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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended June 29, 2001

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-7006

BRUSH ENGINEERED MATERIALS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

<Table>

OHIO 34-1919973
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</Table>

<Table>

17876 ST. CLAIR AVENUE, CLEVELAND, OHIO 44110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</Table>

216-486-4200
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

As of August 3, 2001 there were 16,610,255 shares of Common Stock, no par
value, outstanding.

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2

PART I FINANCIAL INFORMATION

BRUSH ENGINEERED MATERIALS INC. AND SUBSIDIARIES

ITEM 1. FINANCIAL STATEMENTS

The consolidated financial statements of Brush Engineered Materials Inc.
(formerly Brush Wellman Inc.) and its subsidiaries for the quarter ended June
29, 2001 are as follows:

Consolidated Statements of Income -- Three and six months ended June 29,
2001 and June 30, 2000

Consolidated Balance Sheets -- June 29, 2001 and December 31, 2000

Consolidated Statements of Cash Flows -- Six months ended June 29, 2001
and June 30, 2000

1
3

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

<Table>
<Caption>
SECOND QUARTER ENDED FIRST HALF ENDED
-------------------------- --------------------------
(DOLLARS IN THOUSANDS EXCEPT SHARE AND JUNE 29, JUNE 30, JUNE 29, JUNE 30,
PER SHARE AMOUNTS) 2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------

Net sales............................. $ 128,457 $ 137,182 $ 273,980 $ 272,606
Cost of sales....................... 104,881 107,474 216,369 214,604
----------- ----------- ----------- -----------
Gross Margin.......................... 23,576 29,708 57,611 58,002
Selling, general and administrative
expenses......................... 18,770 21,147 40,276 42,964
Research and development expenses... 1,867 1,686 3,559 3,700
Other-net........................... 226 110 1,028 338
----------- ----------- ----------- -----------
Operating Profit...................... 2,713 6,765 12,748 11,000
Interest expense.................... 852 1,061 1,827 2,181
----------- ----------- ----------- -----------
Income before income taxes............ 1,861 5,704 10,921 8,819
Income taxes........................ 586 1,806 3,440 2,672
----------- ----------- ----------- -----------
Net Income............................ $ 1,275 $ 3,898 $ 7,481 $ 6,147
=========== =========== =========== ===========
Per Share of Common Stock: Basic...... $ 0.08 $ 0.24 $ 0.45 $ 0.38
Weighted average number of common
shares outstanding.................. 16,508,248 16,224,638 16,487,575 16,215,338
Per Share of Common Stock: Diluted.... $ 0.08 $ 0.24 $ 0.45 $ 0.38
Weighted average number of common
shares outstanding.................. 16,690,938 16,358,128 16,683,572 16,336,023
Cash dividends per common share....... $ 0.12 $ 0.12 $ 0.24 $ 0.24
</Table>

See notes to consolidated financial statements.
2
4

CONSOLIDATED BALANCE SHEETS
(unaudited)

<Table>
<Caption>
JUNE 29, DEC. 31,
(DOLLARS IN THOUSANDS) 2001 2000
- ---------------------------------------------------------------------------------

ASSETS
Current Assets
Cash and cash equivalents................................. $ 4,562 $ 4,314
Accounts receivable....................................... 88,906 92,334
Inventories............................................... 129,673 115,643
Prepaid expenses.......................................... 7,554 8,525
Deferred income taxes..................................... 32,495 29,263
-------- --------
Total Current Assets.............................. 263,190 250,079
Other Assets................................................ 32,282 31,967
Property, Plant and Equipment............................... 464,328 449,697
Less allowances for depreciation, depletion and
impairment............................................. 289,140 279,237
-------- --------
175,188 170,460
-------- --------
$470,660 $452,506
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt........................................... $ 32,470 $ 25,435
Accounts payable.......................................... 27,037 34,714
Other liabilities and accrued items....................... 36,577 39,021
Dividends payable......................................... 1,993 1,987
Income taxes.............................................. 9,593 5,535
-------- --------
Total Current Liabilities......................... 107,670 106,692
Other Long-Term Liabilities................................. 19,160 15,878
Retirement and Post-employment Benefits..................... 39,698 39,576
Long-term Debt.............................................. 51,305 43,305
Deferred Income Taxes....................................... 18,525 17,148
Shareholders' Equity........................................ 234,302 229,907
-------- --------
$470,660 $452,506
======== ========
</Table>

See notes to consolidated financial statements.
3
5

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

<Table>
<Caption>
FIRST HALF ENDED
--------------------
JUNE 29, JUNE 30,
(DOLLARS IN THOUSANDS) 2001 2000
- ----------------------------------------------------------------------------------

NET INCOME.................................................. $ 7,481 $ 6,147
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED FROM OPERATING ACTIVITIES:
Depreciation, depletion and amortization.................. 11,018 12,248
Decrease (Increase) in accounts receivable................ 1,984 (17,708)
Decrease (Increase) in inventory.......................... (14,959) 3,257
Decrease (Increase) in prepaid and other current assets... (116) 412
Increase (Decrease) in accounts payable and accrued
expenses............................................... (9,987) 9,012
Increase (Decrease) in interest and taxes payable......... 3,078 1,270
Increase (Decrease) in deferred income taxes.............. (135) (119)
Increase (Decrease) in other long-term liabilities........ 2,691 2,006
Other -- net.............................................. 746 548
-------- --------
NET CASH PROVIDED FROM OPERATING ACTIVITIES.......... 1,801 17,073
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property, plant and equipment.... (15,559) (6,415)
Payments for mine development............................. (281) (138)
-------- --------
NET CASH PROVIDED FROM (USED IN) INVESTING
ACTIVITIES.......................................... (15,840) (6,553)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance/(repayment of) short-term debt..... 8,437 (7,460)
Proceeds from issuance of long-term debt.................. 15,500 18,000
Repayment of long-term debt............................... (7,500) (12,000)
Issuance of Common Stock under stock option plans......... 1,753 384
Payments of dividends..................................... (3,974) (3,919)
-------- --------
NET CASH PROVIDED FROM (USED IN) FINANCING
ACTIVITIES.......................................... 14,216 (4,995)
Effects of Exchange Rate Changes............................ 71 (166)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS.............. 248 5,359
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..... 4,314 99
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 4,562 $ 5,458
======== ========
</Table>

See notes to consolidated financial statements.
4
6

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
June 29, 2001 and December 31, 2000 and the results of operations for the three
and six month periods ended June 29, 2001 and June 30, 2000.

