SEC Filing - UFP Industries, Inc.

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

FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 2934. FOR FISCAL YEAR ENDED DECEMBER 25, 2004.

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period of ____ to _____.

Commission File No.: 0-22684

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)

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

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 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: [X] No: [ ]

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. [ ]

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2).
Yes: [X] No: [ ]

As of June 26, 2004, 17,945,158 shares of the registrant's common stock, no par
value, were outstanding. 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 that date was $446,843,443 computed at the closing price of $30.80 on that
date.

As of January 29, 2005, 18,014,518 shares of the registrant's common stock, no
par value, were outstanding.

Documents incorporated by reference:

(1) Certain portions of the Company's Annual Report to Shareholders for the
fiscal year ended December 25, 2004 are incorporated by reference into
Part I and II of this Report.

(2) Certain portions of the Company's Proxy Statement for its 2005 Annual
Meeting of Shareholders are incorporated by reference into Part III of
this Report.

Exhibit Index located on page E-1.

Page 1 of 16

ANNUAL REPORT ON FORM 10-K
DECEMBER 25, 2004
TABLE OF CONTENTS

PART I

Item 1. Business. 3
Item 2. Properties. 7
Item 3. Legal Proceedings. 8
Item 4. Submission of Matters to a Vote of Security Holders. 8

Additional item: Executive Officers of the Registrant. 8

PART II

Item 5. Market for Registrant's Common Equity, Related Shareholder 9
Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data. 10
Item 7. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 10
Item 8. Financial Statements and Supplemental Data. 11
Item 9. Changes In and Disagreements with Accountants on Accounting 11
and Financial Disclosure.
Item 9A. Controls and Procedures. 11
Item 9B. Other Information. 12

PART III

Item 10. Directors and Executive Officers of the Registrant. 12
Item 11. Executive Compensation. 12
Item 12. Security Ownership of Certain Beneficial Owners and Management 12
and Related Shareholder Matters.
Item 13. Certain Relationships and Related Transactions. 13
Item 14. Principal Accountant Fees and Services. 13

PART IV

Item 15. Exhibits, Financial Statement Schedules. 13

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 25, 2004 ("2004 Annual Report") under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Selected portions of the 2004 Annual Report are filed as Exhibit 13 with this
Form 10-K Report.

FINANCIAL INFORMATION ABOUT INDUSTRY 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 and Western
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
divisions into one reporting segment, consistent with SFAS 131. Accordingly,
separate industry segment information is not presented.

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 25% of our total net sales for fiscal 2004, and 30% for 2003 and
2002.

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, close proximity of
our plants to core customers, purchasing 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 beginning in 1997. 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 many manufacturing facilities
located in many different states and 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(R),
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.

Competitors in this market include regional retail contractor yards who also
manufacture components, as well as regional manufacturers of components. Our
objective is to continue to increase our manufacturing capacity and framing
capabilities for this market while developing a national presence. We believe
our primary competitive advantages relate to the engineering and design
capabilities of our regional staff, customer relationships, 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.

While no competitor operates in as widely-dispersed geographic areas as we do,
we face competition from suppliers in many geographic regions. Our principal
competitive advantages include our product knowledge, the capacity to supply all
of the customer's lumber requirements, the ability to deliver engineering
support services, the close proximity of our regional facilities to our
customers and our ability to provide national sales programs to certain
customers.

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
regional sales personnel supported by a centralized national sales and marketing
department.

Suppliers. We are one of the largest domestic buyers of solid sawn lumber from
primary producers (lumber mills). We use primarily southern yellow pines 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, 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. 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.

Seasonal Influences. Our manufactured housing and site-built construction
markets are affected by seasonal influences in the northern states during the
winter months when installation and construction is more difficult.

The activities in the DIY/retail market have substantial seasonal impacts. The
demand for many of our DIY/retail products is highest during the period of April
to 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. 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.

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 25, 2004 and December 27, 2003, we estimate that backlog orders
associated with the site-built construction business approximated $69.2 million
and $76.8 million, respectively. We expect that these orders will be filled
within the current fiscal year.

Research and Development. Our research and development efforts generally fall
into four categories: engineering and testing of new truss designs; design and
development of wood treatment systems and manufacturing processes; design and
development of machinery and tooling of various wood shaping devices; and
development of new products. Although important to our competitive strengths and
growth, the dollar amount of research and development expenditures has not
typically been material to us.

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

Employees. At January 29, 2005, we had approximately 8,200 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 Q of the Consolidated Financial
Statements presented under Item 8 herein.

AVAILABLE INFORMATION.

Our Internet address is www.ufpi.com. Through our Internet web site under
"Financials" 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 web site 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 2. PROPERTIES.

Our corporate headquarters building is located in suburban Grand Rapids,
Michigan. We currently have 98 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 fourteen 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 N 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, 2005. 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 57 Vice Chair. of the Board and Chief Exec. Officer, Universal Forest Products, Inc.
Michael B. Glenn 53 President and Chief Operating Officer, Universal Forest Products, Inc.
C. Scott Greene 49 President, Universal Forest Products Eastern Division, Inc.
Robert K. Hill 57 President, Universal Forest Products Western Division, Inc.
Robert D. Coleman 50 Executive Vice President Manufacturing, Universal Forest Products, Inc.
Matthew J. Missad 44 Executive Vice President and Secretary, Universal Forest Products, Inc.
Michael R. Cole 38 Chief Financial Officer and Treasurer, 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.

Michael B. Glenn has been employed by us since 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.

C. Scott Greene joined us in February of 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.

Robert K. Hill has been with us since 1986. In March of 1993, Mr. Hill was
elected Senior Vice President of our Far West Operations. On December 1, 1997,
Mr. Hill became the Executive Vice President of Operations of Universal Forest
Products Western Division, Inc., and on January 1, 2000, became President of
that Division.

Robert D. Coleman, has been an employee since 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 has been employed since 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 November of 1993. In January of 1997,
Mr. Cole was promoted to Director of Finance, and on January 1, 2000 was made
Vice President of Finance. On July 19, 2000, Mr. Cole became Chief Financial
Officer.

PART II

The following information items in this Part II, which are contained in the 2004
Annual Report, are specifically incorporated by reference into this Form 10-K
Report. These portions of the 2004 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 2004 Annual Report under the caption "Price Range of
Common Stock and Dividends."

Sales of equity securities in the fourth quarter not registered under the
Securities Act:

Date of Class of Number of Consideration
Sale Stock Shares Purchasers Exchanged
------- -------- --------- ---------- -------------

Stock Gift Program Various Common 248 Eligible None
persons

(b) Not applicable.

Fiscal Month (a) (b) (c) (d)
- ------------ ------- --------- -------- ---------

September 26 - October 30, 2004(1)................... 1,550,587
October 31 - November 27, 2004....................... 1,550,587
November 28 - December 25, 2004...................... 1,550,587

(a) Total number of shares purchased.

(b) Average price paid per share.

(d) Maximum number of shares that may yet be purchased under the plans
or programs.

- ----------
(1) On October 21, 1998, the Board of Directors approved a share repurchase
program (which succeeded a previous program) allowing us to repurchase up
to 1.8 million shares of our common stock. On October 18, 2000 and
November 14, 2001, the Board of Directors authorized an additional 1
million shares and 2.5 million shares, respectively, to be repurchased
under the program. As of December 25, 2004, cumulative total authorized
shares available for repurchase is 1.5 million shares.

ITEM 6. SELECTED FINANCIAL DATA.

The information required by this Item is incorporated by reference from the 2004
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 2004
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 25, 2004, the estimated fair value of our long-term debt, including
the current portion, was $210.1 million, which was $3.0 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:

2005 2006 2007 2008 2009 Thereafter Total
-------- ----- ----- --------- --------- ---------- --------

($US equivalents, in thousands)
Long-term Debt:
Fixed Rate ($US) $ 21,500 $ 78,500 $ 15,000 $ 40,000 $155,000
Average interest rate 6.69% 6.98% 5.63% 6.16%
Variable Rate ($US) $ 533 $ 452 $ 358 $ 2,362 $ 30,129 $ 18,308 $ 52,142
Average interest rate(1) 2.78%

- ----------
(1)Average of rates at December 25, 2004.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The information required by this Item is incorporated by reference from the 2004
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"
"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 25, 2004 (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 2004 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 on that Report is
also included in the 2004 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 25,
2004, 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 AND EXECUTIVE OFFICERS OF THE REGISTRANT.

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 directors and compliance with Section
16(a) of the Securities and Exchange Act of 1934 is incorporated by reference
from our definitive Proxy Statement for the year ended December 25, 2004 for the
2005 Annual Meeting of Shareholders, as filed with the Commission ("2005 Proxy
Statement"), under the captions "Election of Directors," "Corporate Governance
and Board Matters," and "Section 16(a) Beneficial Ownership Reporting
Compliance." Information relating to our code of ethics is included in this
report in Part I under the caption "Available Information".

ITEM 11. EXECUTIVE COMPENSATION.

Information relating to executive compensation is incorporated by reference from
the 2005 Proxy Statement under the caption "Executive Compensation."

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 2005 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 25, 2004, is as follows:

Number of shares
Number of remaining available
shares to Weighted for future issuance
be issued average under equity
upon exercise compensation plans
exercise of price of [excluding shares
outstanding outstanding reflected in
options options column (a)]
----------- ----------- -------------------
(a) (b) (c)
----------- ----------- -------------------

Equity compensation plans approved by security holders 1,877,259 $17.42 837,374
Equity compensation plans not approved by security holders none

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information relating to certain relationships and related transactions is
incorporated by reference from the 2005 Proxy Statement under the captions
"Election of Directors" 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 2005 Proxy Statement under the caption "Independent Public Accountants."

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a) 1. Financial Statements. The following Management's Annual Report, Reports
of Independent Registered Public Accounting Firm and Consolidated
Financial Statements are incorporated by reference, under Item 8 of this
report, from the 2004 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
Consolidated Balance Sheets as of December 25, 2004 and December 27, 2003
Consolidated Statements of Earnings for the Years Ended December 25, 2004,
December 27, 2003 and December 28, 2002
Consolidated Statements of Shareholders' Equity for the Years Ended
December 25, 2004, December 27, 2003 and December 28, 2002
Consolidated Statements of Cash Flows for the Years Ended
December 25, 2004, December 27, 2003 and December 28, 2002
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.

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.

Dated: March 10, 2005 UNIVERSAL FOREST PRODUCTS, INC.

By: /s/ William G. Currie
----------------------------------------
WILLIAM G. CURRIE, VICE CHAIRMAN OF THE
BOARD AND CHIEF EXECUTIVE OFFICER

and

/s/ Michael R. Cole
----------------------------------------
MICHAEL R. COLE, CHIEF FINANCIAL OFFICER
AND TREASURER

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on this 10th day of March, 2005, 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/ Gary F. Goode
- -------------------------------- ----------------------------------------
JOHN W. GARSIDE, DIRECTOR GARY F. GOODE, DIRECTOR

/s/ Mark A. Murray /s/ Philip M. Novell
- -------------------------------- ----------------------------------------
MARK A. MURRAY, DIRECTOR PHILIP M. NOVELL, DIRECTOR

/s/ Louis A. Smith
- --------------------------------
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.

(b)(3) Series A, Senior Unsecured Note Agreement dated May 5, 1994,
was filed as Exhibit 4(b)(3) to a Form 10-Q Quarterly Report
for the quarter period ended March 26, 1994, and the same is
incorporated herein by reference.

(b)(4) First Amendment to Note Agreement dated November 13, 1998,
relating to Series A, Senior Unsecured Note Agreement dated
May 5, 1994, was filed as Exhibit 4(b)(4) to a Form 10-K
Annual Report for the fiscal year ended December 26, 1998.

10 Material Contracts.

(a) 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.

(a)(2) Redemption Agreement with Peter F. Secchia, dated January 2,
2002, was filed as Exhibit 10(a)(2) to a Form 10-K, Annual
Report for the year ended December 29, 2001 and the same is
incorporated herein by reference.

*(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.

E-1

*(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.

(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)(2) Series 2002-A, Revolving Credit Agreement dated November 25,
2002 was filed as Exhibit 10(i)(2) to a Form 10-K Annual
Report for the year ended December 28, 2002.

(i)(3) First Amendment dated September 18, 2003 relating to Series
2002-A, Revolving Credit Agreement dated November 25, 2002 was
filed as Exhibit 10(i)(3) to a Form 10-Q Quarterly Report for
the quarter ended September 27, 2003.

(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.

E-2

(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.

(k)(1) Program for Accounts Receivable Transfer ("PARTS") Agreement
dated September 22, 2003 was filed as Exhibit 10(k)(1) to a
Form 10-Q Quarterly Report for the quarter ended September 27,
2003.

(k)(2) Deposit Account Control Agreement dated September 22, 2003,
completed pursuant to the PARTS Agreement, was filed as
Exhibit 10(k)(2) to a Form 10-Q, Quarterly Report for the
quarter ended September 27, 2003.

(k)(3) Program for Accounts Receivable Transfer ("PARTS") Agreement
dated November 12, 2004 was filed as Exhibit 10(k) to a Form
8-K Current Report dated November 15, 2004.

13 Selected portions of the Company's Annual Report to Shareholders for
the fiscal year ended December 25, 2004.

14 Code of Ethics for Senior Financial Officers

(a) Code of Ethics for Chief Financial Officer

(b) Code of Ethics for Vice President of Accounting and
Administration.

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).

E-3

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).

- ----------
* Indicates a compensatory arrangement.

E-4

.
.
.

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.................... 3-16

Management's Annual Report on Internal Control Over
Financial Reporting.................................... 17

Report of Independent Registered Public Accounting Firm
on Internal Control Over Financial Reporting........... 18

Report of Independent Registered Public Accounting
Firm................................................... 19

Consolidated Balance Sheets as of December 25, 2004 and
December 27, 2003...................................... 20

Consolidated Statements of Earnings for the Years Ended
December 25, 2004, December 27, 2003, and December 28,
2002................................................... 21

Consolidated Statements of Shareholders' Equity for the
Years Ended December 25, 2004, December 27, 2003 and
December 28, 2002...................................... 22

Consolidated Statements of Cash Flows for the Years
Ended December 25, 2004, December 27, 2003, and
December 28, 2002...................................... 23

Notes to Consolidated Financial Statements............. 24-41

Price Range of Common Stock and Dividends.............. 42

SELECTED FINANCIAL DATA

(In thousands, except per share and statistics data)

2004 2003 2002 2001 2000
--------------------------------------------------------------

CONSOLIDATED STATEMENT OF EARNINGS DATA
Net sales(1).............................................. $2,453,281 $1,898,830 $1,639,899 $1,530,353 $1,387,130
Gross profit(1)........................................... 296,253 257,986 230,410 211,479 187,013
Earnings before income taxes, minority interest and equity
in earnings of investee................................. 83,059 65,792 62,115 54,300 50,375
Net earnings(3)........................................... 48,603 40,119 36,637 33,142 30,438
Diluted earnings per share(3)............................. $ 2.59 $ 2.18 $ 1.97 $ 1.63 $ 1.49
Dividends per share....................................... $ 0.100 $ 0.095 $ 0.090 $ 0.085 $ 0.080
Weighted average shares outstanding with common stock
equivalents............................................. 18,771 18,379 18,619 20,377 20,477
CONSOLIDATED BALANCE SHEET DATA
Working capital(4)........................................ $ 222,618 $ 190,400 $ 185,256 $ 124,071 $ 120,321
Total assets.............................................. 762,360 686,931 638,874 551,209 485,320
Total debt and capital lease obligations(2)............... 207,142 213,186 243,572 212,187 160,860
Shareholders' equity...................................... 356,769 305,104 264,804 232,416 237,148
STATISTICS
Gross profit as a percentage of net sales(1).............. 12.1% 13.6% 14.1% 13.8% 13.5%
Net earnings as a percentage of net sales(3).............. 2.0% 2.1% 2.2% 2.2% 2.2%
Return on beginning equity(5)............................. 15.9% 15.2% 13.6% 14.0% 14.1%
Current ratio............................................. 2.21 2.33 2.64 2.12 2.50
Debt to equity ratio(2)................................... 0.58 0.70 0.92 0.91 0.68
Book value per common share(6)............................ $ 19.82 $ 17.13 $ 14.93 $ 13.07 $ 12.03

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

(1) In 2001, we reclassified customer rebate expense from cost of goods sold to
include it in net sales. Prior year amounts have been reclassified.

(2) Includes $36 million classified as temporary shareholders' equity in 2001
associated with a share redemption we completed in January 2002.

(3) In 2002, we adopted SFAS 142 and as a result we no longer recognize
amortization expense associated with goodwill.

(4) Current assets less current liabilities.

(5) Net earnings divided by beginning shareholders' equity (including temporary
shareholders' equity).

(6) Shareholders' equity divided by common stock outstanding.

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
25, 2004. We are pleased to present this overview of 2004.

OVERVIEW

We are pleased to report strong results for 2004, which was highlighted by:

- - Our sales growth in the site-built construction, industrial, and manufactured
housing markets as we increased our market share in each. Our unit sales to
the do-it-yourself/retail ("DIY/retail") market declined due to a decline in
consumer demand for our products as a result of higher consumer sale prices.
Higher lumber and chemical costs, combined with an increase in some of our
customers' gross margin requirements, contributed to the higher sale prices
being observed by consumers.

- - Our increase in shipments to the manufactured housing market. While Housing
and Urban Development ("HUD") code industry production remained flat, we
increased our shipments to modular producers.

