.3  |   |   |        |  
| | Reduction of deferred compensation                            |              |      |   |   |      |   |   |      |   |   |        |  
| | Tax benefits from exercise of common stock options            |              |      |   |   |      |   |   | 10.9  |   |   |        |  
| | Shares acquired through share repurchase plan                 |              | (4.8  | ) |   | (1.0  | ) |   | (6.5  | ) |   |        |  
| | Translation adjustments and other                             |              |      |   |   |      |   |   |      |   |   |        |  
| | Unrealized gain on securities, net of deferred taxes of $32.4 |              |      |   |   |      |   |   |      |   |   |        |  
| |                                                               |              |       |   |   |       |   |   |       |   |   |         |  
| | Balance, October 31, 1999                                     |              | 678.6 |   | $ | 135.7 |   | $ | 519.6 |   | $ | 899.2   |  
| |                                                               |              |       |   |   |       |   |   |       |   |   |         |  
| | Net income                                                    |              |      |   |   |      |   |   |      |   |   | 868.1   |  
| | Exercise of common stock options and warrants                 |              | 10.4  |   |   | 2.1   |   |   | 169.5 |   |   |        |  
| | Adjustments to conform year-ends of acquired companies        |              |      |   |   |      |   |   |      |   |   | (7.9    | )
| | Stock issued for business acquisitions                        |              | 81.0  |   |   | 16.2  |   |   | 177.3 |   |   |        |  
| | Stock issued for employee benefit plans                       |              | 0.3   |   |   | 0.1   |   |   | 7.9   |   |   |        |  
| | Reduction of deferred compensation                            |              |      |   |   |      |   |   |      |   |   |        |  
| | Tax benefits from exercise of common stock options            |              |      |   |   |      |   |   | 79.7  |   |   |        |  
| | Translation adjustments and other                             |              |      |   |   |      |   |   |      |   |   |        |  
| | Unrealized gain on securities, net of deferred taxes of $40.5 |              |      |   |   |      |   |   |      |   |   |        |  
| |                                                               |              |       |   |   |       |   |   |       |   |   |         |  
| | Balance, October 31, 2000                                     |              | 770.3 |   | $ | 154.1 |   | $ | 954.0 |   | $ | 1,759.4 |  
| |                                                               |              |       |   |   |       |   |   |       |   |   |         |  

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

18

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Consolidated Statements of Cash Flows
(in millions)

|                                                                                  |                                                                      | For the years ended October 31                  |                                     
|--------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------
|
|Operating Activities:                                                             |                                                                      |                                                 |                                     
|Net income                                                                        |                                                                      | $                                               | 868.1                               
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                      |                                                 |                                     
|                                                                                  | Non-recurring charges                                                |                                                 |                                     
|                                                                                  | Depreciation and amortization                                        |                                                 |                                     
|                                                                                  | Non-cash stock compensation                                          |                                                 |                                     
|                                                                                  | Deferred income taxes                                                |                                                 |                                     
|                                                                                  | Gain on conversion of investment                                     |                                                 |                                     
|                                                                                  | Gain on sale of a business                                           |                                                 |                                     
|                                                                                  | Gain on sale of investments                                          |                                                 |                                     
|                                                                                  | Gain on ownership of investments                                     |                                                 |                                     
|                                                                                  | Other                                                                |                                                 |                                     
|                                                                                  | Changes in assets and liabilities, net of effects from acquisitions: |                                                 |                                     
|                                                                                  |                                                                      | Accounts receivable                             |                                     
|                                                                                  |                                                                      | Inventories                                     |                                     
|                                                                                  |                                                                      | Prepaid and other assets                        |                                     
|                                                                                  |                                                                      | Accounts payable                                |                                     
|                                                                                  |                                                                      | Accrued liabilities                             |                                     
|                                                                                  |                                                                      |                                                 |                                     
|                                                                                  |                                                                      |                                                 | Total cash from operating activities
|                                                                                  |                                                                      |                                                 |                                     
|Investing Activities:                                                             |                                                                      |                                                 |                                     
|                                                                                  | Property and equipment additions, net                                |                                                 |                                     
|                                                                                  | Acquisitions, net of cash acquired                                   |                                                 |                                     
|                                                                                  | Short-term investments, net                                          |                                                 |                                     
|                                                                                  | Other investing activities                                           |                                                 |                                     
|                                                                                  |                                                                      |                                                 |                                     
|                                                                                  |                                                                      | Total cash used for investing activities        |                                     
|                                                                                  |                                                                      |                                                 |                                     
|Financing Activities:                                                             |                                                                      |                                                 |                                     
|                                                                                  | (Decrease) increase in debt                                          |                                                 |                                     
|                                                                                  | Issuance of common stock                                             |                                                 |                                     
|                                                                                  |                                                                      |                                                 |                                     
|                                                                                  |                                                                      | Total cash from (used for) financing activities |                                     
|                                                                                  |                                                                      |                                                 |                                     
|Effect of Exchange Rate Changes on Cash                                           |                                                                      |                                                 | (3.7                                
|Effect of Conforming Year-Ends of Acquired Companies                              |                                                                      |                                                 | (29.5                               
|                                                                                  |                                                                      |                                                 |                                     
|(Decrease) Increase in Cash and Cash Equivalents                                  |                                                                      |                                                 | (61.7                               
|                                                                                  |                                                                      |                                                 |                                     
|Cash and Cash Equivalents, Beginning of Year                                      |                                                                      |                                                 | 279.0                               
|Cash and Cash Equivalents, End of Year                                            |                                                                      | $                                               | 217.3                               
|                                                                                  |                                                                      |                                                 |                                     

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

19

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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, "ADC"). All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents:Cash equivalents 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.

Investments:Short-term investments held by ADC are classified as available-for-sale securities under the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Investments classified as
available-for-sale securities are carried at market value with any unrealized holding gains and losses, net of any related tax effect, presented as a component of accumulated
other comprehensive income (loss) within shareowners' investment.

ADC
also has other minority investments in companies not publicly traded. These investments are included in other assets and are carried at cost. ADC monitors these investments for
impairment and makes appropriate reductions in carrying value when necessary.

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:ADC's policy is to expense all research and development costs in the period incurred.

Income Taxes:ADC 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.

Revenue Recognition:Revenue is recognized when all significant contractual obligations have been satisfied and collection of the resulting receivable
is reasonably assured. Revenue from product sales is recognized at the time of delivery and acceptance, and after consideration of all the terms and conditions of the customer contract.

Revenue
from services consists of fees for systems requirements, system design and analysis, customization and installation services, ongoing system management, system enhancements,
service bureau processing, facilities management and maintenance. Services revenue is recognized as the services are performed, primarily on a time and materials basis and to a lesser extent on a
fixed fee basis over the term of the services provided. Revenue from maintenance contracts is recognized ratably over the term of the agreement, generally one year.

Revenue
from the licensing of software rights is recognized at the time of delivery of the product to the customer, provided that ADC has no remaining service obligations,
collectibility is reasonably

20

---

assured and the fees are fixed and determinable. Where there are service obligations that are essential to the functionality of the software installed, license fees are recorded over the term of the
initial customization period.

Foreign Currency Translation:ADC converts assets and liabilities of foreign operations to their U.S. dollar equivalents at rates in effect at the
balance sheet date and records translation adjustments in shareowners' investment. Income statements of foreign operations are translated from the operations' functional currency to U.S. dollar
equivalents at the exchange rate on the transaction dates. Foreign-exchange transaction gains and losses are reported in other income (expense), net.

Use of Estimates:The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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.

