UFPI Increases Sales by 5% in 3rd Quarter 2010 Despite Weak Economy

- Balance sheet is strong; expenses are down -

- Profits affected by earlier spike in lumber market and inventories -

GRAND RAPIDS, Mich.--(EON: Enhanced Online News)--Universal Forest Products, Inc. (Nasdaq: UFPI) today announced third-quarter 2010 net sales of $480.6 million, compared to net sales of $457.8 million for the same period of 2009. Net earnings for the third quarter of 2010 were $2.6 million, or $0.13 per diluted share, compared to net earnings of $10.1 million, or $0.51 per diluted share, for the same period last year.

“This was the most challenging lumber market I’ve seen in my 36 years with the company, and I’m proud of the way our people managed through it”

The Company grew sales in three of its four markets: Sales to industrial and manufactured housing customers increased 19.3 percent and 18.2 percent, respectively, during the quarter, while sales to site-built construction customers rose 1.6 percent. Only Do-It-Yourself/retail saw a sales decrease, of 7.7 percent, due to weak demand that resulted in slow retail sales. Net earnings were impeded by the spike in lumber costs, which occurred in the spring.

While lumber prices stabilized during the third quarter of 2010, inventories were built earlier in the year—when lumber prices were up as much as 52 percent over the previous year—in preparation for a solid selling season, which didn’t materialize. At the end of June, the Company’s inventory consisted primarily of higher-cost lumber, which adversely affected profits in the third quarter. The Company has sold through this product, and by the end of the third quarter its inventories comprised lumber purchased at a much lower cost.

“This was the most challenging lumber market I’ve seen in my 36 years with the company, and I’m proud of the way our people managed through it,” said CEO Michael B. Glenn. “Frankly, this type of market has the potential to wipe out an entire year’s profits for most companies that operate in our industries. Fortunately, our agility and diverse business model have allowed us to generate more than $17 million in net earnings for the year so far. With more than $58 million in cash and only $53 million in debt, we have the resources to take advantage of opportunities that arise. We remain in an enviable position in our markets.”

By market, Universal posted the following gross sales results for the third quarter of 2010:

Do-It-Yourself/retail: $197.9 million, a decrease of 7.7 percent from the same period of 2009. Unit sales to this market declined 10 percent due to soft demand. Predictions for 2011 and beyond hinge on the stabilization and eventual improvement of the economy. Most experts forecast a recovery to begin in 2011. The Home Improvement Research Institute believes 2011 will see a gain of just 1.6 percent in home improvement spending, with growth hovering between 6 and 7 percent annually in subsequent years. Universal continues to add to the products it offers to retailers and drive costs out of its processes in its persistent efforts to be the low-cost producer.

Industrial packaging/components: $158.1 million, up 19.3 percent over the third quarter of 2009. Unit sales increased by more than 12 percent during the quarter, due primarily to market share gains that resulted from adding 252 new customers. This continues to be an area of strong growth potential for Universal because the market remains fragmented, offering opportunities for a national player. The Company is focused on adding customers and products, as well as on expanding its reach into concrete forming and non-wood packaging materials.

Site-built construction: $70.1 million, up 1.6 percent over same period of 2009. Unit sales decreased by approximately 4 percent during the quarter, due to an 11 percent decrease from plants the Company has closed since the third quarter of 2009, offset by a 7 percent increase in shipments out of plants that continued to operate. Nationally, housing starts decreased almost 6 percent comparing June through August 2010 with the same period of 2009. (Shipment of the Company’s products to the job site lag housing starts by approximately one month.) The Company continues to evaluate and close plants in order to achieve profitability and cash flow objectives. Universal believes this industry will be challenged for years to come and continues to focus on commercial, government and turnkey projects to diversify its business and add value for the customer.

Manufactured housing: $63.4 million, an increase of 18.2 percent over 2009. Unit sales to this market increased by 12 percent primarily due to operations it recently acquired, which reflect the Company’s strategy to expand its product offering to these customers and expand its distribution business, in which it offers everything from adhesives to plumbing supplies.

OUTLOOK

The Company expects the current challenging conditions to prevail through 2010, limiting its ability to provide meaningful guidance for ranges of likely financial performance; therefore, the Company will not provide guidance for the foreseeable future. However, given the significant adverse impact of the lumber market mentioned earlier in this release, the Company does not expect to achieve growth in net earnings in 2010, although it is optimistic about its performance in 2011 and beyond as the economy improves, given its strong financial position, solid business model and diverse business opportunities.

