Greetings and welcome to the Brush Engineered Materials Second Quarter 2010 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, Inc. Thank you. You may begin.

This is Mike Hasychak. With me today is Dick Hipple, our Chairman, President 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 second quarter 2010 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 August 14th by dialing area code 877-660-6853, account number 286 and conference ID number 353877. The call will also be archived on the company's website beminc.com. To access the replay, click on Events and Presentations on the Investor page. 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. These factors are listed in the earnings press release issued this morning. Now I will turn it over to John Grampa for comments.

As Mike indicated, today's agenda is similar to that of past calls. I will review several of the key financial points for the quarter and then comment on the outlook for the third quarter and the balance of the year. Following my comments, Dick Hipple will review the state of our key market and then following Dick's market update, we will open the call for questions. I believe that given the economic conditions that existed in the prior year, it is important in certain areas to compare with second quarter sequentially to the first quarter of this year as opposed to the prior year, where I believe that is relevant, I will do that as well. For those who have not had a chance to review the press release in any detail, I will begin my remarks with a brief summary of the key points in the release. Then I will cover the factors affecting the reported sales growth, isolating real or organic growth from the effect of metal price increases as well as the effect of the Barr acquisition that closed in the fourth quarter of 2009 and the effect of the Academy acquisition that closed in the early part of the first quarter of 2010. I will follow that with a review of how the growth, the metal price inflation and the acquisitions affected reported margins for the company in total and in addition, I will review the Advanced Materials segment margins and in particular the effect that precious metal mix, precious metal price increases and the added precious metal volumes from the acquisition had on a reported margins for the segment. Then I will follow with a review of the balance sheet and I also comment on the impact of the acquisitions on earnings-to-date and then finally…

Thank you, John. All they say what a difference a year makes. Our second quarter results in improved outlook for the balance of the year are really very exciting. The rapid return is strong. Profitability is driven by both our market and product positions in our operating improvements. I would like to highlight the particularly large turn around in profitability of Specialty Engineered Alloys. In meanwhile, our advanced material segment which remain solidly profitable through the downturn continues to gain strength in spite of the additional challenges of integrating two new acquisitions, and again both of these strategic acquisitions are on track to make our objectives. As we moved through the first quarter, the majority of our markets returned to 2008 pre-downturn levels. Consumer electronics is particularly robust as smartphone sales continue to capture a higher percentage of the market, and we are well positioned with applications in the major platforms such as the iPhone, the iPad, the Droid. It is expected that the global demands for portable communication devices will continue to be robust in spite of lower global GDP estimates. The increasing video demands of these devices continues to put pressure on telecom infrastructure spending but we are now enjoying global growth from applications in servers and base stations. This area is also expected to provide multi-year sustaining growth for Brush. Other major areas of our growing electronic applications, such as LEDs, are also robust and have strong sustaining high growth characteristics. After the unfortunate oil spill occurrence in the Gulf of Mexico and the drilling moratorium that followed. We had significant concerns that we would see a downturn in this segment of sales in our alloy business. However, the opposite that has happened, as it appears the drilling companies are reevaluating the materials of choice and switching…

(Operations Instructions) Our first question comes from the line of Chuck Murphy with Sidoti & Company. Chuck Murphy - Sidoti & Company: Nice quarter.

Yes, it was. Chuck Murphy - Sidoti & Company: Need your help here to tie out some numbers, when I calculated second quarter, organic sales were up about 9% sequentially, is that about right? If we excel the metals in Barr Academy.

Second quarter over first? Chuck Murphy - Sidoti & Company: Yes. No change for advanced materials.

For advanced materials, the company was about 11%. For advanced materials I don't have a data. Don't have a calculator again. Chuck Murphy - Sidoti & Company: I was also wondering if that was the case, I went back and looked at the last press release, maybe something was included then, it's not now, but I think it said that Barr Academy sales for the first quarter of 10 are about $60 million this quarter was up 48. Was there any seasonality or some point that?

Yes, there is seasonality in that business. The Barr Academy began the year with little bit of backlog. Actually academy held from December because prior to the, with that turnover the acquisition we had shutdown for the Christmas holiday, so it was little bit backlog of business that came in to the first quarter, so that's the seasonal affect there.

