##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 (Mark One)þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the fiscal year ended May 31, 2005.ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period from  to .
 0-12515.
 
 (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)
   Common Shares
    
    Rights to Purchase Common Shares(Title of class)
    
    (Title of class)
 þ o
 o
 þ o
  DOCUMENTS INCORPORATED BY REFERENCE
 Parts of Form 10-KInto Which DocumentIdentity of Document
    
    Is IncorporatedProxy Statement with respect to the 2005Annual Meeting of Shareholders of the Registrant
    
    Part III




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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; 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 continued investment in new
products and technologies; the ultimate success of the Companys strategic alliances; 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 or clearance 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 ability of the Company to integrate the operations of acquired
businesses; 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 caption Risk Factors beginning on
page 14 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.
  
 TABLE OF CONTENTS
 PART IItem 1.
    
    Business
    
    
    1Item 2.
    
    Properties
    
    
    19Item 3.
    
    Legal Proceedings
    
    
    20Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    20PART IIItem 5.
    
    Market for the
Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    21Item 6.
    
    Selected Financial Data
    
    
    22Item 7.
    
    Managements Discussion & Analysis of Financial Condition & Results of Operations
    
    
    23Item 7A.
    
    Quantitative & Qualitative Disclosures About Market Risk
    
    
    29Item 8.
    
    Financial Statements and Supplementary Data
    
    
    30Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    51Item 9A.
    
    Controls and Procedures
    
    
    51Item 9B.
    
    Other Information
    
    
    51PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    52Item 11.
    
    Executive Compensation
    
    
    52Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    52Item 13.
    
    Certain Relationships and Related Transactions
    
    
    53Item 14.
    
    Principal Accounting Fees and Services
    
    
    53PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    53SubsidiariesConsent of Independent Registered Public Accounting FirmCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Written Statement of CEO and CFO Pursuant to Section 906




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##### Table of Contents



PART I
 
 Item 1. Business.
 General
     Products
 ®
  Years Ended May 31,(Dollar amounts in thousands)2005
    
    
    2004
    
    
    2003Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    PercentNet
    
    
    of Total
    
    
    Net
    
    
    of Total
    
    
    Net
    
    
    of TotalSales
    
    
    Net Sales
    
    
    Sales
    
    
    Net Sales
    
    
    Sales
    
    
    Net SalesReconstructive Products
    
    $
    1,254,234
    
    
    
    67
    %
    
    $
    1,052,865
    
    
    
    65
    %
    
    $
    867,602
    
    
    
    63
    %Fixation Devices
    
    
    246,730
    
    
    
    13
    %
    
    
    248,821
    
    
    
    15
    %
    
    
    237,117
    
    
    
    17
    %Spinal Products
    
    
    214,039
    
    
    
    11
    %
    
    
    159,927
    
    
    
    10
    %
    
    
    143,607
    
    
    
    10
    %Other Products
    
    
    164,947
    
    
    
    9
    %
    
    
    153,640
    
    
    
    10
    %
    
    
    141,974
    
    
    
    10
    %Total
    
    $
    1,879,950
    
    
    
    100
    %
    
    $
    1,615,253
    
    
    
    100
    %
    
    $
    1,390,300
    
    
    
    100
    %
 1




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##### Table of Contents



Reconstructive Products
  Knee Systems.
 ® ® ® ® ®
 ® ® ® ® ®
 ®
 ® ®
  ®
 2




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##### Table of Contents



Hip Systems. ® ®
 ® ® ® ® ® ® ® ® ®
 ® ® ® ®
 2 2 2 2 2 ®
 ® ®
 ® ® ® ® ® ® ® ® ®
 3




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®
 ® ® ®
  ® ® ®
 Extremity Systems. ® ® ® ®
 ®
  Dental Reconstructive Implants. ® ® ® ® ® ®
  4




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##### Table of Contents



Other Reconstructive Devices. ® ® ® ®
 ® ® ®
 ® ®
 ® ®
 ® ® ® ®
 ® ® ® ® ® ® ® ® ® ®
 Palacos ® is a registered trademark of Heraeus Kulzer GmbH.
 5




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##### Table of Contents



Fixation Devices
  Electrical Stimulation Systems.
 ® ® ®
 ® ® ®
 ®
  External Fixation Devices. ® ®
 Internal Fixation Devices.
 6




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##### Table of Contents



® ®
 ® ® ®
 ® ®
  Craniomaxillofacial Fixation Systems. ® ®
 ® ® ®
 ® ® ® ®
 Bone Substitute Materials.
 Spinal Products
  Spinal Fusion Stimulation Systems.
 VHS ® is a registered trademark of Implant Distribution Network, Ltd.
 7




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##### Table of Contents



® ®
 ® ® ®
 Spinal Fixation Systems. ® ® ® ® ®
 ® ®
 ® ® ® ®
  8




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##### Table of Contents



® ®
 ® ®
  Bone Substitute Materials. ® ® ® ® ® ® ® ® ® ® ® ® ® ®
 Precision Machined Allograft. ® ® ®
 Artificial Disc Replacement Products.
 Other Products
 ®
 Skelite ® is a registered trademark of Millenium Biologix, Inc.
 9




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##### Table of Contents



Arthroscopy Products. ® ®
 Orthopedic Support Products. ® SM ®
 Product Development
     Government Regulation
   10




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Sales and Marketing
   11




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Competition
        12




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Raw Materials and Supplies
   ® ®
  Employees
   Patents and Trademarks
   13




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##### Table of Contents



Risk Factors
  The
Companys future profitability depends on the success of the
Companys principal product lines.
  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 Company is subject to substantial government regulation that could have a material adverse
effect on the Companys business.
  14




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##### Table of Contents




    
    the recall or seizure of products;
    
    the suspension or revocation of the authority necessary for the production or sale of a product;
    
    the imposition of fines and penalties;
    
    the delay of the Companys ability to introduce new products into the market; and
    
    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.
  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 healthcare programs are
adopted in the Companys key markets.
    The Companys business may be harmed as a result of litigation.
  15




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##### Table of Contents



A
natural or man-made disaster could have a material adverse effect on
the Companys business.
  The Company may not be able to retain its business in the bone cements and cement delivery system
market segment.
 ®
 16




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##### Table of Contents



EXECUTIVE OFFICERS OF THE REGISTRANT
  Served as Executive
    
    Current Position(s)Name, Age and Business Experience
    
    Officer Since
    
    with the CompanyDane A. Miller, Ph.D., 59President and Chief Executive Officer of the Company.
    
    
    1977
    
    
    President and ChiefDirector of the Company since 1977.
    
    
    
    
    
    Executive Officer andDirector of the Company.Niles L. Noblitt, 54Chairman of the Board of the Company.
    
    
    1978
    
    
    Chairman of the BoardDirector of the Company since 1977.
    
    
    
    
    
    and Director of the CompanyCharles E. Niemier, 49Senior Vice President  International Operations of the Company.
    
    
    1984
    
    
    Senior Vice President Director of the Company since 1987.
    
    
    
    
    
    International Operationsand Director of the Company.Garry L. England, 51Senior Vice President  Warsaw Operations of the Company.
    
    
    1987
    
    
    Senior Vice President Warsaw Operations of theCompany.Daniel P. Hann, 50Senior Vice President, General Counsel and Secretary of the Company.
    
    
    1989
    
    
    Senior Vice President andDirector of the Company since 1989.
    
    
    
    
    
    General Counsel, Secretaryand Director of the Company.Joel P. Pratt, 51Senior Vice President of the Company since June 1999 and President
    
    
    1990
    
    
    Senior Vice Presidentof Walter Lorenz Surgical, Inc. since January 2002. Prior thereto,
    
    
    
    
    
    of the Company and PresidentPresident of Arthrotek, Inc.
    
    
    
    
    
    of Walter Lorenz Surgical, Inc.Gregory D. Hartman, 48Senior Vice President  Finance and Chief Financial Officer of the
    
    
    1991
    
    
    Senior Vice President Company.
    
