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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-K

     (Mark One)
     [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934
         For the fiscal year ended May 31, 1998.

                                       OR

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

         For the transition period from _______________ to________________.

                          Commission file No. 0-12515.

                                  BIOMET, INC

             (Exact name of registrant as specified in its charter)

                  INDIANA                                35-1418342
         (State of incorporation)             (IRS Employer Identification  No.)

       AIRPORT INDUSTRIAL PARK, P.O. BOX 587, WARSAW, INDIANA        46581-0587
              (Address of principal executive offices)               (Zip Code)

                                 (219) 267-6639
              (Registrant's telephone number, including area code)

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

          Securities registered pursuant to Section 12(g) of the Act:

               COMMON SHARES             RIGHTS TO PURCHASE COMMON SHARES
             (Title of class)                     (Title of class)

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

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

The aggregate market value of the Common Shares held by nonaffiliates of the
registrant, based on the average bid and asked prices of the Common Shares on
July 20, 1998, as reported by the Nasdaq Stock Market, was approximately
$3,275,100,000.  As of July 20, 1998, there were 112,123,018 Common Shares
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                                          PARTS OF FORM 10-K
                                                          INTO WHICH DOCUMENT
IDENTITY OF DOCUMENT                                        IS INCORPORATED
Proxy Statement with respect to the 1998
Annual Meeting of Shareholders of the Registrant                Part III

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This Report contains certain statements that are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, as amended. Those statements include,
but are not limited to, statements related to the timing and number of planned
new product introductions, the timing of the implementation of regulatory
requirements and related compliance plans, trends in new product regulatory
review procedures, the anticipated effects of regulatory matters on product
pricing and service offerings of the Company, the outcome of clinical studies,
trends in technology, the future importance of patent protection, the future
availability of raw materials, the anticipated adequacy of the Company's capital
resources to meet its litigation exposures and the other needs of its business
and the ability of the Company to become year 2000 compliant. Readers of this
Report are cautioned that reliance on any forward-looking statement involves
risks and uncertainties. Although the Company believes that the assumptions on
which the forward-looking statements contained herein are based are reasonable,
any of those assumptions could prove to be inaccurate given the inherent
uncertainties as to the occurrence or nonoccurrence of future events. There can
be no assurance that the forward-looking statements contained in this Report
will prove to be accurate. The inclusion of a forward-looking statement herein
should not be regarded as a representation by the Company that the Company's
objectives will be achieved.

                                     PART I
ITEM 1.  BUSINESS.

GENERAL

Biomet, Inc., an Indiana corporation incorporated in 1977 ("Biomet"), and its
subsidiaries design, manufacture and market products used primarily by
orthopedic medical specialists in both surgical and non-surgical therapy,
including reconstructive and fixation devices, electrical bone growth
stimulators, orthopedic support devices, operating room supplies, general
surgical instruments, arthroscopy products, bone cements, bone substitutes,
spinal implants and craniomaxillofacial products and instruments. Biomet has
corporate headquarters in Warsaw, Indiana, and manufacturing and/or office
facilities in more than twenty-five locations worldwide. Biomet markets its
products in the United States through independent commissioned sales
representatives, in Australia, Austria, Belgium, France, Germany, Holland,
Italy, Mexico, New Zealand, Poland, Portugal, Spain and the United Kingdom
primarily through direct sales representatives, and in other international
markets through independent sales representatives and specialty medical product
dealers. Electro-Biology, Inc. ("EBI"), a subsidiary of Biomet, sells electrical
stimulation and external fixation devices through direct factory sales
representatives in the United States and the United Kingdom and through
specialty medical product dealers in the remainder of its markets. Biomet and
its subsidiaries currently distribute products in more than 100 countries.

As more fully described in Note C of the Notes to Consolidated Financial
Statements, effective January 1, 1998, the Company and Merck KGaA, Darmstadt,
Germany ("Merck KGaA") entered into a joint venture agreement to manufacture and
sell orthopedic and biomaterials products in Europe. The Company and Merck KGaA
each contributed its European orthopedic and biomaterials business operations to
a new entity, BioMer C.V. ("BioMer"). The Company controls BioMer and,
accordingly, consolidates the financial statements of BioMer for financial
reporting and reflects Merck KGaA's 50% interest as a minority interest. The
acquisition of BioMer has been accounted for as a purchase and the operating
results of BioMer are consolidated from the date of acquisition.

Unless the context requires otherwise, the term "Company" as used herein refers
to Biomet and all of its subsidiaries.

PRODUCTS

During fiscal year 1998, the Company realigned the reporting of its sales into
four major product groups: reconstructive devices, fixation products, spinal
products and other products. Reconstructive devices include total knee, total
hip and shoulder systems, as well as bone cements and the procedure-specific
instrumentation required to implant the Company's reconstructive systems.
Fixation product sales include internal and external fixation devices,
craniomaxillofacial fixation systems and EBI's electrical stimulation devices
which do not address the spine.  Spinal product sales include EBI's SpF(R)
Spinal Fusion Stimulation System and the SpineLink,(TM) Omega 21(TM) and K2(TM)
spinal fixation systems. The "other product" sales category includes arthroscopy
products, softgoods products, casting materials, general surgical instruments,
operating room supplies and other surgical products such as the Indiana Tome(TM)
Carpal Tunnel Release System. The following table shows the net sales and
percentages of net sales contributed by each of these product groups for each of
the three most recent fiscal years ended May 31, 1998.




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<TABLE>
<CAPTION>

                                                            YEARS ENDED MAY 31,
                                                       (DOLLAR AMOUNTS IN THOUSANDS)
                                       1998                        1997                       1996
                                            PERCENT                     PERCENT                     PERCENT
                                  NET        OF NET           NET        OF NET           NET        OF NET
                                SALES         SALES         SALES         SALES         SALES         SALES
                                -----         -----         -----         -----         -----         -----
<S>                          <C>            <C>          <C>            <C>          <C>            <C>
Reconstructive  Devices      $389,483           60%      $347,762           60%      $323,783           61%

Fixation Products             144,853           22%       132,875           23%       122,819           23%

Spinal Products                35,902            6%        31,426            5%        23,690            4%

Other Products                 81,167           12%        68,284           12%        64,867           12%
                             -------------------------------------------------------------------------------   
Total                        $651,405          100%      $580,347          100%      $535,159          100%
                             -------------------------------------------------------------------------------   
</TABLE>


RECONSTRUCTIVE DEVICES

Reconstructive Devices are used to replace joints which have deteriorated as a
result of disease (principally arthritis and osteoporosis) or injury.
Reconstructive joint surgery involves the modification of the area surrounding
the affected joint and the insertion of one or more manufactured components. The
Company's primary reconstructive joints are the hip, knee and shoulder, but it
also produces other peripheral joints (including the ankle and elbow). In
addition, the Company produces the associated instruments required by the
orthopedic surgeon to implant the Company's Reconstructive Products.

In July 1993, the Company received 510(k) clearance from the United States Food
and Drug Administration ("FDA")  (see "Government Regulation" section for a
general discussion of the regulatory clearance and approval process) for hip and
knee polyethylene components manufactured according to a patented process and
marketed under the trademark, ArCom.(R) ArCom components are machined from
uniform compression molded bar stock manufactured by Biomet, or molded directly
from high molecular weight polyethylene resin. The processes used to mold
devices and manufacture bar stock are designed to maximize mechanical and wear
properties of the polyethylene bearing material. In addition, the finished
components are packaged in argon, an inert gas, to avoid oxidative degradation
during and after sterilization.

     KNEE SYSTEMS. The Maxim(R) Complete Knee System incorporates primary,
posterior stabilized and revision components and competes in the revision
constrained knee market segment, addressing surgical situations where the
surgeon is required to replace a knee that has compromised soft tissue and
instability. The Company also has developed simplified instrumentation for the
implantation of the Maxim Total Knee System components. The Maxim Total Knee
System is the Company's largest selling knee system.

The Company's AGC(R) Total Knee System, with over 10 years of positive clinical
results, is one of the most clinically successful, comprehensive total knee
systems in the orthopedic industry. The AGC Total Knee System consists of cobalt
chromium alloy femoral and tibial components, matching reinforced tibial
components and appropriately sized polyethylene patella components for patellar
resurfacing. AGC components are available either with or without a porous
titanium alloy surface designed to enhance the attachment of bone cement to the
implant surfaces. The Company, with surgeon collaboration, also has developed
surgical techniques and supporting implantation instruments for the AGC and its
other knee systems. These instruments allow for accurate implantation of the
components and improved ligament and tendon balance in the knee following the
surgical procedure.  The Company has expanded its total knee product line to
include the Finn(R) Knee Replacement System. This system offers both resurfacing
and segmental component options in a wide range of sizes to address severe bone
loss due to a previous failure or tumor resections.

The Ascent(TM) Total Knee System, scheduled for release during fiscal year 1999,
incorporates an open box posterior stabilized femoral component with a swept
anterior flange that can accept either a posterior stabilized or constrained
tibial bearing. This system is designed with a deepened patella groove to aid in
enhanced patella tracking and a reduction in lateral release rates. All tibial
bearing surfaces are made from the Company's proprietary ArCom polyethylene for
optimum wear resistance.

The T-1(TM) Ritter Revision Knee Instruments, scheduled for release during
fiscal year 1999, are based on the concept of "trial first." This unique system
provides the surgeon with the ability to reference the position of the patella
for establishment of the joint line prior to the resection of any bone in
revision knee surgery.



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The Trac(R) Mobile Bearing Knee System, which has experienced a successful
launch in Europe, is a unique knee system utilized primarily in total knee
arthroplasty for younger more active patients. The rotating platform design
allows enhanced mobility and increased anatomic flexibility for the patient.
This system is currently involved in clinical studies in the United States.

The Company's offering of knee systems was augmented by the introduction of the
Repicci II(TM) Unicondylar Knee System, the first minimally-invasive knee
arthroplasty procedure of its kind. This system incorporates self-aligning metal
and polyethylene components which can be inserted via an extended arthroscopic
approach. This innovative procedure which can often be performed on an
outpatient basis, requires a smaller incision and less bone removal, which may
result in shorter recovery time and reduced blood loss.

     HIP SYSTEMS. All femoral hip prostheses produced by the Company consist of
a femoral head and stem, which can be cast, forged or machined depending on the
design and material used. Because of variations in human anatomy and differing
design preferences among surgeons, femoral prostheses are manufactured by the
Company in a variety of head sizes, neck lengths, stem lengths, stem
cross-sections and configurations. The Company currently offers several total
hip systems, most of which utilize titanium or cobalt chromium alloy femoral
components and ultra-high molecular weight polyethylene-lined acetabular
components. Many of the femoral prostheses utilize a porous coating which
enhances the attachment of bone cement to the stem, or in a press-fit
configuration, and allows the component's use without bone cement.

Biomet has received clearance under Section 510(k) of the Federal Food, Drug and
Cosmetic Act for many of its porous-coated hip components for cementless use.
These clearances are specifically for noncemented applications in skeletally
mature patients undergoing primary hip replacement surgery as a result of
noninflammatory degenerative joint diseases including osteoarthritis, avascular
necrosis, traumatic arthritis, slipped capital epiphysis, fused hip, fracture of
the pelvis and diastrophic variant.

One of Biomet's largest selling reconstructive systems is the Mallory-Head(R)
Hip Program. The Mallory-Head Hip Program is designed to meet surgeons' needs
for both primary and revision total hip arthroplasty. The primary femoral
components feature a specific proximal geometry for cementless indications and a
slightly different proximal ribbed geometry for those patients requiring
fixation with bone cement. The goal of each of these primary femoral stems is to
ensure proximal loading of the femur to recreate near-normal bone stresses.

The Mallory-Head revision femoral components provide innovative solutions for
difficult revision cases. The long stem revision components feature the primary
proximal finned geometry with additional stem lengths to bridge cortical bone
defects and to provide increased stability. The head/neck porous revision
components feature multiple resection levels to compensate for proximal bone
deficiencies. An optional trochanteric bolt or grip provides additional
rotational stability and implant fixation. In May 1995, the FDA cleared the
Mallory-Head Modular Calcar System for cemented use. This system provides the
surgeon with intraoperative flexibility to independently size the proximal and
distal femur with the appropriate implant size and shape, even in cases of
severe bone deficiency. This is accomplished by using interchangeable modular
subcomponents.

The Alliance(R) family is designed to address the growing trend toward
standardization of total hip systems within hospitals and across surgeon groups.
The Alliance family provides the largest selection in the marketplace of primary
and revision stems available for implantation with a single set of
instrumentation. The Alliance family includes the Integral,(R) Bi-Metric,(R)
Answer,(R) Hip Fracture(TM), Rx90,(R) Osteocap rs(R) and Progressive(TM) Hip
Systems. During fiscal year 1999, the Company plans to introduce an improved
instrumentation system for the Alliance family.

The Company is currently involved in a clinical trial with a metal-on-metal
total hip system. This hip system combines a cobalt chrome head with a cobalt
chrome liner to produce a total hip system that could potentially demonstrate
less wear debris than conventional systems.

     SHOULDER SYSTEMS. During fiscal year 1997 the Company received 510(k)
clearance for the Bi-Angular(R)/Bi-Polar Shoulder System. The Bi-Polar humeral
head is marketed for use in primary cases of noninflammatory degenerative joint
disease, rheumatoid arthritis, correction of severe functional deformity and
fracture. The Bi-Angular(R)/Bi-Polar Shoulder System was introduced in February
1997 and is the only FDA-cleared Bi-Polar Shoulder in the United States.

The Integrated(TM) Shoulder System offers surgeons a wide variety of
reconstructive products.   As part of the Integrated Shoulder System, the
Atlas(R) Modular shoulder prosthesis was introduced during fiscal year 1996 to
further augment the surgeon's ability to match the prosthesis to the individual
patient. This device incorporates a modular stem as well as a modular head to
reduce the inventory required to support a shoulder procedure. Since its
introduction in 1987, the Bio-Modular(R) Total Shoulder System has proven to be
clinically effective and versatile. This system was designed to simplify the
shoulder  replacement procedure and surpass the durability and clinical outcome
requirements of previous designs.



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     OTHER RECONSTRUCTIVE DEVICES. Biomet's Patient-Matched Implant ("PMI(R)")
services group expeditiously designs, manufactures and delivers one-of-a-kind
reconstructive devices to orthopedic specialists. The Company believes this
service continues to enhance Biomet's reconstructive sales. In order to assist
orthopedic surgeons and their surgical teams in preoperative planning, Biomet's
PMI group utilizes a three-dimensional ("3-D") bone and soft tissue
reconstruction imaging system. A patented technology owned by the Company
allows the use of CT data to produce 3-D reconstructions for the design and
manufacture of patient-matched implants. With this imaging technology, Biomet's
PMI group is able to assist the physician, prior to surgery, by creating
electronic 3-D models. Within strict deadlines, the model is used by engineers
to create a PMI design for the actual manufacturing of the custom implant for
the patient. Biomet continues to advance the application of imaging technology
for the design and production of reconstructive devices for various joints in
the body.

During fiscal year 1999, the Company plans to introduce two new elbow systems.
The first, the iBP(TM) Elbow System, is an updated version of the Kudo(R) Elbow
that has experienced success in Europe. The new design is a non-linked,
semi-constrained elbow system that enhances the preservation of bone in the
distal humerus. The second, the Bi-Axial(TM) Elbow System, incorporates a unique
"chain link" dual articulation design that is useful in primary, salvage and
revision cases.

The Company is involved in a variety of research projects involving bone cements
and delivery systems. Currently, the Company sells bone cements only in Europe.

FIXATION PRODUCTS

Fixation Products include external fixation devices, electrical stimulation
devices that do not address the spine, craniomaxillofacial fixation systems,
internal fixation devices, and bone substitute materials.

     EXTERNAL FIXATION DEVICES. During fiscal year 1996, EBI launched a
proprietary external fixation system, the EBI-X-FIX(R) DynaFix(R) External
Fixation System. Market acceptance of the DynaFix System has been extremely
positive, and it is currently the leading external fixation system in the
United States. The DynaFix System is a patented device which is utilized in
complicated trauma situations and in certain limb lengthening applications.

The DynaFix(R) Hybrid Ring Fixator, introduced during fiscal year 1998, is
designed for use in fractures surrounding joints that require small fragment
fixation. This product is EBI's introductory development of a ring fixation
product for use close to the joint. Another new product which addresses this
small joint market is the BioSymMetRic(TM) PIP Fixator. This simple, low profile
external fixator for finger joints provides static or dynamic fixation.

     ELECTRICAL STIMULATION DEVICES. EBI is the market leader in the electrical
stimulation segment of the fixation market. The EBI Bone Healing System(R) is a
non-invasive device used in the treatment of recalcitrant bone fractures
(nonunions) which have not healed with conventional surgical and non-surgical
methods. For clinical purposes, the FDA has defined a "nonunion" as a case in
which no radiographic progression has been seen for three months. The
non-invasive devices sold by EBI generally provide an alternative to surgical
intervention in the treatment of recalcitrant bone fractures, failed joint
fusions and congenital pseudoarthrosis.

The EBI Bone Healing System produces low-energy pulsed electromagnetic field
("PEMF") signals that induce weak pulsing currents in living tissues exposed to
the signals. These pulses, when suitably configured in amplitude, repetition
rate and duration, affect bone cells. EBI's non-invasive stimulator has two
components: treatment heads and a control unit. The treatment heads contain
electrical coils and are connected to the control unit. The control unit
transforms household current or battery power into a predetermined sequence of
pulsed currents that are induced into the fracture site through the treatment
heads which may be placed over a patient's cast, incorporated into the cast, or
worn over the skin.

