UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 27, 2008.

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

For the transition period of                      to                     .

UNIVERSAL FOREST PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

Michigan		38-1465835
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
2801 East Beltline, N.E., Grand Rapids, Michigan		49525
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (616) 364-6161

Securities registered pursuant to Section 12(b) of the Act:

Title Of Each Class		Name of Each Exchange on Which Registered
None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no par value
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by checkmark 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 in the past 90 days. Yes þ No o

Indicate by checkmark if disclosure of delinquent filers pursuant to Items 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-2 of the Act.) Yes o No þ

The aggregate market value of the common stock held by non-affiliates of the registrant (i.e. excluding shares held by executive officers, directors, and control persons as defined in Rule 405, 17 CFR 230.405) on June 28, 2008 was $504,439,465 computed at the closing price of $31.06 on that date.

As of January 31, 2009, 19,121,770 shares of the registrant’s common stock, no par value, were outstanding.

Documents incorporated by reference:

(1)

Certain portions of the registrant’s Annual Report to Shareholders for the fiscal year ended December 27, 2008 are incorporated by reference into Part I and II of this Report.

(2)

Certain portions of the registrant’s Proxy Statement for its 2009 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report.

Exhibit Index located on page E-1.
Page 1 of 17

 

 

ANNUAL REPORT ON FORM 10-K
DECEMBER 27, 2008
TABLE OF CONTENTS

PART I
Item 1. Business			3
Item 1A. Risk Factors			7
Item 1B. Unresolved Staff Comments			10
Item 2. Properties			10
Item 3. Legal Proceedings			10
Item 4. Submission of Matters to a Vote of Security Holders			10
Additional item: Executive Officers of the Registrant			10
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities			12
Item 6. Selected Financial Data			13
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			13
Item 8. Financial Statements and Supplementary Data			14
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure			14
Item 9A. Controls and Procedures			14
Item 9B. Other Information			14
PART III
Item 10. Directors, Executive Officers and Corporate Governance			15
Item 11. Executive Compensation			15
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters			15
Item 13. Certain Relationships and Related Transactions, and Director Independence			16
Item 14. Principal Accountant Fees and Services			16
PART IV
Item 15. Exhibits and Financial Statement Schedules			16
Exhibit 13
Exhibit 21
Exhibit 23
Exhibit 31(a)
Exhibit 31(b)
Exhibit 32(a)
Exhibit 32(b)

PART I

Item 1. Business.

General Development of the Business.

Universal Forest Products, Inc. was organized as a Michigan corporation in 1955. We engineer, manufacture, treat, distribute and install lumber, composite wood, plastic and other building products to the do-it-yourself/retail (“DIY/retail”), site-built construction, manufactured housing, and industrial markets. We currently operate facilities throughout the United States, Canada, and Mexico.

Information relating to current developments in our business is incorporated by reference from our Annual Report to Shareholders for the fiscal year ended December 27, 2008 (“2008 Annual Report”) under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Selected portions of the 2008 Annual Report are filed as Exhibit 13 with this Form 10-K Report.

Financial Information About Segments.

Statement of Financial Accounting Standards (“SFAS”) No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS 131”) defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Under the definition of a segment, our Eastern, Western and Consumer Products Divisions may be considered an operating segment of our business. Under SFAS 131, segments may be aggregated if the segments have similar economic characteristics and if the nature of the products, distribution methods, customers and regulatory environments are similar. We have aggregated our Eastern and Western divisions into one reporting segment, consistent with SFAS 131. Our Consumer Products Division, which was formed in 2006, is included in “All Other.” Separate Financial information about industry segments is incorporated by reference from Note P of the Consolidated Financial Statements presented under Item 8 herein.

Narrative Description of Business.

We presently engineer, manufacture, treat, distribute and install lumber, composite wood, plastic and other building products for the DIY/retail, site-built construction, manufactured housing, and industrial markets. Each of these markets is discussed in the paragraphs which follow.

DIY/Retail Market. The customers comprising this market are primarily national home center retailers, retail-oriented regional lumberyards and contractor-oriented lumberyards. Generally, terms of sale are established for annual periods, and orders are placed with our regional facilities in accordance with established terms. One customer, The Home Depot, accounted for approximately 27% of our total net sales in fiscal 2008, 26% in 2007, and 22% in 2006.

From time to time we enter into certain sales contracts with The Home Depot. The contracts are limited to the establishment of general sales terms and conditions, such as delivery, invoicing, warranties and other standard, commercial matters. Sales are made by the release of purchase orders to us for particular quantities of certain products. We also enter into marketing agreements and rebate agreements with The Home Depot. The marketing agreements provide a certain percentage of our sales revenue or a minimum dollar amount will be committed to generate sales for us and The Home Depot.

We currently supply customers in this market from many of our locations. These regional facilities are able to supply mixed truckloads of products which can be delivered to customers with rapid turnaround from receipt of an order. Freight costs are a factor in the ability to competitively service this market, especially with treated wood products because of their heavier weight. The close proximity of our regional facilities to the various outlets of these customers is a significant advantage when negotiating annual sales programs.

The products offered to customers in this market include dimensional lumber (both preserved and unpreserved) and various “value-added products,” some of which are sold under our trademarks. In addition to our conventional lumber products, we offer composite wood and plastic products. We also sell engineered wood products to this market, which include roof trusses, wall panels and engineered floor systems (see “Site-Built Construction Market” below).

We are not aware of any competitor that currently manufactures, treats and distributes a full line of both value-added and commodity products on a national basis. We face competition on individual products from several different producers, but the majority of these competitors tend to be regional in their efforts and/or do not offer a full line of outdoor lumber products. We believe the breadth of our product offering, geographic dispersion, customer relationships, close proximity of our plants to core customers, purchasing and manufacturing expertise and service capabilities provide significant competitive advantages in this market.

Site-Built Construction Market. We entered the site-built construction market through strategic business acquisitions. The residential housing customers comprising this market are primarily large-volume, multi-tract builders and smaller volume custom builders. We also supply builders engaged in multi-family and commercial construction. Generally, terms of sale and pricing are determined based on quotes for each order.

We currently supply customers in this market from manufacturing facilities located in many different states and Ontario, Canada. These facilities manufacture various engineered wood components used to frame residential or commercial projects, including roof and floor trusses, wall panels, Open Joist 2000^®, I-joists and lumber packages. Freight costs are a factor in the ability to competitively service this market due to the space requirements of these products on each truckload.

We also provide framing services for customers in certain regional markets, in which we erect the wood structure. We believe that providing a comprehensive framing package, including installation, provides a competitive advantage. Terms of sale are based on a construction contract.

Competition in this market is primarily fragmented, but we do compete with a small number of national and regional retail contractor yards who also manufacture components and provide framing services, as well as regional manufacturers of components. Our long-term objective is to continue to increase our manufacturing capacity and framing capabilities for this market in certain regions we do not currently serve in order to expand our a national presence. We believe our primary competitive advantages relate to the engineering and design capabilities of our regional staff, customer relationships, purchasing and manufacturing expertise, product quality and timeliness of delivery.

Manufactured Housing Market. The customers comprising the manufactured housing market are producers of mobile, modular and prefabricated homes and recreational vehicles. Products sold to customers in this market consist primarily of roof trusses, lumber cut and shaped to the customer’s specification, plywood, particle board and dimensional lumber, all intended for use in the construction of manufactured housing. Sales are made by personnel located at each regional facility based on customer orders.

Our principal competitive advantages include our customer relationships, product knowledge, the strength of our engineering support services, the close proximity of our regional facilities to our customers, our purchasing and manufacturing expertise and our ability to provide national sales programs to certain customers. These factors have enabled us to accumulate significant market share in the products we supply.

Industrial Market. We define our industrial market as industrial manufacturers and agricultural customers who use pallets, specialty crates and wooden boxes for packaging, shipping and material handling purposes. Many of the products sold to this market may be produced from the by-product of other manufactured products, thereby allowing us to increase our raw material yields while expanding our business. Competition is fragmented and includes virtually every supplier of lumber convenient to the customer. We service this market with our dedicated local sales teams and national sales support efforts, combined with our competitive advantages in manufacturing, purchasing, and material utilization.

Suppliers. We are one of the largest domestic buyers of solid sawn soft wood lumber from primary producers (lumber mills). We use primarily Southern Yellow Pine in our pressure-treating operations and site-built component plants in the Southeastern United States, which we obtain from mills located throughout the states comprising the Sunbelt. Other species we use include “spruce-pine-fir” from various provinces in Canada; hemlock, Douglas fir and cedar from the Pacific Northwest; inland species of pine, plantation grown radiata and southern yellow pines from South America; and European spruce. There are numerous primary producers for all varieties we use, and we are not dependent on any particular source of supply. Our financial resources and size, in combination with our strong sales network and ability to remanufacture lumber, enable us to purchase a large percentage of a primary producer’s output, (as opposed to only those dimensions or grades in immediate need), thereby lowering our average cost of raw materials and allowing us to obtain programs such as consigned inventory. We believe this represents a competitive advantage.

Intellectual Property. We own several patents and have several patents pending on technologies related to our business. In addition, we own numerous registered trademarks and claim common law trademark rights to several others. As we develop proprietary brands, we may pursue registration or other formal protection. While we believe our patent and trademark rights are valuable, the loss of a patent or any trademark would not be likely to have a material adverse impact on our competitive position.

Backlog. Due to the nature of our DIY/retail, manufactured housing and industrial businesses, backlog information is not meaningful. The maximum time between receipt of a firm order and shipment does not usually exceed a few days. Therefore, we would not normally have a backlog of unfilled orders in a material amount. The relationships with our major customers are such that we are either the exclusive supplier of certain products and/or certain geographic areas, or the designated source for a specified portion of the customer’s requirements. In such cases, either we are able to forecast the customer’s requirements or the customer may provide an estimate of its future needs. In neither case, however, will we receive firm orders until just prior to the anticipated delivery dates for the products in question.

