Welcome to the Brush Engineered Materials’ first quarter 2008 earnings conference call. (Operator Instructions) It is now my pleasure to introduce your host, Michael Hasychak, Vice President, Treasurer and Secretary for Brush Engineered Materials.

This is Mike Hasychak. With me today is Dick Hipple, President, Chairman and CEO; John Grampa, Senior Vice President of Finance and Chief Financial Officer; and Jim Marrotte, Vice President and Corporate Controller. Our format for today’s conference call is as follows. John Grampa, will comment on the first quarter 2008 results and the outlook, and Dick Hipple will give a market update. Thereafter, we will open up the teleconference call for questions. A recorded playback of this call will be available until May 9 by dialing area code, 877-660-6853, account number 286 and conference ID 280902. The call will also be archived on the company’s website, beminc.com. To access the replay, click on “Quarterly Earnings Conference Call” under the Investors page. The broadcast requires RealPlayer software which is available as a free download from the icon as indicated. Any forward-looking statements made in this announcement, including those in the outlook section and during the question-and-answer portion, are based on current expectations. The company’s actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings press release issued this morning. And now, I’ll turn it over to John Grampa for comments.

Welcome to our first quarter 2008 earnings teleconference. Thanks for taking the time to join us today. As in the past, I’ll review the quarter, and then comment on the outlook. And then, following my prepared comments, Dick Hipple will also provide you with a market update, focusing on some encouraging developments. Then, we’ll open the call for questions. I’ll attempt to adequately reinforce, as well as expand, on the key points made in the press release about the quarter, as well as the outlook. I’ll comment on six specific items. First, I’ll review the factors affecting the reported lower sales compared to the prior year and the important progress that is embedded in those numbers, once you remove the influence of metal price, media market factors and handset customer impacts. Then, I’ll review the factors that affect the reported lower profits, especially the favorable prior year one-time benefit that significantly affects the comparisons. I’ll also provide added insight to the non-repeating charges recorded in the first quarter. Third, I’ll cover the specifics of the trends in media. Significant swings in ruthenium market prices, material sources and demand factors, as well as new product and market ramp up rates, can dramatically affect quarterly results. It’s therefore important to review what is happening with all of our new materials that support the perpendicular media recording launch that continues to occur. And Dick will be updating you on the status of our product qualifications in media and the current order trends. Fourth, I’ll review the volatile cell phone handset market, where the expected lower demand levels from a key customer continue to have a negative impact on the earnings comparisons in that segment to prior periods. And then I’ll review briefly our balance sheet, which is strong and is expected to remain…

First of all, I’d like to reinforce how frustrating this first quarter was for Brush. Fundamentally, we are pushing very hard on many fronts, and we were unable to convert all of the initiatives to the bottom line as fast as we would have liked. And as the second quarter unfolds, I’m encouraged from the perspective that we will be seeing substantially improved performance. To cover the most significant issues, first of all, we are seeing good solid market conditions across our product lines. The only significant softness we see is in the U.S. automotive market, but this is a fairly small factor for our company. And even here, we are seeing benefits from the dollar-euro exchange rates, allowing us to gain new sales in Europe from our U.S. manufacturing base. So, in summary, we have not, as yet, seen a significant spillover from the financial crisis having a substantial impact on our markets. But it’s obviously an area of concern, particularly if longer term, it affects consumer spending for electronic devices. John covered several other areas that I would like to provide further details around. The biggest issue for the company is the backward steps in sales that we suffered in the fourth quarter of 2007 and the first quarter of 2008 in the media market. Our shipped volumes of ruthenium targets significantly declined as we modified production processes and proceeded through the re-qualification process. We have completed all steps and have now been re-qualified at our customer base. So, we will be seeing significantly higher shipments in the second quarter as compared to the first quarter. Additionally, we have made good progress at qualifying a new innovative approach to making Ru targets at a new major customer from which we hope to see shipments in the third quarter.…

(Operator Instructions) Your first question comes from Chuck Murphy - Sidoti.

Could you just walk through the non-recurring charges again? And just to make sure I’m clear here, John, I thought I heard you say something about the run-rate being $0.27, but the press release said $0.35, which one?

No, no. The run-rate is $0.35. The $0.27 is the difference between the two years run-rate.

Can you walk through now what those non-recurring charges were again?

The largest one was the $0.09 impact was a due to a $2.6 million billing error that occurred last year that we discovered late in the first quarter, actually discovered in mid-March. And there’s not a whole lot more to say about that.

And that was for Williams, though?