NOTE B -- INVENTORIES

<Table>
<Caption>
JUN. 29, DEC. 31,
(DOLLARS IN THOUSANDS) 2001 2000
- ------------------------------------------------------------------------------

Principally average cost:
Raw materials and supplies............................ $ 17,823 $ 19,458
In process............................................ 94,599 88,956
Finished goods........................................ 43,136 33,202
-------- --------
Gross inventories................................ 155,558 141,616
Excess of average cost over LIFO
Inventory value.................................... 25,885 25,973
-------- --------
Net inventories.................................. $129,673 $115,643
======== ========
</Table>

NOTE C -- COMPREHENSIVE INCOME

The reconciliation between Net Income and Comprehensive Income for the
three and six month periods ended June 29, 2001 and June 30, 2000 is as follows:

<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 29, JUNE 30, JUNE 29, JUNE 30,
2001 2000 2001 2000
(Dollars in Thousands) -------- -------- -------- --------

Net Income................................... $1,275 $3,898 $7,481 $6,147
Cumulative Translation Adjustment............ (189) (138) (779) (539)
Change in the Fair Value of Derivative
Financial Instruments...................... 435 -- (13) --
------ ------ ------ ------
Comprehensive Income......................... $1,521 $3,760 $6,689 $5,608
====== ====== ====== ======
</Table>

NOTE D -- SEGMENT REPORTING

As a result of the recent corporate restructuring, the Company changed how
costs flowed between its businesses. Certain costs that were previously included
in the "All Other" column in the segment disclosures are being charged to Metal
Systems and Microelectronics beginning in the first quarter 2001. Beginning in
2001, the "All Other" column includes the operating results of BEM Services Inc.
and Brush Resources Inc., two wholly-owned subsidiaries of the Company, as well
as the parent company's operating expenses. BEM Services charges a management
fee for the services provided to the other businesses within the Company on a
cost-plus basis. Brush Resouces may sell beryllium hydroxide, produced from its
mine and extraction mill in Utah, to outside

5
7

customers and to businesses within the Metal Systems Group. Segment results from
the prior year have been restated to reflect these changes on a pro forma basis.

<Table>
<Caption>
METAL MICRO- TOTAL ALL
SYSTEMS ELECTRONICS SEGMENTS OTHER TOTAL
(Dollars in thousands) -------- ----------- -------- -------- --------

SECOND QUARTER 2001
- -----------------------
Revenues from external customers.... $ 83,401 $42,301 $125,702 $ 2,754 $128,456
Intersegment revenues............... 352 472 824 5,539 6,363
Profit (loss) before interest and
taxes............................. (1,614) 921 (693) 3,406 2,713
SECOND QUARTER 2000
- -----------------------
Revenues from external customers.... $ 95,088 $41,818 $136,906 $ 276 $137,182
Intersegment revenues............... 1,023 240 1,263 5,766 7,029
Profit (loss) before interest and
taxes............................. 2,683 2,659 5,342 1,423 6,765
FIRST SIX MONTHS 2001
- ------------------------
Revenues from external customers.... $182,030 $89,196 $271,226 $ 2,754 $273,980
Intersegment revenues............... (1,938) (1,301) (3,239) (10,386) (13,625)
Profit (loss) before interest and
taxes............................. 4,946 3,340 8,286 4,461 12,747
FIRST SIX MONTHS 2000
- ------------------------
Revenues from external customers.... $186,263 $83,425 $269,688 $ 2,918 $272,606
Intersegment revenues............... 2,578 526 3,104 11,033 14,137
Profit (loss) before interest and
taxes............................. 2,245 4,801 7,046 3,954 11,000
</Table>

NOTE E -- DERIVATIVE FINANCIAL INSTRUMENTS

The Company adopted SFAS No.133, "Accounting for Derivative Instruments and
Hedging Activities" and as amended by SFAS No. 138 "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" as of January 1, 2001.
The initial adjustment from adopting SFAS No. 133 (as amended) did not have a
material impact on earnings and resulted in a $0.4 million charge recorded
against other comprehensive income on the balance sheet.

The Company is exposed to commodity price, interest rate and foreign
currency exchange rate risks and attempts to minimize the effects of these
exposures on earnings through a combination of natural hedges and the use of
derivative financial instruments. The Company may secure commodity swaps to
hedge copper purchases where changes in the copper price cannot be passed
through to the Company's customers. The Company uses interest rate swaps to fix
interest rates on floating rate obligations as appropriate. The Company also
uses forward contracts, options and collars to hedge a portion of its
anticipated foreign currency transactions. The Company has policies approved by
the Board of Directors that establish the parameters for the allowable types of
derivative instruments to be used, the maximum allowable contract periods,
aggregate dollar limitations and other hedging guidelines. The Company will only
secure a derivative if there is an underlying exposure that is not otherwise
covered by a natural hedge. In general, derivatives will be held until maturity.