On December 27, 2008 and December 29, 2007, we estimate that backlog orders associated with the site-built construction business approximated $57.7 million and $101.6 million, respectively. With respect to the former, we expect that these orders will be primarily filled within the current fiscal year, however, it is possible that some orders could be canceled.

Environmental. Information required for environmental disclosures is incorporated by reference from Note N of the Consolidated Financial Statements presented under Item 8 herein.

Seasonality. Information required for seasonality disclosures is incorporated by reference from Item 1A. Risk Factors under the caption “Seasonality and weather conditions could adversely affect us.”

Employees. On December 27, 2008, we had approximately 6,200 employees.

Financial Information About Geographic Areas.

The dominant portion of our operations and sales occur in the United States. Separate financial information about foreign and domestic operations and export sales is incorporated by reference from Note P of the Consolidated Financial Statements presented under Item 8 herein.

Available Information.

Our Internet address is www.ufpi.com. Through our Internet website under “Financial Information” in the Investor Relations section, we make available free of charge, as soon as reasonably practical after such information has been filed with the SEC, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act. Also available through our Internet website under “Corporate Governance” in the Investor Relations section is our Code of Ethics for Senior Financial Officers.

Reports to Security Holders.

Not applicable.

Enforceability of Civil Liabilities Against Foreign Persons.

Not applicable.

Item 1A. Risk Factors.

We are subject to regional, national and global economic conditions. The unprecedented decline in economics throughout the United States could depress demand for our products further.

A sustained downturn in our markets could adversely impact our credit agreements. As of December 27, 2008, excluding various industrial revenue bond and lease obligations, we had approximately $85 million of outstanding indebtedness, all of which are unsecured, comprised of the following:

•

$15 million senior notes due December 2009

•

$40 million senior notes due December 2012

•

$30 million revolving credit facility due February 2012

In addition, we had approximately $32.2 million outstanding under letters of credit, which principally relate to certain insurance contracts and industrial revenue bond obligations. Amounts outstanding under such letters reduced the availability under our $300 million revolving credit facility due February 2012.

As noted elsewhere in this report, we have been experiencing a significant deterioration in the various markets in which we compete. A sustained and continued, significant deterioration in these markets may adversely impact our ability to meet certain of our covenants under one or more of our existing obligations. Management continues to evaluate what, if any, action or actions may be available or necessary to maintain compliance with these various covenants or, if necessary, refinance or replace these obligations.

We are subject to fluctuations in the price of lumber. We experience significant fluctuations in the cost of commodity lumber products from primary producers (the “Lumber Market”). A variety of factors over which we have no control, including government regulations, environmental regulations, weather conditions, economic conditions, and natural disasters, impact the cost of lumber products and our selling prices. While we attempt to minimize our risk from severe price fluctuations, substantial, prolonged trends in lumber prices can negatively affect our sales volume, our gross margins, and our profitability. We anticipate that these fluctuations will continue in the future.

Our growth may be limited by the markets we serve. Our sales growth is dependent, in part, upon the growth of the markets we serve. If our markets do not achieve anticipated growth, or if we fail to maintain our market share, financial results could be impaired.

Our ability to achieve sales and margin goals, particularly on sales to the site-built construction market, is impacted by housing starts. If housing starts decline significantly, our financial results could be negatively impacted. Single-family housing starts fell approximately 41% in 2008 compared to 2007. Single-family housing starts are predicted to decline even further in 2009. The manufactured housing market is constricted due in part to lack of available long-term financing and lack of credit-worth buyers. While current government initiatives are designed to improve the flow of capital to this market, the availability and restrictions of its use could lead to further depressed demand.

We are witnessing consolidation by our customers in each of the markets we serve. These consolidations will result in a larger portion of our sales being made to some customers and may limit the customer base we are able to serve.

A significant portion of our sales are concentrated with one customer. Our sales to The Home Depot comprised 27% of our total sales in 2008, 26% in 2007, and 22% in 2006.

Current economic and credit market conditions have increased the risk that we may not collect a greater percentage of our receivables. Economic and credit conditions may significantly impact our bad debt expense. We continue to monitor our customer’s credit profiles carefully and make changes in our terms when necessary in response to this heightened risk.

Our growth may be limited by our ability to make successful acquisitions. A key component of our growth strategy is to complete business combinations. Business combinations involve inherent risks, including assimilation and successfully managing growth. While we conduct extensive due diligence and have taken steps to ensure successful assimilation, factors beyond our control could influence the results of these acquisitions.

We may be adversely affected by the impact of environmental and safety regulations. We are subject to the requirements of federal, state, and local environmental and occupational health and safety laws and regulations. There can be no assurance that we are at all times in complete compliance with all of these requirements. We have made and will continue to make capital and other expenditures to comply with environmental regulations. If additional laws and regulations are enacted in the future, which restrict our ability to manufacture and market our products, including our treated lumber products, it could adversely affect our sales and profits. If existing laws are interpreted differently, it could also increase our financial costs. If laws regarding carbon emission, more expensive energy choices, or taxes and fees on resource use are enacted, it could significantly increase our costs of operation, raise costs to our customers, and create a further barrier to demand for United States manufactured products.

Seasonality and weather conditions could adversely affect us. Some aspects of our business are seasonal in nature and results of operations vary from quarter to quarter. Our treated lumber and outdoor specialty products, such as fencing, decking, and lattice, experience the greatest seasonal effects. Sales of treated lumber, primarily consisting of Southern Yellow Pine, also experience the greatest Lumber Market risk (see “Historical Lumber Prices” in Management’s Discussion and Analysis of Financial Condition and Results of Operations which is presented under Item 7 of this Form 10-K and is incorporated herein by reference). Treated lumber sales are generally at their highest levels between April and August. This sales peak, combined with capacity constraints in the wood treatment process, requires us to build our inventory of treated lumber throughout the winter and spring. (This also has an impact on our receivables balances, which tend to be significantly higher at the end of the second and third quarters.) Because sales prices of treated lumber products may be indexed to the Lumber Market at the time they are shipped, our profits can be negatively affected by prolonged declines in the Lumber Market during our primary selling season. To mitigate this risk, consignment inventory programs are negotiated with certain vendors that are intended to decrease our exposure to the Lumber Market by correlating the purchase price of the material with the related sell price to the customer. These programs include those materials which are most susceptible to adverse changes in the Lumber Market.

The majority of our products are used or installed in outdoor construction activities; therefore, short-term sales volume, our gross margins, and our profits can be negatively affected by adverse weather conditions, particularly in our first and fourth quarters. In addition, adverse weather conditions can negatively impact our productivity and costs per unit.

Inbound and outbound transportation costs represent a significant part of our cost structure. A rapid and prolonged increase in fuel prices will significantly increase our costs. While we attempt to pass these costs along to our customers, there can be no assurance that they would agree to these price increases.

New preservatives will be developed to treat our products. The manufacturers of preservatives continue to develop new preservatives. All of our wood preservation facilities utilize either Amine Copper Quaternary (“ACQ”), ProWood^® Micro or borates. While we believe treated products are reasonably priced relative to alternative products such as composites or vinyl, consumer acceptance may be impacted which would in turn affect our future operating results. In addition, new preservatives could increase our cost of treating products in the future.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Our corporate headquarters building is located in suburban Grand Rapids, Michigan. We currently have approximately 85 facilities located throughout the United States, Canada, and Mexico. Depending upon function and location, these facilities typically utilize office space, manufacturing space, treating space and covered storage.

We own all of our properties, free from any significant mortgage or other encumbrance, except for approximately 20 regional facilities which are leased. We believe all of these operating facilities are adequate in capacity and condition to service existing customer locations.

Item 3. Legal Proceedings.

Information regarding our legal proceedings is set forth in Note M of our Consolidated Financial Statements which are presented under Item 8 of this Form 10-K and are incorporated herein by reference.

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

Additional Item: Executive Officers of the Registrant.

The following table lists the names, ages, and positions of our executive officers as of February 1, 2009. Executive officers are elected annually by the Board of Directors at the first meeting of the Board following the annual meeting of shareholders.

Name		Age		Position
William G. Currie		61		Executive Chairman, Universal Forest Products, Inc.
Michael B. Glenn		57		Chief Executive Officer, Universal Forest Products, Inc.
Patrick M. Webster		49		President and Chief Operating Officer, Universal Forest Products, Inc.
C. Scott Greene		53		President, Universal Forest Products Eastern Division, Inc.
Richard C. Frazier		66		President, Universal Forest Products Western Division, Inc.
Robert D. Coleman		54		Executive Vice President of Manufacturing, Universal Forest Products, Inc.
Matthew J. Missad		48		Executive Vice President and Secretary, Universal Forest Products, Inc.
Michael R. Cole		42		Chief Financial Officer and Treasurer, Universal Forest Products, Inc.
Ronald G. Klyn		51		Chief Information Officer, Universal Forest Products, Inc.
Joseph F. Granger		43		Executive Vice President of Sales and Marketing, Universal Forest Products, Inc.

William G. Currie joined us in 1971. From 1983 to 1990, Mr. Currie was President of Universal Forest Products, Inc., and he was the President and Chief Executive Officer of The Universal Companies, Inc. from 1989 until the merger to form Universal Forest Products, Inc. in 1993. On January 1, 2000, Mr. Currie also became Vice Chairman of the Board. On April 19, 2006, Mr. Currie became Executive Chairman.

Michael B. Glenn joined us in 1974. In June of 1989, Mr. Glenn was elected Senior Vice President of our Southwest Operations, and on December 1, 1997, became President of Universal Forest Products Western Division, Inc. Effective January 1, 2000, Mr. Glenn was promoted to President and Chief Operating Officer. On July 1, 2006, Mr. Glenn became Chief Executive Officer.

Patrick M. Webster joined us in 1985.  He has held various sales, purchasing and management positions throughout his career with us.  Mr. Webster became Vice President of the Far West Region in 1999, on July 1, 2007, became President of Universal Forest Products Western Division, Inc., and on January 1, 2009 became our President and Chief Operating Officer.

C. Scott Greene joined us in 1991. In November of 1996 he became General Manager of Operations for our Florida Region, and in January of 1999 became Vice President of Marketing for Universal Forest Products, Inc. During early 2000, Mr. Greene became President of Universal Forest Products Eastern Division, Inc.

