<PAGE>

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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, 2003.

                                       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. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X]  No [ ]

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 November 29,
2002, as reported by The Nasdaq National Market, was approximately
$6,520,022,987. As of August 7, 2003, there were 256,391,095 Common Shares
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
                                                         PARTS OF FORM 10-K
                                                         INTO WHICH DOCUMENT
IDENTITY OF DOCUMENT                                       IS INCORPORATED
<S>                                                      <C>
Proxy Statement with respect to the 2003
Annual Meeting of Shareholders of the Registrant                 Part III
</TABLE>


================================================================================
<PAGE>
                           FORWARD-LOOKING STATEMENTS

This report contains "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 timing and 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 intent and
ability to consummate acquisitions; 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; 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 impact of anticipated changes in the
musculoskeletal industry and the ability of the Company to react to and
capitalize on those changes; the impact of the transfer of marketing
responsibility for the Company's internal fixation products; 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. Readers of this report should carefully read the factors set
forth under the "Risk Factors" section of this report for a description of
certain risks that could, among other things, cause actual results to differ
from those contained in forward-looking statements made in this report and
presented elsewhere by management from time to time. Such factors, among others,
may have a material adverse effect upon the Company's business, financial
condition and results of operations.

The Company undertakes no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Accordingly, the reader is cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date on which
they are made. publicly or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Accordingly, the reader
is cautioned not to place undue reliance on forward-looking statements, which
speak only as of the date on which they are made.



                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                   <C>

                                                          PART I

ITEM 1.   BUSINESS ..................................................................................................    1
ITEM 2.   PROPERTIES ................................................................................................   15
ITEM 3.   LEGAL PROCEEDINGS .........................................................................................   17
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......................................................   17

                                                         PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS .................................   18
ITEM 6.   SELECTED FINANCIAL DATA ...................................................................................   19
ITEM 7.   MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS .........................   20
ITEM 7A.  QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK .................................................    25
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...............................................................   26
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ......................   43
ITEM 9A.  CONTROLS AND PROCEDURES ..................................................................................    43

                                                         PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .......................................................   44
ITEM 11.   EXECUTIVE COMPENSATION ...................................................................................   44
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ...........   44
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...........................................................   44
ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES....................................................................   44

                                                         PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ..........................................   45
</TABLE>



<PAGE>
                                     PART I

ITEM 1. BUSINESS.

GENERAL

Biomet, Inc., an Indiana corporation incorporated in 1977 ("Biomet" or the
"Company"), 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.; BioMer CV (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's annual reports on Form 10-K (for the four most recent fiscal
years), quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to these reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 are available free of charge on or
may be accessed through the Investors Section of the Company's Internet website
at www.biomet.com as soon as reasonably practicable after the Company files or
furnishes such material with or to the Securities and Exchange Commission.

PRODUCTS

The Company operates in one business segment, musculoskeletal products, which
includes the design, manufacture and marketing of four major market segments:
reconstructive devices, fixation products, spinal products and other products.
The Company has three reportable geographic markets: United States, Europe and
Rest of World. 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, spinal fixation systems and
orthobiologicals. 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 intended application, the Company reports sales of
bone substitute materials in the reconstructive device, 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, 2003.


                              YEARS ENDED MAY 31,
                         (DOLLAR AMOUNTS IN THOUSANDS)
                         -----------------------------


<TABLE>
<CAPTION>
                                     2003                           2002                           2001
                                           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     $  867,602         63%         $  721,004        60%          $  614,308          59%

Fixation Products             237,117         17%            215,544        18%             202,152          20%

Spinal Products               143,607         10%            125,119        11%              91,103           9%

Other Products                141,974         10%            130,235        11%             123,100          12%
                           -------------------------------------------------------------------------------------
Total                      $1,390,300        100%         $1,191,902        100%         $1,030,663         100%
                           =====================================================================================

</TABLE>



                                       1

<PAGE>
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 Company continues to be a 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 from the U.S. Food and
Drug Administration ("FDA") to market the Oxford(TM) Phase 3 Knee. During fiscal
year 2003, the Company introduced the Vanguard(TM) Series Unicompartmental Knee
System. The Vanguard(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 Maxim(R) Complete Knee System incorporates cruciate retaining, posterior
stabilized and constrained components, and competes in both the primary and
revision knee market segments. The Maxim(R) System continues to be the Company's
largest-selling 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.

The Biomet(R) Orthopaedic Salvage System ("OSS") continues to gain market
acceptance. 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.

During fiscal year 2003, the Company received clearance from the FDA for the
fixed-bearing cruciate-retaining and posterior-stabilized versions of the
Vanguard(TM) Complete Knee Replacement System. During fiscal year 2004 the
Company plans to complete the instrument design for these two versions of
Biomet's newest and most comprehensive knee system, and begin development focus
on the mobile-bearing and revision aspects of this system. Biomet is also
planning to launch the Maxim(R) MI (minimally-invasive) instruments during
fiscal year 2004. These instruments are designed for utilization with the
Maxim(R) and the AGC(R) Knee Systems to reduce incision size, which may provide
reduced blood loss, a shortened hospital stay, reduced postoperative pain and
less time spent in rehabilitation as compared to a conventional procedure.

     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 offers a broad array of 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 the Company's proprietary
porous plasma spray (PPS(TM)) coating, which enhances the attachment of bone
cement to the stem or enables cementless fixation.


                                       2

<PAGE>
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 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. The
Alliance(R) family was further augmented 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 calcar 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. The modular
version of the Mallory-Head(R) System incorporates the Company's patented roller
hardened technology, which dramatically increases the strength of the modular
connection.

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) Hip Articulation 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.

The Taperloc(R) Hip System is marketed for non-cemented use in patients
undergoing primary hip replacement surgery as a result of noninflammatory
degenerative joint disease. The Taperloc(R) femoral component is a collarless
flat wedge-shaped implant that provides excellent durability and stability in a
design that is relatively simple and predictable to implant. The incorporation
of standard and lateralized offset options provides the surgeon with the ability
to reconstruct a stable joint with proper leg length in virtually all patient
anatomies.

During the second quarter of fiscal year 2003, Biomet Orthopedics commenced the
distribution of its RingLoc(R) constrained hip liners, which are indicated for
patients with a high risk of hip dislocation. While the percentage of patients
requiring a constrained liner is relatively small, surgeons often prefer to
utilize a revision system that includes this option. The Freedom(TM) Constrained
Liner, scheduled for release during fiscal year 2004, offers an enhanced range
of motion of 110(degree) and a wide series of options. Additional new hip
products scheduled for release during fiscal year 2004 include hip instruments
for the Microplasty (TM) Minimally Invasive Hip Program (posterior approach), a
non-flared version of the M(2)a-38(TM) Hip Articulation System and the
Generation 4(TM) Polished Hip System, a smooth, tapered stem designed to help
distribute bone cement evenly around the implant thereby enhancing fixation.

     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 developed to minimize bone
removal in shoulder procedures and has over 10 years of positive clinical
results in the United Kingdom. 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. The modular Mosaic(TM) System is utilized to create
a shoulder implant in complex revision and salvage/oncology procedures. During
fiscal year 2003, Biomet introduced several new extremity products, including
the Liverpool(TM) Radial Head Replacement implant for elbow reconstruction and
the Comprehensive(TM) Shoulder System Fracture Stem, designed to repair and
reconstruct the shoulder joint. Additionally, the AES(R) (Ankle Evolutive
System) modular total ankle was launched in most European countries during
fiscal year 2003.

     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


                                       3

<PAGE>
loading and improved bone integration to the surface of the implant compared to
competitive dental implants. The OSSEOTITE NT(TM) (Natural Taper) Implant,
introduced during fiscal year 2003, continues to gain increased market
acceptance in the dental implant market. The tapered shape of the OSSEOTITE
NT(TM) Implant, which resembles a natural root design, allows for immediate
placement in extraction sockets and facilitates treatment of patients with
convergent roots of adjacent teeth.

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.
Introduced during fiscal year 2003, the Calcigen(TM) Oral bone graft stabilizer
is a resorbable calcium sulfate powder, which is designed for use with graft
material as a binder or barrier in dental reconstructive applications.

     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. During fiscal year 2003, Biomet Orthopedics
introduced the Generation 4(R) Bone Cement with VacPac(R) Delivery System to the
domestic market, where the product is experiencing excellent market acceptance.
The VacPac(R) System is a proprietary, self-contained system designed to promote
consistency and integrity of the cement, eliminate exposure to fumes during
mixing, and reduce operating room time due to ease of the mixing and delivery
process. During fiscal year 2003, Biomet submitted a 510(k) application to the
FDA for Palacos(R) G Bone Cement with gentamicin antibiotic, which is currently
marketed outside the United States.

Additional products and services for reconstructive indications include bone
graft substitute materials and the distribution of allograft material.
Calcigen(TM) S calcium sulfate bone graft substitute is a self-setting paste
used to fill bone voids. The Calcigen(TM) PSI (Porous Synthetic Implant) Bone
Graft System was introduced during fiscal year 2003, and is a porous, calcium
phosphate bone substitute material. The Company also provides services related
to the supply of allograft material procured through several tissue bank
alliances. Biomet's VacPac(TM) System, initially designed for the vacuum mixing
and delivery of bone cement, is also being utilized to package freeze-dried
allografts. The flexible vacuum package allows rehydration with saline, blood or
blood products inside the vacuum package. Markets being addressed by the
distribution of the Company's allograft services include the orthopedic and
dental reconstructive market segments, as well as the spinal and arthroscopy
segments.

The GPS(TM) (Gravitational Platelet Separation) System, which is distributed by
the Company's Cell Factor Technologies subsidiary, is a unique device that
collects platelet concentrate (containing growth factors) from a small volume of
the patient's blood using a fast, single spin process. The concentrate is then
applied to the patient to promote acceleration of the body's natural healing
process.

During fiscal year 2004, Biomet plans to introduce the Acumen(TM) Surgical
Navigation System to the global market, enhancing visualization for
minimally-invasive and traditional procedures. Procedure-specific software has
been developed for reconstructive, fixation and spinal procedures. Clinical
evaluations are scheduled to begin during fiscal year 2004.

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.


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


                                       4

<PAGE>


     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
treatments 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.

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 DynaFix Vision(TM) 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 DynaFix Vision(TM) Systems designed to treat the varying and
unique needs of practitioners and patients.

     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 growing 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. The Holland(TM) Nail System is a single
universal nail designed to treat all types of femoral (hip or thigh) fractures.
The Biomet(R) Low Profile Tibial Nail, used to treat fractures between the knee
and ankle, is primarily indicated in the treatment of unstable or nonunion
fractures. The Biomet(R) Ankle Arthrodesis Nail creates a solid fusion to
correct ankle deformity.

During fiscal year 2003, the Company began 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.

     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, HTR-PMI(R) Hard
Tissue Replacement material 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 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.

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.
Mimix(TM) QS, a quick-setting bone substitute material, was introduced during
fiscal year 2003 to provide surgeons with a faster-setting formulation.

     BONE SUBSTITUTE MATERIALS. When presented with a patient demonstrating 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 reconstructive,
fixation or spinal applications. During fiscal year 2003, the Company introduced
Calcigen(TM) S (calcium sulfate) bone substitute material in granular and
self-setting forms in the United States for orthopedic applications.


