1104657--3/16/2006--BRUSH_ENGINEERED_MATERIALS

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Health issues and litigation relating to machining and manufacturing of beryllium-containing products could significantly reduce demand for our products, limit our ability to operate and cause us to pay material amounts in respect of product liability claims. We are currently self-insured for product liability claims based on exposure to beryllium after July 2001, and we may incur material losses from those claims, which could adversely affect our profitability. Our bertrandite ore mining and our manufacturing operations and our customers businesses are subject to extensive health and safety regulations that impose, and will continue to impose, significant costs and liabilities, and future regulation could increase those costs and liabilities or effectively prohibit production or use of beryllium-containing products. Our bertrandite ore mining and our manufacturing operations are subject to extensive environmental regulations that impose, and will continue to impose, significant costs and liabilities on us, and future regulation could increase these costs and liabilities or prevent production of beryllium-containing products. The availability of competitive substitute materials for beryllium-containing products may reduce our customers demand for these products and reduce our sales. The markets for our beryllium-containing and non-beryllium-containing products are experiencing rapid changes in technology. Our beryllium-containing and non-beryllium-containing products are deployed in complex applications and may have errors or defects that we find only after deployment. We have incurred significant losses in the past, and may not be able to sustain profitability on an ongoing basis. Our customers are subject to significant fluctuations as a result of the cyclical nature of their industries and their sensitivity to general economic conditions, which could adversely affect their demand for our products and reduce our sales. The demand for our products is generally affected by macroeconomic fluctuations in the global economies in which we sell our products. Future economic downturns, stagnant economies or global currency fluctuations could also negatively affect our financial performance. We may not be able to complete our acquisition strategy or successfully integrate acquired businesses. The terms of our indebtedness may restrict our ability to pursue our growth and acquisition strategies. We conduct our sales and distribution operations on a worldwide basis and are subject to the risks associated with doing business outside the United States. A major portion of our bank debt consists of variable-rate obligations, which subjects us to interest rate fluctuations. Our tax position may create volatility in our net income, and our ability to use our net operating loss carryforwards and alternative minimum tax credits may be impaired. The availability and prices of some raw materials we use in our manufacturing operations fluctuate, and increases in raw material costs can increase our operating costs. Because we experience seasonal fluctuations in our sales, our quarterly results will fluctuate, and our annual performance will be affected by the fluctuations. Natural disasters, equipment failures, work stoppages and other unexpected events may lead our customers to curtail production or shut down their operations. Unexpected events and natural disasters at our mine could increase the cost of operating our business. Equipment failures and other unexpected events at our facilities may lead to manufacturing curtailments or shutdowns. Many of our manufacturing facilities are dependent on single source energy suppliers, and interruption in energy services may cause manufacturing curtailments or shutdowns. If the price of electrical power, fuel or other energy sources increases, our operating expenses could increase significantly. We have a limited number of manufacturing facilities, and damage to those facilities could interrupt our operations, increase our costs of doing business and impair our ability to deliver our products on a timely basis. Our lengthy and variable sales and development cycle makes it difficult for us to predict if and when a new product will be sold to customers. Future terrorist attacks and other acts of violence or war may directly harm our operations. We may be unable to access the financial markets on favorable terms. Low investment performance by our pension plan assets may require us to increase our pension liability and expense, which may also lead us to accelerate funding our pension obligations and divert funds from other potential uses. Our expenditures for post-retirement health benefits could be materially higher than we have predicted if our underlying assumptions prove to be incorrect. We are subject to fluctuations in currency exchange rates, which may negatively affect our financial performance.

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1104657--3/16/2006--BRUSH_ENGINEERED_MATERIALS_INC