Greetings, and welcome to the Brush Engineered Materials Fourth Quarter 2008 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Hasychak, Vice President, Treasurer and Secretary for Brush Engineered Materials. Thank you. Mr. Hasychak, you may begin.

Good morning. This is Mike Hasychak. With me today is Dick Hipple, President, Chairman and CEO; John Grampa, Senior Vice President, 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 fourth quarter and year end 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 February 28th, by dialing area code 877 the number is 660-6853, account number 286 and conference ID 310422. The international replay number is area code 201 and the number is 612-7415. 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.

Thank you, Mike. Good morning everyone and welcome to our fourth quarter call. Thanks for taking the time to join us today. Today's format is the same as that of past calls. I'll review the quarter and then comment on the outlook. And then following my comments, Dick Hipple will provide you with a market update and he will review of our key company factors. Dick will also comment on the effect that the economic developments of the past several months have had on our business as well as the aggressive actions that we've taken and will continue to take to ensure that the company remains healthy through the economic environment. Then we'll open the call for questions. I'll focus on some on some of the key points identified in the press release, covering both the quarter and the outlook. I'll comment only briefly on the year and I'll also attempt to pre-answer certain specific questions, some of which we have been receiving recently. First, I believe that it's important to review the non-GAAP operating run rate defined and presented in the press release, along with the key items affecting the comparisons to the prior periods. Then, I'll cover the factors affecting the reported sales compared to the prior year, including the impact that metal prices and our media market issues have had on reported sales and related comparisons for the prior period. And then, I'll review our balance sheet which is very strong, strengthened further in fourth quarter and is expected to continue to strengthen in 2009. And then following those comments, I'll review the outlook identified in the press release. Let's begin. We'll start with the review of the reconciliation of the non-GAAP operating run rate to the reported GAAP earnings. As I review the non-GAAP operating run…

Thanks John. Talking about the market today is almost like saying; I'd like to talk to you about my recent trip to the dentist who ran out of Novocain. And so far, I haven't found a dentist who has any Novocain in stock. Unfortunately we have not been spared the severe economic downturn that has been widespread across the economy, starting in the fourth quarter and continuing to escalate into the first quarter of 2009. I am proud of the management team and the work force as to how they have quickly responded to the rapidly changing conditions. The cost and inventory reductions have been rapid and effective. Our hourly work force has also been extremely flexible in finding ways to reduce the costs. Actions have been taken across the company to reduce costs and to ensure that the company's healthy balance sheet remain strong. Actions include head count reductions globally that have reduced total employment by more than 10%, since the end of the third quarter. The company has also implemented pay freezes, reduced work hours, suspended a portion of the 401(k) match, reduced discretionary spending, supplier costs and deferred lower priority initiatives. In addition, working capital is being diligently managed and targeted capital spending deferrals are being aggressively implemented to ensure that the company's balance sheet remains very healthy. As many of the company's markets continued to weaken through the early part of the first quarter of 2009, additional measured steps are being taken. All markets and all geographic areas of the world have been affected by this rapid downturn. The only exceptions have been the medical and defense markets. As I look forward into the first quarter of 2009, we see many customer order patterns from 50% to 80% down. With this being the case, we expect…

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Our first question is from Avinash Kant with D. A. Davidson. Please state your question.

Good morning, John and Dick.

Good morning.

Good morning.

A few questions. Am I right in understanding that if you did not take the charges related to ruthenium, your gross margin would have been roughly close to 18% or so?

That's correct.

Okay. And in terms of as the commentary was, your customers are seeing much steeper decline in revenue in the March quarter, you said in the order of 40, 50% or so. How is it that your revenue decline is going to be limited to the 25%? Is that partly because of the ruthenium sales that you are starting to do again?

Could you repeat the question to make sure we capture the quarter reference correctly?