- - Higher lumber prices which elevated our sales dollars and required a greater
investment in working capital. Our sales increased 29.2% for the year, and we
estimate that 18% of this increase was due to higher selling prices caused
primarily by higher lumber and chemical costs.

- - A fire that destroyed our site-built construction truss plant in Thorndale,
Ontario in the second quarter. Although we maintained our service to customers
by moving the work to other plants in the United States, transportation costs
and operating inefficiencies resulted in greater costs in the second, third,
and fourth quarters. We recognized a gain on insurance settlement totaling
approximately $1.4 million in the fourth quarter associated with this fire.
Income taxes totaling approximately $451,000 were recorded as a result of this
gain.

- - Enhanced profitability in spite of our decline in unit sales to the DIY/retail
market, poor performance of a framing venture operating in the western United
States, and the temporary loss of operations at our Thorndale, Ontario plant.
The 21.1% increase in net earnings we achieved surpassed our 11% increase in
unit sales. Factors contributing to improved profitability this year include
the effect of rising lumber prices in the second and third quarters on
products we inventory and whose selling prices are tied to the Lumber Market;
strong margins on products sold to the industrial market; inefficiencies
experienced in 2003 as a result of converting to a new preservative in the
third and fourth quarters of that year; the insurance settlement; and gains
from the sale of certain real estate.

We also made the following accomplishments as our people remain focused on
executing our growth strategy:

- - We completed the sale of our interest in Nascor Incorporated as we continue to
stay focused on investing our resources in areas that help us best achieve our
goals.

- - We acquired plants in Indianapolis, IN and Dallas, TX during the first
quarter. These plants manufacture engineered wood components and distribute
other building materials for site-built construction.

- - We started two new plants in 2004 in Berlin, NJ and Tecate, MX, which will
primarily supply engineered wood components for site-built construction.

- - We acquired a 50% interest in Shawnlee Construction LLC ("Shawnlee") on April
2, 2004. Shawnlee is the largest framer for the multi-family construction
market in the Massachusetts area. This acquisition allows us to capitalize on
customer requests for turn-key construction packages by supplying framing
labor through Shawnlee and engineered wood components from our existing plants
in the Northeast.

In summary, we remain optimistic about the future of our business, markets, and
strategies, and our employees remain focused on adding value for our customers,
executing our strategies, and meeting our goals.

RISK FACTORS

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.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Our ability to achieve growth in sales and margins to the site-built
construction market is somewhat dependent on housing starts. If housing starts
decline significantly, our financial results could be negatively impacted.

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 25% of our total sales in 2004, down from 30%
for 2003.

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. Several states have
proposed legislation to limit the uses and disposal of Chromated Copper Arsenic
("CCA") treated lumber. (See Note N to the Consolidated Financial Statements.)

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 ("SYP"), also experience
the greatest Lumber Market risk (see "Historical Lumber Prices"). 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.

WE CONVERTED TO A NEW PRESERVATIVE TO TREAT OUR PRODUCTS. The manufacturers of
CCA preservative voluntarily discontinued the registration of CCA for certain
residential applications as of December 31, 2003. As a result, all of our wood
preservation facilities have been converted to an alternate preservative, either
Amine Copper Quaternary (ACQ) or borates. The cost of ACQ is more than four
times higher than the cost of CCA. We estimate the new preservative has
increased the cost and sales price of our treated products by approximately 10%
to 15%. 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.

MARKET CONDITIONS FOR THE SUPPLY OF CERTAIN LUMBER PRODUCTS AND INBOUND
TRANSPORTATION MAY BE LIMITED. These conditions, which occur on occasion, have
resulted in difficulties procuring desired quantities and receiving orders on a
timely basis for all industry participants. We are not certain how these
conditions may impact our short-term sales volumes and profitability. However,
we attempt to mitigate the risks of these conditions by:

- - Our pricing practices (see "Impact of the Lumber Market on Our Operating
Results");

- - Leveraging our size with mill and transportation suppliers to ensure they
achieve supply and service requirements;

- - Increasing our utilization of consigned inventory programs with mills; and

- - Expanding our supply base of dedicated carriers.

When analyzing this report to assess our future performance, please recognize
the potential impact of the various factors set forth above.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

HISTORICAL LUMBER PRICES

The following table presents the Random Lengths framing lumber composite price
for the years ended December 25, 2004, December 27, 2003, and December 28, 2002.

RANDOM LENGTHS COMPOSITE
AVERAGE $/MBF
--------------------------
2004 2003 2002
--------------------------

January..................................................... $341 $278 $297
February.................................................... 376 295 317
March....................................................... 382 277 339
April....................................................... 431 283 323
May......................................................... 456 278 312
June........................................................ 423 303 302
July........................................................ 426 302 306
August...................................................... 473 336 291
September................................................... 441 375 279
October..................................................... 378 325 274
November.................................................... 355 338 265
December.................................................... 376 327 271
Annual average.............................................. $405 $310 $298
Annual percentage change.................................... 30.6% 4.0% (5.1%)

In addition, a SYP composite price, which we prepare and use, is presented
below. Sales of products produced using this species comprise up to 50% of our
sales volume.

RANDOM LENGTHS SYP
AVERAGE $/MBF
---------------------
2004 2003 2002
---------------------

January..................................................... $410 $387 $410
February.................................................... 436 394 434
March....................................................... 487 392 464
April....................................................... 532 410 457
May......................................................... 535 385 408
June........................................................ 498 384 383
July........................................................ 479 374 409
August...................................................... 503 398 375
September................................................... 473 437 361
October..................................................... 429 390 357
November.................................................... 394 410 354
December.................................................... 408 401 375
Annual average.............................................. $465 $397 $399
Annual percentage change.................................... 17.1% (0.5%) (3.4%)

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

IMPACT OF THE LUMBER MARKET ON OUR OPERATING PROFITS

We generally price our products to pass lumber costs through to our customers so
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 generally comprise up to 70% 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 and low turnover rates, whose
selling prices are indexed to the Lumber Market. This would include treated
lumber, which comprises almost twenty-five percent of our total sales. 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 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. (See "Risk
Factors -- Seasonality and weather conditions could adversely affect us.")

- - 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 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.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

BUSINESS COMBINATIONS AND ASSET PURCHASES

All of the transactions mentioned below are considered business combinations,
except for the purchase of the treating plants from Quality Wood Treating Co.,
Inc. ("Quality") on August 26, 2003 and the purchase of assets from Inno-Tech
Plastics, Inc. ("Inno-Tech") on April 10, 2002. See Note B to the Consolidated
Financial Statements for further details. Each business combination has been
accounted for using the purchase method.

COMPANY NAME ACQUISITION DATE BUSINESS DESCRIPTION
- ---------------------------------------------------------------------------------------------------------------------------

Shawnlee Construction, LLC........................... April 2, 2004 Provides framing services for multi-family
construction in the Northeast. Located in
Plainville, MA.
Slaughter Industries ("Slaughter")................... March 15, 2004 Distributes lumber products and manufactures
engineered wood components for site-built
construction. Located in Dallas, TX.
Midwest Building Systems, Inc. ("Midwest")........... January 30, 2004 One facility in Indianapolis, IN which
manufactures engineered wood components for
site-built construction.
D&L Framing, LLC ("D&L")............................. August 28, 2003 Framing operation for multi-family
construction located in Las Vegas, NV.
Norpac Construction LLC ("Norpac")................... June 4, 2003 Concrete framer for multi-family
construction located in Las Vegas, NV.
Quality Wood Treating Co., Inc. ..................... November 4, 2002
August 26, 2003 One facility in Prairie du Chien, WI which
produces EverX(R) composite decking. We also
entered into an exclusive treating services
agreement with Quality. On August 26, 2003,
we canceled the treating services agreement
and purchased two treating facilities in
Lansing, MI and Janesville, WI and our
subsidiary agreed to lease the real estate
of a third treating facility in White Bear
Lake, MN.
J.S. Building Products, Inc. ........................ September 9, 2002 One facility in Modesto, CA, which
manufactures engineered roof trusses for the
site-built construction market.
Inno-Tech Plastics, Inc. ............................ April 10, 2002 One facility in Springfield, IL which
manufactures "wood alternative" products. We
entered into an exclusive licensing
agreement and acquired certain assets.
Pinelli-Universal S. de R.L. de C.V. ("Pinelli")..... January 15, 2002 One facility in Durango, Durango, Mexico
which manufactures molding and millwork
products. We purchased an additional 5%
interest.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

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 25, DECEMBER 27, DECEMBER 28,
2004 2003 2002
--------------------------------------------

Net sales................................................... 100.0% 100.0% 100.0%
Cost of goods sold.......................................... 87.9 86.4 85.9
----- ----- -----
Gross profit................................................ 12.1 13.6 14.1
Selling, general and administrative expenses................ 8.2 9.4 9.7
Gain on insurance settlement................................ (0.0)
----- ----- -----
Earnings from operations.................................... 3.9 4.2 4.4
Interest, net............................................... (0.6) (0.7) (0.7)
Net gain on sale of real estate and interest in
subsidiary................................................ 0.1 0.0 0.1
----- ----- -----
Earnings before income taxes and minority interest.......... 3.4 3.5 3.8
Income taxes................................................ 1.3 1.3 1.4
----- ----- -----
Earnings before minority interest........................... 2.1 2.2 2.4
Minority interest........................................... (0.1) (0.1) (0.2)
----- ----- -----
Net earnings................................................ 2.0% 2.1% 2.2%
===== ===== =====

NET SALES

We 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. Our strategic sales
objectives include:

- - Diversifying our end market sales mix by increasing sales of specialty wood
packaging to industrial users and engineered wood components and framing
services to the site-built construction market. Engineered wood components
include roof trusses, wall panels, and floor systems.

- - Increasing sales of "value-added" products and framing services. Value-added
product sales 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. 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 net sales (in
thousands) and change in net sales by market classification.

YEARS ENDED
------------------------------------------------------------
DECEMBER 25, % DECEMBER 27, % DECEMBER 28,
MARKET CLASSIFICATION 2004 CHANGE 2003 CHANGE 2002
- -------------------------------------------------------------------------------------------------------------------------

DIY/retail................................................. $ 981,576 9.0 $ 900,150 18.5 $ 759,439
Site-Built Construction.................................... 631,676 56.7 403,201 23.3 326,962
Manufactured Housing....................................... 385,326 36.6 282,139 (3.7) 293,070
Industrial................................................. 454,703 45.1 313,340 20.3 260,428
------------ ------------ ------------
Total...................................................... $2,453,281 $1,898,830 $1,639,899
============ ============ ============

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

Note: During 2004, we reviewed our customer lists and made certain
reclassifications. Historical information has been restated to reflect
these reclassifications.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

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

% CHANGE
---------------------------------------
IN SALES IN SELLING PRICES IN UNITS
---------------------------------------

2004 versus 2003............................................ +29% +18% +11%
2003 versus 2002............................................ +16% +3% +13%
2002 versus 2001............................................ +7% -2% +9%

We estimate that our 2004 unit sales increased by 11%, while overall selling
prices increased by 18%. Overall selling prices primarily increased as a result
of the Lumber Market and higher preservative prices (ACQ). Our pricing practices
are designed to pass these costs along to our customers. See "Impact of the
Lumber Market on Our Operating Results." We estimate that our unit sales
increased by 6% as a result of business combinations and new plants, while our
unit sales out of existing facilities increased by 7% in 2004. Plant closures
and the sale of our interest in Nascor Incorporated caused our unit sales to
decrease by 2% in 2004.

Our increase in unit sales in 2003 was due to business combinations, a new joint
venture framing operation in the western United States, and an exclusive
treating services agreement completed in the fourth quarter of 2002. Unit sales
out of our existing facilities increased by 6% in 2003. The increase in selling
prices was primarily attributable to a slight increase in the Lumber Market.

Changes in our sales by market are discussed below.

DIY/RETAIL:

We have developed strong relationships with national retail customers due to our
ability to provide quality products and a high level of service at competitive
prices. The most significant is our longstanding relationship with The Home
Depot, which comprised 25% of our total sales and 61% of our DIY/retail sales in
2004.

Net sales to the DIY/retail market increased 9% in 2004 compared to 2003,
primarily due to the higher Lumber Market and preservative prices. Our unit
sales declined 7% comparing the two periods, which we believe was due to a
decline in demand as a result of higher product costs for consumers. An increase
in consumer costs can be traced primarily to higher lumber and preservative
prices, combined with higher gross margin requirements of some of our customers.
Hurricanes and poor weather in certain areas of the country also contributed to
the decline in unit sales during our second and third quarters.

Net sales to the DIY/retail market increased 19% in 2003 compared to 2002,
primarily due to acquiring a plant that manufactures composite decking
(EverX(R)) and entering into an exclusive treating services agreement with
Quality. Our organic sales growth out of existing facilities was approximately
11% due to new opportunities with an existing customer and an increase in the
number of our customers' stores. In addition, we began providing installation
services for some of our products.

SITE-BUILT CONSTRUCTION:

Net sales to the site-built construction market increased 57% in 2004 compared
to 2003, despite the sale of our interest in Nascor Incorporated. This increase
primarily resulted from acquisitions (see "Business Combinations and Asset
Purchases") and new plants opened since last year and unit sales growth out of
existing plants totaling approximately 26%. Factors contributing to increased
unit sales out of existing plants include strong housing and multi-family
construction activities, particularly in southern California and Las Vegas, and
greater market penetration by offering turn-key framing and lumber packages, in
addition to engineered wood components, in some regions. In addition, we
estimate the Lumber Market caused our selling prices to increase 13% in 2004.

Net sales to the site-built construction market increased 23% in 2003 compared
to 2002 primarily due to acquisitions completed after the third quarter of 2002,
a new joint venture framing operation in the western United States, and organic
sales growth spread over several existing plants totaling approximately 14%. The
ability of some of our plants to offer framing services in addition to
engineered component sales allowed these plants to capture additional market
share from existing customers, which contributed to our organic sales growth.

MANUFACTURED HOUSING:

Net sales to the manufactured housing market increased 37% in 2004 compared to
2003. This increase resulted primarily from an estimated 26% increase in selling
prices combined with an 11% increase in units shipped. Our increase in selling
prices was primarily due to the higher Lumber Market and a change in sales mix
toward more complex trusses that require greater engineering and manufacturing
costs. Although industry production for HUD code homes remained flat for the
year, we continued to increase our shipments to modular home producers.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Net sales to the manufactured housing market decreased 4% in 2003 compared to
2002 primarily due to a 23% decline in industry shipments. We improved our
market share as a result of new product initiatives and increasing our sales to
modular home producers.

INDUSTRIAL:

Net sales to industrial customers increased 45% in 2004 compared to 2003. This
increase resulted from a combination of unit sales increases out of several
existing facilities totaling approximately 25%, combined with higher selling
prices due to the Lumber Market. We believe our unit sales and market share
continue to grow significantly due to our dedicated local sales teams and
national sales support efforts, combined with our competitive advantages in
manufacturing, purchasing, and material utilization.

Net sales to industrial customers increased 20% in 2003 compared to 2002 due to
unit increases out of several existing facilities as a result of executing our
internal growth strategy. Additional sales personnel, training, and equipment
have been dedicated to this market.

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

2004........................................................ 50.7% 49.3%
2003........................................................ 51.1% 48.9%
2002........................................................ 50.8% 49.2%

Value-added sales increased 28% in 2004 compared to 2003, primarily due to
increased sales of engineered wood components, turn-key framing, EverX(R)
(composite decking), industrial packaging products and other specialty products
supplied to the DIY/retail market. Commodity-based sales increased 30% primarily
due to the higher Lumber Market, higher preservative prices and an increase in
unit sales. Therefore, our decline in value-added sales as a percentage of total
sales was primarily due to the significant impact of the Lumber Market on
selling prices of commodity-based products.

The increase in our ratio of value-added sales to total sales in 2003 compared
to 2002 was primarily due to a 17% increase in value-added sales while
commodity-based sales increased by 15%. Value-added sales increased primarily
due to increased unit sales of trusses sold to the site-built construction
market, new framing operations, EverX(R) (composite decking), and specialty
products supplied to the DIY/retail market. Commodity-based sales increased due
to increased unit sales of plywood and the exclusive treating services agreement
completed with Quality in the fourth quarter of 2002.

COST OF GOODS SOLD AND GROSS PROFIT

Gross profit as a percentage of net sales decreased in 2004 compared to 2003.
Generally, a higher Lumber Market results in a decrease in our gross margin
because we attempt to price our products to earn a fixed profit per unit. (See
"Impact of the Lumber Market on our Operating Results.") Therefore, a more
meaningful analysis of profitability is a comparison of the change in gross
profit dollars compared to our change in units shipped. Our gross profit dollars
increased by almost 15% in 2004, while units shipped increased by 11%. Our
improved profitability was primarily due to the effect of rising lumber prices
in the second and third quarters on products we inventory and whose selling
prices are tied to the Lumber Market and improved profitability on sales to the
industrial market. In addition, many of our treating facilities began converting
to a new preservative in the third quarter of 2003 and experienced
inefficiencies in that year. These positive effects more than offset the
operating inefficiencies we experienced from the fire at our plant in Thorndale,
Ontario and poor results from one of our multi-family framing subsidiaries in
the western United States.