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


                                        5

<PAGE>

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. Spinal fusions are surgical procedures
undertaken to establish bony union between adjacent vertebrae. EBI distributes
both non-invasive and implantable electrical stimulation units that surgeons can
use as options to provide an appropriate adjunct to surgical intervention in the
treatment of spinal fusion applications. EBI's Spinal-Pak(R) Spine Fusion
Stimulator utilizes capacitative coupling technology to encourage fusion
incorporation. The unit consists of a small, lightweight generator worn outside
the body that is connected to wafer-thin electrodes applied over the fusion
site. The SpinalPak(R) System is patient friendly, enhancing comfort whether the
patient is standing, sitting or reclining, and optimizing compliance with the
treatment regimen to achieve fusion success. EBI's SpF(R) Implantable units each
consist of a generator that provides a constant direct current to a titanium
cathode placed where bone growth is required. EBI's implantable SpF(R)-PLUS
Spinal Stimulation System, which was introduced during the fourth quarter of
fiscal year 2003 and offers three times the current density at the cathode. The
SpF(R) System has exhibited a 50% increase in fusion success rates over fusions
with autograft alone.

     SPINAL FIXATION SYSTEMS. The Company distributes a traditional rod and
plate system under the trademark EBI(R) Omega 21(TM) Spine System. EBI also
manufactures and markets the SpineLink(R) Spinal Fixation System, which
addresses many of the inherent limitations of traditional rod and plate systems
by linking 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(R)-II
Spinal Fixation System is a second generation SpineLink(R) product launched
during fiscal year 2003 that combines the independent, intrasegmental concept of
the SpineLink(R) System with a low-profile design, which simplifies
point-to-point fixation for the surgeon. EBI's VueLock(R) Anterior Cervical
Plate System offers surgeons several important benefits, including a one-step
locking mechanism featuring a pre-attached expansive ring that eliminates the
need for additional locking components, as well as a low profile that minimizes
interference with anatomical soft tissue structures. In addition, the open
design of the VueLock(R) System provides surgeons with enhanced visualization of
the bone graft both during the actual surgical procedure and post-operatively on
x-ray. During fiscal year 2003, EBI began its launch of the VuePASS(TM) Portal
Access Surgical System, which offers a minimally-invasive spinal fusion
procedure option for use with the SpineLink(R)-II System. EBI also released the
EBI(R) Ionic(TM) Spine Spacer System during fiscal year 2003. The open design of
this system allows for optimal bone graft placement and bone ingrowth, along
with the additional benefit of excellent postoperative x-ray visualization. The
Company recently secured nonexclusive licenses on three patents for top-loading
spine systems from Interpore Cross, which will allow EBI to enter the spinal
deformity market in January 2004. In addition, EBI co-owns the patent covering
Interpore Cross' GEO Structure(TM) System and the Company plans to develop and
release a competitive device.

     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. The
OsteoStim(R) resorbable bone graft substitute material is a granular form of
calcium phosphate that is resorbed and replaced with natural bone during the
healing process. During fiscal year 2003, EBI introduced its EBI(R) OsteoStim(R)
DBM (Demineralized Bone Matrix) Putty. Derived exclusively from human bone, the
putty can be used with a variety of substances, such as bone substitute
material, machined allograft, autograft and platelet rich plasma, to enhance the
surgeon's treatment options. In addition, EBI began the launch of the
OsteoStim(R) Skelite(TM) Resorbable Bone Graft Substitute during fiscal year
2003. EBI plans to begin clinical trials for the implantable EBI(R) Restore(TM)
vertebral motion restoration product during fiscal year 2004. The one-piece
design of the EBI(R) Restore(TM) product is intended to help in the restoration
of the patient's normal spine motion, as well as helping to simplify the implant
procedure and permitting more minimally-invasive approaches.

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.


Skelite is a trademark of Millenium Biologix, Inc.



                                       6
<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.(SM))
stock and bill program, which efficiently handles the details of product
delivery for the healthcare provider. The Alliance(TM) Knee Brace is a
lightweight product, anatomically designed for each patient. The MD
(multi-dimensional) Elbow Brace, with its dual-hinge adjustment to control range
of motion, accommodates various treatment and rehabilitation plans. EBI is
committed to continuing to expand its line of orthopedic support devices and
introduced the Quick Fit(TM) Post-Op Knee Brace and the EBI(R) Fracture Walker
with Range-of-Motion Option during fiscal year 2003.

     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 CurvTek(R) Bone Tunneling System
for the reattachment of soft tissue to bone, LactoSorb(R) resorbable
arthroscopic fixation products, CuffPatch(TM) soft tissue reinforcement material
for rotator cuff repair, and the Bone Mulch(TM) Screw/WasherLoc(TM) Device for
anterior cruciate ligament repair.

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
Organogenesis' FortaFlex(TM) bio-engineered matrix technology, such as the
CuffPatch(TM) rotator cuff repair product marketed by the Company's Arthrotek
subsidiary. 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.

For the years ended May 31, 2003, 2002 and 2001, the Company expended
approximately $55,309,000, $50,750,000, and $43,020,000, 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,
biomaterial products, gene therapy technologies and image-guided software in the
musculoskeletal products field.

The Company's research and development efforts have produced approximately 340
new products and services during the last four fiscal years, including the
following new products and services introduced during fiscal year 2003: GPS(TM)
Gravitational Platelet Separation System, ReCap(TM) Hemi Hip Resurfacing System,
Mallory-Head(R) HA Coated Primary Stem, Microplasty Minimally Invasive Hip
Program, RingLoc(R) II Constrained Liner, Ascent(TM) Anterior Stabilized Bearing
Knee, Generation 4(R) Bone Cement with VacPac(R) Delivery System, Vanguard(TM)
Series Unicompartmental Knee System, Quad 4(TM) Intramedullary Nail System,
Comprehensive(TM) Fracture Stem, Liverpool(TM) Radial Head, Mosaic(TM) Humeral
Replacement System, DynaFix(R) Hip Distractor, DynaFix(R) Radiolucent Rail,
OptiROM(R) Posterior Approach System, EBI(R) Ionic(TM) Spine Spacer System,
EBI(R) Osteo-Stim(R) ALIF Allograft Spacer System, EBI(R) OsteoStim(R)
Demineralized Bone Matrix Putty, EBI(R) OsteoStim(R) Lordotic Cervical Allograft
Spacer System, EBI(R) OsteoStim(R) PLIF Allograft Spacer System, EBI(R)
VuePASS(TM) Portal Access Surgical System, SpF(R)-PLUS(TM) Spinal Fusion
Stimulator, EBI(R) Fracture Walker with Range of Motion Option, Quick Fit(TM)
Post-Op Knee Brace, Universal Wrist Splint, Allograft Cross Pin, CuffPatch(TM)
Soft Tissue Reinforcement, LactoSorb(R) L-15 Cross Pin, Howell(TM) 65(degree)
Tibial Guide with Coronal Rod, Mimix(TM) QS (Quick Set) Bone Substitute Putty,
Calcigen(TM) PSI Bone Graft System, Calcibon(TM) Bone Substitute Granules,
Calcibon(TM) Bone Substitute Paste, Mesofol(TM) Resorbable Anti-Adhesion Foil,
PMI Beads (antibiotic carrier), Septodrain(R) Surgical Drain, Optigun(TM)
Bayonet, Optigun(TM) Ratchet, Osteopal(R) V Vertebroplasty Cement, F40(TM) Hip
Stem, Petroch(TM) Hip Stem, Performance(R) CrCo Tibia, Performance(R) Modular
Tibial Tray, Performance(R) Tibial Stems with Offset, TMK(TM) Knee (Total
Meniscal Knee), Cemento(TM) Vertebroplasty Cement Delivery System, OSSEOTITE
NT(TM) Natural-Taper Implant and Calcigen(TM) Oral bone graft stabilizer.


FortaFlex is a trademark of Organogenesis, Inc.


                                        7
<PAGE>
During fiscal year 2004, the Company intends to release other new products,
including, but not limited to, the following products: Total Mandibular System,
a top-loading universal spine system, a rod and coupler-based spine system,
fixed-bearing cruciate-retaining and posterior-stabilized versions of the
Vanguard(TM) Complete Knee Replacement System, Maxim(R) MI instruments,
Freedom(TM) Constrained Liner, instruments for the Microplasty(TM) Minimally
Invasive Hip Program (posterior approach), non-flared version of the M2a-38(TM)
Hip Articulation System, Generation 4(TM) Polished Hip System, and the
Acumen(TM) Surgical Navigation System.

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.

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 products sold in Europe bears the
CE mark.

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 were adjusted.
The payments for DRG 209, 471 and 491 increased 6.9% 5.8% and 6.7%,
respectively. The average DRG payments for spinal and trauma procedures
increased 5.7% and 5.8%, respectively. Additional increases in DRG reimbursement
rates will also take effect on October 1, 2003. The payments for DRG 209, 471
and 491 will increase 1.6%, 2.3% and 4.0%, respectively. The average DRG
payments for spinal and trauma procedures will increase 4.5% and 4.7%,
respectively.

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.


                                        8
<PAGE>

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 by the year 2023. 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 third-party distributors, and some independent
commissioned sales agents, 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 2,000 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.

For the fiscal years ended May 31, 2003, 2002 and 2001, the Company's foreign
sales aggregated $423,662,000, $335,527,000 and $308,292,000, respectively, or
30%, 28% and 30% of net sales, respectively. Major international markets for the
Company's products are Western Europe, Asia Pacific, Australia, Canada and Latin
America. The Company's business in these markets is subject to pricing pressures
and currency fluctuation risks. During fiscal year 2003, foreign sales were
positively impacted by $16.4 million due to foreign currency translations. As
the Company continues to expand in key international markets, it faces obstacles
created by competition, governmental regulations and regulatory requirements.
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, 2003, inventory of approximately
$137,992,000 was consigned to these distributors, salespersons and customers.

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
Centerpulse Orthopedics, a division of Centerpulse 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, clinical results, and product design, although price
competition is an important factor as healthcare providers continue to be
concerned with costs. The Company believes that its prices for orthopedic
reconstructive devices are competitive with those in the industry. The Company
believes its future success will depend upon its service and responsiveness to
its distributors and orthopedic specialists, the continued superior clinical
results of its products, and upon its ability to design and market innovative
and technologically-advanced products that meet the needs of the marketplace.


                                       9
<PAGE>
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.; Stryker Spine, a division of Stryker Corp.;
Centerpulse Spine-Tech, Inc., a division of Centerpulse AG; Interpore
International, Inc.; 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 DePuy ACE, a Johnson & Johnson company; Zimmer, Inc., a subsidiary of
Zimmer Holdings, Inc.; Smith & Nephew plc; and Synthes, Inc.

EBI's electrical stimulation devices primarily complete with those offered by
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.

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.

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.; KLS-Martin, L.P.; and Osteomed Corp.

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 limitations on 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
may vary. 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.
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.

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, 2003, the Company's domestic operations (including Puerto Rico)
employed approximately 3,400 persons, of whom approximately 1,770 were engaged
in production and approximately 1,630 in research and development, sales,
marketing, administrative and clerical efforts. The Company's international
subsidiaries employed approximately 1,720 persons, of whom approximately 815
were engaged in production and approximately 905 in research and development,
sales, marketing, administrative and clerical efforts. None of the Company's
principal domestic manufacturing employees is 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.



                                       10
<PAGE>

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, Sweden
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.