The Model 1200 Bone Healing System utilizes household current, or a rechargeable
power supply, and allows for complete patient ambulation during treatment. This
model usually incorporates the treatment coil into the patient's cast or the
coil can be worn over the skin if required. The coil design is capable of
treating the vast majority of nonunion fracture locations. The device can be
pre-programmed as to duration of daily treatment and for patient compliance
history. The Model 1200 Bone Healing System is a light-weight, smaller and
easier to use unit, which was designed to encourage patient compliance and
enhance clinical success. EBI intends to introduce the Bone Healing System Model
2100, a newly designed compact model, during fiscal year 1999.

EBI also manufactures the FLX(R) Flexible Treatment Coils for use with the EBI
Bone Healing System. The FLX Flexible Treatment Coils are extremely lightweight
and provide a slim profile that enhances patient comfort and compliance during
bone healing treatment regimens. When used conjunctively with the EBI Bone
Healing System, the FLX Flexible Treatment Coils afford higher bone healing
success rates. Additionally, EBI offers a series of coils to address shoulder,
foot, ankle, clavicle and metatarsal site applications and an elliptical coil to
be used with external fixation systems.


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     CRANIOMAXILLOFACIAL FIXATION SYSTEMS.  The Company manufactures and
distributes craniomaxillofacial and neurosurgical titanium implants, along with
associated surgical instrumentation, principally marketed to
craniomaxillofacial, neurosurgical and craniofacial surgeons through its
subsidiary, Walter Lorenz Surgical, Inc. ("Lorenz Surgical"). Lorenz Surgical
offers exodontia instruments, Hard Tissue Replacement Polymer Facial Implants
and custom craniofacial implants, as well as electric powered surgical drills
and saws for use in craniomaxillofacial and small bone surgery. Lorenz Surgical
also manufactures and markets resorbable plate and screw systems for
craniomaxillofacial surgery in the United States, the European community, the
Pacific Rim, Canada, South America and South Africa.

The LactoSorb(R) Craniomaxillofacial Fixation System is a copolymer of
poly-L-lactic acid and polyglycolic acid. As a result of its innovative design,
the LactoSorb System is comparable in strength to titanium plating systems and
is completely resorbed within nine to fifteen months after implantation. The
initial market response for the LactoSorb System has been positive, especially
in pediatric and craniofacial reconstruction cases.

Lorenz Surgical is in the process of developing a comprehensive dental implant
system with a proprietary design. Lorenz Surgical expects to introduce its
dental implant system by the end of fiscal year 1999. A dental implant system is
a small titanium screw or cylinder that is surgically placed directly into the
jaw and serves as a foundation for a replacement tooth. Dental implants permit
patients to regain most of the functionality of their natural teeth.

     INTERNAL FIXATION DEVICES.  The Company's fixation devices include
internal bone fixation devices such as nails, plates, screws, pins and wires
designed to temporarily stabilize traumatic bone injuries. These devices are
used by orthopedic surgeons to provide an accurate means of setting and
stabilizing fractures. These implants are intended as aids to healing and may
be removed when healing is completed; they are not intended to replace normal
body structures.

The Uniflex(R) Nailing System, which is the Company's largest selling internal
fixation system, addresses a wide range of fractures utilizing one product
system. The Uniflex Femoral Nailing System is used for internal fixation of
femoral fractures. The flexibility of the system enhances the load transfer to
the bone to further aid in the healing of the fracture. The Uniflex Nailing
System also includes tibial and humeral nailing systems. In addition, the
S.S.T.(R) small bone locking nail and the Vector(R) Intertrochanteric Nail, a
compression nailing system, enhance the Company's intramedullary fracture
fixation family. The Biomet(R) Retrograde Femoral Nail is a clinical option for
femoral fractures that occur below mid-shaft, while the Retrograde Humeral Nail,
introduced during fiscal year 1998, provides an option for distal and/or
mid-shaft humeral fractures without violating the rotator cuff.

The Compression Hip Screw System was designed to provide strong and stable
internal fixation for a variety of intertrochanteric, subtrochanteric and
basilar neck fractures. The Company plans to introduce the Vari-Angle Hip Screw
(VHS(TM)) during fiscal year 1999. This unique compression hip screw will allow
the hospital to carry less inventory, while providing greater intraoperative
selection of optimum fixation angle. The BMP(TM) Cable and Cable Plate System
is used intraoperatively, often as part of revision hip surgery, to reduce the
risk of fracture or to repair existing femoral fractures. System specific
instrumentation for the BMP Cable System is precise and allows reproducible
results.

     BONE SUBSTITUTE MATERIALS.  The Company is engaged in two separate bone
substitute material projects through its subsidiary, BioMer. The first,
Endobon(TM), is a bovine-derived material with interconnecting porosity
available in indication-specific shapes. This material is free of organic
components due to the sintering process which converts it into a non-resorbable
ceramic material which is stable long-term after implantation. Endobon has
regulatory approval in Europe and was recently approved for certain dental
indications in the United States. The second, Biobon,(TM) is a totally
synthetic calcium phosphate material with a composition similar to the mineral
phase of bone. This compound sets by an endothermic reaction at 37 degree
Celcius in moist surroundings to form a solid material which is gradually
resorbed and replaced by natural bone within three months. BioMer plans to
launch this product in Europe during fiscal year 1999.

SPINAL PRODUCTS

Spinal Products include EBI's SpF(R) Spinal Fusion Stimulation System and the
SpineLink(TM) and Omega 21(TM) Spinal Fixation Systems.

     SPINAL FUSION STIMULATION SYSTEM.  Invasive electrical stimulation devices
provide an adjunct to surgical intervention in the treatment of nonunions and
spinal fusions. Spinal fusions are surgical procedures undertaken to establish
bony union between adjacent vertebrae. EBI's SpF(R) Implantable Spinal Fusion
Stimulators are used in conjunction with bone grafting to increase the
probability of fusion success.  EBI's SpF-2, a two lead implantable spinal
fusion stimulator, allows EBI to offer orthopedic surgeons the SpF spinal
fusion technology for the growing posterior lateral procedure market. Another
SpF product, the SpF-T Implantable Spinal Fusion Stimulator, incorporates a
telemetry device which emits a signal to allow device monitor-

* VHS is a trademark of AVR Orthopedics, Ltd.

                                       5

<PAGE>   7
ing after implantation. The compact design of the SpF-T provides easier surgical
implantation and explantation while increasing patient comfort. EBI's SpF-XL, is
designed to address multilevel fusions of 3 to 5 levels. The XL has longer leads
and delivers 40 micro amps of output. In fiscal year 1996, the XL line was
expanded to include the SpF-XLII which provides the same benefits as the XL, in
a two lead configuration. The implantable devices consist of a generator
providing a constant direct current to a titanium cathode placed where bone
growth is required. Over the years EBI has developed new techniques and device
modifications for the SpF product line to address the anterior and posterior
lumbar interbody fusion market segments. More than 70,000 SpF spinal fusion
stimulation systems have been used successfully since this product was
introduced in 1987.

     SPINAL FIXATION SYSTEMS.  During fiscal year 1998, EBI introduced the
SpineLink(TM) Spinal Fixation System that addresses many of the inherent
drawbacks of traditional rod and plate systems. With the SpineLink System, each
spine segment is addressed individually for intrasegmental control. Through the
use of a modular titanium link and polydirectional screw, this unique system
provides an intrasegmental solution to spine fixation, enabling the surgeon to
tailor the segmental construction to the patient's anatomy. The SpineLink
optimizes accessibility to the bone graft site while increasing the volume of
graft that can be used in spinal fusion surgery. During the third quarter of
fiscal year 1998, EBI received 510(k) clearance from the FDA to market the
SpineLink Cervical Fixation System addressing the cervical region of the spine.
This system is scheduled for full release during fiscal year 1999.

During fiscal year 1999, EBI plans to introduce the Omega 21(TM) Spinal Fixation
System in the United States. This system will round out EBI's domestic spinal
fixation product line by offering its customers a traditional rod and screw
system.

OTHER PRODUCTS

The Company also manufactures and distributes several other products including
arthroscopy products, orthopedic support devices  (also referred to as
softgoods), operating room supplies, casting materials, general surgical
instruments and other surgical products such as the Indiana Tome(TM) Carpal
Tunnel Release System. AOA, a division of EBI,  manufactures and distributes its
own extensive line of orthopedic support products. The Company manufactures and
markets a line of arthroscopy products through its Arthrotek, Inc. ("Arthrotek")
subsidiary.

The Indiana Tome(TM) Carpal Tunnel Release System is an innovation in carpal
tunnel surgery. This patented system combines the best aspects of both the
minimally invasive endoscopic approach and the traditional open procedure.
Biomet's offering of hand products will be expanded during fiscal year 1999 with
the introduction of the Trigger Finger Release Knife. This advancement enables
the procedure to be performed through a 2mm incision under local anesthesia.

EBI began distribution of its line of controlled cold therapy units during
fiscal year 1996.  EBIce(R), the first disposable and portable controlled cold
therapy product offered by the Company, is used to aid in the reduction of
postoperative pain, edema and blood loss.

     ARTHROSCOPY PRODUCTS.  Arthroscopy is a less-invasive orthopedic surgical
procedure in which an arthroscope is inserted through a small incision to allow
the surgeon direct visualization of the joint. This market is comprised of five
product categories: power instruments, manual instruments, visualization
products, soft tissue anchors and procedure-specific instruments and implants.
Arthrotek's principal products consist of the Harpoon(R) Soft Tissue Anchor
System, the IES(R) 1000 System, the PowerPump(R) 800, the Tunneloc(R) ACL
Fixation System and manual instruments including the BackBiter(R) forceps
instrument. The IES 1000 System is a fully-integrated arthroscopy system
consisting of a camera, light source, shaver, pump, monitor, printer and VCR
contained in a pre-wired cart. The PowerPump 800 provides the ability for
surgeons to independently control flow and pressure and use the pump in
conjunction with other arthroscopy shaver systems. The Tunneloc System was
augmented with the Bone Mulch(TM) Screw and the Washerloc(TM) Tibial Fixation
System released in fiscal year 1997.

     ORTHOPEDIC SUPPORT DEVICES.  The Company produces an extensive line of
standard orthopedic support devices, many of which are sold under the CTN(R)
and START(R) trademarks. These devices include elbow, wrist, abdominal, thigh
and ankle supports, in addition to a wide variety of knee immobilizers and
braces. The CTN product line primarily addresses the sports medicine market.
CTN compression wraps with Soft-Ice(R) are used in compression cold-therapy
treatment, both post-operative and during rehabilitation. The Company also
distributes the Active Ankle,(R) a unique ankle stirrup brace which addresses
the sports rehabilitation market.

EBI distributes a line of orthopedic support devices under the AOA(R) name,
including traction framing equipment, back supports, wrist and forearm splints,
cervical collars, shoulder immobilizers, slings, abdominal binders, knee braces
and immobilizers, rib belts, ankle supports and a variety of other orthopedic
splints.


Soft-Ice is a registered trademark of Polar Products, Inc.
Active Ankle is a registered trademark of Active Ankle Systems, Inc.


                                       6

<PAGE>   8

     OPERATING ROOM SUPPLIES.  The Company's principal products in the
operating room supplies category are surgical suction devices, filters, glove
liners and drapes. The Redi-Vacette(R) Closed Wound Suction System provides
post-operative wound suction drainage following orthopedic and nonorthopedic
surgical procedures. The Redi-Flow(R) Filter automatically strains the flow of
body liquids during surgery. The filter collects fine bone chips and tissue for
subsequent pathological evaluation and saves operating room time by reducing
suction clogs in surgical procedures. The Redi-Drape(R) protects the sterile
operating field from contamination, and provides a drainage bag and built-in
instrument pouches to assist the surgeon.

     CASTING MATERIALS.  EBI introduced the SynthoCast(R) HP high performance
casting tape during fiscal year 1998. This casting material is lighter,
stronger and more comfortable than conventional plaster products. The
SynthoCast tape offers pre-cut splints on a roll which saves time, controls
waste and improves the convenience for the patient and physician. EBI
manufactures and distributes a variety of casting products for use in the
application and removal of orthopedic casts and splints. Included in these
products are both synthetic casting tape and synthetic splints fabricated using
an advanced fiberglass/polyester substrate material impregnated with a polymer
resulting in casting and splinting products that are lightweight, high strength
and available in a variety of colors.

PRODUCT DEVELOPMENT

For the years ended May 31, 1998, 1997 and 1996, the Company expended
approximately $36,120,000, $23,201,000 and $24,054,000, respectively, on
research and development. As more fully described in Note C of the Notes to
Consolidated Financial Statement, the research and development expense for
fiscal year 1998 includes a one-time $9.8 million charge for acquired in-process
research and development. It is expected that on-going research and development
expenses will continue to increase. The Company's principal research and
development efforts relate to its reconstructive devices, electrical stimulation
products, spinal fixation products, revision products, arthroscopy products,
resorbable technology, bone cements and bone substitute materials. The Company's
primary research and development facilities are located in Warsaw, Indiana and
Darmstadt, Germany.

The Company's research and development efforts contributed to the introduction
in fiscal year 1998 of the following products: Reach(TM) Revision Hip System,
Progressive(TM) Primary Anteverted Hip Stem, T-1(TM) Ritter Revision Knee
Instrumentation, Maxim(R)  Simplified Instrumentation System and the
Bio-Modular(R) 3-Peg Glenoid component. During fiscal year 1999, the Company
intends to release the following products: Silhouette(R) Cemented Hip System,
improved instrumentation for the Alliance family, the Recovery(R) Protrusio
Cage, the Ascent(TM) Total Knee System and the Bi-Metric(R) Modular Revision Hip
System.

EBI conducts a program of research and development intended to maintain its
proprietary position and to expand the range of conditions treatable with its
electrical stimulation products. This program includes clinical investigations
and funding of basic research to study cells and simple biological systems.
Typically, EBI receives proprietary rights with respect to the data developed as
the result of research it sponsors.

In July 1991, the Company and United States Surgical Corporation ("U.S.
Surgical") entered into a cooperative effort to develop and market a line of
state-of-the-art bioresorbable orthopedic and oral-maxillofacial implants. On
March 15, 1996, that effort was terminated by a mutual agreement under the terms
of which each of the parties retains the right to pursue the technologies
developed during their joint efforts. The Company and U.S. Surgical have agreed
not to sell products that incorporate the type of resorbable materials used
during the cooperative effort in the orthopedic and oral-maxillofacial markets,
respectively, until March 15, 1999. After that time, Biomet plans to market
resorbable orthopedic products designed for the repair of the meniscus, shoulder
and ligament.

GOVERNMENT REGULATION

The development, testing, marketing and manufacture of medical devices - such as
arthroscopy, reconstructive, electrical stimulation and internal fixation
devices - are regulated under the Medical Device Amendments of 1976 to the
Federal Food, Drug and Cosmetic Act (the "1976 Amendments") and additional
regulations promulgated by the FDA. In general, these statutes and regulations
require that manufacturers adhere to certain standards designed to ensure the
safety and effectiveness of medical devices.

Under the 1976 Amendments, each medical device manufacturer must be a
"registered device manufacturer" and must comply with regulations generally
applicable to labeling, quality assurance, manufacturing practices and clinical
investigations involving humans. The FDA is authorized to obtain and inspect
devices, their labeling and advertising, and the facilities in which they are
manufactured in order to assure that a device is not improperly manufactured or
labeled. Biomet, EBI, Lorenz Surgical and Arthrotek are registered with the FDA.



                                       7

<PAGE>   9
In addition, the sale and marketing of medical devices are regulated by the FDA
under the 1976 Amendments, which classify medical devices based upon the degree
of regulation deemed appropriate and necessary. A device is classified as a
Class I, II or III device based on recommendations of advisory panels appointed
by the FDA. Class I devices are subject only to general controls. Class II
devices, in addition to general controls, are subject to additional controls.
Class III devices, including most devices used or implanted in the body, require
FDA premarket approval before they may be distributed other than in clinical
trials.

The Company's reconstructive and trauma products are regulated as Class II or
Class III medical devices. The Company's spinal fixation systems are regulated
as Class II devices. The Company's electrical stimulation products are regulated
as Class III medical devices. The procedure for obtaining approval to
commercially market a device involves the submission of a premarket notification
under Section 510(k) of the 1976 Amendments. If the FDA determines that the
device is substantially equivalent to a pre-enactment device or to a device
subsequently classified in Class I or Class II, it will grant clearance to
commercially market the device. If the FDA determines the device is not
substantially equivalent to a pre-enactment device, it is automatically placed
into Class III, and will either require reclassification or the submission of
valid scientific evidence to prove the device is safe and effective for human
use. For Class III devices, in order to conduct clinical trials the manufacturer
must submit to the FDA an application for an Investigational Device Exemption
("IDE"). An approved IDE exempts the manufacturer from certain otherwise
applicable FDA regulations and grants approval for a clinical investigation, or
human study, to generate clinical data to prove safety and efficacy. In
addition, the possibility exists that certain devices marketed prior to 1976, or
devices substantially equivalent thereto, may be placed into Class III by the
FDA. In this event, the manufacturer will be required to submit proof of safety
and efficacy for these devices within 30 months of the Class III determination.

When a manufacturer believes that sufficient clinical data has been generated to
prove the safety and efficacy of the device, it may submit a premarket approval
application ("PMA") to the FDA. The FDA reviews the PMA and determines whether
it is in fileable form and all key elements have been included. Following
acceptance of the PMA, the FDA continues its review process which includes
submission of the PMA to a panel of experts appointed by the FDA to review the
PMA and to recommend appropriate action. The panel then recommends that the PMA
be approved, not approved or approved subject to conditions. The FDA may act
according to the panel's recommendations, or it may overrule the panel. In
approving a PMA, the FDA may require some form of post-market surveillance
whereby the manufacturer follows certain patient groups for two or more years,
making periodic reports to the FDA.