All of the Company's commodity swaps, interest rate swaps and foreign
currency derivatives have been designated as cash flow hedges. Hedge
ineffectiveness of $7,000 was charged against income in the first six months of
2001, all of which was recorded in the first quarter, and was included in
other-net on the Company's consolidated statements of income. All commodity
swaps and foreign currency derivatives outstanding as of June 29, 2001 mature
prior to December 31, 2002.

SFAS No. 133 requires the fair value of outstanding derivative instruments
to be recorded on the balance sheet. With the adoption of SFAS No.133, the
Company began recording the fair values of its derivatives in prepaid expenses,
other assets, other liabilities and accrued items and other long-term
liabilities depending on the Company's rights or obligations under each
derivative and the remaining term to maturity. As of June 29, 2001,

6
8

the Company recorded derivative fair values of $3.7 million in prepaid expenses,
$0.7 million in other assets, $1.9 million in other liabilities and accrued
items and $1.1 million in other long-term liabilities on its consolidated
balance sheet. Changes in fair values are recorded in income or other
comprehensive income as appropriate under SFAS No. 133 guidelines. The change in
the fair value of the Company's outstanding derivatives and other current
hedging activity resulted in a credit to other comprehensive income of $1.1
million in the second quarter 2001 and $1.3 million for the first six months of
2001. As a result of derivatives maturing during the second quarter 2001, $0.7
million was relieved from other comprehensive income and was credited to income.
For the first half of the year, $0.9 million has been relieved from other
comprehensive income and credited to income as a result of matured derivatives.
The net derivative loss recorded in other comprehensive income was $13,000 for
the quarter ended June 29, 2001. The Company expects to reclassify $0.7 million
of net gain on derivative instruments from the initial adjustment to other
comprehensive income to earnings during the year ending December 31, 2001.

The Company hedges a portion of its net investment in its Japanese
subsidiary using yen denominated debt. A net gain of $0.2 million associated
with translating the debt into dollars was recorded in the cumulative
translation adjustment for the quarter ended June 29, 2001.

NOTE F -- NEW PRONOUNCEMENT

In June 2001, the Financial Standards Accounting Board issued Statement No.
142, "Goodwill and Other Intangible Assets". Under this statement, goodwill and
other indefinite lived assets will no longer be amortized, but instead will be
reviewed annually, or more frequently under certain circumstances, for
impairment. Intangible assets with finite lives will continue to be amortized
over their useful lives. The amortization provisions of the statement apply to
any goodwill or other intangible assets acquired after June 30, 2001. The
amortization provisions do not apply to goodwill and other intangible assets
acquired prior to July 1, 2001 until adoption of the statement. The Company is
required to adopt the statement by January 1, 2002, but early adoption is
allowed. The Company had goodwill of $8.0 million on its consolidated balance
sheet as of June 29, 2001.

7
9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

FORWARD-LOOKING STATEMENTS

Portions set forth in this document that are not statements of historical
or current facts are forward-looking statements. 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 include, in
addition to those mentioned herein, the condition of the markets which the
Company serves (especially as impacted by events in particular markets,
including telecommunications, automotive electronics, computers, optical media
and microelectronics, or in particular geographic regions), the Company's
success in implementing its strategic plans, the timely and successful
completion of pending capital expansion projects, changes in government
regulatory requirements, the enactment of new legislation that impacts the
Company's obligations and the conclusion of pending litigation matters in
accordance with the Company's expectation that there will be no material adverse
effects.

RESULTS OF OPERATIONS

<Table>
<Caption>
SECOND QUARTER FIRST SIX MONTHS
---------------- ----------------
2001 2000 2001 2000
(Millions, except per share data) ------ ------ ------ ------

Sales........................................... $128.5 $137.2 $274.0 $272.6
Operating Profit................................ 2.7 6.8 12.7 11.0
Diluted E.P.S. ................................. $ 0.08 $ 0.24 $ 0.45 $ 0.38
</Table>

Sales of $128.5 million in the second quarter 2001 were 6% lower than sales
in the second quarter 2000 and represent the first quarter to quarter sales
decline in two years. Sales for the first six months of 2001 were $274.0 million
compared to $272.6 million in the first six months of 2000. The sales decline in
the second quarter 2001 from the second quarter 2000 was caused by softening of
demand from the telecommunications and computer markets, which are the Company's
two largest markets. The decline was also in the domestic markets, as
international sales (sales through international operations plus direct exports
from the U.S.) grew to $38.5 million in the second quarter 2001 from $37.7
million in the second quarter 2000. For the first six months, international
sales were $80.1 million, or 29.3% of total sales, in 2001 compared to $76.1
million, or 27.9% of sales, in 2000. Sales by the Metal Systems Group, the
larger of the Company's two reportable segments, were lower in the second
quarter and the first six months compared to the prior year while the
Microelectronics Group's sales grew in both periods.

The exchange rate effect reduced the translated value of the Company's
foreign currency denominated sales by $1.6 million in the second quarter and
$3.3 million in the first half of 2001 versus the comparable periods in 2000 as
a result of the stronger dollar relative to the yen, euro and sterling. The
copper and precious metal price pass through had a slightly negative impact on
the sales in the second quarter 2001 but the impact was negligible for the first
half of the year. Underlying selling prices, particularly within portions of the
Metal Systems Group, remained the same or higher on average in the first half of
2001 compared to the first half of 2000.

Gross margin was $23.6 million in the second quarter 2001 compared to $29.7
million in the second quarter 2000. As a percent of sales, gross margin
decreased from 21.7% in the second quarter last year to 18.4 % in the current
year. The decline in margin dollars generated resulted from the lower sales
volumes and the unfavorable currency effect offset in part by the favorable
pricing. Margins were also hampered by an increase in unabsorbed manufacturing
costs. While cost reductions were made at various facilities in response to the
reduced production requirements, particularly at Technical Materials, Inc.
(TMI), the over-all cost adjustments were not made to the same degree and as
quickly as the reduction in volumes. Gross margin for the first six months of
2001 was $57.6 million, down slightly from the $58.0 million earned in the first
six months of 2000. As a percent of sales, the gross margin was 21.0% in the
first six months of 2001 compared to 21.3% in 2000. For the first six months,
price increases offset the majority of the unfavorable currency effect and other
cost issues.