CONFERENCE CALL

Universal Forest Products will conduct a conference call to discuss information included in this news release and related matters at 8 a.m. ET on Thursday, Oct. 14, 2010. The call will be hosted by CEO Michael B. Glenn, and will be available for analysts and institutional investors domestically at [phone] or internationally at [phone]. Use conference pass code 25334951. The conference call will be available simultaneously and in its entirety to all interested investors and news media through a webcast at http://www.ufpi.com. A replay of the call will be available through Monday, Nov. 15, 2010, domestically at [phone] and internationally at [phone]. Use replay pass code 32007502.

UNIVERSAL FOREST PRODUCTS, INC.

Universal Forest Products, Inc. is a holding company that provides capital, management and administrative resources to subsidiaries that design, manufacture and market wood and wood-alternative products for DIY/retail home centers and other retailers, structural lumber and other products for the manufactured housing industry, engineered wood components for the site-built construction market, and specialty wood packaging and components and packing materials for various industries. Universal’s subsidiaries also provide framing services for the site-built market, and forming products for concrete construction. The Company's consumer products subsidiary offers a large portfolio of outdoor living products, including wood composite decking, decorative balusters, post caps and plastic lattice. Its lawn and garden group offers an array of products, such as trellises and arches, to retailers nationwide. Founded in 1955, Universal Forest Products is headquartered in Grand Rapids, Mich., with operations throughout North America. For more about Universal Forest Products, go to www.ufpi.com.

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the markets we serve, the economy and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” likely,” “plans,” “projects,” “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. 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 uncertainty. Among the factors that could cause actual results to differ materially from forward-looking statements are the following: fluctuations in the price of lumber; adverse or unusual weather conditions; adverse conditions in the markets we serve; government regulations, particularly involving environmental and safety regulations; and our ability to make successful business acquisitions. Certain of these risk factors as well as other risk factors and additional information are included in the Company's reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission.

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 2010/2009
	Quarter Period										Year to Date
(In thousands, except per share data)	2010					2009					2010					2009
NET SALES	$	480,574		100	%	$	457,768		100	%	$	1,512,166		100	%	$	1,334,435		100	%
COST OF GOODS SOLD		426,159		88.7			388,505		84.9			1,328,232		87.8			1,135,866		85.1
GROSS PROFIT		54,415		11.3			69,263		15.1			183,934		12.2			198,569		14.9
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES		47,286		9.8			51,198		11.2			149,815		9.9			156,310		11.7
NET LOSS (GAIN) ON DISPOSITION OF ASSETS
AND OTHER IMPAIRMENT AND EXIT CHARGES		1,137		0.2			606		0.1			1,521		0.1			(1,246	)	(0.1	)
EARNINGS FROM OPERATIONS		5,992		1.2			17,459		3.8			32,598		2.2			43,505		3.3
INTEREST EXPENSE		888		0.2			900		0.2			2,677		0.2			3,403		0.3
INTEREST INCOME		(111	)	-			(79	)	-			(301	)	-			(258	)	-
		777		0.2			821		0.2			2,376		0.2			3,145		0.2
EARNINGS BEFORE INCOME TAXES		5,215		1.1			16,638		3.6			30,222		2.0			40,360		3.0
INCOME TAXES		2,017		0.4			6,378		1.4			10,836		0.7			14,808		1.1
NET EARNINGS		3,198		0.7			10,260		2.2			19,386		1.3			25,552		1.9
LESS NET EARNINGS ATTRIBUTABLE TO
NONCONTROLLING INTEREST		(614	)	(0.1	)		(206	)	-			(2,099	)	(0.1	)		(617	)	-
NET EARNINGS ATTRIBUTABLE TO
CONTROLLING INTEREST	$	2,584		0.5		$	10,054		2.2		$	17,287		1.1		$	24,935		1.9
EARNINGS PER SHARE - BASIC	$	0.13				$	0.52				$	0.90				$	1.30
EARNINGS PER SHARE - DILUTED	$	0.13				$	0.51				$	0.89				$	1.28
WEIGHTED AVERAGE SHARES OUTSTANDING		19,201					19,307					19,239					19,244
WEIGHTED AVERAGE SHARES OUTSTANDING
WITH COMMON STOCK EQUIVALENTS		19,416					19,585					19,488					19,442
SUPPLEMENTAL SALES DATA
	Quarter Period										Year to Date
Market Classification	2010			%		2009			%		2010			%		2009			%
Do-It-Yourself/Retail	$	197,855		41	%	$	214,299		46	%	$	678,096		44	%	$	673,063		49	%
Site-Built Construction		70,115		14	%		68,984		15	%		203,227		13	%		189,947		14	%
Industrial		158,091		32	%		132,532		28	%		463,318		30	%		368,951		27	%
Manufactured Housing		63,429		13	%		53,676		11	%		193,407		13	%		134,957		10	%
Total Gross Sales		489,490		100	%		469,491		100	%		1,538,048		100	%		1,366,918		100	%
Sales Allowances		(8,916	)				(11,723	)				(25,882	)				(32,483	)
Total Net Sales	$	480,574				$	457,768				$	1,512,166				$	1,334,435