Like your March guidance, the low end of the guidance is for down 25% in revenues, whereas in the prepared remarks you were talking about your customers, talking about the huge decline somewhere in the 40% to 50% range.

Avinash, my comment was that many customers, not all customers.

Okay. Now that basically, did you give out what was ruthenium sales for the quarter?

I commented on the change between the two years.

It was 27 million I believe.

I think approximately $27 million. And that leaves a very small amount $4 million to $5 million in the fourth quarter.

If I remember correctly your total sales for ruthenium in the last year 2007 were roughly $160 million?

That would include sales into the head businesses. I was referring to sales onto the hard disk drive piece of that business being about a $140 million in the prior year.

140. Okay, because at one point --

150.

150, yeah because at one point... okay, so now it make sense. Okay 150 down by 142 roughly?

Right.

So roughly 8 million. Okay, that makes sense. Okay. So, but you did say that you are starting... you did qualify the new materials again and you'll be starting to ship.

We have started to ship.

Already into fourth quarter, right?

We have started to ship.

Okay. That was in the fourth quarter or in the first quarter now?

It already was in the first quarter.

Okay, very good. And another question I had was, going forward of course you are talking about some sort of recovery, hoping for some recovery from the second quarter onwards. Usually what kind of visibility do you have? Like do you see these things at least three, four, five months ahead of time or is it more of a turn's business and you are kind of expecting it based on the decline that you have seen so far?

Well, there is certainly not visibility three to four months in advance anywhere.

Alright.

So, it's dominated by what we see happening in a given month for example, half of business might to come to us in orders in that month.

Okay. So on a monthly basis you do see things improving from February, March timeframe or beyond that?

Well, no we do not. What I had said in my words is I am using some high level logic that basically says that some of these order patterns are so low that they don't really match with what the ultimate consumer pattern maybe. So, that is a sign of a massive inventory adjustment going on. So that given that, when that order pattern can only be sustained at that lower level for a period of time when ultimately the inventory adjustments are then made and then you see the order pattern pickup. An order pattern picking up to date does not necessarily mean that the economy has improved. It simply means that the inventory adjustments have waned.

Maybe. And John on the operating side, would you say that the efforts that you have made, the full impact of that was not reflected in fourth quarter most likely will be starting this reflect in the Q1 or beyond?

Very little of it would have affected the fourth quarter. There were some but not much. The majority of this will began to take route as the first quarter progresses.

Right.

Probably fully implemented at least what we are planning today, the full impact will be felt in the second quarter of the year, not even the first quarter; majority in the first, some coming in the second.

So could you give us some idea about what's the magnitude of that impact, how do we model it going forward for the year, how much of a decline should we see in the operating expanses?

Well, what we're looking at from these actions is around $25 million to $30 million a year, is what we expect to get out of them. And certainly, yes, if things unfold, we'll be looking for more.

And that's not just in operating expenses, which you referenced that's everything from what happens inside operations above the gross profit line as well as GAAP income.

Both overhead in operating

Below the SG&A... below the gross profit line.

Okay. And any idea in terms of assuming everything else being the same, metal prices and all that. When you talk about $0.75 in earning, what kind of revenue you have in mind. Any range there assuming the metal price being the same?

I wouldn't want to comment too specifically because as you know, metal prices aren't remaining the same, and the mix of metals will not remain the same. So, up to $0.75 could take us up to a revenue rate thats well over $800 million. So it's a difficult number to try to be specific about.

Okay. I'll let other try to question. And then I'll get back inline. Thanks.

Thank you. Our next question is from Mr. Anthony Sorrentino with Sorrentino Metals. Please state your question.

Good morning, everyone.

Good morning.

Good morning

You said in the press release that because Brush has a strong financial position, it would be able to take advantage of strategic opportunities. Would these beat the usual tuck-in acquisitions or are you considering something larger?

Well, again we've never limited ourselves. Obviously in today's environment I think I'd be a little bit more comfortable with tuck-in. But again you have to keep your eyes open if there would be a unique win-win opportunity with a larger company. I mean everything would be up for consideration.