In the third quarter of 2004, one of our multi-family framing subsidiaries in
the western United States began two new projects which are expected to be
completed by the third quarter of 2005. Based on the nature of these projects,
calculating precise estimates is difficult except to determine we will not
recognize a loss. Accordingly, total estimated gross profit on these projects
range from breakeven to a gross profit of approximately $1.3 million. We have
used the low end of the range while utilizing the percentage of completion
method of accounting. If we had used the high end of the range, our gross
profits for 2004 would have been approximately $780,000 higher for the year.

Gross profit as a percentage of net sales decreased in 2003 compared to 2002 and
our gross profit dollars increased by almost 12%, while units shipped increased
by 13%. We believe this slight shortfall in gross profit dollars was due in part
to operating inefficiencies resulting from inclement first quarter weather and
the conversion to ACQ, which began in the third quarter of 2003.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling, general, and administrative expenses ("SG&A") as a percentage of net
sales decreased to 8.2% in 2004 compared to 9.4% in 2003, primarily due to the
impact of the Lumber Market on our selling prices. SG&A expenses increased 13.2%
in 2004, which compares unfavorably with our 11% increase in unit sales. This
increase was primarily due to an increase in bad debt expense, greater incentive
compensation resulting from growth in operating profits and a higher return on
investment, greater health care costs, and new compliance costs associated with
certain regulatory changes. The dollar increase in SG&A was also impacted by
business combinations and an increase in personnel to support growth in our
business.

SG&A as a percentage of net sales decreased to 9.4% in 2003 compared to 9.7% in
2002, primarily due to the impact of the Lumber Market on our selling prices.
Our 12.4% increase in SG&A for the year was slightly lower than our 13% increase
in units shipped. The dollar increase in SG&A was primarily due to business
combinations and new operations, combined with higher compensation costs
resulting from more personnel to support growth in our business, an increase in
health care and legal costs, and greater incentive compensation resulting from
growth in operating profits and a higher return on investment. These increases
were offset somewhat by a decline in bad debt expense as our trend of accounts
receivable write-offs improved.

GAIN ON INSURANCE SETTLEMENT

In April 2004, our plant in Thorndale, Ontario was destroyed by a fire. In
accordance with Financial Interpretation No. ("FIN") 30, Accounting for
Involuntary Conversions of Non-Monetary Assets to Monetary Assets, we have
written off the net book value of the destroyed inventory and property totaling
$3.6 million. The insured value of the property exceeded its net book value by
approximately $1.4 million, which was recorded as a gain on insurance
settlement. As of December 25, 2004, we have collected $2.0 million of insurance
proceeds. The remaining insurance receivable totals approximately $3.0 million
and is recorded in other current assets.

INTEREST, NET

Net interest costs were slightly higher in 2004 compared to 2003. The increase
was due to a slight increase in our average debt balance and an increase in
interest rates on our variable rate debt in 2004.

Net interest costs were higher in 2003 compared to 2002. The increase was due to
an average debt balance that was $13.6 million higher in 2003, combined with an
increase in our average borrowing rates as a result of issuing $55 million of
long-term unsecured notes payable in December 2002. The proceeds from the note
issuance were used to reduce amounts outstanding under our revolving credit
facility which bears interest at a lower rate.

NET GAIN ON SALE OF REAL ESTATE AND INTEREST IN SUBSIDIARY

We entered into the following transactions in 2004:

- - In January 2004, we sold our 60% ownership in Nascor Incorporated, a Calgary,
Alberta-based manufacturer of engineered wood components and licensor of
I-joist manufacturing technology. The total sales price we collected was $4.7
million and we recorded a pre-tax accounting loss of approximately $193,000.

- - In March 2004, we sold a plant in Bend, OR and recognized a pre-tax gain of
approximately $562,000 on the sale in the first quarter and an additional
$207,000 in the second quarter as we collected the note receivable issued to
us on the sale.

- - In June 2004, we sold a plant in Modesto, CA and recognized a pre-tax gain of
approximately $368,000.

- - In December 2004, we sold real estate in Elkhart, IN and Thornton, CA and
recognized a net pre-tax gain of $426,000.

In May 2002, we sold our corporate airplane and recognized a gain of
approximately $1.1 million on the sale, and entered into an operating lease for
a replacement airplane.

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 increased to 37.9% in 2004 compared 37.0% in 2003
primarily due to income taxes totaling approximately $0.3 million associated
with the sale of our interest in Nascor and an increase in state income taxes as
a result of certain tax credits received in 2003.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

While our effective tax rate was 37.0% in 2003 and 2002, we experienced the
following fluctuations between the periods:

- - Our state and local effective tax rate decreased in 2003 as a result of state
income tax credits received.

- - A reduction in the earnings of certain minority owned entities we consolidate.

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 25, 2004 (in thousands).

PAYMENTS DUE BY PERIOD
---------------------------------------------------
LESS THAN 1-3 3-5 AFTER 5
CONTRACTUAL OBLIGATION 1 YEAR YEARS YEARS YEARS TOTAL
- -----------------------------------------------------------------------------------------------------------------

Long-term debt.............................................. $22,033 $ 810 $125,991 $58,308 $207,142
Operating leases............................................ 10,672 13,549 5,167 318 29,706
Capital project purchase obligations........................ 3,097 3,097
------- ------- -------- ------- --------
Total....................................................... $35,802 $14,359 $131,158 $58,626 $239,945
======= ======= ======== ======= ========

As of December 25, 2004, we also had $34.6 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):

2004 2003 2002
--------------------------------

Cash from operating activities.............................. $ 50,234 $ 70,375 $ 20,796
Cash from investing activities.............................. (37,256) (33,999) (48,859)
Cash from financing activities.............................. (5,134) (36,480) 22,710
-------- -------- --------
Net change in cash and cash equivalents..................... 7,844 (104) (5,353)
Cash and cash equivalents, beginning of year................ 17,430 17,534 22,887
-------- -------- --------
Cash and cash equivalents, end of year...................... $ 25,274 $ 17,430 $ 17,534
======== ======== ========

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
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 operating cash flow. 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.

Seasonality has a significant impact on our working capital from March to August
which generally results 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 remained at 47 days (without the sale of receivables
program) in 2004 and 2003. Our accounts receivable cycle increased slightly in
2004, but was offset by a decrease in our days supply of inventory.

Cash flows from operating activities decreased by over $20 million in 2004
compared to 2003, despite an increase in net earnings and non-cash expenses
totaling approximately $13.0 million, due to factors affecting our investment in
working capital. The following factors caused a decline in our operating cash
flow:

- - Inventory increased at a higher rate from 2003 to 2004 than it did from 2002
to 2003. We carried higher than normal inventory levels at the end of 2002 due
to a combination of poor weather and opportunistic buying by our purchasing
offices due to the low Lumber Market at that time. Since a portion of our
seasonal investment in inventory occurred earlier than normal (at the end of
2002 instead of the first quarter of 2003), this had the effect of increasing
our operating cash flows in 2003.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

- - Accounts payable increased at a lower rate from 2003 to 2004 than it did from
2002 to 2003, primarily due to the timing of payments at the end of each year.
At the end of 2004, checks issued but not presented to our bank for payment
(classified as accounts payable in our balance sheet) totaled approximately
$17.2 million compared to $30.5 million at the end of 2003. In addition, our
payables cycle decreased slightly comparing the fourth quarter of 2004 with
the fourth quarter of 2003.

These factors were partially offset by the following:

- - Accounts receivable increased at a lower rate from 2003 to 2004 than it did
from 2002 to 2003, primarily due to slight timing differences in the receipt
of deposits at the end of each year. Our days sales outstanding comparing the
fourth quarter of 2004 with the fourth quarter of 2003 was flat.

- - Accrued liabilities increased at a higher rate from 2003 to 2004 than it did
from 2002 to 2003, primarily due to greater increases in accrued bonuses,
accrued wages, and billings in excess of cost and earnings associated with
framing services on construction contracts.

Cash used for investing activities increased by approximately $3 million in 2004
compared to 2003 as we spent approximately $10.1 on business acquisitions and
collected $4.7 million from the sale of our interest in Nascor Incorporated. Our
capital expenditures totaled $40.7 million in 2004, compared to $40.6 million in
2003, including approximately $6.5 million spent to rebuild our plant in
Thorndale, Ontario. As of December 25, 2004, we received approximately $2.0
million of insurance proceeds related to this fire and expect to receive an
additional $3.0 million in 2005.

Our cash flows used for financing activities decreased approximately $31 million
in 2004 compared to 2003. In 2003, our goal was to reduce our leverage and repay
obligations on our revolving credit facility that accumulated in 2002 as a
result of several business combinations and repurchases of our common stock.

On December 25, 2004, we had $29.1 million outstanding on our $250 million
revolving credit facility. The revolving credit facility supports letters of
credit totaling approximately $32.2 million on December 25, 2004. Financial
covenants on the unsecured revolving credit facility and unsecured notes include
a minimum net worth requirement, minimum interest 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 25, 2004.

ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS

See Note N to the Consolidated Financial Statements.

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 general liability, automobile, workers'
compensation, and certain employee health benefits. We are fully self-insured
for environmental liabilities. The general liability, automobile, workers'
compensation, and environmental liabilities are managed through a wholly-owned
insurance captive; the related assets and liabilities are included in the
consolidated financial statements as of December 25, 2004. Our accounting
policies with respect to the reserves are as follows:

- - General liability, automobile, and 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.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

- - 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 ON CONSTRUCTION CONTRACTS

Earnings on construction contracts are reflected in operations either by the
percentage-of-completion method or completed contract method depending on the
nature of the business at individual operations. Under the
percentage-of-completion method, revenues and related earnings on construction
contracts are measured by the relationships of actual costs incurred related to
the total estimated costs. 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. In addition, we test goodwill for impairment
by utilizing the discounted cash flow method.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note A to the Consolidated Financial Statements.

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
this report and certain economic and business factors which may be beyond our
control. Investors are cautioned that all forward-looking statements involve
risks and uncertainty.

"BUILDING IT FORWARD 2007"

In 2002, we announced our goals for growth and diversification entitled
"Building it Forward 2007." The goals call for us to:

- - Grow our sales by $1 billion while continuing to diversify our markets,
primarily by growing our market share of products we manufacture for the
industrial and site-built construction markets.

- - Improve our cash cycle by 10%.

- - Earn a return on capital exceeding our cost of capital.

We believe that we must complete several business acquisitions in order to
achieve these goals and expect that acquisitions may comprise up to 50% of our
targeted growth.

In line with the goals for growth stated above, we have targeted unit sales
growth of 7% to 12% and net earnings growth of 10% to 15% for 2005. Our net
earnings growth target adjusts results for 2004 to exclude the gain on insurance
settlement and related income taxes, and excludes the impact of adopting FASB
Statement No. 123, as revised, which we are required to do beginning in the
third quarter of 2005.

DIY/RETAIL MARKET

The Home Improvement Research Institute forecasts an increase in home
improvement product sales of 3.5% in 2005. A slower pace of growth is forecasted
primarily as a result of an expectation of higher interest rates, partially
offset by a higher level of home ownership and an increase in the age of housing
stock, which both lead to increased remodeling expenditures.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

In 2005, we expect to feel continued downward pressure on our unit sales
primarily due to our sales strategy with respect to our largest customer. On a
long-term basis, it is our goal to achieve modest sales growth by:

- - Maintaining our market share on sales 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 a 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.

- - Developing new value-added products and services for this market.

- - Adding capacity through strategic business acquisitions.

SITE-BUILT CONSTRUCTION MARKET

The National Association of Home Builders forecasts a 3.4% decline in housing
starts resulting from an anticipated increase in long-term interest rates. The
effect of rising interest rates may be mitigated somewhat by favorable
demographic trends and improving economic conditions.

In 2005, we anticipate strong growth in our sales to the site-built construction
market primarily as a result of business acquisitions and new plants completed
in 2004 that will be owned for a full year in 2005 and modest organic growth out
of existing facilities. We anticipate that this growth will be offset somewhat
by a decline in sales from certain framing operations in the western United
States.

On a long-term basis, we believe the sale of engineered wood components will
continue to grow because of the benefits these products provide builders over
traditional carpentry methods employed on the job site, including cost
advantages through more efficient labor, and consolidation toward large
production-oriented builders, which tend to prefer the use of engineered
products and who desire suppliers with a national presence.

We expect that business acquisitions will play a major role in our future growth
in this market. In addition, we believe the trend whereby customers prefer to
purchase a combination of components and framing services will continue.
Therefore, our acquisition strategy includes targeted markets for framing
operations.

MANUFACTURED HOUSING MARKET

The Manufactured Housing Institute forecasts a 6.0% increase in shipments of HUD
code homes in 2005 as a result of continued improvement in lending conditions,
consumer confidence in new installation standards, and an increase in demand for
multi-section homes. It is our goal to maintain our current market share of
trusses produced for this market, which is currently estimated at 70%.

Sales of modular homes are expected to increase 10% in 2005 as a result of more
developers adopting the controlled building environment of modular construction
as a method of cost control. In addition, these consumers are expected to
experience more favorable lending rates compared to HUD code homes. We believe
we will maintain our current market share of trusses produced for this market as
a result of new products we have recently developed that enable modular homes to
more closely resemble site-built construction and our existing business
relationships with traditional HUD code builders which now produce over 30% of
the modular homes in the United States.

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 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. On a long-term basis, we plan to evaluate strategic acquisition
opportunities.

GROSS PROFIT

We believe the following factors may impact our gross profits in the future:

- - 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, including our goal of increasing our market
share of products we manufacture for the industrial and site-built
construction markets. However, achievement of this goal is dependent, in part,
upon certain factors that are beyond our control.

UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

- - Our ability to increase sales and maintain gross margins on products sold to
our largest customers. We believe our level of service, geographic diversity,
and quality of products provide an added value to our customers. If our
customers are unwilling to pay for the additional services, our sales and
gross margins may be reduced.

- - Fluctuations in the relative level of the Lumber Market and the trend in the
market price of lumber impact our gross margins. (See "Impact of the Lumber
Market on Our Operating Results.")

- - Improved results from framing operations in the western United States.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

SG&A costs have increased at a rate greater than our unit sales in recent years
due, in part, to acquisitions of engineered wood component manufacturers, which
have extensive engineering and design costs, and our growth in sales to the
industrial market. SG&A costs as a percentage of sales may continue to increase
in the future as sales of engineered wood components and specialty wood
packaging become a greater percentage of our total business. However, we strive
to achieve economies of scale in other administrative departments as sales
growth objectives are met.

LIQUIDITY AND CAPITAL RESOURCES

Our cash cycle will continue to be impacted in the future by our growth in sales
to the site-built construction and industrial markets. Sales to these markets
requires 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 approximately $41 million on capital expenditures in
2005 and incur depreciation and amortization of approximately $33 million.
Besides "maintenance" capital expenditures totaling approximately $31 million,
we plan to spend an additional $10 million to expand the business. On December
25, 2004, we had outstanding purchase commitments on capital projects of
approximately $3.1 million.

We have no present intention to change our dividend policy, which is currently
$.050 per share paid semi-annually.

Our Board of Directors has approved a share repurchase program under which we
have authorization to buy back approximately 1.5 million shares as of December
25, 2004. 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.

We are obligated to pay amounts due on long-term debt totaling approximately
$22.0 million in 2005.

We have a $250 million unsecured revolving credit facility used to support
certain outstanding letters of credit and fund seasonal working capital
requirements and growth. We believe our peak seasonal working capital
requirements may consume up to $110 million of this availability through June of
2005 and then decrease for the balance of the year in line with historical
trends.

We plan to finance our capital requirements for the year through operating cash
flows, the use of our sale of receivables program, and use of our revolving
credit facility.

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 25, 2004. 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 25, 2004, 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.

Our independent registered public accounting firm, Ernst & Young LLP, has issued
an audit report on management's assessment of our internal control over
financial reporting. Their report immediately follows our report.