Comprehensive Income (Loss):Components of comprehensive income (loss) include net income, foreign-currency translation adjustments and unrealized gains
(losses) on available-for-sale securities, net-of-tax, and is presented on the consolidated statements of shareowners' investment.

Reclassifications:Certain prior-year amounts have been reclassified to conform to the current-year presentation.

Recent Accounting Pronouncements:In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin
No. 101 "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101, as amended, summarizes some of the SEC's views in applying generally accepted accounting principles to revenue
recognition in financial statements. At this time, management does not expect the adoption of SAB 101 to have a material effect on ADC's operations or financial position. ADC is required to adopt SAB
101 in the fourth quarter of 2001.

Note 2:  Other Financial Statement Data (in millions)

Other Income (Expense), Net:

2000

1999

1998Interest income

$
23.6

$
21.6

$
18.3Interest expense


(4.1
)

(7.7
)

(0.8
)Gain on change in ownership interest


8.1





Gain on sale of available-for-sale securities


23.8





Other expense, net


(8.1
)

(14.0
)

(6.3
)Total, net

$
43.3

$
(0.1
)
$
11.2


Supplemental Cash Flow Information:

2000

1999

1998Income taxes paid

$
218.5

$
85.1

$
100.1Interest paid

$
4.1

$
7.6

$
0.8


21

---

Supplemental Schedule of Non-cash Investing Activities:

2000

1999

1998Acquisitions:Fair value of assets acquired

$
420.7

$
330.8

$
49.3Less: Liabilities assumed


34.5


52.0


0.7Cash acquired


40.9


41.4


1.5Acquisitions, net of cash acquired

$
345.3

$
237.4

$
47.1Unrealized holding gains on available-for-sale securities, net of deferred taxes of $40.5, $32.4 and $0.2

$
59.0

$
54.1

$
0.3


Consolidated Balance Sheet Information:

2000

1999Inventories:Purchased materials and manufactured products

$
452.4

$
249.9Work-in-process


33.7


35.0Total

$
486.1

$
284.9Property and Equipment:Land and buildings

$
186.5

$
126.0Machinery and equipment


633.6


465.6Furniture and fixtures


91.3


72.5Construction-in-process


142.7


Total


1,054.1


664.1Less accumulated depreciation


(445.5
)

(322.9
)Total, net

$
608.6

$
341.2


Note 3:  Investments

ADC maintains an investment portfolio of several publicly held companies. These investments are classified as available-for-sale
securities and, consequently, are recorded on the balance sheet at fair value with unrealized gains and losses reported as a separate component of shareowners' investment in accumulated other
comprehensive income (loss). As of October 31, 2000 and 1999, ADC's short-term investments consisted of the following (in millions):

Cash Basis

Adjusted Basis

Unrealized Gain

Fair Value2000Available-for-sale securities

$
218.1

$
950.4

$
186.5

$
1,136.91999Available-for-sale securities

$
168.5

$
168.5

$
87.0

$
255.5


In
2000, ADC sold common stock in certain investments for a pre-tax gain of $23.8 million. In 1999, there were no such sales.

In
the first quarter of 2000, Siara Systems, Inc., in which ADC had a 7.3% ownership interest, agreed to be acquired by Redback Networks, Inc. in a
stock-for-stock transaction valued at approximately $4.3 billion. ADC's initial investment in Siara Systems was $3.5 million. Upon consummation of the acquisition
of Siara Systems by Redback Networks, ADC's investment was marked-to-market through earnings in the second quarter of 2000 and reflected on the balance sheet at

22

---

the market value of the Redback Networks shares. The pre-tax gain recognized on the conversion of these shares was $722.6 million. This gain increased the basis of investments by
$722.6 million.

Note 4:  Note Payable

ADC has a $340.0 million unsecured revolving credit facility for general corporate purposes. Under this five-year credit facility,
borrowings carry an initial interest rate equal to the commercial paper interest rate plus 25 basis points. There was no outstanding balance at October 31, 2000. At October 31, 1999, the
balance outstanding under this arrangement was $25.0 million. The revolving credit facility expires
on November 24, 2003. This facility requires ADC to maintain certain financial ratios. At October 31, 2000, ADC was in compliance with these requirements.

Note 5:  Acquisitions

Pooling-of-Interests Method:In 2000, ADC acquired Broadband Access Systems, Inc. ("BAS") and PairGain
Technologies, Inc. ("PairGain"), and in 1999, ADC acquired Saville Systems PLC ("Saville"), all of which were accounted for as pooling-of-interests transactions. All
historical financial information has been restated to reflect these acquisitions. BAS is a supplier of next-generation, Internet Protocol (IP) access platforms. PairGain designs,
manufactures, markets and sells digital subscriber line (DSL) networking systems. Saville is a developer and integrator of communications billing and customer care software. There were no material
transactions between ADC and the acquired companies prior to the mergers, and the effects of conforming Saville's, PairGain's and BAS's accounting policies to those of ADC were not material. These
transactions are summarized as follows (in millions):

Acquisition Date

Acquired Company

Shares of ADC Stock Issued, Including Options Assumed

Fair Value of AcquisitionOctober 1999

Saville

56.4

$
613.6June 2000

PairGain

72.2

$
2,946.9September 2000

BAS

66.0

$
1,835.6


ADC's
consolidated financial statements for prior years have been restated to include the results of Saville within the Integrated Solutions business segment and PairGain and BAS
within the Broadband
Access and Transport business segment. Net sales and income (loss) for the individual entities for 2000,1999 and 1998 were as follows (in millions):

October 31, 2000

October 31, 1999

October 31, 1998Net Sales:ADC

$
3,142.0

$
1,786.4

$
1,379.7Saville





140.5


167.7PairGain


145.3


224.9


283.1BAS


0.6





Combined

$
3,287.9

$
2,151.8

$
1,830.5Net Income (Loss):ADC

$
765.2

$
80.7

$
146.7Saville





7.0


27.0PairGain(1)


178.4


2.4


39.5BAS


(75.5
)

(12.2
)

(3.3
)Combined

$
868.1

$
77.9

$
209.9


---

23

---

All
of these acquired companies used a calendar year-end. In recording the pooling-of-interests combinations, PairGain and BAS financial statements
for the years ended December 31, 1999 and 1998 were combined with ADC's financial statements for the years ended October 31, 1999 and 1998. In addition, Saville's financial statements
for the year ended December 31,1998 were combined with ADC's financial statements for the year ended October 31, 1998. In order to conform year-ends, adjustments of
$7.9 million and $6.3 million were made to retained earnings as of October 31, 2000 and 1999.

Other Pooling-of-Interests Combinations:ADC also completed a pooling-of-interests combination with
Altitun AB ("Altitun") during May 2000. Altitun is a developer and supplier of active optical components for next-generation optical networks. The historical operations of Altitun
were not material to ADC's consolidated operations; therefore, prior-period statements have not been restated for this acquisition. ADC exchanged 30.4 million shares (both stock issued and
options assumed) for all of the common stock of Altitun. The fair value of the transaction was $948.8 million.

Acquisition Expenses of Pooling-of-Interests Combinations:Expenses totaling $102.4 million and $21.4 million were
incurred in consummating the above pooling transactions and were recorded as non-recurring charges in 2000 and 1999, respectively. These costs consisted primarily of investment bankers'
fees, attorneys' fees, and other direct charges related to the transaction. Included in Altitun's acquisition expenses were $29.1 million of expenses paid directly by the former shareholders of
Altitun.

Purchase Method:

Centigram

In July 2000, ADC acquired all outstanding common shares of Centigram Communications Corporation ("Centigram") for $173.6 million in cash plus
stock options valued at $42.9 million. Centigram is a
provider of Internet-enabled call management, WAP-based messaging and unified communications services to mobile and landline telecom service providers. The accompanying consolidated
financial statements include the results of operations of Centigram subsequent to the acquisition date. Purchased in-process research and development expenses of $15.8 million were
recorded as a non-recurring charge upon completion of the acquisition.