RISK FACTORS

The following factors, among others, could cause the Company's future results to
differ from those contained in forward-looking statements made in this report
and presented elsewhere by management from time to time. Such factors, among
others, may have a material adverse effect on the Company's business, financial
condition, and results of operations. The risks identified in this section are
not exhaustive. The Company operates in a dynamic and competitive environment.
New risk factors affecting the Company emerge from time to time and it is not
possible for management to predict all such risk factors. Further, it is not
possible to assess the impact of all risk factors on the Company's business or
the extent to which any single factor or combination of factors may cause actual
results to differ materially from those contained in any forward-looking
statements. Given these inherent risks and uncertainties, investors are
cautioned not to place undo reliance on forward-looking statements as a
prediction of actual results. In addition, the Company undertakes no obligation
to update publicly or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. The following discussion of the
Company's risk factors speaks only as of the date on which they were made and
should be read in conjunction with the consolidated financial statements and
related notes included herein. Because of these and other factors, past
financial performance should be not considered an indication of future
performance.

THE COMPANY'S FUTURE PROFITABILITY DEPENDS ON THE SUCCESS OF THE COMPANY'S
PRINCIPAL PRODUCT LINES.

Sales of the Company's reconstructive products accounted for approximately 63%
of the Company's net sales for the year ended May 31, 2003. The Company expects
sales of reconstructive products to continue to account for a significant
portion of the Company's aggregate sales. Any event adversely affecting the sale
of reconstructive products may, as a result, adversely affect the Company's
business, results of operations and financial condition.

IF THE COMPANY IS UNABLE TO CONTINUE TO DEVELOP AND MARKET NEW PRODUCTS AND
TECHNOLOGIES IN A TIMELY MANNER, THE DEMAND FOR THE COMPANY'S PRODUCTS MAY
DECREASE, OR THE COMPANY'S PRODUCTS COULD BECOME OBSOLETE, AND THE COMPANY'S
REVENUE AND PROFITABILITY MAY DECLINE.

The market for the Company's products is highly competitive and dominated by a
small number of large companies. The Company is continually engaged in product
development, research and improvement efforts, and new products and line
extensions of existing products represent a significant component of the
Company's growth rate. The Company's ability to continue to grow sales
effectively depends on its capacity to keep up with existing or new products and
technologies in the musculoskeletal products market. In addition, if the
Company's competitors' new products and technologies reach the market before the
Company's products, they may gain a competitive advantage or render the
Company's products obsolete. See "Competition" in Item 1 - "Business" of this
Form 10-K for more information about the Company's competitors. The ultimate
success of the Company's product development efforts will depend on many
factors, including, but not limited to, the Company's ability to create
innovative designs, materials and surgical techniques; accurately anticipate and
meet customers' needs; commercialize new products in a timely manner; and
manufacture and deliver products and instrumentation in sufficient volumes on
time.


                                       11

<PAGE>
Moreover, research and development efforts may require a substantial
investment of time and resources before the Company is adequately able to
determine the commercial viability of a new product, technology, material, or
other innovation. Even in the event that the Company is able to successfully
develop innovations, they may not produce revenue in excess of the costs of
development and may be quickly rendered obsolete as a result of changing
customer preferences or the introduction by the Company's competitors of
products embodying new technologies or features.

THE COMPANY IS SUBJECT TO SUBSTANTIAL GOVERNMENT REGULATION THAT COULD HAVE A
MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS.

Most aspects of the Company's business are subject to some degree of government
regulation in the countries in which its operations are conducted. As discussed
under the heading "Government Regulation" in Item 1 - "Business" of this Form
10-K, for some products and in some areas of the world, such as the United
States, Canada, Japan and Europe, government regulation is significant. Overall,
there appears to be a trend toward more stringent regulation throughout the
world. The Company does not anticipate this trend to dissipate in the near
future. In addition, the medical device industry is subject to a myriad of
complex laws governing Medicare and Medicaid reimbursements, and the U.S.
Department of Health and Human Services has become increasingly vigilant in
recent years with respect to investigations of various business practices.
Further, as a publicly-traded company, the Company is subject to increasingly
demanding corporate legislation in the United States, such as the Sarbanes-
Oxley Act of 2002.

In general, the development, testing, manufacture and marketing of the Company's
products are subject to extensive regulation and review by numerous governmental
authorities both in the United States and abroad. The regulatory process
requires the expenditure of significant time, effort and expense to bring new
products to market. In addition, the Company is required to implement and
maintain stringent reporting, labeling and record keeping procedures. The
Company cannot assure that the relevant authorities will approve any of its
products. Furthermore, governmental and regulatory actions against the Company
can result in various actions that could adversely impact the Company's
operations, including:

     o    the recall or seizure of products;

     o    the suspension or revocation of the authority necessary for the
          production or sale of a product;

     o    the imposition of fines and penalties;

     o    the delay of the Company's ability to introduce new products into the
          market; and

     o    other civil or criminal sanctions against the Company.


THE COMPANY IS SUBJECT TO RISKS ARISING FROM CURRENCY EXCHANGE RATE
FLUCTUATIONS, WHICH COULD INCREASE THE COMPANY'S COSTS AND MAY CAUSE THE
COMPANY'S PROFITABILITY TO DECLINE.

During fiscal year 2003, sales of the Company's products in foreign markets
approximated $423,662,000, or 30% of the Company's total revenues. Accordingly,
the U.S. dollar value of the Company's foreign-generated revenues varies with
currency exchange rate fluctuations. Measured in local currency, the majority of
the Company's foreign-generated revenues was generated in Europe. Significant
increases in the value of the U.S. dollar relative to foreign currencies could
have an adverse effect on the Company's results of operations. The Company's
consolidated net sales were favorably affected by 3.2% during fiscal year 2003,
and adversely impacted by 0.7% during fiscal year 2002 as a result of the impact
of foreign currency translations. At the present time, the Company does not
engage in hedging transactions to protect against uncertainty in future exchange
rates between any particular foreign currency and the U.S. dollar.

SALES MAY DECLINE IF THE COMPANY'S CUSTOMERS DO NOT RECEIVE ADEQUATE LEVELS OF
REIMBURSEMENT FROM THIRD-PARTY PAYORS FOR THE COMPANY'S PRODUCTS AND IF CERTAIN
TYPES OF HEALTH CARE PROGRAMS ARE ADOPTED IN THE COMPANY'S KEY MARKETS.

In the United States, health care providers that purchase the Company's products
generally rely on payments from third-party payors (principally federal
Medicare, state Medicaid and private health insurance plans) to cover all or a
portion of the cost of the Company's musculoskeletal products. In the event that
third-party payors deny coverage or reduce their current levels of
reimbursement, the Company may be unable to sell certain of its products on a
profitable basis, thus adversely impacting the Company's results of operations.
Further, third-party payors are continuing to carefully review their coverage
policies with respect to existing and new therapies and can, without notice,
deny coverage for treatments that may include the use of the Company's products.

In addition, some health care providers in the United States have adopted or are
considering the adoption of a managed care system in which the providers
contract to provide comprehensive heath care for a fixed cost per person. Health
care providers in a managed care system may attempt to control costs by
authorizing fewer elective surgical procedures, including joint reconstructive
surgeries, or by requiring the use of the least expensive implant available. In
response to these, and other, pricing



                                       12
<PAGE>
pressures, the Company's competitors may lower the prices for their products.
The Company may not be able to match the prices offered by the Company's
competitors, thus adversely impacting the Company's results of operations and
prospects. Further, in the event that the United States considers the adoption
of a national health care system in which prices are controlled and patient care
is managed by the government, such regulation could have a material adverse
effect on the Company's business, results of operations and financial condition.

Outside of the United States, reimbursement systems vary significantly from
country to country. In the majority of the international markets in which the
company's products are sold, government-managed health care systems mandate the
reimbursement rates and methods for medical devices and procedures. If adequate
levels of reimbursement from third-party payors outside of the United States are
not obtained, international sales of the Company's products may decline. Many
foreign markets, including Canada, and some European and Asian countries, have
tightened reimbursement rates. The ability of the Company to continue to sell
certain of its products profitably in these markets may diminish if the
government-managed health care systems continue to reduce reimbursement rates.

THE COMPANY'S BUSINESS MAY BE HARMED AS A RESULT OF LITIGATION.

The Company's involvement in the manufacture and sale of medical devices creates
exposure to significant risk of product liability claims, particularly in the
United States. In the past, the Company has received product liability claims
relating to the Company's products and anticipates that it will continue to
receive claims in the future, some of which could have a negative impact on the
Company's business. Additionally, the Company could experience a material design
or manufacturing failure in its products, a quality system failure, other safety
issues, or heightened regulatory scrutiny that would warrant a recall of some of
the Company's products. The Company's existing product liability insurance
coverage may be inadequate to satisfy liabilities the Company might incur. If a
product liability claim or series of claims is brought against the Company for
uninsured liabilities or in excess of the Company's insurance coverage limits,
the Company's business could suffer and its results could be materially
impacted.

In addition, the musculoskeletal products industry is highly litigious with
respect to the enforcement of patents and other intellectual property rights. In
some cases, intellectual property litigation may be used to gain a competitive
advantage. The Company has in the past and may in the future become a party to
lawsuits involving patents or other intellectual property. A legal proceeding,
regardless of the outcome, could put pressure on the Company's financial
resources and divert the time and effort of the Company's management.

A NATURAL OR MAN-MADE DISASTER COULD HAVE A MATERIAL ADVERSE EFFECT ON THE
COMPANY'S BUSINESS.

The Company has nearly twenty manufacturing operations located throughout the
world. However, a significant portion of the Company's products are produced at
and shipped from its facility in Warsaw, Indiana. In the event that this
facility were severely damaged or destroyed as a result of a natural or man-made
disaster, the Company would be forced to shift production to its other
facilities and/or rely on third-party manufacturers. Although the Company
believes that it is adequately insured, such an event could have a material
adverse effect on the Company's business, results of operations and financial
condition.



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

NILES L. NOBLITT, 52
Chairman of the Board of the Company.                                   1978            Chairman of the Board
Director of the Company since 1977.                                                     and Director of the Company.

CHARLES E. NIEMIER, 47
Senior Vice President - International Operations of                     1984            Senior Vice President -
the Company. Director of the Company since 1987.                                        International Operations
                                                                                        and Director of the Company.
GARRY L. ENGLAND, 49
Senior Vice President - Warsaw Operations of the Company.               1987            Senior Vice President -
                                                                                        Warsaw Operations of the Company.

DANIEL P. HANN, 48
Senior Vice President, General Counsel and Secretary of the Company     1989            Senior Vice President and
since June 1999; prior thereto, Vice President, General Counsel and                     General Counsel, Secretary
Secretary of the Company. Director of the Company since 1989.                           and Director of the Company.

JOEL P. PRATT, 49
Senior Vice President of the Company since June 1999 and President      1990            Senior Vice President
of Walter Lorenz Surgical, Inc. since January 2002; prior thereto,                      of the Company and President
President of Arthrotek, Inc.                                                            of Walter Lorenz Surgical, Inc.

GREGORY D. HARTMAN, 46
Senior Vice President - Finance and Chief Financial Officer of the      1991            Senior Vice President -
Company since June 1999; prior thereto, Vice President - Finance and                    Finance and Chief Financial
Chief Financial Officer of the Company.                                                 Officer of the Company.

JAMES W. HALLER, 46
Controller of the Company and Vice President - Finance                  1991            Controller of the Company
of Biomet Orthopedics, Inc. since June 2001; prior thereto,                             and Vice President - Finance
Controller of the Company.                                                              of Biomet Orthopedics, Inc.

JERRY L. FERGUSON, 62
Vice Chairman of the Board of the Company since December 1997.          1994            Vice Chairman of the Board
Director of the Company since 1977.                                                     and Director of the Company.