Universal Forest Products, Inc.
February 25, 2005

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 management's assessment, included in the accompanying
Management's Annual Report on Internal Control Over Financial Reporting, that
Universal Forest Products, Inc. and subsidiaries maintained effective internal
control over financial reporting as of December 25, 2004, 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.
Our responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of 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, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, 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, management's assessment that Universal Forest Products, Inc. and
subsidiaries maintained effective internal control over financial reporting as
of December 25, 2004, is fairly stated, in all material respects, based on the
COSO criteria. Also, in our opinion, Universal Forest Products, Inc. and
subsidiaries maintained, in all material respects, effective internal control
over financial reporting as of December 25, 2004, 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 25, 2004 and
December 27, 2003, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the three years in the period
ended December 25, 2004 of Universal Forest Products, Inc. and subsidiaries and
our report dated February 25, 2005 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG
Grand Rapids, Michigan
February 25, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 25, 2004 and December 27, 2003,
and the related consolidated statements of earnings, shareholders' equity, and
cash flows for each of the three years in the period ended December 25, 2004.
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 25, 2004 and December 27, 2003, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 25, 2004, in conformity with U.S.
generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Universal
Forest Products, Inc. and subsidiaries' internal control over financial
reporting as of December 25, 2004, 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 25, 2005
expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG
Grand Rapids, Michigan
February 25, 2005

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

DECEMBER 25, DECEMBER 27,
2004 2003
---------------------------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 25,274 $ 17,430
Accounts receivable, net.................................. 151,811 137,660
Inventories:
Raw materials........................................... 116,104 83,064
Finished goods.......................................... 96,817 86,497
--------- ---------
212,921 169,561
Other current assets...................................... 9,515 4,324
Prepaid income taxes...................................... 3,501 3,290
Deferred income taxes..................................... 3,461 1,832
--------- ---------
TOTAL CURRENT ASSETS.................................... 406,483 334,097
OTHER ASSETS................................................ 7,952 6,811
GOODWILL.................................................... 123,845 125,028
OTHER INTANGIBLE ASSETS, NET................................ 7,807 6,791
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements..................................... 52,648 51,942
Building and improvements................................. 123,004 120,001
Machinery, equipment and office furniture................. 183,055 177,525
Construction in progress.................................. 21,925 11,900
--------- ---------
380,632 361,368
Less accumulated depreciation and amortization............ (164,359) (147,164)
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, NET...................... 216,273 214,204
--------- ---------
TOTAL ASSETS................................................ $ 762,360 $ 686,931
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt........................................... $ 1,726
Accounts payable.......................................... $ 87,399 81,687
Accrued liabilities:
Compensation and benefits............................... 58,151 47,150
Other................................................... 16,282 6,723
Current portion of long-term debt and capital lease
obligations............................................. 22,033 6,411
--------- ---------
TOTAL CURRENT LIABILITIES............................... 183,865 143,697
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current
portion................................................... 185,109 205,049
DEFERRED INCOME TAXES....................................... 18,476 15,984
MINORITY INTEREST........................................... 8,265 7,780
OTHER LIABILITIES........................................... 9,876 9,317
--------- ---------
TOTAL LIABILITIES....................................... 405,591 381,827
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 18,002,255 and 17,813,564........ 18,002 17,814
Additional paid-in capital................................ 89,269 85,189
Deferred stock compensation............................... 3,423 2,447
Deferred stock compensation rabbi trust................... (1,331) (615)
Retained earnings......................................... 247,427 200,745
Accumulated other comprehensive earnings.................. 1,525 1,396
--------- ---------
358,315 306,976
Employee stock notes receivable........................... (1,546) (1,872)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY.............................. 356,769 305,104
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $ 762,360 $ 686,931
========= =========

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

YEAR ENDED
------------------------------------------
DECEMBER 25, DECEMBER 27, DECEMBER 28,
2004 2003 2002
------------------------------------------

NET SALES................................................... $2,453,281 $1,898,830 $1,639,899
COST OF GOODS SOLD.......................................... 2,157,028 1,640,844 1,409,489
---------- ---------- ----------
GROSS PROFIT................................................ 296,253 257,986 230,410
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 201,335 177,824 158,299
GAIN ON INSURANCE SETTLEMENT................................ (1,391)
---------- ---------- ----------
EARNINGS FROM OPERATIONS.................................... 96,309 80,162 72,111
OTHER EXPENSE (INCOME):
Interest expense.......................................... 14,904 14,589 11,375
Interest income........................................... (284) (219) (297)
Net gain on sale of real estate and interest in
subsidiary.............................................. (1,370) (1,082)
---------- ---------- ----------
13,250 14,370 9,996
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST.......... 83,059 65,792 62,115
INCOME TAXES................................................ 31,462 24,325 22,983
---------- ---------- ----------
EARNINGS BEFORE MINORITY INTEREST........................... 51,597 41,467 39,132
MINORITY INTEREST........................................... (2,994) (1,348) (2,495)
---------- ---------- ----------
NET EARNINGS................................................ $ 48,603 $ 40,119 $ 36,637
========== ========== ==========
EARNINGS PER SHARE -- BASIC................................. $ 2.70 $ 2.26 $ 2.04
EARNINGS PER SHARE -- DILUTED............................... $ 2.59 $ 2.18 $ 1.97
WEIGHTED AVERAGE SHARES OUTSTANDING......................... 18,032 17,761 17,922
WEIGHTED AVERAGE SHARES OUTSTANDING WITH COMMON STOCK
EQUIVALENTS............................................... 18,771 18,379 18,619

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands, except share and per share data)

DEFERRED ACCUMULATED
ADDITIONAL DEFERRED COMPENSATION OTHER EMPLOYEES
COMMON PAID-IN STOCK RABBI RETAINED COMPREHENSIVE STOCK NOTES
STOCK CAPITAL COMPENSATION TRUST EARNINGS EARNINGS RECEIVABLE
-------------------------------------------------------------------------------------------

BALANCE AT DECEMBER 29, 2001.......... $17,788 $80,994 $1,554 $ 0 $132,677 $ 558 $(1,155)
Comprehensive earnings:
Net earnings........................ 36,637
Foreign currency translation
adjustment........................ (259)
Total comprehensive earnings........
Cash dividends -- $.090 per share..... (1,605)
Issuance of 133,125 shares under
employee stock plans................ 133 710
Issuance of 2,497 shares under stock
grant programs...................... 3 51
Issuance of 5,380 shares under
deferred compensation plan.......... 5 74
Repurchase of 199,435 shares.......... (199) (3,488)
Tax benefits from non-qualified stock
options exercised................... 22
Deferred stock compensation........... 250
Issuance of employee stock notes
receivable.......................... 12 288 (300)
Payments received on employee stock
notes receivable.................... 54
------- ------- ------ ------- -------- ------ -------
BALANCE AT DECEMBER 28, 2002.......... $17,742 $82,139 $1,804 $ 0 $164,221 $ 299 $(1,401)
Comprehensive earnings:
Net earnings........................ 40,119
Foreign currency translation
adjustment........................ 1,097
Total comprehensive earnings........
Cash dividends -- $.095 per share..... (1,689)
Issuance of 89,753 shares under
employee stock plans................ 90 1,191
Issuance of 10,153 shares under stock
grant programs...................... 10 174
Issuance of 37,678 shares under
deferred compensation plan.......... 38 609 615 (615)
Repurchase of 123,234 shares.......... (123) (1,906)
Tax benefits from non-qualified stock
options exercised................... 246
Deferred stock compensation........... 28
Issuance of employee stock notes
receivable.......................... 57 830 (887)
Payments received on employee stock
notes receivable.................... 416
------- ------- ------ ------- -------- ------ -------
BALANCE AT DECEMBER 27, 2003.......... $17,814 $85,189 $2,447 $ (615) $200,745 $1,396 $(1,872)
Comprehensive earnings:
Net earnings........................ 48,603
Foreign currency translation
adjustment........................ 129
Total comprehensive earnings........
Cash dividends -- $.10 per share...... (1,796)
Issuance of 165,982 shares under
employee stock plans................ 165 2,695
Issuance of 4,036 shares under stock
grant programs...................... 4 127
Issuance of 22,528 shares under
deferred compensation plan.......... 23 695 716 (716)
Repurchase of 4,050 shares............ (4) (125)
Tax benefits from non-qualified stock
options exercised................... 557
Deferred stock compensation........... 260
Issuance of employee stock notes
receivable.......................... 6 (6)
Payments received on employee stock
notes receivable.................... 332
------- ------- ------ ------- -------- ------ -------
BALANCE AT DECEMBER 25, 2004.......... $18,002 $89,269 $3,423 $(1,331) $247,427 $1,525 $(1,546)

TOTAL
--------

BALANCE AT DECEMBER 29, 2001.......... $232,416
Comprehensive earnings:
Net earnings........................
Foreign currency translation
adjustment........................
Total comprehensive earnings........ 36,378
Cash dividends -- $.090 per share..... (1,605)
Issuance of 133,125 shares under
employee stock plans................ 843
Issuance of 2,497 shares under stock
grant programs...................... 54
Issuance of 5,380 shares under
deferred compensation plan.......... 79
Repurchase of 199,435 shares.......... (3,687)
Tax benefits from non-qualified stock
options exercised................... 22
Deferred stock compensation........... 250
Issuance of employee stock notes
receivable.......................... 0
Payments received on employee stock
notes receivable.................... 54
--------
BALANCE AT DECEMBER 28, 2002.......... $264,804
Comprehensive earnings:
Net earnings........................
Foreign currency translation
adjustment........................
Total comprehensive earnings........ 41,216
Cash dividends -- $.095 per share..... (1,689)
Issuance of 89,753 shares under
employee stock plans................ 1,281
Issuance of 10,153 shares under stock
grant programs...................... 184
Issuance of 37,678 shares under
deferred compensation plan.......... 647
Repurchase of 123,234 shares.......... (2,029)
Tax benefits from non-qualified stock
options exercised................... 246
Deferred stock compensation........... 28
Issuance of employee stock notes
receivable.......................... 0
Payments received on employee stock
notes receivable.................... 416
--------
BALANCE AT DECEMBER 27, 2003.......... $305,104
Comprehensive earnings:
Net earnings........................
Foreign currency translation
adjustment........................
Total comprehensive earnings........ 48,732
Cash dividends -- $.10 per share...... (1,796)
Issuance of 165,982 shares under
employee stock plans................ 2,860
Issuance of 4,036 shares under stock
grant programs...................... 131
Issuance of 22,528 shares under
deferred compensation plan.......... 718
Repurchase of 4,050 shares............ (129)
Tax benefits from non-qualified stock
options exercised................... 557
Deferred stock compensation........... 260
Issuance of employee stock notes
receivable.......................... 0
Payments received on employee stock
notes receivable.................... 332
--------
BALANCE AT DECEMBER 25, 2004.......... $356,769

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

YEAR ENDED
------------------------------------------
DECEMBER 25, DECEMBER 27, DECEMBER 28,
2004 2003 2002
------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.............................................. $ 48,603 $ 40,119 $ 36,637
Adjustments to reconcile net earnings to net cash from
operating activities:
Depreciation............................................ 28,453 25,638 23,371
Amortization of intangibles............................. 2,383 1,588 1,003
Deferred income taxes................................... 790 1,746 3,102
Minority interest....................................... 2,994 1,348 2,495
Loss on sale of interest in subsidiary.................. 193
Gain on insurance settlement............................ (1,391)
Net (gain)/loss on sale or impairment of property, plant
and equipment.......................................... (710) 1,050 702
Changes in:
Accounts receivable..................................... (16,107) (32,074) (16,489)
Inventories............................................. (42,817) (3,555) (40,780)
Accounts payable........................................ 7,371 23,476 9,638
Accrued liabilities and other........................... 20,472 11,039 1,117
-------- -------- --------
NET CASH FROM OPERATING ACTIVITIES.................. 50,234 70,375 20,796
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment................. (40,722) (40,578) (31,295)
Purchase of licensing agreements.......................... (150) (2,000)
Acquisitions, net of cash received........................ (10,075) (787) (17,540)
Proceeds from sale of interest in subsidiary.............. 4,679
Proceeds from sale of property, plant, and equipment...... 5,226 6,221 2,862
Advances on notes receivable.............................. (308)
Collection of notes receivable............................ 2,560 461 965
Restricted cash equivalents............................... 1,383 (1,383)
Insurance proceeds........................................ 2,000
Other assets, net......................................... (616) (549) (468)
-------- -------- --------
NET CASH FROM INVESTING ACTIVITIES.................. (37,256) (33,999) (48,859)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings/(repayments) of short-term debt and
revolving credit facilities............................. 1,223 (27,070) 14,286
Proceeds from issuance of long-term debt.................. 58,700
Repayment of long-term debt............................... (6,392) (6,140) (8,482)
Proceeds from issuance of common stock.................... 2,860 1,281 843
Distributions to minority shareholder..................... (1,123) (833) (1,345)
Dividends paid to shareholders............................ (1,796) (1,689) (1,605)
Repurchase of common stock and temporary equity........... (129) (2,029) (39,687)
Other, net................................................ 223
-------- -------- --------
NET CASH FROM FINANCING ACTIVITIES.................. (5,134) (36,480) 22,710
-------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS..................... 7,844 (104) (5,353)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 17,430 17,534 22,887
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 25,274 $ 17,430 $ 17,534
======== ======== ========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest................................................ $ 15,087 $ 14,651 $ 11,388
Income taxes............................................ 29,181 19,884 22,827
NON-CASH OPERATING ACTIVITIES:
Non-compete agreements with Chairman of the Board in
exchange for future payments............................ 856
Note receivable in exchange for property, plant and
equipment............................................... 1,455
NON-CASH INVESTING ACTIVITIES:
Note receivable exchanged for management fees to former
subsidiary.............................................. 520
Property, plant and equipment acquired through capital
leases.................................................. 2,110
Stock acquired through employees' stock notes
receivable.............................................. 6 887 300
NON-CASH FINANCING ACTIVITIES:
Note payable exchanged for non-compete.................... 2,069

See notes to consolidated financial statements.

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

OPERATIONS

We engineer, manufacture, treat, distribute, and install lumber, composite wood,
plastic, and other building products for the do-it-yourself/retail
("DIY/retail"), site-built construction, manufactured housing, and industrial
markets. Our principal products include preservative-treated wood,
remanufactured lumber, lattice, fence panels, deck components, specialty
packaging, engineered trusses, wall panels, and other building products.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include our accounts and those of our
wholly-owned and majority-owned subsidiaries and partnerships. In addition, we
consolidate 50% owned entities over which we exercise control. Intercompany
transactions and balances have been eliminated. The equity method of accounting
is used for less than 50% owned affiliates over which we have significant
influence.

INVESTMENT IN AFFILIATE

On December 18, 1998, one of our subsidiaries acquired a 45% interest in Pino
Exporta, and renamed it to Pinelli Universal S. de R.L. de C.V. ("Pinelli"), a
manufacturer of moldings and millwork products. Pinelli operates out of one
facility in Durango, Durango, Mexico. We exchanged $3.0 million for our initial
ownership interest in Pinelli, and accounted for our investment utilizing the
equity method of accounting. In addition, we retained an option to acquire an
additional 5% interest in Pinelli for $1.0 million. This option was extended and
exercised on January 15, 2002. As a result of this transaction, we obtained
additional rights of control and thus began consolidating the results of Pinelli
in the 2002 consolidated financial statements. (See Note B.)

MINORITY INTEREST IN SUBSIDIARIES

Minority interest in results of operations of consolidated subsidiaries
represents the minority shareholders' share of the income or loss of various
consolidated subsidiaries. The minority interest reflects the original
investment by these minority shareholders combined with their proportional share
of the earnings or losses of these subsidiaries, net of distributions paid.

FISCAL YEAR

Our fiscal year is a 52 or 53 week period, ending on the last Saturday of
December. Unless otherwise stated, references to 2004, 2003, and 2002 relate to
the fiscal years ended December 25, 2004, December 27, 2003, and December 28,
2002, respectively. Fiscal years 2004, 2003, and 2002 were each comprised of 52
weeks.

FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

The estimated fair values of financial instruments have been determined in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 107,
Disclosures about Fair Value of Financial Instruments. Significant differences
in fair market values and recorded values are disclosed in Note D. The estimated
fair value amounts have been determined using available market information and
appropriate valuation methodologies. However, considerable judgment is required
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that we could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

The fair value estimates presented herein are based on pertinent information
available to management as of December 25, 2004. Although we are not aware of
any factors that would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes of these
financial statements since that date, and current estimates of fair value may
differ significantly from the amounts presented herein.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and highly-liquid investments
purchased with an original maturity of three months or less. Cash equivalents
totaled approximately $15.4 million and $9.6 million as of December 25, 2004 and
December 27, 2003, respectively.

As a result of our cash management system, checks issued but not presented to
our bank for payment create negative cash balances. These negative balances are
included in accounts payable and accrued liabilities and totaled $19.0 million
and $30.5 million as of December 25, 2004 and December 27, 2003, respectively.

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ACCOUNTS RECEIVABLE

We perform periodic credit evaluations of our customers and generally do not
require collateral. Accounts receivable are due under a range of terms we offer
to our customers. Discounts are offered as an incentive for early payment.

INVENTORIES

Inventories are stated at the lower of average cost or market. The cost of
inventories includes raw materials, direct labor, and manufacturing overhead.
Cost is determined on a first-in, first-out (FIFO) basis. Raw materials consist
primarily of unfinished wood products expected to be manufactured or treated
prior to sale, while finished goods represent various manufactured and treated
wood products ready for sale.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost. Expenditures for renewals and
betterments are capitalized, and maintenance and repairs are expensed as
incurred. Amortization of assets held under capital leases is included in
depreciation and amortized over the shorter of the estimated useful life of the
asset or the lease term. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the assets as follows:

Buildings and improvements.................................. 15 to 31.5 years
Land improvements........................................... 5 to 15 years
Machinery, equipment and office furniture................... 3 to 10 years

FOREIGN CURRENCY TRANSLATION

Our foreign operations use the local currency as their functional currency.
Accordingly, assets and liabilities are translated at exchange rates as of the
balance sheet date and revenues and expenses are translated using weighted
average rates, with translation adjustments included as a separate component of
shareholders' equity. The net realized gain or loss on foreign currency
transactions were not material in any year presented.

SELF-INSURANCE RESERVES

We are primarily self-insured for certain employee health benefits, and have
self-funded retentions for general liability, automobile liability, and workers'
compensation. We are fully self-insured for environmental liabilities. The
general liability, automobile liability, workers' compensation, and
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 25, 2004. Through the captive we are
responsible for general liability claims up to $2 million per occurrence and $4
million in aggregate; for automobile claims up to $1 million per occurrence; and
for workers' compensation claims up to $1 million per accident or disease. We
have purchased excess liability over our general liability, automobile
liability, workers' compensation, and employer's liability up to $100 million
per occurrence and in aggregate. Our policy is to accrue amounts equal to
actuarially determined or internally computed liabilities. The actuarial and
internal valuations are based on historical information along with certain
assumptions about future events. Changes in assumptions for such matters as
legal actions, medical cost trends, and changes in claims experience could cause
these estimates to change in the future.