The Safe Medical Device Act of 1990 (the "1990 Act") affects medical device
manufacturers in several areas, including post-market surveillance and device
tracking procedures. The 1990 Act was the first major change to the Federal
Food, Drug and Cosmetic Act since the 1976 Amendments. The 1990 Act gave the FDA
expanded emergency recall authority, required that a summary be made available
of the safety and effectiveness in the 510(k) process and added design
validation as a requirement of Good Manufacturing Practices. The 1990 Act also
granted the FDA the authority to require manufacturers to conduct post-market
surveillance on most permanent implants and devices that potentially present a
serious risk to human health. Management does not believe the 1990 Act has had a
material adverse effect on the Company or its operations.

On November 21, 1997 the FDA Modernization Act (the "Modernization Act") was
signed into law. The Modernization Act amended the Food, Drug and Cosmetic Act
in an effort to streamline the process of bringing safe and effective drugs,
medical devices and other therapies to the United States market. With respect to
medical devices, the Modernization Act requires the FDA to focus its resources
on the regulation of those devices that pose the greatest risk to the public and
offer the most significant benefits. The FDA must base its decisions on clearly
defined criteria and provide for appropriate interaction with the regulated
industry. The Modernization Act assumes an enhanced collaboration between the
FDA and the regulated industry will accelerate the introduction of safe and
effective devices to the United States marketplace. At this time, management is
not able to determine the effect, if any, the Modernization Act will have on the
time required to obtain FDA approval of its products.

The Company is well-positioned to face the changing international regulatory
environment. The ISO 9000 series of standards are an internationally recognized
set of standards aimed at ensuring the design and manufacture of quality
products. A company that has passed an ISO audit and obtained ISO registration
is internationally recognized as having quality manufacturing processes. The
European Union now requires that medical products bear a CE mark. The CE mark is
an international symbol which indicates that the product adheres to European
Medical Device Regulations. ISO 9000 certification is a requirement for
obtaining the CE mark on most of the Company's products. The Company's
facilities in Warsaw, Indiana; Fairlawn, New Jersey; Parsippany, New Jersey;
Jacksonville, Florida; Guaynabo, Puerto Rico; and Ontario and Redding,
California in the United States as well as the facilities in Germany, Spain,
France and the United Kingdom are authorized to place the CE mark on their
products.


                                       8


<PAGE>   10

SALES AND MARKETING

Reconstructive devices are distributed in the United States through
approximately 380 independent commissioned sales representatives
("distributors") and sales associates engaged principally in the business of
supplying orthopedic products to hospitals in their geographic areas. A few of
these distributors have formal contractual arrangements with Biomet which limit
Biomet's right to terminate the distributor and provide certain long-term
benefits to the distributor upon termination.

EBI and AOA products are distributed in the United States through EBI's
wholly-owned subsidiary, EBI Medical Systems, Inc. ("EBIMS"), a Delaware
corporation with offices in Parsippany, New Jersey. EBIMS maintains a direct
sales force of approximately 250 people which operates in assigned territories
throughout the United States. EBI and AOA products are also distributed through
a growing distribution network in Central and South America, Canada, Asia and
Europe.

Lorenz Surgical products are distributed in the United States through
approximately 75 independent commissioned sales representatives and sales
associates engaged principally in the business of supplying craniomaxillofacial
products and surgical instruments to hospitals and surgeons in their geographic
areas. Additionally, Lorenz Surgical supplies a full-line of surgical hand-held
instruments for sale through the Biomet distributor network. Lorenz Surgical
products are marketed internationally through a growing network of distributors
and sales representatives throughout Europe, Asia, Africa, Canada, and Central
and South America.

Elective surgery-related products appear to be influenced to some degree by
seasonal factors, as the number of elective procedures decline during the
summer months and the holiday seasons.

The Company's customers are the hospitals, surgeons, other physicians and
healthcare providers who employ its products in the course of their practices.
The business of the Company is dependent upon the relationships maintained by
its distributors and salespersons with these customers as well as the Company's
ability to design and manufacture products which will meet the physicians'
technical requirements at a competitive price.

The Company's products are marketed primarily through direct sales
representatives in Australia, Austria, Belgium, France, Germany, Holland,
Italy, Mexico, New Zealand, Poland, Portugal, Spain and the United Kingdom and
through independent sales representatives and specialty medical product dealers
in other international markets.  The Company's products are distributed in
approximately 100 countries worldwide.

For the fiscal years ended May 31, 1998, 1997 and 1996, the Company's foreign
sales were approximately $187,378,000, $154,825,000, and $138,452,000,
respectively, or 29%, 27%, and 26% of net sales, respectively. Additional data
concerning operating income and identifiable assets by geographic areas are set
forth in Note J of the Notes to Consolidated Financial Statements included in
Item 8 of this Report.

The Company consigns inventory to its United States distributors and direct
salespersons for their use in marketing its products and in filling customer
orders. The Company also consigns inventory to hospitals in Australia, Austria,
Belgium, France, Germany, Holland, Italy, Mexico, New Zealand, Poland,
Portugal, Spain and the United Kingdom. As of May 31, 1998, inventory of
approximately $57,775,000 was consigned to these distributors, salespersons and
hospitals.

Under Title VI of the Social Security Amendments of 1983 (the "1983
Amendments"), hospitals receive a predetermined amount of Medicare
reimbursement for treating a particular patient based upon the patient's type
of illness identified with reference to the patient's diagnosis under one or
more of several hundred diagnosis-related groups ("DRGs"). Other factors which
affect a specific hospital's reimbursement rate include the size of the
hospital, its teaching status and its geographic location. The Prospective
Payment Assessment Commission acts for Congress in evaluating, redefining and
adjusting DRGs to encompass technology changes and efficiencies experienced by
hospitals. Biomet products are primarily covered by DRG 209 (Major Joint and
Limb Reattachment Procedures) and DRG 210 (Hip and Femur Procedures). The 1983
Amendments have not adversely affected the Company's reconstructive device or
electrical stimulation business, however, the future impact of these amendments
can not be estimated at the present time.

Biomet's Health Care Initiatives Department ("HCI") is dedicated to providing
"value-added" programs and services to assist Biomet's customers as they
address today's highly competitive environment. These programs and services are
designed to assist orthopedic surgeons and hospitals to improve the quality of
patient care, reduce cost, improve efficiency and improve patient and staff
satisfaction. HCI plans to continue to enhance these programs and create new
programs to increase the efficiencies of  the Company's customers.



                                       9

<PAGE>   11


COMPETITION

The business of the Company is highly competitive. Approximately seven other
manufacturers offer reconstructive devices which compete with the Company's
products. Major companies in this industry include Zimmer, Inc., a subsidiary
of Bristol-Myers Squibb Company; Howmedica, Inc., a subsidiary of Pfizer, Inc.;
DePuy, Inc.; Smith & Nephew, Inc.; Osteonics, Inc., a subsidiary of Stryker
Corporation; Johnson & Johnson Orthopaedics, Inc., a subsidiary of Johnson &
Johnson; and Intermedics Orthopedics, Inc., a division of Sulzermedica.
Management believes these seven companies, together with Biomet, have the
predominant share of the orthopedic implant market. Competition within the
orthopedic implant industry is primarily on the basis of service and product
design, although price competition has become increasingly important in recent
years as the orthopedic industry matures and as providers have become more
concerned with health care costs. At the present time, price is an important
factor in the sale of generic internal fixation devices, orthopedic support
devices and operating room supplies. In addition, health care providers
increasingly limit the use of higher-cost reconstructive devices to younger,
more active patients. Biomet's prices are at approximately the same or slightly
lower levels as those of its major competitors. In recent years the Company has
experienced pricing pressure for its products, however, the Company believes
that the pricing environment is beginning to stabilize and we foresee an
environment that will once again focus on quality of care. The Company believes
its future success will depend upon its service and responsiveness to
distributors and orthopedic specialists, and upon its ability to design and
market innovative products which meet the needs of the marketplace.

EBI's spinal fixation systems compete with those of Sofamor Danek Group, Inc.
and AcroMed Corporation, a subsidiary of DePuy, Inc.

EBI's external fixation devices compete with other external fixation devices
primarily on the basis of ease of application and clinical results. EBI's
principal competitors in the external fixation market are Smith & Nephew Inc.;
Howmedica, Inc., a subsidiary of Pfizer, Inc. and Orthofix, Inc. (see Item 3. -
Legal Proceedings). The Company's fixation product lines compete with those of
ACE Orthopedics, a division of DePuy, Inc.; Zimmer, Inc., a subsidiary of
Bristol-Myers Squibb Company; Smith & Nephew Inc. and Synthes USA.

Lorenz Surgical primarily competes in the surgical instrumentation and
craniomaxillofacial markets. Its competitors include Synthes USA;
Howmedica-Leibinger, a subsidiary of Pfizer, Inc.; ACE Surgical Supply Company,
Inc. KLS-Martin, L.P. and Hu-Friedy Dental.

EBI's electrical stimulation products compete with conventional surgical
procedures and non-invasive electrical stimulation devices manufactured by
others. EBI has the predominant share of the bone growth stimulation market.
Other companies offering products in the electrical stimulation market include
Orthofix, Inc., (formerly American Medical Electronics, Inc.) a subsidiary of
Orthofix International N.V.; Biolectron, Inc.; OrthoLogic Corp. and Exogen, Inc.
Competition in the electrical stimulation market is on the basis of product
design, service and success rates of various treatment alternatives. EBI's
non-invasive stimulators offer advantages over conventional surgery or invasive
products in that their use eliminates hospital, surgeon and operating room
costs, and these products can be used in the presence of infection without
creating a risk of additional infection. EBI's invasive stimulators offer the
advantage of conformance to surgical practice and do not require patient
compliance.

Arthrotek products compete in the areas of power instruments, visualization
products, accessories and manual instruments. Competitors include Linvatec
Corp., a subsidiary of CONMED Corporation; Stryker Corporation; Smith & Nephew
Endoscopy, a division of Smith & Nephew Inc.; Arthrex, Inc.; Olympus; Richard
Wolf and Karl Storz.

RAW MATERIALS AND SUPPLIES

The raw materials used in the manufacture of Biomet products are principally
nonferrous metallic alloys, stainless steel, polyethylene powder and fabrics.
With the exception of cobalt alloy and polyethylene powder, none of Biomet's
raw material requirements are limited to any material extent by critical supply
or single origins. Biomet purchases its cobalt alloy from two outside suppliers
and is aware of at least three additional suppliers of cobalt alloy. With
respect to polyethylene powder, suppliers of this material have become
increasingly concerned because of perceived product liability exposures in the
medical device industry. However, based upon Biomet's present relationship with
such suppliers, a material shortage of polyethylene powder is not anticipated
in the foreseeable future.  EBI purchases all components of its electrical
stimulators from approximately 250 outside suppliers, approximately 15 of whom
are the single source of supply for their particular product. In most cases,
EBI believes that all components are replaceable with similar components. In
the event of a shortage, there are alternative sources of supply available for
all components, but some time would likely elapse before EBI's orders could be
filled. The results of the Company's operations are not materially dependent on
raw material costs.




                                       10
<PAGE>   12

EMPLOYEES

As of May 31, 1998, the Company's domestic operations (including Puerto Rico)
employed approximately 2,000 persons, of whom approximately 1,200 were engaged
in production and approximately 800 in sales, marketing, administrative and
clerical efforts. The Company's international subsidiaries employed
approximately 1,100 persons, of whom approximately 460 were engaged in
production and approximately 640 in sales, marketing, administrative and
clerical efforts. None of the Company's principal domestic manufacturing
employees are represented by a labor union. The production employees at its
Bridgend, South Wales, facility are organized. Employees working at the
facilities in Darmstadt and Berlin, Germany; Valence, France; and Valencia,
Spain are represented by statutory Workers' Councils which negotiate labor
hours and termination rights. The Workers' Councils do not directly represent
such employees with regard to collective bargaining of wages or benefits. The
Company believes that its relationship with all of its employees is
satisfactory. The establishment of Biomet's domestic operations in north
central Indiana, near other members of the orthopedic industry, provides access
to the highly skilled machine operators required for the manufacture of Biomet
products. The Company's European manufacturing locations in South Wales,
England, France, Spain, and Germany, also provide good sources for skilled
manufacturing labor. EBI's Puerto Rican operations principally involve the
assembly of purchased components into finished products using skilled labor.

PATENTS AND TRADEMARKS

As a result of the rapid development of reconstructive products, patents
historically have not been a major factor in the orthopedic industry. However,
as the industry matures, patents and other forms of intellectual property are
taking on increased importance. Accordingly, management has placed greater
significance on patents and is taking steps to increase its acquisition of
intellectual property rights. In addition, management is actively enforcing its
intellectual property rights consistent with strategic objectives.

BIOMET, EBI, W'. LORENZ, AOA, and ARTHROTEK are the Company's principal
registered trademarks in the United States, and federal registration has been
obtained or is in process with respect to various other trademarks associated
with the Company's products. The Company holds or has applied for registrations
of various trademarks in its principal foreign markets.





                                       11
<PAGE>   13

ITEM 2.  PROPERTIES.

The Company has the following properties:

<TABLE>
<CAPTION>

FACILITY                                                     LOCATION                             SQUARE FEET OWNED/LEASED
                                                                                                                              
<S>                                                          <C>                                 <C>                   <C>
Principal manufacturing facility, distribution center        Warsaw, Indiana                      340,000              Owned 
and executive offices of Biomet

Manufacturing facility of Biomet                             Fair Lawn, New Jersey                 40,000              Owned

Office and manufacturing facility of EBI                     Guaynabo, Puerto Rico                 34,700              Owned

Marketing and sales operations                               (1) Parsippany, New Jersey            63,000              Owned
of EBIMS and administrative offices of EBI                   (2) Parsippany, New Jersey           126,000              Owned

Manufacturing facility of EBIMS                              Parsippany, New Jersey                45,000              Owned

Manufacturing facilities of EBI                              (1) Marlow, Oklahoma                  30,000              Owned
                                                             (2) Delray Beach, Florida              8,000              Leased

Administrative, manufacturing and distribution facility      Jacksonville, Florida                 82,500              Owned
of Lorenz Surgical

Office and manufacturing facilities                          (1) Ontario, California               35,400              Owned
of Arthrotek                                                 (2) Redding, California                6,300              Leased

Office manufacturing and warehouse facility of               Indianapolis, Indiana                 16,000              Leased
Catheter Research Institute, Inc.

Office and warehouse facility of Biomet                      Australia                              9,100              Leased
Australia Pty. Ltd.

Office and warehouse facility of Biomet Canada, Inc.         Ontario, Canada                        3,500              Leased

Manufacturing and administrative                             (1) Bridgend, South Wales             85,700              Owned
facilities of Biomet Merck Ltd.                              (2) Swindon, England                  53,400              Owned

Office and warehouse facility of Biomet Mexico S.A. de C.V.  Mexico City, Mexico                    1,100              Leased

Office and warehouse facility of Biomet Orthopedics Ltd.     New Zealand                           10,900              Leased

Office, manufacturing and warehouse facilities               (1) Berlin, Germany                   45,200              Owned
of Biomet Merck Deutschland GmbH                             (2) Berlin, Germany                   16,900              Owned

Office and warehouse facility of Biomet SpA                  Milan, Italy                          10,800              Owned

Office and manufacturing facility of IQL                     Valencia, Spain                       69,600              Owned

Office facility of IQL                                       Madrid, Spain                          4,500              Owned

Office and research & development facility of Polymers       Farum, Denmark                         7,500              Leased

Office and warehouse facility of Biomet Merck                Warsaw, Poland                         1,200              Leased
Polska s.p.z.o.o.
</TABLE>




                                       12





<PAGE>   14

<TABLE>
<CAPTION>

FACILITY                                           LOCATION                              SQUARE FEET OWNED/LEASED
                                                                                                                 
<S>                                                <C>                                  <C>               <C> 
Office and warehouse facility of Biomet Merck SA   (1) Chauteaurenard, France*           37,500             Owned
                                                   (2) Les Pennes Mirabeau, France        7,200            Leased
                                                   (3) Levallois, France                 18,300            Leased
                                                   (4) Chamoz, France                     7,000             Owned

Office and manufacturing facility of               Valence, France                       85,000             Owned
Biomet Merck SA

Office and warehouse facility of Ortomed BV        The Netherlands                       21,500             Owned
and BioMer CV

Office and warehouse facility of Mediplant NV/SA   Belgium                               11,000            Leased

Office and research and development facility       Darmstadt, Germany                    29,200            Leased
of Merck Biomaterial GmbH

Office and warehouse facility of Merck             Vienna, Austria                       15,000            Leased
Biomaterialien GmbH

Office and warehouse facility of Biomet            (1) Altdorf, Switzerland               3,200            Leased
Merck GmbH                                         (2) Oberengstringen, Switzerland       1,400            Leased

Office and warehouse facility of                   Lisbon, Portugal                       9,100            Leased
Sociedade Comercial Multiradix S.A.
</TABLE>


*The operations at this facility have ceased and the facility is being leased to
another party.

The Company believes that its facilities are adequate, well maintained and
suitable for the development, manufacture and marketing of all its products.




                                       13



<PAGE>   15

ITEM 3. LEGAL PROCEEDINGS.

Litigation - In January 1996, a jury returned a verdict in favor of Raymond G.
Tronzo ("Tronzo") and against the Company awarding Tronzo approximately $55
million in damages on the patent and state law claims. On October 29, 1996, the
United States District Court for the Southern District of Florida entered a
judgment, which implemented a reduced jury verdict, awarding $30.2 million to
Tronzo on his state law claims, including compensatory damages of approximately
$7.1 million, punitive damages of $20 million, and prejudment interest. The
trial court dismissed, with prejudice, Tronzo's claims based upon unjust
enrichment. The trial court denied the Company's motion challenging the
validity of Tronzo's patent. Tronzo was awarded an additional $6.3 million
judgment for patent infringement, including a fifty percent enhancement based
upon willfulness. The trial court also granted an injunction prohibiting future
manufacture, use, promotion or sale, in the United States, of the finned
version of the Mallory-Head acetabular cup, the device found to have infringed
the Tronzo patent. The U.S. Court of Appeals for the Federal Circuit (the
"Federal Circuit") denied the Company's motion to stay the injunction pending
the conclusion of the appeal. The Mallory-Head finned acetabular cup accounted
for a relatively small portion of the Company's annual sales. The Company is
vigorously pursuing its appeal before the Federal Circuit on both the patent
and state law claims. The briefing by both parties in the appeal was completed
in the Federal Circuit in June 1997 and oral arguments were held in September
1997. It is anticipated that the Federal Circuit will issue its final decision
on the appeal sometime in the second half of calendar year 1998. In connection
with the District Court's final judgment and its order granting a stay of
enforcement and execution of the judgment, the Company was required to deliver
to an escrow agent investments with a value no less than $36.6 million to be
held in escrow, invested and disbursed for the benefit of the plaintiff pending
the outcome of all appeals. These investments, which are restricted under the
terms of the escrow agreement, are included in investments on the Company's
consolidated balance sheets as of May 31, 1998 and 1997.