Okay. And which areas or industries would you be looking to add to?

Well, if you look at our pattern that we've had in recent history the last couple of years, what we've been doing is looking for acquisitions that provide a certain business model, and that business model is in high growth areas, high value-add, low capital intensity, good working capital turnover and businesses that provide some strategic advantages with our core businesses. And our core businesses, which is kind of interesting today are expanding. So our old core business is different than today's core business, which now gives us additional advantages as we look to expand the company.

Okay. Thank you very much.

Thank you our next question is from Ms. Anne Riley with American Metal Market. Please state your question.

Hi. I'm interested in asking about staffing cuts over the quarter. It says in the release that about a 10% overall cut took place. I wonder if you have any specific numbers on how many that is by a head count.

Well, the release didn't say that the full 10% occurred in the quarter. It reference, what we expect to be accomplished by early in the second quarter, the first quarter then New Year. At the end of the third quarter we had approximately 2,300 employees in the company.

Okay.

So, you can apply that 10% to that number and we'd suggest that it would be,that number, maybe slightly larger.

Okay. You said 2,300?

2,300.

Okay. Now, you are talking just now about the medical medicines industry is really being your strongest markets right now, maybe seeing some growth there. I am wondering whether we are going to see any pulling back in the other market, especially media, which you said just underperformed might we see more staff cuts, more project deferments there.

For us or with them?

With you, with your department.

We'll have this business right size for whatever the market conditions dictate.

Okay, great. Thanks for your help.

Thank you. Our next question is from Mr. Rob Young with WM Smith & Company. Please state your question.

Hey, good morning guys.

Good morning.

Good morning.

Congratulations on getting re-qualified.

Thank you.

I had a quick question regarding that. Are there any other outstanding ruthenium qualifications that you look to seek over the next quarter or so?

Yes.

Okay.

Yeah, we haven't fully on the... there is about four critical customers, and we are over the hump on a couple of them.

Okay. From a risk standpoint, are there any issues with losing market share or potential market share in the time of not being qualified to competitors that are qualified?

Yes, we've already suffered from that.

Okay. Is there any update on the oxide layered off?

That's really... we've got prove our metal and this ruthenium layer.

Okay. And then relative to the head count reductions, are you expecting any severance costs as a result of that?

Yeah. Sure.

Yeah, we would expect some in the first quarter.

Some in the first quarter, okay. That's all I have, I appreciate it. Thank you very much.

Thanks Young.

Thank you.

Thank you. Our next question is from Mr. Mark Parr with KeyBanc. Please state your question.

Hey guys. This is Phil Gibbs for Mark Parr. How are you?

Hi Mark. Good morning Phil. How are you?

Pretty good. Your cost structure as it stands right now, can you give us some idea about how much of that is variable and how much of that is fixed approximately?

We don't disclose that Phil. So no, we will not share that.

Okay. And Dick, did you say $25 million in cost reduction from the recent initiatives you've taken in 09?

Yes.

And how much of that is going to showup in SG&A versus other areas of the business due rationalization?

It's roughly 50-50.

50-50, okay. As far as in the margin impacts from lower copper prices we've seen lately, is there going to be a delay in the pass through or we're going to see in the first quarter or some sort of mismatch, how should we'd looking if that is part of the margin impact?

There is a slight lag there as we talked in the past a month or two between the time of the the order of time of fulfillment. But obviously order levels are down now, so you are not going to see too great an impact in the first quarter. But, if copper prices continue decline we will see the benefit there.

Okay. You've alluded to the fact that the medical markets and the defense business have been strong. We've heard that on past calls that your defense business is been good enough, and I’ve heard from other companies that the defense business is been solid. Is there lot of that going to be baked into the beryllium business? Would you say that the strength that you saw as far as the solid margins, the above 15% margins in the solid sales growth, is that going to be sustainable through next year?