    
    
    
    
    Finance and Chief FinancialOfficer of the Company.James W. Haller, 48Controller of the Company and Vice President  Finance
    
    
    1991
    
    
    Controller of the Companyof Biomet Orthopedics, Inc. since June 2001. Prior thereto,
    
    
    
    
    
    and Vice President  FinanceController of the Company.
    
    
    
    
    
    of Biomet Orthopedics, Inc.Jerry L. Ferguson, 64Vice Chairman of the Board of the Company.
    
    
    1994
    
    
    Vice Chairman of the BoardDirector of the Company since 1977.
    
    
    
    
    
    and Director of the Company.Bart J. Doedens, 46Vice President of the Company since June 2002 and President
    
    
    2002
    
    
    Vice President of the Companyof EBI, L.P. since June 2005. President of Implant Innovations, Inc.
    
    
    
    
    
    and President of EBI, L.P.from January 2001 to June 2005 and Vice President InternationalMarketing and Sales of Implant Innovations, Inc. prior thereto.
 17




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##### Table of Contents



Roger P. Van Broeck, 57Vice President of the Company since July 2004 and President
    
    
    2004
    
    
    Vice President of the Companyof Biomet Europe B.V. since March 2004. Prior thereto
    
    
    
    
    
    and President of BiometChief Executive Officer of BioMer C. V. and Biomet Merck B.V.
    
    
    
    
    
    Europe B.V.Steven F. Schiess, 45Vice President of the Company and President of Implant Innovations
    
    
    2005
    
    
    Vice President of the CompanyInc. since June 2005. Prior thereto, Senior Vice President,
    
    
    
    
    
    and President of ImplantSales and Marketing of Implant Innovations, Inc.
    
    
    
    
    
    Innovations, Inc.
 18




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##### Table of Contents



Item 2. Properties.
  FACILITY
    
    LOCATION
    
    SQUARE
    
    
    OWNED/FEET
    
    
    LEASEDCorporate headquarters of Biomet, Inc.;
    
    Warsaw, Indiana
    
    
    455,600
    
    
    Ownedmanufacturing, storage and research and development facilityof Biomet Manufacturing Corp.; and distribution centerand offices of Biomet Orthopedics, Inc.Administrative, manufacturing and distribution facility
    
    (1) Parsippany, New Jersey1
    
    
    63,000
    
    
    Ownedof EBI, L.P. and administrative offices of Electro-Biology, Inc.
    
    (2) Parsippany, New Jersey
    
    
    209,700
    
    
    OwnedManufacturing facility of EBI, L.P.
    
    Allendale, New Jersey
    
    
    30,000
    
    
    LeasedManufacturing facility of EBI, L.P.
    
    Marlow, Oklahoma
    
    
    51,500
    
    
    OwnedAdministrative, manufacturing and distribution facility
    
    Jacksonville, Florida
    
    
    82,500
    
    
    Ownedof Lorenz SurgicalOffice, manufacturing and distribution facility
    
    (1) Palm Beach Gardens, FL
    
    
    67,000
    
    
    Ownedof Implant Innovations, Inc.
    
    (2) Palm Beach Gardens, FL2
    
    
    69,000
    
    
    OwnedOffice and manufacturing facilities of Arthrotek, Inc.
    
    (1) Ontario, California
    
    
    35,400
    
    
    Owned(2) Redding, California
    
    
    14,400
    
    
    LeasedManufacturing facility of Biomet Fair Lawn L.P.
    
    Fair Lawn, New Jersey
    
    
    40,000
    
    
    OwnedOffice and manufacturing facility of Electro-Biology, Inc.
    
    Guaynabo, Puerto Rico
    
    
    34,700
    
    
    OwnedOffice, manufacturing and distribution facilities
    
    (1) Irvine, California
    
    
    36,800
    
    
    Leasedof Interpore Spine Ltd.
    
    (2) Irvine, California
    
    
    27,700
    
    
    LeasedOffice, manufacturing and warehouse facility of
    
    Valence, France
    
    
    86,100
    
    
    OwnedBiomet France SarlOffice, manufacturing and warehouse facilities of Biomet
    
    Berlin, Germany
    
    
    49,900
    
    
    OwnedDeutschland GmbHOffice and research and development facility of
    
    Darmstadt, Germany
    
    
    29,200
    
    
    LeasedBiomet Deutschland GmbHAdministrative offices of Biomet Europe B.V. and office
    
    Dordrecht, The Netherlands
    
    
    37,700
    
    
    Ownedand warehouse facility of Biomet Nederland BVOffice and manufacturing facility of IQL
    
    Valencia, Spain
    
    
    69,600
    
    
    OwnedOffice, manufacturing and warehouse facilities of Biomet
    
    Sjöbo, Sweden
    
    
    24,200
    
    
    OwnedCementing Technologies ABManufacturing and administrative facilities of
    
    (1) Bridgend, South Wales
    
    
    105,200
    
    
    OwnedBiomet UK Ltd.
    
    (2) Swindon, England
    
    
    53,400
    
    
    Owned
   1
 2
 19




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Item 3. Legal Proceedings.
   
 Item 4. Submission of Matters to a Vote of Security Holders.
  20




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PART II
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
  High
    
    
    Low2005Fourth
    
    $
    43.32
    
    
    $
    34.90Third
    
    
    49.64
    
    
    
    40.53Second
    
    
    49.50
    
    
    
    43.13First
    
    
    49.60
    
    
    
    39.692004Fourth
    
    $
    41.67
    
    
    $
    37.05Third
    
    
    41.25
    
    
    
    34.50Second
    
    
    36.25
    
    
    
    29.56First
    
    
    30.95
    
    
    
    27.262003Fourth
    
    $
    33.50
    
    
    $
    26.74Third
    
    
    30.50
    
    
    
    26.42Second
    
    
    32.00
    
    
    
    25.69First
    
    
    29.28
    
    
    
    21.75
   Issuer Purchases of Equity Securities
  Total Number of
    
    Maximum Number ofShares Purchased
    
    Shares (or ApproximateTotal Number of
    
    Average Price
    
    as Part of Publicly
    
    Dollar Value) that May YetPeriod
    
    Shares Purchased
    
    Paid Per Share
    
    Announced Plans
    
    Be Purchased Under the PlansMarch 1-31
    
    
    982,417
    
    
    
    $38.32
    
    
    
    982,417
    
    
    256,000 shares and $114,773,576April 1-30
    
    
    1,121,700
    
    
    
    37.10
    
    
    
    1,121,700
    
    
    4,000 shares and $82,684,061May 1-31
    
    
    132,000
    
    
    
    37.88
    
    
    
    132,000
    
    
    $78,031,085Total
    
    
    2,236,117
    
    
    
    $37.68
    
    
    
    2,236,117
    
    
    $78,031,085
 21




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##### Table of Contents



Item 6. Selected Financial Data.
  
