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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, 2002.
                                             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.)

     56 EAST BELL DRIVE, WARSAW, INDIANA                    46582
   (Address of principal executive offices)               (Zip Code)


                                 (574) 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. [X]

The aggregate market value of the Common Shares held by non-affiliates of the
registrant, based on the closing price of the Common Shares on July 12, 2002, as
reported by the Nasdaq Stock Market, was approximately $5,978,000,000. As of
July 12, 2002, there were 263,286,529 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 2002
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 federal securities laws. Those statements are often
indicated by the use of words such as "will," "intend," "anticipate,"
"estimate," "expect," "plan" and similar expressions, and include, but are not
limited to, statements related to the timing and number of planned new product
introductions; the effect of anticipated changes in the size, health and
activities of population on demand for the Company's products; the Company's
intent and ability to expand its operations; assumptions and estimates regarding
the size and growth of certain market segments; the Company's ability and intent
to expand in key international markets; the anticipated outcome of clinical
studies; assumptions concerning anticipated product developments and emerging
technologies; the future availability of raw materials; the anticipated adequacy
of the Company's capital resources to meet the needs of its business; the
Company's continued investment in new products and technologies; the ultimate
success of the Company's strategic alliances and joint ventures; the ultimate
marketability of products currently being developed; the ability to successfully
implement new technology; future declarations of cash dividends and stock
splits; the Company's ability to sustain sales and earnings growth; the
Company's goals for sales and earnings growth; the future value of the Company's
Common Stock; the ultimate effect of the Company's Share Repurchase Programs;
the Company's success in achieving timely approval of its products with domestic
and foreign regulatory entities; the stability of certain foreign economic
markets; the trend of reimbursement prices throughout the world; the
susceptibility of health care costs to political pressure and scrutiny; and the
Company's ability to take advantage of technological advancements. 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.

                                TABLE OF CONTENTS

                                     PART I

ITEM 1.   BUSINESS...........................................................  1
ITEM 2.   PROPERTIES......................................................... 12
ITEM 3.   LEGAL PROCEEDINGS.................................................. 13
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 13

                                     PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS............................................................ 15
ITEM 6.   SELECTED FINANCIAL DATA............................................ 16
ITEM 7.   MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION &
          RESULTS OF OPERATIONS.............................................. 17
ITEM 7A.  QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK........... 21
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 22
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE............................................... 40

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS  OF THE REGISTRANT................ 40
ITEM 11.  EXECUTIVE COMPENSATION............................................. 40
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS AND MANAGEMENT.... 40
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 40

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.... 41


<PAGE>


                                     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
musculoskeletal 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, spinal products, bone cements and
accessories, bone substitute materials, craniomaxillofacial implants and
instruments, and dental reconstructive implants and associated instrumentation.
Biomet has corporate headquarters in Warsaw, Indiana, and manufacturing and/or
office  facilities in more than 50 locations worldwide.

The Company's principal subsidiaries include Biomet Orthopedics, Inc.; Biomet
Manufacturing Corp.; EBI, L.P.; the Biomet Merck joint venture; Implant
Innovations, Inc.; Walter Lorenz Surgical, Inc. and Arthrotek, Inc. Unless the
context requires otherwise, the term "Company" as used herein refers to Biomet
and all of its subsidiaries.

The Company intends to fully comply with the recent corporate responsibility
legislation enacted by Congress, the Sarbanes-Oxley Act of 2002, in response to
the recent highly publicized corporate accounting scandals. In practice, these
new requirements will not change the way the Company conducts its business or
the method and diligence with which it prepares its financial statements. The
Company has no special purpose entities or off balance sheet transactions, nor
does it make loans to its executive officers. The only partnership in which the
Company is a party is the Biomet Merck joint venture in Europe, which has been
fully disclosed in the Company's financial statements, including the provision
for the minority interest held by Merck KGaA of Darmstadt, Germany.

PRODUCTS

The Company operates in one business segment, musculoskeletal products, which
includes the design, manufacture and marketing of four major product groups:
reconstructive devices, fixation products, spinal products and other products.
The Company has three reportable geographic markets: United States, Europe and
Other. Reconstructive devices include knee, hip and extremity joint replacement
systems, as well as dental reconstructive implants, bone cements and accessories
and the procedure-specific instrumentation required to implant the Company's
reconstructive systems. Fixation products include internal and external fixation
devices, craniomaxillofacial fixation systems and electrical stimulation devices
that do not address the spine. Spinal products include electrical stimulation
devices addressing the spine and spinal fixation systems. The other product
sales category includes softgoods and bracing products, arthroscopy products,
casting materials, general surgical instruments, operating room supplies, wound
care products and other surgical products. Depending on the application, the
Company reports sales of bone substitute materials in the fixation product or
spinal product group.

The following table shows the net sales and percentages of total net sales
contributed by each of the Company's product groups for each of the three most
recent fiscal years ended May 31, 2002.

<TABLE>
<CAPTION>
                                                               YEARS ENDED MAY 31,
                                                          (DOLLAR AMOUNTS IN THOUSANDS)
                                                          -----------------------------
                                        2002                           2001                        2000
                                               PERCENT                       PERCENT                     PERCENT
                                     NET      OF TOTAL              NET     OF TOTAL            NET     OF TOTAL
                                   SALES     NET SALES            SALES    NET SALES          SALES    NET SALES
                                   -----     ---------            -----    ---------          -----    ---------
<S>                           <C>            <C>             <C>           <C>             <C>         <C>
Reconstructive  Devices       $  721,004           60%       $  614,308          59%       $580,239          63%

Fixation Products                215,544           18%          202,152          20%        180,336          19%

Spinal Products                  125,119           11%           91,103           9%         54,119           6%

Other Products                   130,235           11%          123,100          12%        108,857          12%
                              ----------------------------------------------------------------------------------
Total                         $1,191,902          100%       $1,030,663         100%       $923,551         100%
                              ----------------------------------------------------------------------------------
</TABLE>


                                       1

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RECONSTRUCTIVE DEVICES

Orthopedic reconstructive devices are used to replace joints that have
deteriorated as a result of disease (principally osteoarthritis) or injury.
Reconstructive joint surgery involves the modification of the area surrounding
the affected joint and the implantation of one or more manufactured components,
and may involve the use of bone cement. The Company's primary orthopedic
reconstructive joints are knees, hips and extremities, but it produces other
joints as well. The Company also produces the associated instruments required by
orthopedic surgeons to implant the Company's reconstructive devices, as well as
bone cements and delivery systems. The Company's orthopedic reconstructive
devices are sold through its Biomet Orthopedics, Inc. ("Biomet Orthopedics")
subsidiary. Additionally, dental reconstructive devices and associated
instrumentation are used for oral rehabilitation through the replacement of
teeth and repair of hard and soft tissues.

     KNEE SYSTEMS. Total knee replacement procedures normally include a femoral
component, a patellar component, a tibial tray and an articulating surface.
Total knee replacement may occur as an initial joint replacement procedure, or
as a revision procedure due to the need to replace, repair or enhance the
initial implant. Partial, or unicondylar, knee replacement is an option when
only a portion of the knee requires replacement.

The Maxim(R) Complete Knee System incorporates cruciate retaining, posterior
stabilized and constrained components, and competes in the primary and revision
knee market segments. The Maxim(R) System was the Company's largest-selling
knee system during fiscal year 2002 and continues to gain market share in the
United States. The Company is finalizing the development of the Maxim(R)
Accel(TM) Total Knee System, which is designed to be a comprehensive knee
system, addressing primary and revision indications.

The Company continues to be the market leader in addressing the increasing
demand from practitioners and patients for procedures and products accommodating
minimally-invasive knee techniques. The Repicci II(R) Unicondylar Knee System is
specifically designed to accommodate a minimally-invasive knee arthroplasty
procedure. This system incorporates self-aligning metal and polyethylene
components. This innovative procedure can often be performed on an outpatient
basis and requires a smaller incision and less bone removal, which may result in
shorter recovery time and reduced blood loss. The Oxford(TM) Phase 3
Unicompartmental Knee, which is a mobile-bearing unicondylar knee that utilizes
a minimally-invasive technique, continues to experience strong sales outside the
United States. The Company is currently seeking clearance to market the
Oxford(TM) Phase 3 Knee from the U.S. Food and Drug Administration ("FDA").
During the first half of fiscal year 2003, the Company intends to introduce the
Vanguard M(TM) Series Minimally-Invasive Unicompartmental Knee System. The
Vanguard M(TM) System is designed to accommodate surgeons who prefer a
fully-instrumented minimally-invasive unicondylar system, and incorporates a
fixed-bearing tibial component to accompany the femoral component and
instruments of the Oxford(TM) Phase 3 Minimally-Invasive Unicompartmental Knee
System.

The Ascent(TM) Total Knee System incorporates an open box posterior stabilized
femoral component with a swept-back anterior flange that can accept either a
posterior stabilized or constrained tibial bearing. This system is designed with
a deepened patella groove to enhance patellar tracking and contribute to reduced
lateral release rates. The Ascent(TM) System addresses the needs of both the
primary and revision markets.

During fiscal year 2002, Biomet Orthopedics released the Biomet(R) Orthopaedic
Salvage System ("OSS"). This system provides modular flexibility while reducing
overall inventory demands. The OSS System is used mainly in instances of severe
bone loss or significant soft tissue instability as a result of multiple
revision surgeries or oncological bone deficiencies.

The TRAC(R) Mobile Bearing Knee System, which has been positively received in
Europe and is currently involved in clinical studies in the United States, is a
unique knee system utilized primarily in total knee arthroplasty for younger,
more active patients. Its patented rotating platform design allows greater
anatomic flexibility of the knee.

     HIP SYSTEMS. Total hip replacement procedures involve the replacement of
the head of the femur and the acetabulum, and may occur as an initial joint
replacement procedure, or as a revision procedure due to the need to replace,
repair or enhance the initial implant. A femoral hip prosthesis consists of a
femoral head and stem, which can be cast, forged or machined depending on the
design and material used. Acetabular components include a prosthetic replacement
of the socket portion, or acetabulum, of the pelvic bone. Because of variations
in human anatomy and differing design preferences among surgeons, femoral and
acetabular prostheses are manufactured by the Company in a variety of sizes and
configurations. The Company currently offers over twenty total hip systems, most
of which utilize titanium or cobalt chromium alloy femoral components and the
Company's patented ArCom(R) polyethylene-lined or metal-on-metal acetabular
components. Many of the femoral prostheses utilize a porous coating, which
enhances the attachment of bone cement to the stem or enables cementless
fixation.

The Alliance(R) family of hip systems is designed to address the demand from
hospitals and surgeon groups toward standardization of total hip systems. The
Alliance(R) hip family provides the largest selection in the marketplace of
primary and revision stems


                                       2

<PAGE>

available for implantation with a single set of instrumentation. The Alliance(R)
family of hip systems includes the Answer(R), Bi-Metric(R), Bio-Groove(R), Hip
Fracture(TM), Integral(R), Intrigue(TM), Osteocap RS(R), Progressive(TM),
RX90(TM) and Vision(R) Hip Systems. During fiscal year 2002, Biomet Orthopedics
augmented the Alliance(R) family by introducing Exact((TM)) Instrumentation,
an integrated instrument set developed to promote intraoperative flexibility and
increase the efficiency, simplicity and consolidation of instrument use.

The Mallory-Head(R) Hip System is designed for both primary and revision total
hip arthroplasty procedures. 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
Mallory-Head(R) revision femoral components provide innovative solutions for
difficult revision cases, and have demonstrated excellent clinical results. The
Mallory-Head(R) Calcar Replacement Prosthesis is offered in both a one-piece and
modular geometry, which allows for individual customization at the time of
surgical intervention, even in cases of severe bone deficiency.

Biomet's Metal-on-Metal Hip System combines a cobalt chrome head with a cobalt
chrome liner and has demonstrated a 20- to 100-fold reduction in volumetric wear
in simulator studies compared to traditional metal-polyethylene articulation
systems. The M(2)a-Taper(TM) Metal-on-Metal Articulation System may be utilized
on most of Biomet's femoral components and has continued to evolve with the
introduction of the M(2)a-38(TM)System, which incorporates larger diameter
metal-on-metal components designed to offer increased range of motion and
decrease the likelihood of hip dislocation. The Company is also developing a
ceramic-on-ceramic articulation system, which is currently being marketed
outside the United States and is in the patient-enrollment phase of a clinical
trial in the United States.

During fiscal year 2002, Biomet received clearance from the FDA to market the
Taperloc(R) and Mallory-Head(R) Porous Primary Stems with hydroxyapatite coating
in the United States. The Company already markets several hip components in
Europe with hydroxyapatite coating, which is preferred by some surgeons in
cementless procedures. During fiscal year 2003, the Company plans to introduce
the Max-Ti(TM) Protrusio Cage, the first protrusio cage to offer modular
augments to fit the product to the patient and achieve desired anatomic
positioning. The Company also anticipates clearance from the FDA to market its
constrained hip liners as a result of the FDA's downclassification of
constrained hip liners from Class III to Class II medical devices. This
downclassification was effective May 30, 2002 and could potentially shorten the
FDA review and approval process for constrained hip liners from years to months.

     EXTREMITY SYSTEMS. The Company offers a variety of shoulder systems
including the Absolute(R) Bi-Polar, Bi-Angular(R), Bio-Modular(R), Copeland(TM),
Integrated(TM) and Mosaic(TM) Shoulder Systems, as well as uniquely-designed
elbow replacement systems.

The Copeland(TM) Humeral Resurfacing Head was released in the United States
during fiscal year 2002. With 10 years of positive clinical results in the
United Kingdom, the Copeland(TM) Head was developed to minimize bone removal in
shoulder procedures. The Discovery(TM) Elbow is a unique total elbow device that
incorporates an ArCom(R) polyethylene molded bearing and condylar hinge
mechanism designed to produce a more anatomic articulation than observed in
simple-hinged elbow implants. The iBP(TM) (Instrumented Bone Preserving) Elbow
System is marketed in Europe and is designed to closely resemble the natural
anatomy of the elbow to allow for a more complex pattern of movement than
simple-hinged implants.

     DENTAL RECONSTRUCTIVE IMPLANTS. Through its subsidiary, Implant
Innovations, Inc. ("3i"), the Company develops, manufactures and markets
products designed to enhance oral rehabilitation through the replacement of
teeth and the repair of hard and soft tissues. These products include dental
reconstructive implants and related instrumentation, bone substitute materials
and regenerative products and materials. A dental implant is a small screw or
cylinder, normally constructed of titanium, that is surgically placed in the
bone of the jaw to replace the root of a missing tooth and provide an anchor for
an artificial tooth. 3i's flagship product, the OSSEOTITE(R) product line,
features a patented micro-porous surface technology, which allows for earlier
loading and improved bone integration to the surface of the implant compared to
competitive dental implants.

3i's offering of restorative treatment options also includes the GingiHue(TM)
Post and the ZiReal(TM) Post. The GingiHue(TM) Post is a gold-colored titanium
nitride coated abutment, which optimizes the projection of natural color to
approximate the appearance of natural teeth. The ZiReal(TM) Post offers a highly
aesthetic restorative option. This zirconia-based implant provides the natural
translucence of ceramic material, but with greater strength, durability and
resistance to cracking than conventional aluminum oxide ceramic abutments. Both
of these products may be used with conventional crown and bridge techniques.

Through its collaboration with Colbar Research & Development Ltd., 3i introduced
OSSIX(TM) Resorbable Collagen Membrane during fiscal year 2002. The OSSIX(TM)
membrane provides a barrier for guided bone regeneration for six months and then
completely resorbs within eight to ten months. The regenerated bone may then be
used as the foundation for a dental implant.

Ossix(TM) is a trademark of Colbar Research & Development Ltd.


                                        3

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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 by strengthening its
relationships with orthopedic surgeons and augmenting its reputation as a
responsive company committed to excellent product design. In order to assist
orthopedic surgeons and their surgical teams in preoperative planning, Biomet's
PMI(R) group utilizes a three-dimensional ("3-D") bone and soft tissue
reconstruction imaging system. The Company uses Computed Tomography ("CT") data
to produce 3-D reconstructions for the design and manufacture of patient-matched
implants. Biomet also provides anatomic physical models based on patient CT
data. With this imaging and model-making technology, Biomet's PMI(R) group is
able to assist the physician prior to surgery by creating 3-D models. Within
strict deadlines, the model is used by engineers to create a PMI(R) design for
the actual manufacturing of the custom implant for the patient.