Total purchase cost of Centigram (in millions):Cash

$
173.6Conversion of options


42.9Total consideration


216.5Direct transaction costs and expenses


4.5Total purchase cost

$
221.0Allocation of the purchase price (in millions):Tangible net assets acquired

$
43.5Goodwill and intangible assets acquired


149.6Deferred compensation


12.1In-process research and development


15.8Total purchase price allocation

$
221.0


Tangible
net assets acquired include cash, accounts receivable, inventories and fixed assets. Liabilities assumed principally include accounts payable, accrued compensation and
accrued expenses. Goodwill and other identifiable assets resulting from the acquisition are being amortized over periods ranging from 5 to 15 years.

24

---

The unaudited pro forma results of operations of ADC and Centigram for the years ended October 31, 2000 and 1999, after giving effect to a number of pro forma adjustments, are
(in millions, except per share amounts):

Year ended October 31, 2000

Year ended October 31, 1999Net Sales

$
3,337.1

$
2,235.1Net Income

$
856.5

$
68.9Earnings Per ShareDiluted

$
1.11

$
0.10


Teledata

In November 1998, ADC acquired all outstanding common shares of Teledata Communications Ltd. ("Teledata") for $198.0 million in cash plus
stock options valued at $7.9 million. Teledata designs, develops, manufactures, markets and supports advanced wireline and wireless customer access network equipment for telephone companies
worldwide. The accompanying consolidated financial statements include the results of operations of Teledata subsequent to the acquisition date. Purchased in-process research and
development expenses of $23.6 million were recorded as a non-recurring charge upon completion of the acquisition.

Total purchase cost of Teledata (in millions):Cash

$
198.0Conversion of options


7.9Total consideration


205.9Direct transaction costs and expenses


4.2Total purchase cost

$
210.1Allocation of the purchase price (in millions):Tangible net assets acquired

$
105.8Goodwill and intangible assets acquired


80.7In-process research and development


23.6Total purchase price allocation

$
210.1


Tangible
net assets acquired include cash, accounts receivable, inventories and fixed assets. Liabilities assumed principally include accounts payable, accrued compensation and
accrued expenses. Goodwill and other identifiable intangible assets resulting from the acquisition are being amortized over periods ranging from 5 to 15 years.

The
unaudited pro forma results of operations of ADC and Teledata for the year ended October 31, 1998, after giving effect to a number of pro forma adjustments, are (in
millions, except per share amounts):

Year ended
October 31, 1998Net Sales

$
1,894.1Net Income

$
199.6Earnings Per ShareDiluted

$
0.30


25

---

Other Transactions

In addition to the transactions identified above, ADC made several smaller purchases during 2000, 1999 and 1998. A summary of recent significant acquisitions,
accounted for by the purchase method, is (in millions):

Company

Date

Transaction
valueFrance Electronique's telecom systems integration business

November 2000

$
44.0Computer Telcom Installations Ltd.

September 2000

$
40.4IBSEN Micro Structures

May 2000

$
78.5NVision

January 2000

$
19.7Pathway, Inc.

July 1999

$
19.0Spectracom, Inc.

May 1999

$
102.3Phasor Electronics

January 1999

$
8.2Hadax Electronics

November 1998

$
25.0BHA Pty Ltd.

April 1998

$
20.0W.E. Tech, Inc.

January 1998

$
16.0


The
inclusion of the above purchase acquisitions for periods prior to the date of acquisition would not have materially affected results of operations, except for Centigram and
Teledata as discussed above. Goodwill associated with these purchase acquisitions is being amortized using the straight-line method over periods ranging from 7 to 15 years.

ADC
identifies projects that do not have technological feasibility or other uses at the time of acquisition and records expense at the time of acquisition for these
in-process research and development
projects. Purchased in-process research and development expenses aggregating $22.8 million in 2000 were associated with the purchase acquisitions of IBSEN Micro Structures and
Centigram. Appraisals for each purchased in-process technology were determined using the income approach, discounted based on the estimated likelihood that the project ultimately will
succeed.

Purchased
in-process research and development expenses of $88.6 million in 1999 were associated with the acquisitions of Pathway, Teledata, Phasor Electronics,
Hadax Electronics and Spectracom. Non-recurring charges of $9.2 million in 1998 were associated with the acquisitions of BHA Pty Ltd. and interconnect billing software
technology.

Note 6:  Employee Benefit Plans

Retirement Savings Plan:Substantially all employees are eligible to participate in ADC's Retirement Savings Plan ("the Plan"). ADC
matches employee contributions to the Plan up to 6% of wages and, depending on ADC performance, may voluntarily make an additional contribution up to 70% on 6% of wages. Employees are fully vested in
all contributions. ADC's contributions to the Plan were $22.5 million, $13.6 million and $12.5 million during 2000, 1999 and 1998, respectively. The Plan's trustee invests a
portion of ADC's cash contributions in ADC's common stock.

Global Employee Stock Purchase Plan:ADC has a global employee stock purchase plan available to substantially all employees. Eligible
employees may purchase ADC common stock through payroll deductions. Until April of 2000, the discounted purchase price given to ADC employees on ADC stock was 85% of the market closing price of ADC
stock at the end of each stock purchase period. Under the new stock purchase plan, employees can purchase ADC common stock at a price equal to the lower of 85% of the market closing price of ADC's
stock at the beginning or end of each stock purchase period. ADC issued 0.4 million and 0.3 million shares of common stock during 2000 and 1999, respectively, pursuant to the plan.

26

---

Stock Award Plans:ADC maintains a Global Stock Incentive Plan to grant various stock awards, including stock options at
fair-market value and restricted shares, to key employees of ADC. A maximum of 145.8 million stock awards can be granted under this plan; 42.5 million shares were available
for stock awards as of October 31, 2000. ADC also maintains a Non-employee Director Stock Option Plan in order to enhance ADC's ability to attract and retain the services of
experienced and knowledgeable outside directors. This plan provides for granting of a maximum of 3.4 million
non-qualified stock options at fair-market value. As of October 31, 2000, 0.6 million shares were available for option grants under this plan. In addition to the
foregoing plans, options to acquire a total of 19.6 million shares have been granted under plans assumed in conjunction with some of ADC's acquisitions.

The
following schedule summarizes activity in all plans (shares in millions):

Stock OptionsShares

Weighted Average
Exercise Price

Restricted
SharesOutstanding at October 31, 1997

58.5

$
7.02

0.4Granted

30.7

$
11.52

13.8Exercised

(7.5
)
$
3.18

Restrictions lapsed






(0.3
)Canceled

(12.4
)
$
9.99

Outstanding at October 31, 1998

69.3

$
8.56

13.9Adjustment to conform year-end

0.3




Granted

41.1

$
11.32

1.0Exercised

(11.4
)
$
4.52

Restrictions lapsed






(.1
)Canceled

(8.1
)
$
8.14

Outstanding at October 31, 1999

91.2

$
9.48

14.8Adjustments to conform year-ends

(4.5
)



Granted

38.7

$
15.69

1.1Exercised

(20.0
)
$
18.22

Restrictions lapsed






(0.1
)Canceled

(8.9
)
$
12.57

Outstanding at October 31, 2000

96.5

$
13.84

15.8Exercisable at October 31, 2000

39.5

$
8.39




SFAS
No. 123 "Accounting for Stock-Based Compensation," encourages, but does not require, a fair-value-based method of accounting for employee stock options or
similar equity instruments. As permitted under the standard, ADC 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, ADC has recognized no compensation expense for its Stock Incentive Plan or its Non-employee Director Stock Option
Plan.