 2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Net sales
    
    $
    1,879,950
    
    
    $
    1,615,253
    
    
    $
    1,390,300
    
    
    $
    1,191,902
    
    
    $
    1,030,663Cost of sales
    
    
    533,096
    
    
    
    461,502
    
    
    
    407,295
    
    
    
    332,727
    
    
    
    296,063Gross profit
    
    
    1,346,854
    
    
    
    1,153,751
    
    
    
    983,005
    
    
    
    859,175
    
    
    
    734,600Selling, general and administrative expenses
    
    
    694,254
    
    
    
    595,234
    
    
    
    495,391
    
    
    
    437,731
    
    
    
    374,793Research and development expense
    
    
    79,696
    
    
    
    63,636
    
    
    
    55,309
    
    
    
    50,750
    
    
    
    43,020In-process research and development
    
    
    26,020
    
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    Other charges/(credits)
    
    
    
    
    
    
    
    
    
    
    (5,800
    )
    
    
    
    
    
    
    26,100Operating income
    
    
    546,884
    
    
    
    493,631
    
    
    
    438,105
    
    
    
    370,694
    
    
    
    290,687Other income, net
    
    
    2,816
    
    
    
    15,165
    
    
    
    13,638
    
    
    
    5,421
    *
    
    
    19,989Income before income taxes and minority interest
    
    
    549,700
    
    
    
    508,796
    
    
    
    451,743
    
    
    
    376,115
    
    
    
    310,676Provision for income taxes
    
    
    198,084
    
    
    
    176,098
    
    
    
    156,961
    
    
    
    127,665
    
    
    
    105,906Income before minority interest
    
    
    351,616
    
    
    
    332,698
    
    
    
    294,782
    
    
    
    248,450
    
    
    
    204,770Minority interest
    
    
    
    
    
    
    7,071
    
    
    
    8,081
    
    
    
    8,710
    
    
    
    7,224Net income
    
    $
    351,616
    
    
    $
    325,627
    
    
    $
    286,701
    
    
    $
    239,740
    
    
    $
    197,546Earnings per share:Basic
    
    $
    1.39
    
    
    $
    1.27
    
    
    $
    1.10
    
    
    $
    .89
    
    
    $
    .74Diluted
    
    
    1.38
    
    
    
    1.27
    
    
    
    1.10
    
    
    
    .88
    
    
    
    .73Shares used in the computation of earnings per share:Basic
    
    
    252,387
    
    
    
    255,512
    
    
    
    259,493
    
    
    
    268,475
    
    
    
    267,915Diluted
    
    
    254,148
    
    
    
    257,204
    
    
    
    261,394
    
    
    
    271,245
    
    
    
    270,746Cash dividends paid per common share
    
    $
    .20
    
    
    $
    .15
    
    
    $
    .10
    
    
    $
    .09
    
    
    $
    .07
  
 2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Working capital
    
    $
    672,525
    
    
    $
    807,259
    
    
    $
    845,101
    
    
    $
    715,245
    
    
    $
    726,557Total assets
    
    
    2,096,577
    
    
    
    1,782,905
    
    
    
    1,672,169
    
    
    
    1,521,723
    
    
    
    1,489,311Shareholders equity
    
    
    1,563,931
    
    
    
    1,448,210
    
    
    
    1,286,134
    
    
    
    1,176,479
    
    
    
    1,146,186
 
    
    All share and per share data have been adjusted to give retroactive effect to the three-for-two
stock split declared on July 9, 2001.
    
    The selected financial data includes the operations of Interpore International, Inc. from its
date of acquisition (June 18, 2004).*
    
    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.
 22




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Item 7.
Managements Discussion & Analysis of Financial Condition & Results of Operations.
   ®
   PercentagePercentage of Net Sales
    
    
    Increase (Decrease)2005
    
    
    20042005
    
    
    2004
    
    
    2003
    
    
    vs. 2004
    
    
    vs. 2003Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    16
    %
    
    
    16
    %Cost of sales
    
    
    28.4
    
    
    
    28.5
    
    
    
    29.3
    
    
    
    16
    
    
    
    13Gross profit
    
    
    71.6
    
    
    
    71.5
    
    
    
    70.7
    
    
    
    17
    
    
    
    17Selling, general and administrative expenses
    
    
    36.9
    
    
    
    36.9
    
    
    
    35.6
    
    
    
    17
    
    
    
    20Research and development expense
    
    
    4.2
    
    
    
    3.9
    
    
    
    4.0
    
    
    
    25
    
    
    
    15In-process research and development
    
    
    1.4
    
    
    
    0.1
    
    
    
    
    
    
    
    n/m
    
    
    
    n/mOther charges/(credits)
    
    
    
    
    
    
    
    
    
    
    (0.4
    )
    
    
    n/m
    
    
    
    n/mOperating income
    
    
    29.1
    
    
    
    30.6
    
    
    
    31.5
    
    
    
    11
    
    
    
    13Other income, net
    
    
    0.1
    
    
    
    0.9
    
    
    
    1.0
    
    
    
    (81
    )
    
    
    11Income before income taxes and minority interest
    
    
    29.2
    
    
    
    31.5
    
    
    
    32.5
    
    
    
    8
    
    
    
    13Provision for income taxes
    
    
    10.5
    
    
    
    10.9
    
    
    
    11.3
    
    
    
    12
    
    
    
    12Income before minority interest
    
    
    18.7
    
    
    
    20.6
    
    
    
    21.2
    
    
    
    6
    
    
    
    13Minority interest
    
    
    
    
    
    
    0.4
    
    
    
    0.6
    
    
    
    n/m
    
    
    
    (12
    )Net income
    
    
    18.7
    %
    
    
    20.2
    %
    
    
    20.6
    %
    
    
    8
    %
    
    
    14
    %
    23




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##### Table of Contents



Managements
Discussion & Analysis of Financial Condition& Results of Operations (continued)
             24




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##### Table of Contents



Managements
Discussion & Analysis of Financial Condition& Results of Operations (continued)
             25




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##### Table of Contents



Managements Discussion & Analysis of Financial Condition & Results of Operations (continued)
             26




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##### Table of Contents



Managements Discussion & Analysis of Financial Condition& Results of Operations (concluded).
           27




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##### Table of Contents



Quarterly Results.
 (in thousands, except earnings per share)
    
    1st Qtr.
    
    
    2nd Qtr.
    
    
    3rd Qtr.
    
    
    4th Qtr.
    
    
    Year2005Net sales
    
    $
    438,160
    
    
    $
    456,674
    
    
    $
    482,023
    
    
    $
    503,093
    
    
    $
    1,879,950Gross profit
    
    
    312,188
    
    
    
    325,559
    
    
    
    343,955
    
    
    
    365,152
    
    
    
    1,346,854Net income
    
    
    60,433
    
    
    
    91,199
    
    
    
    96,784
    
    
    
    103,200
    
    
    
    351,616Earnings per share:Basic
    
    
    .24
    
    
    
    .36
    
    
    
    .38
    
    
    
    .41
    
    
    
    1.39Diluted
    
    
    .24
    
    
    
    .36
    
    
    
    .38
    
    
    
    .41
    
    
    
    1.382004Net sales
    
    $
    370,319
    
    
    $
    387,561
    
    
    $
    410,185
    
    
    $
    447,188
    
    
    $
    1,615,253Gross profit
    
    
    264,701
    
    
    
    278,771
    
    
    
    294,193
    
    
    
    316,086
    
    
    
    1,153,751Net income
    
    
    76,478
    
    
    
    82,692
    
    
    
    86,600
    
    
    
    79,857
    
    
    
    325,627Earnings per share:Basic
    
    
    .30
    
    
    
    .32
    
    
    
    .34
    
    
    
    .31
    
    
    
    1.27Diluted
    
    
    .30
    
    
    
    .32
    
    
    
    .34
    
    
    
    .31
    
    
    
    1.272003Net sales
    
    $
    317,600
    
    
    $
    341,448
    
    
    $
    354,042
    
    
    $
    377,210
    
    
    $
    1,390,300Gross profit
    
    
    227,463
    
    
    
    242,843
    
    
    
    246,406
    
    
    
    266,293
    
    
    
    983,005Net income
    
    
    66,006
    
    
    
    70,354
    
    
    
    72,594
    
    
    
    77,747
    
    
    
    286,701Earnings per share:Basic
    
    
    .25
    
    
    
    .27
    
    
    
    .28
    
    
    
    .30
    
    
    
    1.10Diluted
    
    
    .25
    
    
    
    .27
    
    
    
    .28
    
    
    
    .30
    
    
    
    1.10
 
    
    Per share data may not cross-foot due to the share repurchase program affecting the weighted
share calculation differently by quarter
compared to the full fiscal year.
    
    Net income for the first quarter of fiscal 2005 was adversely impacted by a $26 million
charge as a result of in-process research and
development in connection with the Interpore acquisition.
    
