Lynn Afendoulis - Director of Corporate Communications Michael Glenn - CEO Michael Cole - CFO

Steve Chercover - D. A. Davidson David Leibowitz - Horizon Asset Management Trey Grooms - Stephens Robert Kelly - Sidoti & Company Ivy Zelman - Zelman Associates

Good day ladies and gentlemen and welcome to the fourth quarter 2009 Universal Forest Products Inc. earnings conference call. My name is [Chandelle] and I will be your facilitator for today's call. At this time all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Lynn Afendoulis, Director of Corporate Communications. Please proceed.

Thank you. Good morning and welcome to Universal Forest Products fourth quarter 2009 conference call. On the call today are Chief Executive Officer, Michael Glenn and Chief Financial Officer, Michael Cole. Please be aware that any statements included in this call that are not historical are forward looking statements within the meaning of Section 21-E of the Securities and Exchange Act of 1934 as amended. Such forward-looking statements are based on the beliefs of the company’s management as well as on assumptions made by information currently available to the company at the time such statements were made. The company does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. Actual results could differ materially from those included in such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties. Among the factors that could cause actual results to differ materially are the following: adverse lumber market trends, competitive activity, negative economic trends, government regulations and weather. These risk factors and additional information are included in the company’s reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission. This call is the property of Universal Forest Products. Any re-distribution, re-transmission or re-broadcast of this call in any form without the express written consent of Universal is strictly prohibited. At this time, I would like to turn the call over to Mike Glenn.

Thanks Lynn. Guys you know we spent a lot of time in these past few years telling you things that we are going to do from right sizing our organization to closing unprofitable plants. Eliminating ways and focusing on some basic principals like managing our inventories and receivables and making sure that we had a very strong balance sheet. And I think that our numbers reflect what we have done. Today, we are a more efficient organization than we were three years ago. And then to be honest with you we are a more efficient organization today than we were last week. Thanks to our CI journey which is making us a better company day after day. Our general managers and officers are focused on the basics allowing us to improve our inventories our receivables and things that affect our bottom line and we believe that we have a more solid balance sheet in the industry. We told you what we are going to do and we did it. Now I am going to tell you what we are going to focus on this year. We are a sales organization and we are going to focus on top lined sales. That will be the name of the game for Universal. We will grow through new opportunities with existing customers. Obviously, we will add customers and we will bring new price to the market. We also hope that we will grow through acquisitions. We are looking and we are trying, what we will not overpay for anything and we are finding it tough right now to make some deals that makes sense to us. But we will stay true to what we've always have been and that is we will make the right deal for universal and the right deal for the acquiring company. We are done with watching our business receipt. We are focused on sustainable long-term growth. We won't give away any business in any of our markets and that’s one of the reasons we are in the position we are in today. We are a lean and strong with a good flat cash flow and with a rock solid balance sheet. I am more than optimistic about our future and opportunities. I am excited. I am excited to get out of that in the morning and to see what we can get done today. We are the best management team and work force at the industry, they help us reach our goals. To be honest with you, right now we have 60 of our general managers and officers in one of our buildings here in Grand Rapids. We had come here today and for the next two days across the country to talk about rolling sales and the best way for us to do it. And I need to get over there to meet with them and to hear about their great ideas so we can start executing them and growing our company. But remember this; we always do what we tell you we're going to do. And I am telling you we are going to grow our topline sales. And now I'll turn it over to Mike Cole for review of our financials and then we will take some questions