The Company is involved in the ongoing development of bone cements and delivery
systems. The Company has successfully penetrated the domestic cement market with
Palacos(R) Bone Cement, which is marketed primarily in conjunction with the
Optivac(R) Vacuum Mixing System.

FIXATION PRODUCTS

The Company's fixation products include electrical stimulation devices (that do
not address the spine), external fixation devices, craniomaxillofacial fixation
systems, internal fixation devices and bone substitute materials utilized in
fracture fixation applications.

     ELECTRICAL STIMULATION SYSTEMS. The Company's subsidiary, EBI, L.P.
("EBI"), is the market leader in the electrical stimulation segment of the
fixation market. The EBI Bone Healing System(R) unit is a non-invasive option
for the treatment of recalcitrant bone fractures (nonunions) which have not
healed with conventional surgical and/or non-surgical methods. 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 pseudarthrosis. The EBI Bone Healing System(R) units produce
low-energy pulsed electromagnetic field ("PEMF") signals that induce weak
pulsing currents in living tissues that are exposed to the signals. These
pulses, when suitably configured in amplitude, repetition and duration, affect
bone cells. The EBI Bone Healing System(R) unit may be utilized over a patient's
cast, incorporated into the cast or worn over the skin. In addition, the
OrthoPak(R) Bone Growth Stimulation System offers a small, lightweight
non-invasive bone growth stimulator using capacitive coupling technology. The
OrthoPak(R) System provides greater ease of use and enhances access to fracture
sites. Sales of EBI's non-invasive electrical stimulation products continue to
be positively impacted by the FDA's revision of the definition of "nonunions" to
include fractures with no visibly progressive signs of healing, rather than the
previously required time frame of nine months with no signs of healing, as well
as the revision of the Health Care Financing Administration ("HCFA") policy
covering electrical stimulation therapy for fractures to permit reimbursement
for electrical stimulation therapy three months after a fracture has occurred.

EBI also offers an implantable option when bone growth stimulation is required
subsequent to surgical intervention. EBI's OsteoGen(TM) Totally Implantable Bone
Growth Stimulator is an adjunct treatment when bone grafting and surgical
intervention are required to treat a recalcitrant fracture.

     EXTERNAL FIXATION DEVICES. External fixation is generally indicated to
immobilize fractures when traditional casting is not a viable solution. The
DynaFix(R) and Vision(R) Systems are patented devices for use in complicated
trauma situations and in certain limb-lengthening and deformity correction
applications. EBI also offers several other fixation systems addressing distal
radius fractures and elbow fractures, as well as extensions to the DynaFix(R)
and Vision(R) Systems designed to treat the varying and unique needs of
practitioners and patients.

     CRANIOMAXILLOFACIAL FIXATION SYSTEMS. The Company manufactures and
distributes craniomaxillofacial and neurosurgical titanium and resorbable
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
also offers specialty craniomaxillofacial surgical instruments, Hard Tissue
Replacement (HTR(R)) custom craniofacial implants and the Mimix(TM) Bone
Substitute Material for use in craniomaxillofacial surgery.

Lorenz Surgical manufactures and markets the LactoSorb(R) Resorbable Fixation
System of resorbable plates and screws comprised of a copolymer of poly-L-lactic
acid and polyglycolic acid. As a result of its innovative design, the
LactoSorb(R) System is comparable in strength to titanium plating systems at its
initial placement and is completely resorbed within 9 to 15 months after
implantation. The LactoSorb(R) System is especially beneficial in pediatric
reconstruction cases by eliminating the need for a second surgery to remove the
plates and screws.

Palacos(R) is a registered trademark of Hereaus Kulzer GmbH.


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Mimix(TM) Bone Substitute Material is a synthetic tetra-calcium
phosphate/tri-calcium phosphate material. This material is most commonly used
for the repair of cranial defects, and is currently offered in putty form, but
is scheduled to be launched in an injectable form during fiscal year 2003.

     INTERNAL FIXATION DEVICES. The Company's internal fixation products include
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. They are
intended as aids to healing and may be removed when healing is complete; they
are not intended to replace normal body structures.

The VHS(R) Vari-Angle Hip Fixation System is a key internal fixation product
line for the Company. Its components can be adjusted intraoperatively, allowing
the hospital to carry less inventory, while providing greater intraoperative
selection of the optimum fixation angle.

During fiscal year 2003, the Company plans to introduce the Quad 4(TM)
Intramedullary Nail System to the domestic market. The Quad 4(TM) System
requires approximately 50% less inventory than competitive systems and is
uniquely designed to address the widest possible variety of femoral fractures.

     BONE SUBSTITUTE MATERIALS. When presented with a patient having a bone
defect, such as a fractured bone or bone loss due to removal of a tumor, the
treating surgeon may remove a portion of bone from the patient at a second site
to use as a graft to induce healing at the site of the defect. Bone substitute
materials can eliminate the pain created at the graft site, as well as the costs
associated with this additional surgical procedure. Depending on the specific
use of the bone substitute material, it can have fixation or spinal
applications. During fiscal year 2003, the Company expects to receive clearance
from the FDA to market Calcigen S(TM) (calcium sulfate) bone substitute material
in granular and self-setting forms in the United States for orthopedic
applications.

SPINAL PRODUCTS

The Company's spinal products include electrical stimulation devices for spinal
applications, spinal fixation systems and bone substitute materials and
allograft products for spinal applications.

     SPINAL FUSION STIMULATION SYSTEMS. Implantable, direct-current electrical
stimulation units provide an adjunct to surgical intervention in the treatment
of spinal fusion applications. 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. The implantable units each consist of a
generator that provides a constant direct current to a titanium cathode placed
where bone growth is required. The SpinalPak(R) Spine Fusion Stimulation System
offers surgeons a patient-friendly unit for situations in which non-invasive
stimulation is the appropriate option.

     SPINAL FIXATION SYSTEMS. The Company manufactures and distributes a
traditional rod and plate system, as well as the SpineLink(TM) Spinal Fixation
System, which addresses many of the inherent drawbacks of traditional rod and
plate systems by addressing each spine segment 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(TM)-II Spinal Fixation System is a second generation
SpineLink(TM) product scheduled to be launched during fiscal year 2003 and
combines the independent, intrasegmental concept of the SpineLink(TM) System
with a low-profile design that simplifies point-to-point fixation for the
surgeon. The EBI VueLock(TM) Anterior Cervical Plate System features
pre-contoured titanium plates with an open design to provide one-step locking
and better visualization of the bone graft site during surgery and on x-ray
films subsequent to the surgical procedure.

     BONE SUBSTITUTE MATERIALS. Traditional spinal fixation surgery includes the
use of a spinal fixation device in conjunction with a bone substitute or bone
graft material to increase the likelihood of successful bone fusion. During
fiscal year 2002, the Company launched the OsteoStim(TM) resorbable bone graft
substitute material for spinal applications. The OsteoStim(TM) material is a
granular form of calcium phosphate that is resorbed and replaced with natural
bone during the healing process.

OTHER PRODUCTS

The Company also manufactures and distributes several other products including
orthopedic support products (also referred to as softgoods and bracing
products), arthroscopy products, operating room supplies, casting materials,
general surgical instruments, wound care products and other surgical products.
EBI manufactures and distributes an extensive line of orthopedic support
products under the EBI(R) Sports Medicine trade name. The Company manufactures
and markets a line of arthroscopy products through its Arthrotek, Inc.
("Arthrotek") subsidiary.

VHS(R) is a registered trademark of Implant Distribution Network, Ltd.


                                        5

<PAGE>

     ORTHOPEDIC SUPPORT PRODUCTS. EBI distributes a line of orthopedic support
products under the EBI(R) Sports Medicine 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. Sales of these
softgoods and bracing products are assisted by the Support-on-Site (S.O.S.(TM))
stock and bill program, which efficiently handles the details of product
delivery for the healthcare provider.

     ARTHROSCOPY PRODUCTS. Arthroscopy is a minimally-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 Bone Mulch(TM) Screw/WasherLoc(TM)
Device for anterior cruciate ligament repair, the CurvTek(R) Bone Tunneling
System for the reattachment of soft tissue to bone and LactoSorb(R) resorbable
arthroscopic fixation products.

PRODUCT DEVELOPMENT

The Company's research and development efforts are essentially divided into two
categories: innovative new technology and evolutionary developments. Most of the
innovative new technology development efforts are focused on biomaterial
products, and are managed at the corporate level and take place primarily in
Warsaw, Indiana and Darmstadt, Germany. Evolutionary developments are driven
primarily by the individual subsidiaries and include product line extensions and
improvements.

The Company continues to aggressively conduct internal research and development
efforts to generate new marketable products, technologies and materials. In
addition, the Company is well positioned to take advantage of external
acquisition and development opportunities. An important component of the
Company's strategy has been the formation of strategic alliances to enhance the
development of new musculoskeletal products, including the relationships forged
with Organogenesis, Inc. and Z-KAT, Inc. during fiscal year 2002. The Company is
working with Organogenesis to market orthopedic products incorporating the
Organogenesis' FortaFlex(TM) bio-engineered matrix technology, such as the
CuffPatch(TM) rotator cuff repair product, which received clearance from the FDA
in March 2002. The Company is collaborating with Z-KAT to co-develop and
distribute image-guided software and intelligent instrumentation for various
musculoskeletal applications and techniques, including minimally-invasive
procedures.

As previously disclosed, the Company has formed an alliance with Selective
Genetics, Inc. ("Selective Genetics") to develop gene therapy products for
musculoskeletal repair indications. The Company has an exclusive, worldwide
license covering the application of Selective Genetics' Gene Activated Matrix
("GAM(TM)") material for musculoskeletal repair indications and a co-exclusive
license for use of the GAM(TM) material with spine cages. As discussed in Note C
of the Notes to Consolidated Financial Statements, the Company also made a
minority equity investment in Selective Genetics and during the fourth quarter
of fiscal year 2002 incurred a charge of $5.5 million representing impairment of
its equity investment in Selective Genetics based on the equity valuation
utilized by Selective Genetics for its recent round of financing. Despite the
devaluation of the equity investment, the Company continues to be optimistic
about the ultimate marketability of the GAM(TM) material and is continuing the
development of musculoskeletal applications of this technology. In an effort to
ensure the progress of musculoskeletal applications for the GAM(TM) material,
the Company has undertaken greater oversight responsibility for these
development efforts.

For the years ended May 31, 2002, 2001 and 2000, the Company expended
approximately $50,750,000, $43,020,000 and $40,208,000, respectively, on
research and development. It is expected that ongoing 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 orthopedic reconstructive devices,
dental reconstructive implants, arthroscopy products, resorbable technology,
biomaterials products, gene therapy technologies and image-guided software in
the musculoskeletal products field.

The Company's research and development efforts have produced approximately 260
new products during the last three fiscal years, including numerous new products
introduced during fiscal year 2002, such as the following products: Exact(TM)
Hip Instrumentation, the M(2)a-38(TM) Acetabular System, Biomet(R) Patella
Reaming System, Maxim(R) PS Pop Top Tibia, Hydroxyapatite coated Taperloc(R)
Porous Components, Hydroxyapatite coated Mallory-Head(R) Porous Primary
Components, Low-Profile Head Small Cannulated Screws, the Copeland(TM) Humeral
Resurfacing Head, Bio-Modular(R) Choice Shoulder System, Absolute(R) Bi-Polar
Shoulder, the Discovery(TM) Elbow System, Avantage(TM) Revision Cup, ECO Hip
System, Helios(R) Porous Hip Stem with Hydroxyapatite Coating, Oxford(R) TMK
Total Meniscal Knee, Performance(TM) Rotating Platform Knee, Nottingham Fracture
Stem, Optimix(TM) Closed Bone Cementing System, LactoSorb(R) Volar Plate, BHS
UltraSoft FLX(R) Flexible Treatment Coils,

GAM(TM) is a trademark of Selective Genetics, Inc.


                                        6

<PAGE>

OsteoStim(TM) Resorbable Bone Graft Substitute, OsteoStim(TM) Anterior Cervical
Allograft Spacer, DynaFix(R) Vision(R) Rapid Clamps, DynaFix(R) VS(TM) Osteotomy
System, the SpineLink(TM)-II Spinal Fixation System, A-Force(TM) PF Night
Splint, Alliance(TM) ACL Knee Brace, EBI(R) Sport Back Brace, Mentor(TM) Wrist
Brace, ArthroPasser Suture Passer, Bone Patellar Tendon Bone Instrument Set,
LactoScrew(R) Suture Anchor, LactoSorb(R) Hammertoe Implant, LactoSorb(R)
Resorbable Cross Pin, LactoSorb(R) No Profile Screw & Washer, Ti Screw Titanium
Anchor, Arthrotek(R) Resorbable Orthopedic Fixation System, TruGrip(TM) Screw &
Washer, Alveolar Ridge Distractor, Mimix(TM) Synthetic Bone Substitute Material
in injectable form, LactoSorb(R) Endoscopic Push Screws, Overdenture Abutment,
OSSEOTITE(R) NT Natural-Taper Implant and OSSIX(TM) Resorbable Membrane.

During fiscal year 2003, the Company intends to release many new products
including, but not limited to, the following products: Max-Ti(TM) Protrusio
Cage, Maxim(R) Accel(TM) Total Knee System, Vanguard M(TM) Series
Minimally-Invasive Unicompartmental Knee System, Quad-4(TM) Intramedullary Nail
System with instrumentation, the GPS(TM) Gravitational Platelet Separation
System, Calcigen S(TM) Bone Graft System, Multi-vector Distraction Osteogenesis
Device (the "Blue Device"), 1.5/2.0mm Titanium Osteosynthesis Plating System and
Mimix(TM) Synthetic Bone Substitute Material in injectable form.

GOVERNMENT REGULATION

Most aspects of the Company's business are subject to some degree of government
regulation in the countries in which its operations are conducted. It has always
been the practice of the Company to comply with all regulatory requirements
governing its products and operations and to conduct its affairs in an ethical
manner. This practice is reflected in the Company's code of conduct and the
responsibility of the Audit Committee of the Board of Directors to review the
Company's systems of internal control, its process for monitoring compliance
with laws and regulations and its process for monitoring compliance with its
code of conduct. For some products, and in some areas of the world such as the
United States, Canada, Japan and Europe, government regulation is significant,
and, in general, there appears to be a trend toward more stringent regulation
throughout the world. The Company devotes significant time, effort and expense
addressing the extensive government and regulatory requirements applicable to
its business. Governmental regulatory actions can result in the recall or
seizure of products, suspension or revocation of the authority necessary for the
production or sale of a product, and other civil and criminal sanctions. The
Company believes that it is no more or less adversely affected by existing
government regulations than are its competitors.

In the United States, the development, testing, marketing and manufacturing of
medical devices are regulated under the Medical Device Amendments of 1976 to the
Federal Food, Drug and Cosmetic Act, the Safe Medical Devices Act of 1990, the
FDA Modernization Act of 1997, and additional regulations promulgated by the FDA
and various other federal, state and local agencies. In general, these statutes
and regulations require that manufacturers adhere to certain standards designed
to ensure the safety and efficacy of medical devices. For more information
regarding the FDA regulations and their impact, the reader may refer to
www.fda.gov.

The Company believes it is well-positioned to face the changing international
regulatory environment. The International Standards Organization ("ISO") has 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 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 Directives. Compliance with ISO
quality systems standards is one of the requirements for placing the CE mark on
the Company's products. Each of the Company's manufacturing and/or assembly
facilities are authorized to place the CE mark on their products.

In addition, governmental bodies in the United States and throughout the world
have expressed concern about the costs relating to health care and, in some
cases, have focused attention on the pricing of medical devices. Government
regulation regarding pricing of medical devices already exists in some countries
and may be expanded in the United States and other countries in the future. The
Company is subject to increasing pricing pressures worldwide as a result of
growing regulatory pressures, as well as the expanding predominance of managed
care groups and institutional and governmental purchasers. Under Title VI of the
Social Security Amendments of 1983, 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 affecting a specific hospital's reimbursement rate include the size of
the hospital, its teaching status and its geographic location. The Company's
orthopedic reconstructive products are primarily covered by DRG 209 (Major Joint
and Limb Reattachment Procedures-Lower Extremities), DRG 471 (Bilateral Major
Procedures of the Lower Extremity) and DRG 491 (Major Joint and Limb
Reattachment Procedures-Upper Extremities), and have also received approval for
pass-through coding under the Hospital Outpatient Prospective Payment System.
Effective October 1, 2002, certain reimbursements for DRG payment will be
adjusted. The payments for DRG 209, 471 and 491 are


                                       7

<PAGE>
scheduled to increase 6.9%, 5.8% and 6.7%, respectively. In addition, the
average DRG payments for spinal and trauma procedures are scheduled to increase
5.7% and 5.8%, respectively. In general, the Company considers this to be a
positive event, which may serve to alleviate certain components of pricing
pressure on the Company's products.