    Net income for the fourth quarter of fiscal 2004 was adversely impacted by a $25 million
pre-tax charge as a result of a change in the
Companys estimate for bad debt allowance on its domestic insurance receivables.
    
    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.
 28




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##### Table of Contents



Item 7A.
Quantitative & Qualitative Disclosures About Market Risk.
     
 29




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data.
 Biomet, Inc. and Subsidiaries Index to consolidated Financial Statements and Schedule.
 1. Financial Statements:Managements Report on Internal Control over Financial Reporting
    
    
    30Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
    
    
    31Report of Independent Registered Public Accounting Firm
    
    
    32Consolidated Balance Sheets as of May 31, 2005 and 2004
    
    
    33Consolidated Statements of Income for the years ended May 31, 2005, 2004 and 2003
    
    
    34Consolidated Statements of Shareholders Equity for the years ended May 31, 2005, 2004 and 2003
    
    
    35Consolidated Statements of Cash Flows for the years ended May 31, 2005, 2004 and 2003
    
    
    36Notes to Consolidated Financial Statements
    
    
    372. Financial Statement Schedule:Schedule II - Valuation and Qualifying Accounts for the years ended May 31, 2005, 2004 and 2003
    
    
    50Schedules other than that listed above are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
 
 Managements Report on Internal Control over Financial Reporting.
     30




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##### Table of Contents



Report
of Independent Registered Public Accounting Firm On Internal
Control over Financial Reporting.
        /s/
 
 31




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##### Table of Contents



Report of Independent Registered Public Accounting Firm.
      /s/
 
 32




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##### Table of Contents



Biomet, Inc. & Subsidiaries Consolidated Balance Sheets.
 
 2005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    104,706
    
    
    $
    159,243Investments
    
    
    10,962
    
    
    
    10,030Accounts and
notes receivable, less allowance for doubtful receivables
(2005  $59,513 and 2004  $43,384)
    
    
    479,745
    
    
    
    465,949Inventories
    
    
    469,791
    
    
    
    389,391Deferred income taxes
    
    
    72,732
    
    
    
    69,379Prepaid expenses and other
    
    
    35,980
    
    
    
    21,877Total current assets
    
    
    1,173,916
    
    
    
    1,115,869Property, plant and equipment:Land and improvements
    
    
    24,297
    
    
    
    23,173Buildings and improvements
    
    
    145,928
    
    
    
    132,998Machinery and equipment
    
    
    404,173
    
    
    
    310,289574,398
    
    
    
    466,460Less, Accumulated depreciation
    
    
    251,511
    
    
    
    197,634Property, plant and equipment, net
    
    
    322,887
    
    
    
    268,826Investments
    
    
    61,406
    
    
    
    66,339Goodwill
    
    
    435,621
    
    
    
    262,068Other intangible assets
    
    
    87,835
    
    
    
    53,571Other assets
    
    
    14,912
    
    
    
    16,232Total assets
    
    $
    2,096,577
    
    
    $
    1,782,905Liabilities
& Shareholders EquityCurrent liabilities:Short-term borrowings
    
    $
    282,193
    
    
    $
    109,654Accounts payable
    
    
    57,021
    
    
    
    55,365Accrued income taxes
    
    
    9,725
    
    
    
    18,940Accrued wages and commissions
    
    
    62,171
    
    
    
    51,288Other accrued expenses
    
    
    90,281
    
    
    
    73,363Total current liabilities
    
    
    501,391
    
    
    
    308,610Deferred income taxes
    
    
    31,255
    
    
    
    26,085Total liabilities
    
    
    532,646
    
    
    
    334,695Commitments and contingencies (Note M)Shareholders equity:Preferred shares, $100 par value: Authorized 5 shares; none issued
    
    
    
    
    
    
    Common
shares, without par value: Authorized 500,000 shares;issued and
outstanding 2005  249,879 shares and 2004  254,262 shares
    
    
    188,162
    
    
    
    167,301Additional paid-in capital
    
    
    67,613
    
    
    
    60,344Retained earnings
    
    
    1,284,905
    
    
    
    1,218,682Accumulated other comprehensive income
    
    
    23,251
    
    
    
    1,883Total shareholders equity
    
    
    1,563,931
    
    
    
    1,448,210Total liabilities and shareholders equity
    
    $
    2,096,577
    
    
    $
    1,782,905
  33




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##### Table of Contents



Biomet, Inc. & Subsidiaries Consolidated Statements of Income.
 
 2005
    
    
    2004
    
    
    2003Net sales
    
    $
    1,879,950
    
    
    $
    1,615,253
    
    
    $
    1,390,300Cost of sales
    
    
    533,096
    
    
    
    461,502
    
    
    
    407,295Gross profit
    
    
    1,346,854
    
    
    
    1,153,751
    
    
    
    983,005Selling, general and administrative expenses
    
    
    694,254
    
    
    
    595,234
    
    
    
    495,391Research and development expense
    
    
    79,696
    
    
    
    63,636
    
    
    
    55,309In-process research and development
    
    
    26,020
    
    
    
    1,250
    
    
    
    Other charges/(credits)
    
    
    
    
    
    
    
    
    
    
    (5,800
    )Operating income
    
    
    546,884
    
    
    
    493,631
    
    
    
    438,105Other income, net
    
    
    11,677
    
    
    
    18,702
    
    
    
    18,035Interest expense
    
    
    (8,861
    )
    
    
    (3,537
    )
    
    
    (4,397
    )Income before income taxes and minority interest
    
    
    549,700
    
    
    
    508,796
    
    
    
    451,743Provision for income taxes
    
    
    198,084
    
    
    
    176,098
    
    
    
    156,961Income before minority interest
    
    
    351,616
    
    
    
    332,698
    
    
    
    294,782Minority interest
    
    
    
    
    
    
    7,071
    
    
    
    8,081Net income
    
    $
    351,616
    
    
    $
    325,627
    
    
    $
    286,701Earnings per share:Basic
    
    $
    1.39
    
    
    $
    1.27
    
    
    $
    1.10Diluted
    
    
    1.38
    
    
    
    1.27
    
    
    
    1.10Shares used in the computation of earnings per share:Basic
    
    
    252,387
    
    
    
    255,512
    
    
    
    259,493Diluted
    
    
    254,148
    
    
    
    257,204
    
    
    
    261,394
  34




---



##### Table of Contents



Biomet, Inc. & Subsidiaries Consolidated Statements of Shareholders Equity.
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon Shares
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Shareholders(in thousands, except per share amounts)
    
    Number
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance at
June 1, 2002
    
    
    263,651
    
    
    $
    124,417
    
    
    $
    48,868
    
    
    $
    1,054,020
    
    
    $
    (50,826
    )
    
    $
    1,176,479Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    286,701
    
    
    
    
    
    
    
    286,701Change in unrealized holding value on
investments, net of $923 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,716
    
    
    
    1,716Reclassification adjustment for gains included
in net income, net of $34 tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    63Currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,707
    
    
    
    38,707Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    327,187Exercise of stock options
    
    
    1,965
    
    
    
    21,349
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,349Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    5,579
    
    
    
    
    
    
    
    
    
    
    
    5,579Purchase 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
    
    
    
    
    
    
    
    
    
    
    
    1,140Balance at May 31, 2003
    
    
    257,489
    
    
    
    141,931
    
    
    
    54,081
    
    
    
    1,100,462
    
    
    
    (10,340
    )
    
    
    1,286,134Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    325,627
    
    
    
    
    
    
    
    325,627Change in unrealized holding value on
investments, net of $71 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133
    
    
    
    133Reclassification adjustment for losses included
in net income, net of $158 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (294
    )
    
    
    (294
    )Currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,384
    
    
    
    12,384Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    337,850Exercise of stock options
    
    
    1,921
    
    
    
    28,208
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,208Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    5,953
    
    
    
    
    
    
    
    
    
    
    
    5,953Purchase of shares
    
    
    (5,148
    )
    
    
    (2,838
    )
    
    
    (1,083
    )
    
    
    (168,803
    )
    