Thanks Mike. I’ll get things started by reviewing our income statement for the quarter. Our total net sales for the quarter decreased by 20% driven by a decline in unit sales. On market, our sales in the DIY market decreased 15% as unit sales continue to be impacted by declines in housing starts consumer spending. Our sales to manufactured housing market decreased 15% entirely due to declines in industry HUD code and modular production. Our sales to the site-built construction market decreased 42% this quarter. Unit sales were impacted by housing starts which were up approximately 26% from September to November and multi-family starts in particular which were up about 69% during that same period. We have also mentioned in the past that we have made a strategic decision to walk away from unprofitable, unreasonably priced business which is (inaudible) but has helped us improve our profitability. Finally our sales to the industrial market decreased by 9% for the quarter resulting from decreased demand by our customers to the economic conditions, we gained market share due in part to adding new customers expanding our product offering and increasing our penetration into the current pre-forming market Moving down the income statement, we are pleased to report our fourth quarter gross margin increase to 13% from the 11.8% last year, and we are able to do an improvement in material cost resulting from better buying and inventory management, for taxing improved margin, this improvement was offset to some extent by the impact of lower sales and fixed manufacturing cost. Selling, General and Administrative expenses decreased by $6.5 million or 13% for the quarter, which was comprised of $1.7 million reduction in SG&A for operations were previously closed and a decrease in the SG&A of existing locations totaling $4.8 million. The decrease from existing location was primarily due to lower compensation related expenses tied to a decline in head count, incentive compensation accrual and many smaller decreases in several controllable expense categories. Impairment and exit cost this quarter are resulted additional plant closure actions we took in the fourth quarter primarily related to operations supplying (inaudible) market. Considering the external challenges we continue to face affecting our sales we are pleased to report an increase in pre-tax profits for the quarter excluding impairments and exit cost of almost $2.2 million. Moving on to cash flow statement, we are pleased to report, cash flow from operations was a $128 million this year compare to $89 million last year. For comparison purposes I think it's important to note that our operating cash flows in 2008 included $27 million of negative cash flow related to the sale of receivables program that we terminated in September of that year. Our operating cash flow in 2009 includes net earnings of $24 million, $47 million in non cash expenses and $57 million decrease in working capital. Working capital decreased primarily due to reductions in inventory and receivables due to lower sales volumes ad demand. Capital expenditures totaled almost $16 million for the year as a result of efforts to curtail our spend. In fact we were able to sell fixed assets for an amount which nearly funded our capital expenditures which primarily consisted of sales of ideal real estate. Our cash outflows from financing activities was $56 million, as we paid off nearly $50 million of debt, paid dividends and bought back some of our stock in the fourth quarter. Because of our strong balance sheet and confidence in future cash flows, in October our board through an increase in our semi-annual dividend rates from $0.06 to $0.20 a share. Finally, our interest bearing debt decreased to $54 million and our cash balances have grown to $82 million at the end of December. And a $300 million revolving credit facility remains unutilized except for $32 million reserve for letters of credit. That’s all I have on financials Mike.

Thanks Mike and now we'll open up to questions.

(Operator Instructions). And your first question comes from the line of Steve Chercover of D. A. Davidson. Please proceed. Steve Chercover - D. A. Davidson: First of all in the last six weeks or so lumber and panel prices have been on a pretty good roll. I am wondering, do you view that as a sign of recovery or is it just inventory restocking, and if I am not mistaken, higher prices are normally bad for your margins, so maybe you can give us a little comment on that well, please?

Steve, the rise right now is a supply issue, not a demand issue. We've got terrible weather across the country as every is aware of, and we had more rain come across the South East last week, and they just can't get in and get their logs, and a year ago at this time, there was a big build up of finished goods sitting at the mills, and sitting in warehouses down south. This year, there really isn’t any inventory at this time sitting in the warehouses, so this is more supply driven. It is bad for our margins. We are not sure if we have fixed debtors, and so if you have a fixed debtor run $200 wood versus $400 wood, it would negatively on your margin, but when that market goes up, you certainly have higher gross profit dollars also. And see if through this, through these spikes, which is in many ways kind of a traditional up until about four, five years ago, we would see these spikes, they usually come about a month or two later. We'll see these spikes in the marketplace and in some way it plays into our strengths. We can manage within these peaks, where a lot of companies can't, and what I mean by that is, it goes back to; we don't have to buy just a [2x614] in pay letter price they are demanding. We can go in and buy [2x1018s] when they are really cheap and cut them back to 12, those are premium and then we take those six (inaudible), and use them on our spare stringers. So these peaks that are in there create great opportunities for us, and in many ways help us increase our margins, and the other side of that Steve when this goes, and the other side of that Steve is when this thing goes, when this thing comes down and it always does, our ability to cut up wood and move it through the system is a lot quicker than anybody else, so we don’t get hurt as bad as other companies although on at downside, certainly we do take a few loans. Steve Chercover - D. A. Davidson: Sure, and then could you give us a little sense of any regional trends that you're seeing beyond what we know is happening with the weather?

Regional trends in terms of just the market in general? Steve Chercover - D. A. Davidson: Yes, like any regions that seem to be recovering faster or slower in your various markets?

It’s been an unusual from above December 15 until and till today weather pattern that has affected our business everywhere. I was in Florida three weeks ago from meeting and there was ice and every tree was covered and the fruit was going to be destroyed. Now, that’s kind of a tough deal for Florida but to be honest with you, maybe California will pick up that business and being an national player that will help us. The storms in the North East have slowed business down therefore so, it’s affected us everywhere. Steve Chercover - D. A. Davidson: Okay, well you're certainly sounding confident with balance sheet like you have that that seems reasonable. At one stage, do you think you’ll start providing us with guidance again or is it still bit premature for that?

I think it's still early for that Steve. We're not planning on doing it for 2010 right now.