Richard C. Frazier joined us in 1985 as Vice President of our Southwest Region.  He held this position until January 1, 2008, when he took on a new position to work on special projects throughout Company.  On January 1, 2009, Mr. Frazier became President of the Universal Forest Products Western Division, Inc.

Robert D. Coleman, joined us in 1979. Mr. Coleman was promoted to Senior Vice President of our Midwest Operations in September 1993. On December 1, 1997, Mr. Coleman became the Executive Vice President of Manufacturing of the Universal Forest Products Eastern Division, Inc. On January 1, 1999, Mr. Coleman was named the Executive Vice President of Manufacturing.

Matthew J. Missad joined us in 1985. Mr. Missad has served as General Counsel and Secretary since December 1, 1987, and Vice President Corporate Compliance since August 1989. In February 1996, Mr. Missad was promoted to Executive Vice President.

Michael R. Cole, CPA, CMA, joined us in 1993. In January of 1997, Mr. Cole was promoted to Director of Finance, and on January 1, 2000 was made Vice President of Finance and Treasurer. On July 19, 2000, Mr. Cole became Chief Financial Officer.

Ronald G. Klyn joined us in 1993 as Information Services Manager. In October of 1999, Mr. Klyn was promoted to Chief Information Officer.

Joseph F. Granger joined us in 1988.  In 1997 he became Vice President of the Atlantic Region, in 2002 he became Regional Vice President of the Southeast Region, and on January 1, 2007, he became Executive Vice President of Sales and Marketing.

PART II

The following information items in this Part II, which are contained in the 2008 Annual Report, are specifically incorporated by reference into this Form 10-K Report. These portions of the 2008 Annual Report that are specifically incorporated by reference are filed as Exhibit 13 with this Form 10-K Report.

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

(a)		The information relating to market, holders and dividends is incorporated by reference from the 2008 Annual Report under the caption “Price Range of Common Stock and Dividends.”
		There were no recent sales of unregistered securities.
(b)		Not applicable.
(c)		Issuer purchases of equity securities during the fourth quarter.

Fiscal Month		(a)				(b)				(c)				(d)
September 28 – November 1, 2008(1)															1,227,314
November 2 – 29, 2008															1,227,314
November 30 – December 27, 2008			2,461			$	25.25				2,461				1,224,853

Item 6. Selected Financial Data.

The information required by this Item is incorporated by reference from the 2008 Annual Report under the caption “Selected Financial Data.”

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information required by this item is incorporated by reference from the 2008 Annual Report under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to market risks related to fluctuations in interest rates on our variable rate debt, which consists of a revolving credit facility and industrial development revenue bonds. We do not currently use interest rate swaps, futures contracts or options on futures, or other types of derivative financial instruments to mitigate this risk.

For fixed rate debt, changes in interest rates generally affect the fair market value, but not earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not influence fair market value, but do affect future earnings and cash flows. We do not have an obligation to prepay fixed rate debt prior to maturity, and as a result, interest rate risk and changes in fair market value should not have a significant impact on such debt until we would be required to refinance it.

On December 27, 2008, the estimated fair value of our long-term debt, including the current portion, was $101.7 million, which was $0.5 million greater than the carrying value. The estimated fair value is based on rates anticipated to be available to us for debt with similar terms and maturities. The estimated fair value of notes payable included in current liabilities and the revolving credit facility approximated the carrying values.

Expected cash flows over the next five years related to debt instruments are as follows:

($US equivalents, in thousands)		2009				2010				2011				2012				2013				Thereafter				Total
Long-term Debt:
Fixed Rate ($US)		$	15,000											$	40,000											$	55,000
Average interest rate			5.63	%											6.16	%
Variable Rate ($US)		$	490			$	303			$	254			$	30,527							$	14,600			$	46,174
Average interest rate(1)			6.2	%

Item 8. Financial Statements and Supplementary Data.

The information required by this Item is incorporated by reference from the 2008 Annual Report under the following captions:

“Management’s Annual Report on Internal Control Over Financial Reporting”

“Report of Independent Registered Public Accounting Firm On Internal Control over Financial Reporting”

“Report of Independent Registered Public Accounting Firm On Financial Statements”

“Consolidated Balance Sheets”

“Consolidated Statements of Earnings”

“Consolidated Statements of Shareholders’ Equity”

“Consolidated Statements of Cash Flows”

“Notes to Consolidated Financial Statements”

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

(1)

Evaluation of Disclosure Controls and Procedures. With the participation of management, our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a — 15e and 15d — 15e) as of the year ended December 27, 2008 (the “Evaluation Date”), have concluded that, as of such date, our disclosure controls and procedures were effective.

(2)

Management’s Annual Report on Internal Control Over Financial Reporting. Management’s Annual Report on Internal Control Over Financial Reporting is included in the 2008 Annual Report under the caption “Management’s Annual Report on Internal Control Over Financial Reporting” and is incorporated herein by reference. Our accounting firm’s attestation Report on our internal control over financial reporting is also included in the 2008 Annual Report in the caption “Report of Independent Registered Public Accounting Firm On Internal Control over Financial Reporting” and is incorporated herein by reference.

(3)

Changes in Internal Controls. During the fourth quarter ended December 27, 2008, there were no changes in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information relating to our directors, compliance with Section 16(a) of the Securities and Exchange Act of 1934 and various corporate governance matters is incorporated by reference from our definitive Proxy Statement for the year ended December 27, 2008 for the 2009 Annual Meeting of Shareholders, as filed with the Commission (“2009 Proxy Statement”), under the captions “Election of Directors,” “Corporate Governance and Board Matters,” and “Section 16(a) Beneficial Ownership Reporting Compliance.” Information relating to executive officers is included in this report in the last Section of Part I under the caption “Additional Item: Executive Officers of the Registrant.” Information relating to our code of ethics is included in this report in Part I, Item 1 under the caption “Available Information”.

Item 11. Executive Compensation.

Information relating to director and executive compensation is incorporated by reference from the 2009 Proxy Statement under the caption “Executive Compensation.” The “Personnel and Compensation Committee Report” included in the 2009 Proxy Statement is incorporated hereby by reference for the purpose of being furnished herein and is not and shall not be deemed to be filed under the Securities Exchange Act of 1934, as amended.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.

Information relating to security ownership of certain beneficial owners and management is incorporated by reference from our 2009 Proxy Statement under the captions “Ownership of Common Stock” and “Securities Ownership of Management.”

Information relating to securities authorized for issuance under equity compensation plans as of December 27, 2008, is as follows:

Number of shares

remaining

available for future

Number of

Weighted

issuance under

shares to be

average

equity

issued upon

exercise

compensation

exercise of

price of

plans [excluding

outstanding

outstanding

shares reflected in

options

options

column (a)]

(a)

(b)

(c)

Equity compensation plans approved by security holders

600,047

$

22.16

1,031,979

Equity compensation plans not approved by security holders

none

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information relating to certain relationships and related transactions, and director independence is incorporated by reference from the 2009 Proxy Statement under the captions “Election of Directors”, “Affirmative Determination Regarding Director Independence and Other Matters” and “Related Party Transactions.”

Item 14. Principal Accountant Fees and Services.

Information relating to the types of services rendered by our Independent Auditors and the fees paid for these services is incorporated by reference from our 2009 Proxy Statement under the caption “Independent Public Accountants – Disclosure of Fees.”

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)

1. Financial Statements. The following are incorporated by reference, under Item 8 of this report, from the 2008 Annual Report:

Management’s Annual Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm On Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm On Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Earnings

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

2. Financial Statement Schedules. All schedules required by this Form 10-K Report have been omitted because they were inapplicable, included in the Consolidated Financial Statements or Notes to Consolidated Financial Statements, or otherwise not required under instructions contained in Regulation S-X.

3. Exhibits. Reference is made to the Exhibit Index which is included in this Form 10-K Report.

(b)		Reference is made to the Exhibit Index which is included in this Form 10-K Report.
(c)		Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

and

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 25th day of February, 2009, by the following persons on behalf of us and in the capacities indicated.

Each Director whose signature appears below hereby appoints Matthew J. Missad and Michael R. Cole, and each of them individually, as his attorney-in-fact to sign in his name and on his behalf as a Director, and to file with the Commission any and all amendments to this report on Form 10-K to the same extent and with the same effect as if done personally.

/s/ Peter F. Secchia		/s/ William G. Currie
Peter F. Secchia, Director		William G. Currie, Director
/s/ Dan M. Dutton		/s/ John M. Engler
Dan M. Dutton, Director		John M. Engler, Director
/s/ John W. Garside		/s/ Michael B. Glenn
John W. Garside, Director		Michael B. Glenn, Director
/s/ Gary F. Goode		/s/ Mark A. Murray
Gary F. Goode, Director		Mark A. Murray, Director
/s/ William R. Payne		/s/ Louis A. Smith
William R. Payne, Director		Louis A. Smith, Director

EXHIBIT INDEX

Exhibit #		Description
3		Articles of Incorporation and Bylaws.
		(a)		Registrant’s Articles of Incorporation were filed as Exhibit 3(a) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference.
		(b)		Registrant’s Bylaws were filed as Exhibit 3(b) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference.
4		Instruments Defining the Rights of Security Holders.
		(a)		Specimen form of Stock Certificate for Common Stock was filed as Exhibit 4(a) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference.
10		Material Contracts.
		*(a)(3)		Consulting Agreement with Peter F. Secchia, dated December 31, 2002, and Assignment dated January 1, 2003 was filed as Exhibit 10(a)(3) to a Form 10-K, Annual Report for the year ended December 28, 2002 and the same is incorporated herein by reference.
		*(a)(4)		Nondisclosure and Non-Compete Agreement with Peter F. Secchia, dated December 31, 2002 was filed as Exhibit 10(a)(4) to a Form 10-K, Annual Report for the year ended December 28, 2002 and the same is incorporated herein by reference.
		*(a)(5)		Conditional Share Grant Agreement with William G. Currie dated April 17, 2002 was filed as Exhibit 10(a)(5) to a Form 10-K, Annual Report for the year ended December 28, 2002 and the same is incorporated herein by reference.
		*(a)(6)		Form of Conditional Share Grant Agreement utilized under the Company’s Long Term Stock Incentive Plan, was filed as Exhibit 10(a) to a Form 10-Q Quarterly Report for the quarter ended September 25, 2004 and the same is incorporated herein by reference.
		*(a)(7)		Consulting and Non-Compete Agreement with William G. Currie, dated December 17, 2007 was filed as Exhibit 10(a)(7) to a Form 10-K, Annual Report for the year ended December 29, 2007 and the same is incorporated herein by reference.