On June 2, 1997, the Company announced the entry of a jury verdict against it
in the United States District Court of New Jersey in an action brought by
Orthofix SRL ("Orthofix") against the Company and its wholly-owned
subsidiaries, Electro-Biology, Inc. ("EBI") and EBI Medical Systems, Inc.
("EBIMS"), (the "Biomet Group") related to the events surrounding the
expiration of a distribution agreement under which EBIMS distributed Orthofix's
external fixation devices in the United States. The jury found that,
notwithstanding Orthofix's refusal to renew the distribution agreement, EBIMS's
commencement of development activities of a new external fixation system prior
to the expiration of the contract constituted a breach of the distribution
agreement. The jury awarded compensatory damages against the Biomet Group for
breach of contract and related claims of approximately $49 million and punitive
damages of $100 million. The jury also concluded that Orthofix breached the
distribution agreement and tortiously interfered with EBIMS's economic
relations, but awarded only nominal damages to the Biomet Group. With respect
to certain non-jury issues, the trial court entered an order denying Orthofix's
motions for enhanced and/or treble damages and attorneys' fees. The trial court
also granted Orthofix's motion for prejudgment interest, but only on the
compensatory portion of the damages commencing from November 29, 1995. On
September 2, 1997, the trial court entered an amended judgment reducing, to $50
million, the $100 million in punitive damages awarded to Orthofix by the jury.
The Company is appealing the final amended judgment entered against the Biomet
Group to the United States Court of Appeals for the Third Circuit. In
connection with the District Court's final judgment and its order granting a
stay of enforcement and execution of the judgment, the Biomet Group was
required to deliver to an escrow agent investments with a value no less than
$108 million to be held in escrow, invested and disbursed for the benefit of
the plaintiff pending the outcome of all appeals. As of May 31, 1998, $74
million in investments have been delivered to the escrow agent and are included
in investments on the Company's consolidated balance sheet. An additional
installment of $17 million was delivered on July 31, 1998 and a final
installment of $17 million will be delivered on December 31, 1998.

Based on the information currently available and advice from legal counsel,
management believes that the trial courts' judgments in the Tronzo and Orthofix
cases will not be upheld upon appeal. Therefore, no amounts related to these
two cases have been recorded in the Company's financial statements, except for
estimated legal costs associated with the appeal process. If the Company is
unsuccessful in its appeal of either, or both, of these cases, the ultimate
liabilities could be material to the Company's operating results in the period
such losses are recognized. The Company's cash, cash equivalents and
investments are adequate to address the payment of any losses that could
ultimately be determined with respect to these two cases.

The Company and Joint Medical Products Corporation ("Joint Medical"), acquired
by Johnson & Johnson in 1995, were involved in a dispute in which Joint Medical
made claims of patent infringement against Biomet, Kirschner Medical
Corporation and several other manufacturers of orthopedic devices generally
relating to certain acetabular cups that have an asymmetric bearing. On July
20, 1998, the Company and Joint Medical's licensing agent, BTG International
Limited, agreed to settle the matter and entered into a licensing agreement
under the terms of which the Company received a release and license for the
Joint Medical patents and pending patent applications at issue. The terms of
the settlement will not have a material effect on the Company's financial
position or future operations.



                                       14


<PAGE>   16

In October, 1997 the Company received a subpoena from the United States
Department of Health and Human Services, Office of Inspector General
("HHS/OIG"), in conjunction with the possible fraudulent submission of claims
for Medicare reimbursement. The subpoena seeks the production of documents
referring or relating to any of Pennsylvania Hospital and Thomas Jefferson
Hospital, two of the Company's major hospital customers in Philadelphia; a
physician group practicing under the name Orthopaedic Reconstructive
Associates; and the Rothman Institute. The Company also is aware that its
distributor servicing the hospitals has received a similar subpoena. The
Company does not itself submit claims to or receive reimbursements from
Medicare, but the laws with respect to Medicare reimbursement prohibit any
person from paying or offering to pay any direct or indirect remuneration
intended to induce the purchase of products or services. Those laws are complex
and can be broadly construed to cover a wide range of financial and business
activities. The Company has not been advised of the precise subject matter of
the HHS/OIG investigation, but it has long-standing research, product
development, physician training, clinical follow-up and data collection
relationships with the physician group. The Company is fully cooperating with
HHS/OIG in this matter, and is unable to predict what action, if any, might be
taken in the future by HHS/OIG as a result of its investigation or what impact,
if any, the outcome of this matter might have on its financial position or
business operations.

The Company also has been and is now involved in disputes with certain of its
independent commissioned sales representatives over various issues presented by
the agreements between those sales representatives and the Company, including
the right of the sales representative to distribute certain of the products of
the Company and the right of the Company to terminate those relationships.
Generally, these disputes relate to a small minority of the Company's sales
representative relationships. Management does not anticipate that the
resolution of these matters will have a material effect on the Company's
financial position or future operations.

There are various other claims, lawsuits, disputes with third parties,
investigations and pending actions involving various allegations against the
Company incident to the operations of its business, including product liability
claims. The results of litigation proceedings cannot be predicted with
certainty; however, management believes the ultimate disposition of these other
matters will not have a material adverse effect on the consolidated financial
position of the Company.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Not Applicable.






                                       15
<PAGE>   17

EXECUTIVE OFFICERS OF THE REGISTRANT

The name, age, business background, positions held with the Company and tenure
as an executive officer of each of the Company's executive officers are set
forth below. No family relationship exists among any of the executive officers.
Except as otherwise stated, each executive officer has held the position
indicated during the last five years.

<TABLE>
<CAPTION>
                                                                   Served as Executive              Current Position(s)
Name, Age and Business Experience                                     Officer Since                  with the Company
---------------------------------                                     -------------                  ----------------
<S>                                                                   <C>                          <C>
DANE A. MILLER, PH.D., 52
-------------------------
President and Chief Executive Officer of the                               1977                    President and Chief
Company. Director of the Company since 1977.                                                       Executive Officer and
                                                                                                   Director of the Company.

NILES L. NOBLITT, 47
--------------------
Chairman of the Board of the Company.                                      1978                    Chairman of the Board
Director of the Company since 1977.                                                                and Director of the
                                                                                                   Company.

CHARLES E. NIEMIER, 42
----------------------
Senior Vice President - International Operations of                        1984                    Senior Vice President -
the Company. Director of the Company since 1987.                                                   International Operations
                                                                                                   and Director of the
                                                                                                   Company.
GARRY L. ENGLAND, 44
--------------------
Senior Vice President - Warsaw Operations of the                           1987                    Senior Vice President -
Company since May 1994; Prior to May 1994, Vice President -                                        Warsaw Operations of the
Research and Development of the Company.                                                           Company.


DANIEL P. HANN, 43
------------------
Vice President, General Counsel, and                                       1989                    Vice President and General
Secretary of the Company. Director                                                                 Counsel, Secretary and
of the Company since 1989.                                                                         Director of the Company.


JOEL P. PRATT, 44
-----------------
Vice President of the Company and                                          1990                    Vice President of
President of Arthrotek since June 1996;                                                            the Company.
Vice President of the Company and General Manager of
Biomet Medical Products from March 1993
to January 1996;  prior to March 1993,
Vice President - Sales and Marketing of the Company.


GREGORY D. HARTMAN, 41
----------------------
Vice President - Finance and Chief Financial Officer of the Company.       1991                    Vice President - Finance
                                                                                                   and Chief Financial Officer
                                                                                                   of the Company.
JAMES W. HALLER, 41
-------------------
Controller of the Company.                                                 1991                    Controller of the Company.


JERRY L. FERGUSON, 57
---------------------
Vice Chairman of the Board of the Company since December 1997;             1994                    Vice Chairman of the Board
Senior Vice President of the Company from December 1994                                            and Director of the
to December 1977; Special Projects Advisor to the Company from                                     Company.
December 1993 to December 1994; Director of the Company since 1978.   
</TABLE>


                                       16





<PAGE>   18


                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS.

The following table shows the quarterly range of high and low sales prices for
the Company's Common Shares as reported by the Nasdaq Stock Market for each of
the three most recent fiscal years ended May 31, 1998. The approximate number of
recordholders of outstanding Common Shares as of May 31, 1998 was 8,707.


<TABLE>
<CAPTION>
                                High                   Low
<S>                           <C>                    <C>
 1998
          Fourth              $33 1/2                $27 1/4
          Third                30 11/16               23 1/4
          Second               25 5/8                 20 1/4
          First                22 1/2                 17 1/4

 1997
          Fourth               19 3/4                 14 7/8
          Third                16 5/8                 14 1/4
          Second               17 1/8                 15
          First                17 1/4                 12 7/8

 1996
          Fourth               19 5/8                 12 1/2
          Third                20 5/8                 17 3/8
          Second               18 1/2                 16
          First                16 1/2                 14 1/8
</TABLE>



The Company paid cash dividends of eleven cents ($.11) per share on August 8,
1997 and ten cents ($.10) per share on November 22, 1996.

On July 1, 1998, the Company announced the declaration of a cash dividend of
twelve cents ($.12) per share, payable August 7, 1998, to shareholders of record
at the close of business on July 10, 1998.





                                       17
<PAGE>   19

ITEM 6. SELECTED FINANCIAL DATA


INCOME STATEMENT DATA
Years ended May 31,
(in thousands, except earnings per share)


<TABLE>
<CAPTION>
                                                                   1998      1997      1996      1995      1994
<S>                                                             <C>        <C>       <C>       <C>        <C>
Net sales .................................................     $651,405   $580,347  $535,159  $452,272   $373,295
Cost of sales .............................................      202,235    185,795   174,364   142,143    114,829
                                                                --------------------------------------------------  
  Gross profit ............................................      449,170    394,552   360,795   310,129    258,466

Selling, general and administrative expenses ..............      232,944    211,540   199,461   169,332    136,191
Research and development expense...........................       36,120     23,201    24,054    21,770     20,521
                                                                --------------------------------------------------  
  Operating income.........................................      180,106    159,811   137,280   119,027    101,754

Other income, net..........................................       23,691      9,321    12,389     5,915      5,278
                                                                --------------------------------------------------  
  Income before income taxes...............................      203,797    169,132   149,669   124,942    107,032
Provision for income taxes.................................       79,071     62,678    55,563    45,742     37,214
                                                                --------------------------------------------------  
  Net income...............................................     $124,726   $106,454  $ 94,106  $ 79,200   $ 69,818
                                                                --------------------------------------------------  
Earnings per share:
  Basic....................................................        $1.12       $.94      $.82      $.69       $.61
  Diluted..................................................         1.11        .93       .81       .68        .60
                                                                --------------------------------------------------  
Shares used in the computation of earnings per share:
  Basic....................................................      111,717    113,765   115,461   115,459    115,215
  Diluted..................................................      112,852    114,617   116,750   116,798    115,883
                                                                --------------------------------------------------  
</TABLE>


BALANCE SHEET DATA
As of May 31,
(in thousands)


<TABLE>
<CAPTION>
                                                                  1998         1997     1996      1995      1994
<S>                                                             <C>        <C>       <C>       <C>        <C>
Working capital ...........................................     $472,733   $391,326  $400,817  $302,752   $288,408
Total assets ..............................................      848,739    628,356   598,469   539,084    418,077
Shareholders' equity ......................................      667,418    552,828   534,070   444,617    357,283
</TABLE>


-    The selected consolidated financial information includes the operations
     of acquired businesses from the dates of acquisition. Significant
     acquisitions during the five-year period were Kirschner Medical
     Corporation - November 4, 1994 and BioMer - January 1, 1998.

-    The Company paid cash dividends of $.11 and $.10 per common share in 1998
     and 1997, respectively. The Company paid no cash dividends during any of
     the other periods presented.



                                       18
<PAGE>   20

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

The following table shows the percentage relationship to net sales of items
derived from the Consolidated Statements of Income and the percentage change
from year to year.

<TABLE>
<CAPTION>
                                                                                     Percentage
                                                   Percentage of Net Sales       Increase (Decrease)
                                                                                     1998       1997
                                                  1998       1997       1996     vs. 1997   vs. 1996

<S>                                              <C>        <C>        <C>         <C>        <C>
Net sales .....................................  100.0%     100.0%     100.0%       12%         8%
Cost of sales .................................   31.0       32.0       32.6         9          7
                                                 -----------------------------                      
Gross profit ..................................   69.0       68.0       67.4        14          9
Selling, general and administrative expenses ..   35.8       36.5       37.2        10          6
Research and development expense ..............    5.5        4.0        4.5        56         (4)
                                                 -----------------------------                      
Operating income ..............................   27.7       27.5       25.7        13         16
Other income, net .............................    3.6        1.6        2.3       154        (25)
                                                 -----------------------------                       
Income before income taxes ....................   31.3       29.1       28.0        20         13
Provision for income taxes ....................   12.1       10.8       10.4        26         13
                                                 ------------------------------                      
Net income ....................................   19.2%      18.3%      17.6%       17%        13%
                                                 ------------------------------                      
</TABLE>


1998 COMPARED TO 1997
The Company experienced record net sales and net income for the year ended May
31, 1998. Record net sales helped fuel healthy increases in operating income
and net income. Reductions in legal expenses also contributed to these
increases. As more fully described in Note C of the Notes to Consolidated
Financial Statements, effective January 1, 1998, the Company and Merck KGaA,
Darmstadt, Germany ("Merck KGaA") entered into a joint venture agreement to
manufacture and sell orthopedic and biomaterials products in Europe. The
Company and Merck KGaA each contributed its European orthopedic and
biomaterials business operations to a new entity, BioMer C.V. ("BioMer"). The
Company controls BioMer and, accordingly, consolidates the financial statements
of BioMer for financial reporting and reflects Merck KGaA's 50% interest as a
minority interest. The acquisition of BioMer has been accounted for as a
purchase and the operating results of BioMer are consolidated from the date of
acquisition.

Net Sales - Net sales increased 12%, from $580,347,000 in 1997 to $651,405,000
in 1998. The increase in net sales of $71,058,000 was the result of continued
penetration of the reconstructive device market, continued growth of EBI's
electrical stimulation system and SpineLink(TM) Spinal Fixation System and the
formation of BioMer. The Company's AOA(R) line of softgoods and Arthrotek's
arthroscopy products also experienced improved sales growth. The Company's
worldwide reconstructive device sales increased 12% in 1998 to $389,483,000
compared to $347,762,000 in 1997. This increase was positively influenced by a
significant increase in sales of revision products, the formation of BioMer and
incremental sales increases resulting from the acquisition of two (2) foreign
distributors in late fiscal 1997 and early fiscal 1998. In fiscal 1998,
fixation sales increased 9% to $144,853,000 due to strong sales of EBI's Model
1200 Bone Growth Stimulation System and the DynaFix(R) External Fixation
System, and of Lorenz Surgical's LactoSorb(R) Resorbable Craniomaxillofacial
Fixation System. Spinal product sales increased 14% to $35,902,000 due to
strong sales of EBI's SpineLink(TM) Spinal Fixation System. The Company's
"other products" sales increased 19% in fiscal 1998 to $81,167,000, primarily
as a result of increased sales of Arthrotek's arthroscopy products, AOA's line
of softgoods and the Indiana Tome(TM) Carpal Tunnel Release System. Foreign
currency translation adjustments negatively influenced the Company's net sales
by approximately $9.5 million and $3.0 million during the years ended May 31,
1998 and 1997, respectively.

Gross Profit - The Company's gross profit increased 14% to $449,170,000 in
fiscal 1998 from $394,552,000 in fiscal 1997, primarily as a result of increased
sales of higher margin reconstructive products, including revision products, and
EBI's bone healing product line. As a percentage of net sales, gross profit was
69% in 1998 compared to 68% in 1997. Cost of sales increased to $202,235,000 in
fiscal 1998 from $185,795,000 in fiscal 1997, which is consistent with the
increase in net sales. Ongoing improvements in manufacturing and  continued
efforts to control product costs have contributed to the Company's consistently
strong gross profits.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses were $232,944,000 in 1998, or 35.8% of net sales, and
$211,540,000 in 1997, or 36.5% of net sales. This increase is primarily due to
increased commissions on product sales, partially offset by a decrease in legal
expenditures.

Research and Development Expense - Research and development expense increased
$12.9 million from $23,201,000 in fiscal 1997 to $36,120,000 in fiscal 1998. A
significant part of this increase results from the purchase accounting for the
acquisition of BioMer whereby $9.8 million of the purchase price was allocated
to acquired in-process research and development and expensed at the acquisition
date. Excluding this one-time charge, research and development expense
increased 13% in fiscal 1998 compared with fiscal 1997, due to increased
expenditures of BioMer in the development of biomaterials products. The Company
will continue to invest in research and development activities through its
joint venture relationship with Merck KGaA and by further expansion of domestic
research and development projects.

                                       19

<PAGE>   21
Other Income, Net - Other income amounted to $23,691,000 in fiscal 1998 compared
to $9,321,000 in fiscal 1997. Fiscal 1998 includes a $15.2 million pre-tax gain
on the deemed sale of the Company's European orthopedic operations to Merck KGaA
in the formation of BioMer. Excluding this gain, other income decreased 9% due
primarily to exchange losses realized on foreign currency transactions,
partially offset by increased investment income earned on cash and investments.
Merck KGaA's minority interest in BioMer is also netted against other income for
fiscal 1998.