INCOME TAXES

Deferred income tax assets and liabilities are computed for differences between
the financial statement and tax basis of assets and liabilities that will result
in taxable or deductible amounts in the future. Such deferred income tax asset
and liability computations are based on enacted tax laws and rates. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.

REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE ALLOWANCES

Revenue is recognized at the time the product is shipped to the customer.
Generally, title passes at the time of shipment. In certain circumstances, the
customer takes title when the shipment arrives at the destination. However, our
shipping process is typically completed the same day.

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

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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.

The following table presents the balances of percentage-of-completion accounts
on December 25, 2004 and December 27, 2003 which are included in other current
assets and other current liabilities, respectively (in thousands):

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

Cost and Earnings in Excess of Billings..................... $2,803 $2,174
Billings in Excess of Cost and Earnings..................... 2,517 885

We base our allowances related to receivables on historical credit and
collections experience, and the specific identification of other potential
problems, including the economic climate. Actual collections can differ,
requiring adjustments to the allowances. Individual accounts receivable balances
are evaluated on a monthly basis, and those balances considered to be
uncollectible are charged to the allowance. Collections of amounts previously
written off are recorded as an increase to the allowance.

The following table presents the activity in our accounts receivable allowances
(in thousands):

ADDITIONS UNCOLLECTIBLE RECOVERY OF
BALANCE AT CHARGED TO ACCOUNTS AMOUNTS BALANCE
BEGINNING COSTS AND WRITTEN OFF PREVIOUSLY AT END OF
OF PERIOD EXPENSES (NET)(1) WRITTEN OFF PERIOD
-----------------------------------------------------------------

Year Ended December 25, 2004:
Allowance for possible losses on accounts receivable...... $1,891 $24,126 ($23,796) $722 $2,943
Year Ended December 27, 2003:
Allowance for possible losses on accounts receivable...... 2,427 17,817 (18,694) 341 1,891
Year Ended December 28, 2002:
Allowance for possible losses on accounts receivable...... 1,803 17,500 (16,981) 105 2,427

- -------------------------
(1) Includes effects of foreign currency translation.

We record estimated sales returns, discounts, and other applicable adjustments
as a reduction of net sales in the same period revenue is recognized.

SHIPPING AND HANDLING OF PRODUCT

Shipping and handling costs that are charged to and reimbursed by the customer
are recognized as revenue. Costs incurred related to the shipment and handling
of products are classified in cost of goods sold.

EARNINGS PER SHARE

Basic earnings per share ("EPS") is calculated based on the weighted average
number of common shares outstanding during the periods presented. Diluted EPS is
calculated based on the weighted average number of common and common equivalent
shares outstanding during the periods presented, giving effect to stock options
granted (see Note I) utilizing the "treasury stock" method.

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A reconciliation of the changes in the numerator and the denominator from the
calculation of basic EPS to the calculation of diluted EPS follows (in
thousands, except per share data):

2004 2003 2002
------------------------------------ ------------------------------------ -----------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE INCOME
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR)
-----------------------------------------------------------------------------------------

NET EARNINGS.............. $48,603 $40,119 $36,637
EPS -- BASIC
Income available to common
stockholders............ 48,603 18,032 $2.70 40,119 17,761 $2.26 36,637
===== =====
EFFECT OF DILUTIVE
SECURITIES
Options................... 739 618
------ ------
EPS -- DILUTED
Income available to common
stockholders and assumed
options exercised....... $48,603 18,771 $2.59 $40,119 18,379 $2.18 $36,637
======= ====== ===== ======= ====== ===== =======

2002
----------------------
PER
SHARES SHARE
(DENOMINATOR) AMOUNT
----------------------

NET EARNINGS..............
EPS -- BASIC
Income available to common
stockholders............ 17,922 $2.04
=====
EFFECT OF DILUTIVE
SECURITIES
Options................... 697
------
EPS -- DILUTED
Income available to common
stockholders and assumed
options exercised....... 18,619 $1.97
====== =====

Options to purchase 15,000 shares of common stock at an exercise price of $36.01
were outstanding as of December 25, 2004, but were not included in the
computation of diluted EPS because the options' exercise prices were greater
than the average market price of the common stock during the period and,
therefore, would be antidilutive.

Options to purchase 295,000 shares of common stock at exercise prices ranging
from $22.88 to $36.01 were outstanding as of December 27, 2003, but were not
included in the computation of diluted EPS because the options' exercise prices
were greater than the average market price of the common stock during the period
and, therefore, would be antidilutive.

Options to purchase 749,771 shares of common stock at exercise prices ranging
from $21.84 to $36.01 were outstanding as of December 28, 2002, but were not
included in the computation of diluted EPS because the options' exercise prices
were greater than the average market price of the common stock during the period
and, therefore, would be antidilutive.

LONG-LIVED ASSETS

In accordance with SFAS No. 144, Accounting for the Impairment and Disposal of
Long-Lived Assets, we evaluate the recoverability of our long-lived assets by
determining whether unamortized balances could be recovered through undiscounted
future operating cash flows over the remaining lives of the assets. If the sum
of the expected future cash flows was less than the carrying value of the
assets, an impairment loss would be recognized for the excess of the carrying
value over the fair value. The estimated fair value is determined by discounting
the expected future cash flows at a rate that is required for a similar
investment with like risks.

STOCK-BASED COMPENSATION

As permitted under SFAS No. 123, Accounting for Stock-Based Compensation, ("SFAS
123"), we continue to apply the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, which
recognizes compensation expense under the intrinsic value method. Had

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

compensation cost for the stock options granted and stock purchased in 2004,
2003, and 2002 been determined under the fair value based method defined in SFAS
123, our net earnings and earnings per share would have been reduced to the
following pro forma amounts (in thousands, except per share data):

2004 2003 2002
---------------------------

Net Earnings:
As Reported............................................... $48,603 $40,119 $36,637
Deduct: Compensation expense -- fair value method......... (1,866) (1,743) (1,571)
------- ------- -------
Pro Forma................................................. $46,737 $38,376 $35,066
======= ======= =======
EPS -- Basic:
As Reported............................................... $ 2.70 $ 2.26 $ 2.04
Pro Forma................................................. $ 2.59 $ 2.16 $ 1.96
EPS -- Diluted:
As Reported............................................... $ 2.59 $ 2.18 $ 1.97
Pro Forma................................................. $ 2.51 $ 2.13 $ 1.93

The fair value of each option granted in 2004, 2003, and 2002 is estimated on
the date of the grant using the Black-Scholes option pricing model with the
following weighted average assumptions.

2004 2003 2002
---------------------------------

Risk Free Interest Rate..................................... 4.6% 4.6% 4.6%
Expected Life............................................... 6.0 years 6.5 years 5.0 years
Expected Volatility......................................... 27.42% 28.25% 27.52%
Expected Dividend Yield..................................... 0.40% 0.40% 0.40%

USE OF ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. We believe our estimates to be reasonable; however, actual
results could differ from these estimates.

RECLASSIFICATIONS

Certain reclassifications have been made in the 2003 and 2002 consolidated
financial statements to conform to the classifications used in 2004.

RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2003, the Financial Accounting Standards Board ("FASB") issued
Financial Interpretation No. 46, Consolidation of Variable Interest Entities, as
revised December 2003 ("FIN 46(R)"). This new rule requires that companies
consolidate a variable interest entity if the company is entitled to receive a
majority of the risk of loss from the variable interest entity's activities, or
is entitled to receive a majority of the entity's residual returns, or both. We
have no variable interest entities where we are the primary beneficiary as
defined by FIN 46(R), thus the implementation had no effect on our consolidated
financial statements.

In December 2004, the FASB issued a revision of SFAS No. 123, Share-Based
Payment ("SFAS 123(R)"), which supercedes APB Opinion No. 25, Accounting for
Stock Issued to Employees. This statement focuses primarily on transactions in
which an entity obtains employee services in exchange for share-based payments.
Under SFAS 123(R), a public entity generally is required to measure the cost of
employee services received in exchange for an award of equity instruments based
on the grant-date fair value of the award, with such cost recognized over the
applicable vesting period. In addition, SFAS 123(R) requires an entity to
provide certain disclosures in order to assist in understanding the nature of
share-based payment transactions and the effects of those transactions on the
financial statements. The provisions of SFAS 123(R) are required to be applied
as of the beginning of the first interim or annual reporting period that begins
after June 15, 2005. As such, we are required to adopt the provisions of SFAS
123(R) at the beginning of the third quarter of fiscal 2005. While we currently
disclose the pro-forma earnings effects of our stock-based awards, we are
currently evaluating the impact the implementation guidance and revisions
included in SFAS 123(R) will have on our consolidated financial statements.

FASB Staff Position ("FSP") No. 109-2, Accounting and Disclosure Guidance for
the Foreign Earnings Repatriation Provision within the American Jobs Creation
Act of 2004 ("FSP 109-2"), provides guidance under FASB Statement No. 109,
Accounting for Income Taxes, with respect to recording the potential impact of

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

the repatriation provisions of the American Jobs Creation Act of 2004 (the "Jobs
Act") on enterprises' income tax expense and deferred tax liability. The Jobs
Act was enacted on October 22, 2004. FSP 109-2 states than an enterprise is
allowed time beyond the financial reporting period of enactment to evaluate the
effect of the Jobs Act on its plan for reinvestment or repatriation of foreign
earnings for the purposes of applying FASB Statement No. 109. We have not yet
completed evaluating the impact of the repatriation provisions. Accordingly, as
provided for in FSP 109-2 we have not adjusted our tax expense or deferred tax
liability to reflect the repatriation provisions of the Jobs Act.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs ("SFAS 151"),
which amends Accounting Research Bulletin ("ARB") No. 43, chapter 4, Inventory
Pricing. This statement clarifies that abnormal amounts of idle facility
expense, freight, handling costs and wasted materials (spoilage) should be
recognized as current-period charges and requires the allocation of fixed
production overhead to inventory based on the normal capacity of the production
facilities. The provisions of SFAS 151 are required to be applied for fiscal
years beginning after June 15, 2005. As such, we are required to adopt the
provisions of SFAS 151 at the beginning of our fiscal year beginning January 1,
2006. We do not expect that the implementation of SFAS 151 will have a material
effect on our consolidated financial statements.

B. BUSINESS COMBINATIONS AND ASSET PURCHASES

All of the transactions mentioned below are considered business combinations
under the provision of SFAS No. 141, Business Combinations and Emerging Issues
Task Force Issue 98-3, Determining Whether a Nonmonetary Transaction Involves
Receipt of Productive Assets or of a Business ("EITF 98-3"), except for the
purchase of the treating plants from Quality Wood Treating Co., Inc. ("Quality")
on August 26, 2003 and the purchase of assets from Inno-Tech Plastics, Inc.
("Inno-Tech") on April 10, 2002. Each business combination has been accounted
for as a purchase. Accordingly, in each instance, the purchase price was
allocated to the assets acquired, liabilities assumed, and identifiable
intangible assets as applicable based on their fair market values at the date of
acquisition. Any excess of the purchase price over the fair value of the
acquired assets, including identifiable intangible assets, and assumed
liabilities was recorded as goodwill in each transaction. The results of
operations of each business combination is included in our consolidated
financial statements since the date it was acquired.

On April 2, 2004, one of our subsidiaries acquired a 50% interest in Shawnlee
Construction, LLC ("Shawnlee"), which provides framing services for multi-family
construction, and is located in Plainville, MA. The purchase price was
approximately $4.8 million, allocating $1.2 million to tangible assets and
purchased intangibles, $1.1 million to a non-compete agreement, $1.3 million to
customer relationship related intangibles, $0.2 million to a backlog, and $1.0
million to goodwill. Shawnlee had net sales in fiscal 2003 totaling
approximately $20 million. We have consolidated this entity, including a
respective minority interest, because we exercise control.

On March 15, 2004, one of our subsidiaries acquired the assets of Slaughter
Industries, owned by International Paper Company ("Slaughter"), a facility which
supplies the site-built construction market in Dallas, TX. The purchase price
was approximately $3.9 million, which was allocated to the fair value of
tangible net assets. Slaughter had net sales in fiscal 2003 totaling
approximately $48 million.

On January 30, 2004, one of our subsidiaries acquired the assets of Midwest
Building Systems, Inc. ("Midwest"), a facility which serves the site-built
construction market in Indianapolis, IN. The purchase price was approximately
$1.5 million, which was allocated to the fair value of tangible net assets.
Midwest had net sales in fiscal 2003 totaling approximately $7 million.

On August 28, 2003, one of our subsidiaries acquired 50% of the assets of D&L
Framing LLC ("D&L"), a framing operation for multi-family construction located
in Las Vegas, NV. The purchase price was approximately $0.6 million, which was
primarily allocated to the fair value of net assets. D&L had net sales in fiscal
2002 totaling approximately $8 million. We have consolidated this entity,
including a respective minority interest, because we exercise control.

On August 26, 2003, one of our subsidiaries entered into an agreement with
Quality to cancel the treating services agreement completed on November 4, 2002
and purchase plants located in Lansing, MI and Janesville, WI and the equipment
of a plant located in White Bear Lake, MN. The total purchase price for these
assets was $5.1 million, which was allocated to the fair value of tangible net
assets. In addition, another subsidiary entered into a capital lease for the
real estate of the White Bear Lake, MN plant totaling $2.1 million.

On June 4, 2003, one of our subsidiaries acquired 75% of the assets of Norpac
Construction LLC ("Norpac"), a concrete framer for multi-family construction
located in Las Vegas, NV. The purchase price was approximately $0.2 million,
which was primarily allocated to the fair value of tangible net assets. Norpac
had net sales in fiscal 2002 totaling approximately $1.5 million. We have
consolidated this entity, including a respective minority interest, because we
exercise control.

On November 4, 2002, one of our subsidiaries acquired a facility from Quality in
Prairie du Chien, WI, which produces EverX(R) composite decking. The purchase
price was approximately $14.7 million, allocating $10.1 million to the fair
value of tangible net assets, $2.3 million to non-compete agreements, $0.5
million to a licensing agreement and $1.8 million to goodwill. Quality had
composite decking net sales in fiscal 2001 totaling approximately $2 million. In
addition, we entered into a treating services agreement with Quality. Under the
terms of this agreement, we purchased substantially all of the inventory of
Quality for approximately $7.5 million, Quality agreed to provide exclusive
treating services to us for a five-year term, and we agreed to monthly and
annual minimum volumes. The treating services agreement was canceled on August
26, 2003.

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On September 9, 2002, one of our subsidiaries acquired certain assets of J.S.
Building Products, Inc., ("JS") a site-built component manufacturer in Modesto,
CA. The total purchase price for the assets was approximately $2.2 million,
allocating $1 million to the fair value of tangible net assets and $1.2 million
to goodwill. On October 22, 2002, we purchased the real property from JS where
the operation is located for $1.9 million. JS had net sales of approximately $5
million in 2001.

On April 10, 2002, one of our subsidiaries acquired certain assets and entered
into an exclusive licensing agreement with Inno-Tech, which operates one
facility in Springfield, IL. The total purchase price for the assets was
approximately $4.1 million, allocating $2.1 million to the fair value of
tangible net assets and $2.0 million to a licensing agreement. Inno-Tech had net
sales in fiscal 2001 totaling approximately $1.3 million.

On January 15, 2002, one of our subsidiaries acquired an additional 5% interest
in Pinelli, increasing our ownership to 50%. The purchase price for the
additional 5% was approximately $0.9 million, allocating $0.3 million to the
fair value of tangible net assets and $0.6 million to goodwill. As a result of
this transaction, we obtained additional rights of control and thus began
consolidating the results of Pinelli in the 2002 consolidated financial
statements. Pinelli had net sales in fiscal 2001 totaling approximately $31
million. In 2001 and 2000, we accounted for Pinelli under the equity method.

The acquisitions in 2004, 2003 and 2002 were not significant to our operating
results individually nor in the aggregate, and thus pro forma results are not
presented.

C. GOODWILL AND OTHER INTANGIBLE ASSETS

Effective December 30, 2001, we adopted SFAS No. 142, Goodwill and Other
Intangible Assets. This statement changed the accounting and reporting for
goodwill and other intangible assets. Goodwill is no longer amortized; however,
tests for impairment are performed annually in the fourth quarter and if a
triggering event occurs. We tested for annual impairment by utilizing the
discounted cash flow method, which resulted in no impairment of goodwill.

On December 31, 2002, the Chairman of the Board retired as an employee of
Universal Forest Products, Inc., and we entered into a non-compete agreement
with him which provides for monthly payments of $12,500 for a term of seven
years. The present value of these payments has been recorded in Other
Liabilities.

