Greetings, and welcome to the Brush Engineered Materials Inc. Third 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. Thank you. Mr. Hasychak, you may now 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 third 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 November 12th by dialing area code 877; the number is 660-6853, account number 286, and conference ID number 358635. The call will also be archived on the company’s website, beminc.com. To access this 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. And now, I’ll turn it over to John Grampa for comments.

Thank you, Mike. Good morning, everyone. Thank you for taking the time to join us today. Today’s agenda is the same as that of our past calls. I will briefly review several of the key financial points of the quarter and then comment on the outlook. Following my comments, Dick Hipple will review the state of our key market. And then following Dick’s market update, we’ll open the call for questions. As in the most recent quarterly call, I believe that given the economic conditions that existed in the prior year, it is important in certain areas to compare the current quarter sequentially to the previous quarters, as opposed to the prior year. Where relevant, I will do that. For those who have not had a chance to review the press release in any detail, I’ll begin with a brief summary of the key points in the release. Then I’ll cover the factors affecting the reported sales growth, isolating real or organic growth from the effect of passing through metal price increases and the effect of both Barr Associates acquisition that closed in the fourth quarter of 2009 and the Academy Corporation acquisition that closed early in the first quarter of 2010. I will also review sales by markets, comparing sequentially to the second quarter highlighting the key changes, and there were several. Then I’ll review how the growth of the metal price inflation and the acquisitions affected reported margins for the company in total. In addition, I’ll review the Advanced Materials segment margins and in particular the effect the precious metal mix, precious metal price increases and the added precious metal volumes from the Academy acquisition have had on reported margins for this segment. Then I’ll review our cash flow and balance sheet and comment on the impact of…

Thank you, John. My comments today will be fairly brief. I’ll start by saying that I’m very pleased with the Brush team of employees for achieving new milestones for the company. We have rapidly recovered from last year’s recessionary environment and positioned the company to participate in numerous strong secular growth markets. Also, we recently passed $1 billion in sales for the first time in our history, and we’ve greatly expanded our value-add margins as compared to where we were in 2008, prior to the downturn. As John mentioned earlier, we began the year with robust growth from the wireless consumer electronics market. The proliferation of new designs, devices and complex applications is truly amazing. Following this timing, we began to see the telecom infrastructure demand return and then our heavier industrial markets such as oil and gas and consumer aerospace. And all along, we have seen steady demand throughout the year in automotive in most of our defense related applications. The current situation in our markets is unfolding as we expected. I have mentioned in previous calls that although the consumer electronics is a secular growth market, it is always subject to inventory adjustments from time to time, but sometimes these can be significant. We’re now seeing some markets softness in the order patterns, which is what we expected to see show up sometime in the latter half of 2010. Meanwhile, we are seeing increasing strength from our heavy industrial market. This strength comes from a combination of new applications and strong market conditions, driven by the higher price of oil and other commodities. Also, the commercial aerospace industry is finally beginning to build a new platform after significant launch delays. The automotive markets remain steady. And since we have improved our application wins in global participation, we are enjoying global automotive growth, not just relying just on the U.S. market. So overall, we are excited about our key market sectors entering strong secular growth trends, which should continue to offer solid and sustainable growth opportunities as we bring the value to our customers. I’d also like to add that the construction is fully complete at our new beryllium pebbles plant in Ohio, and we’ve now entered their (inaudible) start-up phase. And we’d be ready for questions.

Thank you. We’ll now be conducting a question-and-answer session. (Operator Instructions) Our first question comes from Avinash Kant from D. A. Davidson.

The first question I had was, recently you talked about some pricing increases that you could do in your alloy segment.

Yes.

Could you talk a little bit about extent of price increases and the impact of that on the margin?

We actually cannot disclose too much relative to the specifics market-by-market, segment-by-segment within that business. The announcement that you’re referring to is an increase I believe it was a September announcement on bulk price increases.

Right.

And what was it, 3% that was announced?

5%.

Was it 5% that was announced?

Yes.

Yes. And you know the percentage of the business that is the bulk business. You can do the math on what the maximum impact would be if that was fully absorbed over time. I don’t have a calculation here to kind of give you any indication of what the total percentage from period to period in that business has been on pricing, although it has and we’ve never been public with that, although it has been significant over time.

The market area is very strong and we’re quite confident that the majority of that will stick in the marketplace.

Right. And I missed the number. You said for the revenue you were talking about $1.24 billion to $1.28 billion now?

1.24 to 1.26.

1.26 billion, right? And previously you had talked about, what, roughly 1.2 or so? And I was trying to see, in fact, has it changed how much of it has changed because of the metal pricing, and how much is it because of the fundamental demand?