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 2010/2009
(In thousands)
ASSETS	2010		2009		LIABILITIES AND EQUITY			2010		2009
CURRENT ASSETS					CURRENT LIABILITIES
Cash and cash equivalents	$	58,072	$	79,976		Accounts payable		$	78,683	$	70,817
Accounts receivable		166,369		162,875		Accrued liabilities			70,301		86,633
Inventories		172,457		142,100		Current portion of long-term
Assets held for sale		-		3,057			debt and capital leases		702		3,064
Other current assets		18,759		23,242
TOTAL CURRENT ASSETS		415,657		411,250	TOTAL CURRENT LIABILITIES				149,686		160,514
OTHER ASSETS		6,069		3,439	LONG-TERM DEBT AND
INTANGIBLE ASSETS, NET		175,051		175,809		CAPITAL LEASE OBLIGATIONS,
PROPERTY, PLANT						less current portion			52,465		53,168
AND EQUIPMENT, NET		221,839		230,557	OTHER LIABILITIES				34,376		31,659
					EQUITY				582,089		575,714
TOTAL ASSETS	$	818,616	$	821,055	TOTAL LIABILITIES AND EQUITY			$	818,616	$	821,055

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 2010/2009
(In thousands)	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings attributable to controlling interest	$	17,287		$	24,935
Adjustments to reconcile net earnings attributable to controlling interest
to net cash from operating activities:
Depreciation		22,305			24,604
Amortization of intangibles		5,243			6,414
Expense associated with share-based compensation arrangements		1,495			1,417
Excess tax benefits from share-based compensation arrangements		(265	)		(302	)
Expense associated with stock grant plans		134			103
Deferred income taxes (credit)		(228	)		151
Net earnings attributable to noncontrolling interest		2,099			617
Net loss (gain) on sale or impairment of assets		1,053			(1,892	)
Changes in:
Accounts receivable		(58,151	)		(24,342	)
Inventories		(7,103	)		51,488
Accounts payable		14,127			7,578
Accrued liabilities and other		14,740			21,160
NET CASH FROM OPERATING ACTIVITIES		12,736			111,931
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment		(15,679	)		(9,497	)
Acquisitions, net of cash received		(6,529	)		-
Proceeds from sale of property, plant and equipment		540			10,408
Purchase of product technology and non-compete agreement		(4,589	)		-
Advances of notes receivable		(1,000	)		(14	)
Collections of notes receivable		143			134
Insurance proceeds		-			1,023
Other, net		17			16
NET CASH FROM INVESTING ACTIVITIES		(27,097	)		2,070
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit facilities		-			(30,257	)
Repayment of long-term debt		(719	)		(16,830	)
Borrowings of long-term debt		-			800
Proceeds from issuance of common stock		1,439			2,109
Purchase of additional noncontrolling interest		(1,227	)		(1,770	)
Distributions to noncontrolling interest		(944	)		(270	)
Capital contribution from noncontrolling interest		250			14
Dividends paid to shareholders		(3,869	)		(1,158	)
Repurchase of common stock		(4,999	)		(242	)
Excess tax benefits from share-based compensation arrangements		265			302
Other, net		18			(60	)
NET CASH FROM FINANCING ACTIVITIES		(9,786	)		(47,362	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(24,147	)		66,639
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		82,219			13,337
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	58,072		$	79,976
SUPPLEMENTAL INFORMATION:
Cash paid (refunded) during the period for:
Interest		2,058			3,074
Income taxes		(1,488	)		5,964