Selling, general and administrative expenses (SG&A) were $18.8 million, or
14.6% of sales, in the second quarter 2001 compared to $21.1 million, or 15.4%
of sales, in the second quarter 2000. The majority of the

8
10

improvement was due to lower incentive compensation expenses and legal costs not
associated with chronic beryllium disease. In addition, TMI reduced selling
expenses in response to the decline in sales volumes in the quarter. For the
first six months, SG&A expenses were $40.3 million (14.7% of sales) in 2001 and
$43.0 million (15.8% of sales) in 2000. The $2.7 million change is mainly due to
lower medical and environmental, health and safety expenses as well as the
aforementioned other legal costs. TMI's reduced selling expenses also impacted
the year-to-date comparison, while corporate-wide incentive compensation expense
is relatively flat between the first half of the two years.

Research and development expenses (R&D) were $1.9 million in the second
quarter 2001 versus $1.7 million in the second quarter 2000. R&D expenses for
the first six months of 2001 were $3.6 million, a decrease of $0.1 million from
the first six months of 2000. As a percent of sales, R&D expenses were 1.3% in
the first half of 2001 and 1.4% in the first half of 2000. Approximately 75% of
the total R&D expense supports the Metal Systems Group.

Other-net expense was $0.2 million in the second quarter 2001 and $0.1
million in the second quarter 2000. For the first two quarters of each year,
other-net expense was $1.0 million in 2001 and $0.3 million in 2000. The
year-to-date difference was caused mainly by currency exchange gains being $0.9
million lower in 2001 than 2000. Other net includes other miscellaneous income
and expense items such as metal financing fees, bad debt expense, cash
discounts, amortization of intangible assets, gain or loss on sales of capital
assets and other non-operating items.

Operating profit in the second quarter 2001 was $2.7 million, a decline of
$4.1 million from the second quarter 2000. The lower margin in the current
quarter, as a result of the reasons previously described, was the cause for the
reduction in profit. For the first six months, operating profit was $12.7
million in 2001 and $11.0 million in 2000. Operating profit as a percent of
sales was 4.7% for the first half of 2001 and 4.0% for the first half of 2000.

Interest expense was $0.9 million in the second quarter 2001 compared to
$1.1 million in the second quarter 2000. For the first two quarters of the year,
interest expense was $1.8 million in 2001 and $2.2 million in 2000. The majority
of the difference between years for both the quarter and the first six months
was an increase in interest capitalized associated with long-term capital
projects. The current year average borrowing rate was lower, but the average
debt level was higher than in the prior year.

Income taxes were applied at rate of 31.5% of income before income taxes
for the second quarter and the first six months of 2001. In 2000, a rate of
31.7% was used in the second quarter and 30.3% for the first six months. Major
factors affecting the rate in 2001 include the level of foreign tax benefits,
the depletion allowance and other credits.

Net income was $1.3 million in the second quarter 2001, a $2.6 million
decrease from the second quarter 2000. For the first six months of 2001, net
income of $7.5 million was an improvement of $1.4 million over the first six
months of 2000. Earnings per share was 8 cents in the second quarter 2001
compared to 24 cents in the same quarter last year. Year-to-date per share
earnings in 2001 of 45 cents were 7 cents, or 18%, higher than the first six
months of 2000.

SEGMENT DISCLOSURES

The Company aggregates its businesses into two reportable segments - the
Metal Systems Group and the Microelectronics Group. Corporate expenses as well
as the operating results from the Company's beryllium mine and extraction mill
in Utah historically were not included in either segment and were shown in the
"All Other" column in the segment footnote.

As a result of the recent corporate restructuring, the Company changed how
costs flow between its various businesses and the corporate office. Certain
costs that previously were recorded at the corporate office, primarily expenses
related to beryllium health and safety and chronic beryllium disease, are being
charged to the responsible businesses beginning in the first quarter 2001.
Beginning in 2001, the "All Other" column in the segment disclosures includes
the operating results of BEM Services, Inc. and Brush Resources Inc., two
wholly-owned subsidiaries of the Company, as well as the parent company's
operating expenses. BEM Services charges
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11

a management fee for the services it provides, primarily corporate,
administrative and financial over-sight, to the other businesses within the
Company on a cost-plus basis. Brush Resources sells beryllium hydroxide,
produced through its Utah operations, to outside customers and to businesses
within the Metal Systems Group. The 2000 segment results presented in Note D to
the Consolidated Financial Statements for the period ended June 29, 2001, as
well as in this Management Discussion and Analysis, have been revised to reflect
these changes on a pro forma basis. Management believes that these changes
should more accurately reflect the operating results of its businesses on a go
forward basis.