Exhibit #		Description
		*(a)(8)		Employment, Consulting (and Non-Competition) Agreement with Robert K. Hill, dated June 15, 2007 was filed as Exhibit 10(a)(8) to a Form 10-K, Annual Report for the year ended December 29, 2007 and the same is incorporated herein by reference.
		(b)		Form of Indemnity Agreement entered into between the Registrant and each of its directors was filed as Exhibit 10(b) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference.
		*(e)(1)		Form of Executive Stock Option Agreement was filed as Exhibit 10(e)(1) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference.
		*(e)(2)		Form of Officers’ Stock Option Agreement was filed as Exhibit 10(e)(2) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference.
		*(f)		Salaried Employee Bonus Plan was filed as Exhibit 10(f) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference.
		(i)(4)		Series 2004-A, Credit Agreement dated December 20, 2004 was filed as Exhibit 10(i) to a Form 8-K Current Report dated December 21, 2004 and the same is incorporated herein by reference.
		(i)(5)		First Amendment dated February 12, 2007 relating to Series 2004-A, Credit Agreement dated December 20, 2004 was filed as Exhibit 10(i) to a Form 8-K Current Report dated February 15, 2007 and the same is incorporated herein by reference.
		(j)(1)		Series 1998-A, Senior Note Agreement dated December 21, 1998 was filed as Exhibit 10(j)(1) to a Form 10-K Annual Report for the year ended December 26, 1998, and the same is incorporated herein by reference.
		(j)(2)		Series 2002-A, Senior Note Agreement dated December 18, 2002 was filed as Exhibit 10(j)(2) to a Form 10-K Annual Report for the year ended December 28, 2002 and the same is incorporated herein by reference.
		(k)(4)		Program for Accounts Receivable Transfer (“PARTS”) Agreement dated March 7, 2006 was filed as Exhibit 10(k)(4) to a Form 10-K Annual Report for the year ended December 31, 2005 and the same is incorporated herein by reference.

Exhibit #		Description
13		Selected portions of the Company’s Annual Report to Shareholders for the fiscal year ended December 27, 2008.
14		Code of Ethics for Senior Financial Officers
		(a)		Code of Ethics for Chief Financial Officer was filed as Exhibit 14(a) to a Form 10-K, Annual Report for the year ended December 25, 2004 and the same is incorporated herein by reference.
		(b)		Code of Ethics for Vice President of Accounting and Administration was filed as Exhibit 14(a) to a Form 10-K, Annual Report for the year ended December 25, 2004 and the same is incorporated herein by reference.
		(c)		Code of Ethics for Vice President of Accounting was filed as Exhibit 14(c) to a Form 10-K, Annual Report for the year ended December 31, 2005 and the same is incorporated herein by reference.
21		Subsidiaries of the Registrant.
23		Consent of Ernst & Young LLP.
31		Certifications.
		(a)		Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
		(b)		Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32		Certifications.
		(a)		Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
		(b)		Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

Exhibit 13

UNIVERSAL FOREST PRODUCTS, INC.
FINANCIAL INFORMATION

Table of Contents

Selected Financial Data			2
Management’s Discussion and Analysis of Financial Condition and Results of Operations			3
Management’s Annual Report on Internal Control Over Financial Reporting			20
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting			21
Report of Independent Registered Public Accounting Firm on Financial Statements			22
Consolidated Balance Sheets as of December 27, 2008 and December 29, 2007			23
Consolidated Statements of Earnings for the Years Ended December 27, 2008, December 29, 2007, and December 30, 2006			24
Consolidated Statements of Shareholders’ Equity for the Years Ended December 27, 2008, December 29, 2007, and December 30, 2006			25
Consolidated Statements of Cash Flows for the Years Ended December 27, 2008, December 29, 2007, and December 30, 2006			26
Notes to Consolidated Financial Statements			28
Price Range of Common Stock and Dividends			57
Stock Performance Graph			58
Directors and Executive Officers			59
Shareholder Information			60

SELECTED FINANCIAL DATA
(In thousands, except per share and statistics data)

		2008				2007				2006				2005				2004
Consolidated Statement of Earnings Data
Net sales		$	2,232,394			$	2,513,178			$	2,664,572			$	2,691,522			$	2,453,281
Gross profit			254,201				309,029				381,682				359,256				296,253
Earnings before income taxes and minority interest			7,146				38,609				112,135				110,772				83,059
Net earnings			4,343				21,045				70,125				67,373				48,603
Diluted earnings per share		$	0.23			$	1.09			$	3.62			$	3.53			$	2.59
Dividends per share		$	0.120			$	0.115			$	0.110			$	0.105			$	0.100
Weighted average shares outstanding with common stock equivalents			19,225				19,362				19,370				19,106				18,771
Consolidated Balance Sheet Data
Working capital(1)		$	230,308			$	337,800			$	282,913			$	298,027			$	222,618
Total assets			816,019				957,000				913,441				876,920				762,360
Total debt and capital lease obligations			101,174				206,071				170,097				209,497				207,142
Shareholders’ equity			541,883				536,668				514,742				431,852				356,769
Statistics
Gross profit as a percentage of net sales			11.4	%			12.3	%			14.3	%			13.3	%			12.1	%
Net earnings as a percentage of net sales			0.2	%			0.8	%			2.6	%			2.5	%			2.0	%
Return on beginning equity(2)			0.8	%			4.1	%			16.2	%			18.9	%			15.9	%
Current ratio			2.53				3.08				2.47				2.46				2.21
Debt to equity ratio			0.19				0.38				0.33				0.49				0.58
Book value per common share(3)		$	28.39			$	28.38			$	27.29			$	23.47			$	19.82

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

We advise you to read the issues discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in this Annual Report for the year ended December 27, 2008. We also encourage you to read our Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission. That report includes “Risk Factors” that you should consider in connection with any decision to buy or sell our securities. We are pleased to present this overview of 2008.

OVERVIEW

Our results for 2008 were impacted by the following:

•

We experienced sales decreases in our site-built construction, manufactured housing, and DIY/retail markets, while we continued to grow sales to the industrial market. We believe we have gained additional share in each of the markets we serve except manufactured housing. We have been able to maintain our significant market share of manufactured housing business.

•

Our overall unit sales decreased 9% in 2008 compared to 2007, as sales out of existing facilities and operations we closed decreased by 12% and we experienced a 3% increase in unit sales as a result of acquisitions and new operations.

•

Lumber prices were 11% lower in 2008 compared to 2007, reducing our overall selling prices (see “Impact of the Lumber Market on Our Operating Results” below) and sales dollars. In addition, competition for business was a challenge in 2008 as each of our markets we serve contracted and thus impacted our selling prices and margins.

•

Single-family housing starts decreased approximately 41% in 2008 compared to 2007 as a result of an excess supply of homes, tighter credit conditions, and an increase in foreclosures. In addition, tight credit conditions in the second half of 2008 resulted in a decline in multi-family and light commercial construction activity.

•

Consumer spending for large repair/remodel projects decreased as many homeowners have lost equity in devalued homes and had less disposable income as a result of higher costs for necessities such as food, fuel and utilities. The Consumer Confidence Index has fallen from 87.3 at the beginning of the year to 38 at the end of December.

•

Shipments of HUD code manufactured homes were down 14% in 2008 and industry sales of modular homes have also continued to decline due, in part, to an excess supply of site-built homes and tight credit conditions.

•

The industrial market is declining due to the general weakening of the U.S. economy. We gained additional share and increased sales to this market due, in part, to acquisitions, adding new customers, and adding new concrete forming business.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

•

Our gross profits decreased approximately 18% compared to the same period of 2007 due to 1) a combination of lower unit sales out of existing facilities and fixed manufacturing costs; 2) intense pricing pressure, particularly in the site-built construction market; and 3) higher transportation costs in the second and third quarters of 2008 primarily due to an increase in diesel fuel prices and a decline in the number of available carriers.

•

We recorded a $7.2 million expense for asset impairments and other exit costs associated with facilities and equipment we decided to idle. We believe these actions will improve our cost structure, profitability and cash flow.

•

Since the beginning of this difficult economic cycle, we have focused on cash flow and working capital management. We are pleased to have reduced our debt by approximately $105 million and our sale of receivables program by approximately $27 million.

We expect the current challenging conditions to prevail throughout 2009; however, our strong financial position, solid business model, diverse business opportunities and ability to adjust appropriately to our opportunities position us better than most to endure challenging times. We believe that current economic conditions and uncertainties limit our ability to provide meaningful guidance for ranges of likely financial performance; therefore, we will not provide sales or net earnings targets for the foreseeable future.

HISTORICAL LUMBER PRICES

The following table presents the Random Lengths framing lumber composite price for the years ended December 27, 2008, December 29, 2007, and December 30, 2006.

		Random Lengths Composite
		Average $/MBF
		2008				2007				2006
January		$	249			$	292			$	382
February			244				289				377
March			240				280				368
April			255				286				369
May			281				288				341
June			268				306				326
July			267				299				309
August			282				290				296
September			272				276				292
October			234				261				274
November			224				264				276
December			213				267				288
Annual average		$	252			$	283			$	325
Annual percentage change			(11.0	%)			(12.9	%)			(16.2	%)

In addition, a Southern Yellow Pine (“SYP”) composite price, which we prepare and use, is presented below. Sales of products produced using this species may comprise up to 50% of our sales volume.

