Brush Engineered Materials Inc. Reports Sales up 29% for the First Quarter of 2006; Company Raises the Outlook for the Year

The strong sales growth in the first quarter was driven by acombination of increased demand from the Company's major markets,added sales from acquisitions made subsequent to the first quarter ofthe prior year and higher metal prices. Demand in the quarter wasespecially strong in the magnetic data storage, telecommunications andcomputer, and industrial component market segments. The growth wasalso driven in part by solid performance from new product applicationsin the magnetic data storage, wireless photonics, handset,semiconductor, oil and gas, heavy equipment and aerospace markets.Acquisitions added $8.7 million of sales in the quarter. Approximatelyone fourth of the year-over-year sales increase in the quarter isrelated to higher precious and base metal prices. The first quarterwas the thirteenth consecutive quarter where sales were higher thanthe comparable quarter of the prior year.

Gross margin as a percent of sales improved by 1.5 points in thequarter compared to the Company's fourth quarter 2005 gross margin.While gross margin improved as a percent of sales compared to thefourth quarter, gross margin as a percent of sales and thus earningsin the current quarter continued to be negatively impacted compared tothe prior year by higher precious and base metal prices, primarilycopper. The Company has only been able to pass through to customers aportion of the higher costs. Copper prices increased an additional 15%during the first quarter of 2006 after increasing 42% in 2005.Precious metal and base metal costs passed through in sales withoutany margin benefit, coupled with the portion of costs that could notbe passed through, combined to lower the first quarter 2006 grossmargin as a percent of sales by 1.6 points compared to the firstquarter of 2005.

As was previously announced, the Company expected to record ahigher provision for income tax in 2006 which negatively affects thequarterly earnings comparisons to the prior year. This was due to achange in the accounting treatment of the Company's deferred tax assetallowance. Since the Company continues to have significant netoperating loss carryforwards, most of the additional tax provisionwill be non-cash expense. A 32% effective tax rate was applied to thecurrent quarter's income before income taxes. This compares to an 11%effective tax rate for the first quarter of 2005. The major differencebetween the two rates is that the domestic federal tax expense wasoffset in 2005 by the reversal of a portion of the Company's deferredtax asset allowance. Therefore, the first quarter 2006 earnings pershare comparison to the prior year is negatively affected byapproximately $0.05 per share due to the prior year having a lowereffective tax rate. On a pre-tax basis, earnings were $7.7 million inthe quarter compared to $4.8 million in the first quarter of 2005, anincrease of 60%.

BUSINESS SEGMENT REPORTING

Metal Systems Group:

The Metal Systems Group consists of Alloy Products, TechnicalMaterials, Inc. (TMI), Beryllium Products and Brush Resources Inc.

The Metal Systems Group's first quarter sales of $86.2 millionwere 8% higher than first quarter 2005 sales of $79.5 million. Thefirst quarter operating profit was $2.0 million versus $2.6 millionfor the same quarter a year ago. Margins were negatively impactedduring the current quarter compared to the prior quarter by highercopper prices and unfavorable exchange rates caused by a stronger U.S.dollar. In addition, the first quarter of the prior year includedapproximately $6 million of non-repeat higher margin sales ofmaterials for NASA's James Webb Telescope project.

Alloy Products' first quarter sales of $60.4 million were 15%above first quarter 2005 sales of $52.6 million. Strip form productsales were up 12% and bulk form were up 25% over the respective 2005quarter. Alloy experienced strong sales growth in all core marketsincluding the telecommunications handset market segment, automotiveelectronics, oil and gas, aerospace, heavy equipment and engineeredproducts for power generation. Alloy bulk products continues tobenefit from the acceptance of its new products, particularlyToughMet(R). Key new applications include instrumentation housings foroil and gas products and bushings and bearings in heavy equipment andaerospace products. Although lead times are short, Alloy's orderentry, overall, remains strong for the second quarter of 2006.

TMI's first quarter sales of $17.9 million were $5.2 million or41% higher than first quarter 2005 sales of $12.7 million. The salesincrease was primarily due to strong demand in the telecommunicationsand computer and automotive electronics markets. New product growthincluding materials for disk drive arms and energy and medical productapplications contributed to the strong growth during the firstquarter. The strong conditions and related order entry strength hascontinued thus far during the second quarter.