If
compensation expense for ADC's stock-based compensation plans had been determined based on the fair value at the grant dates consistent with the method of SFAS No. 123,
ADC's net income

27

---

and earnings per share would have decreased to the pro forma amounts indicated below (in millions, except per share amounts):

2000

1999

1998Net IncomeAs reported

$
868.1

$
77.9

$
209.9Pro forma

$
765.7

$
10.2

$
160.2Earnings Per ShareBasicAs reported

$
1.20

$
0.12

$
0.32Pro forma

$
1.06

$
0.02

$
0.24Earnings Per ShareDilutedAs reported

$
1.13

$
0.11

$
0.31Pro forma

$
0.99

$
0.01

$
0.24


The
weighted-average fair value per option at the date of grant for options granted in 2000, 1999 and 1998 was $13.84, $9.48 and $8.56, respectively. The fair value was estimated
using the Black-Scholes option pricing model with the following weighted average assumptions:

2000

1999

1998Risk-free interest rate

5.91
%
5.27
%
5.19
%Expected dividend





Expected volatility factor

82.9
%
67.6
%
68.6
%Expected option term

4.5 years

3.2 years

4.6 years


As
a result of the issuance of Interpretation ("FIN") No. 44, "Accounting for Certain Transactions Involving Stock Compensationan Interpretation of APB Opinion
No. 25," ADC was required to record a non-cash stock compensation expense and deferred compensation expense related to the unvested portion of options issued in the purchase
business combination of Centigram in the third quarter of 2000. The value attributed to unvested options of $12.1 million was allocated to deferred compensation expense and will be amortized
over the remaining vesting period. Non-cash stock compensation expense recorded in 2000 relating to the Centigram acquisition was $2.4 million. Deferred compensation expense of
$9.7 million remains to be amortized through 2004.

Non-cash
stock compensation expenses of $44.7 million and $1.2 million were recognized in 2000 and 1999, respectively, as a result of stock options and
restricted stock converted in connection with the BAS acquisition. The exercise prices at the date of grant were deemed to be less than the estimated fair values of the awards. Expense is being
recognized over the anticipated vesting period of the awards through 2003. Deferred compensation expense of $29.2 million remains to be amortized through 2003.

Note 7:  Capital Stock

Stock Splits:All share and per share amounts, including stock options, have been restated to reflect ADC's two separate
two-for-one stock splits effected in the form of a common stock dividend, which were distributed on February 15, 2000 and July 17, 2000.

Authorized Stock:ADC is authorized to issue 1.2 billion shares of $0.20 par value common stock and 10.0 million shares of
no par value preferred stock. There are no shares of preferred stock outstanding.

Dividends:No cash dividends have been declared or paid during the past five years.

Earnings Per Share:Basic earnings per common share is computed by dividing net income by the weighted average number of shares of
common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of shares of

28

---

common stock outstanding plus all additional common stock that would have been outstanding if potentially dilutive common shares related to stock options had been issued. The following table
reconciles the number of shares utilized in the earnings per share calculations (in millions, except earnings per share):

2000

1999

1998Net income

$
868.1

$
77.9

$
209.9Earnings per sharebasic

$
1.20

$
0.12

$
0.32Earnings per sharediluted

$
1.13

$
0.11

$
0.31Weighted average common shares outstandingbasic


721.6


665.0


655.2Effect of dilutive securities


48.7


18.3


14.8Weighted average common shares outstandingdiluted


770.3


683.3


670.0


Shareowner Rights Plan:ADC has a shareowner rights plan intended to preserve the long-term value of ADC to its shareowners
by discouraging a hostile takeover of ADC. Under the shareowner rights plan, each outstanding share of ADC common stock has an associated common stock purchase right. The rights are exercisable only
if a person or group acquires 15% or more of the outstanding ADC common stock. If the rights became exercisable, the rights would allow their holders (other than the acquiring person or group) to
purchase shares of ADC common stock or stock of the company acquiring ADC at a price equal to one-half of the then current value of such shares. The dilutive effect of the rights on the
acquiring person or group is intended to encourage such person or group to negotiate with ADC's board of directors prior to attempting a takeover. If ADC's board of directors believes a proposed
acquisition of ADC is in the best interests of ADC and its shareowners, the board may amend the shareowner rights plan or redeem the rights for a nominal amount in order to permit the acquisition to
be completed without interference from the plan.

Stock Repurchase Program:In April 1998, ADC announced a stock repurchase program under which ADC was permitted to purchase up to
26.8 million shares of common stock in open market transactions as market and business conditions warranted. As part of this program, ADC permitted for the use of forward repurchase agreements,
"equity collar" arrangements using call and put options, and other arrangements to purchase ADC shares. The share repurchase program was terminated in 1999.

During
1998, ADC sold put options to independent third parties that entitled holders of the options to sell shares of ADC common stock to ADC and purchased call options from the same
parties that entitled ADC to buy shares of its common stock. In January and February 1999, ADC received 4.2 million shares of its common stock in partial settlement of outstanding
options. Shares received in settlement of this transaction have been re-issued through unrelated transactions.

Note 8:  Income Taxes

The components of the provision for income taxes are (in millions):

2000

1999

1998Current taxes payable:Federal

$
270.0

$
83.3

$
87.9Foreign


6.3


7.7


16.2State


33.8


8.3


9.2310.1


99.3


113.3Deferred


282.2


(42.3
)

(0.9
)Total provision

$
592.3

$
57.0

$
112.4


29

---

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

2000

1999

1998Federal statutory rate

35
%
35
%
35
%Research and development tax credits



(4
)
(2
)Goodwill amortization

1

3

1State income taxes, net

3

2

3FSC exempt income



(1
)
(1
)Foreign income taxes



(3
)
(2
)Purchased in-process research & development

1

8

1Acquisition and integration fees

3

5

Tax exempt interest income



(1
)
Other, net

(2
)
(2
)
Effective income tax rate

41
%
42
%
35
%


Deferred
tax assets (liabilities) as of October 31, 1999 and 1998 are composed of the following (in millions):

2000

1999Current deferred tax assets (liabilities):Asset valuation reserves

$
32.3

$
12.3Unrealized gain on investments


(370.4
)

Accrued liabilities


22.8


(2.5
)Other


1.9


7.6Total

$
(313.4
)
$
17.4Non-current deferred tax assets (liabilities):Intangible assets

$
40.4

$
39.3Depreciation


(10.8
)

(8.8
)Other


22.8


12.1Total

$
52.4

$
42.6


In
connection with its 2000 and 1999 acquisitions, ADC recorded non-recurring, non-tax-deductible charges for acquisition fees and purchased
in-process research and development expenses. In 2000, ADC recognized non-recurring, non-operating gains from the sale of a business and the non-cash
conversion of an investment. The exclusion of these charges and gains would result in an effective tax rate of 34%, 31% and 34% in 2000, 1999 and 1998, respectively.

The
provision for foreign income taxes is based upon foreign pre-tax earnings (losses) of approximately $(37.4) million, $8.5 million and $22.3 million
during 2000, 1999 and 1998, respectively.

Deferred
federal income taxes are not provided on the undistributed cumulative earnings of foreign subsidiaries because such earnings are considered to be invested permanently in
those operations. At October 31, 2000, the cumulative earnings of foreign subsidiaries were approximately $86.3 million. The amount of unrecognized deferred tax liability on the
undistributed cumulative earnings was approximately $15.2 million.