METAL SYSTEMS GROUP

<Table>
<Caption>
SECOND QUARTER FIRST SIX MONTHS
-------------- ----------------
2001 2000 2001 2000
(Millions) ----- ----- ------ ------

Sales............................................. $83.4 $95.1 $182.0 $186.3
Operating Profit (Loss)........................... (1.6) 2.7 4.9 2.2
</Table>

The Metal Systems Group consists of Alloy Products, Technical Materials,
Inc. and Beryllium Products. The following chart highlights business unit sales
as a percent of the total Metal System Group sales:

<Table>
<Caption>
SECOND QUARTER FIRST SIX MONTHS
-------------- ----------------
2001 2000 2001 2000
----- ----- ------ ------

Percent of Segment Sales
Alloy........................................... 75.5% 70.5% 73.7% 72.0%
TMI............................................. 15.1 23.9 18.2 22.4
Beryllium Products.............................. 9.4 5.6 8.1 5.6
</Table>

Total Alloy Product sales declined 6% in the second quarter 2001 from the
second quarter 2000. Sales for the first six months of 2001 were unchanged from
the first six months of 2000 as a result of stronger sales in the first quarter
2001. Alloy Products has two main product lines -- strip products and bulk
products. Strip products is the larger of the two lines and its major products
are precision strip and small diameter rod and wire manufactured from beryllium
alloys. Strip product sales in the second quarter 2001 were 10% lower than the
comparable period last year due to the slow down in the telecommunications and
computer markets. The sales order entry rate was weak during the current quarter
and in addition there were numerous orders that were cancelled, reduced or
delayed by the customers.

Total strip pounds sold were 20% lower in the second quarter 2001 than in
the second quarter 2000. For the first half of 2001, pounds sold were 8% lower
than the first half of 2000. Production from the strip mill at the Company's
Elmore, Ohio facility, which was capacity constrained in 2000, was sufficient to
meet demand in the first six months of 2001. Output was reduced in the second
quarter 2001 from recent levels in response to the declining demand for strip
products. The lower demand and the improved performance of the mill provided the
opportunity to reduce work-in-process inventories and replenish the finished
goods inventories.

Bulk products are a family of beryllium and non-beryllium copper alloy
products manufactured in rod, bar, tube, plate and a variety of customized
forms. Sales of bulk products increased 2% in the second quarter 2001 from the
second quarter 2000 while year-to-date sales increased 7% over the prior period.
The improved sales resulted from increased demand from the undersea
communications, aerospace and oil and gas markets. These markets started to show
some softness in the latter half of the second quarter 2001 while the plastic
tooling and welding markets have been soft for most of the current year. Bulk
pounds sold remain unchanged in the current year as compared to last year.

Sales of TMI products declined 45% in the second quarter 2001 from the
second quarter 2000 after growing 9% in the first quarter 2001 from the first
quarter 2000. Sales for the first six months of 2001 were 21% lower than the
first six months of 2000. As with Alloy strip products, the fall-off in sales is
due to the softness in the telecommunication and computer markets. TMI sales
into the automotive market have also slowed. Order entry rates were
significantly lower in the second quarter 2001 than at any time in fiscal 2000.
TMI made significant

10
12

reductions in its cost structure during the quarter in response to the downturn
in the business and as a result, TMI generated a profit in the second quarter
and the first half of 2001 despite the reduced volumes.

Beryllium Products is the smallest of the Company's businesses. This unit
manufactures pure beryllium and beryllium aluminum alloys for defense
applications and a variety of commercial markets, including medical, optical
scanning and electronics. Sales of these products improved 47% in the second
quarter 2001 over the comparable period in 2000 while sales for the first six
months of 2001 were 39% higher than the year ago period. The higher sales
resulted from strength in the defense market.

The gross margin on Metal Systems Group sales was 17.6% in the second
quarter 2001 compared to 20.5% in the second quarter 2000. The unfavorable
foreign currency exchange rate effect and the increase in unabsorbed costs as a
result of lower production levels, particularly within Alloy, were the main
causes for the decline in margins. These factors more than offset the impact of
the Alloy price increases. The year-to-date gross margin was 21.0% in 2001 and
19.8% in 2000. A favorable product mix and operational efficiencies in the first
quarter 2001, when the strip mill ran at a higher level of output, and the
higher selling prices helped to keep the margin rate in the first half of 2001
above the 2000 level.

Total SG&A and Other-net expenses were $0.6 million lower in the second
quarter 2001 than the second quarter 2000. Year-to-date expenses were $0.7
million lower in the first half of 2001 compared to the first half of 2000.
Reductions in TMI selling expenses, lower medical and environmental, health and
safety costs and reduced incentive compensation (as a result of lower profits)
were the main causes of the change between periods.

As a result of the lower margins, offset in part by reduced expenses, the
Metal Systems Group recorded an operating loss of $1.6 million in the second
quarter 2001 after earning $2.7 million in the second quarter 2000. For the
first half of the year, Metal Systems earned $4.9 million in 2001, a $2.7
million improvement over the first half of 2000.

MICROELECTRONICS GROUP

<Table>
<Caption>
SECOND QUARTER FIRST SIX MONTHS
-------------- ----------------
2001 2000 2001 2000
(Millions) ----- ----- ------ ------

Sales............................................... $42.3 $41.8 $89.2 $83.4
Operating Profit.................................... 0.9 2.7 3.3 4.8
</Table>

The Microelectronics Group (MEG) consists of Williams Advanced Materials
Inc. (WAM) and Electronic Products. The following chart highlights business unit
sales as a percent of the total Microelectronics Group sales:

<Table>
<Caption>
SECOND QUARTER FIRST SIX MONTHS
-------------- ----------------
2001 2000 2001 2000
----- ----- ------ ------

Percent of Segment Sales
WAM............................................... 77.2% 74.6% 76.3% 75.6%
Electronic Products............................... 22.8 25.4 23.7 24.4
</Table>

WAM is the larger of the business units within the MEG and its revenues
grew by 5% in the second quarter 2001 from the second quarter 2000. For the
first six months in 2001, WAM's sales improved by 8% over last year. The sales
growth in the quarter resulted from strong demand from the wireless/photonic
sector of the microelectronic market. Fiber optic applications began to soften
in the second quarter 2001 from the higher levels in the first quarter 2001. WAM
also sells into the optical media, magnetic head and decorative and performance
film markets. The cost of the precious metal content of WAM's products is
typically passed through to the customer and WAM's sales value is therefore
affected by the cost and mix of the precious metals sold. The value added, or
sales less the metal cost, removes the impact of the metal mix and price. The
value added increased 17% in the first half of 2001 over the 2000 level. WAM
manufactures a wide variety of products at its facilities in New York and
Singapore, with physical vapor deposition targets being the most significant
product line. In the second quarter 2001, WAM acquired various assets used in
the production of frame lid assemblies from a

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competitor who withdrew from the market. WAM anticipates that the added capacity
and capabilities will increase its sales of frame lid assemblies in the coming
quarters.