The following amounts were included in other intangible assets, net as of
December 25, 2004 and December 27, 2003 (in thousands):

2004 2003
---------------------- ----------------------
ACCUMULATED ACCUMULATED
ASSETS AMORTIZATION ASSETS AMORTIZATION
------- ------------ ------- ------------

Non-compete agreements...................................... $ 9,805 $(4,318) $ 7,884 $(3,067)
Licensing agreements........................................ 2,760 (1,601) 2,910 (936)
Customer relationships...................................... 1,285 (193) 0 0
Backlog..................................................... 190 (121) 0 0
------- ------- ------- -------
Total....................................................... $14,040 $(6,233) $10,794 $(4,003)
======= ======= ======= =======

Amortization is computed principally by the straight-line method over the
estimated useful lives of the intangible assets as follows:

Non-compete agreements...................................... 5 to 11 years
Licensing agreements........................................ 5 to 20 years
Customer relationship....................................... 5 years
Backlog..................................................... 1 year

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Amortization expense for intangibles totaled $2.4 million, $1.6 million and $1.0
million in 2004, 2003, and 2002, respectively. The estimated amortization
expense for intangibles for each of the five succeeding fiscal years is as
follows (in thousands):

2005........................................................ $2,205
2006........................................................ 1,961
2007........................................................ 1,446
2008........................................................ 996
2009........................................................ 480
Thereafter.................................................. 719
------
Total....................................................... $7,807
======

The changes in the net carrying amount of goodwill for the years ended December
25, 2004 and December 27, 2003, are as follows (in thousands):

Balance as of December 28, 2002............................. $126,299
Final purchase price allocation of Quality and JS........... (2,810)
Goodwill acquired........................................... 550
Foreign currency translation effects and other, net......... 989
--------
Balance as of December 27, 2003............................. 125,028

Acquisition................................................. 4,345
Final purchase price allocation of Shawnlee................. (3,397)
Sale of interest in subsidiary.............................. (2,169)
Other, net.................................................. 38
--------
Balance as of December 25, 2004............................. $123,845
========

D. DEBT

On December 20, 2004, we completed a five-year, $250 million unsecured revolving
credit facility, which includes amounts reserved for letters of credit. This
facility replaced our $200 million facility. Cash borrowings are charged
interest based upon an index equal to the Eurodollar rate (in the case of
borrowings in US Dollars) or the bankers' acceptance rate quoted (in the case of
borrowings in Canadian Dollars), plus a margin (ranging from 42.5 to 107.5 basis
points, based upon our financial performance). We are also charged an annual
facility fee on the entire amount of the lending commitment (ranging from 12.5
to 30 basis points, based upon our performance), and a usage premium (ranging
from 7.5 to 12.5 basis points, based upon our performance) at times when
borrowings exceed $125 million. The average borrowing rate on this facility was
2.8% in 2004. The amount outstanding on the revolving credit facility is
included in the long-term debt summary below.

On December 18, 2002, we completed a $55 million private placement of senior
unsecured notes payable. The notes have an average life of over nine years and
an average interest rate of 6.0%.

On November 25, 2002, we completed a three-year, $200 million unsecured
revolving credit facility, which includes amounts reserved for letters of
credit. This facility replaced our $175 million and $20 million Canadian
facilities. Borrowings under the revolver were charged interest at a rate of 125
basis points over the applicable Eurodollar rate. The average borrowing rate on
these facilities was 3.3%, 3.7%, and 2.3% in 2004, 2003, and 2002, respectively.
This facility was replaced on December 20, 2004 by the $250 million facility
noted above.

Outstanding letters of credit extended on our behalf aggregated $34.6 million on
December 25, 2004, which includes approximately $18.3 million related to
industrial development revenue bonds. Letters of credit have terms ranging from
one to five years, and include an automatic renewal clause. The letters of
credit are charged an annual interest rate of 0.575% in 2004 under the $250
million facility and previously, 1.25% under the $200 million facility.

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Long-term debt and capital lease obligations are summarized as follows on
December 25, 2004 and December 27, 2003 (amounts in thousands):

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

Series 1998-A Senior Notes Tranche A, due on December 21,
2005, interest payable semi-annually at 6.69%............. $ 21,500 $ 21,500
Series 1998-A Senior Notes Tranche B, due on December 21,
2008, interest payable semi-annually at 6.98%............. 59,500 59,500
Series 1998-A Senior Notes Tranche C, due on December 21,
2008, interest payable semi-annually at 6.98%............. 19,000 19,000
Series 2002-A Senior Notes Tranche A, due on December 18,
2009, interest payable semi-annually at 5.63%............. 15,000 15,000
Series 2002-A Senior Notes Tranche B, due on December 18,
2012, interest payable semi-annually at 6.16%............. 40,000 40,000
1994 Senior Unsecured Notes, $5,714,000 due annually
commencing May 1998 through May 2004, interest due
semi-annually at 7.15%.................................... 5,714
Revolving credit facility totaling $250 million due on
December 18, 2009, interest due monthly at a floating rate
(2.97% on December 25, 2004).............................. 29,108
Revolving credit facility totaling $200 million............. 27,058
Series 1998 Industrial Development Revenue Bonds, due on
December 1, 2018, interest payable monthly at a floating
rate (1.96% on December 25, 2004)......................... 1,300 1,300
Series 1999 Industrial Development Revenue Bonds, due on
July 1, 2029, interest payable monthly at a floating rate
(1.87% on December 25, 2004).............................. 2,400 2,400
Series 1999 Industrial Development Revenue Bonds, due on
August 1, 2029, interest payable monthly at a floating
rate (1.79% on December 25, 2004)......................... 3,300 3,300
Series 2000 Industrial Development Revenue Bonds, due on
October 1, 2020, interest payable monthly at a floating
rate (1.86% on December 25, 2004)......................... 2,700 2,700
Series 2000 Industrial Development Revenue Bonds, due on
November 1, 2020, interest payable monthly at a floating
rate (1.87% on December 25, 2004)......................... 2,400 2,400
Series 2001 Industrial Development Revenue Bonds, due on
November 1, 2021, interest payable monthly at a floating
rate (1.87% on December 25, 2004)......................... 2,500 2,500
Series 2002 Industrial Development Revenue Bonds, due on
December 1, 2022, interest payable monthly at a floating
rate (1.85% on December 25, 2004)......................... 3,700 3,700
Capital lease obligations, interest imputed at 6.0%......... 2,084 2,102
Other....................................................... 2,650 3,286
-------- --------
207,142 211,460
Less current portion........................................ 22,033 6,411
-------- --------
Long-term portion........................................... $185,109 $205,049
======== ========

Financial covenants on the unsecured revolving credit facility and unsecured
notes include a minimum net worth requirement, minimum interest 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 25, 2004.

On December 25, 2004, the principal maturities of long-term debt and capital
lease obligations are as follows (in thousands):

2005........................................................ $ 22,033
2006........................................................ 452
2007........................................................ 358
2008........................................................ 80,862
2009........................................................ 45,129
Thereafter.................................................. 58,308
--------
$207,142
========

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On December 25, 2004, the estimated fair value of our long-term debt, including
the current portion, was $210.1 million, which was $3.0 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 short-term debt included in current liabilities approximated the
carrying value. The weighted average rate on this short-term debt was 6.0% at
December 27, 2003.

E. LEASES

Leased property included in the balance sheet on December 25, 2004 and December
27, 2003 is as follows (in thousands):

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

Land and improvements....................................... $ 211 $ 230
Buildings and improvements.................................. 1,899 2,061
Machinery and equipment..................................... 431
------ ------
2,110 2,722
Less accumulated amortization............................... (135) (278)
------ ------
$1,975 $2,444
====== ======

We lease certain real estate under operating and capital lease agreements with
original terms ranging from one to ten years. We are required to pay real estate
taxes and other occupancy costs under these leases. Certain leases carry renewal
options of five to fifteen years. We also lease motor vehicles, equipment, and
an airplane under operating lease agreements for periods of one to ten years.
Future minimum payments under non-cancelable leases on December 25, 2004 are as
follows (in thousands):

CAPITAL OPERATING
LEASES LEASES TOTAL
-----------------------------

2005........................................................ $ 146 $10,672 $10,818
2006........................................................ 146 8,024 8,170
2007........................................................ 146 5,525 5,671
2008........................................................ 2,097 3,626 5,723
2009........................................................ 0 1,541 1,541
Subsequent.................................................. 0 318 318
------ ------- -------
Total minimum lease payments................................ $2,535 $29,706 $32,241
========= =======
Less imputed interest....................................... (451)
-------
Present value of minimum lease payments..................... $2,084
=======

Rent expense was approximately $19.3 million, $15.4 million, and $12.7 million
in 2004, 2003, and 2002, respectively.

F. DEFERRED COMPENSATION

We have a program whereby certain executives irrevocably elected to defer
receipt of certain compensation in 1985 through 1988. Deferred compensation
payments to these executives will commence upon their retirement. We purchased
life insurance on such executives, payable to us in amounts which, if
assumptions made as to mortality experience, policy dividends, and other factors
are realized, will accumulate cash values adequate to reimburse us for all
payments for insurance and deferred compensation obligations. In the event cash
values are not sufficient to fund such obligations, the program allows us to
reduce benefit payments to such amounts as may be funded by accumulated cash
values. The deferred compensation liabilities and related cash surrender value
of life insurance policies are included in "Other Liabilities" and "Other
Assets," respectively.

We also maintain a non-qualified deferred compensation plan (the "Plan") for the
benefit of senior management employees who may elect to defer a portion of their
annual bonus payments. The Plan provides investment options similar to our
401(k) plan, including our stock. The investment in shares of our stock has been
made on a "phantom stock" basis and shares issued to a Rabbi trust, and may only
be distributed in kind. Assets held by the Plan totaled approximately $2.7
million and $2.1 million on December 25, 2004 and December 27, 2003,
respectively, and are included in "Other Assets." Related liabilities totaled
$5.4 million and $4.1 million on December 25, 2004 and December 27, 2003,
respectively, and are included in "Other Liabilities" and "Shareholders'
Equity."

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Assets of the Plan are recorded at fair market value. The related liabilities
are recorded at fair market value, with the exception of obligations associated
with investments in our stock which are recorded at the market value on the date
of deferral. Under this Plan we issued 22,528 shares, 37,678 shares, and 5,380
shares in 2004, 2003, and 2002, respectively, which included distributions to
participants and shares held in the Rabbi trust.

G. SALE OF ACCOUNTS RECEIVABLE

On September 25, 2003, we entered into an accounts receivable sale arrangement
with a bank. On November 12, 2004 we amended and extended this agreement. Under
the terms of the agreement:

- - We sell specific receivables to the bank at an agreed-upon price at terms
ranging from one month to one year.

- - We service the receivables sold and outstanding on behalf of the bank at a
rate of 0.50% per annum.

- - We receive an incentive servicing fee, which we account for as a retained
interest in the receivables sold. Our retained interest is determined based on
the fair market value of anticipated collections in excess of the Agreed Base
Value of the receivables sold. Appropriate valuation allowances are included
in the retained interest.

- - The maximum amount of receivables which may be sold and outstanding at any
point in time under this arrangement is $50 million.

On December 25, 2004, $19.5 million of receivables were sold and outstanding,
and we recorded $1.3 million of retained interest in other current assets. On
December 27, 2003, $9.7 million of receivables were sold and outstanding, and we
recorded $0.5 million of retained interest in other current assets. A summary of
the transactions we completed in 2004 and 2003 is presented below (in
thousands).

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

Accounts receivable sold.................................... $301,325 $101,930
Retained interest in receivables............................ (3,892) (2,039)
Expense from sale........................................... (631) (168)
Servicing fee received...................................... 126 37
Discounts and sales allowances.............................. (2,873) (840)
-------- --------
Net cash received from sale................................. $294,055 $ 98,920
======== ========

H. COMMON STOCK

On June 1, 1993, shareholders approved the Incentive Stock Option Plan (the
"Plan") for our officers. Options for the purchase of all 1,200,000 shares of
our common stock authorized under the Plan have been granted. The Plan provides
that the options are exercisable only if the officer is employed by us at the
time of exercise and holds at least seventy-five percent of the individuals'
shares held on April 1, 1993. The Plan also requires the option shares to be
held for periods of six months to three years. The remaining options are
exercisable within thirty days of the anniversary of the Plan in 2005 through
2008.

In January 1994, the Employee Stock Gift Program was approved by the Board of
Directors which allows us to gift shares of stock to eligible employees based on
length of service. We gifted 1,736 shares, 2,397 shares, and 1,097 shares of
stock under this Plan in 2004, 2003, and 2002, respectively, and recognized the
market value of the shares at the date of issuance as an expense totaling
approximately $56,000, $51,000, and $23,000, respectively.

In April 1994, shareholders approved the Employee Stock Purchase Plan ("Stock
Purchase Plan") and Director Retainer Stock Plan ("Stock Retainer Plan"). In
April 2002, shareholders approved the 2002 Employee Stock Purchase Plan ("2002
Stock Purchase Plan") to succeed the Stock Purchase Plan. The plans allow
eligible employees to purchase shares of our stock at a share price equal to 85%
of fair market value on the purchase date. In 2004, 2003, and 2002, 15,594
shares, 24,469 shares, and 13,125 shares, respectively, were issued under this
Plan for amounts totaling approximately $411,000, $417,000, and $243,000,
respectively. The weighted-average discounted fair value of these shares was
$26.34, $17.04, and $18.54, respectively.

The Stock Retainer Plan allows eligible members of the Board of Directors to
defer their retainer fees and receive shares of our stock at the time of their
retirement, disability or death. The number of shares to be received is equal to
the amount of the retainer fee deferred multiplied by 110% divided by the fair
market value of a share of our stock at the time of deferral, is increased for
dividends declared and may only be distributed in kind. We have accrued, in
shareholders equity approximately $533,000 and $355,000 on December 25, 2004 and
December 27, 2003, respectively, for amounts incurred under this Plan. In 2003,
6,156 shares were issued as part of a distribution from the Plan for an amount
totaling approximately $98,000.

In January 1997, we instituted a Directors' Stock Grant Program. In lieu of a
cash increase in the amount of Director fees, each outside Director receives 100
shares of stock for each board meeting attended up to a maximum of 400 shares
per year. In 2004, 2003, and 2002, we issued 2,300 shares, 1,600 shares, and

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1,400 shares, respectively, and recognized the market value of the shares on the
date of issuance as an expense totaling approximately $75,000, $35,000, and
$31,000, respectively.

On April 28, 1999, the shareholders approved the Long Term Stock Incentive Plan
(the "1999 Plan") to succeed the 1997 Long Term Stock Incentive Plan (the "1997
Plan"). The 1999 Plan reserves a maximum of 1,000,000 shares, plus 406,029
shares remaining under the 1997 Plan, plus an annual increase of no more than
200,000 shares which may be added on the date of the annual meeting of
shareholders each year. The 1999 Plan provides for the granting of stock
options, reload options, stock appreciation rights, restricted stock,
performance shares and other stock-based awards. The term of the 1999 Plan is
ten years. In 2004, 2003, and 2002, we granted stock options for 100,000 shares,
140,000 shares, and 576,769 shares, respectively.

On April 17, 2002, under the 1999 Plan, a Conditional Share Grant Agreement was
executed which will grant the Chief Executive Officer 10,000 shares of common
stock immediately upon the satisfaction of the terms and conditions set forth in
the Agreement. We have accrued in shareholders equity approximately $129,000 and
$62,000 on December 25, 2004 and December 27, 2003, respectively, for this
grant.

As of December 25, 2004, a total of 2,833,145 shares are reserved for issuance
under the plans mentioned above and under Note I below.

On October 21, 1998, the Board of Directors approved a share repurchase program
(which succeeded a previous program) allowing us to repurchase up to 1,800,000
shares of our common stock. On October 18, 2000 and November 14, 2001, the Board
of Directors authorized an additional 1,000,000 shares and 2,500,000 shares,
respectively, to be repurchased under the program. In 2004, 2003, and 2002, we
repurchased 4,050 shares, 123,234 shares, and 2,199,435 shares, respectively,
under these programs. As of December 25, 2004, cumulative total authorized
shares available for repurchase is approximately 1.5 million shares.

I. STOCK OPTIONS AND STOCK-BASED COMPENSATION

Stock options issued under the Long Term Stock Incentive Plan are granted to
employees and officers at exercise prices which equaled or exceeded the market
value of the stock on the date of grant. The options are exercisable from three
to fifteen years from the date of grant and the recipients must be employed by
us on the date of exercise.

Options were granted in 2004, 2003, and 2002 with exercise prices which were
equal to the market prices on the date of grant.

Stock option activity since the end of 2001 is summarized as follows:

SHARES OF WEIGHTED WEIGHTED
COMMON STOCK AVERAGE AVERAGE
ATTRIBUTABLE TO EXERCISE PRICE FAIR VALUE OF
OPTIONS OPTIONS OPTIONS GRANTED
----------------------------------------------------

Outstanding on December 29, 2001............................ 1,711,734 $14.15
Granted..................................................... 576,769 $22.48 $ 7.09
Exercised................................................... (120,000) $ 5.00
Forfeited................................................... (62,629) $17.02
---------
Outstanding on December 28, 2002............................ 2,105,874 $16.86
Granted..................................................... 140,000 $17.10 $ 6.18
Exercised................................................... (65,284) $13.24
Forfeited................................................... (185,074) $18.73
---------
Outstanding on December 27, 2003............................ 1,995,516 $16.83
Granted..................................................... 100,000 $30.64 $10.34
Exercised................................................... (155,083) $16.86
Forfeited................................................... (63,174) $21.01
---------
Outstanding on December 25, 2004............................ 1,877,259 $17.42
=========

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Options to purchase 121,073 shares were exercisable on December 25, 2004 with a
weighted average price of $16.26. Options to purchase 55,003 shares were
exercisable at December 27, 2003 with a weighted average price of $13.01.
Options to purchase 20,000 shares were exercisable at December 28, 2002 with a
weighted average price of $20.03. The following table summarizes information
concerning options on December 25, 2004:

WEIGHTED-AVERAGE
NUMBER REMAINING
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE
- -----------------------------------------------------------------------------------------------

$5.75 -- $10.00............................................. 235,000 2.02
$10.01 -- $14.00............................................ 373,804 1.95
$14.01 -- $18.00............................................ 423,693 2.94
$18.01 -- $21.00............................................ 84,753 1.47
$21.01 -- $23.00............................................ 395,009 2.90
$23.01 -- $25.00............................................ 190,000 4.76
$25.01 -- $36.01............................................ 175,000 6.71
---------
1,877,259
=========

J. EMPLOYEES' STOCK NOTES RECEIVABLE

Notes were obtained by us from certain officers for the purchase of our common
stock. On April 30, 2002, we sold 12,555 shares of common stock to three
officers in exchange for additional notes receivable totaling approximately
$300,000. Interest on all of the outstanding notes range from fixed rates of
five to eleven percent per annum and a variable rate of the prime rate less 10%
(minimum 6%, maximum 12%). Each loan is evidenced by a promissory note from the
participating officer, and is secured by all of the shares purchased with the
loan proceeds. As of August 1, 2002, we no longer issue notes to executive
officers under this program.