We had some differences in customer supplies now within the academy.

Academy business as well.

More in that year in the second quarter than we had in first quarter. Chuck Murphy - Sidoti & Company: My other question was in your press release you've mentioned something about medical and defense being down for advanced materials, is that sequentially or year-over-year?

That's year-over-year. Chuck Murphy - Sidoti & Company: Okay, what was medical for advanced material sequentially?

That's situation where we have a new piece of equipment being install in Techni-Met. We are on track and we expect that to be turned around. So let's held back shipments in that particular, it's not a market issue, it's a specific that application issue that we needed new piece of equipments to continue to grow there. If that's coming in and we hope that situation is backup and growing in a fourth quarter. Chuck Murphy - Sidoti & Company: Got it. Now is that related to, there was an issue couple of quarters is that [December timeframe]?

Yes, that's not a new issue. It's the same one we, we'll run on meeting a new piece of equipments there which we've taken care of.

Our next question comes from Avinash Kant with D. A. Davidson.

First on the guidance, if I remember the last quarter when you gave the revenue guidance that was roughly $1.2 billion to $1.3 billion and now you are talking about $1.22 and $1.26.

That's right, we have narrowed it.

Yes, and clearly (inaudible) it's not a big difference but if you talk about the high-end of the guidance, maybe you are tweaking it a little bit. Is that all metal price dependent?

It's largely metal. That's right, we had assumed, in our assumptions and in the last quarter we're continuing increase in metal prices in the guidance.

In the current guidance what's the assumption of metal prices going forward in Q3 and Q4? Is it flat or it's down some?

Q3 flat to Q2 and Q4 higher than Q1.

Q3 flat and Q4 higher than Q1 and how about higher than Q3?

No.

So Q4 compared to Q3 is how?

I think you could take, how then I should, you know it's very difficult to estimate those numbers. I think that the reason that the numbers are we narrow them are obviously we have got line of sight over two quarters and we are headed in the last half of the years, so we have narrow the range for that reason. Our metal prices were not as high in the second quarter as we anticipate in the base. So in our forecast, the metal price outlook generally is lower for the second half of the year than it was in our previous estimate.

Okay, that explains it. I just need to understand your assumptions and then we could see how it's tracking and then it will help us model. But the second half price assumption is lower than the first half, that's why the majority of the change is coming from, that's it.

Not lower in the first half, lower than our previous assumption about the second half.

Would you give us whether it is lower than the first half or not?

I am sorry, I didn't understand.

I know it's lower than what you had assumed earlier but would you venture to give us whether the second half pricing it's actually in absolute sense lower than the first half?

No, about the same.

About the same? Okay. Now, the second question I had was you have the share repurchase plan, is there any timeline for that?

No, there is no timeline.

What should we think about CapEx and depreciation for the year '10?

Yes, depreciation hasn't change. It's approximately $35 million, $36 million for the year. CapEx is probably a little bit lower than what we had forecast earlier. It's probably $20 million to $25 million. I think we had estimated $25 million to $30 million, so it's going to be a little lighter.

Tax rate, should we assume any changes there?

The tax rate at a roughly 33% for the year.

Yes. You got to remember we had in the first quarter $1.4 million hit we took, because of the Obamacare. Once we pull that out of the calculation for the first half of the year, that's about the rate we'll see down there.

In the press release, you did talk about some costs later in the year for the opening of the new beryllium plant. Now, from what I understood, majority or most of it was paid by the government, right? So, how much of a cost are we talking about here?

The construction was paid for by the government but they are all big start-up risks, and so we've estimated some additional costs in the beginning in the late third quarter, but primarily in the fourth quarter, and $1 million or maybe perhaps $1.5 million, but that again that's a stuff that's always start-up risk.

We do have an expected start-up in the numbers that we have forecasted. We are talking about here is that something would go astray.

$1 million to $1.5 million in the fourth quarter, or third and fourth quarter combined?

Mostly fourth quarter.

That's already in the guidance, right?

Yes.

So if anything beyond that will now impact guidance.