Sales of Electronic Products declined 9% in the second quarter but
increased 4% for the first half of 2001 compared to 2000. Electronic Products
manufactures four distinct product lines. Beryllia ceramics is the largest of
the four and sales of these products were lower in the current year due to
telecommunication market slow down, particularly the wireless sector of that
market, and the phasing out of an automotive application. The customer base for
these products is limited so the resulting revenue levels can fluctuate rapidly
from period to period. The thick film product line has improved significantly
during 2001, with revenues more than doubling in the current quarter and the
first half over the prior year. The sales backlog for these products remains
solid. Sales of the two smaller product lines -- direct bond copper and powder
metal products -- were flat to down for the quarter and the year thus far.

Gross margin on MEG sales was 14.6% in the second quarter 2001 versus 17.9%
in the second quarter 2000. For the first half of the year, the gross margin was
16.1% in 2001 and 18.0% in 2000. The margin contribution from WAM improved in
the quarter and the year thus far due to a favorable product mix and cost
containment efforts. However, the product mix within Electronic Products was
unfavorable as beryllia ceramics typically generate the highest variable margins
and sales of those products declined. In addition, there were inventory
adjustments and other cost issues that served to reduced margins in the quarter.
Electronic Products made various adjustments to its cost structure late in the
second quarter, including reductions to staff. The cost benefit from these
adjustments should impact the third quarter.

SG&A and Other-net expense were $0.4 million higher in the quarter and $0.8
million year-to-date 2001 than in the comparable periods in 2000. Selling and
administrative expenses increased in order to support WAM's expanded operations
at its Pure Tech subsidiary. Electronic Products increased its selling expense
efforts in 2001 through geographic expansion and other additions to staff.

Operating Profit for the MEG was $0.9 million in the second quarter 2001
compared to $2.7 million in the second quarter 2000. For the first six months of
2001, profit was $3.3 million, a 30% reduction from the profit earned in the
first six months of 2000.

LEGAL PROCEEDINGS

One of the Company's subsidiaries, Brush Wellman Inc., is a defendant in
proceedings in various state and federal courts brought by plaintiffs alleging
that they have contracted chronic beryllium disease ("CBD") or related ailments
as a result of exposure to beryllium. Plaintiffs in CBD cases seek recovery
under theories of intentional tort and various other legal theories and seek
compensatory and punitive damages, in many cases of an unspecified sum. Spouses,
if any, claim loss of consortium.

The following table summarizes the activity associated with CBD cases:

<Table>
<Caption>
QUARTER ENDED QUARTER ENDED
JUNE 29, 2001 MARCH 30, 2001
------------- --------------

Total cases pending......................................... 79 76
Total plaintiffs............................................ 211 203
Number of claims (plaintiffs) filed during period ended..... 3(8) 5(11)
Number of claims (plaintiffs) settled during period ended... 0 0
Aggregate settlements paid during period ended (dollars in
thousands)................................................ $ 0 $ 0
Number of claims (plaintiffs) dismissed..................... 0 0
</Table>

Additional CBD claims may arise. Management believes Brush Wellman has
substantial defenses in these cases and intends to contest the suits vigorously.
Employee cases, in which plaintiffs have a high burden of proof, have
historically involved relatively small losses to the Company. Third party
plaintiffs (typically employees of Brush Wellman's customers) face a lower
burden of proof than do employees or former employees, but these cases are
generally covered by insurance. In class actions, plaintiffs have historically
encountered difficulty in

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obtaining class certification. The Company recorded a reserve for CBD litigation
of $10.7 million at June 29, 2001 and $9.1 million at December 31, 2000. The
Company also recorded a receivable of $5.2 million at June 29, 2001 and $4.7
million at December 31, 2000 from its insurance carriers as recoveries for
insured claims.

Although it is not possible to predict the outcome of the litigation
pending against the Company and its subsidiaries, the Company provides for costs
related to these matters when a loss is probable and the amount is reasonably
estimable. Litigation is subject to many uncertainties, and it is possible that
some of these actions could be decided unfavorably in amounts exceeding the
Company's reserves. An unfavorable outcome or settlement of a pending CBD case
or additional adverse media coverage could encourage the commencement of
additional similar litigation. The Company is unable to estimate its potential
exposure to unasserted claims.

While the Company is unable to predict the outcome of the current or future
CBD proceedings, based upon currently known facts and assuming collectibility of
insurance, the Company does not believe that resolution of these proceedings
will have a material adverse effect on the financial condition or the cash flow
of the Company. However, the Company's results of operations could be materially
affected by unfavorable results in one or more of these cases.

Standards for exposure to beryllium are under review by governmental
agencies, including the United States Occupational Safety and Health
Administration, and by private standard setting organizations. One result of
these reviews might be more stringent worker safety standards. More stringent
standards, as well as other factors such as the adoption of beryllium disease
compensation programs and publicity related to these reviews may also affect
buying decisions by the users of beryllium containing products. If the standards
are made more stringent or the Company's customers decide to reduce their use of
beryllium containing products, the Company's operating results, liquidity and
capital resources could be materially adversely affected. The extent of the
adverse effect would depend on the nature and extent of the changes to the
standards, the cost and ability to meet the new standards, the extent of any
reduction in customer use and other factors that cannot be estimated.