While the Company is unable to predict the extent to which its business may be
affected by future regulatory developments, it believes that its substantial
experience in dealing with governmental regulatory requirements and restrictions
throughout the world, its emphasis on efficient means of distribution and its
ongoing development of new and technologically-advanced products should enable
it to continue to compete effectively within this increasingly regulated
environment.

SALES AND MARKETING

The Company believes that sales of its products are currently affected and will
continue to be positively affected by favorable demographic trends and a shift
toward a preference for technologically-advanced products. The demand for
musculoskeletal products continues to grow, in part, as a result of the aging of
the baby boomer population in the United States. The U.S. Census Bureau
projections indicate that the population aged 55 to 75 years is expected to grow
to approximately 74.7 million in 20 years. Moreover, the age range of potential
patients is expanding outside the traditional 55 to 75 year range, as procedures
are now being recommended for younger patients and as elderly patients are
remaining healthier and more active than in past generations. The Company has
also observed a trend toward a demand for technologically-advanced products that
are simple to use and cost effective, while incorporating state-of-the-art
solutions to the demands of the increasingly active patient. The Company has
firmly positioned itself as the advocate of the surgeon and has worked to
promote the right of the surgeon to prescribe the medical treatment best suited
to the needs of the individual patient.

The Company has diligently worked to attract and retain qualified, well-trained
and motivated sales representatives. The breadth of the Company's product
offering and the quality of its salesforces collaborate to create synergies that
uniquely position the Company to continue to efficiently penetrate the
musculoskeletal market. In the United States, the Company's products are
marketed by a combination of independent commissioned sales agents and direct
sales representatives, based on the specific product group being represented. In
Europe, the Company's products are promoted by a mixture of direct sales
representatives, independent commissioned sales agents and independent
third-party distributors, based primarily on the geographic location. In the
rest of the world, the Company maintains direct selling organizations in
approximately ten countries, as well as independent commissioned sales agents
and independent third-party distributors in other key markets. In aggregate, the
Company's products are marketed by more than 1,850 sales representatives
throughout the world.

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, with the exception of some elective pediatric
procedures scheduled to coincide with school breaks.

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 that meet the physicians' technical
requirements at a competitive price. Major international markets for the
Company's products are Western Europe, Australia, Canada, Asia Pacific and Latin
America. The Company's business in these markets is subject to pricing pressures
and currency fluctuation risks. As the Company continues to expand in key
international markets, it faces obstacles created by competition, governmental
regulations and regulatory requirements.

For the fiscal years ended May 31, 2002, 2001 and 2000, the Company's foreign
sales aggregated $335,527,000, $308,291,000 and $311,289,000, respectively, or
28%, 30% and 34% of net sales, respectively. During fiscal year 2002, foreign
sales were reduced by $7 million due to foreign currency translations.
Additional data concerning net sales to customers, operating income, long-lived
assets, capital expenditures and depreciation and amortization by geographic
areas are set forth in Note K of the Notes to Consolidated Financial Statements
included in Item 8 of this Report and are incorporated herein by reference.

The Company consigns inventory throughout the world to its customers and to its
distributors and direct salespersons for their use in marketing its products and
in filling customer orders. As of May 31, 2002, inventory of approximately
$118,994,000 was consigned to these distributors, salespersons and customers.


                                       8

<PAGE>

COMPETITION

The business of the Company is highly competitive. Major competitors in the
orthopedic reconstructive device market include DePuy, Inc., a subsidiary of
Johnson & Johnson; Stryker Howmedica Osteonics, a subsidiary of Stryker Corp.;
Zimmer, Inc., a subsidiary of Zimmer Holdings, Inc.; Smith & Nephew plc and
Sulzer Orthopedics, Inc., a subsidiary of Centerpulse AG (formerly Sulzer Medica
AG). Management believes these five companies, together with Biomet Orthopedics,
have the predominant share of the orthopedic reconstructive device market.
Competition within the industry is primarily based on service and product
design, although price competition is an important factor as providers continue
to be concerned with health care costs. The Company believes that its prices for
orthopedic reconstructive devices are competitive with those in the industry.
The average selling prices in the United States of Biomet Orthopedics' products
have increased 5% during fiscal year 2002 as a result of a shift to higher
priced goods and an increase in the price of its products. The Company believes
its future success will depend upon its service and responsiveness to its
distributors and orthopedic specialists, and upon its ability to design and
market innovative and technologically-advanced products that meet the needs of
the marketplace.

EBI's spinal fixation systems compete with those of Medtronic/Sofamor Danek,
Inc., a subsidiary of Medtronic, Inc.; DePuy AcroMed Corporation, a subsidiary
of Johnson & Johnson; Synthes, Inc.; Centerpulse Spine-Tech, Inc., a division of
Centerpulse AG; Interpore International, Inc.; Stryker Spine, a division of
Stryker Corp.; and others.

EBI's external fixation devices compete with other external fixation devices
primarily on the basis of price, ease of application and clinical results. EBI's
principal competitors in the external fixation market are Smith & Nephew plc;
Stryker Corp.; Synthes, Inc. and Orthofix, Inc., a subsidiary of Orthofix
International N.V. The Company's internal fixation product lines compete with
those of ACE Orthopedics, a division of Johnson & Johnson; Zimmer, Inc., a
subsidiary of Zimmer Holdings, Inc.; Smith & Nephew plc; and Synthes, Inc.

3i products compete in the areas of dental reconstructive implants and related
products. Its primary competitors in the dental implant market include Straumann
AG; Nobel Biocare AB and Centerpulse Dental, Inc., a subsidiary of Centerpulse
AG.

EBI is the market leader in the bone growth stimulation market. EBI's electrical
stimulation products include implantable and non-invasive devices indicated for
spinal fusion applications and bone growth stimulation applications. The
implantable spinal fusion stimulation systems and bone growth stimulation
products are used as an adjunct to conventional surgical procedures to enhance
the success rates of these procedures. EBI's non-invasive bone growth
stimulation products are utilized in long-bone recalcitrant fractures as an
alternative to surgical procedures. Other companies offering products in the
electrical stimulation market include Orthofix, Inc., a subsidiary of Orthofix
International N.V.; OrthoLogic Corp.; and Exogen, Inc., a subsidiary of Smith &
Nephew plc. 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 implantable stimulators offer the
advantage of conformance to surgical practice and do not require maintenance by
the patient.

Lorenz Surgical primarily competes in the craniomaxillofacial fixation and
specialty surgical instrumentation and neurosurgical cranial flap fixation
markets. Its competitors include Synthes, Inc.; Stryker-Leibinger, a subsidiary
of Stryker Corp.; Bionx Implants, Inc.; Aesculap AG & Co.; ACE Surgical Supply
Company, Inc.; MacroPore, Inc.; KLS-Martin, L.P.; Osteomed Corp.; and Hu-Friedy
Dental.

Arthrotek products compete primarily in the areas of procedure-specific implants
and instruments, manual instruments and power instruments. Competitors include
Smith & Nephew Endoscopy, a division of Smith & Nephew plc; Stryker Corp;
Linvatec Corp., a subsidiary of CONMED Corporation; Mitek, a division of
Ethicon, a Johnson & Johnson Company; Arthrex, Inc.; and Bionx Implants, Inc.

RAW MATERIALS AND SUPPLIES

The raw materials used in the manufacture of the Company's orthopedic
reconstructive devices are principally nonferrous metallic alloys, stainless
steel and polyethylene powder. With the exception of the concerns discussed
below regarding the supply of polyethylene powder, none of the Company's raw
material requirements are limited to any material extent by critical supply or
single origins. The demand for certain raw materials used by the Company, such
as cobalt alloy and titanium, is somewhat cyclical in nature. The primary buyers
of these metallic alloys are in the aerospace industry. If the demands of the
aerospace industry should increase dramatically, the Company could experience
complications in obtaining these raw materials.


                                       9

<PAGE>

However, based on its current relationship with its suppliers, the Company does
not anticipate a material shortage in the foreseeable future. Further, the
Company believes that its inventory of raw materials is sufficient to meet any
short-term supply shortages of metallic alloys.

Suppliers of polyethylene powder have expressed an increasing level of concern
due to perceived product liability exposure in the medical device industry. The
Company believes that the concern of the suppliers is related to the litigation
involving the use of silicone in breast implants and attempts by plaintiffs'
class action lawyers to pursue lawsuits against the manufacturers of the raw
material, i.e., silicone. The concern expressed to the Company was two-fold:
first, demand for polyethylene powder from manufacturers of medical devices
represents a nominal portion of the aggregate business of suppliers of
polyethylene powder and, second, the legal risk for manufacturers of raw
material selling to the medical device industry is significant. More recent
product liability class action litigation involving medical devices has most
likely served to increase general concern in the industry. While the Company
continues to have a source from which to purchase polyethylene powder, the
Company is aware of the concerns expressed by suppliers of polyethylene powder,
and recognizes that any heightened concern could potentially result in suppliers
refusing to supply this raw material to the Company.

EBI purchases all components of its electrical stimulators from approximately
250 outside suppliers, approximately 15 of whom are the single source of supply
for the 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.

3i purchases all materials to produce its products from approximately 82
suppliers, approximately 21 of whom are the single source of supply for the
particular product. 3i believes that, in the event of a shortage, there are
alternative sources of supply for all products, and maintains an inventory of
materials sufficient to meet any short-term shortages of supply. The results of
the Company's operations are not materially dependent on raw material costs.

EMPLOYEES

As of May 31, 2002, the Company's domestic operations (including Puerto Rico)
employed approximately 3,240 persons, of whom approximately 1,710 are engaged in
production and approximately 1,530 in research and development, sales,
marketing, administrative and clerical efforts. The Company's international
subsidiaries employ approximately 1,490 persons, of whom approximately 700 are
engaged in production and approximately 790 in research and development, 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 a skilled labor force.

PATENTS AND TRADEMARKS

The Company believes that patents and other intellectual property will continue
to be of importance in the musculoskeletal industry. Accordingly, management
continues to protect technology developed internally and to acquire intellectual
property rights associated with technology developed outside the Company.
Management enforces its intellectual property rights consistent with the
Company's strategic objectives. The Company does not believe that it has any
single patent or license (or series of patents or licenses), which is material
to its operations. The Company is not aware of any single patent, the loss or
invalidity of which would be material to its consolidated revenues or earnings.

BIOMET, EBI, W. LORENZ, 3i 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. Unless otherwise noted in
this Report, all trademarks contained herein are owned by Biomet, Inc. or one of
its affiliates.


                                       10

<PAGE>

RISK FACTORS

Risk factors facing the Company's business include, but are not limited to the
following: the increasing cost of product development efforts incorporating
technology advances, the litigious nature of the U.S. health care industry, a
potential downward trend of reimbursement prices throughout the world, currency
fluctuations and the financial stability of global markets for the Company's
products.

CORPORATE GOVERNANCE AND MANAGEMENT OBJECTIVES

It has always been the practice of the Company to comply with all laws and
regulations governing its operations and to conduct its affairs in an ethical
and responsible manner. This practice is reflected in the Company's code of
conduct and the responsibility and level of activity of the Audit Committee and
the independent members of the Executive Committee of the Board of Directors.
The Company utilizes a decentralized management structure intended to empower
local decision-making ability within appropriate corporate-wide controls. The
Company strives to achieve its goal of being responsive to market demands by
attracting and retaining superior, motivated employees.

The Company is committed to achieving a balance between the twin objectives of
maximizing shareholder return and instilling a sense of personal financial
interest with its employees in the Company's success through the grant of
incentive stock options. The Company believes that employee stock options help
to create an entrepreneurial environment within the Company and ultimately serve
to align the interests of employees with those of the Company's shareholders.
However, the Company is also conscious of the concern of some shareholders,
particularly in light of the current corporate climate, of the dilution
resulting from excessive stock option grants to employees, and members of senior
management in particular. Of the aggregate 1,721,171 option shares granted
during fiscal year 2002, only 109,000, or 6.3%, were granted to the Company's
executive officers. As of May 31, 2002, the Company had 8,386,821 option shares
outstanding, of which, only 2,606,065 were currently exercisable. The exercise
of all currently exercisable option shares would result in less than one percent
dilution of the Company's shares outstanding as of July 12, 2002.


                                       11

<PAGE>

ITEM 2.  PROPERTIES.

The following are the principal properties of the Company:

<TABLE>
<CAPTION>
FACILITY                                                          LOCATION                        SQUARE      OWNED/
                                                                                                    FEET      LEASED
<S>                                                               <C>                            <C>          <C>
Corporate headquarters of Biomet, Inc.;                           Warsaw, Indiana                345,000      Owned
manufacturing and research and development facility
of Biomet Manufacturing Corp.; and distribution center
and offices of Biomet Orthopedics, Inc.

Administrative, manufacturing and distribution facility           (1) Parsippany, New Jersey(*)   63,000      Owned
of EBI, L.P. and administrative offices of Electro-Biology, Inc.  (2) Parsippany, New Jersey     165,700      Owned

Manufacturing facility of EBI, L.P. and administrative offices    Allendale, New Jersey           30,000      Leased
of Biolectron, Inc.

Manufacturing facility of EBI, L.P.                               Marlow, Oklahoma                51,500      Owned

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

Office, manufacturing and distribution facility                   (1) Palm Beach Gardens, FL      67,000      Owned
of Implant Innovations, Inc.                                      (2) Palm Beach Gardens, FL      23,000      Leased

Office and manufacturing facilities                               (1) Ontario, California         35,400      Owned
of Arthrotek                                                      (2) Redding, California         14,400      Leased

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

Office and manufacturing facility of Electro-Biology, Inc.        Guaynabo, Puerto Rico           34,700      Owned

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

Office, manufacturing and warehouse facility of                   Valence, France                 86,100      Owned
Biomet Merck France Sarl

Office, manufacturing and warehouse facilities of                 (1) Berlin, Germany             49,900      Owned
Biomet Merck Deutschland GmbH                                     (2) Berlin, Germany             16,900      Owned

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

Office and warehouse facility of Ortomed BV and Biomet Merck      Zwijndrecht, The Netherlands    38,400      Owned

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

Office, manufacturing and warehouse facilities of ScandiMed AB    Sjobo, Sweden                   24,200      Owned

Manufacturing and administrative facilities of                    (1) Bridgend, South Wales      105,200      Owned
Biomet Merck Ltd.                                                 (2) Swindon, England            53,400      Owned
</TABLE>

(*)Operations at these facilities have ceased and the facilities are being
leased to other parties.

In addition, the Company maintains more than 30 offices and warehouse facilities
in various countries, including Canada, Europe, Asia Pacific and Latin America.
The Company believes that all of its facilities are adequate, well-maintained
and suitable for the development, manufacture, distribution and marketing of all
its products.

                                       12

<PAGE>

ITEM 3. LEGAL PROCEEDINGS.

In January 1996, a jury returned a verdict in a patent infringement matter
against the Company and in favor of Raymond G. Tronzo ("Tronzo"), which in
August 1998 was subsequently reversed and vacated by the United States Court of
Appeals for the Federal Circuit (the "Federal Circuit"). The Federal Circuit
then remanded the case to the District Court for the Southern District of
Florida (the "District Court") for further consideration on state law claims
only. On August 27, 1999, the District Court entered a final judgment of $53,530
against the Company. Tronzo then appealed the District Court's final judgment
with the Federal Circuit and in January 2001 the Federal Circuit reinstated a
$20 million punitive damages award against the Company while affirming the
compensatory damage award of $520. The Federal Circuit's decision was based
principally on procedural grounds, and in March 2001 it denied the Company's
combined petition for panel rehearing and petition for rehearing en banc. On
November 13, 2001, the United States Supreme Court ("Supreme Court") denied the
Company's petition to review the $20 million punitive damage award against the
Company given to Tronzo. The Company had previously recorded a one-time special
charge during the third quarter of fiscal 2001 of $26.1 million, which
represents the total damage award plus the maximum amount of interest that, as
calculated by the Company, may be due under the award and related expenses.
While the Company was disappointed in the Supreme Court's decision not to review
the case, the Company has paid $20,236,000 out of escrow. The amount of interest
owed by the Company, if any, on this award continues to be in dispute; however,
if a decision on the interest award is adverse to the Company, it should not
exceed the amount of the remaining funds in escrow. The Supreme Court's decision
does not affect the ongoing sales of any of Biomet's product lines.