Anything beyond that would be risk.

The final question I had was if gross margins have improved meaningfully, I'd say at the current level. Now was there anything that was specific to this quarter, which may or may not happen going forward or this is how we should start to think of gross margins going forward?

I think it's probably reason we will begin to think about second quarter gross margins maybe being a reasonable surrogate from what might exist in the next couple of quarters.

With the [first 60 profits you] declined and slight decline in revenues that you are talking about in Q3 and Q4 still margins could have stay there?

Again you have the issue that we always have a metal price and then customer pull metal versus our own metal and then of course metal mix. So, yes, I think assuming no change in all of that about the same margin.

There has been a lot of concerned lately specifically in the electronics good chain about some upcoming slowdown, especially from Europe or the economic slowdown that people have been talking about. Have you seen anything like that in your customers thus far?

No. I have not.

Our next question comes from Anthony Sorrentino with Sorrentino Metals.

Also in the press release beyond discussing the added cost related to the beryllium plant you also refer to other key company initiatives, would you go in further detail with regard to that?

Sure, let me just comment briefly on that. We are investing in a number of areas. All driven at continuing to improve the effectiveness inside this company's operations and driving margins up in future period. What we're referring to specifically here, our investing is in marketing initiative, investing in purchasing, and some initiatives to improve help us improve pricing, all of which will be spending some money on, again late third quarter through the fourth quarter of the year. In third quarter I should say through the fourth quarter of the year. Benefits in 2011 probably we'll continue to expend into 2011.

Our next question comes from the line of Mark Parr with KeyBanc Capital Markets.

I wanted to add my congratulation it's awesome first half and you guys are continuing to make progress. Dick one of the things, I think that investors have been a little or feeling a little confused about maybe over the last several years is, there is in the ups and downs. There has been periods, where you have done extremely well then there has been another periods, where things come back in a bit. I'm just wondering you've been focusing marketing on trying to really address high growth segments of fast growing markets. How are you feeling right now about the sustainability of the growth track, say relative to where you were couple of years ago. You understand what I'm trying to coming out?

Yes, I do and in fact, I am glad you asked that question because I'll try to get some of that through the discussion I had after John and really, I am really quite excited about it because what we have done, if you think about some of these markets, with the position we have with the mobile electronic space and smartphones, that has got a very strong growth path ahead of us in the parallel with the infrastructure that's very sustaining with what's got to go across the globe.

This is more alloy material. Is that correct?

It's for both segments. Beryllium's actually, probably is to a higher than alloy when you come to the wireless sector. So that whole space is a really strong horse to be riding right now and obviously our plan is to ride stronger than that because we are after growing faster than that market space based on growing applications. Then you take a look at what we have done in the oil and gas space and we have really increased our portfolio of applications there. We have, similarly, on the aerospace, they are going to finally start building these new planes, they are coming and we are growing faster than that market. We have now got a really nice footprint that's going to be growing in the alternative energy space which is another great growth market in both the solar and some other applications. So if you spin the clock back five years ago, we didn't have this diversity of opportunities. We were talking more, one here, one there. Now, it's so darn exciting because of the numerous opportunities we have across the board on numerous growth markets but that's been our strategy. That's where we try to position the company and so we've had an extraordinarily strong rebound from this recession and it's really driven by the strategy that we've been working on for last several years and that's really a blossoming right now.

That's really helpful, and congratulations on that progress. If I could just get one and just ask one follow-up? In the energy markets, where you've had people actually upscale the quality, reliability of the respective tooling et cetera. Is that something that you would expect to be kind of a one-shot deal or?

No. That's going to be another systemic change, because if you are talking about people changing their materials and upgrading their materials, you've got a one-time thing, but that takes a while there, but then what it says is that on an ongoing basis, they are going to be using higher grade materials.

Any way you could put a number around that and perhaps quantify from a revenue standpoint?

It's too early at this point in time, but we're increasing our growth estimates in the oil and gas area because of it.

Any sense of how much of that could add to the second half revenues?

Not at this time, I would be guessing.