    
    
    
    
    
    (172,724
    )Cash dividends ($.15 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,604
    )
    
    
    
    
    
    
    (38,604
    )Other
    
    
    
    
    
    
    
    
    
    
    1,393
    
    
    
    
    
    
    
    
    
    
    
    1,393Balance at May 31, 2004
    
    
    254,262
    
    
    
    167,301
    
    
    
    60,344
    
    
    
    1,218,682
    
    
    
    1,883
    
    
    
    1,448,210Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    351,616
    
    
    
    
    
    
    
    351,616Change in unrealized holding value on
investments, net of $76 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142
    
    
    
    142Reclassification adjustment for losses included
in net income, net of $76 tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    141Currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,085
    
    
    
    21,085Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    372,984Exercise of stock options
    
    
    1,360
    
    
    
    24,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,640Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    6,779
    
    
    
    
    
    
    
    
    
    
    
    6,779Purchase of shares
    
    
    (5,743
    )
    
    
    (3,779
    )
    
    
    (1,362
    )
    
    
    (234,522
    )
    
    
    
    
    
    
    (239,663
    )Cash dividends ($.20 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,871
    )
    
    
    
    
    
    
    (50,871
    )Other
    
    
    
    
    
    
    
    
    
    
    1,852
    
    
    
    
    
    
    
    
    
    
    
    1,852Balance at May 31, 2005
    
    
    249,879
    
    
    $
    188,162
    
    
    $
    67,613
    
    
    $
    1,284,905
    
    
    $
    23,251
    
    
    $
    1,563,931
 
 35




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##### Table of Contents



Biomet, Inc. & Subsidiaries Consolidated Statements of Cash Flows.
 For the years ended May 31,(in thousands)
 2005
    
    
    2004
    
    
    2003Cash flows from (used in) operating activities:Net income
    
    $
    351,616
    
    
    $
    325,627
    
    
    $
    286,701Adjustments to reconcile net income to net cash from operating activities:Depreciation
    
    
    61,781
    
    
    
    52,461
    
    
    
    42,174Amortization
    
    
    7,821
    
    
    
    5,757
    
    
    
    3,485Write-off of in-process research and development
    
    
    26,020
    
    
    
    1,250
    
    
    
    Minority interest
    
    
    
    
    
    
    7,071
    
    
    
    8,081Other
    
    
    (19
    )
    
    
    (214
    )
    
    
    (1,926
    )Deferred income taxes
    
    
    3,250
    
    
    
    (13,686
    )
    
    
    (1,364
    )Tax benefit from exercise of stock options
    
    
    6,779
    
    
    
    5,953
    
    
    
    5,579Changes in current assets and liabilities, excluding effects of
acquisitions and dispositions:Accounts and notes receivable
    
    
    16,265
    
    
    
    (29,955
    )
    
    
    (35,144
    )Inventories
    
    
    (42,188
    )
    
    
    2,888
    
    
    
    7,591Accounts payable
    
    
    (5,927
    )
    
    
    10,949
    
    
    
    3,738Accrued litigation
    
    
    
    
    
    
    
    
    
    
    (5,864
    )Other
    
    
    (14,478
    )
    
    
    17,988
    
    
    
    (2,774
    )Net cash from operating activities
    
    
    410,920
    
    
    
    386,089
    
    
    
    310,277Cash flows from (used in) investing activities:Proceeds from sales and maturities of investments
    
    
    62,344
    
    
    
    236,360
    
    
    
    175,655Purchases of investments
    
    
    (57,890
    )
    
    
    (119,819
    )
    
    
    (131,633
    )Capital expenditures
    
    
    (97,372
    )
    
    
    (61,342
    )
    
    
    (59,770
    )Acquisitions, net of cash acquired
    
    
    (266,229
    )
    
    
    (307,475
    )
    
    
    Other
    
    
    (1,535
    )
    
    
    (1,205
    )
    
    
    (3,949
    )Net cash used in investing activities
    
    
    (360,682
    )
    
    
    (253,481
    )
    
    
    (19,697
    )Cash flows from (used in) financing activities:Increase (decrease) in short-term borrowings
    
    
    167,624
    
    
    
    (11,487
    )
    
    
    1,443Issuance of shares
    
    
    24,640
    
    
    
    28,208
    
    
    
    21,349Cash dividends
    
    
    (50,871
    )
    
    
    (38,604
    )
    
    
    (26,416
    )Purchase of common shares
    
    
    (239,663
    )
    
    
    (172,724
    )
    
    
    (219,184
    )Net cash used in financing activities
    
    
    (98,270
    )
    
    
    (194,607
    )
    
    
    (222,808
    )Effect of exchange rate changes on cash
    
    
    (6,505
    )
    
    
    (4,408
    )
    
    
    3,581Increase (decrease) in cash and cash equivalents
    
    
    (54,537
    )
    
    
    (66,407
    )
    
    
    71,353Cash and cash equivalents, beginning of year
    
    
    159,243
    
    
    
    225,650
    
    
    
    154,297Cash and cash equivalents, end of year
    
    $
    104,706
    
    
    $
    159,243
    
    
    $
    225,650Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    8,666
    
    
    $
    3,657
    
    
    $
    4,667Income taxes
    
    
    196,295
    
    
    
    176,374
    
    
    
    156,570
 
 36




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##### Table of Contents



Biomet,
Inc. & Subsidiaries Notes To ConsolidatedFinancial Statements.
              37




---



##### Table of Contents



Biomet,
Inc. & Subsidiaries Notes To Consolidated Financial Statements (continued)
       
 2005
    
    
    2004Net unrealized holding loss on investments
    
    $
    (2,469
    )
    
    $
    (2,752
    )Cumulative translation adjustment
    
    
    25,720
    
    
    
    4,635$
    23,251
    
    
    $
    1,883
  2005
    
    
    2004
    
    
    2003Net income as reported (in thousands)
    
    $
    351,616
    
    
    $
    325,627
    
    
    $
    286,701Deduct: Total stock-based employee compensation expense determined under fair
value based method for all awards net of related tax effects (in thousands)
    
    
    (7,339
    )
    
    
    (5,823
    )
    
    
    (5,528
    )Pro forma net income (in thousands)
    
    $
    344,277
    
    
    $
    319,804
    
    
    $
    281,173Earnings per share:Basic, as reported
    
    $
    1.39
    
    
    $
    1.27
    
    
    $
    1.10Basic, pro forma
    
    
    1.36
    
    
    
    1.25
    
    
    
    1.08Diluted, as reported
    
    
    1.38
    
    
    
    1.27
    
    
    
    1.10Diluted, pro forma
    
    
    1.35
    
    
    
    1.24
    
    
    
    1.08
 
 38




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##### Table of Contents



Biomet, Inc. & Subsidiaries Notes To Consolidated Financial Statements (continued)
    SFAS No. 123 (R)
  39




---



##### Table of Contents



Biomet,
Inc. & Subsidiaries Notes To Consolidated Financial Statements (continued)
   
 As ofJune 18, 2004Current assets
    
    $
    40,100Property, plant and equipment
    
    
    9,307Intangible assets not subject to amortization:Trademarks and trade names
    
    
    1,260Intangible assets subject to amortization:Developed technology
    
    
    16,180License agreements
    
    
    3,450Trademarks and trade names
    
    
    2,270Customer relationships
    
    
    11,440In-process research and development
    
    
    26,020Deferred taxes
    
    
    15,945Other assets
    
    
    82Goodwill
    
    
    169,596Total assets acquired
    
    $
    295,650Deferred taxes
    
    
    14,512Other
    
    
    14,909Total liabilities assumed
    
    
    29,421Net assets acquired
    
    $
    266,229
 
 40




---



##### Table of Contents



Biomet,
Inc. & Subsidiaries Notes To ConsolidatedFinancial Statements (continued)
   
 As ofMarch 19, 2004Inventories
    
    $
    19,600Intangible assets not subject to amortization:Trademarks and trade names
    