30

---

Note 9:  Business Restructuring and Other Non-recurring Charges

A summary of business restructuring and other non-recurring charges is (in millions):

2000

1999

1998Acquisition and integration fees

$
121.9

$
21.4


Restructuring the Broadband Access and Transport Group


13.3


9.0


Purchased in-process research and development expenses (Note 5)


22.8


88.6

$
9.2Restructuring the former Wireless Systems Group





30.0


Total

$
158.0

$
149.0

$
9.2


As
a result of the merger between ADC and PairGain in the third quarter of 2000, ADC recognized a charge of $64.5 million for the cost of integrating and aligning the
operations of PairGain within ADC's Broadband Access and Transport Group. The components of this charge include $45.9 million in direct and indirect acquisition fees paid to investment bankers,
attorneys and other outside advisors, as well as $18.6 million in employee retention, transition and severance payments, relocation expenses and realignment of product lines and facilities.

Upon
the completion of the mergers between ADC and Altitun in the third quarter of 2000 and BAS in the fourth quarter of 2000, ADC recognized $35.9 million and
$20.6 million, respectively, in acquisition fees. These fees are direct and indirect incremental costs associated with the combinations, primarily consisting of fees paid to investment bankers,
attorneys and other outside advisors. ADC also incurred $0.9 million of integration costs associated with the acquisition of Centigram in the third quarter of 2000.

During
the third quarter of 2000, ADC's management approved a restructuring plan in connection with the merger of PairGain. The merger-related actions included the elimination of
redundant and excess facilities, workforce, and administrative overhead and systems, as well as transition to ADC's shared services. The total estimated charges related to the plan were
$5.5 million. The charges include $4.0 million in employee termination costs and $1.5 million in the elimination of redundant financial and operating systems. The plan is to be
completed by the end of the first quarter of 2001.

During
the fourth quarter of 2000, ADC's management approved restructuring plans, which included initiatives to consolidate unproductive and duplicative facilities and dispose of
product lines that no longer fit ADC's current focus and growth strategy, and to merge the international sales operations within the Broadband Access and Transport Group. The total estimated charges
recorded relating to these restructuring plans were $7.8 million. The charges included $0.7 million for employee termination costs, $4.1 million for the discontinuance of
old-generation Teledata products and a customer development project, and $3.0 million in facilities closing costs and consolidation of international sales operations. The
restructuring plans are to be completed by the end of the second quarter of 2001.

During
the first quarter of 1999, ADC's management approved a restructuring plan, which included initiatives to integrate the software operations of the former Wireless Systems Group
with the newly formed Integrated Solutions Group, consolidate unproductive and duplicative facilities and dispose of product lines that no longer fit ADC's current focus and growth strategy. This
business restructuring plan was completed during the fourth quarter of 1999. Actual costs incurred were $30.0 million, an amount equal to the initial estimate recorded during the first quarter
of 1999. The charges included $4.4 million for employee termination costs, $8.8 million for the sale of a subsidiary, $11.1 million associated with the write-off of
goodwill and discontinuance of the City RFX product line, and $5.7 million in facilities closing costs that were related directly to ADC's exit plan.

31

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During the fourth quarter of 1999, ADC's management approved a restructuring plan to consolidate the Portland, Oregon manufacturing operations of the Broadband Access and Transport
Group into the Minneapolis, Minnesota manufacturing operations. The estimated restructuring charges were $9.0 million. The estimate was composed of $4.8 million for employee termination
costs, $1.5 million for facilities closing costs and $2.7 million for asset disposals and other directly associated costs. This consolidation was completed in the fourth quarter of 2000.
There were no material adjustments made to the initial estimates. Actual costs incurred were approximately $9.0 million.

Note 10:  Derivative Instruments and Hedging Activities

ADC adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," on November 1, 1998. In doing so, ADC did not incur any
transition adjustments to earnings.

All
derivatives are recognized on the balance sheet at their fair value. On the date a derivative contract is entered into, ADC designates the derivative as a
(1) fair-value hedge, (2) cash-flow hedge, (3) foreign-currency hedge, (4) net investment in a foreign operation or (5) trading instrument.
ADC engages primarily in derivatives classified as cash-flow hedges. Changes in the fair value of the derivatives are reported as a separate component of shareowners' investment in
accumulated other comprehensive income (loss). ADC also hedges non-functional current assets and liabilities. Derivatives designated to hedge these exposures are classified as trading
derivatives and are reported in current-period earnings along with the re-valuation of the underlying exposure.

In
2000, ADC entered into a market-price collar arrangement that locks in a price range for the sale of certain shares held as investments, thus guaranteeing a minimum selling price.
Such derivatives are treated as trading derivatives. Changes in the value of these derivatives are reported in current-period earnings.

ADC
formally documents all relations between hedging instruments and the hedged items, as well as its risk-management objectives and strategies for undertaking various
hedge transactions. ADC formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in cash flows of the hedged items.

The
following table presents a summary of the notional amounts and fair values of ADC's derivative contracts at October 31, 2000 (in millions).

Notional Amount

Fair ValueForward contracts:Cash-flow hedges

$
127.0

$
0.6Trading derivatives


31.5


Total foreign exchange

$
158.5

$
0.6Collar options




$
12.9


ADC's
foreign-exchange forward contracts and investment hedges contain credit risk to the extent that its bank counterparties may be unable to meet the terms of the agreements. ADC
minimizes such risk by limiting its counterparties to major financial institutions. Management does not expect any material losses as a result of defaults by other parties.

32

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Note 11:  Commitments and Contingencies

Commitments To Extend Credit:ADC has worked with customers and third-party financiers to find a means of financing projects by
negotiating financing arrangements. As of October 31, 2000, ADC had commitments to extend credit of $380.0 million for such arrangements. The total amount drawn and outstanding as of
October 31, 2000 was $35.0 million. ADC intends to sell all or a portion of these commitments and outstanding receivables to third-parties, but has not yet made any such sales. These
commitments to extend credit are conditional agreements generally having fixed expiration or termination dates and specific interest rates, conditions and purposes. These commitments may exist and
expire without being drawn. Therefore, the amounts committed but not drawn will not necessarily impact future cash flows. ADC regularly reviews all outstanding commitments, and the results of these
reviews are considered in assessing the overall risk for possible credit losses. At October 31, 2000, there was no significant risk of loss in the event of non-performance related
to these financing arrangements.

Operating Leases:Portions of ADC's operations are conducted using leased equipment and facilities. These leases are
non-cancelable and renewable, with expiration dates ranging through the year 2014. The rental expense included in the accompanying consolidated statements of income was
$25.6 million, $26.3 million and $19.0 million for 2000, 1999 and 1998, respectively.

During
2000, ADC entered into several leasing commitments with maturities of between six and seven years for domestic locations. The properties covered under these transactions
include manufacturing equipment, facilities and administrative offices. The purchase and construction of the various properties covered under these transactions began in 2000 and are expected to be
completed by 2002. The leases provide for a substantial residual value guarantee (less than 90% of the total cost), which may become payable upon the termination of the transaction, and include
purchase and renewal options. ADC may exercise its purchase option, or the facilities may be sold to a third party. Upon termination of the leases, ADC expects the fair-market value of the
leased properties to reduce substantially or eliminate entirely the payment under the residual-value guarantees. The table of future minimum operating lease payments below excludes any payments
relating to these guarantees.

The
following is a schedule of future minimum rental payments required under non-cancelable operating leases as of October 31, 2000 (in millions):

2001

$
52.42002


52.92003


44.62004


39.72005 and thereafter


79.8Total

$
269.4


Contingencies:ADC has been named as a defendant in lawsuits in the normal course of business. ADC believes that the ultimate resolution
of these matters will not have a material adverse effect on its financial position or results of operations.