In October, 1997 and April, 2000 the Company received subpoenas from the United
States Department of Health and Human Services, Office of Inspector General
("HHS/OIG"), and the United States Attorney's Office for the Eastern District of
Pennsylvania ("USAO") in conjunction with an investigation of its financial
relationship with a physician group under the Medicare laws. The subpoenas seek
the production of documents referring or relating to Pennsylvania Hospital,
Thomas Jefferson Hospital, 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 received a similar
subpoena. The Company does not itself submit claims to or receive reimbursements
from Medicare with respect to its orthopedic reconstructive products, 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 USAO and
HHS/OIG investigation, but, during the time period covered by the subpoenas, had
research, product development, physician training, clinical follow-up and data
collection relationships with The Rothman Institute. The Company has fully
cooperated with USAO and HHS/OIG in this matter, and is unable to predict what
action, if any, might be taken in the future by the USAO and/or HHS/OIG as a
result of this investigation or what impact, if any, the outcome of this matter
might have on its financial position or business operations.

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 does not anticipate that the adverse
outcome of these matters will result in a material loss. 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.

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

         Not Applicable.

                                       13

<PAGE>

                      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. Executive officers are elected annually by
the Board of Directors to serve for one year and until their successors are
elected, subject to resignation, retirement or removal.


<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., 56
President and Chief Executive Officer of the Company. Director of the                  1977          President and Chief
Company since 1977.                                                                                  Executive Officer and
                                                                                                     Director of the Company.

Niles L. Noblitt, 51
Chairman of the Board of the Company. Director of the Company since 1977.              1978          Chairman of the Board
                                                                                                     and Director of the Company.

Charles E. Niemier, 46
Senior Vice President - International Operations of the Company. Director              1984          Senior Vice President -
of the Company since 1987.                                                                           International Operations
                                                                                                     and Director of the Company.

Garry L. England, 48
Senior Vice President - Warsaw Operations of the Company.                              1987          Senior Vice President -
                                                                                                     Warsaw Operations of the
                                                                                                     Company.

Daniel P. Hann, 47
Senior Vice President, General Counsel and Secretary of the Company since              1989          Senior Vice President and
June 1999; prior thereto, Vice President, General Counsel and Secretary of                           General Counsel, Secretary
the Company. Director of the Company since 1989.                                                     and Director of the Company.

Joel P. Pratt, 48
Senior Vice President of the Company since June 1999 and President                     1990          Senior Vice President
of Walter Lorenz Surgical, Inc. since January 2002, President of Arthrotek,                          of the Company and President
Inc. from 1996 to 2001.                                                                              of Walter Lorenz Surgical, Inc.

Gregory D. Hartman, 45
Senior Vice President - Finance and Chief Financial Officer of the Company             1991          Senior Vice President  -
since June 1999; prior thereto, Vice President - Finance and Chief                                   Finance and Chief Financial
Financial Officer of the Company.                                                                    Officer of the Company.

James W. Haller, 45
Controller of the Company and Vice President - Finance of Biomet Orthopedics,          1991          Controller of the Company
Inc. since June 2001; prior thereto, Controller of the Company.                                      and Vice President - Finance
                                                                                                     of Biomet Orthopedics, Inc.

Jerry L. Ferguson, 61
Vice Chairman of the Board of the Company since December 1997; prior thereto,          1994          Vice Chairman of the Board
Senior Vice President of the Company. Director of the Company since 1977.                            and Director of the Company.

James R. Pastena, 51
Vice President of the Company since September 1998 and President of EBI, L.P.          1998          Vice President of the Company
                                                                                                     and President of EBI, L.P.
</TABLE>


                                       14

<PAGE>

                                     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. The approximate number of
shareholders of record as of July 12, 2002 was 6,437.

                                  High             Low

2002
        Fourth                   $32.68           $25.18
        Third                     33.26            26.77
        Second                    33.74            24.33
        First                     34.36            25.06

2001
        Fourth                    30.67            23.67
        Third                     27.83            20.46
        Second                    26.92            19.08
        First                     23.50            14.97

2000
        Fourth                    17.54            12.04
        Third                     19.79            13.25
        Second                    16.79            10.96
        First                     19.39            15.50

The Company paid cash dividends of $.09, $.07 and $.06 per share on July 27,
2001, July 17, 2000, and August 6, 1999, respectively.

On July 2, 2002, the Company announced a cash dividend of $.10, payable July 15,
2002, to shareholders of record at the close of business on July 8, 2002.

All market prices and dividend information have been adjusted to give
retroactive effect to the three-for-two stock splits announced July 9, 2001 and
July 6, 2000.


                                       15


<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

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


<TABLE>
<CAPTION>
                                                             2002              2001           2000            1999          1998
<S>                                                       <C>               <C>            <C>            <C>            <C>
Net sales .............................................   $1,191,902        $1,030,663     $  923,551     $  830,835     $  708,678
Cost of sales .........................................      332,727           296,063        281,351        262,362        226,829
                                                          -------------------------------------------------------------------------
    Gross profit ......................................      859,175           734,600        642,200        568,473        481,849

Selling, general and administrative expenses ..........      437,731           374,793        326,618        295,401        256,509
Research and development expense ......................       50,750            43,020         40,208         38,723         39,731
Special charges .......................................           --            26,100         11,700         48,447             --
                                                          -------------------------------------------------------------------------
    Operating income ..................................      370,694           290,687        263,674        185,902        185,609

Other income, net .....................................        5,421*           19,989         17,018         13,899         23,452
                                                          -------------------------------------------------------------------------
    Income before income taxes and minority interest...      376,115           310,676        280,692        199,801        209,061
Provision for income taxes ............................      127,665           105,906         99,738         67,317         81,058
                                                          -------------------------------------------------------------------------
    Income before minority interest ...................      248,450           204,770        180,954        132,484        128,003
Minority interest .....................................        8,710             7,224          7,183          7,458            144
                                                          -------------------------------------------------------------------------
    Net income ........................................   $  239,740        $  197,546     $  173,771     $  125,026     $  127,859
                                                          -------------------------------------------------------------------------
Earnings per share:
    Basic .............................................   $      .89        $      .74     $      .66     $      .48     $      .49
    Diluted ...........................................          .88               .73            .65            .47            .48
                                                          -------------------------------------------------------------------------
Shares used in the computation of earnings per share:
    Basic .............................................      268,475           267,915        264,294        261,662        260,330
    Diluted ...........................................      271,245           270,746        267,242        265,815        264,630
                                                          -------------------------------------------------------------------------
Cash dividends paid per common share ..................   $      .09        $      .07     $      .06     $      .05     $      .05
</TABLE>


BALANCE SHEET DATA
At May 31,
(in thousands)

<TABLE>
<CAPTION>
                                                             2002              2001           2000            1999          1998
<S>                                                       <C>               <C>            <C>            <C>            <C>
Working capital .......................................   $  715,245        $  726,557     $  608,185     $  497,010     $  483,025
Total assets ..........................................    1,521,723         1,489,311      1,218,448      1,110,940        879,382
Long-term obligations, including redeemable
 preferred stock ......................................           --                --             --          8,074          7,330
Shareholders' equity ..................................    1,176,479         1,146,186        943,323        795,849        678,311
</TABLE>


-    All share and per share data have been adjusted to give retroactive effect
     to the three-for-two stock splits declared on July 9, 2001 and July 6,
     2000.

-    Amounts after January 1, 1998 include the impact of Biomet Merck. Other
     acquisitions during the five year period individually and in the aggregate
     have not been material to the Company's operating results or financial
     position.

*    Other income, net for fiscal 2002 was adversely impacted by a $9 million
     charge as a result of equity write-downs in marketable securities and other
     investments.



                                       16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & 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)
                                                                                      2002      2001
                                                        2002       2001       2000  vs. 2001  vs. 2000
<S>                                                    <C>        <C>        <C>    <C>       <C>
Net sales ......................................       100.0%     100.0%     100.0%    16%       12%
Cost of sales ..................................        27.9       28.7       30.6     12         5
                                                       ----------------------------
Gross profit ...................................        72.1       71.3       69.4     17        14
Selling, general and administrative expenses ...        36.7       36.3       35.3     17        15
Research and development expense ...............         4.3        4.2        4.3     18         7
Special charges ................................          --        2.5        1.3    n/m       n/m
                                                       ----------------------------
Operating income ...............................        31.1       28.3       28.5     28        10
Other income, net ..............................         0.5        1.9        1.9    (73)       17
                                                       ----------------------------
Income before income taxes and minority interest        31.6       30.2       30.4     21        11
Provision for income taxes .....................        10.8       10.3       10.8     21         6
                                                       ----------------------------
Income before minority interest ................        20.8       19.9       19.6     21        13
Minority interest ..............................         0.7        0.7        0.8     21         1
                                                       ----------------------------
Net income .....................................        20.1%      19.2%      18.8%    21%       14%
                                                       ----------------------------
</TABLE>

n/m - Not Meaningful

FISCAL 2002 COMPARED TO FISCAL 2001(*)

The Company is engaged in the research, development, manufacturing and marketing
of products used primarily by musculoskeletal medical specialists. The Company's
primary products include reconstructive devices, dental reconstructive implants,
bone cements and accessories, fixation devices, electrical bone growth
stimulators, craniomaxillofacial implants, bone substitute materials, spinal
products, arthroscopy products, operating room supplies and instruments. The
solid growth experienced by the Company in both domestic and international
markets is attributable to the Company's emphasis on technological advances
through line extensions and new product introductions. In addition, growth in
the patient population from both growth in the elderly population and the
expansion of the traditional age bracket of musculoskeletal patients have
contributed to this growth.

Net Sales - Net sales increased 16% during the current fiscal year to
$1,191,902,000 from $1,030,663,000 in 2001. Excluding the negative impact of
foreign currency translation adjustments (0.7%) and discontinued products (1.3%)
and the positive impact of acquisitions (2.6%), net sales increased 15% during
the year. Worldwide sales of reconstructive devices increased 17% to
$721,004,000 in fiscal 2002 compared to $614,308,000 in 2001 (16% excluding
acquisitions). Worldwide hip sales increased 16% during the current year. The
products contributing to this increase include the Bi-Metric,(R) Taperloc(R)
and Mallory-Head(R) Cementless Total Hip Systems and the M(2)a-Taper(TM)
Metal-on-Metal Hip System. Worldwide knee sales increased 18% in fiscal year
2002. Products contributing to this increase include the Repicci II(R)
Unicondylar Knee System and the Ascent(TM) Total Knee System. The Company's 3i
division experienced a 17% increase in dental reconstructive implant sales. This
solid growth was fueled by sales of its OSSEOTITE(R) Dental Reconstructive
Implant System and the OSSIX(TM) Resorbable Collagen Membrane. Other products
contributing to the reconstructive sales growth include the Optivac(R) Vacuum
Mixing System and the Company's portfolio of bone cement products.

Fixation sales increased 7% during fiscal 2002 to $215,544,000 from $202,152,000
in 2001. Fixation sales growth was positively influenced by 2% from the
inclusion of Biolectron's OrthoPak(R) Stimulation System for the whole fiscal
year compared to eight months for fiscal 2001. Worldwide sales of internal
fixation devices increased 8% and external fixation devices increased 6% in
fiscal 2002. Worldwide sales of electrical stimulation systems increased 14%.
Biolectron's OrthoPak(R) System was the primary contributor to this sales
increase. Sales of Lorenz Surgical's craniomaxillofacial products experienced a
14% decrease compared to last year. Products showing a decrease in sales include
plating systems and screws and the Pectus bar. Lorenz Surgical did experience
solid sales growth for its Mimix(TM) Bone Substitute Material and HTR(R)
products. The Company completed reorganization plans for the Lorenz Surgical
subsidiary during the year and anticipates that such efforts will result in
improved performance during the next fiscal year.

Spinal sales increased to $125,119,000 in fiscal 2002 compared to $91,103,000 in
fiscal 2001, an increase of 37%. Spinal sales growth was positively influenced
by 13% from the inclusion of Biolectron's SpinalPak(R) Fusion Stimulation
System for the full fiscal year compared to eight months for fiscal 2001. In
addition, Biomet Merck discontinued distributing a spinal product line that
resulted in a 3% decrease in spinal sales. Excluding the effect of these events,
spinal product sales increased 27% for the current fiscal year. Spinal products
experiencing the strongest sales growth include EBI's VueLock(TM) Anterior
Cervical Plate System and Biolectron's non-invasive SpinalPak(R) Fusion
Stimulation System. EBI's SpF(R) Spine Fusion Stimulation System also
demonstrated modest sales growth.

(*) For purposes of this Management's Discussion and Analysis, the fiscal period
is June 1 - May 31.

                                       17
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS (CONTINUED)

Sales of the Company's other products increased 6% to $130,235,000 in fiscal
2002 from $123,100,000 in 2001. These results include discontinued general
surgery products distributed in Portugal through Biomet Merck. Excluding the
effects of this discontinuation, other product sales increased 14% during the
year. Products posting sales growth include EBI's softgoods and bracing
products, Arthrotek's procedure-specific products and the CurvTek(R) Bone
Tunneling System. Products experiencing sales decreases include Lorenz
Surgical's surgical instrumentation.

Sales in the United States increased 19% to $856,375,000 during the current year
compared to $722,372,000 last year. This is due largely to increased product
demand and continued market penetration (14%) and positive pricing environment
(5%). Foreign sales increased 9% to $335,527,000 in fiscal 2002 from
$308,291,000 in fiscal 2001. Excluding the effect of currency translation
adjustments, foreign sales increased 11%. The Company anticipates foreign
currency adjustments to positively influence sales during fiscal year 2003.
Foreign sales continued to be negatively influenced by the expiration and
non-renewal of the distribution agreement with the Company's Japanese
distributor of Biomet products during fiscal 2001. However, the Company
commenced direct sales of product in Japan during the current year and expects
continued market acceptance and sales growth in fiscal 2003.

Gross profit - The Company's gross profit increased 17% to $859,175,000 in 2002
from $734,600,000 in 2001. The gross profit margin increased to 72.1% of sales
in 2002 compared to 71.3% in 2001. The improved gross margin is attributable to
increased sales of higher margin reconstructive and spinal products worldwide
and improved manufacturing efficiencies and general cost controls at the
Company's European operations.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses increased 17% in 2002 to $437,731,000 compared to
$374,793,000. This increase is a result of increased commission expense on
higher sales compared to last year. As a percent of sales, selling, general and
administrative expenses were 36.7% in 2002 compared to 36.3% in 2001. Factors
contributing to this increase include reorganization costs at the Lorenz
Surgical operations (approximately $2 million); costs associated with a direct
selling operation and expanded marketing presence in Japan (approximately $3
million); a year inclusion of Biolectron operations, including amortization of
goodwill (approximately $1.5 million); and continued expansion of the Company's
salesforce worldwide. Due to tighter insurance markets, the Company anticipates
its cost for umbrella liability insurance coverage to increase during fiscal
year 2003.

Research and Development Expense - Research and development expense increased
18% during the current year to $50,750,000 compared to $43,020,000 in 2001. As a
percent of sales, research and development expenses were 4.3% in 2002 compared
to 4.2% in 2001. This increase reflects the Company's continued emphasis on new
product development, enhancements and additions to existing product lines and
technologies, and clinical outcomes research related to the safety, efficacy and
clinical performance of the Company's products.

Operating Income - Operating income increased 28% during fiscal 2002 to
$370,694,000 from $290,687,000 in fiscal 2001. Excluding the $26.1 million
special charge in 2001, operating income increased 17%. U.S. operating income
increased 30% to $326,906,000 from $251,927,000, reflecting solid sales growth
for higher margin product lines. Non-U.S. operating income increased 13% to
$43,788,000 compared to $38,760,000 in 2001. This growth reflects solid sales
growth overseas, effective cost controls and improved foreign currency
translation.

Other Income, Net - Other income, net decreased 73% during the current year to
$5,421,000 from $19,989,000 in 2001. During the fourth quarter, the Company
recorded a one-time, pre-tax charge of $9 million as a result of equity
write-downs in Selective Genetics, Inc. and other marketable securities. The
loss in value of these investments were considered other than temporary.
Excluding these write-downs, other income, net declined 28% as a result of lower
interest rates on lower cash balances during the year.

Provision for Income Taxes - The provision for income taxes increased to
$127,665,000, or 33.9% of income before income taxes compared to $105,906,000 or
34.1% of income before income taxes. This percentage decrease is due to income
growing faster in countries with a lower tax rate. These benefits are partially
offset by changes in the Puerto Rican local tax structure, which, over time
reduce the historical U.S. tax benefits from operating in Puerto Rico. As a
result of various state tax law changes, the Company expects its effective rate
to increase to approximately 34.6% in future years.