Yes, it was. It was in Williams. It was in that segment. It’s an unusual event that the customer was, in fact, billed consistent with the order entry by that customer, and it also happens to be a customer that submits his orders to us electronically, and we ship and bill electronically. But, it turns out that the metal that was associated with that order was his metal, and it shouldn’t have been billed for. It should have been billed only the fab charges but, in fact, he was double billed the metal, because it had been billed to him earlier.

And what was the other stuff?

The others were $0.04 in the aggregate. $0.02 of it was a difference in the effective tax rate for the quarter driven by an adjustment to the deferred tax asset account. And the third one was the non-recurring purchase price allocation adjustments fundamentally to the first turn of the inventory that occurred with the acquisition.

Dick, as far as the media market goes, Williams, did I hear you say that you have qualified the ruthenium with a new customer, but that there was a delay in qualifying for the oxide layer?

Yes. On the ruthenium targets, where we stepped backwards in sales, we are re-qualified now. And then, because of the intense activity required to really get back in the saddle here ASAP, we had to pushback a little bit of our development program on the oxide. And so, that’s pushed the oxide back, as I had mentioned. And we expect if all goes well, and we are proceeding well, and we’ve gone through several phases and everything is thumbs-up, we would hope to be shipping the oxide-type material in the third quarter.

But, it’s just re-qualifying with an existing ruthenium customer. It’s not qualification with a totally new one.

Well, that’s the base, what I call the base core business. And as we move from the first quarter to the second quarter and that volume increases, all associated with existing customers, we do hope to gain a new customer in the ruthenium area in the second half of the year.

And your level of confidence in succeeding in that endeavor?

Well, we are encouraged.

Just to be clear on the full-year guidance, that assumes that the EPS was $0.35 in the first quarter, correct?

Yes.

Your next question comes from Avinash Kant - Broadpoint Capital.

In your prepared remarks, you did say that you see meaningful growth in the ruthenium business going forward. Are you talking about growth from the Q1 levels, or are you talking about growth from second quarter calendar year ‘07 levels?

Well, my comments had to do with from first quarter to second quarter is where my comments were.

If you look at the ruthenium business itself, the price of ruthenium has fluctuated significantly since you started ramping up in the first quarter. On top of that, we are hearing that, in fact, the average film thickness that the customers are using at this point has been coming down significantly. And then, of course, you have the unit issue. You have the average use per wafer – per chip issue, and then you have the pricing issue. How do we reconcile that? What is the best way to look at the fluctuations or the growth in your ruthenium business going forward? Is it just by volume or price or overall business?

Going forward, I think you hit the nail on the head. You’ve got to be thinking in terms of volume as we go forward. For those factors that you’ve expressed and let me repeat them, so that everybody understands them, metal value is significantly different. A year ago in the first quarter of the year, metal value was almost $720 an ounce on what we shipped. In the second quarter, it was $780 an ounce. In the third quarter of last year, it was $460 an ounce. So, presently we are talking about numbers in the $400 to $450 an ounce level. So, ounces could be flat and sales could drop. So, sales have to be overlooked. In addition to that factor, in the first part of last year, as the supply chain was being loaded with ruthenium material, the amount of material coming back through the system that was customer-owned was low. As the year grew and as volumes grew, that number started to change. The customer began to own more and more of his own material which, in fact, was really material that was left in the targets that they bought, that ended up coming starting back through the refine recycle stream. In the first part of last year, 75% of what was being shipped into this system was owned by us and, therefore, showing up as revenue. We would anticipate that that number would drop to less than half the shipments throughout the balance of 2008, perhaps climbing to as much as a complete reversal of that trend by the end of the year. So, following dollars as an indication of growth is not really going to be relevant. It’s going to have to be discussions around ounces and probably even more importantly, numbers of targets shipped.

So, in terms of the number of targets shipped, there’s one more issue, even if the customers were making the same number of chips using your targets, as the average film thickness shrinks, they would need less of your targets to make the same number of units, right?

That’s correct.

But that factor isn’t as significant really in the growth for us as the number of targets themselves.

And there’s all kinds of changing dynamics even on that front. For example, the oxide layer is primarily a platinum layer. And I think everybody is aware of what’s happening to platinum prices. In fact, there’s really a pressure to take a look at the possibility of increasing the ruthenium thickness to allow them to decrease the thickness on the oxide layer. There’s engineering going around that level, too. So, it’s a very complex set of variables here that people are working on because, now, before, they were trying to reduce the thickness of ruthenium because it was up to $800 an ounce, and now you’ve got platinum running away. And now, they are taking a look at another possibility of going back to a thicker ruthenium layers. So, it’s very difficult how this is all going, I just threw another variable at you.