Change of Control:ADC's 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 ADC. The board has retained the flexibility to cancel such provisions under certain circumstances.

Note 12:  Segment Information

ADC has three reportable segments: Broadband Connectivity, Broadband Access and Transport, and Integrated Solutions. Broadband Connectivity products include
broadband connection and access devices for copper, coaxial, optical, wireless and broadcast communications networks. The segment also includes optical and wireless components. Broadband Access and
Transport products include access and

33

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transport systems that deliver broadband, multiservice communications to consumers and businesses over copper, coaxial, optical and wireless networks. Integrated Solutions products and services
consist of systems integration services, operations support systems (OSS) software and enhanced services software that positions service providers to deliver broadband, multiservice communications
over wireline and wireless networks.

The
"management approach" required by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," has been used to present the following segment
information. This approach is based upon the way management organizes segments within an enterprise for making operating decisions and assessing performance. Accounting policies used by the segments
are the same as those described in Note 1.

Intersegment
sales were not significant. The following costs are not allocated to segment results:



Corporate
assets consist primarily of cash and investments, which are managed centrally, and goodwill. Capital expenditures do not include amounts arising from the purchase of
businesses.

34

---

International sales to external customers are on a "shipped-to" basis. No single country has property and equipment sufficiently material enough to warrant disclosure. No
single customer accounts for more than 10% of ADC's consolidated sales.

|Segment Information (in millions)                     |  | Broadband Connectivity |         | Broadband Access and Transport |   | Integrated Solutions |   | Unallocated Corporate Items |       | Segment Consolidated Information |  
|----------------------------------------------------- |  | ---------------------- | ------- | ------------------------------ | - | -------------------- | - | --------------------------- | ----- | -------------------------------- | -
|2000                                                  |  |                        |         |                                |   |                      |   |                             |       |                                  |  
|External sales                                        |  | $                      | 1,781.9 |                                | $ | 992.1                |   | $                           | 513.9 |                                  | $
|Depreciation and amortization                         |  |                        | 49.2    |                                |   | 42.3                 |   |                             | 16.9  |                                  |  
|Non-recurring charges and non-cash stock compensation |  |                        |        |                                |   |                     |   |                             |      |                                  |  
|Operating income (loss)                               |  |                        | 773.5   |                                |   | (147.4               | ) |                             | 20.6  |                                  |  
|Capital expenditures                                  |  |                        | 284.2   |                                |   | 35.8                 |   |                             | 22.7  |                                  |  
|Assets                                                |  |                        | 878.6   |                                |   | 881.0                |   |                             | 386.2 |                                  |  
|                                                      |  |                        |         |                                |   |                      |   |                             |       |                                  |  
|1999                                                  |  |                        |         |                                |   |                      |   |                             |       |                                  |  
|External sales                                        |  | $                      | 912.4   |                                | $ | 856.8                |   | $                           | 382.6 |                                  | $
|Depreciation and amortization                         |  |                        | 31.3    |                                |   | 44.2                 |   |                             | 11.0  |                                  |  
|Non-recurring charges and non-cash stock compensation |  |                        |        |                                |   |                     |   |                             |      |                                  |  
|Operating income (loss)                               |  |                        | 336.4   |                                |   | (47.3                | ) |                             | 24.7  |                                  |  
|Capital expenditures                                  |  |                        | 50.5    |                                |   | 38.1                 |   |                             | 19.1  |                                  |  
|Assets                                                |  |                        | 397.4   |                                |   | 795.8                |   |                             | 280.8 |                                  |  
|                                                      |  |                        |         |                                |   |                      |   |                             |       |                                  |  
|1998                                                  |  |                        |         |                                |   |                      |   |                             |       |                                  |  
|External sales                                        |  | $                      | 649.7   |                                | $ | 827.8                |   | $                           | 353.0 |                                  | $
|Depreciation and amortization                         |  |                        | 29.1    |                                |   | 33.9                 |   |                             | 5.0   |                                  |  
|Non-recurring charges                                 |  |                        |        |                                |   |                     |   |                             |      |                                  |  
|Operating income (loss)                               |  |                        | 192.6   |                                |   | 65.1                 |   |                             | 60.5  |                                  |  
|Capital expenditures                                  |  |                        | 44.9    |                                |   | 42.0                 |   |                             | 10.0  |                                  |  
|Assets                                                |  |                        | 303.5   |                                |   | 632.5                |   |                             | 194.8 |                                  |  
|                                                      |  |                        |         |                                |   |                      |   |                             |       |                                  |  

|Geographic Information (in millions) |                           | 2000  |   | 1999    |         | 1998
|------------------------------------ | ------------------------- | ----- | - | ------- | ------- | ----
|Sales:                               |                           |       |   |         |         |     
|                                     | Outside the United States |       | $ | 708.1   |         | $   
|                                     | Inside the United States  |       |   | 2,579.8 |         |     
|                                     |                           |       |   |         |         |     
|                                     |                           | Total |   | $       | 3,287.9 |     
|                                     |                           |       |   |         |         |     
|Property and Equipment, Net:         |                           |       |   |         |         |     
|                                     | Outside the United States |       | $ | 143.2   |         | $   
|                                     | Inside the United States  |       |   | 465.4   |         |     
|                                     |                           |       |   |         |         |     
|                                     |                           | Total |   | $       | 608.6   |     
|                                     |                           |       |   |         |         |     

35

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Note 13:  Quarterly Financial Data (Unaudited in millions, except earnings per share)

|                                          |  | First Quarter |       | Second Quarter |   | Third Quarter |     | Fourth Quarter |       | Total
|----------------------------------------- |  | ------------- | ----- | -------------- | - | ------------- | --- | -------------- | ----- | -----
|2000                                      |  |               |       |                |   |               |     |                |       |      
|Net Sales                                 |  | $             | 593.9 |                | $ | 770.6         |     | $              | 891.4 |      
|Gross Profit                              |  |               | 278.5 |                |   | 363.3         |     |                | 448.5 |      
|                                          |  |               |       |                |   |               |     |                |       |      
|Income Before Income Taxes                |  |               | 68.4  |                |   | 1,163.1       |     |                | 65.1  |      
|Provision for Income Taxes                |  |               | 15.2  |                |   | 444.9         |     |                | 55.5  |      
|                                          |  |               |       |                |   |               |     |                |       |      
|Net Income                                |  | $             | 53.2  | (1)            | $ | 718.2         | (2) | $              | 9.6   | (3)  
|                                          |  |               |       |                |   |               |     |                |       |      
|Average Common Shares OutstandingBasic   |  |               | 699.7 |                |   | 708.0         |     |                | 715.1 |      
|Earnings Per ShareBasic                  |  | $             | 0.08  |                | $ | 1.01          |     | $              | 0.01  |      
|Average Common Shares OutstandingDiluted |  |               | 730.1 |                |   | 746.1         |     |                | 758.8 |      
|Earnings Per ShareDiluted                |  | $             | 0.07  |                | $ | 0.96          |     | $              | 0.01  |      
|                                          |  |               |       |                |   |               |     |                |       |      
|1999                                      |  |               |       |                |   |               |     |                |       |      
|Net Sales                                 |  | $             | 465.2 |                | $ | 517.7         |     | $              | 534.8 |      
|Gross Profit                              |  |               | 217.5 |                |   | 241.5         |     |                | 247.1 |      
|                                          |  |               |       |                |   |               |     |                |       |      
|Income (Loss) Before Income Taxes         |  |               | (0.3  | )              |   | 67.9          |     |                | 6.9   |      
|Provision for Income Taxes                |  |               | 7.6   |                |   | 24.5          |     |                | 5.6   |      
|                                          |  |               |       |                |   |               |     |                |       |      
|Net Income (Loss)                         |  | $             | (7.9  | )(5)           | $ | 43.4          |     | $              | 1.3   | (6)  
|                                          |  |               |       |                |   |               |     |                |       |      
|Average Common Shares OutstandingBasic   |  |               | 660.0 |                |   | 661.3         |     |                | 664.4 |      
|Earnings (Loss) Per ShareBasic           |  | $             | (0.01 | )              | $ | 0.07          |     | $              | 0.00  |      
|Average Common Shares OutstandingDiluted |  |               | 674.6 |                |   | 682.0         |     |                | 680.9 |      
|Earnings (Loss) Per ShareDiluted         |  | $             | (0.01 | )              | $ | 0.06          |     | $              | 0.00  |      
|                                          |  |               |       |                |   |               |     |                |       |      