    
    27,500Intangible assets subject to amortization:Covenant not to compete
    
    
    3,100Developed technology
    
    
    12,500Trademarks and trade names
    
    
    1,100Customer relationships
    
    
    1,650In-process research and development
    
    
    1,250Other assets
    
    
    3,362Goodwill
    
    
    125,497Total asset step-up
    
    $
    195,559Deferred taxes
    
    
    17,622Pension liabilities
    
    
    7,109Other
    
    
    (10,214
    )Elimination of minority interest
    
    
    (118,958
    )Total liability step-up or elimination
    
    
    (104,441
    )Net assets acquired
    
    $
    300,000
     41




---



##### Table of Contents



Biomet, Inc. & Subsidiaries Notes To Consolidated  Financial Statements (continued)
  
 Amortized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale:Debt securities
    
    $
    10,047
    
    
    $
    
    
    
    $
    (356
    )
    
    $
    9,691Equity securities
    
    
    22,288
    
    
    
    1,099
    
    
    
    (1,975
    )
    
    
    21,412Mortgage-backed securities
    
    
    36,670
    
    
    
    2
    
    
    
    (2,569
    )
    
    
    34,103Total available-for-sale
    
    
    69,005
    
    
    
    1,101
    
    
    
    (4,900
    )
    
    
    65,206Held-to-maturity:Debt securities
    
    
    4,955
    
    
    
    
    
    
    
    (22
    )
    
    
    4,933Mortgage-backed obligations
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    107Total held-to-maturity
    
    
    5,062
    
    
    
    
    
    
    
    (22
    )
    
    
    5,040Certificates of deposit
    
    
    2,100
    
    
    
    
    
    
    
    
    
    
    
    2,100Total
    
    $
    76,167
    
    
    $
    1,101
    
    
    $
    (4,922
    )
    
    $
    72,346
 
 Amortized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale:Debt securities
    
    $
    10,368
    
    
    $
    
    
    
    $
    (721
    )
    
    $
    9,647Equity securities
    
    
    21,602
    
    
    
    904
    
    
    
    (2,153
    )
    
    
    20,353Mortgage-backed securities
    
    
    37,175
    
    
    
    
    
    
    
    (2,263
    )
    
    
    34,912Total available-for-sale
    
    
    69,145
    
    
    
    904
    
    
    
    (5,137
    )
    
    
    64,912Held-to-maturity:Debt securities
    
    
    6,958
    
    
    
    61
    
    
    
    
    
    
    
    7,019Mortgage-backed obligations.
    
    
    1,399
    
    
    
    
    
    
    
    
    
    
    
    1,399Total held-to-maturity
    
    
    8,357
    
    
    
    61
    
    
    
    
    
    
    
    8,418Certificates of deposit
    
    
    3,100
    
    
    
    
    
    
    
    
    
    
    
    3,100Total
    
    $
    80,602
    
    
    $
    965
    
    
    $
    (5,137
    )
    
    $
    76,430
  
 2005
    
    
    2004
    
    
    2003Interest income
    
    $
    4,191
    
    
    $
    8,271
    
    
    $
    10,399Dividend income
    
    
    1,890
    
    
    
    2,150
    
    
    
    3,067Net realized gains
    
    
    1,785
    
    
    
    3,576
    
    
    
    1,926Total
    
    $
    7,866
    
    
    $
    13,997
    
    
    $
    15,392
 42




---



##### Table of Contents



Biomet,
Inc. & Subsidiaries Notes To ConsolidatedFinancial Statements (continued)
  
 2005
    
    
    2004Raw materials
    
    $
    50,676
    
    
    $
    34,075Work-in-progress
    
    
    56,610
    
    
    
    43,187Finished goods
    
    
    200,041
    
    
    
    163,299Consigned distributor
    
    
    162,464
    
    
    
    148,830Total
    
    $
    469,791
    
    
    $
    389,391
   
 United
    
    
    
    
    
    
    Rest ofStates
    
    
    Europe
    
    
    World
    
    
    TotalBalance at June 1, 2003
    
    $
    76,403
    
    
    $
    45,213
    
    
    $
    5,090
    
    
    $
    126,706Goodwill acquired:Mercks KGaAs 50% interest in Biomet Merck joint venture
    
    
    
    
    
    
    125,497
    
    
    
    
    
    
    
    125,497Other
    
    
    
    
    
    
    9,651
    
    
    
    
    
    
    
    9,651Currency translation
    
    
    
    
    
    
    1,217
    
    
    
    (1,003
    )
    
    
    214Balance at May 31, 2004
    
    
    76,403
    
    
    
    181,578
    
    
    
    4,087
    
    
    
    262,068Goodwill acquired:Interpore
    
    
    169,596
    
    
    
    
    
    
    
    
    
    
    
    169,596Currency translation
    
    
    
    
    
    
    3,443
    
    
    
    514
    
    
    
    3,957Balance at May 31, 2005
    
    $
    245,999
    
    
    $
    185,021
    
    
    $
    4,601
    
    
    $
    435,621
 
 2005
    
    
    2004Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationIntangible assets subject to amortization:Developed technology and patents
    
    $
    49,215
    
    
    $
    10,943
    
    
    $
    26,786
    
    
    $
    7,110Trademarks and trade names
    
    
    3,599
    
    
    
    453
    
    
    
    1,329
    
    
    
    149Customer relationships
    
    
    16,670
    
    
    
    2,808
    
    
    
    1,650
    
    
    
    15Covenants not to compete
    
    
    4,055
    
    
    
    923
    
    
    
    3,100
    
    
    
    78Other
    
    
    923
    
    
    
    260
    
    
    
    723
    
    
    
    16574,462
    
    
    
    15,387
    
    
    
    33,588
    
    
    
    7,517Intangible assets not subject to amortization:Trademarks and trade names
    
    
    28,760
    
    
    
    
    
    
    
    27,500
    
    
    
    Total identifiable intangible assets
    
    $
    103,222
    
    
    $
    15,387
    
    
    $
    61,088
    
    
    $
    7,517
 
 43




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##### Table of Contents



Biomet,
Inc. & Subsidiaries Notes To ConsolidatedFinancial Statements (continued)
  
 2005
    
    
    2004Bank line of credit
    
    $
    180,000
    
    
    $
    Bank line of credit  Biomet Europe
    
    
    61,565
    
    
    
    81,516Bank line of
credit  Biomet Japan
    
    
    40,628
    
    
    
    28,138Total
    
    $
    282,193
    
    
    $
    109,654
     44




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##### Table of Contents



Biomet, Inc. & Subsidiaries Notes To Consolidated
Financial Statements (continued)
     Number
    
    
    Weighted Averageof Shares
    
    
    Exercise PriceOutstanding, June 1, 2002
    
    
    8,386,821
    
    
    $
    15.07Granted
    
    
    1,826,475
    
    
    
    27.73Exercised
    
    
    (2,026,034
    )
    
    
    11.84Terminated
    
    
    (395,121
    )
    
    
    16.25Outstanding, May 31, 2003
    
    
    7,792,141
    
    
    
    20.93Granted
    
    
    1,892,270
    
    
    
    34.45Exercised
    
    
    (1,982,116
    )
    
    
    15.45Terminated
    
    
    (344,926
    )
    
    
    20.75Outstanding, May 31, 2004
    
    
    7,357,369
    
    
    
    25.89Granted
    
    
    2,407,505
    
    
    
    42.44Exercised
    
    
    (1,326,339
    )
    
    
    19.21Terminated
    
    
    (374,700
    )
    
    
    24.99Outstanding, May 31, 2005
    
    
    8,063,835
    
    
    $
    31.86
  OutstandingWeighted
    
    
    WeightedNumber
    
    
    Average
    
    
    Average
    
    
    Number
    
    
    WeightedRange of
    
    Outstanding at
    
    
    Remaining
    
    
    Exercise
    
    
    Exercisable at
    
    
    AverageExercise Price
    
    May 31, 2005
    
    
    Contractual Life
    
    
    Price
    
    
    May 31, 2005
    
    
    Exercise Price$11.14
- 20.00
    
    
    530,571
    
    
    1.4 years
    
    $
    13.22
    
    
    