Beryllium Products' first quarter sales of $7.9 million were down44% compared to sales of $14.2 million for the same period of lastyear. First quarter 2005 included $6.1 million of sales of materialsfor NASA's James Webb Telescope. The supply contract for this materialwas substantially completed in 2005. Sales for the first quarter of2006 therefore did not include any significant amount of James WebbTelescope materials. Excluding this from the comparisons, BerylliumProducts' sales are down 4% from the first quarter of 2005. It isexpected that Beryllium Products' sales will improve during the secondquarter.

Brush Resources did not have sales to external customers in thefirst quarter of 2006 or 2005.

Microelectronics Group:

The Microelectronics Group includes Williams Advanced MaterialsInc. (WAM) and Electronic Products.

The Microelectronics Group's first quarter 2006 sales of $81.5million were up $30.6 million or 60% compared to the first quarter2005 sales of $50.9 million. Operating profit of $8.7 million was up$5.0 million compared to the first quarter 2005 operating profit of$3.7 million.

WAM's first quarter sales of $75.4 million were $31.2 million or71% higher than first quarter 2005 sales of $44.2 million. Theincrease in sales was driven by continued strong core demand and newproduct applications in the magnetic data storage, wireless photonics,handset and semiconductor markets. Subsequent to the first quarter of2005, WAM acquired OMC Scientific Holdings Limited, Thin FilmTechnology, Inc. and CERAC, incorporated. These three acquisitionshave added to WAM's product breadth and accounted for approximately$8.7 million or 28% of the sales growth during the first three monthsof 2006. Precious metal price increases passed on to customers duringthe first quarter were approximately 20% of the sales growth. WAM iscontinuing to expand its geographic reach in Europe and Asia and is inthe process of opening facilities in the Czech Republic and China. Weexpect order entry to remain strong in the second quarter of 2006.

Electronic Products' first quarter 2006 sales of $6.1 million weredown 9% from first quarter 2005 sales of $6.7 million. The salesdecline was due to softness in the sectors of the telecommunicationsand computer market that this business serves.

OUTLOOK

Most of our markets were stronger than expected during the firstquarter of the year and we continued to make good progress with ournew products and our initiatives to penetrate new markets. We alsomade progress in the first quarter with our initiatives to improvemargins. Our acquisitions delivered the expected results as well.

These positive factors have continued thus far in the secondquarter. We believe these conditions will continue throughout thequarter and therefore expect results for the quarter to be similar tothose of the first quarter. At this time, sales for the second quarterare expected to be in the range of $160 to $170 million, upapproximately 20% to 25% compared to the same quarter of the prioryear. Earnings are expected to be in the range of $0.25 to $0.30 pershare.

While our markets are subject to inventory swings and macroeconomic factors could yield a softer second half compared to thefirst half, based on the first quarter and the outlook for the secondquarter, we are raising the outlook for the year. Earnings are nowexpected to be in the range of $0.95 to $1.10 per share, up $0.15 pershare compared to the previous estimate provided.

CHAIRMAN'S COMMENTS

Commenting on the results, Gordon D. Harnett, Chairman and CEO,stated, "I am pleased with the continued growth in revenue and netincome that was generated during the first quarter of 2006. Our newproduct and new market initiatives, our efforts to broaden our productand market breadth, our geographic expansions, our lean manufacturingprograms and our recent acquisitions are resulting in growth inrevenue and earnings and are adding significantly to shareholdervalue. As previously announced I will be retiring and thus steppingdown as Chairman and CEO upon conclusion of the Company's annualmeeting of shareholders on May 2. I have enjoyed my tenure, as well asmy association with the employees of Brush, and have appreciated thesupport of our shareholders. I am confident that I'm leaving theCompany with a high quality management team, one that's committed tosucceed. I look forward to the Company's continuing progress."