Since the last call?

Yes.

Very little due to price.

Very little due to price, right?

Yes.

Okay. And also, I was wondering, do you use some rare earth metals in your applications? There has been a lot of chatter about pricing going up there, and availability, and all that -

Very insignificant. It’s very insignificant.

Very insignificant.

I don’t think we’ll ever see it. We’ll use a tiny bit of it. But it’s not going to affect the company and you’ll never see it.

And if you could give us some qualitative idea, you talked about Q4, of course, some seasonality clearly in the electronics segment. But do you expect the aerospace and the defense segments to be steady or going higher in Q4?

Well, at this point of time, we see it being steady or to go higher.

Okay. Thank you so much, Dick.

The seasonality in the fourth quarter isn’t just electronics. Yes, there’s some added, but there’s fewer shipping days.

Yes. What I’m talking about is the market situation. The fourth quarter is always softer from shipping days and other things, but your question I’m interpreting as how the market is.

Right, absolutely. Yes. Okay. And yes, two things. Single digit growth for the next year? For ‘11?

Right.

Yes.

Thank you. Our next question comes from Charles Murphy from Sidoti & Company. Charles Murphy - Sidoti & Company: Nice quarter, particularly since you didn’t really get much help from electronics.

Thank you. Charles Murphy - Sidoti & Company: So I had a few questions. First, just so I’m clear, if I kind of back into the numbers, and am I right in thinking that the kind of implied fourth quarter EPS guidance is $0.35 to $0.45?

Yes. If you take the year and back off the current position, yes. That’s the GAAP number. Charles Murphy - Sidoti & Company: Okay. I just wanted to make sure. Great. And then, in terms of your different segments, I mean, what are your expectations for the fourth quarter for them? I know you kind of mentioned aerospace and defense. If you had to break it out, advanced materials versus alloy kind of thing?

Well, I think that the comment that we made relative to what happened in the third quarter probably still holds for the fourth quarter, sequentially to the third. It could be additional fall off through the inventory corrections and seasonal factors in consumer electronics. I’m talking about now outside of the shipping day effect. And then helping to offset that would be a greater demand from energy, telecom, infrastructure, defense, optics, the industrial and the aerospace markets as well, perhaps even a little bit in appliance and a couple of other areas. So our expectations are not too different from what really happened in the third quarter.

Right. And that’s reflected in the range. Charles Murphy - Sidoti & Company: Got you. What about, you mentioned the single digit growth for ’11. How are you thinking about margins?

That’s a fair question. I think that we still have plenty being done in the area of surgically examining pricing. We don’t see costs being added back at any pace consistent with the revenue growth. We think that revenue growth will outpace cost add backs. And I would say at this point I was assuming that there isn’t anything that occurs from a macroeconomic perspective that is too negative, that margins in 2011 will equal to or greater than 2010. Charles Murphy - Sidoti & Company: Got you. Okay. And my last question was, and I know you guys have kind of gotten better with your ability to pass through rising copper prices. But obviously they’ve jumped more than just a little bit in the past few months. How do you feel about that in terms of pass throughs and it affecting margins near-term?

Sure. That’s a good question. As you know, we changed the business model back in 2006 and maybe it was late 2005 to where copper, for example, was a pass through like a precious metal. But as you know, that pass through is about one month delayed typically. And so you benefit when prices are falling a little bit and then you gain a little bit or lose a little bit when prices are increasing. During the tight supply situation and the rapid growth of this current year, the lead times on the business stretched out a little bit, so the pass through period extended maybe by up to, in some cases, six to eight weeks. So we would have been in this period of time a little bit more exposed to increases or get a little more benefit from the decreases that have occurred in that period of time. So moving forward, if there would be a rapid increase in copper, we might suffer a little bit, but I wouldn’t think that it would be significant.

Thank you. Our next question comes from Rob Young from William Smith & Company. Rob Young - William Smith & Company: Just quickly, can you talk a little bit about the M&A environment? Is that something you’re still looking at? Just the opportunities there.

Well as you know, we are always active in the environment, and we were constantly looking and looking for right opportunities. And hopefully, something will come along here that will fit nicely with the corporation, and we like to phase them in. We just had two acquisitions. And we’ll like to make sure that we take the appropriate time, make sure that those are folding in, stable and et cetera, and then we kind of move on to the next. But it’s not a pure linear game. So you always have to have your finger in the pulse of the market and be out there active. So we are. But again, we’re not doing acquisitions just to do acquisitions, they have to be a nice strategic augmentation. But the answer to your question, yes, we are certainly proactive in that area. Rob Young - William Smith & Company: Okay. And then, with customer qualifications, can you give some data points on the comparability of what you’re out there now trying to qualify at versus historical periods?