    482,792
    
    
    $
    12.8620.01 - 30.00
    
    
    3,486,395
    
    
    5.7 years
    
    
    26.01
    
    
    
    832,806
    
    
    
    25.8330.01 - 40.00
    
    
    1,774,202
    
    
    7.8 years
    
    
    34.81
    
    
    
    186,908
    
    
    
    34.7340.01 - 48.27
    
    
    2,272,667
    
    
    8.1 years
    
    
    42.88
    
    
    
    38,267
    
    
    
    40.148,063,835
    
    
    
    
    
    
    
    
    
    
    
    1,540,773
 
 45




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##### Table of Contents



Biomet, Inc. & Subsidiaries Notes To Consolidated  Financial Statements (continued)
      
 2005
    
    
    2004
    
    
    2003United States operations
    
    $
    490,252
    
    
    $
    468,701
    
    
    $
    417,315Foreign operations
    
    
    59,448
    
    
    
    40,095
    
    
    
    34,428Total
    
    $
    549,700
    
    
    $
    508,796
    
    
    $
    451,743
 
 Current:
    
    2005
    
    
    2004
    
    
    2003Federal
    
    $
    161,971
    
    
    $
    156,925
    
    
    $
    128,319State, including Puerto Rico
    
    
    19,927
    
    
    
    20,865
    
    
    
    18,606Foreign
    
    
    12,936
    
    
    
    11,994
    
    
    
    11,400194,834
    
    
    
    189,784
    
    
    
    158,325Deferred
    
    
    3,250
    
    
    
    (13,686
    )
    
    
    (1,364
    )Total
    
    $
    198,084
    
    
    $
    176,098
    
    
    $
    156,961Effective tax rate
    
    
    36.0
    %
    
    
    34.6
    %
    
    
    34.7
    %
  2005
    
    
    2004
    
    2003U.S. statutory income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Add (deduct):State taxes, less effect of federal reduction
    
    
    2.0
    
    
    
    2.1
    
    
    
    2.3Foreign income taxes at rates different from the U.S. statutory rate
    
    
    (1.3
    )
    
    
    (.4
    )
    
    
    (1
    )Tax benefit relating to operations in Puerto Rico
    
    
    (.2
    )
    
    
    (.2
    )
    
    
    (.3
    )Tax credits
    
    
    (.4
    )
    
    
    (.7
    )
    
    
    (.4
    )Tax benefit relating to U.S. export sales
    
    
    (.6
    )
    
    
    (.5
    )
    
    
    (.6
    )In-process research and development
    
    
    1.7
    
    
    
    
    
    
    
    Other
    
    
    (.2
    )
    
    
    (.7
    )
    
    
    (1.2
    )Effective tax rate
    
    
    36.0
    %
    
    
    34.6
    %
    
    
    34.7
    %
 46




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##### Table of Contents



Biomet, Inc. & Subsidiaries Notes To Consolidated
Financial Statements (continued)
  
 Current deferred tax asset:
    

2005
    
    
    2004Accounts and notes receivable
    
    $
    19,730
    
    
    $
    31,033Inventories
    
    
    40,875
    
    
    
    32,301Accrued expenses
    
    
    12,127
    
    
    
    6,045Current deferred tax asset
    
    $
    72,732
    
    
    $
    69,379Long-term deferred tax asset (liability):Depreciation
    
    $
    (12,202
    )
    
    $
    (10,657
    )Financial accounting basis of net assets of acquired companies different than tax basis
    
    
    (12,681
    )
    
    
    (19,362
    )Other
    
    
    (6,372
    )
    
    
    3,934Long-term deferred tax liability
    
    $
    (31,255
    )
    
    $
    (26,085
    )
   
 2005
    
    
    2004Sales Growth
    
    
    
    
    
    
    Sales Growth in
    
    
    Sales Growth
    
    
    
    
    
    
    Sales Growth inAs Reported
    
    
    FX Impact
    
    
    Local Currencies
    
    
    As Reported
    
    
    FX Impact
    
    
    Local CurrenciesNet sales to customers:United States
    
    
    15
    %
    
    
    
    %
    
    
    15
    %
    
    
    12
    %
    
    
    
    %
    
    
    12
    %Europe
    
    
    17
    
    
    
    7
    
    
    
    10
    
    
    
    26
    
    
    
    16
    
    
    
    10Rest of World
    
    
    31
    
    
    
    4
    
    
    
    27
    
    
    
    28
    
    
    
    10
    
    
    
    18Total
    
    
    16
    %
    
    
    2
    %
    
    
    14
    %
    
    
    16
    %
    
    
    4
    %
    
    
    12
    %Product category sales growth:Reconstructive
products
    
    
    19
    %
    
    
    3
    %
    
    
    16
    %
    
    
    21
    %
    
    
    6
    %
    
    
    15
    %Fixation devices
    
    
    (1
    )
    
    
    1
    
    
    
    (2
    )
    
    
    5
    
    
    
    1
    
    
    
    4Spinal products
    
    
    34
    
    
    
    1
    
    
    
    33
    
    
    
    11
    
    
    
    1
    
    
    
    10Other products
    
    
    7
    %
    
    
    1
    %
    
    
    6
    %
    
    
    8
    %
    
    
    2
    %
    
    
    6
    %
 47




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##### Table of Contents



Biomet, Inc. & Subsidiaries Notes To Consolidated
Financial Statements (continued)
  
 2005
    
    
    2004
    
    
    2003Reconstructive products
    
    $
    1,254,234
    
    
    $
    1,052,865
    
    
    $
    867,602Fixation devices
    
    
    246,730
    
    
    
    248,821
    
    
    
    237,117Spinal products
    
    
    214,039
    
    
    
    159,927
    
    
    
    143,607Other products
    
    
    164,947
    
    
    
    153,640
    
    
    
    141,974$
    1,879,950
    
    
    $
    1,615,253
    
    
    $
    1,390,300Net sales to customers:United States
    
    $
    1,238,727
    
    
    $
    1,079,532
    
    
    $
    966,638Europe
    
    
    487,991
    
    
    
    418,328
    
    
    
    332,053Rest of World
    
    
    153,232
    
    
    
    117,393
    
    
    
    91,609$
    1,879,950
    
    
    $
    1,615,253
    
    
    $
    1,390,300Operating income:United States
    
    $
    507,690
    
    
    $
    443,862
    
    
    $
    394,641Europe
    
    
    76,566
    
    
    
    49,228
    
    
    
    41,924Rest of World
    
    
    12,898
    
    
    
    4,241
    
    
    
    1,540Current period impact of inventory step-up
    
    
    (24,250
    )
    
    
    (2,450
    )
    
    
    Write-off of in-process research and development
    
    
    (26,020
    )
    
    
    (1,250
    )
    
    
    Operating income
    
    $
    546,884
    
    
    $
    493,631
    
    
    $
    438,105Long-lived assets:United States
    
    $
    475,087
    
    
    $
    241,035
    
    
    $
    238,249Europe
    
    
    353,979
    
    
    
    334,177
    
    
    
    141,950Rest of World
    
    
    23,732
    
    
    
    19,814
    
    
    
    13,742$
    852,798
    
    
    $
    595,026
    
    
    $
    393,941Capital expenditures:United States
    
    $
    50,930
    
    
    $
    26,833
    
    
    $
    31,780Europe
    
    
    38,008
    
    
    
    26,068
    
    
    
    21,868Rest of World
    
    
    8,434
    
    
    
    8,441
    
    
    
    6,122$
    97,372
    
    
    $
    61,342
    
    
    $
    59,770Depreciation and amortization:United States
    
    $
    29,273
    
    
    $
    22,309
    
    
    $
    20,535Europe
    
    
    34,695
    
    
    
    30,746
    
    
    
    22,352Rest of World
    
    
    5,634
    
    
    
    5,163
    
    
    
    2,772$
    69,602
    
    
    $
    58,218
    
    
    $
    45,659
 48




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##### Table of Contents



Biomet, Inc. & Subsidiaries Notes To
ConsolidatedFinancial Statements (concluded).
       49




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##### Table of Contents



Biomet,
Inc. and Subsidiaries Schedule II  Valuation
and Qualifying Accounts.
 