Provision for Income Taxes - Provision for income taxes increased to $79,071,000
in fiscal 1998, representing 38.8% of income before taxes, compared to
$62,678,000 in fiscal 1997, or 37.1% of income before taxes. This increase is a
result of increased income before taxes and the expensing of the purchased
in-process research and development in connection with the formation of BioMer,
which generates no tax benefit. The Company will continue to be adversely
affected by changes in the Puerto Rican local tax structure which reduces the
U.S. tax benefits from operating in Puerto Rico; however, the effect is not
expected to be material to the consolidated tax provision.

Net Income - The factors mentioned above resulted in a 17% and 19% increase in
net income and basic earnings per share, respectively, for fiscal 1998 as
compared to fiscal 1997, increasing to $124,726,000 from $106,454,000 and to
$1.12 from $.94, respectively.

LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities was $121,843,000 in
fiscal 1998 compared to $121,683,000 in 1997. In 1998, net cash provided by
operating activities and net income were approximately the same, as the noncash
charges for depreciation of $16,801,000, amortization of $6,728,000 and the
$9,764,000 write-off of acquired in-process research and development were
offset by the $15,222,000 noncash gain on the deemed sale of the Company's
European operations, increases in accounts and notes receivable and inventories
of $22,920,000 and $9,431,000, respectively, and other changes in operating
activities. Included in the aforementioned changes were decreases in accounts
and notes receivable and inventories attributable to the decrease from May 31,
1997 to May 31, 1998, in the exchange rates used to convert the financial
statements of Biomet's foreign subsidiaries from their functional local
currency to the U.S. dollar. These decreases were immaterial and did not affect
the Company's earnings during the year because foreign currency translation
adjustments to balance sheet items are recognized as a component of
shareholders' equity in the Company's consolidated balance sheet. The Company
will continue to be exposed to the effects of foreign currency translation
adjustments. The Company expects that operating cash flows in the near future
will be primarily determined by levels of net income, working capital
requirements and, if adverse, rulings of outstanding litigation matters as
discussed in Note K of the Notes to Consolidated Financial Statements.

Cash flows used in investing activities were $77,350,000 in fiscal 1998 compared
to $56,151,000 in fiscal 1997. The primary use for investing activities were
purchases of investments, partially offset by proceeds from sales and maturities
of investments, purchases of capital equipment and the acquisition of a foreign
distributor. Included in capital expenditures are costs for facility expansion
at the Company's Warsaw, Indiana and Parsippany, New Jersey locations.

Cash flows used in financing activities were $7,612,000 in 1998 and $86,583,000
in 1997. The primary use for financing activities in 1998 was an $.11 per share
cash dividend. In 1997, the primary uses of funds for financing activities were
the purchase of the Company's  Common Shares as part of the expired Common Share
Repurchase Program and a cash dividend of $.10 per share. On July 1, 1998, the
Company announced a cash dividend of $.12 per share, payable August 7, 1998, to
shareholders of record at the close of business on July 10, 1998.

The Company currently expects that capital spending for the foreseeable future
will continue to be at levels at least as high as in 1998 and 1997. The Company
will continue to monitor its level of capital spending, however, taking into
consideration factors such as trends in the orthopedic market. Based on
currently expected market trends and conditions for fiscal 1999, the Company
plans to devote a significant amount of time and resources to a variety of
projects, including (i) expanded research and development activities overseas in
the biomaterials field, (ii) continued expansion of EBI's facility in
Parsippany, New Jersey, (iii) expansion of AOA's softgoods production facility
in Marlow, Oklahoma, (iv) potential acquisitions of foreign distribution
networks, and (v) other acquisitions and business development activities. The
Company expects to spend in excess of $100 million over the next two fiscal
years for capital expenditures and research and development and additional
outlays to fund the aforementioned projects. Funding is expected to come from
currently available funds and cash flows generated from future operations.

LITIGATION
As more fully described in Note K of the Notes to Consolidated Financial
Statements, the Company is currently appealing adverse jury awards in two
separate cases (Tronzo and Orthofix). The judgment in the Tronzo case, which
involved patent infringement and state law claims, approximates $36.6 million.
The judgment in the Orthofix case, which alleged breach of a distribution
agreement, approximates $99 million, including punitive damages of $50 million.
Management believes, based on available information and advice from outside
legal counsel handling the appeals, that the judgments in both these cases will
be reversed on appeal. Except for estimated litigation costs associated with
the appeals process, no additional amounts have been accrued in the Company's
consolidated financial statements. The Company's cash, cash equivalents and
investments are adequate to address the payment of any losses that could
ultimately result if the Company is unsuccessful in the appeal of these cases.
As disclosed in Note K, the Company's investments include $110.6 million of
investment securities which have been placed with an escrow agent pending the
outcome of the appeals of these two judgments, and the Company is required to
deliver two additional installments of investment securities of $17 million
each on July 31, 1998 and December 31, 1998 to the escrow agent in connection
with the Orthofix judgment.


                                       20
<PAGE>   22
OTHER MATTERS 
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information". SFAS No. 130 will require the Company to report
comprehensive income in its financial statements. Comprehensive income includes
net income and certain transactions that are reported as a separate component of
shareholders' equity, such as translation adjustments and net unrealized
appreciation of available-for-sale securities. SFAS No. 131 changes the manner
in which public companies report selected segment information in annual reports
and requires companies to report selected segment information in interim
financial reports. Companies will be required to report financial and
descriptive information about the Company's operating segments. The Company will
adopt SFAS Nos. 130 and 131 in the first quarter of fiscal 1999 and year-end
1999, respectively. These statements increase disclosure only and will have no
effect on the Company's consolidated financial position or results of
operations.

YEAR 2000 COMPLIANCE
The Company is currently in the process of identifying, evaluating, and
implementing changes to computer programs necessary to address the year 2000
issue. This issue affects computer systems that have date-sensitive programs
that may not properly recognize the year 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail, resulting in business interruption. The Company does not believe the cost
of converting all internal systems to be year 2000 compliant will be material
to its consolidated financial condition or results of operations. Costs related
to the year 2000 issue are being expensed as incurred. The year 2000 issue is
expected to affect the systems of various entities with which the Company
interacts, including suppliers, and vendors. There can be no assurance that the
systems of other companies on which the Company's systems rely will be timely
converted, or that a failure by another company's systems to be year 2000
compliant would not have a material adverse effect on the Company. Based on
information currently available, management believes its systems will be year
2000 compliant.

1997 COMPARED TO 1996
Net Sales - Net sales increased 8% from $535,159,000 in fiscal 1996 to
$580,347,000 in fiscal 1997. The Company's U.S.-based revenues increased 7% to
$425,522,000 in fiscal 1997, while foreign sales increased 12% in fiscal 1997 to
$154,825,000. Worldwide reconstructive device sales increased 8% during 1997 to
$347,762,000. Products contributing to this growth were the Maxim(R) Total Knee
and Alliance(R) Hip Systems. In fiscal 1997, fixation sales increased 8% to
$132,875,000 due to strong sales of EBI's DynaFix(R) External Fixation System,
Lorenz Surgical's craniomaxillofacial products and Biomet's fixation products.
Spinal product sales increased 33% to $31,426,000 due to strong sales of EBI's
SpF(R) Spinal Fusion Stimulation System and IQL's spinal products. The Company's
"Other Products" sales increased 5% to $68,284,000 primarily the result of
strong sales of EBIce(R) Controlled Cold Therapy System and increased market
acceptance of the Indiana Tome(TM) Carpal Tunnel Release System.

Gross Profit - The Company's gross profit increased 9% from $360,795,000 in
fiscal 1996 to $394,552,000 in fiscal 1997 primarily as a result of increased
sales of higher margin reconstructive products, increased in-house
manufacturing efficiencies of the external fixation product line, and improved
margins realized through acquisitions of international distributors. As a
percentage of net sales, gross profit was 68% in 1997 and 67.4% in 1996. Cost
of sales increased from $174,364,000 in fiscal 1996 to $185,795,000 in fiscal
1997, due primarily to increased sales.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses increased slightly to $211,540,000 in fiscal 1997 from
$199,461,000 in fiscal 1996. Increased litigation costs is the primary reason
for this increase. Excluding litigation costs, selling, general and
administrative expenses remained relatively level during fiscal 1997 in
comparison with fiscal 1996.

Research and Development Expense - Research and development expense in fiscal
1997 decreased to $23,201,000 from $24,054,000 in fiscal 1996. As a percentage
of sales, research and development expense decreased from 4.5% in fiscal 1996
to 4.0% in fiscal 1997. The decrease in research and development expense was
the result of the completion of the resorbable craniomaxillofacial products
project and the termination of the United States Surgical Corporation ("USSC")
joint venture.

Other Income, Net - Other income decreased from $12,389,000 in 1996 to
$9,321,000 in 1997. This decrease was due to two nonrecurring items in fiscal
1996. First, the Company sold all of its holdings in American Medical
Electronics, Inc., realizing a gain of
$2.5 million, and secondly, $2.9 million was received pursuant to the
termination of the joint venture agreement with USSC. Excluding these
nonrecurring items, the Company experienced an increase in other income in
fiscal 1997 as a result of improved returns on its cash
and investments.

Provision for Income Taxes - Provision for income taxes increased to
$62,678,000 in fiscal 1997 compared to $55,563,000 in fiscal 1996, primarily as
a result of increased income before taxes. The Company's effective tax rate
remained at 37.1% in fiscal 1997. The Company was adversely affected by changes
in the Puerto Rican local tax structure which reduced the U.S. tax benefits
from operating in
Puerto Rico.

Net Income - The factors mentioned above resulted in a 13% and 15% increase in
net income and basic earnings per share, respectively, for fiscal 1997 as
compared to fiscal 1996, increasing from $94,106,000 to $106,454,000 and $.82
to $.94, respectively.



                                       21
<PAGE>   23

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The information required by this Item is set forth on pages 26 through 40 of
this Report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

Not applicable.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information included under the caption "Election of Directors" in the
Company's definitive Proxy Statement filed pursuant to Regulation 14A in
connection with its 1998 Annual Meeting of Shareholders (the "Proxy Statement")
is incorporated herein by reference in response to this item.

Information regarding executive officers of the Company is included in Part I
of this Report under the caption "Executive Officers of the Registrant."

ITEM 11.  EXECUTIVE COMPENSATION.

The information included under the captions "Election of Directors -
Compensation of Directors" and "Executive Compensation" in the Proxy Statement
is incorporated herein by reference in response to this item.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information contained under the captions "Principal Shareholders" and
"Share Ownership of Directors and Executive Officers" in the Proxy Statement is
incorporated herein by reference in response to this item.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information contained under the caption "Certain Transactions" in the Proxy
Statement is incorporated herein by reference in response to this item.







                                       22
<PAGE>   24
                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

  (a) (1)FINANCIAL STATEMENTS:
         Report of Independent Accountants
         Consolidated Balance Sheets as of May 31, 1998 and 1997
         Consolidated Statements of Income for the years ended May 31, 1998, 
          1997 and 1996
         Consolidated Statements of Shareholders' Equity for the years ended May
          31, 1998, 1997 and 1996
         Consolidated Statements of Cash Flows for the years ended May 31, 1998,
          1997 and 1996
         Notes to Consolidated Financial Statements

      (2)FINANCIAL STATEMENT SCHEDULE:
         Report of Independent Accountants on Financial Statement Schedule
         Schedule II - Valuation and Qualifying Accounts

         Schedules other than those listed above are omitted because they are 
          not required.

      (3)EXHIBITS:
          3.1  Amended Articles of Incorporation filed July 23,1982.
              (Incorporated by reference to Exhibit 3(a) to Biomet, Inc. Form
              S-18 Registration Statement, File No. 2-78589C).

         3.2  Articles of Amendment to Amended Articles of Incorporation filed
              July 11, 1983. (Incorporated by reference to Exhibit 3.2 to
              Biomet, Inc. Form 10-K Report for year ended May 31, 1983, File
              No. 0-12515).

         3.3  Articles of Amendment to Amended Articles of Incorporation filed
              August 22, 1987. (Incorporated by reference to Exhibit 3.3 to
              Biomet, Inc. Form 10-K Report for year ended May 31,1987, File No.
              0-12515).

         3.4  Articles of Amendment to the Amended Articles of Incorporation
              filed September 18, 1989. (Incorporated by reference to Exhibit
              3.4 to Biomet, Inc. Form 10-K Report for year ended May 31, 1990,
              File No. 0-12515).

         3.5  Amended and Restated Bylaws. (Incorporated by reference to Exhibit
              4.2 to Biomet, Inc. Form S-3 Registration Statement, File No.
              33-33376).

         3.6  Amended and Restated Bylaws as amended December 13, 1997.

         4.1  Specimen certificate for Common Shares. (Incorporated by reference
              to Exhibit 4.1 to Biomet, Inc. Form 10-K Report for year ended May
              31, 1985, File No. 0-12515).

         4.2  Rights Agreement between Biomet, Inc. and Lake City Bank as Rights
              Agent, dated as of December 2, 1989. (Incorporated by reference to
              Exhibit 4 to Biomet, Inc. Form 8-K current Report dated December
              22, 1989, File No. 0-12515).

         10.1 Employee Stock Option Plan, as last amended December 14, 1991.
              (Incorporated by reference to Exhibit 10.1 to Biomet,Inc. Form
              10-K Report for year ended May 31, 1992, File No. 0-12515).

         10.2 Form of Employee Stock Option Agreement. (Incorporated by
              reference to Exhibit 10.2 to Biomet, Inc. Form 10-K Report for
              year ended  May 31, 1991, File No. 0-12515).

         10.3 Employee and Non-Employee Director Stock Option Plan, dated
              September 18, 1992. (Incorporated by reference to Exhibit 19.1 to
              Biomet, Inc. Form 10-K Report for year ended May 31, 1993, File
              No. 0-12515).

         10.4 Form of Stock Option Agreement under the Employee and
              Non-Employee Stock Option Plan dated September 18, 1992.
              (Incorporated by reference to Exhibit 4.03 to Biomet, Inc. Form
              S-8 Registration Statement, File No. 33-65700).

         10.5 401(k) Profit Sharing Plan filed January 19,1996. (Incorporated
              by reference to Form S-8 Registration Statement, File No.
              333-00331).

         10.6 Biomet, Inc. 1998 Qualified and Non-Qualified Stock Option Plan.

         21.1 Subsidiaries of the Registrant.

         23.1 Consent of PricewaterhouseCoopers LLP.

         27.1 Financial Data Schedule.

  (b) REPORTS ON FORM 8-K.

         None.



                                       23

<PAGE>   25

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on August 5, 1998.

                                  BIOMET, INC.


                   By:  /s/   DANE A. MILLER
                        --------------------------------------------- 
                        Dane A. Miller
                        President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on August 5, 1998.



                   By:  /s/  NILES L. NOBLITT
                        --------------------------------------------- 
                        Niles L. Noblitt, Director



                   By:  /s/  DANE A. MILLER
                        --------------------------------------------- 
                        Dane A. Miller, Director  (Principal
                        Executive Officer)



                   By:  /s/  JERRY L. FERGUSON
                        --------------------------------------------- 
                        Jerry L. Ferguson, Director



                   By:  /s/  M. RAY HARROFF
                        --------------------------------------------- 
                        M. Ray Harroff, Director




                   By:  /s/  KENNETH V. MILLER
                        --------------------------------------------- 
                        Kenneth V. Miller, Director



                   By:  /s/  JERRY L. MILLER
                        --------------------------------------------- 
                        Jerry L. Miller, Director



                   By:  /s/  L. GENE TANNER
                        --------------------------------------------- 
                        L. Gene Tanner, Director





                                       24
<PAGE>   26


                      By:  /s/  THOMAS F. KEARNS, JR
                           -----------------------------------------------
                           Thomas F. Kearns, Jr., Director



                      By:  /s/  CHARLES E. NIEMIER
                           -----------------------------------------------
                           Charles E. Niemier, Director



                      By:  /s/  DANIEL P. HANN
                           -----------------------------------------------
                           Daniel P. Hann, Director



                      By:  /s/  MARILYN TUCKER QUAYLE
                           -----------------------------------------------
                           Marilyn Tucker Quayle, Director



                      By:  /s/  C. SCOTT HARRISON
                           -----------------------------------------------
                           C. Scott Harrison, Director



                      By:  /s/  PROF. DR. BERNHARD SCHEUBLE
                           -----------------------------------------------
                           Prof. Dr. Bernhard Scheuble, Director



                      By:  /s/  GREGORY D. HARTMAN
                           -----------------------------------------------
                           Gregory D. Hartman, Vice President -
                           Finance (Principal Financial Officer)



                      By:  /s/  JAMES W. HALLER
                           -----------------------------------------------
                           James W. Haller, Controller
                           (Principal Accounting Officer)


                                       25
<PAGE>   27

                         BIOMET, INC. AND SUBSIDIARIES
            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<CAPTION>
<S>                                                                                                         <C>
1. FINANCIAL STATEMENTS:
   Report of Independent Accounts........................................................................     26
   Consolidated Balance Sheets as of May 31, 1998 and 1997...............................................     27
   Consolidated Statements of Income for the years ended May 31, 1998, 1997 and 1996.....................     28
   Consolidated Statements of Shareholders' Equity for the years ended May 31, 1998, 1997 and 1996.......     29
   Consolidated Statements of Cash Flows for the years ended May 31, 1998, 1997 and 1996.................     30
   Notes to Consolidated Financial Statements............................................................  31-40

2. FINANCIAL STATEMENT SCHEDULE:
   Report of Independent Accountants in Financial Statement Schedule.....................................     41
   Schedule II - Valuation and Qualifying Accounts.......................................................     42
   Schedule others than those listed above are omitted because they are not required.
</TABLE>





REPORT OF INDEPENDENT ACCOUNTANTS


[PRICEWATERHOUSECOOPERS LOGO]


To the Shareholders and Board of Directors of Biomet, Inc.:

In our opinion, the accompanying consolidated financial statements listed in
Item 14 (a)(1) of this Form 10-K present fairly, in all material respects, the
financial position of Biomet, Inc. and its subsidiaries at May 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended May 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.