		Random Lengths SYP
		Average $/MBF
		2008				2007				2006
January		$	337			$	414			$	496
February			330				405				503
March			331				396				514
April			345				397				510
May			421				390				488
June			427				410				444
July			406				412				409
August			401				374				394
September			388				347				387
October			329				337				363
November			325				331				365
December			346				347				396
Annual average		$	366			$	380			$	439
Annual percentage change			(3.7	%)			(13.4	%)			(10.6	%)

IMPACT OF THE LUMBER MARKET ON OUR OPERATING PROFITS

We experience significant fluctuations in the cost of commodity lumber products from primary producers (“Lumber Market”). We generally price our products to pass lumber costs through to our customers so that our profitability is based on the value-added manufacturing, distribution, engineering, and other services we provide. As a result, our sales levels (and working capital requirements) are impacted by the lumber costs of our products. Lumber costs are a significant percentage of our cost of goods sold.

Our gross margins are impacted by both (1) the relative level of the Lumber Market (i.e. whether prices are higher or lower from comparative periods), and (2) the trend in the market price of lumber (i.e. whether the price of lumber is increasing or decreasing within a period or from period to period). Moreover, as explained below, our products are priced differently. Some of our products have fixed selling prices, while the selling prices of other products are indexed to the reported Lumber Market with a fixed dollar adder to cover conversion costs and profits. Consequently, the level and trend of the Lumber Market impact our products differently.

Below is a general description of the primary ways in which our products are priced.

•

Products with fixed selling prices. These products include value-added products such as decking and fencing sold to DIY/retail customers, as well as trusses, wall panels and other components sold to the site-built construction market, and most industrial packaging products. Prices for these products are generally fixed at the time of the sales quotation for a specified period of time or are based upon a specific quantity. In order to maintain margins and reduce any exposure to adverse trends in the price of component lumber products, we attempt to lock in costs for these sales commitments with our suppliers. Also, the time period and quantity limitations generally allow us to re-price our products for changes in lumber costs from our suppliers.

•

Products with selling prices indexed to the reported Lumber Market with a fixed dollar “adder” to cover conversion costs and profits. These products primarily include treated lumber, remanufactured lumber, and trusses sold to the manufactured housing industry. For these products, we estimate the customers’ needs and carry anticipated levels of inventory. Because lumber costs are incurred in advance of final sale prices, subsequent increases or decreases in the market price of lumber impact our gross margins. For these products, our margins are exposed to changes in the trend of lumber prices.

Changes in the trend of lumber prices have their greatest impact on the following products:

•		Products with significant inventory levels with low turnover rates, whose selling prices are indexed to the Lumber Market. In other words, the longer the period of time these products remain in inventory, the greater the exposure to changes in the price of lumber. This would include treated lumber, which comprises approximately 17% of our total sales. This exposure is less significant with remanufactured lumber, trusses sold to the manufactured housing market, and other similar products, due to the higher rate of inventory turnover. We attempt to mitigate the risk associated with treated lumber through vendor consignment inventory programs. (Please refer to the “Risk Factors” section of our annual report on form 10-K, filed with the United States Securities and Exchange Commission.)
•		Products with fixed selling prices sold under long-term supply arrangements, particularly those involving multi-family construction projects. We attempt to mitigate this risk through our purchasing practices by locking in costs.

In addition to the impact of the Lumber Market trends on gross margins, changes in the level of the market cause fluctuations in gross margins when comparing operating results from period to period. This is explained in the following example, which assumes the price of lumber has increased from period one to period two, with no changes in the trend within each period.

		Period 1				Period 2
Lumber cost		$	300			$	400
Conversion cost			50				50
= Product cost			350				450
Adder			50				50
= Sell price		$	400			$	500
Gross margin			12.5	%			10.0	%

As is apparent from the preceding example, the level of lumber prices does not impact our overall profits but does impact our margins. Gross margins are negatively impacted during periods of high lumber prices; conversely, we experience margin improvement when lumber prices are relatively low.

BUSINESS COMBINATIONS AND ASSET PURCHASES

See Notes to Consolidated Financial Statements, Note B, “Business Combinations.”

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the components of our Consolidated Statements of Earnings as a percentage of net sales.

		Years Ended
		December 27,				December 29,				December 30,
		2008				2007				2006
Net sales			100.0	%			100.0	%			100.0	%
Cost of goods sold			88.6				87.7				85.7
Gross profit			11.4				12.3				14.3
Selling, general, and administrative expenses			10.2				9.8				9.7
Net loss on disposition of assets and other impairment and exit charges			0.3				0.4
Earnings from operations			0.9				2.1				4.6
Interest, net			(0.5	)			(0.6	)			(0.4	)
Earnings before income taxes and minority interest			0.4				1.5				4.2
Income taxes			0.1				0.6				1.5
Earnings before minority interest			0.3				0.9				2.7
Minority interest			(0.1	)			(0.1	)			(0.1	)
Net earnings			0.2	%			0.8	%			2.6	%

GROSS SALES

We market, manufacture and engineer wood and wood-alternative products for the do-it-yourself/retail (“D-I-Y/retail”) market, structural lumber products for the manufactured housing market, engineered wood components for the site-built construction market, and specialty wood packaging for various markets. We also provide framing services for the site-built construction market and various forms for concrete construction. Our strategic long-term sales objectives include:

•		Diversifying our end market sales mix by increasing sales of specialty wood packing to industrial users, penetrating the concrete forms market, and increasing our sales of engineered wood components for custom home, multi-family and light commercial construction.
•		Expanding geographically in our core businesses.
•		Increasing sales of “value-added” products and framing services. Value-added product sales primarily consist of fencing, decking, lattice, and other specialty products sold to the DIY/retail market, specialty wood packaging, engineered wood components, and “wood alternative” products. Engineered wood components include roof trusses, wall panels, and floor systems. Wood alternative products consist primarily of composite wood and plastics. Although we consider the treatment of dimensional lumber with certain chemical preservatives a value-added process, treated lumber is not presently included in the value-added sales totals.
•		Maximizing unit sales growth while achieving return on investment goals.

The following table presents, for the periods indicated, our gross sales (in thousands) and percentage change in gross sales by market classification.

		Years Ended
		December 27,				%				December 29,				%				December 30,
Market Classification		2008				Change				2007				Change				2006
DIY/Retail		$	910,679				(7.8	)		$	988,175				2.7			$	962,240
Site-Built Construction			454,846				(22.7	)			588,778				(27.5	)			811,923
Industrial			605,143				2.2				592,369				7.6				550,669
Manufactured Housing			303,523				(22.6	)			392,163				2.6				382,203
Total Gross Sales			2,274,191				(11.2	)			2,561,485				(5.4	)			2,707,035
Sales Allowances			(41,797	)							(48,307	)							(42,463	)
Total Net Sales		$	2,232,394							$	2,513,178							$	2,664,572

The following table presents estimates, for the periods indicated, of our percentage change in gross sales which were attributable to changes in overall selling prices versus changes in units shipped.

		% Change
		in Sales				in Selling Prices				in Units
2008 versus 2007			-11	%			-2	%			-9	%
2007 versus 2006			-5	%			-5	%			0	%
2006 versus 2005			-1	%			-4	%			+3	%

Gross sales in 2008 decreased 11% compared to 2007. We estimate that our unit sales decreased by 9% and overall selling prices decreased by 2% comparing the two periods. We estimate our unit sales increased 3% as a result of acquisitions and new facilities, while unit sales from existing and closed facilities decreased 12%. Our overall selling prices fluctuate as a result of the Lumber Market (see “Historical Lumber Prices”) and were negatively impacted by pricing pressure primarily in the site-built construction market.

Gross sales in 2007 decreased 5% compared to 2006. We estimate that our unit sales remained flat while overall selling prices decreased by 5% comparing the two periods. We estimate our unit sales increased 9% as a result of acquisitions and new facilities, while unit sales from existing and closed facilities decreased 9%.

Changes in our sales by market are discussed below.

DIY/Retail:

Gross sales to the DIY/retail market decreased 8% in 2008 compared to 2007, as a result of an estimated 7% decrease in overall unit sales combined with an estimated 1% decrease in overall selling prices. We estimate that our unit sales increased 2% as a result of acquisitions, while unit sales from existing and closed facilities decreased 9%. Unit sales declined due to the impact of the housing market on our retail customers whose business is closely correlated with single-family housing starts and a decline in consumer spending as evidenced by a decline in same store sales of our “big box” customers.

Gross sales to the DIY/retail market increased 3% in 2007 compared to 2006, as a result of a 7% increase in unit sales offset by a 4% decrease in selling prices due to a soft Lumber Market. We estimate that our unit sales increased as a result of our acquisitions of GeoMatrix and Aljoma and the significant market share gains we realized with “big box” retail customers. Our sales to these customers increased 12% (8% due to acquisitions and 4% due to existing facilities) while our sales to other retailers whose business is more closely correlated with housing starts was off 17% (a 10% increase due to acquisitions offset by a 27% decrease due to existing facilities). Our increase in sales to “big box” customers was less than expected, which we believe was caused by a decline in consumer spending on large home improvement projects.

Site-Built Construction:

Gross sales to the site-built construction market decreased 23% in 2008 compared to 2007, due to an estimated 14% decrease in unit sales out of existing facilities and an estimated 9% decrease in average selling prices primarily due to intense pricing pressure and a soft Lumber Market. National single-family housing starts were off a reported 40.5% for 2008 compared to 2007. In the first half of 2008, we were able to mitigate some of the decrease in the single-family market by pursuing multi-family and light commercial business and increasing our turn-key framing activities. However, these markets have recently been impacted by tight credit conditions as well as other economic factors.

Gross sales to the site-built construction market decreased 28% in 2007 compared to 2006, due to a 14% decrease in unit sales out of existing facilities, a 4% decline due to our decision to exit the Las Vegas framing market, and a 10% decrease in selling prices due to a soft Lumber Market and competitive pricing pressure, particularly in our third and fourth quarters. Single-family housing starts have fallen approximately 29% in 2007 compared to 2006 as a result of an excess supply of homes, tighter credit conditions, and an increase in foreclosures associated with sub-prime lending practices. These decreases were offset by market share gains we have realized in the multi-family and light commercial market and a 1% increase in unit sales due to our acquisitions of Dura-Bilt and Perfection.