Now, maybe another way to look at this one is that we should maybe start to think about market share that you have had. And before the re-qualification happened, what market share did you have, and where do you think you are now, and where can you get by the end of this year, that would be a better way to look at it maybe in terms of your competitive advantage?

Well, as I’ve said before Avinash, is that we had targeted, we’d like to be about at least the 30% player in this marketplace, and we are certainly not there now with the decrease in volume that we had. And so, that’s where we’d like to be, and we are certainly not there right now.

But, I think, Dick, you were closer to 20% by the end of last year’s third quarter or so? Is that a reasonable assumption?

We’ve never really stated what our specific market share was. I only say what our targets are.

Your next question comes from Anthony Sorrentino - Sorrentino Metals.

Are you confident that this new media technology is the one that the industry is going to accept, that that is going to be the new industry standard?

Well, it already has. Basically, the whole industry has gone to this technology, which is called the PMR technology. And I would say that effectively in the second quarter of this year, which is, like right now, 95 plus percent of the drives made will be made with this technology. So, it has been accepted.

In the cell phone handset market, the trend has been toward low-end handsets. In what way is Brush impacted by that trend?

Well, on the lower-end handset, that would have a bigger impact on the alloy business, because as you try to sell cell phones that are very, very inexpensive, you are surely going to try to design down the components that are in the phone.

Your next question comes from Bob Schenosky - Jefferies.

John, can you give us an update on the CapEx for the year?

It’s going to be approximately $30 million. Maybe a little lower, not a whole lot different than depreciation.

With the second layer relative to the platinum and the demand, potentially, for the thinner, do you foresee any other design challenges with some of your customers that could potentially push this out from, say, third quarter into fourth quarter potentially next year?

I certainly don’t know of any right now.

We are working very hard on a certain design, and we don’t see that changing.

The industry is now five, six quarters into their ramp. So, things have settled out quite a bit on the specifications that are coming at us and the mixes of the metals that are in some of the alloys as well. So, I wouldn’t anticipate significant change at this point. A lot of things were being sorted out across the industry last year.

You talked about potential inventory concerns as the year progresses. Are there any specific markets at this point that you would be willing to talk about or highlight where you are starting to see some early concerns relative to where?

No. It’s the item that I lose sleep on. We are not seeing it. We think the inventories in the systems right now seem to be quite lean. We don’t see a buildup anywhere that we’ve picked up on at this point.

We’ve seen backlogs climb, and we are seeing quick lead times being requested by customers. And it’s just counter what you read in the newspapers these days about what’s happening in the economy at large.

And you are talking specifically about domestic concerns, right?

Yes.

Your next question comes from Phil Gibbs - KeyBanc Capital.

I was really impressed with the underlying strength in Williams, if you stripped out the media market sales. I think if you exclude the sales in those respective quarters, the top line growth was somewhere north of 45% year-over-year. Can you speak to some of the momentum in that segment and some of the specific areas? I know you generally spoke about it. And what’s the impact of metal pass-through in that strength?

Just to clarify one point for everybody, that 40% growth, about half of that was metal value and some more in that neighborhood, but nonetheless, it’s still 20% growth. Just to clarify, that’s where the metal value changes occurred.

Well, I actually appreciate you asking that question because there’s so many things that are overshadowed by this media, is that there’s a lot of great things going on at Williams right now in other sectors of the business and a lot of the target business that’s going into the wireless area is growing very strongly. We’ve got new products there. The area of, for example, the LED space, using high-intensity LEDs for energy conservation, a lot of new designs there are using precious metal targets for the higher-end LED markets. That’s growing very robustly. We are seeing a good growth in our Organic Chemicals business in the optics area. I had mentioned that. And we also are seeing some real nice growth in this under bump area for the targets for under bump metallization for smaller chip size in the semiconductor area. There are a lot of things going on right now at Williams that are seeing some very, very healthy growths in other segments of the market.

That Organic Chemicals business, that’s CERAC. And on the SG&A side, just for housekeeping, what are we looking for as far as a run rate? Should we look for something pretty comparable going forward? I know the fourth quarter is obviously where I know that your compensation and things like that take place.

The rate may be a little bit higher than what we had in the first quarter because of the compensation issue. We also will have the full-year effect of Techni-Met and their expenses. They were only in there for part of this quarter.

We should be looking for a pickup a little bit from these levels.

Yes.

There is another segment on the P&L. How do we look at that as far as what’s wrapped up in that?

That’s our corporate office, and then one of our small plants that doesn’t fit with the other segments. But, the majority of the difference there, the improvement, is actually driven by a compensation plan for our Directors that’s based on our share price. There was about a $1.5 million swing between periods on that plant due to the decline of the share price this quarter versus an increase in the share price last quarter. There was also, in last year’s results, the operating loss and the loss on the sale of that small subsidiary that we would have had in the first quarter of last year that we do not repeat this year.