                                                /s/  PricewaterhouseCoopers LLP




South Bend, Indiana
July 2, 1998




                                       26
<PAGE>   28

BIOMET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS.


As of May 31,
(in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                                            1998        1997
<S>                                                                                       <C>         <C>
ASSETS
Current assets:
  Cash and cash equivalents .........................................................     $117,089    $ 82,034
  Investments........................................................................       31,618      41,237
  Accounts and notes receivable, less allowance for doubtful receivables    
    (1998 - $5,957 and 1997 - $6,175 )...............................................      188,800     162,135
  Inventories........................................................................      186,535     151,523
  Prepaid expenses and other.........................................................       46,750      27,311
                                                                                          --------------------
    Total current assets.............................................................      570,792     464,240
                                                                                          --------------------
Property, plant and equipment:
  Land and improvements..............................................................       18,868       9,544
  Buildings and improvements.........................................................       74,747      53,156
  Machinery and equipment............................................................      133,441      90,139
                                                                                          --------------------
                                                                                           227,056     152,839
Less, Accumulated depreciation.......................................................       87,284      61,927
                                                                                          --------------------
    Property, plant and equipment, net...............................................      139,772      90,912
                                                                                          --------------------
Investments .........................................................................       73,175      44,527 
Intangible assets, net of accumulated amortization (1998 - $14,427 and 1997 - $12,215)       9,012       5,787
Excess acquisition costs over fair value of acquired net assets, net of
  accumulated amortization (1998 - $11,102 and 1997 - $6,979)........................       52,248      20,306
Other assets.........................................................................        3,740       2,584
                                                                                          --------------------
    Total assets.....................................................................     $848,739    $628,356
                                                                                          --------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Short-term borrowings..............................................................     $  6,345    $  5,568 
  Accounts payable...................................................................       16,581      17,140
  Accrued income taxes...............................................................        5,873      12,181
  Accrued wages and commissions......................................................       16,393      12,232
  Accrued insurance..................................................................       11,388       7,617
  Other accrued expenses.............................................................       41,479      18,176
                                                                                          --------------------
    Total current liabilities........................................................       98,059      72,914
Deferred federal income taxes........................................................        9,345       2,229
Other liabilities....................................................................          685         385
                                                                                          --------------------
    Total liabilities................................................................      108,089      75,528
                                                                                          --------------------
Minority interest....................................................................       73,232           - 
                                                                                          --------------------
Commitments and contingencies (Note K)
Shareholders' equity:
  Preferred shares, $100 par value: Authorized 5 shares; none issued ..                          -           -
  Common shares, without par value:  Authorized 500,000 shares;
    issued and outstanding 1998 - 112,043 shares and 1997 - 111,214 shares...........       75,712      73,587
  Additional paid-in capital.........................................................       19,209      16,001
  Retained earnings..................................................................      584,920     472,450
  Net unrealized appreciation of available-for-sale securities.......................        1,742       1,040
  Cumulative translation adjustment..................................................      (14,165)    (10,250)
                                                                                          --------------------
    Total shareholders' equity .....................................................       667,418     552,828
                                                                                          --------------------
    Total liabilities and shareholders' equity.......................................     $848,739    $628,356
                                                                                          --------------------
</TABLE>

The accompanying notes are a part of the consolidated financial statements.



                                       27
<PAGE>   29
BIOMET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME.


For the years ended May 31,
(in thousands, except earnings per share)

<TABLE>
<CAPTION>
                                                          1998             1997            1996
<S>                                                     <C>              <C>             <C>
Net sales............................................   $651,405         $580,347        $535,159
Cost of sales........................................    202,235          185,795         174,364
                                                        -----------------------------------------
  Gross profit.......................................    449,170          394,552         360,795
Selling, general and administrative expenses.........    232,944          211,540         199,461
Research and development expense.....................     36,120           23,201          24,054
                                                        -----------------------------------------
  Operating income...................................    180,106          159,811         137,280
Other income, net....................................     24,032            9,972          13,505
Interest expense.....................................       (341)            (651)         (1,116)
                                                        -----------------------------------------
  Income before income taxes ........................    203,797          169,132         149,669
Provision for income taxes ..........................     79,071           62,678          55,563
                                                        -----------------------------------------
  Net income.........................................   $124,726         $106,454        $ 94,106
                                                        -----------------------------------------
Earnings per share:
  Basic..............................................      $1.12             $.94            $.82
  Diluted ...........................................       1.11              .93             .81
                                                        -----------------------------------------
Shares used in the computation of earnings per share:
  Basic..............................................    111,717          113,765         115,461
  Diluted ...........................................    112,852          114,617         116,750
                                                        -----------------------------------------
</TABLE>


The accompanying notes are a part of the consolidated financial statements.




                                       28
<PAGE>   30
BIOMET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF SHAREHOLDERS' EQUITY.

<TABLE>
<CAPTION>
                                                                             1998              1997               1996
<S>                                                                       <C>              <C>                <C>
Common shares, Number:
 Balance, June 1 .....................................................    111,214           115,826            115,188
 Issuance of shares...................................................          -                 -                173
 Exercise of stock options ...........................................        829               612                465
 Purchase of shares...................................................          -            (5,424)                 -
 Common shares used in acquisitions ..................................          -               200                  -
                                                                         ----------------------------------------------
 Balance, May 31 .....................................................    112,043           111,214            115,826
                                                                         ----------------------------------------------
Common shares, Amount:
 Balance, June 1......................................................   $ 73,587          $ 68,376           $ 64,526
 Issuance of shares...................................................          -                 -              2,293
 Exercise of stock options............................................      2,125             5,292              1,557
 Purchase of shares...................................................          -            (3,202)                 -
 Acquisitions.........................................................          -             3,121                  -
                                                                         ----------------------------------------------
 Balance, May 31 .....................................................     75,712            73,587             68,376
                                                                         ----------------------------------------------
Additional paid-in capital:
 Balance, June 1 .....................................................     16,001            14,410             12,624
 Purchase of shares...................................................          -              (675)                 -
 Tax benefit arising from the exercise of stock options...............      3,208             1,315              1,199
 Other................................................................          -               951                587
                                                                         ----------------------------------------------
 Balance, May 31......................................................     19,209            16,001             14,410
                                                                         ----------------------------------------------
Retained earnings:
 Balance, June 1......................................................    472,450           458,193            364,087
 Net income...........................................................    124,726           106,454             94,106
 Purchase of shares...................................................          -           (80,723)                 -
 Cash dividends ($.11 per share in 1998 and $.10 per share in 1997)...    (12,256)          (11,474)                 -
                                                                         ----------------------------------------------
 Balance, May 31......................................................    584,920           472,450            458,193
                                                                         ----------------------------------------------
Net unrealized appreciation of available-for-sale securities:
 Balance, June 1......................................................      1,040               584              2,800
 Change in unrealized appreciation of available-for-sale securities...        702               456             (2,216)
                                                                         ----------------------------------------------
 Balance, May 31......................................................      1,742             1,040                584
                                                                         ----------------------------------------------
Cumulative translation adjustment:
 Balance, June 1......................................................    (10,250)           (7,493)               580
 Translation adjustment...............................................     (3,915)           (2,757)            (8,073)
                                                                         ----------------------------------------------
 Balance, May 31......................................................    (14,165)          (10,250)            (7,493)
                                                                         ----------------------------------------------
Total shareholder's equity, May 31....................................   $667,418          $552,828           $534,070
                                                                         ----------------------------------------------
</TABLE>


The accompanying notes are a part of the consolidated financial statements.



                                       29

<PAGE>   31
BIOMET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended May 31,
(in thousands)

<TABLE>
<CAPTION>

                                                                                                       1998       1997       1996
<S>                                                                                                  <C>        <C>        <C>
Cash flows from (used in) operating activities:
  Net income....................................................................................     $124,726   $106,454   $ 94,106
    Adjustments to reconcile net income to net cash from operating activities:
    Depreciation................................................................................       16,801     12,578     12,928
    Amortization................................................................................        6,728      5,962      7,884
    Other.......................................................................................       (1,529)      (471)    (3,018)
    Write-off of purchased in-process research and development..................................        9,764          -          -
    Deemed gain on sale of European operations..................................................      (15,222)         -          -
    Deferred federal income taxes...............................................................        9,366     (4,527)    (1,417)
    Changes in current assets and liabilities, excluding effects of acquisitions and dispositions:
      Accounts and notes receivable.............................................................      (22,920)    (5,766)   (15,906)
      Inventories...............................................................................       (9,431)     4,189    (13,386)
      Accounts payable..........................................................................       (2,014)    (1,332)    (9,297)
      Other.....................................................................................        5,574      4,596     (4,608)
                                                                                                     ------------------------------
          Net cash from operating activities....................................................      121,843    121,683     67,286
                                                                                                     ------------------------------
Cash flows from (used in) investing activities:
  Proceeds from sales and maturities of investments.............................................       51,934     25,212     54,823
  Purchases of investments......................................................................      (68,206)   (47,272)   (25,630)
  Capital expenditures..........................................................................      (44,143)   (21,380)   (14,065)
  Acquisitions, net of cash acquired............................................................      (15,444)   (10,670)         -
  Other ........................................................................................       (1,491)    (2,041)    (1,767)
                                                                                                     ------------------------------
          Net cash from (used in) investing activities..........................................      (77,350)   (56,151)    13,361
                                                                                                     ------------------------------
Cash flows from (used in) financing activities:
  Increase (decrease) in short-term borrowings..................................................         (689)     2,884        (65)
  Issuance of shares............................................................................        2,125      5,292      3,850
  Tax benefit from stock options exercised......................................................        3,208      1,315      1,199
  Cash dividends................................................................................      (12,256)   (11,474)         -
  Purchase of common shares.....................................................................            -    (84,600)   (10,406)
                                                                                                     ------------------------------
          Net cash (used in) financing activities...............................................       (7,612)   (86,583)    (5,422)
                                                                                                     ------------------------------
Effect of exchange rate changes on cash.........................................................       (1,826)    (2,983)    (3,248)
                                                                                                     ------------------------------
          Increase (decrease) in cash and cash equivalents......................................       35,055    (24,034)    71,977
Cash and cash equivalents, beginning of year ...................................................       82,034    106,068     34,091
                                                                                                     ------------------------------
Cash and cash equivalents, end of year .........................................................     $117,089   $ 82,034   $106,068
                                                                                                     ------------------------------

Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest....................................................................................     $    380   $    666   $  1,116 
    Income taxes................................................................................       68,548     64,447     55,576

Noncash investing and financing activities:
  Acquisitions and dispositions:
    Deemed sale of 50% of the net assets of the Company's European business
      in the formation of BioMer ...............................................................       48,000          -          -
    Liabilities assumed ........................................................................       12,439      3,775          -
    Common shares issued .......................................................................            -      3,121          -
</TABLE>

The accompanying notes are a part of the consolidated financial statements.



                                       30
<PAGE>   32

BIOMET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

NOTE A: NATURE OF OPERATIONS.
Biomet, Inc. and its subsidiaries design, manufacture and market products used
primarily by orthopedic medical specialists in both surgical and nonsurgical
therapy, including reconstructive and fixation devices, electrical bone growth
stimulators, orthopedic support devices, operating room supplies, general
surgical instruments, arthroscopy products, spinal implants, bone cements, bone
substitutes, and craniomaxillofacial implants and instruments. Biomet has
corporate headquarters in Warsaw, Indiana, and manufacturing and/or office
facilities in more than twenty-five locations worldwide. The Company currently
distributes its products in more than 100 countries.

NOTE B: ACCOUNTING POLICIES.
The following is a summary of the accounting policies adopted by Biomet, Inc.
and subsidiaries which have a significant effect on the consolidated financial
statements.

Principles of Consolidation - The consolidated financial statements include the
accounts of Biomet, Inc. and its subsidiaries (individually and collectively,
the "Company"). All foreign subsidiaries are consolidated on the basis of an
April 30 fiscal year. Investments in less than 20% owned affiliates are
accounted for on the cost method, the carrying amount of which approximates
market. Investments in 20% to 50% owned affiliates are accounted for on the
equity method. The financial statements of the BioMer joint venture (see Note
C) are consolidated because the Company has the ability to exercise significant
influence and control. The minority shareholder's 50% interest in BioMer is
reflected as minority interest.

Use of Estimates - The consolidated financial statements are prepared in
conformity with generally accepted accounting principles and, accordingly,
include amounts that are based on management's best estimates and judgments.

Translation of Foreign Currency - Assets and liabilities of foreign
subsidiaries are translated at rates of exchange in effect at the close of
their fiscal year. Revenues and expenses are translated at the weighted average
exchange rates during the year. Translation gains and losses are accumulated as
a separate component of shareholders' equity. Foreign currency transaction
gains and losses, which are not material, are included in other income, net.

Cash and Cash Equivalents - The Company considers all highly liquid investments
with original maturities of three months or less to be cash equivalents.

Investments - Highly liquid investments with insignificant interest rate risk
and with original maturities of three months or less are classified as cash and
cash equivalents. Certificates of deposit with maturities greater than three
months and less than one year are classified as short-term investments.
Certificates of deposit with maturities greater than one year are classified as
long-term investments. The Company accounts for its investments in debt and
equity securities under Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
which requires certain securities to be categorized as either trading,
available-for-sale or held-to-maturity. Available-for-sale securities are
carried at fair value with unrealized gains and losses recorded as a separate
component of shareholders' equity. Held-to-maturity securities are carried at
amortized cost. The Company has no trading securities. The cost of investment
securities sold is determined by the specific identification method. Dividend
and interest income are accrued as earned.

Inventories - Inventories are stated at the lower of cost or market, with cost
determined under the first-in, first-out method.

Property, Plant and Equipment - Property, plant and equipment are carried at
cost less accumulated depreciation. Depreciation is computed based on the
estimated useful lives using the straight-line method. Gains or losses on the
disposition of property, plant and equipment are included in income.
Maintenance and repairs are expensed as incurred.

Intangible Assets - Intangible assets consist primarily of patents, trademarks,
product technology, acquired license agreements and other identifiable
intangible assets and are carried at cost less accumulated amortization.
Amortization of intangibles is computed based on the straight-line method over
periods ranging from eight to fifteen years.

Excess Acquisition Costs Over Fair Value of Acquired Net Assets - Excess
acquisition costs over fair value of acquired net assets (goodwill) are
amortized using the straight-line method over periods ranging from eight to
fifteen years. The carrying value of goodwill is periodically reviewed by the
Company based on the expected future undiscounted operating cash flows of the
related business unit. Based upon its most recent analysis, the Company believes
no material impairment of goodwill exists at May 31, 1998.

Short-Term Borrowings - Certain of the Company's foreign subsidiaries had
short-term borrowings of $6,345,000 and $5,568,000 as of May 31, 1998 and 1997,
respectively.

                                       31
<PAGE>   33


BIOMET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED.

NOTE B: ACCOUNTING POLICIES, CONCLUDED.
Income Taxes - Deferred income taxes are determined using the liability method.
No provision has been made for U.S. and state income taxes or foreign
withholding taxes of the undistributed earnings ($78 million at May 31, 1998)
of foreign subsidiaries because it is expected that such earnings will be
reinvested overseas indefinitely. Upon distribution of those earnings in the
form of dividends or otherwise, the Company would be subject to U.S. income
taxes (subject to an adjustment for foreign tax credits), state income taxes
and withholding taxes payable to the various foreign countries. Determination
of the amount of any unrecognized deferred income tax liability on these
undistributed earnings is not practical.

Fair Value of Financial Instruments - The carrying amounts of cash and cash
equivalents, receivables, short-term borrowings, accounts payable and accruals
that meet the definition of a financial instrument approximate fair value. The
fair value of investments is disclosed in Note D.

Earnings Per Share - The Company has adopted SFAS No. 128, "Earnings Per
Share." In accordance with SFAS No. 128, earnings per common share amounts
("basic EPS") were computed by dividing net income by the weighted average
number of common shares outstanding and excluded any potential dilution.
Earnings per common share amounts assuming dilution ("diluted EPS") were
computed by reflecting potential dilution from the exercise of stock options.
Earnings per share amounts for the prior periods have been restated to conform
with the provisions of SFAS No. 128.

Revenue Recognition, Concentrations of Credit Risk and Allowance for Doubtful
Receivables - Revenue is recognized when the product is shipped to the
healthcare provider. The Company provides credit, in the normal course of
business, to hospitals, private and governmental institutions and healthcare
agencies, insurance providers and physicians. The Company maintains an
allowance for doubtful receivables and charges actual losses to the allowance
when incurred. The Company invests the majority of its excess cash in
certificates of deposit with financial institutions, money market securities,
short-term municipal securities and common stocks. The Company does not believe
it is exposed to any significant credit risk on its cash and cash equivalents
and investments. At May 31,1998 and 1997, cash and cash equivalents and
investments included of $42 million and $60 million, respectively, of cash
deposits and certificates of deposit with financial institutions in Puerto
Rico. Also, at May 31, 1998 and 1997, investments included $28 and
$21 million, respectively, of municipal bonds issued by state and local
subdivisions in Puerto Rico.

Stock-Based Compensation - The Company has not adopted the measurement
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation," for
stock option grants to Team Members and, accordingly, has made all of the
required pro-forma disclosures for the years ended May 31, 1998, 1997 and 1996.