---

36

---

Eleven-Year Financial Summary
(dollars in millions, except per share data)

|                             |                                               |       |         |         |         |         |         |         |         |         |         |         |       |       |       |       |       |       |       |       |       |       |       | 10-Year Compound Annual Growth Rate 2000-1990 |      | 5-Year Compound Annual Growth Rate 2000-1995 |     
|---------------------------- | --------------------------------------------- | ----- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | ----- | --------------------------------------------- | ---- | -------------------------------------------- | ----
|
|
|Operating Results            |                                               |       |         |         |         |         |         |         |         |         |         |         |       |       |       |       |       |       |       |       |       |       |       |                                               |      |                                              |     
|Net Sales                    |                                               | $     | 3,287.9 |         | 2,151.8 |         | 1,830.5 |         | 1,553.8 |         | 1,087.4 |         | 723.7 |       | 528.3 |       | 411.7 |       | 331.0 |       | 300.3 |       | 263.0 |                                               | 28.7 | %                                            | 35.4
|                             | International Sales                           |       | $       | 708.1   |         | 499.2   |         | 392.1   |         | 319.0   |         | 228.8   |       | 130.1 |       | 79.0  |       | 66.9  |       | 49.3  |       | 38.0  |       | 41.6                                          |      | 32.8                                         | %   
|Gross Profit                 |                                               | $     | 1,608.9 |         | 1,003.4 |         | 884.5   |         | 749.3   |         | 519.7   |         | 353.1 |       | 265.1 |       | 210.8 |       | 166.9 |       | 146.8 |       | 127.2 |                                               | 28.9 | %                                            | 35.4
|                             | Research and Development Expense              |       | $       | 338.0   |         | 250.7   |         | 199.8   |         | 164.8   |         | 113.7   |       | 78.8  |       | 55.0  |       | 44.9  |       | 38.3  |       | 33.8  |       | 25.5                                          |      | 29.5                                         | %   
|                             | Selling and Administrative Expense            |       | $       | 665.6   |         | 445.3   |         | 351.9   |         | 281.7   |         | 202.7   |       | 155.3 |       | 125.2 |       | 104.0 |       | 88.5  |       | 78.4  |       | 64.0                                          |      | 26.4                                         | %   
|                             | Goodwill Amortization                         |       | $       | 34.3    |         | 22.2    |         | 12.5    |         | 10.0    |         | 5.2     |       | 3.1   |       | 3.1   |       | 2.8   |       | 2.7   |       | 2.0   |       | 0.9                                           |      | 43.6                                         | %   
|                             | Non-recurring Charges                         |       | $       | 158.0   |         | 149.0   |         | 9.2     |         | 25.3    |         |        |       | 3.9   |       |      |       |      |       | 3.8   |       |      |       |                                              |      |                                              |     
|                             | Non-cash Stock Compensation                   |       | $       | 47.1    |         | 1.2     |         |        |         |        |         |        |       |      |       |      |       |      |       |      |       |      |       |                                              |      |                                              |     
|Operating Income(1)          |                                               | $     | 571.0   |         | 285.2   |         | 320.2   |         | 292.8   |         | 198.0   |         | 115.9 |       | 81.7  |       | 59.1  |       | 37.4  |       | 32.7  |       | 36.8  |                                               | 31.5 | %                                            | 37.6
|Operating Income as Reported |                                               | $     | 365.9   |         | 135.0   |         | 311.1   |         | 267.4   |         | 198.0   |         | 112.0 |       | 81.7  |       | 59.1  |       | 33.6  |       | 32.7  |       | 36.8  |                                               | 25.8 | %                                            | 26.7
|                             | Non-recurring, Non-operating Gains            |       | $       | 1,083.0 |         |        |         |        |         |        |         |        |       |      |       |      |       |      |       |      |       |      |       |                                              |      |                                              |     
|                             | Income Taxes(1)                               |       | $       | 198.0   |         | 88.1    |         | 113.1   |         | 108.7   |         | 75.1    |       | 44.6  |       | 30.0  |       | 19.0  |       | 15.1  |       | 14.4  |       | 15.3                                          |      | 29.2                                         | %   
|                             | Income Taxes as Reported                      |       | $       | 592.3   |         | 57.0    |         | 112.4   |         | 99.5    |         | 75.1    |       | 42.1  |       | 30.0  |       | 19.0  |       | 13.7  |       | 14.4  |       | 15.3                                          |      | 44.1                                         | %   
|Net Income(1)                |                                               | $     | 384.4   |         | 197.0   |         | 218.3   |         | 196.5   |         | 133.9   |         | 64.0  |       | 53.0  |       | 39.3  |       | 21.0  |       | 18.1  |       | 22.9  |                                               | 32.6 | %                                            | 43.1
|Net Income as Reported       |                                               | $     | 868.1   |         | 77.9    |         | 209.9   |         | 180.4   |         | 133.9   |         | 62.6  |       | 53.0  |       | 39.3  |       | 18.6  |       | 18.1  |       | 22.9  |                                               | 43.8 | %                                            | 69.2
|                             | EPS (Diluted)(1)                              |       | $       | 0.50    |         | 0.29    |         | 0.33    |         | 0.30    |         | 0.21    |       | 0.11  |       | 0.10  |       | 0.08  |       | 0.04  |       | 0.04  |       | 0.05                                          |      | 25.9                                         | %   
|                             | EPS (Diluted) as Reported                     |       | $       | 1.13    |         | 0.11    |         | 0.31    |         | 0.28    |         | 0.21    |       | 0.11  |       | 0.10  |       | 0.08  |       | 0.04  |       | 0.04  |       | 0.05                                          |      | 36.6                                         | %   
|Financial Ratios             |                                               |       |         |         |         |         |         |         |         |         |         |         |       |       |       |       |       |       |       |       |       |       |       |                                               |      |                                              |     
|                             | Gross Margin                                  |       |         | 48.9    | %       | 46.6    | %       | 48.3    | %       | 48.2    | %       | 47.8    | %     | 48.8  | %     | 50.2  | %     | 51.2  | %     | 50.4  | %     | 48.9  | %     | 48.4                                          | %    |                                              |     
|                             | Operating Margin(1)                           |       |         | 17.4    | %       | 13.3    | %       | 17.5    | %       | 18.8    | %       | 18.2    | %     | 16.0  | %     | 15.5  | %     | 14.3  | %     | 11.3  | %     | 10.9  | %     | 14.0                                          | %    |                                              |     
|                             | Pre-tax Income Margin(1)                      |       |         | 17.7    | %       | 13.3    | %       | 18.1    | %       | 19.6    | %       | 19.2    | %     | 15.0  | %     | 15.7  | %     | 14.2  | %     | 10.9  | %     | 10.8  | %     | 14.5                                          | %    |                                              |     
|                             | Effective Tax Rate(1)                         |       |         | 34.0    | %       | 30.9    | %       | 34.1    | %       | 35.6    | %       | 35.9    | %     | 41.1  | %     | 36.2  | %     | 32.7  | %     | 41.8  | %     | 44.2  | %     | 40.0                                          | %    |                                              |     
|                             | Net Margin(1)                                 |       |         | 11.7    | %       | 9.2     | %       | 11.9    | %       | 12.6    | %       | 12.3    | %     | 8.8   | %     | 10.0  | %     | 9.5   | %     | 6.4   | %     | 6.0   | %     | 8.7                                           | %    |                                              |     