  Col. A
    
    Col. B
    
    
    Col. C
    
    
    Col. D
    
    
    Col. EAdditions(1)
    
    
    (2)Charged toBalance at
    
    
    Charged to
    
    
    other
    
    
    
    
    
    
    Balancebeginning of
    
    
    costs and
    
    
    accounts 
    
    
    Deductions 
    
    
    at end ofDescription
    
    period
    
    
    expenses
    
    
    describe
    
    
    describe
    
    
    periodAllowance
for doubtful receivables:For the year ended
May 31, 2005
    
    $
    43,384
    
    
    $
    29,116
    
    
    $
    288
    (B)
    
    $
    14,280
    (A)
    
    $
    59,513$
    1,005
    (C)For the year ended
May 31, 2004
    
    $
    18,742
    
    
    $
    41,341
    
    
    $
    1,195
    (B)
    
    $
    14,562
    (A)
    
    $
    43,384223
    (C)(3,555
    ) (D)For the year ended
May 31, 2003
    
    $
    13,175
    
    
    $
    17,981
    
    
    $
    1,256
    (B)
    
    $
    14,215
    (A)
    
    $
    18,742545
    (C)Excess and obsolete
inventory reserves:For the year ended
May 31, 2005
    
    $
    81,655
    
    
    $
    34,792
    
    
    $
    2,984
    (C)
    
    $
    26,385
    
    
    $
    93,046For the year ended
May 31, 2004
    
    $
    80,467
    
    
    $
    37,338
    
    
    $
    2,259
    (C)
    
    $
    22,239
    (E)
    
    $
    81,655(16,170
    ) (D)For the year ended
May 31, 2003
    
    $
    73,586
    
    
    $
    24,446
    
    
    $
    5,630
    (C)
    
    $
    23,195
    (E)
    
    $
    80,467
  
 50




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 (a) Evaluation of Disclosure Controls and Procedures.
 (b) Changes in Internal Control.
 (c) Managements Report on Internal Control over Financial Reporting.
 
 Item 9B. Other Information
  51




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##### Table of Contents



PART III
 
 Item 10. Directors and Executive Officers of the Registrant.
      
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
  Securities Authorized for Issuance Under Equity Compensation Plans
  Number of SecuritiesRemainingNumber of Securities to
    
    
    Weighted-Average
    
    
    Available for Future IssuanceBe Issued upon Exercise
    
    
    Exercise Price of
    
    
    Under Equity Compensationof Outstanding Options,
    
    
    Outstanding Options,
    
    
    Plans (excluding securitiesWarrants and Rights
    
    
    Warrants and Rights
    
    
    reflected in first column)Equity compensation plans approved
by security holders
    
    
    8,063,835
    
    
    
    $31.86
    
    
    
    1,874,307Equity compensation plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    8,063,835
    
    
    
    $31.86
    
    
    
    1,874,307
 
 52




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##### Table of Contents



Item 13. Certain Relationships and Related Transactions.
  
 Item 14. Principal Accounting Fees and Services.
  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules.
 (a) The following financial statements and financial statement schedule are included in Item 8
herein.
 (1)
    
    Financial Statements:
 Managements Report on Internal Control over Financial ReportingReport of Independent Registered Public Accounting Firm on Internal Control over Financial
ReportingReport of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of May 31, 2005 and 2004Consolidated Statements of Income for the years ended May 31, 2005, 2004 and 2003Consolidated Statements of Shareholders Equity for the years ended May 31, 2005, 2004 and 2003Consolidated Statements of Cash Flows for the years ended May 31, 2005, 2004 and 2003Notes to Consolidated Financial Statements
 (2)
    
    Financial Statement Schedule:
 Schedule II  Valuation and Qualifying Accounts
 (3)
    
    Exhibits:
 
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##### Table of Contents



SIGNATURES
  BIOMET, INC.
 By:
    
    /s/ DANE A. MILLERDane A. Miller, Ph.D.
President and Chief Executive Officer
  By:
    
    /s/ NILES L. NOBLITTNiles L. Noblitt, DirectorBy:
    
    /s/ DANE A. MILLERDane A. Miller, Director
(Principal Executive Officer)By:
    
    /s/ JERRY L. FERGUSONJerry L. Ferguson, DirectorBy:
    
    /s/ DANIEL P. HANNDaniel P. Hann, DirectorBy:
    
    /s/ C. SCOTT HARRISONC. Scott Harrison, DirectorBy:
    
    /s/ M. RAY HARROFFM. Ray Harroff, DirectorBy:
    
    /s/ THOMAS F. KEARNS, JR.Thomas F. Kearns, Jr., Director
 54




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##### Table of Contents



By:
    
    /s/ SANDRA A. LAMBSandra A. Lamb, DirectorBy:
    
    /s/ JERRY L. MILLERJerry L. Miller, DirectorBy:
    
    /s/ KENNETH V. MILLERKenneth V. Miller, DirectorBy:
    
    /s/ CHARLES E. NIEMIERCharles E. Niemier, DirectorBy:
    
    /s/ MARILYN TUCKER QUAYLEMarilyn Tucker Quayle, DirectorBy:
    
    /s/ L. GENE TANNERL. Gene Tanner, DirectorBy:
    
    /s/ GREGORY D. HARTMANGregory D. Hartman, Senior Vice President - Finance
(Principal Financial Officer)By:
    
    /s/ JAMES W. HALLERJames W. Haller, Controller
(Principal Accounting Officer)
 55




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##### Table of Contents



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), as amended
September 1, 2002 to change
rights agent to American Stock
Transfer and Trust Company.
(Incorporated by reference to
Exhibit 4.2 to Biomet, Inc. Form
10-Q Quarterly Report dated
January 13, 2003, File No.
0-12515).(9)
    
    
    No exhibit.(10) 10.1
    
    
    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).10.2
    
    
    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).10.3
    
    
    401(k) Profit Sharing Plan filed
January 19, 1996. (Incorporated
by reference to Form S-8
Registration Statement, File No. 333-00331).10.4
    
    
    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).10.5
    
    
    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).10.6
    
    
    Purchase and Substitution
Agreement dated March 19, 2004
by and among Merck KGaA, Biomet,
Inc., BioHoldings UK Ltd. and
Biomet Europe Ltd. (Incorporated
by reference to Exhibit 10.1 to
Biomet, Inc. Form 8-K current
Report dated March 19, 2004,
File No. 0-12515).10.7
    
    
    Agreement and Plan of Merger
dated March 7, 2004 among
Biomet, Inc., Laker Acquisition
Corp. I and Interpore
International, Inc.
(Incorporated by reference to
Exhibit 1 to Biomet, Inc. Form SC 13D General Statement of
Acquisition of Beneficial
Ownership dated March 17, 2004,
File No. 0-12515)
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##### Table of Contents



10.8
    
    Credit Agreement dated as of June 18, 2004, by and among Biomet, Inc., Bank of America, N.A.
and
UBS Securities LLC (Incorporated by reference to Exhibit 10.1 to Biomet, Inc. Form 8-K Current
Report dated June 18, 2004, File No. 0-12515).(11)
    
    No exhibit.(12)
    
    No exhibit.(13)
    
    No exhibit.(14)
    
    No exhibit.(16)
    
    No exhibit.(18)
    
    No exhibit.(21) 21.1
    
    Subsidiaries of the Registrant.*(22)
    
    No exhibit.(23) 23.1
    
    Consent of Independent Registered Public Accounting Firm.*(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