Summary of UNIVERSAL FOREST PRODUCTS INC

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Included in this report are certain 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 below and certain economic and business factors which may be beyond our control. Investors are cautioned that all forward-looking statements involve risks and uncertainty. We also encourage you to read our Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission. That report includes "Risk Factors" that you should consider in connection with any decision to buy or sell our securities. We are pleased to present this overview of 2009.
OVERVIEW Our results for the second quarter of 2009 were impacted by the following:
• We experienced sales decreases in all of our markets; nonetheless, we believe we have gained additional share in each of the markets we serve, except manufactured housing. We have been able to maintain our significant share of the manufactured housing market.

• Our overall unit sales decreased 19%, as sales out of existing facilities and operations we closed decreased by 20% this quarter and we experienced a 1% increase in unit sales as a result of acquisitions.

• Single-family housing starts decreased approximately 43% in April and May of 2009, compared to the same periods of 2008, as a result of an excess supply of homes, tight credit conditions, and an increase in foreclosures. In addition multi-family and commercial construction has decreased approximately 65% and 34%, respectively, in April and May 2009 compared to the same periods of 2008.

• Consumer spending for large repair/remodel projects has decreased due to general economic conditions, among other factors. The Consumer Confidence Index has fallen from 51 in June of 2008 to 49 in June of 2009, and the same store sales of "big box" home improvement retailers have declined by low double-digit rates.

• Shipments of HUD code manufactured homes were down 46% in April and 45% in May of 2009, compared to the same periods of 2008. Industry sales of modular homes have also continued to decline. Weak market conditions are due, in part, to an excess supply of site-built homes and tight credit conditions.

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UNIVERSAL FOREST PRODUCTS, INC. • The industrial market has declined due to the general weakening of the U.S. economy. We gained additional share of this market due, in part, to acquisitions and adding new concrete forming business.

• Our gross margin increased to 16.0% from 12.0% in 2008 primarily due to:

• An improvement in material costs as a percentage of net sales.

• An improvement in labor and plant overhead as a percentage of net sales.

• Lower freight costs.

• The lower level of the Lumber Market.

• Our SG&A expenses are down approximately $5.7 million, or 9%, from the second quarter of 2008, due to our right-sizing efforts and plant consolidation actions we took last year, offset somewhat by an increase in bad debt and incentive compensation expense.

• Our net interest costs decreased by $1.8 million, or 57%, as our interest-bearing debt and amounts outstanding under our sale of receivables program declined from $178 million at the end of June of 2008 to $56 million at the end of June of 2009. This decrease was slightly offset by approximately $360,000 of expense related to a make-whole provision we incurred by electing to pay off a $15 million senior unsecured note six months early. We will save approximately $420,000 in the last six months of 2009 because of this pre-payment.

• We are pleased to report operating and investing cash flows totaling almost $67 million for the first six months of 2009 due to improved profitability, effective working capital management, and reduced working capital requirements due to weak demand.

Outlook
We expect the current challenging conditions to prevail throughout 2009; however, our strong financial position, solid business model, diverse business opportunities and ability to adjust appropriately to our opportunities position us well to endure challenging times. We believe that current economic conditions and uncertainties limit our ability to provide meaningful guidance for ranges of likely financial performance; therefore, we will not provide annual sales or net earnings targets for the foreseeable future. Route 2012
Since we discussed our Growth & Opportunity 2010 ("GO 2010") goals in our annual report on form 10-K for the period ended December 30, 2006, industry and general economic conditions have significantly deteriorated. In addition, the Lumber Market has declined from an average of $388/mbf in 2005 to an average of $203/mbf in 2009; a 48% decline from when we first set our goals, which has adversely impacted our sales.

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UNIVERSAL FOREST PRODUCTS, INC. In place of our GO 2010 goals, we have a new four-year growth plan titled "Route 2012," which includes goals to be achieved by the end of our fiscal year 2012 including:
• Increase sales to $3 billion.

• Improve productivity by 15% through our Continuous Improvement initiative.

• Improve profitability by three hundred basis points through productivity improvements, cost reductions, and growth.

• Improve receivables cycles in our industrial, site-built and manufactured housing markets by 10% by reducing the amount of our receivables that are paid past the agreed upon due date.

• Improve inventory turnover by 10%.