Net Income - The factors mentioned above resulted in a 21% and 20% increase in
net income and basic earnings per share, respectively, for 2002 compared to
2001. Net income increased to $239,740,000 from $197,546,000 and basic earnings
per share increased to $.89 from $.74.

FISCAL 2001 COMPARED TO FISCAL 2000

On September 25, 2000, the Company through its EBI subsidiary acquired
Biolectron, Inc. for $90 million in cash. The Company accounted for this
acquisition as a purchase and the operating results have been consolidated from
the date of acquisition. Biolectron's sales are principally included in the
fixation and spinal product categories.

Net Sales - Net sales increased 12% in 2001 to $1,030,663,000 from $923,551,000
in 2000. Excluding the effect of foreign currency translation adjustments, net
sales increased 15%. During the fourth quarter of 2001, the Company adopted
Emerging Issues Task Force ("EITF") 00-10 "Accounting for Shipping and Handling
Fees and Costs." This EITF requires certain shipping and handling fees billed to
customers to be recorded as revenue instead of as a reduction of shipping
expense. Accordingly, the Company has reclassified amounts billed to customers
from


                                       18
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS (CONTINUED)

cost of sales to net sales for all periods presented, with no effect on net
income. All product categories experienced solid growth during fiscal year 2001.
The Company's reconstructive sales increased 6% (10% excluding the effect of
foreign currencies) in 2001 to $614,308,000 from $580,239,000 in 2000. The
products experiencing the strongest growth were Biomet's knee products,
including the Repicci II(R) Unicondylar Knee System and the Ascent(TM) Total
Knee System; 3i's dental reconstructive implants, including the OSSEOTITE(R)
Dental Reconstructive Implant System; and bone cements and accessories. The
domestic introduction of Palacos(R) bone cement and the Optivac(R) Vacuum
Mixing System was responsible for sales growth of bone cement and accessory
products. The Company's fixation sales increased 12% to $202,152,000 in 2001
compared to $180,336,000 in 2000. Products responsible for this increase were
primarily electrical stimulation systems, which include the EBI Bone Healing
System(R)unit and Biolectron's OrthoPak(R) Stimulation System, and Lorenz
Surgical's craniomaxillofacial products, led by the successful introduction of
Mimix(TM) Bone Substitute Material. Spinal product sales increased 68% from
$54,119,000 in 2000 to $91,103,000 in 2001. Spinal products experiencing sales
growth included EBI's SpF(R) Spine Fusion Stimulation System and Biolectron's
SpinalPak(R) Fusion Stimulation System, as well as the introduction of the
VueLock(TM) Cervical Fixation System. The Company's "other product" sales
increased 13% (17% excluding the effect of foreign currencies) to $123,100,000
in 2001 from $108,857,000 in 2000. Products contributing to this growth were
Arthrotek's procedure-specific products and LactoSorb(R) resorbable products,
Biolectron's CurvTek(R) Bone Tunneling System and EBI's softgoods and bracing
products. The Company's United States sales increased 18% during fiscal 2001 to
$722,372,000 from $612,262,000 in 2000. Foreign sales increased 9% in local
currencies, however, due to currency exchange rates, the Company reported a 1%
decrease to $308,291,000 from $311,289,000 in 2000. In addition to currency
exchange rates, foreign sales were negatively influenced by the expiration and
non-renewal of the distribution agreement with the Company's Japanese
distributor of Biomet products during fiscal year 2001.

Gross Profit - The Company's gross profit increased 14% in 2001 to $734,600,000
from $642,200,000 in 2000. Cost of sales as a percentage of sales decreased to
28.7% in 2001 compared to 30.6% in 2000. The decrease in cost of sales as a
percentage of net sales is a result of a higher growth rate in domestic sales as
well as improved manufacturing efficiencies and the inclusion of Biolectron's
products. The Company continued to make improvements in manufacturing processes,
including the purchase of newer, more efficient equipment.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses increased 15% in 2001 to $374,793,000 compared to
$326,618,000 in 2000. The primary factor contributing to this change was an
increase in commission expense on increased product sales and the inclusion of
Biolectron's operations. As a percentage of sales, selling, general and
administrative expenses were 36.3% in 2001 and 35.3% in 2000. Factors
contributing to this percentage increase were higher staffing costs to expand
salesforces worldwide ($3 million), costs to establish a direct selling
operation in Japan ($1 million) and increased amortization of goodwill
associated with the Biolectron acquisition ($2.5 million).

Research and Development Expense - Research and development expense increased 7%
from $40,208,000 in 2000 to $43,020,000 in 2001. The increase in research and
development expenses in 2001 was mainly due to the increase in research and
development personnel and the increase in new product introductions.

Special Charges - In 2001, the Company recorded a $26.1 million special charge
in connection with an appellate court's decision in the Tronzo litigation. In
2000, a special charge of $11.7 million was comprised of $2.7 million of merger
costs related to the 3i merger and $9 million for the final determination of the
interest element of the final judgment in the Orthofix litigation.

Operating Income - U.S. operating income increased 12% to $251,927,000 from
$224,385,000 reflecting the growth in sales in this geographic segment and
improved operating efficiencies. Non-U.S. operating income was flat at
$38,760,000 reflecting primarily the effect of foreign currency translations on
reported U.S. dollar results. Overall, operating income increased 10% to
$290,687,000 in 2001 from $263,274,000 in 2000.

Other Income, Net - Other income, net increased 17% in 2001 to $19,989,000 from
$17,018,000 in 2000. Increased investment income on cash and investments offset
by increased interest expense on short-term borrowings was largely responsible
for this increase.

Provision for Income Taxes - The provision for income taxes increased to
$105,906,000 for 2001, or 34.1% of income before income taxes, compared to
$99,738,000 in 2000, or 35.5% of income before income taxes. The decrease in the
effective rate was a result of organizational changes implemented during fiscal
year 2000 in the United States and internationally resulting in a more
tax-efficient corporate structure. The Company will continue to be adversely
affected by changes in the Puerto Rican local tax structure, which reduces over
time the historical U.S. tax benefits from operating in Puerto Rico.

Net Income - The factors mentioned above resulted in a 14% and 12% increase in
net income and basic earnings per share, respectively, for 2001 compared to
2000. Net income increased to $197,546,000 from $173,771,000 and basic earnings
per share increased to $.74 from $.66.

LIQUIDITY & CAPITAL RESOURCES

The Company's cash and investments decreased to $386,517,000 at May 31, 2002,
from $463,148,000 at May 31, 2001. Net cash from operating activities was
$184,237,000 in fiscal 2002 compared to $190,506,000 in fiscal 2001. The
principal sources of cash from operating activities were net income of
$239,740,000 and non-cash charges of depreciation and amortization of
$47,827,000. The principal uses of cash include increases

Palacos(R) is a registered trademark of Hereaus Kulzer GmbH.


                                       19
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS (CONTINUED)

in accounts and notes receivable and inventory of $38,537,000 and $48,903,000,
respectively, and decreases in accrued litigation of $20,236,000. Accounts
receivable and inventory balances continue to increase as the Company continues
to expand its direct selling operations in countries where it traditionally sold
to distributors, and as it experiences sales growth. In addition, inventory
continues to increase as the Company introduces new products and line
extensions.

Cash flows used in investing activities were $77,419,000 in 2002 compared to
$156,673,000 in 2001. The primary uses of cash for investing activities were
purchases of investments, offset by sales and maturities of investments, and
capital expenditures. Also, the Company continues to expand its operations in
key manufacturing locations of Indiana, New Jersey, Florida and European
locations of England, France and Spain.

Cash flows used in financing activities were $188,923,000 in 2002 compared to
$14,946,000 in 2001. The primary uses of funds during the current year were the
share repurchase programs approved in 2002, in which $210,000,000 was used to
purchase 7,345,000 Common Shares of the Company, and a cash dividend of $.09 per
share was paid on July 27, 2001 to shareholders of record on July 9, 2001. The
sources of funds from financing activities were increases in the unsecured line
of credit used to fund the Biomet Merck Joint Venture and proceeds on the
exercise of stock options. On July 2, 2002, the Company's Board of Directors
announced a cash dividend of $.10 per share payable on July 15, 2002 to
shareholders of record at the close of business on July 8, 2002. Additionally,
the Board of Directors authorized the purchase of up to an additional $100
million of the outstanding Common Shares of the Company. The Company maintains
its cash and investments in money market funds, certificates of deposit,
corporate bonds, debt instruments, mortgage-backed securities and equity
securities. The Company's investments are generally liquid and investment grade.
The Company is exposed to interest rate risk on its corporate bonds, debt
instruments, fixed rate preferred equity securities and mortgage-backed
securities.

The Company anticipates that its use of cash for capital expenditures in fiscal
2003 will be at least as high as 2002 and 2001. The Company continues further
expansion of its Warsaw-based headquarters, as well as its Japanese and European
operations. The Company will continue to pursue strategic acquisition
candidates. The Company is confident about the growth prospects in these areas
and will continue to invest in an effort to improve its worldwide market
position. The Company expects to spend in excess of $200 million over the next
two fiscal years for capital expenditures and research and development costs,
including the commitments to Selective Genetics, Organogenesis and Z-KAT to
develop products and technologies that further enhance musculoskeletal
procedures. Funding of these and other activities is expected to come from
currently available funds and cash flows generated from future operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's discussion and analysis of its financial position and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosure of contingent
assets and liabilities. The Company's significant accounting policies are
discussed in Note B of the Notes to Consolidated Financial Statements. In
management's opinion, the Company's critical accounting policies include
allowance for doubtful accounts, excess and obsolete inventories, non-marketable
securities, goodwill and intangible assets and accrued insurance.

Allowance for Doubtful Accounts - The Company maintains an allowance for
doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. If the financial condition of our customers
were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required which would affect our future
operating results.

Excess and Obsolete Inventory - In our industry, consigned inventory is
routinely used to provide the healthcare provider with the appropriate product
when needed. Because of the bell curve of product used, larger and smaller sizes
of inventory are provided but infrequently used. In addition, the
musculoskeletal market is highly competitive with new products, raw materials
and procedures being introduced continually, which may obsolete products
currently on the market. The Company must make estimates regarding the future
use of these products and provides a provision for excess and obsolete
inventories. If actual product life-cycles, product demand or market conditions
are less favorable than those projected by management, additional inventory
write-downs may be required which would affect future operating results.

Non-Marketable Securities - Periodically the Company makes strategic investments
in companies whose stock is not currently traded on a major stock exchange. The
cost method of accounting is used to account for these investments as the
Company holds a non-material ownership percentage and does not participate in
management of such companies. Each quarter the Company assesses the value of
these investments by using information acquired from industry trends, the
management of these companies and other external sources. Based on the
information acquired, the Company records an investment impairment charge when
it is believed an investment has experienced a decline in value that is other
than temporary. In the fourth quarter of fiscal 2002, the Company recorded an
impairment charge of $5.5 million for its investment in Selective Genetics
(current carrying value of $0.5 million). Future adverse changes in market
conditions or poor operating results of underlying investments could result in
losses or an inability to recover the carrying value of the investments that may
possibly require additional impairment charges in the future.

                                       20
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS (CONCLUDED)

Goodwill and Other Identified Intangibles - In assessing the recoverability of
the Company's intangibles, the Company must make assumptions regarding estimated
future cash flows and other factors to determine the fair value of the
respective assets. If these estimates or their related assumptions change in the
future, the Company may be required to record impairment charges for these
assets. During fiscal year 2003, the Company will adopt SFAS No. 142 "Goodwill
and Other Intangibles Assets" and will analyze its goodwill for impairment
issues during the first quarter, and then on a periodic basis thereafter.

Accrued Insurance - As noted in Note L of the Notes to Consolidated Financial
Statements, the Company has a self-insured retention against product liability
claims with insurance coverage over and above the retention. There are various
other claims, lawsuits, disputes with third parties, investigations and pending
actions involving various allegations against the Company. Product liability
claims are routinely reviewed by the Company's insurance carrier and management
routinely reviews other claims for purposes of establishing ultimate loss
estimates. In addition, management must determine estimated liability for claims
incurred but not reported. Such estimates and any subsequent changes in
estimates may result in adjustments to our operating results in the future.

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

In the normal course of business, operations of the Company are exposed to
fluctuations in interest rates and foreign currencies. These fluctuations can
vary the cost of financing, investment yields and operations of the Company.

During fiscal year 2002, BioMer C.V., maintained a EUR 100 million unsecured
line of credit at a major European bank for its operations. Outstanding
borrowings under the line of credit bear interest at a variable rate of the
lender's interbank rate plus 0.6% and, accordingly, changes in interest rates
would impact the Company's cost of financing.

The Company does not have any investments that would be classified as trading
securities under generally accepted accounting principles. The Company's
non-trading investments, excluding cash and cash equivalents, consist of
certificates of deposit, debt securities, equity securities and mortgage-backed
securities. The debt securities include municipal bonds, with fixed rates, and
preferred stocks, which pay quarterly fixed rate dividends. These financial
instruments are subject to market risk in that changes in interest rates would
impact the market value of such investments. The Company generally does not
utilize derivatives to hedge against increases in interest rates which would
decrease market values, except for one of its investment managers who utilizes
U.S. Treasury bond futures options ("futures options") as a protection against
the impact of increases in interest rates on the fair value of preferred stocks
managed by that investment manager. The Company marks any outstanding futures
options to market and market value changes are recognized in current earnings.
The futures options generally have terms ranging from 90 to 180 days. Net
realized gains (losses) on sales of futures options aggregated ($188,700) and
$69,600 for the years ended May 31, 2002 and 2001, respectively, and unrealized
gains (losses) on outstanding futures options at May 31, 2002 and 2001,
aggregated ($96,000) and $38,606, respectively.

Based on the Company's overall interest rate exposure at May 31, 2002, including
variable rate debt and fixed rate preferred stocks, a hypothetical 10 percent
change in interest rates applied to the fair value of the financial instruments
as of May 31, 2001, would have no material impact on earnings, cash flows or
fair values of interest rate risk sensitive instruments over a one-year period.

The Company's foreign currency risk exposure results from fluctuating currency
exchange rates, primarily the U.S. dollar against the European currencies. The
Company faces transactional currency exposures that arise when its foreign
subsidiaries (or the Company itself) enter into transactions, generally on an
intercompany basis, denominated in currencies other than their local currency.
The Company also faces currency exposure that arises from translating the
results of its global operations to the U.S. dollar at exchange rates that have
fluctuated from the beginning of the period. Historically, the Company has not
used financial derivatives to hedge against fluctuations in currency exchange
rates. Based on the Company's overall exposure for foreign currency at May 31,
2002, a hypothetical 10 percent change in foreign currency rates would not have
a material impact on the Company's balance sheet, net sales, net income or cash
flows over a one-year period.


                                       21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

<TABLE>
<S>                                                                                                           <C>
1. FINANCIAL STATEMENTS:

     Reports of Independent Auditors ....................................................................     23

     Consolidated Balance Sheets as of May 31, 2002 and 2001 ............................................     24

     Consolidated Statements of Income for the years ended May 31, 2002, 2001 and 2000 ..................     25

     Consolidated Statements of Shareholders' Equity for the years ended May 31, 2002, 2001 and 2000 ....     26

     Consolidated Statements of Cash Flows for the years ended May 31, 2002, 2001 and 2000 ..............     27

     Notes to Consolidated Financial Statements .........................................................  28-37

2. FINANCIAL STATEMENT SCHEDULE:

     Schedule II - Valuation and Qualifying Accounts for the years ended May 31, 2002, 2001 and 2000 ....     38

     Schedules others than those listed above are omitted because they are not applicable or the required

     information is shown in the financial statements or notes thereto

3. SUPPLEMENTARY DATA:

     Quarterly Results ..................................................................................     39
</TABLE>




                                       22
<PAGE>
BIOMET, INC. & SUBSIDIARIES
REPORTS OF INDEPENDENT AUDITORS

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

We have audited the accompanying consolidated balance sheet of Biomet, Inc. and
its subsidiaries as of May 31, 2002, and the related consolidated statements of
income, shareholders' equity, and cash flows for the year then ended. Our audit
also included the 2002 financial statement schedule listed in the accompanying
index. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audit.

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

In our opinion, the 2002 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Biomet, Inc.
and its subsidiaries at May 31, 2002 and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the 2002 financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.

                                                /s/ Ernst & Young LLP

Fort Wayne, Indiana
July 1, 2002



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

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Biomet, Inc. and its subsidiaries at May 31, 2001, and the results of their
operations and their cash flows for each of the two years in the period ended
May 31, 2001, in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the 2001 and 2000
financial statement schedule listed in the accompanying index presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and the financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America 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 our opinion.