Your next question comes from the line of David Leibowitz of Horizon Asset Management. Please proceed. David Leibowitz - Horizon Asset Management: Couple of quick questions, first am I to take what you said at the very beginning that we are expecting to have higher sales this year than we did a year ago?

Absolutely. David Leibowitz - Horizon Asset Management: Okay and as a follow-up, would profit margins expand or at least operating margins expand as a consequence of that?

We don’t think our margins are going to be affected. We've already walked away from a fair amount business in one of our segments because I think we talked about it, in one of our couple other calls ago. We're not in here for practice. We know how to do and there are still some people out there that are pricing very foolishly and we will participate. We've got a great strategy now David. We're going to execute it, you are going to see our sales growth, you are going to see our margins stay firm, and you are going to see some pretty good things at our Universal Forest Products this year.

David, it's certainly our goal to maintain the margin improvements that we were able to achieve this year. And continue to build on that by increasing productivity as we grow sales. We had our 2004 goals about it, improving our productivity and enhancing our profitability through cost reductions is still right on our radar screen. David Leibowitz - Horizon Asset Management: Also I may have missed it but I did not remember hearing anything said about new product introductions or how those products introduced in the last 12 to 24 months have been doing. Could you update us on that?

David, we've introduced a fair amount of products in the marketplace over the past 12 months. Like any new product, we get them in the stores. We're getting them set. They are new products and to be honest, they are doing it quite well. But its early to give you any kind of numbers of how well, but the fact that we're bringing some different products in that to be honest with you, some are (inaudible) related, in fact a lot of them are, and they are bringing us some better margins and we're kind of excited about what we are bringing in to the market place and what we have got coming down the pipe that we really want to disclose on the call right now because we do have people that listen to this that kind of come after us with it. So we got some pretty good things coming down the pipe. David Leibowitz - Horizon Asset Management: And the last question, in terms of the sales increases that you are looking for, how much of that will come from new territories from existing accounts and how much of that comes from adding inventory items to the existing regions you already have with those accounts.

I think that there is a fair amount that’s going to come from new products that we are going to bring in to the market place, I would say that a bulk of that’s going to come from that David.

Your question comes from the line of Trey Grooms of Stephens please proceed. Trey Grooms - Stephens: Just a couple of quick questions one, you guys obviously generated significant amount of free cash in 2009 and I am sure you'll generate a descent amount of cash flow in 2010 as well and you're sitting with quite a bit of cash on the balance sheet. I know you increased your dividend, but what is your intended use of cash kind a look as you look into 2010 and 2011 kind of by priority looking out there.

Yes, I’ll take that one Trey, I think in the last call we mentioned that expansionary capital expenditures and capital expenditures in general, we expect those to be around $32 million for the year, so the CapEx is certainly one. At the current semi-annual dividend rate, we'll have $8 million of dividends. We still will be engaged in share repurchase activity when it's at a price target that makes sense for us. We pretty much done volumes where to prevent any dilution under a benefit plan, but most significantly, we will be looking at acquisitions and looking to grow the business and I would think that the bulk of the capital will be used for that purpose. Trey Grooms - Stephens: And with your debt pay down that you accomplished over the last year or so, when mentioning acquisitions, would you care to give us an update of what your comfort level would be if the right acquisition came along as far as increasing leverage again?

We remain committed to making sure we have a conservative balance sheet and when we look at our capital structure, we look at debt to EBITDA as kind of the base like measure for what we are comfortable with and debt to EBITDA is about one in three quarters, two times is kind of where our comfort level is. Trey Grooms - Stephens: Okay and then you talked about increased sales in 2010 and I know you hit on it again with the prior question, but so do you think that those increase, I know you mentioned new products, but do you think that those increases will be kind of across the board when you look at your different divisions or do you think that it could be more from just one or two of the different divisions that you guys have.

Are you referring to like our DIY versus our industrial markets price? Trey Grooms - Stephens: Yes.

I think our biggest growth that you'll see will be in our industrial market and within that grouping is our packs group which is our new packing and container solutions program that we started out about 15 months ago. We really haven’t talked a lot about it because we are trying to fly into the radar a little bit, but you will see in calls in the future we'll probably talk about that and some pretty good growth that we have got. Our concrete forming is a really initiative for us. Unfortunately, we had lot of projects slow down here in the last half of '09. The manufacture to housing is a segment that is kind of flat, but we have a strategy where we are going to put more products in the house and that products that are outside of the core universal. So you'll see if we execute this strategy you'll see some pretty good growth there also. Trey Grooms - Stephens: My last question, when you look at SG&A, it looks like you guys have done a great job of pulling that number down and I think I've asked you guys this question before in the past about how much that could sustain or how much top line growth level of SG&A could fuel I guess, and I think you had mentioned 5% to 10%. Do you still think that's a good number because I mean the fourth quarter in my opinion, was a great SG&A number for the level of sales you guys put up and I'm just trying to get a feel for, okay if your sale up and I think you said 5% to 10% could you still maintain that level kind of SG&A in 2010 if we were to see that level of growth?

