Press Release Details

Brush Engineered Materials Inc. Reports Stronger Than Expected First Quarter 2004 Earnings Per Share of $0.22; Sales up 26% over First Quarter 2003

April 29, 2004

CLEVELAND, Apr 29, 2004 (BUSINESS WIRE) -- Brush Engineered Materials Inc. (NYSE:BW) today reported first quarter net income of $3.8 million or $0.22 per share diluted versus a net loss of $3.0 million or $0.18 per share for the first quarter of 2003. Sales were up 26.0% to $125.9 million compared to the first quarter 2003 sales of $99.5 million.

The significant improvement in earnings is due to increased sales volume, improved product mix and continued improvement in margins and operating efficiencies. Gross margin as a percent of sales improved to 23.5% compared to 17.2% in the first quarter of 2003. Net income was negatively affected by $1.2 million due to a non-cash mark-to-market valuation of a stock based compensation plan and a non-cash unrealized loss related to the fair value of an interest rate swap.

First quarter 2004 was the fifth consecutive quarter where sales were higher than the comparable quarter of the prior year. The increase, approximately $26.4 million, was driven by strength across almost all of the Company's key end-use markets, including telecommunications and computer, automotive and optical media. In addition to continued strength in Asia and Europe, the domestic economy showed signs of a stronger recovery. Metal prices and exchange rates accounted for approximately $6.4 million of the $26.4 million increase in sales for the quarter.

    Business Segment Reporting

    Metal Systems Group:

The Metal Systems Group consists of Alloy Products, Technical Materials, Inc. (TMI) and Beryllium Products.

The Metal Systems Group's first quarter sales of $76.0 million were 24.1% higher than first quarter 2003 sales of $61.2 million. The first quarter operating profit was $3.2 million compared to the first quarter 2003 operating loss of $3.4 million.

Alloy Products first quarter sales of $52.5 million were up 30.0% over 2003 first quarter sales of $40.5 million. Alloy is experiencing global strength across its major markets including telecommunications and computer, automotive and industrial components. In addition to the continued strong demand in Asia, which was up 32.0%, first quarter sales in Europe were up 44.0% and North American sales were up 24.0% versus the first quarter of 2003. New products including ToughMet(R), a non-beryllium based copper-nickel-tin alloy system for heavy equipment applications, also contributed to the growth in sales. During the first quarter, Alloy Products continued to make progress with its operating improvement programs and achieved a record high in manufacturing productivity.

TMI first quarter sales of $13.8 million were 16.0% higher than the first quarter 2003 sales of $11.9 million. The sales increase is primarily due to the increased demand from telecommunications and computer product applications.

Beryllium Products sales in the first quarter of $9.7 million were approximately 10.0% above first quarter 2003 sales of $8.8 million. Beryllium Products continues to experience strong demand from the defense market. In addition, record shipments were achieved in the first quarter in the Electrofusion Products business due to strong commercial demand. Also the first shipments for the James Webb Space Telescope application were made in the first quarter.

Microelectronics Group:

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

The Microelectronics Group first quarter 2004 sales of $49.9 million were 30.0% above the first quarter 2003 sales of $38.3 million. Operating profit of $5.5 million was more than double the first quarter 2003 operating profit of $2.5 million.

WAM's first quarter sales of $42.1 million were 37.8% higher than first quarter 2003 sales of $30.5 million. The increase in sales was driven by strong demand from the optical media, performance film, wireless telecommunications handset and semiconductor markets.

Electronic Products first quarter 2004 sales of $7.8 million were about flat with the first quarter of 2003. Sales to the telecommunications and computer market remained steady through the first quarter of 2004 with some strength from the electronics packaging sector.

Outlook

The strengthening that occurred in the Company's key end-use markets during the fourth quarter of 2003 and the first quarter of 2004 is currently expected to continue into the second quarter. Orders received in the first quarter exceeded orders billed in the quarter by approximately $12.0 million. Lead times are short and changes in order rates can quickly translate to higher or lower sales. Assuming the stronger markets continue throughout the second quarter, the Company's revenues would be favorably affected and sales would be up approximately 15.0-25.0% compared to the second quarter of 2003 sales of $101.8 million.

The second quarter earnings may be favorably affected by higher factory operating rates. The mark-to-market valuations that negatively affected the first quarter results could favorably or unfavorably affect the second quarter's results depending upon interest rates and the Company's stock price.

Chairman's Comments

Commenting on the results, Gordon D. Harnett, President, Chairman and CEO, stated, "I am very pleased to report the significant improvement in sales and earnings for the first quarter of 2004. Our long-term strategic initiatives including operational improvements, overhead reduction, expanded geographic marketing and sales and the introduction of new products have returned us to profitability. We will remain disciplined in the continued implementation of our strategy and look forward to continued improvement throughout 2004."