On April 30, 2003, we sold 57,232 shares of common stock to employees in
exchange for notes receivable totaling approximately $887,000. Interest on these
notes is fixed at 4.8% per annum. Each loan is evidenced by a promissory note
from the participating employee, and is secured by all of the shares purchased
with the loan proceeds.

On March 31, 2004, we sold 195 shares of common stock to an employee in exchange
for a note receivable totaling approximately $6,000. Interest on the note is
fixed at 4.8% per annum. The loan is evidenced by a promissory note from the
participating employee, and is secured by all of the shares purchased with the
loan proceeds.

All loans are recourse loans. On December 25, 2004, payments on the notes are
due as follows (in thousands):

2005........................................................ $ 39
2006........................................................ 109
2007........................................................ 105
2008........................................................ 130
2009........................................................ 284
Thereafter.................................................. 879
------
$1,546
======

K. LIFE INSURANCE

We maintained an officer's life insurance policy on the Chairman with a death
benefit of $1.3 million. The cash surrender value on this policy on December 28,
2002 is included in "Other Assets." During 2003, this policy was purchased by
the Chairman of the Board for approximately $190,000, which was equal to its
cash value.

L. RETIREMENT PLANS

We have a profit sharing and 401(k) plan for the benefit of substantially all of
our employees, excluding the employees of certain non-wholly owned subsidiaries.
Amounts contributed to the plan are made at the discretion of the Board of
Directors. We made a profit sharing contribution of approximately $384,000 in
2002

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

and made an additional discretionary match of approximately $311,000 in 2003. In
addition, we matched 50% of employee contributions in 2004, 2003, and 2002, on a
discretionary basis, totaling $3.3 million, $2.9 million, and $2.1 million,
respectively. The basis for matching contributions may not exceed the lesser of
6% of the employee's annual compensation or $13,000.

In addition, a wholly-owned subsidiary acquired in 1998 had a 401(k) plan for
the benefit of substantially all of its employees. This subsidiary matched 50%
of employee contributions, on a discretionary basis, totaling $583,000 in 2002.
On July 1, 2003, this plan merged with our plan.

M. INCOME TAXES

Income tax provisions for the years ended December 25, 2004, December 27, 2003,
and December 28, 2002 are summarized as follows (in thousands):

2004 2003 2002
-----------------------------

Currently Payable:
Federal................................................... $26,385 $19,331 $17,196
State and local........................................... 3,728 2,296 2,590
Foreign................................................... 486 952 (509)
------- ------- -------
30,599 22,579 19,277
Net Deferred:
Federal................................................... (712) 2,422 1,753
State and local........................................... 8 (443) 462
Foreign................................................... 1,567 (233) 1,491
------- ------- -------
863 1,746 3,706
------- ------- -------
$31,462 $24,325 $22,983
======= ======= =======

The effective income tax rates are different from the statutory federal income
tax rates for the following reasons:

2004 2003 2002
-----------------------------

Statutory federal income tax rate........................... 35.0% 35.0% 35.0%
State and local taxes (net of federal benefits)............. 2.9 1.8 3.2
Effect of minority owned interest in earnings of
partnerships.............................................. (0.9) (0.1) (1.0)
Other, net.................................................. 0.9 0.3 (0.2)
----- ----- -----
Effective income tax rate................................... 37.9% 37.0% 37.0%
===== ===== =====

We have no present intention of remitting undistributed earnings of certain
foreign subsidiaries aggregating $9.9 million on December 25, 2004 and,
accordingly, no deferred tax liability has been established relative to these
earnings. We have not reevaluated our position with respect to the indefinite
reinvestment of foreign earnings to take into account the possible election of
the repatriation provisions contained in the American Job Creation Act of 2004
(the "Jobs Act"), enacted on October 22, 2004. The status of our evaluation of
these provisions is described in the following paragraphs.

The Jobs Act provides for a temporary 85% dividends received deduction on
certain foreign earnings repatriated during a one-year period. The deduction
would result in an approximate 5.25% federal tax rate on the repatriated
earnings. To qualify for the deduction, the earnings must be reinvested in the
United States pursuant to a domestic reinvestment plan established by a
company's chief executive officer and approved by the company's board of
directors. Certain other criteria in the Jobs Act must be satisfied as well. The
maximum amount of our foreign earnings that qualify for the temporary deduction
is $9.9 million. The one-year period during which our qualifying distributions
can be made is fiscal 2005.

We are in the process of evaluating whether we will repatriate foreign earnings
under the repatriation provisions of the FSP 109-2, and if so, the amount that
will be repatriated. The range of reasonably possible amounts that we are
considering for repatriation, which would be eligible for the temporary
deduction is zero to $2.0 million. We are awaiting the issuance of further
regulatory guidance and passage of statutory technical corrections with respect
to certain provisions in the Jobs Act prior to determining the amounts we will
repatriate. If such regulatory guidance or technical corrections are favorable,
we may repatriate amounts in the high end of our range. We expect to determine
the amounts and sources of foreign earnings to be repatriated, if any, during
2005. If we were to repatriate the $2.0 million amount of our undistributed
earnings of foreign subsidiaries, we estimate that we would accrue additional
income tax expense totaling approximately $200,000.

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Temporary differences which give rise to deferred tax assets and (liabilities)
on December 25, 2004 and December 27, 2003 are as follows (in thousands):

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

Employee benefits........................................... $ 4,907 $ 4,322
Foreign subsidiary net operating loss....................... 216 9
Depreciation................................................ (15,575) (14,919)
Inventory................................................... (658) (382)
Accrued expenses............................................ 207 279
All other, net.............................................. (3,639) (2,810)
-------- --------
$(14,542) $(13,501)
Valuation allowance......................................... (473) (651)
-------- --------
$(15,015) $(14,152)
======== ========

The valuation allowance consists of a capital loss carryforward we have related
to a prior investment in a wholly-owned subsidiary, UFP de Mexico. We do not
anticipate realizing a future benefit from this loss carryforward, therefore, we
have established an allowance for the entire amount of the future benefit. This
carryforward will expire at the end of 2005.

N. COMMITMENTS, CONTINGENCIES, AND GUARANTEES

We are self-insured for environmental impairment liability through a wholly
owned subsidiary, UFP Insurance Ltd., a licensed captive insurance company. We
own and operate a number of facilities throughout the United States that
chemically treat lumber products. In connection with the ownership and operation
of these and other real properties, and the disposal or treatment of hazardous
or toxic substances, we may, under various federal, state, and local
environmental laws, ordinances, and regulations, be potentially liable for
removal and remediation costs, as well as other potential costs, damages, and
expenses. Insurance reserves, calculated with no discount rate, have been
established to cover remediation activities at our Union City, GA; Stockertown,
PA; Elizabeth City, NC; Auburndale, FL; Schertz, TX; and Janesville, WI wood
preservation facilities. In addition, a small reserve was established for our
Thornton, CA property to remove asbestos and certain lead containing materials
which existed on the property at the time of purchase.

Including amounts from our wholly owned captive insurance company, we have
reserved approximately $1.9 million on December 25, 2004 and December 27, 2003,
representing the estimated costs to complete future remediation efforts and has
not been reduced by an insurance receivable.

The manufacturers of CCA preservative voluntarily discontinued the registration
of CCA for certain residential applications as of December 31, 2003. As a
result, all of our wood preservation facilities have been converted to alternate
preservatives, either ACQ or borates.

In November 2003, the EPA published its report on the risks associated with the
use of CCA in children's playsets. While the study observed that the range of
potential exposure to CCA increased by the continuous use of playsets, the EPA
concluded that the risks were not sufficient to require removal or replacement
of any CCA treated structures. The EPA did refer a question on the use of
sealants to a scientific advisory panel. The panel issued a report which
provides guidance to the EPA on the use of various sealants but does not mandate
their use. The EPA is reviewing the report and is expected to issue further
clarifications.

The results of the EPA study are consistent with a prior Consumer Products
Safety Commission (CPSC) study which reached a similar conclusion.

In addition, various special interest environmental groups have petitioned
certain states requesting restrictions on the use or disposal of CCA treated
products. The wood preservation industry trade groups are working with the
individual states and their regulatory agencies to provide an accurate, factual
background which demonstrates that the present method of uses and disposal is
scientifically supported.

We have been requested by a customer to defend it from purported class action
lawsuits filed against it in Florida, Louisiana, Texas, Illinois, and New
Jersey. The purported class action lawsuits seek unspecified damages from one of
our customers, based on generalized claims under a purported theory of inherent
defect, failure to properly warn, or violation of individual state Consumer
Protection Act statutes. To date, none of these cases have been certified as a
class action. The Florida claim was denied class action status, and all appeals
have been denied. We had previously been dismissed as a defendant from the
Louisiana litigation, and this case was denied class action status in March
2004. The Illinois case and the Texas case were recently dismissed without
prejudice, although the plaintiff may choose to appeal or refile. The Texas case
has been continued as an individual plaintiffs case, rather than a class action.
As such, the case is not material. The Illinois case, based on an alleged
violation of the consumer protection act, has been restated and filed. The
remaining complaints do not allege personal injury or property damage. As
previously stated, our vendors believe and scientific studies support the fact
that CCA treated lumber poses no unreasonable risks, and we intend to vigorously
defend this position. While our customer has charged us for certain costs
incurred in the defense of these claims and we have expensed them accordingly,
we have not formally accepted liability of these costs.

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

We believe that based on current facts, laws, and existing scientific evidence,
as well as the favorable disposition of the above referenced lawsuits, that the
likelihood of a material adverse financial impact from the remaining claims is
remote. Therefore, we have not accrued for any potential loss related to the
contingencies above. However, potential liabilities of this nature are not
conducive to precise estimates and are subject to change. To the extent we are
required to defend these actions, we intend to do so vigorously and will monitor
these facts on an ongoing basis.

In addition, on December 25, 2004, we were parties either as plaintiff or a
defendant to a number of lawsuits and claims arising through the normal course
of our business. In the opinion of management, our consolidated financial
statements will not be materially affected by the outcome of these contingencies
and claims.

On December 25, 2004, we had outstanding purchase commitments on capital
projects of approximately $3.1 million included in other liabilities.

We provide a variety of warranties for products we manufacture. Historically,
warranty claims have not been material.

In certain cases we jointly bid on contracts with framing companies to supply
building materials to site-built construction projects. In some of these
instances we are required to post payment and performance bonds to insure the
owner that the products and installation services are completed in accordance
with our contractual obligations. We have agreed to indemnify the surety for
claims made against the bonds. Historically, we have not had any claims for
indemnity from our sureties. As of December 25, 2004, we had approximately $17.0
million in outstanding performance bonds which expire during the next two to
twenty-one months. In addition, approximately $14.7 million in payment and
performance bonds are outstanding for completed projects which are still under
warranty.

We have entered into operating leases for certain assets that include a
guarantee of a portion of the residual value of the leased assets. If at the
expiration of the initial lease term we do not exercise our option to purchase
the leased assets and these assets are sold by the lessor for a price below a
predetermined amount, we will reimburse the lessor for a certain portion of the
shortfall. These operating leases will expire periodically over the next five
years. The estimated maximum aggregate exposure of these guarantees is
approximately $1.2 million.

Under our sale of accounts receivable agreement, we guarantee that Universal
Forest Products RMS, LLC, as accounts servicer, will remit collections on
receivables sold to the bank. (See Note G.)

On December 25, 2004, we had outstanding letters of credit totaling $34.6
million, primarily related to certain insurance contracts and industrial
development revenue bonds, as further described below.

In lieu of cash deposits, we provide irrevocable letters of credit in favor of
our insurers to guarantee our performance under certain insurance contracts. We
currently have irrevocable letters of credit outstanding totaling approximately
$16.3 million for these types of insurance arrangements. We have reserves
recorded on our balance sheet, in accrued liabilities, that reflect our expected
future liabilities under these insurance arrangements.

We are required to provide irrevocable letters of credit in favor of the bond
trustees for all of the industrial development revenue bonds that we have issued
(see Note D). These letters of credit guarantee principal and interest payments
to the bondholders. We currently have irrevocable letters of credit outstanding
totaling approximately $18.3 million related to our outstanding industrial
development revenue bonds. These letters of credit have varying terms but may be
renewed at the option of the issuing banks.

Certain wholly owned domestic subsidiaries have guaranteed the indebtedness of
Universal Forest Products, Inc. in certain debt agreements, including the Series
1998-A Senior Notes, Series 2002-A Senior Notes, and our revolving credit
facility. The maximum exposure of these guarantees is limited to the
indebtedness outstanding under these debt arrangements and this exposure will
expire concurrent with the expiration of the debt agreements (see Note D).

O. SALE OF REAL ESTATE AND INTEREST IN SUBSIDIARY

In January 2004, we sold our 60% ownership in Nascor Incorporated, a Calgary,
Alberta-based manufacturer of engineered wood components and licensor of I-joist
manufacturing technology. The total sales price we collected was $4.7 million
and we recorded a pre-tax accounting loss of approximately $193,000.

In March 2004, we sold a plant in Bend, OR and recognized a pre-tax gain of
approximately $562,000 on the sale in the first quarter and an additional
$207,000 in the second quarter as we collected the note receivable issued to us
on the sale.

In June 2004, we sold a plant in Modesto, CA and recognized a pre-tax gain of
approximately $368,000.

In December 2004, we sold real estate in Elkhart, IN and Thornton, CA and
recognized a net pre-tax gain of $426,000.

In May 2002, we sold our corporate airplane and recognized a gain of
approximately $1.1 million on the sale, and entered into an operating lease for
a replacement airplane.

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

P. GAIN ON INSURANCE SETTLEMENT

In April 2004, our plant in Thorndale, Ontario was destroyed by a fire. In
accordance with FIN 30, Accounting for Involuntary Conversions of Non-Monetary
Assets to Monetary Assets, we have written off the net book value of the
destroyed inventory and property totaling $3.6 million. The insured value of the
property exceeded its net book value by approximately $1.4 million, which was
recorded as a gain on insurance settlement. As of December 25, 2004, we have
collected $2.0 million of insurance proceeds. The remaining insurance receivable
totals approximately $3.0 million and is recorded in other current assets.

Q. SEGMENT REPORTING

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 and Western 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 chosen to aggregate our divisions into one reporting segment.
Our divisions operate manufacturing and treating facilities throughout North
America.

In 2004, 2003, and 2002, 25%, 30%, and 30% of net sales, respectively, were to a
single customer.

Information regarding principal geographic areas was as follows (in thousands):

2004 2003 2002
------------------------ ------------------------ ------------------------
LONG-LIVED LONG-LIVED LONG-LIVED
TANGIBLE TANGIBLE TANGIBLE
NET SALES ASSETS NET SALES ASSETS NET SALES ASSETS
--------------------------------------------------------------------------------

United States.......................... $2,373,289 $194,480 $1,813,257 $182,904 $1,559,530 $181,761
Foreign................................ 79,992 29,745 85,573 38,111 80,369 28,121
---------- -------- ---------- -------- ---------- --------
Total.................................. $2,453,281 $224,225 $1,898,830 $221,015 $1,639,899 $209,882
========== ======== ========== ======== ========== ========

Sales generated in Canada and Mexico are primarily to customers in the United
States of America.

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

VALUE-ADDED COMMODITY-BASED
-----------------------------

Value-added product sales 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. Wood alternative
products consist primarily of composite wood and plastic. 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. Commodity-based product sales consist primarily of remanufactured
lumber and preservative treated lumber.

UNIVERSAL FOREST PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table presents, for the periods indicated, our net sales (in
thousands) by major product classification.