                                                /s/ PricewaterhouseCoopers LLP

Chicago, Illinois
July 9, 2001



                                       23
<PAGE>
BIOMET, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

At May 31,
(in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                  2002             2001
<S>                                                                                        <C>              <C>
ASSETS
Current assets:
    Cash and cash equivalents ........................................................     $   154,297      $   235,091
  Investments ........................................................................          30,973           52,627
  Accounts and notes receivable, less allowance for doubtful receivables
    (2002 - $13,175 and 2001 - $13,420) ..............................................         365,148          324,848
    Inventories ......................................................................         335,348          277,601
    Deferred income taxes ............................................................          49,523           48,982
  Prepaid expenses and other .........................................................          17,655           29,230
                                                                                           ----------------------------
    Total current assets .............................................................         952,944          968,379
                                                                                           ----------------------------
Property, plant and equipment:
  Land and improvements ..............................................................          17,854           13,877
  Buildings and improvements .........................................................         102,957           92,459
  Machinery and equipment ............................................................         268,643          219,554
                                                                                           ----------------------------
                                                                                               389,454          325,890
Less, Accumulated depreciation .......................................................         170,393          140,139
                                                                                           ----------------------------
     Property, plant and equipment, net ..............................................         219,061          185,751
                                                                                           ----------------------------
Investments ..........................................................................         201,247          175,430
Intangible assets, net of accumulated amortization (2002 - $25,163 and 2001 - $23,183)           8,532            8,848
Excess acquisition costs over fair value of acquired net assets, net of
  accumulated amortization (2002 - $42,972 and 2001 - $32,952) .......................         125,157          134,835
Other assets .........................................................................          14,782           16,068
                                                                                           ----------------------------
     Total assets ....................................................................     $ 1,521,723      $ 1,489,311
                                                                                           ----------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
    Short-term borrowings and current maturities of long-term obligations ............     $    90,467      $    62,734
    Accounts payable .................................................................          36,318           25,744
    Accrued income taxes .............................................................          17,483           31,085
    Accrued wages and commissions ....................................................          35,106           33,030
    Accrued insurance ................................................................          14,383           11,965
    Accrued litigation ...............................................................           5,864           26,100
    Other accrued expenses ...........................................................          38,078           51,164
                                                                                           ----------------------------
        Total current liabilities ....................................................         237,699          241,822

Deferred federal income taxes ........................................................           3,332            5,783
Other liabilities ....................................................................             406              423
                                                                                           ----------------------------
        Total liabilities ............................................................         241,437          248,028
                                                                                           ----------------------------
Minority interest ....................................................................         103,807           95,097
                                                                                           ----------------------------
Commitments and contingencies (Note L)

Shareholders' equity:
    Preferred shares, $100 par value: Authorized 5 shares; none issued ...............              --               --
    Common shares, without par value:  Authorized 500,000 shares;
       issued and outstanding 2002 - 263,651 shares and 2001 - 269,124 shares ........         124,417          108,918
    Additional paid-in capital .......................................................          48,868           48,732
    Retained earnings ................................................................       1,054,020        1,044,564
    Accumulated other comprehensive loss .............................................         (50,826)         (56,028)
                                                                                           ----------------------------
       Total shareholders' equity ....................................................       1,176,479        1,146,186
                                                                                           ----------------------------
       Total liabilities and shareholders' equity ....................................     $ 1,521,723      $ 1,489,311
                                                                                           ----------------------------
</TABLE>


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


                                       24
<PAGE>
BIOMET, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

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

<TABLE>
<CAPTION>
                                                                 2002             2001             2000
<S>                                                       <C>              <C>              <C>
Net sales ...........................................     $ 1,191,902      $ 1,030,663      $   923,551
Cost of sales .......................................         332,727          296,063          281,351
                                                          ---------------------------------------------
    Gross profit ....................................         859,175          734,600          642,200
Selling, general and administrative expenses ........         437,731          374,793          326,618
Research and development expense ....................          50,750           43,020           40,208
Special charges .....................................              --           26,100           11,700
                                                          ---------------------------------------------
    Operating income ................................         370,694          290,687          263,674
Other income, net ...................................           8,801           24,099           20,211
Interest expense ....................................          (3,380)          (4,110)          (3,193)
                                                          ---------------------------------------------
    Income before income taxes and minority interest          376,115          310,676          280,692
Provision for income taxes ..........................         127,665          105,906           99,738
                                                          ---------------------------------------------
    Income before minority interest .................         248,450          204,770          180,954
Minority interest ...................................           8,710            7,224            7,183
                                                          ---------------------------------------------
    Net income ......................................     $   239,740      $   197,546      $   173,771
                                                          ---------------------------------------------
Earnings per share:
    Basic ...........................................     $       .89      $       .74      $       .66
    Diluted .........................................             .88              .73              .65
                                                          ---------------------------------------------
Shares used in the computation of earnings per share:
    Basic ...........................................         268,475          267,915          264,294
    Diluted .........................................         271,245          270,746          267,242
                                                          ---------------------------------------------
</TABLE>


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



                                       25
<PAGE>
BIOMET, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                         ACCUMULATED
                                                                                ADDITIONAL                   OTHER         TOTAL
                                                            COMMON SHARES        PAID-IN     RETAINED    COMPREHENSIVE SHAREHOLDERS'
(in thousands, except per share amounts)                  NUMBER     AMOUNT      CAPITAL     EARNINGS    INCOME (LOSS)    EQUITY
                                                         -------  -----------  -----------  -----------   -----------   -----------
<S>                                                      <C>      <C>          <C>          <C>           <C>           <C>
Balance at June 1, 1999 ..............................   262,266  $    77,850  $    28,271  $   706,094   $   (16,366)  $   795,849
                                                                                                                        -----------
  Net income .........................................        --           --           --      173,771            --       173,771
  Change in unrealized holding value on investments,
    net of $5,638 tax effect .........................        --           --           --           --       (10,467)      (10,467)
  Reclassification adjustment for gains included
    in net income, net of $344 tax expense ...........        --           --           --           --           638           638
  Currency translation adjustments ...................        --           --           --           --       (23,030)      (23,030)
                                                                                                                        -----------
    Comprehensive income .............................        --           --           --           --            --       140,912
                                                                                                                        -----------
  Net earnings of 3i for the five months
    ended May 31, 1999 ...............................        --           --           --        2,076            --         2,076
  Exercise of stock options ..........................     2,555        7,235        4,418           --            --        11,653
  Exercise of warrants and conversion of preferred
    stock ............................................     1,659            1        2,504           --            --         2,505
  Tax benefit from exercise of stock options .........        --           --        6,258           --            --         6,258
  Cash dividends ($.06 per common share) .............        --           --           --      (15,785)           --       (15,785)
  Other ..............................................        --           --           --         (145)           --          (145)
                                                        ---------------------------------------------------------------------------
Balance at May 31, 2000 ..............................   266,480       85,086       41,451      866,011       (49,225)      943,323
                                                                                                                        -----------
  Net income .........................................        --           --           --      197,546            --       197,546
  Change in unrealized holding value on investments,
    net of $2,138 tax effect .........................        --           --           --           --         3,967         3,967
  Reclassification adjustment for gains included
    in net income, net of $41 tax expense ............        --           --           --           --            74            74
  Currency translation adjustments ...................        --           --           --           --       (10,844)      (10,844)
                                                                                                                        -----------
    Comprehensive income .............................        --           --           --           --            --       190,743
                                                                                                                        -----------
  Exercise of stock options ..........................     2,644       23,832           --           --            --        23,832
  Tax benefit from exercise of stock options .........        --           --        7,281           --            --         7,281
  Cash dividends ($.07 per common share) .............        --           --           --      (18,993)           --       (18,993)
                                                        ---------------------------------------------------------------------------
Balance at May 31, 2001 ..............................   269,124      108,918       48,732    1,044,564       (56,028)    1,146,186
                                                                                                                        -----------
  Net income .........................................        --           --           --      239,740            --       239,740
  Change in unrealized holding value on investments,
    net of $374 tax effect ...........................        --           --           --           --           692           692
  Reclassification adjustment for gains included
    in net income, net of $63 tax expense ............        --           --           --           --           118           118
  Currency translation adjustments ...................        --           --           --           --         4,392         4,392
                                                                                                                        -----------
    Comprehensive income .............................        --           --           --           --            --       244,942
                                                                                                                        -----------
  Exercise of stock options ..........................     1,872       18,351           --           --            --        18,351
  Tax benefit from exercise of stock options .........        --           --        1,268           --            --         1,268
  Purchase of shares .................................    (7,345)      (2,852)      (1,132)    (206,016)           --      (210,000)
  Cash dividends ($.09 per common share) .............        --           --           --      (24,268)           --       (24,268)
                                                        ---------------------------------------------------------------------------
Balance at May 31, 2002 ..............................   263,651  $   124,417  $    48,868  $ 1,054,020   $   (50,826)  $ 1,176,479
                                                        ---------------------------------------------------------------------------
</TABLE>


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



                                       26
<PAGE>
BIOMET, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the years ended May 31,
(in thousands)
                                                                                        2002           2001          2000
<S>                                                                                  <C>            <C>            <C>
Cash flows from (used in) operating activities:
Net income .....................................................................     $ 239,740      $ 197,546      $ 173,771
      Adjustments to reconcile net income to net cash from operating activities:
      Depreciation .............................................................        35,410         30,890         30,678
      Amortization .............................................................        12,417         11,934          9,088
      Write-down of investments ................................................         9,000             --             --
      Minority interest ........................................................         8,710          7,224          7,183
      Other ....................................................................          (916)        (1,936)        (1,467)
      Deferred federal income taxes ............................................        (2,992)       (15,635)        (9,037)
      Tax benefit from exercise of stock options ...............................         1,268          7,281          6,258
      Changes in current assets and liabilities, excluding effects of
          acquisitions and dispositions:
        Accounts and notes receivable ..........................................       (38,537)       (68,134)       (31,326)
        Inventories ............................................................       (48,903)       (37,648)       (27,429)
        Accounts payable .......................................................         9,488          1,950         (2,089)
        Accrued litigation .....................................................       (20,236)        26,100        (55,000)
        Other ..................................................................       (20,212)        30,934         37,198
                                                                                     ---------------------------------------
            Net cash from operating activities .................................       184,237        190,506        137,828
                                                                                     ---------------------------------------
Cash flows from (used in) investing activities:
  Proceeds from sales and maturities of investments ............................       116,189         62,256         45,826
  Purchases of investments .....................................................      (121,619)       (95,406)       (46,491)
  Capital expenditures .........................................................       (62,275)       (35,261)       (43,067)
  Acquisitions, net of cash acquired ...........................................        (6,735)       (85,802)       (22,177)
  Other ........................................................................        (2,979)        (2,460)        (1,741)
                                                                                     ---------------------------------------
          Net cash (used in) investing activities ..............................       (77,419)      (156,673)       (67,650)
                                                                                     ---------------------------------------
Cash flows from (used in) financing activities:
  Increase (decrease) in short-term borrowings .................................        26,994        (13,792)        27,056
  Payment of long-term obligations .............................................            --         (5,993)        (7,664)
  Issuance of shares ...........................................................        18,351         23,832         11,658
  Cash dividends ...............................................................       (24,268)       (18,993)       (16,468)
  Purchase of common shares ....................................................      (210,000)            --             --
                                                                                     ---------------------------------------
          Net cash from (used in) financing activities .........................      (188,923)       (14,946)        14,582
                                                                                     ---------------------------------------
Effect of exchange rate changes on cash ........................................         1,311          2,598         (3,235)
                                                                                     ---------------------------------------
          Increase in cash and cash equivalents ................................       (80,794)        21,485         81,525
Cash and cash equivalents, beginning of year ...................................       235,091        213,606        132,081
                                                                                     ---------------------------------------
Cash and cash equivalents, end of year .........................................     $ 154,297      $ 235,091      $ 213,606
                                                                                     ---------------------------------------
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest ...................................................................     $   3,639      $   4,076      $   3,807
    Income taxes ...............................................................       140,228        109,822         69,555

Noncash investing and financing activities:
  Liabilities assumed in business acquisitions .................................            --         18,093          3,190
  Dividends accrued on redeemable preferred stock ..............................            --             --             81
  Redeemable preferred stock converted to common shares ........................            --             --          2,500
</TABLE>


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


                                       27
<PAGE>
BIOMET, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A: NATURE OF OPERATIONS.

Biomet, Inc. and its subsidiaries design, manufacture and market products used
primarily by musculoskeletal 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 products, bone
cements and accessories, bone substitute materials, craniomaxillofacial implants
and instruments, and dental reconstructive implants and associated
instrumentation. Headquartered in Warsaw, Indiana, Biomet has manufacturing
and/or office facilities in over 50 locations worldwide. The Company currently
distributes products in more than 100 countries throughout the world. The
Company operates in one business segment but has three reportable geographic
segments.

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.

Basis of Presentation - 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 affiliates in which the Company does not
have the ability to significantly influence the operations are accounted for on
the cost method, the carrying amount of which approximates market. Investments
in affiliates in which the Company does have the ability to significantly
influence the operations, but does not control, are accounted for on the equity
method. The financial statements of BioMer C.V. (a joint venture) are
consolidated because the Company has the ability to control the operations of
this entity. The minority shareholder's interest in BioMer C.V. 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 within other
comprehensive income (loss) as a separate component of shareholders' equity.
Foreign currency transaction gains and losses resulting from product transfer
between subsidiaries is recorded in cost of goods sold, other foreign currency
exchange 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 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
within other comprehensive income (loss) 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 obtained through acquisition and are carried at cost less
accumulated amortization. Amortization of intangibles is computed based on the
straight-line method over periods ranging from three to fifteen years.

Excess Acquisition Costs Over Fair Value of Acquired Net Assets - Excess
acquisition costs over the fair value of acquired tangible and intangible net
assets (goodwill) are amortized using the straight-line method over periods
ranging from eight to twenty years. The carrying value of goodwill is reviewed
as circumstances warrant by the Company based on the expected future
undiscounted operating cash flows of the related business unit. The Company
believes no material impairment of goodwill exists at May 31, 2002.


                                       28
<PAGE>
BIOMET, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE B: ACCOUNTING POLICIES, CONTINUED.

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 on the undistributed earnings (approximately $129 million at
May 31, 2002) 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, long-term obligations, 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.

Revenue Recognition, Concentrations of Credit Risk and Allowance for Doubtful
Receivables - For the majority of the Company's products in a country where the
Company has a direct distribution operation, revenue is recognized upon
notification to the Company that the product has been implanted in or applied to
the patient. For other products or services, and in countries where the Company
does not have a direct distribution operation, the Company recognizes revenue
when title passes to the customer and there are no remaining obligations that
will affect the customer's final acceptance of the sale. The Company records
estimated sales returns and discounts as a reduction of net sales in the same
period that revenue is recognized. Shipping and handling fees billed to
customers are recorded as revenue, while related costs are included in cost of
goods sold. 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, 2002 and 2001, cash and cash equivalents and investments included $35
million and $26 million, respectively, of cash deposits and certificates of
deposit with financial institutions in Puerto Rico. Also, at May 31, 2002 and
2001, investments included $12 million and $11 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, 2002, 2001 and 2000.

Comprehensive Income - Other comprehensive income refers to revenues, expenses,
gains and losses that under generally accepted accounting principles are
included in comprehensive income but are excluded from net income as these
amounts are recorded directly as an adjustment to shareholders' equity. The
Company's other comprehensive income is comprised of unrealized gains (losses)
on available-for-sale securities, net of tax, and foreign currency translation
adjustments.

The components of accumulated other comprehensive income (loss) at May 31, 2002
and 2001 are as follows:
(in thousands)
                                                                2002       2001
Net unrealized holding gain (loss) on investments........  $  (4,370)  $ (5,180)
Cumulative translation adjustment .......................    (46,456)   (50,848)
                                                           --------------------
                                                           $ (50,826)  $(56,028)
                                                           --------------------

Special Charges - The special charges of $26.1 million for the year ended May
31, 2001 results from the appellate court's decision in the Tronzo litigation
(see Note L). Special charges of $11.7 million for the year ended May 31, 2000
are comprised of $2.7 million of merger costs related to the 3i merger (see Note
C) and $9.0 million for the final determination of the interest element of the
final judgment in the Orthofix litigation (see Note L).