Forward-looking Statements

Portions of the content set forth in this document that are not statements of historical or current facts are forward-looking statements. The Company's actual future performance, including performance in the near term, may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. These factors include, in addition to those mentioned elsewhere herein:

    --  The condition of the markets which the Company serves, whether
        defined geographically or by market, with the major markets
        being telecommunications and computer, optical media,
        automotive electronics, industrial components, aerospace and
        defense and appliance.

    --  Actual sales, operating rates and margins in the second
        quarter 2004 and for the full year of 2004.

    --  Changes in product mix.

    --  The financial condition of particular customers.

    --  The Company's success in implementing its strategic plans and
        the timely and successful completion of any capital expansion
        projects.

    --  Other factors, including, interest rates, exchange rates, tax
        rates, pension costs, energy costs, raw material costs and the
        cost and availability of insurance.

    --  Changes in government regulatory requirements and the
        enactment of any new legislation that impacts the Company's
        obligations.

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

    --  Additional risk factors that may affect the Company's results
        are identified under the caption "Risk Factors" in the S-3
        Registration Statement of the Company filed with the
        Securities and Exchange Commission on April 2, 2004.

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

                    Brush Engineered Materials Inc.

                          Digest of Earnings

                             April 2, 2004


                                                 2004         2003
                                            ------------- ------------

First Quarter

   Net Sales                                $125,862,000  $99,518,000


   Net Income (Loss)                          $3,754,000  ($3,016,000)


   Share Earnings - Basic                          $0.23       ($0.18)

   Average Shares - Basic                     16,618,565   16,561,430

   Share Earnings - Diluted                        $0.22       ($0.18)

   Average Shares - Diluted                   16,969,433   16,561,430



Consolidated Balance Sheets
(Unaudited)

                                                    Apr. 2,   Dec. 31,
(Dollars in thousands)                               2004       2003
----------------------------------------------------------------------
Assets
Current assets
   Cash and cash equivalents                         $5,338    $5,062
   Accounts receivable                               67,117    55,102
   Inventories                                       95,085    87,396
   Prepaid expenses                                   6,208     5,454
   Deferred income taxes                                133       291
                                                   --------- ---------
        Total current assets                        173,881   153,305

Other assets                                         25,835    26,761
Long-term deferred income taxes                         883       704

Property, plant and equipment                       536,440   535,421
   Less allowances for depreciation,
     depletion and impairment                       349,534   344,575
                                                   --------- ---------
                                                    186,906   190,846

                                                   --------- ---------
                                                   $387,505  $371,616
                                                   ========= =========


Liabilities and Shareholders' Equity
Current liabilities
   Short-term debt                                  $23,808   $13,387
   Accounts payable                                  20,350    16,038
   Other liabilities and accrued items               34,184    37,366
   Income taxes                                         812     1,373
                                                   --------- ---------
        Total current liabilities                    79,154    68,164

Other long-term liabilities                          13,991    14,739
Retirement and post-employment benefits              49,794    49,358
Long-term debt                                       84,292    85,756
Minority interest in subsidiary                           -        26

Shareholders' equity                                160,274   153,573
                                                   --------- ---------
                                                   $387,505  $371,616
                                                   ========= =========


See notes to consolidated financial statements.



Consolidated Statements of Income
(Unaudited)


                                                 First Quarter Ended
(Dollars in thousands except share and per      April 2,     March 28,
 share amounts)                                   2004         2003
----------------------------------------------------------------------

Net sales                                        $125,862     $99,518
     Cost of sales                                 96,285      82,405
                                               ----------- -----------
Gross margin                                       29,577      17,113
     Selling, general and administrative
      expenses                                     19,048      17,298
     Research and development expenses              1,268       1,108
     Other-net                                      3,190         746
                                               ----------- -----------
Operating profit (loss)                             6,071      (2,039)
     Interest expense                               2,218         772
                                               ----------- -----------
Income (loss) before income taxes                   3,853      (2,811)

     Income taxes                                      99         205
                                               ----------- -----------

Net income (loss)                                  $3,754     $(3,016)
                                               =========== ===========

Per share of common stock: basic                    $0.23      $(0.18)

Weighted average number
     of common shares outstanding              16,618,565  16,561,430


Per share of common stock: diluted                  $0.22      $(0.18)

Weighted average number
     of common shares outstanding              16,969,433  16,561,430


See notes to consolidated financial statements.