JAMES R. PASTENA, 52
Vice President of the Company since September 1998 and President        1998            Vice President of the Company
of EBI, L.P.                                                                            and President of EBI, L.P.
</TABLE>

                                       14


<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                    413,600         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(1)       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(2)       69,000         Owned

Office and manufacturing facilities                                      (1) Ontario, California             35,400         Owned
of Arthrotek, Inc.                                                       (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 Biomet                   Darmstadt, Germany                  29,200        Leased
Merck Biomaterials GmbH

Administrative offices of Biomet Merck and office                        Dordrecht, The Netherlands          37,700         Owned
and warehouse facility of Ortomed BV
</TABLE>


(1) Operations at this facility have ceased and the facility is being leased to
    other parties.

(2) Includes 46,000 square feet of space in this facility that is subleased to
    other parties.


                                       15
<PAGE>
<TABLE>
<CAPTION>
FACILITY                                                              LOCATION                          SQUARE         OWNED/
                                                                                                          FEET         LEASED
<S>                                                                   <C>                              <C>             <C>
Office and manufacturing facility of IQL                              Valencia, Spain                    69,600         Owned

Office, manufacturing and warehouse facilities of Biomet              Sjobo, Sweden                      24,200         Owned
Merck Cementing Technologies AB

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


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.



                                       16
<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 year 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. The
Company has paid $20.2 million out of escrow. On February 12, 2003 the Federal
Circuit ruled that the Company does not owe post-judgment interest in connection
with the damage award paid in this case. As a result of this favorable ruling,
the Company recorded a pre-tax gain of approximately $5.8 million in the third
quarter of fiscal year 2003. Management considers this matter fully to be
concluded.

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 a physician group,
with which the Company had a relationship, under the Medicare laws. The
subpoenas sought the production of documents referring or relating to
Pennsylvania Hospital and Thomas Jefferson Hospital, (two of the Company's major
hospital customers at that time in Philadelphia), a physician group practicing
under the name Orthopaedic Reconstructive Associates and The Rothman Institute.
The Company also is aware that its distributor servicing the hospitals 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. During the time period covered by the subpoenas, the Company had
research, product development, physician training, clinical follow-up and data
collection relationships with The Rothman Institute. The Company has not been
advised of the precise subject matter of the USAO and HHS/OIG investigation, but
was advised by the USAO in May 2003 that it is not a target of the
investigation. As a result, the Company believes it is unlikely that this matter
will have a material impact on the Company's 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.


                                       17
<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 National Market for each
of the three most recent fiscal years ended May 31. The approximate number of
shareholders of record as of August 7, 2003 was 6,389.

<TABLE>
<CAPTION>
                      High          Low
<S>                 <C>          <C>
2003
       Fourth       $  33.50     $  26.74
       Third           30.50        26.42
       Second          31.87        25.69
       First           29.28        21.75

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
</TABLE>


The Company paid cash dividends of $0.10, $0.09 and $0.07 per share on July 15,
2002; July 27, 2001 and July 17, 2000, respectively.

On July 2, 2003, the Company announced a cash dividend of $0.15, payable July
18, 2003, to shareholders of record at the close of business on July 11, 2003.

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.


                                       18
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA.

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

<TABLE>
<CAPTION>
                                                                     2003         2002          2001         2000          1999
<S>                                                              <C>          <C>           <C>          <C>           <C>
Net sales .....................................................  $1,390,300   $1,191,902    $1,030,663   $  923,551    $  830,835
Cost of sales .................................................     407,295      332,727       296,063      281,351       262,362
                                                                 ----------------------------------------------------------------
Gross profit ..................................................     983,005      859,175       734,600      642,200       568,473

Selling, general and administrative expenses ..................     501,191      437,731       374,793      326,618       295,401
Research and development expense ..............................      55,309       50,750        43,020       40,208        38,723
Other charges/(credits) .......................................      (5,800)           -        26,100       11,700        48,447
                                                                 ----------------------------------------------------------------
  Operating income ............................................     432,305      370,694       290,687      263,674       185,902

Other income, net .............................................      19,438        5,421*       19,989       17,018        13,899
                                                                 ----------------------------------------------------------------
  Income before income taxes and minority interest ............     451,743      376,115       310,676      280,692       199,801
Provision for income taxes ....................................     156,961      127,665       105,906       99,738        67,317
                                                                 ----------------------------------------------------------------
  Income before minority interest .............................     294,782      248,450       204,770      180,954       132,484
Minority interest .............................................       8,081        8,710         7,224        7,183         7,458
                                                                 ----------------------------------------------------------------
  Net income ..................................................  $  286,701   $  239,740    $  197,546   $  173,771    $  125,026
                                                                 ================================================================

Earnings per share:
  Basic .......................................................  $     1.10   $      .89    $      .74   $      .66    $      .48
  Diluted .....................................................        1.10          .88           .73          .65           .47
                                                                 ----------------------------------------------------------------

Shares used in the computation of earnings per share:
  Basic .......................................................     259,493      268,475       267,915      264,294       261,662
  Diluted .....................................................     261,394      271,245       270,746      267,242       265,815
                                                                 ----------------------------------------------------------------
Cash dividends paid per common share ..........................  $      .10   $      .09    $      .07   $      .06    $      .05
</Table>


BALANCE SHEET DATA
At May 31,
(in thousands)

<Table>
<Caption>
                                                                     2003         2002          2001         2000          1999
<S>                                                              <C>          <C>           <C>          <C>           <C>
Working capital ...............................................  $  845,101   $  715,245    $  726,557   $  608,185    $  497,010
Total assets ..................................................   1,672,169    1,521,723     1,489,311    1,218,448     1,110,940
Long-term obligations, including redeemable preferred stock ...           -            -             -            -         8,074
Shareholders' equity ..........................................   1,286,134    1,176,479     1,146,186      943,323       795,849
</TABLE>


o  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.

*  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.

                                       19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS.

OVERVIEW

This discussion should be read in conjunction with the Company's consolidated
financial statements and the corresponding notes contained herein. The
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that are subject to certain risk
factors, as described in this report under "Risk Factors" in Part I, Item 1 -
"Business". 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, electrical bone growth
stimulators, fixation devices, craniomaxillofacial implants, bone substitute
materials, spinal products, softgoods and bracing products, arthroscopy
products, operating room supplies and instruments. The Company has operations in
over 30 countries and distributes its products in over 100 countries throughout
the world. The solid growth experienced by the Company during fiscal year 2003
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 (as a result of
increases in both the size of the elderly population and the expansion of the
traditional age bracket of musculoskeletal patients) has contributed to this
growth.

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)
                                                                                              2003       2002
                                                           2003        2002       2001     VS. 2002   vs. 2001

<S>                                                       <C>         <C>        <C>       <C>        <C>
Net sales ...........................................     100.0%      100.0%     100.0%       17%        16%
Cost of sales .......................................      29.3        27.9       28.7        22         12
                                                          ----------------------------
Gross profit ........................................      70.7        72.1       71.3        14         17
Selling, general and administrative expenses ........      36.0        36.7       36.3        14         17
Research and development expense ....................       4.0         4.3        4.2         9         18
Other charges/(credits) .............................      (0.4)          -        2.5       n/m        n/m
                                                          ----------------------------
Operating income ....................................      31.1        31.1       28.3        17         28
Other income, net ...................................       1.4         0.5        1.9       258        (73)
                                                          ----------------------------
Income before income taxes and minority interest ....      32.5        31.6       30.2        20         21
Provision for income taxes ..........................      11.3        10.8       10.3        23         21
                                                          ----------------------------
Income before minority interest .....................      21.2        20.8       19.9        19         21
Minority interest ...................................       0.6         0.7        0.7        (7)        21
                                                          ----------------------------
Net income ..........................................      20.6%       20.1%      19.2%       20%        21%
                                                          ============================
</TABLE>

n/m - Not Meaningful

FISCAL 2003 COMPARED TO FISCAL 2002*

Net Sales - Net sales increased 17% during the current fiscal year to
$1,390,300,000 from $1,191,902,000 in 2002. Excluding the positive impact of
foreign currency translation adjustments (3.2%), net sales increased 14%.
Worldwide sales of reconstructive devices increased 20% to $867,602,000 in
fiscal year 2003 compared to $721,004,000 in 2002. Contributing to this increase
was approximately 4% due to currency translation, 3% from pricing and 13% from
incremental volume and product mix. Worldwide hip and bone cement sales
increased 23% during the current year, while knee sales increased 18%,
extremities sales increased 16% and dental reconstructive product sales
increased 19%.

Fixation sales increased 10% during fiscal 2003 to $237,117,000 from
$215,544,000 in 2002. Contributing to this increase was approximately 1% due to
currency translation, 1% from pricing and 8% from incremental volume and product
mix. Worldwide sales of internal fixation devices increased 13%, external
fixation devices increased 7%, electrical stimulation devices increased 6%, and
craniomaxillofacial products including bone substitutes increased 21%.

Spinal sales increased 15% to $143,607,000 in fiscal 2003 compared to
$125,119,000 in 2002. Contributing to this increase was approximately 1% due to
currency translation, 2% from pricing and 12% from incremental volume and
product mix. Worldwide sales of spinal stimulation products increased 13%, while
spinal hardware including bone substitutes increased 18%.

Sales of the Company's other products increased 9% to $141,974,000 in fiscal
2003 from $130,235,000 in 2002. Contributing to this increase was approximately
2% due to currency translation, 1% from pricing and 6% from incremental volume
and product mix. Worldwide sales of arthroscopy products increased 16%,
softgoods and bracing products increased 8% and general surgical instrumentation
increased 12%.

Sales in the United States increased 13% to $966,638,000 during the current
fiscal year compared to $856,375,000 last year. Components of this increase were
incremental volume and product mix (9%) and positive pricing environment (4%).
European sales increased 28% to

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

                                       20
<PAGE>

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS (CONTINUED)

$332,053,000 during the current fiscal year from $260,420,000 in 2002.
Components of this increase were positive currency translation (13%),
incremental volume and product mix (13%) and positive pricing environment (2%).
The Company anticipates foreign currency translations to positively influence
sales during fiscal 2004. Sales in Rest of World increased 22% to $91,609,000
this year from $75,107,000 last year. Components of this increase were
incremental volume and product mix (18%) and positive pricing environment (4%).
The Company commenced direct sales of its products in Japan during fiscal 2002
which accounted for about half of this increased product demand.

Gross Profit - The Company's gross profit increased 14% to $983,005,000 in
fiscal 2003 from $859,175,000 in 2002. The gross profit margin decreased to
70.7% of sales in fiscal 2003 compared to 72.1% in 2002. On a country-by-country
basis, the Company improved gross margins through higher selling prices,
improved manufacturing efficiencies and general cost controls, but due to the
lower margins received on international sales and the higher growth rate on
international sales compared to domestic sales, the consolidated gross margin
decreased.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses increased 14% in fiscal 2003 to $501,191,000 compared to
$437,731,000 last year. This increase is primarily a result of increased
commission expense on higher sales compared to last year. As a percent of sales,
selling, general and administrative expenses were 36.0% in fiscal 2003 compared
to 36.7% in 2002. Factors contributing to this decrease include eliminating the
amortization of goodwill (approximately $7.2 million) and an overall slower
growth rate for expenditures, partially offset by increased liability insurance
premiums. Due to tighter insurance markets, the Company anticipates its cost for
liability insurance coverage to increase during fiscal 2004.

Other charges/(credits) - On February 12, 2003, the United States Court of
Appeals for the Federal Circuit ruled that the Company did not owe post-judgment
interest in connection with the damage award paid in the Tronzo case. As a
result of this favorable ruling, the Company recorded a pre-tax gain of
approximately $5.8 million during the third quarter (See Note L in the Notes to
Consolidated Financial Statements).