Our next question comes from Yvonne Varano with Jefferies & Company. Yvonne Varano - Jefferies & Company: Good quarter, nice margin expansion and I did want to ask on the specialty engineered business. I think that's where we saw some significant operating margin improvement, and from the comments and the press release and it seems like that should be sustainable and I'm just wondering you think it stays in this 10% to 11% range or is there more upside to that or other factors that affected the quarter what we would like to see that for back in the back half.

They were really special factors in the quarter, which is really good news. We have systemically improved that business. I mean that's major message and as always we are going to continue to try to improve that business, better our margins and just operating the business better and improve productivity and better pricing strategies and better product, higher margins. That's the normal blocking and tackling but the business has systemically improved and so now but to sacrifice those margins would be say a significant change in the volume side. I mean, again, it's a business that has a tendency. They are just sensitive to volume. So, other than that we are rally proud of the job that the division has done.

I think the key point area that you picked up on, Yvonne, was that even if the volume were to drop, the cost that have been taken out, they had not and will not come back in to the break-even point in that business have been changed significantly and if you ever see the environment that we had in 2009 again in that business you won't see the loss levels fall in that business in 2009. So, significant difference and change in the cost structure. Yvonne Varano - Jefferies & Company.: Okay, and looking at the entry businesses I know the volumes they were anticipated to come down a little on the seasonal factors you talked about maybe impacting the margins barely but any other key business that you expect to see greater margin deterioration in the back half of the year.

No. Yvonne Varano - Jefferies & Company: I guess, I am asking because it seems that if they are really not, outlook you put out could end of being conservative?

That's a difficult one. The outlook is our best estimate and our best judgment considering some of those downside factors. If we don't see the start up cost, for example, that we have got baked in there, if don't see the seasonality, if we see some stronger demand from the consumer electronic side, we see some lift then you can argue that it is conservative, but at this point I think it would be unwise for anyone for predict that there is not going to be some sort of economic effect out there later in the year.

Our next question comes from the line of Rob Young with Wm Smith & Company. Rob Young - Wm Smith & Company: Just curious, could you remind us on the permanent cost reductions on how much they were and the aggregate level of cost reduction you were able to take down last year?

Actually, I think that probably what you would most interested in is that on the same basis our manning levels are approximately 250 people below, still below where they were at the third quarter 2008, end of third quarter of 2008 when we started to take the cost actions. So we have got an employment level on the same basis but when I say on the same basis excluding the employment level that's in the acquisitions. We have got an employment level that's still 12% lower. On the costs side, including the employment level on that same basis, we still have about somewhere between 10% to 15% of the overhead structure out of the organization including the many levels. Rob Young - Wm Smith & Company: Right, so is that a permanent thing to see going forward or you see that?

Well, I didn't ever say that it's entirely permanent. You do get step functions as your business grows but certainly we are not seeing any of this significant of that coming back over the next couple of quarters and I would go as far saying perhaps even in the early parts of 2011 but again it's all dependant upon growth and the statement and that makes perfect sense,depending on the state of the economy. Rob Young - Wm Smith & Company: So obviously you were able to deal with this level of growth that's coming through the pipeline with fewer employees from the legacy business.

Yes, and one thing that I would add also that, I should have added in response to your volumes question is that one of the big difference is in that engineered alloy segment also is pricing. Stronger pricing, stronger margins. Rob Young - Wm Smith & Company: Okay, and then, I was hoping that you could possibly comment on the inventory levels that your supply is as low as customers. I know that your score levels are so below the end-user but can you comment at all or is that data available?

Two things, yes, on the raw material side coming in there are no supply issues that we have seen. No interruption in supply of any kind. On the other side, albeit that we have maintained that maybe there is an inventory build out there, maybe there is an inventory correction, we have said, logic would suggest that that's perhaps the case, we have not seen that. We have heard that from our customer base. Rob Young - Wm Smith & Company: Okay, and then just lastly, last quarter I think you mentioned that, and correct me if I'm wrong, but I thought it was mentioned that order entry levels were essentially at three or high. I was hoping that you could possibly comment on that a little bit. I mean has that sequentially improved or tailed off a little bit due to seasonal?