Are you talking about the, like the number of products? Rob Young - William Smith & Company: Yes. Just, I mean, anything from a qualification standpoint.

Oh my goodness, I could talk for hours on that one. But the market is very, very busy across all of our divisions, on new application submissions and qualifications. Rob Young - William Smith & Company: So do you have a percentage on how many that you’re actually becoming qualified on at all?

No, I don’t. Rob Young - William Smith & Company: Okay. Last quarter you talked about how head count, I think, was down maybe 12% on a year-over-year comparison. Is that something that you’re looking to maintain those levels? I know that you just mentioned that you’re not expecting cost to come back with any great force, I mean, is head count looking to remain at current levels?

That’s a good question, Rob. We’re actually down about just over 10%. Rob Young - William Smith & Company: Okay.

From end of Q3, 2008 levels, and we feel that that level is something that we’ll maintain for a little while. I’m excluding the acquisition from that. Rob Young - William Smith & Company: Right, right, right. And then, relative to your transformation, I know there’s just been a lot of talk about how you’ve done various changes in order to reduce the cyclicality of the overall earnings environment, and I was just kind of hoping you could talk about how you’re seeing it right now? You implemented this guidance, or you adjusted this guidance upwards, and in an environment where you might go back down to the lower levels of the cyclical environment, what can you see happening from a margin, revenue, and earnings standpoint? It’s kind of a long-winded question, but just trying to see the volatility from the peaks to the valleys?

Well, I guess, that’s been a key part of our strategy. And as you kind of see what some of these moving pieces are even accomplishing as we speak from the perspective that we have really increased out footprint. And in several nice secular growth markets they don’t all move together. So now we’re benefiting from some really nice growth in three or four markets as we may be fighting through some inventories adjustments in another one, and we are still holding strong and you’re not seeing a big down drift in the company, whereas you might see that in the past. So as we’ve restructured the company in maybe, let’s say, in the alloy division, which used to take its cycles, it would have a much larger impact. We can take more variability there now without it driving us crazy on a results basis. So that’s really improved. And then we’ve improved our market footprint. So this whole transformation is working and I think you’re starting to see these results. Rob Young - William Smith & Company: Yes. Fine. Okay. And then, a quicker question, and then I’ll jump off. Can you give an average price on the stock that you bought back in the quarter?

Sure. We bought back approximately 150,000 shares at an average price of about 23.52.

Thank you. Our next question comes from Phil Gibbs from KeyBanc Capital Markets.

Can you update us on the medical requalification process?

Yes. It’s taking a little bit longer than what we’d like, but it’s proceeding, and we do fully expect with the high confidence level that the first quarter we’ll be back in the swing there. And by the way, that’s one particular customer. We actually are really growing with two other customers at this point in time in that same market basket, if you will.

Okay. Can you give us a feel, as to the way you see telecom infrastructure progressing, as we move into next year, what type of growth you’re looking for in that market place? It seems like a big driver from what you’ve been indicating?

Yes. I’d say that that one is, as I’ve mentioned, in the pure consumer electronics space, at this point in time we’re seeing some inventory adjustments going on there. Whereas at this point in time for us the telecom infrastructure space is a little different. That seems to be a lot more steady. And I think it makes sense, I mean, if you think it. Telecom infrastructure, that’s your capital spending, which is less cyclical with consumer swings and guesses on inventory, because people have to build out their systems. My forecast for that area is still going to be a nice sustainable growth as we go forward into 2011.

Okay, perfect. And I just have a couple of quick quantitative questions. John, did you talk about value added revenues for the business in the mid-teens in the quarter?

For the company -

Value-added operating margins? Excuse me.

For the company in total?

Yes.

Yes. Were you not on the call when I did that?

Did you say it was up 60 basis points sequentially?

Let me find the reference point. Yes, up 60 basis points sequentially, correct.

Okay. Perfect. And then, just lastly, what was your book-to-bill approximately in the quarter?

1.03.

Thank you. (Operator Instructions) Our next question comes from Brad Evans from Heartland Communications.

I’m sorry if you mentioned this. I did not hear it. But could you just give us your current thinking in terms of capital spending for 2010 and into 2011 at this point?

It hasn’t changed for 2010. It’s in the $25 million range. I would think that 2011 would take us maybe to the $30 million range. It could be a little higher, could be a little lower depending upon how markets unfold next year, but not significantly different.