Research and Development Expense - Research and development expense increased 9%
during the current year to $55,309,000 compared to $50,750,000 in 2002. 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. As a percent of sales, research and
development expenses were 4.0% in fiscal 2003 compared to 4.3% in 2002.

Operating Income - Operating income increased 17% during fiscal 2003 to
$432,305,000 from $370,694,000 in 2002. U.S. operating income increased 19% to
$388,841,000 from $326,906,000, reflecting solid sales growth for higher-margin
product lines. European operating income increased 7% to $41,924,000 compared to
$39,152,000 in 2002. This growth reflects solid sales growth in Europe, lower
gross margins, higher selling expenses and improved foreign currency
translation. Rest of World operating income decreased to $1,540,000 in fiscal
2003 from $4,636,000 in 2002 due to start up expenses associated with
establishing direct operations in Japan and Brazil for the orthopedic and dental
reconstructive businesses, respectively.

Other Income, Net - Other income, net increased during the current year to
$19,438,000 from $5,421,000 in 2002. During the fourth quarter of last year, the
Company recorded a 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 was considered other than temporary.
Excluding these write-downs, other income, net increased 35% as a result of
higher cash and investment balances, partially offset by lower investment
yields.

Provision for Income Taxes - The provision for income taxes increased to
$156,961,000, or 34.7% of income before income taxes for fiscal 2003 compared to
$127,665,000 or 33.9% of income before income taxes last year. This increase is
due to income growing faster in countries with higher tax rates, changes in the
U.S. tax code which, over time reduce the historical U.S. tax benefits from
operating in Puerto Rico and various state tax rate increases. The Company
expects these tax increases to continually increase its effective rate in future
years and anticipates its effective rate to be 34.8% in 2004.

Net Income - The factors mentioned above resulted in a 20% increase in net
income to $286,701,000 for fiscal 2003 from $239,740,000 in 2002. These factors
and the reduction in the shares used in the computation of earnings per share
through the Company's share repurchase programs resulted in a 24% increase in
basic earnings per share for 2003 to $1.10 compared to $0.89 in 2002.

FISCAL 2002 COMPARED TO FISCAL 2001

Net Sales - Net sales increased 16% during fiscal 2002 to $1,191,902,000 from
$1,030,663,000 in 2001. Excluding the negative impact of foreign currency
translation (0.7%) and discontinued products (1.3%) and the positive impact of
acquisitions (2.6%), net sales increased 15% during fiscal 2002. 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 fiscal 2002. Worldwide knee sales increased 18% in fiscal
2002. The Company's 3i division experienced a 17% increase in dental
reconstructive implant sales.

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%.
Sales of Lorenz Surgical's craniomaxillofacial products experienced a 14%
decrease compared to fiscal 2001.


                                       21

<PAGE>

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS (CONTINUED)

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 fiscal 2002.

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, and Arthrotek's procedure-specific products. Products experiencing
sales decreases include Lorenz Surgical's surgical instrumentation.

Sales in the United States increased 19% to $856,375,000 during fiscal 2002
compared to $722,372,000 in 2001. 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 2001. Excluding the effect of currency translation, foreign
sales increased 11%. 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 in Japan during fiscal 2002.

Gross Profit - The Company's gross profit increased 17% to $859,175,000 in
fiscal 2002 from $734,600,000 in 2001. The gross profit margin increased to
72.1% of sales in fiscal 2002 compared to 71.3% in 2001. The improved gross
margin was 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 fiscal 2002 to $437,731,000 compared to
$374,793,000 in 2001. This increase was a result of increased commission expense
on higher sales compared to the previous year. As a percent of sales, selling,
general and administrative expenses were 36.7% in fiscal 2002 compared to 36.3%
in 2001. Factors contributing to this increase include reorganization costs at
Lorenz Surgical (approximately $2 million); costs associated with a direct
selling operation and expanded marketing presence in Japan (approximately $3
million); inclusion of Biolectron operations for a full fiscal year, including
amortization of goodwill (approximately $1.5 million); and continued expansion
of the Company's worldwide salesforces.

Research and Development Expense - Research and development expense
increased 18% during fiscal 2002 to $50,750,000 compared to $43,020,000 in 2001.
As a percent of sales, research and development expenses were 4.3% in fiscal
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 2001. Excluding the $26.1 million charge in
2001 for the Tronzo litigation, 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
foreign sales growth, effective cost controls and improved foreign currency
translation.

Other Income, Net - Other income, net decreased 73% during fiscal 2002 to
$5,421,000 from $19,989,000 in 2001. During the fourth quarter of fiscal 2002,
the Company recorded a 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 was 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 fiscal 2002.

Provision for Income Taxes - The provision for income taxes increased to
$127,665,000, or 33.9% of income before income taxes in fiscal 2002 compared to
$105,906,000 or 34.1% of income before income taxes in 2001. This percentage
decrease was 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 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.

LIQUIDITY & CAPITAL RESOURCES

The Company's cash and investments increased to $418,594,000 at May 31, 2003,
from $386,517,000 at May 31, 2002. Net cash from operating activities was
$310,277,000 in fiscal 2003 compared to $184,237,000 in 2002. The principal
sources of cash from operating activities were net income of $286,701,000 and
non-cash charges of depreciation and amortization of $45,659,000. The principal
uses of cash include increases in accounts and notes receivable of $35,144,000.
Accounts receivable 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.

Cash flows used in investing activities were $19,697,000 in fiscal 2003 compared
to $77,419,000 in 2002. The primary uses of cash for investing activities were
purchases of investments, offset by sales and maturities of investments, and
capital expenditures. Major capital expenditures for the year were expansion of
facilities at key manufacturing sites in Indiana and Florida, as well as a new
office building for the joint venture operations in Europe.


                                       22




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


Cash flows used in financing activities were $222,808,000 in fiscal 2003
compared to $188,923,000 in 2002. The primary uses of funds during the current
year were the share repurchase programs, in which $219,184,000 was used to
purchase 8,127,000 Common Shares of the Company, and a cash dividend of $0.10
per share was paid on July 15, 2002 to shareholders of record on July 8, 2002.
The source of funds from financing activities was proceeds on the exercise of
stock options. On July 2, 2003, the Company's Board of Directors announced a
cash dividend of $0.15 per share payable on July 18, 2003 to shareholders of
record at the close of business on July 11, 2003. Additionally, the Board of
Directors authorized the purchase of up to an additional $100 million and
2,000,000 shares of the outstanding Common Shares of the Company in two separate
repurchase programs. 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.

Pursuant to the terms of the Joint Venture Agreement with Merck KGaA ("Merck"),
the Company granted Merck a put option whereby Merck has the right to elect to
require the Company to purchase all, but not less than all, of Merck's interest
in the BioMer C.V. ("BioMer"). Merck 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 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 based on earnings of BioMer and multiples of comparative public
companies, as defined in the Joint Venture Agreement, or (ii) the net book value
of all the assets of BioMer less all liabilities of BioMer multiplied by Merck's
50% ownership percentage in BioMer. The put option formula is a mechanism
whereby the Company would pay a fair market purchase price for Merck's 50%
ownership interest in BioMer. If Merck chooses to exercise its put option in the
future, at the time of exercise the transaction could be deemed a material
transaction for the Company; however, management believes that the transaction
could be funded out of the Company's current operations and, given the Company's
current cash position and the strength of its balance sheet, the transaction
should not negatively impact the financial strength of the Company or its
ongoing operations. As of the close of the Company's most recently completed
fiscal quarter, the net book value purchase price of BioMer would be
approximately $110 million, which may or may not reflect the fair market
purchase price at the time of closing the put transaction, should it occur.

The Company anticipates that its use of cash for capital expenditures in fiscal
2004 will be at least as high as 2003 and 2002. The Company is currently
expanding its EBI manufacturing site, as well as its Japanese and European
operations. The Company intends to pursue strategic acquisition candidates. The
Company is confident about the growth prospects in these areas and intends to
invest in an effort to improve its worldwide market position. The Company
expects to spend in excess of $230 million over the next two fiscal years for
capital expenditures and research and development costs, including the research
projects with Z-Kat, Selective Genetics and Organogenesis 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. The Company has no off-balance
sheet financial arrangements and no material long-term contractual financial
obligations.

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


                                       23
<PAGE>

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS (CONCLUDED)

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.

Goodwill and Other Intangible Assets - 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.


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.


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>
2003
Net sales ...............     $  317,600     $  341,448     $  354,042     $  377,210     $1,390,300
Gross profit ............        227,463        242,843        246,406        266,293        983,005
Net income ..............         66,006         70,354         72,594         77,747        286,701
Earnings per share:
  Basic .................            .25            .27            .28            .30           1.10
  Diluted ...............            .25            .27            .28            .30           1.10


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
</TABLE>

o  All 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.

o  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.

o  Net income for the third quarter of fiscal 2003 was positively impacted by a
   $5.8 million pre-tax credit as a result of the favorable ruling of the
   Federal Circuit on the post-judgment interest in the Tronzo litigation.

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

o  Net income for the third quarter of fiscal 2001 was adversely impacted by a
   $26.1 million pre-tax charge related to the appellate court's decision in the
   Tronzo litigation.

                                       24
<PAGE>



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.

The Company maintains unsecured lines of credit in countries that it has
significant intercompany transactions with, to minimize currency rate risks. At
May 31, 2003 and 2002, the Company had lines of credit of EUR 105 million and
EUR 100 million, respectively, in Europe and $20 million and $0, respectively,
in Japan. Outstanding borrowings under the lines 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 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 losses on sales of futures options aggregated ($404,000) and ($189,000)
for the years ended May 31, 2003 and 2002, respectively, and unrealized gains
(losses) on outstanding futures options at May 31, 2003 and 2002, aggregated $0
and ($96,000), respectively.

Based on the Company's overall interest rate exposure at May 31, 2003, 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, 2003, 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,
2003, 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.


                                       25
<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 Accountants .................................................................     27
   Consolidated Balance Sheets as of May 31, 2003 and 2002 ............................................     28
   Consolidated Statements of Income for the years ended May 31, 2003, 2002 and 2001 ..................     29
   Consolidated Statements of Shareholders' Equity for the years ended May 31, 2003, 2002 and 2001.....     30
   Consolidated Statements of Cash Flows for the years ended May 31, 2003, 2002 and 2001 ..............     31
   Notes to Consolidated Financial ....................................................................  32-41

2. FINANCIAL STATEMENT SCHEDULE:
   Schedule II - Valuation and Qualifying Accounts for the years ended May 31, 2003, 2002 and 2001 ....     42

   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.

</TABLE>


                                       26
<PAGE>
BIOMET, INC.& SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS


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

We have audited the accompanying consolidated balance sheets of Biomet, Inc. and
its subsidiaries as of May 31, 2003 and 2002, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the two
years in the period ended May 31, 2003. Our audits also included the 2003 and
2002 financial statement schedule listed in the index at Item 15(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Biomet, Inc. and
its subsidiaries at May 31, 2003 and 2002 and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
May 31, 2003, in conformity with accounting principles generally accepted in the
United States. Also, in our opinion, the 2003 and 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.


                                          Ernst & Young LLP


Fort Wayne, Indiana
July 1, 2003


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

In our opinion, the consolidated statements of income, shareholders' equity and
cash flows of Biomet, Inc. and its subsidiaries listed in the accompanying index
present fairly, in all material respects, the results of their operations and
their cash flows for the year ended May 31, 2001, in conformity with accounting
principles generally accepted in the United States of America. In addition, in
our opinion, the 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.