FORWARD-LOOKING STATEMENTS

Portions of the narrative set forth in this document that are notstatements of historical or current facts are forward-lookingstatements. Our actual future performance may materially differ fromthat contemplated by the forward-looking statements as a result of avariety of factors. These factors include, in addition to thosementioned herein:

-- The global and domestic economies;

-- The condition of the markets which we serve, whether defined geographically or by segment, with the major market segments being telecommunications and computer, magnetic and optical data storage, aerospace and defense, automotive electronics, industrial components and appliance;

-- Changes in product mix and the financial condition of customers;

-- Actual sales, operating rates and margins for the year 2006;

-- Our success in developing and introducing new products and applications;

-- Our success in integrating newly acquired businesses;

-- Our success in implementing our strategic plans and the timely and successful completion of any capital projects;

-- The availability of adequate lines of credit and the associated interest rates;

-- Other financial factors, including cost and availability of materials, tax rates, exchange rates, pension and other employee benefit costs, energy costs, regulatory compliance costs, and the cost and availability of insurance.

-- The uncertainties related to the impact of war and terrorist activities;

-- Changes in government regulatory requirements and the enactment of new legislation that impacts our obligations; and

-- The conclusion of pending litigation matters in accordance with our expectation that there will be no material adverse effects.

Brush Engineered Materials Inc. is headquartered in Cleveland,Ohio. The Company, through its wholly-owned subsidiaries, suppliesworldwide markets with beryllium products, alloy products, electronicproducts, precious metal products, and engineered material systems.
Brush Engineered Materials Inc.

Digest of Earnings

March 31, 2006


2006 2005
------------- --------------

First Quarter

Net Sales $167,723,000 $130,372,000


Net Income $5,227,000 $4,286,000


Share Earnings - Basic $0.27 $0.22

Share Earnings - Diluted $0.27 $0.22


Consolidated Balance Sheets
(Unaudited)

Mar. 31, Dec. 31,
(Dollars in thousands) 2006 2005
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $5,946 $10,642
Accounts receivable 85,962 69,938
Inventories 121,158 104,060
Prepaid expenses 16,752 14,417
Deferred income taxes 1,177 1,118
--------- ---------
Total current assets 230,995 200,175

Other assets 18,118 8,252
Related-party notes receivable 358 358
Long-term deferred income taxes 1,259 4,109

Property, plant and equipment 551,110 540,420
Less allowances for depreciation,
depletion and impairment 372,998 363,358
--------- ---------
178,112 177,062

Goodwill 19,097 12,746
--------- ---------
$447,939 $402,702
========= =========


Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $27,301 $23,634
Current portion of long-term debt 632 636
Accounts payable 23,767 20,872
Other liabilities and accrued items 41,284 38,522
Unearned revenue 1,380 254
Income taxes 981 726
--------- ---------
Total current liabilities 95,345 84,644

Other long-term liabilities 7,879 8,202
Retirement and post-employment benefits 66,574 65,290
Deferred income taxes 152 172
Long-term debt 58,882 32,916

Shareholders' equity 219,107 211,478
--------- ---------
$447,939 $402,702
========= =========

See notes to consolidated financial statements.


Consolidated Statements of Income
(Unaudited)

First Quarter Ended
(Dollars in thousands except share and per share Mar. 31, April 1,
amounts) 2006 2005
----------------------------------------------------------------------

Net sales $167,723 $130,372
Cost of sales 133,580 101,795
--------- ----------
Gross margin 34,143 28,577
Selling, general and administrative expense 23,908 18,701
Research and development expense 1,081 1,241
Other-net 325 2,211
--------- ----------
Operating profit 8,829 6,424
Interest expense 1,143 1,622
--------- ----------
Income before income taxes 7,686 4,802

Income taxes 2,459 516
--------- ----------

Net income $5,227 $4,286
========= ==========

Per share of common stock: basic $0.27 $0.22

Per share of common stock: diluted $0.27 $0.22


See notes to consolidated financial statements.