Yeah we think so, certainly our goal is to be able to grow sales by that type of an amount and still hold the SG&A cost, kind of that run rate that you are mentioning for Q4 and one thing I should point for Q4 is that you know because it was more of a break even type of quarter even there wasn’t any bonus expense in that number so that gives you just kind of a pure base line look at what our core SG&A is and so in quarters when we were much more profitable that number will spike up with bonus expense.

Your next question comes from the line of Robert Kelly of Sidoti & Company. Please proceed. Robert Kelly - Sidoti & Company: Just a maybe point of clarification Mike when you called that the individual segments pricing unit comparisons from a year ago period was price a positive factor or detractor in the quarter

I didn’t mention it. We are still developing, place versus quantity sort of our sales change I think what you want to do is the dominant part of the sales change is unit sales decline. Robert Kelly - Sidoti & Company: Okay so price wasn’t too much of a factor?

Not as much factor Robert Kelly - Sidoti & Company: Now when you talk about 2010 being a growth year would lumber prices be additive to that and on top of volume growth, just trying to think about how would lumber start in to rise a little bit of depress lows how should we think about 2010?

Yeah, lumber will certainly positively affect sales when it moves up [40 to 60 buck to thousand] they will have a positive impact but we are talking about beyond that growing our sales. Robert Kelly - Sidoti & Company: So when you talk to 2010 growth you were talking from a unit perspective.

Correct, yes.

Although again with the market being up that’s added to this one. Robert Kelly - Sidoti & Company: Right. If we just exclude kind of whatever the numbers have (inaudible), no one knows.

It is. Robert Kelly - Sidoti & Company: Right. So do you assume the market for industrial and DIY starts to grow in 2010 and then you have share gains in the product growth on top of that driving volume. I am just trying to think about how you get to the growth for 2010. Has the market bottomed and it starts to recover a little or do you expect just flat from here.

We think that our housing segment is going to be flat. We think that there's going to be a modest growth in the DIY, we'll see a little better than modest growth on our industrial from an organic now from what we add we see a pretty good growth in these segments. Robert Kelly - Sidoti & Company: Got you. And then just on acquisition pipeline, it sounds like the multiples being earned quite reasonable or you are just not, is it more of a the multiples aren’t quite visible, or are you just not finding that a good fit for universal.

Rather we’ve had some really good acquisitions that we’ve worked out and some of them would have been pretty surprising but we just weren’t going to leverage the future of our company just to make an acquisition. And so we’ve got two or three we passed on and we’ve got three of four we are working on right now that if they can align with what we think is a fair value we will pull the trigger. Robert Kelly - Sidoti & Company: Understood. And then as far as the few that you passed on and the few that you are still looking at, would they be more complimentary built-on type or something of more significance?

They will be, they will be outside of what we presently do, but they will be with in the industry that we're in.

And your next question comes from the line of Ivy Zelman of Zelman Associates. Please proceed. Ivy Zelman - Zelman Associates: Can you help with the correlation to unit volume of single family residential and then maybe what you receive in January from what we understand, residential unit volume in the back half of January is picking up and orders maybe as much as 25% or 30%, so although you're looking for flat residential if unit volume was up 25% year-over-year in calendar 2010, I'm well with that duty of business, and are you beginning to see some pickup and demand because there is more single family residential building activity going on?

First of all, I hope you're right that the single family housing will increase by 25%. We don't believe that. We think its going to be a very modest increase. We've seen false starts for the last two quarters, and we're seeing it now. We hear the same things from some of the builders that they got some business in their building, but to be honest with you, we don't [cheat]. Now if it happens, we're in the component business, so when you look at our business in the next quarter realize that we like to sell trusses, and wall panels and floor systems. We were not into doing peaceful lumber, we're not into doing molding and mill work, we're not into doing dry wall. We're into components where we are very, very good, and we're the low cost producer and that's our [midge] that's where we're strong at those markets do improve our sales guys are very aggressive they will get the orders and we've got a lot under your live capacity, we’ll be able to adjust quickly.

At this time there are no further questions in the queue.

Thanks everybody, we also late in the day and we appreciate you taken the time to listen to us today. I’m going to across the street now and listen to 60 of our General Managers and up and VPs tell us how we are going to grow up sales but I want to leave you with this. We do what we say we are going to do and we will grow our sales and we will grow our profits in 2010 and you can write it down. Thanks for your time.

Thank you for your participation in today’s conference, this concludes the presentation. You may now disconnect. Have a wonderful day.