Accounting Pronouncements - In June of 2001 the Financial Accounting Standards
Board (FASB) approved the issuance of Statement 141, "Business Combinations",
and Statement 142, "Goodwill and Other Intangible Assets". FASB Statement 141,
among other things, requires that all business combinations be accounted for
using the purchase method; use of the pooling-of-interests method is prohibited.
Beginning in the first quarter of fiscal 2003, the Company will no longer
amortize goodwill, but will perform impairment tests annually, or earlier if
indicators of potential impairment exist. All other intangible assets continue
to be amortized over their estimated useful lives. Based on acquisitions
completed as of June 30, 2001, application of the goodwill non-amortization
provisions is expected to result in a decrease in amortization of approximately
$1.5 million for the first quarter of fiscal year 2003.



                                       29
<PAGE>
BIOMET, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE B: ACCOUNTING POLICIES, CONCLUDED.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This statement is effective for fiscal years beginning
after June 15, 2002. The Company is currently assessing the impact of this new
standard, although it does not expect the new standard to affect its results of
operations.

In August 2001, the FASB issued SFAS No. 144, "Impairment or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after December
15, 2001. The provisions of this statement provide a single accounting model for
impairment of long-lived assets. The Company is currently assessing the impact
of this new standard, although it does not expect the new standard to affect its
results of operations.

Reclassifications - Certain amounts in the 2001 consolidated financial
statements have been reclassified to conform to the current year's presentation.
These reclassifications had no impact on total shareholders' equity as
previously reported.

NOTE C: BUSINESS COMBINATIONS.

Biolectron - On September 25, 2000, the Company, through its EBI subsidiary,
acquired Biolectron, Inc. for $90 million in cash. Biolectron's products
principally address the spinal fusion, fracture healing and arthroscopy market
segments. Substantially all of Biolectron's results are included in the U.S.
geographic segment. The Company accounted for this acquisition as a purchase and
the operating results of Biolectron have been consolidated from the date of
acquisition. The acquisition cost was allocated to the fair value of the net
tangible and identifiable intangible assets including $4.4 million to acquired
product technology. Acquired product technology is amortized over 13 years and
goodwill of $76.0 million, arising from this acquisition, is amortized over 20
years (See Note B - Accounting Pronouncements).

Implant Innovations International Corporation - On December 16, 1999, the
Company and Implant Innovations International Corporation ("3i") completed a
merger transaction. The Company issued 11.7 million Common Shares for all of
3i's issued and outstanding shares. 3i and its subsidiaries design, develop,
manufacture, market, and distribute dental reconstructive products. 3i's
corporate headquarters and manufacturing facility are located in Palm Beach
Gardens, Florida, with sales offices in Canada, Europe and Mexico. The business
combination has been accounted for as a pooling-of-interests whereby all prior
period financial statements of the Company have been restated to include the
combined financial position, results of operations and cash flows of the Company
and 3i. 3i's fiscal year-end was December 31 and, accordingly, the financial
information for the fiscal year ended May 31, 1999 include 3i's financial
information for its calendar year ended December 31, 1998. For the year ended
May 31, 2000, the reporting period of 3i's statements of income and cash flows
has been conformed to the Company's May 31 fiscal year. As a result, 3i's
results of operations for the five-month period ended May 31, 1999, have been
excluded from the reported results of operations and, therefore, have been added
to the Company's retained earnings in the year ended May 31, 2000. 3i had net
sales, expense and net income of $31,193,000, $29,181,000, and $2,076,000,
respectively, for the five-month period ended May 31, 1999. For 1999 net sales
and net income of 3i were $70,488,000 and $8,676,000, respectively. For the
period June 1, 1999 through the date of acquisition, December 16, 1999, net
sales and net income were $42,825,000 and $4,511,000, respectively. The Company
recorded a one-time pre-tax charge of $2.7 million for merger-related costs
during the third quarter of fiscal year 2000.

Other Acquisitions - During fiscal years 2002, 2001 and 2000, the Company has
completed several acquisitions of foreign distributors and/or businesses. The
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 date of acquisition. Goodwill
recognized in connection with these acquisitions aggregated $0, $4.1 million,
and $19.8 million for the years ended May 31, 2002, 2001 and 2000, respectively
and is amortized over 15 years (see Note B - Accounting Pronouncements). Pro
forma financial information reflecting all acquisitions accounted for as
purchases has not been presented as it is not materially different from the
Company's historical results.

Investment in Affiliate - In April 1999, the Company entered into an agreement
with Selective Genetics, Inc. ("Selective Genetics"). Under the terms of the
agreement, the Company paid $5 million cash for Series C preferred stock of
Selective Genetics. In April 2000, the Company made an additional investment of
$640,000 to acquire shares of Series D preferred stock of Selective Genetics. In
June 2000, the Company made an additional investment of $250,008 to acquire
shares of Series E preferred stock of Selective Genetices. In June 2001, the
Company exercised Series D warrants of $83,336. During the fourth quarter of
fiscal 2002, the Company determined that its equity investment in Selective
Genetics has been permanently impaired. Therefore, a charge of $5.5 million was
recorded and included in other income in the Statement of Income. Under the
agreement, the Company will fund as incurred certain defined research and
development efforts of Selective Genetics over a ten-year period (see Note L) in
exchange for license rights to market certain products to be manufactured by
Selective Genetics. Amounts funded under the agreement are charged to research
and development expense.


                                       30

<PAGE>
BIOMET, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE D: INVESTMENTS.

At May 31, 2002, the Company's investment securities were classified as follows:

                                  Amortized         Unrealized
(in thousands)                         Cost       Gains       Losses  Fair Value
                                  ----------------------------------------------
Available-for-sale:
  Debt securities .............    $146,300    $  1,079    $ (3,763)    $143,616
  Equity securities ...........      19,371         348      (3,401)      16,318
  Mortgage-backed securities ..      57,731         157      (1,140)      56,748
                                  ----------------------------------------------
    Total available-for-sale ..     223,402       1,584      (8,304)     216,682
                                  ----------------------------------------------

Held-to-maturity:
  Debt securities .............       8,029           -           -        8,029
  Mortgage-backed obligations .       4,409           -           -        4,409
                                  ----------------------------------------------
    Total held-to-maturity ....      12,438           -           -       12,438
                                  ----------------------------------------------
Certificates of deposit .......       3,100           -           -        3,100
                                  ----------------------------------------------
  Total .......................    $238,940    $  1,584    $ (8,304)    $232,220
                                  ----------------------------------------------

At May 31, 2001, the Company's investment securities were classified as follows:

                                  Amortized         Unrealized
(in thousands)                         Cost       Gains       Losses  Fair Value
                                  ----------------------------------------------
Available-for-sale:
  Debt securities .............    $169,733    $    838    $ (6,043)    $164,528
  Equity securities ...........      12,986       1,507      (1,741)      12,752
  Mortgage-backed securities ..      39,345          54      (2,581)      36,818
                                  ----------------------------------------------
    Total available-for-sale ..     222,064       2,399     (10,365)     214,098
                                  ----------------------------------------------

Held-to-maturity:
  Debt securities .............       2,701           1           -        2,702
  Mortgage-backed obligations .       8,158         152        (267)       8,043
                                  ----------------------------------------------
    Total held-to-maturity ....      10,859         153        (267)      10,745
                                  ----------------------------------------------
Certificates of deposit .......       3,100           -           -        3,100
                                  ----------------------------------------------
  Total .......................    $236,023    $  2,552    $(10,632)    $227,943
                                  ----------------------------------------------

Proceeds from sales of available-for-sale securities were $35,730,000,
$32,251,000 and $7,340,000 for the years ended May 31, 2002, 2001 and 2000,
respectively. There were no sales of held-to-maturity securities for the years
ended May 31, 2002, 2001 and 2000. The cost of marketable securities sold is
determined by the specific identification method. For the year ended May 31,
2002, gross realized gains and (losses) on sales of available-for-sale
securities were $1,313,000 and $(397,000), respectively. Gross realized gains
and (losses) for the year ended May 31, 2001 were $2,172,000 and $(584,000),
respectively. Gross realized gains and (losses) for the year ended May 31, 2000
were $1,581,000 and $(330,000), respectively. The Company's investment
securities at May 31, 2002 include $30,973,000 of debt securities all maturing
within one year, and $3,100,000 of certificates of deposit, $120,672,000 of debt
securities, $16,318,000 of equity securities and $61,157,000 of mortgage-backed
securities all maturing past one year.

Investment income (included in other income, net) consists of the following:
(in thousands)
                                            2002            2001            2000
                                         ---------------------------------------
Interest income ................         $17,562         $20,053         $15,640
Dividend income ................           3,195           5,061           5,851
Net realized gains .............             916           1,588           1,251
                                         ---------------------------------------
      Total ....................         $21,673         $26,702         $22,742
                                         ---------------------------------------


                                       31
<PAGE>
BIOMET, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE E: INVENTORIES.

Inventories at May 31, 2002 and 2001 consist of the following:
(in thousands)
                                                         2002               2001
Raw materials ............................           $ 35,036           $ 32,024
Work-in-progress .........................             45,476             31,082
Finished goods ...........................            135,842            108,704
Consigned distributor ....................            118,994            105,791
                                                     ---------------------------
    Total ................................           $335,348           $277,601
                                                     ---------------------------
NOTE F: DEBT.

At May 31, 2002 and 2001, short-term borrowings, including current maturities of
long-term obligations, consist of the following:
(in thousands)
                                                              2002          2001
Bank line of credit - BioMer C.V ...................       $90,467       $61,740
Current maturities of long-term obligations ........             -           994
                                                           ---------------------
    Total ..........................................       $90,467       $62,734
                                                           ---------------------

BioMer C.V. has a EUR 100 million unsecured line of credit with a major European
bank. This line of credit is used to finance its operations and interest on
outstanding borrowings is payable monthly at the lender's interbank rate plus
0.6% (effective rate of 3.93% and 5.79% at May 31, 2002 and 2001, respectively).

NOTE G: TEAM MEMBER BENEFIT PLANS.

The Company has an Employee Stock Bonus Plan for eligible Team Members of the
Company and certain subsidiaries. The Company may contribute up to 3% of
eligible Team Member's compensation. The amounts expensed under this plan for
the years ended May 31, 2002, 2001 and 2000 were $4,290,000, $4,401,000 and
$2,845,000, respectively. The Company makes cash contributions to the plan and
issues no Common Shares in connection with the plan.

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 75% 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,
2002, 2001 and 2000 were $4,953,000, $4,008,000, and $3,252,000, respectively.

NOTE H: STOCK OPTION PLANS.

The Company has various stock option plans: the 1984 Employee Stock Option Plan,
as amended, the 1992 Employee and Non-Employee Director Stock Option Plan; the
1992 Distributor Stock Option Plan and the 1998 Qualified and Non-Qualified
Stock Option Plan. At May 31, 2002, the only plan with shares available for
grant is the 1998 Qualified and Non-Qualified Stock Option Plan.

Under the stock option plans, options may be granted to key employees, directors
and distributors, at the discretion of the Stock Option Committee, and generally
become exercisable in annual or biannual increments beginning one or two years
after the date of grant in the case of employee options and in annual increments
beginning at the date of grant for distributor options. 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 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,
distributors and directors is an amount per share 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. All rights under the options terminate upon the optionee's separation
from service with the Company, unless such separation results from retirement,
disability or death. For the years ended May 31, 2002, 2001 and 2000, the amount
of compensation expense applicable to options granted to distributors was not
material to the consolidated financial statements.



                                       32
<PAGE>
BIOMET, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE H: STOCK OPTION PLANS, CONCLUDED.

The following table summarizes stock option activity:

                                                   Number      Weighted-Average
                                                  of Shares     Exercise Price
                                                 ------------------------------
Outstanding, June 1, 1999 .................       9,007,238          $ 8.71
    Granted ...............................       3,214,876           12.05
    Exercised .............................      (2,449,720)           5.41
    Terminated ............................        (364,067)           8.67
                                                 -----------
Outstanding, May 31, 2000 .................       9,408,327           10.82
    Granted ...............................       2,366,990           20.33
    Exercised .............................      (2,694,668)          10.99
    Terminated ............................        (370,232)          11.31
                                                 -----------
Outstanding, May 31, 2001 .................       8,710,417           13.81
    Granted ...............................       1,721,171           26.82
    Exercised .............................      (1,665,194)          12.29
    Terminated ............................        (379,573)          14.21
                                                 -----------
Outstanding, May 31, 2002 .................       8,386,821          $15.07
                                                 -----------

Options outstanding at May 31, 2002, are exercisable at prices ranging from
$4.33 to $30.75 and have a weighted-average remaining contractual life of 4.4
years. The following table summarizes information about stock options
outstanding at May 31, 2002.

<TABLE>
<CAPTION>

                                      Outstanding
                                       Weighted-        Weighted-
                        Number          Average          Average          Number         Weighted-
   Range of         Outstanding at     Remaining         Exercise     Exercisable at      Average
Exercise Price       May 31, 2002   Contractual Life      Price        May 31, 2002    Exercise Price
-----------------------------------------------------------------------------------------------------
<S>     <C>             <C>             <C>               <C>              <C>             <C>
$ 4.33 - 10.00           796,701         1.6 years         $ 6.93           609,729         $ 6.55
 10.01 - 15.00         3,256,238         3.5 years          12.30         1,265,200          12.35
 15.01 - 20.00         1,014,296         4.0 years          16.04           397,606          15.97
 20.01 - 25.00         1,452,064         7.3 years          21.13           272,552          21.40
 25.01 - 30.75         1,867,522         7.7 years          27.00            60,978          28.28
                       ---------                                          ---------
                       8,386,821                                          2,606,065
                       ---------                                          ---------
</TABLE>

At May 31, 2001 and 2000, there were exercisable options outstanding to purchase
2,077,850 and 2,399,000 shares, respectively, at weighted-average exercise
prices of $11.07 and $9.16, respectively.


As permitted by SFAS No. 123, the Company accounts for its employee stock
options using the intrinsic value method. Accordingly, no compensation expense
is recognized for the employee stock-based compensation plans. If compensation
expense for the Company's employee stock options issued in fiscal years 2002,
2001 and 2000 had been determined based on the fair value method of accounting,
pro forma net income and diluted earnings per share would have been as follows:

                                                 2002         2001          2000
Pro forma net income (in thousands).......   $234,477     $193,430      $170,262
Pro forma diluted earnings per share......        .86          .71           .64
The weighted-average fair value of
 options granted during the year .........       9.32         7.09          4.11

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 2002, 2001 and 2000: (1) expected life of
option of 4.8, 3.6 and 3.6 years; (2) dividend yield of .40%, .42% and .40%; (3)
expected volatility of 35%, 36% and 35%; and (4) risk-free interest rate of
2.43%, 4.47% and 5.62%, respectively.


                                       33
<PAGE>
BIOMET, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE I: SHAREHOLDERS' EQUITY & EARNINGS PER SHARE.

On July 2, 2002, the Company announced a cash dividend of ten cents ($.10) per
share, payable July 15, 2002 to shareholders of record at the close of business
on July 8, 2002.

On July 9, 2001, the Company announced a three-for-two stock split payable
August 6, 2001 to shareholders of record on July 30, 2001. On July 6, 2000, the
Company announced a three-for-two stock split payable August 8, 2000 to
shareholders of record on July 18, 2000. All shares and all per share data have
been adjusted to give retroactive effect to all stock splits.


On December 16, 1999, the Company issued 11.7 million common shares in
connection with the business combination with 3i (see Note C).

In December 1999, the Board of Directors of the Company adopted a new
Shareholder Rights Plan (the "Plan") to replace a 1989 rights plan that expired
on December 2, 1999. Under the Plan, rights have attached to the outstanding
common shares at the rate of one right for each share held by shareholders of
record at the close of business on December 28, 1999. The rights will become
exercisable only if a person or group of affiliated persons (an "Acquiring
Person") acquires 15% or more of the Company's common shares or announces a
tender offer or exchange offer that would result in the acquisition of 30% or
more of the outstanding common shares. At that time, the rights may be redeemed
at the election of the Board of Directors of the Company. If not redeemed, then
prior to the acquisition by the Acquiring Person of 50% or more of the
outstanding common shares of the Company, the Company may exchange the rights
(other than rights owned by the Acquiring Person, which would have become void)
for common shares (or other securities) of the Company on a one-for-one basis.
If not exchanged, the rights may be exercised and the holders may acquire
preferred share units or common shares of the Company having a value of two
times the exercise price of $117.00. Each preferred share unit carries the same
voting rights as one common share. If the Acquiring Person engages in a merger
or other business combination with the Company, the rights would entitle the
holders to acquire shares of the Acquiring Person having a market value equal to
twice the exercise price of the rights. The Plan will expire in December 2009.
The Plan is intended to protect the interests of the Company's shareholders
against certain coercive tactics sometimes employed in takeover attempts.