Consolidated Statements of Cash Flows
(Unaudited)
First Quarter Ended
Mar. 31, April 1,
(Dollars in thousands) 2006 2005
----------------------------------------------------------------------

Net income $5,227 $4,286
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation, depletion and amortization 5,627 5,343
Amortization of deferred financing costs in
interest expense 139 304
Derivative financial instrument ineffectiveness (248) (510)
Stock option expense 98 -
Decrease (increase) in accounts receivable (12,462) (7,059)
Decrease (increase) in inventory (11,919) (5,024)
Decrease (increase) in prepaid and other current
assets (3,336) 941
Decrease (increase) in deferred income taxes 1,967 -
Increase (decrease) in accounts payable and
accrued expenses 2,141 (11,413)
Increase (decrease) in unearned revenue 1,126 (5,252)
Increase (decrease) in interest and taxes
payable 1,065 (1,600)
Increase (decrease) in other long-term
liabilities 1,156 949
Other - net 2,612 826
--------- ---------
Net cash used in operating
activities (6,807) (18,209)


Cash flows from investing activities:
Payments for purchase of property, plant and
equipment (2,081) (2,179)
Payments for mine development (13) -
Purchase of equipment previously held under
operating lease - (448)
Payments for purchase of business net of cash
received (25,694) -
Proceeds from sale of property, plant and
equipment - 25
Other investments - net - (16)
--------- ---------
Net cash used in investing
activities (27,788) (2,618)

Cash flows from financing activities:
Proceeds from issuance/(repayment) of short-term
debt 3,599 (717)
Proceeds from issuance of long-term debt 26,000 -
Repayment of long-term debt (33) (18,607)
Issuance of common stock under stock option
plans 558 249
--------- ---------
Net cash provided from (used
in) financing activities 30,124 (19,075)
Effects of exchange rate changes (225) (64)
--------- ---------
Net change in
cash and cash
equivalents (4,696) (39,966)
Cash and cash equivalents
at beginning of period 10,642 49,643
--------- ---------
Cash and cash
equivalents at
end of period $5,946 $9,677
========= =========

See notes to consolidated financial statements.


Notes to Consolidated Financial Statements
(Unaudited)


Note A - Accounting Policies

In management's opinion, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the
financial position as of March 31, 2006 and December 31, 2005 and the
results of operations for the three month periods ended March 31, 2006
and April 1, 2005. All of the adjustments were of a normal and
recurring nature. Certain items in the prior year have been
reclassified to conform to the 2006 consolidated financial statement
presentation.

Note B - Acquisition

In January 2006, WAM acquired the stock of CERAC, incorporated for
$26.2 million, including advisor fees. CERAC provides physical vapor
deposition and specialty inorganic materials for the precision optics,
semiconductor and other industries. CERAC employs approximately 120
people at its Milwaukee, Wisconsin facility. Their sales were
approximately $20 million in 2005. The purchase price included $3.8
million to be held in escrow pending resolution of various matters as
detailed in the purchase agreement. Preliminary goodwill assigned to
the transaction totaled $6.3 million. CERAC's results of operations
are included in the Company's financial statements since the
acquisition date.

Note C - Inventories

Mar. 31, Dec. 31,
(Dollars in thousands) 2006 2005
---------------------------------------------------------------------

Principally average cost:
Raw materials and supplies $26,866 $24,050
Work in process 95,801 88,480
Finished goods 40,971 30,553
--------- ---------
Gross inventories 163,638 143,083

Excess of average cost over LIFO inventory
value 42,480 39,023
--------- ---------
Net inventories $121,158 $104,060
========= =========


Notes to Consolidated Financial Statements
(Unaudited)


Note D - Comprehensive Income

The reconciliation between net income and comprehensive income for the
three month periods ended March 31, 2006 and April 1, 2005 is as
follows:


First Quarter Ended
Mar. 31, Apr. 1,
(Dollars in
thousands) 2006 2005
------------------------------------------

Net income $5,227 $4,286

Cumulative translation
adjustment 106 (874)

Change in the fair
value of derivative
financial
instruments 1,446 3,261
---------- ----------

Comprehensive income $6,779 $6,673
========== ==========


Note E - Segment Reporting



(Dollars in Metal Micro- Total All
thousands) Systems Electronics Segments Other Total
----------------------------------------------------------------------
First Quarter 2006
------------------
Revenues from
external customers $86,209 $81,514 $167,723 $- $167,723

Intersegment
revenues 938 631 1,569 - 1,569

Operating profit
(loss) 2,038 8,743 10,781 (1,952) 8,829


First Quarter 2005
------------------
Revenues from
external customers $79,481 $50,891 $130,372 $- $130,372

Intersegment
revenues 591 230 821 - 821

Operating profit 2,618 3,696 6,314 110 6,424