FINANCIAL POSITION

Cash flow from operations was $1.8 million in the first six months of 2001.
Cash balances increased $0.2 million during the first half of 2001 and stood at
$4.6 million at the end of the second quarter 2001.

Accounts receivable declined $3.4 million during the first six months of
2001. However, with lower sales in the second quarter 2001 compared to the
fourth quarter 2000, the days sales outstanding increased by six days. The
Company has not experienced any significant changes in its bad debts as a result
of the slow-down in business and the recent lengthening of the receivable
collection period.

Inventories totaled $129.7 million at the end of the second quarter 2001,
an increase of $14.0 million since year-end 2000 with $12.7 million of the
increase occurring in the first quarter of 2001. The majority of the increase in
inventory is in finished goods, as inventories in the Alloy worldwide
distribution centers were replenished after operating at low levels during most
of 2000. The quantity of Alloy finished goods increased 34% while raw material
and work-in-process pounds decreased by 15% during the first half of 2001.
Towards the end of the second quarter 2001, the Company purchased the first
installment of beryllium under a long-term supply arrangement at a cost of $3.1
million. This material will be used during the third and fourth quarters,
supplementing the beryllium supply from the Company's mining operations. TMI's
inventories declined in response to the lower business level while WAM's
inventories increased as their volumes continued to be strong.

Capital expenditures were $15.8 million in the first two quarter of 2001.
Approximately 60% of the spending was in support of Metal Systems. Major Metal
Systems Group projects include annealing and pickling equipment for strip
manufacturing in Reading, Pa., bulk annealing equipment in Elmore and an
additional precious metal plating line at TMI. Major MEG capital projects in the
first half of 2001 include a capacity expansion at the Company's Oceanside, Ca.
facility that produces thick film circuits and the used assets acquired by WAM
used in the manufacture of frame lid assemblies. The Company also purchased the
land and mineral rights that were previously leased by its mining operations in
Utah and land adjacent to its Utah milling facility for $1.3 million. The
purchased mineral rights cover approximately 95% of the Company's proven
bertrandite ore reserves.

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Accounts payable and other liabilities and accrued items were lower at the
end of the second quarter 2001 as a result of the reduced business volumes and
payment of the accrued incentive compensation for 2000 in early 2001. Other
long-term liabilities grew $3.3 million in the first six months of 2001 as a
result of increases to the legal liability reserves, changes in the fair value
of derivative financial instruments and a financing arrangement for the Utah
land purchase.

Total balance sheet debt was $83.8 million at the end of the second quarter
2001 compared to $68.7 million at December 31, 2000. Short-term debt increased
$7.1 million and long-term debt increased $8.0 million. Short-term debt includes
$17.2 million of foreign currency denominated loans and $6.4 million of a
precious metal denominated loan.

Dividends paid totaled $4.0 million in the first half of 2001. The
quarterly dividend payout remained the same at 12 cents per outstanding share.
The Company received $1.8 million of cash for the purchase of common stock under
stock option plans in the first two quarters of 2001.

Cash flow from operations was $17.1 million in the first half of 2000 and
cash balances grew by $5.4 million during the six-month period. Accounts
receivable increased by $16.7 million during the first half of the year as a
result of the record sales level and a slight increase in the days sales
outstanding. Inventories declined by $4.0 million from the prior year-end level.
Accounts payable and other liabilities and accrued items increased due to the
higher activity level and to finance the growth in accounts receivable. Capital
expenditures were $6.6 million during the first two quarters of 2000. Total
balance sheet debt decreased by $2.3 million during the first half of 2000 while
dividends paid totaled $3.9 million during the same time period.

Funds generated by operations plus the available borrowing capacity are
believed adequate to support operating requirements, capital expenditures,
remediation projects and dividends. Excess cash, if any, is invested in money
market or other high quality investments.

MARKET RISK DISCLOSURE

For information regarding the Company's market risks, refer to page 21 of
the annual report to shareholders for the year ended December 31, 2000.

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16

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company and its subsidiaries are subject, from time to time, to a
variety of civil and administrative proceedings arising out of their normal
operations, including, without limitation, product liability claims, health,
safety and environmental claims and employment-related actions. Among such
proceedings are the cases described below.

CBD CLAIMS

There are claims pending in various state and federal courts against Brush
Wellman, one of the Company's subsidiaries, by its employees, former employees
or surviving spouses and third party individuals alleging that they contracted,
or have been placed at risk of contracting, chronic beryllium disease ("CBD") or
related ailments as a result of exposure to beryllium. Plaintiffs in CBD cases
seek recovery under theories of intentional tort and various other legal
theories and seek compensatory and punitive damages, in many cases of an
unspecified sum. Spouses, if any, claim loss of consortium.

During the second quarter of 2001, the number of CBD cases grew from 76
cases (involving 203 plaintiffs), as of March 31, 2001, to 79 cases (involving
211 plaintiffs), as of June 29, 2001.

The 79 pending CBD cases fall into three categories: 44 "employee cases"
involving an aggregate of 44 Brush Wellman employees, former employees or
surviving spouses (in 26 of these cases, a spouse has also filed claims as part
of his or her spouse's case, and in one case, one child has filed a claim as
part of his parent's case); 32 cases involving third party individual
plaintiffs, with 68 individuals (and 46 spouses who have filed claims as part of
their spouse's case, and ten children who have filed claims as part of their
parent's case); and three purported class actions involving 14 individuals (and
two spouses who have filed claims as part of their spouse's case). Employee
cases, in which plaintiffs have a high burden of proof, have historically
involved relatively small losses to the Company. Third party plaintiffs
(typically employees of our customers) face a lower burden of proof than do
employees or former employees, but these cases are generally covered by
insurance, at least partially.