PricewaterhouseCoopers LLP


Chicago, Illinois
July 9, 2001


                                       27
<PAGE>

BIOMET, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

At May 31,
(in thousands, except par value)


<TABLE>
<CAPTION>
                                                                                                          2003             2002
<S>                                                                                                   <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents .....................................................................     $   225,650      $   154,297
  Investments ...................................................................................          37,337           30,973
  Accounts and notes receivable, less allowance for doubtful
    receivables (2003 - $18,742 and 2002 - $13,175) .............................................         418,095          365,148
  Inventories ...................................................................................         356,270          335,348
  Deferred income taxes .........................................................................          54,262           49,523
  Prepaid expenses and other ....................................................................          20,141           17,655
                                                                                                      -----------      -----------
    Total current assets ........................................................................       1,111,755          952,944
                                                                                                      -----------      -----------

Property, plant and equipment:
  Land and improvements .........................................................................          22,285           17,854
  Buildings and improvements ....................................................................         127,030          102,957
  Machinery and equipment .......................................................................         319,650          268,643
                                                                                                      -----------      -----------
                                                                                                          468,965          389,454
  Less, Accumulated depreciation ................................................................         215,519          170,393
                                                                                                      -----------      -----------
  Property, plant and equipment, net ............................................................         253,446          219,061
                                                                                                      -----------      -----------
Investments .....................................................................................         155,607          201,247
Goodwill, net of accumulated amortization (2003 - $44,011 and 2002 - $42,972) ...................         126,706          125,157
Other intangible assets, net of accumulated amortization (2003 - $29,704 and 2002 - $25,163) ....          10,874            8,532
Other assets ....................................................................................          13,781           14,782
                                                                                                      -----------      -----------
    Total assets ................................................................................     $ 1,672,169      $ 1,521,723
                                                                                                      ===========      ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
  Short-term borrowings                                                                               $   114,120      $    90,467
  Accounts payable ..............................................................................          42,106           36,318
  Accrued income taxes ..........................................................................          12,453           17,483
  Accrued wages and commissions .................................................................          43,715           35,106
  Accrued insurance .............................................................................          11,568           14,383
  Accrued litigation ............................................................................               -            5,864
  Other accrued expenses ........................................................................          42,692           38,078
                                                                                                      -----------      -----------
    Total current liabilities ...................................................................         266,654          237,699

Deferred federal income taxes ...................................................................           7,031            3,332
Other liabilities ...............................................................................             462              406
                                                                                                      -----------      -----------
    Total liabilities ...........................................................................         274,147          241,437
                                                                                                      -----------      -----------
Minority interest ...............................................................................         111,888          103,807
                                                                                                      -----------      -----------

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 2003 - 257,489 shares and 2002 - 263,651 shares ......................         141,931          124,417
  Additional paid-in capital ....................................................................          54,081           48,868
Retained earnings ...............................................................................       1,100,462        1,054,020
Accumulated other comprehensive loss ............................................................         (10,340)         (50,826)
                                                                                                      -----------      -----------
    Total shareholders' equity ..................................................................       1,286,134        1,176,479
                                                                                                      -----------      -----------
    Total liabilities and shareholders' equity ..................................................     $ 1,672,169      $ 1,521,723
                                                                                                      ===========      ===========
</TABLE>


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


                                       28

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




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


<TABLE>
<CAPTION>
                                                                          2003             2002             2001
<S>                                                                   <C>              <C>              <C>
Net sales .......................................................     $ 1,390,300      $ 1,191,902      $ 1,030,663
Cost of sales ...................................................         407,295          332,727          296,063
                                                                      ---------------------------------------------
  Gross profit ..................................................         983,005          859,175          734,600
Selling, general and administrative expenses ....................         501,191          437,731          374,793
Research and development expense ................................          55,309           50,750           43,020
Other charges/(credits) .........................................          (5,800)               -           26,100
                                                                      ---------------------------------------------
  Operating income ..............................................         432,305          370,694          290,687
Other income, net ...............................................          23,835            8,801           24,099
Interest expense ................................................          (4,397)          (3,380)          (4,110)
                                                                      ---------------------------------------------
  Income before income taxes and minority interest ..............         451,743          376,115          310,676
Provision for income taxes ......................................         156,961          127,665          105,906
                                                                      ---------------------------------------------
  Income before minority interest ...............................         294,782          248,450          204,770
Minority ........................................................           8,081            8,710            7,224
                                                                      ---------------------------------------------
  Net income ....................................................     $   286,701      $   239,740      $   197,546
                                                                      =============================================
Earnings per share:
  Basic .........................................................     $      1.10      $       .89      $       .74
  Diluted .......................................................            1.10              .88              .73
                                                                      ---------------------------------------------
Shares used in the computation of earnings per share:
  Basic .........................................................         259,493          268,475          267,915
  Diluted .......................................................         261,394          271,245          270,746
                                                                      ---------------------------------------------
</TABLE>


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



                                       29
<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, 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
                                                                                                                        -----------
  Net income ..................................          -           -              -       286,701              -          286,701
   Change in unrealized holding value on
    investments, net of $923 tax effect .......          -           -              -             -          1,716            1,716
  Reclassification adjustment for gains
    included in net income, net of $34
    tax expense ...............................          -           -              -             -             63               63
  Currency translation adjustments ............          -           -              -             -         38,707           38,707
                                                                                                                        -----------
    Comprehensive income ......................          -           -              -             -              -          327,187
                                                                                                                        -----------
  Exercise of stock options ...................      1,965      21,349              -             -              -           21,349
  Tax benefit from exercise of stock options ..          -           -          5,579             -              -            5,579
  Purchase of shares ..........................     (8,127)     (3,835)        (1,506)     (213,843)             -         (219,184)
  Cash dividends ($.10 per common share) ......          -           -              -       (26,416)             -          (26,416)
  Other .......................................          -           -          1,140             -              -            1,140
                                                  ----------------------------------------------------------------------------------
Balance at May 31, 2003 .......................    257,489   $ 141,931    $    54,081   $ 1,100,462    $   (10,340)     $ 1,286,134
                                                  ==================================================================================
</Table>


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


                                       30
<PAGE>
BIOMET, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


For the years ended May 31,
(in thousands)

<Table>
<Caption>

                                                                                                      2003       2002        2001
<S>                                                                                                <C>        <C>         <C>
Cash flows from (used in) operating activities:
  Net income ..................................................................................... $ 286,701  $ 239,740   $ 197,546
    Adjustments to reconcile net income to net cash from operating activities:
    Depreciation .................................................................................    42,174     35,410      30,890
    Amortization .................................................................................     3,485     12,417      11,934
    Write-down of investments ....................................................................         -      9,000           -
    Minority interest ............................................................................     8,081      8,710       7,224
    Other ........................................................................................    (1,926)      (916)     (1,936)
    Deferred federal income taxes ................................................................    (1,039)    (2,992)    (15,635)
    Tax benefit from exercise of stock options ...................................................     5,579      1,268       7,281
    Changes in current assets and liabilities, excluding effects of acquisitions and dispositions:
      Accounts and notes receivable ..............................................................   (35,144)   (38,537)    (68,134)
      Inventories ................................................................................     7,591    (48,903)    (37,648)
      Accounts payable ...........................................................................     3,738      9,488       1,950
      Accrued litigation .........................................................................    (5,864)   (20,236)     26,100
      Other ......................................................................................    (3,099)   (20,212)     30,934
                                                                                                   ---------------------------------
        Net cash from operating activities .......................................................   310,277    184,237     190,506
                                                                                                   ---------------------------------

Cash flows from (used in) investing activities:
  Proceeds from sales and maturities of investments ..............................................   175,655    116,189      62,256
  Purchases of investments .......................................................................  (131,633)  (121,619)    (95,406)
  Capital expenditures ...........................................................................   (59,770)   (62,275)    (35,261)
  Acquisitions, net of cash acquired .............................................................         -     (6,735)    (85,802)
  Other ..........................................................................................    (3,949)    (2,979)     (2,460)
                                                                                                   ---------------------------------
        Net cash used in investing activities ....................................................   (19,697)   (77,419)   (156,673)
                                                                                                   ---------------------------------

Cash flows from (used in) financing activities:
  Increase (decrease) in short-term borrowings ...................................................     1,443     26,994     (13,792)
  Payment of long-term obligations ...............................................................         -          -      (5,993)
  Issuance of shares .............................................................................    21,349     18,351      23,832
  Cash dividends .................................................................................   (26,416)   (24,268)    (18,993)
  Purchase of common shares ......................................................................  (219,184)  (210,000)          -
                                                                                                   ---------------------------------
        Net cash used in financing activities ....................................................  (222,808)  (188,923)    (14,946)
                                                                                                   ---------------------------------
Effect of exchange rate changes on cash ..........................................................     3,581      1,311       2,598
                                                                                                   ---------------------------------
        Increase (decrease) in cash and cash equivalents .........................................    71,353    (80,794)     21,485
Cash and cash equivalents, beginning of year .....................................................   154,297    235,091     213,606
                                                                                                   ---------------------------------
Cash and cash equivalents, end of year ........................................................... $ 225,650  $ 154,297   $ 235,091
                                                                                                   =================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
  Interest ....................................................................................... $   4,667  $   3,639   $   4,076
  Income taxes ...................................................................................   156,570    140,228     109,822
Noncash investing and financing activities:
  Liabilities assumed in business acquisitions ...................................................         -          -      18,093
</Table>


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




                                       31
<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 dental reconstructive implants and associated instrumentation.
Headquartered in Warsaw, Indiana, the Company and its subsidiaries currently
distributes products in more than 100 countries. 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.
which have a significant affect 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. Availablefor- 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. The Company reviews its investments quarterly for
declines in market value that are other than temporary. Investments that have
declined in market value that are determined to be other than temporary are
charged to other income by writing that investment down to market value.

Concentrations of Credit Risk and Allowance for Doubtful Receivables - 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, municipal, corporate and mortgaged-backed
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, 2003 and 2002, cash and cash equivalents and investments included $58
million and $35 million, respectively, of cash deposits and certificates of
deposit with financial institutions in Puerto Rico. Also, at May 31, 2003 and
2002, investments included $11 million and $12 million, respectively, of
municipal bonds issued by state and local subdivisions in Puerto Rico.

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 by the
straight-line method over the estimated useful lives of 5 to 30 years for
buildings and improvements and 3 to 10 years for machinery and equipment. Gains
or losses on the disposition of property, plant and equipment are included in
income. Maintenance and repairs are expensed as incurred. In accordance with
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," the Company reviews property,
plant and equipment for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. An
impairment loss would be recognized when estimated future cash flows relating to
the asset are less than its carrying amount.


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


NOTE B: ACCOUNTING POLICIES, CONTINUED.

Goodwill - In June of 2001 the Financial Accounting Standards Board (FASB)
approved the issuance of Statement 142, "Goodwill and Other Intangible Assets".
FASB Statement 142, among other things, requires that goodwill not be amortized
but should be tested for impairment at least annually. The Company adopted this
statement during the first quarter of fiscal 2003 by discontinuing the
amortization of goodwill totaling $1.8 million per quarter ($1.6 million net of
tax). In addition, the Company was required to review its goodwill for possible
impairment as of June 1, 2002, and at least annually thereafter. Based on the
Company's reviews, no impairment charges have been recorded. The following
tables show the reported net income and earnings per share for the fiscal years
ended May 31, 2002 and 2001, reconciles them to the adjusted net income and
earnings per share had the nonamortization provisions of Statement 142 been
applied beginning June 1, 2000, and compares it to the fiscal year ended May 31,
2003:

(in thousands, except per share data)
<TABLE>
<CAPTION>
                                                       2003            2002            2001
<S>                                             <C>             <C>             <C>
Reported net income .......................     $   286,701     $   239,740     $   197,546
Effect of goodwill amortization ...........               -           6,400           6,400
                                                -------------------------------------------
As adjusted ...............................     $   286,701     $   246,140     $   203,946
                                                ===========================================

Reported earnings per share ...............     $      1.10     $      0.89     $      0.74
Effect of goodwill amortization ...........               -            0.03            0.02
                                                -------------------------------------------
As adjusted ...............................     $      1.10     $      0.92     $      0.76
                                                ===========================================

Reported diluted earnings per share .......     $      1.10     $      0.88     $      0.73
Effect of goodwill amortization............               -            0.03            0.02
                                                -------------------------------------------
As adjusted ...............................     $      1.10     $      0.91     $      0.75
                                                ===========================================
</TABLE>

Other 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 3 to 15 years.