Earnings per share for the years ended May 31, 2002, 2001 and 2000 are computed
as follows:
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                          2002          2001          2000
<S>                                                   <C>           <C>           <C>
Numerator:
    Net income .................................      $239,740      $197,546      $173,771
    Less: Preferred stock dividends ............             -             -            81
                                                      ------------------------------------
    Numerator for basic earnings per share -
     income available to common shareholders ...       239,740       197,546       173,690

Effect of dilutive securities:
    Dividend on convertible preferred securities             -             -            81
                                                      ------------------------------------
    Numerator for diluted earnings per share -
    income available to common shareholders
    after assumed conversions ..................      $239,740      $197,546      $173,771
                                                      ------------------------------------
Denominator:
    Denominator for basic earnings per share -
      weighted average shares ..................       268,475       267,915       264,294

Effect of dilutive securities:
    Warrants ...................................             -             -           359
    Convertible preferred securities ...........             -             -           537
    Stock options ..............................         2,770         2,831         2,052
                                                      ------------------------------------
Dilutive potential common shares ...............         2,770         2,831         2,948
    Denominator for diluted earnings per share -
    adjusted weighted  average shares and
    assumed conversions ........................       271,245       270,746       267,242
                                                      ------------------------------------
Earnings per share - basic .....................      $    .89      $    .74      $    .66
Earnings per share - diluted ...................           .88           .73           .65
</TABLE>

                                       34
<PAGE>
BIOMET, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE J: INCOME TAXES.

The components of income before income taxes are as follows:
(in thousands)
                                          2002           2001           2000

United States operations.........    $ 336,523      $ 280,171      $ 260,107
Foreign operations ..............       39,592         30,505         20,585
                                     ----------------------------------------
     Total ......................    $ 376,115      $ 310,676      $ 280,692
                                     ----------------------------------------
The provision for income taxes is summarized as follows:
(in thousands)

Current:                                  2002           2001          2000
     Federal ....................    $ 100,599      $  98,332      $  88,996
     State, including Puerto Rico       16,354         13,736         13,622
Foreign .........................       13,704          9,473          6,157
                                     ----------------------------------------
                                       130,657        121,541        108,775
Deferred ........................       (2,992)       (15,635)        (9,037)
                                     ----------------------------------------
     Total ......................    $ 127,665      $ 105,906      $  99,738
                                     ----------------------------------------
Effective tax rate ..............         33.9%          34.1%          35.5%
                                     ----------------------------------------

A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate follows:

                                                         2002    2001      2000
U.S. statutory income tax rate ......................    35.0%   35.0%     35.0%
Add (deduct):
    State taxes, less effect of federal reduction ...     2.6     2.6       2.9
    Foreign income taxes at rates different from
     the U.S. statutory rate ........................      .4       -       (.8)
    Tax benefit relating to operations in Puerto Rico     (.1)    (.3)      (.3)
    Tax credits .....................................     (.7)    (.9)      (.4)
    Earnings of Foreign Sales Corporation ...........     (.6)    (.7)      (.5)
    Other ...........................................    (2.7)   (1.6)      (.4)
                                                         -----------------------
Effective tax rate ..................................    33.9%   34.1%     35.5%
                                                         -----------------------

The components of the net deferred tax asset and liability at May 31, 2002 and
2001 are as follows:
(in thousands)
                                                       2002         2001
Current deferred tax asset:
    Accounts and notes receivable .............    $ 16,635     $ 13,227
    Inventories ...............................      24,249       17,139
    Accrued expenses ..........................       8,639       18,616
                                                   ----------------------
      Current deferred tax asset ..............    $ 49,523     $ 48,982
                                                   ----------------------
Long-term deferred tax asset (liability):
    Depreciation ..............................    $ (3,796)    $ (4,158)
    Financial accounting basis of net assets of
   acquired companies different than tax basis       (5,596)      (4,958)
    Other .....................................       6,060        3,333
                                                   ----------------------
      Long-term deferred tax liability ........    $ (3,332)    $ (5,783)
                                                   ----------------------

                                       35
<PAGE>
BIOMET, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE K: SEGMENT DATA.

The Company operates in one business segment, musculoskeletal products, which
includes the designing, manufacturing and marketing of reconstructive products,
fixation devices, spinal products and other products. Other products consist
primarily of Arthrotek's arthroscopy products, EBI's softgoods and bracing
products, general instruments and operating room supplies. The Company manages
its business segments primarily on a geographic basis. These geographic markets
are comprised of the United States, Europe and Other. The other geographic
market includes Canada, South America, Mexico, Japan and the Pacific Rim. The
Company evaluates performance based on operating income of each geographic
segment. Identifiable assets are those assets used exclusively in the operations
of each geographic segment. Revenues attributable to each geographic segment are
based on the location in which the sale originated.

Net sales of musculoskeletal products by product category and reportable
geographic segment results are as follows:
(in thousands)

                                          2002            2001            2000
Reconstructive products ......      $  721,004      $  614,308      $  580,239
Fixation devices .............         215,544         202,152         180,336
Spinal products ..............         125,119          91,103          54,119
Other products ...............         130,235         123,100         108,857
                                    -------------------------------------------
                                    $1,191,902      $1,030,663      $  923,551
                                    -------------------------------------------

Net sales to customers:
United States ................      $  885,791      $  759,465      $  662,146
Europe .......................         261,435         239,136         236,047
Other ........................          44,676          32,062          25,358
                                    -------------------------------------------
                                    $1,191,902      $1,030,663      $  923,551
                                    -------------------------------------------

Operating income:
United States ................      $  326,906      $  251,927      $  224,385
Europe .......................          39,152          34,772          34,841
Other ........................           4,636           3,988           4,448
                                    -------------------------------------------
                                    $  370,694      $  290,687      $  263,674
                                    -------------------------------------------

Long-lived assets:
United States ................      $  226,406      $  213,339      $  129,978
Europe .......................         121,253         109,758         121,350
Other ........................          10,061           8,532           5,635
                                    -------------------------------------------
                                    $  357,720      $  331,629      $  256,963
                                    -------------------------------------------

Capital expenditures:
United States ................      $   36,795      $   18,091      $   20,375
Europe .......................          22,923          15,457          20,365
Other ........................           2,557           1,713           2,327
                                    -------------------------------------------
                                    $   62,275      $   35,261      $   43,067
                                    -------------------------------------------

Depreciation and amortization:
United States ................      $   25,031      $   21,891      $   17,032
Europe .......................          21,609          19,236          21,570
Other ........................           1,187           1,697           1,164
                                    -------------------------------------------
                                    $   47,827      $   42,824      $   39,766
                                    -------------------------------------------

United States export sales, primarily to European countries, aggregated
$29,416,000, $37,093,000 and $49,884,000 for the years ended May 31, 2002, 2001
and 2000, respectively. These sales are included in United States sales to
customers above. The decrease in U.S. export sales for the past 2 years is
attributable to the acquisition of foreign distributors and the changeover to
direct representation in various foreign countries (principally Japan and
Korea).

                                       36
<PAGE>
BIOMET, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)

NOTE L: COMMITMENTS & CONTINGENCIES.

BioMer C.V. Put Option - Pursuant to the terms of the Joint Venture Agreement
with Merck KGaA, 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 C.V. Merck KGaA may exercise the put
option by giving notice to the Company at any time during (a) the period
beginning on May 1, 2001 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 C.V. and multiples,
as defined in the Joint Venture Agreement, or (ii) the net book value of all the
assets of BioMer C.V. less all liabilities of BioMer C.V. multiplied by Merck
KGaA's ownership percentage.

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 insured 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, 2002 the Company's self-insurance limits were
$3,000,000 per occurrence and $6,000,000 aggregate per year. Liabilities in
excess of these amounts are the responsibility of the Company's insurance
carrier up to policy limits. 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 - On November 13, 2001, the United States Supreme Court ("Supreme
Court") denied the Company's petition to review the $20 million punitive damage
award against the Company given to Raymond G. Tronzo by the United States
District Court for the Southern District of Florida which affirmed a
compensatory damage award of $520. The Company had previously recorded a
one-time special charge during the third quarter of fiscal 2001 of $26.1
million, which represents the total damage award plus the maximum amount of
interest that, as calculated by the Company, may be due under the award and
related expenses. While the Company was disappointed in the Supreme Court's
decision not to review the case, the Company has paid $20,236,000 out of escrow.
The amount of interest owed by the Company, if any, on this award continues to
be in dispute; however, if a decision on the interest award is adverse to the
Company, it should not exceed the amount of the remaining funds in escrow. The
Supreme Court's decision does not affect the ongoing sales of any of Biomet's
product lines.

On June 30, 1999, the United States Court of Appeals for the Third Circuit (the
"Third Circuit") significantly reduced the judgment previously entered against
the Company in an action brought by Orthofix SRL ("Orthofix") against the
Company and certain of its wholly-owned subsidiaries. The litigation related to
events surrounding the expiration of a distribution agreement under which the
Company distributed Orthofix's external fixation devices in the United States.
The final judgment of $55 million, including estimated interest of $5.1 million,
was accrued at May 31, 1999 and that amount plus $9.0 million related to the
final determination of interest was paid during the year ended May 31, 2000.

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.

Other Commitments - As discussed in Note C, the Company has a commitment to fund
certain research and development efforts of Selective Genetics, not to exceed
$1.25 million annually and $5 million through April 2009.

                                       37
<PAGE>

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

for the years ended May 31, 2002, 2001 and 2000
(in thousands)

-------------
<TABLE>
<CAPTION>

    Col. A                  Col. B             Col. C                Col. D        Col. E

                                             Additions
                                             ---------

                                         (1)          (2)
                                                   Charged to
                          Balance at   Charged to     other                       Balance at
                         beginning of  costs and   accounts -       Deductions -    end of
Description                 period      expenses     describe         describe      period
-----------                 ------      --------     --------         --------      ------
<S>                      <C>           <C>         <C>              <C>           <C>
Allowance for
doubtful receivables:

For the year ended
  May 31, 2002              $13,420     $15,400      $ 1,375(B)       $17,061(A)    $13,175
                                                          41(C)
                            =======     =======      ==========       ==========    =======

For the year ended
  May 31, 2001              $ 8,241     $11,166      $ 1,606(B)       $13,360(A)    $13,420
                                                        (319)(C)
                                                       6,086(E)
                            =======     =======      ==========       ==========    =======

For the year ended
  May 31, 2000              $ 7,262     $ 8,415      $   994(B)       $ 7,750(A)    $ 8,241
                                                        (177)(C)
                                                        (503)(D)
                            =======     =======      ==========       ==========    =======
</TABLE>

Notes:
        (A)Uncollectible accounts written off
        (B)Collection of previously written off accounts
        (C)Effect of foreign currency translation adjustment
        (D)Change in 3i's allowance for the five-month period to conform 3i's
           calendar year-end with the Company's May 31 fiscal year-end
        (E)Acquisitions

                                       38
<PAGE>

QUARTERLY RESULTS
(in thousands, except earnings per share)
<TABLE>
<CAPTION>
                           1st Qtr.        2nd Qtr.        3rd Qtr.        4th Qtr.            Year
<S>                      <C>             <C>             <C>             <C>             <C>
2002
Net sales .........      $  272,022      $  289,387      $  304,609      $  325,884      $1,191,902
Gross profit ......         194,630         210,353         219,371         234,821         859,175
Net income ........          56,013          61,452          61,674          60,601         239,740
Earnings per share:
    Basic .........             .21             .23             .23             .23             .89
    Diluted .......             .21             .23             .23             .23             .88

2001
Net sales .........      $  231,134      $  244,361      $  267,162      $  288,006      $1,030,663
Gross profit ......         162,966         173,334         192,121         206,179         734,600
Net income ........          48,427          51,798          38,205          59,116         197,546
Earnings per share:
    Basic .........             .18             .19             .15             .22             .74
    Diluted .......             .18             .19             .14             .22             .73

2000
Net sales .........      $  213,430      $  225,448      $  233,659      $  251,014      $  923,551
Gross profit ......         148,243         156,349         162,517         175,091         642,200
Net income ........          41,172          38,786          43,192          50,621         173,771
Earnings per share:
    Basic .........             .16             .15             .16             .19             .66
    Diluted .......             .15             .15             .16             .19             .65
</TABLE>


-   All per share data have been adjusted to give retroactive effect to the
    three-for-two stock splits announced on July 9, 2001 and July 6, 2000.

-   Per share data may not cross-foot due to the share repurchase program
    affecting the weighted share calculation differently by quarter compared to
    the full fiscal year.

-   Net income for the fourth quarter of fiscal 2002 was adversely impacted by a
    $9 million pretax charge as a result of equity write-downs in marketable
    securities and other investments.

-   The operating results for the third quarter of fiscal 2001 were adversely
    impacted by a $26.1 million special charge related to the appellate court's
    decision in the Tronzo litigation.

-   The operating results for the second quarter of fiscal 2000 were adversely
    impacted by a $9 million special charge related to the final determination
    of the interest element of the final Orthofix judgment.

-   The operating results for the third quarter of fiscal 2000 were adversely
    impacted by a $2.7 million special charge relating to the closing of the
    merger with 3i.


                                       39
<PAGE>
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

In June 2001, PricewaterhouseCoopers LLP ("PWC") advised Biomet that it was
closing its office in South Bend, Indiana, which office had served the Company
since 1980. Upon receipt of this advice, Biomet's Audit Committee and members of
management interviewed several accounting firms, including PWC. On October 29,
2001, the Board of Directors of the Company, on the recommendation of the Audit
Committee, approved the dismissal of PWC and the appointment of Ernst & Young
LLP as the Company's independent accountants for the year ended May 31, 2002.

The reports of PWC on the Company's financial statements for the years ended May
31, 2001 and 2000 did not contain any adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles. In connection with the audits of the Company's financial statements
for the years ended May 31, 2001 and 2000 and through October 29, 2001, there
have been no disagreements with PWC on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures,
which disagreements, if not resolved to the satisfaction of PWC, would have
caused them to make reference thereto in their reports on the financial
statements for such years.

                                    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 2002 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 on page 14
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 "Stock Ownership" 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.



                                       40


<PAGE>
                                     PART IV

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

     (a)  THE FOLLOWING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
          ARE INCLUDED IN ITEM 8 HEREIN.

          (1)  FINANCIAL STATEMENTS:

               Reports of Independent Auditors

               Consolidated Balance Sheets as of May 31, 2002 and 2001

               Consolidated Statements of Income for the years ended May 31,
               2002, 2001 and 2000

               Consolidated Statements of Shareholders' Equity for the years
               ended May 31, 2002, 2001 and 2000

               Consolidated Statements of Cash Flows for the years ended May 31,
               2002, 2001 and 2000

               Notes to Consolidated Financial Statements

          (2)  FINANCIAL STATEMENT SCHEDULE:
               Schedule II - Valuation and Qualifying Accounts

          (3)  EXHIBITS:
               Refer to the Index to Exhibits on p.44.

     (b)  REPORTS ON FORM 8-K.

               None.


                                       41
<PAGE>

                                   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 16, 2002.

                                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 14, 2002.


            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


                                       42
<PAGE>


                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, Senior Vice President - Finance
                     (Principal Financial Officer)


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



                                       43
<PAGE>

                                  BIOMET, INC.

                                    FORM 10-K

                                  MAY 31, 2002

                                INDEX TO EXHIBITS

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


    (2)        No exhibit

    (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 as Amended December 13, 1997.
               (Incorporated by reference to Exhibit 3.6 to Biomet, Inc. Form
               10-K Report for year ended May 31, 1998, File No. 0-12515).

    (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 16, 1999. (Incorporated by
               reference to Exhibit 4 to Biomet, Inc. Form 8-K Report dated
               December 16, 1999, 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 Qualified and Non-Qualified Stock Option Plan
               adopted August 3, 1998. (Incorporated by reference to Exhibit
               10.6 to Biomet, Inc. Form 10-K Report for year ended May 31,
               1998, File No. 0-12515).

    (11)       No exhibit.

    (12)       No exhibit.


                                       44
<PAGE>

    (13)       No exhibit.

    (16)       No exhibit.

    (18)       No exhibit.

    (21) 21.1  Subsidiaries of the Registrant.

    (22)       No exhibit.

    (23) 23.1  Consent of Ernst & Young LLP.
         23.2  Consent of PricewaterhouseCoopers LLP.

    (24)       No exhibit.

    (99) 99.1  Written Statement of Chief Executive Officer and Chief Financial
               Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
               2002.