In the three purported class actions that are pending against Brush
Wellman, the named plaintiffs allege that past exposure to beryllium has
increased their risk of contracting CBD, though most of them do not claim to
have actually contracted it. They seek medical monitoring funds to be used to
detect medical problems that they believe may develop as a result of their
exposure and, in some cases, also seek compensatory and punitive damages.

One of the three purported class actions pending against Brush Wellman was
brought by named plaintiffs on behalf of tradesmen who worked in one of Brush
Wellman's facilities as employees of independent contractors. The two others
were brought on behalf of current and former employees of Brush Wellman's
present and former customers and vendors.

OTHER CLAIMS

Brush Wellman's Egbert subsidiary has been named as a defendant in a number
of lawsuits alleging asbestos-induced illness, arising out of the conduct of a
friction materials business whose operating assets Egbert sold in 1986. In each
of the pending cases, Egbert is one of a large number of defendants named in the
respective complaints. Egbert is a party to an agreement with the predecessor
owner of its operating assets, Pneumo Abex Corporation (formerly Abex
Corporation), and five insurers, regarding the handling of these cases. Under
the agreement, the insurers share some expenses of defense, and Egbert, Pneumo
Abex Corporation and the insurers share payment of settlements and/or judgments.
In each of the pending cases, both expenses of defense and payment of
settlements and/or judgments are subject to a limited separate reimbursement
agreement under which a successor owner of the business is obligated. A number
of cases of this type have been disposed of to date, some by voluntary
dismissal, others by summary judgment, one by jury verdict of no liability, and
still others upon payment of nominal amounts in settlement. There are at present
23 asbestos cases pending.
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17

A Consent Decree is pending between Brush Wellman Inc. and the Pima County
Air Quality Control District. The Consent Decree requires Brush Wellman Inc. to
pay $145,000 as full payment and complete satisfaction of all claims arising out
of 6 counts of alleged violations of the Pima County Air Code. All of the
alleged violations relate to the operation of a clothes dryer in the company's
Tucson, Arizona plant and the alleged failure of Brush Wellman Inc. to vent the
clothes dryer through the plant's air pollution control system.

CLAIMS CONCLUDED SINCE THE END OF FIRST QUARTER 2001.

As previously reported in the Form 10-Q for the second quarter of 1999, a
subsidiary of the Company, Brush Wellman Inc., was a defendant in a case filed
in the Court of Common Pleas, Ottawa County, Ohio on June 3, 1999: John
Stipanovich, et al. v. Brush Wellman Inc., et al. The plaintiffs alleged that
Brush Wellman negligently failed to remove beryllium chloride and other
chemicals from a site located at Brush Wellman's Elmore, Ohio facility where the
plaintiffs worked. The plaintiffs sought to recover damages for medical expenses
incurred, both present and future, loss of earnings, and the plaintiffs' alleged
permanent disability. This action has been settled by the Company for a nominal
amount and the release was executed on June 13, 2001; however, the Company is
awaiting final court dismissal.

As previously reported in the Form 10-K for the year ended December 31,
2000, a subsidiary of the Company, Technical Materials, Inc. ("TMI"), and an
employee of TMI were defendants in a case filed in the Superior Court of the
State of Rhode Island on October 15, 1997: Handy & Harmon Electronic Materials
Corporation v. Technical Materials, Inc., et al. The complaint alleged that TMI
tortiously induced the employee to breach his confidentiality obligations to his
former employer, the plaintiff, and misappropriated trade secrets of the
plaintiff. The plaintiff sought permanently to enjoin TMI from using any
confidential information obtained by the employee while he was employed with the
plaintiff, and compensatory and punitive damages of unspecified amounts. This
action has been settled by the Company for a nominal amount and the release was
executed on May 16, 2001. The dismissal stipulation was filed with the Court on
May 11, 2001.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The Company's Annual Meeting of Shareholders for 2001 was held on May
1, 2001.

(b) At the Annual Meeting, three directors were elected to serve for a term
of three years by the following vote:

<Table>
<Caption>
SHARES VOTED SHARES VOTED SHARES VOTED SHARES
"FOR" "AGAINST" "ABSTAINING" "NON-VOTED"
------------ ------------ -------------- -------------

Joseph P. Keithley............... 14,953,187 -0- 202,175 -0-
William R. Robertson............. 14,950,846 -0- 204,516 -0-
John Sherwin, Jr................. 14,955,546 -0- 199,816 -0-
</Table>

The following directors continued their term of office after the meeting:
Albert C. Bersticker, Dr. Charles F. Brush, III, Gordon D. Harnett, David H.
Hoag, William P. Madar, and R. Mohan Reddy.

(c) The approval of the 1997 Stock Incentive Plan for Non-Employee
Directors (as amended and restated as of May 1, 2001) was ratified and
approved by the following vote:

<Table>
<Caption>
SHARES VOTED SHARES VOTED SHARES VOTED SHARES
"FOR" "AGAINST" "ABSTAINING" "NON-VOTED"
------------ ------------ -------------- -------------

12,113,736 2,699,519 342,105 2
</Table>

<Table>
<Caption>
SHARES VOTED SHARES VOTED SHARES VOTED SHARES
"FOR" "AGAINST" "ABSTAINING" "NON-VOTED"
------------ ------------ -------------- -------------

15,025,655 53,403 76,303 1
</Table>

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

(11) Statement re computation of per share earnings (filed as Exhibit 11 to
Part I of this report).

(b) Reports on Form 8-K

Brush Engineered Materials Inc. filed a report on Form 8-K on July 26, 2001
that included a copy of a press release reporting on the second quarter 2001
earnings.

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SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.

BRUSH ENGINEERED MATERIALS INC.
Dated: August 10, 2001
/s/ John D. Grampa
--------------------------------------
John D. Grampa
Vice President Finance
and Chief Financial Officer