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 $163 million at
May 31, 2003) of foreign subsidiaries because it is expected that such earnings
will be reinvested overseas indefinitely. Upon distribution of those earnings in
the form of dividends or otherwise, the Company would be subject to U.S. income
taxes (subject to an adjustment for foreign tax credits), state income taxes and
withholding taxes payable to the various foreign countries. Determination of the
amount of any unrecognized deferred income tax liability on these undistributed
earnings is not practical.

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

Revenue Recognition - 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.

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, 2003
and 2002 are as follows:
(in thousands)

<TABLE>
<CAPTION>
                                                         2003            2002
<S>                                                    <C>           <C>
Net unrealized holding loss on investments .......     $ (2,591)     $ (4,370)
Cumulative translation adjustment ................       (7,749)      (46,456)
                                                       ----------------------
                                                       $(10,340)     $(50,826)
                                                       ======================
</TABLE>

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


NOTE B: ACCOUNTING POLICIES, CONCLUDED.

Stock-Based Compensation - 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 2003, 2002 and 2001 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:

<TABLE>
<CAPTION>
                                                                                         2003             2002             2001
<S>                                                                                 <C>            <C>             <C>
Net income as reported (in thousands) ............................................  $ 286,701      $   239,740      $   197,546
Deduct: Total stock-based employee compensation expense determined under fair
  value based method for all awards net of related tax effects (in thousands) ....     (5,528)          (5,263)          (4,116)
                                                                                    -------------------------------------------
Pro forma net income (in thousands) ..............................................  $ 281,173      $   234,477      $   193,430
                                                                                    ===========================================
Earnings per share:
  Basic, as reported .............................................................  $    1.10      $       .89      $       .74
                                                                                    -------------------------------------------
  Basic, pro forma ...............................................................       1.08              .87              .72
                                                                                    -------------------------------------------
  Diluted, as reported ...........................................................       1.10              .88              .73
                                                                                    -------------------------------------------
  Diluted, pro forma .............................................................       1.08              .86              .71
                                                                                    -------------------------------------------
</TABLE>


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 2003, 2002 and 2001: (1) expected life of
option of 4.8, 4.8 and 3.6 years; (2) dividend yield of .38%, .40% and .42%; (3)
expected volatility of 35%, 35% and 36%; and (4) risk-free interest rate of
1.15%, 2.43% and 4.47%, respectively.

Other Charges/(Credits) - Other credits of $5.8 million for the year ended May
31, 2003 results from the Court of Appeals for the Federal Circuit's favorable
ruling on the post-judgment interest in the Tronzo litigation (see Note L).
Other 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).

Accounting Pronouncements - 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 January 2003, the FASB
issued FASB Interpretation No. (FIN) 46, "Consolidation of Variable Interest
Entities." FIN 46 addresses the requirements for business enterprises to
consolidate related entities, in which they do not have controlling interests
through voting or other rights, if they are determined to be the primary
beneficiary of these entities as a result of variable economic interests. FIN 46
is effective at the time of investment for interests obtained in a variable
interest entity after January 31, 2003. Beginning in the second quarter of
fiscal year 2004, FIN 46 applies to interests in variable interest entities
acquired prior to February 1, 2003. The Company has not completed its assessment
of the overall impact of the adoption of FIN 46 for possible variable interest
acquired before February 1, 2003, but it is not expected to have a material
impact on the Company's consolidated earnings, financial position or cash flows.

Reclassifications - Certain amounts in the 2002 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.
Goodwill recognized in connection with this transaction amounted to $76 million.

Other Acquisitions - During fiscal year 2002 and 2001, the Company 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 and $4.1 million, respectively.
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 has paid approximately $6 million for preferred stock of
Selective Genetics. During the fourth quarter of fiscal 2002, the Company
determined that its equity investment in Selective Genetics had been permanently
impaired. Therefore, a charge of $5.5 million was included in other income.
Under the agreement, the Company will fund as incurred certain defined research
and development efforts of Selective Genetics 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.


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


NOTE D: INVESTMENTS.

At May 31, 2003, the Company's investment securities were classified as follows:

<TABLE>
<CAPTION>
                                     Amortized           Unrealized
(in thousands)                            Cost       Gains        Losses     Fair Value
                                     --------------------------------------------------
<S>                                  <C>          <C>           <C>          <C>
Available-for-sale:
Debt securities .................     $ 89,940     $    862     $   (566)     $ 90,236
Equity securities ...............       21,065           54       (4,180)       16,939
Mortgage-backed securities ......       72,163          227         (382)       72,008
                                      ------------------------------------------------
    Total available-for-sale ....      183,168        1,143       (5,128)      179,183
                                      ------------------------------------------------

Held-to-maturity:
Debt securities .................        8,020          697            -         8,717
Mortgage-backed obligations .....        2,641            -            -         2,641
                                      ------------------------------------------------
    Total held-to-maturity ......       10,661          697            -        11,358
                                      ------------------------------------------------
Certificates of deposit .........        3,100            -            -         3,100
                                      ------------------------------------------------
Total ...........................     $196,929     $  1,840     $ (5,128)     $193,641
                                      ================================================
</TABLE>

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


<TABLE>
<CAPTION>
                                     Amortized          Unrealized
(in thousands)                            Cost       Gains        Losses     Fair Value
                                     --------------------------------------------------
<S>                                  <C>          <C>           <C>          <C>
Available-for-sale:
Debt securities .................     $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
                                      ================================================
</TABLE>

Proceeds from sales of available-for-sale securities were $71,361,000,
$35,730,000 and $32,251,000 for the years ended May 31, 2003, 2002 and 2001,
respectively. There were no sales of held-to-maturity securities for the years
ended May 31, 2003, 2002 and 2001. The cost of marketable securities sold is
determined by the specific identification method. For the year ended May 31,
2003, gross realized gains and (losses) on sales of available-for-sale
securities were $2,414,000 and $(488,000), respectively. Gross realized gains
and (losses) for the year ended May 31, 2002 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. The Company's investment
securities at May 31, 2003 include $36,272,000 of debt securities and $1,065,000
of mortgage obligations all maturing within one year, and $3,100,000 of
certificates of deposit, $61,984,000 of debt securities and $73,584,000 of
mortgage-backed securities all maturing past one year.

Investment income (included in other income, net) consists of the following:
(in thousands)


<TABLE>
<CAPTION>
                               2003        2002        2001
<S>                         <C>         <C>         <C>
Interest income .......     $10,399     $17,562     $20,053
Dividend income .......       3,067       3,195       5,061
Net realized gains ....       1,926         916       1,588
                            -------------------------------
Total .................     $15,392     $21,673     $26,702
                            ===============================
</TABLE>


                                       35

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


NOTE E: INVENTORIES.

Inventories at May 31, 2003 and 2002 consist of the following:
(in thousands)

<TABLE>
<CAPTION>
                                       2003         2002
<S>                                <C>          <C>
Raw materials ................     $ 37,685     $ 35,036
Work-in-progress .............       38,110       45,476
Finished goods ...............      142,483      135,842
Consigned distributor ........      137,992      118,994
                                   ---------------------
Total ........................     $356,270     $335,348
                                   =====================
</TABLE>


NOTE F: DEBT.

At May 31, 2003 and 2002, short-term borrowings consist of the following:
(in thousands)

<TABLE>
<CAPTION>
                                                 2003         2002
<S>                                          <C>          <C>
Bank line of credit - BioMer C.V .......     $ 97,634     $ 90,467
Bank line of credit - Biomet Japan .....       16,486            -
                                             ---------------------
  Total ................................     $114,120     $ 90,467
                                             =====================
</TABLE>

BioMer C.V. has a EUR 105 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 3.18% and 3.93% at May 31, 2003 and 2002, respectively).
Biomet Japan has a $20 million unsecured line of credit with a major Japanese
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 1.00% at May 31, 2003).

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, 2003, 2002 and 2001 were $5,792,000, $4,290,000 and
$4,401,000, 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,
2003, 2002 and 2001 were $4,916,000, $4,953,000, and $4,008,000, respectively.

NOTE H: STOCK OPTION PLANS.

The Company has various stock option plans: 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, 2003, 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 automatically 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, 2003,
2002 and 2001, the amount of compensation expense applicable to options granted
to distributors was not material to the consolidated financial statements.


                                       36

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


NOTE H: STOCK OPTION PLANS, CONCLUDED.

The following table summarizes stock option activity:

<TABLE>
<CAPTION>
                                    Number        Weighted-Average
                                   of Shares       Exercise Price
                                  -----------    ------------------
<S>                               <C>            <C>
Outstanding, June 1, 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
  Granted ....................      1,826,475           27.73
  Exercised ..................     (2,026,034)          11.84
  Terminated .................       (395,121)          16.25
                                    ---------

Outstanding, May 31, 2003 ....      7,792,141          $20.93
                                    =========
</TABLE>


Options outstanding at May 31, 2003, are exercisable at prices ranging from
$4.33 to $32.31 and have a weighted-average remaining contractual life of 5.9
years. The following table summarizes information about stock options
outstanding at May 31, 2003.


<TABLE>
<CAPTION>
                                      Outstanding
                                       Weighted-      Weighted-
                      Number            Average        Average        Number         Weighted-
   Range of       Outstanding at      Remaining       Exercise    Exercisable at     Average
Exercise Price     May 31, 2003    Contractual Life    Price       May 31, 2003   Exercise Price
------------------------------------------------------------------------------------------------
<C>               <C>              <C>                <C>         <C>             <C>
$  4.33 - 10.00       264,479         0.9 years       $  7.38           259,979       $  7.39
  10.01 - 15.00     1,963,803         2.8 years         12.29           968,784         12.39
  15.01 - 20.00       624,143         3.4 years         16.11           283,677         16.12
  20.01 - 25.00     1,402,235         6.8 years         21.30           335,548         21.30
  25.01 - 30.00     3,437,837         8.1 years         27.36           313,107         27.34
  30.01 - 32.31        99,644         7.5 years         30.50            10,975         30.69
                    ---------                                         ---------
                    7,792,141                                         2,172,070
                    =========                                         =========
</TABLE>


At May 31, 2002 and 2001, there were exercisable options outstanding to purchase
2,606,065 and 2,077,850 shares, respectively, at weighted-average exercise
prices of $12.87 and $11.07, respectively. The weighted-average fair value of
options granted during the fiscal years ended May 31, 2003, 2002, and 2001 was
$8.56, $9.32, and $7.09 respectively.


                                       37

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


NOTE I: SHAREHOLDERS' EQUITY & EARNINGS PER SHARE.

On July 2, 2003, the Company announced a cash dividend of fifteen cents ($0.15)
per share, payable July 18, 2003 to shareholders of record at the close of
business on July 11, 2003.

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.

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.