And that $0.02 purchase accounting head, does that run through the cost of goods sold for Williams?

Yes.

Your next question comes from Rob Young - Wm Smith.

As far as a qualification process for the oxide layer, how does that compare to the ramp-up time that you saw with the ruthenium layer?

Well, again, the way it would normally work, let’s say that we go through and get qualified totally in the second quarter. A customer is going to then ramp you up in a space to run you through a quarter and make sure that everything is up and running reliable within a certain set of volumes. And then, you would kick it up again in the fourth quarter. So, we would see this steadily increasing from the third to the fourth quarter, but you are not going to see, like I always call it, a huge step function change one month to the next.

And then, same type of question with the Alloy segment. In relation, you spoke a little bit about Samsung last quarter. How does that qualification process work? Is it similar to what you just described with the ruthenium?

That’s a little different. In fact, it’s a lot easier. Because in that case, there is a product that’s out there, a copper beryllium product, and we just need to make sure we are penetrating a supply chain more effectively. And that’s what we are about doing. So, there’s not a, what I call, a sophisticated qualification process as you might find in the media market, although you still have to get qualified. You need to ship your product in, as it goes into stamping machines. But, it doesn’t have a specification, so I would call it a faster or a qualification cycle there.

I think, or at least my assumption is with what you were talking about with revenue growth, that it’s more of a stair step from the second to the fourth quarter, fourth quarter being the highest revenue growth on a quarter-over-quarter basis. Is that a correct assumption?

That’s correct.

On relation to some of your balance sheet stats, it looked as though your AR days sales outstanding grew slightly in comparison to last year and the average over the 2007 fiscal year. Is that something that you expect to come on down to historical levels, or is that a new watermark?

Yes, we do. We expect it to comeback. It’s not unusual for us, if you look at our pattern over a long time, for the first quarter, DSO to be higher than we had at year end. It’s also a function of some shifts in the business as well. We expect that to come down. And I would also like to reiterate that our normal bad debt expense continues to be very, very low.

You have a follow-up question from Chuck Murphy - Sidoti & Company.

Regarding this new potential ruthenium customer that you are hoping to penetrate in the second half of the year, is this something that you have been expecting for a while? Why would they start to accept your targets in the second half of the year when they hadn’t done it in the past? Maybe you have changed something about the targets for them.

Yes.

What’s changed?

What we have, it’s a different target, which we believe will offer a significant cost reduction and also provide some working capital improvement. So, it’s a new innovation.

Is this the same customer that you are hoping to penetrate with the oxide layer?

Yes.

You mentioned that alloy had some capacity changes. Can you elaborate on that again?

Yes. That’s in our Alloy bulk products are opposed to our chip products. And as I’ve mentioned, we have been growing very strongly in our bulk products in alloy. And we started about six months ago, determined, we were going to hit some capacity bottlenecks. And so, we got ahead of that curve. And as we speak, we are bringing some equipment online to help alleviate some of those bottlenecks.

And was that Lorraine or Elmore?

That actually is in Elmore.

You have a follow-up question from Avinash Kant - Broadpoint Capital.

What was your international sales overall for the quarter? And what should we think of the tax rate for the rest of the year?

Certainly below last year’s rate. And Avinash, it will in the end depend upon the mix of business, and domestic versus international, and where it occurs as well. It could be as much as one to two percentage points lower by year-end.

And the international sales were approximately $77 million. It’s a drop-off from last year in the first quarter because a good portion of the media business was international.

The quarterly growth that you are expecting for the rest of the year, maybe if you could qualify that a little bit further. Do you expect a jump in June, or the real jump will come in the September quarter?

We expect to see a significant increase starting in the second quarter versus the first quarter.

And then, from then on it will be a gradual improvement to that.

That would be a one way to think about it. Here again, from a sales perspective, let me remind you what I already said about metal prices, and then what will or will not occur, what may occur with metal mix and the source of the ruthenium, whether it’s customer owned or material that we provide direct from purchased sources and the effect on those numbers.

Given the high amount of copper and ruthenium prices that you use, if we were to assume that the prices of copper and ruthenium and the other precious metals stay at current levels, your top-line growth will be 10%?

That’s right. That’s what we’ve said.

But, if the prices go up, it could be higher than that.

That’s right.

There are no further questions at this time.

We’d like to thank all of you for participating on the call this morning. I’ll be around for the remainder of the day to answer any questions. My direct number is 216-383-6823. Thank you very much.