NOTE C: ACQUISITIONS.
BioMer Joint Venture - Effective January 1, 1998, the Company and Merck KGaA,
Darmstadt, Germany ("Merck KGaA") entered into a Joint Venture Agreement (the
"Agreement") to manufacture and sell orthopedic and biomaterial products in
Europe. Under the terms of the Agreement, the Company and Merck KGaA each
contributed its European orthopedic and biomaterials business operations to a
new partnership entity and its wholly-owned holding company. Both the
partnership and holding company (collectively "BioMer") are organized under the
laws of The Netherlands. The Company is the general partner with a 50% interest
and Merck KGaA is a limited partner with a 50% interest. The Company has
control of BioMer through its voting control of the board of directors and,
accordingly, the Company has consolidated the financial statements of BioMer
for financial reporting beginning January 1, 1998 and has shown a minority
interest for Merck KGaA's 50% interest. This amount, which is immaterial for
the year ended May 31, 1998, has been netted against other income. The
Agreement required certain levels of assets and limits on liabilities to be
contributed to the joint venture. At May 31, 1998, prepaid expenses and other
includes a receivable of $10,766,000 from Merck KGaA to meet that requirement.

The accounting for the exchange of the Company's European orthopedic operations
for a controlling interest in another company is addressed in EITF Issue 86-29,
"Nonmonetary Transactions: Magnitude of Boot and the Exceptions to the Use of
Fair Value" and EITF Issue 90-13, "Accounting for Simultaneous Common Control
Mergers." Under this accounting, the Company is deemed to have sold
50% of its European orthopedic operations, with purchase consideration being
the fair value of the net assets deemed sold which results in a gain to the
Company. The acquisition of a 50% interest in BioMer is accounted for as a
business combination and the Company is required to adjust to fair value the
acquired Merck KGaA net assets to the extent acquired (i.e. 50%) and the
Company's European net assets to the extent sold (i.e.50%), with the remainder
of BioMer's net assets reported at historical cost.

The fair value of 50% of the Company's European orthopedic operations, which
are deemed to have been sold to Merck KGaA in the formation of BioMer,
aggregated $48 million and resulted in a $15.2 million pre-tax gain which is
reported in the current year. Deferred tax expense of $5.3 million was
recognized in conjunction with recording this gain.

The acquisition of BioMer has been accounted for as a purchase and the
operating results of BioMer are consolidated from the date of acquisition.
Based on the fair value of the acquired net assets of BioMer, the excess
acquisition cost over fair value for the net tangible

                                       32
<PAGE>   34
BIOMET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED. 

Note C: Acquisitions, Concluded.
assets aggregated $21.7 million. This excess has been allocated as follows:
$9.8 million to purchased in-process research and development ("R&D") and $11.9
million to other identified intangible assets and goodwill to be amortized over
8 to 15 years using the straight-line method. Purchased in-process R&D includes
the value of products that are in the development stage for which the
technological feasibility had not yet been established and the technology had
no alternative use. In accordance with applicable accounting rules, purchased
in-process R&D is required to be expensed and, accordingly, $9.8 million of the
acquisition cost was expensed during the current year.

Unaudited pro forma net sales for the years ended May 31, 1998 and 1997, as if
BioMer had been acquired at the beginning of each of the periods, are $698
million and $652 million, respectively. Pro forma net income and earnings per
share for the years ended May 31, 1998 and 1997, is not presented as it would
not be materially different from the Company's historical results.

Other Acquisitions - On June 1, 1997, the Company completed the acquisition of
one of its foreign distributors. The purchase price consisted of $13.2 million
cash. The excess acquisition cost over fair value of acquired net assets at the
acquisition date approximated $8.5 million. On August 1, 1996, the Company
completed the acquisition of one of its foreign distributors. The purchase
price consisted of 200,385 Common Shares of the Company, $4.7 million cash and
$3.8 million of assumed liabilities. The excess acquisition cost over fair
value of acquired net assets at the acquisition date approximated $4.8 million.
On April 1, 1997, the Company completed the acquisition of another one of its
foreign distributors. The purchase price consisted of $6.0 million cash. The
excess acquisition cost over fair value of acquired net assets at the
acquisition date approximated $3.1 million. These acquisitions were accounted
for using the purchase method of accounting with the operating results of the
acquired businesses included in the Company's consolidated financial statements
from the dates of acquisition. Pro forma financial information reflecting these
acquisitions has not been presented as it is not materially different from the
Company's historical results.

Note D: Investments.
As of May 31, 1998, the Company's investment securities were classified as
follows:

<TABLE>
<CAPTION>
                                Amortized           Unrealized
(in thousands)                       Cost         Gains   Losses    Fair Value
                                ---------    ----------   -------   ----------
<S>                             <C>          <C>          <C>       <C>
Available-for-sale:
  Debt securities               $  41,001    $      253   $  (131)  $   41,123
  Equity securities                 5,101         2,982      (201)       7,882
                                ---------    ----------   -------   ----------
    Total available-for-sale       46,102         3,235      (332)      49,005
                                ---------    ----------   -------   ----------
Held-to-maturity:
  Debt securities                  20,360           344       (77)      20,627
  Mortgage-backed obligations      10,828            15      (710)      10,133
                                ---------    ----------   -------   ----------
    Total held-to-maturity         31,188           359      (787)      30,760
                                ---------    ----------   -------   ----------
Certificates of deposit            24,600             -         -       24,600
                                ---------    ----------   -------   ----------
    Total                        $101,890        $3,594   $(1,119)    $104,365
                                ---------    ----------   -------   ----------

As of May 31, 1997, the Company's investment securities were classified as follows:

                                Amortized           Unrealized
(in thousands)                       Cost         Gains   Losses    Fair Value
                                ---------    ----------   -------   ----------
<S>                             <C>          <C>          <C>       <C>
Available-for-sale:
  Debt securities                 $19,592        $   38   $  (138)     $19,492
  Equity securities                 3,554         1,895       (62)       5,387 
                                ---------    ----------   -------   ----------
    Total available-for-sale       23,146         1,933      (200)      24,879
                                ---------    ----------   -------   ----------
Held-to-maturity:
   Debt securities                 11,062           151    (1,294)       9,919
   Mortgage-backed obligations     12,223            12      (914)      11,321
                                ---------    ----------   -------   ----------
    Total held-to-maturity         23,285           163    (2,208)      21,240
                                ---------    ----------   -------   ----------
Certificates of deposit            37,600             -         -       37,600
                                ---------    ----------   -------   ----------
    Total                         $84,031        $2,096   $(2,408)     $83,719
                                ---------    ----------   -------   ----------
</TABLE>
Proceeds from sales of available-for-sale securities were $27,504,000,
$14,476,000 and $15,381,000 for the years ended May 31, 1998, 1997 and 1996,
respectively. There were no sales of held-to-maturity securities for the years
ended May 31, 1998, 1997 and 1996. For the year ended May 31, 1998, gross
realized gains and (losses) on sales of available-for-sale securities were
$1,609,000 and $(80,000), respectively. Gross realized gains and (losses) for
the year ended May 31, 1997, were $563,000 and $(92,000), respectively.

                                       33
<PAGE>   35

BIOMET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED.

Note D: Investments, Concluded.
Gross realized gains and (losses) for the year ended May 31, 1996 were
$3,090,000 and $(72,000), respectively. The Company's investment securities at
May 31, 1998, include $21,500,000 of certificates of deposit, $10,023,000 of
debt securities and $95,000 of mortgage-backed obligations all maturing within
one year, and $3,100,000 of certificates of deposit, $51,460,000 of debt
securities, $7,882,000 of equity securities and $10,733,000 of mortgage-backed
obligations all maturing past one year.

<TABLE>
<CAPTION>

Investment income (included in other income, net) consists of the following:
(in thousands)
                                                                          -------------------------
                                                                            1998     1997     1996
                                                                          -------------------------
<S>                                                                       <C>      <C>      <C>
Interest income........................................................   $ 6,384  $6,782   $ 6,454 
Dividend income........................................................     2,701   1,480     1,217 
Net realized gains.....................................................     1,529     471     3,018 
                                                                          -------------------------
    Total..............................................................   $10,614  $8,733   $10,689
                                                                          -------------------------
</TABLE>

Note E:  Inventories.
Inventories at May 31, 1998 and 1997 consist of the following:
(in thousands)
<TABLE>
<CAPTION>
                                                                                   ------------------
                                                                                      1998      1997  
                                                                                   ------------------
<S>                                                                                 <C>        <C>    
Raw materials................................................................      $ 26,172  $ 20,958  
Work-in-progress.............................................................        24,036    16,546  
Finished goods...............................................................        78,552    64,992 
Consigned distributor........................................................        57,775    49,027 
                                                                                   ------------------
    Total......................................................................    $186,535  $151,523 
                                                                                   ------------------
</TABLE>

Note F: Team Member Benefit Plans.
The Company has an Employee Stock Bonus Plan for eligible Team Members of the
Company and certain subsidiaries. The amounts expensed under this plan for the
years ended May 31, 1998, 1997 and 1996 were $2,280,000,  $2,461,000, and
$2,165,000, respectively.

The Company also has a defined contribution profit sharing plan which covers
substantially all of the Team Members within the continental U.S. and allows
participants to make contributions by salary reduction pursuant to Section
401(k) of the Internal Revenue Code. The Company may match up to 50% of the
Team Member's contribution up to a maximum of 5% of the Team Member's
compensation. The amounts expensed under this profit sharing plan for the years
ended May 31, 1998, 1997 and 1996 were $1,609,000, $1,484,000, and $1,406,000
respectively.

Biomet Ltd., a subsidiary based in the United Kingdom, has a defined benefit
pension plan for all of its salaried Team Members. Pension expense and related
pension amounts are immaterial to the consolidated financial statements.

Note G: Stock Option Plans.
The Company has three stock option plans: the 1984 Employee Stock Option Plan,
as amended, the 1992 Employee and Non-Employee Director Stock Option Plan and
the 1992 Distributor Stock Option Plan.

Under the 1992 Employee and Non-Employee Director Stock Option Plan, options may
be granted to key employees and directors, at the discretion of the stock option
committee, and generally become exercisable in annual increments beginning one
year after the date of grant. In the case of options granted to an employee of
the Company who is a 10% or more shareholder, the option price is an amount per
share of not less than 110% of the fair market value per share on the date of
granting the option, as determined by the stock option committee. No options
have been granted to employees who are 10% or more shareholders. The option
price for options granted to all other employees and directors is an amount per
share of not less than the fair market value per share on the date of granting
the option. The term of each option granted expires within the period prescribed
by the stock option committee, but shall not be more than five years from the
date the option is granted if the optionee is a 10% or more shareholder, and not
more than ten years for all other optionees.

An aggregate of 9,680,000 common shares had been reserved for granting under
the 1984 Employee Stock Option Plan. This Plan expired in September 1994, which
has no effect on unexercised options. An aggregate of 3,000,000 common shares
have been reserved for granting under the 1992 Employee and Non-Employee
Director Stock Option Plan. The 1992 Plan does not affect options granted under
the 1984 Plan.

                                       34
<PAGE>   36

BIOMET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED.

Note G: Stock Option Plans, Continued.
The 1992 Distributor Stock Option Plan provides for granting of options to
purchase common shares of the Company to persons who serve as distributors of
the Company's products. An aggregate of 4,000,000 common shares have been
reserved for granting under this Plan. Under this Plan, options may be granted
from time to time at the discretion of the stock option committee, and become
exercisable in full at any time or on a cumulative basis from time to time, in
accordance with the stock option agreement prescribed by the stock option
committee. The option price is determined by the stock option committee, but
shall not be less than the fair market value of such shares on the date of
grant, as determined by the stock option committee. All rights under the option
terminate upon the termination of an optionee's distributorship with the
Company unless such termination results from retirement, disability or death.
No option may have a term longer than ten years from the date the option is
granted. For the years ended May 31,1998 and 1997, the amount of compensation
expense applicable to common shares issued under this Plan was not material to
the consolidated financial statements.

The following table summarizes stock option activity:

<TABLE>
<CAPTION>
                                               -----------------------------
                                                  Number           Exercise 
                                               of Shares             Price*
                                               -----------------------------
<S>                                            <C>           <C>
Outstanding, June 1, 1995....................  3,226,644     $ 1.53 - $15.00
 Granted.....................................    473,742      13.25 -  17.50
 Exercised...................................   (676,398)      2.44 -  14.00 
 Terminated..................................   (173,957)      2.86 -  15.00
                                               ---------
Outstanding, May 31, 1996....................  2,850,031            9.75
 Granted.....................................  1,240,006           14.03
 Exercised...................................   (763,720)           8.72
 Terminated..................................   (201,924)          10.96
                                               ---------
Outstanding, May 31, 1997....................  3,124,393           11.66
 Granted.....................................  1,124,284           21.80
 Exercised...................................   (814,360)          10.19
 Terminated..................................   (259,987)           9.99
                                               ---------
Outstanding, May 31, 1998....................  3,174,330          $15.57
                                               ---------
</TABLE>

* The exercise price presented for fiscal year 1998 and 1997, represents the
weighted-average exercise price in accordance with Statements of Financial
Accounting Standards No. 123. Amounts for fiscal year 1996, represent the range
of exercise prices in accordance with Accounting Principles Board Opinion No.
25.

Options outstanding at May 31, 1998, are exercisable at prices ranging from
$5.06 to $29.75 and have a weighted average remaining contractual life of 4.1
years. The following table summarizes information about stock options
outstanding at May 31, 1998.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                                  Outstanding   
                                   Weighted-     Weighted-    Number      
                    Number          Average       Average   Exercisable    Weighted-  
  Range of       Outstanding at    Remaining     Exercise    at Number      Average
Exercise Price   May 31, 1998   Contractual Life    Price   May 31, 1998  Exercise Price
----------------------------------------------------------------------------------------
<S>                 <C>            <C>            <C>          <C>           <C>
$ 5.06 - 10.00        545,942      2.8 years    $  8.37        240,782       $  7.71
 10.01 - 15.00      1,370,592      4.2 years      13.24        276,927         13.24
 15.01 - 20.00        630,131      4.7 years      17.51         15,052         15.65
 20.00 - 29.75        627,665      4.5 years      24.97              -             -
                    ---------                                  -------
                    3,174,330                                  532,761
                    ---------                                  -------
</TABLE>

At May 31, 1997 and 1996, there were exercisable options outstanding to
purchase 767,000 and 826,000 shares at weighted-average exercise prices of
$9.82 and $8.40, respectively.

The Company accounts for all stock option plans under APB Opinion No. 25, under
which no compensation cost has been recognized as all options granted during
1998, 1997 and 1996, have been granted at the fair market value of the
Company's common shares. Had compensation cost for these plans been determined
in accordance with SFAS No. 123, the pro forma net income and basic earnings
per share would have been as follows:

<TABLE>
<CAPTION>
                                         -------------------------------------
                                              1998         1997          1996 
                                         -------------------------------------
<S>                                       <C>          <C>           <C>
(in thousands, except per share data)
Pro forma net income..................... $123,563     $105,998      $ 94,014
Pro forma basic earnings per share.......     1.11          .93           .81 
The weighted-average fair value of 
 options granted during the year.........     6.68         4.57          5.17
</TABLE>


                                       35
<PAGE>   37

BIOMET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED.

Note G: Stock Option Plans, Concluded.
Under SFAS No. 123, the fair value of each option is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 1998, 1997 and 1996: (1) expected life of
option of 3.6 years; (2) dividend yield of .53%, .73% and 0%; (3) expected
volatility of 33%, 36% and 39%; and (4) risk-free interest rate of 5.69%, 6.50%
and 6.55%, respectively.

Note H: Shareholders' Equity.
On July 1, 1998, the Company announced a cash dividend of $.12 per share,
payable August 7, 1998, to shareholders of record on July 10, 1998.

On December 2, 1989, the Board of Directors of the Company approved the adoption
of a Shareholder Rights Plan (the "Plan") under which the Company declared a
dividend of one common share purchase right for each common share outstanding to
shareholders of record on December 26, 1989 (the "Right"). Each Right entitles
the shareholder to purchase from the Company one common share at a price of
$37.50 per common share, subject to adjustment. The Rights will not be
exercisable or separable from the common shares until ten business days after a
person or group acquires 15% or more or tenders for 30% or more of the Company's
outstanding common shares. The Plan also provides that if any person or group
becomes an "Acquiring Person," each Right, other than Rights beneficially owned
by the Acquiring Person (which will thereafter be void), will entitle its holder
to receive upon exercise that number of common shares having a market value of
two times the exercise price of the Right. In the event the Company is acquired
in a merger or other business combination transaction, each Right will entitle
its holder to receive upon exercise of the Right, at the Right's then current
exercise price, that number of the acquiring company's common shares having a
market value of two times the exercise price of the Right. The Company is
entitled to redeem the Rights at a price of one cent per Right at any time prior
to them becoming exercisable, and the Rights expire on December 2, 1999. The
Plan was designed to protect the interests of the Company's shareholders against
certain coercive tactics sometimes employed in takeover attempts.


Note I: Income Taxes.

<TABLE>
<CAPTION>

The components of income before income taxes are as follows:
(in thousands)
                                                --------------------------
                                                  1998      1997     1996
                                                --------------------------
<S>                                             <C>      <C>      <C>
United States operations.....................   $181,208 $154,827 $138,742 
Foreign operations...........................     22,589   14,305   10,927 
                                                --------------------------
  Total......................................   $203,797 $169,132 $149,669
                                                --------------------------

The provision for income taxes is summarized as follows:
(in thousands)
                                                --------------------------
                                                  1998      1997     1996
Current:                                        --------------------------
<S>                                             <C>      <C>       <C>
  Federal....................................   $47,864  $49,945   $39,480 
  State, including Puerto Rico...............    13,356   11,439    11,675 
  Foreign....................................     8,485    5,821     5,825 
                                                --------------------------
                                                 69,705   67,205    56,980 
Deferred.....................................     9,366   (4,527)   (1,417) 
                                                --------------------------
  Total......................................   $79,071  $62,678   $55,563
                                                -------------------------- 
Effective tax rate...........................      38.8%    37.1%     37.1%
                                                --------------------------
</TABLE>


                                       36
<PAGE>   38

BIOMET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED.