                            HISTORICAL LUMBER PRICES
The following table presents the Random Lengths framing lumber composite price
for the six months ended June 27, 2009 and June 28, 2008:

                                                     Random Lengths Composite
                                                           Average $/MBF
                                                      2009                2008

     January                                      $         198         $     249
     February                                               199               244
     March                                                  195               240
     April                                                  208               255
     May                                                    198               281
     June                                                   222               268

     Second quarter average                       $         209         $     268
     Year-to-date average                         $         203         $     256

     Second quarter percentage change from 2008           (22.0 %)
     Year-to-date percentage change from 2008             (20.7 %)

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

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                        UNIVERSAL FOREST PRODUCTS, INC.

                                                        Random Lengths SYP
                                                           Average $/MBF
                                                         2009           2008

         January                                      $      241        $ 269
         February                                            233          264
         March                                               232          264
         April                                               241          272
         May                                                 231          324
         June                                                236          318

         Second quarter average                       $      236        $ 285
         Year-to-date average                         $      236        $ 305

         Second quarter percentage change from 2008        (17.2 %)
         Year-to-date percentage change from 2008          (22.6 %)

IMPACT OF THE LUMBER MARKET ON OUR OPERATING RESULTS We experience significant fluctuations in the cost of commodity lumber products from primary producers ("Lumber Market"). We generally price our products to pass lumber costs through to our customers so that our profitability is based on the value-added manufacturing, distribution, engineering, and other services we provide. As a result, our sales levels (and working capital requirements) are impacted by the lumber costs of our products. Lumber costs are a significant percentage of our cost of goods sold.
Our gross margins are impacted by both (1) the relative level of the Lumber Market (i.e. whether prices are higher or lower from comparative periods), and
(2) the trend in the market price of lumber (i.e. whether the price of lumber is increasing or decreasing within a period or from period to period). Moreover, as explained below, our products are priced differently. Some of our products have fixed selling prices, while the selling prices of other products are indexed to the reported Lumber Market with a fixed dollar adder to cover conversion costs and profits. Consequently, the level and trend of the Lumber Market impact our products differently. Below is a general description of the primary ways in which our products are priced.
• Products with fixed selling prices. These products include value-added products such as decking and fencing sold to DIY/retail customers, as well as trusses, wall panels and other components sold to the site-built construction market, and most industrial packaging products. Prices for these products are generally fixed at the time of the sales quotation for a specified period of time or are based upon a specific quantity. In order to maintain margins and reduce any exposure to adverse trends in the price of component lumber products, we attempt to lock in costs for these sales commitments with our suppliers. Also, the time period and quantity limitations generally allow us to re-price our products for changes in lumber costs from our suppliers.

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

Changes in the trend of lumber prices have their greatest impact on the following products:
• Products with significant inventory levels with low turnover rates, whose selling prices are indexed to the Lumber Market. In other words, the longer the period of time these products remain in inventory, the greater the exposure to changes in the price of lumber. This would include treated lumber, which comprises approximately 12% of our total sales. This exposure is less significant with remanufactured lumber, trusses sold to the manufactured housing market, and other similar products, due to the higher rate of inventory turnover. We attempt to mitigate the risk associated with treated lumber through vendor consignment inventory programs. (Please refer to the "Risk Factors" section of our annual report on form 10-K, filed with the United States Securities and Exchange Commission.)

• Products with fixed selling prices sold under long-term supply arrangements, particularly those involving multi-family construction projects. We attempt to mitigate this risk through our purchasing practices by locking in costs.

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

                                        Period 1       Period 2

                     Lumber cost       $      300     $      400
                     Conversion cost           50             50

                     = Product cost           350            450
                     Adder                     50             50

                     = Sell price      $      400     $      500
                     Gross margin            12.5 %         10.0 %

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

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                        UNIVERSAL FOREST PRODUCTS, INC.
                             BUSINESS COMBINATIONS
See Notes to Consolidated Condensed Financial Statements, Note H, "Business
Combinations."
                             RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of our
Consolidated Condensed Statements of Earnings as a percentage of net sales.

