Item 2.05 Costs Associated with Exit or Disposal Activities.

On November 12, 2008, Applied reported its intent to implement a restructuring program to reduce its global workforce through a combination of attrition, voluntary separation and other workforce reduction actions. Due to the variability of costs associated with voluntary separation programs, Applied was unable at the time of the Initial Filing to make a good faith determination of the cost estimates, or ranges of cost estimates, associated with the restructuring program.

Applied currently expects to incur total charges associated with the restructuring program of approximately $133 million, consisting primarily of one-time termination benefits, which amount represents substantially all of the expected costs for this program. These charges will be recorded in the Company's first fiscal quarter ended January 25, 2009 and will result in cash expenditures of approximately $133 million through October 2009.

Safe Harbor Statement

This report contains forward-looking statements, including those regarding the expected charges and cash expenditures under the restructuring program. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including but not limited to: uncertain global economic and industry conditions; Applied's ability to implement the program as planned; retention of key employees; changes in Applied's business requirements; and other risks described in Applied's filings with the Securities and Exchange Commission. All forward-looking statements are based on management's estimates, projections and assumptions as of the date hereof and include the assumptions that underlie such statements. Applied undertakes no obligation to revise or update any forward-looking statements.

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