Okay. And just thinking about the strong recovery you’ve had this year, and very nice margin performance, could you just give us your thoughts in terms of where you think your longer-term margin goals are for the overall business, obviously as value add and the mix continues to shift to higher-margin business for you?

Yes. That really hasn’t changed a whole lot, Brad. The value add margin OP percent of VA. Our goal has been 100 bps a year. We’ve accomplished that over the last three years certainly. And we would hope that in a decent economic environment we could continue to do that.

So that’s 100 basis points of operating margin expansion per annum. Is that correct?

Operating profit percent of VA.

Okay. And then, just lastly for me, just in terms of debt structure at the end of the quarter, could you just give us the amount that was drawn on the revolver and the balance on the lease?

Sure. Revolver was about 53 million.

Okay. And the lease is still around 30 to 32?

Yes.

Thank you. Our next question comes from Mark Parr from KeyBanc Capital Markets.

Okay, first, I’m sure, I’m coming in here late because we had today was Cleveland Day, because we’ve got Graphtec, Brush Engineered Materials, and Timken all at 11 o’clock. So it’s like -

And here I thought you were going to talk about celebrating the Cavs, but that’s another story.

Well, I just can’t wait to see some more of that LB body language, as he dances around in that Miami uniform, but -

I guess we’d better move on because this is Inside Baseball.

Yes. Okay, fine. Congratulations on the quarter, the progress. Clearly, you’re making good progress in the alloy business on a margin perspective, and that’s really critical, I think, and then additive to all the other good things going on. But, Dick, you had mentioned a single-digit outlook for revenues in ‘11. How can you frame that for us? Can you give us, maybe you already did and I missed it. But I sure would like to get as much color as you’re willing to share and kind of the components of that and how you get to that level, and what are the puts and takes and what are the bright spots and et cetera, et cetera?

Well, I think it’s a tough call and I think at a very high macro level, the way we see it is we should continue to see the overall heavy industrial side continue to grow next year and plus we had the added benefit that our application base is also growing. And then, I also mentioned about the telecom infrastructure. Things are going to continue to grow next year. And then we have, always the big unknown for us is, the big question is in the consumer electronics. So what we have is, we got a big piece of growth. I do believe that consumer electronics next year will be growing. If you look at any kind of a macro forecast out there, the electronics business ought to be growing in general. And I’m not getting into the subsets of smartphones and all this other stuff. But in general, that market probably should grow 6% to 8% a year. So if you put all that together, you’d say, okay, well, the numbers might be higher than what we just indicated. But what we don’t really know here is of the rapid growth, particularly that occurred in the electronics area in 2010, how much of that is what I call the double order that goes on when you’re building inventories for a very fast upturn. So that’s the one that’s really hard to predict. And we don’t really know the answer to that. Nobody does. So we see that as kind of like the cyclical thing that swings around, and it’s not unusual in the electronics business that you have a big booming year, then the next year gets softer, although the market still climbs simply because of the inventory situation. So I think that’s the big question, Mark, that we can’t answer. So we feel very good about next year and the growth with this question, Mark, of the cyclicality on the inventory build.

Okay. So your assumption on consumer right now is that it will grow on top of 2010 next year?

Yes. And the way I would put that is, just take a look at what would the normal indicators be? That would be your PC sales, your smartphone sales, the handset sales, all those kinds of things or now you can say handsets or iPods or similar devices. The amount of portable devices sold next year, my opinion would certainly be, it will be higher than it was this year.

How would you view…

That’s a global comment. That’s not a U.S. comment.

Okay. Any comments you can make about the supply chain for the new Verizon iPhone? I mean, how that’s looking? Are they I mean, is that really helping you right now? Or do you look for that to help you more next year?

I think next year.

Okay. All right. So, I mean, that’s certainly something that’s going to be additive to the process and these new flat computers that don’t open and close, like the iPad, that’s another one, I would think.

Yes. I mean, just the proliferation of these devices. And what’s neat about this is that because of all the new designs, people will change and buy things just because they’re new. It doesn’t mean that just because you might already have an iPhone or a BlackBerry or what have you, but something else comes along, you’ll have that device plus another one. I mean, that’s the magic of the whole consumer electronics area.

Of course the other side of that that none of us know about yet is to what extent some of those devices, especially the tablets, might find themselves in corporate use. That’s not talked about a lot and we don’t have that in our...