Industrial:

Gross sales to the industrial market increased 2% in 2008 compared to 2007, due to an estimated 3% increase in unit sales and an estimated 1% decrease in selling prices. Acquisitions and our continued focus on adding new customers, including concrete forming, helped us mitigate the effect of a decline in sales to certain customers that supply the housing market or have been impacted by the weakening U.S. economy.

Gross sales to the industrial market increased 8% in 2007 compared to 2006, due to an 8% increase in units shipped offset by a slight decrease in selling prices. Our acquisitions of United and Aljoma and our continued focus on adding new customers, including concrete forming, helped us mitigate the effect of a decline in sales to certain customers that supply the housing market.

Manufactured Housing:

Gross sales to the manufactured housing market decreased 23% in 2008 compared to 2007, due to an estimated 21% decrease in unit sales and an estimated 2% decrease in selling prices due to the Lumber Market. Our decline in unit sales from existing facilities was the result of an overall decline in industry production. The industry most recently reported a 14% decrease in HUD code production in 2008, while modular production was off a reported 28%.

Gross sales to the manufactured housing market increased 3% in 2007 compared to 2006, due to a 9% increase in unit sales offset by a 6% decrease in selling prices primarily due to a soft Lumber Market. We estimate that our unit sales increased 21% as a result of acquiring Banks, while unit sales from existing and closed facilities decreased 12% due to the continued decline in industry production.

Value-Added and Commodity-Based Sales:

The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total sales.

		Value-Added				Commodity-Based
2008			60.4	%			39.6	%
2007			60.5	%			39.5	%
2006			62.7	%			37.3	%

Value-added sales decreased 11% in 2008 compared to 2007, primarily due to decreased sales of trusses, engineered wood products, wall panels, and manufactured brite and other lumber, offset partially by increases in sales of industrial packaging and related components. Commodity-based sales decreased 11% in 2008 compared to 2007, primarily due to decreased sales of non-manufactured brite and other lumber and non-manufactured treated lumber. See Notes to Consolidated Financial Statements, Note P, “Segment Reporting.”

Value-added sales decreased 9% in 2007 compared to 2006, primarily due to decreased sales of trusses, turn-key framing packages, and wall panels, offset partially by increased sales of fencing and lattice sold to the DIY/retail market. Commodity-based sales remained flat in 2007 compared to 2006 in spite of difficult market conditions primarily due to our acquisitions of Aljoma and Banks.

COST OF GOODS SOLD AND GROSS PROFIT

Our gross profit percentage decreased to 11.4% in 2008 from 12.3% in 2007 and gross profit dollars decreased 17.7% in 2008 compared to 2007. The decline in profitability was primarily due to a combination of:

•

Price pressure in all of our markets but particularly in our site-built construction market.

•

A significant increase in fuel and other transportation costs in the second and third quarter of 2008.

•

Missed buying opportunities as a result of stocking lower levels of lumber inventory.

•

Cost inefficiencies as a result of lower volumes combined with fixed manufacturing costs.

Our gross profit percentage decreased to 12.3% in 2007 from 14.3% in 2006 and gross profit dollars decreased 19% in 2007 compared to 2006. The decline in profitability was primarily due to a combination of:

•

Increased pricing pressure on sales to the site-built construction market due to the overall decline in market demand and excess capacity of suppliers.

•

Cost inefficiencies as a result of the impact of decreased unit sales out of existing facilities and fixed manufacturing costs.

•

Sales incentives offered to customers to gain market share.

•

A change in sales mix whereby historically higher margin engineered wood components sold to site-built construction customers comprised a lower percentage of our sales.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling, general and administrative (“SG&A”) expenses decreased by approximately $18.8 million, or 7.6%, in 2008, while we reported a 9% decrease in unit sales. Existing facilities decreased SG&A expenses by approximately $2.6 million, operations we closed decreased expenses approximately $20.9 million, and business acquisitions added $4.7 million in expenses. The decrease in SG&A expenses in our existing facilities was primarily due to a decline in wages and related benefits due to a reduction in headcount and a reduction in bonus and other performance related compensation. These decreases were partially offset by an increase in bad debt expense. We believe our cost reduction efforts will continue to drive down our costs and will have a more significant impact in future reporting periods.

SG&A expenses decreased by approximately $10.4 million, or 4%, in 2007. Existing facilities and operations we closed had the effect of decreasing our SG&A expenses approximately $17.4 million, while business acquisitions added $7.0 million to our costs. The cost decrease in our existing facilities was primarily due to a decline in accrued bonus expense, which is tied to operating profits and return on investment.

NET LOSS ON DISPOSITION OF ASSETS AND OTHER IMPAIRMENT AND EXIT CHARGES

We incurred $7.2 million and $8.2 million of asset impairments and other costs associated with idled facilities and downsizing efforts in 2008 and 2007, respectively. We believe these actions will improve our cost structure, profitability and cash flow. See Notes to Consolidated Financial Statements, Note C, “Assets Held for Sale and Net Loss on Disposition of Assets and Other Impairment and Exit Charges.”

INTEREST, NET

Net interest costs were lower in 2008 compared to 2007 due to lower debt balances combined with a decrease in short-term interest rates.

Net interest costs were higher in 2007 compared to 2006 primarily due to an increase in borrowings on the revolving credit facility as a result of acquisitions.

INCOME TAXES

Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for state and local income taxes and permanent tax differences. Our effective tax rate decreased to 23.6% in 2008 compared to 39.9% in 2007. This year’s rate was favorably impacted by certain state income tax credits we expect to receive and the impact of other permanent tax differences on substantially lower pretax income. See Notes to Consolidated Financial Statements, Note L, “Income Taxes”.

Our effective tax rate increased to 39.9% in 2007 compared to 34.6% in 2006 primarily due to the impairment charge we recorded for property, plant and equipment for our Canadian subsidiary, for which we recorded no related tax benefit.

OFF-BALANCE SHEET TRANSACTIONS AND CONTRACTUAL OBLIGATIONS

We have no significant off-balance sheet transactions other than operating leases. The following table summarizes our contractual obligations as of December 27, 2008 (in thousands).

		Payments Due by Period
		Less than				1 – 3				3 – 5				After
Contractual Obligation		1 Year				Years				Years				5 Years				Total
Long-term debt and capital lease obligations		$	15,490			$	557			$	70,527			$	14,600			$	101,174
Estimated interest on long-term debt			3,836				5,917				3,110				1,664				14,527
Operating leases			13,976				17,931				4,799				2,294				39,000
Capital project purchase obligations			890																890
Total		$	34,192			$	24,405			$	78,436			$	18,558			$	155,591

As of December 27, 2008, we also had $32.2 million in outstanding letters of credit issued during the normal course of business, as required by some vendor contracts.

LIQUIDITY AND CAPITAL RESOURCES

The table below presents, for the periods indicated, a summary of our cash flow statement (in thousands):

		December 27,				December 29,				December 30,
		2008				2007				2006
Cash from operating activities			88,551			$	87,078			$	152,322
Cash from investing activities			(11,367	)			(91,971	)			(111,705	)
Cash from financing activities			(107,452	)			(2,610	)			(35,724	)
Net change in cash and cash equivalents			(30,268	)			(7,503	)			4,893
Cash and cash equivalents, beginning of year			43,605				51,108				46,215
Cash and cash equivalents, end of year		$	13,337			$	43,605			$	51,108

In general, we financed our growth in the past through a combination of operating cash flows, our revolving credit facility, industrial development bonds (when circumstances permit), and issuances of long-term notes payable at times when interest rates are favorable. We have not issued equity to finance our growth except in the case of a large acquisition. We manage our capital structure by attempting to maintain a targeted ratio of debt to equity and debt to earnings before interest, taxes, depreciation and amortization. We believe this is one of many important factors to maintaining a strong credit profile, which in turn helps ensure timely access to capital when needed. We are currently below our internal targets and plan to manage our capital structure conservatively in light of current economic conditions.

Seasonality has a significant impact on our working capital from March to August which historically resulted in negative or modest cash flows from operations in our first and second quarters. Conversely, we experience a substantial decrease in working capital from September to February which results in significant cash flow from operations in our third and fourth quarters.

Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days sales outstanding plus days supply of inventory less days payables outstanding) is a good indicator of our working capital management. Our cash cycle (excluding the impact of our sale of receivables program) increased to 46 days in 2008 from 45 days in 2007 due to a one day increase in our days of sales outstanding as a one day decrease in our days supply of inventory was offset by a one day decrease in our days of payables outstanding. The increase in our days of sales outstanding was primarily due to slower payments with certain site-built and industrial customers.

Cash from operating activities was approximately $89 million in 2008. Our net earnings of $4.3 million included $48.3 million of non-cash expenses and a $35.9 million decrease in working capital. Working capital decreased primarily due to a decline in sales which caused a reduction in our inventory and receivables, offset by the effect of terminating of our sales of receivables program at the end of September 2008. Terminating this program resulted in an operating cash outflow of $27 million in 2008. Our sales of receivables program was terminated on September 26, 2008, due to the downgrade of the credit rating of certain customers whose receivables were part of this program. This downgrade triggered a re-pricing of the program under the terms of the agreement which made this program a less favorable source of liquidity.

We made the decision to limit our investing activities in 2008 and make debt repayment our first priority for use of our operating cash flows. As a result, cash used for investing activities decreased by approximately $81 million. Our proceeds from the sale of property, plant and equipment was approximately $30 million consisting primarily of vacant land we owned as a result of our acquisition of Aljoma in 2007 and certain plants we previously closed for which we had no future use. (See Notes to Consolidated Financial Statements, Note C, “Assets Held for Sale and Net Loss on Disposition of Assets and Other Impairment and Exit Charges”.) Amounts spent for business acquisitions totaled approximately $23 million. (See Notes to Consolidated Financial Statements, Note B, “Business Combinations”.) Finally, we curtailed our capital expenditures and spent approximately $19 million in 2008.