                                           For the Three Months Ended                 For the Six Months Ended
                                       June 27, 2009        June 28, 2008        June 27, 2009         June 28, 2008

Net sales                                       100.0 %              100.0 %              100.0 %               100.0 %
Cost of goods sold                               84.0                 88.0                 85.2                  88.4

Gross profit                                     16.0                 12.0                 14.8                  11.6
Selling, general, and
administrative expenses                          10.9                  8.7                 12.0                  10.0
Net (gain) loss on disposition of
assets and other impairment and
exit charges                                     (0.1 )                0.1                 (0.2 )                 0.1

Earnings from operations                          5.2                  3.2                  3.0                   1.5
Interest, net                                     0.2                  0.4                  0.3                   0.5

Earnings before income taxes                      5.0                  2.8                  2.7                   1.0
Income taxes                                      1.9                  1.1                  1.0                   0.3

Net earnings                                      3.1                  1.7                  1.7                   0.7
Less net earnings attributable to
noncontrolling interest                          (0.0 )               (0.1 )               (0.0 )                (0.1 )

Net earnings attributable to
controlling interest                              3.1 %                1.6 %                1.7 %                 0.6 %

GROSS SALES
We market, manufacture and engineer wood and wood-alternative products for the DIY/retail market, structural lumber products for the manufactured housing market, engineered wood components for the site-built construction market, and specialty wood packaging for various markets. We also provide framing services for the site-built construction market and various forms for concrete construction. Our strategic long-term sales objectives include:
• Diversifying our end market sales mix by increasing sales of specialty wood packaging to industrial users, increasing our penetration of the concrete forms market, and increasing our sales of engineered wood components for custom home, multi-family and light commercial construction.

• Expanding geographically in our core businesses.

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UNIVERSAL FOREST PRODUCTS, INC. • Increasing sales of "value-added" products and framing services. Value-added product sales primarily consist of fencing, decking, lattice, and other specialty products sold to the DIY/retail market, specialty wood packaging, engineered wood components, and "wood alternative" products. Engineered wood components include roof trusses, wall panels, and floor systems. Wood alternative products consist primarily of composite wood and plastics. Although we consider the treatment of dimensional lumber with certain chemical preservatives a value-added process, treated lumber is not presently included in the value-added sales totals.

• Maximizing unit sales growth while achieving return on investment goals.

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

                                For the Three Months Ended                   For the Six Months Ended
                           June 27,       June 28,          %         June 27,        June 28,           %
Market Classification        2009           2008         Change         2009            2008          Change
DIY/Retail                 $ 291,540      $ 337,061        (13.5 )    $ 459,674      $   512,520        (10.3 )
Site-Built Construction       60,830        132,085        (54.0 )      121,595          239,093        (49.1 )
Industrial                   131,281        172,285        (23.8 )      234,940          311,893        (24.7 )
Manufactured Housing          44,668         84,167        (46.9 )       81,218          160,609        (49.4 )

Total Gross Sales            528,319        725,598        (27.2 )      897,427        1,224,115        (26.7 )
Sales Allowances             (13,374 )      (17,113 )                   (20,760 )        (26,118 )

Total Net Sales            $ 514,945      $ 708,485        (27.3 )    $ 876,667      $ 1,197,997        (26.8 )

Note: In the first
quarter of 2009,
we reviewed the
classification of
our customers and
made certain
reclassifications.
Prior year
information has
been restated to
reflect these
reclassifications.

Gross sales in the second quarter of 2009 decreased 27% compared to the second quarter of 2008. We estimate that our unit sales decreased by 19% and overall selling prices decreased by 8% comparing the two periods. We estimate that our unit sales increased 1% as a result of business acquisitions, while unit sales from existing and closed facilities decreased 20%. Our overall selling prices may fluctuate as a result of the Lumber Market (see "Historical Lumber Prices) and competitive factors.
Gross sales in the first six months of 2009 decreased 27% compared to the first six months of 2008 resulting from an estimated decrease in units shipped of approximately 20%, while overall selling prices decreased by 7%. We estimate that our unit sales increased 1% as a result of business acquisitions and new plants, while our unit sales from existing and closed facilities decreased by 21%.