Note I: INCOME TAXES, CONCLUDED.
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate follows:

<TABLE>
<CAPTION>
                                                                                1998    1997    1996
                                                                                --------------------
<S>                                                                            <C>     <C>     <C>
U.S. statutory income tax rate................................................. 35.0%   35.0%   35.0%
Add (deduct):
  State taxes, less effect of federal reduction................................  3.6     3.9     3.8
  Foreign income taxes at rates different from the U.S. statutory rate.........   .3      .5     1.4
  Tax benefit relating to operations in Puerto Rico............................ (1.3)   (1.7)   (2.0)
  Tax credits..................................................................  (.3)    (.2)    (.1)
  Earnings of Foreign Sales Corporation........................................  (.5)    (.5)    (.5)
  Financial accounting basis of net assets of acquired companies different
    than tax basis.............................................................  2.1       -       -
  Other........................................................................  (.1)     .1     (.5)
                                                                                --------------------
Effective tax rate............................................................. 38.8%   37.1%   37.1%
                                                                                --------------------
</TABLE>

The components of the net deferred tax asset and liability at May 31, 1998 and
1997 are as follows: (in thousands)

<TABLE>
<CAPTION>
                                                                                     1998       1997
                                                                                  -------    -------
<S>                                                                               <C>        <C>
Current deferred tax asset:                                                          
  Accounts and notes receivable................................................   $ 1,203    $ 3,274 
  Inventories..................................................................     6,523      7,958 
  Accrued expenses.............................................................     7,938      5,566 
  Investments in affiliates....................................................         -      1,116 
                                                                                  ------------------
    Current deferred tax asset.................................................   $15,664    $17,914 
                                                                                  ------------------
Long-term deferred tax asset (liability):
  Depreciation.................................................................   $(2,488)   $(2,594)
  Financial accounting basis of net assets of acquired companies different
    than tax basis.............................................................    (5,366)         -   
  Other........................................................................    (1,491)       365
                                                                                  ------------------
    Long-term deferred tax liability...........................................   $(9,345)   $(2,229)
                                                                                  ------------------
</TABLE>









                                       37
<PAGE>   39

BIOMET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED.

NOTE J: INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION.
The Company operates in one industry segment which includes the designing,
manufacturing and marketing of reconstructive and fixation devices, electrical
bone growth stimulators, orthopedic support devices, operating room supplies,
general surgical instruments, arthroscopy products, spinal implants, bone
cements, bone substitutes, craniomaxillofacial implants, and instruments used
primarily by orthopedic medical specialists in both surgical and nonsurgical
therapy.

Net sales, operating income and identifiable assets by geographic area are
presented in the following table. The Company's major identifiable assets are
located in the United States (North America) and France, Germany, Italy, Spain
and the United Kingdom (Europe).

<TABLE>
<S>                                             <C>        <C>        <C>
Net sales:                                          1998       1997       1996
  North America..............................   $498,249   $468,757   $439,638
  Europe.....................................    143,615    110,039     95,521
  Other......................................      9,541      1,551          -
  Intercompany...............................     28,296     19,085     14,023
  Eliminations...............................    (28,296)   (19,085)   (14,023)
                                                ------------------------------
                                                $651,405   $580,347   $535,159
                                                ------------------------------


Operating income:
  North America..............................   $168,080   $144,536   $124,667
  Europe.....................................      9,942     15,131     12,613
  Other......................................      2,084        144          -
                                                ------------------------------   
                                                $180,106   $159,811   $137,280
                                                ------------------------------


Identifiable assets:
  North America..............................   $603,407   $511,442   $502,229
  Europe.....................................    267,098    138,059    125,126
  Other......................................     11,537      7,149          -
  Eliminations...............................    (33,303)   (28,294)   (28,886)
                                                ------------------------------
                                                $848,739   $628,356   $598,469
                                                ------------------------------
</TABLE>

Intercompany transfers, primarily from North America to Europe, are made at
agreed-upon prices which include a profit element. Domestic export sales,
primarily to European countries, aggregated $34,222,000, $43,235,000 and
$42,931,000 for the years ended May 31, 1998, 1997 and 1996, respectively. The
decrease in domestic export sales for the year ended May 31, 1998, is
attributable to the acquisition of foreign distributors in mid to late fiscal
1997 and early fiscal 1998. Sales to these entities were domestic export sales
prior to acquisition and are now classified as either Europe or Other net sales
above.

Selected Financial data of the Company's foreign subsidiaries is as follows:
(in thousands)

<TABLE>
<CAPTION>
                                                    1998       1997       1996
<S>                                             <C>        <C>        <C>
Net sales....................................   $153,156   $111,590   $ 98,907
                                                ------------------------------
Net income...................................   $  9,258   $  8,585   $  5,237
                                                ------------------------------
Current assets...............................   $176,038   $111,872   $101,425
Property, plant and equipment................     87,965     29,554     21,407
Intangible assets............................     47,352     12,525      6,396
                                                ------------------------------
                                                 311,355    153,951    129,228
                                                ------------------------------
Current liabilities..........................     53,409     31,054     29,617
Intercompany loans...........................     46,638     38,297     40,738
Long-term liabilities........................        146         11        380
                                                ------------------------------
                                                 100,193     69,362     70,735
                                                ------------------------------
Net assets...................................   $211,162   $ 84,589   $ 58,493
                                                ------------------------------
</TABLE>







                                       38
<PAGE>   40

BIOMET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED.

NOTE K: COMMITMENTS AND CONTINGENCIES.
BioMer Put Option - Pursuant to the terms of the Joint Venture Agreement with
Merck KGaA (see Note B), the Company granted Merck KGaA a put option whereby
Merck KGaA has the right to elect to require the Company to purchase all, but
not less than all, of Merck KGaA's interest in BioMer. Merck KGaA may exercise
the put option by giving notice to the Company at any time during (a) the
period beginning on May 1, 2002 and ending on May 10, 2008, or (b) a period of
180 days following receipt by Merck KGaA of notice from the Company that "a
change of control" of the Company (as defined in the Joint Venture Agreement)
has occurred prior to May 1, 2023. The put exercise price, which is payable in
cash, is the greater of (i) a formula value based on earnings of BioMer and
multiples, as defined in the Joint Venture Agreement, or (ii) the net book value
of all the assets of BioMer less all liabilities of BioMer multiplied by Merck
KGaA's ownership percentage.

Self Insurance - Medical Insurance Plan - The Company maintains a
self-insurance program for covered medical expenses for all Team Members within
the continental U.S. The Company is liable for claims up to $125,000 per Team
Member annually. Self-insurance costs are accrued based upon the aggregate of
the liability for reported claims and a management-determined estimated
liability for claims incurred but not reported.

Liability Insurance - Since 1989, the Company has self-insured against product
liability claims, and at May 31, 1998 the Company's self-insurance limits were
$3,000,000 per occurrence and $5,000,000 aggregate per year. Liabilities in
excess of these amounts are the responsibility of the Company's insurance
carrier. Self-insurance costs are accrued based on reserves set in consultation
with the insurance carrier for reported claims and a management-determined
estimated liability for claims incurred but not reported. Based on historical
experience, management does not anticipate that incurred but unreported claims
would have a material impact on the Company's consolidated financial position.

Litigation - In January 1996, a jury returned a verdict in favor of Raymond G.
Tronzo ("Tronzo") awarding him approximately $55 million on his patent and state
law claims. On October 29, 1996, the United States District Court for the
Southern District of Florida entered a judgment, which implemented a reduced
jury verdict, awarding $30.2 million to Tronzo on his state law claims,
including compensatory damages of approximately $7.1 million, punitive damages
of $20 million, and prejudment interest. The trial court dismissed, with
prejudice, Tronzo's claims based upon unjust enrichment. The trial court denied
the Company's motion challenging the validity of Tronzo's patent. Tronzo was
awarded an additional $6.3 million judgment for patent infringement, including a
fifty percent enhancement based upon willfulness. The trial court also granted
an injunction prohibiting future manufacture, use, promotion or sale, in the
United States, of the finned version of the Mallory-Head acetabular cup, the
device found to have infringed the Tronzo patent. The U.S. Court of Appeals for
the Federal Circuit (the "Federal Circuit") denied the Company's motion to stay
the injunction pending the conclusion of the appeal. The Mallory-Head finned
acetabular cup accounted for a relatively small portion of the Company's annual
sales. The Company is vigorously pursuing its appeal before the Federal Circuit
on both the patent and state law claims. The briefing by both parties in the
appeal was completed in the Federal Circuit in June 1997 and oral arguments were
held in September 1997. It is anticipated that the Federal Circuit will issue
its final decision on the appeal sometime in the second half of calendar year
1998. In connection with the District Court's final judgment and its order
granting a stay of enforcement and execution of the judgment, the Company was
required to deliver to an escrow agent investments with  value no less than
$36.6 million to be held in escrow, invested and disbursed for the benefit of
the plaintiff pending the outcomes of all appeals. The $36.6 million of
investments, which are restricted under the terms of the escrow agreement, are
included in investments on the Company's consolidated balance sheets as of May
31, 1998 and 1997.

On June 2, 1997, the Company announced the entry of a jury verdict against it in
the United States District Court of New Jersey in an action brought by Orthofix
SRL ("Orthofix") against the Company and its wholly-owned subsidiaries,
Electro-Biology, Inc. ("EBI") and EBI Medical Systems, Inc. ("EBIMS"), (the
"Biomet Group") related to the events surrounding the expiration of a
distribution agreement under which EBIMS distributed Orthofix's external
fixation devices in the United States. The jury found that, notwithstanding
Orthofix's refusal to renew the distribution agreement, EBIMS's commencement of
development activities of a new external fixation system prior to the expiration
of the contract constituted a breach of the distribution agreement. The jury
awarded compensatory damages against the Biomet Group for breach of contract and
related claims of approximately $49 million and punitive damages of $100
million. The jury also concluded that Orthofix breached the distribution
agreement and tortiously interfered with EBIMS's economic relations, but awarded
only nominal damages to the Biomet Group. With respect to certain non-jury
issues, the trial court entered an order denying Orthofix's motions for enhanced
and/or treble damages and attorneys' fees. The trial court also granted
Orthofix's motion for prejudgment interest, but only on the compensatory portion
of the damages commencing from November 29, 1995. On September 2, 1997, the
trial court entered an amended judgment reducing to $50 million, the $100
million in punitive damages awarded to Orthofix by the jury. The Company is
appealing the final amended judgment entered against the Biomet Group to the
United States Court of Appeals for the Third Circuit. In connection with the
District Court's final judgment and its order granting a stay of enforcement and
execution of the judgment, the Biomet Group is required to deliver to an escrow
agent investments with a value no less than $108 million to be held in escrow,
invested and disbursed for the benefit of the plaintiff pending the outcomes of
all

                                       39
<PAGE>   41

BIOMET, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
CONTINUED.

NOTE K: COMMITMENTS AND CONTINGENCIES, CONCLUDED.
appeals. As of May 31, 1998, $74 million has been delivered to the escrow agent
and is included in investments on the Company's consolidated balance sheet as
of May 31, 1998. In addition, two additional installments of $17 million each
will be delivered on July 31, 1998 and December 31, 1998.

Based on the information currently available and advice from legal counsel,
management believes that the trial courts' judgments in the Tronzo and Orthofix
cases will not be upheld upon appeal. Therefore, no amounts related to these
two cases have been recorded in the Company's financial statements, except for
estimated legal costs associated with the appeal process. If the Company is
unsuccessful in its appeal of either, or both, of these cases, the ultimate
liabilities could be material to the operating results in the period such
losses are recognized. The Company's cash, cash equivalents and investments are
adequate to address the payment of any losses that could ultimately be
determined with respect to these two cases.

There are various other claims, lawsuits, disputes with third parties,
investigations and pending actions involving various allegations against the
Company incident to the operation of its business, principally product liability
and intellectual property cases. Each of these matters is subject to various
uncertainties, and it is possible that some of these matters may be resolved
unfavorably to the Company. The Company establishes accruals for losses that are
deemed to be probable and subject to reasonable estimate. Based on the advice of
counsel to the Company in these matters, management believes that the ultimate
outcome of these matters and any liabilities in excess of amounts provided will
not have a material adverse impact on the Company's consolidated financial
position or on its future business operations.

                                       40
<PAGE>   42

REPORT OF INDEPENDENT ACCOUNTANTS

[PWC LOGO APPEARS HERE]

To the Board of Directors of Biomet, Inc.: 

Our report on the consolidated financial statements of Biomet, Inc. and
subsidiaries is included on page 26 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion,
this financial statement schedule when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.


                                            /s/  PricewaterhouseCoopers LLP



South Bend, Indiana
July 2, 1998


                                       41
<PAGE>   43

BIOMET, INC. AND SUBSIDIARIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

for the years ended May 31, 1998, 1997 and 1996
(in thousands)

----------

<TABLE>
<CAPTION>
     Col. A                   Col. B              Col. C               Col. D        Col. E
                                                 Additions
                                                 ---------
                                              (1)         (2)
                                                       Charged to
Description                 Balance at    Charged to     other                     Balance at
-----------                beginning of   costs and     accounts-    Deductions-     end of
                              period       expenses     describe      describe       period
                              ------       --------     --------      --------       ------
<S>                          <C>          <C>          <C>           <C>            <C>
Allowance for
doubtful receivables:

For the year ended
  May 31, 1998                $6,175        $7,253       $519(B)      $7,976(A)      $5,957
                                                                          14(C)
                              =====         ======       =======      =========      ======

For the year ended
  May 31, 1997                $6,889        $6,912       $528(B)      $8,142(A)      $6,175
                                                                          12(C)
                              ======        ======       =======      =========      ======

For the year ended
  May 31, 1996                $6,039        $6,208       $197(B)      $5,080(A)      $6,889
                                                                         475(C)
                              ======        ======       =======      =========      ======
</TABLE>



Notes:

       (A) Uncollectible accounts written off
       (B) Collection of previously written off accounts
       (C) Effect of foreign currency translation adjustment
       







                                       42



<PAGE>   44

                                        
                                  BIOMET, INC.
                                        
                                   FORM 10-K
                                        
                                  MAY 31, 1998

                               INDEX TO EXHIBITS


NUMBER ASSIGNED
IN REGULATION S-K, ITEM 601     TITLE OF EXHIBITS

<TABLE>
<CAPTION>
<S>       <C> 
(3)  3.1  Amended Articles of Incorporation filed July 23,1982.
          (Incorporated by reference to Exhibit 3(a) to Biomet, Inc. Form S-18
          Registration Statement, File No. 2-78589C).

     3.2  Articles of Amendment to Amended Articles of Incorporation filed July
          11, 1983. (Incorporated by reference to Exhibit 3.2 to Biomet, Inc. Form 10-K
          Report for year ended May 31, 1983, File No. 0-12515).

     3.3  Articles of Amendment to Amended Articles of Incorporation filed
          August 22, 1987. (Incorporated by reference to Exhibit 3.3 to Biomet, Inc.
          Form 10-K Report for year ended May 31, 1987, File No. 0-12515).

     3.4  Articles of Amendment to the Amended Articles of Incorporation filed
          September 18, 1989.  (Incorporated by reference to Exhibit 3.4 to Biomet, Inc.
          Form 10-K Report for year ended May 31, 1990, File No.
          0-12515).

     3.5  Amended and Restated Bylaws. (Incorporated by reference to Exhibit 4.2
          to Biomet, Inc. Form S-3 Registration Statement, File No. 33-33376).

     3.6  Amended and Restated Bylaws as Amended December 13, 1997.

 (4) 4.1  Specimen certificate for Common Shares. (Incorporated by reference
          to Exhibit 4.1 to Biomet, Inc. Form 10-K Report for year ended May 31, 1985,
          File No. 0-12515).

     4.2  Rights Agreement between Biomet, Inc. and Lake City Bank as Rights
          Agent, dated as of December 2, 1989. (Incorporated by reference to Exhibit 4 to
          Biomet, Inc. Form 8-K current Report dated December 22, 1989, File No.
          0-12515).
     
 (9)      No exhibit.

(10) 10.1 Employee Stock Option Plan, as last amended December 14, 1991.
          (Incorporated by reference to Exhibit 10.1 to Biomet, Inc. Form 10-K Report for
          year ended May 31, 1992, File No. 0-12515).

     10.2 Form of Employee Stock Option Agreement. (Incorporated by reference
          to Exhibit 10.2 to Biomet, Inc. Form 10-K Report for year ended May 31, 1991,
          File No. 0-12515).

     10.3 Employee and Non-Employee Director Stock Option Plan, dated September
          18, 1992. (Incorporated by reference to Exhibit 19.1 to Biomet, Inc. Form 10-K
          Report for year ended May 31, 1993, File No.
          0-12515).

     10.4 Form of Stock Option Agreement under the Employee and Non-Employee
          Stock Option Plan dated September 18, 1992. (Incorporated by reference
          to Exhibit 4.03 to Biomet, Inc. Form S-8 Registration Statement, File
          No. 33-65700).

     10.5 401(k) Profit Sharing Plan filed January 19,1996. (Incorporated by
          reference to Form S-8 Registration Statement, File No. 333-00331).

     10.6 Biomet, Inc. 1998 Qualifed and Non-Qualified Stock Option Plan adopted
          August 3, 1998.

 (12)     No exhibit.

 (13)     No exhibit.

 (16)     No exhibit.

 (18)     No exhibit.
</TABLE>

                                       43
<PAGE>   45


<TABLE>
<CAPTION>

<S>       <C> 
 (21)21.1 Subsidiaries of the Registrant.

 (22)     No exhibit.

 (23)23.1 Consent of PricewaterhouseCoopers LLP

 (24)     No exhibit.

 (27)27.1 Financial Data Schedule.

 (28)     No exhibit.

 (99)     No exhibit.

</TABLE>


                                       44