On December 27, 2008, we had approximately $30 million outstanding on our $300 million revolving credit facility. The revolving credit facility supports letters of credit totaling approximately $29.7 million on December 27, 2008. Financial covenants on the unsecured revolving credit facility and unsecured notes include a minimum net worth requirement, minimum interest and fixed charge coverage tests, and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets which may be sold. We were within all of our lending requirements on December 27, 2008. If our profitability declines in the future it may adversely impact our ability to meet certain of these loan covenants without further action on our part. Management will evaluate what, if any, action or actions may be available to resolve any future non-compliance. A possible consequence of non-compliance may include an adjustment to increase our interest rates to reflect current market conditions.

ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS

See Notes to Consolidated Financial Statements, Note N, “Commitments, Contingencies, and Guarantees”.

CRITICAL ACCOUNTING POLICIES

In preparing our consolidated financial statements, we follow accounting principles generally accepted in the United States. These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. Following is a summary of our more significant accounting policies that require the use of estimates and judgments in preparing the financial statements.

ACCOUNTS RECEIVABLE ALLOWANCES

We record provisions against gross revenues for estimated returns and cash discounts in the period when the related revenue is recorded. These estimates are based on factors that include, but are not limited to, historical discounts taken, analysis of credit memorandum activity, and customer demand. We also evaluate the allowance for uncollectible accounts receivable and discounts based on historical collection experience and specific identification of other potential problems, including the economic climate. Actual collections can differ, requiring adjustments to the allowances.

SELF-INSURANCE RESERVES

We are primarily self-insured for certain employee health benefits, and have self-funded retentions for general liability, automobile liability, property and workers’ compensation. We are fully self-insured for environmental liabilities. The general liability, automobile liability, property, workers’ compensation, and certain environmental liabilities are managed through a wholly-owned insurance captive; the related assets and liabilities of which are included in the consolidated financial statements as of December 27, 2008. Our accounting policies with respect to the reserves are as follows:

•		General liability, automobile, workers’ compensation reserves are accrued based on third party actuarial valuations of the expected future liabilities.
•		Health benefits are self-insured by us up to our pre-determined stop loss limits. These reserves, including incurred but not reported claims, are based on internal computations. These computations consider our historical claims experience, independent statistics, and trends.
•		The environmental reserve is based on known remediation activities at certain wood preservation facilities and the potential for undetected environmental matters at other sites. The reserve for known activities is based on expected future costs and is computed by in-house experts responsible for managing our monitoring and remediation activities. (See “Environmental Considerations and Regulations.”)

REVENUE RECOGNITION

Earnings on construction contracts are reflected in operations using either percentage-of-completion accounting, which includes the cost to cost and units of delivery methods, or completed contract accounting, depending on the nature of the business at individual operations. Under percentage-of-completion using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under percentage-of-completion using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent. Under the completed contract method, revenues and related earnings are recorded when the contracted work is complete and losses are charged to operations in their entirety when such losses become apparent.

LONG-LIVED ASSETS AND GOODWILL

We evaluate long-lived assets for indicators of impairment when events or circumstances indicate that this risk may be present. Our judgments regarding the existence of impairment are based on market conditions, operational performance and estimated future cash flows. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded to adjust the asset to its fair value. Changes in forecasted operations and changes in discounted rates can materially affect these estimates. In addition, we test goodwill for impairment by utilizing the discounted cash flow method.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Notes to Consolidated Financial Statements, Note A, “Summary of Significant Accounting Policies”.

FORWARD OUTLOOK

The following section contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements are based on the beliefs and assumptions of management, together with information available to us when the statements were made. Future results could differ materially from those included in such forward-looking statements as a result of, among other things, the factors set forth in the “Risk Factors” section of our Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission and certain economic and business factors which may be beyond our control. Investors are cautioned that all forward-looking statements involve risks and uncertainties.

“GO 2010”

Since we announced our Growth & Opportunity 2010 Goals in our annual report on form 10-K for the period ended December 30, 2006, industry and general economic conditions have significantly deteriorated. For example, the Lumber Market has declined from an average of $388/mbf in 2005 to an average of $252/mbf in 2008; a 35% decline from when we first announced our goals, which has adversely impacted our sales. We are currently reviewing these long-term goals and expect to modify them when market conditions stabilize so new targets can be set using more current data and assumptions.

DIY/RETAIL MARKET

Harvard’s Joint Center for Housing Studies projects home improvement spending to decline at an annual rate of 12.1% by the third quarter of 2009. A decline is forecasted due to a decrease in consumer spending, a continued decline in housing market activity, and tight credit conditions in 2009. The Consumer Confidence Index fell to 38 in December, down from 87.3 at the beginning of the year.

In 2009, we believe we will increase our market share with certain “big box” home improvement and other retailers, but will continue to be impacted by the soft market conditions discussed above. On a long-term basis, it is our goal to achieve sales growth by:

•

Increasing our market share of value-added wood products and preservative-treated products as a result of our national presence, service capabilities that meet stringent customer requirements, diversified product offering, and purchasing leverage.

•

Increasing our sales of wood alternative products such as composite wood decking, which continues to take market share from preservative-treated products. Although we expect this trend to continue to some extent, we believe wood products will continue to maintain a dominant market share for the foreseeable future as a result of its cost advantages over wood alternative products.

•

Increasing our market penetration of products distributed by our newly formed Consumer Products Division, including decorative balusters, accessories, and post caps, plastic lattice and other proprietary plastic products which have greatly enhanced our deck and fencing product lines.

•

Developing new value-added products and services for this market through our Consumer Products Division.

•

Adding new products or new markets through strategic business acquisitions.

SITE-BUILT CONSTRUCTION MARKET

The Mortgage Bankers Association of America forecasts a 32% decline in single-family housing starts to an estimated 0.4 million starts in 2009 as the industry continues to recover from excess inventory levels of single-family homes, tighter credit conditions, and an increase in foreclosures associated with sub-prime lending practices.

In 2009, we believe the decline in single-family housing starts will continue to adversely impact our sales and gross margins. Our strategy during this downturn is to down-size our operations to current demand and increase our share with custom home builders and multi-family and light commercial construction markets.

On a long-term basis, we anticipate growth in our sales to the site-built construction market as market conditions improve and as a result of market share gains as weaker competitors exit the market.

MANUFACTURED HOUSING MARKET

The National Association of Home Builders forecasts a 16.6% decline in manufactured home shipments in 2009. It is our goal to maintain our current market share of trusses produced for the HUD code market, which increased as a result of our acquisition of Banks in November 2006. On a long-term basis we believe the HUD code market will regain a greater share of the single-family market as credit conditions normalize and as consumers seek more affordable housing alternatives.

Sales of modular homes are expected to be impacted by the current oversupply of single-family housing and tight credit conditions. It is our goal to maintain our market share of trusses produced for the modular market as a result of our strong relationships with modular builders, design services and proprietary products. On a long-term basis, we anticipate modular housing will gain additional share of the single-family market as a result of more developers adopting the controlled building environment of modular construction as a method of cost control.

INDUSTRIAL MARKET

One of our key strategic objectives is to increase our sales of wood packaging products to industrial users. We believe the vast amount of hardwood and softwood lumber consumed for industrial applications, combined with the highly fragmented nature of this market provides us with significant market share growth opportunities as a result of our competitive cost advantages in manufacturing, purchasing, and material utilization. To take advantage of these opportunities, we plan to continue to obtain market share through an internal growth strategy utilizing our current manufacturing capabilities and dedicated industrial sales force. However, we recognize that any market share gains we may realize in 2009 may be offset by a decline in demand due to the rapidly deteriorating economy. On a long-term basis, we also plan to evaluate strategic acquisition opportunities and continue to gain market share with concrete forming customers.

GROSS PROFIT

We believe the following factors may impact our gross profits and margins in 2009:

•

Our ability to maintain sales and gross margins on products sold to our largest customers. We believe our level of service, geographic diversity, and quality of products provides an added value to our customers. If our customers are unwilling to pay for these advantages, our sales and gross margins may be reduced.

•

In the first half of 2009 we expect to continue to experience a decline in demand in each of our markets, which in turn will impact our sales prices, capacity utilization, and profitability.

•

Fluctuations in the relative level of the Lumber Market and the trend in the market price of lumber. (See “Impact of the Lumber Market on our Operating Results.”)

•

Fuel and transportation cost trends.

•

Our ability to continue to achieve planned cost reductions through plant consolidations and our Continuous Improvement initiative. In January 2009, we temporarily closed facilities in Bunn, NC and Ooltewah, TN to better align manufacturing capacity with the current business environment. In February 2009, we also temporarily closed a facility in White Pigeon, MI.

•

We have a long-term goal of continuing to increase our ratio of value-added sales to total sales, which in turn should increase gross margins. Our acquisition and internal sales growth strategies will help us continue to make progress toward this objective. However, achievement of this goal is dependent, in part, upon certain factors that are beyond our control.

•

Organizational changes made to our lumber purchasing function to continue to enhance our buying advantage over competitors.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

In the third quarter of 2008, as a result of deteriorating market conditions, we took actions to close plants to better align our manufacturing capacity with the current business environment and reduce our headcount and certain overhead costs. We realized most of these cost reductions in the fourth quarter of 2008 and we expect that these actions will favorably impact our SG&A expenses in 2009. The decreases mentioned above are expected to be slightly offset by a stock grant made on February 1, 2009. We estimate that we will recognize total expense of approximately $1.6 million over the next five years for this grant. In addition, economic and credit conditions may significantly impact our bad debt expense. We continue to monitor our customer’s credit profiles carefully and make changes in our terms where necessary in response to this heightened risk.

On a long-term basis, we expect that our SG&A expenses will primarily be impacted by:

•		Our growth in sales to the industrial market and, when industry conditions improve, the site-built construction market. Our sales to these markets require a higher ratio of SG&A costs due, in part, to product design requirements.
•		Our incentive compensation program discussed above.
•		Our growth and success in achieving Continuous Improvement objectives.