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UNIVERSAL FOREST PRODUCTS, INC. Changes in our sales by market are discussed below. DIY/Retail:
Gross sales to the DIY/retail market decreased 14% in the second quarter of 2009 compared to 2008 primarily due to an estimated 6% decrease in overall unit sales and an estimated 8% decrease in overall selling prices due to the Lumber Market. We estimate that our unit sales increased 1% as a result of acquisitions, while unit sales from existing and closed facilities decreased 7%. Unit sales declined due to the impact of the housing market on our retail customers whose business is closely correlated with single-family housing starts and a decline in consumer spending as evidenced by low double-digit declines in same store sales reported by our "big box" customers. We achieved market share gains in 2009 which offset some of the impact of these adverse market conditions. Gross sales to the DIY/retail market decreased 10% in the first six months of 2009 compared to 2008 primarily due to an estimated 4% decrease in overall unit sales and an estimated 6% decrease in overall selling prices due to the Lumber Market. We estimate that our unit sales increased 1% as a result of acquisitions, while unit sales from existing and closed facilities decreased 5%. The decrease in unit sales is primarily due to the same factors mentioned in the paragraph above.
Site-Built Construction:
Gross sales to the site-built construction market decreased 54% in the second quarter of 2009 compared to 2008 due to an estimated 42% decrease in unit sales out of existing plants and an estimated 12% decrease in our average selling prices primarily due to the Lumber Market. National single-family housing starts were off a reported 43% for April and May of 2009 compared to the same period of 2008. Multi-family and commercial construction activity declined approximately 65% and 34%, respectively, in April and May 2009 compared to the same period of 2008.
Gross sales to the site-built construction market decreased 49% in the first six months of 2009 compared to 2008, due to an estimated 39% decrease in unit sales and an estimated 10% decrease in selling prices. National single-family housing starts were off a reported 40% through May of 2009 compared to the same period of 2008. Multi-family and commercial construction activity declined approximately 55% and 25%, respectively, through May of 2009 compared to the same period of 2008.
Industrial:
Gross sales to the industrial market decreased 24% in the second quarter of 2009 compared to the same period of 2008, due to an estimated 15% decrease in unit sales and an estimated 9% decrease in selling prices. We continue to experience a decline in sales to certain of our customers that supply the housing market or have been impacted by the weakening U.S. economy. We have been able to offset some of the impact of a decline in demand with market share gains and our continued penetration of the concrete forming market.

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UNIVERSAL FOREST PRODUCTS, INC. Gross sales to the industrial market decreased 25% in the first six months of 2009 compared to the same period of 2008, due to an estimated 20% decrease in units and an estimated 5% decrease in selling prices. Unit sales decreased for the reasons mentioned in the paragraph above. Manufactured Housing:
Gross sales to the manufactured housing market decreased 47% in the second quarter of 2009 compared to the same period of 2008, primarily due to an estimated 41% decrease in unit sales and an estimated 6% decrease in selling prices due to the Lumber Market. Our decline in unit sales was the result of an overall decline in industry production. The industry most recently reported a decrease in HUD code production of 46% in April and 45% in May of 2009 compared to the same period of 2008. Modular home production was similarly down during the period.
Gross sales to the manufactured housing market decreased 49% in the first six months of 2009 compared to the same period of 2008. This decrease resulted from an estimated 45% decrease in unit sales combined with an estimated 4% decrease in selling prices. Industry production of HUD code homes was off a reported 46% through May of 2009 compared to the same period of 2008. Modular home production was similarly down during the period.
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.

                                Three Months Ended             Six Months Ended
                            June 27,         June 28,      June 27,        June 28,
                              2009             2008          2009            2008

          Value-Added            61.2 %           61.4 %        61.0 %          61.2 %
          Commodity-Based        38.8 %           38.6 %        39.0 %          38.8 %

Value-added sales decreased 27% in the second quarter of 2009 compared to 2008, primarily due to decreased sales of trusses, turn-key framing and installed sales, engineered wood products, fencing and manufactured component lumber. Commodity-based sales decreased 27% comparing the second quarter of 2009 with the same period of 2008, primarily due to decreased sales of non-manufactured and treated lumber.
Value-added sales decreased 27% in the first six months of 2009 compared to 2008, primarily due to decreased sales of trusses, turn-key framing and installed sales, engineered wood products and manufactured component lumber. Commodity-based sales decreased 27% comparing the first six months of 2009 with the same period of 2008, primarily due to decreased sales of non-manufactured lumber and panels and treated lumber.

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UNIVERSAL FOREST PRODUCTS, INC. COST OF GOODS SOLD AND GROSS PROFIT
Our gross profit percentage increased to 16.0% from 12.0% comparing the second quarter of 2009 with the same period of 2008. In addition, our gross profit dollars decreased by only 3% comparing the second quarter of 2009 with the same period of 2008, which compares favorably with our 19% decrease in unit sales. Our improved gross margin is primarily due to:
• An improvement in material costs as a percentage of net sales as a result of better inventory management to protect margins.

• An improvement in labor and plant overhead as a percentage of net sales due to plant consolidation and right-sizing efforts previously taken.

• Lower freight costs.

• The lower level of the Lumber Market.

Our gross profit percentage increased to 14.8% from 11.6% comparing the first six months of 2009 with the same period of 2008. In addition, our gross profit dollars decreased by approximately 7% comparing the first six months of 2009 with the same period of 2008, which compares favorably with our 20% decrease in . . .