Consolidated Statements of Cash Flows
(Unaudited)
                                                   Three Months Ended
                                                   April 2,  March 28,
(Dollars in thousands)                               2004      2003
----------------------------------------------------------------------

Net income (loss)                                   $3,754   ($3,016)
Adjustments to reconcile net income (loss) to net
 cash used in operating activities:
  Depreciation, depletion and amortization           5,396     5,101
  Amortization of deferred financing costs in
   interest expense                                    362        83
  Derivative financial instrument ineffectiveness      482        16
  Decrease (increase) in accounts receivable       (12,121)  (11,640)
  Decrease (increase) in inventory                  (7,684)     (454)
  Decrease (increase) in prepaid and other current
   assets                                             (290)      910
  Increase (decrease) in accounts payable and
   accrued expenses                                  2,437     7,476
  Increase (decrease) in interest and taxes payable (1,147)      282
  Increase (decrease) in deferred income taxes        (178)      (52)
  Increase (decrease) in other long-term
   liabilities                                        (950)     (333)
  Other - net                                          800     1,445
                                                    -------- --------
   Net cash used in operating activities            (9,139)     (182)


Cash flows from investing activities:
  Payments for purchase of property, plant and
   equipment                                        (1,356)   (1,587)
  Payments for mine development                        (90)     (101)
  Proceeds from (payments for) other investments        39        (1)
  Proceeds from sale of property, plant and
   equipment                                            15         9
                                                    -------- --------
   Net cash used in investing activities            (1,392)   (1,680)

Cash flows from financing activities:
  Proceeds from issuance/(repayment) of short-term
   debt                                              8,983       842
  Proceeds from issuance of long-term debt              24         -
  Repayment of long-term debt                          (60)      (34)
  Issuance of common stock under stock option plans  1,883         -
                                                    -------- --------
   Net cash provided from financing activities      10,830       808
Effects of exchange rate changes                       (23)       84
                                                    -------- --------
   Net change in cash and cash equivalents             276      (970)
   Cash and cash equivalents
    at beginning of period                           5,062     4,357
                                                    -------- --------
   Cash and cash equivalents at end of period       $5,338    $3,387
                                                    ======== ========


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 April 2, 2004 and December 31, 2003 and the
results of operations for the three month periods ended April 2, 2004
and March 28, 2003. All of the adjustments were of a normal and
recurring nature. Certain items in the prior year have been
reclassified to conform to the 2004 consolidated financial statement
presentation.


Note B - Inventories

                                                  Apr. 2,  Dec. 31,
(Dollars in thousands)                              2004     2003
-------------------------------------------------------------------

Principally average cost:
  Raw materials and supplies                      $24,470  $24,990
  Work in process                                  69,078   65,212
  Finished goods                                   25,572   20,637
                                                  -------- --------
     Gross inventories                            119,120  110,839

Excess of average cost over LIFO
   Inventory value                                 24,035   23,443
                                                  -------- --------
   Net inventories                                $95,085  $87,396
                                                  ======== ========


Notes to Consolidated Financial Statements
(Unaudited)


Note C - Comprehensive Income (Loss)

The reconciliation between net income (loss) and comprehensive income
(loss) for the three month periods ended April 2, 2004 and March 28,
2003 is as follows:


                      First Quarter Ended
(Dollars in            Apr. 2,    Mar. 28,
 thousands)             2004        2003
------------------------------------------

 Net income (loss)    $3,754      $(3,016)

 Cumulative
  translation
  adjustment             225          (74)

 Change in the fair
  value of derivative
  financial
  instruments            928        1,164
                     -------- ------------

 Comprehensive
  income (loss)       $4,907      $(1,926)
                     ======== ============




Note D - Segment Reporting

                       Metal     Micro-      Total     All
 (Dollars in          Systems  Electronics  Segments  Other    Total
  thousands)
----------------------------------------------------------------------
 First Quarter 2004
-------------------
 Revenues from
  external customers $75,958      $49,904  $125,862    $-    $125,862

 Intersegment
  revenues             1,214          296     1,510   5,297     6,807

 Operating profit
  (loss)               3,176        5,489     8,665  (2,594)    6,071


 First Quarter 2003
-------------------
 Revenues from
  external customers $61,207      $38,311   $99,518    $-     $99,518

 Intersegment
  revenues               901          272     1,173   3,573     4,746

 Operating profit
  (loss)              (3,424)       2,537      (887) (1,152)   (2,039)

SOURCE: Brush Engineered Materials Inc.

Brush Engineered Materials Inc.
Investors: Michael C. Hasychak, 216/383-6823
Media: Patrick S. Carpenter, 216/383-6835
http://www.beminc.com
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