Well, I think that that’s and there is a lot of upside, there really is a lot of upside when you get to the consumer electronics, because you can start to talk to yourself silly. Because I can share you within our own IT department, you go downstairs and they’re playing around with all these new devices, which is almost unheard of corporately. Normally, it’s just laptops, well now these guys are fooling around with new stuff. And I am sure that we’re no different than many other corporations. So all of a sudden you could have a whole new corporate spend going on with some of these new devices that can be very helpful to traveling sales people, business people and the convenience factor goes up tremendously. If we take a look at these new, let’s say, iPads or other similar devices that operate like little mini computers, they’re instant start-up and it takes maybe 10 to 15 seconds and you’re online versus this very long cycle that goes on with a normal PC once you from a shut down mode. So the convenience factors are tremendous being smaller form factors and everything else. So, I am just rambling on, but these are all unknowns that are out there that and generally there’s more positives than negatives out there on potential upside.

Okay. If I could just ask one more point of clarification. Do you see the mix between red and gold alloys shifting any more in ‘11 versus what you saw in ‘10?

Well, we’re certainly focused to make that happen. So this does not happen by circumstance, I mean, randomness. And then the other point is that as the devices, the demand on the devices and the form factors get smaller, your tendency to need gold goes up. So that’s also going for us. We really are focused on growing that value on that side of the business.

Yes. It was amazing when 174 first came out and that was supposed to be the next great thing these new red alloys are going to kill the world. I think it’s really comforting to an old guy like me to kind of see you get back to your roots, these gold alloys, and see you doing so well. And just congratulations on that, and we’re going to keep rooting for you, as far as keeping that growth momentum going next year. So that’s awesome. Thank you very much.

Our next question comes from Ray Rund from Shaker Investments.

I had a question on international sales during the quarter. Can you tell us what percent of your total revenue they accounted for?

Yes. We’re looking that up now.

We’re about 30% in the quarter. (inaudible)

Excuse me?

30% for the quarter and 30% for the year.

Okay. There really hasn’t been too much movement in it?

Well, yes. Let’s be a little bit careful. The 30% figure represents direct, what is billed and shipped directly into the international environment. We do have customers that we build domestically, that we ship international. The company probably is closer to 50%.

A couple of classic examples would be a shipment to RF Micro Devices out in the West Coast. When they finish making their chips for the handsets or mobile devices. That goes all over the world. That’s not really a U.S. for us, it’s a U.S. sale, but in reality their probably sales are more than 50% overseas. So that’s the thing. It misses from our numbers. You really can’t tell. If we ship to a oil and gas, let’s say, a big customer of ours would be Schlumberger. Well, that’s going all over the world, but it’s a pure U.S. sale in our books. So what really happens is our pure sales internationally are 30%, but in reality we’re much more driven by the global marketplace than that 30% indicates.

I see. And as a follow-up question, just out of curiosity, there’s been a lot of talk about the Chinese limiting their export of rare earth elements. And I was wondering if this has potential to affect you in any way?

Well, for us, we’ve obviously taken a very close look at that. That will not really have an effect on this company based on what we do. My concern would be more on a much broader basis. What does that do to general markets across the world? Who knows, and I don’t know what the impacts of all that are. But for our use of those specific materials, it’s a non-factor.

Our next question is a follow-up from Avinash Kant from D. A. Davidson & Company.

Hi, Dick and John. Once again, you have been talking about some of the growing segments in your business. You’ve been talking about revenues from LED, solar, and battery markets, more clean technology kinds of end markets. Could you give us some idea in terms of how is the trend in those businesses at this point, in terms of growth, and would you also give us some idea about what percentage of overall sales are coming from these segments? Roughly.

Well, I think we had it published in our pie chart that well, no, that’s a mix. You’re not going to see that because you’ve got some of that LED stuff in the consumer electronic space. So I would be taking a flyer at that. But may be it’s 5%, 7% of the business at this point. And in those different areas we’re at some really ground floor areas for the LED areas. Well, actually the LED is a good space, solid space for us right now, but some of the next-generation, let’s say, in bright lighting, if you will, which was kind of the next phase, it’s early phase because it’s got to get its cost down to really have a breakthrough there. The electric battery market is still, quite frankly, in its infancy. There is a lot out there. There’s a lot being built, but there is not a lot being sold. So that’s another area that we’ll be well-positioned in as that first takeoff. And then in the solar, again, as you’re aware we’re working, expanding in the thin film solar area, both in the coatings, the TCO coatings and also the possibility of participating and actually putting on coatings on thin film flexible substrate itself through our coatings business. So, again, it’s all still infancy for us with tremendous amount of applications and calls going on.

So, when you say 5% to 7%, you’re talking about all these three markets combined roughly at this point?

Yes.

At this time, we have no further questions. I’d like turn the call back over to Mr. Hasychak for any closing comments.

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

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.