YEARS ENDED
------------------------------------------
DECEMBER 25, DECEMBER 27, DECEMBER 28,
2004 2003 2002
------------------------------------------

Value-Added Sales
Fencing..................................................... $ 139,473 $ 127,899 $ 113,786
Decking..................................................... 37,908 37,816 30,304
Lattice..................................................... 20,755 20,705 19,939
Outdoor preservative treated products....................... 14,469 11,820 10,785
Wood alternative products................................... 33,348 19,357
Engineered wood components and other building materials..... 656,338 523,508 497,384
Turn-key framing and installed sales........................ 120,741 58,576 34,413
Packaging................................................... 57,581 42,138 31,775
Specialty lumber products................................... 84,919 73,650 62,201
Other....................................................... 78,155 55,782 32,796
---------- ---------- ----------
Total Value-Added Sales..................................... 1,243,687 971,251 833,383
Commodity-Based Sales
Dimensional lumber.......................................... 451,041 296,512 302,877
Preservative treated lumber................................. 489,682 450,891 386,332
Plywood and OSB............................................. 254,499 165,545 104,146
Other....................................................... 14,372 14,631 13,161
---------- ---------- ----------
Total Commodity-Based Sales................................. 1,209,594 927,579 806,516
---------- ---------- ----------
Total Net Sales............................................. $2,453,281 $1,898,830 $1,639,899
========== ========== ==========

R. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table sets forth selected financial information for all of the
quarters, each consisting of 13 weeks, during the years ended December 25, 2004
and December 27, 2003 (in thousands, except per share data):

FIRST SECOND THIRD FOURTH
------------------- ------------------- ------------------- -------------------
2004 2003 2004 2003 2004 2003 2004 2003
-------------------------------------------------------------------------------------

Net sales................................. $465,665 $355,619 $742,568 $552,463 $709,294 $536,278 $535,754 $454,470
Gross profit.............................. 56,361 51,804 92,821 78,742 83,792 72,563 63,279 54,877
Net earnings.............................. 5,567 4,500 19,756 17,162 14,626 12,204 8,654 6,252
Basic earnings per share.................. 0.31 0.25 1.09 0.97 0.81 0.69 0.48 0.35
Diluted earnings per share................ 0.30 0.25 1.06 0.94 0.78 0.66 0.46 0.34

S. SUBSEQUENT EVENTS

On January 3, 2005, we sold real estate located in Stockton, CA for $2.3 million
and recorded a pre-tax gain totaling approximately $1.3 million.

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

Our common stock trades on the Nasdaq National Market tier of the Nasdaq Stock
Market under the symbol UFPI. The following table sets forth the range of high
and low sales prices as reported by Nasdaq.

FISCAL 2004 HIGH LOW FISCAL 2003 HIGH LOW
- -------------------------------------------------------- --------------------------------------------------------

Fourth Quarter........................... 44.34 31.50 Fourth Quarter........................... 31.74 24.25
Third Quarter............................ 34.19 28.54 Third Quarter............................ 26.10 19.98
Second Quarter........................... 33.03 26.36 Second Quarter........................... 21.50 15.41
First Quarter............................ 34.48 28.08 First Quarter............................ 21.99 15.01

There were approximately 6,000 shareholders of record as of March 1, 2005.

In 2004, we paid dividends on our common stock of $.050 per share in June and
December. In 2003, we paid dividends on our common stock of $.045 per share in
June and $.050 per share in December. We intend to continue with our current
semi-annual dividend policy for the foreseeable future.

DIRECTORS AND EXECUTIVE OFFICERS

BOARD OF DIRECTORS

Peter F. Secchia
Chairman of the Board
Universal Forest Products, Inc.
William G. Currie
Vice Chairman of the Board and
Chief Executive Officer
Universal Forest Products, Inc.
Dan M. Dutton
Chairman of the Board
Stimson Lumber Co.
John M. Engler
President and Chief Executive Officer
National Association of Manufacturers
John W. Garside
President and Treasurer
Woodruff Coal Company
Gary F. Goode, CPA
Chairman
Titan Distribution, LLC
Mark A. Murray
President
Grand Valley State University
Louis A. Smith
President
Smith and Johnson, Attorneys, P.C.

EXECUTIVE OFFICERS
William G. Currie
Vice Chairman of the Board and
Chief Executive Officer
Michael B. Glenn
President and Chief Operating Officer
Michael R. Cole
Chief Financial Officer and Treasurer
Matthew J. Missad
Executive Vice President and Secretary
Robert K. Hill
President
Universal Forest Products
Western Division, Inc.
C. Scott Greene
President
Universal Forest Products
Eastern Division, Inc.
Robert D. Coleman
Executive Vice President Manufacturing
Universal Forest Products, Inc.

SHAREHOLDER INFORMATION

ANNUAL MEETING
The annual meeting of Universal Forest Products(R), Inc., will be held at 8:30
a.m. on April 20, 2005, at the Company's corporate headquarters, 2801 East
Beltline NE, Grand Rapids, Michigan.
SHAREHOLDER INFORMATION
Shares of the Company's stock are traded under the symbol UFPI on the NASDAQ
Stock Market. The Company's 10-K report, filed with the Securities and Exchange
Commission, will be provided free of charge to any shareholder upon written
request. For more information contact:
Investor Relations Department
Universal Forest Products(R), Inc.
2801 East Beltline NE
Grand Rapids, MI 49525
Telephone: (616) 364-6161
Web: www.ufpi.com
SECURITIES COUNSEL
Varnum, Riddering, Schmidt & Howlett
Grand Rapids, MI
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
Grand Rapids, MI
TRANSFER AGENT/
SHAREHOLDER'S INQUIRIES
American Stock Transfer & Trust Company serves as the transfer agent for the
Corporation. Inquiries relating to stock transfers, changes of ownership, lost
or stolen stock certificates, changes of address and dividend payments should be
addressed to:
American Stock Transfer & Trust Co.
59 Maiden Lane
New York, NY 10005
Telephone: (718) 921-8210
UNIVERSAL FOREST
PRODUCTS(R), INC.,
CORPORATE HEADQUARTERS
2801 East Beltline NE
Grand Rapids, MI 49525
Telephone: (616) 364-6161
UNIVERSAL FOREST
PRODUCTS(R), INC.,
AND ITS AFFILIATES
LOCATIONS:
Arlington, TX
Ashburn, GA
Auburn, NY
Auburndale, FL
Belchertown, MA
Berlin, NJ
Blanchester, OH
Bunn, NC
Burlington, NC
Chaffee, NY
Chandler, AZ
Chesapeake, VA
Clinton, NY
Conway, SC
Dallas, NC
Dallas, TX
Denver, CO
Durango, Durango, Mexico
Earlysville, VA
Eatonton, GA
Elizabeth City, NC
Emlenton, PA
Englewood, CO
Fishersville, VA
Folkston, GA
Fontana, CA
Georgetown, DE
Gordon, PA
Grandview, TX
Grand Rapids, MI(2)
Granger, IN
Haleyville, AL
Hamilton, OH
Harrisonville, MO
Hope, AR
Houston, TX
Hudson, NY
Indianapolis, IN
Janesville, WI
Jefferson, GA
Kyle, TX
LaColle, Quebec, Canada
Lafayette, CO
Lancaster, PA
Lansing, MI
Las Vegas, NV(2)
Liberty, NC
Lodi, OH
Minneota, MN
Moultrie, GA
New London, NC
New Waverly, TX
New Windsor, MD
Ocala, FL
Ooltewah, TN
Parker, PA
Pearisburg, VA
Plainville, MA
Prairie du Chien, WI
Ranson, WV
Riverside, CA
Saginaw, TX
Salisbury, NC
San Antonio, TX
San Diego, CA
Sanford, NC
Santee, SC
Schertz, TX
Sidney, NY
Silsbee, TX
Springfield, IL
Stockertown, PA
Tecate, Baja California, Mexico
Thorndale, Ontario, Canada
Thornton, CA
Union City, GA(2)
Warrens, WI
Westville, IN
White Bear Lake, MN
White Pigeon, MI
Windsor, CO
Woodburn, OR



                                                                   EXHIBIT 14(a)

                         UNIVERSAL FOREST PRODUCTS, INC.
                  CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS

      Each person who has been designated by the Board of Directors of Universal
Forest Products, Inc. (the "Company") as a senior financial officer of the
Company shall, as a condition of employment by the Company, be required to sign
and deliver to the Company the following statement:

      In my role as a senior financial officer of Universal Forest Products,
      Inc. (the "Company"), I certify to the Company and the Audit Committee of
      the Board of Directors of the Company, that I adhere to and advocate the
      following principles and responsibilities governing my professional and
      ethical conduct, and to the best of my knowledge and ability:

      1.    I act with honesty and integrity, avoiding actual or apparent
            conflicts of interest in personal and professional relationships.

      2.    I provide constituents with information that is accurate, complete,
            objective, relevant, timely, and understandable.

      3.    I comply with rules and regulations of federal, state, and local
            governments, and other appropriate private and public regulatory
            agencies.

      4.    I act in good faith, responsibly, with due care, competence, and
            diligence, without misrepresenting material facts or allowing my
            independent judgment to be subordinated or otherwise compromised.

      5.    I respect the confidentiality of information acquired in the course
            of my work except when authorized or otherwise legally obligated to
            disclose. Confidential information acquired in the course of my work
            is not used for my personal advantage.

      6.    I share knowledge and maintain skills important and relevant to my
            constituents' needs.

      7.    I proactively promote ethical behavior among my professional peers.

      8.    I comply with and adhere to each and all of the Company's policies
            and practices, including those policies governing accounting and
            financial reporting practices and procedures.

/s/ Michael R. Cole                             January 15, 2003
- ------------------------                        ---------------------
(signature)                                     Dated



                                                                   EXHIBIT 14(b)

                         UNIVERSAL FOREST PRODUCTS, INC.
                  CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS

      Each person who has been designated by the Board of Directors of Universal
Forest Products, Inc. (the "Company") as a senior financial officer of the
Company shall, as a condition of employment by the Company, be required to sign
and deliver to the Company the following statement:

      In my role as a senior financial officer of Universal Forest Products,
      Inc. (the "Company"), I certify to the Company and the Audit Committee of
      the Board of Directors of the Company, that I adhere to and advocate the
      following principles and responsibilities governing my professional and
      ethical conduct, and to the best of my knowledge and ability:

      1.    I act with honesty and integrity, avoiding actual or apparent
            conflicts of interest in personal and professional relationships.

      2.    I provide constituents with information that is accurate, complete,
            objective, relevant, timely, and understandable.

      3.    I comply with rules and regulations of federal, state, and local
            governments, and other appropriate private and public regulatory
            agencies.

      4.    I act in good faith, responsibly, with due care, competence, and
            diligence, without misrepresenting material facts or allowing my
            independent judgment to be subordinated or otherwise compromised.

      5.    I respect the confidentiality of information acquired in the course
            of my work except when authorized or otherwise legally obligated to
            disclose. Confidential information acquired in the course of my work
            is not used for my personal advantage.

      6.    I share knowledge and maintain skills important and relevant to my
            constituents' needs.

      7.    I proactively promote ethical behavior among my professional peers.

      8.    I comply with and adhere to each and all of the Company's policies
            and practices, including those policies governing accounting and
            financial reporting practices and procedures.

/s/ Eric S. Maxey                        January 15, 2003
- -----------------------                  ---------------------
(signature)                              Dated



                                                                      EXHIBIT 21

                LIST OF REGISTRANT'S SUBSIDIARIES AND AFFILIATES

1.    Advanced Component Systems LLC, a Michigan Limited Liability
      Company.

2.    D&L Framing, LLC, a Nevada Limited Liability Company (50% owned).

3.    D&R Framing Contractors, L.L.C., a Michigan Limited Liability
      Company (50% owned).

4.    Euro-Pacific Building Materials, Inc., an Oregon Corporation.

5.    Indianapolis Real Estate, L.L.C., a Michigan Limited Liability
      Company.

6.    Norpac Construction, L.L.C., a Nevada Limited Liability Company (75%
      owned).

7.    Pinelli Universal, S. de R.L. de C.V., a Mexican Corporation (50%
      owned).

8.    Shawnlee Construction LLC, a Michigan Limited Liability Company (50%
      owned).

9.    Treating Services of Minnesota, LLC, a Michigan Limited Liability
      Company.

10.   Tresstar, LLC, a Michigan Limited Liability Company.

11.   UFP Framing LLC, a Michigan Limited Liability Company.

12.   UFP Framing of Florida, LLC, a Michigan Limited Liability Company.

13.   UFP Insurance Ltd., an exempted company organized under the laws of
      Bermuda.

14.   UFP Real Estate, Inc., a Michigan Corporation.

15.   UFP Transportation, Inc., a Michigan Corporation.

16.   UFP Ventures, Inc., a Michigan Corporation.

17.   UFP Ventures II, Inc., a Michigan Corporation.

18.   Universal Forest Products Canada Limited Partnership.

19.   Universal Forest Products Eastern Division, Inc., a Michigan
      Corporation.

20.   Universal Forest Products Foundation, a Michigan Nonprofit
      Corporation.

21.   Universal Forest Products Holding Company, Inc., a Michigan
      Corporation.

22.   Universal Forest Products Mexico Holdings, S. de R.L. de C.V., a
      Mexican Corporation.

23.   Universal Forest Products Nova Scotia ULC, a Canadian Corporation.

24.   Universal Forest Products of Canada, Inc., a Canadian Corporation.

25.   Universal Forest Products of Modesto L.L.C., a Michigan Limited
      Liability Company.

26.   Universal Forest Products Reclamation Center, Inc., a Michigan
      Corporation.

27.   Universal Forest Products RMS, LLC, a Michigan Limited Liability
      Company.

28.   Universal Forest Products Shoffner LLC, a Michigan Limited Liability
      Company.

29.   Universal Forest Products Texas Limited Partnership.

30.   Universal Forest Products Western Division, Inc., a Michigan
      Corporation.

31.   Universal Truss, Inc., a Michigan Corporation.

32.   Western Building Professionals, LLC, a Michigan Limited Liability
      Company.

33.   Western Building Professionals of California, Inc., a Michigan
      Corporation.

34.   Western Building Professionals of California II Limited Partnership.



                                                                      EXHIBIT 23

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Form 10-K of Universal
Forest Products, Inc. and subsidiaries of our reports dated February 25, 2005,
on Universal Forest Products, Inc. and subsidiaries management's assessment of
the effectiveness of internal control over financial reporting, and the
effectiveness of internal control over financial reporting of Universal Forest
Products, Inc. and subsidiaries included in the 2004 Annual Report to
Shareholders of Universal Forest Products, Inc. and subsidiaries.

We also consent to the incorporation by reference in the Registration Statement
File Numbers 33-81128, 33-81116, 33-81450, 333-60630 and 333-88056 on Form S-8
and Registration Statement File Number 333-75278 on form S-3 of our reports
dated February 25, 2005, with respect to the consolidated financial statements
of Universal Forest Products, Inc. and subsidiaries, Universal Forest Products,
Inc. and subsidiaries management's assessment of the effectiveness of internal
control over financial reporting, and the effectiveness of internal control over
financial reporting of Universal Forest Products, Inc. and subsidiaries,
incorporated by reference in the Form 10-K for the year ended December 25, 2004.

/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Grand Rapids, Michigan
March 10, 2005



                                                                   EXHIBIT 31(A)

                         UNIVERSAL FOREST PRODUCTS, INC.

                                  CERTIFICATION

I, William G. Currie, certify that:

1.    I have reviewed this report on Form 10-K of Universal Forest Products,
      Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) for the registrant and have:

      a.    Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      b.    Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to de designed under
            our supervision, 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;

      c.    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      d.    Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has


            materially affected, or is reasonably likely to materially affect,
            the registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation of internal control over financial reporting,
      to the registrant's auditors and the Audit Committee of registrant's Board
      of Directors (or persons performing the equivalent functions):

      a.    All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      b.    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

Date:    March 10, 2005             /s/ William G. Currie
                                    ---------------------------------------
                                    William G. Currie
                                    Chief Executive Officer



                                                                   EXHIBIT 31(b)

                         UNIVERSAL FOREST PRODUCTS, INC.

                                  CERTIFICATION

I, Michael R. Cole, certify that:

1.    I have reviewed this report on Form 10-K of Universal Forest Products,
      Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f)) for the registrant and have:

      a.    Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            registrant, including its consolidated subsidiaries, is made known
            to us by others within those entities, particularly during the
            period in which this report is being prepared;

      b.    Designed such internal control over financial reporting, or caused
            such internal control over financial reporting to de designed under
            our supervision, 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;

      c.    Evaluated the effectiveness of the registrant's disclosure controls
            and procedures and presented in this report our conclusions about
            the effectiveness of the disclosure controls and procedures, as of
            the end of the period covered by this report based on such
            evaluation; and

      d.    Disclosed in this report any change in the registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has


            materially affected, or is reasonably likely to materially affect,
            the registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation of internal control over financial reporting,
      to the registrant's auditors and the Audit Committee of registrant's Board
      of Directors (or persons performing the equivalent functions):

      a.    All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the registrant's ability to
            record, process, summarize and report financial information; and

      b.    Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal control over financial reporting.

Date: March 10, 2005                /s/ Michael R. Cole
                                    ---------------------------------------
                                    Michael R. Cole
                                    Chief Financial Officer



                                                                   EXHIBIT 32(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):

      I, William G. Currie, Chief Executive Officer of Universal Forest
Products, Inc., certify, to the best of my knowledge and belief, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that:

      (1) The report on Form 10-K for the year ended December 25, 2004, which
this statement accompanies, fully complies with requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in this report on Form 10-K for the period
ended December 25, 2004 fairly presents, in all material respects, the financial
condition and results of operations of Universal Forest Products, Inc.

                                    UNIVERSAL FOREST PRODUCTS, INC.

Date: March 10, 2005                By: /s/ William G. Currie
                                        ---------------------------
                                        William G. Currie
                                    Its:Chief Executive Officer



                                                                   EXHIBIT 32(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):

      I, Michael R. Cole, Chief Financial Officer of Universal Forest Products,
Inc., certify, to the best of my knowledge and belief, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that:

      (1) The report on Form 10-K for the period ended December 25, 2004, which
this statement accompanies, fully complies with requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in this report on Form 10-Q for the period
ended December 25, 2004 fairly presents, in all material respects, the financial
condition and results of operations of Universal Forest Products, Inc.

                                    UNIVERSAL FOREST PRODUCTS, INC.

Date: March 10, 2005                By: /s/ Michael R. Cole
                                        -----------------------
                                        Michael R. Cole
                                    Its:Chief Financial Officer