Yes, sequentially improved, book-to-bill was $1.13 in the first quarter and $1.07 in the second quarter. Rob Young - Wm Smith & Company: Has that have any effect on the abilities for you to predict that, essentially predict the future? Has that helped your overall outlook and essentially extended out your ability to see the future, does that make sense?

Yes. It has, because having the growth there in the backlog and it gives us a better line of sight obviously to having an initial quarter of the second half. So the answer to your question is yes. Rob Young - Wm Smith & Company: In terms of fiscal year 2011, would we expect to see some type of guidance in the next quarters for what's out to shake out?

As we began get our own line of sight over 2011, we'll provide the guidance. We generally provide that guidance in the first call after the end of the year.

(Operator Instructions). Our next question comes from the line of Mario Gabelli with Gabelli & Company. Mario Gabelli - Gabelli & Company: As you look out to, unfortunately I have been grazing on four conference calls at the same time, as we look at the 2011, 2012, you done a good job in using cash flow to buy Academy and Barr. What do you feel you need to reinforce the trends that you see in the markets you want serve and is it tuck-in acquisitions or is it larger acquisition? Can you do it internally through organic growth?

I think Mario, Dick Hiple, how you are doing today. I think we have had a practice here where we have been basically would be doing tuck-in acquisitions. We think strategically that's right on the mark. Obviously it's a little bit safer route to go. In case something would blow up you haven't really disturbed the company so much and we have been very strategic about this tuck-in and acquisitions that when we buy them we really we are buying them with some pretty high confident that their ability to grow is pretty strong. They have also been based on expanding our footprint of technology end-markets. So they really work well for us. That's never precluded us from saying that we don't want to do larger acquisition but if we would do that we have to be very confident that it would be building sustainable growth at a fairly low risk profile and so what we wanted to be here is stable and growing stable over time versus, it's a very large acquisition that might have a larger risk profile to it, but that does not preclude us from having that philosophy should the right opportunity come along and I must say that we have looked at those opportunities. However, we have not been totally comfortable with them. Mario Gabelli - Gabelli & Company: That's a fair Statement. Everyone is in the world of uncertainty. Uptick, as you are looking out, you got smartphones, you talked about the big 787 Dreamliner and the Airbus. Did you talk about how much dollar per smartphone you get as content?

No, we don't talk about that, reveal that information. The type of applications we have in a smartphone are kind of two fold, one is from our alloy division where we provide connector materials into those devices for the very high end reliable, our reliability connector materials and then in our Williams Advanced Materials group we provide a lot of precious metal targets that are used for sputtering compounds semiconductor devices that go into cell phone, smartphones.

That's helpful. How about on the 787 in the airbus on a dollar content and what do you do there in dollar content per chipset?

Again we haven't talked about the dollars per plane but we're in a lot of bushing applications, on the landing gear, on the parts of the plane that, for example, where you have the air flaps, I won't get the technical words right. So there. We've got a flyer in the team here. Where you have the bushing material in those devices. So we're in a lot weird areas of the plane where they need, where they don't want to do a lot of lubrication and they get a lot of high loads. They are going to our material base because it's a higher strength and a better wear resistant overtime. So what they can actually do is they can use less metal on their planes because we're about double the strength of the metal that we replace. Therefore we're not a light weight metal in the case of what we are providing but they use half of it because our strength is high. Mario Gabelli - Gabelli & Company: Is it too late to get more content for plane and to the designs of the 787 and the new 737 single bodies or anything like that?

That has a very long design phase ahead of that but what's been really nice for us is for example, we have a very unique metal that's going on these planes and we worked hard for several years to get the material certified at the major airplanes. So anytime you have a new metal, I can tell you, it's very, very difficult to get it specified and certified on commercial airline designs. We have accomplished that. So now the airlines, the engineers have full capability to use our materials that they need the design of the plane. They now have the flexibility because we are certified from an engineering perspective. Mario Gabelli - Gabelli & Company: That's terrific. I just want to figure where the new products, the markets that you are targeting in the 2011, 2012, 2013 period. I will look at that offline at some point. Thank you very much.

There are no further questions in the queue this time. I would like to turn the floor back over to management for closing comments.

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

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.