The first question, yeah I think I'm glad you brought this up because generally this company has always talked about the defense business centered around our beryllium business and that is true for the beryllium business. So, what's interesting is that our footprint has expanded in the defense business really through our acquisitions. For example the business that we acquired out in California several years ago, the TFT we call it. Their primary business is defense and is growing very, very strongly. Our business, our inorganic chemical business that we bought up in Milwaukee, they are big suppliers of TFT. And they had a very nice core of defense business. So, actually our defense business footprint is expanding within the company.

Is that TFT business, is that the infrared business, is that right?

No. The TFT... well, yeah. You are right. It's the filters, yeah. The coating for the filters, the infrared filters, that's correct.

Okay. But would you expect this strength in the beryllium business in the fourth quarter to continue our is that a depiction of some lumpiness?

Well, I think let me put this way. We expect the good year in 2009, it's one of the few businesses that you have some, forward look to them because of the lead times. We did a very strong shipping quarter, in the fourth quarter in beryllium business. Now will we repeat that every quarter, I don't think so. But that's just a reflection of lumpy shipments. I think the business itself is solid for 2009.

Okay, fair enough. Thanks guys.

Thank you. (Operator Instructions). Our next question is from Mr. Avinash Kant with D. A. Davidson. Please state your question.

Just a quick follow-up. Any comments on the development on the new plant that was coming up to accommodate the beryllium plant?

Yes, all the building steel is up, foundation is in, the building steel is up, it's on schedule. And I don't have its schedule committed to memory. But I think, our start-up is scheduled right around the end of the first quarter next year. And so everything is in order there.

End of Q1?

Yes, that's routine.

Okay, perfect. And, of course, is that the production time, you'll start producing at the end of Q1 or?

Yes, that's pretty much all the construction that would be completed right around probably April, then we'll go into a start-up mode. So I would expect us to be seeing some decent production at that facility certainly before the end of the year.

Before the end of the year?

Correct.

Okay, perfect. Thanks so much John.

(Operator Instructions). Our next question is from Mr. Mark Parr with KeyBanc. Please state your question.

Hi, just a real quick. Had you mentioned that your CapEx plans for next year?

Thanks for asking that question. No we did not. But as you recall, we've been operating in the range of 25 to $30 million in the last couple of years. We would expect that in 2009 given some of the actions that we've taken that will be well below $20 million in CapEx. So, for a range effective range $15 million to $20 million.

Okay. And just the last question on the balance sheet; the retirement of pension benefits that went up about $40 million on the balance sheet in the quarter, can you give some color on that?

Yeah, that's the peculiarities of pension accounting and that's the unrecognized loss that we had on our investments this year, plus changes in the various assumptions by the discount rate. So here in the fourth quarter we had to raise our liability. The offset there was a hit to what we call OCI within shareholders equity. I'm sure you're seeing that same type of adjustment from a lot of your other clients.

Right, right. Is there a pension fund status that you can lead us to?

Sure. Our valuation of our pension fund as of the pension fund plan year end, which is May 31st, the last one was May 31st of 2008. And taking into consideration the cash that will be putting in during 2009, we would be up at the 80% funded rate. Of course, we'll have to redo that as of May 31st of 2009 to see what the shortfall maybe given the performance of the assets for the remainder of the year of 2008 and to May 31st of 2009.

Now, is there going to be a cash outlay that we're going to see?

We'll be putting in about $18 million into the fund in 2009.

Okay. Perfect, thank you.

Majority of that has been expected for quite sometime.

Right.

Okay. Thank you.

Thank you. There are no further questions at this time. I would like to turn the call back over to management for closing comments.

This is Michael Hasychak. We would like to thank all of you for participating on the call this morning. I'll be around for the remainder of the afternoon to answer any further questions. My direct dial number is area code 216, numbers 383-6823. Thank you very much.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.