                                       38
<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)


<TABLE>
<CAPTION>
                                       2003         2002         2001
<S>                                <C>          <C>          <C>
United States operations .....     $417,315     $336,523     $280,171
Foreign operations ...........       34,428       39,592       30,505
                                   ----------------------------------
  Total ......................     $451,743     $376,115     $310,676
                                   ==================================
</TABLE>


The provision for income taxes is summarized as follows:
(in thousands)

<TABLE>
<CAPTION>

                                             2003            2002            2001
<S>                                     <C>             <C>             <C>
Current:
  Federal .........................     $ 128,319       $ 100,599       $  98,332
  State, including Puerto Rico ....        18,606          16,354          13,736
  Foreign .........................        11,400          13,704           9,473
                                        -----------------------------------------
                                          158,325         130,657         121,541
Deferred ..........................        (1,364)         (2,992)        (15,635)
                                        -----------------------------------------
  Total ...........................     $ 156,961       $ 127,665       $ 105,906
                                        =========================================
Effective tax rate ................          34.7%           33.9%           34.1%
                                        -----------------------------------------
</TABLE>


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


<TABLE>
<CAPTION>
                                                                            2003         2002            2001
<S>                                                                        <C>          <C>             <C>
U.S. statutory income tax rate ............................................  35.0%        35.0%           35.0%
Add (deduct):
  State taxes, less effect of federal reduction ...........................   2.3          2.6             2.6
  Foreign income taxes at rates different from the U.S. statutory rate ....   (.1)          .4              -
  Tax benefit relating to operations in Puerto Rico .......................   (.3)         (.1)            (.3)
  Tax credits .............................................................   (.4)         (.7)            (.9)
  Earnings of Foreign Sales Corporation ...................................   (.6)         (.6)            (.7)
  Other ...................................................................  (1.2)        (2.7)           (1.6)
                                                                             ---------------------------------
Effective tax rate ......................................................    34.7%        33.9%           34.1%
                                                                             =================================
</TABLE>


The components of the net deferred tax asset and liability at May 31, 2003 and
2002 are as follows: (in thousands)


<TABLE>
<CAPTION>
                                                                                                        2003          2002
<S>                                                                                                 <C>           <C>
Current deferred tax asset:
  Accounts and notes receivable ...............................................................     $ 19,283      $ 16,635
  Inventories .................................................................................       27,040        24,249
  Accrued expenses ............................................................................        7,939         8,639
                                                                                                    ----------------------
    Current deferred tax asset ................................................................     $ 54,262      $ 49,523
                                                                                                    ======================
Long-term deferred tax asset (liability):
  Depreciation ................................................................................     $ (3,433)     $ (3,796)
  Financial accounting basis of net assets of acquired companies different than tax basis .....       (8,165)       (5,596)
  Other .......................................................................................        4,567         6,060
                                                                                                    ----------------------
    Long-term deferred tax liability ..........................................................     $ (7,031)     $ (3,332)
                                                                                                    ======================
</TABLE>


                                       39


<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 EBI's softgoods and bracing products, Arthrotek's arthroscopy
products, general instruments and operating room supplies. The Company manages
its business segment primarily on a geographic basis. These geographic markets
are comprised of the United States, Europe and the Rest of World. Major markets
included in the Rest of World geographic market are 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 of the
customer.


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


<TABLE>
<CAPTION>

                                              2003           2002           2001
<S>                                     <C>            <C>            <C>
Reconstructive products ...........     $  867,602     $  721,004     $  614,308
Fixation devices ..................        237,117        215,544        202,152
Spinal products ...................        143,607        125,119         91,103
Other products ....................        141,974        130,235        123,100
                                        ----------------------------------------
                                        $1,390,300     $1,191,902     $1,030,663
                                        ========================================

Net sales to customers:
  United States ...................     $  966,638     $  856,375     $  722,381
  Europe ..........................        332,053        260,420        237,444
  Rest of World ...................         91,609         75,107         70,838
                                        ----------------------------------------
                                        $1,390,300     $1,191,902     $1,030,663
                                        ========================================
Operating income:
  United States ...................     $  388,841     $  326,906     $  251,927
  Europe ..........................         41,924         39,152         34,772
  Rest of World ...................          1,540          4,636          3,988
                                        ----------------------------------------
                                        $  432,305     $  370,694     $  290,687
                                        ========================================
Long-lived assets:
  United States ...................     $  238,249     $  226,406     $  213,339
  Europe ..........................        141,950        121,253        109,758
  Rest of World ...................         13,742         10,061          8,532
                                        ----------------------------------------
                                        $  393,941     $  357,720     $  331,629
                                        ========================================
Capital expenditures:
 United States ....................     $   31,780     $   36,795     $   18,091
 Europe ...........................         21,868         22,923         15,457
 Rest of World ....................          6,122          2,557          1,713
                                        ----------------------------------------
                                        $   59,770     $   62,275     $   35,261
                                        ========================================
Depreciation and amortization:
  United States ...................     $   20,535     $   25,031     $   21,891
  Europe ..........................         22,352         21,609         19,236
  Rest of World ...................          2,772          1,187          1,697
                                        ----------------------------------------
                                        $   45,659     $   47,827     $   42,824
                                        ========================================

</TABLE>


                                       40
<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 of
comparative public companies, 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, 2003 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. Self-insurance costs are accrued based on reserves set in consultation
with the insurance carrier for reported claims and a management-determined
estimated liability for claims incurred but not reported. Based on historical
experience, management does not anticipate that incurred but unreported claims
would have a material impact on the Company's consolidated financial position.

Litigation - In January 1996, a jury returned a verdict in 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 $53,520
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 damage 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 petition 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
charge during the third quarter of fiscal 2001 of $26.1 million, which
represented the total damage award plus the maximum amount of interest that, as
calculated by the Company, could have been due under the award and related
expenses. The Company paid $20,236,000 out of escrow. On February 12, 2003 the
Federal Circuit ruled that the Company does not owe post-judgment interest in
connection with the damage award paid in this case. As a result of this
favorable ruling, the Company recorded a pre-tax gain of approximately $5.8
million in the third quarter of fiscal 2003, and management considers this
matter fully concluded.

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.


                                       41
<PAGE>


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

for the years ended May 31, 2003, 2002 and 2001
(in thousands)

________


<Table>
<Caption>
Col. A                         Col. B                Col. C                Col. D         Col. E

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


For the year ended
  May 31, 2003                $13,175          $17,981      $1,256 (B)  $14,215(A)         $18,742
                                                               545 (C)
                              =======          =======      ======      =======            =======

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 (D)
                              ========         =======      ======      =======            =======

</Table>

Notes:

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



                                       42
<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 notice, 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 ("Ernst & Young") as the Company's independent accountants for the year
ended May 31, 2002. Prior to retaining Ernst & Young, the Company had not
consulted with Ernst & Young on any accounting, auditing or reporting matters.
The Audit Committee also selected Ernst & Young as the Company's independent
accountants for the year ended May 31, 2003.

The report of PWC on the Company's financial statements for the year ended May
31, 2001 did not contain any adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or accounting
principles. In connection with the audit of the Company's financial statements
for the year ended May 31, 2001 and the interim period through October 29, 2001,
there were 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 report on the financial
statements for such year.


ITEM 9A. CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures. As of the end of the
period covered by this report, the Company carried out an evaluation, under the
supervision and with the participation of its management, including the
Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based on
this evaluation, the Company's Chief Executive Officer and Chief Financial
Officer have concluded that the Company's disclosure controls and procedures are
effective in timely notification to them of information the Company is required
to disclose in its periodic SEC filings and in ensuring that this information is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and regulations.

(b) Changes in Internal Control. During the fourth quarter covered by this
report, there have been no significant changes in our internal control over
financial reporting that have materially affected, or were reasonably likely to
materially affect, our internal control over financial reporting.



                                       43
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information included under the captions "Election of Directors" and "Section
16(e) Beneficial Ownership Reporting Compliance" in the Company's definitive
Proxy Statement filed with the Securities and Exchange Commission pursuant to
Regulation 14A in connection with its 2003 Annual Meeting of Shareholders (the
"Proxy Statement") is incorporated herein by reference in response to this item.

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

ITEM 11. EXECUTIVE COMPENSATION.

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information contained under the captions "Stock Ownership" in the Proxy
Statement is incorporated herein by reference in response to this item.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table sets forth information regarding the securities to be issued
and the securities remaining available for issuance under the Company's
stock-based incentive plans as of May 31, 2003 (in thousands, except exercise
price per share):


<Table>
<Caption>

                                                     Number of Securities to       Weighted-Average          Number of Securities
                                                     Be Issued upon Exercise       Exercise Price of        Remaining Available for
                                                     of Outstanding Options,     Outstanding Options,        Future Issuance Under
                                                       Warrants and Rights        Warrants and Rights      Equity Compensation Plans
                                                    -----------------------      --------------------      -------------------------
<S>                                                  <C>                          <C>                      <C>
Equity compensation plans approved
  by security holders ............................            7,792                     $20.93                       5,508
Equity compensation plans not approved
  by security holders ............................                -                          -                           -
                                                              -----                     ------                       -----
Total ............................................            7,792                     $20.93                       5,508
</TABLE>


Further information about the Company's stock-based incentive plans can be found
in Note H to the financial statements contained in Item 8 of this report. The
Company does not have any plans not approved by its shareholders.

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.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Not applicable because this report is filed for a period ending prior to
December 15, 2003. However, the information contained under the caption
"Independent Auditor Fee Information" in the Proxy Statement is incorporated
herein by reference in partial response to this item.


                                       44

<PAGE>

                                    PART IV

ITEM 15. 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 Accountants
        Consolidated Balance Sheets as of May 31, 2003 and 2002
        Consolidated Statements of Income for the years ended May 31, 2003, 2002
          and 2001
        Consolidated Statements of Shareholder's Equity for the years ended May
          31, 2003, 2002 and 2001
        Consolidated Statements of Cash Flows for the years ended May 31, 2003,
          2002 and 2001
        Notes to Consolidated Financial Statements

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

    (3) EXHIBITS:
        Refer to the Index to Exhibits immediately following the signature page
        of this report, which is incorporated herein by reference.

(b) REPORTS ON FORM 8-K.
    The Company did not file any current reports on Form 8-K during the quarter
    ended May 31, 2003.

    Subsequent Form 8-K Filings
    On July 8, 2003, the Company filed a current report on Form 8-K to disclose
    that the Company issued a press release announcing its financial results
    for the quarter and fiscal year ended May 31, 2003 and that a related
    conference call was held on the same day to discuss these results. A copy
    of the release was furnished as an exhibit pursuant to Item 12 under Item 9
    of such Form 8-K.


                                       45
<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 22, 2003.


                                  BIOMET, INC.


                  By: /s/ DANE A. MILLER
                      -------------------------------------
                      Dane A. Miller, Ph.D.
                      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 22, 2003.


                  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


                                       46
<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)



                                       47
<PAGE>

                               INDEX TO EXHIBITS

EXHIBIT 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).

     10.7 Joint Venture Agreement between Biomet, Inc. and Merck KGaA dated as
          of November 24, 1997 (Incorporated by reference to Exhibit 2.01 to
          Biomet, Inc. Form 8-K Current Report dated February 17, 1998, File
          No. 0-12515).

(11)      No exhibit.

(12)      No exhibit.

(13)      No exhibit.

(14)      No exhibit.


                                       48
<PAGE>

(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.

(31) 31.1   Certification of Chief Executive Officer Pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.*

     31.2   Certification of Chief Financial Officer Pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.*

(32) 32.1   Written Statement of Chief Executive Officer and Chief Financial
            Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*


*Filed herewith