LIQUIDITY AND CAPITAL RESOURCES

Our cash cycle will continue to be impacted in the future based on our mix of sales by market. Sales to the site-built construction and industrial markets require a greater investment in working capital (inventory and accounts receivable) than our sales to the DIY/retail and manufactured housing markets.

Management expects to spend up to $10 million on capital expenditures in 2009 and incur depreciation of approximately $35 million and amortization of intangible assets of approximately $10 million. On December 27, 2008, we had outstanding purchase commitments on capital projects of approximately $0.9 million.

We have no present intention to change our dividend policy, which is currently $0.06 per share paid semi-annually.

Our Board of Directors has approved a share repurchase program under which we have authorization to buy back approximately 1.2 million shares as of December 27, 2008. In the past, we have repurchased shares in order to offset the effect of issuances resulting from our employee benefit plans and at times when our stock price falls to a pre-determined level.

The Series 2002-A Senior Notes totaling $15.0 million are due December 18, 2009, which we currently intend to pay-off through cash flows generated from operations. We are also obligated to pay additional amounts due on long-term debt totaling approximately $0.5 million in 2009.

We currently have assets held for sale totaling $8.3 million at December 27, 2008 that we intend to sell during 2009. On February 6, 2009, we sold real estate located in Woodburn, Oregon. The net sales price was approximately $5.2 million resulting in a gain of approximately $2.4 million.

Management’s Annual Report on Internal Control Over Financial Reporting

The management of Universal Forest Products, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to us and the Board of Directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

We assessed the effectiveness of our internal control over financial reporting as of December 27, 2008. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on our assessment, management has concluded that as of December 27, 2008, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

The effectiveness of the Company’s internal control over financial reporting has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which follows our report.

Universal Forest Products, Inc.

February 20, 2009

Report of Independent Registered Public Accounting Firm
On Internal Control over Financial Reporting

The Board of Directors and Shareholders of Universal Forest Products, Inc.

We have audited Universal Forest Products, Inc. and subsidiaries’ internal control over financial reporting as of December 27, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Universal Forest Products, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Universal Forest Products, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 27, 2008, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Universal Forest Products, Inc. and subsidiaries as of December 27, 2008 and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years the period ended December 27, 2008 and our report dated February 20, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Grand Rapids, Michigan
February 20, 2009

Report of Independent Registered Public Accounting Firm
On Financial Statements

The Board of Directors and Shareholders of Universal Forest Products, Inc.

We have audited the accompanying consolidated balance sheets of Universal Forest Products, Inc. and subsidiaries as of December 27, 2008 and December 29, 2007, and the related consolidated statements of earnings, shareholders’ equity, and cash flows for each of the three years in the period ended December 27, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Universal Forest Products, Inc. and subsidiaries at December 27, 2008 and December 29, 2007, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 27, 2008, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Universal Forest Products, Inc. and subsidiaries’ internal control over financial reporting as of December 27, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Grand Rapids, Michigan
February 20, 2009

UNIVERSAL FOREST PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

		December 27,				December 29,
		2008				2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	13,337			$	43,605
Accounts receivable, net			138,043				142,562
Inventories:
Raw materials			109,942				120,805
Finished goods			83,554				115,063
			193,496				235,868
Assets held for sale			8,296				33,624
Other current assets			13,037				21,754
Prepaid income taxes			6,283				15,077
Deferred income taxes			8,416				8,035
TOTAL CURRENT ASSETS			380,908				500,525
OTHER ASSETS			5,927				8,094
GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS			159,263				150,272
OTHER INTANGIBLE ASSETS, net			22,751				23,849
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements			88,958				64,754
Building and improvements			143,845				148,000
Machinery, equipment and office furniture			271,104				293,579
Construction in progress			1,270				6,670
			505,177				513,003
Less accumulated depreciation and amortization			(258,007	)			(238,743	)
PROPERTY, PLANT AND EQUIPMENT, NET			247,170				274,260
TOTAL ASSETS		$	816,019			$	957,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	63,184			$	83,505
Accrued liabilities:
Compensation and benefits			49,306				49,558
Other			22,620				28,717
Current portion of long-term debt and capital lease obligations			15,490				945
TOTAL CURRENT LIABILITIES			150,600				162,725
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion			85,684				205,126
DEFERRED INCOME TAXES			17,056				24,536
MINORITY INTEREST			6,343				10,376
OTHER LIABILITIES			14,453				17,569
TOTAL LIABILITIES			274,136				420,332
SHAREHOLDERS’ EQUITY:
Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none
Common stock, no par value; shares authorized 40,000,000; issued and outstanding, 19,088,880 and 18,907,841		$	19,089			$	18,908
Additional paid-in capital			128,830				123,368
Retained earnings			393,312				391,253
Accumulated other comprehensive earnings			2,353				4,704
			543,584				538,233
Employee stock notes receivable			(1,701	)			(1,565	)
TOTAL SHAREHOLDERS’ EQUITY			541,883				536,668
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	816,019			$	957,000

See notes to consolidated condensed financial statements.

UNIVERSAL FOREST PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share data)

		Year Ended
		December 27,				December 29,				December 30,
		2008				2007				2006
NET SALES		$	2,232,394			$	2,513,178			$	2,664,572
COST OF GOODS SOLD			1,978,193				2,204,149				2,282,890
GROSS PROFIT			254,201				309,029				381,682
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			228,557				247,373				257,796
NET LOSS ON DISPOSITION OF ASSETS AND OTHER IMPAIRMENT AND EXIT CHARGES			7,239				8,164				141
EARNINGS FROM OPERATIONS			18,405				53,492				123,745
Interest expense			12,088				17,033				14,053
Interest income			(829	)			(2,150	)			(2,443	)
			11,259				14,883				11,610
EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST			7,146				38,609				112,135
INCOME TAXES			1,686				15,396				38,760
EARNINGS BEFORE MINORITY INTEREST			5,460				23,213				73,375
MINORITY INTEREST			(1,117	)			(2,168	)			(3,250	)
NET EARNINGS		$	4,343			$	21,045			$	70,125
EARNINGS PER SHARE — BASIC		$	0.23			$	1.10			$	3.73
EARNINGS PER SHARE — DILUTED		$	0.23			$	1.09			$	3.62
WEIGHTED AVERAGE SHARES OUTSTANDING			19,074				19,056				18,820
WEIGHTED AVERAGE SHARES OUTSTANDING WITH COMMON STOCK EQUIVALENTS			19,225				19,362				19,370

See notes to consolidated condensed financial statements.

UNIVERSAL FOREST PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share and per share data)

														Deferred								Accumulated				Employees
						Additional				Deferred				Compensation								Other				Stock
		Common				Paid-In				Stock				Rabbi				Retained				Comprehensive				Notes
		Stock				Capital				Compensation				Trust				Earnings				Earnings				Receivable				Total
Balance at December 31, 2005		$	18,403			$	97,372			$	4,212			$	(2,117	)		$	312,878			$	2,408			$	(1,304	)		$	431,852
Comprehensive earnings:
Net earnings																			70,125
Foreign currency translation adjustment																							43
Total comprehensive earnings																															70,168
Cash dividends — $.110 per share																			(2,072	)											(2,072	)
Reversal of deferred compensation upon adoption of SFAS 123(R)							2,095				(4,212	)			2,117																—
Issuance of 349,644 shares under employee stock plans			350				5,678																								6,028
Issuance of 3,467 shares under stock grant programs			3				194																								197
Issuance of 101,278 shares under deferred compensation plans			101				(101	)																							—
Received 1,367 shares for the exercise of stock options			(1	)			(89	)																							(90	)
Tax benefits from non-qualified stock options exercised							4,376																								4,376
Expense associated with share-based compensation arrangements							972																								972
Accrued expense under deferred compensation plans							3,056																								3,056
Issuance of 3,222 shares in exchange for employee stock notes receivable			3				201																				(204	)			—
Payments received on employee stock notes receivable																											255				255
Balance at December 30, 2006		$	18,859			$	113,754			$	—			$	—			$	380,931			$	2,451			$	(1,253	)		$	514,742
Comprehensive earnings:
Net earnings																			21,045
Foreign currency translation adjustment																							2,253
Total comprehensive earnings																															23,298
Cash dividends — $.115 per share																			(2,185	)											(2,185	)
Issuance of 220,345 shares under employee stock plans			220				3,683																								3,903
Issuance of 3,961 shares under stock grant programs			4				170																								174
Issuance of 69,777 shares under deferred compensation plans			70				(70	)																							—
Repurchase of 239,400 shares			(239	)															(8,538	)											(8,777	)
Received 15,866 shares for the exercise of stock options			(16	)			(766	)																							(782	)
Tax benefits from non-qualified stock options exercised							1,867																								1,867
Expense associated with share-based compensation arrangements							505																								505
Accrued expense under deferred compensation plans							3,733																								3,733
Issuance of 10,132 shares in exchange for employee stock notes receivable			10				492																				(502	)			—
Payments received on employee stock notes receivable																											190				190
Balance at December 29, 2007		$	18,908			$	123,368			$	—			$	—			$	391,253			$	4,704			$	(1,565	)		$	536,668
Comprehensive earnings:
Net earnings																			4,343
Foreign currency translation adjustment																							(2,351	)
Total comprehensive earnings																															1,992
Cash dividends — $.120 per share																			(2,284	)											(2,284	)
Issuance of 174,528 shares under employee stock plans			175				3,030																								3,205
Issuance of 3,706 shares under stock grant programs			4				100																								104
Issuance of 15,288 shares under deferred compensation plans			15				(15	)																							—
Received 19,857 shares for the exercise of stock options			(20	)			(622	)																							(642	)
Tax benefits from non-qualified stock options exercised							878																								878
Expense associated with share-based compensation arrangements							1,136																								1,136
Accrued expense under deferred compensation plans							725																								725
Issuance of 7,374 shares in exchange for employee stock notes receivable			7				230																				(237	)			—
Payments received on employee stock notes receivable																											101				101
Balance at December 27, 2008		$	19,089			$	128,830			$	—			$	—			$	393,312			$	2,353			$	(1,701	)		$	541,883