|                             | Return on Average Shareowners' Investment(1)  |       |         | 17.9    | %       | 12.7    | %       | 17.9    | %       | 20.6    | %       | 18.3    | %     | 13.0  | %     | 16.7  | %     | 17.0  | %     | 12.5  | %     | 12.3  | %     | 18.7                                          | %    |                                              |     
|                             | Current Ratio                                 |       |         | 2.55    |         | 3.07    |         | 2.84    |         | 3.57    |         | 3.85    |       | 5.47  |       | 3.52  |       | 3.47  |       | 2.85  |       | 2.92  |       | 2.75                                          |      |                                              |     
|                             | Long-term Debt to Equity Ratio                |       |         | 0.6     | %       | 0.9     | %       | 0.3     | %       | 0.3     | %       | 0.8     | %     |      |       | 0.3   | %     | 0.3   | %     | 9.9   | %     | 27.2  | %     | 3.6                                           | %    |                                              |     
|Cash Flow Data               |                                               |       |         |         |         |         |         |         |         |         |         |         |       |       |       |       |       |       |       |       |       |       |       |                                               |      |                                              |     
|                             | Total Cash from Operating Activities          |       | $       | 250.9   |         | 290.5   |         | 170.3   |         | 176.8   |         | 135.4   |       | 60.8  |       | 67.3  |       | 27.6  |       | 30.9  |       | 33.3  |       | 35.0                                          |      | 21.8                                         | %   
|                             | Depreciation and Amortization                 |       | $       | 146.2   |         | 114.8   |         | 80.4    |         | 59.0    |         | 39.3    |       | 30.7  |       | 25.3  |       | 21.3  |       | 20.2  |       | 18.1  |       | 14.3                                          |      | 26.2                                         | %   
|                             | Capital Expenditures                          |       | $       | 375.3   |         | 125.1   |         | 112.6   |         | 139.9   |         | 79.4    |       | 40.5  |       | 24.1  |       | 23.0  |       | 16.5  |       | 24.9  |       | 13.7                                          |      | 39.2                                         | %   
|Year-End Data                |                                               |       |         |         |         |         |         |         |         |         |         |         |       |       |       |       |       |       |       |       |       |       |       |                                               |      |                                              |     
|                             | Current Assets                                |       | $       | 2,650.9 |         | 1,376.6 |         | 1,310.6 |         | 905.8   |         | 729.8   |       | 576.9 |       | 291.8 |       | 211.4 |       | 123.9 |       | 121.5 |       | 102.5                                         |      | 38.4                                         | %   
|                             | Current Liabilities                           |       | $       | 1,041.3 |         | 448.5   |         | 461.7   |         | 254.0   |         | 189.4   |       | 105.4 |       | 82.8  |       | 60.9  |       | 43.4  |       | 41.6  |       | 37.3                                          |      | 39.5                                         | %   
|                             | Working Capital                               |       | $       | 1,609.6 |         | 928.1   |         | 848.9   |         | 651.8   |         | 540.4   |       | 471.4 |       | 209.0 |       | 150.5 |       | 80.5  |       | 80.0  |       | 65.2                                          |      | 37.8                                         | %   
|                             | Property and Equipment, Net                   |       | $       | 608.6   |         | 341.2   |         | 289.5   |         | 243.7   |         | 145.7   |       | 87.4  |       | 70.1  |       | 65.4  |       | 59.1  |       | 58.4  |       | 45.4                                          |      | 29.6                                         | %   
|                             | Total Assets                                  |       | $       | 3,970.5 |         | 2,057.8 |         | 1,796.0 |         | 1,324.1 |         | 1,020.3 |       | 742.4 |       | 431.2 |       | 351.5 |       | 251.9 |       | 250.9 |       | 181.7                                         |      | 36.1                                         | %   
|                             | Long-term Debt                                |       | $       | 16.5    |         | 14.0    |         | 3.9     |         | 3.4     |         | 6.9     |       |      |       | 1.1   |       | 0.8   |       | 17.0  |       | 43.6  |       | 4.8                                           |      |                                              |     
|                             | Shareowners' Investment                       |       | $       | 2,912.7 |         | 1,595.3 |         | 1,330.4 |         | 1,066.6 |         | 821.7   |       | 635.7 |       | 345.1 |       | 285.8 |       | 172.2 |       | 160.3 |       | 134.0                                         |      | 36.1                                         | %   
|                             | Number of Employees                           |       |         | 22,452  |         | 14,337  |         | 10,315  |         | 7,683   |         | 5,747   |       | 3,748 |       | 3,137 |       | 2,759 |       | 2,303 |       | 2,428 |       | 2,111                                         |      | 26.7                                         | %   
|Investor Information         |                                               |       |         |         |         |         |         |         |         |         |         |         |       |       |       |       |       |       |       |       |       |       |       |                                               |      |                                              |     
|                             | Stock PriceClose                             |       | $       | 21.38   |         | 11.92   |         | 5.75    |         | 8.28    |         | 8.55    |       | 5.00  |       | 2.95  |       | 2.28  |       | 1.13  |       | 0.76  |       | 0.51                                          |      | 45.3                                         | %   
|                             |                                               | High |         | $       | 49.00   |         | 13.41   |         | 10.91   |         | 11.25   |         | 8.78  |       | 6.17  |       | 2.98  |       | 2.75  |       | 1.19  |       | 1.35  |                                               | 0.81 |                                              |     
|                             |                                               | Low  |         | $       | 11.50   |         | 5.81    |         | 3.94    |         | 5.31    |         | 3.56  |       | 2.47  |       | 1.94  |       | 1.13  |       | 0.64  |       | 0.51  |                                               | 0.48 |                                              |     
|                             | Price Earnings Ratio at Year-end(1)           |       |         | 42.76   |         | 41.10   |         | 17.42   |         | 27.60   |         | 40.71   |       | 45.45 |       | 29.50 |       | 28.50 |       | 28.25 |       | 19.00 |       | 10.20                                         |      |                                              |     
|                             | Book Value Per Share                          |       | $       | 3.78    |         | 2.35    |         | 1.99    |         | 1.65    |         | 1.31    |       | 1.06  |       | 0.67  |       | 0.59  |       | 0.39  |       | 0.37  |       | 0.32                                          |      |                                              |     
|                             | Registered Shareowners at Year-end            |       |         | 7,001   |         | 6,918   |         | 5,364   |         | 4,442   |         | 2,973   |       | 2,664 |       | 2,172 |       | 1,633 |       | 1,608 |       | 1,621 |       | 1,758                                         |      |                                              |     
|                             | Shares Outstanding at Year-end (Millions)     |       |         | 770.3   |         | 678.6   |         | 669.2   |         | 647.1   |         | 629.2   |       | 598.0 |       | 512.3 |       | 485.6 |       | 437.3 |       | 431.2 |       | 425.2                                         |      |                                              |     
|                             | Average Shares OutstandingDiluted (Millions) |       |         | 770.3   |         | 683.3   |         | 670.0   |         | 654.7   |         | 641.3   |       | 582.4 |       | 551.2 |       | 492.1 |       | 472.7 |       | 460.9 |       | 429.6                                         |      |                                              |     

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